Are customer satisfaction and customer loyalty drivers

of customer lifetime value in mobile data services:

a comparative cross-country study
Jia-Yin Qi

Yong-Pin Zhou

Wen-Jing Chen

Qi-Xing Qu
Published online: 11 July 2012
Springer Science+Business Media, LLC 2012
Abstract Many research papers have been published on
the effect of customer satisfaction and customer loyalty on
customer protability which is related to customer lifetime
value (CLV). However, there is limited research on the
impact of cross-cultural factors on the effect of customer
satisfaction and customer loyalty on CLV. This study aims
to ll this gap. Focusing on the usage of mobile data ser-
vices, 846 samples from China and 689 from the US are
obtained. Data analysis suggests that customer loyalty is a
driver of CLV, while customer satisfaction is not. This
research has important implications for rms about how to
enhance CLV in mobile data services.
Keywords Customer lifetime value (CLV) Cross-
cultural Customer satisfaction Customer loyalty Mobile
data services E-business
1 Introduction
Customer relationship management (CRM) is a holistic
approach to managing customer relationship and creating
shareholder value. CRM integrates marketing strategies
and uses IT to create protable, long-term relationship with
customers and other stakeholders [6, 61, 77, 84]. By
employing CRM, a rm can enhance its knowledge about
customers, thereby enabling itself to provide customers
with products that meet their needs more precisely, and
lead to increase customer value and higher prot [36, 58,
86]. Customer lifetime value (CLV) is important in the
context of CRM because it is one of the ve marketing
metrics to evaluate marketing decisions [91].
Two issues considered important by most rms in
practice: (1) who the most protable customers are; and (2)
how to identify them. This has led to very active research
on the measurement of CLV in recent years. Firms can
implement a protable customer management strategy
based on the measurement of CLV. However, for many
rms, the most protable customers are a small portion of
their customer base, while a large number of customers are
less protable, and even unprotable. Therefore, it
becomes vital to raise the CLV for most of their customers.
Compared with the study on CLV measurement modeling,
there is a dearth of empirical research on how to raise
customers CLV [10].
The growing economic globalization has led to greater
customer resource globalization [61, 103105]. Thus,
national environmental factor (NEF) becomes a factor
inuencing the success of a rms CLV enhancement
strategy [105]. A multinational rm, therefore, must learn
to customize its CRM strategy to suit each region and its
culture, in order to better manage customer resource across
national boundaries [66, 102, 105]. For example, cultural
J.-Y. Qi (&) W.-J. Chen Q.-X. Qu
School of Economics and Management, Beijing University of
Posts and Telecommunications, P.O.BOX 295, Beijing 100876,
Peoples Republic of China
e-mail: qijiayin@bupt.edu.cn
W.-J. Chen
e-mail: cwjing1978@163.com
Q.-X. Qu
e-mail: quqx85@yahoo.com.cn
Y.-P. Zhou
Department of Information Systems and Operations
Management, University of Washington Business School, Box
353200, Seattle, WA 98195-3200, USA
e-mail: yongpin@uw.edu
1 3
Inf Technol Manag (2012) 13:281296
DOI 10.1007/s10799-012-0132-y
difference between countries or regions can lead to dif-
ferent customer consumption behaviors [69]. Therefore, to
achieve greater prots, a successful CLV enhancement
strategy requires a rm to understand the customers
diverse consumption behaviors inuenced by culture and
value, and to adopt a corresponding strategy to improve its
relationship with the customers.
Identifying the drivers of CLV is the rst step in
enhancing it. The relationship between expected CLV
drivers and CLV components can be the proof to identify
CLV drivers. Customer lifetime duration and customer
revenue are the two essential CLV components. Customer
satisfaction and customer loyalty are considered the two
key drivers to improve CLV. It is often believed that
customer satisfaction can positively relate with customer
lifetime duration and customer revenue [11, 12, 46, 74],
which are the two important components of CLV. An
opposing view held by other researchers is that customer
satisfaction may cause positive purchase intention and keep
relationship intention, but it cannot certainly lead to sub-
sequent purchase behavior and non-defection behavior
[19, 64, 78, 92]. To date, there is little consensus on
whether customer satisfaction is a driver of CLV. The
situation is similar for customer loyalty. While some
researchers view customer loyalty as a driver of CLV
because it can bring more future purchases and longer
relationship duration [13, 37, 82, 93, 97], others think the
effect of customer loyalty is overrated or simplied. In
some cases, customer loyalty can have positive effect on
CLV, but in other cases it cannot [25, 85]. More empirical
research is thus needed to explore whether customer sat-
isfaction and customer loyalty are drivers of CLV.
The strength of the effect of CLV drivers on CLV
components could differ between western and eastern
countries with national cultures that are very different from
each other. Although some have recognized customer value
research under cross-cultural background as an important
future research direction in the eld of customer value
management [34], the research on enhancing CLV in the
context of different national cultures is almost non-existent
until recently. We aim to clarify the drivers of CLV under
the cross-cultural background in this study. To the best of
our knowledge, our research is the rst to study whether
customer satisfaction and customer loyalty are CLV drivers
under cross-national background.
We choose the US and China as the two countries to do
the comparative cross national research for three reasons:
(1) the US and China are representative of countries with
western and eastern cultures; (2) the US is the most
developed country in the world, while China is the largest
developing country with the fastest developing economy;
(3) both countries have become the most important markets
for many rms.
The consumption of mobile data services in the tele-
communications industry is a good market segment for our
research for several reasons. First, it has become increas-
ingly important to increase CLV on data usage for tele-
communication carriers [57]. Mobile data service revenue,
as a percentage of the total industry revenue, has been
increasing [47]. The growth continues even during the
current economic downturn, when the growth of the tele-
communications industry as a whole has slowed down [33,
80]. Second, there are obvious regional differences
between the behaviors of mobile data service users [21,
79]. Customers perception of the importance of the same
mobile data service and their willingness to pay for it differ
signicantly across countries [52]. Thus, customers pre-
ferred mobile data services also differ across countries [54,
81]. Third, although the aforementioned regional differ-
ence in mobile data services usage pattern has been noticed
in telecommunications industry, there is little research in
the existing literature that can evaluate the impact of
national culture on this difference.
This paper will address the following issues:
1. Are customer satisfaction and customer loyalty drivers
of CLV?
2. Does NEF inuence the effect of the various CLV
drivers on CLV components?
3. As for China and the US, what are the respective key
factors to enhance CLV?
The rst question is important for formulating marketing
strategies for enhancing customers CLV. The second
question is especially relevant in the context of greater
globalization in the last few decades, and will give some
guidance for international companies to do business across
the world. The third question is to follow up the rst two
and has implications for a rms marketing strategies in the
US and China. Once a rm recognizes how NEF affects the
drivers of CLV, it should adopt appropriate approaches to
enhance CLV to suit the national culture it operates in.
In answering these questions, we examined the moder-
ating effect of NEF on the relationships between the drivers
of CLV and CLV components. If we nd signicant
moderating effects of NEF, then a rm must take them into
account in order to enhance its CLV.
Below, we rst develop theoretical conceptual model
and the hypotheses, and then describe how to measure the
various factors involved in the model. Next, we describe in
details the research hypothesis validation process and
verication results. After that, we summarize and discuss
the validation results and make recommendations about
how to enhance CLV in mobile data services from a cross-
cultural perspective. Finally, we conclude the paper with a
discussion of limitations to our research and topics for
future research.
282 Inf Technol Manag (2012) 13:281296
1 3
2 Theoretical background
2.1 CLV components
A customers CLV for a rm is the net prot or loss to the
rm from a customer over the entire life of transactions of
that customer with the rm. Usually, the CLV of a cus-
tomer for a rm is the net revenues obtained from the
customer over the lifetime of transactions with that cus-
tomer minus the cost of attracting, selling, and serving that
customer, taking into account the time value of money
[50]. Consequently, relationship duration, revenues, and
costs are selected as the components of CLV in our model
[10]. Here, relationship duration is the time length of the
entire customer relationship life cycle; revenues are the
expected revenues generated by the customer, including
autonomous revenue, up-selling revenue and cross-selling
revenue; costs are the entire expected costs to serve the
customer including acquisition costs, marketing costs, sales
costs and termination costs. Although Reinartz and Kumar
[86] nd that relationship duration has a small correlation
with future CLV in some contexts, most of the researchers
agree that there is a positive relationship between customer
relationship duration and CLV [50, 83]. That means the
longer the customer relationship duration is, the greater the
CLV will be. If we assume the cost for each customer is
equal, it is certainly that the bigger the revenues, the larger
the CLV. So, to increase CLV, it is necessary to extend
relationship duration, increase revenues, and decrease
costs.
Because data on many factors that affect the operating
costs are extremely difcult to obtain, we have excluded
costs from our model. As a result, our model focuses on
relationship duration and revenue as the components of
CLV. This does not pose a problem for our analysis. One
reason is that the CLV components do not interact with
each other, if we omit one component, the relationships
between the variables and the other two components will
not been affected. The second reason is that the telecom-
munications industry generally has high xed cost and low
variable cost for each subscriber of mobile data services;
thus, we can consider the cost of each customer as
approximate the same in this study.
2.2 Expected CLV drivers
There may be many complex factors that drive the afore-
mentioned CLV components, which include customer
satisfaction, commitment, trust, and loyalty. However,
there is no consensus on which dimensions make up CLV
drivers and the existing models have mainly considered
two following relationship quality related factors: customer
satisfaction and customer loyalty. Although commitment
and trust is also considered as two dimensions of rela-
tionship quality [100], they can be replaced by loyalty [83].
As an important outcome of customer relationship quality,
customer loyalty is considered as the highest level of
relational bonding and maintains a long-term relationship
[56], while customer satisfaction is an important dimension
of customer relationship quality which has a direct and
indirect inuence [59, 87]. In the CLV literature, Ho et al.
[41] introduce customer satisfaction into the CLV calcu-
lation based on the Pareto/NBD model; Hwanag et al. [49]
introduce customer loyalty into the CLV model.
Customer satisfaction describes customer feelings
toward the rm and its products/service [62, 63, 103]. It has
also been dened as customer reaction to the state of ful-
llment of their expectation and needs, customer judgment
towards service and products quality [27, 32, 39, 75, 107].
Customer satisfaction is a positive experience on enter-
prises which can stimulate customers purchasing behavior
[20, 90]. A commonly used statistical result is that a very
satised customer is six times more likely to repurchase
than a merely satised customer.
Customer loyalty is the internal positive attitude, emo-
tion, preference expressed by customer to a brand or
product/service. It means that loyal customers have some
preference or dependency on one particular brand or its
provider, cannot easily be tempted by competitive prod-
ucts, and will pay for it repeatedly, even recommending it
to relatives and friends on their own initiative [65, 82, 84].
2.3 Does national culture matter for improving CLV?
Culture can be viewed as a set of shared characteristics
(symbols, norms, and values etc.) within a group of people
that affect the behaviors of individual members by pro-
viding norms for that group [21, 70]. It can also be seen as
a store of social knowledge, whereas a country is often seen
as a cultural studies unit. Value is the foundation of culture
[45], and culture affects the overall function of society
through cultural values. Therefore, depending on the spe-
cic culture conguration of values, certain sets of
behavior pattern occur.
According to [38, 44, 45], there are seven cultural
variables, namely power distance, uncertainty avoidance,
individualism, masculinity, communication context, long-
term orientation and time perspective. Among these cul-
tural dimensions, four ones are relevant to our study:
uncertainty avoidance, individualism, communication
context and long-term orientation. Based on the research in
[42, 43, 45] and the results of other culture research [1, 28,
31, 53, 55, 94, 96, 108], the cultural value of China and the
US can be described in Table 1.
Individualism represents a preference for a loosely-knit
social framework where people are expected to take care of
Inf Technol Manag (2012) 13:281296 283
1 3
themselves and their own interests, whereas collectivism
indicates an inclination toward a tightly-knit social
framework where people expect their companies to look
out for their welfare and where personal goals are subor-
dinated to those of the group [45]. This cultural value
inuences customer behaviors [99] and the rms strategy
to attract them. Advertisement which aims at individualism
focuses on the individual enjoyment, while the collectivist
culture pays more attention to the relationships among
people [98].
Uncertainty avoidance is the degree to which members
of society feel uncomfortable with uncertainty and ambi-
guity, which leads them to seek conformity [96]. If
uncertainty avoidance is strong, people tend to avoid risk
and seek security; otherwise, if the uncertainty avoidance is
weak, people will look for more challenges and are willing
to accept new products or services. Money and Grotts [73]
and Cyr [22] prove the effect of uncertainty avoidance on
consumers behaviors.
Low communication context means information is sta-
ted directly and reects a preference for hard, quantiable
detail as compared to high context, which reects a pref-
erence to draw conclusions from implicit information via
intuition [96]. In high communication context culture,
explicit communications and clear procedures are pre-
ferred, while in low communication context culture, group
bonds and harmony are viewed as important [108]. The
difference of communication context can inuence cus-
tomers choice. For example, the short message services of
mobile data services are more popular in eastern countries
than in western countries because most of the eastern
customers live in high communication context and most of
the western customers live in low communication context.
Long-term or short-term orientation is a salient aspect of
national culture values and has inuences on consumers
decision making processes. According to [42], on the long-
term orientation side, one nds values oriented towards the
future and represented by values such as perseverance,
ordering relationships by status and observing that order,
thrift, and having a sense of shame; on the short-term
orientation, one nds values rather oriented towards the
past and the present and represented by values such as
personal steadiness and stability, saving face, and others.
Confucian ethics lead to long-term orientation of eastern
cultures. Donthu and Yoo [24] prove that long-term ori-
ented customers have lower service quality expectations
than short-term oriented customers and long-term oriented
customers also place lesser importance on responsiveness
than short-term oriented customers.
National culture has a strong relation with customer
satisfaction. Hejaili et al. [40] study the patient satisfaction
in Austria, Syria, Saudi Arabia and the United Arab
Emirates (UAE). They show that patients in Saudi Arabia
and the UAE are the most likely to show satisfaction with
healthcare services, while those in Austria are the least
likely. Those in Syria show medium satisfaction. The
author suggests that it is the characteristics of Arab culture
that make people of Gulf States have a more optimistic
assessment of things. Ruetzler [88], who studies food and
beverage service quality of a university in Southeast Asia,
compares the service quality assessment of four groups of
students from Asia (excluding India), Latin America, India,
and Canada. The results nd that people from different
cultural backgrounds assess the same service signicantly
differently.
Eng and Kim [26] study customer e-loyalty in e-shop-
ping in South Korea. They show that the remarkable fea-
tures of Confucian culture (high power distance,
collectivism) have a positive correlation with customer
e-loyalty. In particular, the research nds collectivism has a
strong positive correlation with customer lock-in of cus-
tomer e-loyalty. Cyr [22] is among the few researchers that
discuss the moderating effects of culture on the relationship
between the antecedents of customer loyalty and customer
loyalty. The paper nds that collectivism culture can sig-
nicantly strengthen the relationship.
As we described earlier, we have found some cross
cultural research on CLV drivers (most of them are in
recent years). However, there is very little cross cultural
empirical research on the relations between CLV drivers
and CLV components. Thus, we have little evidence to
judge whether national culture matters for a rms CLV
enhancing. Using the US and China with different national
cultures as two comparative countries, this study aims at
exploring the key CLV drivers for the two countries,
respectively.
3 Hypothesis and model
3.1 The moderating effect of NEF on CLV drivers
Customer satisfaction is a mental state which results from
the customers comparison of expectation prior to a pur-
chase with performance perceptions after a purchase.
On the one hand, whether a customer complains directly
to the rm after a product or service failure is affected by
Table 1 Cultural values of China and the US
China US
Individualism Collectivism Individualism
Uncertainty avoidance Weak Strong
Communication context High Low
Long-term orientation High Low
284 Inf Technol Manag (2012) 13:281296
1 3
social attitude towards the complaint behavior, which is in
turn related to the extent of the cultures collectivism and
long-term orientation. In collectivistic and long-term ori-
entation cultures, conict is typically viewed negative, and
avoided and even suppressed [15, 17, 60]. Hence, conict
avoidance is prevalent in East Asia, especially in China. A
society that is more oriented toward collectivism and long-
term orientation has social norms with less allowance for
complaints, and people express more negative attitude
toward complaining behavior. For example, by following
the Golden Mean principle, Chinese people try hard to be
neutral and avoid extreme attitudes as a way to protect
themselves in society. It seems that people under collec-
tivistic and long-term oriented culture have higher degree
of tolerance than those under individualistic and short-term
oriented culture. Therefore, it is likely for Chinese people
to give a higher evaluation even when they are dissatised.
On the other hand, a persons self-evaluation emotion is
affected by his/her cultural background. An individualistic
theory of human nature assumes that a persons interests
are best served by permitting maximum freedom and
responsibility for choosing objectives and the means for
obtaining them. Freedom is an important component of
individualism. Low communication context is helpful for a
person to express his or her real opinions and to pursue his
or her goals directly. In contrast, in collectivism and high
communication context society, personal identity is dened
in terms of the system of relationships in which a person is
involved, and people are inclined to avoid extreme evalu-
ation to things explicitly. Thus, harmony is an important
component of relational identity [5]. Since modesty is
viewed as a good character in the Chinese society, while
individual right is highly advocated in the U S, it is likely
for Chinese people to give a modest evaluation when they
are satised or dissatised.
Thus, we hypothesize:
H1 Chinese customers are more likely to generate more
moderate customer satisfaction than customers in the US.
Several reasons have been given as to why Chinese
customers are more likely to generate customer loyalty
than American customers: In a collectivist culture people
prefer a tightly knit social framework in which individuals
can expect their relatives, clan, or others in the group to
look after them in exchange for unquestioning loyalty
[101]. In contrast, people in an individualist culture prefer a
loosely knit social framework in society wherein individ-
uals are supposed to take care of themselves and their
families [98]. Wheeler et al. [101] show that collectivist
cultures tend to engage in long-term in-group relationships
and have more intimate relationships among in-group
members. Therefore, it is more likely for customers in a
collectivist society to have feelings of interdependence
with the rm if the rm provides good customer care. This
likely makes it easier to generate customer loyalty with
good service in a collectivist culture.
This does not, however, lead to the conclusion that
Chinese customers are more loyal to their product/service
providers than their counterparts of the US to their product/
service providers. The rst reason lies in balance between
face and guanxi, which are the two very important ele-
ments of Confucian culture and relate to Hofstedes cul-
tural dimensions of collectivism and high power distance.
The high importance that Chinese people place on face
will cause brand loyalty to a rms product or service
brand; while the maintenance of cordial guanxi could bring
personal loyalty to in-group persons, not organizational
loyalty to a rm [29]. The second reason is that Chinese
collectivism differs substantially from that in other Asian
countries. Chinese collectivism is individualistic collec-
tivism where small group or family, rather than society,
value is emphasized [67]. The third reason is uncertainty
avoidance [22]. China is a high uncertainty avoidance
society where people adapt to changes to avoid risk.
Comparatively, the US is a low avoidance society, where
people are more willing to have a try, tend to accept
innovation and are more likely to adapt to changes. This
may cause the Americans to be more loyal to high-tech
products/services than the Chinese.
Considering the features of mobile data services, which
are characterized by innovation and change, it seems that in
this particular market the Americans should be more loyal
to the usage of mobile data services than the Chinese do.
We thus hypothesize:
H2 American customers are more likely to generate
customer loyalty than Chinese customers in the mobile data
service market.
3.2 The moderating effect of NEF on the relations
among CLV drivers
Matos [69] nds that there is a strong positive relation
between customer satisfaction and customer loyalty. This
strong link is further demonstrated by [14, 18, 23, 30, 39,
51, 68, 76].
According to H1, Chinese customers are more likely to
show moderate customer satisfaction (i.e., say OK
instead of unsatisfactory and satised instead of
very satised), thereby weakening the positive relation
between customer satisfaction and customer loyalty. Thus,
we hypothesize:
H3 The positive relation between customer satisfaction
and customer loyalty is much stronger for American cus-
tomers than for Chinese customers.
Inf Technol Manag (2012) 13:281296 285
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3.3 The moderating effect of NEF on the relations
between CLV drivers and the components of CLV
3.3.1 Customer satisfaction as a CLV driver
For most of the previous studies, satised customers are
more likely to view the rm as less risky and thus are more
likely to adopt other products from the same rm and to
increase volume and frequency with the rm [91]. Bolton
and Lemon [12] report a positive effect of customer sat-
isfaction on usage of a service (telecommunications and
entertainment). Homburg et al. [46] reveal the existence of
a strong positive impact of customer satisfaction on will-
ingness to pay. Therefore, the improvement of customer
satisfaction can lead to the increase of customer revenue.
Oliver holds that customer satisfaction represents an
important source of revenue for rms [75].
However, Seider et al. [89] question the explicit
assumption that satised customers repurchase more and
therefore are more protable. They propose that the rela-
tionship between satisfaction and repurchase behavior is
moderated by customer, relational, and marketplace char-
acteristics. The results suggest that the relationship between
customer satisfaction and repurchase behavior is contingent
on the moderating effects of convenience, competitive
intensity, customer involvement, and household income.
Convenience is a positive moderator of satisfactions effect
on repurchase visits and spending, while increasing com-
petition will attenuate the positive effect of convenience.
Involved customers and high income customers both spend
even more when their satisfaction is high.
For some people (e.g. the youth) it is very convenient to
subscribe and use mobile data services, while for other
people (such as the elderly) it may be difcult for them to
manage the subscription and the un-subscription processes.
Compared with retailing industry, telecommunication
industry has relative lower competition intensity, which
may decrease the positive effect of customer satisfaction on
customer spending. Combining the views from most
researchers and the view of [89], for mobile data services,
it seems that the positive relationship between customer
satisfaction and customer revenue will be non-signicant.
Although compared with the Americans, the Chinese are
more likely to moderate their satisfaction level, which may
have a moderating effect on the relationship between cus-
tomer satisfaction and customer revenue, the non-signi-
cant relationship between the two variables will not differ
in the two countries. Thus, we have the following
hypothesis:
H4a For mobile data services, the relationship between
customer satisfaction and customer revenue is non-signif-
icant in both China and the US.
Customer satisfaction also has a positive effect on cus-
tomer relationship duration. Fomell [30] shows that satis-
ed customers are more likely to keep stable relationship
with the rm. Hallowell and Bolton [11, 39] conrm that
there is positive correlation between customer satisfaction
and relationship duration in the retail banking and cell
phone areas, respectively.
However, Yeung and Ennew [106] nd that the strength
of the impact of customer satisfaction, in terms of both the
relation between customer satisfaction and customer reve-
nues and the relation between customer satisfaction and
relationship duration, varies with the industry sector. For
example, the relationship is stronger in nancial sectors but
weaker in technology and communication sectors. It seems
that industry sectors characteristics can moderate.
Although the positive relationship between customer
satisfaction and customer relationship duration is accepted
by most researchers, empirical evidence reveals that many
customers who state they are very satised with a service
provider nevertheless subsequently defect. Chandrasheka-
ran et al. [19] decompose a customers stated satisfaction
into satisfaction level and satisfaction strength, and dem-
onstrate that customer satisfaction strength plays a central
role in the translation of customer satisfaction to the length
of customer relationship. Uncertainty and weakly-held
judgments promote customer vulnerability, which will
weaken the relationship between customer satisfaction and
relationship duration.
For mobile data services, continuous innovations and
rapid changes are the two important features. The
increasingly faster update rate of mobile data services
may keep customer satisfaction at a high level, but it
may also weaken the satisfaction strength between cus-
tomers and the present mobile data services. This brings
some uncertainty in the consumption of mobile data
services. It is expected that the relationship between
customer satisfaction and customer revenue would be
non-signicant in this consumption area. Because mobile
data service has the same features in China and the US,
we hypothesize:
H4b For mobile data services, the relationship between
customer satisfaction and customer duration is non-signif-
icant in both China and the US.
3.3.2 Customer loyalty as a CLV driver
It has been found that loyal customers generate much more
customer revenue. In an online business-to-customer (B2C)
context, Srinivasan [93] shows that more loyal customers
generate higher autonomous revenue because they have
greater willingness to pay. Bourdeau [13] shows customer
loyalty has a direct, positive effect on customers exclusive
286 Inf Technol Manag (2012) 13:281296
1 3
consideration, strength of preference and share of wallet.
These then lead to more up selling and cross selling.
As for the relationship between customer loyalty and
customer relationship duration, the previous studies have
consistent view that higher customer loyalty also leads to
longer customer relationship duration. Reichheld [83]
analyzes the value of loyalty systematically and believes
that loyal customers have a longer customer duration time.
Tsao et al. [97] nd that customer loyalty effect is posi-
tively related to customer retention rate, which is the
probability of a customer being alive.
The role of customer loyalty is more obvious in the
service industry than other industries [7, 37]. Most service
rms use customer loyalty as a metric to design marketing
strategies aimed at decreasing customer churn and
increasing customer consumption. On the other hand,
Dowling and Mark [25] consider that loyal customers
spend more with the company is a gross over-simplica-
tion. Further, they point out that only in some market
conditions more customer loyalty generates more customer
revenue. These conditions can be summarized as: (a) there
is open competition; (b) products and services are func-
tionally equivalent in broad terms (and therefore substi-
tutable); (c) there is little tendency for any brand to
uniquely appeal to a particular subgroup of consumers; and
(d) there is little dynamic variation over time in competing
brands market shares. Some products and services, such as
state monopolies, highly innovative new products, and
products whose success depends on fads and fashions, do
not appear to match these market conditions.
Telecommunication industry is not a sufciently open
competition industry. Mobile data services are typical
highly innovative products, and to some extent, their
market adoption depends on customers fashion con-
sumption experiences perceived from the usage of mobile
data services. According to Dowling and Marks [25]
opinions, it seems that the positive relation between cus-
tomer loyalty and customer revenue may not stand in the
consumption area of mobile data services.
Since the characteristics of mobile data service will not
differ between China and the US, it is expected that:
H5a For mobile data services, the relationship between
customer loyalty and customer revenue is non-signicant
in both China and the US.
H5b For mobile data services, the relationship between
customer loyalty and customer duration is non-signicant
in both China and the US.
Considering NEF as the moderator, we propose the
theoretical model of this research shown in Fig. 1. We
want to clarify the difference of CLV drivers, the differ-
ence of the relationships between CLV drivers and CLV
components between the US and China. Thus, we want to
get the answer for how to improve CLV under the different
culture background of China and the US.
4 Research method
4.1 Sample and data collection
We conducted surveys in the US and China simultaneously
through various channels including online survey, e-mail
survey, and in-person survey. Sample design is conducted
by quota sampling.
Data Collection in China We limited survey subjects to
persons who were born in Beijing, China, have lived in
Beijing for at least 5 years, and have used mobile data
services. We designed sampling quota by gender, age, and
occupation in accordance with the demographics of this
target population. Surveys were conducted by email and
through in-person interviews. There were 905 samples in
total, but after screening and deleting invalid samples, we
obtained 875 valid samples. The amount of sample used for
data analysis is consistent with quota sample.
Data Collection in the US We limited survey subjects
to mobile data services users who were born in Seattle,
Fig. 1 Theoretical conceptual
model
Inf Technol Manag (2012) 13:281296 287
1 3
USA, or have lived there for at least 5 years. Again, we
designed sampling quota by gender, age, and race in
accordance with the demographics of this target population
based on the Census 2000 of the United States. Surveys
were conducted online and through in-person interviews.
There were 850 samples in total, but after screening and
deleting invalid samples, we obtained 689 valid samples.
The amount of sample used for data analysis is consistent
with quota sample.
4.2 Measurement development and validity
We measure national culture and CLV drivers on a seven-
point Likert scale (1 = strongly disagree, and 7 = strongly
agree). The components of CLV, on the other hand, are
calculated from data collected in the survey. The research
instrument was developed on the basis of prior studies in
the west. For the Chinese sample, the English questionnaire
was translated into Chinese. We conducted 15 in-depth
interviews with random samples meeting in the street to
ensure the face validity of the measures. The above pro-
cedures to get both Chinese and American survey ques-
tionnaires follow Brislins methodology [16].
4.2.1 The measurement of CLV drivers
Customer satisfaction can be measured by the disconr-
mation of expectation for each part of an offer or for the
offer in total. Repeated purchase, positive attitude, expec-
ted purchase and recommendation are the main factors
used to measure customer loyalty [35].
Our measurements of the CLV drivers are based on the
measurement of customer satisfaction and customer loyalty
in [66]. The measurements in these two papers are designed
for M-commerce and banking industries, respectively, and
are modied to t the mobile data services in this paper.
For details, please see Appendix 1.
4.2.2 The measurement of CLV components
We measure customer revenue by their average monthly
spending on mobile data services. Moreover, we measure
customer relationship duration time by future relationship
time. The data of the two variables is collected from
questionnaire.
We use Cronbachs Alpha reliability to measure the
reliability of the questionnaire. In our dataset, the Cron-
bachs Alpha values of customer satisfaction and customer
loyalty are found to be .773 and .741 with the Chinese
sample and .925 and .838 with the American sample,
respectively (for details please see Table 8 in Appendix
2). All Cronbachs Alpha values exceed the threshold
value of .7, which suggests that the proposed model has
acceptable psychometric properties [74].
We performed conrmatory factor analysis (CFA) to
assess the validity of the measurements. We ran two sep-
arate measurement models, grouping related constructs.
The rst CFA grouped items measuring customer satis-
faction, the second was the customer loyalty. The t indi-
ces presented in Table 8 in Appendix 2 indicate that the
models t the data well in both samples. All item stan-
dardized loadings for each construct were signicant
(P\.001), which supports the dimensionality of the
constructs.
5 Data analyses and hypotheses testing
5.1 Assessment of model t
To test the models effectiveness, we apply it to the China
sample, the US sample, and the total sample, respectively.
Tests were done using the AMOS 17.0 software. For the
Chi-square is very sensitive to the sample size, number of
items and number of factors in the model [8, 9], other t
indices, such as goodness-of-t index (GFI), adjusted
goodness-of-t index (AGFI), root mean square of
approximation (RMSEA), and Comparative Fit Index
(CFI) were used to assess overall model t. These results
are reported in Table 2. In general, all these results suggest
that our model ts the data well (see Table 2).
5.2 The hypothesis testing for whether customer
satisfaction and customer loyalty are drivers
of CLV or not H4, H5
We use structural equations to analyze the relation between
national culture and its impact on CLV, according to the
theoretical conceptual model in Fig. 2. The AMOS17
software was used.
Table 2 Evaluation indicators
of the model
Indicators Reference
value
References China-sample
model
US-sample
model
Total-sample
model
GFI [.9 Hooper et al. [48] .957 .968 .972
AGFI [.7 .926 .939 .949
CFI [.9 .926 .982 .970
RMSEA \.08 .077 .064 .063
288 Inf Technol Manag (2012) 13:281296
1 3
Table 3 presents the analysis of the relationships among
different variables in the conceptual models. The three
models are quite consistent: all the relations are signicant
(P\.001), except for those between customer satisfaction
and customer direct revenue and between customer satis-
faction and customer relationship duration. Based on this
observation, we modify the model as shown in Fig. 2.
After the modied model in Fig. 2 is analyzed, we
present the path coefcients in the structural equation
models in Table 4.
5.2.1 Customer satisfaction as a driver of CLV (H4a, H4b)
On the one hand, the path coefcientsChina-sample
model: -.169, US-sample model: -.068, Total-sample:
-.058 (see the second line in Table 4)show that the
relationship between customer satisfaction and customer
revenue contribution is slightly negative, but not signi-
cant, in all three samples. On the other hand, the data
analysis of the path coefcientsChina-sample model:
-.142, US-sample model: -.144, Total-sample: -.096
(see the third line in Table 4)show that the relation
between customer satisfaction and customer relationship
duration is also negative, but still not signicant, in the
three samples. Therefore, we cannot conclude that cus-
tomer satisfaction is a driver of CLV.
5.2.2 Customer loyalty as a driver of CLV (H5a, H5b)
The path coefcients of the relationship from customer
loyalty to customer revenue China-sample model: .343,
US-sample model: .348, Total-sample: .175 (see the fourth
line in Table 4)show that the relationship between cus-
tomer loyalty and customer direct revenue is signicantly
positive. It is supported that customer loyalty is a driver of
customer revenue. The path coefcients of the relationship
from customer loyalty to customer relationship duration
China-sample model: .556, US-sample model: .664, Total-
sample: .584 (See the fth line in Table 4)show that the
relationship between customer loyalty and customer life
cycle is signicantly positive. This means that customer
loyalty really is a driver of customer relationship duration.
Fig. 2 Modied theoretical conceptual model
Table 3 Correlation analysis of the variables in the conceptual model
Relations between variables Correlation P value in the
China-sample model
P value in the
US-sample model
P value in the
total-sample model
Signicance
Customer satisfaction and
customer loyalty
Positive correlation *** *** *** Signicant
Customer satisfaction and
relationship duration
Negative correlation .074 .032 .036 Not signicant
Customer loyalty and
relationship duration
Positive correlation *** *** *** Signicant
Customer loyalty and
customer revenue
Positive correlation *** *** .013 Signicant
Customer satisfaction and
customer revenue
Negative correlation .037 .335 .225 Not signicant
***: signicant at the 0.001 level for a two-tailed test
Table 4 Path coefcient for the three samples
Path China-sample
model
US-sample
model
Total-sample
model
Signicance
Customer satisfaction ? customer loyalty .749 .775 .731 Signicant
Customer satisfaction ? customer revenue -.169 -.068 -.058 Not signicant
Customer satisfaction ? relationship duration -.142 -.144 -.096 Not signicant
Customer loyalty ? customer revenue .343 .348 .175 Signicant
Customer loyalty ? relationship duration .556 .664 .584 Signicant
Inf Technol Manag (2012) 13:281296 289
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Consequently, we can say that customer loyalty is a driver
of CLV.
5.3 The hypothesis testing for the moderating effect
of nationality H1, H2, H3, H4a, H4b, H5a, H5b
5.3.1 Independent sample t test and related hypothesis
testing-H1-H2
In order to test the differences in the variables between
American and Chinese customers, we performed the t test.
The results are shown in Table 3. The signicance levels of
all the variables in Table 5 are \.01, indicating the dif-
ferences of satisfaction and loyalty between the two groups
are signicant.
The difference of customer satisfaction between the
Chinese customers and the American customers (H1)
A more detailed analysis in Table 1 shows that Chinese
customers satisfaction mean score (-.064) is signicantly
lower than that of the American consumers (.082).
Moreover, standard deviation of Chinese customers sat-
isfaction is .888, signicantly lower than that of the
American customers (1.122). Thus, H1 is supported,
which holds that the satisfaction of the Chinese consumers
in the collectivist culture shows a more moderate trend than
the American customers for using mobile data services.
The difference in customer loyalty between the Chinese
customers and the American customers (H2) The
mean loyalty score is .092 for American customers and -
.072 for the Chinese customers. This supports H2. Addi-
tionally, we can see the customer loyalty standard devia-
tion of American customers (1.102) is signicantly higher
than Chinese customers loyalty standard deviation (.906),
which means the American customers show larger differ-
ence on their customer loyalty to mobile data services than
the Chinese customers do.
5.3.2 Multi-group SEM analysis of related hypothesis
testing: H3, H4a, H4b, H5a and H5b
To test the moderating effect of nationality, i.e. the H3,
H4a, H4b, H5a and H5b, we conducted multi-group
structure equation model (Multi-Group SEM) [48, 95]. The
objective of multi-group simultaneous path analysis is to
determine whether the path coefcients between CLV
drivers and the related variables were equal across different
countries.
For H3 to H5b, the sample is divided into two subgroups
according to the nationality. We rst constrained the paths
to be invariant across the two countries and then freely
estimated these paths. If the Chi-square change between the
above constrained and unconstrained multi-group SEM is
statistically signicant, it means the path loadings in dif-
ferent industries are signicantly changed. That is,
nationality type is a signicant moderator to the relation-
ships between CLV driver and related variables.
For the unconstrained multi-group analysis, we assume
the corresponding path coefcients from CLV drivers to
CLV components in the two sample models (the China
model and the US model) are statistically equivalent. Then
we do multi-group invariance test using the software
AMOS17, we get the Table 6. It is shown that
Dv = 17.750,which is non-signicant at the level of
P\.05. That is to say that the study does not pass the
multi-group invariance test. In other words, there are sig-
nicant difference between the China model and the US
model.
Table 7 shows the results of Multi-group SEM analysis.
As we can see, for H3, the Chi-square change (92 with 61
df) is 3.395, which is not signicant at the .05 level, so H3
is not supported. That is, the positive relation between
customer satisfaction and customer loyalty is not much
stronger for American customers than for Chinese cus-
tomers. H4a was tested using the same method. We divided
the sample into two subgroups, Chi-square change (92
with 61 df) is 3.477, which is not signicant at .05 level, so
H4a is not supported. Other hypothesis, H5a, H5b are
Table 5 T test results and differences between China and the United
States
t test of the mean equation Nation Mean SD
T Df Sig.
Satisfaction -2.877 1,561 .004 China -.064 .888
USA .082 1.122
Loyalty -3.237 1,561 .001 China -.072 .906
USA .092 1.102
Table 6 Multi-group invariance test (assuming model unconstrained to be correct)
Model df CMIN P NFI
Delta-1
IFI
Delta-2
RFI
rho-1
TLI
rho2
Measurement weights 5 17.750 .003 .003 .003 -.002 -.002
290 Inf Technol Manag (2012) 13:281296
1 3
tested by using the same method. Here, H5a is supported
where the Chi-square change (92 with 61 df) is 9.565 and
the P value is .002 which is signicant at .05 level; H5b is
not supported where the Chi-square change (92 with 61 df)
is .563 and the P value is .453. Therefore, except for the
positive relationship between customer loyalty and cus-
tomer revenue, all the other relationships between CLV
driver and related variables do not differ between China
and the US, which means NEF has a partially moderating
effect in this study. That is, the positive relationship
between customer loyalty and customer revenue is signif-
icantly stronger in the US than in China as the consumption
of mobile data services are involved.
6 Discussions
In the Introduction section, we raised three questions
that we want to address with our research. After collecting
and analyzing data from mobile data service customers
both in the US and in China, we are now in a position to
answer them.
6.1 Are customer satisfaction and customer loyalty
drivers of CLV (H4a, H4b, H5a, H5b)?
The answer is partly yes and partly no. From our data
analysis, all three samples (China sample, US sample and
the total sample) give a consistent conclusion that, in the
consumption of mobile data services, customer satisfaction
is not a driver of CLV while customer loyalty is.
What is the role of customer satisfaction exactly? Our
study supports the opinion that satised customers are not
necessarily more protable in Ref. [89]. Although customer
satisfaction does not directly inuence relationship
duration and customer revenue, it indeed has some indirect
effects on CLV. From our data analysis, customer satis-
faction has positive effect on customer loyalty while cus-
tomer loyalty has positive effects on CLV, which means
the impact of customer satisfaction on CLV is mediated
through customer loyalty. The indirect effect of customer
satisfaction on relationship maintenance and development
is also proved by [2, 4].
Our study also conrms customer loyaltys positive
direct effect on CLV. Although Reinartz and Kumar [85]
state that loyal customers are not always protable, Meyer-
Waarden [72] proves the positive relation between cus-
tomer loyalty and customer protability. Our study also
approves the positive direct effect of customer loyalty on
CLV. This provides a counter-example to Dowling and
Marks [25] claim that the positive effects of customer
loyalty on customer revenue and customer relationship
lifetime do not exist for highly innovative new products,
and products success depends on fads and fashions. Our
study indicates that, although mobile data services are
updated in an increasingly faster pace, and have become
more and more fashionable, they still follow the rule in
most industries that higher customer loyalty cause higher
CLV.
6.2 Does NEF inuence the effect of various drivers
on CLV components (H1, H2, H4a, H4b, H5a
and H5c)?
The answer is still partly yes and partly no. NEF does
moderate customer satisfaction and customer loyalty, while
for the relationships between CLV drivers and their related
variables, only the positive relationship between customer
loyalty and customer revenue is moderated by NEF, all the
other variable relationships are not moderated by NEF.
Table 7 The results for multi-group SEM
Path and hypothesis Indices
v
2
GFI CFI RMSEA df Dv
2
P Signicance
Customer satisfaction ?
H3
Customer loyalty 307.809 .962 .963 .051 61 3.395 .065 Not signicant
Customer satisfaction ?
H4a
Customer revenue 307.891 .962 .963 .051 61 3.477 .062 Not signicant
Customer satisfaction ?
H4b
Relationship duration 304.545 .962 .964 .051 61 .131 .718 Not signicant
Customer loyalty ?
H5a
Customer revenue 313.979 .961 .963 .052 61 9.565 .002 Signicant
Customer loyalty ?
H5b
Relationship duration 304.977 .962 .964 .051 61 .563 .453 Not signicant
Inf Technol Manag (2012) 13:281296 291
1 3
Our study strongly supports that Chinese culture mod-
erate Chinese customer satisfaction assessment. On the one
hand, the Chinese people tend to keep the relation har-
mony, they will avoid extreme explicit conict; on the
other hand, the Chinese people are in high communication
context, they will also avoid speak highly of praise for
things or persons. The relatively low customer satisfaction
level (-.064) and the relatively smaller standard variance
(.082) of customer satisfaction from the China sample
indicate the Chinese cultures role on the customer
behavior.
Our study also proves the American cultures effect on
American customers satisfaction and loyalty. The indi-
vidualism and lower communication context make the
Americans speak out their real assessments explicitly in
most cases and do not care about any direct conicts. As
for customer satisfaction and customer loyalty, this is
embodied in the relatively larger standard variance of
customer satisfaction (1.122) and customer loyalty (1.102)
compared with the counterparts in China. Furthermore, the
lower uncertainty avoidance of American culture encour-
ages American customers to accept new innovations, which
is benecial to higher customer satisfaction (.082) and
higher customer loyalty (.092). Our data analysis indeed
demonstrates this point.
Our study nds that the positive effect of customer
loyalty on customer revenue is much more obvious in the
US than in China. Cyr [22] gives some support to our
research result. Taking Canada, Germany and China as the
cross-cultural background for the investigation of website
design, Cyr [22] discovers that trust has greater effect on
customers behavior in China than in Canada for the high
uncertainty avoidance in China while the low uncertainty
avoidance in Canada. Trust should be an important mod-
erator to be considered for the cross-cultural consumer
research between western culture and eastern culture. It is
expected that customer trust in uncertainty avoidance
maybe moderate the relationship between customer loyalty
and customer revenue. For more assertion, further study is
needed.
Our study does not nd evidences that NEF can
moderate the effect of customer loyalty on customer
lifetime duration. Although our study has proved cus-
tomer loyalty to be a driver of customer relationship
duration, data analysis from China and the US shows no
difference on customer loyalty and customer lifetime
duration between the two countries. This conclusion
supports Baalbaki and Malhotra [3] and Meffert and
Bolz [71] who believe that the consumption of high-tech
or digital products has little relevance to national
culture.
6.3 As for China and the US, what are the key factors
to enhance CLV, respectively (H4a, H4b, H5a
and H5c)?
Our study discovers that for both China and the US, the
most important aspect in enhancing CLV in the con-
sumption of mobile data services is customer loyalty. But,
due to the different national culture characteristics between
China and the US, the ways to foster customer loyalty
should be different.
Chinese culture advocates collectivism and human
relationship network. Therefore, Chinese customers rely
more on informal communication channels to disseminate
product and service information. Once a Chinese cus-
tomer becomes loyal to certain products or services, he/
she is willing to share his/her experience with the people
around, hoping to create group identity and social value.
Our recommendation is that in a collectivist culture
environment such as the Chinese one, rms can benet
signicantly by focusing on and maximizing its custom-
ers positive word-of-mouth (WOM). Additionally, China
is also a high uncertainty avoidance and long-term ori-
entation country, so the carriers should have the patience
to spend much longer time to win customer trust and
spend more effort on customer service, in order to win
customer loyalty.
The culture of the US is identied by individualism, low
uncertainty avoidance, low communication context and
short-term orientation. Therefore, our recommendation is
that in a western culture environment, such as in the US,
mobile data service providers should focus on developing
novel, abundant, personalized, fashionable and useful
mobile data services to increase customer loyalty and to
maximize CLV.
7 Limitations and future research
In this article, we aim to identify whether customer satis-
faction and customer loyalty are CLV drivers and to
explore how to enhance a rms CLV from the perspective
of cross cultural comparison research. Taking China and
the US as the representatives of eastern and western cul-
tures, and analyzing mobile data service usage in these two
countries, our study conrms that customer satisfaction is
not a driver of CLV, but customer loyalty is; nationality is
partially a signicant factor in CLV enhancement and
should be considered in the formation of a rms marketing
strategy with respect to CLV.
Our study is the rst cross-cultural study on CLV, and as
such, it has some limitations. First, we focus on customer
292 Inf Technol Manag (2012) 13:281296
1 3
satisfaction and customer loyalty as the CLV drivers. In
future research, we hope to continue and complete this
analysis by including other factors such as customer trust
and customer commitment. Second, since our dataset is
collected mainly through questionnaire survey, it only
contains user information. We do not have access to
information from carriers and service providers. In future
research, we will try to get the help from carriers and
services providers and obtain users actual usage data of
mobile data services. That way, we can calculate CLV
more precisely and build quantitative model between CLV
drivers and CLV directly.
Acknowledgments This paper was supported by the National
Natural Science Foundation of China (Grant No.: 71171023,
70701005, 70911120262), Major State Basic Research Development
Program of China (973 Program) (No. 2012CB315805), Program for
Excellent Talents in Beijing University of Posts and Telecommuni-
cations, Beijing Municipal Natural Science Foundation (Project No.
9122018), Program for New Century Excellent Talents in University
(Program No.: NCET-10-0241), and the Open Research Fund
between Beijing University of Posts and Telecommunications and
IBM (Grant No. JLP200906011-3). The diligent work by graduate
students Lei Peng and Fang Liu from School of Economics and
Management, Beijing University of Posts and Telecommunications,
Beijing, China, are greatly appreciated. We are also grateful to Dr.
Robert W. Palmatier of the Marketing and International Business
Department, Foster Business School, University of Washington,
Seattle, USA, for his many helpful suggestions. We should also say
our thanks for Dr. Aihua Zhang of the School of Economics and
Management, Beijing University of Posts and Telecommunications,
Beijing, China, who helped with the research survey in China.
Appendix 1: Measurement
The following statements are evaluated on a scale of 17
which represents the level of agreement with the statement:
Strongly disagree (1), disagree (2), slightly disagree (3),
neutral agree (4), slightly agree (5), agree (6), and strongly
agree (7).
SAT1. Overall, I am satised with the mobile data services I am
using
SAT2. Using mobile data services has met with my expectations
SAT3. I am pleased with the experience of using mobile data
services
SAT4. My decision to use mobile data services was a wise one
LOY1. My preference for using mobile data services would not
change
LOY2. It would be difcult to change my beliefs about mobile
data services
LOY3. I will continue using mobile data services in the future
LOY4. Even if friends recommended that I give up using mobile
data services, my preference for mobile data services would not
change
Appendix 2: Reliability and validity
of the measurements
See Tables 8, 9.
Table 8 Reliability analysis of the measurements for CLV drivers
Country Variable Measuring
statement
Correlation coefcient
between the statement
and the total
Cronbachs
alpha if item
deleted
Cronbachs alpha
based on
standardized items
China Customer
satisfaction
A1 .621 .694 .773
A2 .633 .689
A3 .589 .711
A4 .465 .775
Customer
loyalty
A5 .552 .671 .741
A6 .499 .701
A7 .524 .687
A8 .560 .666
US Customer
satisfaction
A1 .827 .902 .925
A2 .874 .886
A3 .869 .888
A4 .737 .932
Customer
loyalty
A5 .713 .776 .838
A6 .648 .806
A7 .631 .813
A8 .694 .785
Inf Technol Manag (2012) 13:281296 293
1 3
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Table 9 Validity analysis of the measurements for CLV drivers
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Standard path
coefcients
T value
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SAT2 .728*** 14.760
SAT3 .709*** 14.492
SAT4 .575***
Customer loyalty LOY1 .671***
LOY2 .578*** 14.549
LOY3 .632*** 14.708
LOY4 .678*** 15.636
US Customer satisfaction SAT1 .829*** 23.901
SAT2 .877*** 25.865
SAT3 .946*** 27.343
SAT4 .785***
Customer loyalty LOY1 .701***
LOY2 .608*** 19.987
LOY3 .818*** 18.891
LOY4 .784*** 18.586
***: signicant at the 0.001 level for a two-tailed test
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