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Arelationalapproachtounderstandingantecedents ofcustomerloyaltyintheairlineindustry
Masterthesis Cand.merc.(MCM) DepartmentofMarketing CopenhagenBusinessSchool



The objective of this thesis is to contribute to the understanding of drivers of customer loyalty byexploring the dynamics of customerbrand relationships and therole they play for thecreationandmanagementofcustomerloyaltyintheairlineindustry. The particular relevance of the research objective arises from the intensification of competition in the airline industry and the extensive consolidation that is expected to accompany it. These market challenges make the retention of valuable customers an essential prerequisite for the achievement of a sustainable competitive advantage and, hence,theairlinesoverallsuccess. Relevant literature from related fields, such as relationship and service marketing, form the foundation for the development of the conceptual airline customer loyalty (ACL) model. Centered on the concept of relational benefits,this model depicts important antecedents to customer loyalty in the airline industry. Relational benefits are thereby defined as benefits customers receive as a result of their engagement in customerbrand relationships. In the courseofthisstudy,threetypesofrelationalbenefitsareidentifiedasbearingrelevancefor theairlineindustry:social,psychological,andfunctionalbenefits. TheACLmodelisempiricallytestedemployingstructuralequationmodelingonprimarydata collected from an online survey with 276 participants. The results reveal that three distinct paths to airline customer loyalty can be distinguished with each being characterized by one of the observed relational benefits. Accordingly, they are defined as the social, the psychological, and the functional path to airline customer loyalty. Each path originates from distinct brand performance characteristics, moves along the respective type of relational benefits, and results in customer loyalty either directly and/or mediated by the dimensions of relationship quality customer satisfaction and relationship commitment. Managerial implicationsonhowtomanageairlinecustomerloyaltyareinferredalongthesethreepaths, accentuating the particular relevance of socialpsychological aspects of customerbrand relationships for the management of airline customer loyalty. By combining important brand and relationshiprelated concepts, this thesis provides a holistic perspective on the management of customer loyalty in the airline industry that has to date been missing.



Listoffigures .................................................................................................IV Listoftables...................................................................................................V Listofappendices.........................................................................................VII Listofabbreviations....................................................................................VIII 1 Introduction.............................................................................................1

1.1 1.2 1.3 Researchquestion....................................................................................................... 3 Subquestions.............................................................................................................. 4 Definitions .................................................................................................................... 4

2 Methodology............................................................................................5
2.1 2.2 2.3 Methodologicalorientationandresearchapproach..................................................5 Overallresearchdesign............................................................................................... 7 Thesisoutlineanddemarcation.................................................................................. 7

3 Theairlineindustry ..................................................................................9
3.1 3.2 3.3 3.4 3.5 3.6 Airlineindustryspecificities......................................................................................... 9 Keybusinessmodelsintheairlineindustry..............................................................11 Customersegmentation............................................................................................ 13 Loyaltyprograms....................................................................................................... 15 Industryoutlook........................................................................................................ 16 Chaptersummary...................................................................................................... 17

4 Conceptualandtheoreticalfoundationforthedevelopmentofthe airlinecustomerloyaltymodel................................................................ 17
4.1 Theconceptofcustomerloyalty...............................................................................18 Theinfluenceofcustomerloyaltyonafirmsprofitability................................18 Definingcustomerloyalty................................................................................... 19 Customerloyaltythroughrelationshipmarketing.............................................22 Theservicedominantlogicofmarketingintheairlineindustry........................23 I 4.1.1 4.1.2 4.1.3 4.2 4.2.1

Customerloyaltythroughrelationshipsbetweencustomersandairlinebrands .....23

Tableofcontents 4.2.2 4.2.3 4.2.4 4.3 Theservicebrandasarelationshippartner.......................................................26 Relationalbenefitsasabasisofairlinecustomerloyalty...................................27 Relationshipqualityasmediatorbetweenrelationalbenefitsand customerloyalty.................................................................................................. 31


5 Theairlinecustomerloyaltymodel......................................................... 35
5.1 Theinfluenceofairlinebrandperformancecharacteristicsonrelationalbenefits.35 Theinfluenceofsocialbrandperformanceonrelationalbenefits....................36 Theinfluenceofairlineimageonrelationalbenefits.........................................37 Theinfluenceofbrandselfcongruenceonrelationalbenefits.........................39 Theinfluenceoftrustworthinessonrelationalbenefits....................................40 Theinfluenceofservicequalityonrelationalbenefits......................................42 Theinfluenceofperceivedvalueonrelationalbenefits....................................43 Theinfluenceofcocreationofvalueonrelationalbenefits..............................44 Theinfluenceoftheairlinescountryoforiginonrelationalbenefits...............45 TheinfluenceofFFPattractivenessonrelationalbenefits................................46 Consequencesofsocialbenefits.........................................................................47 Consequencesofpsychologicalbenefits............................................................49 Consequencesoffunctionalbenefits..................................................................51 Theinfluenceofcustomersatisfactiononcommitmentandcustomerloyalty 52 Theinfluenceofrelationshipcommitmentoncustomerloyalty.......................53 5.1.1 5.1.2 5.1.3 5.1.4 5.1.5 5.1.6 5.1.7 5.1.8 5.1.9 5.2 5.2.1 5.2.2 5.2.3 5.3 5.3.1 5.3.2 5.4


Theinfluenceofrelationshipqualityoncustomerloyalty ........................................52


6 Empiricaltestingoftheproposedairlinecustomerloyaltymodel........... 54
6.1 PLSasresearchmethod ............................................................................................. 54 SelectionofPLSasresearchmethod..................................................................54 ApplicationofPLS............................................................................................... 55 Internetsurveyasdatacollectionmethod.........................................................57 Questionnairedesign.......................................................................................... 57 Courseofdatacollectionanddescriptivedataofsample..................................58 6.1.1 6.1.2 6.2 6.2.1 6.2.2 6.2.3 6.3

Datacollection........................................................................................................... 56

Operationalizationofconstructsandvalidationofmeasurementmodel................59 II

Tableofcontents 6.3.1 6.3.2 6.3.3 6.3.4 6.3.5 6.3.6 6.4 6.5 Exploratoryfactoranalysis.................................................................................. 59 Operationalizingbrandperformancecharacteristics.........................................60 Operationalizingrelationalbenefits...................................................................64 Operationalizingrelationshipquality ..................................................................66 Operationalizingcustomerloyalty......................................................................66 Validationofmeasurementmodel.....................................................................67

Validationofstructuralmodelandsubgroupcomparison......................................68 Discussionofempiricalfindings................................................................................70

7 Managerialimplications.......................................................................... 78
7.1 7.2 7.3 Thesocialpathtoairlinecustomerloyalty...............................................................79 Thepsychologicalpathtoairlinecustomerloyalty...................................................82 Thefunctionalpathtoairlinecustomerloyalty........................................................85

8 Conclusion............................................................................................... 86 References.................................................................................................... 90 Appendices.................................................................................................100



Figure1:MosttravelledseatingclassbyUKbusinesstravelersin2007................................14 Figure2:Loyaltymatrix............................................................................................................ 21 Figure3:Theexchangeversustherelationshipperspectiveinthemarketingprocess..........24 Figure4:ConnectionsbetweentheidentifiedconceptstobeincludedintheACLmodel....34 Figure5:TheACLmodel ........................................................................................................... 54 Figure6:Thethreepathstoairlinecustomerloyalty..............................................................78 Figure7:Thesocialpathtoairlinecustomerloyalty...............................................................79 Figure8:Thepsychologicalpathtoairlinecustomerloyalty..................................................82 Figure9:Thefunctionalpathtoairlinecustomerloyalty........................................................85 Figure10:ThestructuralACLmodel...................................................................................... 133 Figure11:DifferencesintheACLmodelbetweenbusinessandleisuretravelers................137



Table1:Comparisonoflowcostcarriersvs.networkcarriers...............................................12 Table2:Overviewofdefinitionsofcustomerloyalty..............................................................19 Table3:Operationalizationofairlinereputation....................................................................60 Table4:Operationalizationofbrandselfcongruence............................................................61 Table5:Operationalizationoftrustworthiness.......................................................................61 Table6:Operationalizationofservicequality.........................................................................62 Table7:Operationalizationofperceivedvalue.......................................................................62 Table8:Operationalizationofcocreationofvalue................................................................63 Table9:Operationalizationofairlinecountryoforigin...........................................................63 Table10:OperationalizationofFFPattractiveness.................................................................64 Table11:Operationalizationofsocialbenefits.......................................................................64 Table12:Operationalizationofpsychologicalbenefits...........................................................65 Table13:Operationalizationoffunctionalbenefits................................................................65 Table14:Operationalizationofcustomersatisfaction............................................................66 Table15:Operationalizationofrelationshipcommitment.....................................................66 Table16:Operationalizationofcustomerloyalty ....................................................................67 Table17:HypothesistestingfortheACLmodel......................................................................68 Table18:Qualitycriteriaforthemeasurementmodel.........................................................100 Table19:Qualitycriteriaforthestructuralmodel................................................................102 Table20:Summaryofsurveyparticipantssociodemographiccharacteristics...................117 Table21:Summaryofsurveyparticipantssituationalcharacteristics.................................117 Table22:Overviewofconsultedstudies...............................................................................118 Table23:Studiesconsultedwithrespecttosocialbrandperformance.............................119 Table24:Studiesconsultedwithrespecttoairlineimage..................................................119 Table25:Studiesconsultedwithrespecttobrandselfcongruence ...................................120 Table26:Studiesconsultedwithrespecttotrustworthiness.............................................121 Table27:Studiesconsultedwithrespecttoservicequality................................................122 Table28:Studiesconsultedwithrespecttoperceivedvalue.............................................122 Table29:Studyconsultedwithrespecttococreationofvalue.........................................122 Table30:StudyconsultedwithrespecttoFFPattractiveness............................................122 Table31:Studiesconsultedwithrespecttosocialbenefits................................................123 V

Listoftables Table32:Studiesconsultedwithrespecttopsychologicalbenefits...................................123 Table33:Studiesconsultedwithrespecttofunctionalbenefits .........................................124 Table34:Studiesconsultedwithrespecttocustomersatisfaction....................................124 Table35:Studiesconsultedwithrespecttorelationshipcommitment..............................125 Table36:Studiesconsultedwithrespecttocustomerloyalty............................................125 Table37:Measurementitemsincludedinquestionnaire.....................................................127 Table38:KMOandBartletttestforconstructsofbrandperformancecharacteristics......128 Table39:Rotatedcomponentmatrixforconstructsofbrandperformancecharacteristics128 Table40:KMOandBartletttestforconstructsofrelationalbenefits.................................129 Table41:Rotatedcomponentmatrixforconstructsofrelationalbenefits..........................129 Table42:KMOandBartletttestforconstructsofrelationshipquality...............................129 Table43:Rotatedcomponentmatrixforconstructsofrelationshipquality........................129 Table44:KMOandBartletttestforcustomerloyaltyconstruct.........................................130 Table45:Componentmatrixforcustomerloyaltyconstruct................................................130 Table46:Latentvariablecorrelations.................................................................................... 130 Table47:Correlationmatrixforformativevariableservicequality....................................130 Table48:Calculationofvarianceinflationfactor(VIF)forservicequality..........................131 Table49:Coefficientsofdetermination(R)forendogenousconstructs.............................131 Table50:Calculationofvarianceinflationfactors(VIF)forstructuralmodel .......................132 Table51:StoneGeisserQforendogenousconstructs........................................................132 Table52:Criteriafortheevaluationofsignificantdifferencesbetweensubgroups...........134 Table53:Calculationoftvaluesforsubgroupcomparison.................................................134 Table54:Hypothesistesting;subgroupcomparisonofbusinessandleisuretravelers......135 Table55:ComparisonofRforbusinessandleisuretravelers.............................................136



Appendix1:QualitycriteriaforthevalidationoftheACLmodelinPLS...............................100 Appendix2:Questionnaire.................................................................................................... 104 Appendix3:Descriptivedataofsample................................................................................117 Appendix4:Measurementscalesreviewedforoperationalizationofconstructs................118 Appendix5:Measurementitemsincludedinquestionnaire.................................................126 Appendix6:Resultsofexploratoryfactoranalysis................................................................128 Appendix7:Calculationsforvalidationofmeasurementmodel..........................................130 Appendix8:Calculationsforvalidationofstructuralmodel.................................................131 Appendix9:Subgroupcomparison....................................................................................... 134



ACL AirRep AMOS AVE Bsc cf. Comm CoO CoV e.g. etal. FFP FunBen i.e. IATA LISREL LMU Loy p. Perv PLS pp. PsyBen Sat Sbp SEM Servq SocBen SPSS SQ Trustw VIF Airlinecustomerloyalty Airlinereputation AnalysisofMomentStructures Averagevarianceexplained Brandselfcongruence Confer(compare) Commitment Countryoforigin Cocreationofvalue Exempligratia(forexample) Etalli(andothers) Frequentflyerprogram Functionalbenefits Idest(thatis) InternationalAirTransportAssociation LinearStructuralRelationship LudwigMaximiliansUniversitt,Munich Loyalty Page Perceivedvalue Partialleastsquare Pages Psychologicalbenefits Satisfaction Socialbrandperformance Structuralequationmodeling Servicequality Socialbenefits StatisticalPackagefortheSocialSciences Subquestion Trustworthiness Varianceinflationfactor


1 Introduction
Runningairlinesprofitablehasalwaysbeenagreatchallenge(cf.Doganis,2006). In addition to intense competition diminishing airlines profits, airlines are exposed to market volatility, legalregulationsrestrictingoperations,andadisadvantageouscoststructurewithhighfixed costs(Delfmann,2005,p.12;Shaw,2007,p.54).Theongoingderegulationandliberalization of the industry over the past years, which has, inter alia, resulted in the removal of fare restrictions,havefurtheralteredthecompetitivelandscapebyencouragingtheentryofnew competitorsinthemarket.Inparticular,lowcostcarriershavebecomeadrivingforceinthis competitive landscape. In contrast to traditional network carriers1, which typically pursue a service differentiation strategy, lowcost carriers focus primarily on keeping their operating costs low, thus taking over cost leadership. These developments have had extensive repercussions on the European airline industrys market structure, resulting in increased price competition. In an industry that has always been marked by marginal profitability (Doganis,2006),thiscompetitiononpricehasledtofurtherprofitdecline.Today,numerous airlines in Europe are struggling to make profits or are facing bankruptcy, implying that extensive consolidation activities are forecast for the European market. At the same time, the relentless price competition, especially in the shorthaul segment, puts airlines service atrisktobeperceivedbycustomersasarathergenericoffering. In such a highly competitive environment, customer loyalty has become an increasingly effective means for securing a firms profitability (e.g. Reichheld & Sasser, 1990; Reinartz & Kumar,2002).Customerloyaltyreferstoacustomersrepeatedsamebrandpurchasewithin a given category, based on a favorable attitude toward and preference for the particular brand. Empirical findings have revealed that increased market share and decreasing price sensitivity among customers are particular contributions of customer loyalty to a firms profitability (Chaudhuri & Holbrook, 2001). The establishment and maintenance of a loyal customer base should, therefore, be (and in many cases already is) a key objective for airlines, since it promotes a sustainable competitive position in the market place. Consequently, the retention of valuable customers is an important objective and requires airline management to understand the underlying factors that reinforce airline customers loyaltytowardagivenairlinebrand.

Thesecarriersareoftenalsoreferredtoaslegacyorflagcarriersastheywereformerlystateowned.Fora detaileddescription,pleaserefertoChapter3.2.

Customer loyalty rests in particularon the brand, which plays an important role incustomer retention. A brand can be described as a cluster of functional and emotional values that promises a unique and welcome experience (de Chernatony et al., 2006, p.819) for its customers. By creating unique associations and feelings among customers that are directly and exclusively connected to the given airline, the brand helps airlines differentiate themselves from their competitors. In addition to its differentiation function, the brand servesasapotentialrelationshippartnerforthecustomer.Thecustomerbrandrelationship canevolveanddevelopthroughcontinuouspositiveinteractionsbetweenthecustomerand the brand (e.g. Grnroos, 2007, p.331) and provides airlines with the opportunity to offer their customers benefits that go beyond the core air transport service (cf. HennigThurau et al., 2002, p.234). In such relationships, customers perceive the airline brand as a legitimate partner in the relationship dyad (Sweeney & Chew, 2000; cf. Fournier, 1998). Customers constructrelationshipswithbrandssothattheyprovideandaddmeaningandvaluetotheir lives (Sweeney & Chew, 2000; Fournier & Yao, 1997). This value is generated by the relational benefits resulting from the relationship with the brand as perceived by the customer (cf. Aaker, 2002, p.95; HennigThurau et al., 2002, p.234). Ultimately, the customer decides whether the relationship with a given brand generates value or not. Hence, it is fundamental for the establishment of customer loyalty to understand what potential and existing customers expect from their relationship with an airline brand. However, since customers personalities and lifestyles differ, as does their evaluation of the relationshipwiththebrand,customercharacteristicsmustalsobetakenintoaccount. With the objective of fostering customer loyalty, airlines introduced loyalty schemes in the 1980s and 1990s. These socalled frequent flyerprograms award customers for flights taken with the given airline. While these programs attract a great number of airline customers, skepticism has been expressed whether such programs in fact lead to true customer loyalty based on a positive attitude toward and preference for the brand. Critics assert that the reason why customers repurchase a ticket to travel with the given airline rests alone on the rationalandeconomicbenefitstheairlinesfrequentflyerprogramoffers(cf.Plimmer,2006; Dowling & Uncles, 1997). Given frequent flyer programs questionable effect with reference to the creation of customer loyalty, other drivers of customer loyalty in the commercial airline industry must be considered. Several studies on the antecedents of customer loyalty in the airline industry have been carried out (e.g. Ostrowski et al., 1993; Park et al., 2006; 2

Zins, 2001). This thesis, however, takes a different approach and argues that the consideration of the dynamics that result from customerbrand relationships can generate new knowledge about how customer loyalty can be created and maintained in the airline industry.

1.1 Researchquestion
Based on the previous discussion, this thesis research objective is to gain insights into the dynamics of customerbrand relationships in the airline industry and the effect these can have on customer loyalty. To achieve the stated objective, the research focuses on the identificationofimportantdriversofairlinecustomerloyalty.Thisfurtherestablishesamore profound understanding of customers appraisal of specific airline brand characteristics. Further consideration of customers influential role in relational exchanges elicits the need topayspecialattentiontothosecharacteristicsthatdifferentiateairlinecustomersfromone another. The knowledge gained from this research study provides a foundation on which recommendations directed at airline managers can be built. Consequently, this thesis approachestheresearchquestionfromamanagerialperspective. In consideration of the previously formulated research objective, the overarching research questionofthisthesisis: Whatkindofbenefitsdocustomersseekwhentheyengageinrelationshipswithairline brands,andhowcantheserelationshipsstrengthenairlinecustomerloyalty?

1.2 Subquestions
Based on this overall research question, the following subquestions (SQ) to be answered are:

SQ1:Howdorelationalbenefitsaffectcustomerloyaltytowardaspecificairlinebrand? SQ2:Howdofundamentalairlinebrandperformancecharacteristicsinfluencethe relationalbenefitsperceivedbyairlinecustomers? SQ3:Howdodifferencesinairlinecustomercharacteristicsmoderatetheairlinecustomer loyaltymodel? SQ4:Whatmanagerialimplicationscanbeinferredfromtheresultsofthisstudy?

1.3 Definitions
Themostimportantconceptsmentionedintheresearchquestionandthesubquestionsare brieflydefinedbelow.Moredetaileddefinitionsareprovidedinthefollowingchapters. First,theinterchangeableuseofthetermsairline,airlinebrand,andairline/brandimagein this thesis must be addressed. The term airline in general relates to the company that provides the actual air transport service. However, this thesis concentrates on the relationshipbetweenagivenairlineanditscustomers.Customersprimarilyperceiveairlines as brands, i.e., in terms of the benefits the airline provides them. The brand, on the other hand, cannot be created by the airline per se, but is built by the customer (Grnroos, 2007, p.331).Brandimagethusrelatestotheassociationsacustomerlinkstoaparticularairline. In this context, customer loyalty is defined as a customers repeated samebrand purchase withinagivencategory,basedonafavorableattitudetowardandpreferenceforthespecific brand. A more elaborate definition of customer loyalty is presented in Chapter 4.1.2. It is worth mentioning that several different descriptions of loyalty are discussed in the literature, e.g., customer loyalty, brand loyalty, or service loyalty. Here, the term customer loyalty was explicitly chosen to emphasize that this research study focuses on the loyalty customersexhibittowardaspecificairlinebrand.

The relational benefit approach assumes that both the customer and the service provider must benefit from the relationship if it is to persist in the long run. From the customers perspective, the maintenance of this relationship depends primarily on the existence of relational benefits. These refer to benefits that go beyond the basic services offered by the service provider. This thesis distinguishes between three different types of relational benefits:social,psychological,andfunctionalbenefits. It should further be noted that, whenever it is referred to the customer, female and male customers are considered. However, for simplicity and easiness to read, only he and him willbeused.

2 Methodology
This chapter discusses the methodological orientation applied in this thesis to answer the research question. Furthermore, the role of theory within this context is assessed. Finally, theoutlineanddemarcationofthethesisarepresented.

2.1 Methodologicalorientationandresearchapproach
With regard to the overall research question and the proposed subquestions, this thesis objectivesare(1)togainnewinsightsintothe effectcustomerbrandrelationshipscanhave onairlinecustomerloyalty.Thesefindingsarearrivedatbyreviewingandexploringrelevant literature on customer loyalty, relationship and service marketing, and brand management. Bysynthesizingthemostimportantconceptsidentifiedinthedifferentfieldsofresearch,(2) a conceptual model is developed which depicts the causal relationships between the identified concepts and their influence on airline customer loyalty. (3) This model is then empiricallytested. To meet the objectives described above, this thesis adopts a positivist research philosophy; relevant literature is reviewed to establish a suitable conceptual framework, including the construction of hypotheses (cf. Saunders et al., 2007, p.103). Hypotheses refer to ideas or propositions about the relationship between two or more concepts that can be tested using statistical analysis (cf. Saunders et al., 2007, p.117; Collis & Hussey, 2003, p.55). The hypotheses formulated and subsequently tested here concern the proposition of causal relationshipsbetweendifferentconceptsthatleadtoairlinecustomerloyalty.Consequently, 5

thefirstpartofthestudy,whichaimstounderstandtherelevantconceptsandconstructsof customer loyalty, relationship marketing, and service marketing in literature, is exploratory (cf. Malhotra & Birks, 2007, p.70). The purpose is to deduce hypotheses from the existing literature and from previous studies (cf. Ghauri & Grnhaug, 2005, p.15; Gill & Johnson, 2002, p.34). The second part of the study is explanatory, with its focus on testing the postulated hypotheses and examining the causal relationships between the concepts (cf. Malhotra & Birks, 2007, p.70; Saunders et al., 2007, p.134), to be able to infer managerial implicationsfromtheempiricalresultsobtained. Since the main objective of this study is to explore the underlying causal relationships between variables that result in airline customer loyalty, a deductive research approach is employed. That is, hypotheses on the causal relationships are deduced from existing knowledge (literature), subjected to empirical scrutiny (testing), and, based on the findings are either accepted or rejected (Ghauri & Grnhaug, 2005, p.15). Saunders et al. (2007, pp.117118) draw attention to several important characteristics of the deductive approach. First, resulting from the formulation of hypotheses that need to be tested, deduction is usually associated with the collection of quantitative data which lend themselves to statistical analysis (Saunders et al., 2007, p.104). Because measurement is an essential element of the analysis of quantitative data, it must be conducted with precision to ensure the measurements accuracy (Collis & Hussey, 2005, p.7). In order to ensure objective data collection, the researcher should be impartial to the subject matter being measured (Saunders et al., 2007, p.118). Furthermore, to make the measuring of the concepts possible, they have to be presented in operational terms (Ghauri & Grnhaug, 2005, p.15; Saundersetal.,2007,p.118). Finally, this research study takes a managerial perspective. The objective is to understand the underlying reasons for why customers remain loyal to a specific airline brand. The insights gained can be transformed into distinctive initiatives by airline managers, which contribute to the strengthening of airline customers loyalty. Hence, this thesis goal is to propose recommendations for airline managers on how to intensify the bonds between the customersandtheairlinebrand.

2.2 Overallresearchdesign
While deduction describes the general approach applied here to answer the research question, the research design details the necessary procedures to obtain the information to answerit.Itfurtherspecifiestheroleoftheoryandtheunitofanalysis. The employment of a deductive research approach requires the collection of a considerable amount of representative quantitative data. Consequently, a survey is the most suitable research strategy for this study, since the collection of a large amount of standardized and structured data is thereby possible, which, in turn, allows for a quantitative analysis (Saunders et al., 2007, p.138; Malhotra & Birks, 2007, p.266). A detailed discussion of the typeofsurveyconductedandthedataanalysisprocessispresentedinChapter6. This thesis main research question necessitates profound knowledge on what kinds of benefits customers seek in a relationship with a select airline brand. In the conceptual part of this thesis, theory, i.e., a system for organizing concepts in a way that produces understanding and insights (Zaltman et al., 1977 in: Ghauri & Grnhaug, 2005, p.39) is applied to identify the frameworks key dependent and independent variables. In addition, theory provides guidance on the operationalization of the key variables identified. In the analytical part of this thesis, the theory on which the airline customer loyalty model is built guidesthedataanalysisstrategyandtheinterpretationofresults.Furthermore,thefindings arrived at are interpreted on the basis of the literature reviewed and previous research and areintegratedintheexistingbodyofknowledge(cf.Malhotra&Birks,2007,p.51). Concentrating on customers particular attitudes and behavior toward airline brands, the research question clearly identifies airline customers as the designated unit of analysis. For reasons of generalization, this study aims to cover a heterogeneous consumer base. Airline customersingeneral,therefore,constitutetheunitofanalysis.

2.3 Thesisoutlineanddemarcation
Thissection brieflyintroducesthecontentsofeachoftheindividualchapters.Italsodepicts thisthesislimitations. Chapter Three provides a brief introduction to the airline industry, its current challenges, and its two most prominent business models: network carriers and lowcost carriers. In 7

addition, dimensions for customer segmentation are discussed. Furthermore, frequent flyer programs (FFPs), a loyalty scheme specific to the airline industry, are introduced, and their advantages and disadvantages highlighted. It must be noted here that the chapter focuses on airline industry specificities and forecasts that were made prior to the outbreak of the financial and economic crisis. What effect the current developments will have on the industryinthelongtermisdifficulttoassessandbeyondthescopeofthisthesis. Chapter Four concentrates on the review of existing literature in the fields of customer loyalty, relationship and service marketing. With reference to customer loyalty, various definitionsdiscussedinacademicliteraturearepresented,andthedifferentcomponentsfor definingtrueloyaltyareassessed.Asthefocusofthisstudyisontheidentificationoffactors thatinfluencecustomerloyaltyratherthanontheanalysisofcustomerloyaltyassuch,anin depth analysis of different levels of loyalty or a comprehensive discussion of loyaltys influence on a companys profitability is beyond the scope of this thesis. By considering relationship marketings primary objective, namely building and strengthening relationships with customers, this study intends to contribute to the current understanding of the drivers of customer loyalty. To further contemplate the nature of services and the specificities of service marketing, analyzing customerbrand relationships is a feasible approach. Here, special attention is given to the relevance of relational benefits and relationship quality in the longterm maintenance and enhancement of such relationships. By processing and evaluating existing knowledge and synthesizing it, the focus of the research is refined and conceptsforinclusionintheconceptualmodelaredetermined. Based on the insights gained from the literature review and the results from studies previouslyconductedinthefieldsofrelationshipmarketingandcustomerloyalty,theairline customer loyalty (ACL) model is conceptualized in Chapter Five. Hypotheses on causal relationships that exist between the different constructs of the model are postulated for subsequentempiricaltesting. Chapter Six focuses on the empirical testing of the airline customer loyalty model. The analyticalapproachisintroduced,anddetailsonthedatacollectionprocedureareprovided. Furthermore, the operationalization of the constructs is described. Following the validation ofthemodel,theresultsoftheempiricalstudyarepresented.Thechapterconcludeswitha

discussion on the empirical findings based on the inferences arrived at by answering sub questionsone,two,andthree. Chapter Seven combines the theoretical insights gained from the literature review with the empirical findings based on the conclusions to subquestions one, two, and three to deliberatemanagerialimplications.Thus,subquestionfourisaddressed. ChapterEightpresentsfinalconclusionsandsuggestsdirectionsforfutureresearch.

3 Theairlineindustry
This chapter provides a brief overview on the specificities of the passenger airline industry. First, an outline of historical, legal, and economic factors is presented before the industrys two dominant business models, network carriers and lowcost carriers, are introduced. The chapter further addresses marketingrelated aspects that characterize the airline industry such as dimensions for customer segmentation and frequent flyer programs. The chapter concludeswithaconcisefutureoutlookoftheindustry.

3.1 Airlineindustryspecificities
Until the mid1980s, the highlyregulated airline industry was dominated by international airlines which were fully, or at least majorityowned by their national governments. This was primarily because governments realized that air transport would be of major significance for economic and social development, as well as for trade (Doganis, 2006, p.223). To promote their countrys power, status, and prestige (Hanlon, 2007, p.7), each statedesignatedoneairline,thecountrysflagcarrier,tooperateflightsonbilateralroutes between those countries with which air traffic rights had been exchanged (Doganis, 2006, p.223).Sincethemid1980s,thesuccessiveliberalizationoftrafficrightsandregulationshas facilitated the privatization of stateowned airlines. Today, most are either fully or partially privatized, or are in the process of being privatized (Doganis, 2006, p.225; Hanlon, 2007, p.15).However,alargenumberofformerlystateownedcarrierscontinuetocommemorate their historical heritage in their names and in the colors of their corporate design (e.g., British Airways, Air France). While liberalization initially spurred the privatization of airlines, it also triggered the entry of new carriers in the market. Faced with increasing competition and, simultaneously, decreasing government subsidies traditional carriers were forced to 9

abandon old market practices and become more competitive and customeroriented (Doganis, 2006, p.224). At the end of the 1990s, traditional flag carriers faced new challenges from the emergence of lowcost, lowfare carriers2 entering the market and altering the competitive landscape. Again, traditional carriers had to rethink their strategies andincreasetheirflexibilityinordertoadapttothechangesinthemarketplace. The airline industry has been characterized by heavy regulations which limit airlines room for maneuver. While other industries have paved the way for companies to transform into global players, the principle that airlines should be substantially owned and effectively controlledbynationalsfromthegivenstateinwhichtheairlineisregistered,hasprevented airlines from becoming truly global businesses by obstructing crossborder merger and acquisition activities (Hanlon, 2007, p.9; Doganis, 2006, p.54; Shaw, 2007, p.53). To overcometherestrictionsimposedbythisnationalityrule,airlinesformedglobalalliancesas ameanstosecuresomeofthebenefitsalargersizeandscopeoffer(e.g.greaterpurchasing power,betterdistributionofmaintenancecosts,etc).Whilethe1990switnessedanoutright alliancebuilding frenzy, three major alliances, namely Star Alliance, oneworld, and SkyTeam3, now dominate the competitive landscape (cf. Doganis, 2006, p.85,99). Shaw (2007,p.110)assertsthattheformationofallianceswasnotameansinitself;rather,itwas an indispensable detour, since crossborder consolidation activities continue to be restricted by regulations. Moreover, Hanlon (2007, p.10) argues that the existing airline alliances may prove to be precursors to actual crossborder mergers, considering that governmentimposed constraints and regulations on foreign ownership are progressively beingrelaxed. The cyclical nature of the airline industry, with its growth cycles closely linked to changes in theworldeconomy,isoneofitsmajoreconomicidiosyncrasies(Doganis,2006,p.4;Mason, 2005, p.19; Shaw, 2007, p.64). However, this direct relationship between economic growth and air travel demand seems to have weakened, mainly as a result of lowcost airlines that offer lower fares and thus stimulate demand irrespective of the economic situation

Lowcostcarriersareprimarilycharacterizedbytheirlowoperationalcosts,enablingthemtoofferlowfare tickets. 3 StarAlliancehas19memberairlines.AmongthemareAirCanada,AirChina,Lufthansa,Scandinavian Airlines,SingaporeAirlines,Thai,andUnited(StarAlliance,2009).oneworldhas10memberairlines,including AmericanAirlines,BritishAirways,CathayPacific,JAL,andQuantas(oneworld,2009).SkyTeamhas11 memberairlines,includingAirFrance,Alitalia,SouthernChinaAirlines,DeltaAirLines,KLM,andNorthwest Airlines(SkyTeam,2009).


(Doganis, 2006, p.18). Airlines furthermore have to cope with marginal profitability (Doganis, 2006, p.4; Hanlon, 2007, p.5). The airline industrys cost structure with high fixed costs relative to variable costs makes volume a crucial factor for securing profits (Taneja, 2003in:Tiernanetal.,2008,p.213).Whiletheconstantemergenceofnewcompetitorsand the simultaneous pullout or failure of others intensify the industrys dynamics, additional pressure is exerted by the customer, who is gaining power in an increasingly transparent market made possible by the easily accessible information on the Internet on prices, conditions, and consumer rights (Mason&Alamdari, 2007, p.303; Delfmannetal., 2005, p.12).

3.2 Keybusinessmodelsintheairlineindustry
In general, four fairly generic business models can be identified in the airline industry: (1) network airlines, (2) lowcost airlines, (3) charter airlines, and (4) regional airlines (Bieger&Agosti, 2005, p.50). Since network airlines and lowcost carriers represent the dominantbusinessmodelsintheinternationalairlineindustry,onlythesetwomodelswillbe furtherelaboratedon. Network carriers are first and foremost characterized by an extensive international route network with a complex hubandspoke system that includes short and longhaul connections (e.g. Doganis, 2006, p.149; Franke, 2004, p.15; Tiernanetal., 2008, p.214). In most cases, network carriers evolved from formerly stateowned flag carriers. Traditionally, they have pursued a full service differentiation strategy. Different seating classes and corresponding preflight, inflight, and postflight services function as a means for differentiation and further facilitate the targeting of multiple customer segments (Pompletal., 2003, p.6; Tiernanetal., 2008, p.214). Offering loyalty schemes such as frequent flyer programs and belonging to one of the three major airline alliances (Star Alliance, oneworld, and SkyTeam) complement network carriers differentiation strategy (cf. Tiernanetal., 2008, p.214). Yet network carriers profitability on shorthaul operations has been heavily undermined by the expansion of lowcost carriers and their impact on pricing. Airline business experts (e.g. Mason&Alamdari, 2007, p.306;4 Doganis, 2006, p.266) argue thatthefuturebusinessmodelofmajornetworkcarrierswillbebasedonanextensivelong

MasonandAlamdari(2007)conductedaDelphistudywith26airtransportexpertsinordertodetectfuture trendsconsideringEUnetworkcarriers,lowcostcarriers,andconsumerbehavior.


haul network backed by alliances to provide a global spread, and supported by a shorthaul anddomesticnetworkreducedsignificantlyinsizeandimportance. In contrast to network carriers business model, which is based on service differentiation, lowcost carriers pursue a strategy of cost leadership. The traditional low cost model concentrates on maximum aircraft utilization, the operation of a single aircraft type only, and keeping to short turnaround times at secondary or less congested airports with lower fees (e.g. Bieger&Agosti, 2005, p.53; Doganis, 2006, pp.147; Hanlon, 2007, pp.58). An overview of the most important operation and product features distinguishing lowcost carriersfromnetworkcarriersisprovidedinTable1.
Operation/ product feature Airports




Low-cost carriers Secondary, less congested (by and large) 15-20 minute turnarounds Single aircraft type (e.g. Boeing 737, Airbus A320) High utilization (over 11 hours/day) Point-to-point No interlining No baggage transfer Mostly direct via Internet booking

Network carriers Primary (hubs) Higher turnaround times due to congestion and labor regulations Multiple aircraft types Moderate utilization Hub-and-spoke Interlining Code share, global alliance Travel agents Internet Call center Complex structure Multiple class Seat assignment Complimentary amenities In-flight entertainment Yes Leisure and business

Fares In-flight

Low Simple structure Single class No seat assignment Pay for amenities, onboard selling

No (by and large) Leisure, price sensitive business travelers Table1:Comparisonoflowcostcarriersvs.networkcarriers5

FFP Target group

Owingtotheirsignificantlylowercostbase,lowcostcarriersareabletoofferpointtopoint services at substantially lower fares than network carriers. This introduction of lowfare services on European routes has brought about an increase in leisure travel, a higher traffic volume, and a loss of market shares for both network carriers and charter airlines (Mason, 2005; Lufthansa Consulting, 2008, p.22). Initially targeting leisure travelers, recent studies indicate that lowcost carriers have been successful in increasing their number of business



travelers in Europe as well (Mason & Alamdari, 2007, p.302). Though Europe experienced a virtual lowcost boom in 2002/2003 with over a dozen new airlines entering the market (Doganis, 2006, p.161), several of them had to pull out of the market soon thereafter, since they could not operate profitably or were taken over by competitors (Anonymous, 2006, p.19).Thusfar,itseemsthatthelowcostcarrierbusinessmodelisonlysuccessfulonshort haulroutes.Thoughseveralcarriershavetriedtoadoptthelowcostbusinessmodeltolong haulinternationalroutes,suchattemptshavetodatebeenunsuccessful(cf.Simon,2008).

3.3 Customersegmentation
In order to define distinct target groups, customers are typically segmented along demographic, psychographic, and/or behavioral dimensions (cf. Peter & Olson, 2008, pp.370; Solomon et al., 2006, p.9). Shaw (2007, p.24) specifies three variables along which passengers in the airline market are traditionally segmented: (1) passengers journey purpose(reasonfortravel),(2)thelengthoftheirjourney,and(3)theircountryorcultureof origin. Oyewole & Choudhury (2006), on the other hand, contend that purchase situation factors also represent useful segmentation dimensions. Accordingly, they differentiate betweenreasonfortravel,frequencyoftravel,classoftravel,andtypeofairlineused.6Since the reason for travel constitutes the most traditional dimension along which customers are segmented in the airline industry (cf. Teichert et al., 2008, p.229), it is described in more detailinthefollowingsection. Airline customers can essentially be divided into business and leisure travelers. While there may be some exceptions to these two dimensions (e.g. pilgrimage, medical transport) most of the trips taken by airline passengers fit into one of these two categories (Shaw, 2007, p.24). Business travelers have long been the most important customer segment for airlines due to their relative price inelasticity (Hanlon, 2007, p.35). While business travelers in the past gave emphasis to flexibility and service over price and, therefore, generally purchased firstandbusinessclasstickets,alargeproportionofthiscustomersegmentseemstonowbe giving preference to price over service, and seems willing to sacrifice flexibility and frills in return for lower fares (Mason&Alamdari, 2007, p.302). This development is corroborated byrecentstudieswhichrevealthatinparalleltothedecreaseofbusinesstravelerswhofly

Intheirstudy,Oyewole&Choudhury(2006)analyzetheinfluencethefourdifferentpurchasesituationscan haveontheimportanceconsumersattachtoservicesintheairlineindustry.


business class on shorthaul routes the proportion of passengers who choose lowcost carriersforbusinesstravelroseto71%in2004/2005fromonly28%in1998/1999(Company Barclaycard in: Mason&Alamdari, 2007, p.302). Indicators used in these studies show that business travel continues to expand, but that the expenditures for business travel are under increasing scrutiny (Barclaycard Business, 2008, p.3). In 2007/2008, 55% percent of UK business travelers stated that they fly economy class most often (cf. Figure 1) as compared to 46% in 2006/2007. While 41% of the business travelers participating in the Barclaycard survey cited business class as being their main class of travel in 2001, their number decreasedtoonly11%in2007(BarclaycardBusiness,2008,p.5).
60% 50% 40% 30% 20% 10% 0% Economy Premium economy Low cost First/business Not stated 15%



11% 5%

Figure 1: Mosttravelled seating class by UK business travelers in 20077

IATAs (2007) Corporate Air Travel Survey found that the key determinants for business travelers airline choice for shorthaul flights included frequent flyer programs, convenient departure and arrival times, as well as punctuality of flights. On longhaul flights, the main factors influencing business travelers airline choice were frequent flyer programs, nonstop flights,andseatcomfort. Air travel demand in the leisure travel segment is primarily influenced by ticket price, travelers disposable income, and their available free time (Graham, 2006, p.16), where the amount of disposable income is principally determined by economic wealth. Graham (2006, p.16) points out that greater job pressure and concerns over job security actually deters employees from taking leave for extended periods, which has contributed to the trend toward shorter vacations. Lower fares, on the other hand, imply that frequent shorter trips



are not necessarily more expensive than the traditional annual leave (Mason, 2005, p.303), which has led to an increase in the frequency of shorter trips taken by leisure travelers (Graham,2006,p.16).Inrecentyears,theleisuretravelmarkethasgrownmorerapidlythan the business travel market (Hanlon, 2007, p.35; Dresner, 2006, p.30). Hanlon (2007, p. 35) estimates that the current breakdown of the worldwide demand for air travel between leisureandbusinessliesatapproximately80/20.

3.4 Loyaltyprograms
Considering this highly competitive landscape, airlines need to undertake great efforts to retain their profitable customers. Shaw (2007, p.241) suggests that relationship marketing, i.e., putting equal or greater emphasis on the maintenance and strengthening of relationships with existing customers than on the acquisition of new customers, is an effective concept to be pursued in order to retain customers. Loyalty programs that center on passengers whose air travel demands are generally less price elastic (e.g. business travelers) (Hanlon, 2007, p.85) and expected to be so in the longterm, constitute an importantcustomerrelationshipmanagementtool(Liu&Yang,2009,p.104). Liu and Yang (2009, p.94) define loyalty programs as longtermoriented programs that allow consumers to accumulate some form of program currency, which can be redeemed later for free rewards. Frequent flyer programs (FFPs) represent loyalty programs typical of the airline industry. Consumers accumulate frequent flyer points for each purchased flight, with the number of points awarded usually equaling the distance of the flight (Lederman, 2007,p.1137).Theseaccumulatedpointscaneventuallyberedeemedforrewards,themost commonofwhichisafreeflightorafreeupgradewiththegivenairlineoroneofitsalliance partners (IATA, 2007, p. 73; Lederman, 2007, p.1137; Carlsson&Lfgren, 2006, p.1470). Due to the award schemes nonlinear design, customers have even more incentives to stick to one particular airline (Carlsson & Lfgren, 2006, p.1470). Furthermore, airlines seek to make their competitors appear more expensive by emphasizing the opportunity costs of forgoneloyaltyrewards(Palmer,2005,p.161).Hence,frequentflyerprogramsconstitutean importanteconomicswitchingbarrier(Hanlon,2007,p.85;Dowling&Uncles,1997). Seriousdoubts,however,havebeenraisedaboutthesuccessoffrequentflyerprogramsand their contribution to true customer loyalty. Dowling and Uncles (1997), for example, claim 15

that customers end up associating their loyalty to a particular rewards program rather than to the actual airline brand. Furthermore, Doganis (2006, p. 277) argues that frequent flyers, who often are highyield passengers, tend to be members of several airlines FFPs. Accordingly, FFPs relevance in terms of securing customer loyalty for a particular airline is diminishing. A recent study conducted by Liu and Yang (2009) analyzed the success of competing loyalty programs in the airline industry and found that loyalty programs did not always lead to beneficial outcomes, and that only airlines with high market shares enjoyed salesincreasesonaccountoftheirloyaltyprograms.

3.5 Industryoutlook
Consideringthedownwardtrendinairlineyields,primarilyowingtoairlinederegulationand liberalization,increasedcompetition,excesscapacity,downgradingactivity,andtheadvance of lowcost carriers (cf. Mason, 2005, p.19; A.T. Kearney, 2003, p.8), industry experts predictthatconsolidationactivitiesintheairlinebusinesswillincrease(Doganis,2006,p.20; A.T. Kearney, 2003, p.8). Such activities may include mergers and acquisitions and will most likelytranslateintostrongairlinesacquiringtheirweakorfailingcompetitors(Doganis,2006, p.21).Suchascenariowillresultinamarketthatischaracterizedbyasmallnumberofvery large network carriers (Mason&Alamdari, 2007, p.310). Consolidation, however, is not predicted to remain limited to network carriers alone. Rather, the trend toward consolidationwillaffectallsectorsoftheindustry,includinglowcostairlines(Doganis,2006, p.21; Mason&Alamdari, 2007, p.310). The challenges network carriers face in the competition with lowcost airlines on shorthaul routes have already been mentioned in Chapter 3.1. Since the network carriers business model precludes the achievement of cost structures similar to those of lowcost carriers (e.g. complex hubandspoke system, labor issues, unions), network carriers are expected to increasingly shift their focus to longhaul routes which will deliver sustainable profit streams (Mason&Alamdari, 2007). The current trend among business travelers, who are increasingly becoming pricesensitive, is further forecasttoleadtotheterminationofbusinessclassserviceonshorthaulroutes,whilemore leisure travelers will take advantage of low fares to travel more frequently both within the EUandabroad(Mason&Alamdari,2007,p.310).


3.6 Chaptersummary
The airline industry, which historically was statesubsidized to demonstrate and sustain a countrysstatusandpower,hasundergoneextensivetransitionssincethemid1980s. These changes were initiated in particular by gradual liberalization and deregulation. The emergence of lowcost carriers, the increasing power of customers, as well as a general economicdownturnappliedpressureonairlinemanagerstorethinktheirbusinessstrategies yet again. Forecasts predict that the network carrier model will only remain sustainable on international routes, while continental and shorthaul routes will increasingly be dominated by a small number of large lowcost carriers and a few niche carriers. With regard to airline specific customer segments, a key differentiator between business and leisure travelers has long been the higher price elasticity for leisure travelers (cf. Hanlon, 2007, p.35; Dresner, 2006,p.29).However,theintroductionoflowfareticketsbylowcostcarriershasweakened the direct relationship between economic growth and air travel demand. Especially with respect to network carriers, experts advise airline managers to focus on individual customers needs, brand distinction, and the differentiation of services (Lufthansa Consulting, 2008, p.9). Only those airlines that find ways to attract and retain customers by offering a differentiated service concept visvis competitors will succeed to operate profitable on the grounds of a valuable customer base. The strengthening of customer loyalty, therefore, is an important objective for achieving profitability through the retention ofvaluablecustomers.

4 Conceptual and theoretical foundation for the development of theairlinecustomerloyaltymodel

The previous chapter focused on current challenges in the airline industry and emphasized theimportanceofaloyalcustomerbase.Thischaptersetsthetheoreticalframeworkforthe developmentoftheairlinecustomerloyalty(ACL)model.Introducingcustomerloyaltyasan effective means for the achievement of a companys overall objectives of profitability and differentiation, this chapter first discusses different notions of customer loyalty to establish a general understanding of the concept. Second, it is argued that the building of customer loyalty is closely linked to the establishment and maintenance of relationships between the customer and the firm, i.e., to relationship marketing. Furthermore, considering the specificities of the service industry, special attention is given to the management of 17

customerbrand relationships and the meaning of relational benefits and relationship quality. The chapter concludes with a synthesis of the theories reviewed and the identificationofconceptstobeACLmodel.

4.1 Theconceptofcustomerloyalty
This chapter explains how customer loyalty can influence a firms profitability, introduces definitions of customer loyalty as depicted in the literature, and discusses the prerequisites for the establishment of true loyalty. It furthermore advocates the consideration of relationshipmarketingtobetterunderstandthedriversofcustomerloyalty. 4.1.1 Theinfluenceofcustomerloyaltyonafirmsprofitability Several authors contend that a direct relationship exists between a firms loyal customer base and its profitability (Reichheld & Sasser, 1990; Heskett et al., 2008; Reinartz & Kumar, 2002;Aaker,2002;Knox,1998;Andreassen&Lindestad,1998;Berry,1995).Moreprecisely, aloyalcustomerbaseimpliesincreasedrevenuesforthefirm(Reichheld,1993,1996; Berry, 1995; Schlesinger & Heskett, 1991). On the one hand, customer loyalty leads to higher repurchase rates, on the other hand loyal customers display a greater tendency to purchase additional goods, for example through crossselling opportunities. Moreover, customer loyalty results in a higher predictability of sales and profit streams (Aaker, 2002; Clark & Payne, 1994; Reichheld, 1996). Typically, loyal customers generate low customer turnover (Reichheld&Sasser,1990),andoftenintroducenewcustomerstothefirmthroughwordof mouthrecommendations(Reichheld,1996;Reichheld&Sasser,1990;Schlesinger&Heskett, 1991; Zeithaml et al., 1996). In addition, a loyal customer base can lead to decreased costs (Reichheld, 1993; Berry, 1995), since it costs less to provide services to loyal and satisfied customers (Reichheld, 1996) and because sales, marketing, and setup costs can be amortized over an extended period, i.e., throughout the customer lifetime (Clark & Payne, 1994). Customer loyalty is furthermore essential, as it represents an important basis for developing a sustainable competitive advantage (Dick & Basu, 1994, p.99) over competing brandsininterandintramarketcompetition.


4.1.2 Definingcustomerloyalty Customer loyalty and its advantages for the firm have been extensively discussed in marketing literature. The result is a plethora of definitions. Table 2 provides an overview of definitionsthatarefrequentlycitedintheliterature.
Definition Single-brand loyalty is the proportion of total purchases represented by the largest single brand used. Dual-brand loyalty is the proportion of total purchases represented by the two largest single brands used. Day (1969) There is more to brand loyalty than just consistent buying of the same brand attitudes, for instance (p. 29) Jacoby & Kyner (1973) Brand loyalty is (1) the biased (i.e., nonrandom), (2) behavioral response (i.e., purchase), (3) expressed over time, (4) by some decision-making unit, (5) with respect to one or more alternative brands out of a set of such brands, and (6) is a function of psychological (decision-making, evaluative) processes. (p. 2) Dick & Basu (1994) Customer loyalty is the strength of the relationship between an individuals relative attitude and repeat patronage, mediated by social norms and situational factors. Oliver (1999) a deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior (p. 34) Table2:Overviewofdefinitionsofcustomerloyalty Author(s) Cunningham (1956)

As the comparison of the different definitions of customer loyalty illustrates, two key dimensions exist: a behavioral (cf. Cunningham, 1956) and an attitudinal (cf. Day, 1969) dimension. Both are described below in more detail and an equal consideration of both dimensionsisadvocated,iftrueloyaltyistobeachieved. Behavioral loyalty refers to the customers actual behavior of repurchasing a specific brand withinagivencategoryovertime(e.g.,Day,1969;Chaudhuri&Holbrook,2002).Kumarand Shah (2004, p.318) describe behavioral loyalty as loyalty of a customer as observed from the customers purchase behavior. This explicitly means that the customer repeatedly choosesthesamebrandwhenheneedsaspecificproductorservice.Thisbehaviormaybea resultofatruepreferenceforthebrand.However,repeatpurchasesofthesamebrandmay also be attributable to mere convenience, habit, or because the barriers to change (i.e. the switching barriers) are too high. While proponents of the onedimensional construct of customer loyalty argue that attitude is irrelevant in determining loyalty toward a brand and consider the debate on the notion of true loyalty a waste of time (Sharp et al., 2002) opponents claim that behavioral definitions of customer loyalty are inadequate for 19

explaining how and why customers are loyal to a specific brand, and call for an analysis of the individuals dispositional basis for repeated purchase (Dick & Basu, 1994, p.100). Zins (2001, p.270) further criticizes that the observation of behavioral loyalty alone does not leave room to draw any substantiated conclusions about customers future actions. Only measuring behavioral loyalty actually overestimates the share of true loyalty, since it does not account for those customers who buy a brand simply because no other alternative is availableorbecauseaparticularbrandisofferingaspecialpromotion(Day,1969). Considering the deficiency of behavioral loyalty to provide insights into the underlying motives and processes that lead to customer loyalty, researchers promote the inclusion of attitude,inadditionto behavior,toadequatelydefinecustomerloyalty.Day(1969,cf.Table 2)wasperhapsthefirsttorecognizeandarticulatethisnecessity(Bandyopadhyay&Martell, 2007, p.37). A customers attitude basically performs an object appraisal function. Keller (2003, p.392) refers to brand attitude as the overall evaluation of the brand in terms of its quality and the satisfaction it generates. Dick and Basu (1994) assert that the attitude toward a brand has to be measured in relation to other brands that are perceived by consumersasbeingrelevantinaspecificconsumptioncontext.Onlywhenaparticularbrand is associated with a strong attitude and is clearly differentiated from other brands in the customers mind does the given brand exhibit a high relative attitude visvis other brands in the consumption context. Jacoby and Chestnut (1978) refer to attitudinal loyalty as the consumers predisposition toward a brand as a function of decisionmaking and evaluative processes. Based on a strong preference for the given brand relative to other brands in the category, attitudinal loyalty helps companies build an invisible exit barrier for their customers, especially in noncontractual situations where switching costs and barriers are low(Shapiro&Vivian,2000in:Kumar&Shah,2004,p.322). In consideration of the attitudebehavior relationship, four specific conditions related to loyalty, as illustrated in Figure 2, are identifiable. Low attitudinal loyalty combined with low behavioral loyalty indicates an absence of loyalty (cf. Dick & Basu, 1994, p.101). Day (1969, p.30) categorizes those customers as spuriously loyal who exhibit high repeat purchase behavior,butlackanyattachmenttothebrandandcaneasilybecapturedbyanotherbrand offering a better deal. Latent loyalty, in contrast, is reflected by high attitudinal loyalty combined with low repeat purchase. True loyalty, firms preferred condition, can be 20

conceptualized as an attitudebased behavioral loyalty toward the given brand (see Kim et al.,2008,pp.99100).

Behavioral loyalty High Low

Attitudinal loyalty


True loyalty

Latent loyalty


Spurious loyalty

No loyalty


As has been argued above, the twodimensional understanding of customer loyalty allows a more precise measurement and analysis of customer loyalty. This view is supported by a widespectrumofmarketingresearchers(e.g.Day,1969;Jacoby&Kyner,1973;Dick&Basu, 1994; Oliver, 1999; Jones & Taylor, 2007) and has come to be accepted as the basic understanding of customer loyalty in marketing research. Accordingly, customer loyalty is definedinitstwodimensionalunderstandingas: repeated attitudebased behavior (Kim et al., 2008, pp. 99100) toward a brand, driven by a preference for this specific brand (cf. Jacoby & Chestnut, 1978) vis vis competing brands relevant in the given consumption context (Dick & Basu, 1994). A direct relationship between customer loyalty and relationship marketing has been proposed by a number of authors. Webster (1994, p.26) claims that Customer loyalty has meaning only within the context of relationship marketing. Similarly, Aaker (2002, p.23) proposes that one approach for enhancing customer loyalty is the development or strengthening of customers relationship with the brand, which constitutes the basic objective of relationship marketing. Relationship marketing thus serves as a concept that contributes to the understanding of the factors that drive customer loyalty. The concept is furtherelaboratedinthenextchapter.



4.1.3 Customerloyaltythroughrelationshipmarketing The term relationship marketing was initially mentioned by Berry in 1983 in the service marketing literature (Bitner, 1995, p.246; HennigThurau et al., 2002, p.230). It can be definedas: the attraction, maintenance, and enhancement of customer relationships (Berry 1983 in: Berry, 1995, p.236) that should generate profit and fulfill the objectives ofallpartiesinvolved(Grnroos1994,p.9). Relationshipmarketingis,therefore,astrategicorientationthatfocusesonretainingexisting customers (Sheth & Parvatiyar, 2002, p.4; Zeithaml & Bitner, 2003, p.157; Grnroos, 2007, p.43) and enhancing their loyalty (Berry, 2002, p.71). While the emphasis is on customer retention, new customer acquisition is also critical for a companys longterm economic success and cannot be achieved by exclusively focusing on existing customers (Hennig Thurau et al., 2002, p.232). However, attracting new customers is considered an intermediate step in the marketing process (Berry, 1995, p.237) rather than a goal in itself. The underlying objective is to attract those customers who demonstrate the potential and likelihood of establishing a loyal relationship with the company in the long run (Zeithaml & Bitner, 2003, p.158). A companys primary objective in terms of relationship marketing is, consequently,tocreatecustomerloyaltyandtoestablishaprofitablelongtermrelationship (Ravald & Grnroos, 1996, p19).9 For customers, the main reasons for becoming involved and staying in a relationship with a company are risk reduction and simplification of choice (DallOlmo Riley & de Chernatony, p.138). Relationship customers know what to expect fromtheirbrandand,therefore,donothavetospendtimedecidingwhichbrandtochoose. A relationship develops through a series of encounters between a customer and a company (Bitner, 1995, p.248; Coulter & Ligas, 2004, p.483; Grnroos, 2007, p.8). Such encounters are characterized by interactive behaviors at a specific point in time involving both parties (Bitner, 1992; Lovelock, 1983 in: Coulter & Ligas, 2004, p.483; Czepiel, 1990). Fournier (1998,p.346)summarizestheseaspectsofrelationshipsinherdefinition:

HennigThurauetal.(2002,p.230)describecustomerloyaltyasanimportantrelationshipmarketing outcome.


Relationships are constituted of a series of repeated exchanges between two parties known to eachother: they evolve in response to these interactions and to fluctuationsinthecontextualenvironment. During each encounter (moment of truth [Bitner, 1995, p.248]; moment of interaction [Coulter & Ligas, 2004, p.483]), customers have the possibility of testing the firms ability to fulfill its promises. For the firm, each encounter provides an opportunity to increase the customers overall satisfaction and willingness to continue doing business with the firm in thefuture(i.e.tobuildarelationshipandtherebystrengthencustomerloyalty). Several authors (e.g. Grnroos, 2007; Berry, 2000; Czepiel, 1990) argue that the establishmentandmaintenanceofcustomerrelationshipsandtheachievementofcustomer loyalty (e.g. Gremler & Brown, 1999; Bloemer et al., 1999) are especially important and applicable in service industries. In the following chapter, this aspect, as well as the specific roleoftheservicebrandintheformationofrelationshipswithcustomers,isexplained.

4.2 Customer loyalty through relationships between customers and airline brands
The previous chapter touched upon the relevance of customer loyalty and relationship marketingintheservicecontext.Now,acloserlookistakenatthenatureofservicesandthe specificities that need to be considered in terms of marketing services, especially in the airline market. In addition, the service brand is introduced as an important relational asset that can further foster customer loyalty by acting as a legitimate partner in the relationship withthecustomer. 4.2.1 Theservicedominantlogicofmarketingintheairlineindustry AccordingtoGrnroos(2006,p.323),servicescanbedefinedas: processes that consist of a set of activities which take place in interactions between a customer and [] the service provider [], which aim at solving customersproblems. Services exhibit two distinctive characteristics. First, services have a processual nature (Grnroos,2007,p.330;2006,p.319;Vargo&Lusch,2008a,p.258),thatis,servicesemerge in processes and are directly influenced by the further evolvement of these processes. 23

Second, customers are involved in the production of the given service through their interaction with the service provider. Consequently, they participate as coproducers in the production process and influence the nature of the service that is produced and consumed. Likewise, they determine the actual value of the service experience (Grnroos, 2006, pp.326327),i.e.,whethertheirexpectationsweremet. Accordingtotheabovestateddefinitionofservices,airlinescanclearlybedefinedasservice providers: (1) passenger airline travel can be understood as a process that is directly influenced by the further evolvement of this process (e.g. rebooking after flightdelays) (2) passengers consume their travel experience while it is being produced. Furthermore, the notion of airlines offering a service is widely accepted in the marketing and airline literature (e.g. Anderson et al., 2008; Oyewole & Choudhury, 2006). Hence, the following theoretical discussion on relationships between customers and airlines needs to take the specificities thatapplytotheconceptofservicemarketingintoconsideration. Traditionally, the marketing process has focused on the exchange of goods in which value is embedded and distributed through transactions (Grnroos, 2006, p.323). The service centered approach, in contrast, places the provision of services rather than the manufactured good at the center of attention (cf. Vargo & Lusch, 2004, p.1; 2008a, p.254). ThisshiftinperspectiveisillustratedinFigure3.
Process (intangible resources)

Relationship perspective Value distribution Exchange perspective Value creation

Outcome (tangible resources)

Figure 3: The exchange versus the relationship perspectiveinthemarketingprocess10




The servicecentered perspective on marketing, therefore, focuses on value cocreation through the interaction between the customer and the service provider (cf. Prahalad & Ramaswamy, 2004, p.6; Wikstrm, 1996), with the role of the customer transforming from one in which he represents a recipient of a service to one in which he coproduces that service (Vargo & Lusch, 2004, p.7). The customer thus becomes an even more significant driving force in the cocreation process (Rajah et al., 2008, p.367; Anderson et al., 2008, p.366). The service provider, in contrast, increasingly adopts a support function by creating and developing the resources, means, or competence that the customer requires (Vargo & Lusch, 2004; Grnroos, 2006, p.324; Rajah et al., 2008, p.367). Value is created when services are used or consumed by the customer. That is, value is the outcome of the subjective, personalized consumption experience characterized by the customers active involvement in its design, delivery, and creation (Sheth et al., 2000 in: Rajah et al., 2008, p.367). As Anderson et al. (2008; see also: Gummesson, 2008, p.16) point out, differences in customer characteristics inevitably lead to differences in what customers value. Resulting from their research about the moderating effects of airline passenger characteristics on the relationship between service components and overall service satisfaction, the authors conclude that, in line with Vargo and Luschs (2008b, p.9) premise that value is uniquely and phenomenologically determined by the customer, it is important to consider customersvaryingdemographicandsituationalcharacteristics. The circumstance that individual customers appreciation of different service factors diverges considerably constitutes a major challenge for airlines, considering that they interact with customers from very diverse national and cultural backgrounds. The nature of airlinesservicechain,inwhichprocessescanbroadlybedividedintopreflight,inflight,and postflight activities, further complicates the building of personal relationships between service employees and the customer. This is due to the changing contact persons from one activity to the next. In such an environment, the service brand should be considered an essentialrelationshippartner.Thisargumentisbroughtforwardinthefollowingchapter.


4.2.2 Theservicebrandasarelationshippartner While branding has long been a central issue in the marketing of physical products, awarenessoftheimportanceofcreatingservicebrandshasonlyevolvedinthelast20years (Grnroos, 2007, p.329). Today, however, it is widely recognized that branding plays a fundamental role and signifies a principal success driver for service organizations and representsacornerstoneforservicemarketing(Berry,2000,p.128). Ambler and Styles (1997, pp.222223) define a brand as the promise of the bundles of attributes that someone buys and that provides satisfaction. Accordingly, Berry (2000, p. 129) describes a service brand as a promise of future satisfaction, a blend of what the companysaysthebrandis,whatotherssay,andhowthecompanyperformstheserviceall fromthecustomerspointofview.Theservicebrandsinherentsignificanceisderivedfrom services specific nature. As services are produced only once the interaction between the customer and the service provider is initiated, services are difficult to appraise prior to consumption. Here, the service brand, i.e., the image resulting from accumulated experiences as perceived by the customer, can reduce customers perceived monetary, social,andsafetyrisks.Theservicebrandsubsumesawidespectrumofdimensionstocreate acomprehensiveimageinthecustomersminds.11 In the brands conceptualization as a risk reducer, simplifier of choice, and guarantor of quality, DallOlmo Riley and de Chernatony (2000, p.138) identify similarities with the conceptualization of relationship marketing. Consequently, the authors claim that the brand is a relationship builder in that the service brand is a holistic process beginning with the relationship between the firm and its staff and coming alive during the interaction between the staff and customers (p.138). Brodie et al. (2006, p.375) support this proposition by identifyingtheservicebrandasarelationalasset. A theoretical foundation of customerbrand relationships has been laid by Fourniers relationship theory. Fournier (1998, p.344) contends that a brand is legitimized as a relationship partner when it is animated, humanized, or to some degree personalized. Anthropomorphization refers to the process of projecting human qualities and personalities onto brands (Patterson & OMalley, 2006), which facilitates their interaction with the

ForthecreationoftheACLmodel,thesedifferentdimensionsarereferredtoasbrandperformance characteristics.


immaterial world (Fournier, 1998, p.345). The legitimization of the brand as a relationship partner can further be achieved through interactive and direct marketing communication activities, which can be construed as behaviors performed by the brand acting in its relationship role (Fournier, 1998, p.345). Similar studies conducted in the service domain by Sweeney and Chew (2000), have verified Fourniers assertion of the brand as a relationshippartnerthatisespeciallyrelevantforservicebrands. The consideration of the brand as a relationship partner and the contribution of this relationship to customer loyalty are of great relevance for the airline industry. Changing travel environments and changing personal contacts prevent the development of personal relationships with the airline. Here, the brand depicts a constant and familiar relationship partnerforthecustomer.Eachencounter,ormomentofinteractionwiththeairline,addsto how the customer perceives the airline brands image and reinforces the brand and the relationship the customer has with it. While a single contact between the customer and the airline may not constitute a relationship per se, each contact contributes to the overall relationshipbetweenthecustomerandtheairlinebrand.Thisnotionfurtheremphasizesthe decisiverelevanceofeachcustomerairlineinteraction. Whether the relationship between customers and brands is strong and leads to customer loyaltyinthelongrundependsontheattractivenessoftherelationshipfromthecustomers point of view. This, in turn, is influenced by the benefits the customer enjoys from the relationship with the given brand. These socalled relational benefits are explained in the nextchapter. 4.2.3 Relationalbenefitsasabasisofairlinecustomerloyalty Accordingtotherelationshipapproach,longtermrelationshipsonlyexistifboththeservice providerandthecustomerbenefitfromtherelationship(HennigThurauetal.,2002,p.231; Gwinner et al., 1998, p.101; MarzoNavarro et al., 2004). While the primary advantage of customerbrand relationships for the firm is customer loyalty and the consequences resulting from it (cf. Chapter 4.1.1), relational benefits refer to those that customers are likelytoreceiveasaresultofhavingcultivatedalongtermrelationshipwithaservicebrand (Gutek et al., 1999; Gwinner et al., 1998; Reynolds & Beatty, 1999; HennigThurau, 2002; Zeithaml & Bitner, 2003). Relational benefits refer to benefits that go beyond the inherent advantages provided by the actual service. Those perceived by the customer have been 27

identified as a driving force for consumers to engage in longterm relationships with service providers and are positively associated with satisfaction, wordofmouth communication, andrepeatedpurchases(Reynolds&Beatty,1999). Empirical research conducted on the types of relational benefits customers gain from long termrelationshipswithaspecificserviceproviderputforthdifferentperspectivesonhowto categorize relational benefits. First, based on a study analyzing different service industries, Gwinner et al. (1998) classified relational benefits into three different categories. According totheauthors,confidencebenefitsrefertotheperceptionofcomfortorfeelingsofsecurity, reduced anxiety, and trust in the service provider. Social benefits include feelings of understanding, familiarity, and even friendship between the customer and service employees. Special treatment benefits include economic and customization benefits that only relationship customers enjoy (in contrast to nonrelational customers), such as special treatment (Gwinner et al., 1998; HennigThurau et al., 2002; Chang & Chen, 2007). Along all service industries studied, Gwinner et al. (1998) concluded that confidence benefits representthemostimportantbenefits,ifcustomersaretoremaininlongtermrelationships with a specific service provider, followed by social benefits and special treatment benefits, respectively. In an exploratory study of the retail industry, Beatty et al. (1996; see also: Reynolds & Beatty, 1999) identified two categories of relational benefits: social and functional benefits. While functional benefits, according to Reynolds and Beatty (1999, p.13), comprise Gwinner et al.s (1998) confidence and special treatment benefits, social benefits refer to the specific benefits that result from the interaction with the salesperson. These two categories of relational benefits have also been proposed by other authors (cf. Adelman et al., 1994; Berry, 1995; Bitner, 1995; Dwyer et al., 1987; Gwinner et al., 1998 in: Reynolds & Beatty, 1999, p.13). In a study investigating the effect of relationship benefits for companies in businesstobusiness settings, Sweeney and Webb (2007) differentiated betweensocial,psychological,andfunctionalbenefits. Here,inaccordancewiththefindingspresentedabove,threetypesofrelationalbenefitsare proposed to be relevant: social, psychological, and functional benefits. They will be describedinthefollowingsection.

28 Socialbenefits Social benefits focus on the customerbrand relationship itself rather than on the outcome (orresult)ofserviceencounters(HennigThurauetal.,2002,p.235).Theyincludefeelingsof familiarity,personalrecognition,friendship,rapport,andsocialsupport(Berry,1995,Barnes, 1994 in: Gwinner et al., 1998, p.102) and are positively related to customers commitment to the relationship (Berry, 1995; Goodwin, 1997; Goodwin & Gremler, 1996 in: Hennig Thurauetal.,2002,p.235).Theyfurtherareexpectedtohaveapositiveimpactoncustomer satisfaction(Reynolds&Beatty,1999). Reynolds and Beatty (1999, see also: Price & Arnould, 1999) refer to social benefits as feelingsoffriendshipacustomerhasforthesalesperson,i.e.,thesalespersonisperceivedas a good friend. Comparing this relationship with a private friendship is criticized by Hennig Thurau et al. (2002), who emphasize the difficulty and risk accompanying the commercial instrumentalization of social relationships. The authors call for a more straightforward understanding of social benefits and propose a rapport as being a much more achievable level of interaction between both parties (cf. Gremler & Gwinner, 2000). According to LaBahn (1996, p.30), social rapport refers to the clients perception that the personal relationshipshavetherightchemistryandareenjoyable. In their study of benefits resulting from relational exchanges with service firms, Gwinner et al.(1998)empiricallysubstantiatedthatmanycustomersdoindeedreceivesocialbenefitsas a result of a relationship with a specific service provider. The authors further argue that social benefits appear to be particularly prevalent in those service settings with a high degreeofinterpersonalcontactbetweencustomersandemployees(p.104). As has been argued in Chapter 4.2.1, it seems more promising to analyze customerbrand relationships rather than interpersonal ones in the airline setting. Therefore, social benefits have to be conceptualized at a broader level. Besides the feeling of familiarity and enjoyment resulting from the relationship with the airline brand, social benefits in this context include social support the brand may provide for the customer in his social environment. This relates to customers social status in society, the roles they play, the lifestyletheylead,andhowtherelationshipwiththeairlinebrandenhancestheseaspects.

29 Psychologicalbenefits While social benefits relate to the emotional reactions that arise directly from the interaction with the brand, psychological benefits are more introversive and refer to the feelings and emotions experienced by customers. The understanding of psychological benefits here resemble the confidence benefits as suggested by Gwinner et al. (1998; see also: HennigThurau et al., 2002; Yen & Gwinner, 2003; Chang & Chen, 2007), and the psychologicalbenefitsdescribedbySweeneyandWebb(2007,p.476). Psychological benefits from the customers perspective refer to feelings of trust and confidence in the brand. The result is a sense of reduced risk and anxiety which leads to feelings of security and comfort in customers. As customers engage in relational behavior with the service provider and accumulate experiences through these encounters, their level ofuncertaintydecreasesasbrandknowledgeincreases(cf.MartnRuizetal.,2007,p.1091). Functionalbenefits Functionalbenefitsinvolvetherationalaspectsofarelationship(Beattyetal.,1996,p.225). According to Beatty et al. (1996, p.225) and Reynolds and Beatty (1999, p.28), functional benefits include time savings and convenience resulting from the relationship with the brand. Furthermore, they include customers perceptions of making better purchase decisions and feeling confident about the purchase decisions made. Correspondingly, functionalbenefitsrefertotheeconomicbenefitscustomersgainfromtherelationshipwith thebrand(cf.Sweeney&Webb,2007,p.475). In the conceptualization used here, functional benefits are partly related to special treatment benefits as proposed by Gwinner et al. (1998). Berry (1995) contends that special treatment benefits are those that can most easily be duplicated and, therefore, do not provide a sustainable source of competitive advantage. However, it can be argued that a serviceproviderhastoofferatleastaminimumleveloffunctionalbenefitsinordertomeet thecustomersneeds. This chapter introduced relational benefits as a basis for the development of longterm customerbrand relationships. The following chapter presents the concept of relationship qualityasamediatingconstructbetweenrelationalbenefitsandcustomerloyalty.


4.2.4 Relationshipqualityasmediatorbetweenrelationalbenefitsandcustomerloyalty Relationship quality can be regarded as a metaconstruct that includes several components and focuses on the overall nature of the customerbrand relationship (HennigThurau et al., 2002, p.230). It is conceptualized as a diagnostic tool to evaluate the relationships strength and durability (Fournier, 1998). Roberts et al. (2003, p.191 in: Beatson et al., 2008, p.212) definerelationshipqualityasameasureoftheextenttowhichconsumerswanttomaintain relationships with their service providers. While the relational benefits approach is based on the assumption that the perception of benefits is a prerequisite for the relationship to persist in the long run, the relationship quality approach addresses the customers evaluation of the relationship and his resulting decision to continue or abandon it (Hennig Thurau et al., 2002, p.234). Relationship quality can, therefore, be seen as mediating the influenceofrelationalbenefitsoncustomerloyalty. While there is no clear consensus on what represents the most appropriate conceptualization of relationship quality, there is general agreement that customer satisfaction with a brands performance, trust in the service brand, and commitment to the relationship are key components of relationship quality (e.g. Kim et al., 2005, p.118; Garbarino & Johnson, 1999; Crosby et al., 1990; Dorsch et al., 1998 in: HennigThurau et al., 2002, p.234). As discussed in the previous chapter, trust is an important factor in the construct of psychological benefits. Therefore, this thesis considers customer satisfaction and commitment to be key dimensions of relationship quality (cf. HennigThurau et al., 2002). Customersatisfaction The relevance of customer satisfaction in winning loyal customers has been empirically verified by a number of studies which found that satisfaction is a leading factor in determiningloyalty(e.g.Garbarino&Johnson,1999;Anderson&Fornell,1994). Several definitions of customer satisfaction exist. However, the most widely accepted definition describes customer satisfaction as an affective and emotional response (e.g. Dick & Basu, 1994, p.104; HennigThurau et al., 2002, p.232; Zins, 2001, p.276) to an expectancydisconfirmation experience that involves a cognitive process (Oliver, 1980). Customers evaluate the service performance and compare the results with their expectations prior to purchase or consumption. Any discrepancy between expectations and 31

actual experience leads to disconfirmation. Positive disconfirmation, i.e., when the performance is higher than expected, increases or upholds satisfaction. Negative disconfirmation, i.e., when the performance is lower than expected, decreases satisfaction and creates dissatisfaction. In general terms, satisfaction relates to whether the service or brandmeetsthecustomersneedsandexpectations. Because loyal customers stick to one brand over an extended period of time and are assumed to build and maintain a relationship with this brand over a number of interaction episodes, it is important to distinguish between transactional (e.g. Cronin & Taylor, 1992, p.56) and cumulative satisfaction (e.g. Anderson et al., 1994, p.54). While transactional satisfaction refers to the postchoice evaluation of one specific service encounter, cumulative satisfaction comprises all encounters in the customerbrand relationship and thusrelatestotheoverallevaluationofthisrelationshipbasedonlongtermexperiences(cf. Brunner et al., 2008, p.1097; Anderson et al., 1994, p.54). However, it is important to note that the two constructs are not independent of each other. Previous experiences, which constitute cumulative satisfaction, affect expectations and, therefore, influence transaction specific satisfaction. On the other hand, each new experience with the brand enhances and modifiescumulativesatisfaction.Asthefocusofthisthesisliesonthelongtermrelationship between customers and airline brands, approaching satisfaction from a cumulative perspectiveismorepractical. Relationshipcommitment Commitment has been analyzed in a variety of marketing contexts and is viewed as being central to the establishment of relationships and successful relationship marketing (Berry & Parasuraman,1991;Morgan&Hunt,1994). Morgan and Hunt (1994, p.23), who concentrated specifically on buyerseller relationships in businesstobusiness markets, define relationship commitment as an exchange partner believing that an ongoing relationship with another is so important as to warrant maximum efforts at maintaining it; that is, the committed party believes the relationship is worth workingontoensurethatitenduresindefinitely.TheirdefinitioncorrespondstoMoorman etal.s(1992,p.316)descriptionofcommitmentasanenduringdesiretomaintainavalued relationship. In the service context, Berry and Parasuraman (1991, p.139) contend that relationshipsarebuiltonmutualcommitments. 32

In the customerbrand context, relationship commitment can be understood as the customers motivation and dedication to continue the interaction with the brand in the future. The brands trustworthiness and its ability to successfully support the customers valuegenerationandvalueformationprocessesareimportantprerequisitesforrelationship commitment(cf.Grnroos,2007,p.41). Bloemer and Kasper (1995, p.326) claim that relationship commitment is an important determinant for the degree of true brand loyalty and creates a substantial switching barrier for customers; this is because committed customers are bound to their brand choices. Therefore, loyal customers are less vulnerable to competitors marketing actions and more willingtosticktotheirbrand.

4.3 Chapter summary identification of concepts to be included in the ACL model

Customer loyalty has been conceptualized as repeated attitudebased behavior toward a brand, driven by a preference for this particular brand visvis competing brands that are relevant in the specific consumption context. Directly influencing a firms profitability, it providesabasisfordevelopingasustainablecompetitiveadvantageinthemarketplace. Buildingandstrengtheningrelationshipsbetweenthecustomerandthecompanythemain objective of relationship marketing is considered an important approach to the creation and improvement of customer loyalty. Relationships emerge from a number of encounters betweenthecustomerandthecompany. The relationship perspective has special relevance in the service context. Since the airline industry is a service industry, the particularities that characterize service marketing also apply to this research study. Services are considered processes in which activities are performed during the interaction between the customer and the service provider. Through theseprocessesthecustomerbecomesacoproducerofthevaluecreated. The interaction between the customer and the airline is particularly affected by changing environments and changing contact persons. As a result, the brand comes to represent familiarity,consistencyand,therefore,canbeconsideredaneffectiverelationshippartner.


The service brand is a unique image of a company and its offerings, as perceived by the customer. Considering the nature of services, the most significant impressions and associations that evolve throughout the service process come to reflect the companys image and are, therefore, primarily based on the customers own experience. Customers have the opportunity to evaluate the brands performance during these processes and decide whether their needs have been satisfied based on a number of characteristics or attributes that can be ascribed to the brand. The customers image of the brand, therefore, constitutesthesubsumedassessmentofthesecharacteristics. In customerbrand relationships the brand is accepted as a legitimate partner in the relationship dyad. However, these relationships can only persist in the long term when both parties benefit from them. While customer loyalty constitutes the ultimate benefit of the customerbrandrelationshipforthefirm,relationalbenefits,i.e.,benefitsresultingfromthe relationship with the brand as perceived by the customer, have been identified as an important prerequisite for the relationship to continue on the part of the customer. Relational benefits can be categorized into social, psychological, and functional benefits and are considered to positively influence customer loyalty. They also have a positive influence on customers commitment and satisfaction, which both have been identified as key dimensionsofrelationshipquality.Relationshipquality,inturn,describestheoverallnature of the customerbrand relationship and functions as a mediator between relational benefits andcustomerloyalty.

Brand performance characteristics inf luence the perception of

Relational benefits

Relationship quality which directly, and mediated by relationship quality, inf luence the creation and improvement of customer loyalty towards the airline brand.

Customer loyalty


Figure 4 illustrates the concepts that have been identified as influencing customer loyalty in the airline industry, namely brand performance characteristics, relational benefits, and relationship quality. Brand performance characteristics are considered assessable attributes of the airline brand, whose positive evaluation leads to the perception of relational benefits by the customer as a result of the relationship with the brand. Based on the previous discussion, relational benefits are a prerequisite if the customerbrand relationship is to 34

continueinthefuture.Whilerelationalbenefitsareconsideredtohaveadirectinfluenceon customer loyalty, the inclusion of relationship quality in the ACL model provides further informationabouttheoverallstrengthanddurabilityofthecustomersrelationshipwiththe airlinebrandandtheresultingimpactoncustomerloyalty.

5 Theairlinecustomerloyaltymodel
The previous chapter laid the conceptual and theoretical foundation for the development of the ACL model. Brand performance characteristics, relational benefits, and relationship quality have been identified as important concepts to be included in the airline customer loyalty model. Taking a closer look at these concepts, this chapter develops hypotheses about the causal relationships that exist between the concepts and concludes with the constructionofacomprehensiveACLmodel.

5.1 The influence of airline brand performance characteristics on relational benefits

This chapter postulates hypotheses on the influence of key airline brand performance characteristics on relational benefits as perceived by the customer. To the best of knowledge,nopreviousstudyhasanalyzedtheserelationships.Forthepurposeofthisstudy and to support the hypothesis development, findings from studies analyzing the direct influenceofbrandperformancecharacteristicsoncustomerloyaltyareconsulted. Some of the brand performance variables tested here have been examined in previous studies as antecedents of customer loyalty (e.g. service quality, airline image, perceived value). Within the context of this research study, the selection of these variables was made in accordance with their potential influence on relational benefits. Furthermore, additional variables (e.g. airline country of origin and FFP attractiveness) have been added, in the assumption that they bear a special importance in the airline industry. Where applicable, empirical findings derived from research studies conducted within the airline industry have been taken into consideration. Otherwise, studies researching the different constructs in otherindustriesandproductcategoriesareused.


5.1.1 Theinfluenceofsocialbrandperformanceonrelationalbenefits Brand performance, according to Keller (2003, p. 82), refers to the ways in which the product or service attempts to meet customers more functional needs. To define social brand performance, this understanding is adapted to the social context and describes social brand performance as the brands attempt to meet customers social needs. Hence, it relates to the brands capability to support airline customers in expressing their values and lifestyleintheirsocialenvironment. The social environment includes all social interactions between and among people. While the macro social environment refers to both indirect and vicarious social interactions that influence customers general values and beliefs, the micro social environment includes face toface social interactions among smaller groups of people such as families and reference groups. Compared to the macro social environment in particular, the more intense micro social interactions affect and nurture airline customers knowledge and feelings about specific airline brands (cf. Peter & Olson, 2008, p. 258259). Therefore, the micro social environment has considerable impact on what customers think and how they feel about airlinebrands,anditisconsideredakeyinfluenceoncustomersmotivationtomaintainthe relationship (Sheth & Parvatiyar, 1995b, p.259). It further influences airline customers consumption behavior (cf. Childers & Rao, 1992 in: Bendapudi & Berry, 1997, p.25) and the lifestyle they choose to live. Lifestyle refers to the specific manner in which consumers conduct their lives (Peter & Olson, 2008, p. 535). The consumption pattern reflects consumers choices of how they spend their time and money. According to Solomon et al. (2006,p.558),lifestyleisastatementaboutwhooneisinsocietyandwhooneisnot. With regard to the social environment and its influence on consumers purchasing behavior, Fishbein and Ajzen developed the theory of reasoned action, which assumes that consumers consciously consider the consequences of alternative behaviors and choose the one that leads to the most desirable outcomes (Peter & Olson, 2008, p. 539). According to their theory, consumers behaviors are strongly influenced by their perceptions of what other people want them to do (i.e., social norm; cf. Peter& Olson, 2008, p. 151; Solomon et al., 2006, p. 362) and whether these behaviors are evaluated favorably by and are popular withotherpeople(Peter&Olson,2008,p.149).Socialapproval,anemotionalresponsethat emerges from the interaction with the brand, refers to the positive feelings that customers 36

develop in response to the reactions of others (Keller, 2003, p.90). Airline customers are, therefore, presumed to choose a brand that complies with what other people expect from them. Choosing a specific airline further helps customers signal to others who they are and what they represent (cf. Martensen & Grnholdt, 2004, p. 44). Wallin & Coote (2007, p. 90) further argue that consumers may purchase particular brands and show a sustained preference for these brands, because the brands reinforce their social status and signal membershipindesiredsocialgroups.Abrandssocialperformance,therefore,influencesthe socialbenefitsthatairlinecustomersperceiveasresultingfromtherelationshipwithagiven airlinebrand. In a broader sense, it is also possible to hypothesize about the influence of social brand performance on psychological benefits. As defined within the context of this thesis, psychological benefits of the relationship with the airline brand relate to the feeling of confidence in and comfort with the airline brand. If airline customers perceive the brand to reflect theirstanding in society, therelationship with the airline brand provides them with a senseofsecurityandcontentment. Empirical studies analyzing the influence of social approval/social norm on customers willingness to remain in a relationship with a brand have underlined its significance for customerloyalty.MartensenandGrnholdt(2004),forexample,analyzedsocialapprovalas part of the emotional evaluation of a brand and its influence on customerbrand relationshipsandcollecteddatathatvalidatedthisassumption. Correspondingly,thefollowinghypothesesareformulated: H1a:Socialbrandperformancepositivelyinfluencessocialbenefits. H1b:Socialbrandperformancepositivelyinfluencespsychologicalbenefits. 5.1.2 Theinfluenceofairlineimageonrelationalbenefits Airline image can be described as the perceptions of an airline reflected in the associations held in consumers memory (Keller, 2003, p. 66), resulting from accumulated experiences madethroughanumberofbrandcontactsandinteractions(Grnroos,2007,p.330). Zeithaml and Bitner (1996) and Andreassen and Lindestad (1998, p. 11) suggest that image has an important effect on customers company choice when the services attributes are difficulttoassess.Lovelock(1984,p.134in:Andreassen&Lindestad,1998,p.7)hasclaimed 37

that:(images)arelikelytoplayonlyasecondaryroleincustomerchoicedecisionsunless competing services are perceived as virtually identical on performance, price, and availability. As has been argued in Chapter 3.1, air transport, especially on shorthaul flights, is likely to transform into a rather generic service. Furthermore, the airlines service attributes are difficult to evaluate prior to the actual consumption experience. Taking Lovelocks argument into account, it can be argued that an airlines image is an important factor that influences passengersairlinechoice.ThisargumentisfurthersupportedbyParketal.(2006)whostate that the purpose of airline image is to reflect a distinctive competence in comparison to competitors, implying that the brand represents distinctiveness and appeals to airline customers. A favorable image maycontribute to an airline becoming a customers preferred choice(seealso:Andreassen&Lindestad,1998,p.11). The accumulated image perceived by multiple constituencies is often referred to as brand reputation (cf. de Chernatony, 1999, p.170; Argenti & Druckenmiller, 2004, p. 369). By definition, brand reputation signifies the perceptions of a brand as reflected in the impressions and associations held by a number of consumers in a given social environment. Paul et al. (2009) suggest that one aspect of social benefits as perceived by customers is affiliation, i.e., a feeling of attachment to the airline and to other customers of the same airline. Perceiving ones own image of the brand as being shared by others strengthens customers identification with the brand. Therefore, favorable airline image is suggested to positivelyinfluencesocialbenefits. Defined as the customers overall perception of the brand, airline image is also related to psychologicalbenefitsresultingfromtherelationshipcustomershavewiththebrand.Thisis because a favorable image is related to positive associations with the brand. Positive associations, in turn, translate into feelings ofconfidence in the brand,reduced anxiety, and afeelingofsecurityandcomfort. Parketal.(2006)foundthatairlineimagehasasignificantdirecteffectonairlinecustomers future behavioral intentions. Investigating antecedents of customer loyalty in the commercial airline industry, Zins (2001) identified corporate image to have the strongest influence on customer loyalty. Andreassen and Lindestad (1998) investigated the influence 38

ofcorporateimageonperceivedquality,customersatisfaction,andloyaltyintheNorwegian packagetourindustryandfoundcorporateimagetohaveanimpactonallthreeconstructs. Correspondingly,thefollowinghypothesesareformulated: H2a:Afavorableairlineimagepositivelyinfluencessocialbenefits. H2b:Afavorableairlineimagepositivelyinfluencespsychologicalbenefits. 5.1.3 Theinfluenceofbrandselfcongruenceonrelationalbenefits Brandself congruence refers to the extent to which airline customers perceive the airline brand image to match their own selfconcept (cf. Sirgy et al., 2008, p. 1091; Keller, 2003, p.474; Morschett et al., 2008, p. 417). In consumer behavior literature selfimage congruence, selfcongruence, selfcongruity, and image congruence are used interchangeablytodescribethisnotion(Kressmannetal.,2006,p.954). Kim et al. (2005, p. 111) refer to selfcongruity as the parallel between consumer self conceptandbrandpersonalitythatconsumersfeelorexperienceinthecourseofcustomer brand relationship formation. The authors argue that consumers tend to like, prefer, and ultimately,maintainalongtermrelationshipwithabrandthathasanimageconsistentwith their own selfimage (Aaker, 1999; Fournier, 1998; Keller, 2003 in: Kim et al., 2005, p. 111). The motivation to choose a brand perceived to be similar to ones selfconcept arises from the need for selfconsistency, i.e., the need to behave in ways consistent with how consumers view themselves (Sirgy et al., 2008, p. 1092). Brands are, therefore, not only bought or consumed for their utilitarian benefits, but are purchased by consumers because thegivenbrand(s)helpthemexpressandcommunicatetheiridentities(e.g.Parketal.,1986 in:Sirgyetal.,2008,p.1091;Aaker,2002,p.99,p.153). Taking this argument and transferring it to airlines, it can be deduced that the longterm persistence of customerbrand relationships in the airline industry depends on airline customers perceived match between the airlines brand image (i.e., the sum of all the associations with the brand) and their individual selfimage. Helping customers express and communicate their identities adds to the customers perception of being endorsed by the given brand in their social environment. The perceived congruence can further create a feeling of connectedness and familiarity (Keller, 2003, p. 474; Aaker, 2002, p. 154). Therefore,brandselfcongruenceisproposedtohaveapositiveinfluenceonsocialbenefits. 39

Furthermore, positive feelings and emotions about the brand and a positive evaluation of therelationshipwiththebrandaredirectresultsofperceivedbrandselfcongruence.Paulet al. (2009) describe psychological benefits as benefits which satisfy important intrinsic, self oriented goals customers have. The perception of brandself congruence is, therefore, hypothesized to influence psychological benefits that emerge from the customers relationshipwiththebrand. Brandself congruence has been argued to play an important role in purchase motivation and brand loyalty (Malhotra, 1988; Sirgy, 1985; Sirgy & Samli, 1985 in: Kressmann et al., 2006, p. 956). Its relevance in predicting brand loyalty and other consumer behavior constructs, such as brand preference or satisfaction, has been corroborated by several researchstudiesonconsumerbehavior(Kressmannetal.,2006;Baueretal.,2006;Claiborne andSirgy,1990;Sirgy,1982, 1985;Sirgyetal.,2000;SirgyandSu,2000 in:Sirgyetal.,2008, p.109212). Correspondingly,thefollowinghypothesesareformulated: H3a:Brandselfcongruencepositivelyinfluencessocialbenefits. H3b:Brandselfcongruencepositivelyinfluencespsychologicalbenefits. 5.1.4 Theinfluenceoftrustworthinessonrelationalbenefits An airline brands trustworthiness refers to airline customers appraisal of whether the brand can be trusted. To be perceived as trustworthy, the brand must be reliable, credible, anddemonstrateahighdegreeofintegrity(cf.Moormanetal.,1992;Morgan&Hunt,1994; Bitner, 1995). Berry (1995, p. 242) further argues that for trust in a brand to develop, it has tocommunicateopenly,honestly,andfrequentlywithitscustomers. Several research studies have emphasized trust as an important foundation for relationship marketing(e.g.,Crosbyetal.,1990;Parasuramanetal.,1991in:Berry,1995,p.242;Morgan & Hunt, 1994). While Chaudhuri and Holbrook (2001, p. 91) have demonstrated that brand trust is directly related to both purchase and attitudinal loyalty, HennigThurau et al. (2002, p. 232) suggest that more recent empirical findings (e.g. Grayson & Ambler, 1999) question the direct influence of trust on loyalty. Even if there is no clear understanding of the relationshipbetweentrustandcustomerloyalty,HessandStory(1995,p.315)proposethat



any personal relationship, whether interpersonal or between a person and a brand, is built on trust. Trust is especially critical for the establishment of servicebased relationships because of the intangibility of services. Customers appraisal of a brands trustworthiness is animportantprerequisitefortrusttodevelop. Here, the focus is on trustworthiness as a brand performance characteristic, while trust is the resulting willingness to rely on the brand in which the customer has confidence. Trust is the belief, sentiment, or expectation of a brands trustworthiness (cf. Moorman et al., 1992, p. 215). A brand is perceived as trustworthy if customers believe in the brands good intentionsintherelationship(cf.Berry,1995,p.242). As described above, trustworthiness develops when the customer has confidence in the brands actions and its capability to keep its promises. These positive attitudes and expectations lead to a decrease in uncertainty and a feeling of safety and comfort in the relationship with the brand. Therefore, it is proposed that a brands trustworthiness has a positiveinfluenceonpsychologicalbenefits. In addition, the trustworthiness of a brand as perceived by the customer reduces concerns ofopportunisticbehaviorinthecaseofunforeseenevents(Bendapudi&Berry,1997,p.20). If airline customers consider their preferred airline brand to be reliable and to demonstrate integrity in every situation, they can take quicker decisions on which airline to choose and thereby save time while feeling confident about their decision. Promises made by the brand are used in the decisionmaking process rather than basing the decision on further information.Consequently,itcanbepostulatedthattrustworthinesshasapositiveinfluence onfunctionalbenefits. Correspondingly,thefollowinghypothesesareformulated: H4a:Trustworthinesspositivelyinfluencespsychologicalbenefits. H4b:Trustworthinesspositivelyinfluencesfunctionalbenefits.


5.1.5 Theinfluenceofservicequalityonrelationalbenefits Perceivedqualityreferstothecustomersjudgmentofserviceexcellenceacrossanumberof dimensions (Parasuraman et al., 1988). Arguing that an objective measurement of service quality was lacking, Parasuraman et al. (1998, p.13) proposed measuring consumers perceptions of quality as a suitable approach to assess the quality of a firms services. The measurementmodelintroducedbyParasuramanetal.(1988),SERVQUAL,comprisesasetof multidimensional measures of customer evaluations. The conceptualization of service quality, however, continues to be a highlydiscussed issue in academic literature. While some authors (e.g. Cronin & Taylor, 1992) argue for a performancebased conceptualization of the service quality construct, this thesis promotes a perceptionbased understanding in accordance with Parasuraman et al.s (1988) definition. This understanding is further supported by Ostrowski et al.s (1993, p. 17) reasoning that It is essential that service quality measures are customerdriven, as there could be disparity between managerial thoughts and customer expectations. Furthermore, service quality here is treated as a brand performance characteristic and is thereby part of the customers image of the brand. Therefore,theconceptualizationofservicequalityasperceivedbythecustomerissuitable. Airline service quality has been identified as a significant driver of customer satisfaction, customer loyalty, and customers airline choice (Ritchie et al., 1980; Alotaibi, 1992; Ostrowski et al., 1993; Taylor & Barker, 1994; Young et al., 1994; Wells & Richey, 1996 in: Park et al., 363). Several different dimensions have been proposed to measure service quality in the airline setting (e.g. Cunningham et al., 2002; Nadiri et al., 2008). Here, in accordance with the results of an exploratory study conducted by Park et al. (2006) to identify dimensions of airline service quality, airline service quality includes three general dimensions: reliability and customer service, inflight service, and convenience and accessibility. Understanding perceived service quality as the positive and favorable evaluation of the airline service by the customer, it influences social, psychological, and functionalbenefits.First,iftheairlinebrandisperceivedasprovidingexcellentservicetothe customer, such a service quality appraisal fosters the positive evaluation of the relationship with the brand, thereby intensifying the perceived social benefits. Second, it further positively influences the confidence and trust the customer has in the relationship with the brand (cf. Han et al., 2008, p.26), hence, psychological benefits are positively reinforced. A


positive assessment of the airlines services facilitates airline choice, which implies convenienceandtimesavings,thusinfluencingfunctionalbenefits. Correspondingly,thefollowinghypothesesareformulated: H5a:Servicequalitypositivelyinfluencessocialbenefits. H5b:Servicequalitypositivelyinfluencespsychologicalbenefits. H5c:Servicequalitypositivelyinfluencesfunctionalbenefits. 5.1.6 Theinfluenceofperceivedvalueonrelationalbenefits The relevance of delivering value as perceived by the customer has been widely accepted. While various approaches for defining and measuring customer value can be found in the literature, no single conceptualization and means of operationalization is generallyaccepted (cf.MartnRuizetal.,2007,p.1088;Ravald&Grnroos,1996,p.21). Monroe(1991,p.46in: MartnRuizetal.,2007, p.1088) suggeststhatbuyersperceptions of value represent a tradeoff between the quality or benefits they perceive in the product relative to the sacrifice they perceive by paying the price. Here, this quality/price ratio as a valueformoney approach (cf. Huber et al., 2007, p. 556) to understand customers perceived value is preferred over a multidimensional approach (cf. Martn Ruiz et al., 2007, p. 1090). The significance of the factor price for the evaluation of a services value is further emphasized by Anderson et al. (1994, p.54). Besides the actual monetary price, sacrifice components of perceived value also include nonmonetary costs such as time or risk. Perceived value is further highly subjective and individual, and therefore varies among consumers(Zeithaml,1988,p.13). Zeithaml and Bitner (1996, p. 32) describe value in services as the key competitive factor definingthewayservicesareboughtandsold.Perceivedvaluehasfurtherbeenproposedto be a major antecedent to future intentions (Bolton & Drew, 1991). Blackwell et al. (1999) empirically substantiated a decisive link between value and repeat purchase behavior in pharmaceutical services. Park et al. (2006) identified a positive effect of perceived value on customersatisfactionandbehavioralintentionsintheairlineindustry. Customers deem that the price paid for a service determines the level of quality that they can expect (Teboul, 1991 in: Park et al., 2006, p. 364). Based on Zeithamls proposition that perceived value is personal and idiosyncratic, the level of quality expected will vary among 43

customers. In general, this quality/price ratio is reflected by the different airline business models. Lowcost/nofrills airlines typically offer cheap fares, concentrating on their key service of air transportation, while network carriers offer additional services at a higher price. Perceived value is hypothesized to have a positive influence on social benefits, because customers who believe that the service they are enjoying is worth the costs will have a positive attitude about the relationship with the given brand. The notion of getting a good valueformoney deal will further intensify customers perception of the brand as being a fairminded relationship partner who is not taking advantage of them, which influences psychological benefits. Perceived value is further hypothesized to influence functional benefitsbyfacilitatingthepurchasedecision,sincelesstimeisneededtocometoadecision and a higher degree of convenience is experienced. Furthermore, a favorable valuefor money ratio as perceived by the customer results in the estimation that money was saved or,atleast,thatareasonableamountwaspaidfortheservice. Correspondingly,thefollowinghypothesesareformulated: H6a:Perceivedvaluepositivelyinfluencessocialbenefits. H6b:Perceivedvaluepositivelyinfluencespsychologicalbenefits. H6c:Perceivedvaluepositivelyinfluencesfunctionalbenefits. 5.1.7 Theinfluenceofcocreationofvalueonrelationalbenefits Cocreationof value refers to the creation of value for thecustomer through the interaction between him and the service provider. The customer, therefore, becomes a coproducer of the value created for him (see Chapter 4.2.1). While the argument concerning perceived value in the previous chapter very specifically focused on the service provided in relation to thepricepaid,herethefocusisonwhetherthecustomerfeelsheisincludedandinvolvedin theairlinesprocessofvaluecreation. Rajah et al. (2008) were most likely the first to empirically test the concept of value co creation. Their study revealed that cocreation generates both satisfaction and trust. Customers who contribute to the design and delivery of their service experience feel that they are being taken seriously by the brand as partners in the service production process. Therefore, it is hypothesized that customers will positively perceive their interaction with 44

the airline brand if they are directly involved in the service production process. Further, the impressionthattheserviceistailoredtotheirneedswillgivescustomersthefeelingthatthe brand contributes to the expression of their lifestyle. Both these factors the positive interaction experience and the support in expressing ones lifestyle can be classified as social benefits. Moreover, the power to actively influence the value creation process through the interaction with the brand reduces the customers perceptions of risk and uncertainty (cf. Rajah et al., 2008, p.365), thereby positively influencing psychological benefits. Correspondingly,thefollowinghypothesesareformulated: H7a:Cocreationofvaluepositivelyinfluencessocialbenefits. H7b:Cocreationofvaluepositivelyinfluencespsychologicalbenefits. 5.1.8 Theinfluenceoftheairlinescountryoforiginonrelationalbenefits The countryoforigin (CoO) effect is considered an important phenomenon in international marketing. As has been argued above (see Chapter 4.2.1), due to their international operations, airlines have to deal with customers with very diverse national and cultural backgrounds. Therefore, it seems reasonable to include CoO as a brand performance characteristicspecifictotheairlineindustry. According to Zhang and Zarb (1996 in: Berentzen et al., 2009, p.393), CoO is defined as information pertaining to where a product is made. For the airline industry, CoO refers to the country from which the airline originates. Often, especially for former stateowned carriers, the airlines brand name still refers to its CoO (e.g. British Airways, Air India, etc.; seeChapter3.1).CoOcanserveasanimportantcuefromwhichconsumersmakeinferences about services; it triggers a global evaluation of quality, performance, or specific service attributes (Bruning, 1997, p.60). A tremendous amount of literature has been published which provides evidence that CoO has a significant effect on consumer attitude, purchase intention, and behavior (cf. Papadopoulos, 1993; GrhanCanli & Maheswaran, 2000 in: Hennebichler,2007,p.60). Within the context of banking and airline services, Pecotich et al. (1996) have argued that service quality perceptions fluctuate depending on the services CoO. In a customer evaluation study researching factors that influence airline choice, Bruning (1997) found CoO 45

to be ranked second after price. Respondents preferred national airlines unless switching carriers yielded price or service advantages. Berentzen et al. (2009) found that the CoO of lowcost carriers exerted a noticeable influence on purchase intention, following price and distancetotheairport. CoO is hypothesized to influence both psychological and functional benefits. A favorable image of the country from which the airline originates may make customers feel more comfortable in the relationship with the airline brand. CoO can be seen as a means for risk reduction (Cordell, 1992 in: Berentzen et al., 2009, p.394). A positive evaluation of the airlines CoO conveys a positive perception of the brand as a relationship partner. Furthermore, CoO has been argued to represent an important extrinsic cue in the decision makingprocess.Therefore,afavorableCoOfurtherfacilitatesthepurchasedecisionprocess andcustomersperceivefunctionalbenefitsasresultingfromtherelationshipwiththeairline brand. Correspondingly,thefollowinghypothesesareformulated: H8a:Afavorablecountryoforiginimagepositivelyinfluencespsychologicalbenefits. H8b:Afavorablecountryoforiginimagepositivelyinfluencesfunctionalbenefits. 5.1.9 TheinfluenceofFFPattractivenessonrelationalbenefits InChapter3.4,FFPsaredescribedasloyaltyschemesspecifictotheairlineindustry.FFPscan motivate customers to assume a more longterm decisionmaking approach toward their choice of airline brand, with customers response to the program, in turn, depending on its attractiveness, the prospect and the extent of rewards granted (cf. Rust & Chung, 2006, p.571). Studyingtheeffectofloyaltyprogramslinkedtocreditcards,Boltonetal.(2000)foundthat these programs strengthened customers perception of the credit cards value and made them more likely to reject competitors offers. These results are consistent with the traditional notion that loyalty reward programs provide an opportunity to build longer, stronger,anddeeperrelationships withcustomers(Boltonetal.2000, p.106).Researchon the attitudes and behaviors of business flyers by Toh et al. (1996 in: Long et al., 2006, p.4) revealedthatmembershipinafrequentflyerprogramdidinfactinfluenceairlinechoice.


Danaher et al. (2008, p.46 referring to Gwinner et al., 1998) claim that the reasons for joining a loyalty program range from purely economic to social benefits. Based on this argument, it is proposed that FFPs attractiveness influences both social and functional benefits as perceived by the customer. The attractiveness of a FFP motivates customers to become members, thereby reinforcing the customerbrand interaction and thus intensifying therelationship(cf.Boltonetal.,2000).Furthermore,FFPscanalsocontributetocustomers standing within their social environment. FFPs usually allocate different statuses to their members based on the frequent flyer points/miles collected. Holding a preferred status, customers feel especially valued by the given airline while, on the other hand, their preferred status may support them in expressing their lifestyle. Typical FFP rewards usually comprise free flights, seating class upgrades, or other incentives. These incentives directly translate into perceived economic and functional benefits as a result from the relationship withtheairlinebrand. Correspondingly,thefollowinghypothesesareformulated: H9a:FFPattractivenesspositivelyinfluencessocialbenefits. H9b:FFPattractivenesspositivelyinfluencesfunctionalbenefits.

5.2 Consequencesofrelationalbenefits
In this section, hypotheses about the causal relationships between relational benefits and customer loyalty are formulated. As has been argued in Chapter 4.2.4, relationship quality mediatestherelationshipbetweenrelationalbenefitsandcustomerloyalty.Accordingly,the influence of relational benefits on the two relationship dimensions, customer satisfaction andrelationshipcommitment,areproposedhereaswell. 5.2.1 Consequencesofsocialbenefits Social benefits refer to the feeling of belonging and familiarity perceived by the customer as a result of the longterm relationship with the given airline brand. In a broader sense, social benefits also relate to customers perceptions of how the brand can enhance their standing intheirsocialenvironments(seeChapter4.2.3.1). Several researchers have suggested that social benefits are positively related to the customers commitment to the relationship (Goodwin, 1996; Goodwin & Gremler, 1996 in: HennigThurau et al., 2002, p. 235). Berry (1995) claims that social bonds between 47

customersandserviceemployeesleadtohigherlevelsofcustomercommitmenttothegiven company.Moreover,asarguedinChapter4.2.2,relationshipsdonotonlyexistbetweentwo persons,theycanalsoevolvebetweenapersonandabrand.Onthepremisethatcustomers only maintain a relationship with a brand if they benefit from it, positive experiences as social benefits over time will lead to commitment on the customers part to maintain the relationshipinthefuture. Differing results have been obtained on the effect of social benefits on satisfaction. While Gwinner et al. (1998, p.111) found a strong link between social benefits and customer satisfaction, HennigThurau et al.s study (2002) revealed that the relation between social benefitsandcustomersatisfactionwasinsignificant. Reynolds and Beatty (1999, p. 14 referring to Crosby et al., 1990) argue that the interaction between the customer and the service provider within a relationship is crucial for satisfaction. Further support for this proposition is provided by Gremlerand Gwinner (2000) whose analysis on customeremployee rapport13 suggests that such interaction plays a significant role in the degree of satisfaction with the service provider. Social benefits, however, do not only comprise the direct social interaction with the brand but also the extent to which the brand reinforces its customers status within their social environments. Sincecustomersatisfactionisrelatedtothedegreetowhichcustomerexpectationsaremet, it can be said that the customers level of satisfaction in the interaction with the brand increasesinresponsetorisingsocialbenefitsassociatedwiththerelationship. Nexttotheseindirectinfluences,adirectinfluenceofsocialbenefitsoncustomerloyaltycan be proposed. Empirical evidence for this hypothesis has been established by several studies on customer loyalty (Chang & Chen, 2007; HennigThurau et al., 2002; Price & Arnould, 1999, Reynolds & Beatty, 1999). Researchers contend that a strong link exists between the social aspects of the customerprovider relationship and customer loyalty. For example, Berry (1995) suggests that social bonds between customers and employees can be used to foster customer loyalty. Similarly, Oliver (1999) suggests that customers who are part of a social organization (which may include both other customers and employees) are more
Theconceptofrapportiscloselyrelatedtotheconceptofsocialbenefitsasdefinedhere.Gremlerand Gwinner(2000,p.91)denominatepositiveinteractionsandpersonalconnectionsastwocommonand importantfacetsofrapport.



motivated to remain loyal to the given company. Social relationship concepts such as fondness,tolerance,respect,andrapport(Gremler&Gwinner,2000)havebeenfoundtobe influential in the development of service loyalty (Goodwin & Gremler, 1996). The effect of social benefits on customer loyalty in the airline industry, moreover, has been substantiated in a study among Taiwanese airline passengers (Chang & Chen, 2007). In their study analyzing the relationship between relational benefits and customer loyalty in three classes of service firms, HennigThurau et al. (2002) found that social benefits have a significant influenceoncommitmentandcustomerloyalty. Correspondingly,thefollowinghypothesesareformulated: H10a:Socialbenefitspositivelyinfluencecustomersatisfaction. H10b:Socialbenefitspositivelyinfluencerelationshipcommitment. H10c:Socialbenefitspositivelyinfluencecustomerloyalty. 5.2.2 Consequencesofpsychologicalbenefits Psychological benefits refer to the positive feelings and emotions customers develop from their relationship with the brand. Confidence in the positive outcomes of the relationship results in less anxiety and a feeling of safety and comfort when interacting with the brand. Customers further develop a feeling of trust, that is, a willingness to rely on an exchange partnerinwhomonehasconfidence(Moormanetal.,1992,p.315). AsBerry(1995,p.242)suggests,customerswhodeveloptrustinservicesuppliersbasedon theirexperiencewiththem[]havegoodreasonstoremainintheserelationships.Trustis seen to reduce consumer uncertainty and vulnerability in service relationships (cf. Beatson etal.,2008,p.215;Berry,1995,p.242).Thesebenefitscancreaterelationshipefficiencyfor the customer (e.g. through decreased transaction costs) which, in turn, fosters commitment to the relationship (Garbarino and Johnson, 1999; HennigThurau et al., 2002; Morgan and Hunt, 1994; Beatson et al., 2008, p. 215). If customers feel comfortable with the service brand, they are more likely to develop a positive attachment to the brand. Through the ongoingrelationship,customersknowwhattoexpectfromthebrandandperceivedriskand anxiety decrease. All of these factors affect a customers willingness to remain in and refine the relationship with the brand in the future, that is, psychological benefits are also proposedtopositivelyinfluencerelationshipcommitment.


Less anxiety about the relationship can also have a positive impact on satisfaction (cf. HennigThurau et al., 2002; Beatson et al., 2008, p. 215; Anderson & Narus, 1990). Beatson et al. (2008, p. 215) propose that customers confidence in the honesty and integrity of a brand are likely to result in increased customer satisfaction with the brand and its performance. Psychological benefits relate to customers knowledge about what to expect from the airline brand. Based on the confirmation/disconfirmation paradigm, it can be argued that when the brand meets the customers expectation, perceived psychological benefitsleadtocustomersatisfaction. Turning again to Berrys (1995, p. 242) proposition that customers who trust the service provider will remain in the relationship, it can further be proposed that psychological benefits have a positive influence on customer loyalty. Accordingly, Chang and Chen (2007) foundthatconfidencebenefitshaveapositiveandsignificantinfluenceoncustomerloyalty. As described in Chapter 4.1.3, a relationship between the customer and the brand develops through several encounters and interactions over time. The customers experience of the brandasarelationshippartnerthatcanbetrustedmotivateshimtocontinuetheinteraction withthebrandand,hence,remainintherelationship. HennigThurau et al. (2002) emphasize the significance of the link between confidence benefits and customer satisfaction, as well as between confidence benefits and customer loyalty. However, in their study, confidence benefits only have an insignificant influence on commitment. In the businesstobusiness context, on the other hand, Sweeney and Webb (2007) found the link between psychological benefits and relationship commitment to be crucial. Beatson et al. (2008), in a study on relationship quality in crosssea passenger transportation, determined that relationship trust affects satisfaction, commitment, and behavioralintentions. Correspondingly,thefollowinghypothesesareformulated: H11a:Psychologicalbenefitspositivelyinfluencecustomersatisfaction. H11b:Psychologicalbenefitspositivelyinfluencerelationshipcommitment. H11c:Psychologicalbenefitspositivelyinfluencecustomerloyalty.


5.2.3 Consequencesoffunctionalbenefits Functional benefits relate mainly to rational and economic benefits that customers perceive to result from their relationship with the airline brand. These include time and cost savings, convenience,andconfidenceinthepurchasedecision. HennigThurau et al. (2002, p. 236 referring to Fornell, 1992; Guiltinan, 1989) propose that cognitive and emotional switching barriers are increased when a company provides economic incentives to its customers. This, again, can result in increased customer loyalty and relationship commitment (Selnes, 1993 in: HennigThurau et al., 2002, p. 236). In the businesstobusiness context, Sweeney and Webb (2007) identified a strong correlation betweenfunctionalbenefitsandrelationshipcommitment. With reference to the argument made by Reynolds and Beatty (1999), functional benefits offered by the brand are perceived as part of the service performance itself. Correspondingly, the perceived functional benefits, such as cost savings, can be expected to positivelyinfluencecustomersatisfaction. HennigThurau et al. (2002) found that special treatment benefits and commitment are interlinked.14Therelationshipbetweenspecialtreatmentbenefitsandcustomersatisfaction and special treatment benefits and customer loyalty could, however, not be verified. Gwinner et al. (1998) found special treatment benefits to have a positive influence on relationship marketing outcomes such as loyalty, positive wordofmouth, relationship continuance,andsatisfactionwiththeservice.Analyzingcustomersalespersonrelationships in retail, Reynolds and Beatty (1999) identified a positive relationship between functional benefitsandsatisfactionwiththesalesperson. Correspondingly,thefollowinghypothesesareformulated: H12a:Functionalbenefitspositivelyinfluencecustomersatisfaction. H12b:Functionalbenefitspositivelyinfluencerelationshipcommitment. H12c:Functionalbenefitspositivelyinfluencecustomerloyalty.


AsarguedinChapter4.2.3.3,theconceptualizationoffunctionalbenefitsinthisthesispartlyrelatetothe conceptualizationofspecialtreatmentbenefitsasconceptualizedbyGwinneretal.,1998andHennigThurau etal.,2002.


5.3 Theinfluenceofrelationshipqualityoncustomerloyalty
Relationship quality has been described as a concept that mediates the influence of relational benefits on customer loyalty (see Chapter 4.2.4). In the following section, the interrelationship between customer satisfaction and relationship commitment, and the effectsofbothconceptsoncustomerloyaltyarehypothesized. 5.3.1 Theinfluenceofcustomersatisfactiononcommitmentandcustomerloyalty Customer satisfaction here refers to the affective state determined by the evaluation of the brandsperformance(cf.Zins,2001,p.276).Itisajudgmentoftheservicebrandscapability to provide a pleasurable level of consumptionrelated fulfillment, including levels of under oroverfulfillment(Oliver,1997,p.13).Customersaresatisfiediftheperformancemeetsor exceeds their expectations prior to consumption. Likewise, they are dissatisfied if the brand doesnotmeettheirexpectations. Customer satisfaction is theoretically and empirically considered to be one of the most important factors influencing customer loyalty (Garbarino & Johnson, 1999; Heskett et al., 2008). Customers choose brands that they think can satisfy their needs. If customers evaluate an airline brand as being capable of meeting the expectations they have raised prior to consumption, it is presumed that customers are satisfied with the brand. Once satisfied, customers will choose the same airline for subsequent travels. In line with this argumentation, Beatson et al. (2008) found that customer satisfaction positively influences behavioral intentions such as willingness to recommend the brand, positive wordofmouth, and repurchase intention, i.e. customer loyalty. Park et al. (2006) determined that customer satisfaction directly influences behavioral intentions, which were measured as the customers willingness to recommend the airline to others and their repurchase intention. Gwinner et al. (1998) showed that satisfaction with the service provider positively impacts customer retention. Reynolds and Beatty (1999) demonstrated that satisfaction with a company was positively linked to loyalty to the company. HennigThurau et al. (2002) found that of all constructs hypothesized to influence customer loyalty, satisfaction had the strongestimpact. Customer satisfaction is further assumed to positively influence customers commitment to their relationship with the airline brand. A high level of satisfaction resulting from the 52

interaction with the airline brand provides repeated positive reinforcement, thereby creating positive emotional commitment bonds with the brand (cf. Beatson et al., 2008, p. 215;HennigThurauetal.,2002,p.237;HennigThurau&Klee,1997,p.753). Correspondingly,thefollowinghypothesesareformulated: H13a:Customersatisfactionpositivelyinfluencesrelationshipcommitment. H13b:Customersatisfactionpositivelyinfluencescustomerloyalty. 5.3.2 Theinfluenceofrelationshipcommitmentoncustomerloyalty Commitmentrelatestoacustomersdesireandmotivationtocontinueavaluedrelationship with the brand in the future (cf. Moorman et al., 1992, p. 316; Grnroos, 2007, p. 41). It is seen as a focal relationship construct that precedes customers relational behaviors such as repurchaseorpositiveofwordofmouthcommunications(Garbarino&Johnson,1999). Commitment can be described as customers longterm orientation toward the relationship with the brand that is grounded in both emotional bonds (Moorman et al., 1992) and the customers conviction that maintaining the relationship in the future will yield higher net benefits than if the relationship is terminated (Geyskens et al., 1996; Sllner, 1994 in: HennigThurau et al., 2002, p. 232). Understanding loyalty as the attitudes and behaviors in response to commitment (Han et al., 2008, p. 24), it can be assumed that a customers commitmenttotherelationshipwiththebrandpositivelyinfluencesloyalty.ReferringtoKim et al. (2008) and Punniyamoorthy and Raj (2002, p. 224), commitment can even be consideredanecessityfortheevolvementoftruebrandloyalty. Beatson et al. (2008) found that relationship commitment positively influences behavioral intentions. Pritchard et al. (1999) concluded that strong support for commitment was an important direct antecedent of customer loyalty for airline services. Kim et al.s (2008) experimental study involving eight product classes and two involvement levels identified a stronglinkbetweenbrandcommitmentandtrueloyalty. Correspondingly,thefollowinghypothesisisformulated: H14:Relationshipcommitmentpositivelyinfluencescustomerloyalty.


5.4 GraphicalillustrationoftheproposedACLmodel
Summarizingtheformulatedhypotheses,Figure5providesagraphicalillustrationoftheACL model.

Social brand performance

Airline image

Social benefits

Customer satisfaction

Brand-self congruence


Service quality

Psychological benefits

Customer loyalty

Perceived value

Co-creation of value


Functional benefits

Relationship commitment

FFP attractiveness


6 Empiricaltestingoftheproposedairlinecustomerloyaltymodel
This chapter describes the empirical testing of the ACL model. The analysis approach, the data collection method, the operationalization of the models constructs, as well as the analyticalresultsarepresented.

6.1 PLSasresearchmethod
6.1.1 SelectionofPLSasresearchmethod To empirically validate the ACL model developed in the previous chapter for its transferability to reality, a research method needs to be chosen that is able to accurately test the model. The method, therefore, needs to be able to analyze logically and theoretically derived causal relationships between latent (i.e. unobservable) variables. According to Malhotra and Birks (2007, p.406) structural equation modeling (SEM), a statistical technique based on multiple regression and factor analysis, is suitable to test 54

interrelationships among a set of variables (see also: Pallant, 2001, pp. 9192; Haenlein & Kaplan,2004,p.285). In general, there are two approaches to SEM which can be differentiated according to their underlying estimation algorithms: covariancebased approaches (e.g., LISREL, AMOS) and variancebased approaches (e.g., PLS) (Jahn, 2007, p.1; Haenlein & Kaplan, 2004, p.285). Based on the differentiation of both approaches according to Jahn (2007; see also: Haenlein & Kaplan, 2004), the variancebased PLS approach proves to be the more appropriate approach for the present analysis: first, besides constructs that are reflectively operationalized, the ACL model established in Chapter 5 also includes one construct (i.e. service quality) that is formatively operationalized.15 While PLS basically supports a formative operationalization of latent variables and therefore can be used for models with reflective and formative types of indicators (Fornell & Bookstein, 1982, p.442), covariance based approaches do not accept formative variables (Blunch, 2008, p. 155). Second, in comparison to covariancebased approaches, PLS is insensitive to skewed distributions; a normal distribution of the empirical data is therefore not imperatively required (Fornell & Bookstein, 1982, p.443; Huber et al., 2007, p.10). Third, as previously stated, the present analysispursuesamanagerialperspectiveandisthusstronglypracticeorientated.Especially for this reason the variancebased approach PLS is preferred in this study, since it is demonstrably the approach with the highest predictive accuracy and, hence, the highest practicalexplication(cf.Huberetal.,2007,p.13;Jahn,2007,p.16). 6.1.2 ApplicationofPLS The partial least squares (PLS) estimation basically consists of three parts. (1) The structural model (inner model) reflects the relationships between the latent variables (Haenlein & Kaplan, 2004, p.290). While latent variables are characterized by abstract, not directly measurable content, each latent variable needs to be defined by a set of indicators (cf. Huberetal.,2007,p.3).(2)Themeasurementmodel(outermodel)describeshowthelatent variables and their manifest indicators (i.e., measurement variables) are connected (Haenlein & Kaplan, 2004, p.290; Blunch, 2008, p.5). (3) Weight relations, which link the


SeeEdwardsandBagozzi(2000)foramoreelaboratedifferentiationbetweenreflectiveandformative variables.


indicators to their respective unobservable variables, are further used to estimate case valuesforthelatentvariables(Chin&Newsted,1999in:Haenlein&Kaplan,2004,p.290). In general, indicators can be divided into two groups reflective and formative variables. Theirdifferentiationisbasedonthedirectionoftherelationshipbetweenthelatentvariable and its respective indicators (Edwards & Bagozzi, 2000, p.155). Reflective variables mirror the latent variable (cf. Edwards & Bagozzi, 2000, p.155). They are caused by the latent variables and are indirectly affected by exogenous influences on the latent variable (Bollen, 1989 in: Diamantopoulos, 1994, p.445; Zinnbauer & Eberl, 2004, p.4). Formative variables, on the other hand, form the construct (Edwards & Bagozzi, 2000, p.15), and constitute conceptual elements of the latent variable (Huber et al., 2007, p.18). In comparison to reflective variables, changes in the latent variables are, therefore, caused by their formative indicators(Haenlein&Kaplan,2004,p.288). Based on the differentiation between the structural model and the measurement model as well as the two types of indicators, different quality criteria need to be tested in order to validatethemodel.Hulland(1999,p.198)suggeststhataPLSmodelshouldbeanalyzedand interpretedsequentiallyintwostages:(1)theassessmentofthereliabilityandvalidityofthe measurement model; and (2) the assessment of the structural model. Appendix 1 discusses thequalitycriteriathatneedtobefulfilledforbothstages,respectively. Compared to covariancebased structural equation models, there is no overall goodnessof fit measure for the PLS model. However, based on a summarized validation of the previouslymentioned quality criteria, an overall evaluation of the models informational valueispossible(cf.Fornell&Bookstein,1982,p.450;Huberetal.,2007,p.43).

6.2 Datacollection
While general methodological considerations have been dealt with in Chapter 2, the following section addresses the particular data collection method chosen. It further introduces the questionnaire design before providing information about the course of the datacollectionanddescriptivedataofthesample.


6.2.1 Internetsurveyasdatacollectionmethod TocollecttheprimarydataneededtotestthetransferabilityofthehypothesizedACLmodel toreality,aselfadministeredInternetsurveywaschosenasthedatacollectionmethod.This choice is primarily based on the Internet surveys inherent advantages compared to other survey methods such as personal interviewing, telephone interviewing, or mail interviewing (cf.Malhotra&Birks,2007,pp.273274).Internetsurveyspresentacostefficientmethodto collectagreatamountofdatainarelativelyshorttimeframe.Furthermore,comparingdata reliability for telephone and Internetbased surveys, Braunsberger et al. (2007) found that webpanelsdisplayhigherlevelsofdatareliabilitythantelephonesurveys.Thiseffectcanbe ascribed to the removed interviewer bias (Malhotra & Birks, 2007, p.274) for self administered surveys. The lack of an interviewer affords more privacy to the respondents (Braunsberger et al., 2007, p.763), which may lead respondents to answer questions more truthfully. The softwarecontrolled collection of data further decreases the risk of wrong or incomplete data. Respondents can be advised of uncompleted questions, for example. Thereby, the quality of the data is increased (Malhotra & Birks, 2007, p. 274). As data is already stored in electronic format, the electronic processing of the data is more efficient andlesspronetotransmissionerror(cf.Saundersetal.,2007,p.358). The most important limitations to Internet surveys are probably sample representativeness and issues of sample control and diversification (cf. Prophis, 2002 in: McConkey et al., 2003, p.78; Malhotra & Birks, 2007, p. 275). As Internet use has, however, been growing in all societal segments in the last years, it is already evident that the total population is increasinglywellrepresentedinthecommunityofInternetusers(cf.Ltters,2004,pp.15). 6.2.2 Questionnairedesign The questionnaire is divided into four parts. First, respondents are introduced to the survey and informed about its purpose and background. In the context of the introduction, respondents are advised of the anonymity of their information and instructed that it is their personal perceptions and opinions that are to be the basis of their answers. Furthermore, survey participants are advised that they have the opportunity to take part in a drawing for an iPod nano by providing their email address at the end of the questionnaire. Second, participants are asked to choose an airline about which they will answer the stated questions. They are advised to choose an airline they have preferably flown with more than 57

once within the last three years. The selfselection of the airline was chosen to make sure that respondents have sufficient knowledge about the airline to answer the survey questions. The third and major part of the questionnaire addresses questions related to the concepts in the ACL model. Participants are asked to specify to which degree they agree or disagree with each statement in a series about the concepts in the model (for the operationalizationoftheconcepts,seeChapter6.3).A7pointLikertscalewaschosenasthe rating scale, ranging from strongly agree to strongly disagree. It was chosen in order to giverespondentsawideenoughrange,ontheonehand,buttonotoverwhelmrespondents with too many answer possibilities, on the other hand (cf. Saunders et al., 2007, p.372). Fourth, respondents were asked to provide information about their general travel habits with respect to air transport and some information on their sociodemographic background. ThequestionnairedesignedforthestudyisavailableinAppendix2. 6.2.3 Courseofdatacollectionanddescriptivedataofsample To make sure that the questionnaire was easy to understand and fill in, a pretest was conducted in the period from January 30 to February 03, 2009. In total, 8 people participated in the pretest with most of the participants aged between 20 and 35 years. To ensure that the questionnaire was also easy to fill in for older respondents, 2 persons older than 60 years were asked to take part in the pretest. Furthermore, half of the testers were chosen because of their regular flying habits, while the other half were fairly inexperienced withregardtotheairlineindustryingeneral.Theselectionofpretesterswasmadeinorder tocoverawidevarietyofrespondents,whichwasanticipatedintheactualsample. The sampling for the survey took place as a combination of targeted emails and a snowball procedure (cf. Malhotra, 2007, p.414). The link including a short introduction and the requesttoparticipatewaspostedonseveralonlineplatformsandwasalsosentviaemail.In thefieldtime,betweenFebruary15,2009andFebruary20,2009,atotalof276respondents participated in the survey. An overview of the sociodemographic distribution of the respondentsandtheirparticulartravelhabitsisprovidedinAppendix3. The sample indicates an almost even distribution between female (51.1%) and male (48.9%) respondents. Two thirds of the survey participants belonged to the age range between 20 and 29 years, indicating an overrepresentation of young participants. Corresponding to the age distribution, 43.1% indicated that they were students while 27.9% were company 58

employees.Withrespecttotheinformationregardingtravelhabits,72.8%claimedthatthey primarily travelled on leisure while 27.2% stated that their primary reason for air travel was business. These numbers almost correspond to Hanlons (2007, p.35) 80/20 breakdown between leisure and business airline passengers (see Chapter 3.3). Interestingly, 80% of respondents indicated that they traveled by air at least once every 6 months (52.9% travel by air at least once every 3 months), which emphasizes that respondents had profound knowledgeofandexperiencewithairlinetravel. In summary, it can be concluded that the sample indicates an overrepresentation of young participants and students. Due to the high level of the overall sample quality, it should not beovervalued,butmustbekeptinmindwheninterpretingthefindings.

6.3 Operationalizationofconstructsandvalidationofmeasurementmodel
In the following, the operationalization of the constructs included in the ACL model is described. A number of studies previously conducted by other authors have been reviewed in order to compile measurement scales that suit the measurement of the integrated constructs. These items were either directly adopted or adapted to the present study. If no measurement items could be found to accurately measure the respective construct, new indicators were created. A compilation of the measurement scales reviewed is provided in Appendix4. Prior to the estimation of the ACL model with smartPLS, an exploratory factor analysis was conducted in SPSS. The results are briefly discussed in Chapter 6.3.1 before the operationalization of the constructs and the validity of the measurement model is analyzed inChapters6.3.2to6.3.6. 6.3.1 Exploratoryfactoranalysis An exploratory factor analysis was conducted to examine to what extent the formulated questionnaire items are related to the latent constructs of the ACL model (cf. Byrne, 1998, p.6). Factor analysis can only be conducted for reflective variables (cf. Fornell & Bookstein, 1982, p.441). As service quality is defined by formative indicators, it is left out of the exploratory factor analysis. Aside from the items measuring airline image, social brand performance,andfunctionalbenefits,allotherquestionnaireitemscouldbeallocatedtothe construct they were intended to measure. A list of the measurement items is provided in 59

Appendix 5. A summary of the results from the exploratory factor analysis can be found in Appendix6. Resulting from the findings of the exploratory factor analysis, the constructs airline image and social brand performance were merged and entitled airline reputation. The measurement items for airline reputation consist of all items originally asked with reference to airline image plus items one, two, and five that were asked for social brand performance. Items three and four measuring social brand performance were excluded from the analysis. Furthermore, concerning functional benefits, items one and two were deleted, leaving only twomeasurementitemsforthislatentconstruct. 6.3.2 Operationalizingbrandperformancecharacteristics Airlinereputation As reported in Chapter 6.3.1, the exploratory factor analysis resulted in merging the construct airline image and social brand performance. Interpreting the questionnaire items constituting the newly created construct, this construct was entitled airline reputation. In contrast to airline image, airline reputation alludes to associations and opinions of society, notjustofindividualcustomers.
Factor loadings 0.738 0.816 0.870

Measurement items 1 I have always had a good impression of this airline. 2 I believe this airline has a better image than its competitors. 3 In my opinion, this airline has a good image in the minds of passengers. 4 I think that this airline has a good reputation in society. 5 Most people who are important to me like this airline. 6 My friends and family highly value this airline. 7 I think that a lot of people have a high opinion about this airline. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.634 fulfilled Composite reliability: 0.923 Table3:Operationalizationofairlinereputation

T-values 22.543 31.972 56.415 39.596 19.794 23.996 35.377

0.849 0.711 0.744 0.832 Unidimensionality: fulfilled

Measurement items one, two, and three are adopted from Park et al. (2006, based on: Nha & Gaston, 2001). Item four widens the concept of airline image, including the airlines reputation in society. Statements five and six, which originally measured subjective norm, are based on Chang (1998). Statement 7 is adapted from Martensen and Grnholdt (2004) focusingonsocialapprovalaspartofemotionalbrandevaluation. 60

Brandselfcongruence The scale for testing brandself congruence was adopted from a survey on brandconsumer relationships conducted at LMU, Munich. While the original scale was in German, the scale was translated into English and checked for meaning and grammar by a native speaker (cf. Saundersetal.,2007,p.377).
Factor loadings 0.887 0.905 0.925 0.929 0.925

Measurement items 1 The brand image and how I see myself are very similar. 2 The brand says a lot about who I am and who I want to be. 3 I can identify with the brand. 4 The brand and I have very much in common. 5 I think there is a similarity between what the brand stands for and me. 6 The brand suits me. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.821 fulfilled Composite reliability: 0.965 Table4:Operationalizationofbrandselfcongruence

T-values 57.593 68.593 85.709 52.506 56.046 40.892

0.863 Unidimensionality: fulfilled

Trustworthiness Measuring trustworthiness, items one, two, and three have been adapted from Sderlund and Julander (2003), while items four and five have been adapted from Martensen & Grnholdt(2004).
Factor loadings T-values 0.855 34.313 0.862 33.269 0.845 28.168 0.890 66.226 0.828 28.603 Unidimensionality: fulfilled

Measurement items 1 This airline is upright and sincere. 2 This airline cares about my needs. 3 This airline is concerned about my well-being. 4 This airline is trustworthy and credible. 5 This airline communicates openly and honestly. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.733 fulfilled Composite reliability: 0.932 Table5:Operationalizationoftrustworthiness

Servicequality Several scales can be found for testing the service quality of airlines. While a great number ofauthorsconcentrateontestingservicequalityinitsownright,thescalesareusuallyquite extensive. For this study, a scale from Parketal. (2006) was adopted. Resulting from in depth interviews and focus group discussions with airline staff and passengers, the authors identified three dimensions of service quality characteristic for airline services, namely 61

reliabilityandcustomerservice,inflightservice,andconvenienceandaccessibility.The3 measurement items with the highest values within each dimension have been selected to measureairlineservicequalityinthepresentsurvey.
Measurement items Weights T-values 1 The employees of this airline are willing to help passengers. 0.181 1.829 2 The employees of this airline are able to answer passengers 0.152 1.765 questions in a satisfactory way. 3 The employees of this airline give passengers personal 0.125 1.315 attention. 4 This airline offers high seating comfort. 0.143 1.452 5 This airline offers great meal service. 0.259 2.618 6 This airline offers great in-flight entertainment. 0.001 0.011 7 The reservation and ticketing is prompt and accurate. 0.277 2.813 8 The check-in service of this airline is very good. 0.086 0.821 9 This airline offers a convenient flight schedule. 0.190 2.725 Discriminant validity: Multicollinearity: Composite correlation < 0.9: fulfilled Variance inflation factor (VIF) < 10: fulfilled Table6:Operationalizationofservicequality

Perceivedvalue ThemeasurementitemsforperceivedvaluearedirectlyadoptedfromParketal.(2006).
Factor loadings 0.953

Measurement items 1 Considering the services that this airline offers, they are worth what I pay for them. 2 The ticket price of this airline is reasonable. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE:0.906 fulfilled Composite reliability: 0.951 Table7:Operationalizationofperceivedvalue

T-values 87.260 80.679

0.951 Unidimensionality: fulfilled

Cocreationofvalue Rajah et al. (2008) argue that, while the idea of value cocreation has been conceptually discussed by a number of authors, their study is the first to support it empirically. Of the three measurement items proposed by the authors, only item one was adopted from their study. Items two to seven have been developed for this study. They relate to the understandingofvaluecocreationashasbeenelaboratedinChapter4.2.1.


Factor loadings 0.827 0.872 0.876 0.664 0.877 0.894 0.758 Unidimensionality: fulfilled

Measurement items 1 If necessary, this airline really goes out of its way to react to my needs. 2 If there is a problem, this airline is interested in what I have to say. 3 This airline tailors its service to my needs. 4 I find it easy to contact this airline. 5 I feel that my comments and concerns are highly valued by this airline. 6 This airline is responsive to my needs. 7 I have experienced this airline offering non-standardized levels of service to me. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.685 fulfilled Composite reliability: 0.938 Table8:Operationalizationofcocreationofvalue

T-values 33.116 46.813 57.172 14.462 53.380 63.353 21.499

Airlinecountryoforigin The indicators for the respondents perception of the airlines country of origin were primarilyadaptedfromstandardattitudescales(cf.Bruneretal.,2001).
Factor loadings 0.925 0.944 0.957 0.949 Unidimensionality: fulfilled

Measurement items 1 I have a favorable opinion about the country this airline originates from. 2 I really like this airlines country-of-origin. 3 I have a very good impression about this airlines country-oforigin. 4 I feel comfortable about this airlines country-of-origin. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.891 fulfilled Composite reliability: 0.970 Table9:Operationalizationofairlinecountryoforigin

T-values 63.265 65.094 105.218 78.956

FFPattractiveness The measurement items for FFP attractiveness are loosely based on a study by Long et al. (2006) in which the authors analyzed important aspects of frequent flyer programs for business and leisure travelers. While the authors identified four factors relating to airlines FFPs, namely keeping score, program benefits, flight treatment, and administrative issues, only items from program benefits (see items one, two, three, and four) and treatment(seeitemsfiveandsix)areincludedtomeasureFFPattractivenessinthisanalysis.


Factor loadings 0.811 0.855 0.803 0.713 0.754 0.779 Unidimensionality: fulfilled

Measurement items 1 This airlines frequent flyer program is very attractive. 2 This airlines frequent flyer program offers desirable benefits. 3 It is easy to redeem benefits earned from this airlines frequent flyer program. 4 This airlines frequent flyer program helps me reduce the cost of air travel. 5 This airlines frequent flyer program treats members better than other travelers who do not belong to the program. 6 Being a member of this airlines frequent flyer program makes me feel special. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.891 fulfilled Composite reliability: 0.970 Table10:OperationalizationofFFPattractiveness

T-values 18.619 22.758 19.614 12.835 11.981 20.453

6.3.3 Operationalizingrelationalbenefits Socialbenefits As previously discussed in Chapter, in this study social benefits are considered to have a much broader meaning compared to Gwinner et al.s (1998) original description. While measurement item one is adapted from LaBahns definition of social rapport as the clients perception that the personal relationships have the right chemistry and are enjoyable, the remaining measurement items of social benefits have been developed for thisstudybasedonthedefinitionofsocialbenefitspredominantinthisthesis.
Factor loadings 0.698 0.817

Measurement items 1 The interaction with this airline and its employees is enjoyable. 2 Dealing with this airlines employees gives me a sense of harmony. 3 Traveling with this airline, I perceive a feeling of familiarity. 4 This airline emphasizes my role in society. 5 This airline complements my social status. 6 This airline supports my lifestyle. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.656 fulfilled Composite reliability: 0.919 Table11:Operationalizationofsocialbenefits

T-values 19.081 37.497 28.413 63.295 48.888 28.947

0.796 0.884 0.858 0.792 Unidimensionality: fulfilled

Psychologicalbenefits As mentioned in Chapter, psychological benefits relate to the customers positive feelings and emotions derived from the relationship with the brand. Since these include the confidence benefits defined by Gwinner et al. (1998), some of the measurement items are adopted from confidence benefit measurements adopted in related studies. For example, 64

measurement items one, two, and three are adopted from Chang and Chen (2007) who analyzed the influence of confidence benefits on switching barriers and customer loyalty among airline customers in Taiwan. Measurement items one and two have similarly been used to measure psychological benefits in the B2B context by Sweeney and Webb (2007). Measurement items four, five and six are adapted from Gwinner et al.s (1998) confidence benefitmeasurements,whereitemfivehasalsobeenusedbySweeneyandWebb(2007)to measure psychological benefits. Item seven has been added to place more emphasis on the feeling of security and comfort that characterizes the definition of psychological benefits in thisthesis.
Factor loadings 0.803 0.879 0.829

Measurement items 1 I feel I can trust this airline. 2 I am less worried when I fly with this airline. 3 I am confident that the service will be performed correctly by this airline. 4 I believe there is less risk that something will go wrong. 5 I know what to expect from this airline. 6 I have less anxiety when I buy a ticket for this airline. 7 I feel secure and comfortable with this airline. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.688 fulfilled Composite reliability: 0.939 Table12:Operationalizationofpsychologicalbenefits

T-values 23.701 51.290 33.936 45.228 13.534 27.714 50.962

0.873 0.724 0.801 0.887 Unidimensionality: fulfilled

Functionalbenefits As has been discussed in Chapter 6.3.1, two of the original measurement items regarding functional benefits have been removed based on the results of the exploratory factor analysis conducted prior to the calculation in smartPLS. The remaining measurement items for functional benefits are loosely based on Reynolds and Beatty (1999) and Paul et al. (2009). Special emphasis is put on the rational and economic benefits which characterize functionalbenefits.
Factor loadings 0.738

Measurement items 1 Compared to other airlines, I have the feeling to save money when I buy a ticket for this airline. 2 It is easy and convenient to use this airline. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.648 fulfilled Composite reliability: 0.785 Table13:Operationalizationoffunctionalbenefits

T-values 10.222 19.810

0.867 Unidimensionality: fulfilled


6.3.4 Operationalizingrelationshipquality Customersatisfaction Customer satisfaction is measured adapting HennigThurau et al.s (2002) measurement items to the airline context (items one to four). Additional items measuring customers satisfaction in relation to their previous expectations (item five) (cf. Han et al., 2008, p.39) and in comparison to the airlines competitors (item six) (cf. Zhang & Bloemer, 2008) have furtherbeenincluded.
Factor loadings 0.821 0.819 0.807 0.840 0.784 0.849

Measurement items 1 Overall, I am very satisfied with this airline. 2 I am always delighted with this airlines service. 3 It is wise of me to fly with this airline. 4 I think I do the right thing when I decide to use this airline. 5 My experiences with this airline exceed my expectations. 6 In comparison to other airlines, I am very satisfied with this airline. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.673 fulfilled Composite reliability: 0.925 Table14:Operationalizationofcustomersatisfaction

T-values 30.940 31.646 31.505 36.608 26.829 43.228

Unidimensionality: fulfilled

Relationshipcommitment All of the items measuring customers relationship commitment have been adopted from HennigThurauetal.s(2002)study.
Factor loadings 0.863 0.963 0.953 0.912

Measurement items 1 I am very committed to my relationship to this airline. 2 My relationship to this airline is very important to me. 3 I really care about my relationship to this airline. 4 My relationship to this airline deserves my maximum effort to maintain. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.853 fulfilled Composite reliability: 0.959 Table15:Operationalizationofrelationshipcommitment

T-values 52.365 181.034 126.973 66.887

Unidimensionality: fulfilled

6.3.5 Operationalizingcustomerloyalty To give consideration to both the attitudinal and the behavioral aspect of customer loyalty, the measurement items for customer loyalty include both dimensions. Items one and two relate to positive wordofmouth and willingness to recommend the brand. Items three and four measure the customers repurchase intention (i.e. the customers intention to utilize the service of the airline again). All items are adapted from Nadiri et al. (2008). In addition, 66

measurement item five is included to measure the customers overall loyalty towards the airline.
Measurement items 1 I say positive things about this airline to others. 2 I recommend this airline to others. 3 I consider this airline the first choice for air transport. 4 I will consider this airline for air transport in the next few years. 5 I consider myself to be loyal to this airline. Discriminant validity: Convergence validity: Fornell-Larcker-Criterion: AVE: 0.696 fulfilled Composite reliability: 0.920 Table16:Operationalizationofcustomerloyalty Factors loadings T-values 0.866 44.340 0.871 47.943 0.857 43.591 0.759 25.656 0.813 35.731 Unidimensionality: fulfilled

6.3.6 Validationofmeasurementmodel The validity assessment of the measurement model is based on the previously mentioned qualitycriteriathatneedtobefulfilled(seeChapter6.1.2andAppendix1). Except from one reflective indicator for the latent variable cocreation of value (0.664) and one reflective indicator for social benefits (0.698), all reflective indicators have loadings above 0.7. However, as the values of both indicators are close to 0.7 and both their tvalues well exceed the threshold of 1.66, they still fulfill the item reliability requirements. For the latentvariablesbrandselfcongruence,trustworthiness,countryoforigin,perceivedvalueas well as commitment the loadings of all reflective indicators exceed 0.8. The tvalues for all reflective indicators are well above 1.66. Furthermore, all values for the AVE as well as the composite reliability are above 0.6 and 0.7, respectively. Therefore, convergent validity for alllatentvariableswithreflectiveindicatorsisachieved.Withrespecttotheextenttowhich the latent variables differ from each other, Table 46 (in Appendix 7) presents the results of the discriminant analysis. The FornellLarckerCriterion is fulfilled for all latent variables, indicating discriminant validity. The performance of an exploratory factor analysis prior to theanalysiswithsmartPLShasalreadyassuredthatunidimensionalityexists. Within the measurement model, service quality is the only latent variable defined by formative indicators. Two of the indicators, regarding inflight entertainment and checkin servicehaveverylowweightingsandtvalues,whiletherespectivevaluesareacceptablefor the rest of the indicators. However, indicators cannot easily be eliminated as this would change the structure of the construct (Bollen & Lenox, 1991, p.308). Therefore, both indicators are retained. The correlations between service quality and all other latent 67

variables are well below 0.9 (see Table 47 in Appendix 7). Therefore, the criterion for discriminant validity is fulfilled. With a calculated VIF below 10 for all formative variables, thereisnotmulticollinearityamongtheindicators(seeTable48inAppendix7).

6.4 Validationofstructuralmodelandsubgroupcomparison
Based on the validation of the measurement model, the construct relationships postulated in Chapter 5, have to be assessed with respect to their nomological validity. The path coefficients, tvalues and signs of the parameters function as criteria upon which the formulated hypotheses are either accepted or rejected. Table 17 summarizes the results of the hypothesis testing. A graphical illustration of the structural model is provided in Figure 10(inAppendix8).
Hypothesis H1,2a Airline reputation Social benefit H1,2b Airline reputation Psychological benefit H3a Brand-self congruence Social benefit H3b Brand-self congruence Psychological benefit H4a Trustworthiness Psychological benefit H4b Trustworthiness Functional benefit H5a Service quality Social benefit H5b Service quality Psychological benefit H5c Service quality Functional benefit H6a Perceived value Social benefit H6b Perceived value Functional benefit H7a Co-creation of value Social benefit H7b Co-creation of value Psychological benefit H8a Country of origin Psychological benefit H8b Country of origin Functional benefit H9a FFP attractiveness Social benefit H9b FFP attractiveness Functional benefit H10a Social benefit Satisfaction H10b Social benefit Commitment H10c Social benefit Loyalty H11a Psychological benefit Satisfaction H11b Psychological benefit Commitment H11c Psychological benefit Loyalty H12a Functional benefit Satisfaction H12b Functional benefit Commitment H12c Functional benefit Loyalty H13a Satisfaction Commitment H13b Satisfaction Loyalty H14 Commitment Loyalty Table17:HypothesistestingfortheACLmodel Path coefficients T-values Result 0.128 2.392 accepted 0.237 3.832 accepted 0.400 8.857 accepted -0.041 0.675 rejected 0.306 4.223 accepted -0.054 0.811 rejected 0.133 2.012 accepted 0.215 2.994 accepted 0.111 0.910 rejected 0.120 3.001 accepted 0.566 8.070 accepted 0.250 3.658 accepted 0.098 1.211 rejected 0.125 2.599 accepted 0.085 1.530 rejected 0.078 2.091 accepted 0.049 0.883 rejected 0.399 8.785 accepted 0.501 7.050 accepted -0.060 0.873 rejected 0.343 7.715 accepted 0.144 2.135 accepted 0.154 2.814 accepted 0.303 7.127 accepted -0.012 0.226 rejected 0.131 2.919 accepted 0.042 0.589 rejected 0.481 6.665 accepted 0.291 5.915 accepted Total effects





While an elaborate discussion of the findings follows in Chapter 6.5 with respect to answeringsubquestionone(SQ1)andsubquestiontwo(SQ2),onlysomeofthefindingsare pointedouthere.Intotal,20ofthe29testedhypothesesareaccepted.Thestrongestdirect influences on customer loyalty emanate from customer satisfaction and relationship commitment. The influence of perceived value on functional benefits is the strongest measured in the model. At the same time, perceived value is the only exogenous construct that has a significant influence on functional benefits. All other hypotheses linking brand performance characteristics with functional benefits are rejected. Furthermore, brandself congruencestrongly influences social benefits, yet the hypothesis regarding the influence of brandselfcongruenceofpsychologicalbenefitsisrejected.Socialbenefitsstronglyinfluence satisfaction and commitment, but there is no direct causal relationship between social benefits and customer loyalty. Here, it is also worth emphasizing that the hypotheses proposing causal relationships between functional benefits and commitment and between satisfactionandcommitmentarerejected. Furthermore, the coefficients of determination (R) are assessed for the endogenous constructs to specify the degree to which the variance in these constructs can be explained. All constructs exceed the threshold of 0.3. For social benefits, customer satisfaction, and customer loyalty R is even above 0.6 (see Table 49 in Appendix 8). The hypothesized model therefore has good explanatory power. The structural model further needs to be tested for multicollinearity,whichshouldbeavoided.Table50(inAppendix8)presentsthecalculation of the variance inflation factors for each endogenous construct and proves no multicollinearity to exist. In a next step, the predictive validity of the endogenous reflective constructs needs to be assessed. For the model to possess predictive validity, the Stone Geisser Q needs to be > 0. This is the case for all endogenous reflective constructs in the ACL model (see Table 51 in Appendix 8). Therefore, a good predictive validity for the model can be attested. As previously stated, a global assessment of the quality of the model with PLS is impracticable. Rather, the evaluation of the models informational value is based on theinterpretationoftheseparatequalitycriteriaathand(cf.Huberetal.,2007,p.43).With respect to the measurement model, all quality criteria could be fulfilled. Regarding the structural model, nine of the 29 tested hypotheses are rejected. This is due to weak and insignificantrelationshipsbetweenconstructs,indicatedbylowpathcoefficientsand/orlow


tvalues respectively. However, satisfactory values for R and Q attest the model good explanatoryandpredictivepower. In addition to the estimation of the ACL model for the entire sample, the model has also been estimated for two subgroups. As discussed in Chapter 3.3, reason for travel presents an important situational factor along which airline customers are segmented. Respondents, therefore, have been divided according to their primary reason for air travel. The subgroup of business travelers consists of 75 respondents, while respondents that primarily take leisure trips account for 201 of the total sample. Prior to the subgroup comparison, an estimation of the structural model took place for each subgroup separately. The validation of the measurement model can be waived, since its validity has already been assessed with respect to the entire sample. For the validation of the structural model for each subgroup, only the path coefficients, tvalues, R, and StoneGeisser Q need to be considered. Analyzing differences between the subgroups, four different constellations are possible. Table52inAppendix9providesanoverviewoftheseconstellationsandfurthersummarizes the criteria that need to be fulfilled to make valid statements about the significance of differences between the subgroups. The results of the subgroup comparison are summarizedinTable53,54,and55(inAppendix9).Agraphicalillustrationofthedifferences in the model according to reason for travel is provided in Figure 11 (in Appendix 9). A discussion of the findings is pursued in Chapter 6.5 with respect to answering sub question three(SQ3).

6.5 Discussionofempiricalfindings
Inthischapter,theempiricalfindingsbrieflypresentedintheprevioussectionarediscussed with regard to their contribution to the understanding of drivers of customer loyalty in the airline industry. The following discussion corresponds to the research subquestions one, two, and three formulated in Chapter 1.2. A global contemplation of the findings concludes thechapter.



Relational benefits have been argued to be motivating drivers for customers to engage in longterm relationships with service providers, eventually leading to customer loyalty. The assumption that relational benefits significantly influence customer loyalty in the airline industry is generally confirmed by the empirical results. They indicate that psychological benefits (p=0.154) and functional benefits (p=0.131) have considerable direct influence on customer loyalty. Although widely supported theoretically and empirically in the literature (see Chapter 5.2.1), the direct influence of social benefits on customer loyalty is not confirmed in this study. Instead, a strong indirect influence mediated by the dimensions of relationship quality is confirmed: social benefits significantly influence relationship commitment(p=0.501)andcustomersatisfaction(p=0.399),whichboth,inturn,significantly impact customer loyalty (satisfaction, p=0.481; commitment, p=0.291). Therefore, through theconstructssatisfactionandcommitment,socialbenefitstotaleffectoncustomerloyalty is significant (p=0.283). The strongest total effect of relational benefits on customer loyalty derivefrompsychologicalbenefits(p=0.366).Sincetheconsumptionofservicesisconnected torelativelyhighrisksanduncertainty(seeChapter4.2.1),trustintheserviceproviderplays a crucial role. The measured importance of psychological benefits, therefore, reflects their theoreticalweightand,hence,emphasizesthenomologicalvalidityoftheACLmodel. Further empirical evidence for the models high explanatory power lies within the high R2 of customer loyalty, which indicates that 64.5% of the measured variance of customer loyalty can be explained by the ACL model. Eliminating the relationship quality dimensions satisfaction and commitment, the explained variance decreases to 51.5%, thereby further highlighting the conceptual significance of relationship quality for the customer loyalty model. Of all three types of relational benefits, social benefits have the strongest effect on both relationship quality dimensions. While their influence is stronger on commitment than on satisfaction, both psychological and functional benefits have considerable influence on satisfaction, with functional benefits exhibiting no significant influence on commitment. A possible explanation for these findings lies in the conceptualization of relationship quality in Chapter 4.2.4: customer satisfaction can loosely be described as the result of met expectations. That is, customers are satisfied with their relationship with the brand, if it produces the outcomes they expect from it. Satisfaction, therefore, focuses on the 71

evaluation and assessment of the customerbrand relationships outcomes. The perception of social, psychological, and functional benefits resulting from the relationship with the branddetermineswhethercustomersaresatisfied. In contrast, relationship commitment relates to the evaluation of the relationship itself. It can result from the assessment of the interactions that take place and which constitute the relationship,ratherthanfromtheappraisaloftheoutcomesofthisrelationshipasperceived by the customer. The interaction with the brand is an important element in the conceptualization of social benefits, hence, the particularly strong influence of social benefits on relationship commitment. In contrast, functional benefits are strictly focused on rational aspects of the relationship with the brand. The evaluation of the relationship as such, detached from its outcome, plays only an inferior role for perceived functional benefits,thusimplyingthattherelationshipbetweenfunctionalbenefitsandcommitmentis insignificant. In comparison, the perception of psychological benefits requires some degree of positive assessment of the interaction with the brand. Consequently, an impact of psychological benefits on commitment can be measured albeit smaller than the observed influence of social benefits. Based on this conceptual distinction of satisfaction and commitment the first being particularly outcomeoriented, while the latter is particularly relationshiporiented the rejection of the hypothesis proposing a link between customer satisfactionandrelationshipcommitmentcanalsobeexplained. With respect to SQ1, the following main findings can be summarized: relational benefits positively affect customer loyalty directly and through the two relationship quality dimensions, customer satisfaction and relationship commitment, which act as mediating constructs. Due to their conceptual differences, specific influential paths for each of the relational benefits for customer loyalty can be distinguished: While psychological and functional benefits have a significant direct influence on customer loyalty, no direct link between social benefits and customer loyalty is evident. However, social benefits exhibit significant indirect influence on customer loyalty through satisfaction and commitment. All three types of relational benefits reveal a significant influence on satisfaction, while social benefitsareinparticularcausallyassociatedwithcommitment.Regardingthethreetypesof relational benefits, the strongest total influence on customer loyalty derives from psychological benefits, followed by social and functional benefits, respectively. Including the 72

relationship quality dimensions, satisfaction and commitment, the model explains 64.5% of thevarianceincustomerloyaltytherebyverifyingitshighexplanatorypower.

SQ2:Howdofundamentalairlinebrandperformancecharacteristicsinfluencethe relationalbenefitsperceivedbyairlinecustomers? As discussed in the previous section, relational benefits constitute important drivers of customer loyalty. To reiterate, relational benefits result from the interaction with the brand and the evaluation of the airline brands specific performance characteristics. The following section discusses the influence of airline brand performance characteristics on relational benefits. 66% of the variance in social benefits is explained by brandself congruence (p=0.4), co creation of value (p=0.25), service quality (p=0.133), airline reputation (0.128), perceived value (p=0.12), and FFPattractiveness (p=0.078). While all of the hypotheses concerning the influence of brand performance characteristics on social benefits are confirmed, two key determinants of social benefits come to light: With comparatively high path coefficients, brandself congruence and cocreation of value constitute the main influencing factors of social benefits. At the same time, the postulated influence of these two brand performance variablesonpsychologicalbenefitsarerejected,presentingthemasspecificdeterminantsof social benefits. Accordingly, customers seem to choose brands that are perceived as being similar to their selfconcept, i.e., a brand is not chosen for its ability to meet the customers intrinsic needs but rather for its ability to express and communicate the customers identity to his social environment. Similarly, customers impression of being valued by the airline brand as an active partner in the value creation process seems to positively influence the perception of social benefits that arise from this relationship. Thereby, both brandself congruence and value cocreation are results of an interactive process between the customerandtheairlinebrand.Consideringtheconceptualizationofsocialbenefits,whichis mainlydeterminedbyitsinteractivecharacteristic,thisfindingstronglycorrespondswiththe theoreticalfoundationofthisthesis. With regard to psychological benefits, distinct influencing brand performance factors can be determined: trustworthiness (p=0.306), airline reputation (p=0.237), and service quality 73

(p=0.215) are the key determinants of psychological benefits, followed by the much weaker influencing factor airline country of origin (p=0.125). As already mentioned and previously explained, the initially proposed links between cocreation of value and psychological benefits,andbetweenbrandselfcongruenceandpsychologicalbenefitsarerefuted. With 59.6% of the variance in psychological benefits explained by these brand performance characteristics, they can be ascribed good explanatory power. Furthermore considering that psychological benefits are the most influential relational benefit of customer loyalty these brand performance characteristics gain special momentum in their influence on customer loyalty. With a path coefficient of 0.306, trustworthiness exhibits the strongest influence on psychological benefits and, hence, is one of the most influential brand performance characteristics for customer loyalty. Against the background of comparably high uncertainty and perceived risk in the consumption of services, this finding corresponds to the general scientific notion in marketing that trustworthiness is one of the most important brand characteristics in the service industries. Similarly, airline reputation and service quality as strong influential factors of psychological benefits can be seen as cues for riskreductionand,consequently,uncertaintyavoidance. Concerning causal relationships between airline brand performance characteristics and functional benefits, perceived value is the only variable with significant influence on functionalbenefits(p=0.566).Itsimpactisquitestrongandexplains37.7%ofthevariancein functional benefits. However, due to the average R, other variables that have an influence on functional benefits must exist but have not been considered here. Since perceived value has been conceptualized and was subsequently operationalized primarily as a valuefor money consideration, ticket price and the corresponding service level can be regarded as important factors affecting functional benefits as perceived from the interaction with the airlinebrand. While most of the brand performance characteristics included in the ACL model have previously been tested for their influence on customer loyalty in related studies, CoO and FFP attractiveness have been deliberately added to this study due to their explicit connection with the airline industry. However, only a comparatively weak or even insignificant impact of these two brand performance characteristics on the respective relational benefits was observed within the framework of this study. While controversial 74

opinions concerning the impact of FFPs on loyalty were pointed out in Chapter 3.4, the airline industrys strong focus on FFPs rather negates the notion of a generally low significance of these factors for an airlines success. Therefore, the assumption is put forward that the operationalization of the two constructs did not quite match their considered meaning. Independent of the actual reason for the weak effect of FFP attractiveness and of CoO, further research should be conducted to clarify their relevance forcustomerloyaltyintheairlineindustry.Duetotheirminorsignificanceinthisstudy,they willnotbeconsideredinthefurtherdiscussionoftheACLmodel. With respect to SQ2, the airline brand performance characteristics identified essentially explain the relational benefits perceived by airline customers. Similar to SQ1, specific characteristics of each relational benefit and, accordingly, the effect each relational benefit has on customer loyalty can be determined for SQ2: As the most influential relational benefit, psychological benefits are, to a large extent, shaped by the perceived trustworthiness of an airline, as well as its reputation and service quality. Social benefits as the second most important benefit are strongly affected by brandself congruence and co creation of value. Perceived value is the only brand performance characteristic that influences functional benefits, still explaining 37.7% of the variance. Notably, it must be mentioned that the allocation of brand performance characteristics to the considered relational benefits matches their theoretical conceptualization, thereby reinforcing the ACL modelsvalidity.

SQ3:Howdodifferencesinairlinecustomercharacteristicsmoderatetheairlinecustomer loyaltymodel? It has been argued (see Chapter 3.3) that customers differing situational characteristics constitute important dimensions for segmentation in the airline industry. Customers reasonsfortraveling,i.e.,whethertheyaretravelingforbusinesspurposesorforleisureisa fundamental situational segmentation criterion. The following section addresses the differencesthatemergeintheACLmodel,consideringbothcustomergroupsindividually. In view of the influence of brand performance characteristics on relational benefits, several differences between the two customer segments, business travelers and leisure travelers, 75

can be highlighted. In general, only five of the eight brand performance characteristics significantly impact on business travelers relational benefits, while all brand performance characteristics considerably influence at least one of the relational benefits for leisure travelers. Brandself congruence is the only construct that has a significant influence on social benefits for business travelers. Nevertheless, it explains 70% of the variance in social benefits. Its influence is, furthermore, significantly stronger for business travelers than for leisuretravelers.Basedonthisfinding,itcanbeinferredthatbusinesstravelersexplicitlyuse the airline brand to present who they are or who they want to be to their social environment. The congruence between their selfconcept and how they perceive the brand contributestotheirexpressionoftheirlifestyleandemphasizestheroleandstatustheyhold or aim to hold in society. Business travelers focus on social environment is further supported by the brand performance characteristic with the strongest influence on psychological benefits. While trustworthiness is the most important contributor to the perceptionofpsychologicalbenefitsforleisuretravelers,airlinereputationhasthestrongest influence on psychological benefits for business travelers. Therefore, it can be argued that business travelers relate their airline choice to how society as a whole perceives the given airlineandwhichairlinebusinesstravelersassumetheirsocialenvironmentexpectsthemto fly, rather than concentrating on whether they perceive the airline brand as being trustworthy. While perceived value is the only brand performance characteristic that influences functional benefits for leisure travelers, service quality additionally influences functionalbenefitsforbusinesstravelers.Theimpactofservicequalityisevenstrongerthan that of perceived value. At the same time, the effect of perceived value is significantly stronger for leisure travelers than it is for business travelers. These findings highlight business travelers relative price inelasticity in comparison to that of leisure travelers (see Chapter 3.3). That is, whether business travelers deem functional benefits to emerge from theirrelationshipwiththebrandisdeterminedmorebythequalityoftheservicethanbyits price. Taking into account the direct influence of relational benefits on customer loyalty and the mediating role of the dimensions of relationship quality, further differences between the two subgroups become apparent. First, functional benefits exert no significant direct influence on customer loyalty for business travelers; only an indirect influence through customersatisfactionisevident.Second,theinfluenceofcommitmentoncustomerloyaltyis 76

insignificantforbusinesstravelersaswell.Furthermore,incomparisontotheoverallmodel, the causal relationship between psychologicalbenefits and commitment is rejected for both traveler groups, leaving social benefits as the only relational benefit with an impact on commitment. Social benefits explain 56.3% of the variance in relationship commitment for business travelers, but only 34.7% for leisure travelers. Effected by the insignificant links between functional benefits and customer loyalty and between relationship commitment and customer loyalty, less variance in customer loyalty is evident for business travelers (59.3%)thanforleisuretravelers(67.9%). With respect to the subgroup comparison based on primary reason for air travel, it can be summarized that airline reputation, brandself congruence, perceived value, and service quality influence the respective relational benefits for business travelers. In comparison to the leisure traveler segment, all other identified brand performance characteristics exhibit no significant influence on relational benefits for business travelers. Furthermore, while commitment is wellexplained by social benefits, no significant influence of commitment on customerloyaltyisevidentforthebusinesstravelersegment. From a global perspective, the findings with respect to SQ1 and SQ2 indicate that each type of relational benefit is characterized by specific brand performance characteristics that exhibit a particularly strong influence on them. These key determinants are further distinguished for each relational benefit so that no overlapping can be reported. Furthermore, relational benefits influence customer loyalty in different ways. By depicting these causeeffect relationships in Figure 6, three essential paths to airline customer loyalty can be distinguished: the social path, the psychological path, and the functional path. These paths accentuate the main causeeffectrelationships that lead to customer loyalty in the airline industry and, therefore, represent a meaningful foundation from which to derive managerial implications. However, as the discussion of SQ3 has demonstrated, it should be noted that the general ACL model will demonstrate minor deviations when only specific customersegmentsareconsidered.


Brand-self congruence

Co-creation of value

Social benefits

Customer satisfaction


Airline reputation

Psychological benefits

Customer loyalty

Service quality

Perceived value

Functional benefits

Relationship commitment


The social path The psychological path The functional path

FFP attractiveness


Taking a closer look at the paths, it becomes apparent that they are wellsuited based not only on their empirically verified relationships, but also on their intrinsic logic. The social path to customer loyalty is characterized by the interaction that takes place between the customer and the brand. Both brandself congruence and cocreation of value require the simultaneous consideration of the interplay between the customer and the brand. The psychological path to customer loyalty is initiated by the consideration of airline trustworthiness,airlinereputation,andservicequality.Allthreevariablesarecloselyrelated to the assertion that the engagement in a relationship with the brand is appropriate. While trustworthiness and service quality relate more to a subjective evaluation of the brand, airline reputation contributes to an objective assessment of the brand. Perceived value, again, as the starting point for the functional path to customer loyalty, emphasizes the rationalassessmentofwhatisreceivedinreturnforwhatwasgiven.

7 Managerialimplications
The previous chapter identified three essential paths to airline customer loyalty. Building on these,threemainavenuescanbetakenbyairlinemanagerstostrengthencustomerloyalty. Recommendationswithregardtosubquestionfour(SQ4)arepresentedinthischapter:



7.1 Thesocialpathtoairlinecustomerloyalty
The social path to customer loyalty is characterized by a strong influence of brandself congruence and cocreation of value on social benefits. From there, the social path takes an indirect course toward customer loyalty, involving both customer satisfaction and relationshipcommitment.Foragraphicalillustration,seeFigure7.

Brand-self congruence Social benefits Co-creation of value

Customer satisfaction Customer loyalty Relationship commitment


To achieve brandself congruence, airline management must first assess customers self concepts, i.e., how they see themselves and how they want to be seen by others. Second, recognizingthatcustomersdonotchooseabrandsimplyforitsutilitarianbenefit,butrather use the brand as a resource that supports them in the expression and communication of their identity, it is essential to understand the feelings and associations the brand elicits in customersminds.Thiscanshedlightonthecustomersactualobjectivewhenengagingina relationshipwiththebrand.Third,positivecongruenciesbetweencustomersselfimageand theirperceivedimageofthebrandshouldbeidentified,andbrandtouchpointsspecifictoa givencustomersegmentshouldbedetermined.Finally,thesimilaritiesidentifiedneedtobe emphasized and openly communicated during all customerbrand interactions. Beyond the interactions that take place during the actual air transport and its accompanying activities, management should identify ways in which the brand can become more relevant and prominent in customers everyday lives. Many airlines, e.g., offer their FFP members high quality luggage tags, once they have reached a certain FFP status. Differentiating the colors in accordance with the status achieved allows customers to demonstrate their close relationship with the given airline. Furthermore, offering merchandise (e.g. a luggage line designed in the airlines corporate colors and/or displaying the airlines logo) or distributing 79

giveawaysdepictingthebrandslogo(e.g.sweatshirts,amenitykits)conveysthecustomers experience with the airline brand to his social environment, thereby also making it less ephemeral. The fact that brandself congruence constitutes the most important variable influencing social benefits for the entire sample, as well as for both subgroups presents an additional challenge for airline managers. They need to very carefully and narrowly group customers according to similar selfconcepts and shared perceptions of the brand. To address more than one segment, the messages geared at different segments have to be modified to the segments specific selfimages while at the same timeensuring that these complement each other in order to avoid confusion. Aside from the fact that customers differing social backgrounds influence their selfconcepts, airlines have to take cultural differences into special consideration as well. Against this background, service employees as key brand representatives can function as important intermediaries between the brand and the customer. This, however, requires the simultaneous tackling of two crucial challenges: first, employees have to internalize the brands values and act in the brands best interest. Second, they have to adequately relate these values to customers emotions, feelings, and cultural diversities. Employees empathy, as well as their crosscultural competence should, therefore, be crucial requirements in employee selection. Trainings and internal communication should further sensitize service employees, so they can adequately represent the brands values and respond to the customers needs. Moreover, targeted assignments of regional flight attendants offer an additional possibility for effectively transferring and adapting the brands values to foreign passengers cultures and customs. Thereby, special attention should also be paid to the clear communication and exemplification of the brands values, as well as appropriate rewards for employees achievements. Demonstrating to employees that their work is indeed appreciated and that theycanactivelyinfluencethebrandssuccessinhibitsthepowertoincreaseemployeesjob satisfaction, which, in turn, can positively affect customer satisfaction (cf. Heskett et al., 2008). As the airlines servicechain is characterized by a number of activities (e.g., checkin, boarding, actual flight, baggage claim) in which the customer interacts with different employees in each sequence, the comprehensive training of all employees ensures a consistent communication of the brands key values and a seamless service experience for thecustomer. 80

Besides brandself congruences influence on customer loyalty, the importance of this concept should also be considered with respect to strategic branding decisions. Particularly against the background of ongoing consolidation activities in the airline industry, attention must be paid to the adequate management of airlines brand portfolios: emerging opportunities of communication synergies resulting from brand consolidations should not lead to the omission of the immense risk that lies in the reciprocal imagetransfer effect of these consolidations and the possible consequential disturbance of the brandself congruence,especiallyfortheloyalandvaluablecustomersoftheairlinesinvolved. In addition to brandself congruence, cocreation of value constitutes the second key determinant of social benefits. Therefore, special attention must be paid to the customers active involvement in the creation of the customer experience, as this fosters feelings of belongingness to the brand. Customers involvement in the service process can be, for example, spurred by inviting them to participate in product tests. By reaching out to the customer, the airline demonstrates that its customers opinions and ideas are greatly appreciated. Furthermore, actively seeking customer feedback and suggestions for improvement underlines airlines roles as sponsors of customers valuecreation processes. Aside from traditional feedback opportunities, such as inflight surveys, valued customers can be invited to roundtable meetings where their experiences and future demands are discussed with the airlines service employees. Such discussion sessions exhibit two specific advantages over traditional feedback opportunities. First, customers comments are addressed to those employees that directly interact with them. Second, by actively inviting customers to share their experiences, airline management signals to customers that their comments are highly valued and that they can make an important contribution to service improvements. However, value is not created by only listening to customers concerns. Further action must be taken to process and evaluate customers recommendations. This is achieved be implementing efficient and effective communication processes among customers, service employees, and management to ensure the exchange and timely realization of recommendations. Communication platforms could be created that can reach a large number of employees and generate intensive experiences that are easy to recall while at the same time keeping track of the incurring costs (e.g. mouthtomouth communications,businessTV).


The first path to customer loyalty along social benefits is first and foremost characterized by the direct interaction that takes place between the customer and the brand. Special importance should thereby be attached to the service employees in their function as representatives of the brand. The creation of customer loyalty is based on the reciprocal effect both relationship partners the customer and the brand have on each other. While the brand supports customers in expressing themselves to their social environments, customers,ontheotherhand,canhelpvitalizethebrandintheirsocialsurrounding.

7.2 Thepsychologicalpathtoairlinecustomerloyalty
Originating in trustworthiness, airline reputation, and service quality, the psychological path to airline customer loyalty is the strongest and most efficient, since psychological benefits influence customer loyalty directly as well as indirectly through satisfaction and commitment.ThepsychologicalpathtoairlinecustomerloyaltyisillustratedinFigure8.


Customer satisfaction

Airline reputation

Psychological benefits

Customer loyalty

Service quality

Relationship commitment


In addition to the general significance of a brands trustworthiness with respect to services (seeChapter5.1.4),itsspecialrelevanceintheairlineindustrycanbeexplainedbythegreat number of aspects that are beyond the scope of customers direct control. Studies have found that up to 40% of passengers have some degree of anxiety or feel uneasy when flying (Murphy, 2007). This matter should be taken very seriously by airlines. For customers to perceiveanairlinebrandastrustworthy,thebrandmustdemonstratecredible,reliable,and honestbehavior.Thisimpliesthatairlinesmustbecarefulinwhattheypromisethattheyare abletodeliver.Oncepromisesaremadeandcommunicatedtocustomers,managementhas to ensure that these are kept. Otherwise, the airline brands reliability is jeopardized. In addition, airlines should communicate honestly and timely about what precisely they can deliver. The same applies to incidents in which the airline is unable to deliver on the promises made. In order to uphold the brands trustworthiness, airline managers have to 82

show genuine interest in their customers wellbeing. Reports about safety issues or accidents, for example, should be addressed and clarified as accurately and promptly as possible. Reducing risk and anxiety can further be achieved by creating a safe and comfortable environment for the customer. Again, airline employees should be considered important contributors to this objective. Welltrained employees come across as informed, experienced, and competent. Clean and proper facilities, such as airport areas and the aircraftinterior,canfurtherincreasecustomersperceptionsofsafetyandcomfort. The abovementioned initiatives, while contributing to the brands trustworthiness, can also be related to the second key determinant of psychological benefits: service quality. Training employees to smoothly and competently perform the service processes, for example, can increase customers perception of the airlines degree of customer service. Ergonomically andtechnologicallyadvancedaircraftinteriorsaddtotheperceivedinflightservicelevel.As most initiatives to increase service quality involve increasing costs and it is customers perception of the service that eventually determines the service level airline management needs to have a thorough understanding of what their customers require and what level of service they expect the airline to deliver. Instead of undertaking bold and expensive initiatives, the acceleration of a pronounced service culture and the implementation of programs that actively encourage employees to make suggestions for service improvements can lead to the continuous improvement of the airlines service quality level. Service employees as important intermediaries between customers and management should be regardedasimportantsourcesofintelligence.Furthermore,airlinemanagementneedstobe aware that during the entire duration of their journey, airline travelers interact with a number of service providers that are directly or only indirectly linked to the airline with which they originally booked their ticket. The appearance of airport facilities, the performance of handling agencies, or even the service of partner airlines operating the actualflightonacodeshareagreementallinfluencethelevelofservicequalityperceivedby customers and are projected on the given airline. Therefore, a thorough assessment of the customerschainofactivitiesduringtheirjourneyinsteadofthelimitedfocusontheairlines service chain helps identify important brand touch points that influence customers evaluation of the airlines service quality. Collaborations and partnerships with other service 83

providers participating in the customers journey chain help ensure a consistent and standardizedlevelofservicequality. While trustworthiness and service quality mainly relate to the personal, subjective evaluationofthebrand,airlinereputationreferstohowtheairlineisassessedinsocietyasa whole, thereby describing a rather objective assessment of the brand. In comparison to brand image, which can be different for each stakeholder, airline reputation incorporates the images of multiple stakeholders to create an overall picture of the brand over time (cf. deChernatony,1999).Basedontheresultsofastudyanalyzingtheimportanceofcorporate reputation in the airline context (Graham & Bansal, 2007), the following organizational characteristics are proposed to be significant predictors of customers reputation perceptions: the endorsement of governmental institutions monitoring the airline industry, crash status, and the airlines financial performance. Endorsements can be perceived as objectiveevaluationsoftheairlinesactions.Inadditiontocustomerssubjectiveassessment of the airline, they can help rationalize their evaluation, thereby enhancing the airlines reputation in society. Second, recent accidents or an unusually high record of safety issues can damage the airlines reputation. As already discussed with regard to the airlines trustworthiness,airlinemanagersneedtoensurethattheairlinehasaflawlesssafetyrecord and that appropriate crisis management procedures are in place in case of an unforeseen incident. A strong financial performance further signals to customers that the airline is well managedandpositivelyassessedbyotherstakeholdergroups.Externalcommunicationslike press releases, annual reports, and environmental reports, give airlines the opportunity to address the abovementioned topics. Mentioning pilot and cabin crew training in press releases, for example, can help customers evaluate the flight crews competence, while financial reports help airlines communicate managements skills to make strategic decisions intheairlinesand,consequently,thecustomersbestinterest. From an aggregate consideration of the three key determinants of psychological benefits, uncertainty avoidance can be determined as a common denominator. Based on this observation, the previously discussed suggestions about how to increase the brands trustworthiness, service quality, and reputation have to be regarded with some reservation. Uncertainty avoidance relates to an entrenched feeling. Hence, the three airline brand performancevariablescannotbeeasilyimprovedinashortperiodoftime.Rather,theyhave 84

to be carefully and considerately built over time. Comfort and security cannot be created through a small number of interactions but necessitate anongoing relationship in which the customer is repeatedly assured that the brand can be trusted. Considerable care must be taken not to destroy the confidence in the brand by inconsiderate behavior. Caution should also be exercised when planning the acquisition of or merger with other airlines. Positive safety records, quality standards, and a favorable airline reputation cannot easily be transferred from one brand to the other, while quite the opposite is true for negative impressions.

7.3 Thefunctionalpathtoairlinecustomerloyalty
Compared to psychological and social benefits, functional benefits exhibit the weakest total effect on customer loyalty. Considering the functional path to airline customer loyalty, perceived value is the only variable that significantly affects functional benefits which, in turn,influencecustomerloyaltydirectlyandthroughcustomersatisfaction(seeFigure9).

Customer satisfaction Perceived value Functional benefits Customer loyalty


Perceived value is defined as the outcome of weighing the airlines perceived performance against the perceived ticket price. A positive valueformoney appraisal leads customers to perceive functional/economic benefits as resulting from their relationship with the brand. Basedonthisconceptualization,twogeneralalternativesfortheimprovementofcustomers perceived value emerge: Lowering the perceived price or increasing the perceived service level. The two identified sources of perceived value possibly constitute the most important foundation for the differentiation between lowcost carriers and network carriers. For the most part, network carriers focus on offering a high service level at a corresponding price. Their imageis based on the serviceoffer ratherthan on the price customers have to pay for it. Quite the contrary is true for lowcost carriers approach of delivering value to their customers, which is strongly based on offering lowpriced tickets in return for a reduced 85

level of service. Given the fact that network carriers are pressured to lower their fares on routesonwhichtheydirectlycompetewithlowcostcarriers,aspecialopportunityarisesfor them. While their brands image is related more to a high level of service than to low ticket prices,networkcarrierscanusetheconceptofperceivedvalueasaninterestingcompetitive tool. Charging a comparable price to that offered by lowcost carriers, network carriers can suggest better value for money since customers associate a higher service level with traditionalcarriers. Marketing communications have the greatest potential to change customers perception about the price and/or the service level. Concentrating on the communication of benefits asidefromlowticketpricecanhelpairlinesincreasetheperceivedvalueformoneyratio. To conclude this chapter, the relationship quality dimensions customer satisfaction and relationship commitment need to be addressed. Although these variables were found to emanate the greatest direct influence on airline customer loyalty, no specific managerial recommendations about how to improve them will be formulated. This is first and foremost due to the way in which the ACL model has been developed and depicted. The fundamental understanding of a causeeffect model implies that each construct within the model is influenced by its respective antecedents. Hence, with respect to the two variables of relationship quality it can be argued that the successful realization of the presented recommendations, mostly geared at improving the identified brand performance characteristics, will initially have a positive effect on the respective relational benefits and, consequently,improvecustomersatisfactionandrelationshipcommitment.

8 Conclusion
With regard to the challenges that managers in the airline industry find themselves confrontedwith,thefollowingoverarchingresearchquestionwasformulated: Whatkindofbenefitsdocustomersseekwhentheyengageinrelationshipswithairline brands,andhowcantheserelationshipsstrengthenairlinecustomerloyalty? Based on the review of relevant literature in the fields of customer loyalty, relationship and service marketing, relational benefits were identified as important antecedents to customer 86

loyalty in the airline industry. These relational benefits were defined as benefits that result for customers from relationships with the airline brand, thereby moving beyond the actual benefitoftheservicebeingoffered.Threetypesofrelationalbenefitswerederivedasbeing relevantintheairlinebusiness:social,psychological,andfunctionalbenefits.Basedonthese three types of relational benefits, the airline customer loyalty (ACL) model was developed, depicting causeeffect relationships that lead to airline customer loyalty. The testing of empirical data attested the model strong explanatory power, thereby verifying its value for themanagementofcustomerloyaltyintheairlineindustry. A global contemplation of the empirical findings identified three distinct paths to airline customer loyalty in the ACL model. Each path evolves around one particular type of the observed relational benefits, and thus, they were entitled the social, the psychological, and the functional path. All three paths originate from distinct airline brand performance characteristics, proceedalong the respective types of relational benefits and progress either directly and/or through the relationship qualitydimensions satisfaction and commitment to airline customer loyalty. These influential paths provide airline management with two importantinsightsintothemanagementofairlinecustomerloyalty:Onabroaderlevel,they emphasize the overall importanceof differentbrand performance characteristics relevant in the airline industry, thereby identifying opportunities, as well as risks that lie in their improvement and their deterioration, respectively. On a more specific level, they allow the derivationofconcretemanagementdecisionstoimprovecustomerloyalty. In consideration of the identified paths, a wide spectrum of distinct implications for the improvement of airline customer loyalty has been provided by this thesis. Summarizing these, the following general inference can be pinpointed: The empirical findings accentuate the particular relevance of airlines socialpsychological aspects for customers. Important driversofcustomerloyaltysuchasthecongruencebetweencustomerselfimageandairline brand image, the trustworthiness of the airline brand, as well as the process of value co creation emphasize this notion. These main findings lead to an interesting conclusion: comparable to developments in other industries, functional aspects seem to be important, but, at the same time presupposed, by airline customers. In contrast, socialpsychological benefits have an accentuated role, especially in the building of strong and committed relationshipsbetweencustomersandairlinebrands.Accordingly,managementinitiallymust 87

ensure a basic provision of rather hard service criteria such as the delivery of a flawless service at a reasonable priceperformance ratio. Most importantly, however, airline management must ensure that the service environment enables the realization of a socially and psychologically enriching customer experience. As has been argued in this thesis, successfullydealingwiththesesocialpsychologicalchallengescan,toagreatextent,bemet through appropriate interactions between customers and service employees. The systematized and comprehensive recruitment and training of these employees, as well as the creation of a satisfactory work environment, therefore, constitute important tasks that airlinemanagement needs to address. In addition, customers have to be actively involved in the service process to ensure their satisfaction and commitment in the longrun. The coordination of the different service components, as well as their incorporation in a clear andintegratedcommunicationstrategyfurthersupportsthecreationofaharmoniousbrand imageincustomersminds,whichis thebasisforthedevelopmentofrelationshipsbetween customers and the airline and, moreover, a prerequisite for the development of true customerloyalty. By implementing a holistic perspective on the creation of customer loyalty in the airline industry, this study has developed an innovative approach for its examination. The integration of brand performance characteristics, relational benefits, and the relationship quality concept into the ACL model enables a differentiated analysis of causeeffect relationships of customer loyalty in the airline industry. Furthermore, contributing to the recent discussions about the concept of value cocreation in academic literature, this study has empirically verified that the cocreation of value is an important antecedent to social benefitsand,hence,tocustomerloyalty. Following directions for future research can be addressed: The empirical testing of the modelprovidedsignificantandmeaningfulresultsforthegivensample.However,inorderto make a clear statement about its overall applicability with regard to the entire target population of airline customers, it is proposed to retest the model with a different sample. In order to further affirm the abovementioned conclusion about the predominance of socialpsychological benefits over functional benefits, future studies should examine the particular function of socialpsychological and functional benefits, as well as their interdependency. While the industryspecific brand performance characteristics airline 88

country of origin and FFP attractiveness showed only weak influences on the respective relational benefits, further research should clarify their relevance for the industry. Although the model has been specifically developed to understand drivers of customer loyalty in the airline industry, future research should further develop the three distinct paths to customer loyaltyandtestthemodelsrelevanceinotherserviceindustries. With the development of the ACL model and the identification of the three loyalty paths, this thesis has made an important contribution to marketing science. Future potential research fields have also been addressed. Last but not least, it contributes beneficial knowledge to the airline industry, especially in consideration of the expected further intensification of competition and the forecast consolidation of airlines which calls for the deliberatemanagementofbrandportfolios.



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Quality criteria for the Reflective variables measurement model Loading > 0.7 (better > 0.8) Weights (not relevant) T-values > 1.66 Convergent validity - Ave > 0.6 - Composite reliability > 0.7 Discriminant validity Fornell-Larcker-Criterion Multicollinearity not possible Table18:Qualitycriteriaforthemeasurementmodel16 Formative variables (not relevant) (no specifications) > 1.98 (not possible) (not possible) Composite correlations (< 0.9) Variance inflation factor (VIF) < 10

Itemreliability:Valueandsignificanceofindicatorloadings In PLS individual item reliability is assessed by examining the loadings of the measures with their respective construct (Hulland, 1999, p.198). The loadings should at least exceed 0.6, however a value above 0.8 is recommended for the variables to remain in the model (Herrmann et al., 2006, p.56 in: Huber et al., 2007, p.87). Hulland suggests accepting items with loadings of 0.7 or more and to drop items with loadings less than 0.5 (Hulland, 1999, p.198). The tvalues, which determine the significance of the loadings, should exceed the valueof1.66(Huberetal.,2007,pp.8788). Convergentvalidity While individual item reliability and significance is assessed by the loadings and the respective tvalues, the extent to which all items measuring a specific latent variable demonstrate convergent validity should also be evaluated (Hulland, 1999, pp.198199). PLS reports the internal consistency of a set of items forming a specific scale as composite reliability, a measure developed by Fornell and Larcker (1981, p.45). According to the authors, this measure is superior to Cronbachs alpha since it does not assume that all indicators are equally weighted (cf. Ringle & Spreen, 2007, p.212; Hulland, 1999, p.1999). TheAVE(averagevarianceextracted)measuresthevarianceexplainedbytherelevantlatent variable relative to the amount due to measurement error and, should be above 0.6 (Huber etal.,2007,p.45).



Appendices Discriminantvalidity The discriminant validity indicates the extent to which measures of a given construct differ from measures of other constructs in the same model (Hulland, 1999, p.199). A construct should, therefore, share more variance with its measures than its shares with other constructs in the model in order to constitute a selfcontained construct. The discriminant validity is determined by the FornellLarckerCriterion. For the criterion to be fulfilled, the square rooted AVE of a latent construct needs to be greater than each correlation with anotherconstruct(Hulland,1999,p.200). Unidimensionality Unidimensionality can be assessed by conducting an exploratory factor analysis. It is given, when all indicators of a construct actually load on the construct they are supposed to be measuring, while not loading on any other construct so that a definite allocation of indicators with regard to a construct is possible. For the present analysis, the exploratory factoranalysisisconductedpriortothemodelsestimationinsmartPLS.

Itemreliability:Valueandsignificanceofregressioncoefficients To evaluate formative variables, the weights and the tvalues of the respective indicators need to be evaluated. The weights make a statement about the predictive validity of an indicator with respect to the latent variable possible. The respective tvalue gives evidence to the reliability of the indicator. While there is no threshold specified for the formative variables weights the tvalues should be above 1.98. However, indicators that do not fulfill these criteria cannot easily be eliminated. As a formative construct is defined through the totality of its indicators, omitting an indicator is omitting a part of the construct (Bollen & Lenox,1991,p.308). Discriminantvalidity For formative variables, discriminant validity is achieved when the correlations in the correlationmatrixforthelatentvariablesaresmallerthan0.9(Huberetal.,2007,p.102). Multicollinearity Multicollinearity is given when the indicators of one latent variable are highly correlated among themselves (cf. Hair et al., 2006, p573). This should be avoided for formative 101

Appendices variables (Blunch, 2008, p.155). To test the formative measurement model for potential multicollinearity, the variance inflation factor (VIF) needs to be calculated. The VIF helps evaluatetheextenttowhichthevarianceofanindicatorisexplainedbytheotherindicators of the same construct. A VIF < 10 gives evidence that there is no multicollinearity (Huber et al.,2007,p.98).

Quality criteria for the structural model Path coefficients (no specifications) T-values > 1.66, (critical value; better > 1.98) R > 0.3 Multicollinearity Variance inflation factor (VIF) < 10 Predictive validity (concerning endogenous Stone-Geisser Q (redundancy) > 0 reflective constructs) Table19:Qualitycriteriaforthestructuralmodel17

Valueandsignificanceofpathcoefficients Path coefficients indicate the strength of the causal relationship between two constructs. While Huber et al. (2007, p.45) do not specify any specific value that ought be achieved, in general, a value close to zero indicates a weak causal relationship, whereas a value close to onemarksastrongrelationshipbetweentheconstructs(Ringle&Spreen,2007,p.214).The significance of the path coefficients is determined by the respective tvalues whose critical value is 1.66. However, it is recommended that they are above 1.98 (Huber et al., 2007, p.104). For the hypothesis to be accepted, the plausibility of the path coefficient needs to be further assessed. The sign needs to correspond with the previously postulated relationship. R The determinant of coefficient R specifies the degree of variance explained for all endogenous constructs in a PLS model (Hulland, 1999, p.202). Chin (1998, p.323) characterizes R=0.67 as substantial, R=0.33 as average, and R= 0.19as weak. Hubert et al. (2007, p.107) suggest that for the PLS model to have high explanatory power, R should exceedthevalueof0.3.



Appendices Multicollinearity For each endogenous construct that is explained by two or more latent variables, the structuralmodelalsohastobetestedformulticollinearity,whichshouldbeavoided.Forthe structural model, the variance inflation factor (VIF) should be < 10. In order to conduct a regression analysis in SPSS, weighted construct values for each variable have to be calculated.TheadjustedR,whichresultfromtheregressionareusedforthecalculationsof theVIF. Predictivevalidity ThepredictivevalidityoftheproposedmodelcanbeassessedwiththehelpofStoneGeisser Q. If Q = 1, the observed endogenous variables can be perfectly reconstructed by the model (Fornell & Bookstein, 1982, p.449). For the model to have predictive relevance, Q needstobe>0.






























Characteristic Gender Age Characteristic value Female Male Below 20 20-29 30-39 40-49 50-59 60-69 Above 70 Secondary school High school Further education (Technical, professional) Undergraduate Graduate/PhD Frequency Absolute Percentage 141 51.1% 135 48.9% 6 2.2% 185 67.0% 50 18.1% 16 5.8% 11 4.0% 8 2.9% 0 0% 3 1.1% 29 10.5% 19 6.9% 79 28.6% 139 50.4% 7 2.5% 119 11 77 9 22 23 1 3 11 97 36 45 29 35 34 43.1% 4.0% 27.9% 3.3% 8.0% 8.3% 0.4% 1.1% 4.0% 35.1% 13.0% 16.3% 10.5% 12.7% 12.3%



Student Trainee Company employee Government employee Professional/private business Management Housewife/househusband Retired Other Income Below EUR 20,000 EUR 20,000-35,000 EUR 35,000-50,000 EUR 50,000-65,000 Above 65,000 n/a Table20:Summaryofsurveyparticipantssociodemographiccharacteristics

Characteristic value Business Leisure Several times/week Several times/month Once/month Once every 3 months Once every 6 months Once/year Less than once/year Travel distance Short-haul (domestic, continental) Long-haul (intercontinental) Type of airline Network carrier primarily chosen Low-cost/no-frills carrier Table21:Summaryofsurveyparticipantssituationalcharacteristics

Characteristic Reason for travel Frequency of travel

Frequency Absolute Percentage 75 27.2% 201 72.8% 6 2.2% 29 10.5% 23 8.3% 88 31.9% 75 27.2% 33 12.0% 22 8.0% 190 68.8% 86 31.2% 177 64.1% 99 35.9%



Appendix4:Measurementscalesreviewedforoperationalizationof constructs
Overview of consulted studies Martensen & Grnholdt Development of a customer-based brand equity model linking brand (2004) associations and brand evaluations to customer-brand relationships Chang (1998) Study comparing the validity of theory of reasoned action and theory of planned behavior with respect to their ability to predict unethical behavior Zins (2001) Study investigating the role of relative attitude and commitment in customer loyalty models. Using insights gained from a study in the commercial airline industry Park et al. (2006) Study investigating the impact of service quality and other marketing variables on airline passengers future behavioral intentions Ostrowski et al. (1993) Study investigating the relationship between service quality and retained preferences as a measure of customer loyalty Nadiri et al. (2008) Survey investigating the impact of developed industry-specific service quality dimensions on customer loyalty toward the national airline of Northern Cyprus Andreassen & Lindestad Study investigating the impact of corporate image on quality, customer (1998) satisfaction and loyalty in the Norwegian packaged tour industry Esch et al. (2006) Study investigating the influence of brand knowledge and brand relationships on current and future purchases Grzeskowiak & Sirgy Study investigating the influence of self-image congruence, customer (2008) loyalty, brand-community, and consumption regency on customer wellbeing Han et al. (2008) Study investigating determinants of service loyalty across various service contexts among Chinese consumers Sderlund & Julander Study examining the role of trust in customers satisfaction responses (2003) to poor and good services Rajah et al. (2008) Study exploring the role of co-creation of value for the strengthening of the customer-marketer relationship Long et al. (2006) Study examining the influence frequent flyer programs have on loyalty to the service provider Gwinner et al. (1998) Studies investigating the benefits customers receive as a result of engaging in long-term relational exchanges with service firms Sweeney & Webb (2007) Study examining the influence of functional, psychological, and social relationship benefits on individual and firm commitment to the relationship in a B2B context Hennig-Thurau et al. Study investigating the influence of relational benefits and relationship (2002) quality on relationship marketing outcomes in different service contexts Chang & Chen (2007) Study examining the influence of relational benefits on switching barriers and customer loyalty among Taiwanese airline customers Paul et al. (2009) Testing theory about repeat purchase drivers for consumer services Reynolds & Beatty (1999) Study investigating the influence of relational benefits on satisfaction, loyalty, word of mouth, and purchases in retailing Zhang & Bloemer (2008) Study examining the impact of value congruence on consumer-service brand relationships among consumers of clothing stores and banks in the Netherlands. Beatson et al. (2008) Study examining the impact of employee behavior and relationship quality on customers in the cross-sea passenger transport context Table22:Overviewofconsultedstudies


Social brand performance Brand X is a lifestyle more than a product. I really identify with people who use brand X. I am proud to use brand X.

Martensen & Grnholdt (2004) -> social approval as part of emotional evaluation Chang (1998) subjective norm

Most people who are important to me think I should buy this brand. My friends and familys opinion about the airline (washing powder) I use is. important to me Making my choice, I am concerned about other peoples opinion. Table23:Studiesconsultedwithrespecttosocialbrandperformance Airline image This airline is competent. This airline offers great quality Park et al. (2006) based on: Nha & I have always had a good impression of this airline Gaston (2001) I believe this airline has a better image than its competitors In my opinion, this airline has a good image in the minds of passengers Ostrowski et al. (1993) Carrier image Please choose the airline that is best for each of the following: - convenient schedules - low fares - frequent flyer program - quality of customer service - airline reputation - on-time performance Note: the names of major carriers were listed and respondents were to check their one choice for each criteria Nadiri et al. (2008, p. 270) Availability of low price ticket offerings Consistency of ticket prices with given service Image of the airline company Andreassen & Lindestad (1998, Overall opinion of the company p. 16) Opinion of the companys contribution to society Liking of the company Esch et al. (2006, p. 101) based on: Overall attitude towards the brand Low & Lamb (2000) Perceived quality of the brand The brands overall affect Table24:Studiesconsultedwithrespecttoairlineimage Zins (2001)


Brand-self congruence Do the typical people who buy this brand of coffee match how you see yourself? 1. I can identify myself with the people who buy this brand of coffee. 2. The typical person who buys this brand of coffee matches how I see myself 3. The image of this coffee brand is highly inconsistent with my self-image Do the typical people who shop at this coffee store match how you see yourself? 1. I can identify myself with the people who shop at this store 2. The typical person who comes to this store matches how I see myself. 3. The image of this store is highly inconsistent with my selfimage Do the typical people who work at this coffee store match how you see yourself? 1. I can identify myself with the people who work at this store. 2. The typical person who works at this store matches how I see myself. 3. The image of this stores personnel is highly inconsistent with my self-image. Take a moment to think about. Think about the kind of person who typically uses . Imagine this person in your mind and then describe this person using one or more personal adjectives such as stylish, classy, masculine, sexy, old, athletic, or whatever personal adjectives you can use to describe the typical user of . Once youve done this, indicate your agreement or disagreement to the following statements. is consistent with how I see myself reflects who I am People similar to me fly (wear) is very much like me is a mirror image of me Survey about brand relationships at LMU University Munich Das Markenimage und mein Selbstbild sind in vielen Dingen sehr hnlich. (The brand and how I see myself are very similar) Die Marke sagt viel darber aus, wer ich bin und sein will. (The brand says a lot about who I am and who I want to be) Ich kann mich mit der Marke identifizieren. (I can identify with the brand) Die Marke hat mit mir viel gemein. (The brand and I have very much in common) Die Marke passt zu mir. (The brand suits me)

Grzeskowiak & Sirgy (2008, p. 302) self-image congruence, adapted from direct measures of selfcongruity (Sirgy et al. 1997)

Bruner et al. (2001, p. 513) based on: Sirgy et al. (1997)

Ich sehe hnlichkeiten zwischen dem, wofr die Marke steht und meiner Person. (I think there is a similarity between what the brand stands for and me) Table25:Studiesconsultedwithrespecttobrandselfcongruence


Trustworthiness Brand X is trustworthy and credible Brand X communicates openly and honestly I have great faith in brand X Han et al. (2008, p. 39) Trust This hotel is trustworthy because it is concerned with the customers interests. This hotel treats customers with honesty. This hotel has the ability to provide for my needs. I trust and am willing to depend on this hotel. Sderlund & Julander (2003) based X keeps its promise to me on: Anderson et al. (1994); X does really care for me Ganesan, (1994); Garbarino & I feel I can trust X Johnson (1999); Morgan & Hunt X is concerned about my well-being (1994) I feel confidence with regards to X Table26:Studiesconsultedwithrespecttotrustworthiness Martensen & Groenholdt (2004) Trust and credibility Service quality In-flight comfort - leg-room - chair width Personal service - friendliness - service on board Catering - variety - quality Reliability and customer service - courtesy of employees - employees who are willing to help passengers - employees who have the knowledge to answer passengers' questions - give passengers personal attention - neat appearance of employee - safety of flying - sincere interest in solving problems - on-time performance Convenience and accessibility - convenience of reservation and ticketing - Promptness and accuracy of reservation and ticketing - Check-in service - Frequent flyer program - Promptness and accuracy of baggage delivery - availability of non-stop flight - Convenient flight schedule - seat allocation - amount imposed for overweight baggage In-flight service (Park et al., 2006) - seating comfort - seat space and legroom - meal service - in-flight entertainment services - up-to-date aircraft and in-flight facilities The employees are competent The employees give me individual attention The employees are courteous and forthcoming

Zins (2001)

Park et al. (2006)

Martensen & Grnholdt (2004)


Service reliability (very unreliable/very reliable) Service individuation (very standard/very individualized) Service professionalism (very unprofessional/very professional) Service speed (very slow/very fast) Service facilities (very dated/very advanced) Staff appearance and manner (very inappropriate/very appropriate) Staff interest and caring (very little/very much) Overall service quality (poor/excellent) Table27:Studiesconsultedwithrespecttoservicequality Perceived value Considering the services that the airline offers, are they worth what you paid for them? The ticket price of this airline is reasonable Martensen & Groenholdt (2004) Brand X provides good value for money brand value as dimension of Brand X lives up to my expectations rational evaluation It makes sense to buy brand X instead of any other brand, even if they are the same Andreassen & Lindestad (1998, p. Quality given price 15) Price given quality Table28:Studiesconsultedwithrespecttoperceivedvalue Park et al. (2006) Co-creation of value The company really went out of its way to work with the customer. The final purchase solution was arrived at mainly through the joint effort of the company and the customer. I would describe the situation described as a very high level of purchasing co-creation. Table29:Studyconsultedwithrespecttococreationofvalue Rajah et al. (2008) FFP attractiveness Keeping score Program benefits Flight treatment Administrative issues Table30:StudyconsultedwithrespecttoFFPattractiveness Long et al. (2006) Han et al. (2008)


Social benefits I am recognized by certain employees I am familiar with the employee(s) who perform(s) the service I have developed a friendship with the service provider They know my name I enjoy certain social aspects of the relationship We have more than a formal business relationship with them We have a real friendship with them We work on things together We share information I am recognized by certain employees. I enjoy certain social aspects of the relationship. I have developed a friendship with the service provider. I am familiar with the employee(s) that perform(s) the service.

Gwinner et al. (1998)

Sweeney & Webb (2007)

Hennig-Thurau et al. (2002)

They know my name. I enjoy certain social aspects of the relationship Some airline employees know my name I have developed friendships with certain airline employees Paul et al. (2009) Affiliation: it creates a feeling of attachment to the airline or other people there. Altruism: it allows me to do something good for the airline or others Communication: it allows me to have enjoyable interactions with the employees or other customers Community: it helps to ensure that I can live in a thriving community Table31:Studiesconsultedwithrespecttosocialbenefits Chang & Chen (2007) Psychological benefits I feel I can trust this airline I am not worried when I fly on this airline I am confident that the service will be performed correctly by this airline Sweeney & Webb (2007) B2B We have peace of mind in dealing with them context We trust them We know what to expect of/from them If they give us their word, we know that whatever it is, it will be done There's a real sense of understanding between us Gwinner et al. (1998) confidence I believe there is less risk that something will go wrong benefits I feel I can trust this airline (service provider) I have more confidence the service will be performed correctly I have less anxiety when I buy the service I know what to expect when I buy a ticket for this airline (go in) I get the airline's (provider's) highest level of service Paul et al. (2009) That airline [brand company] [most important attribute] is important to me, because Autonomy: it allows me to decide and act on my own Comfort: it helps me to feel less stress then when there Confidence: it helps me to trust Privilege: it makes me feel like a preferred customer Welcomeness: it makes me feel welcome as a customer Table32:Studiesconsultedwithrespecttopsychologicalbenefits Chang & Chen (2007) confidence benefits


Functional benefits I value the convenience benefits my airline (sales associate) provides me very highly. I value the time saving benefits my airline (sales associate) provides me very highly. I benefit from the advice my sales associate gives me. I make better purchase decisions because of my sales associate. Chang & Chen (2007) special I can get faster service if necessary treatment benefits I am placed higher on the stand-by lost when the flight is full This airline will manage to give me a seat when the flight is full This airline will upgrade my seat when possible Gwinner et al. (1998) special I get discounts or special deals that most customers do not treatment benefits get I get better prices than most customers They do services for me that they do not do for most customers I am placed higher on the priority list when there is a line I get faster service than most customers. Paul et al. (2009) That airline [brand company] [most important attribute] is important to me, because Convenience: it helps me to save time and effort Knowledge: it allows me to feel informed Money savings: it helps me to save money Table33:Studiesconsultedwithrespecttofunctionalbenefits Reynolds & Beatty (1999) Customer satisfaction Overall, how satisfied are you with the airline's service quality? My choice to use this airline was a wise one I think that I did the right thing when I decided to use this airline Hennig-Thurau et al. (2002) My choice to use this airline (company) was a wise one. I am always delighted with this airline's (firms) service. Overall, I am satisfied with this airline (organization). I think I did the right thing when I decided to use this airline (firm). Zhang & Bloemer (2008) adapted Compared to other airlines (banks), I am very satisfied with X from: Bettencourt (1997) Based on all my experience with X, I am very satisfied My experiences at X have always been pleasant Overall, I am satisfied with X Martensen & Groenholdt (2004) Overall, how satisfied are you with brand X? satisfaction as dimension of rational How well does brand X meet your expectations? evaluation When thinking of your ideal brand, how well does brand X compare? Andreassen & Lindestad (1998, Overall satisfaction p. 16) Comparison with an ideal package tour company Congruence with expectations Han et al. (2008, p. 39) I am satisfied with my experiences in this hotel. I have had pleasurable stays in this hotel. I am satisfied with this hotel overall. My experiences at this hotel have exceeded my expectations. It was wise of me to stay at this hotel. Table34:Studiesconsultedwithrespecttocustomersatisfaction Park et al. (2006) based on: Oliver (1980)


Relationship commitment My relationship to this specific airline (service provider) . . . - is something that I am very committed to. - is very important to me. - is something I really care about. - deserves my maximum effort to maintain. Beatson et al. (2008) I am loyal to [firm name]. I am committed to my relationship with [firm name] because I like being associated with them I feel strongly attached to [firm name]. I would like to develop a long term relationship with [firm name]. I feel a sense of belonging to [firm name]. Table35:Studiesconsultedwithrespecttorelationshipcommitment Hennig-Thurau et al. (2002) Repurchase intention Nadiri et al. (2008)

Chang & Chen (2007) Zhang & Bloemer (2008) adapted from: Lam et al. (2004); Zeithaml et al. (1996) Positive word-of-mouth Nadiri et al. (2008)

I consider this airline company first choice for air transportation. I will consider this airline company more for air transport in the next few years. I will continue patronizing this airline. I consider X as my first choice for airlines (banks). I will do more business with X in the next few years. If I had to do it over again, I would make the same choice. I say positive things about this airline company to other people. I recommend this airline company to someone who seeks my advice. I encourage my friends and relatives to fly with this airline company. I say positive things about this airline to others. I recommend this airline to others. I often recommend this airline (service provider) to others. I say positive things about X to other people. I recommend X to people who seek my advice. I encourage friends and relatives to do business with X. I am very interested in brand X.

Chang & Chen (2007) Hennig-Thurau et al. (2002) Zhang & Bloemer (2008) adapted from: Fullerton (2003); Zeithaml et al. (1996) Willingness to interact Martensen & Groenholdt (2004) engagement Willingness to pay more Zhang & Bloemer (2008)

I am willing to continue to do business with X, even if its prices increase. I am willing to pay a higher price than other airlines (banks) charge for the benefits I currently receive from X. Table36:Studiesconsultedwithrespecttocustomerloyalty



Model constructs Measurement items 1. Most people who are important to me like this airline. 2. My friends and family highly value this airline. 3. I am proud to fly with this airline. 4. This airline represents a specific lifestyle. 5. I think that a lot of people have a high opinion about this airline. 1. I have always had a good impression of this airline. 2. I believe this airline has a better image than its competitors. 3. In my opinion, this airline has a good image in the minds of passengers. 4. I think that this airline has a good reputation in society. 1. The brand image and how I see myself are very similar. 2. The brand says a lot about who I am and who I want to be. 3. I can identify with the brand. 4. The brand and I have very much in common. 5. I think there is a similarity between what the brand stands for and me. 6. The brand suits me. 1. This airline is upright and sincere. 2. This airline cares about my needs. 3. This airline is concerned about my well-being. 4. This airline is trustworthy and credible. 5. This airline communicates openly and honestly. 1. The employees of this airline are willing to help passengers. 2. The employees of this airline are able to answer passengers questions in a satisfactory way. 3. The employees of this airline give passengers personal attention. 4. This airline offers high seating comfort. 5. This airline offers great meal service. 6. This airline offers great in-flight entertainment. 7. The reservation and ticketing is prompt and accurate. 8. The check-in service of this airline is very good. 9. This airline offers a convenient flight schedule. Perceived 1. Considering the services that this airline offers, they are worth what I pay for them. value 2. The ticket price of this airline is reasonable. 1. If necessary, this airline really goes out of its way to react to my need. 2. If there is a problem, this airline is interested in what I have to say. 3. This airline tailors its service to my needs. 4. I find it easy to contact this airline. 5. I feel that my comments and concerns are highly valued by this airline. 6. This airline is responsive to me needs. 7. I have experienced this airline offering non-standardized levels of service to me. 1. I have a favorable opinion about the country this airline originates from. 2. I really like this airlines country-of-origin. 3. I have a very good impression about this airlines country-of-origin. 4. I feel comfortable about this airlines country-of-origin.


Co-creation of value

Service quality


Brand-self congruence

Airline image

Social brand performance


FFP attractiveness Functional benefits Psychological benefits Social benefits 1. This airlines frequent flyer program is very attractive. 2. This airlines frequent flyer program offers desirable benefits. 3. It is easy to redeem benefits earned from this airlines frequent flyer program. 4. This airlines frequent flyer program helps me reduce the cost of air travel. 5. This airlines frequent flyer program treats members better than other travelers who do not belong to the program. 6. Being a member of this airlines frequent flyer program makes me feel special. 1. The interaction with this airline and its employees is enjoyable. 2. Dealing with this airlines employees gives me a sense of harmony. 3. Traveling with this airline, I perceive a feeling of familiarity. 4. This airline emphasizes my role in society. 5. This airline complements my social status. 6. This airline supports my lifestyle. 1. I feel I can trust this airline. 2. I am less worried when I fly with this airline. 3. I am confident that the service will be performed correctly by this airline. 4. I believe there is less risk that something will go wrong. 5. I know what to expect from this airline. 6. I have less anxiety when I buy a ticket for this airline. 7. I feel secure and comfortable with this airline. 1. This airline saves me time and effort. 2. I feel confident in my purchase decision when I buy a ticket for this airline. 3. Compared to other airlines, I have the feeling to save money when I buy a ticket for this airline. 4. It is easy and convenient to use this airline. 1. 2. 3. 4. 5. 6. 1. Overall, I am very satisfied with this airline. I am always delighted with this airlines service. It is wise of me to fly with this airline. I think I do the right thing when I decide to use this airline. My experiences with this airline exceed my expectations. In comparison to other airlines, I am very satisfied with this airline. I am very committed to my relationship to this airline.

Relationship commitment Loyalty

Customer satisfaction

2. My relationship to this airline is very important to me. 3. I really care about my relationship to this airline. 4. My relationship to this airline deserves my maximum effort to maintain.

1. I say positive things about this airline to others. 2. I recommend this airline to others. 3. I consider this airline the first choice for air transport. 4. I will consider this airline for air transport in the next few years. 5. I consider myself to be loyal to this airline. Table37:Measurementitemsincludedinquestionnaire



KMO- und Bartletts Test Kaiser-Meyer-Olkin measure of sampling adequacy ,920 Approx. Chi-sq. 9439,231 df 741 Sig. ,000 Table38:KMOandBartletttestforconstructsofbrandperformancecharacteristics Bartletts Test of Sphericity Rotated component matrix Component 3 4 5 6

1 2 7 Bsc4 ,866 Bsc5 ,863 Bsc3 ,851 Bsc2 ,840 Bsc1 ,823 Bsc6 ,801 Spb4 ,614 Spb3 ,592 CoV6 ,833 CoV2 ,831 CoV5 ,816 CoV3 ,783 CoV1 ,716 CoV7 ,696 CoV4 ,569 AirI4 ,749 AirI3 ,732 ,430 Sbp2 ,716 Sbp1 ,714 AirI2 ,696 Spb5 ,690 AirI1 ,547 FFP2 ,868 FFP1 ,826 FFP3 ,826 FFP4 ,711 FFP5 ,698 FFP6 ,678 CoO2 ,943 CoO3 ,928 CoO4 ,914 CoO1 ,884 Trustw4 ,710 Trustw5 ,662 Trustw1 ,650 Trustw2 ,631 Trustw3 ,600 Perv2 ,917 Perv1 ,900 Table39:Rotatedcomponentmatrixforconstructsofbrandperformancecharacteristics


Deleted before PLS analysis

Merged to become indicators for airline reputation


KMO- und Bartletts Test Kaiser-Meyer-Olkin measure of sampling adequacy Approx. Chi-sq. df Sig. Table40:KMOandBartletttestforconstructsofrelationalbenefits Bartletts Test of Sphericity ,902 3239,738 136 ,000

Rotated component matrix Component 1 2 3 Remarks PsyBen4 ,865 PsyBen7 ,841 PsyBen2 ,834 PsyBen6 ,789 PsyBen3 ,728 PsyBen1 ,688 PsyBen5 ,650 SocBen4 ,881 SocBen5 ,866 SocBen6 ,813 SocBen2 ,724 SocBen3 ,691 SocBen1 ,579 FunBen4 ,743 FunBen3 ,733 FunBen1 ,680 Deleted before FunBen2 ,534 ,585 PLS analysis Table41:Rotatedcomponentmatrixforconstructsofrelationalbenefits KMO- and Bartletts Test Kaiser-Meyer-Olkin measure of sampling adequacy ,877 Approx. Chi-sq. 2337,254 df 45 Sig. ,000 Table42:KMOandBartletttestforconstructsofrelationshipquality Bartletts Test of Sphericity Rotated component matrix Component 1 2 Sat1 ,840 Sat4 ,831 Sat6 ,794 Sat2 ,785 Sat3 ,779 Sat5 ,740 Comm3 ,951 Comm2 ,940 Comm4 ,910 Comm1 ,778 Table43:Rotatedcomponentmatrixforconstructsofrelationshipquality


KMO- und Bartletts Test Kaiser-Meyer-Olkin measure of sampling adequacy Approx. Chi-sq. df Sig. Table44:KMOandBartletttestforcustomerloyaltyconstruct Component matrix Component 1 ,867 ,858 ,855 Bartletts Test of Sphericity ,803 841,467 10 ,000

Loy2 Loy1 Loy3

Loy5 ,814 Loy4 ,776 Table45:Componentmatrixforcustomerloyaltyconstruct

Discriminant validity for reflective variables
AirRep Bsc AirRep Bsc CoO CoV Comm FFP FunBen Loyalty Perv PsyBen Sat Servq SocBen Trustw 0,796 0,466 0,906 0,352 0,270 0,944 0,532 0,510 0,217 0,828 0,477 0,572 0,221 0,560 0,291 0,276 0,095 0,313 0,193 0,168 0,106 0,221 0,600 0,465 0,282 0,508 0,182 0,118 0,003 0,237 0,661 0,410 0,377 0,562 0,624 0,477 0,256 0,617 0,666 0,429 0,283 0,644 0,581 0,680 0,261 0,661 0,667 0,539 0,320 0,632 0,923 0,301 0,787 0,185 0,145 0,578 0,298 0,077 0,117 0,462 0,263 0,473 0,227 0,420 0,328 0,611 0,362 0,430 0,276 0,805 0,453 0,597 0,273 0,505 0,325 0,272 0,239 0,834 0,411 0,952 0,606 0,234 0,830 0,746 0,541 0,659 0,820 0,595 0,374 0,664 0,667 1,000 0,572 0,309 0,585 0,681 0,622 0,567 0,312 0,692 0,661 0,689 0,810 0,635 0,856 CoO CoV Comm FFP Fun Ben Loyalty Perv Psy Ben Sat Servq Soc Ben Trustw

Note: Numbers in bold are root squared AVE = AVE^0,5

Table46:Latentvariablecorrelations Discriminant validity for formative variable

AirRep Servq Construct correlation < 0.9 0,666 Bsc 0,429 CoO 0,283 CoV 0,644 Comm 0,420 FFP 0,328 FunBen 0,325 Loyalty 0,595 Perv 0,374 PsyBen 0,664 Sat 0,667














Indicators Weights t-statistics Adjusted R VIF= 1/1-R < 10 Servq1 0,181 1,829 0,626 2,67 Servq2 0,152 1,765 0,595 2,47 Servq3 0,125 1,315 0,595 2,47 Servq4 0,143 1,452 0,582 2,39 Servq5 0,259 2,618 0,531 2,13 Servq6 0,001 0,011 0,536 2,16 Servq7 0,277 2,813 0,538 2,16 Servq8 0,086 0,821 0,530 2,13 Servq9 0,190 2,725 0,332 1,50 Table48:Calculationofvarianceinflationfactor(VIF)forservicequality

Endogenous construct R Social benefit 0,660 Psychological benefit 0,596 Functional benefit 0,377 Satisfaction 0,650 Commitment 0,391 Loyalty 0,645 Table49:Coefficientsofdetermination(R)forendogenousconstructs Calculation of VIF for social benefits Regression on Adjusted R VIF = 1/1-R AirRep 0,391 1,642 Bsc 0,303 1,435 Servq 0,516 2,066 Perv 0,109 1,122 CoV 0,464 1,866 Calculation of VIF for psychological benefits Regression on Adjusted R VIF = 1/1-R AirRep 0,443 1,795 Bsc 0,336 1,506 Trustw 0,536 2,155 Servq 0,53 2,128 CoV 0,479 1,919 CoO 0,116 1,131 Calculation of VIF for functional benefits Regression on Adjusted R VIF = 1/1-R Trustw 0,437 1,776 Servq 0,424 1,736 Perv 0,135 1,156 CoO 0,102 1,114 FFP 0,053 1,056


Calculation of VIF for satisfaction Regression on Adjusted R VIF= 1/1-R SocBen 0,26 1,351 PsyBen 0,264 1,359 FunBen 0,054 1,057 Calculation of VIF for commitment Regression on Adjusted R VIF= 1/1-R SocBen 0,377 1,605 PsyBen 0,425 1,739 FunBen 0,177 1,215 Sat 0,567 2,309 Calculation of VIF for loyalty Regression on Adjusted R VIF= 1/1-R SocBen 0,47 1,887 PsyBen 0,44 1,786 FunBen 0,174 1,211 Sat 0,567 2,309 Comm 0,36 1,563
Note: Highest VIF for each construct is marked in bold

Table50:Calculationofvarianceinflationfactors(VIF)forstructuralmodel StoneEndogenous construct Geisser Q Social benefit 0,427 Psychological benefit 0,405 Functional benefit 0,244 Satisfaction 0,435 Commitment 0,316 Loyalty 0,437 Table51:StoneGeisserQforendogenousconstructs



R= 0.66 Social benefits

0.4 (8.80)

Airline reputation R= 0.65 Customer satisfaction

Brand-self congruence

0.40 (8.86)

0.04 (0.59)

Service quality Psychological benefits

0.15 (2.81)

Customer loyalty R= 0.645

R= 0.596

Perceived value

Co-creation of value Functional benefits R= 0.377

-0.01 (0.23)

Relationship commitment R= 0.391


FFP attractiveness

NOTE:Numbersare pathcoefficients.Numbersinbracketsare tvalues. Dottedlinesindicate nonsignificant paths.Rindicatesthe amountof variance explained.




Combination Combination 1 Combination 2 Group comparison The hypothesis is rejected for both sub-groups. Hence, there is no significant difference between the sub-groups. The assessed values for the evaluated hypothesis are identical for both sub-groups. Hence, there is no significant difference between the subgroups. The hypothesis is accepted for one sub-group but rejected for the other. Hence, there is a significant difference between the sub-groups. The hypothesis is accepted for both sub-groups. By means of a t-test it has to be evaluated whether the difference is significant. The difference between the sub-groups is significant for a calculated t-value > 1.66 (=10%) or > 1.98 (=5%). According to Chin (2002):

Combination 3 Combination 4


2 p1 x px 1 1 + S* m n

n m ;

(m 1)2

* ( ( p )) +
1 x 2

(n 1)2

2 2 * ( ( p x ))

Size of sub-group 1 Size of sub-group 2 Estimate of the original sample with regard to the model association of interest in both sub-groups Standard error of the generated bootstrap sample ); Table52:Criteriafortheevaluationofsignificantdifferencesbetweensubgroups18
AirRep PsyBen Sample 1 Sample 2 Standard error 1 Standard error 2 Path coefficient 1 Path coefficient 2 S T-value Difference significant 75 201 0,127 0,073 0,302 0,186 1,054 0,813 No Bsc FunBen SocBen Sat 75 201 0,093 0,048 0,525 0,357 0,714 1,729 Yes 75 201 0,084 0,050 0,373 0,279 0,714 0,977 No Perv FunBen 75 201 0,142 0,071 0,368 0,620 1,063 -1,753 Yes PsyBen Loy 75 201 0,124 0,061 0,257 0,128 0,922 1,032 No PsyBen Sat 75 201 0,107 0,054 0,225 0,391 0,805 -1,520 No Sat Loy 75 201 0,161 0,070 0,468 0,491 1,109 -0,153 No SocBen SocBen Comm Sat 75 201 0,121 0,089 0,574 0,464 1,204 0,678 No 75 201 0,098 0,056 0,380 0,401 0,804 -0,192 No





Business Hypothesis Airline reputation Social benefit Airline reputation Psychological benefit Brand-self congruence Social benefit Brand-self congruence Psychological benefit Country of origin Psychological benefit Country of origin Functional benefit Co-creation of value Social benefit Co-creation of value Psychological benefit FFP attractiveness Social benefit FFP attractiveness Functional benefit Perceived value Social benefit Perceived value Functional benefit Service quality Social benefit Service quality Psychological benefit Service quality Functional benefit Trustworthiness Psychological benefit Trustworthiness Functional benefit Social benefit Satisfaction Social benefit Commitment Social benefit Loyalty Psychological benefit Satisfaction Psychological benefit Commitment Psychological benefit Loyalty Functional benefit Satisfaction Functional benefit Commitment Functional benefit Loyalty Satisfaction Commitment Path Tcoefficients values Results 0,084 0,302 0,525 0,098 -0,010 0,009 0,124 0,074 0,053 -0,008 0,080 0,368 0,159 0,197 0,383 0,259 0,035 0,380 0,574 -0,145 0,225 0,153 0,257 0,373 0,117 0,100 -0,003 0,872 rejected 2,376 accepted 5,648 accepted 0,830 rejected 0,128 rejected 0,100 rejected 1,160 rejected 0,643 rejected 0,664 rejected 0,067 rejected 0,766 rejected 2,591 accepted 1,245 rejected 1,553 rejected 2,047 accepted 1,718 accepted 0,279 rejected 3,885 accepted 4,727 accepted 0,868 rejected 2,113 accepted 1,527 rejected 2,070 accepted 4,432 accepted 1,304 rejected 0,956 rejected 0,024 rejected Leisure Path Tcoefficients values Results 0,155 0,186 0,357 -0,071 0,169 0,112 0,277 0,088 0,124 0,030 0,121 0,620 0,126 0,239 -0,007 0,330 -0,041 0,401 0,464 -0,042 0,391 0,107 0,128 0,279 -0,049 0,153 0,093 2,550 accepted 2,528 accepted 7,433 accepted 1,136 rejected 2,707 accepted 1,631 rejected 3,638 accepted 1,098 rejected 2,500 accepted 0,538 rejected 2,504 accepted 8,780 accepted 1,633 rejected 2,856 accepted 0,042 rejected 3,817 accepted 0,509 rejected 7,169 accepted 5,212 accepted 0,604 rejected 7,273 accepted 1,304 rejected 2,096 accepted 5,561 accepted 0,724 rejected 2,964 accepted 1,047 rejected 7,039 accepted 6,445 accepted

Satisfaction Loyalty 0,468 2,899 accepted 0,491 Commitment Loyalty 0,211 1,274 rejected 0,317 Table54:Hypothesistesting;subgroupcomparisonofbusinessandleisuretravelers19




Business R 0,700 0,628 0,457 0,656 0,563 0,593 Leisure R 0,659 0,604 0,380 0,659 0,347 0,679

Construct Social benefits Psychological benefits Functional benefits Satisfaction Commitment

Loyalty Table55:ComparisonofRforbusinessandleisuretravelers



R B= 0.7 R L= 0.659
0.53 0.36

Airline reputation R B = 0.656 R L= 0.659

0.38 0.4

Brand-self congruence

Social benefits

Customer satisfaction

-0.0 0.09

Service quality Psychological benefits

0.26 0.13

Customer loyalty R B = 0.593 R L= 0.679

Perceived value

R B= 0.628 R L= 0.604

Co-creation of value Functional benefits R B= 0.457 R L= 0.380

0.12 - 0.05

Relationship commitment R B= 0.563 R L= 0.347


FFP attractiveness

NOTE:Topnumbersare pathcoefficientsforbusinesstravelers.Bottomnumbersare pathcoefficientsforleisuretravelers. Dottedlinesindicate nonsignificant paths.Boldlinesindicatesignificantdifferencesbetweensubgroups. RB referstovariance explainedforbusinesstravelers.RL referstovariance explainedforleisuretravelers.