the strategic role of hedonic value and utilitarian value in

Pakistan Journal of Social Sciences (PJSS)

Vol. 35, No. 2 (2015), pp. 1025-1036

The Strategic Role of Hedonic Value and Utilitarian

Value in Building Brand Loyalty: Mediating

Effect of Customer Satisfaction

Khawaja Khalid Mehmood Lecturer, Institute of Management Sciences,

Bahauddin Zakariya University, Multan, Pakistan

[email protected]

Jalal Hanaysha Senior Lecturer,

DRB-Hicom University of Automotive Malaysia Pekan, 26607, Pahang, Malaysia

[email protected]

Abstract Hedonic value and utilitarian value are considered important aspects

of business strategy and retail strategy. Further, customer satisfaction

and brand loyalty are among crucial concerns in management and

marketing. This study examines the direct and indirect effects of

hedonic value and utilitarian value on brand loyalty mediated by

customer satisfaction. The review of literature indicates that only few

studies intended to examine this topic in Malaysian context. Therefore,

the data were collected from 251 customers of department stores in

northern Malaysia through survey questionnaire. The respondents

comprised of university students. The analysis was done using AMOS

which indicates that hedonic value positively affects customer

satisfaction and brand loyalty, whereas, utilitarian value positively

affects customer satisfaction. The direct effect of utilitarian value on

brand loyalty is insignificant. The findings also reveal that customer

satisfaction positively affects brand loyalty and it mediates the

relationship between hedonic value, utilitarian value and brand loyalty.

Keywords: Hedonic Value, Utilitarian Value, Customer Satisfaction, Brand Loyalty,

Retailing

I. Introduction In today’s world, the concept of value for customers has become an important

strategic consideration for organizations and has turned into a strategic necessity for

creating and holding a strong competitive advantage (Dastan & Gecti, 2014; Sánchez-

Fernández, & Iniesta-Bonillo; Wang, Lo, Chi, & Yang, 2004). A rich conceptualization

of value could although be developed, but for ease, marketers and researchers define

value in terms of hedonic value and utilitarian value (Babin, Darden & Griffin, 1994;

Irani & Hanzaee, 2011). Organizations and researchers have pointed towards the need of

managing these values strategically (Carpenter & Moore, 2009; Chen & Dholakia, 2014).

In successful business and retail strategy, managers must define the strategic role

of hedonic value and utilitarian value and manage for effective provision of these values

1026 Pakistan Journal of Social Sciences Vol. 35, No. 2

to the shoppers (Kim, 2006; Olsen & Skallerud, 2011). This could bring greater

satisfaction among the customers (Irani & Hanzaee, 2011) as well as result into higher

brand loyalty among the customers (Carpenter, Moore, & Fairhurst, 2005). Satisfied

customers could naturally tend to be more loyal through their indication for the increased

appreciation of organization’s offerings (Sokachaee & Babaei, 2014). Moreover,

researchers agree that brand loyalty could be attained via customer satisfaction and might

be achieved through strategically managing the provision of hedonic value and utilitarian

value (Ahmed, Rizwan, Ahmad, & Haq, 2014; Carpenter et al., 2005; Da Silva & Alwi,

2006; Jones, Reynolds, & Arnold, 2006) pointing towards the mediating role of customer

satisfaction.

In context of Malaysia particularly, although certain past studies were conducted

on related variables (Khan & Kadir, 2011; Permarupan, Mohan, Al-Mamun, & Zainol,

2014; Sondoh Jr., Omar, Wahid, Ismail, & Harun, 2007; Yusof, Musa, & Rahman, 2012)

but studies undertaken to examine the direct and indirect impact (through mediating role

of customer satisfaction) of hedonic value and utilitarian value on brand loyalty are few

and this is the purpose of this research.

II. Literature Review Customers today, go to retail stores and supermarkets not only to buy products but

with the aim of making their shopping experience pleasurable and enjoyable (Yusof et

al., 2012). As a part of retail strategy, it has become important for retailers to understand

the factors that customers consider important, and enhance customer’s perceived

shopping value (Permarupan et al., 2014). The literature on retailing categorizes customer

shopping value broadly in two types: ‘Hedonic Value’ and ‘Utilitarian Value’ (Babin et

al., 1994; Sarkar, 2011).

A. Hedonic Value

Customers derive hedonic value from the perceived fun or playfulness of the

shopping (Sarkar, 2011). It is concerned with positive word of mouth, loyalty, emotional

value, and psychological satisfaction related with the overall shopping experience in the

store (Jones et al., 2006). When customers go to retail stores today, they want more than

just the products they are looking for and expect their shopping experience to be more

enjoyable, pleasurable and full of excitement (Yusof et al., 2012). All these are

components of hedonic value that retailers are working on. Hedonic value components

are assumed to play strategic role in the customer purchase process (Chen & Dholakia,

2014; Sánchez-Fernández & Iniesta-Bonillo, 2007).

Evidence from a number of past studies indicates that hedonic value influenced

customer satisfaction (Ha & Jang, 2010; Purwanto, Kuswandi, & Sunjoto, 2015; Ryu,

Han, & Jang, 2010).These studies were conducted in different contexts such as United

States (Ha & Jang, 2010; Ryu et al., 2010) and Asia including Iran (Hanzaee & Khonsari,

2011; Irani & Hanzaee, 2011), Indonesia (Purwanto et al., 2015), and Thailand

(Leelakulthanit & Hongcharu, 2011). Also, the studies were conducted for different

industries/segments, such as coffee shops (Purwanto et al., 2015), restaurants (Ha & Jang,

2010; Hanzaee & Khonsari, 2011), mobile service providers (Leelakulthanit &

Hongcharu, 2011), or for variety format retail stores (Jones et al., 2006). Thus, the

following hypothesis is proposed.

Khawaja Khalid Mehmood, Jalal Hanaysha 1027

H1: Hedonic value has a significant effect on customer satisfaction.

Hedonic value must be related to loyalty because theoretically, customers develop

favorable attitudes regarding experiences that provide psychological incentives like those

that are felt in a joyful shopping experience (Jones et al., 2006; Katz, 1960). Certain past

studies conducted in different countries and for different segments established that

hedonic value influenced brand loyalty (Jones et al., 2006; Purwanto et al., 2015; Yusof

et al., 2012). Thus, following hypothesis is proposed:

H2: Hedonic value has a significant effect on brand loyalty.

B. Utilitarian Value

Utilitarian value is based on the rational purchase criteria and can be derived from

the availability of product & convenience of finding the required product in the retail

store (Sánchez-Fernández & Iniesta-Bonillo, 2007; Yusof et al., 2012). In a retail store, a

customer is both, intellectual and emotional, and values both, hedonic and utilitarian

values (Babin et al., 1994). This study is conducted for the strategic role of hedonic value

and utilitarian value in retail format setting only, and the perception and role of these

values in catalogue or online purchase are not considered pointing towards the specificity

and limitation of this study.

Evidence from a number of past studies indicates that utilitarian value impacted

customer satisfaction (Jones et al., 2006; Lee & Overby, 2004; Ryu et al., 2010; Sánchez-

Fernández & Iniesta-Bonillo, 2007). Those researches were also done in variety of

contexts including western (Ha & Jang, 2010; Ryu et al., 2010) and Asian countries (Irani

& Hanzaee, 2011; Leelakulthanit & Hongcharu, 2011). Further, the studies were done for

different industries and market segments. Thus, following hypothesis is proposed:

H3: Utilitarian value has a significant effect on customer satisfaction.

As argued earlier in section 2.1.2, utilitarian value could also impact brand loyalty.

Customers perceiving high utilitarian value in a retail store should be expected to

successfully accomplish their purchase (Babin et al., 1994) and exhibit high brand

loyalty. Previous scholars like Yusof et al. (2012), Jones et al. (2006), and Hu & Chuang

(2012) found significant impact of utilitarian value on brand loyalty. Thus, based on the

discussion made, the following hypothesis is forwarded:

H4: Utilitarian value has a significant effect on brand loyalty.

C. Brand Loyalty

Brand loyalty was conceived by Oliver (1997) as an intense commitment from

customer to rebuy same brand in spite of great marketing efforts from competing brands.

Building brand loyalty has been the prime objective for organizations. Awan and Rehman

(2014) found that brand loyalty can be created through improving customer satisfaction

and offering higher brand value. Therefore, organizations should focus on building high

brand loyalty among their customers for the purpose of building competitive advantage

and ensuring better future performance.


D. Customer Satisfaction (The Mediator)

Customer satisfaction reflects the overall evaluation of customers toward a brand

in fulfilling their needs and expectations (Alam & Yasin, 2010; Zeithaml & Bitner,

2003). It is a key component of business strategy (Fornell, Mithas, Morgeson, &

Krishnan, 2006) and a main driver of a firm’s long-term market value and profitability

(Oh, Hong, & Kim, 2013). This is because satisfied customers are in most cases less price

sensitive, cannot easily be influenced by the threat of competitors, and they have higher

loyalty to the brand as compared to dissatisfied ones (Dimitriades, 2006). Lien and Kao

(2008) confirmed that better understandings of the creation process of satisfaction could

help firms enhance the satisfaction and loyalty of their customers.

Previous studies have reported that consumer satisfaction positively influenced

brand loyalty (Ahmed et al., 2014; Da Silva & Alwi, 2006; Yang & Peterson, 2004).

Particularly, when consumers are satisfied with the products or services of a certain

brand, they become more likely to recommend them to others, develop less intention to

switch to other alternatives, and form favorable repurchase behavior (Bennett & Rundle-

Thiele, 2004). Thus, the following hypothesis is proposed:

H5: Customer satisfaction has a significant effect on brand loyalty.

Taken together the arguments and justifications regarding the assumed effect of

hedonic value and utilitarian value on customer satisfaction and brand loyalty, as well as

effect of customer satisfaction on brand loyalty, customer satisfaction is proposed to

mediate the relationship between hedonic value, utilitarian value and brand loyalty. Thus,

the following hypotheses are proposed:

H6: Customer satisfaction mediates the relationship between hedonic value and

brand loyalty.

H7: Customer satisfaction mediates the relationship between utilitarian value and

brand loyalty.

III. Methodology This study collected primary data from respondents which were comprised of

customers of department stores in northern Malaysia. It was because based upon

literature review; this could be noticed that only few studies were conducted on the

subject in this part of Malaysia. Further, following other studies, university students were

selected for response as they are considered important target market for department stores

(Ryu et al., 2010; Wang & Ha, 2011). Out of 500 questionnaires distributed to students,

251 were returned back. To measure the variables of this study, the scales were adopted

and adapted from previous studies. For instance, brand loyalty was measured using five

items taken from Hameed (2013), Gil, Andrés, and Salinas (2007). Customer satisfaction

was measured using seven items taken from Stock (2011), Zboja and Voorhees (2006).

Similarly, eight items to measure hedonic value and four items to measure utilitarian

value were adapted from the work of Babin et al. (1994), and Sarkar (2011). All the items

were measured on seven point Likert scale from 1 (strongly disagree) to 7 (strongly

agree).


IV. Respondents’ Profile and Instrument Validation To conduct the analyses using AMOS, firstly the missing values were replaced

through their medians on SPSS. Moreover, 15 questionnaires were detected as outliers

and they were eliminated, which provided 236 usable questionnaires. Approximately

61% respondents were female. Majority of shoppers were undergraduate (58.5%)

students followed by Master’s students (30.5%). As undergraduate students were in

majority, therefore, the age group 16-25 years had greatest percentage (67.8%). 26.3%

had age between 26-35 years, and only 5.5% had age between 36-45 years. 46.6% of

shoppers spent between RM50-200 per month in shopping, while 11% spent more than

RM500 per month for shopping.

The normality of dependent variable (brand loyalty) was assessed through

skewness (0.015, as close to zero) and kurtosis (-0.457< 3.00) which were satisfactory

(Park, 2008). EFA (exploratory factor analysis) was carried on SPSS to examine

instrument validity. Using varimax rotation and principal components extraction method,

four components were extracted having Eigenvalue more than 1.0. In the final output of

EFA, no cross loadings were seen between the components as well as the minimum

loadings (Hedonic Value: 0.583, Utilitarian Value: 0.653, Customer Satisfaction: 0.674,

Brand Loyalty: 0.609) for the constructs were satisfactory (Comrey & Lee, 1992). This

pointed towards discriminant and convergent validity of the questionnaire (Gefen &

Straub, 2005).

V. Analysis and Results The test of multicollinearity was executed on all constructs through confirmatory

factor analysis. The findings revealed that correlation between any paired constructs was

less than 0.9 which indicated that data was free of multicollinearity (Tabachnick & Fidell,

2007). As this study used AMOS to test the hypotheses, there were some other

assumptions besides data screening that were met before final analysis. First,

confirmatory factor analysis using the measurement model was executed. Then structural

model which combines all factors was estimated based on a number of fit indices.

The results revealed that the measurement model achieved a good fit for the data

where chi-square (χ2) was equal to 323.970 and significant at p<0.001. Other fit criteria

were used to supportχ2

and confirm the goodness-of-fit for the measurement model (df =

146, GFI = 0.872, AGFI = 0.833, CFI = 0.916, TLI = 0.901, and RMSEA = 0.072).

Moreover, the factor loadings of all items were calculated. The findings indicated that the

loadings ranged between 0.50 and 0.80, and this confirmed that no value was less than

0.50. Therefore, the results of confirmatory factor analysis were satisfactory (Nazim &

Ahmad, 2013). The loadings are given in Appendix A. Cronbach’s alpha shown in

Appendix A indicated sufficient reliability as the statistics were greater than 0.60 (Hair,

Babin, Money, & Samouel, 2003; Yusof et al., 2012).

Similarly, the structural model was evaluated after ensuring a good fit for the

measurement model according to several indices. As it can be seen in Figure 1, the

structural model achieved a good fit for the data where the χ2 value is equal to 323.970

and was it found to be significant (P = 0.000). Other fit criterion were also used to give

further support for the value of χ2 and ensure reasonable fit for the structural model (df =

146, GFI = 0.872, AGFI = 0.833, CFI = 0.916, TLI = 0.901, and RMSEA = 0.072).


Therefore, it could be concluded that the structural model achieved an acceptable fit for

the data which qualified for testing the hypotheses.

Figure 1. Structural Model

Based on the results of regression analysis that were generated from structural

model, it was possible to test the hypotheses. As shown in Table 1, the findings reveal

that hedonic value has significant positive impact on customer satisfaction (β= 0.154,

CR= 2.094, p= <0.05), therefore, H1 is accepted. The effect of hedonic value on brand

loyalty is also significant and positive (β= 0.555, CR= 5.820, p= <0.05), thus, H2 is

confirmed. Furthermore, the findings indicated that utilitarian value has significant

positive impact on customer satisfaction (β= 0.635, CR= 6.468, p= <0.05), hence, H3 is

supported. But the effect of utilitarian value on brand loyalty is insignificant (β= -0.070,

CR= -0.515, p= <0.05), which means H4 is rejected. The findings also supported the

significant positive effect of customer satisfaction on brand loyalty (β= 0.674, CR=

4.804, p= <0.05), thus, H5 is confirmed. Hedonic value and utilitarian value explain 51%

of variance in customer satisfaction. In sum, hedonic value, utilitarian value, and

customer satisfaction explain 99% of overall variance in brand loyalty.

Table 1.Results of Hypotheses

Hypothesized Effect Std.

Estimateβ S.E. C.R. P Support

H1: Hedonic value has a significant effect on customer satisfaction.

0.154 0.059 2.094 0.036 Yes


H2: Hedonic value has a significant effect on brand loyalty.

0.555 0.087 5.820 *** Yes

H3: Utilitarian value has a significant effect on customer satisfaction.

0.635 0.100 6.468 *** Yes

H4: Utilitarian value has a significant effect on brand loyalty.

-0.070 0.156 -0.515 0.607 No

H5: Customer satisfaction has a significant effect on brand loyalty.

0.674 0.159 4.804 *** Yes

To test the mediating effect of customer satisfaction, this study followed the

bootstrapping procedure based on the suggestions of Preacher and Hayes (2008). In the

present study, the estimates of both direct and indirect effects of the final model were

calculated to examine the mediating effect of customer satisfaction on the relationship

between hedonic value and utilitarian value as independent variables and brand loyalty as

dependent variable with 1000 bootstrap samples (Preacher and Hayes, 2008).

Table 2.Indirect effects of hedonic value and utilitarian value on brand loyalty

Bootstrapping BC 95% CI

Estimate Std.

Error Lower Bound

Upper Bound

Two-Tale sig

Direct Effect

Indirect Effect

Hedonic Value

0.270 0.060 0.173 0.423 0.001 0.002 0.001

Utilitarian Value

0.579 0.129 0.376 0.915 0.001 0.967 0.001

Mediator: Customer satisfaction

As shown in Table 2, bias-corrected confidence interval was reported at 95% level.

In general, the findings indicated that customer satisfaction mediates the relationship

between hedonic value and brand loyalty (2-tail sig = 0.001), thus, H6 is supported.

Moreover, customer satisfaction mediates the relationship between utilitarian value and

brand loyalty (2-tail sig = 0.001), therefore, H7 is also confirmed.

VI. Discussion, Conclusion, and Limitations Firstly, the findings reveal that hedonic value and utilitarian value positively

influence customer satisfaction. This conclusion is supported by many past studies

conducted on the topic (Lee & Overby, 2004; Sánchez-Fernández & Iniesta-Bonillo,

2007). Specifically, the findings agree to and reinforce similar conclusions laid by past

scholars like Hanzaee and Khonsari (2011), Ryu et al. (2010), Jones et al. (2006), Irani

and Hanzaee (2011), and Ha and Jang (2010). The findings point towards the

generalizability of this conclusion over various contexts and market segments. The

conclusions recommend retailers to emphasize on both hedonic and utilitarian value for

brining higher satisfaction among customers and it should be done frequently.

Results also reveal significant positive impact of hedonic value on brand loyalty.

The findings are in line with those of Jones et al. (2006), Yusof et al. (2012), and

Purwanto et al. (2015). While combining with the previous conclusion, it could be

suggested that provision of hedonic value is an important precondition for bringing


greater customer satisfaction as well as higher brand loyalty. Conversely, the impact of

utilitarian value on brand loyalty is insignificant. This finding relates with some of the

previous researches. The finding is partly like those of Sondoh Jr. et al. (2007) conducted

for cosmetic products in Malaysia and found that only some features of utilitarian value

caused high loyalty and others did not. Recent study by Purwanto et al. (2015) for

Indonesia also concluded with insignificant utilitarian value’s influence on loyalty. These

conclusions are against those of Hu and Chuang (2012), and Yusof et al. (2012) who

found opposite results. Overall, this situation requires future researchers to further test the

hypothesis in Asian contexts and also come up with better utilitarian value measures.

Next, the findings indicated that customer satisfaction had significant positive

effect on brand loyalty. This is consistent with previous studies (Ahmed et al., 2014;

Nawaz & Usman, 2011) which reported that customer satisfaction played an important

role in building brand loyalty. Hence, it is suggested for the management of department

stores to continuously assess and focus on satisfaction of their customers through

different means.

Most importantly, through hypotheses 6 and 7, this research confirms the

mediating role of customer satisfaction between hedonic value, utilitarian value, and

brand loyalty. The findings suggest that although hedonic value directly affects customer

satisfaction and brand loyalty, but utilitarian value does not directly influence loyalty,

rather it influences it through customer satisfaction. Overall, the strategic role of both

type of values in creating loyal customers is emphasized which recommend retailers in

Malaysia and those in relevant business economies to strategically use the concept of

hedonic and utilitarian values for welfare of their retail businesses. This study possesses

some limitations which should be acknowledged. Firstly, by using university students’

sample, some external validity was sacrificed for attaining higher internal validity

(Carpenter et al., 2005). Future researchers are suggested to add additional profile of

customers into their Malaysian studies. Moreover, in order to further augment the

conclusions in Malaysian context, other sectors and market segments must also be

considered.

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Appendix A: Factor loadings on final items

Construct/ Item Factor Loading

Brand Loyalty (Cronbach’s Alpha = 0.610)

BL1 I consider myself to be loyal to this store. 0.655

BL3 I will not buy from any other store if this store is available. 0.50

Customer Satisfaction (Cronbach’s Alpha = 0.898)

CS1 My choice to buy this store’s products was a wise one. 0.707

CS2 I truly enjoyed my purchase of this store’s products. 0.776

CS3 I am very pleased with the products which this store delivers.

0.770

CS4 I am very pleased with the services which this store delivers.

0.695

CS5 I am satisfied with my decision to purchase this store’s products.

0.804

CS6 The products of this store fulfill my expectations. 0.746

CS7 The services of this store fulfill my expectations. 0.735

Hedonic Value (Cronbach’s Alpha = 0.876)

HV2 I shop not because I have to, but because I want to. 0.658

HV3 Shopping in this store is like an escape from my daily routine life.

0.696

HV4 I enjoy being absorbed in exciting new products while shopping in this store.

0.643

HV5 In this store, I enjoy shopping for its own sake and not because of that I need to purchase something.

0.635

HV6 While shopping in this store, I am able to forget my other problems.

0.742

HV7 While shopping in this store, I feel a sense of adventure. 0.788

HV8 Any shopping in this store is a very nice time out to me. 0.805

Utilitarian Value (Cronbach’s Alpha = 0.726)

UV1 I just accomplish what I want to while shopping in this store. 0.703

UV2 While shopping in this store I can really buy what I need. 0.731

UV3 While shopping in this store I find just the items I look for. 0.609

the strategic role of hedonic value and utilitarian value in

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