M-loyalty: winning strategies for mobile carriers

Heejin Lim
Retail and Consumer Sciences, The University of Tennessee, Knoxville, Tennessee, USA, and

Richard Widdows and Jungkun Park

Consumer Sciences and Retailing, Purdue University, West Lafayette, Indiana, USA
Abstract Purpose This study aims to investigate determinants of satisfaction and loyalty decisions in the use of mobile services. Design/methodology/approach A research model was designed to identify multi-dimensions of mobile service quality and perceived value, and investigate their inuences on satisfaction and loyalty. Structural equation modeling was employed to test hypotheses. Findings Statistical analysis identied ve distinct dimensions of mobile service quality, and their direct and indirect effects on economic value, emotional value on loyalty intention through satisfaction. Two dimensions of perceived value (i.e. economic value, emotional value) had signicant inuences on customer satisfaction, and then, on loyalty intention. Also, the results show interrelationship between economic and emotional value. Originality/value In particular, each dimension of mobile service quality appeared to have different effects on perceived economic value, emotional value, and the level of satisfaction. Accordingly, mobile service managers are recommended to develop strategic promotion efforts based on targeted consumers needs and marketing goals. Keywords Mobile communication systems, Customer services quality, Customer satisfaction, Customer loyalty Paper type Research paper

An executive summary for managers and executive readers can be found at the end of this article.

Drivers of satisfaction and loyalty intention in the use of mobile services

Consumer loyalty has been a main goal of marketers for the past decade. Marketers have invested a great amount of their resources to develop loyalty programs. However, a recent article raised a question about the effectiveness of loyalty marketing in practice (Capizzi and Ferguson, 2005). The article suggested a well-designed loyalty program with strong value propositions as a key factor of successful loyalty marketing. To develop an effective loyalty program, it is imperative to understand the process of consumers loyalty decisions. Given that consumers needs and value propositions vary across different types of products and service, the current study focuses on the process of loyalty decisions in the context of mobile services. In the new millennium, consumers can go to market with the mobility that new technology has brought to consumers daily lives for example, Wireless Application Protocol (WAP) and a 3G mobile communication system. Owing to the rapid development of mobile technology, usage of mobile phones has extended from voice communications to the internet. Propagation of mobile internet technology and m-commerce applications opens a great opportunity for
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mobile service carriers. Nevertheless, surveys on US consumers perceptions of mobile service show that the level of satisfaction is much lower for mobile service carriers compared to other service sectors (Consumer Report, 2005; McKinsey Quarterly, 2004). In fact, 35 percent of US mobile subscribers in 2004 reported that they were considering switching mobile service carriers (Consumer Report, 2005). Such ndings suggest that mobile service carriers need to be aware of drivers of customer satisfaction and loyalty intention in order to build effective business strategies for customer retention. Previous studies identied determinants of consumers loyalty for mobile services in foreign markets (e.g. France (Lee et al., 2001), Germany (Gerpott et al., 2001), and South Korea (Kim et al., 2004)). Few studies, however, investigated effects of various service attributes on consumers decision making in the US mobile market. Because of the different levels of market development and distinct consumer behavior in foreign markets, study ndings may provide only limited application to the US market. In recognition of this problem, this study aims to investigate drivers of satisfaction and loyalty in the US mobile market. The service literature supports that perceived service quality and value serve as drivers of customer satisfaction and loyalty intention (e.g. Cronin et al., 2000; Yang and Peterson, 2004). Given that perceived service quality and value play important roles in the level of satisfaction and loyalty decisions, this study has two objectives. The rst purpose of this study is to identify relevant dimensions of service quality in the mobile services context that consumers perceive in their service evaluations. Lee et al. (2001) studied the effect of perceived service quality on consumer satisfaction with mobile services, but the concept of service quality was limited to voice services. Many studies have addressed value propositions of mobile data services with the advent of M-commerce era 208

M-loyalty: winning strategies for mobile carriers Heejin Lim, Richard Widdows and Jungkun Park

Journal of Consumer Marketing Volume 23 Number 4 2006 208 218

(e.g. Chae et al., 2002; Clarke, 2001; Mort and Drennan, 2004). However, empirical studies of these mobile data services remain untested. Collectively, this study recognizes the need to identify service quality of mobile services at the carrier level, including both voice and data services. The second purpose of the study is to identify relevant dimensions of consumers perceived value in the mobile services context. Previous studies tended to examine perceived value in terms of monetary tradeoffs only (e.g. Chen, 2003; McDougall and Levesque, 2000) what you get for what you pay. However, consumers appear to assess perceived value not only by monetary tradeoffs but also by other psychological benets (e.g. enjoyment, fun, and social approval) (Holbrook, 1986; Mathwick et al., 2001; Sweeney and Soutar, 2001). Researchers have empirically demonstrated that multidimensional components of perceived value provide a broader examination of the customer shopping experience (Mathwick et al., 2001) as well as being stronger predictive power of future consumer behavior than a single-value construct (Sweeney and Soutar, 2001). Recognizing the importance of a multidimensional approach to perceived value, efforts are directed to identify the relevant dimensions of perceived value in consumers experience of mobile services.

Literature review
Perceived quality of mobile service In general, consumers go through different decision processes when they make a contractual transaction (e.g. for mobile services) compared to when they make a single discrete transaction (e.g. for a computer). For a continuous contractual transaction that represents a long-term commitment, consumers pay a basic monthly service fee. Depending on additional minutes and optional services, consumers pay extra charges. For such usage-dependent contractual goods, a long-term relationship with customers is important for service providers (Gerpott et al., 2001). In this sense, customer-oriented marketing strategies are essential for mobile service carriers to retain their customers (Kim et al., 2004). Compared to other consumer goods and services, mobile telephone services are relatively homogeneous in nature because of technological standards and regulations (Fullerton, 1998). Nevertheless, current US national service providers make an effort to differentiate and promote their service quality to retain existing customers as well as to acquire new customers. Such efforts include both price and non-price competitive strategies (e.g. free calling among subscribers of a particular company, push-to-talk (PTT), and reduced priced handsets). Attractive price and non-price service offerings disseminate quickly among other competitors. Nonetheless, service carriers still try to provide innovative service offerings in the hope that consumers perceive their services as superior and leading in the mobile service sector (Federal Communications Commission (FCC), 2004). Quality dimensions in mobile service Quality is dened as overall excellence or superiority that consumers perceive from a product/service (Zeithaml, 1988). Gro nroos (1984) proposed two distinct service dimensions technical and functional quality. Technical quality is what 209

consumers get as an outcome of an interaction with a service provider, which is equivalent to core service quality product/service-related offerings (McDougall and Levesque, 2000). In turn, functional quality has to do with how the service is delivered (Gro nroos, 1984). It includes a broad range of service delivery items, such as perceptions of a rms customer care and the manner of service personnel (Adelman et al., 1994). In service industry where technical quality is difcult to differentiate among competitors, functional attributes of service are potentially more important in customer satisfaction (Gro nroos, 1984). This study identies a comprehensive set of technical and functional attributes of mobile services, which can be evaluated by consumers in their decision making. Technical aspects of mobile services include consumers perceptions of pricing plans, network quality, and mobile data services; functional attributes comprise carriers billing systems and customer service quality. Table I summarizes service quality attributes that consumers may perceive in their evaluations of mobile service carrier. Items were identied based on the literature (e.g. Gerpott et al., 2001; Kim et al., 2004; Lee et al., 2001; Mahatanankoon et al., 2005; Mort and Drennan, 2004; Pagani, 2004) and results of consumer surveys that are conducted by marketing research rms (e.g. Cap Gemini, 2003; Consumer Report, 2005; FCC, 2004; McKinsey Quarterly, 2004). Consumers perceived value in the mobile services context In this study, multi dimensions of perceived value are based on Sweeney and Soutars (2001) work, which originally included quality, economic, emotional, and social value. To develop distinct hierarchical levels between consumers perceived quality and value, this study adopts the three value dimensions that are most relevant to mobile service experience economic, emotional, and social value. Economic value is related to perceived economic benets received in comparison to a monetary cost of the service. Many researchers found a signicant role of consumers perceived monetary value in satisfaction and future decisions (e.g. Chen, 2003; McDougall and Levesque, 2000). Emotional value refers to the utility derived from the feelings or affective states that a service provider engenders (Sweeney and Soutar, 2001). This emotional value is expected to incorporate consumers affective responses to service stimuli in a cognitive-oriented means-end model. In a retailing context, Sweeney and Soutar (2001) found that emotional value is the strongest predictor of consumers purchase intention in a particular store. In turn, social value is related to enhancement of social selfconcept (Sweeney and Soutar, 2001). In the use of technology-driven products or services, social image can be an important factor that affects consumers decision making. Mobile phones are medium through which users keep social contact (Ling, 2004). Also, consumers consider the possession of a technology-driven device as a symbol of social status as well as a fashion item. In this sense, the display and use of their mobile phones is important for mobile phone users to improve the way of being perceived by others (Ling, 2004; Lu et al., 2003). Hence, social value is expected to play an important role in the context of mobile service usage.

M-loyalty: winning strategies for mobile carriers Heejin Lim, Richard Widdows and Jungkun Park

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Table I Identication of consumers perceived quality of mobile services

Dimensions Pricing plans Examples Offering the best plan that meets a customers need Ease of changing service plans Superiority of overall pricing options Delivery of information about products and services Frequency of dropped calls Voice quality Coverage Sending/receiving SMS (short message service) Sending/receiving MMS (multimedia message service) Receiving calendar/reminder services Receiving sports information Listening to music from the internet Playing online games Providing location/map/directions services Receiving weather reports Receiving trafc information Receiving and reading news Reporting emergencies based on location Transmitting emergencies information (e.g. roadside assistance) Provision of accurate billing Ease of understanding and resolving billing issues Resolving billing issues quickly Ability in xing a problem Courtesy of customer service representative Provision of consistent advice/instructions from a call center Accurate representation of service and terms Sources Cap Gemini (2003); Consumer Report (2005); Gerpott et al. (2001); Kim et al. (2004); Lee et al. (2001); McKinsey Quarterly (2004)

Network quality

Data services Messaging services

Mahatanankoon et al. (2005); Mort and Drennan (2004); Pagani (2004)

Entertainment services

Locator services

Billing system

Cap Gemini (2005); Consumer Report (2005); Gerpott et al. (2001); Kim et al. (2004); Lee et al. (2001); McKinsey Quarterly (2004)

Customer service

Hypotheses developments A positive relationship between service quality and perceived value is supported by a number of studies in service settings (e.g. Fornell et al., 1996; Harris and Goode, 2004). That is, a high level of perceived service performance leads to a high level of perceived value. Previous studies conrmed this relationship mostly focusing on perceived monetary value. However, consumers cognitive evaluation is also likely to lead to positive emotion (Babin et al., 2004). Babin et al.s (2004) study showed that a positive evaluation of product quality enhances positive affect that are aroused from a shopping experience. Thus, positive perceptions of service quality are likely to increase perceived emotional value. This study identify relevant attributes of mobile services price plans, network quality, data services, billing systems, and customer service quality. Each service dimension may have different contributions to perceived value. However, overall quality perceptions, a combined function of different service attributes, are likely to affect a consumers perceptions of value in the same manner (Bell et al., 2005). Based on these, the following is hypothesized: H1a. Perceived service quality will have a positive inuence on perceived economic value. H1b. Perceived service quality will have a positive inuence on perceived emotional value. Satisfaction refers to the consumers fulllment response, the degree to which the level of fulllment is pleasant or 210

unpleasant (Oliver, 1997, p. 28). As stated in this denition, satisfaction comprises consumers global affective responses to marketing stimuli (Olsen, 2002). This notion may confuse the concept of satisfaction with emotional value. However, researchers argue that satisfaction is a distinct construct from perceived emotional value. While perceived value can be generated in any stage of consumption experience without actual use of a product/service, satisfaction is aroused in a post-consumption stage after an actual experience of a product/service (Sweeney and Soutar, 2001). Thus, consumers perceived value that is generated in each stage of service experience must be a predictor of satisfaction in the post-consumption phase. The marketing literature supports a positive inuence of perceived economic value on satisfaction (McDougall and Levesque, 2000) as well as perceived emotional value on satisfaction (Eroglu et al., 2005). This study also proposes social value as an important factor that comprises a consumers perceived value. Mobile service is mainly used for a communication purpose, and a consumers feeling of belonging to a certain group may enhance perceived value. An empirical study found perceived social value increases the level of satisfaction in the use of mobile internet services (Lee et al., 2002). Thus, the following hypotheses are proposed: H2a. Perceived economic value will have a positive inuence on satisfaction. H2b. Perceived emotional value will have a positive inuence on satisfaction.

M-loyalty: winning strategies for mobile carriers Heejin Lim, Richard Widdows and Jungkun Park

Journal of Consumer Marketing Volume 23 Number 4 2006 208 218

H2c. Perceived social value will have a positive inuence on satisfaction. Satisfaction has been widely studied as a predictor of customer loyalty (e.g. Cronin et al., 2000; Fornell et al., 1996; Kim et al., 2004; Olsen, 2002; Yang and Peterson, 2004). Customer satisfaction is an important factor for a long-term relationship between a rm and a customer (Anderson and Srinivasan, 2003). That is, a consumers positive affect toward a service provider is likely to motivate the consumer to stay with the provider and also recommend the service to others (Zeithaml et al., 1996). Thus, the following is hypothesized: H3. The level of satisfaction will have a positive inuence on loyalty intention.

Methods
Sample, data collection, and questionnaire development A web-based survey was conducted to collect the data. Samples are general US consumers who currently subscribe to a mobile service. Our sample is restricted to individual users who have a full control over decision making for their mobile services (e.g. decisions on carriers and service contracts). A list of mobile subscribers was obtained by an online marketing research rm. The rm distributed an invitation e-mail to their panel members whose proles match a research interest, that is, mobile customers. The ndings of this study were drawn from a probabilistic survey. The survey resulted in an 81 percent click-through rate with no duplicated responses (i.e. respondents IP addresses were checked). To avoid possible confounding variables that can be caused by different network capabilities, responses from those who subscribed national service providers (i.e. AT&T Wireless, Sprint PCS, Verizon Wireless, T-Mobile, Cingular Wireless, and Nextel) were included in statistical analysis. These six players are described as nationwide in that they have service available in at least some portion of the Western, Midwestern, and Eastern United States (FCC, 2004). After dropping respondents that were using regional service carriers, 330 usable questionnaires were analyzed. Prior to the survey, a questionnaire was pre-tested to ensure clarity and readability of all instructions and questions. A convenience sample of 137 undergraduate students was employed on a voluntary basis. Participant feedback was used to explore dimensionality of mobile service attributes as well as to rene the questionnaire. The results of exploratory factor analysis revealed ve dimensions of mobile service quality as expected (i.e. pricing plans, network quality, data services, billing system, and customer service quality). Measures Exogenous variables include attributes of mobile service quality. Measures of exogenous variables are adapted from consumer surveys conducted by marketing research rms (e.g. Cap Gemini, Consumer Reports, and McKinsey Quarterly) as well as the literature. Although such a combination of sources captures factors that affect the level of mobile customers satisfaction and switching intentions, a comprehensive set of well-established scales for mobile service quality are not available in consumer research. Therefore, the 211

scales developed for measures of mobile service quality are exploratory. Items for perceived quality of pricing plans, network, billing system, customer service were measured on ve-point Likert scales ranged from strongly disagree (1) to strongly agree (5). Measures of mobile data services in the current study were adapted from literature on the topic of M-commerce value propositions (Mahatanankoon et al., 2005; Mort and Drennan, 2004; Pagani, 2004). To measure consumers perceptions of service quality, however, selection of items was restricted to mobile data services that are available in the current US market. All items that ask quality of mobile data services were measured on ve-point semantic differential scales anchored from poor (1) to excellent (5). Each item of service attributes was presented to respondents in a different order to avoid order effects. Dimensions and measures of mobile service quality are presented in Table I. Endogenous variables include perceived value, satisfaction, and loyalty intention. All items were measured on ve-point Likert scales anchored from strongly disagree (1) to strongly agree (5). For perceived value, all items were employed from the work of Sweeney and Soutar (2001). In the original work, each value construct included four, ve, and four items for economic, emotional, and social value, respectively. Reliabilities were 0.80, 0.94, 0.82 for economic value, emotional value, and social value, respectively. Customer satisfaction is conceptualized as consumers overall evaluation of service experience after the actual use of the service over time (Garbarino and Johnson, 1999). Adapted from Anderson and Srinivasans (2003) study, ve items ask respondents overall evaluative and affective responses to their experience with a mobile carrier. Items ask Reliability in the original work was 0.89. Consumer loyalty is dened as consumers overall attachment or commitment to a service provider (Oliver, 1999). Ten items were generated to measure consumer loyalty. Adapted from the literature (e.g. Anderson and Srinivasan, 2003; Yang and Peterson, 2004; Zeithaml et al., 1996), these items reect consumers cognitive, affective, conative, and behavioral loyalty intention.

Results
Sample characteristics The analysis of respondents demographic information reveals that 54.4 percent of respondents were female. Approximately 28 percent reported an age of 18-24, 21 percent were aged 25-34, and 22 percent were aged 35-44. The household income of major respondents ranged from the middle to high levels with 23 percent reporting annual income of $50,000$74,999, and 25 percent reporting annual income of $75,000$149,999. As for education achievement, about 59 percent of respondents had either attended college or held a four-year college degree. Nearly 24 percent of respondents reported their average monthly spending on mobile services does not exceed the charge for their plan. About 56 percent, however, spent over $40 per month exceeding their plan charges. Factor analysis for dimensions of service quality Prior to building a measurement model, two sets of exploratory factor analysis were conducted to identify dimensions of mobile services quality and those of perceived value. Principal component analysis and varimax rotation

M-loyalty: winning strategies for mobile carriers Heejin Lim, Richard Widdows and Jungkun Park

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were used for exploratory factor analyses. Factor loadings of each item are ranged from 0.42 to 0.90, all exceeding the minimum loading criterion of 0.40 (Nunnally and Bernstein, 1994). Internal reliabilities of each construct ranged from 0.69 to 0.96, all exceeding the minimum criterion of 0.60 (Bagozzi and Yi, 1988). For dimensions of mobile service quality, the resulting factors generally emerged as expected. Exploratory factor analysis produced a ve-factor solution for mobile services, representing carriers pricing plans, network quality, data services, billing systems, and customer service quality. For data services, three distinct dimensions (i.e. messaging, entertainment, locator services) were proposed. Contrary to expectations, however, factor analysis reveals a unidimensional solution for data service attributes. In further analyses, therefore, thirteen items were treated as one dimension for data services. One item (i.e. a carrier makes customers aware of products/service) was initially expected to load on a factor of pricing plans. The result, however, shows that the item measures quality of billing systems rather than pricing plans. The item as well as billing systems reects carriers communication quality with their customers. Based on this reasoning, four items were identied as billing systems in further analyses. Items for perceived value loaded as expected. One item for perceived emotional value, however, was excluded in subsequent analysis because of cross loading. The second analysis for perceived value generated a three-factor solution. The rst factor contains four items that convey economic value. The second factor consists of three items that relate to emotional value. The third factor, comprised of four items, conveys social value. Based on the results of exploratory factor analysis, dimensionality of mobile service quality was reassessed by conrmatory factor analysis. Items were excluded because of low reliabilities smaller than 0.60 or high-frequencies of standardized residuals greater than 2.58 (Schumacker and Lomax, 2004). All remaining items showed factor loadings that ranged between 0.74 and 0.94. Reliabilities of each construct ranged between 0.73 and 0.96, which exceed the minimum criteria of 0.70 (Nunnally and Bernstein, 1994). The AVE for each construct ranged between 0.65 and 0.78, which exceed the threshold value of 0.50 (Fornell and Larcker, 1981). The results of conrmatory analysis for mobile service quality are presented in Table II. Evaluations of construct validity A measurement model was established by conrmatory factor analysis to test convergent and discriminant validity of endogenous variables (i.e. perceived value, satisfaction, loyalty). In this process, two items were excluded from a measure of loyalty because of low item reliabilities ( , 0.30). All other indicators remained in the measurement model. The results of the measurement model are presented in Table III. Overall, a measurement model ts data well as indicated by t indices (i.e. GFI, RMSEA, NFI, CFI). The convergent validity for each construct was examined by the value of the composite reliability and average variance extracted (AVE). All the composite reliabilities were higher than the minimum criteria of 0.70 (Nunnally and Bernstein, 1994). All constructs showed that an acceptable amount of variance was captured by indicators (. 0.50, see Fornell and Larcker, 1981). 212

Table II Results of conrmatory factor analysis for mobile service quality

Dimension/items Factor loading a AVEa

Pricing plans Offers the best possible plan that meets my need Offers overall superior pricing plans compared with other providers Network quality Has better coverage Provides high voice quality Data services Receiving calendar/reminder services Sending/receiving MMS (multimedia message service) Receiving sports information Playing online games Listening to music from the internet Downloading ringtones Providing location/map/directions services Receiving weather reports Receiving trafc information Billing system Provides accurate billing Makes it easy to understand and resolve billing issues Resolves billing issues quickly Customer service quality Repeatedly fails to x a problem Customer service representative is rude Call-center personnel is not able to help with my problems Service agents in a call center provide inconsistent advice or instructions from one to the next
Note: AVE (Average Variance Extracted)
a

0.80 0.78 0.92 0.80 0.73 0.65 0.76 0.85 0.96 0.77 0.82 0.84 0.92 0.89 0.89 0.76 0.89 0.93 0.93 0.85 0.67 0.71 0.79 0.81 0.85 0.66 0.76 0.79 0.75

0.74

Discriminant validity was assessed by examining the AVE and chi-square difference tests. The square root of the AVE is higher than the correlation between constructs, verifying discriminant validity for all constructs. Results of chi-square difference tests for all possible pairs of constructs showed that a x2 value for the unconstrained model is signicantly lower than that of constrained model (Bagozzi and Phillips, 1982). Consequently, discriminant validity was conrmed for study constructs. In a test of construct validity, indicators of mobile service quality were not included. When a construct (e.g. network quality) is measured by an explanatory combination of indicators (e.g. coverage, voice quality, frequency of dropped calls for mobile services), the indicators are considered formative (Fornell and Bookstein, 1982). A composite variable (i.e. network quality) is caused by these formative indicators that are exogenously determined. For formative multi-item measures, external validity of a composite variable

M-loyalty: winning strategies for mobile carriers Heejin Lim, Richard Widdows and Jungkun Park

Journal of Consumer Marketing Volume 23 Number 4 2006 208 218

Table III Results of the measurement model

Constructs

t Factor loading value

Perceived economic value (adapted from Sweeney and Soutar (2001)) (a 5 0:93, CRa 5 0:94, AVEb 5 0:83) Mobile service from XYZ is reasonably priced Mobile service from XYZ offers value for money Mobile service from XYZ is a good service for the price Mobile service from XYZ would be economical Perceived emotional value (adapted from Sweeney and Soutar (2001)) (a 5 0:85, CR 5 0:82, AVE 5 0:69) Mobile service from XYZ would make me want to use it Using XYZ mobile service would make me feel good Using XYZ mobile service would give me pleasure Perceived social value (adapted from Sweeney and Soutar (2001)) (a 5 0:94, CR 5 0:94, AVE 5 0:83) Using mobile services would help me to feel acceptable by others Using mobile services would improve the way I am perceived by others Using mobile services would make a good impression on other people Using mobile services would give its owner social approval

0.93 0.92 0.95 0.83

22.03 21.78 22.86 19.46

needs to be assessed by examining the predictive power of a construct for another reective construct (i.e. nomological validity) (Diamantopoulos and Winklhofer, 2001). In this study, nomological validity of mobile service quality was veried by the results of structural equation modeling (see Figure 1 and Table IV). Each construct of mobile service appears to have different effects on perceived economic value, perceived emotional value, and customer satisfaction. Hypothesis testing LISREL 8.52 was used for structural equation modeling. In general, the structural model (Figure 1) appears to t the data well (x2 426868.24, RMSEA 0:06, GFI 0:86). Table IV presents the results of structural equation modeling. Exogenous paths H1a and H1b posited that perceptions of service quality will be positively related to perceived economic value and emotional value, respectively. The results reveal that respondents perceived economic value increase with the positive perception of pricing plans and data services. However, the positive relationship between network quality and perceived economic value is not statistically signicant. None of functional service attributes (i.e. billing system, customer service quality) is statistically signicant. Therefore, H1a is partially supported. For perceived emotional value, perceived quality of data services is a signicant predictor. Concerning functional service quality, both billing system and customer service appear to have signicant inuences on respondents perceived emotional value. Contrary to expectations, however, the results indicate a negative relationship between customer service quality and perceived emotional value. Therefore, H1b is partially supported. Figure 1 Results of the research model

0.84 0.83 0.81

18.51 18.54 17.48

0.93 0.86 0.90 0.93

22.54 20.18 20.84 22.65

Customer satisfaction (adapted from Anderson and Srinivasan (2003)) (a 5 0:94, CR 5 0:95, AVE 5 0:83) I am satised with my decision to use mobile service from XYZ 0.94 22.72 My choice to use mobile service from XYZ was a wise one 0.96 23.89 I feel badly regarding my decision to choose XYZ for c mobile service 2 0.84 2 19.50 I think I did the right thing by using mobile service from XYZ 0.95 23.36 I am unhappy that I use mobile service from XYZc 2 0.80 2 17.75 Loyalty (adapted from Anderson and Srinivasan (2003); Yang and Peterson (2004)) (a 5 0:97, CR 5 0:97, AVE 5 0:84) As long as the present service continues, I doubt that I would switch mobile service carrier I try to use this carrier whenever I need to have mobile service When I need mobile service, this carrier is my rst choice I like using mobile service from this carrier I believe that this is my favorite carrier for mobile service I say positive things about the mobile service carrier to other people I would recommend the mobile service carrier to those who seek my advice about such matters I would encourage friends and relatives to use the mobile service provider P 2 lyi Notes: a CR Composite Reliability P 2 P :
lyi
Var1i
b

0.85 0.85 0.92 0.96 0.95 0.93 0.95 0.91

19.35 19.29 22.23 23.75 23.01 22.51 23.57 21.63

P2 l yi AVE Average Variance Extracted Pl2 yiPVar1i

Reverse coded; Fit indices x2 781:24 (p 0:00)/df 345, RMSEA 0:06, GFI 0:86, NFI 0:98, CFI 0:99

213

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Journal of Consumer Marketing Volume 23 Number 4 2006 208 218

Table IV Results of the structural equation model

Constructs Standardized coefcient
2

Standard error 0.09 0.08 0.04 0.09 0.06 0.10 0.08 0.04 0.08 0.05 0.07 0.08 0.06 0.09 0.07 0.04 0.06 0.05 0.07

t value
7.12* 0.40 3.82* 2 1.11 1.58 2 1.02 1.29 3.21* 2.59* 2 4.12* 7.35* 0.84 4.07* 2.62* 2 0.13 4.67* 6.39* 2.28* 15.03*

consumer loyalty. As shown in Table IV, customer satisfaction is a powerful predictor of consumer loyalty (b 0:94, R2 0:88). Thus, H3 is supported.

Perceived economic value (R ) Pricing plans Network quality Data services Billing system Customer service quality Perceived emotional value (R2) Pricing plans Network quality Data services Billing system Customer service quality Perceived economic value Customer satisfaction (R2) Pricing plans Network quality Data services Billing system Customer service quality Perceived economic value Perceived emotional value Loyalty (R2) Customer satisfaction
2

(0.61) 0.70 0.04 0.18 2 0.11 0.10 (0.55) 2 0.13 0.12 0.17 0.27 2 0.27 0.61 (0.80) 0.07 0.12 0.09 2 0.01 0.22 0.38 0.11 (0.88) 0.94

Discussion
In the research model, service quality and perceived value were designed to affect consumer loyalty intention through the level of satisfaction. In addition, the model suggested a multidimensional approach to consumers perceived value in the service experience. Identication of mobile service quality Two stages of factor analysis (i.e. exploratory and conrmatory factor analysis) identied ve distinct service characteristics, including pricing plans, network quality, data services, billing system, and customer service quality. In general, such dimensionality was consistent with that of previous studies. Based on the literature (ARC Group, 2004; FCC, 2004; Mahatanankoon et al., 2005; Mort and Drennan, 2004; Pagani, 2004), this study proposed three distinct service attributes of mobile data services (i.e. messaging services, entertainment services, locator services). The results of statistical analysis, however, identied all items of data services as one dimension. This nding might be related to a relatively low rate of mobile data access in the US market (Dholakia and Dholakia, 2004). Voice communication still dominates mobile usage among US consumers despite increasing popularity of data services such as text messaging and entertainment services (e.g. music downloading and online games) (FCC, 2004). Interestingly, the ndings from this study show that each quality dimension has different effects on consumers perceived value, satisfaction and loyalty intention. As presented in Figure 1, perceived quality of carriers pricing offerings and data services are positively related to consumers perceived economic value. Perceptions of functional quality (i.e. billing system, customer service quality) appeared to have a positive effect on consumers perceived emotional value. Quality of data services also increased perceived emotional value. The revised model also includes direct paths from quality attributes to customer satisfaction. Although network quality was not related to consumers value perceptions, it increased the level of satisfaction signicantly. Previous studies support such a direct relationship between consumers quality perceptions and satisfaction (e.g. McDougall and Levesque, 2000; Olsen, 2002). Hence, satisfaction is inuenced by the extent to which perceived quality exceeds or fails relative to pre-purchase expectations (Anderson and Sullivan, 1993). In this study, customer service quality and quality of data services had direct impacts on customer satisfaction. Multidimensional approach to perceived value The measurement model conrmed distinct dimensions of three value constructs in the context of mobile services economic value, emotional value, and social value. In the initial structural equation model, economic value and emotional value were positively related to customer satisfaction. Social value was dropped from the nal structural equation model because of high residuals presented in each measurement item of the construct. Previous studies found that the importance of social value 214

Notes: * p , 0:01; Fit indices x df868:24426; RMSEA 0:06, GFI 0:86; NFI 0:93, CFI 0:96

Additionally, direct paths from quality of service attributes and customer satisfaction were added in the model based on modication indices. Empirical ndings of the service literature support direct relationships between perceptions of service quality and customer satisfaction (e.g. Fornell et al., 1996; McDougall and Levesque, 2000; Olsen, 2002). The results of the research model conrm that network quality, data services, and customer service quality have signicant direct inuences on customer satisfaction. Endogenous paths The results support hypotheses regarding relationships between perceived economic value (H2a) and emotional value (H2b) and customer satisfaction. The level of satisfaction increased with improved economic and emotional value. Thus, H2a and H2b are supported. In the analysis, perceived social value, however, was dropped from the structural model because all indicators presented high frequency of standardized residuals greater than 2.58 (Schumacker and Lomax, 2004). Therefore, H2c is not supported. Additionally, modication indices suggested a path from perceived economic value to perceived emotional value. This relationship can be supported by a psychological process of decision making, namely, cognition ! affect ! behavior (Olsen, 2002). The results of the structural model conrm a signicant effect of perceived economic value on perceived emotional value. Lastly, H3 predicted a positive effect of the level of satisfaction on consumer loyalty. The results reveal that the level of customer satisfaction increased the likelihood of

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in consumers mobile usage varies in different cultures (e.g. South Korea versus Japan in Chae et al., 2002). The results of this study, however, show that U.S. consumers tend to appraise economic and emotional value more than social value in use of mobile services. Findings of this study draw attention to the role of emotion in consumers satisfaction process. Conventionally, researchers tended to investigate consumers perceived value in a restricted concept of monetary value (e.g. Chen, 2003; McDougall and Levesque, 2000). The ndings of this study, however, signal the importance of emotional responses in loyalty decisions. Because of the hedonic nature of service consumption, affect plays an important role in consumers decision making as well as a variety of behavioral responses (Grace and OCass, 2004). The ndings of this study conrm that consumers perceived emotional value has a substantial inuence on the level of satisfaction in service consumption. The results support a previous studys argument that there is an inter-relationship between value dimensions (Sweeney and Soutar, 2001). Researchers argue that cognition can generate affective responses (Malhotra, 2005). That is, consumers positive evaluations of service quality can arouse positive feelings, which also enhance the level of satisfaction. Findings of this study suggest that the introduction of emotional response and the inter-relationship between value dimensions yields a more robust prediction of customer satisfaction and further behavioral responses.

important role in customer satisfaction, and can affect loyalty. Although voice communication dominates the usage of mobile services in the current US market, the usage of a mobile phone also involves lling users leisure time (e.g. music download and online games). Findings of this study show that precise billing systems and speedy solution of billing problems can enhance mobile customers emotional value. Thus, mobile carriers need to develop value-added services to create perceived emotional value.

Limitations and future research

A limitation of this study lies in measures of service quality for mobile data services. Items of mobile data services were measured on ve-point semantic differential scales arranged from Poor (1) to Excellent (5). Scales, however, did not present respondents neutral attitude, which may be caused by lack of actual experience of certain data services (e.g., a dont know option). Thus, it is suggested for future research to include a scale point of neutral attitude. A precise interpretation of the neutral point will be also challenging for future studies. A second limitation of this study is related to individual characteristics that might moderate the effects of service quality and value on loyalty intention. For example, previous studies found individual characteristics (e.g. gender) inuence consumers information processing (e.g. Meyers-Levy and Maheswaran, 1991), technology acceptance decisions (e.g. Davis et al., 1989; Venkatesh et al., 2000), and intention to use mobile chat services (Nysveen et al., 2005). By investigating the moderating role of individual characteristics, future research is expected to provide more insightful guidelines to consumer research as well as practitioners.

Managerial implications
Findings of this study provide helpful guidelines for mobile service carriers in understanding key drivers of satisfaction and loyalty. This study identied ve distinct service attributes of mobile service carriers, and found that each attribute affects consumers cognitive and affective responses differently. For example, perceived quality of pricing plan has a positive effect on economic value; network quality on satisfaction; data service quality on economic value, emotional value, and satisfaction; billing system on emotional value; customer service quality on satisfaction. Such ndings suggest that mobile service carriers need to strategically put an emphasis on certain service attributes in their promotions based on targeting consumers needs economic value, emotional value, or service satisfaction. In addition, it is worth taking a close look at the effect of data service quality in the consumption of mobile services. Data services appear to affect consumers cognitive and affective evaluations in every stage of service experience economic value, emotional value, and customer satisfaction. The nding indicates that enhanced quality of data services can provide mobile service carriers competitive advantages over their competitors. Although current US consumers do not have elaborate perceptions of mobile data services, the literature supports increasing demand for mobile data services in the US market (FCC, 2004). Also, the prevailing usage of mobile data services in other countries (e.g. Asian and European countries) signals US mobile carriers that there will possibly be upcoming demand for mobile data services in the US mobile market. Thus, the ndings suggest that mobile service carriers need to develop high quality data services as a powerful marketing tool. Findings of this study draw attention to emotional value in the consumption of mobile services. Emotional value plays an 215

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Department at Purdue University. His research interest includes consumers strategic behavior in the internet environment and m-commerce.

Executive summary and implications for managers and executives

This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benets of the material present. Mobile technology has developed rapidly and provided a wealth of opportunity for mobile service providers. As a result, many mobile phone users enjoy access to data services in addition to basic voice communication. However, the standardization of mobile technology means that providers need to look elsewhere in order to develop effective differentiation strategies that will help them attract and retain customers. Lim et al. claim that providers must provide value to their customers if they are to secure loyalty in return. The authors warn, however, that customer perceptions of value often vary depending on the product or service type offered. For instance, that mobile service provision usually involves entering into a long-term contract is likely to mean the consumer will value different attributes than when making a single purchase. Customer-focused strategies are essential in such a context, although many US organizations seem to be missing the point. Surveys have shown that US consumers satisfaction levels are much lower in mobile services than for other service sectors. Providers must, therefore, better understand what satises customers in order to retain their patronage.

About the authors

Heejin Lim is Assistant Professor at the University of Tennessee in the Department of Retail, Hospitality, and Tourism Management. Her research focuses on consumer behavior and retail strategies in the contexts of e-commerce and m-commerce. She has conducted research on e-store image, consumer attitude and purchase intention on the internet, a quantitative assessment of e-grocers and consumer loyalty in the mobile services context. Her publications have appeared in Psychology & Marketing, Journal of Services Marketing, and Journal of Food Distribution Research. Heejin Lim is the corresponding author and can be contacted at: hlim@utk.edu Richard Widdows is Professor and Department Head of the Consumer Sciences and Retailing Department at Purdue University. Widdows has published widely in consumer sciences journals on topics related to consumer economics, customer satisfaction, and technology and the consumer. He has taught in Universities and Colleges in the UK, the USA, Australia, China, Taiwan and Malaysia. He has been active in the American Council on Consumer interests and the Society of Consumer Affairs Professionals in Business, has worked cooperatively on consumer satisfaction issues with several major corporations. Jungkun Park is Assistant Professor of the Consumer Sciences and Retailing 217

Economic and emotional value Previous research has suggested strong links between perceived service quality and customer satisfaction and loyalty. Studies have also identied drivers of consumer loyalty in mobile services within foreign markets, though this has only partial relevance in the USA because of the variations in market development. The aim of Lim et al. is to identify those attributes that bring perceived value to the customer and most inuence their impression of mobile service providers. The authors focus on the notion of economic and emotional value. Previous studies have largely regarded perceived value in monetary terms even though there is evidence that consumers also attach value to, for instance, the degree of enjoyment the activity brings. The authors emphasize the importance of this and point to empirical research proving a multidimensional approach to perceived value offers a wider analysis and more accurate prediction of future consumer behavior than a consideration of monetary value alone. Some previous studies have dened quality attributes as being technical or functional. Technical aspects relate directly to what is being offered. In this context, quality of the mobile service would be measured in terms of such as cost, network quality and variety of data services. On the other hand, functional attributes concern how the service is

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delivered and include customer care and providers billing systems. In the authors opinion, these attributes inuence consumer perception of economic and/or emotional value. Service quality and consumer value Many studies have indicated a connection between service quality and perceived value and the authors believe that this is an area for providers to exploit, more especially with it being hard to differentiate in terms of technical quality or price. Lim et al. investigate the issue via a web-based survey of US consumers who currently subscribe to national mobile service providers. Of the 330 responses, 71 percent were aged between 18 and 44 and just over half were female. The participants answered questions that measured perceived economic value, perceived emotional value, satisfaction and loyalty intention. Satisfaction was dened as the consumers overall evaluation after use of a service over a period of time. The results indicated that different attributes seem to have a different effect on consumer perceptions. For example, pricing plans and billing systems were found to have a positive impact on perceived economic value, while the inuence of network quality was insignicant in this respect. And while billing systems had an impact on perceived emotional value, the quality of customer services surprisingly did not. As expected, both perceived economic value and perceived emotional value had a positive effect on customer satisfaction, which itself was found to relate positively to loyalty intentions. Implications Even though network quality appeared to have no signicant impact on perceived economic value, the authors stress that providers should not neglect this area as good performance was found to signicantly increase overall satisfaction. That

quality of data services was also found to have a direct impact on all stages of the service experience (economic value, emotional value, satisfaction) offers a potential source of competitive advantage in the US market. Demand there for such as text messaging, music downloading and online gaming is on the rise, even though voice communication remains the most popular function for mobile phone users. Providers should, therefore, aim to offer high quality data services to the consumer. Lim et al. note the importance that consumers attach to emotional value and its role in determining future behavior. Billing was found to have a major impact on emotional value and mobile carriers will impress the consumer in this area by providing an efcient service that includes a speedy resolution of any problems. The authors also planned to explore consumer perceptions of social value, based on previous studies that indicated mobile phones role as a status symbol. While there is evidence of this within other cultures, this study indicated that US consumers did not share these tendencies. Consideration of this aspect was thus omitted. It was pointed out that individual characteristics such as gender have proven to be signicant in earlier studies and the authors suggest further research to determine the impact of gender on mobile phone usage. Research of this nature could help providers design marketing strategies to target subgroups. Lim et al. also draw attention to the difculty in measuring service quality and the fact that the scales used in their study were exploratory. cis of the article M-loyalty: winning strategies for mobile (A pre carriers. Supplied by Marketing Consultants for Emerald.)

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