An Augmented Model of Customer Loyalty For Organizational Purchasing of Financial Services

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An Augmented Model of Customer Loyalty for Organizational Purchasing

of Financial Services
Yew-Wing Lee a; Steven Bellman b
a
Arab Insurance Group, University of Western Australia, Perth, Australia b Interactive Television
Research Institute (ITRI), Murdoch University, Perth, Australia
To cite this Article Lee, Yew-Wing and Bellman, Steven(2008) 'An Augmented Model of Customer Loyalty for
Organizational Purchasing of Financial Services', Journal of Business To Business Marketing, 15: 3, 290 322
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An Augmented Model of Customer

Loyalty for Organizational Purchasing
of Financial Services
1547-0628
WBBM
Journal
of Business-to-Business Marketing
Marketing, Vol. 15, No. 3, July 2008: pp. 151
Downloaded By: [Romanian Ministry Consortium] At: 19:52 2 March 2010
Yew-Wing OF
JOURNAL
LeeBUSINESS-TO-BUSINESS
and Steven Bellman
MARKETING
Yew-Wing Lee
Steven Bellman
ABSTRACT. Purpose. To understand how the drivers of loyalty in

business-to-business (B2B) markets for financial services might be moderated by short- versus long-term relational orientation to help companies in
those markets optimize the allocation of their marketing resources.
Methodology/Approach. The basis of this study was the European
Customer Satisfaction Index (ECSI) model of customer loyalty, which was
relevant for this B2B market because the ratio of customers to suppliers
was large and, therefore, similar to a business-to-consumer (B2C) market.
Partial least squares (PLS) was used to estimate the ECSI model in two
groups defined by a median split on Ganesans (1994) buyers relational
orientation (BRO) scale.
Findings. Buyers relational orientation was a significant moderator of
several relationships in the ECSI model. For buyers with a higher (longterm) BRO, loyalty was driven by satisfaction, corporate image, product
quality, and service quality. For buyers with a lower (short-term) BRO,
what little loyalty existed was driven by product quality alone, rather than
service quality, image, or satisfaction.
Yew-Wing Lee is Singapore Branch Manager for the Arab Insurance Group
(Arig). This research is based on his DBA thesis, completed as a student of the
University of Western Australia, Perth, Australia (E-mail: lee.w@arig.com.sg).
Steven Bellman is Associate Professor and Deputy Director of the Interactive
Television Research Institute (ITRI), Murdoch University, Perth, Australia.
Address correspondence to: Steven Bellman, Interactive Television Research
Institute, Murdoch University, South Street, Murdoch, WA 6150, Australia
(E-mail: S.Bellman@Murdoch.edu.au).
290
Journal of Business-to-Business Marketing, Vol. 15(3) 2008

Available online at http://www.haworthpress.com
2008 by The Haworth Press. All rights reserved.
doi:10.1080/15470620802059299
Yew-Wing Lee and Steven Bellman
291
Originality/Value/Contribution. This study demonstrates the usefulness

of testing for differences in the drivers of loyalty for customers with
short-versus long-term relational orientation. The management implications are the usefulness of adopting a portfolio approach to managing
financial services customers by (1) segmenting customers into high and
low BRO groups and (2) implementing different marketing approaches for
these two segments.
KEYWORDS. Customer loyalty, financial services, satisfaction, relational

orientation, moderating effect, portfolio approach, partial least squares
Customer loyalty has been the subject of much research during recent
years because of the belief that higher loyalty leads to better results in the
marketplace due to higher price tolerance, favorable word-of-mouth, and
opportunities for cross-selling (Reichheld and Sasser 1990). There have
been concerns, however, that the extensive customer satisfaction programs adopted by companies to promote customer loyalty might have had
a negative impact on their profitability (Westbrook 1997). This study
set out to understand the drivers and moderators of loyalty in businessto-business (B2B) markets for financial services and to help companies in
those markets optimize the allocation of their limited resources by
targeting expensive customer-relationship strategies only to the customer
segments where they would be most effective (Martensen, Grnholdt, and
Kristensen 2000).
The importance of satisfaction as a key driver of loyalty in business
relationships has been examined in more than seventy studies since 1970
(Geyskens, Steenkamp, and Kumar 1999). The conceptual model that
forms the basis of this study is the European Customer Satisfaction Index
(ECSI) model of customer loyalty. Although it was developed to measure
loyalty in end-consumer markets, it has previously been used in a B2B
context (Kristensen, Martensen, and Grnholdt 2000) and has advantages
over other models of B2B loyalty because of its conceptual simplicity and
its relative ease of measurement. Many studies have demonstrated the fit
and validity of the ECSI model. However, it is relevant for B2B markets
only if the number of customers for each supplier is large, necessitating
the use of customer relationship management (CRM) software to keep
track of customer information. Such B2B markets are very similar to
consumer markets. In B2B markets with smaller numbers of customers,
customer relationships are conducted through personal relationships and
292
JOURNAL OF BUSINESS-TO-BUSINESS MARKETING
are better understood using network analysis and longitudinal case studies
(the Industrial Marketing and Purchasing [IMP] Group approach, see,
e.g., Ford et al. 2002).
There are other variables, besides satisfaction, that are relevant in
organizational buying but not in consumer buying and vice versa
(Patterson, Johnson, and Spreng 1997). An extensive review of the B2B
marketing literature revealed that a major constructa buyers relational
orientation (BRO), which is not present in the ECSI modelis an important predictor of customer loyalty in B2B markets (Anderson and Weitz
1992; Cannon and Perreault 1999; Ganesan 1994; Reichheld 2001). This
study augmented the original ECSI model by using BRO to segment
customers in a B2B context into high and low BRO groups, which would
allow sellers to use a portfolio approach to managing their relationships
with their customers.
In the Kraljic (1983) portfolio approach to business purchasing, strategic items with high profit impact and high supply risk are differentiated
from other items with either lower profit impact or lower supply risk. For
strategic items, customers are advised to take a collaborative approach to
purchasing or, in other words, to adopt a long-term relational orientation
with the supplier. In contrast, for leverage items (high profit impact, low
supply risk), a transactional approach that exploits the customers purchasing power is recommended. Reduction of suppliers, in effect adopting a long-term relational orientation, can also be an effective way of
reducing transaction costs (Kalwani and Narayandas 1995) for noncritical
items (low profit impact and supply risk) and ensuring delivery for bottleneck items (low profit impact but high supply risk). The more sophisticated a company is in terms of its purchasing strategy the more likely it is
that the company uses a portfolio approach to purchasing (Gelderman and
van Weele 2005), and therefore the more likely it is that the firm adopts a
high BRO approach for some suppliers and a low BRO approach to others. Although there is little evidence so far that customer firms adopt a
portfolio approach to buying services (e.g., van der Valk, Wynstra, and
Axelsson 2005), there are strong theoretical reasons for assuming that
customers differentiate between staff (MRO) and line (production) services, with critical services requiring greater vertical and horizontal management involvement, at least for new buys (Fitzsimmons, Noh, and
Thies 1998), and presumably adopt a strategic, high BRO approach for
these critical services as well.
Portfolio approaches have also been recommended for sellers in B2B
markets. Walter, Ritter, and Gemnden (2001) proposed that customers
293
can be mapped using two dimensions of value for the supplier. Value can
be direct or indirect, depending on whether the value received comes from
the customer (direct) or is derived from sales to other companies, or future
developments, made possible by the relationship with that customer
(indirect). High-performing relationships deliver on both dimensions. Our
portfolio approach differs from that proposed by Walter, Ritter, and
Gemnden (2001) because the market we are considering is the reverse of
their study: they looked at many small suppliers (employing 445 persons
on average) servicing large customers (employing 1,076 on average). Our
sample consists mainly of large suppliers servicing many smaller customers. Walter and colleagues found that direct functions (profit) were more
important than indirect functions, especially for larger suppliers who are
less dependent on any single relationship. But Walter and colleagues did
not examine nonrational or noneconomical reasons behind relationships,
such as the social functions of relationships, which could have positive or
negative (dysfunctional) economic effects (e.g., lock-in). Also, they modeled only the outcomes of relationships (profitability) rather than their
determinants, such as trust and commitment (Blankenburg Holm, Eriksson,
and Johanson 1996; Wetzels, de Ruyter, and van Birgelen 1998).
Our portfolio approach, based on differentiating between customers with
low versus high BRO, is likely to be more encompassing than the purely economic and outcome-based approach adopted by Walter, Ritter, and
Gemnden (2001) because customers can adopt a high BRO for social as well
as economic reasons. Considering the social functions of a relationship (the
interaction between customer and supplier) is likely to be more important for
services than it is for products (Kristensen, Martensen, and Grnholdt 2000).
This study tested the usefulness of a portfolio approach based on high versus
low BRO, using data from the B2B market for financial services in Singapore.
LITERATURE REVIEW
The European Customer Satisfaction Index (ECSI)
The ECSI model of customer loyalty was introduced in 1999
(Martensen, Grnholdt, and Kristensen 2000) and drew its inspiration
from the Swedish Customer Satisfaction Barometer (SCSB; Fornell 1992)
and the American Customer Satisfaction Index (ACSI; Fornell et al.
1996). Several studies that use the basic ECSI model have been
undertaken in Europe since then (Grnholdt, Martensen, and Kristensen
294
2000; Kristensen, Martensen, and Grnholdt 2000). The ECSI model

has been shown to be a good fit to the data from B2C markets in
several industries in Europe, including financial services, with an average
R2 = .69 (Martensen, Grnholdt, and Kristensen 2000). Although there is
limited evidence of the ECSI models suitability in B2B markets, a recent
study involving Post Denmark (Kristensen, Martensen, and Grnholdt
2000), where the business market was included, demonstrated that the
ECSI model can provide a good explanation of business customer satisfaction and business customer loyalty (R2 = .78).
There are seven variables in the basic ECSI model (see Figure 1),
customer loyalty (the dependent variable) and six antecedent independent
variables: (1) customer satisfaction, (2) perceived value, (3) perceived
corporate image, (4) customer expectations, (5) perceived quality of hardware (i.e., product quality), and (6) perceived quality of human ware (i.e.,
service quality). The main premise of the ECSI model is that product and
service performance is reflected in customer satisfaction, which in turn is
the main driver of customer loyalty and the value of the company (Anderson,
Fornell, and Mazvancheryl 2004; Fornell et al. 2006; Johnson 1998).
FIGURE 1. The ECSI Model of Customer Loyalty.
Perceived
Image
Expectations
Perceived
Value
Satisfaction
Loyalty
Hardware
Quality
Human
Ware Quality
Original ECSI model paths shown as solid lines. Extra paths identified by Kristensen, Martensen, and
Grnholdt (2000) shown as dashed lines.
295
The other drivers of customer loyalty are corporate image and quality of
human ware. The main drivers of customer satisfaction are perceived
value, expectations, and quality of hardware. The drivers of perceived
value are corporate image, expectations, and quality of both hardware and
human ware. These variables and their relationships in the basic ECSI
model are backed by much research in the past decades and this explains
the popularity of this model for measuring customer satisfaction across
industries, especially in Europe.
Customer Loyalty
According to the ECSI model, customer loyalty is a behavioral intention rather than actual buying behavior, which might be constrained artificially by, for example, long-term contracts. So that the ECSI would be
relevant for our sample, we surveyed only organizational buyers who had
the freedom to choose between competitive alternatives. The ECSI model
measures four characteristics of customer loyalty (Grnholdt, Martensen,
and Kristensen 2000): intention to repurchase, intention to cross-purchase
from the same supplier, intention to stay with that supplier rather than
switch to a competitor, and intention to recommend the supplier to other
customers. The ECSI is a cross-sectional model that does not incorporate
feedback effects (i.e., the effects of loyalty on its antecedents), but implicitly, the beliefs that define the constructs in the model (e.g., satisfaction),
will be more informed the longer a customer has had a relationship with a
seller.
Customer Satisfaction
Overall customer satisfaction is a cumulative evaluation based on total
purchase and consumption experience with a good or service over time
(Anderson, Fornell, and Lehmann 1994). While the customers overall
satisfaction is influenced by the sellers performance on various criteria
(e.g., product and service quality), the customers re-purchase intention is
also affected by the relative level of his or her satisfaction with the seller
compared to the sellers competitors (Kumar 2002). According to the
logic of the satisfactionperformance relationship, satisfaction affects
future buying intentions (Liu and Leach 2001) and, generally, satisfied
customers are more loyal, which increases revenue and lowers operating
costs and therefore higher satisfaction lifts return on investments, stock
price, and market-value added (Anderson, Fornell, and Mazvancheryl
2004; Fornell et al. 2006). The more competitive a market is, the more
296
sensitive changes in customer loyalty are to changes in customer satisfaction (Grnholdt, Martensen, and Kristensen 2000). Also, because of the
intangibility of services, satisfaction has a greater effect on loyalty for
services than it does for products, and also revenue growth for services is
more dependent on the effects of loyalty, that is, customer referrals and
word-of-mouth, and therefore the overall effect of satisfaction on profit
and growth is greater for services than it is for products (Edvardsson et al.
2000).
Some researchers have challenged this satisfaction-loyalty-performance
argument. Studies have shown that up to 20% of customers who have
switched banks did so even though they were satisfied (Keaveney 1995).
Another study found that up to 75% of customers who switched said they
were satisfied with their previous provider (Storbacka and Lehtinen
2001). Neal (1999) argued that while the relationship between customer
dissatisfaction and customer defection is strong, the converse is very
weak. Once a suppliers performance level has reached a certain minimum acceptable standard, customer satisfaction alone cannot reliably
predict repeat purchases (loyalty). This nonlinearity of the satisfactionloyalty link (Anderson and Mittal 2000) means that customer satisfaction
can be a poor predictor of future behavior, especially if brand choice does
not matter (all options are acceptable; Hofmeyr and Rice 2000). For this
reason, the ECSI model incorporates other drivers of customer loyalty
mentioned by the critics of pure customer satisfaction modelsperceived
image, product and service quality, and perceived value, although in the
ECSI model perceived value affects loyalty only indirectly, via customer
satisfaction.
Perceived Value
Perceived value is an important concept because it drives satisfaction
(Patterson, Johnson, and Spreng 1997) and, in turn, loyalty. Customers
compare quality received with investment put in (Storbacka and Lehtinen
2001) and choose the product or service that offers the best relative value
compared to others in their consideration set (Neal 1999). Although many
studies have shown that price is perhaps the most important determinant
of customer loyalty (Wathne, Biong, and Heide 2001), the perceived
value construct is more dynamic than price because the nature and determinants of value assessments may change during various stages of a
customers association with the seller (Slater and Narver 1994; Woodruff
1997). Also, using value judgments rather than price, as the ECSI model
297
does, allows for comparability across firms and industries, even though
absolute price levels would vary widely, and controls for differences in
income and budget constraints across respondents (Lancaster 1971).
Empirical studies using the ECSI support its assumption that perceived
value has a direct influence on customer satisfaction but only an indirect
effect on customer loyalty. This was also the conclusion of the wellvalidated ACSI model.
Perceived Quality
Perceived quality is a customers assessment of the ability of a product
or service to give satisfaction relative to the available alternatives (Dodds
and Monroe 1985). There are two dimensions of perceived quality in the
ECSI model (Grnholdt, Martensen, and Kristensen 2000): hardware,
which consists of the quality of the attributes of the product or service,
and human ware, which represents the associated customer interactive
elements in service, that is, the personal behavior of the service personnel
and the atmosphere of the service environment. Grnroos (2000) makes a
similar distinction between technical quality, the outcomes delivered by a
product or service, and functional quality, the manner in which those outcomes are delivered.
Several studies have found that perceived quality has a direct effect on
customer satisfaction (Bruhn and Grund 2000; Kristensen, Martensen,
and Grnholdt 1999). Fornell and colleagues (1996) found that the impact
of quality on customer satisfaction is greater than the impact of value.
While value may be central to the formation of the customers initial
preference and choice, quality is more important to the consumption
experience itself. Higher quality hardware generally has greater product
reliability (Adams and Browning 1989) and higher perceived value
(Homburg et al. 2002; Zeithaml 1988). Besides the indirect effect of hardware quality on loyalty via value and satisfaction, Kristensen, Martensen,
and Grnholdt (1999) also found that perceived quality of hardware had a
direct effect on customer loyalty. Martensen, Grnholdt, and Kristensen
(2000) found that for Swedish banks the second largest driver of customer
loyalty in the B2C market was service quality. This was because in that
market new products could be easily copied and implemented by competitors whereas service quality and corporate image were harder to duplicate and therefore the main differentiating factors. However, it is more
difficult to achieve an appreciably high and consistent standard of quality
with services compared to products. Consequently, researchers have
298
found that products generally outperform services in the area of perceived

quality and satisfaction (Fornell et al. 1996).
Service Quality in B2B Markets

Studies employing the ACSI have suggested that customization is
more central to perceptions of quality than reliability, especially in service-oriented sectors (Fornell et al. 1996). Grewal and Sharma (1991)
argued that in B2B exchanges, the effectiveness of a seller at providing
consultative services will be a prominent attribute in the formation of
customer satisfaction. The services literature related to B2B markets has
also highlighted the importance of the salesperson. Kristensen, Martensen,
and Grnholdt (2000) found that, for the business market they examined,
good customer interaction was important for customer satisfaction, and in
fact, customer interaction was more important in the business market than
it was in the consumer market. Garbarino and Johnson (1999) also found
that for customers with a weak relationship with the company as a whole,
satisfaction with the salesperson was the main driver of future intentions
to buy.
However, a recent study, based on a sample of corporate buyers of
financial services from commercial banks in America, found that service
quality may be less important in B2B markets for financial services than
providers of financial services might think it is (Wathne, Biong, and
Heide 2001). Buyers and suppliers both considered price the most important factor influencing the decision to switch, but while suppliers regarded
interpersonal relationships as the second most important factor, buyers
rated firm-level switching costs second. The reason why corporate buyers
give less importance to interpersonal relationships is because managers
are also businesspeople who are asked to maximize profits for their
employers, as well as friends of the suppliers representative who feel an
obligation to cooperate in order to maintain that relationship (Montgomery
1998). In many cases, the customers role as friend assumes less
importance in the presence of explicit competitive offers (Wathne, Biong,
and Heide 2001).
Customer Expectations
Deighton (1992) argues that the critical performance issue for a service is
not what kind of performance the service provider is attempting, but rather
what kind of performance the customers expect or think they are viewing.
According to the confirmationdisconfirmation paradigm, performance
299
is compared with a preconsumption expectation to form an overall judgment of satisfaction or dissatisfaction (Churchill and Suprenant 1982).
Kristensen, Martensen, and Grnholdt (1999) reviewed the literature and
found that there is no conclusive evidence for whether expectations have
a positive or negative influence on perceived quality and customer satisfaction. Some studies have shown that expectations affect both perceived
quality and customer satisfaction directly (Oliver and DeSarbo 1988;
Spreng and Olshavsky 1993). Other studies have shown that expectations
have no influence on perceived quality but do have a direct influence on
customer satisfaction (Westbrook and Reilly 1983). Using the ECSI
methodology, however, Kristensen, Martensen, and Grnholdt (1999)
confirmed its assumption that expectations have a significant direct effect
only on perceived value, not customer satisfaction. Fornell and colleagues
(1996) showed that the total effects of expectations were lowest in both
the durable manufacturing and the finance sectors because current quality
experiences may be more salient and thus take precedence over previous
quality experiences.
Perceived Corporate Image

According to Martensen, Grnholdt, and Kristensen (2000), image is
the main driver of customer satisfaction and loyalty when there are many
suppliers, presumably because image is used as a screening variable to
reduce the consideration set down to a more manageable size. Previous
studies have found that corporate credibility (image) has a significant
influence on customer loyalty, as measured by purchase intentions
(Lafferty and Goldsmith 1999), especially for services (Grnroos 2000).
Laroche, Kim, and Zhou (1996) also found that product purchase decisions were in part influenced by the consumers positive view of the companys citizenship. However, Kristensen, Martensen, and Grnholdt
(2000) found that in the business market, compared with the consumer
market, image had less impact on customer loyalty and customer satisfaction, although image was still the most important driver of loyalty.
The Post Denmark ECSI Model

In the B2B market for services from Post Denmark, Kristensen,
Martensen, and Grnholdt (2000) discovered that the predictive ability of
the ECSI model could be improved by adding three new paths: corporate
image to customer satisfaction, product quality (hardware) to customer
loyalty, and service quality (human ware) to customer satisfaction (see
300
Figure 1). In our model we also included these three paths because we
were similarly analyzing data from a B2B market for services.
Buyers Relational Orientation (BRO)

Relational orientation (or commitment) has been defined as a customers psychological attachment, loyalty, concern for future welfare,
identification, and pride in being associated with the organization
(Garbarino and Johnson 1999, 73). Jackson (1985) suggested that the
application of high-cost relational marketing should depend on the
buyers relational orientation. Buyers with a short-term (or transactional)
orientation rely on the price efficiencies of market exchanges to maximize
their profits over a series of transactions. In contrast, buyers with a longterm orientation rely on transaction efficiencies through joint synergies
and risk sharing to maximize profits over a series of transactions (Ganesan
1994), benefiting from improved quality and process performance and
continuous cost reduction (Chow and Holden 1997). Generally, buyers
with a generic need and facing a continuous availability of competing but
similar suppliers are likely to choose or prefer a transactional exchange,
while those customers with a unique need will see the benefits of a relationship to reduce the risk of failure of supply and to have services or
products that are tailored to meet their specific requirements (Pels,
Coviello, and Brodie 2000).
Several researchers have argued that positive relational orientation is
important in determining whether customers would repurchase from the
same service provider (Cannon and Perreault 1999; Garbarino and
Johnson 1999; Morgan and Hunt 1994). Recent studies have shown that
relational elements such as long-term orientation and mutual commitment
enhance performance outcomes and satisfaction and hence loyalty
between buyers and sellers (Anderson and Weitz 1992; Ganesan 1994).
Walter (2000) found that the more a customer valued a relationship with a
seller, the stronger their intentions to remain loyal to that seller. Ganesan
(1994) also found that a customers relational orientation had a direct
effect on their relationship and dependence on a vendor.
But insufficient understanding of the BRO can lead to problems such
as attempting a relationship marketing approach when transaction marketing is more suitable (Ganesan 1994). Although the ECSI model has a
good track record for explaining customer loyalty in general, there is
evidence from the relationship marketing area that taking a portfolio
approach with the ECSI model may be more appropriate, especially for
301
more mature and sophisticated B2B marketers. The relationships between

variables in the ECSI model may differ systematically between customers
with a high versus a low BRO. For example, Garbarino and Johnson (1999)
found that a customers relational orientation may affect the relative importance of satisfaction, product quality (quality of hardware), and service quality (quality of human ware), as predictors of customer loyalty. But since
there is little evidence on which to base specific hypotheses for all the potential moderating effects of relational orientation on the paths in the ECSI
model, we propose the following overall exploratory research question.
RQ: Buyers relational orientation moderates relationships between
variables in the ECSI model.
For one path in the ECSI model, however, it is possible to propose a
specific hypothesis of moderation based on previous empirical results.
Garbarino and Johnson (1999) found that while the link between satisfaction and loyalty was strong for transactional customers, this link was not
so important for customers with a higher relational orientation (who
forgave the occasional poor performance from a service provider).
The following hypothesis tests whether relational orientation moderates
the association between satisfaction and loyalty.
H1: Satisfaction will have a significantly stronger effect on loyalty for
customers with lower relational orientation (a transactional
orientation).
This specific moderator effect hypothesis (H1) would be supported if the
interaction between the independent variable and the moderator variable
has a significant negative effect on the dependent variable (Baron and
Kenny 1986), that is, higher BRO will reduce the impact of satisfaction on
loyalty. For the more general exploratory research question (RQ), a simple
way of testing for moderation effects using structural equation modeling is
to split the sample at the median for the proposed moderator and compare
the relationships between variables in the two groups (Srbom 1974).
This research question and its related hypothesis are important because if
BRO affects the relative importance of the drivers of loyalty in the ECSI
model, financial service providers would be better off using a portfolio
approach to their relationships with customers. The costs to service providers of investing in long-term relationships, in identical ways with all their
customers, may far exceed the long-term gains. If high BRO customers differ
302
systematically from low BRO customers in terms of what drives their loyalty, financial services firms should target their CRM efforts differently
across these two segments. The following sections describe a survey carried
out to test for differences between these two groups (high vs. low BRO),
using data from the B2B market for financial services in Singapore.
RESEARCH METHODOLOGY
The Sample
The sample consisted of 118 business customers for financial services
in Singapore. Singapore is an open economy and, therefore, there are
many choices for buyers of financial services so that Singapore is a suitable environment in which to research the attitudinal loyalty of organizational
customers. Although relatively small, this sample size was adequate for
testing the research question and the hypothesis. According to Chin
(1998), the PLS analysis technique, which is essential for estimating the
ECSI model, requires a sample size of at least ten times the number of
items associated with the construct with the largest number of indicators,
or ten times the number of structural paths associated with the construct
with the largest number of structural paths, whichever number is higher.
In this case, two constructs in the ECSI model (Customer Loyalty and
Perceived Corporate Image) had the largest number of indicators, four,
and the largest number of structural paths was also four. This meant that
the minimum sample size required was at least 40 companies, so the
sample of 118 was more than large enough, as it enabled a median split
into two samples of 59.
An advantage of confining the survey to one country, Singapore, is that
this minimized the impact of environmental and cultural variables on the
research. It also allows for cross-country comparison with existing
research using the ECSI model in other countries. Also, by limiting the
survey only to companies based in Singapore, the survey was cheaper to
conduct and survey responses were faster.
All of the respondents had some influence on the buying decision for
their companies because this was a criterion for participation (high
influence, 27%; significant influence, 41%; some influence, 32%). Most
company types were represented in the sample in roughly the same
proportions they occupied in the Singaporean economy, although
government-linked organizations were underrepresented (multinational
303
companies, 49%; large local companies, 12%; small or medium size companies, 27%; government-linked companies, 6%; others, 6%).
The sample covered a fairly wide range of financial services and buying situations, although it mainly represented banking services supplied to
companies with two or more financial service providers. To ensure that
the respondents answered questions about suppliers that were not locked
in, and could be switched away from, all of the questions in the survey
referred to the Financial Service Provider indicated as being the one that,
if a decision was made to change that provider, the respondent would
have the most influence on that decision to change. The main type of service provider indicated was principal banker (57%), followed by secondary bankers (18%), insurance brokers (8%), insurers/reinsurers (7%),
investment bankers (6%), stockbrokers (2%), and others (2%). These
numbers indicate that our results are more applicable to banking services
than to any other type of financial services. Even within the same type of
services, asymmetries in power and information would vary with the relative size of the supplier and buyer companies. Our sample had a wide spectrum of company size, which is related to the use of a portfolio approach to
purchasing and other aspects of purchasing maturity (Gelderman and van
Weele 2005). About one third (30%) of the companies represented in our
sample employed more than 250 people, another third (33%) employed
from 51 to 150, and another third (29%) were very small companies,
employing 50 or less (8% employed from 151 to 250 employees). Similarly, half (50%) of the sample had a turnover of less than $50 million
(Singapore Dollars [SGD]), while one third (29%) turned over between $51
million and $250 million, and one seventh (14%) turned over in excess of
$500 million (7% turned over between $251 million and $500 million).
Further evidence of the range of contexts represented in this sample was
provided by the number of suppliers used. Three quarters of the sample
(75%) used from two to six suppliers of financial services while around a
sixth (17%) used just one supplier (8% used more than six suppliers).
Measures
European Customer Satisfaction Index (ECSI)
The items for the ECSI model were adapted from a survey used by
Kristensen, Martensen, and Grnholdt (2000), which were used in both
B2C and B2B contexts. All the items were measured on ten-point semantic differential scales, with end points adapted to the item (Andrews 1984;
Cassel, Hackl, and Westlund 2000). All items loaded significantly on
304
their correct factors, which indicated cross-cultural factorial invariance

for the ECSI (Steenkamp and Baumgartner 1998). Construct reliabilities
were all above the minimum .70 criterion (Nunnally, 1978; lowest = .87
for Customer Loyalty) and Average Variance Extracted (AVE) was above
the minimum .50 for all seven scales (Fornell and Larcker 1981; again,
lowest = .62 for Customer Loyalty). In addition, the R2 (the amount of
variance explained) for Customer Satisfaction (.74), exceeded the criterion (.65) required by the ECSI technical committee. This means that the
items used in the ECSI in this study had more than adequate reliability
and predictive validity in this Singaporean sample. The scores for each
factor can be converted to a score out of 100 by multiplying the mean by
ten. Customer Satisfaction in the market for B2B financial services in
Singapore, 70 (95% CI; 40 to 100), compared favorably with B2B satisfaction with Sweden Post, 61 (measured by the ACSI; Kristensen,
Martensen, and Grnholdt 2000), and was at the upper limit of the general
range found in the United States and Sweden (56 to 70).
Buyers Relational Orientation (BRO)

Buyers relational orientation includes both long term relationship orientation (Ganesan 1994) and relational norms (Kaufmann and Stern
1988). However, no existing instrument captures both these aspects of the
construct. Ganesans (1994) instrument was chosen, although it does not
cover relational norms, because it has been validated in a B2B marketing
context. Cronbachs alpha for this scale in this Singaporean context (.86)
was higher than the .82 reported by Ganesan (1994) in the United States.
The confidence interval for the Singaporean sample (3.13 to 6.97;
SD = .98) includes the norm reported by Ganesan (1994), 5.49 (SD = .93).
Discriminant Validity
We used PLS to evaluate the discriminant validity of the ECSI factors
(Gefen and Straub 2005) because PLS is the method mandated by the
originators of the scale and our sample size was too small to use covariance structure analysis techniques such as LISREL (Anderson and
Gerbing 1988; Marsh, Balla, and McDonald 1988). The correlations
between factors ranged from .16 (Expectations and Loyalty) to .97
(Human Ware and Hardware), and AVE ranged from .62 (Loyalty) to .92
(for both Value and Expectations). The highest correlation (.97, between
Human Ware and Hardware) exceeded the square root of AVE for both factors (Human Ware .88 [square root = .94], Hardware .84 [square root = .92]),
305
indicating no discriminant validity between perceptions of product quality

and service quality for the financial services examined in this study. For
all other correlations between factors, the correlation was lower than the
square root of AVE for both factors.
We conducted a similar test of the discriminant validity between
Loyalty, the dependent variable of the ECSI model, and our proposed
moderator variable, BRO. The correlation between these two factors was .55
and AVE was .62 (square root = .79) for Loyalty and .56 (square root = .75)
for BRO. For both factors, the correlation was less than the square root of
AVE, indicating discriminant validity between them. We also conducted
a principal components exploratory factor analysis of the items used to
measure these two factors. Two factors, with eigenvalues greater than
one, were extracted and Table 1 shows the item loadings on these two factors, after varimax rotation, with loadings greater than .7 indicated in
bold. Six of the seven BRO items had their highest loading on the first
factor, and three of the four Loyalty items had their highest loading on the
second factor. However, many items had significant loadings on both factors indicating a lack of clear discrimination between the two scales.
Because of the close relationship between these two factors, we did not
include BRO as a predictor of Loyalty but instead tested whether differences in BRO, which in our data is close to but empirically distinct from
Loyalty, moderated relationships between variables in the ECSI model of
Loyalty.
Survey Procedure
The questions in the survey questionnaire were first adapted from
the various measurement scales, as stated earlier, and then tested
on a group of twenty respondents that were representative of the
final sample. The feedback received was used to further modify the
survey questions to make them more clear and more specific in some
cases.
Of the 1,365 companies listed as members of the Singapore National
Employers Federation (SNEF) at the end of 2002, 900 (66%), chosen at
random, were approached for this survey over a five-month period, from
February to June 2003. The questionnaires were addressed either to the
CEO or the CFO to ensure that we received responses from top-level
managers involved in strategic purchasing, as well as the views of chief
purchasing officers (CPOs) and middle managers involved in more routine purchasing. Respondents were encouraged to pass the survey on to
306
TABLE 1. Rotated factor analysis of CL items

from the ECSI model and BRO items
Factor
BRO4: My company is willing to make sacrifices to help this
financial service provider from time to time.
BRO2: I believe that maintaining a long-term relationship with
this financial service provider is important to my company.
BRO3: I focus on long-term goals when I deal with this
financial service provider.
BRO7: Any concessions that I make to this service provider
will even out in the long run.
BRO1: I believe that over the long run, my companys relationship
with this financial service provider will be profitable.
BRO6: I expect this financial service provider to work
with us for a long time.
CL2: Would you buy a different product or service from
this financial service provider?
CL4: Do you intend to switch to another financial service
provider? [Reverse coded]
CL1: Do you intend to continue buying from this financial
service provider?
CL3: Would you recommend this financial service provider?
BRO5: I am only concerned with the benefits to my company in
my dealings with this financial service provider. [Reverse coded]
Eigenvalues (unrotated)
.83*
.03
.82*
.34*
.82*
.18
.80*
.04
.77*
.40*
.73*
.41*
.47*
.38*
.15
.81*
.25*
.77*
.50*
.41*
.68*
.46*
5.54
1.55
*p < .05 (loading > .18, i.e., 1.96 SE, where SE = 1/ N , and N = 118).
Notes: Loadings greater than .70 shown in bold. CL = Customer Loyalty (dependent variable
from ECSI model), BRO = Buyers Relational Orientation. Extraction method = principal component analysis. Rotation Method = varimax with Kaiser normalization. Kaiser-Meyer-Olkin
measure of sampling adequacy = .870. Bartletts test for sphericity: 2(55) = 773.56, p < .001.
Two factors with Eigenvalues greater than 1.0 explained 64.5% of total variance.
the person in the firm who was best able to answer its questions: This
survey is for managers who are either the decision maker for changing or
retaining any financial service providers to their company, or have some
influence on these decisions. If another person in your company is a more
suitable respondent, please pass this survey form to him or her. Several
reminders were sent to encourage response. Another 46 respondents (5%
of the total sample) were Singaporean MBA students. The response rate,
12.5% (118 usable surveys from 946 sent out), was poor, but typical for
B2B surveys (Dillman 2000).
307
Analysis Techniques
Partial least squares, a type of structural equation modeling (SEM),
was used to estimate the ECSI model, as mandated by the ECSI technical
committee (Kristensen, Martensen, and Grnholdt 1999, 609). Partial
least squares attempts to maximize the variance explained in the dependent
variables by iteratively estimating the relationships between measured
indicators and their related latent variables (the outer or measurement
model), and then updating the relationships between these latent variables
(the inner or structural model). Chin (2000) describes in more detail how
PLS-Graph, the software we used, derives its inner and outer weights. For
example, the inner weights are based on the estimated covariances
between adjacent latent constructs, which in turn are determined by the
current approximations of the weights allocated across the indicators of
these latent constructs.
There are several advantages of using PLS to analyze the results of this
survey: (1) while PLS, like other forms of SEM, accommodates the network of cause and effect relationships among the various latent variables
in a model, PLS is considered better for explaining complex relationships
(Fornell and Bookstein 1982); (2) PLS estimates are more accurate than
multiple regression and principal components regression when estimating
complex customer loyalty models (Ryan, Rayner, and Morrison 1999);
(3) PLS is extremely robust against potential deficiencies in data sets and
model specification, for example, the erroneous omission of indicator and
latent variables, multicollinearity, and non-normal or heavily skewed
response distributions (Cassel, Hackl, and Westlund 2000); and (4) PLS
can utilize small sample sizes, even less than fifty per group, whereas
other SEM methods (e.g., LISREL) require a minimum sample size of
200 in each group (Anderson and Gerbing 1988).
The PLS analyses reported in this article were carried out following the
procedural steps outlined by Ryan, Rayner, and Morrison (1999, 24):
(1) specify the hypothetical model to be tested; (2) estimate all the regression path weights in the structural model as well as the relationships
between the latent variables and their components (the significance of
these regression weights and factor loadings were determined using bootstrap analysis); and finally (3) estimate direct and indirect paths in the
model (indirect effects were calculated by multiplying the direct effects in
a causal chain; total effects were the sum of direct and indirect effects).
In PLS, the significance of an interaction effect is tested using a latent
variable defined by the cross products of the indicators of the independent
308
variable and the moderator variable (Chin, Marcolin, and Newsted 1996).
The latent interaction variable for the test of H1 would have required a
total of 21 cross-product indicators (7 for BRO 3 for satisfaction). Estimating this model would therefore have required a minimum sample size
of 210, which was larger than the actual sample size of 118. Therefore,
H1 was tested using classical regression (Jaccard, Turrisi, and Wan
1990).
RESULTS
Descriptive Statistics
Table 2 lists the means, standard deviations, and correlations between
the variables in the proposed augmented ECSI model. The standard deviations of all the variables were quite high, indicating a fairly wide dispersion of values, so the research question and hypothesis tests conducted by
this survey did not suffer from range restriction. The business buyers in
this survey were generally loyal to their financial service providers. However, the fact that about 30% of the respondents were willing to switch
providers showed that there was a significant business segment that was
TABLE 2. Means, standard deviations, and correlations among

variables in the proposed augmented ECSI model
Variable
Mean (SD)
1. Customer Loyalty
2. Customer Satisfaction
3. Perceived Value
4. Customer Expectations
5. Perceived Quality
of Hardware
6. Perceived Quality of
Human Ware
7. Perceived Corporate
Image
8. Buyers Relational
Orientationa
6.33 (.96)
6.91 (1.60)
6.93 (1.54)
7.47 (1.19)
7.24 (1.46)
.55
.56
.16*
.61
.76
.32
.85
.35
.75
.33
7.22 (1.47)
.62
.86
.76
.37
.97
7.36 (1.40)
.50
.78
.65
.45
.81
.83
5.05 (.98)
.55
.56
.63
.22
.61
.61
.52
.46
*p > .05 (not significant).

Measured on a seven-point scale; all other variables were measured using ten-point
scales.
a
309
dissatisfied with what they were getting from their existing providers. The
rating given to BRO was also generally high.
European Customer Satisfaction Index (ECSI) Model

Figure 2 shows the fit of the basic ECSI model (without the three extra
paths found in the Post Denmark study by Kristensen, Martensen, and
Grnholdt 2000) to data from the B2B market for financial services in
Singapore. It achieved excellent fit, explaining 66% of the variance in
Customer Loyalty. In these data, Satisfaction had a significantly positive
effect on Customer Loyalty ( = .49, t = 4.19, p < .001). However, the
effects of Perceived Corporate Image ( = .20, t = 1.27) and Perceived
Quality of Human Ware ( = .13, t = .88) were not significant. Product
quality (Perceived Quality of Hardware) had a significant effect on Satisfaction ( = .67, t = 6.44, p < .001), as did Perceived Value ( = .25,
t = 2.39, p < .05), but the effect of Expectations was not significant
( = .02, t = .27). Product quality (Hardware) also had an effect on Value
( = .47, t = 4.60, p < .001), as did service quality (Human Ware: = .28,
t = 2.70, p < .01).
FIGURE 2. Direct effect of BRO on Customer Loyalty.
Perceived
Image
.02
.20
.04
.25*
.45***
Expectations
.04
Perceived
Value
Satisfaction
Loyalty
.48***
Hardware
Quality
.28***
.04
Human
Ware Quality
.66***
* p < .05. ** p < .01. *** p < .001.

Explained variance (R ): Value = .66, Satisfaction = .74, Loyalty = .67.
310
Moderating Effects of BRO

To explore all possible moderation effects of BRO (the RQ), the overall sample was split at the median for BRO into two groupsHigh versus
Lowand the three additional paths indicated by the Post Denmark study
(Kristensen, Martensen, and Grnholdt 2000) were included in the ECSI
model. The High group was significantly more long-term relationally oriented
than the Low group (MHigh = 5.75 on a seven-point scale vs. MLow = 4.32;
t = 11.44, p < .001). The High group was also more Loyal overall
(MHigh = 6.80 vs. MLow = 5.85; t = 6.19, p < .001).
Figure 3 shows the differences in path coefficients for the structural
(inner) model across the two groups. Not only was the High BRO group
more loyal, the ECSI model was more effective in predicting loyalty for
this group of buyers compared to the Low BRO group (R2High = .81 vs. R2Low
=.60). The R2 of .67 obtained for the unmoderated ECSI model (Figure 2)
was obviously an average over these two groups. The R2 for satisfaction in
both groups of buyers was similar (R2High = .84 vs. R2Low = .75), which
indicated that the ECSI model was a good predictor of buyers satisfaction for buyers with High and Low BRO.
FIGURE 3. Moderating effects of BRO on the ECSI Model.
Perceived
Image
.28
.11
.02
.28*
.02
.38
.23
Low BRO
High BRO
.27*
.56
.08
.28
.30*
Expectations
.07
Perceived
Value
.05
Satisfaction
Loyalty
.62***
.13
Hardware
Quality
.34*
.10
.04
.06
Human
Ware Quality
.35
.55***
.12
.33*
.19
.27*
*p < .05. ** p < .01. *** p < .001.

Explained variance (R ): Value: High BRO = .48, Low BRO = .67; Satisfaction: High BRO = .84,
Low BRO = .75; Loyalty: High BRO = .81, Low BRO = .60.
311
Other Differences Between the High and Low BRO Groups

None of the drivers of Customer Loyalty in the Post Denmark ECSI
model was significant for both BRO groups. In particular, the effect of
Satisfaction on Loyalty was significant in the High BRO group but not in
the Low BRO group.
Confining attention just to the path coefficients that were significant in
at least one group, the following differences in paths were observed
between the Low and the High BRO groups: (1) product quality (Hardware) had a highly significant effect on Value for customers with a Low
BRO but no effect for customers with a High BRO; (2) similarly, service
quality (Human Ware) affected Value for Low BRO customers but not for
High BRO customers; (3) together, these results explained why the R2 for
Value was higher for the Low BRO group (R2Low = .67 vs. R2High = .48);
and (4) why Value had a significant impact on Satisfaction for Low BRO
customers, whereas its influence was insignificant for High BRO customers; (5) product quality (Hardware) had a significant direct effect on Satisfaction for High rather than Low BRO customers; but (6) product quality
had a significant direct effect on Loyalty for Low rather than High BRO
customers; also (7) service quality (Human Ware) had a significant direct
effect on Loyalty for High BRO rather than Low BRO customers; and
finally (8) Perceived Image had a significant effect on Satisfaction in the
High BRO group but not in the Low BRO group.
Since product and service quality were highly related in this sample,
we checked these results using a variable (Financial Service Product
Quality [FSPQ]) that was the mean of all six items used to measure product and service quality (Cronbachs alpha = .94). The pattern of results
was very similar. Financial service product quality had a more significant
relationship with Value for Low rather than High BRO customers (rLow =
.57, p < .001 vs. rHigh = .38, p = .004; controlling for Image and Expectations). But FSPQ had a more significant relationship with Satisfaction for
High rather than Low BRO customers (rHigh = .61, p < .001 vs. rLow = .33,
p = .014; controlling for Image, Expectations, and Value). Finally, the
relationship between FSPQ and Loyalty was significant only for customers with a High BRO (rHigh = .35, p = .009 vs. rLow = .21, p = .132; controlling for Image, Expectations, Value, and Satisfaction).
The Moderating Effect of BRO on the SatisfactionLoyalty Link

To test H1, a hierarchical regression model was used with Loyalty as the
dependent variable. All the variables in the model were first standardized
312
before constructing the product term, BRO Satisfaction, to minimize

multicollinearity between the interaction term and its constituent variables (Jaccard, Turrisi, and Wan 1990). First, the exogenous variables in
the ECSI model were entered, Image, Expectations, Hardware, and
Human Ware, which together explained a significant amount of the variance in Loyalty (R2 = .387, p < .001). Next, Perceived Value was
entered, which had a significant effect on Loyalty ( = .229, SE = .113,
p = .044, R2 = .409, R2 = .022), followed by Satisfaction, which did not
( = .010, SE = .156, p = .949, R2 = .409, R2 = .000). Finally, the addition of BRO significantly increased explained variance in Loyalty
( = .242, SE = .096, p = .013, R2 = .442, R2 = .032), as did the interaction between BRO and Satisfaction ( = .131, SE = .066, p = .048,
R2 = .461, R2 = .020). The highest condition index for all these models
was 12.91 (for a factor highly correlated with Hardware [.90] and Human
Ware [.93]), which was below the critical level of 15 at which multicollinearity problems would be indicated. Although the interaction effect
was significant, it was significantly positive and, therefore, in the opposite direction to that predicted by H1.
The moderating effect of BRO can be illustrated using the method recommended by Jaccard, Turrisi, and Wan (1990). The relationship
between Satisfaction and Loyalty at different levels of BRO is given by
the following equation.
b1 at X 2 = b1 + b3 X 2 ,
where b1 is the slope of the effect of Satisfaction (X1), X2 is the level of
BRO, and b3 is the slope of the interaction effect between X1 and X2
(Satisfaction and BRO). Using one standard deviation on either side of
the mean to define Low and High Relational Orientation (using standardized variables, the standard deviation = 1), and results from the final
model including the interaction effect, the following slopes are obtained.
b1 at Low X2 (BRO = 1) = .018 + (.131) (1) = .018.131 = .149
b1 at Medium X2 (BRO = 0) = .018 + (.131) (0) = .018
b1 at High X2 (BRO = +1) = .018 + (.131) (1) = .018+.131 = .113
For customers with a Low Relational Orientation, the effect of Satisfaction on Loyalty is negative but insignificant. As Relational Orientation
increases, Satisfaction has an increasingly positive effect on Loyalty. In
313
contrast, H1 predicted that Satisfaction would have an increasingly negative (i.e., less significant) effect on Loyalty as BRO increased.
DISCUSSION
This study tested whether the preferences of individual B2B buyers for
long-term or short-term (transactional) relationships with their service
providers makes a difference to the influences on their loyalty. We found
that buyers relational orientation (BRO) affected the significance of
many relationships between variables in one of the most reliable models
of B2B customer loyalty available, the European Customer Satisfaction
Index (ECSI) model. In particular, the loyalty of customers with a High
BRO is positively influenced by their satisfaction with the supplier,
whereas satisfaction had a negative but insignificant effect on loyalty for
customers with a Low BRO.
The last finding, that satisfaction had a significant effect on loyalty for
High BRO customers rather than Low BRO customers, was in the opposite direction to the one predicted by H1, based on a previous study by
Garbarino and Johnson (1999). Garbarino and Johnson found that customers with a High BRO were more resilient, and remained loyal even
after experiencing low satisfaction occasionally, because their loyalty was
also driven by trust and commitment. On the other hand, the loyalty of
Low BRO customers was entirely determined by their satisfaction. In
Garbarino and Johnsons (1999) study, however, the items measuring
specific attributes of the offering were more likely to be confidently evaluated by regular customers rather than occasional customers, which
would have increased the predictive value of global satisfaction. In our
study, the components of satisfaction, image, expectations, and product
and service quality, were all measured at a relatively abstract level suitable even for one-time buyers, and this may have increased the relative
importance of all these components relative to global satisfaction. Our
result is also more consistent with Jacksons (1985) view that customers
looking for a long-term relationship are more sensitive and intolerant of
any inadequacies because they have so much invested in the relationship.
Our findings also suggest that the three extra paths included in the Post
Denmark version of the ECSI model should be routinely included in future
estimations of the ECSI model, especially in B2B markets. Although only
one of these additional paths (hardware to loyalty) was significant in this
Singaporean sample, all three may be significant in other samples.
314
Management Implications
Customer Segmentation
The finding that BRO is an important moderator of customer loyalty
means that financial service providers can usefully segment their customers according to whether they have a long-term or a short-term BRO.
Ganesans (1994) seven-item questionnaire could be useful for this or
BRO could be inferred from customer sales records. More likely, however, because B2B relationships generally involve continual direct and
personal contact, company representatives will be able to assign customers
to segments (for specific products) based on their own in-depth knowledge of the company. If the number of customers is large enough to justify the use of a CRM database, CRM programs should be focused to the
needs of the high BRO segment, which is the only segment that desires a
long-term relationship with their supplier (Garbarino and Johnson 1999;
Jackson 1985). Their financial service providers need to have greater
competence in image, product quality, and service quality because all
three have significant direct or indirect effects on loyalty for these customers, as well as substantial total effects (image = .48, product quality = .29,
service quality = .14). All three drove High BRO customers satisfaction
in these data, and the linkage between satisfaction and loyalty was strong
for this group of buyers.
For those customers with a Low BRO, the main driver of loyalty in this
sample was product quality (total effect = .69; image = .04, service
quality = .04). Hultman and Shaw (2003) suggest that the offer of a standardized product at a reduced price might be attractive to these Low BRO
customers because they are more interested in tangible offers (i.e., product quality) rather than company image or how the product is delivered.
Since the needs of the High and Low Relational Orientation segments
are different, this differentiation of marketing strategy and tactics, and the
differential allocation of resources across High and Low Relational
Orientation segments, would be more effective and cheaper than using
one strategy for all customers.
Another possibility, suggested by Ganesan (1994), is for the service
provider to try to convert buyers with a short-term orientation to become
more long-term orientated through trust-enhancing behaviors like providing
promised benefits reliably or by increasing switching costs through substantial investments in meeting specific needs. Each investment in a currently
transactional customer would need to be evaluated on a case-by-case basis.
315
Limitations and Suggestions for Future Research

Similar to most quantitative models of satisfaction and loyalty this
study assumed that the direction of causality flowed from perceptions of
the supplier and the suppliers goods and services to perceptions of value,
satisfaction, and, finally, intentions to remain loyal to that supplier. But
the cross-sectional nature of this study cannot rule out reverse causality as
a reason for the high correlations between the variables in these data. If
reverse causality was present, then the drivers of loyalty would not be the
variables in the ECSI model. For example, if a buyer had a high intention
to buy again from the same supplier for situational reasons, such as
pressure from a powerful superior, time pressure, habit, or structural
bonds (e.g., Storbacka and Lehtinen 2001), then to maintain cognitive
consistency the buyer might realign perceptions of the supplier so that
they are more favorable toward that intention (Festinger 1957; Sweeney,
Hausknecht, and Soutar 2000). Future studies using the ECSI model in
B2B markets should use longitudinal experimentation, combined perhaps
with in-depth case studies, to investigate how much reverse causality
affects its apparent findings.
The lack of significance of some results could have been due to the
small sample size used. There is a need to replicate this study with a
larger sample size. In a different market, there would probably be the
usual distinction between product and service quality, which exhibited
low discriminant validity in this sample. Also, the finding that satisfaction was more predictive of loyalty for high BRO customers needs further replication because it may have been due to peculiarities of the
sample or the method we used. The moderation effects we found in
relation to our research question also need confirmation using a
hypothesis-testing approach. Another limitation is that, as far we are
aware, this was the first B2B marketing research study to use the ECSI
model in Singapore, so we have no local benchmarks to compare
against. Our results suggest, however, that the ECSI model performs
well in this context and this may encourage other researchers to use the
ECSI model in other countries in the Asian region and in other B2B
markets.
Most critically, however, the use of the ECSI model requires B2B markets that resemble B2C markets in that a small number of suppliers serve
large numbers of customers. We acknowledge that for many B2B markets
this is not the case, and our results may not be applicable outside the types
of contexts represented in our sample.
316
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EXECUTIVE SUMMARY
Customer loyalty has been a subject of much interest to marketers
because of the economic benefits that come from having a customer base
that is stable, profitable, and requires less cost to service. The purpose of
this article was to investigate whether the key drivers of business customer loyalty differed depending on whether the customer preferred a
short-term or a long-term relationship with the seller, using data from the
business-to-business (B2B) market for financial services in Singapore.
The main conceptual model used was the European Customer Satisfaction
Index (ECSI), which has proven to be easy to administer but also very
effective at explaining customer loyalty across many industries in Europe.
This model may not be applicable to most B2B markets but was appropriate for this B2B market for financial services, which was characterized by
a large number of customers relative to suppliers; all of these customers
perceived they could choose between suppliers. In smaller markets, or
markets characterized by constraints on choice, other approaches such as
in-depth case studies would have been more appropriate.
The ECSI in its basic form predicts customer loyalty using six drivers:
customer satisfaction, perceived value, perceived corporate image, customer expectations, service quality (perceived quality of human ware),
and product quality (perceived quality of hardware). Customer loyalty is
measured as a behavioral intention rather than using actual purchase history because intentions are more predictive of future buying behavior. A
review of the literature found that, in general, the empirical evidence supports the assumptions of the ECSI model, although there are arguments to
the contrary for some of them, especially regarding the role of expectations and the satisfactionloyalty linkage.
The importance of a buyers relational orientation (BRO) in business
buying has been highlighted in the B2B marketing literature, especially in
channel and industrial marketing research. This literature suggests that
the drivers of loyalty for buyers with a long-term orientation may be different from those that are effective for buyers with a short-term (transactional) orientation. This article tested whether differences in BRO
affected the relationships among the six predictors in the ECSI, and also
tested the specific hypothesis that satisfaction would be a better predictor
of loyalty for customers with a low (short-term) BRO than it would be for
customers with a high (long-term) BRO.
Two validated measurement scales were used in this article: the ECSI
and Ganesans (1994) BRO scale. These measurement scales proved to be
322
reliable with a Singaporean sample. The statistical methodology used was

Partial Least Squares (PLS), as mandated by the originators of the ECSI
model (Grnholdt, Martensen, and Kristensen 2000).
The sample size was 118 business buyers of financial services in
Singapore who were surveyed in 2003. The respondents were either the
purchase decision maker or had significant influence on decisions about
their companys financial services purchasing, and came from a wide
range of companies including large multinationals, government agencies,
and small to medium size firms.
There were many significant findings in relation to the research question about whether BRO moderated relationships in the ECSI model. For
buyers with a high (long-term) BRO, satisfaction, perceived corporate
image, product quality (quality of hardware), and service quality (quality
of human ware) were the drivers of loyalty. For buyers with a low relational orientation, satisfaction had an insignificant effect on loyalty, and
product quality alone was the main driver of loyalty. The results did not
support the hypothesis test. Satisfaction had a greater effect on loyalty for
customers with a high rather than a low BRO.
The management implications are the usefulness of adopting a portfolio approach to managing financial services customers by (1) segmenting
customers into high and low BRO groups and (2) implementing different
marketing approaches for these two segments. For example, concentrating on product quality is likely to be more attractive to buyers with a low
BRO while expensive customized interactions, and corporate image communications, should be reserved for buyers with a high BRO because they
are the most receptive toward these types of selling tactics.
Further research is necessary to replicate these findings, which may not
be applicable outside the specific context we examined, and to investigate
other possible influences on loyalty that the ECSI ignores, such as constraints on choice, and reverse causality (positive perceptions arising from
loyal behavior rather than the other way around, which would mean that
loyalty was explained by variables not included in the ECSI model).

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An Augmented Model of Customer Loyalty for Organizational Purchasing

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An Augmented Model of Customer

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ABSTRACT. Purpose. To understand how the drivers of loyalty in

Journal of Business-to-Business Marketing, Vol. 15(3) 2008

Yew-Wing Lee and Steven Bellman

Originality/Value/Contribution. This study demonstrates the usefulness

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KEYWORDS. Customer loyalty, financial services, satisfaction, relational

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JOURNAL OF BUSINESS-TO-BUSINESS MARKETING

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Yew-Wing Lee and Steven Bellman

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2000; Kristensen, Martensen, and Grnholdt 2000). The ECSI model

Yew-Wing Lee and Steven Bellman

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Yew-Wing Lee and Steven Bellman

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found that products generally outperform services in the area of perceived

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Service Quality in B2B Markets

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Yew-Wing Lee and Steven Bellman

Perceived Corporate Image

The Post Denmark ECSI Model

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Buyers Relational Orientation (BRO)

Yew-Wing Lee and Steven Bellman

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more mature and sophisticated B2B marketers. The relationships between

JOURNAL OF BUSINESS-TO-BUSINESS MARKETING

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Yew-Wing Lee and Steven Bellman

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their correct factors, which indicated cross-cultural factorial invariance

Buyers Relational Orientation (BRO)

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Yew-Wing Lee and Steven Bellman

indicating no discriminant validity between perceptions of product quality

JOURNAL OF BUSINESS-TO-BUSINESS MARKETING

TABLE 1. Rotated factor analysis of CL items

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Yew-Wing Lee and Steven Bellman

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TABLE 2. Means, standard deviations, and correlations among

*p > .05 (not significant).

Yew-Wing Lee and Steven Bellman

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* p < .05. p < .01. * p < .001.

p < .05. p < .01. p < .001.