Customer satisfaction and loyalty in a digital

environment: an empirical test

Jean Donio’
University of Paris II, Paris, France
Paola Massari and Giuseppina Passiante
e-Business Management School, ISUFI, University of Lecce, Lecce, Italy

Abstract
Purpose – The purpose of this paper is to explore the links between customer loyalty attitude, customer loyalty behaviours (measured by customer
purchase behaviours) and profitability. The aim is to define a conceptual framework within which to analyse the relationships between attitudes,
behaviour, and profitability of the customers.
Design/methodology/approach – Reference was made to earlier studies which argued that loyal customers constitute competitive asset of business
organizations. Several authors noted that customers generally vary in terms of loyalty behaviours and attitudes and highlighted that differences about
customers’ loyalty levels affect a firm’s profitability results. Customer loyalty, its antecedents and outcomes, and the links between customer
satisfaction, customer loyalty and profitability have been analyzed at a customer level.
Findings – The results showed support for all but one of the five hypotheses, the exception being H2.
Originality/value – The results of the study provide evidence that a Loyalty Index can give managers an adequate support for market segmentation.
This means that actual market segment strategies, based on geographical, demographical and/or psychographic variables, should take into account also
loyalty measurement models.

Keywords Customer satisfaction, Customer loyalty, Electronic commerce, Customer relations, Marketing intelligence

Paper type Research paper

Introduction differ in current and/or future profitability makes a firm’s

Research on factors that influence customer satisfaction and
loyalty has made considerable progress within the last years
(Szymanski and Henard, 2001; Oliver, 1999). Customer
loyalty is seen to be crucial to the success of business
organizations, since attracting new customers is far more
expensive than retaining existing ones (Dick and Basu, 1994;
Saren and Tzokas, 1998; Fournier, 1998). It has been
suggested by many authors that loyal customers are a
competitive asset and that a way of increasing customer
retention is through secure and collaborative relationship
between buyers and sellers (Chaudhuri, 1999; Chaudhuri and
Holbrook, 2001; Fournier, 1998; Oliver, 1999).
Several authors pointed out that customers generate
different levels of profitability (Cooper and Kaplan, 1991;
Peppers and Rogers, 1993; Shapiro et al., 1987; Slywotzky
and Shapiro, 1993), and not all customers generate
acceptable cost and revenue streams (Carroll, 1991;
Storbacka et al., 1994). It has been suggested, therefore,
that the firm should actively develop relationships with
profitable customers and try to end relationships with
unprofitable customers (Jones and Sasser, 1995; Peppers
and Rogers, 1993; Shapiro et al., 1987; Slywotzky and
Shapiro, 1993). Tailoring marketing efforts to segments that
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Journal of Consumer Marketing
23/7 (2006) 445– 457
q Emerald Group Publishing Limited [ISSN 0736-3761]
[DOI 10.1108/07363760610712993]
strategy more effective, by identifying profitability customer
tiers, and offer products and services customized for the
specific tier, and therefore capturing its financial value.
The purpose of this empirical study is to explore the links
existing between customer loyalty attitude (as his consistently
favourable set of stated beliefs towards the brand purchase),
customer loyalty behaviours (in terms of his pattern of past
purchases) and profitability. To this end, customer loyalty, its
antecedents and outcomes, and, thus, the links between
customer satisfaction, customer loyalty and profitability have
been analyzed at a customer level. Specifically, the study has
focused on the following issues:
.
What are the main antecedents and outcomes of customer
loyalty?
.
What are the links between customer satisfaction,
customer loyalty and profitability?
. How can loyalty be evaluated in a firm’s customer base? Is
there any model that can assess customer loyalty based on
specific variables and indexes? Do characteristics exist
which determine whether customers attain high levels of
customer loyalty?
Our approach is based on a framework put forward by
Costabile (2001) to analyse the relationship existing between
the act of purchase of the customer, his satisfaction, his trust
and commitment and, at the end, his loyalty. In this study, we
have extended the single act of purchase to the complete
purchase behaviour of the customer, and we have also
explored the relationship existing between the customer
loyalty and his profitability.
The paper is organized as follows. The first section presents
the theoretical framework and the main hypotheses. The
second section illustrates the method adopted. The main

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 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
results are described and discussed in section three. The final
section presents conclusions and a future research agenda.
Theoretical framework and main hypotheses
Customer loyalty: antecedents and outcomes
Customer loyalty is a concept that has enjoyed wide currency
and usage within the field of consumer behaviour for many
years. Dick and Basu (1994) viewed customer loyalty as “the
strength of the relationship between an individual’s relative
attitude towards an entity (brand, service, store, or vendor)
and repeat patronage”. Three conceptualizations of customer
loyalty have been identified in the literature:
1 loyalty as primarily an attitude that sometimes leads to a
relationship with the brand;
2 loyalty mainly expressed in terms of revealed behaviour
(i.e. the pattern of past purchases); and
3 buying moderated by the individual’s attitudes.
Loyalty as primarily an attitude that leads to a relationship with
the brand
Researchers argue that there must be a strong “attitudinal
commitment” to a brand for true loyalty to exist (Day, 1969;
Jacoby and Chestnut, 1978; Foxall and Goldsmith, 1994;
Mellens et al., 1996; Reichheld, 1996). This is seen as taking
the form of a consistently favourable set of stated beliefs
towards the brand purchased. These attitudes may be
measured by asking people how much they like the brand,
feel committed to it, will recommend it to others, and have
positive beliefs and feelings about it – relative to competing
brands (Dick and Basu, 1994). The strength of these attitudes
is the key predictor of a brand’s purchase and repeat
patronage. This is what Oliver (1997, p. 392) has in mind
when he defines customer loyalty as: “A deeply held
commitment to re-buy or re-patronize 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 behaviour”. In the fields of advertising and brand
equity research this model received some support (e.g. Aaker,
1996; de Chernatony and McDonald, 1998). The approach
also appealed to many practitioners in advertising and brand
management because it is empathetic with the search for
strategies to enhance the strength of consumers’ attitudes
towards a brand.
Ahluwalia et al. (1999) have shown that attitudinally-loyal
customers are much less susceptible to negative information
about the brand than non-loyal customers. Also, where loyalty
to a brand increases, the revenue-stream from loyal customers
becomes more predictable and can become considerable over
time – as shown in analyses of cases such as Federal Express,
Pizza Hut franchises, and Cadillac dealerships (Gremler and
Brown, 1999). An extension of the “attitudes define loyalty”
perspective is to suggest that consumers form relationships
with some of their brands. A good example of this perspective
is provided by Fournier (1998), who sees loyalty as a
committed and affect-laden partnership between consumers
and brands. It is a partnership that will be even stronger when
supported by other members of a household or buying group,
and where consumption is associated with community
membership or identity. Examples include Skoal smokeless
tobacco among some North American cowboys, loyalty to
particular European soccer teams (Arnould et al., 2002), the
Beanie Babies craze (Morris and Martin, 2000), Jeep brand
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fests (McAlexander et al., 2002), and the classic case of
Harley-Davidson bikers (Schouten and McAlexander, 1995).
Despite the psychological and sociological richness of the
“attitudes drive behaviour” and “relationship” approaches to
understand customer loyalty, these conceptualizations of
loyalty are not without drawbacks (e.g. Dowling, 2002). They
are thought to be less applicable for understanding the buying
of low-risk, frequently-purchased brands, or when impulse
buying or variety seeking is undertaken, than for important or
risky decisions (Dabholkar, 1999). Also, as Oliver (1999) has
noted, there is little systematic empirical research to
corroborate or refute this perspective of customer loyalty.
The examples above are isolated cases, often cited as
illustrative of the revenue-effects that might be achieved,
rather than the profit impacts that have been achieved.
Loyalty mainly expressed in terms of revealed behaviour
This conceptualisation is arguably the most controversial but
the best supported by data. The controversy comes out
because loyalty is defined mainly with reference to the pattern
of past purchases with only a secondary interest in consumer
motivations or commitment to the firm (Ehrenberg, 1988;
Fader and Hardie, 1996; Kahn et al., 1988; Massy et al.,
1970). Researchers have gathered impressive amounts of data
about these purchase patterns over many years – across
dozens of product categories and for many diverse countries
(Uncles et al., 1994). They have found that few consumers are
“monogamous” (100 percent loyal) or “promiscuous” (no
loyalty to any brand). Rather, most people are “polygamous”
(i.e. loyal to a portfolio of brands in a product category).
From this perspective, loyalty is defined as “an ongoing
propensity to buy the brand, usually as one of several”
(Ehrenberg and Scriven, 1999).
These researchers tend to adopt a market focus as opposed
to an individual focus (e.g. key performance measures are
purchase amount and frequencies, repeat-buying – for a
defined period).
Stochastic modelling techniques describe the observed
patterns of customer buying. Given these descriptions, loyalty
is inferred to operate in the following manner: through trial
and error, a brand that provides a satisfactory experience is
chosen.
Loyalty to the brand (measured by repeat purchase) is the
result of repeated satisfaction that in turn leads to weak
commitment. The consumer buys the same brand again, not
because of any strongly-held prior attitude or deeply-held
commitment, but because it is not worth the time and trouble
to search for an alternative. If the usual brand is out of stock
or unavailable for some reason, then another functionally
similar (or substitutable) brand (from the portfolio) will be
purchased (e.g. East, 1997; Ehrenberg et al., 1997, 2004).
There is little reason to spend much effort weighing up the
alternatives when all are likely to be satisfactory. However,
over repeated purchases a weak commitment to the (limited)
number of brands bought in a product category can form.
All these studies are grounded in considerable amounts of
market research data and analysis. But, despite the weight of
empirical evidence, controversy persists. Those who subscribe
to the “attitudes drive behaviour” and “relationship”
approaches expressly rule out revealed behaviour as a
dominant measure of loyalty. That, they argue, may merely
reflect happenstance. Even combined measures of revealed
behavior and satisfaction may not probe deeply enough for us
 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
to be sure there is true loyalty (Arnould et al., 2002; Oliver,
1999).
Buying moderated by the individual’s attitudes
This conceptualisation argues that the best conceptualization
of loyalty is to allow the relationship between attitude and
behaviour to be moderated by time. The reasons for
incorporating buyers’ attitudes into a definition of loyalty
have been put forward by various authors over the past 20
years are two:
1 Distinguishing between attitudinally loyalty and
non-attitudinally loyal customers is useful because it
indicates who and how many customers are vulnerable to
a change in the “spurious” environmental causes of their
loyal behaviour. Hence, it gives an indication of how long
customers are likely to stay loyal.
2 A purely behavioural definition of loyalty fails to explain
the causes of loyal behaviour.
The dynamic approach is based on a dynamic model that has
been defined in order to interpret the customer-firm
relationship life-cycle as a continuum, along which cognitive
and behavioural constructs overlap. In this way through
successive sedimentation the multidimensional construct of
customer loyalty is defined.
The model is founded on empirical evidence and
experiments realized in the different fields of study.
Specifically, it refers to: studies on customer satisfaction, its
determinants and consequences (Iacobucci et al., 1992;
Oliver, 1997); empirical evidence on trust, as well as studies
that are the connection with the propensity to repurchase and
the consolidation of the relationship (Bitner, 1995; Blois,
1999); and the studies of the relationship life-cycle and the
different forms of loyalty, whose basic configuration is simple
repurchase, but with an evolution path towards “true loyalty”
on the base of the attitudinal constructs interacting with the
behavioural one (Jacoby and Chestnut, 1973, 1978; Ford,
1980, 1998; Iacobucci and Zerrillo, 1997). In Figure 1, the
dynamic model of customer loyalty is described. The anchor
points are customer trust and customer commitment.
In this model, satisfaction with past purchases, and any
consequential habit formation, explains most of a person’s
Figure 1 A dynamic model of customer loyalty
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ongoing propensity to buy one or a product from a specific
firm. All these patterns profile customers, not brands per se;
that is, consumers of a firm’s products could be distributed
across segmentation criteria with respect to their loyalty level
to a brand/firm.
As shown in Figure 1, trust is considered as an outcome of
customer satisfaction and as antecedent of customer
commitment and customer loyalty. The reason why many
authors regard trust as an antecedent of customer loyalty is
underlined by Moorman et al. (1993). According with Schurr
and Ozanne (1985) trust has been defined as “the belief that a
party’s word or promise is reliable and that a party will fulfil
his/her obligation in an exchange relationship”.
Commitment expresses the extent to which a partner is
willing to maintain a valued relationship (Moorman et al.,
1992), and similarly to trust, is “critical to the study and
management of customer loyalty” (Morgan and Hunt, 1994,
p. 31). Trust is seen as a key determinant to commitment (e.g.
Morgan and Hunt, 1994; Gruen, 1995; Geyskens et al.,
1996). Morgan and Hunt (1994) state that “trust is so
important to relational exchange . . . because relationships
characterized by trust are so highly valued that parties will
desire to commit themselves to such relationships”.
Conceptualising customer profitability
Customer profitability is a customer-level variable which
refers to the revenues which one particular customer
generates over a given period of time. Customer profitability
appears in two temporal forms in marketing literature. First, it
appears as an historical record. In this sense, a customer
profitability analysis is similar to the firm’s analysis of its
profits and losses. The main difference is that a customer
profitability analysis refers to one particular customer,
whereas a profit and loss statement refers to all customers.
A history-oriented customer profitability analysis can be
made at several levels. A common point of departure is to
calculate the contribution margin (gross contribution
margin), based on “sales revenue less all product-related
expenses for all products sold to an individual customer
during one particular period of time” (cf. Wang and Splegel,
1994). Then, depending on the availability of data, sales,
general and administrative expenses traceable to the
individual customer are subtracted (Cooper and Kaplan,
1991; Howell and Soucy, 1990). The result of this calculation
is the operating profit generated by the customer. An
extension of this line of thinking is the computation of
“customer return on assets”, i.e. customer profitability
divided by, e.g. the sum of accounts receivable and
inventory (Rust et al., 1996).
Second, customer profitability is also referred to in a future
sense in the literature. In this case, it often takes the form of
the output from a net present value analysis. The output is
sometimes referred to as the “lifetime value” of a customer
(cf. Heskett et al., 1997; Peppers and Rogers, 1993; Petrison
et al., 1993; Rust et al., 1996). It has been defined, for
example, as the stream of expected future profits, net of costs,
on a customer’s transactions, discounted at some appropriate
rate back to its current net present value (Peppers and Rogers,
1997, p. 32).
A similar concept is “customer equity” which is seen as a
function of the customer’s volume of purchases, margin per
unit of purchase and acquisition, development and retention
costs traceable to this customer (Blattberg and Deighton, 1996;
 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
Wayland and Cole, 1997). Several authors have also noted that
customers generally vary in terms of profitability (Cooper and
Kaplan, 1991; Peppers and Rogers, 1997; Shapiro et al., 1987;
Slywotzky and Shapiro, 1993). It has been argued that one
particular customer does not generate the same costs and
revenues over time as another customer. Moreover, not all
customers generate acceptable cost and revenue streams. For
example, in retail banking, some 50-60 percent of customers
may be unprofitable (Carroll, 1991; Storbacka et al., 1994). It
has been suggested, therefore, that the firm should actively
encourage relationships with profitable customers and attempt
to terminate relationships with unprofitable customers (Jones
and Sasser, 1995; Peppers and Rogers, 1997; Shapiro et al.,
1987; Slywotzky and Shapiro, 1993).
Customer profitability and customer loyalty
An increased focus on profitability at the customer level is a
reflection of a movement within the marketing discipline
towards a less aggregate view of markets. In other words, the
individual customer – rather than segments of customers – is
increasingly stressed as the unit of analysis. This movement
has given birth to labels such as “one-to-one marketing” and
“micro marketing”. Seen from this perspective, customer
profitability is emerging as an important dimension in which
each (unique) customer can be described.
A focus on customer-level profitability can also be
conceived of as a reflection of marketing’s changing role
within the firm (cf. Webster, 1992). An important aspect of
the new role is that “marketing is too important to be left to
the marketing department”. Consequently, at least in
marketing literature, other departments are encouraged to
deal with marketing issues. This can be seen particularly in
terms of cost control, in the sense that marketing performance
measures are being introduced in cost accounting literature
and practice. For example, activity-based costing and
balanced scorecard techniques often include dimensions
which are highly relevant to marketing (cf. Cooper and
Kaplan, 1991; Kaplan and Norton, 1992). In this context, it
is worth noting that marketing has traditionally lagged behind
other functional areas of business with respect to the
implementation of cost control systems (Dunne and Wolk,
1977; Morgan and Morgan, 1980). Another factor behind the
interest in customer profitability (and its links to behaviour
and attitudes) is the development of information technology,
e.g. in terms of “data warehouses”, which allows for a detailed
analysis of each customer.
Despite the growing interest in customer profitability,
identifying profitable customers is likely to be easier said than
done for most firms. The main reason is that few firms have an
internal accounting system which allows for an analysis of
profitability at the individual customer level. At least this is
what many academicians claim (Howell and Soucy, 1990;
Myer, 1989; Reichheld, 1996; Slywotzky and Shapiro, 1993).
However, given that several computerized systems which
facilitate an analysis of customer profitability are commercially
available on the market, there are reasons to believe that
practitioners are experimenting with such data to an extent that
is not yet reported in academic journals. In any case,
profitability data on the customer level are generally not
collected in empirical studies carried out by marketing
scholars. This is not likely to advance marketing theory. After
all, profitability lies at the heart of the marketing concept
(Kohli and Jaworski, 1990; Narver and Slater, 1990). Similarly,
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Volume 23 · Number 7 · 2006 · 445 –457
marketing’s link to profitability is stressed in the definitions of
marketing offered by the Chartered Institute of Marketing and
the American Marketing Association (cf. Buttle, 1996).
However, attention in the marketing literature has instead
been focused on other customer-level variables than customer
profitability which provide marketers and market researchers
with an easier access to data, particularly in terms of customer
surveys, and are assumed to be carriers of information about
customer profitability. Customer satisfaction and customer
loyalty are a variable of this type. The attention devoted to
these particular variables can be seen in the light of the current
interest in relationship marketing. It is assumed, in brief, that it
is more profitable to keep existing customers than to attract
new customers, and it is commonly assumed that customer
satisfaction serves as a particularly important antecedent of
customer retention and thus long-term customer relationships
(cf. Anderson et al., 1994; Buttle, 1996; Rust et al., 1995).
However, due to the lack of data on customer profitability, the
nature of the satisfaction-loyalty-profitability link has rarely
been analyzed in empirical terms.
Hypotheses development
Figure 2 presents the model that guided our hypotheses
development. Following the Bagozzi (1974) holistic construal,
the conceptual meaning of our focal concept (loyalty) is
obtained through specification of antecedents (purchase
behaviour, satisfaction, trust, commitment) and the
outcomes (profitability).
As shown in Figure 2, following Blattberg and Deighton
(1996), Wayland and Cole (1997), we consider customer
profitability as a performance outcome (from the supplier’s
point of view) of customer’s purchase behaviour. We assume
customer’s purchase behaviour to affect profitability by effects
on both revenues and costs. First, as the customer continues
to purchase from the same supplier, the supplier’s revenues
increase. In addition, as the purchases continue, the customer
may discover, and purchase, additional products in the
supplier’s assortment. In other words, the potential for cross-
selling may increase over time – which affects revenues
positively (Kalwani and Narayandas, 1995). Second, a high
level of repeated purchases is likely to go hand in hand with
having contacts with the supplier at several occasions.
H1. Customer purchase behaviour is positively and
significantly related to customer profitability.
As pointed out by several authors (Jones and Sasser, 1995;
Chaudhuri and Holbrook, 2001; Fournier, 1998; Oliver,
1999), we suggest that customer satisfaction (a mental state)
can have an impact on customer profitability: indeed, the
University of Michigan found that for every percentage
increase in customer satisfaction, there is an average increase
of 2.37 percent of return on investment (Keiningham and
Vavra, 2001). Moreover, the cost of gaining a new customer is
ten times greater than the cost of keeping a satisfied customer
(Gitomer, 1998).
Following Costabile (2001) we consider satisfaction as a
possible antecedent of customer loyalty. Research about
influencing factors of customer satisfaction on loyalty has
made considerable progress within the last years (Fournier
and Mick, 1999; Oliver, 1999; Anderson et al., 1994; Buttle,
1996; Rust et al., 1995; Szymanski and Henard, 2001; Oliver,
1999). Indeed, the most commonly applied conceptual
models of loyalty begin from the well-established notion that
customers who have satisfying experiences with products will
 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
Figure 2 Predicted links between customer loyalty attitude, purchase behaviour and customer profitability
buy those products or will intend to buy them again (Jacoby
and Kyner, 1973; Szymanski and Henard, 2001; Jacoby and
Chestnut, 1973, 1978; Ford, 1980, 1998; Iacobucci and
Zerrillo, 1997).
Finally, we hypothesize that, as the customer loyalty
enhances, customer profitability increases (Reichheld and
Sasser, 1990; Kohli and Jaworski, 1990; Narver and Slater,
1990). Improvements in customer loyalty and retention by
even a few percentage points have in some cases increased
profits by 25 per cent or more (Griffin, 1995).
H2. Customer satisfaction is positively and significantly
related to customer profitability.
H3. Customer loyalty attitude is positively and significantly
related to customer profitability.
H4. Customer satisfaction is positively and significantly
related to customer loyalty attitude.
We have also included two variables, which are assumed to be
consequences of customer satisfaction and predictors of
profitability, as they have been suggested by the literature
(Costabile, 2001; Garbarino and Johnson, 1999; Anderson
et al., 1994; Peppers and Rogers, 1997; Reichheld, 1996).
Variables are trust and commitment that influence reciprocity
and co-operation between the firm and its customers (Stern
and El Ansary, 1992; Bucklin and Sengupta, 1993; Bitner,
1995; Blois, 1999). We have added to the previous hypotheses
the analysis of trust and commitment as determinants that
develop as customers gain experience and adopt relational
orientations, and their connection with the customer
propensity to repurchase and to consolidate of the
relationship, following the suggestions of Bitner (1995),
Blois (1999) and Garbarino and Johnson (1999).
More specifically, trust has been considered as an outcome
of customer satisfaction (Schurr and Ozanne, 1985) and as an
antecedent of customer commitment and customer loyalty
(e.g. Morgan and Hunt, 1994; Gruen, 1995; Geyskens et al.,
1996; Scheer and Stern, 1992).
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H5. Customer satisfaction, trust and commitment are
positively and significantly related to purchase
behaviour.
Research method
In order to test our hypotheses, we have conducted an
empirical study in the agri-food sector. The point of departure
for the case study was to match customer satisfaction and
customer loyalty attitude data (at the customer level) with
purchase behaviour and profitability data (also at the
customer level). The first step has been to identify a firm
which had kept track of costs and revenues over time at a
customer level, and was willing to provide access to this data.
We identified one firm. For confidentiality issues we cannot
name it.
The firm is based in Italy and sells food products (pasta,
olive oil, wine, vegetables, bread, sauces, cakes, honey and
other typical foods) through direct marketing activities. Its
current range consists of about 50 different items. Most
relevant sales channels used are: telephone, internet,
television, catalogue mail. The most important direct
marketing instrument is based on the telephone, which
develops alone 52 per cent of sales purchase. Television
instrument develops 27 per cent of sales, catalogue mail 18
per cent of sales, and internet just 3 per cent of sales. The
customer base is spread throughout the national territory.
Products are delivered through a national courier directly to
the houses of its customers. The cost accounting system
allows for a detailed analysis of customer behaviour, as well
as analyses of profitability at several levels (customers,
products, sales persons, etc). This technology has been
complemented with a telephone survey submitted to the
customers.
 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
Data collection
The data used in this study have been derived from two
sources: a telephone survey of the firm’s customers; and the
firm’s customers’ database.
In order to collect data on customer satisfaction and
customer loyalty attitude, a telephone survey was developed.
The scales used by respondents have been measured on
balanced five-point Likert-type scales, ranging from “strongly
disagree” to “strongly agree”, where 1 ¼ strongly disagree and
5 ¼ strongly agree. The telephone survey was chosen because
of its relevant advantages such as monitoring of interviews for
improved quality control, higher response rates, less bias due
to non-response, shorter time requirements for completion,
reasonably low cost (Dutka, 1993; Leland and Bailey, 1995).
Customer satisfaction was measured as the weighted mean of
three items[1] defined during a previous the market survey,
based on global satisfaction, congruence between expected
and perceived value, value perception. Customer Loyalty
Attitude was measured with nine items adapted from
Morgan and Hunt (1994), Moorman et al. (1992, p. 82),
Pearson (1996), Schijns and Schroder (1996), Anderson and
Narus (1984, p. 66), Selnes (1993), Crosby et al. (1990),
Anderson and Weitz (1989). Two main dimension of
customer loyalty attitude were investigated: customer trust
and customer commitment. Customer Trust was measured
with one item adapted from Hess (1995) and Moorman et al.
(1992). Customer Commitment was measured using a multi-
item scale adopted and modified from Mowday et al.’s (1979)
Organizational Questionnaire, and Beatty and Kahle’s (1988)
brand commitment scale. In particular, the following most
relevant dimensions of customer commitment were examined:
exclusive purchase intention, word-of-mouth[2], expectation
of continuity, price sensitivity.
Indicators and items capturing customer satisfaction and
the attitudinal dimensions of customer loyalty are described in
Table I.
Data on customer purchase behaviour and profitability were
collected from the firm database. Thus, the behavioural
Table I Variables and items capturing attitudinal loyalty and customer satisfaction
Variables Indicators Survey’s items
Attitudinal Trust Trust attitude (1-5)
Loyalty Commitment Willingness to invest in the relationship (1-5) As a consumer to this firm/brand, I am willing to put in extra effort to buy
Exclusive purchase intention (1-5)
Word-of-mouth attitude (1-5)
Exclusive purchase Intention (1-5)
Expectation of continuity (1-5)
Price sensitivity (1-5)
Loyalty perception (1-5)
Satisfaction Satisfaction Global satisfaction (1-5)
Congruence between expected and perceived Performance expectations after purchasing firm A’s products exceed
value (1-5)
Value perception (1-5)
Note: a Reverse coded items
Journal of Consumer Marketing
Volume 23 · Number 7 · 2006 · 445 –457
dimension of customer loyalty was measured by ten indicators
as shown in Table II.
Data on purchase behaviour and customer profitability were
collected from the firm database. The firm provided us the
access to its records for the period December 2002-June
2004. The sample selection was based on the firm’s retained
customers (those customers who made at least one purchase
annually after the initial sale), who participated to the
telephone survey with a useful response rate (in total, 4,397
customers). Data from these records were then entered into
the same database as the survey responses. The client code
was the key to matching the purchase behaviour and
profitability records kept by Firm A on each customer with
the survey responses. Several attempts were made to examine
the quality of measurements. Internal consistency of the scales
used was ascertained by both calculating Cronbach’s
coefficient alpha and conducting an item analysis (through
item-whole and inter-item correlation, as suggested by
Spector, 1992).
First, Cronbach’s alpha results were largely higher than
Malhotra’s (1993, p. 308) 0.60 limit for acceptable reliability
in terms of internal consistency. The customer attitudinal
loyalty measure, consisting of nine items, has an alpha value
of 0.910. The customer satisfaction measure, consisting of
three items, has an alpha value of 0.798. The customer
purchase behaviour measure, consisting of ten items, has an
alpha value of 0.92. Content validity for the customer loyalty
attitude, customer satisfaction, customer behaviours and
customer profitability measures was ascertained by examining
the scale composition throughout measure purification. The
resulting scales demonstrate good reliability, as evidenced by
Table III, in addition to being content valid.
Data analysis
The data gathered from the customer survey (data capturing
attitudinal loyalty and customer satisfaction) and the firm’s
data base (data capturing customer behaviours and
profitability) were entered into a computer database and
I feel that I completely trust this firm activities and its products
product from this firm
As long as the product is similar I could just as well be buying from a different
firm/branda
I am proud to tell others that I buy product from this firm. I would recommend
this brand to others
For me, this brand is the best alternative
I expect to stay with this brand for a long period of time
As a consumer to this brand, I feel that I am prepared to pay more for higher
quality products
I feel very little loyalty to this firm/branda
I am completely satisfied with the products of firm A
expectations prior to the purchase
Firm A’s products benefits are more important with respect to the costs and
sacrifices related to the product purchase
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Table II Variables and items capturing customer purchase behaviour and profitability
Variables Definitiona
1. Sales purchases value (1-5) The amount of sales purchases (Euros) during a period of time of 18 months
2. N. of orders (1-5) The number of orders during a period of time of 18 months
3. Frequency of purchases (1-5) The frequency of purchase, expressed in days (n. orders/days)
4. Returns (1-5) The percentage of products returns with respect to overall sales purchase value (returns/total sales purchase
value expressed in %)
5. Debt (1-5) The % of debt with respect to overall sales purchase
6. Interactions (1-5) All kind of interaction with the firm, intended ad communications, compliments, complaints
7. Way of payment (1-5) The way of payment usually chosen by the customer (credit card, anticipated to the courier, at moment of delivery,
anticipated through the bank, after 30/60 days)
8. Way of order (1-5) The order could be done in outbound way (the firm contact the client, during a direct marketing campaign) or in
inbound way (the client contact the firm for the order)
9. Loyalty program’s membership (1-5) The client shares some personal information with the firm in order to participate in Loyalty Programs
Composition of purchase (1-5) The composition of purchase, expressed in %, could be based more on special offers and discount or could be
based more on purchase with normal conditions of price
Customer profitability (1-5) According with Cooper and Kaplan (1991) and Howell and Soucy (1990), customer profitability was
operationalised for each customer in the sample as “ þ sales revenue – all product related expenses for all
products sold to an individual customer during one particular period of time, – sales, general and administrative
expenses traceable to the individual customer for the same period of time”. The currency is EU currency (Euro)
and a period of 18 months is included in the analysis. Thus, the profitability observations for each customer
consist of the operating profit generated by each customer during this period of time
Note: a Variables definition is based on literature review (Kelley, 1967; Raj, 1982; Tate, 1961, Farley, 1968; Fournier and Yao, 1997; Kahn et al., 1986; Rao, 1969;
Carman, 1970; Enis and Paul, 1970; Goldman, 1977-1978; Jacoby and Chestnut, 1978; Cooper and Kaplan, 1991; Howell and Soucy, 1990; Kaplan and Norton,
2004) and on the results of an Expert Analysis (survey to 30 managers of the agri-food sector)

Table III Scale summary ANOVA analysis summarized the results of variance’s
Constructs scale n a N Std dev. analysis. The sum of squares and mean square were analysed,
for two sources of variation, regression and residual. The
Satisfaction 3 0.798 4,397 0.42 output for Regression displayed useful information about the
Customer loyalty attitude 9 0.910 4,397 0.54 variation accounted for by each model. The output for
Customer purchase behaviour 10 0.92 4,397 3.9 Residual displayed information about the variation that was
Customer profitability 1 0.944 4,397 4.2 not accounted for by each model. R, R squared, adjusted R
squared, and the standard error were analysed. Among the
Notes: n ¼ number of items; a = Cronbach’s alpha; N ¼ number of cases;
initial hypothesis, the model that accounted for most of
Std dev. ¼ standard deviation
variation in the dependent variable, with a good large
regression sum of squares in comparison to the residual sum
then analyzed using the Statistical Package for the Social of squares, was highlighted.
Sciences (SPSS). Factor analysis, cluster analysis, ANOVA, Some observations should be made before we examine the
canonical correlation analysis, multiple regression, path outcome with regard to the hypotheses.
analysis, and t-tests were employed to test the research First, the standard deviations for customer profitability
hypotheses on the relationships among the variables. confirm what was claimed about this variable in the
A logistic regression analysis was used in order to identify introduction. That is to say, customers clearly do vary in
the stronger predictors of customer profitability and customer terms of the profitability they generate. For example, in this
loyalty, using all available measures, including both case study, the top ten customers (2.4 per cent of the sample)
behavioural and attitudinal variables. The regression who ranked highest in terms of customer profitability
coefficients of each model equation related to the main generated 20 per cent of the total customer profitability in
hypothesis were elaborated. A particular attention was given the sample. This is in line with most relevant theoretical
to standardised coefficients calculation. This, because the approaches and empirical evidences. Second, the analysis of
magnitude of a regression coefficient isn’t necessary related to the most relevant behavioural loyalty variables (customer n of
how good a predictor the variable is, since the size of the orders and sales purchases value) reveals a positive and strong
coefficient depends in large part on the units of the measure correlation with customer profitability that has been
for the variable. One way to make the coefficients easier to confirmed by the Beta coefficients computation. The
compare is to compute what are known as standardised detailed results of these computations are summarised in
coefficients (Beta coefficients). Table IV.

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Table IV Results of the computations

Unstandardized
coefficients Standardized coefficients
B Std error Beta t Sig.
H1
Dependent variable: profitability
(Constant) 0.015 0.007 2.164 0.031
Customer purchase behaviour (REGR factor score 1 for analysis 1) 0.736 0.015 0.964 48.329 0.000
H2
Dependent variable: profitability
(Constant) 0.431 0.010 45.308 0.000
Customer satisfaction 0.446 0.007 0.684 62.010 0.000
H3
Dependent variable: profitability
(Constant) 0.018 0.021 0.875 0.381
Customer loyalty attitude (REGR factor score 1 for analysis 2) 0.325 0.035 0.822 10.022 0.000
H4
Dependent variable: loyalty attitude
(Constant) 0.015 0.002 6.138 0.021
Customer satisfaction 0.058 0.005 0.725 0.039 0.000
H5
Dependent variable: purchase behaviour
(Constant) 2.386 0.500 212.430 0.000
Customer trust 0.230 0.060 0.760 12.208 0.000
Customer commitment 1.254 0.023 0.823 32.342 0.000
Customer satisfaction 20.061 0.054 0.621 1.778 0.000

As shown in Table IV, all the hypotheses of conceptual
framework were confirmed by the empirical results.
Discussion: the governance of customer loyalty
The results showed support for all but one of the five
hypotheses, the exception being H2.
Purchase behaviour (behavioural dimension of customer
loyalty) was found to be positively and significantly associated
with customer profitability. This result was confirmed by t
statistics method results, that identified sales purchase value
and number of orders as some of the best predictors of
customer profitability.
Customer satisfaction was found to be positively associated
with customer profitability, but it was considered not statically
significant. The results confirm what was claimed about this
variable in the introduction: customer satisfaction (a mental
state) has not any direct impact on customer profitability.
Thus, our results seem to confirm the hypotheses of Fournier
and Mick (1999) and Oliver (1999) that it is the behaviour of
the customer, which may follow from a certain level of
satisfaction, trust and commitment that affects customer
profitability.
Customer loyalty attitude was found to be positively and
significantly associated with customer profitability. Our model
then relates “customer attitudinal loyalty” measures (intent to
repurchase, willingness to recommend and other probable
market actions) to the expected profitability of each customer:
estimating the customer expected profitability, basing on his
attitudinal loyalty level, could be extremely useful for a
manager for setting-up a customized marketing strategy, such
as maintaining a price advantage and/or providing additional
services to offer value. To this end, in the literature some
categorization of customers are suggested, useful for
identifying, motivating, serving a customer according to his/
her expected differential levels of profits (e.g. Zeithaml et al.,
2001)
Customer satisfaction was found to be positively related to
customer loyalty attitude, explaining 43 per cent of the
variance of the latter. However, multiple linear regression and
ANOVA analysis have shown that the model fails to explain a
lot of the variation in the dependent variable, and it needs for
additional factors that help account for a higher proportion of
the variation in the dependent variable. This is in line with
many theoretical approaches that highlighted how apparent
high levels of satisfaction may not result in a behaviour
characterised by high loyalty due to the many intervening
variables of customer loyalty development process (Jones and
Sasser, 1995; Oliver, 1999).
Satisfaction, trust and commitment were found to be
positively and significantly associated with purchase
behaviour. Three variables were entered the model, but two
of them resulted most relevant according with t statistic
method: customer trust and customer commitment. Figure 3
shows the links between purchase behaviour and the main
customer loyalty attitude enablers.
Customer trust and customer commitment resulted the
most important variables positively and significatively related
to purchase behaviour. In particular, customer commitment,
with the large t statistics value, resulted to be the main driver
for customer purchase behaviour.

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 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
Figure 3 Links between customer loyalty attitude enablers and purchase behaviour
Our study has identified several significant associations
between variables in the customer satisfaction-customer
loyalty attitude-purchase behaviour (behavioural loyalty)-
customer profitability chain. The associations between the
two latter types of variables should not be surprising, since it
is the actual acts by customers, not their attitudes that affect
the firm’s performance (cf. Storbacka et al., 1994). However,
the results of our analysis show that customer loyalty variables
are related to what customers do in terms of purchase
behaviour: these relationships are commonly missing in many
parts of the marketing literature. Segmentation literature, and
particularly the literature on segmentation of business
markets, is one area in which these results are relevant.
Many segmentation variables have been described as
candidates for the segmentation of business markets, but
they are generally related to other characteristics of the buyer
than customer loyalty (cf. Shapiro and Bonoma, 1984;
Webster, 1984). The results of the study provide evidence that
a Loyalty Index can give managers an adequate support for
market segmentation. This means that actual market segment
strategies, based on geographical, demographical and/or
psychographic variables, should take into account also
loyalty measurement models.
Literature review and empirical results have also shown cost
savings associated with a loyalty building strategy in at least
six areas (Reichheld, 1996):
1 reduced marketing costs – customer acquisition costs
more;
2 lower transaction costs, such as outbound efforts and
order processing;
3 reduced customer turnover expenses (fewer lost
customers to replace);
4 increased cross-selling success, leading to larger share of
customer;
5 more positive word of mouth; and
6 reduced failure costs (reduction in returns, debt, claims
and complaints).
To obtain these cost savings, we believe that is necessary to
measure and manage customer loyalty effectively, by using
both leading and lagging indicators:
.
Attitudinal measures, such as customer commitment
(intent to repurchase, willingness to recommend and
other probable market actions) provide the basis for
developing leading indicators of customer loyalty.
.
Behavioural measures, such as repeat purchasing, volume
or frequency of purchasing, returns, debt, complaints and
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Volume 23 · Number 7 · 2006 · 445 –457
interactions, customer retention and longevity, furnish key
lagging indicators of customer loyalty.
As suggested by Kaplan and Norton (1992), without effective
leading indicators, it may be difficult to establish how
outcomes are achieved. Moreover, an organization lacking
leading indicators of key performance outcomes or results has
no early warning mechanism to signal the need for corrective
action. By relying exclusively on outcomes or results,
organizations may not detect the need for action until it is
too late. The link between the attitudinal and behavioural
indicators pointed out in this paper allow to use attitudinal
measures for the purpose of estimating future results, as well
as developing models that enable an organization to examine
alternative “what-if” scenarios.
Conclusions
In this paper we have explored links between variables
concerning the customer satisfaction – the customer
attitudinal loyalty – the customer behavioural loyalty – the
customer profitability chain.
We have included both attitudinal (such as intent to
repurchase, willingness to recommend and other probable
market actions have been included in order to provide the
basis for developing leading indicators of customer loyalty)
and behavioural measures (such as repeat purchasing, volume
or frequency of purchasing, returns, debt, complaints and
interactions, customer retention and longevity, have been
included as lagging indicators of customer loyalty).
Our model also has verified some relations existing between
attitudinal measures and behavioural measures, in order to
use attitudinal measures for estimating the customer expected
profitability; this estimation can be used for setting-up a
customized marketing strategy, such as maintaining a price
advantage and/or providing additional services to offer value.
As a conclusion, some limitations of our study should be
emphasised. Firstly, data were collected in one single firm.
Secondly, the study focused on a single industry, namely that
of agri-food. While useful in controlling for potential
extraneous influences unrelated to the study, the limitation
involved in studying a single industry constrains the possibility
to generalize these findings. Future research should seek to
replicate the study into different firms and business sectors in
order to assess whether the linkages identified here still exist
in different industrial and consumer populations. Another
limitation is related to the time periods used in the study. It is
not clear to what extent the time periods have provided a
 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
proper context for an analysis of the relationships between
attitudinal variables and behavioural variables. However, it
does seem clear that attitudinal variables such as customer
satisfaction do not remain constant over time (cf. Peterson
and Wilson, 1992). Future research should seek to replicate
the study into different period of time, more than one. It
means, among other things, that the timing of the survey
becomes a key issue. One may consider as time unit “the
year”, but if customer relationships are viewed as investments,
a longer period may be needed to determine the extent to
which one particular customer is profitable (cf. Reichheld,
1996).
Notes
1 Items capturing customer satisfaction have been adapted
from Pearson (1996), Oliver (1993), Holbrook (1999),
Costabile (2001), Westbrook and Oliver (1991).
2 Word-of-mouth can be defined as “oral, person-to-person
communication between a receiver and a communicator”
(Arndt, 1967, p. 189).
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 Customer satisfaction and loyalty in a digital environment
Jean Donio’, Paola Massari and Giuseppina Passiante
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Volume 23 · Number 7 · 2006 · 445 –457
O’Brien, L. and Jones, C. (1995), “Do rewards really create
loyalty?”, Harvard Business Review, Vol. 73 No. 3, pp. 75-82.
About the authors
Jean Donio’, is a Full Professor at the University of Paris II,
France. He is the corresponding author and can be contacted
at: jdonio@easynet.fr
Paola Massari is a Researcher at e-Business Management
School, ISUFI, University of Lecce, Lecce, Italy.
Giuseppina Passiante is a Full Professor of Innovation
Management at the e-Business Management School, ISUFI,
University of Lecce, Lecce, Italy.
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