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Journal of Quality Assurance in Hospitality & Tourism

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Co-Branding and Brand Loyalty

Woo Gon Kima; Soojin Leeb; Hae Young Leec a Dedman School of Hospitality, Florida State University, College of Business, Tallahassee, FL, USA b Department of Recreation, Texas A&M University, Park and Tourism Sciences College Station, TX, USA c School of Hospitality and Tourism Management, Kyungsung University, Nam-gu Busan, South Korea

To cite this Article Kim, Woo Gon , Lee, Soojin and Lee, Hae Young(2007) 'Co-Branding and Brand Loyalty', Journal of

Quality Assurance in Hospitality & Tourism, 8: 2, 1 — 23 To link to this Article: DOI: 10.1300/J162v08n02_01 URL: http://dx.doi.org/10.1300/J162v08n02_01

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Co-Branding and Brand Loyalty
Woo Gon Kim Soojin Lee Hae Young Lee

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ABSTRACT. Co-branding can be a win-win strategy to help drive sales, develop brand images, and save marketing or advertising cost in the restaurant industry. Despite the increasing attention in co-branding, the relationship between co-branding, consumer satisfaction, and brand loyalty remains largely unexplored. Therefore, this study aims to examine the effect of co-branding on customer satisfaction, which in turn leads to brand loyalty in restaurants in Korea. The result indicates that some types of co-branding (i.e., price benefits and post-purchase services) can be an effective marketing strategy that allows restaurants to construct customer satisfaction and brand loyalty. doi:10.1300/J162v08n02_01
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KEYWORDS. Co-branding, customer satisfaction, brand loyalty, restaurant industry

Woo Gon Kim is Associate Professor, Florida State University, College of Business, Dedman School of Hospitality, One Champions Way, Suite 4116, Tallahassee, FL 32306 (E-mail: wkim@cob.fsu.edu). Soojin Lee is Doctoral Student, Texas A&M University, Department of Recreation, Park and Tourism Sciences College Station TX 77843-2261 (E-mail: sjlee73@tamu.edu). Hae Young Lee is Assistant Professor, Kyungsung University, School of Hospitality and Tourism Management, 314-79 Daeyeon-3dong, Nam-gu Busan, 608-736 South Korea (E-mail: hylee1228@ks.ac.kr). Journal of Quality Assurance in Hospitality & Tourism, Vol. 8(2) 2007 Available online at http://jqaht.haworthpress.com Ó 2007 by The Haworth Press, Inc. All rights reserved. doi:10.1300/J162v08n02_01

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consumer satisfaction. which in turn leads to brand loyalty in restaurants. the restaurant operators are trying to work out brand differentiation strategies for keeping the preceding level of market share to continue to exist (Kim. it has become an urgent issue for them to implement effective marketing and promotional tools. The crisis has induced the mistrust of eating-out and consumption contraction. 2003). Popeyes in 1994. Finally.2 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM INTRODUCTION The chain restaurant has become a typical form of global business that interconnects diverse cultures and nations. and numerous foreign chain restaurants have been established in Korea. Outback Steakhouse in 1997. and save marketing or advertising cost in the chain restaurant industry. Co-branding is increasingly becoming a trendy technique to sell both service and products and has been mainly used by the chain restaurant industry in Korea (Jung. the chain restaurant industry has grown dramatically. Bennigan’s in 1995. Under these bad circumstances. Therefore. & Lee. 1998). interior design development. In general. 2001). Sizzler in 1993. 2001). Han. Planet Hollywood in 1995. In addition. Next. Hard Rock Cafe in 1996. and brand loyalty remains largely unexplored. the relationship between co-branding. Chili’s in 1996. It can be a win-win strategy to help drive sales. For this reason. Ponderosa in 1992. and customer-service differentiation. some adverse economic situations such as the huge growth of family debt and the number of bad credit personals also brought serious challenges to the Korean restaurant industry. and Starbucks in 1999 (Kim & Chon. the literature on co-branding. an Downloaded At: 07:49 8 March 2011 . In recent years. develop brand images. Tony Roma’s in 1995. This is why more and more chain restaurants are venturing into co-branding. this study aims to examine the impact of co-branding on customer satisfaction. co-branding means that more than two companies co-involve in marketing/advertising and share risks. A rapidly increasing number of chain restaurants have certainly brought severe competition among the restaurants in terms of unique menus. Namely. while maintaining their independence as separate business entities (Hahm & Khan. customer satisfaction. and brand loyalty was reviewed. the Korean restaurant industry suffered due to unexpected events such as the breakout of mad cow and bird flu scare. In the present study. In 2004. TGI Friday’s arrived in 1991. Despite the increasing attention in co-branding. the practice of co-branding in the Korean chain restaurant industry was discussed mainly based on information from the interviews with restaurant managers.

In addition. 1999). On the other hand. as a result. & Paswan. Friday’s with Holiday Inn.I. and casual-dining restaurants because they serve a similar customer” (Ryan. Pizza Hut with Marriott. Yip (2005) summarizes the advantages of implementing a cobranding strategy as follows: “From the viewpoint of both the operator and the partner. hotel and restaurant companies have recognized the importance of co-branding strategies (Lee. T. the ability to access a broader customer base and form new relationships with clients is one of the most important and beneficial advantages. stated that “cobranding works especially well for limited-service hotels and midpriced hotels. President. Hoggatt. Ramada with Bennigan’s. and Sofitel with Dorint) (Young. Country Inns with T. LITERATURE REVIEW Co-Branding Stewart (1995) defines co-branding as multiple business alliances cooperating in marketing. space sharing. hotels. This study offers useful information to both marketing managers in restaurant industry and academics concerning the crucial determinants of customer satisfaction and brand loyalty linked to co-branding. and Lee 3 on-site survey was conducted to the customers who have visited chain restaurants in Seoul. TGIF generated additional 15-20% revenue from hotel guests during their lunch and dinner business.G. and production while maintaining their independence as a separate brand. Paul Kirwin.I. Lately.” Downloaded At: 07:49 8 March 2011 . Friday’s was a win-win strategy for both brands. co-branding enhances the credibility of the hotel’s brand by borrowing credibility from other brands. Kim. A larger number of chain restaurants. budgeted expenditures can be concentrated in other areas. the benefits of hotel were derived from (1) meeting hotel guests’ dining needs and (2) savings from the construction costs of building and operating a decent restaurant in the hotel (or on premise) (Ryan.G.Kim. Country Inns & Suites. Starbucks with both Marriott and Hyatt. The revenue generated by the partnership can generally outweigh the expense of forming the alliance. 1999). McDonald’s with WaltDisney.I. & Kim. 2006). Friday’s. Lee. Korea in order to investigate the effects of cobranding on customer satisfaction and brand loyalty. Country Inns’ co-branding partnering with a T. 2001).G.g.. and theme parks have together implemented co-branding strategies to accomplish synergy (e.

The most widely accepted definition is cognitive and emotional responses by the consumer to the most recent transactional experience with a party (Oliver.. Since the 1970s. Customer satisfaction often serves as an indicator that reflects customers’ revisit intentions to a given restaurant. 2004. 1999). the level of satisfaction is positively associated with the degree of repeat visits. and stress experienced by consumers) of the providing (Bolton & Lemon.4 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM Customer Satisfaction One of the major tasks that confront food-service managers is related to customer satisfaction in one way or another (e. This theory considers the ratio of the consumer’s outcome/input to the ratio of the provider’s outcome/input (Oliver & DeSarbo. customer satisfaction results from an estimation of the sacrifices and rewards received by restaurants to an exchange. Conversely. considerable attention has been focused on customer satisfaction in food-service industries since an examination of the factors of customer satisfaction can offer clues concerning actions restaurant managers must take to grow the chances that customers will repeat Downloaded At: 07:49 8 March 2011 . If the customer’s expectations of service/products’ quality and price are exceeded. 1973). they are likely to be satisfied with the restaurants. the customer satisfaction indicates one’s subjective evaluation of the provided products/services.. then. As evidenced by many literatures (Ellinger. maintenance.g. dissatisfaction is likely to occur. Park. From this perspective. the most widely used measurement method may be the expectation-disconfirmation method. Customers are likeable to an equitably treated experience if they believe the ratio of their outcome to inputs is equivalent to the ratio of outcome to inputs felt by the restaurant. According to this perspective. monetary payments. How can we effectively measure customer satisfaction? It has been measured in many ways. Kim. Newman & Werbel. In recent years. As implied in this definition. and evaluation). if the perceived performance does not exceed the expectation about the restaurant. time consumption. The term “customer satisfaction” has been conceptualized in various ways along the different contextual situations. & Jeong. 1999. 1993). Equity refers to estimation of what is “fair” or “justice” for the perceived cost (e. Daugherty. In most cases.g. & Plair. the level of customer satisfaction acts as a strong determinant of behavioral aspect of customer loyalty. one of the major measurement methods is equity view. 1988). customer satisfaction is the degree to which perceived performance of service/products matches a customer’s expectations. Besides. enhancement.

accessibility of the service/product and diversity-seeking manners) that may affect repeated purchases. The previous idea of loyalty focused on repeat purchase behavior (Brown. 2002. repeat patronage and word-of-mouth recommendations) and attitudinal (e. Accordingly. It is likely that customers with a high level of loyalty spend more money on the products/services that provide a simpler decision-making process than others. Jacoby. 2004). 1994). it has been known that the level of loyalty is closely related to several purchase behaviors such as sensitivity to price. trust.g. For this reason. Su. and switching cost) aspects should be taken into consideration to measure “true” loyalty concept (Baloglu... Spurious/artificial loyal customers can make frequent purchases even when the customers are not emotionally or psychologically involved with the companies because there are a number of conditional barriers (e. a significant difference was noticed between loyal customers and frequent visitors (Day. Brand Loyalty The maintenance and enhancement of brand loyalty stands for a fundamental marketing method for attaining advantage under high market pressure (Reichheld. 1994. However. For such reasons. 2004). and increased tolerance to the quality of products/services. service quality issues have been stated about the excessive emphasis on customer satisfaction and whether or not it connects to their performance (Lam & Zhang. 1952). even though there may be a high level of correlation between repeat purchase behavior and “true” loyalty. and Lee 5 visit. loyal customers are often considered as a crucial component that ensures the prosperity of many businesses. Downloaded At: 07:49 8 March 2011 .g. several researchers have suggested that both behavioral (e. Few researchers have examined the linkage between co-branding and customer satisfaction as one of the effective marketing strategies. 2001. Chestnut. & Fisher. 1999. Tidewell & Fredline. 1996).g. Also. 1999. A simplistic behavioral approach is not an adequate measure of loyalty. Brand loyalty has emerged as a significant marketing concept for many consumer driven businesses.. Mattila. However. Dick & Basu. 1969. positive word-of-mouth publicity. “true” loyalty has been defined as a long-term commitment to repeat purchase involving both repeated patronage and an emotional attachment (Dick & Basu. Shoemaker & Lewis. emotional attachment or commitment.Kim. Lee. 1978).

. From the perspective of utility theory (Thaler. It is. 2007).g. logical to suggest that the perceived price benefits enable customers to develop a degree of brand loyalty. Smart pricing has become a crucial tool to achieve customer satisfaction and the bottom line profit (Bhattacharya & Friedman. offering low price or discounting price) to ensure customer satisfaction and loyalty as a way to gain a competitive edge over other competing restaurants. One of the strengths in co-branding may be related to increased promotional effects.6 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM RESEARCH HYPOTHESES DEVELOPMENT Customers’ perceived benefits on the chain restaurants’ co-branding strategies can be classified into three different categories (i. and post-purchase services as the three main benefits of chain restaurants’ co-branding efforts. Since people are inclined to behave in a way that maximize the expected utility value. customers at the restaurants utilizing co-branding strategies can have the same quality of service and product (e. From this perspective. As demonstrated previously. it is reasonable to infer that the perceived optimal (or maximized) values such as receiving price benefits leads to increased satisfaction for the customers.g. the co-branding strategy (e. The second hypothesis is: H1b: Price benefits are positively related to brand loyalty. joint advertising and event programs) can produce significant Downloaded At: 07:49 8 March 2011 . The detailed logic behind each hypothesis is explained below. Within the context of this study. premium promotion. Hence.. the first hypothesis states: H1a: Price benefits are positively related to customer satisfaction. premium promotion.. chain restaurants adopting co-branding strategies actively utilize price benefits (e. this study views the price benefits. people always select the one for which the expected value of the expected utility is maximum. and post-purchase services). customers who perceive that they can receive benefits are likely to be attached to the brand offering psychological and behavioral benefits (Woodside & Walser. price benefits. therefore. Although the utility theory does not necessarily argue for the relationship between the maximized value choice and satisfaction.. This study also postulates that three types of perceived benefits offered by co-branding efforts are positively related to customer satisfaction and brand loyalty. As briefly described. 1985).e. foods and drinks) with lower price.g. 2001).

1997. the increased perceived value of services and products may also lead to increased brand loyalty. catalogues. Eggert & Ulaga. The perceived value. 2000). Parasuraman & Grewal. Hence. 1999). The future incentives that they are expected to receive may act as a catalyst to enhance the perceived value of the services and products at the present stage. & Hult. and gifts. Particularly. It can be inferred that the perceived premium promotion such as samples and gifts increases the level of customer satisfaction and brand loyalty. such co-branding can provide customers with more diverse choices of samples. the next hypothesis states: H3a: Post-purchase services are positively related to customer satisfaction. can lead to increase customer satisfaction. Lee.. The postpurchase services can help customers shape positive expectation of services and products related to the certain brand. Much literature has demonstrated the positive impacts of relationship marketing efforts on customer satisfaction and brand loyalty (Tadayuki & Nexhmi. These conjectures help generate two other hypotheses that are related to the effects of premium promotion: H2a: Premium promotion is positively related to customer satisfaction. 2000. may significantly affect customer satisfaction (Cronin. The increased diversity of promotional materials available to customers can enhance the perceived value of services and products at the restaurants. Downloaded At: 07:49 8 March 2011 H2b: Premium promotion is positively related to brand loyalty. As discussed above. and Lee 7 synergic effects for both parties (restaurants and other industries). Ping Jr..Kim. Brady. another hypothesis is suggested: . 2004. Therefore. in turn. The expectation of future benefits enables the customers to develop a certain loyalty to the brand that provides such benefits. 2002. The jointpromotion strategy can help enhance the quality of services and products through more diverse strategies of maintaining positive relationship with the customers. Parasuraman. The third category of co-branding strategy is post-purchase services that include mileages accumulation and electronic newsletter. in turn. The increased value.

In this study.g. Skogland and Siguaw (2004) reported that satisfaction with a product or service offered is a key antecedent of hotel guest loyalty. this study posits customer satisfaction parFIGURE 1. revisit intentions and recommendations) to a certain brand results from consistent positive evaluation of diverse performance attributes (Oliver. Thus. and post-purchase services) on brand loyalty can be mediated by customer satisfaction.. the performance evaluation of restaurants is equated with satisfaction. The last hypothesis is proposed as following: H4: Customer satisfaction is positively related to customers’ brand loyalty. price. which in turn is directly related to an organization’s profitability. premium promotion. 1983). it is reasonable to suggest that customer satisfaction significantly positively affects customer loyalty. The development of loyalty (e. Mittal and Lassar (1998) showed the positive relationship between customer satisfaction and loyalty. 1992. LaBarbera & Mazursky.. Given that the impact of three types of perceived benefits (i. There is a plethora of literature that demonstrates a positive association between customer satisfaction and customer loyalty (Cronin & Taylor. A Proposed Research Model Downloaded At: 07:49 8 March 2011 . 1999).e. The conceptual model for this study is shown in Figure 1.8 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM H3b: Post-purchase services are positively related to brand loyalty.

. The second part (3 questions) was applied to measure the customers’ satisfaction level TABLE 1. The survey was conducted from September 9-25 in 2003. Lee.G. 4 = agree. where 1 = strongly disagree.g. 16 questionnaires were eliminated from the analysis due to some incomplete answers. (3) brand loyalty. Ponderosa Steakhouse. As Table 1 shown. Outback Steakhouse. and (4) demographic characteristics. For data collection. (2) customer satisfaction. METHODS A convenience sampling method was used to select customers of chain restaurants in this study. Coco’s. Bennigan’s. Friday’s. Marché and VIP’s) in Korea. Sky Lark. which results in 207 usable questionnaires. the questionnaire consisted of a total of 22 questions. 2 = disagree. The first part (9 questions) was employed to measure types of joint-promotion in chain restaurants and was measured by asking customers about nine advantages obtained from jointpromotion by five-point Likert scales.I. a self-administered questionnaire was distributed to 350 customers at main exit of each ten chain restaurants (e. Sizzler.Kim. and Lee 9 tially mediates the relationship between three types of perceived benefits offered by joint promotion efforts and brand loyalty. 5 = strongly agree. 3 = neutral. Structure of Survey Downloaded At: 07:49 8 March 2011 . but after a thorough inspection. A total of 223 questionnaires were collected from the survey. T. The questionnaire composed of four subsections: (1) joint-promotion. Tony Roma’s.

000. The third part (5 questions) was used to examine the level of brand loyalty in chain restaurants. Co-Branding Practices of Chain Restaurants in Korea In recent years. Since almost one-half of the respondents fell into the range of an average Korean household income. a chain restaurant industry has started to utilize numerous marketing techniques to attract new customers as well as to maintain the existing loyal customers (Jung. Likert-type scale ranging from 1 (strongly disagree) to 5 (strongly agree). The survey instrument to measure brand loyalty was adapted from Mols (1998). The structural model that best fit the data was then demonstrated. satisfaction with physical environment.000 in 2004 (Korea National Statistical Office. An average Korean annual household income of city residents was approximately US$ 44.3%.10 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM Downloaded At: 07:49 8 March 2011 when they visited chain restaurants during co-branding.9%) respondents had an income between US$ 35. Following the two-stage approach suggested by Anderson and Gerbing (1988). Finally. Structural equation modeling (SEM) was used for hypotheses testing in this study. To measure customer satisfaction in the full-service casual dining restaurants three items were used: satisfaction with employees’ service. The educational levels were high–about 90% of subjects had two-year college degrees or above. and satisfaction with location and accessibility. Items in the scales were measured on a five-point.5%) were single. the measurement model was first estimated using confirmatory factor analysis to test whether the constructs possess sufficient validation and reliability.000 and US$ 50. Females represented 65. RESULTS Sample Characteristics A profile of participants (see Table 2) in this study is summarized. 1998). Slightly less than half (45. Although simply issuing membership cards or coupons was considered as an effective marketing strategy until recently. The samples ranged in age from 19 to 49. 2004). demographic characteristics (5 questions) were intended to analyze the profile of selected customers. we surmise that this sample represents the overall restaurant guests in Korea. the rapidly changing market conditions .7% of the sample and males 34. The majority of respondents (85.

. department stores. An in- .g. and Lee TABLE 2. the credit card companies have become the most active partners of co-branding with chain restaurants. and post-purchase services to their customers. 2001). catalogues. and samples) and post-purchase services (e. The chain restaurants in cooperation with big companies (e. mileage accumulation and electronic newsletters).. co-branding has emerged as an alternative marketing strategy. The co-branding strategy among chain restaurants is a type of strategic alliance that aims to develop joint advertising or event programs by exchanging their own techniques and know-how with each other.Kim.g.. Demographic Characteristic Data of Respondents 11 Downloaded At: 07:49 8 March 2011 (e. Other representative types of co-branding include premium promotion (e. are in an advantageous position to increase a market share by providing multiple benefits such as price benefits. in many cases. Lee. credit-card companies. a decreased customer base and increasing competition within the industry) in Korea started to challenge the effectiveness of such conventional marketing tools (Kim et al. Over the last several years. A price benefit is one of the most popular strategies in co-branding among Korean chain restaurants. mobile communication.g. premium promotion. and rival chain restaurants). gifts. It often produces various synergistic effects such as improving mutual brand images and sales. which could lead to a win-win situation. In response to this...g. The chain restaurants often provide a discount price for their visitors through a co-branding.

and TTL became a huge success..I.G.g. Outback Steak House.G. and cosmetic companies).G.I.F.kr). tgif.G. several chain restaurants such as T. various discount rate plans and entertainment programs for those in their twenties).) may be the first chain restaurant that implemented a co-branding strategy with different types of business. Sizzler. T. cardholders get 20% discount off hairdressing price in Juno Hair. co-branding with department stores is other type of ex- Downloaded At: 07:49 8 March 2011 . A mobile communication company is another partner that has been vigorously engaged in co-branding with chain restaurants over the last several years.I. gives free soft drinks to Juno Hair cardholders (http://www. discount benefits and promotion gifts) to the customers through a co-branding with credit-card companies that charge the lowest service fee.. T.G.g. LG Card is considered as the most successful credit card company in establishing cooperation with chain restaurants. T. named ‘Juno Hair.’s co-branding with SK-telecom significantly affected its sales revenue (http://www.I..I. Vip’s.G.I. the proportion of TTL customers in T.F. As a result. Chain restaurants also make alliances with the companies whose main customers are women (e.G. and Marché began to make co-branding with other mobile communication companies (e.F. they give a variety of benefits (e.I. Bennigan’s & KTF and Outback Steak House & KTF). increase sales. As the communication market reached its ceiling. the mobile communication companies started to aim to maintain their existing customers rather than create new customers.’s total sales increased up to approximately 10% in six months. became allied with a beauty salon.F.I. TTL customers receive a 25% discount when they visit T. The collaborated chain restaurants offered a 5% discount to their customers who made their payment by LG Card. Since chain restaurants cannot explicitly force their customers to use specific credit cards.G. In contrast to the goal of mobile companies.F. In return. This shows that T. Marché. Also. chain restaurants attempt to attract new customers.G.I.F. As the cooperation between T.G. and the market share of LG card has increased to nearly 13%. rival family restaurants such as Bennigan’s.F.12 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM crease in the rate of credit card usage and card service charges prompts the joint action between chain restaurants and credit card companies. In Korea.F. and reduce marketing expenses. department stores.g.’ T. Friday’s (T.kr). Tony Roma’s.I.G.. allied with SK-telecom’s TTL program that is designed to fit perfectly into the life style of young people by offering several benefits (e.g. In Korea.co.F. As a result.F. and Outback Steak House has experienced a sharp growth. First case is co-branding with hair salons.I. T. beauty salons.tgif.co.

g.92. The alliance with department stores has enabled chain restaurants to create new customers.60. Lee. As shown in Table 1. In Korea. & Black. AGFI = . Customers can save up points through the card (i. Sizzler. Moreover. indicating no multicollinearity problems among the variables (Hair. a gift. a discount coupon.Kim. RMSEA = .57.I. there is a problem for the possible down reputation of a restaurant if the co-branding fails. There is a good practice called ‘Big Family.05. Tony Roma’s. 1992).’ and gives free drinks along with gifts (i. and bivariate correlations for the constructs included in the theoretical model. The Results of Correlation Matrix ( ) . and Outback Steak House) of different concepts have cooperated with each other to promote competitiveness and efficiency.G.90.e. and electronic newsletters) when mileages of the card reached a certain point. bivarate correlations ranged from r = .. Anderson. Measurement Model Table 3 reports means. First of all.’ The five family restaurants (i. and increase sales. Tatham. GFI = . a meal certificate. called ‘Happy World. Co-branding with rival chain restaurants can help improve their reputation. a branch of Bennigan’s puts coupons in DM (direct mail) of Lotte department store.84. Marché. one can also expect some negative consequences that may result from the excessive use of this co-branding strategy. chain restaurants actively cooperate with rival restaurants as well as companies in other industries.e. the co-branding strategy may keep one from developing an independent image.G. However. The results of measurement model (Ù2 [65] = 171. teddy bears) to the customers who bring the coupon.Friday’s. T. CFI = .I. p < .13 to r = . A branch of T.08) indiTABLE 3. standard deviations. provides coupons to those who carry specific department store cards and 10% discount to those who are enrolled in the Lotte woman center. LG Big Family Card) that is interchangeably used within the circle of the five chain restaurants and are provided various benefits (e. and Lee 13 Downloaded At: 07:49 8 March 2011 ample. Also.e. cut marketing costs.F.

Table 5 presents standardized path coefficients resulting from Downloaded At: 07:49 8 March 2011 TABLE 4. 2000). Structural Model and Hypotheses Testing The structural equation model (SEM) was performed using LISREL 8.3 and each indicator t-value exceeds 3.14 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM cates that the confirmatory factor model fits the data well. One item for post-purchase services and two items for brand loyalty were dropped because of the weak contributions to coefficient alpha and low item-to-total correlations (see Table 4). The composite reliability indicates whether the individual indicators of each construct provide reliable measurement of the construct.6 (Diamantopoulos & Siguaw. and all loadings of the items exceed .52.45 (p < . the composite reliability ( C) for each construct is acceptable. Summary Results of Measurement Models Using Confirmatory Factor Analysis . Additionally.6 for each scale. The findings indicates that the Cronbach’s alpha exceed . exceeding the minimum value of .01) (see Table 4).

s.001).38). AGFI = . Overall. In comparison with consumer learning theory.89. free entrées. The role of price benefits as a strong antecedent of customer satisfaction has been confirmed in the previous literatures (Voss. The relationship between price benefits and customer satisfaction (H1a) is supported by the positive path coefficient (standardized 11 = .83.26. Taylor.g. 2001).46.). while the relationship between price benefits and brand loyalty (H1b) is not supported (standardized 21 = -. n. no relationship between the premium promotion and customer satisfaction (standardized 12 = -. the result was shown that price benefits were not likely to develop brand loyalty to the chain restaurants. free beverages.) and brand loyalty (standardized 22 Downloaded At: 07:49 8 March 2011 . As not expected. n. 1998). GFI = . consumer-behavior theorists who argue that discount benefit may not effect on brand loyalty. The result of hypothesis testing. RMSEA = .05.06.s. The first two hypotheses concerned the relationship the price benefits and two outcomes of customer satisfaction and restaurant brand loyalty. 1987. The Results of Hypothesized Tests a b 15 testing the proposed structural model. and Lee TABLE 5. CFI = . Parasuraman.Kim. p < . t = 5.91.08) and support was found for four of the seven hypothesized paths.16. the model accounted for 49% of the variance in customer satisfaction (SMC = . corroborates the existing literature. therefore. t = -1. and free desserts) would be less likely to visit the chain restaurant in the post-promotion period without the benefits (Bawa & Shoemaker.. Customers who visit chain restaurants in response to price benefits (e. The fit of structural model was good (Ù2 [67] = 185. Hypothesis 2 postulated that premium promotion is positively related to customer satisfaction and brand loyalty. However. t = -.49) and 38% of the variance in brand loyalty (SMC = . & Grewal.11. Lee. p < .55.94.

19. Yoon & Uysal. p < ..38.36.. positively effect on brand loyalty (standardized ß21 = . The role of customer satisfaction as a strong antecedent of brand loyalty has been confirmed in the previous literatures (Ellinger et al. Lastly. The results of hypotheses testing are also shown in Figure 2.16 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM = . 1999.01).00.01.001. standardized 23 = . t = . Kim et al. thus H2a and H2b are not supported. t = 3. Estimates of the Proposed Model .g..00. respectively). Downloaded At: 07:49 8 March 2011 DISCUSSIONS AND MANAGERIAL IMPLICATIONS With a reduced customer base due to continuous deteriorating economic situations following Korea’s currency devaluation in 1998 and escalating food safety concerns (e. p < . FIGURE 2. Newman & Werbel.) were discovered. 1992. t = 4. p < . the path coefficients between satisfaction and loyalty were examined for Hypothesis 4.38. bird flu and mad cow disease). 2004.001. H3a and H3b are supported by significant and positive path coefficients (standardized 13 = . 2005). n. As theorized. Thus H4 is supported.81. 1973. Hypothesis 3 suggested that the post-purchase services positively related to customer satisfaction and brand loyalty. Fornell. satisfaction was found to have significantly.s. t = 2.

consumer satisfaction.. driven by the price joint-promotion. the relationship between joint-promotion. and free desserts) was positively associated with the customer satisfaction. That is. this study investigates the effects of joint-promotion on customer satisfaction and brand loyalty. Disregarding their customers’ perceptions/ preferences toward joint-promotion may result in a large waste of resources by the companies. For this reason. Plus. on the other hand. significantly affected the level of satisfaction and brand loyalty to the chain restaurants. facility maintenance. price benefits. the increased number of customers. the present study showed that the attainment of price benefits (e. jointpromotion has increasingly risen as one of the alternative methods among restaurant marketers in Korea. and brand loyalty remains largely unexplored. the price benefit strategy may generate a bad margin for the restaurant. For this reason. and the profit for each customer is likely to decrease. However. However. Among the three joint-promotional strategies (i.).. and post-purchase services) shown previously. although it helps increase the number of customers and the total revenue.e. Lee. it was also shown that those who received the price benefits did not tend to develop brand loyalty to the chain restaurants. requires more operating costs (labor cost. mileages accumulation and electronic newsletter). Nowadays.Kim. Post-purchase services (e. it has become an urgent issue for them to implement successful marketing strategies. although it was a much less powerful factor in restaurant selection processes than the Downloaded At: 07:49 8 March 2011 .g. and Lee 17 most chain restaurants have been struggling to work out brand differentiation strategies for keeping the preceding level of market share to continue to exist.. Besides. Thus. and etc. free beverages. it was shown that the customers who receive the benefits of discount prices tend to be more satisfied with the restaurant than those who do not get the price benefits. In Korea. price benefits seem to be a better promotional method for new opening restaurants to attract new customers as a short term marketing strategy than for the established restaurants. premium promotion. most chain restaurants do joint-promotion with uniform benefits to the customers. the price benefits related promotional strategy seems to be the most effective method to attract customers to the chain restaurants in Korea. This suggests that the joint-promotion method that does not contribute to developing brand loyalty to the given restaurant is not a desirable strategy. They seem to develop a loyalty to the price benefits but not to the chain restaurants that provide such benefits. Therefore. then they are likely to visit the restaurants with a better price offer.g. if other competing restaurants offer more competitive prices. free meals.

It seems to be appropriate that marketers recognize the characteristics of their restaurants and major target market and provide the gifts that could best match the identified characteristics. The first limitation Downloaded At: 07:49 8 March 2011 . repurchase patronage and favorable attitudes) (Dube. most chain restaurants in Korea have begun to adopt a joint-promotion strategy and have provided numerous benefits to their customers without any differentiation among themselves.e. customer satisfaction was found to have a significant effect on restaurants brand loyalty. In addition. This study may have produced somewhat different results if the restaurants had provided the customers with more attractive gifts. 2000). catalogues. joint-promotion can be an effective marketing tool that enables chain restaurants to enhance customer satisfaction as well as to build switching barriers. Limitations and Suggestions for Future Research The limitations of this study and future research agenda are as follows.g. which finally leads to more numbers of visits. In sum. it has been suggested that satisfaction serves as an important determinant of the brand loyalty (i. this study found that the effects of joint-promotion on customer’s attitudes such as satisfaction and loyalty were strongly related to the types of benefits. That is. 1994. However. However. Premium promotion (e.18 JOURNAL OF QUALITY ASSURANCE IN HOSPITALITY & TOURISM price benefits. There are several limitations to this study. Regardless of the type of benefits. marketers of the restaurants need to take some effective measure to adopt a premium promotion strategy. and gifts) did not significantly affect the level of both customer satisfaction and brand loyalty to the chain restaurants.. Numerous empirical evidences have pointed toward a positive causal association between customer satisfaction and loyalty in previous literature. Renaghan. Oh. This result shows that the post-purchase services that helps familiarize the customers to the restaurants in a long-term period are effective ways of promotion. & Miller. samples. In recent years. since it appears to be virtually impossible to satisfy all the customers’ tastes for gifts. A good combination between the types of joint-promotion and the profiles of customers in chain restaurants can help enhance the level of both customer satisfaction and brand loyalty. The results from the present study corroborated this positive causal relationship between satisfaction and brand loyalty particularly within the context of chain restaurants. many restaurant managers view joint-promotion as a necessary evil. Only the benefits that customer wants can help increase the level of customer satisfaction and build their brand loyalty.

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I would recommend this chain restaurant to others. although chain restaurants are available in a number of options. I intend to continue to visit this chain restaurant.Kim. I think I am very loyal to this chain restaurant. Price benefits: (1-5 Likert-type scale) The restaurant offers free beverages The restaurant offers free entrées The restaurant offers free desserts Premium promotion: (1-5 Likert-type scale) The restaurant provides various samples/products The restaurant provides catalogues The restaurant provides various presents (free gifts) Post-purchase services: (1-5 Likert-type scale) The restaurant offers mileage (point) accumulation The restaurant offers e-news The restaurant offers discount price Downloaded At: 07:49 8 March 2011 . I always visit this chain restaurant. Lee. and Lee APPENDIX 23 Customer satisfaction: (1-5 Likert-type scale) How would you rate your level of satisfaction with the employees’ service? How would you rate your level of satisfaction with the restaurant’s physical environment? How would you rate your level of satisfaction with location and accessibility? Brand loyalty: (1-5 Likert-type scale) I usually think this chain restaurant as my first choice compared to other restaurants.

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