A Comprehensive Model of E-Loyalty: the Mediational Role of Customer Satisfaction

Masters Thesis

Presented to

The Faculty of the Graduate School of Arts and Science

Brandeis University
Department of Psychology
Xiaodong Liu, Advisor

In Partial Fulfillment
of the Requirements for the Degree

Master of Arts
in
Psychology

by
Chuchu Cheng

August 2014


Abstract

As online shopping is more and more common in everyday life, e-loyalty has become a

very important issue in e-commerce. In this study, I propose an integrative model of e-loyalty

development process and present a research design to test this model. The main factors that

impact e-loyalty include customer satisfaction, trust, perceived value, service quality, and

switching cost. Based on the theoretical model, a set of hypotheses was formulated. The scales

used were adapted from former studies and will be further revised based on confirmatory factor

analysis results. The survey will be sent to 200 participants. The model will be tested using

structural equation modeling.

Keywords: E-Loyalty, E-Commerce

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Table of Contents
ABSTRACT ................................................................................................................................................. ii

INTRODUCTION ....................................................................................................................................... 1
E-LOYALTY .......................................................................................................................................... 2
CUSTOMER SATISFACTION ................................................................................................................... 3
TRUST ................................................................................................................................................... 5
PERCEIVED VALUE ............................................................................................................................... 6
SWITCHING COSTS ................................................................................................................................ 7
SERVICE QUALITY ................................................................................................................................ 8

METHODS ................................................................................................................................................ 11
PARTICIPANTS ...................................................................................................................................... 11
MEASUREMENT .................................................................................................................................... 12
PROCEDURES ....................................................................................................................................... 15
IRB Approval and Consent Forms............................................................................................. 15
Pretest ........................................................................................................................................ 15
Formal survey ............................................................................................................................ 16

ANALYTICAL PLAN .............................................................................................................................. 16

DESCRIPTIVE STATISTICS ................................................................................................................... 16
BIVARIATE ANALYSIS ........................................................................................................................ 17
STRUCTURAL MODELS (STRUCTURAL EQUATION MODELING) .......................................................... 18

DISCUSSION AND IMPLICATION ...................................................................................................... 20

REFERENCES .......................................................................................................................................... 23

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A Comprehensive Model of E-Loyalty: the Mediational Role of Customer Satisfaction

Introduction

E-commerce is a business model that makes communication, information integration,

transaction and data exchange digitized and reduces the limits of the time and space (de Ruyter

Wetzels, & Kleijnen, 2001). Compared with the traditional business model, e-commerce has

great advantages. For example, the entire process (including the transportation of goods and

services) is fully automated, thus the cost may be greatly reduced. Online shopping is one of the

most common forms of e-commerce. Therefore, it is important to understand the variables

involved in online shopping, and in particular, to model how customers e-loyalty (defined later)

will be impacted by different factors.

Generally in accordance with the type of e-commerce activities objects, e-commerce has

three modes: Business to Business (B2B); Business to Consumer (B2C); Consumer to Consumer

(C2C). In addition, there is a new e-commerce mode, B2G (Business to Government). In this

study, we mainly focus on B2C mode.

The purpose of this proposed research is to explore the development process of customer

loyalty in e-commerce environment (e-loyalty). Specifically, I propose a study to examine how

customer satisfaction, trust (to the product and business), perceived value (of the product),

switching cost, and service quality each will be related to customer e-loyalty and whether

customer satisfaction plays a mediational role in bridging the relationships between each of the

other factors and e-loyalty.

This proposed study includes four parts. In the rest of this introduction, e-loyalty will first be

defined and related literature will be reviewed. Then the literature on each of the factors that are

related to e-loyalty will be presented. A comprehensive theoretical model depicting the

relationships of the key variables will be presented and research hypotheses will be proposed.

The Methods section (part 2) will detail the selection of participants, the measures of each

variables/factors, and the proposed procedure of the study. The third part is a detailed Analytic

Plan, in which the details of the steps of data analyses will be laid out. In particular, as an

example, a detailed statistical model will be presented to illustrate how the estimating and

hypothesis testing of the parameter(s) can help test a specific research hypothesis. Finally, in the

Discussion and Implication section, the expected results and the importance of the results will be

discussed in context of the literature; limitations and future direction will also be discussed.

E-Loyalty
According to Pareto rule, 80% of the profits are created by 20% consumers (Johnson et al,

2006). Therefore, the 20% consumers are the company's core consumers, or called loyal

consumers. Numerous studies indicated that loyal consumers are the key to profitability and

sustainable development. Keller (1993) defined customer loyalty as repeated purchase behavior

driven by the love for a certain product over a period of time. Shanker et al(2003) argued that

loyalty should not be viewed merely as repeated purchase behavior. Repeated purchase is just a

manifestation of the decision-making process, and does not include the mood and attitude of

loyalty. The true loyal consumers should have a sense of commitment and dependence towards

the company, rather than simply being attracted and thus tend to choose this merchant. The value

of loyalty is obvious. Loyal consumers only take up a small amount of time and energy of

businesses, but they will bring a lot of profits; many loyal consumers tend to forgive the mistakes

of the merchant; they are also less sensitive to prices; and they will recommend products to other

people (Reichheld et al, 2000).

In the environment of e-commerce, loyalty still cannot be ignored. E-Loyalty is consumers

preferences and commitment of a certain online retailer and a repeat purchase behavior from this

retailer (Srinivasan et al., 2002). Reichheld et al (2000) defined e-loyalty as feeling or attitude

that drives consumers repeat visits to a website and buy a particular product or service, and the

purpose of the visits to the website is for information, entertainment or communication.

Reichheld believed that the so-called E-loyalty is the same as the original loyalty in the physical

world. The loyalty law still applies in the world of e-commerce: the same increase of purchase

frequency, purchase quantity and also reduced sensitivity to price. Therefore, even if the costs of

establishing e-loyalty is larger than the traditional store, however, once it is established, profits

will increase faster (Reichheld & Schefter, 2000).

Based on the definition of Srinivasan et al in 2002, the current generic concept of e-loyalty is

used: out of preference and commitment, customers visit a website repeatedly, keep an eye on

the product information, purchase the products or services through the website repeatedly, have a

high degree of trust and loyalty to it, and consciously maintain, increase and enhance the

websites interests or image.

Customer Satisfaction

Customer satisfaction plays an important role in the formation process of e-loyalty

(Anderson & Srinivasan, 2003). Customer Satisfaction is the feeling of pleasure that consumers

experience in the shopping process (Oliver, 1999). Satisfaction is an affective response to

purchase situations (Babin & Griffin, 1998). When determining the development of loyalty,

satisfaction has traditionally been identified as the main inputs for customer loyalty (Dick &

Basu, 1994; Fornell, 1992), and satisfaction is believed to be a driver for e-loyalty (Anderson &

Srinivasan, 2003; Balabanis, Reynolds, & Simintiras, 2006). A lot of evidence showed that there

is a close relationship between shopping satisfaction and e-loyalty (Anderson & Srinivasan,

2003; Kim, J., et al.,2009; Park & Kim, 2003; Rodgers et al., 2005). Satisfied consumers tend to

use more services of the previous company(Ram & Jung, 1991)have stronger motivation to

purchase and recommend this company to others more frequently (Zeithaml et al., 1996). In

addition, dissatisfied consumers tend to find information about other online stores and even

switch to another online store, which is not good for a close relationship (Anderson &

Srinivasan, 2003). However, Loyal customers are not necessarily satisfied customers, but

satisfied customers tend to be loyal customers (Fornell, 1992).

The strength of the relationship between satisfaction and loyalty also varies under different

conditions. For example, Jones and Sasser (1995) discovered that the strength of the relationship

between satisfaction and loyalty depends upon the competitive structure of the industry. Unlike

traditional commerce, in the settings of e-commerce, one online-shopping website often has

many competitors, transactions are just one click away, so it is critical that companies understand

how to build customer loyalty in online markets (Anderson et al, 2003). Although previous

studies pointed out an important role of customer satisfaction in the formation of e-loyalty,

however, it is important to study their relationship in a new and more rational model and also in

the environment of e-commerce.

Satisfaction leads to loyalty, but that loyalty can only be achieved when other factors are

present (Oliver, 1999). Therefore customer satisfaction plays an important role in the

development process of e-loyalty and also has relationship with other factors.

Trust

In e-commerce, trust is the confidence in the quality and credibility of the goods and

services provided by the online store (Gabarino & Johnson, 1999). Trust is very important in

many business relationships, especially in e-commerce relationships, since there will be more

obstacles to establish trust with customers, such as customers cannot see real products but only

some pictures, and customers will be charged before they receive their products (Reichheld &

Schefter, 2000; Gefen et al., 2003). Unless Consumers believe that online store will not bring

them risks and loss, they will not be assured of shopping, and they would not consider this online

store (Gefen, 2000). The study of Morgan and Hunt (1994) shows that trust will contribute to

brand loyalty, because trust will establish important trading relations between the two sides.

Consumers are more willing to shop on the Website they trust (Singh & Sirdeshmukh, 2000).

Previous studies have shown that trust has a major impact on both traditional loyalty

(Chaudhuri & Holbrook, 2001; Singh & Sirdeshmukh, 2000) and e-loyalty (Kim, J., et al, 2009;

Park & Kim, 2003; Pitta et al., 2006; Reichheld et al., 2000). Trust not only has a direct impact

on e-loyalty, may also have indirect impact on e-loyalty through satisfaction. Trust is a

prerequisite for sellers to build relationships with consumers (Sirdeshmukh et al., 2002; Verhoef

et al., 2002). In any trading relationship, consumers trust before the transaction has a direct

impact on satisfaction after the transaction (Singh & Sirdeshmukh, 2000). In previous studies,

trust is an important predictor of online shopping satisfaction(Gummerus et al., 2004; Harris &

Goode, 2004; Jin & Park, 2006). To make consumers satisfied with the online store, they need to

first establish a relationship based on trust (Kim, J., et al.,2009).

In summary, trust has a major impact on e-loyalty and its relationship with e-loyalty may be

mediated by customer satisfaction.

Perceived Value1

Perceived Value is described as consumers assessment of the transaction, whether it is

worth what consumers used to judge for businesses to provide goods (Bolton & Lemon, 1999).

Perceived value includes "pay" and "get" two factors. Consumers are required to pay in order to

get products or services, including the pay of the monetary and non-monetary, such as time and

energy; on the other hand, they obtain the goods or services provided by the online store (Dodds

et al., 1991).

Studies have shown that perceived value is one of the main factors of loyalty (e.g., Dodds et

al., 1991; Grewal et al., 1998; Sirdeshmukh et al., 2002). The literature also notes that customer

satisfaction may be based on a foundation of perceived value (Pitta et al, 2006). The connection

between perceived value and satisfaction was also found by Bolton & Lemon (1999) and

Mathwick, Malhotra, & Rigdon (2002). Additionally, some scholars have argued (Blake &

Neuendorf, 2003; Bruner & Kumar, 2000) that Internet experience is important in understanding

customers perceptions, attitudes, and behavior in online environments. The importance of

perceived value in traditional business model has been more widely studied, however, in e-

commerce, there is not enough evidence to support perceived values effects on e-loyalty and the

1 In the e-commerce literature, some suggest to distinguish between expected value and

perceived value, I found only one conference paper (Tang & Zhang, 2010) talked about the
differences of their characteristics, structure and influence factors. However, no empirical
research has been identified on how these two factors have influence on customer
satisfaction or loyalty. Given the scope of this proposed study, expected value will not be
included.

presumably mediating effect of customer satisfaction on the link from perceived value and e-

loyalty has yet to be tested.

Switching Costs

Switching Costs is the costs of changing suppliers. It is not just a feature of the transaction,

and also has both psychological and emotional features (Sharma, & Patterson, 2000). For

consumers, switching costs include money, behavior, searching, learning and many other aspects

(Yang & Peterson, 2004). The concept of switching costs is theoretically supported by both

social psychological exchange theory (Blau, 1964) and institutional economics (Williamson,

1975). Both approaches focus mainly on investments made by the parties involved in an

exchange relationship. And apparently, switching costs are not only economic in nature but also

can be psychological and emotional (Sharma & Patterson, 2000; Wu, Chen, & Lin, 2007).

Compared to traditional business, in the e-commerce environment, the convenience of

network makes the costs of searching business information greatly reduced, also transport costs,

so distance is no longer part of switching costs (Lynch & Ariely, 2000). In this condition,

switching to another online store is simply clicking the mouse, seemingly the obstacles are much

smaller. However, companies have created many other obstacles, such as web design,

commodity classification, payment methods, and so on. For example, most online consumers

tend to re-login to the familiar site to make transactions because it is more convenient than to

adapt to a new shopping website (Lee,& Feick, 2001). Therefore Consumers are still easy to

become loyal to one website when its design brings proper switching costs.

There is also a connection between customer satisfaction and switching cost. Some

researchers believe that switching cost, as one of the main factors of loyalty, not only has direct

effects on loyalty, but also through customer satisfaction has indirect effects on loyalty (Fornell,

1992; Lee et al., 2001; Oliver, 1999). For example, in mobile phone service, switching costs

indirectly affect consumer loyalty through changes of satisfaction (Lee et al., 2001). Customers

with high switching costs may not be loyal customers because of low customer satisfaction

(Jones, Mothersbaugh, & Beatty, 2000), and customers with low switching costs may remain

loyal because of high customer satisfaction. For example, customers moving to a new service

provider requires an investment of effort, time and money, which act as a significant barrier to

consumers taking action when dissatisfied with their current service provider (Colgate & Lang,

2001). And most previous studies (Balabanis et al., 2006; Lee et al, 2001) have treated customer

satisfaction as a moderator of the relationship between switching costs and loyalty.

The impact of switching costs on e-loyalty is obvious, and has been shown in a lot of

studies; however, switching costs relationship with customer satisfaction, has only been studied

in traditional business.

Service Quality

Service quality plays an important role in the relationship between online stores and

consumers, also in the formation process of e-loyalty (Anderson et al., 2003). However, the

manifestation of service quality in online shopping environment is quite different from

traditional business. Although powered by the Internet, consumers now know more about stores

than ever before, service of e-commerce is still quite different from traditional commerce. In

online shopping process, very few online stores and consumers have the opportunity of face-to-

face contact, consumers are more exposed to the website as well as remote service (Harris et al.,

2004). Therefore, service quality in the online shopping environment includes the delivery of

goods or services, as well as maintenance services, such as whether the website is fast and

convenient, whether the way to pay is safe and reliable, whether the attitude of customer service

is friendly and so on. A study showed that convenient online stores are easier to attract loyal

consumers (Harris et al., 2004). Consumers want web design to be simple and website to be

quick to load, easy to use, but online stores want to attract more consumers, so they make

website more complex with flash, various buttons, and all kinds of contents, which is inevitable.

Companies often make website complex and beautiful, without paying too much attention to

establishing long-term relationships with consumers.

Additionally, previous frameworks also supported the associations between service quality

and customer satisfaction (Heskett et al, 1994; Lynch & Ariely, 2000). Oliver (1997) had a

framework that presents service leads to satisfaction and in turn affects loyalty, suggesting that

service quality through customer satisfaction, further affecting customer loyalty.

In e-commerce, the effects of service quality on e-loyalty still cannot be ignored, which is

the problem that many online stores have trouble establishing a loyal consumer groups.

In summary, the main factors that may impact e-loyalty include customer satisfaction, trust,

service quality, switching costs and perceived value. Besides, trust, service quality, switching

costs, and perceived value may be related to e-loyalty indirectly through their impact on

customer satisfaction. That is, customer satisfaction may play a meditational role. Few studies

have put these factors in the same model of loyalty in online shopping environment. Figure 1

shows a theoretical model that depicts the comprehensive relationships among the related

variables. Based upon the literature and as shown in Figure 1, the following research hypotheses

will be tested:

H1: Higher customer satisfaction will improve e-loyalty.

H2a&b: Trust will be positively related to customer satisfaction and to e-loyalty,

respectively.

H3a&b: Higher perceived value will improve customer satisfaction and e-loyalty,

respectively.

H4a&b: Higher switching costs will improve customer satisfaction and e-loyalty,

respectively.

H5a&b: Higher service quality will improve customer satisfaction and e-loyalty,

respectively.

H6: Satisfaction has a meditational effect on the relationship between trust, perceived

value, service quality, and switching cost each with e-loyalty.

H2b
Trust
H2a

Perceived H3a Satisfaction

Value H1

H4a H3b
Switching
Costs H4b
E-Loyalty
H5a
H5b
Service
Quality

Figure 1. Hypothetical Model of Factors that May Impact E-Loyalty

As shown in Figure 1, the hypothetical model presented in this study shows how these

factors affect e-loyalty directly or indirectly.

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Methods

Participants

This study will use convenient sampling to select 200 participants, which is the typical

number of participants used by previous studies (Kim et al, 2009; Lauren & Lin, 2003; Yang &

Peterson, 2004). A power analysis will also be run to determine if the sample size is large

enough for a power of 80%. Amazon is a well-known online-shopping website. Amazon

Mechanical Turk has a pool of large number of subjects (Berinsky, Huber, & Lenz, 2011). The

participants will be sampled through Amazon Mechanical Turk. The subjects will be customers

with experience in online shopping. Before formal survey, a few questions will be asked to select

participants with experience in online shopping, online banking account or credit card and

regular online shopping habits. Participants with no experience in online shopping or no payment

method for online shopping will be excluded. If online shopping frequency (including visit

times) is 0/month, the participant will also be excluded. Participants invited to the formal survey

will be the ones with online shopping experience, payment methods and regular online shopping

habits.

The participants will be at least 18 years old. Approximately half of the participants will be

male. The formal survey (data collection) will be conducted online with Mechanical Turk. After

completing the formal survey, each participant will receive a 0.5 USD Amazon Credit as an

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appreciation token, which is standard in the Mechanical Turk system (Berinsky et al, 2011).

Measurement

The measurement tool used in this study is modified from existing scales. The measure of

each variable is selected from classic scales in the research area. Appropriate adjustments or

revision will be made based on the feedback in the pretest.

In this study, the survey will be divided into two parts. The first part of the survey is

demographic questions (including gender, age, and occupation) and online shopping related

questions. For example, have you ordered products from any online-shopping websites? Do you

have an online banking account, debit card, credit card or PayPal account? How often do you

visit the shopping website (e.g., how many times per month)? Which website(s) you visited most

often? The demographic data will be used to contrast with data from previous research, the

online shopping experience data will be used to select participants for formal survey. Participants

with no experience in online shopping, no payment method for online shopping, or online

shopping frequency (including visit times) is less than once per month will not be invited to the

next part of the survey. The respondents will be asked to answer the questionnaire with a familiar

(online shopping) website in mind. The aim is to help decide whether the subjects have the

proper online shopping experience in order to answer the questions in the second part of the

survey.

The second part of the survey is to collect data on e-loyalty, customer satisfaction, trust,

service quality, perceived value, and switching cost. To ensure the content validity of the survey,

the items selected must represent the concept. To measure the various constructs, validated

scales used by other researchers were adapted. A small number of questions were not used in

online shopping environment, so some modifications were made.

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E-loyalty: the measure of e-loyalty will be adapted from Srinivasan et al (2002) (cited in

Kim et al, 2009) and from Mols (1998) (cited in Yang & Peterson, 2004). Totally 10 items are

included, for example, I will recommend this website to others. When I want to shop online,

this website is my first choice. As long as it is running, I will not choose other websites. And

To me, this is the best online shopping website. In Kim, Jin, & Swinneys study (2009), they

used the same items for e-loyalty, and factor loadings for e-loyalty were in the 0.66-0.93 range

and reliability were in the 0.85-0.93. Yang & Peterson (2004) reported the scale with reliability

(cronbach alpha) at 0.91 and factor loadings between 0.45-0.91.

Trust: the measure of Trust includes seven items. For example, I believe the claims and

promises of products on this website. This website is reliable. and I think the product

descriptions on this website are not true. These items are adapted from Gabarino and Johnsons

(1999) study (cited in Kim et al, 2009) and Gefen et al. (2003) (cited in Lauren & Lin, 2003).

Kim et al (2009) reported the scale with reliability (cronbach alpha) at 0.850.93 and factor

loadings between 0.66-0.93. Lauren & Lin (2003) reported the scale with reliability (cronbach

alpha) at 0.93 and factor loadings between 0.79-0.86.

Customer satisfaction: The items of customer satisfaction are adapted from study of Fornell

(1996) (cited in Kim et al, 2009) and the study of Yang & Peterson (2004). Totally nineteen

items are included, for example, I feel contented with the shopping experience on this website.

I am satisfied with the products I purchased from this website. and Generally speaking, I am

satisfied with this website. In Yang and Petersons (2004) study, they have divided customer

satisfaction into several subscales, but in this study, I will use the items for overall construct of

customer satisfaction. Kim et al (2009) reported the scale with reliability (cronbach alpha) at

0.850.93 and factor loadings between 0.66-0.93. Yang & Peterson (2003) reported the scale

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with reliability (cronbach alpha) at 0.64-0.85 and factor loadings between 0.57-0.92.

Perceived value: The items of perceived value are adapted from study of Lassar et al (1995)

(cited in Kim et al, 2009) and the study of Levesque & McDougall (1996) (cited in Yang &

Peterson, 2004). Totally six items are included, for example, In spite of consideration about pay

and rewards, I still think shopping experience on this website is very valuable. What I got

deserved what I paid, including money, time, energy. and This website is reasonable about

price. Kim et al (2009) reported the scale with reliability (cronbach alpha) at 0.850.93 and

factor loadings between 0.66-0.93. Yang & Peterson (2003) reported the scale with reliability

(cronbach alpha) at 0.80 and factor loadings between 0.55-0.95.

Switching costs: The items of switching costs are adapted from study of Jones et al. (2000)

(cited in Yang & Peterson, 2004) and the study of Ping (1993) (cited in Chang & Chen, 2008).

Totally seven items were included, for example, It is easy to switch to another website.

Generally speaking, to purchase in another website is a difficult thing and It will costs me a

lot of energy and time to get used to another website. Yang and Peterson (2004) reported the

scale with reliability (cronbach alpha) at 0.78 and factor loadings at 0.68-0.82. Chang & Chen

(2008) reported the scale with reliability (cronbach alpha) at 0.88 and factor loadings at 0.75-

0.92.

Service quality: The items of service quality are adapted from study of Wolfinbarger and

Gilly (2003) (cited in Kim et al, 2009). Totally 5 items are included, for example, This website

is safe and reliable and never use my personal information in an impropriate way. Customer

service is friendly and efficient. and Website design is simple, reasonable and attractive. Kim

et al (2009) reported the scale with reliability (cronbach alpha) at 0.590.86 and factor loadings

between 0.63-0.90.

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The final scales for each variable are presented in the appendix. A five-point Likert rating

scale (1 for strongly disagree, 2 for disagree, 3 for neutral, 4 for agree, 5 for strongly agree) will

be used for response. There will be one extra option for each question, which is I do not want to

answer this question. If a participant chooses this option, his or her answer will be treated as

missing.

Procedures

IRB Approval and Consent Forms

Before conducting the survey, an application for IRB Approval will be submitted, including

a detailed description of the research, any grant proposals, the survey/scales used in this study,

the recruitment materials used to enlist human subjects, and a detailed description of data

analyses and consent forms. The consent forms will be built using RASCALs Consent Form

Builder (www.rascal.columbia.edu).

Pretest

Initial scales will be tested with 30 participants on Amazon Mechanical Turk with different

demographic characteristics. In pretest stage, Cronbachs reliability analysis and confirmatory

factor analysis will be used to analyze the pretest data to see whether the scale is reliable and

whether the questions are truly measuring those variables (such as loyalty, satisfaction, etc.).

According to the results of analysis, items that do not significantly contribute to the reliability or

not highly correlated with other items (representing the same variable) and not representing the

construct will be eliminated or modified.

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Formal survey

This study conducted a Web-based survey. Revised scale will be uploaded to Mechanical

Turk and participants will be directed to the survey questionnaires. Web-based survey allows

respondents to feel anonymous and without limits of time and place constraints, which is helpful

to reach respondents more easily than using other data collection methods (Wang & Emurian,

2005). To ensure the quality of response, the survey will first select qualified participants based

on the first part of survey (as explained earlier).

Analytical Plan

Descriptive Statistics

First, the demographic characteristics and online shopping behavior data of sample will be

presented in a table, including gender, age, education, frequency of online shopping, etc.

Missing data analysis will be done based on the missing pattern and the number of missing.

If missing data is only a few, listwise deletion will be used. If there is a fair amount of missing,

multiple imputation will be considered.

For continuous variables, Mean, Standard Deviation, and distribution will be presented. For

categorical variables, proportion and frequency distribution will be generated.

Measurement Models

For each factor/scale, measurement model will be estimated through confirmatory factor

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analysis (CFA). CFA is a commonly used method for estimating convergent validity by

estimating the factor loadings of the measured variables (Anderson & Gerbing, 1988). As an

example, Figure 2 presents the measurement model for the factor Trust.

T1

T2
2
11
21 T3 3
31
T4 4
41
Trust 51 T5 5
(1)
61 T6 6

71 T7 7

Figure 2. Measurement Model of Trust

As shown in Figure 2, the factor Trust, an underlying construct, was set to be represented

by seven items (T1 to T7). T1 to T7 are observed variables (responses to the seven items

measuring Trust). 1 to 7 will capture the measurement error, if any, corresponding to each

observed variable. coefficients reveal how well the factor Trust is related to each observed

variable. Standardized coefficients will be the factor loadings. Factor loadings greater than 0.5

are considered very significant (Hair, Anderson, & Black, 1998). Based upon the measurement

model, a factor score of Trust can be generate and used for further analysis. A measurement

model will be tested for each of the other factors.

Bivariate Analysis

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Bivariate scatter plots between each of the factors (trust, perceived value, switching costs,

service quality) and e-loyalty or customer satisfaction will be generated to check the linearity of

the relationships. Potential bivariate outliers can also be shown. If theres any concern of

linearity, appropriate data transformation will be explored. Intercorrelation among all the factors

will also be generated and used for further analyses.

Structural Models (structural equation modeling)

The hypothetical model shown in Figure 1 will be tested using structural equation modeling

by Lisrel (Byrne, 2001). This is because SEM examines the overall data fit of the hypothesized

model and offers the advantage of considering measurement unreliability when estimating the

relationships among variables (Maruyama & McGarvey, 1980). Assumptions of SEM will be

checked. Assumptions about covariation and association of variables will be checked by the

correlation results.

To evaluate the fit of models, chi-square with degrees of freedom, the comparative fit index

(CFI), the goodness of fit index (GFI), the adjusted goodness of fit index (AGFI), and root mean

square error of approximation (RMSEA) will be assessed (Schermelleh-Engel, Moosbrugger, &

Mller, 2003). In general, model fit will be considered to be adequate if CFI and GFI are larger

than 0.9, AGFI is larger than 0.8 and RMSEA is smaller than 0.08. The ratio of chi-square to

degrees-of-freedom falling within the suggested value of 5 or below is acceptable (Chang &

Chen, 2008).

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If a significant chi-square is produced and the model fit statistics suggest a misfit between

the model and the data, the proposed model will be modified by removing non-significant

hypothesized relationships from the original model or be revised based upon the modification

index statistics. However, modification will only be done if it theoretically or substantively

makes sense. The structural model is illustrated in Figure. 3.

21

Trust (1)
11

12 Satisfaction
Perceived 1
Value (2) 21

13 22
Switching 23
Costs (3) E-Loyalty
(2)
14
24
Service
Quality (4)

Figure 3. Structural model

Note: the residuals of Satisfaction and E-loyalty and the covariances between/among the four
exogeneous variables are not shown in this figure but they will be estimated.

In the structural model, trust, perceived value, switching costs and service quality will be set

as four exogenous () latent variables, while customer satisfaction and e-loyalty will be adopted

as endogenous () latent variables. The original hypothesized model will be tested for examining

the hypotheses in this study. Relationships between exogenous and endogenous variables will be

evaluated by estimating weights, while relationships between endogenous variables will be

19



evaluated by estimating weights. The equations predicting e-loyalty and customer satisfaction

represented by Figure 3 can be written as follows:

Customer Satisfaction: 1=11*1+12*2+13*3+14*4+1

E-loyalty: 2=21*1+21*1+22*2+23*3+24*4+2

For example, to test H1, the effect of customer satisfaction on e-loyalty, hypothesis test of

the parameter 21 will be estimated. H2a, the effect of trust on satisfaction, can be tested by

estimating the hypothesis test of 11. And the hypothesis test of 21will help address H1b, the

effect of trust on e-loyalty.

A major purpose of this study is to explore the potential mediational role of customer

satisfaction between trust, perceived value, switching costs, service quality each and e-loyalty.

As shown in Figure 3, for example, in order to test whether there is a mediational effect for

customer satisfaction on the relationship between trust and e-loyalty (i.e. part of H6), 11 and 21

both need to be examined. If both 11 and 21 are significant, there will be an indirect effect of

trust on e-loyalty through customer satisfaction, i.e. there is a mediational effect of customer

satisfaction on the relationship of trust and e-loyalty. And this indirect effect of trust on e-loyalty

would be 11* 21. All the other hypotheses can be tested in a similar way.

Discussion and Implication

The phenomenal growth in numbers of Internet users and the enormous potential of e-

20



commerce (electronic commerce) has pushed merchants to conduct business online (Wang &

Emurian, 2005). E-loyalty has high rate of customer retention and reduced cost for attracting new

customers and maintaining long-term profitability to the online retailer (Reichheld et al., 2000).

The purpose of this study is to propose and test an integrative model of e-loyalty by

conceptualizing that e-loyalty is influenced by satisfaction, trust, perceived value, switching

costs and service quality, in which satisfaction acts as a moderator. Previous studies have

estimated the relationships among e-loyalty, customer satisfaction, trust, perceived value,

switching costs and service quality (Kim, J., Jin, B., & Swinney, J. L., 2009; Luarn & Lin, 2003;

Yang & Peterson, 2004; Harris & Goode, 2004; Chang & Chen, 2008), which provided solid

foundation of the framework establishment of this study. However, there were few studies put all

these factors into one comprehensive model. The results of this study will have great importance

on issues related to e-loyalty construct that have not been addressed by previous studies.

This study provides several valuable implications. From a theoretical perspective, the

contribution of this study is the investigation of the integrative model of e-loyalty development

process by incorporating customer satisfaction, trust, perceived value, switching costs and

service quality. The model in this study can reflect the main factors of e-loyalty, not only studies

the behavioral performance of e-loyalty, but also pays attention to psychological and emotional

develop process of e-loyalty.

From a practical perspective, effective ways will be discovered to help online shopping

websites to establish long-term relationship between retailers and customers. At present, many

online retailers have not yet got rid of the situation of low-income operations and lower profits.

So many of them put their energy and resources in how to attract new customers rather than

seizing more loyal customers. However, if retailers focus on attracting new customers, the

21



growth rate of the consumer, and offer a variety of benefits (such as various discounts) to attract

new customers, it will ignore the other value that customers need, let alone how to maintain

customer loyalty. Customer satisfaction and loyalty can create value for business, also an

important source of business to increase profits, which is an important part of strategic

management. This study will help online retailers to realize the importance of e-loyalty and how

to maintain the relationship between retailers and customers.

For customers, the benefit of online shopping is tremendous. Because online shopping is

convenient and time saving, also with great amount of free information, including prices and

product details. This study will help customers to pay attention to important parts of online

retailers and enjoy better online shopping experience.

There are some limitations with this study. First, the survey was conducted online and

employed a non-random convenience sample. A larger sample, using mail survey and random

sampling methods would be very expensive. The Mechanical Turk method was appropriate for

collecting data from participants with online shopping experience and without geographical

limits. Second, it does not distinguish different product categories and different shopping

websites in testing the model. Future studies can be more specific about this and provide better

suggestions for retailers, since customers may have different needs and purchase experience.

Third, this study let respondent choose a familiar website as the understanding of e-commerce.

However, website characteristics may influence the e-loyalty creation. Future research should

attempt to further examine the role of website characteristics in an e-loyalty model.

22



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Appendix- Scale items

E-Loyalty

1. I will recommend this website to others.

2. When I want to shopping online, this website is my first choice.

3. As long as it is running, I will not choose other websites.

4. To me, this is the best online shopping website.

5. I say positive things about this online store to other people.

6. I would recommend this online store to those who seek my advice about such matters.

7. I would encourage friends and relatives to use this online store.

8. I would post positive messages about the online store on some Internet message

board.

9. I intend to continue to do business with the present online store.

10. I intended to do more business with the present online store.

Switching Cost

1. It is easy to switch to another website.

2. Generally speaking, to purchase in another website is a difficult thing.

3. It will costs me a lot of energy and time to get used to another website.

4. It takes me a great deal of time and effort to get used to this website.

5. It costs me too much to switch to another online store.

6. In general it would be a hassle switching to another online store.

7. Overall, I would spend a lot and lose a lot if I change to another online store.

Trust

1. I believe the claims and promises of products on this website.

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2. This website is reliable.

3. I think the product descriptions on this website are not true.

4. Based on my experience with this online store, I know it is not opportunistic.

5. Based on my experience with this online store, I know it cares about customers.

6. Based on my experience with this online store, I know it is honest.

7. Based on my experience with this online store, I know it is predictable.

Customer Satisfaction

1. I feel contented with the shopping experience on this website.

2. I am satisfied with the products I purchased from this website.

3. Generally speaking, I am satisfied with this website.

4. Company employees have the knowledge to answer my questions.

5. Company employees properly handle any problems that arise.

6. The contact employees understand my specific needs.

7. Employees address my complaints in a friendly manner.

8. The c online store performs the service correctly the first time.

9. My online transactions are always accurate.

10. The online store keeps my records accurately.

11. The products or services I ordered were delivered to me within the time promised.

12. Using the companys web site requires a lot of effort.

13. All my purchasing needs are included in the menu options.

14. The organization and structure of online content is easy to follow.

15. The online store provides most of purchasing functions that I need.

16. The online store provides wide products/services with the features I want.

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17. I feel the risk associated with online transactions is low.

18. The company will not misuse my personal information.

19. I feel safe in my online transactions.

Perceived Value

1. In spite of consideration about pay and rewards, I still think shopping experience on

this website is very valuable.

2. What I got deserved what I paid, including money, time, and energy.

3. This website is reasonable about price.

4. Compared to alternative online shopping websites, this website offers attractive

product/service costs.

5. Compared to alternative online shopping websites, this website charges me fairly for

similar products/services.

6. Comparing what I pay to what I might get from other competitive websites, I think

this website provided me with good value.

Service Quality

1. This website is safe and reliable and never use my personal information in an

impropriate way.

2. Customer service is friendly and efficient.

3. Website design is simple, reasonable and attractive.

4. This online store provides service as promised.

5. This online store performs services right the first time.

29