The Impact of Product, Price, Promotion and Place Logistics On Customer Satisfaction and Share of Business.

The Impact of Product, Price, Promotion and Place/Logistics on Customer Satisfaction and Share of Business
Dissertation
Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University
By
Rudolf Leuschner, M.A. Graduate Program in Business Administration
The Ohio State University 2010
Dissertation Committee: Professor Douglas M. Lambert, Advisor Professor Keely L. Croxton Professor A. Michael Knemeyer
UMI Number: 3438241
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Copyright by
Rudolf Leuschner
2010
Abstract
Customer service has been a topic in marketing and logistics research for many decades. Much of the research was functionally focused and lacked the integration of logistics customer service with the other components of the Marketing Mix (price, product and promotion). In addition many prior studies focused only on a single industry and there is little replication and limited possibilities for generalizability. This shortcoming is alleviated in this research by using a multiindustry approach that allows for replication across the samples. The focus of this research was on business-to business relationships in several industries, health care, electronics, plastics, and sporting goods. The goals of the research were to test a general model that across multiple samples and industries and to understand where differences occur. The outcome variables are customer satisfaction and share of business. The results show that the impact of each component of the Marketing Mix varies by sample. In no two samples do the same components of the Marketing Mix show a significant impact on customer satisfaction. This does not diminish the importance of the Marketing Mix, but it shows that a careful evaluation of individual samples is necessary. The impact of customer satisfaction on share of business is significant in most samples, but not all of them. As a result of this research future researchers should investigate why differences occur between the samples. Managers should take away that they must perform customer service studies in their own company and that the studies must be repeated in regular intervals.
ii
Dedication
This dissertation is dedicated to my family who always supported me.
iii
Acknowledgments
My first thanks go to Dr. Douglas M. Lambert for all the advice, guidance, and support he provided me with. His tireless pursuit of perfection is remarkable and hopefully my work is a reflection of this spirit. He is the best editor I have had and he sets an example of professionalism that we all should strive to achieve. In addition, I would like to thank him for providing me with all the data for this dissertation.
I would like to also thank Dr. A. Michael Knemeyer for the insightful comments throughout the writing of this dissertation. His great attitude and skill as a researcher have made positive contributions to the quality of my work. Special thanks go to Dr. Keely Croxton for her counsel regarding the dissertation. It is remarkable that she let me defend my dissertation within days of her giving birth to her beautiful daughter. I would also like to thank Marley for not wanting to come out during my defense, which would have caused an interesting situation.
Next, I would like to extend my gratitude to several special people in the Fisher College of Business. I am grateful to Drs. Martha Cooper, Walter Zinn, John Saldanha, Rao Unnava, Thomas Otter, Bob Leone, and Michael Browne for teaching the classes and seminars that taught me so much. I am especially thankful to Shirley Gaddis who always took care of me. I also appreciate the support from my friends Francois Charvet, Matias Enz, Steve Robeano, Sebastin Garca-Dastugue, Chris Randall, Ned Sandlin, Tim Pettit, Ping Wang, Jason Miller, and
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Matt Schwieterman. The members of the Global Supply Chain Forum have also provided me with valuable feedback on various stages of the dissertation.
Last but not least, I would like to thank my family because without them none of this would have been possible. First, I have to acknowledge my mother Maria Leuschner and my father Wolfgang Leuschner. Only with their sacrifice, devotion and support was I able to do all the things I did. Next, I have to thank my grandparents Alexandru and Stella Ioanitescu who were the first ones to show me what hard work, dedication and perseverance really mean. Then, I also would like to specifically mention my uncle Emil, my other uncle Lothar and my aunt Heidi. Finally, I thank all the special people in my life who have cheered me on and kept me going.
Vita
2004 ........................................................ B.S. Business Administration, University of Nevada
2006 ........................................................ M.B.A., University of Nevada
2009 ........................................................ M.A. Business, The Ohio State University
Publications
Lambert, Douglas M., Rudolf Leuschner, and Dale S. Rogers, Implementing and Sustaining the Supply Chain Management Processes, in Douglas M. Lambert (editor), Supply Chain Management: Processes, Partnerships, Performance, Third Edition, Sarasota, FL: Supply Chain Management Institute, 2008, pp. 235-254. Carter, Craig R., Rudolf Leuschner, and Dale S. Rogers (2007) A Citation Analysis of the Journal of Supply Chain Management: An Examination of Social Networks, The Journal of Supply Chain Management, Vol. 43, No. 2, pp. 1528. Rogers, Dale S. and Rudolf Leuschner (2004) Supply Chain Management: Retrospective and Prospective, Journal of Marketing Theory and Practice, Vol. 12, No. 4, pp. 60-65.
Fields of Study
Major Field: Business Administration Area of Specialization: Logistics Minor Field: Marketing
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Table of Contents
Abstract ............................................................................................................................................ ii Dedication ....................................................................................................................................... iii Acknowledgments........................................................................................................................... iv Vita .................................................................................................................................................. vi Table of Contents ........................................................................................................................... vii List of Tables ................................................................................................................................... xi List of Figures ................................................................................................................................ xvii CHAPTER 1. INTRODUCTION ........................................................................................................ 1
1.1.
Background ...................................................................................................................... 2
1.2.
Scope of the Research ..................................................................................................... 4
1.3.
Objectives and Research Questions ................................................................................ 6
1.4.
Research Hypotheses ...................................................................................................... 8
1.5.
Methodology and Research Design ............................................................................... 10
1.6.
Contributions and Future Research............................................................................... 13
vii
1.7.
Organization .................................................................................................................. 15 LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT ....................................... 16
CHAPTER 2.
2.1.
Introduction and Origins of Customer Service .............................................................. 17
2.2.
Customer Service in Marketing and Logistics ................................................................ 25
2.3.
Customer Satisfaction and Firm Performance .............................................................. 44
2.4.
Hypothesis Development .............................................................................................. 52
2.5.
Summary ........................................................................................................................ 58 METHODOLOGY ..................................................................................................... 59
CHAPTER 3.
3.1.
Data Collection .............................................................................................................. 60
3.2.
Overview of the Samples ............................................................................................... 64
3.3.
Data Analysis Preparation ............................................................................................. 69
3.4.
Overview of Questions Used in the Samples................................................................. 76
3.5.
Structural Equation Modeling ....................................................................................... 83
3.6.
Measurement Model Results for Sample A-1 ............................................................... 87
3.7.
Measurement Model Results for Sample A-2 ............................................................... 92
3.8.
Measurement Model Results for Sample A-3 ............................................................... 97 viii
3.9.
Measurement Model Results for Sample B-1.............................................................. 101
3.10.
Measurement Model Results for Sample B-2.............................................................. 106
3.11.
Measurement Model Results for Sample C-1.............................................................. 110
3.12.
Measurement Model Results for Sample D-1 ............................................................. 114
3.13.
3.14.
3.15.
Summary ...................................................................................................................... 129 RESULTS................................................................................................................ 130
CHAPTER 4.
4.1.
Overview of the Results Evaluation ............................................................................. 131
4.2.
A-1 Blood Banking Reagents Sample Results .............................................................. 132
4.3.
A-2 Coagulation Reagents Sample Results .................................................................. 135
4.4.
A-3 Coagulation Reagents Sample Results .................................................................. 137
4.5.
B-1 Professional Video Tape Sample Results............................................................... 139
4.6.
B-2 Consumer Video Tape Sample Results .................................................................. 141
4.7.
C-1 Plastics Resin Sample Results ................................................................................ 143
4.8.
D-1 Golf Balls Sample Results ...................................................................................... 145 ix
4.9.
D-2 Golf Clubs Sample Results ..................................................................................... 147
4.10.
D-3 Golf Shoes Sample Results .................................................................................... 149
4.11.
Sample Comparison ..................................................................................................... 151
4.12.
Summary ...................................................................................................................... 155 CONCLUSIONS ...................................................................................................... 156
CHAPTER 5.
5.1.
Summary of Research Purpose.................................................................................... 157
5.2.
Review of Research Objectives and Hypotheses ......................................................... 158
5.3.
Summary of Findings ................................................................................................... 161
5.4.
Research Limitations ................................................................................................... 163
5.5.
Opportunities for Future Research.............................................................................. 165
5.6.
Implications for Theory................................................................................................ 166
5.7.
Implications for Practice .............................................................................................. 167
5.8.
Overall Conclusions ..................................................................................................... 169
References ................................................................................................................................... 170
List of Tables
Table 1: Sample Overview ............................................................................................................. 11
Table 2: Effective Sample Size........................................................................................................ 12
Table 3: Summary of Results of Previous Customer Service Studies............................................. 23
Table 4: Constructs of the Marketing Mix ..................................................................................... 43
Table 5: Outcome Variables in Customer Service Studies ............................................................. 51
Table 6: Overview of the Samples ................................................................................................. 64
Table 7: Number of Questions and Usable Cases .......................................................................... 71
Table 8: Summary of Composite Formation Methods................................................................... 74
Table 9: Product Attributes Across all Sample ............................................................................... 77
Table 10: Price Attributes Across all Samples ................................................................................ 80
Table 11: Promotion/Personal Selling Attributes Across all Samples ............................................ 80
Table 12: Place/Logistics Attributes Across all Samples ................................................................ 82
Table 13: A-1 Measurement Model Product Construct Loadings ................................................. 88 xi
Table 14: A-1 Measurement Model Price Construct Loadings ...................................................... 89
Table 15: A-1 Measurement Model Promotion Construct Loadings ............................................. 89
Table 16: A-1 Measurement Model Place Construct Loadings ...................................................... 90
Table 17: A-1 Discriminant Validity Test Results ........................................................................... 91
Table 18: A-2 Measurement Model Product Construct Loadings ................................................. 93
Table 22: A-2 Discriminant Validity Test Results ........................................................................... 96
Table 23: A-3 Measurement Model Product Construct Loadings ................................................. 97
Table 27: A-3 Discriminant Validity Test Results ......................................................................... 100
Table 28: B-1 Measurement Model Product Construct Loadings................................................ 102
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Table 29: B-1 Measurement Model Price Construct Loadings .................................................... 103
Table 30: B-1 Measurement Model Promotion Construct Loadings ........................................... 103
Table 31: B-1 Measurement Model Place Construct Loadings .................................................... 104
Table 32: B-1 Discriminant Validity Testing Results ..................................................................... 105
Table 33: B-2 Measurement Model Product Construct Loadings................................................ 106
Table 34: B-2 Measurement Model Price Construct Loadings .................................................... 107
Table 35: B-2 Measurement Model Promotion Construct Loadings ........................................... 108
Table 36: B-2 Measurement Model Place Construct Loadings .................................................... 108
Table 37: B-2 Discriminant Validity Testing Results ..................................................................... 109
Table 38: C-1 Measurement Model Product Construct Loadings ................................................ 110
Table 39: C-1 Measurement Model Product Construct Loadings ................................................ 111
Table 40: C-1 Measurement Model Promotion Construct Loadings ........................................... 111
Table 41: C-1 Measurement Model Place Construct Loadings .................................................... 112
Table 42: C-1 Discriminant Validity Testing Results ..................................................................... 113
Table 43: D-1 Measurement Model Product Construct Loadings ............................................... 115
xiii
Table 44: D-1 Measurement Model Price Construct Loadings .................................................... 116
Table 45: D-1 Measurement Model Promotion Construct Loadings ........................................... 116
Table 46: D-1 Measurement Model Place Construct Loadings.................................................... 117
Table 47: D-1 Discriminant Validity Testing Results .................................................................... 118
Table 58: A-1 Blood Banking Results............................................................................................ 133
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Table 59: A-1 Blood Banking Results Alternative Model ............................................................. 134
Table 60: A-2 Coagulation Reagents Results ............................................................................... 135
Table 61: A-2 Coagulation Reagents Results Alternative Model ................................................. 136
Table 62: A-3 Coagulation Reagents Results ............................................................................... 137
Table 63: A-3 Coagulation Reagents Results Alternative Model ................................................. 138
Table 64: B-1 Professional Tape Results ...................................................................................... 140
Table 65: B-1 Professional Tape Results Alternative Model ........................................................ 140
Table 66: B-2 Consumer Tape Results ......................................................................................... 141
Table 67: B-2 Consumer Tape Results Alternative Model ........................................................... 142
Table 68: C-1 Plastic Resin Results ............................................................................................... 143
Table 69: C-1 Plastic Resin Results Alternative Model................................................................. 144
Table 70: D-1 Golf Balls Results ................................................................................................... 145
Table 71: D-1 Golf Balls Results Alternative Model ..................................................................... 146
Table 72: D-2 Golf Clubs Results .................................................................................................. 147
Table 73: D-2 Golf Clubs Results Alternative Model .................................................................... 148
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Table 74: D-3 Golf Shoes Results ................................................................................................. 149
Table 75: D-3 Golf Clubs Results Alternative Model .................................................................... 150
Table 76: Overall Impact of the Marketing Mix on Customer Satisfaction ................................. 152
Table 77: Overall Impact of Customer Satisfaction on Share of Business ................................... 153
Table 78: Overall Impact of Customer Satisfaction on Preferred Share of Business ................... 154
Table 79: Overall Impact of the Marketing Mix on Customer Satisfaction ................................. 161
Table 80: Overall Impact of Customer Satisfaction on Share of Business ................................... 162
xvi
List of Figures
Figure 1: Conceptual Model with Hypotheses ................................................................................. 9
Figure 2: A Model of Service Quality Improvement and Profitability............................................ 48
Figure 3: Conceptual Model ........................................................................................................... 53
Figure 4: Conceptual Model with Hypotheses ............................................................................... 57
Figure 5: Structural Model and Hypotheses ................................................................................ 131
xvii
CHAPTER 1. INTRODUCTION
Traditionally, logistics has been viewed as a cost center in companies and the functions primary contributions to the bottom line are cost and asset reductions. However, there is some evidence that logistics attributes have a stronger and more consistent influence on customer satisfaction and share of business than the factors that are commonly attributed to the marketing function (Lambert and Harrington 1989; Sterling and Lambert 1988). By comparing logistics attributes to other attributes, in multiple industries, it can be determined whether logistics consistently has a stronger impact on customer satisfaction and share of business. In this dissertation, data from several industries are used: health services, electronics, plastics, and sporting goods. In order to gain a better understanding of the factors that contribute consistently to business performance nine distinct samples are analyzed. The results suggest that managers should look beyond the common belief that logistics can only contribute cost and asset reductions.
1.1.
Background
Customer service has been an important research stream in both the marketing and the logistics areas. Early academic work in Marketing included a large number of areas that today would be considered as logistics activities, like transportation and distribution (Shaw 1915). Over time marketing and logistics became more specialized, just as businesses became more functionally specialized. The problem with functional silos is that both Marketing and Logistics functions can influence customer service but if their actions are not coordinated, it can lead to suboptimal decisions. More general frameworks like the Marketing Concept and the Marketing Mix incorporate elements from marketing and logistics.
The Marketing Concept is the philosophy that firms should analyze the needs of their customers, then make decisions to satisfy those needs and do so better than the competition (Kotler 1967). The Marketing Mix (Borden 1953) activities have often been conceptualized as the Four Ps of marketing (McCarthy 1960), product, price, promotion, and place. Once the channels of distribution have been selected, place generally occurs in the logistics function as time and place utilities are created. For this reason, place is synonymous with logistics service (Coyle, Bardi and Langley 1992, Stock and Lambert 2001). Marketing and logistics are involved in the Marketing Mix, yet conflicting objectives can hinder effective integration of service activities (Sterling and Lambert 1988; Sterling and Lambert 1989). Customer service is a boundary-spanning activity that takes place within and beyond the firm (La Londe, Cooper and Noordewier 1988; Rinehart, Cooper and Wagenheim 1989). Integration within the firm should
focus on marketing and logistics activities that interface with the customer (Rinehart, Cooper and Wagenheim 1989).
A problem facing many manufacturing firms when marketing to downstream members of their supply chain is the integration of logistics customer service with the other components of the Marketing Mix: product, price, and promotion (Innis and La Londe 1994; Sterling and Lambert 1988; Sterling and Lambert 1989). How management allocates scarce resources to the components of the Marketing Mix has a significant impact on the market share and profitability of a company (Innis and La Londe 1994, Leuthesser and Kohli 1995; Sterling and Lambert 1988; Sterling and Lambert 1989). Logistics scholars have attempted to understand how logistics activities affect customer service, but often this happened without consideration of a broad set of marketing activities (Innis and La Londe, 1994; Sterling and Lambert 1988; Sterling and Lambert 1989). Although the link between marketing and logistics customer service has been documented in several studies (Emerson and Grimm, 1996; Emerson and Grimm 1998; Innis and La Londe 1994; Lambert and Harrington 1989; Sterling and Lambert 1988; Sterling and Lambert 1989) other studies focused exclusively on either logistics (Mentzer, Flint and Kent 1999; Mentzer, Flint and Hult 2001; Stank, Goldsby and Vickery 1999; Stank, et al. 2003) or marketing (Cronin and Taylor 1992; Parasurman, Zeithaml and Berry 1985; Parasurman, Zeithaml and Berry 1988; Parasurman, Zeithaml and Berry 1991).
1.2.
Scope of the Research
The main goal for this research was to develop a model that shows the contribution of logistics relative to the other components of the Marketing Mix across several industries. By comparing the four components of the Marketing Mix in multiple industries, it can be determined whether logistics consistently has a stronger impact on customer satisfaction and share of business. Such a result could help change the common belief that logistics can only contribute cost and asset reductions.
Many previous studies on customer service focused only on a single industry (Innis and La Londe 1994; Stank, Goldsby and Vickery, 1999; Sterling and Lambert 1988) and few were replication studies (Lambert and Harrinton, 1990; Lambert, Lewis and Stock 1993; Stank, et al. 2003). As such, no prior research can claim generalizability. Generalizability provides the confidence that a theoretical model can be expanded beyond the situation in which it was developed. If a study is conducted in one industry, then the results may be valid only for that industry. A customer service model with a more universal application was called for in several previous studies (DavisSramek, Mentzer and Stank 2008; Mentzer, Flint and Hult 2001; Stank, Goldsby and Vickery 1999; Stank, et al. 2003) and this research addresses that need.
By using a multi-industry approach with nine samples, a model can be developed on one sample and then validated on the others (Hubbard and Armstrong 1994; Hubbard and Vetter 1996). This approach yields stronger results because it minimizes the chance for misspecification of the model (Ehrenberg 2004). The need for replication has been voiced several times in the past (Furchtgott 1984, Lubin 1957, Sterling, Rosenbaum and Weinkam 1995). Often, researchers and 4
reviewers seem biased toward publishing research that reports significant results (Rosenthal 1979). This leads to a majority of published studies showing significant results, even if Type I errors cause them. In addition, a large number of studies showing non-significant results are not published.
Lindsay and Ehrenberg (1993) offer guidelines for designing replication studies. If a study is performed for the first time, the result can be regarded as one-off. One can ask, under what conditions, if any, will it hold again? Would the same result be obtained at a later point in time? Would the result hold in a different situation? If the study is repeated, these questions can be answered. It is important to note that replicated studies are not identical. First, identical replication is virtually impossible and second pointless because that would mean the results must be the same. If the same result is obtained even with varying conditions, researchers can note these conditions and investigate why they did not change the result. For this research, different products, industries and points in time are the major conditions that may influence the outcomes. There are two types of replications, close and differentiated. Close replications attempt to keep as many of the conditions constant as possible. An example would be the two samples on coagulation reagents (see samples A-2 and A-3) used in this research. Differentiated replications involve major differences, such as different industries, different products, and different position in the supply chain. The other samples would fall into that category. Generally with close replication one expects to see the same result, while under differentiated replication, variations are more likely.
1.3.
Objectives and Research Questions
One framework for determining and assessing all variables important for selecting and evaluating suppliers is the framework first presented by Lambert and Zemke (1982). Since the goal of this research is to develop a generalizable model, it is best to start with more variables and reduce them as the need arises during scale purification. The variables that buyers in companies use to select and evaluate suppliers can be summarized into one of the four components of the Marketing Mix: product, price, promotion/personal selling and place/logistics. The product construct was made up of attributes describing the performance of the product. Price contained attributes regarding competitiveness of pricing and the satisfaction with billing procedures. Promotion (including personal selling) had attributes related to advertising efforts and salesperson performance. Place (logistics) evaluated different aspects of logistics performance. The outcomes measured in this research are: customer satisfaction and share of business. Customer satisfaction is the overall evaluation of satisfaction with a supplier. Share of business denotes the percentage of business given to a supplier.
The suppliers with better products will usually be rewarded with higher customer satisfaction. Lower prices also mean generally higher customer satisfaction. Satisfaction with the salesperson also has an impact on overall satisfaction. Suppliers who can deliver their products on time and without errors can create higher customer satisfaction as well. Each of these four relationships was tested in this dissertation in addition to the impact that customer satisfaction has on share of business. These relationships were tested on a range of samples from several industries.
The specific research questions for this dissertation are:
1.
What are multi-item scales to assess the performance of customer service elements in business-to-business relationships across industries?
2.
What is the relative importance of the components of the Marketing Mix on customer satisfaction in business-to-business settings in several industries?
3.
What is the influence of customer satisfaction on share of business?
1.4.
Research Hypotheses
The four components of the marketing mix were all believed to influence the level of customer satisfaction (Emerson and Grimm 1998; Innis and La Londe 1994; Lambert and Harrington 1989; Sterling and Lambert 1988). Therefore, the first hypothesis was:
H1: All components of the Marketing Mix contribute to customer satisfaction More specifically, the relationship between the individual components of the Marketing Mix were analyzed. The nature of all the relationships is projected to be positive and significant.
H1a: Product has a significant impact on customer satisfaction. H1b: Price has a significant impact on customer satisfaction. H1c: Promotion/personal selling has a significant impact on customer satisfaction. H1d: Place/logistics has a significant impact on customer satisfaction. While customer satisfaction is an important construct in the literature, it does not directly translate into profitability or market share. There is evidence that satisfaction can and should be connected to hard financial measures (Rust, Zahorik and Keiningham 1996). Share of business is a good indicator of the financial success of a business-to-business relationship. Focusing on expanding business with current customers rather than attracting new customers has been referred to as the Leaky Bucket Theory (Brown, et al. 2005; Dowling and Uncles 1997), which holds that over time, customers defect and business is lost just as water is lost
through the holes in a bucket. There are two ways to maintain the water level in the bucket: put more water into the bucket or plug the holes. Defecting customers can either be replaced by new customers or by increased volume from the remaining customers (Brown, et al. 2005; Dowling and Uncles 1997). It is often suggested that it is a better strategy to increase the share of business than to attract new customers (Fornell and Wernerfeld 1987; Rust, Zahorik and Keiningham 1996). In order to understand the effect of customer satisfaction on share of business, the direct link was tested. It is believed to be a generally positive relationship (Rust, Zahorik and Keiningham 1996). In addition, indirect effects between the Marketing Mix and share of business are assessed.
H2: Customer satisfaction has a significant impact on share of business. All of these hypotheses were tested. The research model with the hypotheses is displayed in Figure 1.
Figure 1: Research Model with Hypotheses
1.5.
Methodology and Research Design
A database of nine customer satisfaction surveys was used for this dissertation. This section begins with a description of the data collection methodology. Next, there is a brief overview of the samples. Then, the hypothesis testing is described.
Questionnaire Design
The data were collected using mail questionnaires which are described in more detail in Chapter 3. The service attributes in each survey were identified during in-depth, personal interviews with key decision-makers in the sponsoring organization and buyers in 20 to 32 of each sponsors customer firms. Those who determined how much business was given to suppliers were asked to review the attributes and (1) describe any that they used that were not on the list and (2) evaluate the wording to determine if it was clear to them what each question meant. Attributes were presented by product, price, promotion and place to make it easier for those interviewed to identify attributes that they considered that were not included. The objective was to compile a set of comprehensive and meaningful questions for the mail survey. The attributes were randomized for the surveys.
Next, mail questionnaires were sent to representative decision-makers in firms served by major suppliers in the respective industry. The sponsor of the research was not identified. The questionnaires consisted of the following:
Part A: importance of attributes used to select and evaluate suppliers and the performance of the top three suppliers on those attributes.
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Part B: measurement of overall performance. Part C: expected performance levels. Part D: meaningful demographic data.
Overview of the Samples

For this study, nine samples were used for which the data were collected using the methodology that was described previously. An overview of the samples is presented in Table 1.
Industry Health services Health services Health services Electronics Electronics Plastics Sporting goods Sporting goods Sporting goods
Sample Name A-1 (Blood Banking Reagents) A-2 (Coagulation Reagents) A-3 (Coagulation Reagents) B-1 (Professional Tape) B-2 (Consumer Blank Tape) C-1 (Commodity Resin) D-1 (Golf Balls) D-2 (Golf Clubs) D-3 (Golf Shoes)
Sample Size 2,015 1,005 667 1,369 434 1,854 1,012 2,240 1,001
Responses 754 299 212 342 77 540 134 172 95
Response Rate 37.42% 29.75% 31.78% 24.98% 17.74% 29.13% 13.24% 7.68% 9.49%
Table 1: Sample Overview
The nine samples involve five distinct industries. The overall response rates vary from 7.68 to 37.42 percent. While the response rates in the Sporting goods industry are fairly low, this is not unusual due to the fact that surveys of retailers generally have lower response rates (Ellram, La Londe and Weber 1999). The sample sizes are sufficiently large and non-response bias is assessed in two ways (Armstrong and Overton 1979; Lambert and Harrington). Therefore, reliable conclusions can be drawn (Boyer and Swink 2008). The number of responses in each sample is adequate for the type of analysis that is performed because each respondent was 11
asked to evaluate up to three suppliers, thus effectively increasing the number of cases for the analysis. In Table 2, the effective sample size and the number of attributes is shown.
Industry Health services Health services Health services Electronics Electronics Plastics Sporting goods Sporting goods Sporting goods
Responses 753 299 205 347 113 534 141 120 89
Usable Cases 1,400 435 279 508 229 759 288 265 205
Attributes 88 78 71 83 69 91 130 149 135
Table 2: Effective Sample Size
Hypothesis Testing
All of the main hypotheses were tested using structural equation modeling (Bagozzi and Yi 1988; Bollen 1989). Each of the four components of the Marketing Mix was modeled as a latent variable with multiple indicators. The structural regression equations were used to test the hypotheses. The advantage of this approach is the ability to use multi-item constructs and jointly estimate structural parameters that correspond to the research hypotheses. Each sample was analyzed individually. Then, values of the latent variables from the individual samples were compared. In the industries where multiple samples exist, exploratory model development and confirmatory analysis were performed.
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1.6.
Contributions and Future Research
The customer satisfaction and revenue implications of superior logistics service should not be ignored. But such an argument can only be made with solid evidence. If the place/logistics construct has a consistently higher influence on customer satisfaction and share of business, then that could provide the necessary evidence. Determining if this is indeed the case is the main motivation for this dissertation.
The most important theoretical contribution is the extension of the frameworks integrating the Marketing Mix variables into a customer service context (Innis and La Londe, 1994; Lambert and Harrington 1989; Lambert, Lewis and Stock 1993; Sterling and Lambert 1988; Sterling and Lambert 1989). This extends previous theory by including the outcome variables customer satisfaction and share of business. By using multiple samples from multiple industries, a stable model can be developed (Rentz 1987). The power of replication should not be underestimated because theoretical models should be tested extensively before theory can be accepted as valid (Ehrenberg 2004).
The strength of replication lies not only in attempting to obtain the same result in multiple samples, but also to test the impact of the Marketing Mix on customer satisfaction and the impact of customer satisfaction on share of business. Therefore it is not only important to determine if any of the 4Ps is significant more often than the others, but also to determine if all of them have an impact at all. As most of the replication takes the form of differential replication, larger deviations in the results are expected (Lindsay and Ehrenberg 1993).
13
By providing a number of validated scales, the research also has the potential to provide direction for those interested in building questionnaires for measuring customer service attributes. Scale purification will provide guidance on which questions are most applicable in each industry. The research evaluates the data collection approach recommended by Lambert and Zemke (1982) for identifying service attributes that are important for customers. This will help managers who want to identify a useful set of questions for customer service and customer satisfaction attributes. The methodology to identify attributes is general enough that it can be used in any industry and it provides an accurate representation of all important attributes. Managers can use the results of this study as a starting point to determine which attributes increase customer satisfaction and share of business in their firms.
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1.7.
Organization
In Chapter 2, the relevant literature is reviewed. It includes sections on the origins of customer service, customer service in marketing and logistics, and customer satisfaction. The literature is then used to build the research hypotheses. Chapter 3 contains a description of the methodology and contains sections on data collection, questionnaire development, sample description and measurement model development. The results are presented in Chapter 4. Chapter 5 includes a summary of the research purpose, a review of research objectives and hypotheses, a summary of findings, research limitations, opportunities for future research, and implications for theory and practice.
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CHAPTER 2. LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

In this chapter, a review of the relevant literature in the customer service domain is provided. The review is divided in the following subsections: introduction and origins of customer service, customer service research in the fields of marketing and logistics, and customer satisfaction and firm performance. Following the literature review, the conceptual model is presented and the research hypotheses are developed. The chapter concludes with a summary.
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2.1.
Introduction and Origins of Customer Service
Customer service research has a long tradition in business and understanding how to better serve customers has always been part of the Marketing domain. This section will include the development of customer service as a field of study. All research in this section is based on data from surveys or experiments. The main analysis technique is rank-ordered lists, although some studies used analysis of variance and this is a major difference from later work in this area. Early in the twentieth century, business activities were classified into three great divisions (Shaw 1915):
the activities of production, which change the form of materials the activities of distribution, which change the place and ownership of the commodities thus produced the facilitating activities which aid and supplement the operations of production and distribution
The accepted system of distribution had been built up on the satisfying of staple needs (Shaw 1915). The ability of manufacturers to produce to the demand of the market was reached quickly and then emphasis shifted to aspects like distribution performance in order to reach an expanded market base (Shaw 1915).
Later, distribution was separated into its transportation and storage functions and the importance of service was recognized (Clark 1922). Service is, as far as the purchaser is concerned, a part of the product, a part of the thing which he is purchasing (Clark 1922). Later, the importance of physical distribution was once again highlighted by including a chapter on it in a Marketing textbook (Clark 1924). This was the first use of the term physical distribution (Bowersox, Smykay and LaLonde 1968) which would be replaced by the term logistics in 1985 17
when the National Council of Physical Distribution Management changed its name to the Council of Logistics Management (Bowersox 2007).
Until the early 1950s, commercial and academic interest in distribution was traditionally fragmentary and most often a secondary consideration (Bowersox 1969). Manufacturers all too often fail to realize the marketing penalty they pay when even a small proportion of the outlets normally handling their type of product does not have their brand in stock. Generally speaking, all marketing, selling, and advertising effort which has been put behind the product fails to the extent that potential buyers do not find it on hand when they are buying (Brown 1955). In a survey of factors that affect industrial buying decisions, the important areas were identified as product quality, delivery performance, quality of salesperson, price, and effective communication (Klass 1969).
It was suggested that stockouts, excess delivery time, or excess variability of delivery time all can result in lost sales (LeKashman and Stolle 1965). This concept was later expanded by specifying six steps to help companies achieve cost reductions through improved customer service (Hutchinson and Stolle 1968):
Define the elements of service Determine the customers viewpoint Design a competitive service package Develop a program to sell service Market-test the program Establish performance controls
In an experimental approach, factors that are considered when selecting a supplier were identified (Dickson 1966). The subject was assigned to read one of four hypothetical situations, 18
put himself in the position of the purchasing manager, and rate the importance of 23 purchasing factors. The ranking of the factors did vary by individual case situation but quality, delivery, and past performance were always in the top five and the cumulative ranking of the top five factors were quality, delivery, performance, warranties, and facilities. Analysis of variance on the factor rating showed that there was general agreement on factors with high and low importance, but not for factors between the extremes (Dickson 1966). This was one of the first studies that highlighted the importance of good delivery systems in purchasing decisions.
Researchers in another study attempted to determine the relative importance of determinants of industrial buyers vendor selection (Wind, Green and Robinson 1968). Subjects were asked to consider a list of 10 vendor characteristics and assign 100 to the most important, zero to the least important and proportional values to the remainder (Wind, Green and Robinson 1968). These results indicated agreement among the buyers as to the ranking of characteristics and quality/price ratio and delivery reliability were indicated as the two most important characteristics. In contrast, reciprocity and personal benefits to the buyer were grouped at the bottom. This study confirmed the importance of logistics aspects in customer service, which in this case was conceptualized as delivery reliability.
A similar approach was used in a later study by examining the role of customer service in business-to-business purchasing situations (Cunningham and Roberts 1974). Buyers were asked to name the five most important service factors and to rank them in order. Service factors were then compared by three criteria: times mentioned, times ranked in top 5, times ranked first. The rankings from combined results were (1) delivery reliability, (2) technical advice, (3) test 19
facilities, and (4) replacement guarantee. It was also found that 80% of the buyers formed a favorable impression of suppliers if they would meet the buyers need for quality, service, and price (Cunningham and Roberts 1974).
The first research to examine the role of physical distribution in industrial purchasing decisions was by Perreault and Russ (1976c) who studied the importance of physical distribution, the determinants of its importance, and the determinants of buyer satisfaction regarding physical distribution. Aggregate results indicated the five most important supplier characteristics were quality, distribution service, price, supplier management, and distance. The results showed the relative importance of supplier characteristics varied widely across the six product categories (semiconductors, bearings, acid, sheet plastic, fasteners, and lubricants), but only quality and distribution service were consistently ranked as first and second most important. The highest satisfaction was with billing procedures, order methods, and accuracy in filling orders, while the lowest satisfaction was with delivery time and delivery time variation (Perreault and Russ 1976c). The major contribution of this study is that customer service was assessed across different products and industries.
Gilmour et al. (1977) examined the service provided by major suppliers in the scientific instrument and supplies industry in Australia. Each respondent was shown a list of 17 customer service elements and asked to rank order the five most important. The average importance of each of the nine most mentioned elements was noted for all customers, for all suppliers and for five types of customer organizations. The five most important purchasing elements for all customers were availability, after-sales service, delivery reliability, delivery time, and technical 20
competence of the representatives. There were some differences in the rankings depending on the segment which indicates a possible benefit for applying different customer service policies in different segments (Gilmour, et al. 1977). However, the importance of the elements across the five customer groups was quite similar, which supports the conclusion that customer service is perceived uniformly.
The relative importance of physical distribution aspects continued to be an area of interest. Anderson, Jerman and Constantin (1978) used a mail survey to ask respondents to make 20 paired comparisons of goals for physical distribution. The comparisons then were converted to an interval scale. The results of the rankings were (1) order cycle time reliability, (2) percent orders filled, (3) minimum physical distribution cost, (4) minimum order cycle time, and (5) minimum damage in transit. The importance of elements is the same whether the respondent was from top or middle management (Anderson, Jerman and Constantin 1978).
A mail survey of manufacturers and wholesalers in the over-the-counter pharmaceutical products industry compared manufacturer and wholesaler views of customer service (Levy 1978). The wholesaler questionnaire requested information on the wholesalers perceptions of suppliers service performance. The manufacturers questionnaire requested information on their perceptions of the importance of each service to wholesale customers. The results of the rank ordering of the customer service elements in terms of perceived dollar value were (1) fill rate, (2) terms of sale, (3) lead time, (4) order placement policy, and (5) consistent delivery (Levy 1978).
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A survey of purchasing managers (located in two industrial areas in Brazil) on physical distribution service added more findings to the body of knowledge about customer service (Luce 1982). Respondents were asked to rank order the five overall purchasing factors and the five specific physical distribution elements which they perceived as most important. The overall purchasing factors mentioned most often were: quality, price, physical distribution, location, and minimum order size. The five specific physical distribution elements were: accuracy in filling orders, average delivery time, rush services and billing, action on complaints, and order status information (Luce 1982).
Jackson, Keith and Burdick (1986) studied the perceived relative importance of six physical distribution service components. Purchasing agents from 25 large industrial manufacturing firms were randomly assigned to one product type and one buy class condition. The elements ranked in the following order: (1) consistent delivery, (2) in-stock, (3) lead time, (4) cooperation, and (5) order processing information. The results supported earlier research which found order cycle time and in-stock performance to be important physical distribution service elements. No differences were found based on size of firm or industry type (Jackson, Keith and Burdick 1986).
The relationship between service level, the resulting customer satisfaction level, and the customers purchase decision has implications for the entire firm (Mentzer, Gomes and Krapfel 1989). The previously cited research revealed that elements of logistics were among the most important sub-factors of customer service. It is also apparent that purchasing managers ranked elements of logistics customer service high. A summary of the results of these studies is shown in Table 3. 22
Study (Dickson 1966)
Research Method Experiment: read one of four scenarios and rate the importance of 23 purchasing factors
Main Findings The ranking of the factors did vary by individual case situation but quality, delivery, and past performance were always in the top five and the cumulative ranking of the top five factors were quality, delivery, performance, warranties, and facilities. Analysis of variance on the factor rating showed that there was general agreement on factors with high and low importance, but not for factors between the extremes. The results indicated agreement among the buyers as to the ranking of characteristics and quality/price ratio and delivery reliability were indicated as the two most important characteristics. In contrast, reciprocity and personal benefits to the buyer were grouped at the bottom. The rankings were (1) delivery reliability, (2) technical advice, (3) test facilities, and (4) replacement guarantee. It was also found that 80% of the buyers formed a favorable impression of suppliers if they would meet the buyers need for quality, service, and price. The top five important supplier characteristics were quality, distribution service, price, supplier management, and distance. The relative importance of supplier characteristics varied widely across product categories, but only quality and distribution service were consistently ranked as first and second. The highest satisfaction was with billing procedures, order methods, and accuracy in filling orders, while the lowest satisfaction was with delivery time and delivery time variation.
Continued
(Wind, Green and Robinson 1968)
Experiment: assign between zero and 100 based on importance to a list of 10 vendor characteristics.
(Cunningham and Roberts 1974)
Experiment: name the five most important service factors and to rank them in order.
(Perreault and Russ 1976c)
Survey: Importance and satisfaction of supplier characteristics in six product categories (semiconductors, bearings, acid, sheet plastic, fasteners, and lubricants)
Table 3: Summary of Results of Previous Customer Service Studies
23
Table 3 continued
Study (Gilmour, et al. 1977)
Research Method Interviews: rank order the five most important of 17 customer service elements.
Main Findings The five most important purchasing elements for all customers were availability, after-sales service, delivery reliability, delivery time, and technical competence of the representatives. There was some difference of ranking by segment which indicates a possible benefit for applying different customer service policies in different segments. The top five were (1) order cycle time reliability, (2) percent orders filled, (3) minimum physical distribution cost, (4) minimum order cycle time, and (5) minimum damage in transit.
(Anderson, Jerman and Constantin 1978)
Survey: sales representatives for motor and rail transportation; each respondent completed 20 paired comparisons of goals that were then ranked. Survey: wholesalers perceptions of their suppliers service performance, and the manufacturers perception of the importance of each service to their wholesalers. Experiment: purchasing agents from 25 large industrial manufacturing firms were randomly assigned to one product type and one buy class condition.
(Levy 1978)
The results of the rank ordering of the customer service elements in terms of perceived dollar value were (1) fill rate, (2) terms of sale, (3) lead time, (4) order placement policy, and (5) consistent delivery.
(Jackson, Keith and Burdick 1986)
The perceived relative importance of six physical distribution service components was assessed. The importance varied across five product types and three buy classes. Overall, the elements ranked in the following order: (1) consistent delivery, (2) in-stock, (3) lead time, (4) cooperation, and (5) order processing information.
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2.2.
Customer Service in Marketing and Logistics
In this section, more recent customer service research is described. The following research has been published from the mid 1980s onwards and there are differences from the previous research. Previous research mostly used rank-ordered lists or analysis of variance compared to regression and structural equation modeling. The second difference is the connection of customer service elements to outcome variables like customer satisfaction. Customer service research in the Marketing domain is related to the SERVQUAL framework. In the Logistics domain research can be divided into studies that solely focus on logistics elements, the logistics service quality scale, and studies comparing elements related to Marketing and Logistics.
SERVQUAL
For more than two decades, the definition and measurement of service quality has occupied a prominent position in the Marketing literature. Unlike a physical product where one can often quantify quality, measuring service quality is different because there are no objective metrics (Parasurman, Zeithaml and Berry 1985). Exploratory research (Parasurman, Zeithaml and Berry 1985) initially offered support for the idea that service quality is an overall evaluation similar to an attitude. The difficulty of measuring service quality as a psychometric concept was overcome by measuring the customers expectations on service quality in a general service category and concurrently the perceptions about the particular firm whose service quality was being assessed. The difference between expectation scores and perception scores was conceptualized as perceived service quality. The total SERVQUAL score for service quality was calculated by
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averaging the difference scores. The findings show that regardless of the type of service, customers used the same general criteria for making an evaluative judgment about service quality. Based on those results, it was concluded that it was possible to construct one multiitem scale that could be used to evaluate universal service quality (Parasurman, Zeithaml and Berry 1985).
Following the exploratory research, a multi-item scale for surveys was developed (Parasurman, Zeithaml and Berry 1988). Ten aspects of service quality and 97 individual items were tested. Each item was converted into two statements, one to measure service expectations about firms in general and another to measure perceptions about the service performance of a particular firm. After scale purification, the refined scale had 22 items spread among five dimensions (Parasurman, Zeithaml and Berry 1988):
Tangibles: Physical facilities, equipment, and appearance of personnel Reliability: Ability to perform the promised service dependably and accurately Responsiveness: Willingness to help customers and provide prompt service Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence Empathy: Caring, individualized attention the firm provides its customers
Despite the obvious popularity of SERVQUAL in literature (Carman 1990; Johnson, Dotson and Dunlop 1988), several researchers questioned its usefulness in measuring service quality and proposed alternative approaches (Babakus and Boller 1992; Brown, Churchill and Peter 1993; Cronin and Taylor 1992; Teas 1993). There is little, if any, theoretical or empirical evidence to support the relevance of the expected service-perceived service gap as a basis for measuring service quality (Brown, Churchill and Peter 1993; Cronin and Taylor 1992; Teas 1993). It was shown that this operationalization of service quality confounds satisfaction and attitude (Cronin 26
and Taylor 1992). In addition to theoretical issues, the usefulness of SERVQUAL for making managerial decisions is doubtful because numerous aspects of service are not covered and some of the SERVQUAL questions are vague in some contexts.
Although SERVQUAL was originally intended as a generic measure of service performance (Parasurman, Zeithaml and Berry 1985), subsequent research has shown that the SERVQUAL items must be customized to the specific situation to which it is applied (Donnelly, et al. 1995; Finn and Lamb 1991; Reidenbach and Sandifer-Smallwood 1990). Other researchers argue that it takes more than a simple adaptation of the SERVQUAL items to effectively address service quality in some environments (Brown, Churchill and Peter 1993; Carman 1990; Finn and Lamb 1991). It is also important to note that managers and researchers are advised to carefully assess which issues are important to service quality in a particular situation and to modify the SERVQUAL scale accordingly or develop a proprietary scale (Parasurman, Zeithaml and Berry 1991):
By design, the iterative procedure retained only those items that are common and relevant to all service firms included in the study. However, by the same token, this procedure may have deleted certain "good" items relevant to some but not all firms. Therefore, while SERVQUAL can be used in its present form to assess and compare service quality across a wide variety of firms or units within a firm, appropriate adaptation of the instrument may be desirable when only a single service is investigated. While many researchers acknowledge the theoretical validity of the individual items comprising the SERVQUAL scale, the usability of the conceptualization has been challenged several times (Babakus and Boller 1992; Carman 1990; Cronin and Taylor 1992; Finn and Lamb 1991). Some empirical evidence suggests that the proposed delineation of the five components is not 27
consistent when used on different industries (Babakus and Boller 1992; Carman 1990; Cronin and Taylor 1992; Finn and Lamb 1991). Another unclear issue is the application of SERVQUAL to business-to-business relationships versus the business-to-consumer context in which it was developed. Some of the SERVQUAL items did not load on the same constructs when compared across different types of industries and different situations in subsequent research (Babakus and Boller 1992; Carman 1990; Cronin and Taylor 1992; Finn and Lamb 1991). This suggests that the dimensions of service quality may vary between different industries. An additional area of concern is whether a generic conceptual scheme like that has merit at all. Using the same questions to evaluate a situation-specific concept like service has not been a successful strategy in previous research. It would have merit to use the same constructs because it enables comparing results from several samples.
Simply measuring service quality alone is of limited interest and therefore service quality was linked to outcome variables in the service marketing literature. While studies in Marketing identified significant relationships among service quality, marketing variables and profitability and market share (Buzzell and Gale 1987; Gale 1992; Phillips, Chang and Buzzell 1983), other researchers have shown that the link between service quality and business performance is neither straightforward nor simple (Greisig 1994; Rust and Zahorik 1993). Some researchers have focused on intermediate links between service quality and profitability (Zeithaml, Berry and Parasurman 1996). The findings offered empirical support for the notion that improving service quality can increase favorable behavioral intentions on the part of a customer.
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Cronin and Taylor (1992) developed a competing scale to SERVQUAL called SERVPERF. The main difference between the two scales is that SERVQUAL is made up of the difference between actual performance and expectations of performance and SERVPERF only contains actual performance. It was found that the SERVPERF was an antecedent of customer satisfaction. In addition, customer satisfaction exerted a stronger influence on purchase intentions than did service quality (Cronin and Taylor 1992).
The SERVQUAL scale also had a direct influence on logistics research. Stank, Goldsby and Vickery (1999) used the five dimensions of SERVQUAL to build two scales: operational and relational service quality. Both dependability and accuracy relate to the consistent quality or conformance quality aspect of operational performance. The other dimensions, responsiveness, assurance, and empathy are all aspects of relational performance. Tangibles might also be viewed as being related to relational performance, at least to some degree, as they encompass the physical appearance of employees (Stank, Goldsby and Vickery 1999). The logistics customer service research is reviewed in the next section.
Logistics Customer Service

In both marketing and logistics, the nature of interactions between buyers and service suppliers has been identified as an important influence on buyer satisfaction and is a significant predictor of the continuation of a successful business relationship (Daugherty, Stank and Ellinger 1998; Innis and La Londe 1994; Leuthesser and Kohli 1995). Empirical research revealed that relational behavior is an important complement to offering quality in determining customer satisfaction (Leuthesser and Kohli 1995). It was found that service employees that engaged in deliberate 29
efforts to understand their customers unique business conditions cause higher levels of buyer satisfaction (Leuthesser and Kohli 1995). Logistics studies have revealed that both operational and relational performance relative to the logistics aspect of service quality had significant positive links to customer satisfaction and repurchase intentions (Daugherty, Stank and Ellinger 1998; Innis and La Londe 1994; Stank, Goldsby and Vickery 1999). Operational elements are aspects related to product availability, product condition, delivery reliability, and delivery speed. Relational elements are aspects related to communications and responsiveness.
There are many definitions and descriptions in the literature of how logistics activities create value for the customer. The most traditional are based on the creation of time and place utilities (Perreault and Russ 1976). Another approach are the Seven Rs that describe the attributes of the companys product/service offering that lead to utility creation through logistics value: the companys ability to deliver the right product in the right amount at the right place at the right time for the right customer in the right condition at the right price (Coyle, Bardi and Langley 1992; Stock and Lambert 2001). This definition implies that a significant part of the value of a product is created by logistics service. The service-dominant logic of Marketing also provides evidence for that argument (Vargo and Lusch 2004). Logistics customer service is often defined as a component of, or used as a substitute for, logistics value (Langley and Holcomb, 1992). Customer service adds value through three components (La Londe and Zinszer 1976):
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An activity to satisfy customers needs Performance measures to ensure customer satisfaction A philosophy of firm-wide commitment
In a subsequent book customer service was defined as a process for providing significant valueadded benefits to the supply chain in a cost effective way (La Londe, Cooper and Noordewier 1988). The supply chain view of this definition points to the notion that the benefits of good service go beyond the four walls of a company.
Using a sample from the personal products industry, the link between logistics capabilities, customer satisfaction, customer loyalty, and market share was investigated (Daugherty, Stank and Ellinger 1998). The path from logistics service through satisfaction to loyalty to market share is not linear as previously believed. The results of that study indicate that both satisfaction and loyalty are required to influence market share positively, however this is not a straightforward process. Positive market share benefits accrue only when firms create customers that are not only satisfied but also committed to repurchasing from a vendor over time (Daugherty, Stank and Ellinger 1998). This highlights the importance of measuring the financial benefits of customer service.
In addition, research has revealed that the relationship between service quality and outcome measures is complex. For example, Stank, Goldsby and Vickery (1999) found that:
The covariance between operational and relational performance, is supported by a significant positive value. The relationship between operational performance and customer satisfaction is statistically significant. Improvements in operational performance yield higher levels of customer satisfaction. Improvements in relational performance only marginally affect customer satisfaction as evidenced by the weak statistical significance. 31
Customer satisfaction has a highly significant positive effect on customer loyalty.
One issue that was raised was the fact that there could be other constructs that affect customer satisfaction and loyalty (Stank, Goldsby and Vickery 1999). Operational service performance and relational service performance are not the only variables affecting customer satisfaction. If service quality is operationalized just as operational and relational service performance (Stank, Goldsby and Vickery 1999), then product, pricing and service expectations that are set by the sales person are neglected. It is very likely, however that such attributes influence the outcome variables like satisfaction and loyalty. Another limitation is the fact that financial implications are omitted.
A subsequent study alleviated some of the issues by adding two more constructs: cost performance and market share (Stank, et al. 2003). Unlike previous studies, the findings show relational performance had a significant relationship with customer satisfaction, while the operational performance-satisfaction and cost performance-satisfaction relationships were not significant. It can be interpreted that operational performance and cost performance are order qualifiers and relational performance elements are the main drivers of determining which suppliers are excellent. The link between customer loyalty and market share was significant but at a lower level than the satisfaction-loyalty link (Stank, et al. 2003).
Because logistics service can be used by managers as a differentiating competitive tool, it is important to discern whether suppliers and customers have a similar understanding about logistics service expectations. Data from qualitative interviews showed a close match between the supplier's perception of what the customer expects and actual customer expectations (Davis
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and Mentzer 2006). A gap in perceptions about what loyalty means to customers and suppliers was revealed as well. The more powerful customers had a very behavioral view of loyalty, while suppliers took a more affective perspective. This is likely due to asymmetry in the relationship (large customers and small suppliers). The zone of tolerance concept seems to show its effect in this circumstance as well. The concept portrays service performance as a range rather than a distinct point. Service levels can vary within the zone without changes in customers satisfaction. Larger customers have a narrower zone, and suppliers differentiate service offerings in order to cater to the demands of more powerful customers (Davis and Mentzer 2006).
In a later article, the results of the previously described exploratory research were tested with a survey (Davis-Sramek, Mentzer and Stank 2008). Relational- and operational order fulfillment are based on the conceptualization of Stank, Goldsby and Vickery (1999). Relational order fulfillment service was modeled as an antecedent to operational order fulfillment service. The relational component of order fulfillment was conceptualized like the personnel contact quality construct in Mentzer, Flint and Hult (2001), which referred to the customer orientation of the suppliers customer service contact people. Operational order fulfillment was conceptualized as driving customer satisfaction. Satisfaction is the result of a cognitive evaluation based on total purchase experience over time and more specifically it is affected by (1) general satisfaction, (2) confirmation of expectations, and (3) the distance from the customers hypothetical ideal product. The final outcome is measured as loyalty, which is conceptualized as the causal relationship between two variables: affective commitment and purchase behavior (DavisSramek, Mentzer and Stank 2008).
33
To examine the model, data were collected from retailers of consumer durable manufacturing goods (Davis-Sramek, Mentzer and Stank 2008). The results show the existence of a complex, mediating relationship between satisfaction, affective commitment, and purchase behavior. Just satisfying customers may not be enough to influence future behavior; forging emotional bonds and trust in the relationship stems from satisfying customers and consequently influences purchase behavior. The results justify the importance of looking at the emotional and behavioral components of loyalty not only as distinctly different constructs, but as a causal relationship between affective commitment and purchase behavior (Davis-Sramek, Mentzer and Stank 2008). However, affective commitment and purchase behavior were measured as perceptions. It would be revealing to see if measuring actual purchase behavior would change that result.
Logistics Service Quality
In this section the stream of research centered on the logistics service quality scale (LSQ) is reviewed. The LSQ conceptualization refers to a distinct operationalization of logistics customer service. The quality of all aspects of logistics service several articles were published. Two articles involved literature reviews (Bienstock, Mentzer and Bird 1997, Mentzer, Gomes and Krapfel 1989) and three are based on empirical research (Mentzer, Flint and Hult 2001, Mentzer, Flint and Kent 1999, Rafiq and Jafaar, 2007).
Twenty-six elements of logistics and customer service reported in the literature were synthesized in order to obtain a three-dimensional construct composed of availability,
34
timeliness, and quality (Mentzer, Gomes and Krapfel 1989). This structure was generally supported by later empirical evidence, with adaptations based on qualitative research (Bienstock, Mentzer and Bird 1997). A multi-item scale of service quality in the logistics context was developed as an extension of physical distribution service (Mentzer, Flint and Kent 1999). As a result, service is believed to have considerable value as a competitive advantage input to strategic planning.
The research project was made up of a qualitative stage and a quantitative stage. In the qualitative phase, 13 focus group interviews were conducted with customers. The general topics covered four basic areas (Mentzer, Flint and Kent 1999):
The nature of the participants' work in relation to the sponsoring organization Evaluation of the working relationship with the sponsoring organization Assessment of sponsoring organizations performance Perceptions of what the sponsoring organization does well or poorly
In the quantitative phase, surveys were mailed and the results were analyzed. Respondents were divided into 10 separate data sets based on industry, one for scale purification, eight for scale validation. Respondents who failed to indicate the segment to which they belonged were excluded from the data analysis. Following the analysis, nine constructs were identified that make up LSQ (Mentzer, Flint and Kent 1999):
Information Quality: Value of information provided by the supplier. Ordering Procedures: Efficiency and effectiveness of the order process of the supplier. Ordering Release Quantities: Product availability (customers should be the most satisfied when they are able to obtain the quantities they desire). Timeliness: Whether orders arrive when promised, but more broadly, timeliness is dependent on the length of time between order placement and receipt.
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Order Accuracy: How closely actual shipments match orders upon arrival (having the right items, the correct number of items, and no substitutions). Order Quality: How well products work in two ways: how well they conform to product specifications and how well they meet customers' needs. Order Condition: Ensuring undamaged products. Order Discrepancy Handling: How well the suppliers deal with issues that the customer experiences due to the suppliers fault. Personnel Contact Quality: Whether the customer service employees are knowledgeable, empathize with the customers situation, and help them resolve their problems.
In an attempt to connect customer service with customer satisfaction, the LSQ constructs were split into two categories, order placement and order receipt (Mentzer, Flint and Hult 2001). Personnel contact quality, order release quantities, information quality, and ordering procedures fall into the order placement category. The others, order accuracy, order condition, order quality, timeliness, and order discrepancy handling fall into the order receipt category. The two categories then drive customer satisfaction as an outcome construct (Mentzer, Flint and Hult 2001). The single outcome variable is one of the limitations of this study and LSQ must be linked to other customer outcome measures, such as loyalty, word of mouth, and price sensitivity, as well as supplier outcome measures, such as revenues, market share, and profitability (Mentzer, Flint and Hult 2001).
An extension of this scale was used in a survey of logistics managers in the United Kingdom about their perceptions of third-party logistics (3PL) providers (Rafiq and Jafaar 2007). This was an independent validation of the LSQ scale. The researchers conceptualized the constructs for information quality and ordering procedures differently and achieve improved reliability of both constructs. In contrast to previous research (Mentzer, Flint and Hult 2001), it was found that the components of LSQ do not contribute equally to customer satisfaction. The functional LSQ 36
elements (personnel contact quality, ordering procedures, order discrepancy handling, and information quality) are perceived as more important than the technical ones (Rafiq and Jafaar 2007).
Integration of Marketing and Logistics Elements of Customer Service
Organizationally, customer service involves a variety of people at different levels within the organization and from different functions. A survey from ICSA showed that 51.0% of customer service respondents report to sales/marketing, 14% to administration, 13% to logistics and the remaining 22% report to other functions (ICSA 1988). A logistics organizational study shows that customer service reports to logistics in 56.1% of companies (Bowersox 1987). Customer service is a pervasive, boundary-spanning activity that takes place from within and beyond the firm and integration within the firm should focus on marketing and logistics activities as the primary functions which interface with the customer (Rinehart, Cooper and Wagenheim 1989). However, traditionally marketing and logistics have evolved separately within many corporations and therefore this can pose some serious challenges because both functions influence the service experience of the customer. If the functions do not coordinated their effort, it can deteriorate the customer satisfaction.
One of the earliest comprehensive frameworks for assessing the importance of customer service was the work of Sterling and Lambert (1988). They focused on the office systems and furniture industry. Before this study, customer service research had several shortcomings (Sterling and Lambert 1987):
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Either multiple industries were examined as a homogeneous group or if a single industry was assessed, the findings were not generalizable beyond a specific firm. A majority of the studies examined customer service in isolation from the rest of the marketing mix. Others perceived no functional boundaries to customer service, and consequently included in the "customer service" component variables which in fact were related specifically to product, price or promotion. In such instances "customer satisfaction" has, in effect, been mistakenly replaced by "customer service" as the output of all marketing effort.
Several studies used a cross-sectional approach to assess customer service within an industry (Daugherty, Stank and Ellinger 1998; Davis-Sramek, Mentzer and Stank 2008; Stank, Goldsby and Vickery 1999; Stank, et al. 2003). LSQ could be considered a generalizable model, but it lacks a holistic perspective because it excludes Marketing aspects and it does not use actionable outcome variables like financial outcomes (Mentzer, Flint and Kent 1999; Mentzer, Flint and Hult 2001). The second shortcoming is a more serious issue because often outcome variables such as customer satisfaction are used. If only a subset of attributes affecting the outcome variable is analyzed, the findings of the entire study are in jeopardy. Namely the effect of the factors that are included in the study is grossly overestimated. The third shortcoming illustrates another problem that can arise by not including the other parts of the marketing mix. Thus, several research gaps existed 20 years ago (Sterling and Lambert 1987):
It is uncertain which of the marketing mix variables are more important, and how these variables interact in affecting sales. Most empirically based studies were conducted using restricted data, such as advertising or price data exclusively, and were aimed at testing alternative model formulations and therefore, the generalizability of their findings is questionable. Most users of share measures have failed to: Carefully explore the role of share in their marketing and corporate strategic models Assess its relative importance under different environmental scenarios Establish empirically for their own brands, the historical and projected relationship between share and the effectiveness of their marketing strategy variables
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With few exceptions, researchers have failed to obtain direct empirical evidence concerning the cause-effect relationship between share or other objectiveness, such as profitsand the effectiveness of marketing strategy variables.
The first research gap is still valid because no study is known to have systematically included the marketing mix components and connected it to share of business or other measures in a single structural equation model. The second research gap is not so much of an issue any more because there were several surveys that focused at least on an industry level so that crosssectional data of several companies could be analyzed (Daugherty, Stank and Ellinger 1998; Davis-Sramek, Mentzer and Stank 2008; Stank, Goldsby and Vickery 1999; Stank, et al. 2003). The third and fourth research gaps are difficult to assess because causal relationships are inherently difficult to prove with statistical methods.
A factor analysis was performed on the office systems and furniture industry data and eleven functionally oriented factors were obtained (Sterling and Lambert 1987). Each of the four marketing mix components was represented by two or three factors:
Product Product Flexibility Product Development Product Breadth/Quality Price Discount Structure All Inclusive Bids Promotion Personal Selling Sales Assistance/Training Place/Logistics Physical Distribution Information System Capability Transportation Services Order Completeness
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Scales developed from these factors were then used for hypothesis testing. The results of the stepwise regression show that the four components of the marketing mix did not contribute equally to the share of business allocated to vendors by end users. Specifically place/logistics factors, which were referred to as physical distribution/customer service, consistently contributed more to the share of business. Price and promotion factors were inconsistent in their ability to predict share of business. Therefore, concentrating on only one or a few elements of the marketing mix would be dangerous, if a firm's objective was to gain market share (Sterling and Lambert 1987). Improved performance on the components of the Marketing Mix may lead to increased market penetration.
Customer service, one of the key elements provided by logistics, was seen to have a significant and positive impact on customer satisfaction, cognitive attitudes, and repurchase intentions (Innis and La Londe 1994). Customer satisfaction is one of the key objectives of the marketing function in most firms and cross-functional coordination should be encouraged to allow marketing and logistics to work together to provide the optimal marketing mix output to the customer (Innis and La Londe 1994). It can be concluded that only with efficient cross-functional integration can an optimal level of customer satisfaction be achieved. Innis and La Londe (1994) proposed but never tested a model where sales were driven by product, price, and promotion as well as physical distribution and customer service (logistics activities).
The marketing and logistics dimensions of customer service proposed by Mentzer, Gomes and Krapfel (1989) were tested with a survey by Emerson and Grimm (1996). A factor analysis was performed and several constructs were revealed (Emerson and Grimm 1996): 40
Quality Product support customer service Availability Product support sales Pricing policy Communication Delivery quality
Three logistics factors and four marketing factors were obtained (Emerson and Grimm 1996). The availability construct (proposed by Mentzer, Gomes and Krapfel 1989) was confirmed without any adaptation. While quality of physical distribution service was suggested as a construct by Mentzer, Gomes and Krapfel (1989), one modification was the renaming of this construct as delivery quality, to better represent the two indicators (Emerson and Grimm 1996). Communication formed the third logistics construct.
Of the four marketing constructs, pricing policy loaded on one factor as expected. However, the product support items for sales representatives and product support items for customer service representatives loaded on two separate factors. Customer service representatives are viewed differently from sales representatives by customers, because a customer service representative might communicate with only a small subset of accounts and there were many customers in the sample who have never had any interaction with a customer service representative and would certainly view a customer service representative differently from their sales representative (Emerson and Grimm 1996). The last marketing construct was named quality, but the measures contained questions on warranty, which was interpreted as a result of quality products.
In a later study, the difference in importance between marketing and logistics elements of customer service was assessed under different environmental conditions (Emerson and Grimm 41
1998). The informants were asked to distribute 100 points across eight attributes, with assignment of more points indicating greater importance (Emerson and Grimm 1998). The eight attributes included four from logistics (percentage of order filled, order cycle-time consistency, accuracy of orders shipped, and order status information) and four from marketing (terms of sale, competence of customer service representatives, overall product quality, and action on complaints) (Emerson and Grimm 1998). In order to calculate a score, the total assigned to the four items representing marketing customer service were subtracted from the sum of the four items representing logistics customer service (Emerson and Grimm 1998). Several findings were reported (Emerson and Grimm 1998):
The more indirect a channel (the higher the number of intermediaries), the more important logistics customer service becomes. Larger customers will place more importance on marketing customer service. Smaller customers often perceive the level of logistics service to be lower than the level of marketing service they receive. Firms experiencing high levels of supplier flexibility are obtaining high levels of logistics service.
A summary of constructs of the Marketing Mix variables obtained in three previous research studies is shown in Table 4. The selected studies used customer service elements that could be classified into the Marketing Mix components. Only studies where constructs could be assigned the categories were used. It is apparent that the constructs are different across multiple industries (office systems and furniture, plastics, and large power tools). But it is seems that each component of the Marketing Mix is important and at least one factor was obtained for each component.
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Marketing Mix Component Study/ Industry (Sterling and Lambert 1987) / Office Systems and Furniture
Product
Price
Promotion
Place/Logistics
Product Flexibility Product Development Product Breadth/ Quality
Discount Structure All Inclusive Bids
Personal Selling Sales Assistance/ Training
Information System Capability Order Completeness Transportation Services Information System Capability Lead Time Order Servicing Product Availability Availability Delivery quality
(Lambert and Harrington 1989) / Plastics 43 (Emerson and Grimm 1996) / Large Power Tools
Product Quality
Credit Discount Structure
Direct Mail Gifts, Entertainment, and Trade Shows Sales Support Quality of Sales Force Communication Product support sales
Quality Product support customer service
Pricing policy
Table 4: Constructs of the Marketing Mix
2.3.
Customer Satisfaction and Firm Performance
Customer Satisfaction has long been a central topic in Marketing research and practice. High customer satisfaction ratings are widely believed to be the best indicator of a company's future profits (Kotler 1991). Managers often use customer satisfaction as a criterion for diagnosing product or service performance and often tie customer satisfaction ratings to employee compensation. To encourage actions that will lead to an optimal level of satisfaction, it is necessary to understand the link between the antecedents of satisfaction and satisfaction's behavioral and economic consequences (Anderson and Sullivan 1993). Satisfaction was conceptualized as a post-purchase evaluation of product quality given pre-purchase expectations (Kotler 1991).
Using data from Sweden, several experimental findings of satisfaction research were tested (Anderson and Sullivan 1993). Satisfaction was found to increase with both perceived quality and disconfirmation. The term disconfirmation refers to the concept that a customer perceives a change in satisfaction only when their expectations are not confirmed. Both positive and negative disconfirmation increased with the ease of evaluating quality. When quality is ambiguous or difficult to evaluate, then expectations will play a greater role in determining satisfaction, and more importantly, quality which falls short of expectations was found to have a greater impact on satisfaction and retention than quality which exceeds expectations. Satisfaction was found to have a positive impact on repurchase intentions, and the elasticity of
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repurchase intentions with respect to satisfaction is found to be lower for firms that provide high satisfaction (Anderson and Sullivan 1993).
Using the same dataset as above, the link between customer satisfaction, market share, and profitability was investigated (Anderson, Fornell and Lehmann 1994). Firms that achieve high customer satisfaction enjoy superior economic returns, but the findings also indicate that economic returns from improving customer satisfaction are not immediately realized. Because efforts to increase current customers' satisfaction primarily affect future purchasing behavior, the greater portion of any economic returns from improving customer satisfaction will be realized in subsequent periods. Overall, customer satisfaction actually may fall as market share increases. This may be because gains in market share may come from attracting customers with preferences more distant from the target market. The firm may overextend its capabilities as the number of customers and/or segments grows. In such a situation, even though the overall level of customer satisfaction is falling, a firm's sales and profits may be increasing. It is important to note that this may be a short-run versus long-run phenomenon. In the long run, it is possible that customer satisfaction and market share go together, but there is evidence that this is not always the case in the short run (Anderson, Fornell and Lehmann 1994). This effect may also not be recognized in a cross-sectional research design, because changes cannot be measured.
The American Customer Satisfaction Index (ACSI) is a customer-based measurement system for evaluating and enhancing the performance of firms, industries, economic sectors, and national
45
economies (Fornell, et al. 1996). It was designed to be representative of the economy as a whole and covers more than 200 firms, with 1994 sales in excess of $2.7 trillion competing in over 40 industries in the seven major consumer sectors of the economy. On an annual basis, the ACSI system estimates a firm-level customer satisfaction index for each company in the sample and weights these firm-level indices to calculate industry, sector, and national indices. Overall customer satisfaction (ACSI) has three antecedents: perceived quality, perceived value, and customer expectations. The immediate consequences of increased customer satisfaction are decreased customer complaints and increased customer loyalty (Fornell, et al. 1996).
Many studies up to that point used the standard customer service paradigm (Oliver 1980). Those models reveal anomalies and omissions of previous approaches and to propose extensions and new discoveries that address the limitations and exclusions in existing theory. Fournier and Mick (1999) chose a different approach to explore and describe satisfaction by using firsthand accounts of subjects. This approach enabled the development of a more realistic perspective of satisfaction as it unfolds in the course of daily life. Satisfaction was investigated through extensive and repeated in-home interviews that focused on consumers' purchase and usage experiences with technological products. The study resulted in five main conclusions (Fournier and Mick 1999):
Consumer product satisfaction is an active, dynamic process. The satisfaction process often has a strong social dimension. Meaning and emotion are integral components of satisfaction. The satisfaction process is context-dependent and contingent, encompassing multiple paradigms, models, and modes.
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Product satisfaction is invariably intertwined with life satisfaction and the quality of life itself.
In order to assess the value of customer satisfaction in financial terms, a mathematical model approach was used (Rust and Zahorik 1993). The research is built on the premise of defensive marketing (Fornell and Wernerfeld 1987), which in contrast to offensive marketing focuses more on retaining customer rather than acquiring new ones. It is generally believed that it is more costly to add a new customer than to keep an existing one (Brown et. al 2005). The authors show how customer satisfaction can be linked to individual loyalty, aggregate customer retention rate, market share, and profitability. However, this is not a straightforward process (Rust and Zahorik 1993).
Quantifying the results of quality expenditures by linking service quality and customer satisfaction to financial outcomes can show the effect service improvements have on the bottom line. The return on quality (ROQ) approach is characterized by the following assumptions (Rust, Zahorik and Keiningham 1996):
Quality is an investment. Quality efforts must be financially accountable. It is possible to spend too much on quality. Not all quality expenditures are equally valid.
The relationship between service quality improvement efforts and profitability is modeled as a chain of effects that can be seen in Figure 2. The improvement effort, if successful, leads to an improvement in service quality. Improved service quality typically results in increased customer satisfaction. Increased customer satisfaction in turn leads to higher levels of customer retention, 47
and also positive word-of-mouth. Revenue and market share increases are driven by losing fewer existing customers and gaining more new customers. The increased revenues lead to greater profitability. The effect of word-of-mouth is very difficult to measure in a practical business situation, however it is important and it has a real effect (Kumar, Petersen and Leone 2007).
Source: (Kumar, Petersen and Leone 2007)
Figure 2: A Model of Service Quality Improvement and Profitability
Analysis of repurchase intention as a function of overall satisfaction showed that disappointed customers had only a 45% probability of returning, whereas the satisfied and very satisfied customers had a probability of over 90% (Rust, Zahorik and Keiningham 1996). The ROQ approach also considers a shift in market share as a result of the shift in satisfaction and given
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the right data specific ROQ figures can be calculated. Clearly, these numbers have little meaning without knowing the details of the particular situation, but it is important to note that there are approaches to quantify the results of increased customer satisfaction.
A review of outcome measures for customer service in prior research revealed that several outcome variables have been used. They can be classified into perceptual and financial measures. In general perceptual measures are about the subjects opinion, while financial measures are about quantifiable data. It is also apparent that most studies either choose to use one type or the other and only few combine both approaches.
The most popular perceptual outcome variable is customer satisfaction (see Table 5). Other related variables are loyalty (Daugherty, Stank and Ellinger 1998; Davis-Sramek, Mentzer and Stank 2008; Stank, Goldsby and Vickery 1999; Stank, et al. 2003; Zeithaml, Berry and Parasurman 1996) and future purchase intentions/behavior (Cronin and Taylor 1992; DavisSramek, Mentzer and Stank 2008). Often several outcome variables are used in order to provide a more accurate picture of the results. It is noteworthy, especially with exclusively perceptual outcome measures, that there might be some issues with common method variance. The problem may occur because strictly perceptual measures could mask actual differences. Data collected with the same method may limit variance, which makes it more difficult to recognize differences between the subjects.
In the other category, quantifiable measures of financial performance were used as outcome variables. Market share was the most popular measure used (see Table 5). Others used
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measures of profitability to determine success (Anderson, Fornell and Lehmann 1994; Phillips, Chang and Buzzell 1983; Rust, Zahorik and Keiningham 1996). Financial outcome measures, such as profitability and market share are often measured as perceptions. Often, not even the managers themselves have accurate profitability data on individual customers and as such obtaining accurate data is difficult, if not impossible (Lambert and Pohlen 2001; Lambert and Sterling 1987). Market share data can be obtained from databases covering an industry (Stank, et al. 2003).
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Study (Phillips, Chang and Buzzell 1983) (Sterling and Lambert 1987) (Cronin and Taylor 1992) (Anderson, Fornell and Lehmann 1994) (Zeithaml, Berry and Parasurman 1996)
Perceptual Outcomes
Financial Outcomes Relative Market Position Relative Direct Costs Relative Prices Return on Investment
Share of business Customer Satisfaction Purchase Intentions

EXPECTt = f1(EXPECTt-1, QUAL t-1, E1t) SATt = f2(QUALt-1, PRICEt-1, EXPECTt-2, E2t) PROFITt = f3(SATt-1, , E3t)
where Eit = vector of other factors (e.g., environmental trends, firm-specific factors, error)
Behavioral Intentions: Loyalty Switch Pay More External Response Internal Response Customer Attitudes, Emotions and Perceptions Customer Satisfaction Customer Satisfaction Loyalty Customer Satisfaction Loyalty Customer Satisfaction Customer Satisfaction Loyalty Customer Satisfaction Customer Satisfaction Loyalty: Affective Commitment Purchase Behavior Market Share Profitability Market Share Return on Quality Market Share
(Rust, Zahorik and Keiningham 1996) (Daugherty, Stank and Ellinger 1998) (Stank, Goldsby and Vickery 1999) (Mentzer, Flint and Hult 2001) (Stank, et al. 2003) (Rafiq and Jafaar 2007) (Davis-Sramek, Mentzer and Stank 2008)
Table 5: Outcome Variables in Customer Service Studies
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2.4.
Hypothesis Development
The literature presented in this chapter revealed that there was an opportunity to add new insights to the customer service domain. Although this area has a long stream of excellent research, there are still gaps that should be addressed. While there were several studies that presented a framework for assessing customer service, many of those were focused exclusively on logistics (Stank, Goldsby and Vickery 1999) or marketing (Parasurman, Zeithaml and Berry 1985). The research revealed that narrow approaches to customer service needed to be extended to include additional variables (Mentzer, Flint and Kent 1999) or customized to individual situations (Parasurman, Zeithaml and Berry 1991). The only framework for determining and assessing all variables important for selecting and evaluating suppliers is the framework first presented by Lambert and Zemke (1982). This approach has been refined over time and repeated in various industries and provides the direction for future research (Sterling and Lambert 1987; Lambert and Harrington 1989).
The conceptual model of this research is depicted in Figure 3. The variables that buyers in companies use to select and evaluate suppliers can be summarized into one of the four categories of the Marketing Mix: product, price, promotion and place. While there were several studies that included fewer variables responsible for driving customer satisfaction (Mentzer, Flint and Kent 1999; Stank, Goldsby and Vickery 1999), they later would be extended to include additional variables (Stank, et al. 2003). Since the goal of this research was to develop a
52
generalizable model, it was determined that the best strategy was to start with more variables and reduce them as the need arises during scale development.
Figure 3: Conceptual Model
The four components of the marketing mix are all believed to influence the level of customer satisfaction. The product construct generally covers attributes like performance, reliability, quality, and product development. The price attributes address billing, discounts and competitiveness. The promotion/personal selling attributes deal with characteristics of the sales representative. While advertising would certainly be part of the promotion construct in business-to-consumer relationships, business-to-business relationships are different (Mudambi 2002). There may be some advertisements in trade magazines, but during data analysis it was evident that they only played a minor role compared to characteristics of the sales 53
representative. In addition, training the sales force to deliver the branding message is of critical importance (Lynch and de Chernatony 2004). Attributes in the place/logistics category are focused on delivery issues like reliability, availability, accuracy, lead time and logistics service. Several studies focused on marketing and logistics components of customer service (Emerson and Grimm 1998; Innis and La Londe 1994; Lambert and Harrington 1989). The Marketing Mix variables are believed to drive satisfaction (Innis and La Londe 1994), however empirical testing of these relationships is still lacking. Therefore, the first hypothesis is:
H1:
The Marketing Mix has a positive significant impact on customer satisfaction
Beyond the general relationship between the overall Marketing Mix, the individual components must be assessed as well. Because customers first perceive the benefits of the product they are buying it is likely the primary source of satisfaction they derive from the purchase. There is evidence that better products increase customer satisfaction, however this is not a linear relationship (Maddox 1981; Swan and Combs 1976). In the samples that are analyzed in this research, a basic level of performance is present because only existing suppliers are evaluated.
H1a:
Product has a positive significant impact on customer satisfaction.
Pricing is an important factor in determining which products to procure, and it is not necessarily the absolute level of pricing but price level in relation to other factors (Herrmann, et al. 2004; Hoyer, Herrmann and Huber 2002). This notion of price fairness is captured in the way the
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construct is measured in this study. Because respondents are asked to indicate their perceptions on a seven-point scale relative pricing is measured. Pricing has shown a significant impact on satisfaction in several previous studies (Herrmann, et al. 2004; Hoyer, Herrmann and Huber 2002; Morganoski 1988; Voss, Parasuraman and Grewal 1998). However, most of the studies were experiments and this study would strengthen the understanding of the hypothesis.
H1b:
Price has a positive significant impact on customer satisfaction.
Previous research has shown that good salespeople can help increase satisfaction (Goof, et al. 1997; Grewal and Sharma 1991; Johnson, Barksdale and Boles 2001; Liu and Leach 2001). This effect has been shown to take place with manufacturers and retailers, which is important for this research because in some samples of this research manufacturers are surveyed, while in others retailers are surveyed (Goof, et al. 1997). Salespeople also set the expectations regarding the other three components of the Marketing Mix, and if that is done well, it should result in higher satisfaction.
H1c:
Promotion/personal selling has a positive significant impact on customer satisfaction.
The three constructs that belong to the Marketing function have all received attention in the Marketing literature. The contrast between Marketing and Logistics attributes has not been thoroughly explored and only a few studies have evaluated constructs from both areas together (see Table 5). Logistics attributes have been shown to have an impact on customer satisfaction
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in some studies (Davis-Sramek, Mentzer and Stank 2008; Mentzer, Flint and Hult 2001; Stank, Goldsby and Vickery 1999). However, in the presence of other constructs like pricing attributes, this effect is not consistent (Stank, et al. 2003).
H1d:
Place/logistics has a positive significant impact on customer satisfaction.
While customer satisfaction is an important construct in the literature, the downside is that it does not directly translate into financial success of a company. There is some evidence in the literature that satisfaction can and should be connected to hard financial measures (Heskett, et al. 1994; Heskett, Sasser and Schlesinger 2003; Rust, Zahorik and Keiningham 1996). The link between satisfaction and business outcomes is well-documented in the Service-Profit Chain framework (Heskett, et al. 1994; Heskett, Sasser and Schlesinger 2003; Homburg, Wieseke and Hoyer 2009). Share of business is a good indicator for determining financial success within a business-to-business relationship and therefore a useful outcome variable for this research. If the goal of management is to increase sales from existing customers then share of business must be expanded. In addition, understanding how the direct effect of the Marketing Mix on share of business differs from the effect on customer satisfaction provides additional insight.
The relationship between customer satisfaction and share of business is also useful in determining the accuracy of satisfaction as a predictor of financial success. If satisfied customers are contributing to larger share of business, then managers can focus their attention on activities that have a significant impact on customer satisfaction that are identified in the first hypothesis. It would seem that high customer satisfaction should result in a large share of 56
business, but there have been examples where this was not clear (Homburg, Wieseke and Hoyer 2009; Kamakura, et al. 2002). The last hypothesis deals with the relationship between these variables directly:
H2:
Customer satisfaction has a positive significant impact on share of business.
These hypotheses are tested in the course of this research. Figure 4 shows the conceptual model with the hypotheses. While some of the individual hypotheses have been addressed in previous research, connecting these links in one model adds a more holistic perspective. This perspective is useful when evaluating the model in several industries because it is able to show differences between the samples. If consistent patterns emerge across the different samples they could be regarded as generalizable. The main contribution of this research is the replication of the model over the nine samples.
Figure 4: Conceptual Model with Hypotheses
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2.5.
Summary
In this chapter, the relevant literature that influenced this research was presented. Although an extensive literature base already exists, there are gaps that this research addresses. The main gaps that are being addressed are:
The effect of logistics attributes relative to the other components of the Marketing Mix is examined. Both customer satisfaction and share of business are used as outcome variables. Differences between industries are examined.
The described hypotheses are believed to advance knowledge in the field and hopefully will spur new research in this area. The next chapter contains a description of the methodology. In Chapter 4, the results are presented and analyzed. Chapter 5 contains the conclusions.
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CHAPTER 3. METHODOLOGY
In this chapter the research methodology is described. First, the data collection and research instrument are reviewed. Next, the data analysis preparation including non-response bias testing, missing data mitigation and parceling technique are described. Then, scale development is reviewed for each sample:
Health Services (A-1): blood banking reagents Health Services (A-2): coagulation reagents Health Services (A-3): coagulation reagents Electronics (B-1): professional video tape Electronics (B-2): consumer video tape Plastics (C-1): commodity resin Sporting Goods (D-1): golf balls Sporting Goods (D-2): golf clubs Sporting Goods (D-3): golf shoes
For each of these samples the measurement model part of the structural equation modeling is described. Last, an overview of the questions used for each sample and a summary are provided.
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3.1.
Data Collection
A dataset of nine customer satisfaction studies used to conduct this research. For the data collection, the methodology proposed by Lambert and Zemke (1982) was followed on all samples. This methodology has been validated in several articles (Sterling and Lambert 1988, Lambert and Harrington 1989, Lambert, Lewis and Stock, 1993). The studies consisted of the following steps: external audit, internal audit, evaluation of customer perceptions and identification of opportunities. Because this research requires customer provided data, only the external audit part of each dataset was used. In the next section, the steps that were used for obtaining the data are described in detail.
Data Collection Methodology
The external audit part in the Lambert and Zemke (1982) methodology was used to identify attributes for evaluating suppliers. There are two parts in the data collection procedure: indepth, personal interviews and a mail survey. For each of the nine samples used for this research, interviews were conducted with key decision-makers in each of the sponsoring manufacturer organizations and then in 20-32 customer firms for each product category. Customer firms were selected on the basis of their geographic location, size, marketing needs and the major suppliers they used. The objective was to obtain a perspective that was as broad as possible in order to compile a comprehensive and meaningful set of questions for the mail survey. Any attribute that was mentioned during an interview was used on the questionnaire because the goal was to provide the sponsoring organization with a comprehensive 60
understanding of factors that customers use to select and retain suppliers. The interviews were continued until a saturation point was reached and no new attributes could be identified. The number of interviews conducted is consistent with previous research (Blair and Presser 1993).
In the second part, the mail survey, all potential respondents from industry databases were contacted by telephone and asked to participate in the survey before the mail questionnaire was sent to them. Pre-qualifying the respondents improved the overall response rate (Allen, Schewe and Wijk 1980, Hornik 1982). It also ensured that the informant was responsible for choosing supplier, was knowledgeable about the suppliers and could provide the information to complete the questionnaire. During the telephone conversations, the name and position of the decision-maker was determined and the mailing address was verified. Respondents were offered a summary of the research findings in return for their participation in the survey.
Then, questionnaires were sent to the representatives identified during the telephone interviews. The questionnaires were sent in three waves. In addition to the three waves of regular questionnaires, a short version of the main questionnaire was sent to non-respondents in order to assess non-response bias (Lambert and Harrington 1990).
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Research Instrument
The questionnaires consisted of four parts:
Part A: Importance of attributes used to select and evaluate suppliers. Performance of the top three suppliers on those attributes. Part B: measurement of overall performance. Part C: expected performance levels. Part D: meaningful demographic data.
The main data sources for the analysis in this research are the first two parts of the questionnaires. The questions in Part A fell into one of the following four categories: product, price, promotion/personal selling, and place/logistics. The product questions generally covered attributes like performance, reliability, quality and product development. The price questions addressed billing, discounts and competitiveness. The promotion/personal selling questions dealt with characteristics of the sales representative. Advertising in trade magazines was not an important factor for purchasing managers based on the low importance scores in the questionnaires. Questions in the place/logistics category focused on delivery issues like reliability, availability, accuracy, and lead time.
In Part A of the questionnaire, there were two tasks that must be completed. The first task was an evaluation of the importance of the attributes. The respondent was asked to circle on a scale from one to seven the number which best expressed the importance of each attribute when deciding how much business to give to each supplier. If an attribute was not used or possessed very little weight in the evaluation of suppliers, the respondent was asked to circle the number
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one (not important). A rating of seven (very important) should be reserved for those factors that would cause the respondent to reevaluate the amount of business done with a supplier, or cause the manager to drop the supplier in the event of inadequate performance.
The second task in Part A was to evaluate the current performance of three major suppliers. Using the scale labeled perceived performance, the respondent was asked to insert a number between one and seven which best expresses the perception of the supplier's current performance under the appropriate supplier heading. A rating of one indicates poor performance and seven should be used for excellent performance. If a service was not available from a supplier, then the respondent should use NA (not available).
In Part B, the current performance of all three major suppliers was evaluated. The two most important questions were about overall customer satisfaction and current and ideal share of business for each of the three major suppliers. These measures are used directly in the structural equation models. Another question in this section was whether the customer would recommend each of the suppliers they evaluated. The next two questions are about problems, whether any were reported and if they were solved satisfactory. The question after that assessed the percentage of on-time shipments during a typical month. The last question in that section referred to price differences. The lowest price supplier receives a score of 0 percent and for the other two the price premium as a percentage is indicated.
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3.2.
Overview of the Samples
For this study, nine independent samples were collected using the methodology described above. An overview of the samples is presented in Table 6.
Industry Health Services Health Services Health Services Electronics Electronics Plastics Sporting Goods Sporting Goods Sporting Goods
Sample Size 2,015 1,005 667 1,369 434 1,854 1,012 2,240 1,001
Responses 754 299 212 342 77 540 134 172 95
Response Rate 37.42% 29.75% 31.78% 24.98% 17.74% 29.13% 13.24% 7.68% 9.49%
Table 6: Overview of the Samples
The nine samples represented four distinct industries. The overall response rates varied from 7.68 to 37.42 percent. While the response rates in the Golf industry are fairly low, this is not unusual due to the fact that surveys of retailers generally have lower response rates (Ellram, La Londe and Weber 1999). The sample sizes are sufficiently large. Non-response bias was assessed in two ways (Armstrong and Overton 1979; Lambert and Harrington) and no significant differences were identified indicating that non-response bias was not a problem. Therefore, reliable conclusions can be drawn (Boyer and Swink 2008). The number of responses in each sample is adequate for the type of analysis that was performed because each respondent was asked to evaluate up to three suppliers, thus bringing the sample size into an acceptable level 64
for each sample. It is often suggested that at least 200 observations are necessary to run a structural equation model (Shah and Meyer Goldstein 2006). This is also dependent on the specifics of the model in particular the number of latent variables. In this model, there are six latent variables (LV) so in the smallest samples an adequate ratio of observations to LVs was achieved. In the next sections, each of the samples is described.
Health Services Industry

The health services industry yielded three separate samples. For sample A-1, a total of 2,015 hospitals with on-site blood banks were surveyed. Each hospital had 100 or more beds, which was believed to be the smallest sized hospital to have an on-site blood bank. Three separate mailings, spaced at three to four week intervals, were conducted. A total of 753 usable surveys were obtained, representing an overall response rate of 37.42 percent. In addition, 55 responses of the short version were obtained.
For sample A-2, a total of 1,005 of the largest hospitals in the continental United States having on-site coagulation/hematology laboratories were surveyed. Also included in the survey were a limited number of commercial laboratories (approximately 40) and other hospitals. Three separate mailings, spaced at three to four week intervals, were conducted. The second mailing replicated the initial mailing list; all respondents contacted in the first survey were polled a second time. The final, third mailing was restricted to those institutions not responding to the first two mailings. A total of 299 usable surveys were obtained, representing an overall response rate of 29.75 percent. An additional 147 short surveys were obtained.
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For sample A-3, a total of 667 hospitals in the continental United States having on-site coagulation/hematology laboratories were surveyed. Three separate mailings, spaced at three to four week intervals, were conducted. The second mailing replicated the initial mailing list; all respondents contacted in the first survey were polled a second time. The third mailing was restricted to those institutions not responding to the first two mailings. A total of 212 usable surveys were obtained representing an overall response rate of 31.78 percent. In addition to the regular surveys, 100 short surveys were received.
Electronics Industry
The customers in the electronics industry sample B-1 were mainly TV Broadcasters, TV Producers/Post Production and various distributors. Personal in-depth interviews were conducted at 32 companies in order to develop and pre-test the survey instrument. The questionnaire was sent to representatives from 1,369 firms. There were 342 completed questionnaires that were returned after three mailings. The response rate was 24.98 percent. In addition, a two-page short version of the questionnaire was sent to the remaining nonrespondents and 70 completed questionnaires were returned.
In sample B-2, vendors of blank video cassettes were surveyed. In order to develop and pre-test the questionnaire in-depth personal interviews at 23 firms were conducted. The complete questionnaire was sent to 434 recipients in three mailings. At various times during the mailing of surveys, the recipients were contacted by phone in order to encourage participation. There were 77 completed questionnaires which represents a response rate of 17.74 percent. In
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addition, a four-page version of the survey was sent to non-respondents and 36 additional surveys were received.
Plastics Resin Industry

The customers in the plastics resin industry were molders and extruders that purchased plastic resins from approximately 24 manufacturers and more than a dozen distributors. Most of the manufacturers sold directly to large original equipment manufacturers and used distributors to reach smaller volume molders and extruders as well as to provide fast turnaround on small volume orders. The market was very competitive with many of the manufacturers being well known Fortune 1000 companies. There were two large national distributors and many regional and local distributors that also served the market.
For sample C-1 a random sample of 1,920 purchasers was selected from a mailing list of approximately 8,000 firms. Phone calls to each of the 1,920 buyers confirmed that 1,858 of them had responsibility for purchasing plastic resins. Next, the questionnaires were mailed to each of the 1,858 buyers. There were 260 completed questionnaires returned from the first mailing. Another round of phone calls was followed by a second mailing. As a result of both mailings, the number of usable surveys was 540 which represented a 29.13 percent response rate. In addition, 161 responses from the mailing of the short version of the questionnaire were obtained.
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Sporting Goods Industry

The sporting goods industry yielded three samples. For sample D-1, 1012 sellers of golf balls were surveyed. Of these sellers, 762 were Green Grass pro shops and 250 were retailers. Overall, 134 responses for the complete survey and seven for the reduced version were received, which represents a 13.93 percent response rate.
For sample D-2, 2240 sellers of golf clubs were surveyed. Of these, 1737 were Green Grass pro shops and 504 were retailers. Overall, 172 responses for the complete survey and 50 for the reduced version were received, which represents a 7.68 percent response rate.
For sample D-3, 1001 sellers of golf shoes were surveyed. Of these 751 were Green Grass pro shops and 250 were retailers. Overall, 95 responses for the complete survey and eight for the reduced version were received, which represents a 9.49 percent response rate.
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3.3.
Data Analysis Preparation
Before the data analysis can begin, several issues must be resolved: non-response bias, missing data, and parceling. Non-response bias is a concern in surveys because it can lead to an incorrect sampling frame. If the sample that is taken from a population has different characteristics, then the results of the survey cannot be generalized to the population. Some respondents did not answer every question, so there were some missing data with which to deal. Testing for non-response bias is described next, then missing data issues and parceling is covered.
Non-Response Bias Testing

There are two popular methods of determining non-response bias in the literature. In one, early and late respondents are compared (Armstrong and Overton 1977) and in the other a subset of questions is sent to non-respondents and the results are compared to the full version of the questionnaire (Lambert and Harrington 1990). In all of the surveys used for this research, a short version of the survey was sent to non-respondents. In order to test for non-response bias, an analysis of variance (ANOVA) was performed on each sample to test for differences between the full version of the survey and the reduced version.
Questions from Part A for each of the three suppliers were used to determine the difference between the three waves of the regular survey and the short version (Lambert and Harrington 1990). Based on the results of the ANOVA, most questions that were analyzed showed no
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difference in means between the four different mailings (three mailings of the regular questionnaire and one mailing of the short questionnaire). On the few questions where differences between the groups were detected, further analysis was performed with multiple comparisons using Tukeys method (Lambert and Harrington 1990). The results of that analysis showed that differences did not consistently occur in the short version of the survey. Overall, there was no evidence to indicate that non-response bias is a concern in any of the samples.
Missing Data Mitigation

There are several procedures that are commonly used to deal with missing data: pairwise deletion (or available-case analysis), listwise deletion (or complete-case analysis), mean substitution, and imputation methods like maximum likelihood and Bayesian (Kamakura and Wedel 2000, Schafer and Graham 2002). When listwise deletion is used, only cases with complete data are used. Pairwise deletion is a procedure where incomplete cases are only removed if they are used in one calculation. Both methods have disadvantages: listwise deletion severely reduces the sample size and pairwise deletion may yield a covariance matrix that is not positive-definite (Little and Rubin 1987). Mean substitution is another simple procedure which may be used to deal with missing data, where missing data is replaced by the average score. An issue with mean substitution is that covariances are systematically underestimated, but simulations have shown that for low levels of missing data (less than 10 percent) this procedure can yield equally good results compared to more sophisticated methods, like maximum likelihood imputation (Kamakura and Wedel 2000).
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When the amount of missing data was assessed, it was evident that there were some respondents who only answered a few questions. Those responses with less than 75 percent of the questions answered were deemed unreliable and removed. In addition, there were a few questions that had much fewer responses than other questions. Therefore, all questions where at least 80 percent of data were present were deleted. The remaining amount of missing data were less than 10 percent, and as such mean substitution would be adequate (Kamakura and Wedel 2000). In order to minimize undervalued correlations, mean replacement was conducted for suppliers A, B, and C separately. So, missing data for supplier A was replaced by the mean score for all responses for supplier A. The same procedure was used for data on suppliers B and C. Table 7 shows the number of attributes used and the number of usable cases for data analysis.
Responses 753 299 205 347 113 534 141 120 89
Usable Cases 1,400 435 279 508 229 759 288 265 205
Attributes 88 78 71 83 69 91 130 149 135
Table 7: Number of Questions and Usable Cases
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Parceling of Items to Build Composite Scores

Parceling is a technique in which factors are estimated using composites of items instead of individual items (Garver and Mentzer 1999, Little, et al. 2004). So, instead of estimating the constructs with the ratings of the questions, the scores of several questions are combined into a composite that is then used to estimate the construct. The first reference for the parceling technique was in the Psychology literature (Cattell 1956) and this technique has since been used in other areas such as education, psychology, and marketing (Bandalos and Finney 2001).
While there is debate about the use of parcels (Cattell and Burdsal Jr. 1975, Little, et al. 2004), parcels built on items that have a unidimensional structure are shown to accurately reflect the scale (Bandalos 2002). In this study, before the parcels were constructed, the unidimensionality of the construct was tested with a confirmatory factor analysis and only items that had sufficiently high loadings were used for the parcels. The concerns that are voiced about this technique generally relate to the fact that modeled data should be as close to the response of the individual as possible in order to avoid the potential imposition or arbitrary manufacturing of a false structure (Little, et al. 2004). It is questionable that Likert-type scales by definition do not impose an arbitrary structure on the data. However, there are several advantages as well. From a psychometric perspective the advantages are: higher reliability, higher communality, a larger ratio of common-to-unique factor variance, and a smaller likelihood of distributional violations (Little, et al. 2004). Advantages from an estimation perspective are that models based on parceled data are more parsimonious, have fewer chances for residuals to be correlated or dual loadings to emerge, and lead to reductions in various sources of sampling error (Little, et al. 72
2004). In this dataset multivariate normality is potentially enhanced because the data are transformed from categorical to continuous, which is another reason why some researchers choose to use parcels (Landis, Beal, and Tesluk 2000).
The main reason parcels are used in this research is because too many items load on each construct. Ideally three to five manifest variables should be used to estimate a latent variable (Bollen 1989). There are two options to estimate a construct with more variables. The focal construct can be estimated as a second-order latent variable or several variables can be combined into a composite. Second-order models use several first-order constructs that make up the second-order construct (Bollen 1989). When parcels are used to combine several items the parcels are then used to estimate the construct (Bandalos 2002, Garver and Mentzer 1999). The parcels in this research are built as importance-weighted averages of the performance scores. When the respondents answer the question about an attribute in the questionnaire, they are required to perform two tasks, indicate the importance of that attribute in selecting and evaluating suppliers and the performance of each major supplier. Since the parcel score takes into account importance and performance ratings, a more precise understanding of how the respondent rates a particular attribute is obtained. When respondents answer a question, they are required to consider the importance and performance of the attribute, and therefore just using one or the other may cause bias in the data. Another reason for importance-weighted parcels is that second-order models would not take importance scores into account, and the estimation procedure would assign weights to each manifest variable in a manner that would not reflect how respondents would assign relative importance to them. It was shown that
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weighted composites are preferred to un-weighted or equal-weighted composites (Rozeboom 1979). Generally, parcels where individual items have different weights are closer to the true structure of the latent variable they represent (Bollen 1991). In this case, weighing the items by relative importance should reasonably lead to a closer assessment of the latent variables that are used in this research.
There are two issues regarding how parcels are built, how the items are combined and which items are combined (see Table 8). Regarding the calculation of composites, the simplest method is to add all variables. This procedure requires that each parcel has the same number of variables, otherwise parcels with more variables are systematically overemphasized. Another method is to average the items. The downside is that all attributes are assumed to be equally important, which is not always accurate. Therefore, the procedure used in this study is a weighted average in which weights are based on relative importance.
Method Single factor
Description Pair off items with highest and lowest loadings as first composite based on a single-factor solution; continue pairing until items are exhausted Correlational Pair off items with highest interrorrelation as first composite; continue pairing until items are exhausted Random Randomly assign items to composites Content Create composites based on rational grouping (s) of items Exploratory factor analysis Create composites based on results from exploratory factor analysis Empirically equivalent Create composites with equal means, variances, and reliabilities Adapted from: Landis, Beal, and Tesluk 2000
Table 8: Summary of Composite Formation Methods
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For this study, questions on similar issues are combined to build the parcels (see content method in Table 8) because it allows better conceptualization of the construct (Bagozzi and Edwards 1998). More on the results of the parceling is provided in the next section of this chapter. The parcel scores were calculated using Equation 1, which follows the standard formula for weighted averages.
Equation 1: Calculation of Parcel Scores
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3.4.
Overview of Questions Used in the Samples
In order to get a better understanding of which questions are used in each sample an overview of the questions that are used across the nine samples is provided next. There are 56 questions that are used for the product construct. The main reason why there are that many questions is because most of them address very specific issues that are used to evaluate the product construct. The questions and in which samples they are used is displayed in Table 9. For the price construct, fewer questions are used (25). Overall, the constructs are much more consistent across the nine samples. The main differences occur because questions in some sample are more general while others use more specific questions. There are a few questions that are used in only one sample. Table 10 provides an overview of the questions and in which samples they are used. There are 18 questions that are used for the promotion/personal selling construct across the nine samples. One difference is that some questions ask the respondent to evaluate quality of sales force and others use sales representative characteristics. Both terms have been used interchangeably. The questions and which ones are used in each sample are shown in Table 11. There are 25 different questions that are used for the place/logistics construct. Some constructs are adapted to reflect specific industry conditions. The questions and in which samples they are used is displayed in Table 12.
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Questions Adequate availability of newly introduced products Advance information (literature, specs, prices, etc.) on new product introductions Consistent development of new golf balls by supplier Development of new products by supplier Frequency of new product introduction Speed at which vendor responds to industry technical improvements Supplier adequately tests new products before delivering to market Appropriate range of sizes Availability of men's and women's products Availability of different widths Supplier has complete assortment of footwear items Consistency of supplier's delivered product after initial evaluation of samples by my facility Durability of product Overall quality of resin relative to price Past experience with supplier's product Product durability (tape continues play back without loss of video and audio quality): after multiple passes Product durability (tape continues play back without loss of video and audio quality): after extensive shuttling Product quality relative to price Product reliability (consistent performance from shipment to shipment) Quality of product Quality of product line above minimum standards Supplier replaces entire allotment when there is evidence of defective product Supplier's resins are of consistent color Supplier's resins are of consistent quality Warranty program for footwear
Table 9: Product Attributes Across all Sample
A-1 X X
A-2 X X
A-3 X X
B-1
B-2 X
C-1
D-1 X X
D-2
D-3
X X X
X X X X X
X X X X X X
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X X X X X X
X X
X
Continued
Continued Table 9 continued
Questions Prompt notification of technical analysis results Service support if salesperson is not available Consistency of product performance Consistent shaft quality & performance Consistent sizing Fit and comfort Footwear consistent with most preferred styles and trends Functionality Level of product performance Overall appearance of shoe Performance of premium balls Processability of resin Product features (distance, spin rate) Product stability (Shelf life): Antiserum Product stability (Shelf life): Red cells Sensitivity (specificity) of reagent Supplier at leading edge of technology Supplier's products are at the leading edge of technology Supplier's resins are of consistent melt flow Waterproofing Adequate identification/labeling of package contents Availability of the following package: type-bag Durability of packaging Packaging: aids in consumer purchasing decision Packaging: product/technical info on package Packaging: visual appeal Quality/durability of packaging Vendor's willingness to work with your firm to develop custom packaging configurations Ability of vendor to handle: consumer complaints
A-1 X X
A-2 X X
A-3
B-1
B-2
C-1
D-1
D-2
D-3
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
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Ability of vendor to handle: defective product returns Past experience with vendor's product
X X
Questions A-1 Adequate advance notice of price changes provided X Responsiveness of vendor to competitor's price reductions Supplier does not raise prices more than once per year X Supplier gives you an adequate period of price protection after a price increase is announced X Supplier gives you an adequate period of price protection after a price decrease is announced Vendor gives you adequate price protection and/or markdown funds Integrity of suggested retail price Margin reflects selling effort Profit margin Simplicity of pricing program Prompt and comprehensive response to competitive bid quotations X Supplier reacts quickly to competitive price reductions X Pre-book discount program Quantity discount structure Quantity discount structure based on size of individual order X Quantity discount structure based on total annual purchases X Sales rep will give you volume price even if you are buying less Supplier combines purchases of different products in order to compute volume discount X Assurance that my target price at retail will equal that of my competitors Competitiveness of price X Low price Lowest price Realistic, consistent pricing policy by supplier over time Sales rep has authority to negotiate special prices X Willingness of sales rep to be flexible in offering special/volume discounts, pricing, etc.
A-2 X X X
A-3
B-1 X
B-2 X X
C-1 X
D-1
D-2 X X
D-3 X
X X X X X
X X X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
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X X
X X
Table 10: Price Attributes Across all Samples
Questions/Parcels Ability of vendor to: provide unique promotions to your firm Customer service backup if salesperson is not available Number of sales calls you personally receive per year from: vendor's sales representatives Sales force characteristics: follows up promptly Sales representative characteristics: accessibility Timely response to requests for assistance from supplier's sales representative Quality of sales force: knowledge of industry trends Quality of sales force: knowledge of merchandising techniques Quality of sales force: knowledge of my business Quality of sales force: knowledge of my competitor's business Sales representative characteristics: industry knowledge Sales representative characteristics: product knowledge Sales representative characteristics: technical knowledge Quality of sales force: adequate preparation for sales calls Quality of sales force: prompt follow-up Quality of sales force: understands logistics issues Sales representative characteristics: concern/empathy Sales representative characteristics: honesty
Table 11: Promotion/Personal Selling Attributes Across all Samples
A-1
A-2
A-3
B-1
B-2 X X X
C-1
D-1
D-2
D-3
X X
X X
X X
X X X
X X X X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X
X X X X X
X X X X
X X X X
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X X X X X X X X X X X X X
Questions/Parcels A-1 Action on complaints related to order servicing and shipping X Advance notice of shipping delays Assistance from supplier in handling carrier loss and damage claims X Prompt handling of claims due to overages, shortages or shipping errors X Supplier absorbs cost of freight and handling on returns due to damage or product X shipped in error Ability of supplier to meet specific service and delivery needs X Ability of supplier to respond to changes in requested delivery dates X Ability to expedite emergency orders Adequate availability (Supplier' ability to deliver) of new products at time of introduction X Availability of reorder product Availability of supplier to meet specific and/or unique customer service/delivery needs of individual customers Supplier expedites emergency orders in a fast, responsive manner X Supplier's adherence to special shipping instructions X Consistent lead times (supplier consistently meets promised delivery date) X Length of promised lead times (from order submission to delivery): pre-booked order/initial stocking Length of promised lead times (from order submission to delivery): Normal orders X Length of promised lead times (from order submission to delivery): Emergency orders X Length of promised lead times: ad or promotional orders Length of promised lead times: ASAP or emergency orders Ability of supplier to automatically backorder out-of-stock items Ability to meet/keep dates for pre-booked shipments Accuracy in filling orders (correct product is shipped) X Availability of inventory status information
A-2 X X X X X X X
A-3 X
B-1 X
B-2 X X X
C-1 X X X
D-1
D-2
D-3
X X X X X
X X
X X
X X
X X
X X X X X X X X X
X X X
X X X
X X X
X X
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X X X
X X X X
X X X X
X X
X X
X X
X X X X
X X
X X
X X
X X
Availability of status information on orders Supplier ships complete orders and within specified windows (no incomplete or split shipments)
Table 12: Place/Logistics Attributes Across all Samples
X X
X X
X X
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3.5.
Structural Equation Modeling
The statistical analysis was performed using the two-step approach for structural equation modeling (SEM), which combines the features of a factor analysis with a path analysis (Anderson and Gerbing 1988, Bollen 1989). In the first step, the measurement model is established with a confirmatory factor analysis. Then, hypotheses are tested with the structural model in the second step. This analysis technique allows the researcher to examine the validity of the measures and the relationship of the constructs at the same time.
Scale Development and Measurement Model
In SEM, before starting the hypothesis testing, the scales used to measure the constructs must be developed and validated. For this dissertation, the recommendations for building scales by Gerbing and Anderson (1988) are followed. A necessary condition for building a scale estimating the constructs is that the measures must be acceptably unidimensional (Gerbing and Anderson 1988). That is, each set of indicators has only one underlying trait or construct in common. A confirmatory factor analysis (CFA) measurement model is used to establish unidimensionality (Anderson and Gerbing 1988). The criteria for assessing the CFA are the overall model fit and the validity of the components (Garver and Mentzer 1999). The criteria are described next and the results from the samples are provided in the later sections.
The fit indices that are used to assess model fit are chi-square, Tucker-Lewis index (TLI), comparative fit index (CFI), and root mean squared error (RMSEA), which have been shown to 83
be reliable (Hu and Bentler 1999). The chi-square goodness-of-fit statistic is the probably most commonly used measure of fit and a starting point for other fit indices; however one drawback is the increased sensitivity to large sample sizes. Additionally, chi-square divided by degrees of freedom is another revealing fit statistic. The TLI compares a proposed model's fit to a nested null model and it measures parsimony by assessing the degrees of freedom from the proposed model to the degrees of freedom of the null model (Tucker and Lewis 1973). A well-fitting model should have a TLI of 0.95 or higher (Hu and Bentler 1999), but values above 0.90 are acceptable. The CFI is a noncentrality parameter-based index to overcome the limitation of sample size effects (Bentler 1990). A well-fitting model should have a CFI of 0.96 or higher (Hu and Bentler 1999) , but values above 0.90 are acceptable. The RMSEA index measures the discrepancy between the observed and estimated covariance matrices per degree of freedom (Steiger and Lind 1980). Ideally RMSEA values are less than 0.60 (Hu and Bentler 1999), but values between 0.60 and 0.80 are still acceptable (Browne and Cudek 1993). In addition to good overall fit indices, an acceptable measurement of unidimensional constructs should reveal relatively small standardized residuals of and modification indices (Garver and Mentzer 1999). A large residual is larger than 2.58 (Medsker, Williams and Holahan 1994). A significant modification index is larger than 7.88 (Jreskog and Sorborn 1993).
In order to assess construct validity, several components of the model are evaluated: reliability, convergent validity, and discriminant validity (Garver and Mentzer 1999). Reliability was assessed using internal consistency method via Cronbachs alpha (Cronbach 1951, Nunnally 1978). Typically, reliability coefficients of 0.70 or higher are considered adequate (Cronbach 84
1951, Nunnally 1978). Additionally, composite reliability (CR) scores were calculated to assess construct reliability (Bagozzi and Yi 1988). A CR greater than 0.70 would imply that the variance captured by the factor is significantly more than the variance indicated by the error components (Bagozzi and Yi 1988). In addition to CR, average variance extracted (AVE) was calculated (Bagozzi and Yi 1988). An AVE of more than 0.50 implies that more variance is captured than error (Bagozzi and Yi 1988). Convergent validity is the extent to which a latent variable correlates to the items used to measure it. This is achieved by using manifest variables that load highly on the latent variables (Dunn, Seaker and Waller 1994). Most factor loadings should be above 0.60 and ideally above 0.70 (Chin 1998). Discriminant validity is established using CFA. Measurement models are constructed for all possible pairs of the theoretical constructs. These models were tested on each selected pair by fixing the correlation between the constructs at 1.00. A significant difference in chi-square values for the fixed and free solutions indicates the distinctiveness of the two constructs (Bagozzi, Yi and Phillips 1991). In addition, the confidence interval for each pair of constructs was set to be equal to plus or minus two standard errors of the respective correlation coefficient.
The development of the scales for each of the constructs representing the Marketing Mix variables was performed on sample A-1 (blood banking reagents). Next, validation of the scales was performed on sample A-2 (coagulation reagents). For the remaining samples, slight adaptations were necessary because of industry and product differences. The attributes that are used to evaluate blood banking reagents, video tapes, plastic resin, golf balls, golf clubs, and
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golf shoes have to be different because the products are very different. Not all questions for one survey were available in the others.
The outcome variables, customer satisfaction and share of business, are measured as single indicators. This has the consequence that there is no specific error associated with those variables. However, the informant was prequalified and it was ensured that the key informant was answering the questionnaire (Phillips and Bagozzi 1986). Based on that, the measurement of the outcome variables should be as precise as possible and measurement error is not likely to improve the overall model. Specifically for share of business it is not possible build multi-item scales, and as such, it is not possible but to use the single item scale.
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3.6.
Measurement Model Results for Sample A-1
A CFA was run on sample A-1 (blood banking reagents) to develop the scales for the constructs and to establish the measurement model. The overall fit of the measurement model was adequate (chi-square = 632.172 /98 d.f.; TLI = 0.955; CFI = 0.968; RMSEA = 0.062) and with the exception of the chi-square, the fit indexes were above the recommended thresholds. The chisquare has the property that it increases with larger sample sizes and as such the high value should not cause dismissal of the model (Hu and Bentler 1999). The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has four parcels representing 11 questions. The questions and parcels are shown in Table 13. The first parcel is made up of questions on new product development. The second parcel has questions on reagent performance. The third parcel is based on questions regarding reagent quality. The fourth parcel is about service regarding the product. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.866, a CR of 0.874, and an AVE of 0.634. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
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Questions/Parcels Supplier adequately tests new products before delivering to market Development of new products by supplier Advance information (literature, specs, prices, etc.) on new product introductions Product stability (Shelf life): Red cells Product stability (Shelf life): Antiserum Sensitivity (specificity) of reagent Supplier replaces entire allotment when there is evidence of defective product Consistency of supplier's delivered product after initial evaluation of samples by my facility Product reliability (consistent performance from shipment to shipment) Service support if salesperson is not available Prompt notification of technical analysis results
Table 13: A-1 Measurement Model Product Construct Loadings
Standard Loadings 0.821
0.765
0.797
0.800
The price construct has four parcels representing 11 questions. The questions and parcels are shown in Table 14. The first parcel has several questions on price changes. The second parcel uses questions regarding price competition. The third parcel has questions regarding discounts. The fourth parcel uses questions on price level. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.847, a CR of 0.840, and an AVE of 0.569. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
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Questions/Parcels Adequate advance notice of price changes provided Supplier gives you an adequate period of price protection after a price increase is announced Supplier does not raise prices more than once per year Supplier reacts quickly to competitive price reductions Prompt and comprehensive response to competitive bid quotations Supplier combines purchases of different products in order to compute volume discount Quantity discount structure based on total annual purchases Quantity discount structure based on size of individual order Sales rep has authority to negotiate special prices Competitiveness of price
Table 14: A-1 Measurement Model Price Construct Loadings
0.796
0.703
0.745
The promotion construct has four parcels representing seven questions. The questions and parcels are shown in Table 15. The first parcel has questions regarding sales representative accessibility. The second parcel uses questions regarding knowledge of the sales representative. The third parcel is on questions regarding personal characteristics of the sales representative. Overall, the construct exhibits excellent reliability with a Cronbachs alpha of 0.909, a CR of 0.912, and an AVE of 0.776. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Sales representative characteristics: accessibility Timely response to requests for assistance from supplier's sales representative Sales representative characteristics: product knowledge Sales representative characteristics: industry knowledge Sales representative characteristics: technical knowledge Sales representative characteristics: honesty Sales representative characteristics: concern/empathy
Table 15: A-1 Measurement Model Promotion Construct Loadings
0.868
0.829
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The place construct has four parcels representing 14 questions. The questions and parcels are shown in Table 16. The first parcel summarizes various aspects of problem solving on shipping. The second parcel has questions on delivery flexibility. The third parcel is about lead times. The fourth parcel summarizes delivery quality. Overall, the construct exhibits excellent reliability with a Cronbachs alpha of 0.888, a CR of 0.890, and an AVE of 0.670. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values as shown in Table 16.
Questions/Parcels Prompt handling of claims due to overages, shortages or shipping errors Supplier absorbs cost of freight and handling on returns due to damage or product shipped in error Action on complaints related to order servicing and shipping Assistance from supplier in handling carrier loss and damage claims Ability of supplier to meet specific service and delivery needs Adequate availability (Supplier' ability to deliver) of new products at time of introduction Supplier's adherence to special shipping instructions Ability of supplier to respond to changes in requested delivery dates Supplier expedites emergency orders in a fast, responsive manner Consistent lead times (supplier consistently meets promised delivery date) Length of promised lead times (from order submission to delivery): Normal orders Length of promised lead times (from order submission to delivery): Emergency orders Availability of status information on orders Accuracy in filling orders (correct reagent is shipped)
Table 16: A-1 Measurement Model Place Construct Loadings
Standard Loadings
0.861
0.885
0.796
0.721
All constructs in the measurement model for sample A-1 exhibit high reliability and seem to fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 17. The first row of each cell contains the chi square value after fixing the
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correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 632.2 and the difference in degrees of freedom from 98 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
Product Price New chi square: 835.6 Difference: 203.4 (1) p < 0.01 New chi square: 805.6 Difference: 173.4 (1) p < 0.01 New chi square: 984.9 Difference: 352.7 (1) p < 0.01
Price
Promotion
Promotion
Place
New chi square: 641.3 Difference: 9.1 (1) p < 0.01 New chi square: 710.2 Difference: 78 (1) p < 0.01
New chi square: 689.8 Difference: 57.6 (1) p < 0.01
Table 17: A-1 Discriminant Validity Test Results
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3.7.
As the second step in validating the constructs, the measurement model is tested on an independent sample, which in this case is sample A-2 (coagulation reagents). The overall fit of the measurement model was adequate (chi-square = 270.454 /98 d.f.; TLI = 0.950; CFI = 0.964; RMSEA = 0.064) and the fit indices are above the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has the same four parcels as sample A-1. The questions and parcels are shown in Table 18. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.822, a CR of 0.813, and an AVE of 0.533. All the parcels have significant loadings and all but one have standardized loadings that are well above the minimum recommended values as shown in Table 18. The third parcel has a lower standardized loading but since it is only one variable the overall construct exhibits acceptable reliability.
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Questions/Parcels Supplier adequately tests new products before delivering to market Development of new products by supplier Advance information (literature, specs, prices, etc.) on new product introductions Product stability (Shelf life): Red cells Product stability (Shelf life): Antiserum Sensitivity (specificity) of reagent Supplier replaces entire allotment when there is evidence of defective product Consistency of supplier's delivered product after initial evaluation of samples by my facility Product reliability (consistent performance from shipment to shipment) Service support if salesperson is not available Prompt notification of technical analysis results
0.670
0.556
0.789
The price construct has the same four parcels as sample A-1. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.842, a CR of 0.854, and an AVE of 0.595. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Adequate advance notice of price changes provided Supplier gives you an adequate period of price protection after a price increase is announced Supplier does not raise prices more than once per year Supplier reacts quickly to competitive price reductions Prompt and comprehensive response to competitive bid quotations Supplier combines purchases of different products in order to compute volume discount Quantity discount structure based on total annual purchases Quantity discount structure based on size of individual order Sales rep has authority to negotiate special prices Competitiveness of price
0.773
0.779
0.835
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The promotion construct has the same three parcels that are used for sample A-1. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.874, a CR of 0.845, and an AVE of 0.645. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values as shown in Table 20.
0.744
0.816
The place construct has the same four parcels as in sample A-1. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.882, a CR of 0.880, and an AVE of 0.648. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
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Questions/Parcels Prompt handling of claims due to overages, shortages or shipping errors Supplier absorbs cost of freight and handling on returns due to damage or product shipped in error Action on complaints related to order servicing and shipping Assistance from supplier in handling carrier loss and damage claims Ability of supplier to meet specific service and delivery needs Adequate availability (Supplier' ability to deliver) of new products at time of introduction Supplier's adherence to special shipping instructions Ability of supplier to respond to changes in requested delivery dates Supplier expedites emergency orders in a fast, responsive manner Consistent lead times (supplier consistently meets promised delivery date) Length of promised lead times (from order submission to delivery): Normal orders Length of promised lead times (from order submission to delivery): Emergency orders Availability of status information on orders Accuracy in filling orders (correct reagent is shipped)
Standard Loadings
0.686
0.896
0.800
0.824
All constructs in the measurement model for sample A-2 exhibit high reliability and seem to fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 22. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 270.5 and the difference in degrees of freedom from 98 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
95
Price
Promotion
Promotion
Place
New chi square: 283.6 Difference: 13.1 (1) p < 0.01 New chi square: 326.8 Difference: 56.3 (1) p < 0.01
Following the validation of the measurement model in two separate samples, it can be concluded that the measures for the Product, Price, Promotion, and Place constructs are validated and reliable. Next, the measurement models in the remaining samples are assessed as adaptations to the validated scales.
96
3.8.
For sample A-3 slight adaptations had to be made because not all questions from the previous surveys were available. The overall fit of the measurement model was adequate (chi-square = 198.088 /74 d.f.; TLI = 0.918; CFI = 0.942; RMSEA = 0.078) and the fit indexes are close to the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has three of the four parcels from the previous two samples. The questions and parcels are shown in Table 23. The construct has a Cronbachs alpha of 0.774, a CR of 0.785, and an AVE of 0.550. All the parcels have significant loadings and all have standardized loadings that are above the minimum recommended values.
Questions/Parcels Supplier adequately tests new products before delivering to market Development of new products by supplier Advance information (literature, specs, prices, etc.) on new product introductions Product stability (Shelf life): Red cells Product stability (Shelf life): Antiserum Sensitivity (specificity) of reagent Supplier replaces entire allotment when there is evidence of defective product Consistency of supplier's delivered product after initial evaluation of samples by my facility Product reliability (consistent performance from shipment to shipment)
Standard Loadings 0. 703
0.780
0.740
97
The price construct has three of the four parcels that appeared in the previous two samples. The questions and parcels are shown in Table 24. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.829, a CR of 0.798, and an AVE of 0.569. All the parcels have significant loadings and standardized loadings that are above the recommended values.
Questions/Parcels Supplier reacts quickly to competitive price reductions Prompt and comprehensive response to competitive bid quotations Supplier combines purchases of different products in order to compute volume discount Quantity discount structure based on total annual purchases Quantity discount structure based on size of individual order Sales rep has authority to negotiate special prices Competitiveness of price
0.817
0.704
The promotion construct has the same three parcels that are used for sample A-1 and A-2. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.863, a CR of 0.865, and an AVE of 0.682. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
0.866
0.783
98
The place construct has the same four parcels as in sample A-1 and A-2. The only adaptation is the removal of one question due to missing data. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.846, a CR of 0.854, and an AVE of 0.595. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Prompt handling of claims due to overages, shortages or shipping errors Supplier absorbs cost of freight and handling on returns due to damage or product shipped in error Action on complaints related to order servicing and shipping Ability of supplier to meet specific service and delivery needs Adequate availability (Supplier' ability to deliver) of new products at time of introduction Supplier's adherence to special shipping instructions Ability of supplier to respond to changes in requested delivery dates Supplier expedites emergency orders in a fast, responsive manner Consistent lead times (supplier consistently meets promised delivery date) Length of promised lead times (from order submission to delivery): Normal orders Length of promised lead times (from order submission to delivery): Emergency orders Availability of status information on orders Accuracy in filling orders (correct reagent is shipped)
0.891
0.737
0.723
All constructs in the measurement model for sample A-3 exhibit adequate reliability and seem to fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 27. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 291.5 and the difference in degrees of freedom from 74 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed
99
correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
Price
Promotion
Promotion
Place
100
3.9.
Measurement Model Results for Sample B-1
For sample B-1 adaptations had to be made because not all questions from the previous surveys were available and other more specific questions were used. The largest differences were on the product construct, which is not surprising since the video tape industry is very different and the surveys were designed to be industry- specific. The overall fit of the measurement model was good (chi-square = 236.847/ 86 d.f.; TLI = 0.964; CFI = 0.974; RMSEA = 0.059) and the fit indexes are meet the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has three parcels which are mostly specific to the video tape industry. The first parcel summarizes consistency of performance in different aspects. The second parcel summarizes the level of performance on the same aspects as the first parcel. The third parcel summarizes various aspects of product quality. The questions, parcels and standardized loadings are shown in Table 28. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.883, a CR of 0.829, and an AVE of 0.622. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
101
Questions/Parcels Consistency of product performance: electromagnetics Consistency of product performance: audio playback levels Consistency of product performance: bit error rate Consistency of product performance: dropouts Consistency of product performance: scratches Consistency of product performance: edge damage Consistency of product performance: slitting errors Consistency of product performance: creases/cinches Consistency of product performance: wind quality Level of product performance: electromagnetics Level of product performance: audio playback levels Level of product performance: bit error rate Level of product performance: dropouts Level of product performance: scratches Level of product performance: edge damage Level of product performance: slitting errors Level of product performance: creases/cinches Level of product performance: wind quality Vendor replaces entire allotment when there is evidence of defective product Consistency of vendor's delivered product after initial evaluation of samples by my facility Product durability (tape continues play back without loss of video and audio quality): after multiple passes Product durability (tape continues play back without loss of video and audio quality): after extensive shuttling Quality of product line above minimum standards
Table 28: B-1 Measurement Model Product Construct Loadings
Standard Loadings
0.685
0.718
0.939
The price construct has the same four parcels as the previous samples, however there are slight adaptations in the questions that make up the parcels, but overall they can be considered equivalent. The questions and parcels are shown in Table 29. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.838, a CR of 0.824, and an AVE of 0.540. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values. 102
Questions/Parcels Adequate advance notice of price changes provided Vendor gives you an adequate period of price protection after a price increase is announced Vendor reacts quickly to competitive price reductions Prompt and comprehensive response to competitive bid quotations Supplier combines purchases of different products in order to compute volume discount Quantity discount structure based on total annual purchases Quantity discount structure based on size of individual order Sales rep will give you volume price even if you are buying less Competitiveness of price Low price
Table 29: B-1 Measurement Model Price Construct Loadings
Standard Loadings 0.718 0.750
0.744
0.819
The promotion construct has the same three parcels that are used in the previous samples. The questions, parcels, and standardized factor loadings are shown in Table 30. One question was added to the first parcel. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.870, a CR of 0.886, and an AVE of 0.722. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Sales force characteristics: accessibility Sales force characteristics: follows up promptly Timely response to requests for assistance from supplier's sales representative Sales force characteristics: product knowledge Sales force characteristics: industry knowledge Sales force characteristics: technical knowledge Sales force characteristics: honesty Sales force characteristics: concern/empathy
Table 30: B-1 Measurement Model Promotion Construct Loadings
0.861
0.897
103
The place construct has the same four parcels as in previous samples with some slight adaptations. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.904, a CR of 0.912, and an AVE of 0.723. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Action on complaints related to order servicing and shipping Prompt handling of claims due to overages, shortages or shipping errors Vendor meets specific customer service and delivery needs of individual customers Vendors adherence to special shipping instructions Vendors ability to respond to changes in requested delivery dates Vendor expedites emergency orders in a fast, responsive manner Consistent lead times (supplier consistently meets promised delivery date) Length of promised lead times (from order submission to delivery): Normal orders Length of promised lead times (from order submission to delivery): Emergency orders Availability of status information on orders Accuracy in filling orders
Table 31: B-1 Measurement Model Place Construct Loadings
0.899
0.876
0.791
All constructs in the measurement model for sample B-1 exhibit adequate reliability and fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 32. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 236.8 and the difference in degrees of freedom from 86 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved. 104
Product Price New chi square: 362.2 Difference: 125.4 (1) p < 0.01 New chi square: 416.4 Difference: 179.6 (1) p < 0.01 New chi square: 376.8 Difference: 140 (1) p < 0.01
Price
Promotion
Promotion
Place
New chi square: 390.3 Difference: 153.5 (1) p < 0.01 New chi square: 334.8 Difference: 98 (1) p < 0.01
Table 32: B-1 Discriminant Validity Testing Results
105
3.10.
Measurement Model Results for Sample B-2
For sample B-2 adaptations had to be made because not all questions from sample B-1 were available. The overall fit of the measurement model was good (chi-square = 163.050/ 61 d.f.; TLI = 0.933; CFI = 0.955; RMSEA = 0.086) and the fit indexes are close to the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has three parcels which are mostly specific to the video tape industry. The first parcel summarizes aspects of new product development. The second parcel summarizes several aspects of packaging. The third parcel summarizes various aspects of service related to the product. The questions, parcels and standardized loadings are shown in Table 33. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.883, a CR of 0.829, and an AVE of 0.622. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
Questions/Parcels Speed at which vendor responds to industry technical improvements Adequate availability of newly introduced products Quality/durability of packaging Adequate identification/labeling of package contents Vendor's willingness to work with your firm to develop custom packaging configurations Ability of vendor to handle: defective product returns Ability of vendor to handle: consumer complaints Past experience with vendor's product
Table 33: B-2 Measurement Model Product Construct Loadings
0.652
0.933
106
The price construct has the three of the four parcels from previous samples. The questions and parcels are shown in Table 34. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.905, a CR of 0.908, and an AVE of 0.767. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
Questions/Parcels Prompt and comprehensive response to competitive bid quotations Competitiveness of price Lowest price Willingness of sales rep to be flexible in offering special/volume discounts, pricing, incentives and other offers Assurance that my target price at retail will equal that of my competitors Responsiveness of vendor to competitor's price reductions Adequate advance notice of price changes Vendor gives you adequate price protection and/or markdown funds
Table 34: B-2 Measurement Model Price Construct Loadings
0.931
0.828
The promotion construct has the same three parcels that are used in the previous samples, but some questions were added. The questions, parcels, and standardized factor loadings are shown in Table 35. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.901, a CR of 0.858, and an AVE of 0.670. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
107
Questions/Parcels Customer service backup if salesperson is not available Ability of vendor to: provide unique promotions to your firm Number of sales calls you personally receive per year from: vendor's sales representatives Timely response to requests for assistance from vendor's sales rep Quality of sales force: knowledge of merchandising techniques Quality of sales force: product knowledge Quality of sales force: knowledge of industry trends Quality of sales force: knowledge of my business Quality of sales force: knowledge of my competitor's business Quality of sales force: adequate preparation for sales calls Quality of sales force: honesty Quality of sales force: understands logistics issues
Table 35: B-2 Measurement Model Promotion Construct Loadings
Standard Loadings
0.907
0.795
0.746
The place construct has the three of the four parcels from previous samples. The questions, parcels and standard loadings are shown in Table 36 Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.902, a CR of 0.887, and an AVE of 0.725. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Ability to expedite emergency orders Ability of vendor to meet specific and/or unique customer service and delivery needs Vendor's adherence to your specific shipping instructions Length of promised lead times: normal reorders Length of promised lead times: ad or promotional orders Length of promised lead times: ASAP or emergency orders Action on complaints related to order servicing and shipping Prompt handling of claims due to: overages, shortages/pricing errors Advance notice of shipping delays
Table 36: B-2 Measurement Model Place Construct Loadings
0.809
0.870
108
All constructs in the measurement model for sample B-2 exhibit adequate reliability and fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 37. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 163.1 and the difference in degrees of freedom from 61 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
Product Price New chi square: 219.2 Difference: 56.1 (1) p < 0.01 New chi square: 197.5 Difference: 34.4 (1) p < 0.01 New chi square: 216 Difference: 52.9 (1) p < 0.01
Price
Promotion
Promotion
Place
Table 37: B-2 Discriminant Validity Testing Results
109
3.11.
Measurement Model Results for Sample C-1
For sample C-1, adaptations had to be made because not all questions from previous samples were available. The overall fit of the measurement model was good (chi-square = 330.718 / 74 d.f.; TLI = 0.922; CFI = 0.945; RMSEA = 0.075) and the fit indexes are close to the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has three parcels which are mostly specific to the plastics resin industry. The first parcel summarizes different aspects of packaging. The second parcel summarizes the level of performance of the suppliers product. The third parcel summarizes various aspects of product quality. The questions, parcels and standardized loadings are shown in Table 38. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.823, a CR of 0.821, and an AVE of 0.606. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
Questions/Parcels Adequate identification/labeling of package contents Quality/durability of packaging materials (bag, box, drum) Availability of the following package: type-bag Processability of resin Supplier's resins are of consistent melt flow Supplier's resins are of consistent quality Overall quality of resin relative to price Supplier's resins are of consistent color
Table 38: C-1 Measurement Model Product Construct Loadings
0.781
0.856
110
The price construct has three parcels and there are slight adaptations in the questions from previous samples. The questions and parcels are shown in Table 39. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.742, a CR of 0.760, and an AVE of 0.513. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
Questions/Parcels Realistic, consistent pricing policy by supplier over time Competitiveness of price Adequate advance notice of price changes Supplier gives you an adequate period of price protection after a price increase is announced Prompt and comprehensive response to competitive bid quotations Quantity discount structure
Table 39: C-1 Measurement Model Product Construct Loadings
Standard Loadings 0.719 0.688 0.741
For the promotion construct the parceling technique that is used in the previous samples, is not employed because fewer questions are available. Thus, with only four questions not enough parcels could be built and therefore individual items are used. The questions and standardized factor loadings are shown in Table 40. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.835, a CR of 0.831, and an AVE of 0.622. All the items have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Timely response to requests for assistance from supplier's sales representative Quality of sales force-technical knowledge Quality of sales force-prompt follow-up Quality of sales force-honesty
Table 40: C-1 Measurement Model Promotion Construct Loadings
Standard Loadings 0.660 0.732 0.847 0.782
111
The place construct has the three of the four parcels from previous samples. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.844, a CR of 0.846, and an AVE of 0.647. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values as shown in Table 41.
Questions/Parcels Accuracy in filling orders (correct product is shipped) Availability of status information on orders Ability of supplier to automatically backorder out-of-stock items Availability of inventory status information Ability to expedite emergency orders in a fact responsive manner Supplier's adherence to special shipping instructions Availability of supplier to meet specific and/or unique customer service/delivery needs of individual customers Action on complaints (e.g. order servicing, shipping, product, etc.) Advance notice of shipping delays Assistance from supplier in handling carrier loss and damage claims
Table 41: C-1 Measurement Model Place Construct Loadings
Standard Loadings
0.793
0.789
0.831
All constructs in the measurement model for sample C-1 exhibit acceptable reliability and fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 42 . The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 330.2 and the difference in degrees of freedom from 74 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved. 112
Product Price New chi square: 518.2 Difference: 188 (1) p < 0.01 New chi square: 534.7 Difference: 204.5 (1) p < 0.01 New chi square: 417.8 Difference: 87.6 (1) p < 0.01
Price
Promotion
Promotion
Place
Table 42: C-1 Discriminant Validity Testing Results
113
3.12.
Measurement Model Results for Sample D-1
For sample D-1, adaptations had to be made because of industry differences for the golf ball industry and the fact that retailers were surveyed. The overall fit of the measurement model was good (chi-square = 204.435 / 103 d.f.; TLI = 0.962; CFI = 0.971; RMSEA = 0.059) and the fit indexes are well beyond the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has five parcels which are mostly specific to the golf ball industry. The first parcel summarizes development of new products. The second parcel summarizes various aspects of product packaging. The third and fourth parcels are about performance and quality of the golf balls. The questions, parcels and standardized loadings are shown in Table 43. Overall, the construct exhibits excellent reliability with a Cronbachs alpha of 0.902, a CR of 0.910, and an AVE of 0.718. All the parcels have significant loadings and they have large enough standardized loadings that are above the minimum recommended values.
114
Questions/Parcels Consistent development of new golf balls by supplier Frequency of new product introduction Advance information (literature, specs, prices, etc.) on new product intros Packaging: visual appeal Packaging: aids in consumer purchasing decision Packaging: product/technical info on package Durability of packaging Performance of premium balls Supplier's products are at the leading edge of technology Product features (distance, spin rate) Past experience with supplier's product Quality of product Durability of product
Table 43: D-1 Measurement Model Product Construct Loadings
0.826
0.786
0.919
The price construct has the same four parcels as the previous samples, however there are slight adaptations in the questions that make up the parcels, but overall they can be considered equivalent. The questions and parcels are shown in Table 44. The first parcel summarizes the effect of pricing on the retailer. The second parcel is about price increases. The third parcel is made up of questions on discounts. In the fourth parcel there are questions concerning the price level. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.859, a CR of 0.850, and an AVE of 0.587. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
115
Questions/Parcels Profit margin Simplicity of pricing program Supplier does not raise prices more than once per year Supplier gives you an adequate period of price protection after a price decrease is announced Quantity discount structure based on total annual purchases Quantity discount structure based on size of individual order Pre-book discount program Lowest price Competitiveness of price Sales rep has authority to negotiate special prices
Table 44: D-1 Measurement Model Price Construct Loadings
0.844
0.714
0.725
The promotion construct has the same three parcels that are used in the previous samples. The questions, parcels, and standardized factor loadings are shown in Table 45. Overall, the construct exhibits excellent reliability with a Cronbachs alpha of 0.908, a CR of 0.916, and an AVE of 0.784. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values.
Questions/Parcels Sales force characteristics: accessibility Timely response to requests for assistance from supplier's sales rep Sales force characteristics: product knowledge Sales force characteristics: industry knowledge Sales force characteristics: knowledge of merchandising techniques Sales force characteristics: honesty Sales force characteristics: concern/empathy Sales force characteristics: adequate preparation for sales calls
Table 45: D-1 Measurement Model Promotion Construct Loadings
0.921
0.914
116
The place construct uses the same four parcels as previous samples. Although some questions are different it should not change the overall validity of the construct. Overall, the construct exhibits excellent reliability with a Cronbachs alpha of 0.900, a CR of 0.910, and an AVE of 0.705. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values as shown in Table 46.
Questions/Parcels Supplier ships complete orders and within specified windows (no incomplete or split shipments) Availability of status information on orders Ability to meet/keep dates for pre-booked shipments Accuracy in filling orders (correct product is shipped) Adequate availability (supplier's ability to deliver) of new products at time of introduction Availability of reorder product Supplier's adherence to special shipping instructions Consistent lead times (supplier consistently meets promised delivery date) Length of promised lead times (from order submission to delivery): pre-booked order/initial stocking Length of promised lead times (from order submission to delivery): reorders Prompt handling of claims due to overages, shortages or shipping errors Assistance from supplier in handling carrier loss and damage claims
Table 46: D-1 Measurement Model Place Construct Loadings
Standard Loadings
0.891
0.848
0.838
0.777
All constructs in the measurement model for sample D-1 exhibit very good reliability and fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 47. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 206.4 and the difference in degrees of freedom from 103 in parentheses. The last row displays the p-value of the chi square difference test. All of the
117
fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
Price
Promotion
Promotion
Place
Table 47: D-1 Discriminant Validity Testing Results
118
3.13.
For sample D-2, only slight adaptations had to be made from sample D-1. The overall fit of the measurement model was excellent (chi-square = 144.763 / 74 d.f.; TLI = 0.949; CFI = 0.964; RMSEA = 0.060) and the fit indexes are at the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has four parcels which are mostly specific to golf clubs. The first parcel summarizes development of new products. The second parcel is about golf club performance. The third parcel covers golf club quality. The questions, parcels and standardized loadings are shown in Table 48. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.819, a CR of 0.815, and an AVE of 0.595. All the parcels have significant loadings and all have large enough standardized loadings.
Questions/Parcels Supplier adequately tests new products before delivering to market Consistent development of new products by supplier Consistent shaft quality & performance Supplier at leading edge of technology Supplier's products are at the leading edge of technology Past experience with supplier's product Quality of product Product reliability (consistent performance from shipment to shipment)
0.775
0.806
119
The price construct has three of the four parcels from the previous samples. The only parcel that was removed was the one about discounts. The questions and parcels are shown in Table 49. The first parcel summarizes the effect of pricing on the retailer. The second parcel is about price changes. The third parcel is made up of questions concerning the price level. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.798, a CR of 0.804, and an AVE of 0.578. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
Questions/Parcels Supplier reacts quickly to competitive price reductions Profit margin Adequate advance notice of price changes provided Supplier does not raise prices more than once per year Lowest price Competitiveness of price Sales rep has authority to negotiate special prices
Standard Loadings 0.680 0.811
0.784
120
0.971
0.809
The place construct uses the four parcels from previous samples. The first parcel covers the efficiency and effectiveness of delivery. The second parcel summarizes the flexibility of the logistics system. The third parcel is about lead time. The last parcel covers problem solving. The construct exhibits excellent reliability with a Cronbachs alpha of 0.839, a CR of 0.856, and an AVE of 0.600. All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values as shown in Table 51.
121
Standard Loadings
0.890
0.749
0.787
0.654
All constructs in the measurement model for sample D-2 exhibit very good reliability and fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 52. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 144.8 and the difference in degrees of freedom from 74 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
122
Price
Promotion
Promotion
Place
123
3.14.
For sample D-3, adaptations had to be made because of industry differences for the golf shoe industry and the fact that retailers were surveyed. The overall fit of the measurement model was adequate (chi-square = 186.527/ 74 d.f.; TLI = 0.935; CFI = 0.955; RMSEA = 0.086) and the fit indexes are close to the recommended thresholds. The model did not show any high modification indexes or residuals. All of this evidence points to a well-fitting measurement model. Next, the constructs are assessed.
The product construct has three parcels which are mostly specific to the golf shoe industry. The first parcel summarizes the assortment of products offered by the manufacturer. The second parcel and third parcels are about golf shoe performance and quality. The questions, parcels and standardized loadings are shown in Table 53. Overall, the construct exhibits very good reliability with a Cronbachs alpha of 0.883, a CR of 0.899, and an AVE of 0.749. All the parcels have significant loadings and they have large enough standardized loadings that are above the minimum recommended values.
124
Questions/Parcels Appropriate range of sizes Availability of men's and women's products Availability of different widths Supplier has complete assortment of footwear items Waterproofing Functionality Consistent sizing Fit and comfort Overall appearance of shoe Footwear consistent with most preferred styles and trends Product quality relative to price Warranty program for footwear Product reliability (consistent product performance from shipment to shipment
Standard Loadings
0.800
0.888
0.905
The price construct has three of the four parcels from the previous samples, and there are slight adaptations in the questions that make up the parcels, but overall they can be considered equivalent. The questions and parcels are shown in Table 54. The first parcel summarizes the effect of price changes. The second parcel is made up of questions on discounts. In the third parcel there are questions concerning the margin. Overall, the construct exhibits good reliability with a Cronbachs alpha of 0.772, a CR of 0.785, and an AVE of 0.549. All the parcels have significant loadings and all have large enough standardized loadings that are above the minimum recommended values.
125
Questions/Parcels Adequate advance notice of price changes provided Supplier gives you an adequate period of price protection after a price decrease is announced Quantity discount structure based on total annual purchases Quantity discount structure based on size of individual order Pre-book discount program Integrity of suggested retail price Margin reflects selling effort Profit margin
0.699
0.765
0.971
0.889
The place construct uses the same four parcels as previous samples. Overall, the construct exhibits excellent reliability with a Cronbachs alpha of 0.918, a CR of 0.914, and an AVE of 0.780. 126
All the parcels have significant loadings and the standardized loadings are well above the minimum recommended values as shown in Table 56.
Standard Loadings
0.883
0.894
0.873
0.800
All constructs in the measurement model for sample D-3 exhibit very good reliability and fit the data well. Next, discriminant validity is tested. The results of the discriminant validity testing are shown in Table 57. The first row of each cell contains the chi square value after fixing the correlation between two constructs to 1.00. The second row shows the difference to the chi square value of the original model of 185.6 and the difference in degrees of freedom from 74 in parentheses. The last row displays the p-value of the chi square difference test. All of the fixed correlations cause the fit of the model to increase significantly and none of the correlation confidence intervals include 1.00. This evidence supports the conclusion that the constructs are distinct from each other and thus discriminant validity is achieved.
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Price
Promotion
Promotion
Place
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3.15.
Summary
This chapter contains a description of the research methodology. There are nine samples that are used for this research and each one is analyzed separately. There is no evidence that nonresponse bias is a problem in any of the samples. Because too many items loaded on each latent variable representing the Marketing Mix variables, parcels were used to summarize several items into one importance-weighted composite score. The composite scores were then used to estimate the constructs. The same constructs were used in all samples, but the questions that were used to estimate each construct were not the same across all samples. All measurement models exhibit adequate fit indices and there is enough evidence that the variables represent the constructs well. The results of the structural part of the model are presented in the next chapter.
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CHAPTER 4. RESULTS
In this chapter, the results of the research are described. The measurement model part was described in Chapter 3. In this chapter, the structural relationships between the constructs are evaluated. In order to test the hypotheses, the structural relationships between the latent variables of the structural equation modeling (SEM) are evaluated. The remainder of the chapter is comprised of the structural model results from the nine samples. In order to gain a more holistic understanding of the differences between the samples, a comparison of the results is provided. The chapter ends with a summary.
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4.1.
Overview of the Results Evaluation
In order to evaluate the strength of a relationship between two constructs, the estimate, standard error, critical ratio, and p-value are assessed. The estimate represents a regression coefficient that describes the magnitude of the relationship between the two constructs (Arbukle 2008). The standard error (S.E.) is the amount of variability that is associated with the estimate. The critical ratio (C.R.) is related to the significance of the regression weight. A C.R., larger than 1.96, indicates that a path that is significant at the 0.05 level (Arbukle 2008). The pvalue (P) denotes the absolute level of significance and refers to the probability of obtaining an estimate that is zero. For this research, p-values of less than 0.01 are considered highly significant, those between 0.01 and 0.05 are significant, and those between 0.05 and 0.10 are marginally significant. In order to compare the relative strength of all paths in the model, standardized estimates are presented. All relationships shown in Figure 5 as arrows are estimated simultaneously in the SEM model.
Figure 5: Structural Model and Hypotheses
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4.2.
A-1 Blood Banking Reagents Sample Results
The results for the blood banking reagents sample are displayed in Table 58. The overall fit of the structural model was good (TLI = 0.950; CFI = 0.962; RMSEA = 0.065) and the fit indexes were above the recommended thresholds. The difference between the measurement model and the structural model is not large enough to be significant and that points to a well-fitting structural model.
The first hypothesis shows the impact of the Marketing Mix on customer satisfaction. Three out of four paths are significant. Promotion/personal selling has the strongest impact on satisfaction (H1c), followed by place/logistics (H1d) and then by price (H1b). Only the product construct does not have significant impact on satisfaction (H1a). With three out of four constructs having a significant impact on customer satisfaction, it can be concluded that Hypothesis one is supported.
One explanation for why product does not have a significant impact on customer satisfaction is that blood banking reagents are regulated commodities that do not vary significantly in performance and quality among the different manufacturers. New blood banking reagents must be approved by the food and drug administration (FDA). As such, reagents must at least fulfill a minimum level of performance and quality. New products would have to go through the same approval process for any supplier. This explanation seems to be supported by the fact that the parcel describing product performance has the highest average rating and the lowest standard
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deviation of all parcels in the model, which indicates that the different blood banking reagents perform similarly well at a high level.
The second hypothesis describes the impact of customer satisfaction on share of business and the analysis shows a significant and positive effect. In addition, indirect effects of the price, promotion/personal selling and place/logistics constructs can be observed as well. This means that those constructs have a significant impact on satisfaction, which in turn has a significant impact on share of business. So, going back to the premise of the research, logistics attributes are important part of the Marketing Mix and their impact on business generation must not be ignored. Satisfaction explains 38.1 percent of the variance in the model and share of business explains 6.5 percent of the variance. Standard Estimate -0.091 0.140 0.415 0.209 0.254
Structural Path H1a: H1b: H1c: H1d: H2: Product Price Promotion Place Satisfaction Satisfaction Satisfaction Satisfaction Satisfaction Share
Estimate -3.240 2.743 6.257 5.421 0.481
S.E. 2.717 1.232 0.498 2.063 0.049
C.R. -1.192 2.227 12.554 2.628 9.810
P 0.233 0.026 <0.001 0.009 <0.001
Table 58: A-1 Blood Banking Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. Preferred share of business is the percentage of business that a respondent would ideally want to award to a supplier. Introducing preferred share as an alternative outcome variable enables the
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assessment whether ideal and preferred share show the same level of significance and explain similar amounts of variance.
The significance and the magnitude of the variables generally remains the same, but the link between satisfaction and preferred share of business is stronger in magnitude. Overall, the model fit was comparable (TLI = 0.951; CFI = 0.963; RMSEA = 0.065). Preferred share of business explains a larger percentage of the variance (10.7 percent) in the model than current share of business (6.5 percent). While the estimates are not significantly different there is still an indication that customer satisfaction is a better predictor of preferred share of business. Standard Estimate -0.092 0.142 0.415 0.208 0.326
Structural Path H1a: H1b: H1c: H1d: H2: Product Price Promotion Place Satisfaction Satisfaction Satisfaction Satisfaction Satisfaction Preferred Share
Estimate -3.281 2.786 6.258 5.402 0.585
S.E. 2.718 1.229 0.498 2.062 0.045
C.R. -1.207 2.267 12.574 2.619 12.878
P 0.227 0.023 <0.001 0.009 <0.001
Table 59: A-1 Blood Banking Results Alternative Model
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4.3.
A-2 Coagulation Reagents Sample Results
The next sample that is assessed is the coagulation reagents sample. The overall fit of the structural model was good (TLI = 0.941; CFI = 0.955; RMSEA = 0.066). The difference between blood banking and coagulation reagents largely refers to the type of test that is performed in the laboratory. Blood banking reagents are necessary for every surgery, but coagulation tests are not and they may be used less frequently. The pattern of results for the coagulation reagents sample is different than in the blood banking sample and they are shown in Table 60. The relationship between the promotion/personal selling construct and customer satisfaction is significant (H1c), as it was in the blood banking sample. The effect of product attributes on customer satisfaction is significant (H1a), and it was not significant in the blood banking sample. There is a significant impact of the product construct on customer satisfaction. Overall, two of the four components of the Marketing Mix have a significant relationship with customer satisfaction. The impact of customer satisfaction on share of business is marginally significant. Therefore, hypothesis two is not supported and no indirect effects are supported either.
Structural Path H1a: Product Satisfaction Satisfaction Satisfaction Satisfaction Share
Estimate 20.304 3.986 9.146 6.780 0.163
S.E. 7.116 2.541 2.014 7.381 0.094
C.R. 2.853 1.568
P 0.004 0.117
Standard Estimate 0.558 0.175 0.459 0.205 0.083
H1b: Price H1c: Promotion
4.542 <0.001 0.919 1.733 0.358 0.083
H1d: Place H2: Satisfaction
Table 60: A-2 Coagulation Reagents Results
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In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the link between satisfaction and preferred share of business is now significant. Overall, the model fit was comparable (TLI = 0.944; CFI = 0.957; RMSEA = 0.065). Preferred share of business explains a larger percentage of the variance (3.6 percent) in the model than current share of business (0.7 percent). The differences are statistically significant and there is an indication that customer satisfaction is a better predictor of preferred share of business. Medical laboratories must go through a difficult procedure in order to switch suppliers. They must run parallel tests with both the new and the old reagent for a week and compare results to ensure the tests are interpreted correctly (Ezzelle, et al. 2008). This creates significant extra work for the staff and may cause customers to keep a current supplier even if the performance is subpar. Standard Estimate 0.558 0.175 0.459 0.205 0.191
Structural Path H1a: Product Satisfaction Satisfaction Satisfaction Satisfaction Preferred Share
Estimate 20.304 3.986 9.146 6.780 0.368
S.E. 7.116 2.541 2.014 7.381 0.091
C.R. 2.853 1.568
P 0.004 0.117
4.542 <0.001 0.919 4.049 0.358 ***
Table 61: A-2 Coagulation Reagents Results Alternative Model
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4.4.
A-3 Coagulation Reagents Sample Results
The second survey on the coagulation sample was performed three years after A-2 and used the same sampling frame. The overall fit of the structural model was good (TLI = 0.914; CFI = 0.935; RMSEA = 0.080). The results are different than in the first survey on coagulation reagents. The results are shown in Table 62. One component of the Marketing Mix, the price construct, showed a significant impact on customer satisfaction (H1b). The product construct, which was highly significant in the earlier sample, is not significant (H1a). This could be because some suppliers who previously had worse performance improved and large differences exist no longer. The opposite also could be possible, where some high-performing suppliers became worse. Overall, hypothesis one has minimal support. The impact of customer satisfaction on share of business is not significant and hypothesis two is not supported. Standard Estimate -0.004 0.489 -0.041 0.215 0.059
Estimate -0.251 21.862 -1.590 10.762 0.084
S.E. 9.855 4.353 5.120 7.778 0.085
C.R. -0.025 5.023 -0.311 1.384 0.994
P 0.980 *** 0.756 0.166 0.320
Table 62: A-3 Coagulation Reagents Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the magnitude
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of the relationship between customer satisfaction and share of business increased and moved closer to significance. However, the impact of customer satisfaction on preferred share of business is still not significant. Overall, the fit of the alternative model shown in Table 63 was slightly better (TLI = 0.917; CFI = 0.938; RMSEA = 0.078). Preferred share of business explains a larger percentage of the variance (0.9 percent) in the model than current share of business (0.4 percent), but it is at a very low level in both models. Although the explanatory power of customer satisfaction decreases from 15.3 percent with current share of business to 12.8 percent with preferred share of business. Standard Estimate -0.048 0.447 0.007 0.143 0.092
Estimate -2.837 19.295 0.251 6.969 0.135
S.E. 9.571 4.121 4.971 7.517 0.087
C.R. -0.296
P 0.767
4.682 <0.001 0.05 0.927 1.547 0.96 0.354 0.122
Table 63: A-3 Coagulation Reagents Results Alternative Model
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4.5.
B-1 Professional Video Tape Sample Results
In the professional tape sample, the results show a different impact of the Marketing Mix on firm performance. The results are shown in Table 64. The overall fit of the structural model was very good (TLI = 0.963; CFI = 0.972; RMSEA = 0.059). The product in this sample was video tapes sold to professional recording studios. Two of the four components of the Marketing Mix have a significant impact on customer satisfaction, product (H1a) and place/logistics (H1d). The place/logistics construct has the strongest impact on customer satisfaction. Customer satisfaction does have a significant effect on share of business and as such hypothesis two is supported. In addition, the product and place/logistics constructs have an indirect effect on share of business through customer satisfaction. This result highlights the importance of superior logistics performance as it directly affects customer satisfaction and indirectly affects share of business. This means that suppliers who provide superior products and logistics services to their customers are the most successful.
Availability of the desired tape is critical because of tight schedules, which makes logistics performance very important. The best way for a supplier to succeed is to provide a high-quality video tape with characteristics that professional users desire and make them easily available when customers need them. Users of professional video tape placed a higher importance on logistics attributes than product attributes as evidenced by the larger estimate. It may be concluded that the video tape that is available is more appreciated than the one that has the highest technical specifications.
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Estimate 7.369 1.005 0.003 9.297 0.643
S.E. 2.201 1.920 1.354 2.166 0.059
C.R.
Standard Estimate 0.222 0.049 0.000 0.434 0.437
3.348 <0.001 0.523 0.002 0.601 0.998
4.292 <0.001 10.953 <0.001
Table 64: B-1 Professional Tape Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the magnitude of the relationship between customer satisfaction and share of business increased in magnitude. The difference is not statistically significant. Overall, the fit of the alternative model shown in Table 65 was equal (TLI = 0.962; CFI = 0.972; RMSEA = 0.060). Preferred share of business explains a slightly larger percentage of the variance (20.8 percent) in the model than current share of business (19.1 percent). The explanatory power of customer satisfaction stays the same at 43.7 percent. Standard Estimate 0.222 0.049 0.000 0.434 0.456
Estimate 7.369 1.005 0.003 9.297 0.660
S.E. 2.201 1.920 1.354 2.166
C.R.
3.348 <0.001 0.523 0.002 0.601 0.998
4.292 <0.001
0.057 11.535 <0.001
Table 65: B-1 Professional Tape Results Alternative Model
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4.6.
B-2 Consumer Video Tape Sample Results
In the second electronics sample, video tapes for consumers sold to retailers, slightly different results were obtained. The results are shown in Table 66. Overall, the fit of the model was good (TLI = 0.935; CFI = 0.954; RMSEA = 0.084). Two of the four components of the Marketing Mix have a significant impact on customer satisfaction, promotion/personal selling (H1c) and place/logistics (H1d). In contrast to the professional users, retailers seem to value good salespeople. In this sample, the product performance did not have a significant impact. Customer Satisfaction has a significant effect on share of business and hypothesis two is supported. In addition indirect effects are observed as promotion/personal selling and place/logistics impact share of business through customer satisfaction. This adds additional evidence to the importance of logistics attributes regarding business performance. Standard Estimate -0.103 -0.009 0.544 0.237 0.260
Estimate -2.417 -0.159 10.309 5.073 0.222
S.E. 2.984 2.297 3.613 2.444 0.055
C.R. -0.810 -0.069 2.853 2.076
P 0.418 0.945 0.004 0.038
4.074 <0.001
Table 66: B-2 Consumer Tape Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the magnitude
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of the relationship between customer satisfaction and share of business increased in magnitude. The difference is not statistically significant. Overall, the fit of the alternative model shown in Table 67 was similar (TLI = 0.932; CFI = 0.951; RMSEA = 0.086). Preferred share of business explains a slightly larger percentage of the variance (9 percent) in the model than current share of business (6.8 percent). The explanatory power of customer satisfaction stays the same at 43.1 percent. Standard Estimate -0.103 -0.009 0.544 0.237 0.299
Estimate -2.417 -0.159 10.309 5.073 0.233
S.E. 2.984 2.297 3.613 2.444 0.049
C.R. -0.810 -0.069 2.853 2.076
P 0.418 0.945 0.004 0.038
4.740 <0.001
Table 67: B-2 Consumer Tape Results Alternative Model
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4.7.
C-1 Plastics Resin Sample Results
In the plastic resin sample, the respondents were buyers in a manufacturing environment, as compared to the hospitals, movie studios, and retailers from previous samples. The results are shown in Table 68. The overall model fit was good (TLI = 0.926; CFI = 0.943; RMSEA = 0.073). One component of the Marketing Mix, price, has a significant impact on customer satisfaction (H1b). The direct effects of product and promotion/personal selling factors are not significant. Customer satisfaction has a significant effect on share of business, which supports hypothesis two. In addition, the results provide evidence for a significant indirect effect of the price construct through customer satisfaction on share of business. Standard Estimate 0.086 0.324 0.061 0.064 0.108
Estimate 0.124 0.480 0.082 0.087 1.796
S.E. 0.112 0.230 0.212 0.118 0.666
C.R. 1.112 2.083 0.390 0.739 2.699
P 0.266 0.037 0.697 0.460 0.007
Table 68: C-1 Plastic Resin Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the magnitude of the relationship between customer satisfaction and share of business increased in magnitude. The difference is not statistically significant. Overall, the fit of the alternative model shown in
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Table 69 was similar (TLI = 0.927; CFI = 0.944; RMSEA = 0.073). Preferred share of business explains a slightly larger percentage of the variance (2.1 percent) in the model than current share of business (1.2 percent). The explanatory power of customer satisfaction stays the same at 25.4 percent. Standard Estimate 0.086 0.324 0.061 0.064 0.146
Estimate 0.124 0.480 0.082 0.087 2.302
S.E. 0.112 0.230 0.212 0.118 0.625
C.R. 1.112 2.083 0.390 0.739
P 0.266 0.037 0.697 0.460
3.682 <0.001
Table 69: C-1 Plastic Resin Results Alternative Model
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4.8.
D-1 Golf Balls Sample Results
The last three samples are from the golf industry and in each of them volume retailers and pro shops were surveyed. The overall model fit was good (TLI = 0.950; CFI = 0.961; RMSEA = 0.069). The results of the golf balls sample are shown in Table 70. None of the components of the Marketing Mix have a significant impact on customer satisfaction and as such there is no support for the hypothesis that the Marketing Mix has a significant impact on customer satisfaction. An analysis of the performance scores shows that variability of performance scores is lower for this sample than the other two sporting goods samples. Customer satisfaction has a significant impact on share of business, so there is support for hypothesis two. Standard Estimate 0.055 0.144 -0.040 -0.078 0.313
Estimate 1.261 3.127 -0.666 -1.763 0.310
S.E. 3.649 3.176 2.040 4.143 0.055
C.R. 0.345 0.985 -0.326 -0.426
P 0.730 0.325 0.744 0.670
5.586 <0.001
Table 70: D-1 Golf Balls Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the magnitude of the relationship between customer satisfaction and share of business increased in magnitude. The difference is not statistically significant. Overall, the fit of the alternative model shown in
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Table 71 was similar (TLI = 0.953; CFI = 0.963; RMSEA = 0.067). Preferred share of business explains a slightly larger percentage of the variance (13.6 percent) in the model than current share of business (9.8 percent). The explanatory power of customer satisfaction stays the same at one percent. Standard Estimate 0.055 0.144 -0.040 -0.078 0.368
Estimate 1.261 3.127 -0.666 -1.763 0.346
S.E. 3.649 3.176 2.040 4.143 0.052
C.R. 0.345 0.985 -0.326 -0.426
P 0.730 0.325 0.744 0.670
6.713 <0.001
Table 71: D-1 Golf Balls Results Alternative Model
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4.9.
D-2 Golf Clubs Sample Results
The data in the second sample in the golf industry is a survey of volume retailers and pro shops regarding golf clubs. The overall model fit was good (TLI = 0.939; CFI = 0.955; RMSEA = 0.066). The results are shown in Table 72. Two constructs have a significant impact on customer satisfaction, product (H1a) and promotion/personal selling (H1c). These are the only significant relationships in this sample. This is a disconnect because the relationship between customer satisfaction and share of business is not significant. In other words, there is no statistical relationship between customer satisfaction and share of business. In this sample no indirect effects from the Marketing Mix, through customer satisfaction, on share of business can be reported. Standard Estimate 0.260 0.018 0.263 -0.062 0.112
Estimate 12.883 0.710 7.991 -2.668 0.056
S.E. 6.746 3.788 2.533 6.703 0.031
C.R. 1.910 0.188 3.155 -0.398 1.824
P 0.056 0.851 0.002 0.691 0.068
Table 72: D-2 Golf Clubs Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the strength of the relationship between customer satisfaction and share of business is higher. The difference
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is statistically significant. Overall, the fit of the alternative model shown in Table 73 was similar (TLI = 0.942; CFI = 0.957; RMSEA = 0.068). Preferred share of business explains a much larger percentage of the variance (62.9 percent) in the model than current share of business (1.2 percent). The explanatory power of customer satisfaction stays the same at 18.9 percent. The indirect effects of product and promotion/personal selling, through customer satisfaction, on preferred share of business are significant. Standard Estimate 0.260 0.018 0.263 -0.062 0.793
Estimate 12.883 0.710 7.991 -2.668 0.766
S.E. 6.746 3.788 2.533 6.703 0.036
C.R. 1.910 0.188 3.155 -0.398 21.157
P 0.056 0.851 0.002 0.691 <0.001
Table 73: D-2 Golf Clubs Results Alternative Model
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4.10.
D-3 Golf Shoes Sample Results
The results of the golf shoes sample are shown in Table 74. The overall fit of them model is good (TLI = 0.958; CFI = 0.971; RMSEA = 0.071). One component of the Marketing Mix, promotion/personal selling had a significant impact on customer satisfaction (H1c). The relationship between customer satisfaction and share of business is significant which offers support for hypothesis two. Therefore, the indirect effect between promotion/personal selling and share of business is significant. Standard Estimate 0.186 0.201 0.502 0.193 0.434
Estimate 5.021 3.879 8.379 4.267 0.594
S.E. 3.432 3.624 1.644 4.178 0.086
C.R. 1.463 1.070
P 0.143 0.284
5.097 <0.001 1.021 0.307
6.878 <0.001
Table 74: D-3 Golf Shoes Results
In addition to the impact of satisfaction on current share of business, a variation of the model was evaluated with preferred share of business as an alternative outcome variable. The significance and the magnitude of the variables generally remains the same, but the magnitude of the relationship between customer satisfaction and share of business increased in magnitude. The difference is not statistically significant. Overall, the fit of the alternative model shown in Table 75 was similar (TLI = 0.961; CFI = 0.972; RMSEA = 0.069). Preferred share of business explains a much larger percentage of the variance (24.7 percent) in the model than current
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share of business (18.8 percent). The explanatory power of customer satisfaction stays the same at 46.9 percent. Standard Estimate 0.186 0.201 0.502 0.193 0.497
Estimate 5.021 3.879 8.379 4.267 0.649
S.E. 3.432 3.624 1.644 4.178 0.079
C.R. 1.463 1.070 5.097 1.021 8.176
P 0.143 0.284 <0.001 0.307 <0.001
Table 75: D-3 Golf Clubs Results Alternative Model
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4.11.
Sample Comparison
After analyzing the results of each sample individually, an overall assessment of the results from all samples is provided. The impact of the Marketing Mix components on customer satisfaction is shown in Table 76. The table shows the sign and the significance of the coefficient representing each hypothesis. A marginal significance represented by a p-value between 0.05 and 0.10 is denoted by . One star (*) denotes a p-value between 0.01 and 0.05. Two stars (**) denote a p-value between 0.001 and 0.01. Three stars (***) denote a p-value of less than 0.001. If a coefficient is not significant it is denoted with n.s.. In the last row of the table the number of significant relationships is shown.
The same the Marketing Mix components are not significant for more than one sample. Even in samples A-2 and A-3, which are based on the same product, the results are different. It seems that promotion/personal selling has a more consistent impact on customer satisfaction than the other components of the Marketing Mix. The other constructs are significant three out of nine times. Based on the fact that differences between samples appear in the results, it must be made clear that different types of industries, products and organizations were surveyed. Based on the results in this study, customer service attributes are not equally important nor do they have the same influence on customer satisfaction across all samples. It is not possible to use previous data to generalize what components of the Marketing Mix have a significant impact on customer satisfaction. If managers want to know what areas are key to the success of their company, they must collect data and analyze it.
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Sample Name A-1 (Blood Banking) A-2 (Coagulation) A-3 (Coagulation) B-1 (Professional Tape) B-2 (Consumer Tape) C-1 (Commodity Resin) E-1 (Golf Balls) E-2 (Golf Clubs) E-3 (Golf Shoes)
Product n.s. 0.56 ** n.s. 0.22 *** n.s. n.s. n.s. 0.26 n.s. 2/9
Price 0.14 * n.s. 0.49 *** n.s. n.s. 0.32 * n.s. n.s. n.s. 3/9
Promotion/ Pers. Selling 0.42 *** 0.46 *** n.s. n.s. 0.54 ** n.s. n.s. 0.26 ** 0.50 *** 5/9
Place/ Logistics 0.21 ** n.s. n.s. 0.43 *** 0.24 * n.s. n.s. n.s. n.s. 3/9
Statistically Significant Relationships:
Table 76: Overall Impact of the Marketing Mix on Customer Satisfaction
The impact of the customer satisfaction on share of business is shown in Table 77. Overall, the hypothesis was supported five out of nine times. In addition there were several indirect effects, where there were significant relationships between a construct and customer satisfaction and between customer satisfaction and share of business.
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Satisfaction 0.25 *** 0.08 n.s. 0.44 *** 0.26 ** 0.11 ** 0.31 *** 0.11 0.43 *** 6/9
Indirect Effects Price, Promotion, and Place n/a n/a Product and Place Promotion and Place Price Price n/a Product
Table 77: Overall Impact of Customer Satisfaction on Share of Business
The impact of customer satisfaction on preferred share of business was assessed as well and the results are shown in Table 78. In sample A-2 current share of business is marginally significant, but preferred share of business is highly significant. Another difference is in sample E-2, where current share of business has a marginally significant impact on customer satisfaction, but preferred share of business is highly significant.
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Satisfaction 0.33 *** 0.19 *** n.s. 0.46 *** 0.30 ** 0.15 *** 0.37 *** 0.79 *** 0.50 *** 8/9
Indirect Effects Price, Promotion, and Place n/a n/a Product and Place Promotion and Place Price Price Promotion Product
Table 78: Overall Impact of Customer Satisfaction on Preferred Share of Business
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4.12.
Summary
In this chapter the research results were described. The nine samples were analyzed and the results were compared. The promotion/personal selling construct had the most consistent impact on customer satisfaction. The other constructs were significant in three samples each. Customer satisfaction had a significant impact on share of business in five samples. In the next chapter, the implications of the results for theory and practice are described. In addition, the limitations of the study are described and extensions for future research are proposed.
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CHAPTER 5. CONCLUSIONS
In this chapter, a summary and the conclusions of the research are presented. The results were provided in Chapter 5, and this chapter contains an evaluation and interpretation of the results. As specific hypotheses were tested and evaluated in the previous chapter, the overall impact of the Marketing Mix on both outcome variables is described in this chapter. Based on the results, it is not possible to argue that one component of the Marketing Mix has a stronger impact on firm performance than the others. The primary research objective was to investigate the relative effect of logistics attributes versus the other components of the Marketing Mix customer satisfaction and share of business and replicate the model under different conditions. First, a summary of the research purpose is provided. Second, the research objectives and hypotheses are reviewed. Third, the findings are summarized. Fourth, the research limitations are described. Fifth, opportunities for future research are illustrated. Sixth, implications for theory are described. Seventh, implications for practice are described. The chapter ends with overall conclusions.
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5.1.
Summary of Research Purpose
Many of the previous studies on customer service focused only on a single industry and few were replication studies. If a study is conducted in a particular industry, then the results may be valid only for that industry. The goal for this dissertation was to address this shortcoming by using a multi-industry approach with nine samples enabling replication of the research model (Hubbard and Armstrong 1994, Hubbard and Vetter 1996). By using multiple samples, a model can be developed on one sample and then validated with the others. This approach yields stronger results because it minimizes the chance for misspecification of the model (Ehrenberg 2004).
The need for replication has been voiced several times in the past (Furchtgott 1984, Lubin 1957, Sterling, Rosenbaum and Weinkam 1995). The need for replication is adressed with this dissertation. The results of this research show that the Marketing Mix components that have a significant impact in one industry or even in one sample may not have a significant impact in others. Consequently, the findings of past research studies that were based on a single sample may be questioned. This research reinforces the need for replication.
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5.2.
Review of Research Objectives and Hypotheses
The variables that managers use to select and evaluate suppliers were summarized into one of the four components of the Marketing Mix: product, price, promotion/personal selling and place/logistics. The main gap that has been addressed is the differential effect of logistics attributes versus the other components of the Marketing Mix. The use of both customer satisfaction and share of business as outcome variables enabled a better understanding of how the Marketing Mix may affect supplier financial performance. As established in Chapter 1, the specific research questions of the dissertation were:
1.
What are multi-item scales to assess the performance of customer service elements in business-to-business relationships across multiple industries?
2.
What is the relative importance of the components of the Marketing Mix in business-tobusiness settings in several industries?
3.
What is the influence of the components of the Marketing Mix on customer satisfaction and share of business?
Each component of the Marketing Mix is measured as a latent variable with several attributes, making up the variable. The attributes are summarized as importance-weighted averages of different aspects of the construct. In order to clarify the research model, a short review of the constructs is provided:
1.
The product construct is made up of attributes describing the performance, quality, new product development and support provided for the product. 158
2.
Price contains attributes related to level and competitiveness of pricing and the satisfaction with billing procedures.
3. 4.
Promotion/personal selling attributes are related to the efforts of the salesperson. Place/logistics attributes evaluated different aspects of logistics performance like delivery reliability, delivery flexibility, lead time, and problem solving of delivery issues.
5. 6.
Customer satisfaction is the overall evaluation of satisfaction with a supplier. Share of business denotes the percentage of business given to a supplier.
Hypotheses
The following formal hypotheses were tested in using structural equation modeling (SEM). Each hypothesis relates to a relationship in the structural model. The components of the Marketing Mix are believed to influence customer satisfaction. More specifically, the relationships between the individual components of the Marketing Mix were analyzed.
H1a: H1b: H1c: H1d:
Product has a significant impact on customer satisfaction.
Price has a significant impact on customer satisfaction.
Promotion/personal selling has a significant impact on customer satisfaction.
Place/logistics has a significant impact on customer satisfaction.
While customer satisfaction is an important construct in the literature, it does not directly translate into profitability or market share. In order to understand the effect of customer
159
satisfaction on share of business, the direct link was tested. It is believed to be a generally positive relationship (Rust, Zahorik and Keiningham 1996). In addition, indirect effects between the Marketing Mix and share of business through customer satisfaction are assessed.
H2:
Customer satisfaction has a significant impact on share of business.
The research model, shown in Figure 6, displays the tested hypotheses in a path diagram.
Figure 6: Research Model with Hypotheses
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5.3.
Summary of Findings
The overall impact of the Marketing Mix on customer satisfaction is shown in Table 79. One star (*) denotes a p-value between 0.01 and 0.05. Two stars (**) denote a p-value between 0.001 and 0.01. Three stars (***) denote a p-value of less than 0.001. A marginal significance is denoted by . If a coefficient is not significant it is denoted with n.s..
Product n.s. 0.56 ** n.s. 0.22 *** n.s. n.s. n.s. 0.26 n.s. 2/9
Price 0.14 * n.s. 0.49 *** n.s. n.s. 0.32 * n.s. n.s. n.s. 3/9
Promotion/ Pers. Selling 0.42 *** 0.46 *** n.s. n.s. 0.54 ** n.s. n.s. 0.26 ** 0.50 *** 5/9
Place/ Logistics 0.21 ** n.s. n.s. 0.43 *** 0.24 * n.s. n.s. n.s. n.s. 3/9
Table 79: Overall Impact of the Marketing Mix on Customer Satisfaction
The first result is that no consistent pattern emerged as to which components of the Marketing Mix affect customer satisfaction. This shows that the customer service attributes that have the 161
most impact on customers can vary by circumstances in the market. The impact of customer satisfaction on share of business is shown in Table 80.
Industry Health Services Health Services Health Services Electronics Electronics Plastics Sporting Goods Sporting Goods Sporting Goods Significant Relationships:
Satisfaction 0.25 *** 0.08 n.s. 0.44 *** 0.26 ** 0.11 ** 0.31 *** 0.11 0.43 *** 6/9
Indirect Effects Price, Promotion, and Place n/a n/a Product and Place Promotion and Place Price Price n/a Product
Table 80: Overall Impact of Customer Satisfaction on Share of Business
The impact of customer satisfaction on share of business is fairly consistent, with six significant relationships, two that are marginally significant and one non significant relationship. This also enabled several indirect relationships of the Marketing Mix on share of business, when the link between a component of the Marketing Mix and customer satisfaction was significant and the link between customer satisfaction and share of business.
162
5.4.
Research Limitations
As with any research, there are limitations that must be considered. The first limitation is the possible impact for multicollinearity on the results. The second limitation is the use of contextspecific attributes to estimate the components of the Marketing Mix. Each of these limitations will be described briefly.
Multicollinearity
The latent variables are left to correlate freely in the structural model. The correlations are always significant and removing those paths would have resulted in poor fit of the model. One possible problem is that multicollinearity may persist in the SEM models (Grewal, Cote and Baumgartner 2004). The most common problem with multicollinearity is that type II errors may occur, meaning that a relationship, which in reality is significant, is shown as non-significant (Jagpal 1982). Restricting the latent variables to be uncorrelated would not be an option, because conceptually it would be unreasonable to expect Product, Price, Promotion, and Place to not be correlated. This modeling strategy was used previously (Stank, Goldsby and Vickery 1999), and is a compromise that seems prudent in this research. The best safeguards against multicollinearity issues are large sample size, discriminant validity, and high measure reliability (Grewal, Cote and Baumgartner 2004). For all samples, adequate sample size, discriminant validity, and sufficiently high AVE and CR exist, but the threat of multicollinearity cannot be eliminated completely.
163
Context-Specific Attributes
It was not possible to use exactly the same questions across all the samples, because each had to give adequate customization to specific industry nuances. Across the product construct there are 56 different questions. For the price construct, there are 25 different questions. There are 16 questions used for the promotion/personal selling construct. And 25 different questions are used for the place/logistics construct. As a result, the questions are not entirely consistent across the samples. Completely standardized surveys like SERVQUAL (Parasurman, Zeithaml and Berry 1988) have suffered because of their inability to be specific enough and take into account heterogeneity of different industries (Parasurman, Zeithaml and Berry 1991). The questions for the surveys were developed during interviews with customers of the sponsoring firms. The surveys were developed to provide an accurate account of the attributes used to select and evaluate suppliers. If the surveys were developed with the premise that differences between industries would be examined, then some common and some industry-specific questions may be used (Baumgartner and Steenkamp 1998).
164
5.5.
Opportunities for Future Research
The premise of this research was to investigate the impact of place/logistics versus the other components of the Marketing Mix on customer satisfaction and indirectly share of business. While this research question was investigated, several other issues emerged that warrant further investigation. Each sample represents the situation at the point in time when the data were collected. While A-2 and A-3 are two surveys that dealt with the same product, three years apart, they are analyzed as two samples. An opportunity for future research is to use longitudinal data to investigate how the impact of the Marketing Mix changes over time for a particular industry.
The current model evaluates primary, secondary and tertiary suppliers in an equal manner. However, it could be determined how the effect of these attributes varies between primary suppliers and other suppliers. Establishing empirical evidence of logistics managements impact on business outcomes improves logistics managers understanding of their contribution to financial performance. Another source of variance that could be investigated is the difference between small specialized stores and larger mass retailers in the sporting goods samples.
In this research structural modeling was used to determine the current impact of the components of the Marketing Mix on customer satisfaction and indirectly on share of business. It does not consider areas where all suppliers might be underperforming, where an improvement in the performance of one supplier might lead to increases in customer satisfaction and share of business. 165
5.6.
Implications for Theory
Across the nine samples, it was determined which of the components of the Marketing Mix had a significant impact on customer satisfaction and indirectly on share of business. One piece of prior evidence that points to logistics having a stronger impact on share of business is the work by Sterling and Lambert (1987). The place/logistics construct has a significant impact on customer satisfaction in three samples (A-1, B-1, and B-2). Similar to previous results (Daugherty, Stank and Ellinger 1998, Stank, et al. 2003), the current study does point to a complex relationship between the place/logistics construct and customer satisfaction and firm performance. Logistics attributes, together with the other components of the Marketing Mix are an important driver of customer satisfaction and share of business and the impact varies by industry.
The impact of promotion/personal selling on customer satisfaction is evident in five samples, which is the most consistent relationship of any component of the Marketing Mix. This is not a surprising result because the salesperson can influence the expectations of the customer. A salesperson that can set realistic expectations has a stronger effect on customer satisfaction than one who overpromises. The salesperson can be regarded as a promise-maker and product and place/logistics are fulfilling that promise. Price has a different relationship because it is subject to promise-making during the negotiation and serves as a background to evaluate product and place/logistics.
166
5.7.
Implications for Practice
Due to the general nature of this research, no specific recommendations to managers are made, but general suggestions can be asserted. If specific recommendations for a company are required, then an analysis that charts importance and performance of several attributes versus competitors is preferable (Stock and Lambert 2001). This research is focused on a high-level holistic perspective in each cross-sectional sample. This research was focused on what was leading to customer satisfaction and share of business. Business people are more interested in what could impact customer satisfaction and share of business if performance was improved.
The result that promotion/personal selling has a strong impact on customer satisfaction and only a minimal direct impact on share of business has also implications for managers. It is possible that salespeople, who customers regard as good, do not drive higher share of business directly. It is important at this point to remember that each sample only provides a snapshot in time. No longitudinal analysis is performed. Samples A-2 and A-3 are on the same product three years apart, and it seems that in the later sample the effect of promotion/personal selling is not significant as it was in the previous sample.
The construct that is controlled by the logistics function place - has a strong impact on firm performance in some samples. Managers must be aware that in those samples better logistics performance can lead to better outcomes for the firm. This is especially important in those samples where the place/logistics construct is significant. In those samples one or more of the other components of the Marketing Mix are significant and it is important that the marketing
167
and logistics functions coordinate their efforts. Firm performance is influenced by activities that take place in these two functions.
In four of the nine samples retailers are surveyed (B-2, D-1, D-2, and D-3). There is one distinction between the retailers in the electronics industry and the sporting goods industry. Video tapes are sold in larger electronics or general retailers, and some of the golf equipment is often sold in smaller more specialized stores. It must not be assumed that differences in results are only explained by differences in industries because the type of retailer may also be a reason why different components of the Marketing Mix are significant.
For managers interested in understanding which factors drive customer satisfaction and share of business in their companies, this research shows the importance of collecting data on their actual customers and analyzing it. Relying on data collected in other industries or on other products cannot provide management with the data necessary to make informed decisions that are relevant in their specific situations. Even looking at data that is several years old, may prove troublesome if the differences between A-2 and A-3 are considered.
168
5.8.
Overall Conclusions
The analysis of the nine samples revealed the importance of individual components of the Marketing Mix varied by situation. It was not possible to determine a generalizable pattern in the components of the Marketing Mix that has a significant impact on customer satisfaction and indirectly on share of business. Other efforts to create a general framework for customer service did not succeed (Parasurman, Zeithaml and Berry 1991). This research provides further evidence that caution should be used in generalizing findings based on one study. The results that were significant in one situation may not be significant again, but without replicating the research it would not be possible to know.
169
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The Impact of Product, Price, Promotion and Place Logistics On Customer Satisfaction and Share of Business.

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The Impact of Product, Price, Promotion and Place/Logistics on Customer Satisfaction and Share of Business

Rudolf Leuschner, M.A. Graduate Program in Business Administration

The Ohio State University 2010

UMI Number: 3438241

2006 ........................................................ M.B.A., University of Nevada

2009 ........................................................ M.A. Business, The Ohio State University

Scope of the Research ..................................................................................................... 4

Objectives and Research Questions ................................................................................ 6

Research Hypotheses ...................................................................................................... 8

Methodology and Research Design ............................................................................... 10

Contributions and Future Research............................................................................... 13

Organization .................................................................................................................. 15 LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT ....................................... 16

Introduction and Origins of Customer Service .............................................................. 17

Customer Service in Marketing and Logistics ................................................................ 25

Customer Satisfaction and Firm Performance .............................................................. 44

Hypothesis Development .............................................................................................. 52

Summary ........................................................................................................................ 58 METHODOLOGY ..................................................................................................... 59

Data Collection .............................................................................................................. 60

Overview of the Samples ............................................................................................... 64

Data Analysis Preparation ............................................................................................. 69

Overview of Questions Used in the Samples................................................................. 76

Structural Equation Modeling ....................................................................................... 83

Measurement Model Results for Sample A-1 ............................................................... 87

Measurement Model Results for Sample A-2 ............................................................... 92

Measurement Model Results for Sample A-3 ............................................................... 97 viii

Measurement Model Results for Sample B-1.............................................................. 101

Measurement Model Results for Sample B-2.............................................................. 106

Measurement Model Results for Sample C-1.............................................................. 110

Measurement Model Results for Sample D-1 ............................................................. 114

Measurement Model Results for Sample D-2 ............................................................. 119

Measurement Model Results for Sample D-3 ............................................................. 124

Summary ...................................................................................................................... 129 RESULTS................................................................................................................ 130

Overview of the Results Evaluation ............................................................................. 131

A-1 Blood Banking Reagents Sample Results .............................................................. 132

A-2 Coagulation Reagents Sample Results .................................................................. 135

A-3 Coagulation Reagents Sample Results .................................................................. 137

B-1 Professional Video Tape Sample Results............................................................... 139

B-2 Consumer Video Tape Sample Results .................................................................. 141

C-1 Plastics Resin Sample Results ................................................................................ 143

D-1 Golf Balls Sample Results ...................................................................................... 145 ix

D-2 Golf Clubs Sample Results ..................................................................................... 147

D-3 Golf Shoes Sample Results .................................................................................... 149

Sample Comparison ..................................................................................................... 151

Summary ...................................................................................................................... 155 CONCLUSIONS ...................................................................................................... 156

Summary of Research Purpose.................................................................................... 157

Review of Research Objectives and Hypotheses ......................................................... 158

Summary of Findings ................................................................................................... 161

Research Limitations ................................................................................................... 163

Opportunities for Future Research.............................................................................. 165

Implications for Theory................................................................................................ 166

Implications for Practice .............................................................................................. 167

Overall Conclusions ..................................................................................................... 169

References ................................................................................................................................... 170

Table 2: Effective Sample Size........................................................................................................ 12

Table 3: Summary of Results of Previous Customer Service Studies............................................. 23

Table 4: Constructs of the Marketing Mix ..................................................................................... 43

Table 5: Outcome Variables in Customer Service Studies ............................................................. 51

Table 6: Overview of the Samples ................................................................................................. 64

Table 7: Number of Questions and Usable Cases .......................................................................... 71

Table 8: Summary of Composite Formation Methods................................................................... 74

Table 9: Product Attributes Across all Sample ............................................................................... 77

Table 10: Price Attributes Across all Samples ................................................................................ 80