Asia Pacific Paper 2

Asia Pacific Journal of Marketing and Logistics
The impact of customer equity drivers on loyalty intentions among Chinese

banking customers: The moderating role of emotions
Zohaib Razzaq, Ali Razzaq, Salman Yousaf, Umair Akram, Zhao Hong,
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Zohaib Razzaq, Ali Razzaq, Salman Yousaf, Umair Akram, Zhao Hong, (2019) "The impact of
customer equity drivers on loyalty intentions among Chinese banking customers: The moderating
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The impact of
The impact of customer equity CED on loyalty
drivers on loyalty intentions intentions
among Chinese banking customers

The moderating role of emotions
Zohaib Razzaq Received 7 October 2017
Revised 16 February 2018
Hailey College of Commerce, University of the Punjab, Lahore, Pakistan and 22 July 2018
School of Economics and Management, 13 October 2018
Accepted 8 January 2019
University of Chinese Academy of Sciences, Beijing, China
Ali Razzaq
Department of Management Sciences, Air University, Multan, Pakistan
Salman Yousaf
Institute of Banking and Finance, Bahauddin Zakariya University,
Multan, Pakistan
Umair Akram
Guanghua School of Management, Peking University, Beijing, China, and
Zhao Hong
School of Economics and Management,
University of Chinese Academy of Sciences, Beijing, China
Abstract
Purpose – The implementation of customer equity drivers (CED) as a crucial marketing tactic to surge
customer loyalty intentions has received a considerable importance in the literature. However, most of the
research done in the past has mainly centralized around western societies. To make it even more interesting is
the fact that the significance of customer emotions has been ignored by the previous studies. Therefore, the
purpose of this paper to explore the impacts of CED on loyalty intentions along with exploring the
moderating role of customer emotions (positive emotions and negative emotions).
Design/methodology/approach – A sample of 661 Chinese banking customers was collected by making
the use of store-intercept survey design. The gathered data were then utilized to empirically validate the
proposed model by making the use of hierarchical moderated regression.
Findings – Loyalty intentions were found to be driven by emotions of Chinese banking customers. Consequently,
in order to better forecast the loyalty intentions of the customers, the emotional aspect is vital and therefore should
be incorporated along with other cognitive aspects (value equity, brand equity and relationship equity).
Practical implications – The managers of the banks should make every effort to make the visit of their
customers as pleasant as possible as the emotional responses of customers have a significant impact on the
formation of loyalty intentions.
Originality/value – The current study holds its unique contribution by including emotions in the service-
oriented settings.
Keywords China, Loyalty intentions, Value equity, Emotions, Brand equity, Relationship equity
Paper type Research paper
1. Introduction
In the contemporary world, banking industry around the globe is under constant rivalry.
Gradually increasing customer desires along with intensifying product and service portfolio
Asia Pacific Journal of Marketing
of the banks are some of the prime reasons underlying in the competitive banking industry. and Logistics
© Emerald Publishing Limited
1355-5855
The authors declare that there is no conflict of interest. DOI 10.1108/APJML-10-2017-0243
APJML In order to survive in this ever-evolving economic workplace, banks have to sustain a
healthy relationship with their customers (Ernst and Young, 2011). This crafting of solid
relationships with the clients becomes more important when you are in the field of giving
financial services as compared to any other service providing industry in the market (Tung
and Carlson, 2013). Therefore, a primary responsibility resides on the shoulders of the bank
managers to comprehensively cater the changing needs of their customers in order to
restrict them from moving to other banks (Chiu et al., 2005). Now the marketing activities of
many banks have been transformed into accomplishing customer loyalty (Izogo and Ogba,
2015), the reason being losing customers in the banking sector is considered as a potential
loss and a point of severe concern (Sweeney and Swait, 2008; Chi and Gursoy, 2009;
Fathollahzadeh et al., 2011; Akhter et al., 2011).
After consumption, customers’ intention to use the product or service again
(i.e. loyalty) is the subject of ample investigation in consumer behavior and marketing
literature. In the past, cognitive factors were used to explain these attitudes and behaviors,
but later on the focus was shifted to the emotional components, which significantly
complimented the former factors and led to the formation of cognitive-affective models
(Rufín et al., 2012). A growing number of researchers are stressing upon the fact that
emotions experienced by the customers during the service consumption process play a
vital role in fetching benefits such as satisfaction, retention, positive word of mouth,
loyalty development and their future behaviors (Lin and Liang, 2011; Loureiro and
Roschk, 2014; Suwanamas et al., 2015).
Loyalty intentions can be seen as a customer’s psychological temperament toward a
particular product or service. Loyalty intentions help in shaping favorable attitude in
consumer’s decision-making process (Kumar et al., 2013). Bank managers spend a huge
amount of their budget on increasing the efficiency and performance of their banking
services. The problem is that to the present date there have been no concrete standards on
the basis of which one can drive the effectiveness of the services that banks are providing
to their customers (Bahia and Nantel, 2000; Zameer et al., 2015). This makes challenging
for the bank managers to determine whether the prevailing services are helpful in creating
loyalty among the customers. Nevertheless, consumer equity model (Rust and Oliver,
2000) can act as a bridging link between bank services and customer loyalty. This is
because consumer equity drivers (CED) can not only help in forming strategies that boost
customer relationship but are also more useful owing to the fact that they are more
measurable (Lemon et al., 2001). Moreover, due to the highly competitive banking
environment, it is becoming enormously important for the service providers to pay special
consideration when it comes to crafting loyal customers (Watson et al., 2015). The model
proposed by Rust and Oliver (2000) specifies that consumer’s loyalty intentions are made
up of three vital equity drivers: value equity (VE), brand equity (BE) and relationship
equity (RE), respectively. To make it even more interesting is the fact that CED are
subsequently found to be positively related to customer’s loyalty in various diverse
service sectors around the globe (Ou et al., 2014).
Irrespective of this significant relationship of CED with the loyalty of customers, there
has been a debate done in the past which points that loyalty is not homogenous across
different industries; in fact, it varies from industry to industry (De Haan et al., 2015;
Eisenbeiss et al., 2014; Kumar et al., 2013). The extant literature has mainly focused on the
role of CED in shaping loyalty intentions by keeping customer characteristics, firm
characteristics and industry characteristics as a predictor variable (e.g. Eisenbeiss et al.,
2014; Seiders et al., 2005; Nijssen et al., 2003; Keiningham et al., 2015).
Emotional signals vary across cultures from being a little bit different to quite different
(Alon and Higgins, 2005), and individuals’ emotions are affected by their cultures prevailing
framework of actions and interactions (Elfenbein and Ambady, 2002). The prominence of
emotions both in consumer behavior and marketing is accumulating day by day (Pham, The impact of
2004; Gaur et al., 2014). There exists an extensive amount of empirical support that customer CED on loyalty
emotion is significantly related to loyalty intentions and satisfaction (Romani et al., 2012; intentions
Batra et al., 2012; Han et al., 2008). But in utilitarian service settings like banks, emotions
have not been employed as a mechanism to grab loyalty of customers (Rychalski and
Hudson, 2017), despite the fact that emotions strongly and persistently affect consumer
decision making (Lerner et al., 2015). This study, therefore, expects that emotions will have a
substantial impact on the development of loyalty intentions among Chinese banking
customers. Like Mattila and Enz (2002) found that positive emotions increase confidence
regarding service performance in the contractual setting. There exist a very minimal
amount of work relating to the emotional aspect of loyalty (Britton et al., 2006), which is
shocking due to the fact that scholars have attached a high degree of emotionality when it
comes to loyalty (Miller et al., 2008).
While the extant literature mainly focused on CED and loyalty link (Ou et al., 2017), they
overlook that how emotions can act as a moderator in strengthening this relationship
further. Utilizing emotions as a way to attain loyalty is still uncertain due to two reasons.
First, companies strive to build a positive experience in the minds of the customer as a
medium to remain competitive in the marketplace (Pine and Gilmore, 1998), which implies
that customer retention is realizable with the help of emotions. However, emotions exist for a
short span of time and are categorized as positive and negative (Andrade and Ariely, 2009).
Can the effect of positive and negative emotions be confirmed, when we account for regular
policies, like advancing CED? While the link between CED and loyalty is proven, the degree
to which customer emotions can significantly contribute to the formation of loyalty
intentions remains indistinct. Second, for service firms establishing relationships, building
brand image, delivering superior services along with harnessing customer emotions are
vital for shaping overall customer experiences (Lemon and Verhoef, 2016). One unsettled
query is whether the blend of CED and emotions produces synergies for bank managers or
results in dis-synergies. This study aims to explore the answer to these specific questions in
an empirical manner.
In service settings, the importance of front-line employees cannot be overruled, as the
delivery of their superior services during the service encounter is directly related to greater
customer satisfaction (Benjarongrat and Neal, 2017). Front-line employees help to establish
a long-lasting relationship with the customers (Grewal et al., 2009). Moreover, the emotions
that these front-line employees display are transmitted as a contagion to the customers
(Pugh et al., 2002), and that transmitted emotion can in return have an impact on customer
decision making and satisfaction level (Tan et al., 2004). Similarly, customer emotions can
also have an appealing influence on front-line employees (Zablah et al., 2017). For example,
Hennig-Thurau et al. (2006) found that a pleasant gesture of front-line employees like
smiling can result in positive customer experience and future intentions to rebuy. This gives
us the notion that in order to foster loyalty intentions among the customers, it is imperative
for the bank managers to equip their front-line employees with the essential skill set so that
they can uplift positive emotions among their customers. Thus, the exploration of emotion
becomes far more critical.
Due to the benefits associated with retaining customers, the development of
customer loyalty is becoming an essential pillar in the services marketing paradigm (Wu,
2011). Although despite the importance of customer loyalty in financial services, a gap
exists in explaining the determinants and their interrelationships in forming loyalty
(Baumann et al., 2011). Filling this gap is of extreme importance as it will assist in
understanding the differences that prevail in customer decision-making process
(Eisenbeiss et al., 2014). Overall, this study contributes in investigating the moderating
effects of emotions on the relationship between equity drivers and loyalty intentions
APJML among the Chinese banking sectors. By using consumer equity driver model of Rust et al.
(2004) as a base, we incorporated customer emotions as additional loyalty drivers and
moderators. The present study contributes to the existing body of the literature on loyalty
intentions and customer emotions by means of three ways. First, we enlarge Rust et al.
(2004) model by investigating the incremental influence of customer positive and negative
emotions on loyalty. Second, we are conducting a preliminary examination of moderating
impact of customer positive and negative emotions among the relationships between CED
and loyalty intentions. Handling both CED and emotions can serve as a competitive
marketing tactic to realize customer loyalty in the banking sector. Third, we are testing
positive and negative emotions in a banking setting which is rarely tested concurrently.
Investigating both these emotions can have theoretical and managerial implications for
policymakers. On a managerial level, considering both positive and negative emotions can
help to gain a stronger understanding of how to utilize these emotions in order to upsurge
loyalty intentions.
In order to accomplish these objectives, this study is arranged as follows. The next
section explains the literature review and hypotheses development. We then present the
methodology and data collection process. In the end, we discuss results, future work,
limitations as well as theoretical and managerial implications. The theoretical framework of
our research is shown in Figure 1.
2. Literature review and hypotheses development

2.1 Customer loyalty
Customer loyalty is the main goal for all companies and has always been the prime focus of
marketing (Toufaily et al., 2013; Keiningham et al., 2007). It can be stated as customer
propensity to rebuy a product or service during an extended period of time (Han et al., 2008;
Petrick, 2004). Loyal customers are less costly to oblige (Shugan, 2005), are always ready to
Positive emotions
H4
H6
Customer Equity Driver

H1
• Value equity Loyalty
H2 Intentions
• Brand equity
• Relationship equity H3
H7
H5
Figure 1.
Theoretical framework
of the research Negative emotions
pay extra (Evanschitzky et al., 2012) and, not only this, they spread a positive word of mouth The impact of
to the other citizens of the society (Zeithaml, 2000). Customer equity model (CED) of CED on loyalty
Rust et al. (2004) was utilized in which VE, BE and RE were found to be factors in intentions
establishing customer loyalty. The present study made use of loyalty intentions to measure
customer loyalty because of two motives: first, it is simply not possible to measure loyalty
behavior across a very large set of industries and firms. Second, loyalty intentions have
been categorized as a forecaster of sales and hence offer a course for the companies to
formulate their strategies (Gustafsson et al., 2005).
2.2 Drivers of loyalty intentions

According to Rust and Oliver (2000), a consumer’s loyalty is dependent upon the three
equity drivers which are VE, BE and RE (RE). From the previous literature, several studies
can be found which comprehensively validated this model; for example, CED were found to
be positively associated with loyalty intentions across 13 different service sector industries
(Ou et al., 2014). But despite the prevailing empirical evidence between CED and loyalty
intentions, there are a number of studies that have found a significant difference when it
comes to loyalty strategies among diverse industries and firms (De Haan et al., 2015;
Eisenbeiss et al., 2014; Kumar et al., 2013; Rust et al., 2004). Vogel et al. (2008) identified that
VE, BE and RE are three conformist drivers of customer loyalty. Lately, Segarra-Moliner
and Moliner-Tena (2016) found that there is a significant and positive association of all three
equity drivers with customer loyalty intentions.
2.2.1 Value equity. VE the first driver of loyalty can be stated as the ratio of what is
received in terms of product or service and what actually is given out in terms of price paid
in order to acquire that product or service (Vogel et al., 2008). High VE results in forming
positive attitudes which, in turn, help in establishing trust, satisfaction and loyalty in the
customer arena (Lam et al., 2004; Silvestro and Cross, 2000; Yang and Peterson, 2004).
2.2.2 Brand equity. As far as BE is concerned, a personal, passionate and empirical
assessment of a product or service is more likely (Kim et al., 2008; Lovelock and Wirtz, 2007).
It is something that is determined by images and the personal messages that an individual
has of a particular corporation or brand (Keller, 1998). BE has more to do with emotions and
feelings (Aaker, 1992). BE is higher for those products and services for which the customer
has favorable attitudes or desires (Verhoef et al., 2007).
2.2.3 Relationship equity. The third driver of customer loyalty is RE, which acts as a
medium of connection between customer and product or service (Vogel et al., 2008; Rust and
Lemon, 2001). Lemon et al. (2001) said that RE helps in creating a strong sense of
commitment among the individuals. The literature suggests that there is a strong
association between RE and customer loyalty intention (Hennig-Thurau et al., 2002;
Patterson and Smith, 2001).
As debated in Section 2.2, the previous literature (Vogel et al., 2008) points out that there
exists a significant positive relationship between all the CED and loyalty intentions. This
leads to the formation of the following hypotheses:
H1. VE has a significant positive impact on loyalty intentions.
H2. BE has a significant positive impact on loyalty intentions.
H3. RE has a significant positive impact on loyalty intentions.
3. Emotions
Emotions are viewed as the most integral part for the survival of human being (Niedenthal
and Ric, 2017). In order to comprehend emotions in a better way, first, there is a need to
APJML understand the underlying theories of emotions to exactly know their background and how
they are developed. Schachter and Singer (1962) came up with a theory called two-factor
theory of emotions and proposed that emotions are formed as a combination of two things:
automatic arousal – which can be triggered by anything; and a label – that defines the
experience with respect to that specific situation. Two-factor theory envisages that a human
being upon experiencing a stimulus would label himself or herself “happy” or “fearful” by
the nature of situation or environment he or she experiences, and the result would be termed
as emotion. On the other hand, development theories of emotions acknowledged that our
emotions are also formed by the social experiences, comprising cultural traditions and
customs (Saarni, 2008). Development theories encapsulate that emotion is the amalgamation
of both nature (gene) as well as nurture (experiences), i.e. the place where the individual is
being brought up (Burnette et al., 2013). Furthermore, Darwin suggested that human
emotions evolved because of their adaptive value. According to him, fear, for instance,
evolved because it aids individuals to act in ways that ameliorate the probabilities of
survival, as it alarms about the possible dangers in the surroundings (Darwin, 1859).
Various scholars have defined emotions differently. The academic literature gives
diminutive consensus about the difference between emotions and moods. Beedie et al. (2005)
indicated that most of the studies posit hardly two or three differences between emotions
and moods. On the other hand, in reality, there are eight explicit differences between moods
and emotions ranging from intensity, period, source, penalties, intentionality and
functionality (Beedie et al., 2005). However, the literature only pinpoints that moods are
more long lasting as compared to emotions (Ekkekakis, 2012). Therefore, in quest of
comprehending emotions completely, there is a strong need to distinguish between moods
and emotions. According to Mehrabian and Russell (1974), customer experience and
environmental stimulation trigger a psychological response called emotion. Emotions are
generally divided into positive (happiness and joy) and negative feelings (anger and
sadness) (Lee et al., 2009). Emotions are stated as “a psychological state of promptness that
ascends from cognitive assessments or events or feelings” (Bagozzi et al., 1999). Emotions
are diverse from moods (Bagozzi et al., 1999). Consumer behavior has always been studied
under the microscope of emotions (Gaur et al., 2014). From past few years, the impact of
emotions has been studied across marketing, retailing, consumer decision-making process
and satisfaction (Bagozzi et al., 1999; Gaur et al., 2014).
The problem with emotions is that there is no common agreement among researchers in
defining it. The ever-increasing amount of scientific explanations in context of emotions has
made it difficult to agree on a single definition (Scherer, 2005). Likewise, Shouse (2005) and
Koenig-Lewis and Palmer (2014) have revealed that emotions have been poorly defined. The
difference of opinion regarding what emotion is has made it a challenging task for the
researchers in defining it (Cabanac, 2002; Scherer, 2005). The reason for contradictory
definitions of emotion lies in the fact that these definitions are of diverse nature, i.e.
psychological, behavioral and extensive or contracted definitions (Kleinginna and
Kleinginna, 1981), since people cannot every time recognize the trigger or even the
emotion itself. In order to define emotions systematically, it is crucial to differentiate it from
other relating phenomenon such as affects and moods. Another possible reason for this
complex situation is that there is a wide range of emotions like guilt, shame, regret,
disappointment, envy, anger, fear, joy, pride and many more. Different scholars have
proposed different scales for the measurement of emotions. For instance, Izards (1978) scale
is based on positive and negative emotions, while Mehrabian and Russell (1974) proposed a
bi-dimensional scale. Also, Laros and Steenkamp (2005) developed a hierarchical model to
measure emotions. We use the positive and negative categorization of emotions in our study
as several researchers have given support to this approach of measuring emotions
(Namkung and Jang, 2010; Hosany et al., 2015).
The extant literature (Levy and Hino, 2016) has revealed that there exists a significant The impact of
positive relationship between emotions and customer loyalty with respect to the banking CED on loyalty
sector. Similar results were established by Ladhari (2007) who also found that emotions intentions
were critical in the creation of loyalty intentions. Further positive emotions were found to
have a significant positive impact on the loyalty of customer (Medler-Liraz and Yagil, 2016).
Lee et al. (2008) proposed that positive emotions were helpful in the formation of loyalty,
while negative emotions had a rather indirect impact on loyalty. In the service sector,
Su et al. (2014) confirmed that positive emotions had a positive effect on customer loyalty
intentions, whereas negative emotions considerably diminish loyalty intentions. This
resulted in the proposal of the following hypotheses:
H4. Positive emotions have a significant positive impact on loyalty intentions.
H5. Negative emotions have a significant negative impact on loyalty intentions.
The moderating role of positive and negative emotions can be well explained by two
theories: one is emotion primacy approach and second is broaden-and-built theory.
These two theories are very much helpful in understanding how customers unequally
respond to positive and negative emotions in diverse perspectives. The first one
emphasizes on the convenience of emotion in action propensities and the second, on the
scope of thought-action range. The emotion primacy approach recommends that
consumer positive and negative emotions evidently tell whether they like or dislike
experiences with the firms and corporations (Kwortnik and Ross, 2007). This leads to the
conclusion that consumer decision-making process is pretty much dependent on emotions
(Pham, 2004). The moderating role of emotions is also supported by broaden-and-built
theory. It mainly focuses on positive emotions. This theory proses that individual’s
positive emotions broaden their thought-action range (Fredrickson, 1998; Fredrickson
and Losada, 2005). This broadening of thought leads toward identifying various other
factors in the creation of loyalty, which implies that loyalty intentions may not only
include CED but also a couple of other factors at the consumption level. Furthermore, the
accretion of wide positive experiences might not correspondingly influence loyalty
decisions (Das Gupta et al., 2015). Contrary to positive emotions, negative emotions limit
consumer’s thought-action range (Fredrickson and Joiner, 2002). Positive emotions loosen
the impact that a negative emotion has on the mind of the consumer (Fredrickson and
Losada, 2005). This may indirectly imply that consumer positive experiences nullify the
outcomes of negative emotions, suggesting that CED (if professed positively) and negative
emotions form a positive relation with loyalty intentions. Thus, we are proposing that
positive emotions diminish, whereas negative emotions enhance the link between CED
and loyalty intentions.
Present research has highlighted that customers with positive emotions tend to
purchase products on simple judgments rather than getting involved in rationale thinking
process (Kim and Benbasat, 2003; Rodgers et al., 2005), while, on the other hand, customers
with negative emotions pay heed on the details of the purchase and are always in pursuit
of acquiring additional information (Yang et al., 2006; Pomering and Johnson, 2009). In the
same manner, customer decision-making process was short when it comes to customers
accompanying positive emotions but was considerably high when it comes to customers
experiencing negative emotions (Sauter, 2010). Formerly, only a limited amount of studies
has empirically tested the moderating role of emotions in the service settings (Smith and
Bolton, 2002). Banks are considered as high involvement service settings and past
research has discovered that customer involvement level has a significant positive
impact in forming the behavior and attitudes of customers toward the service provider
(Mayer et al., 2009). Because banking customers have to get involved in a comprehensive
thought making process, we assume that positive emotions will decrease the positive
APJML impact of all three CED on loyalty intentions and negative emotions will boost the positive
impact of equity drivers (VE, BE and RE) on loyalty intentions. Similar results have been
furnished by Razzaq et al. (2017) and Ou et al. (2017) in banking context that positive
emotions diminish the impact of equity drivers on loyalty intentions, while negative
emotions enhance the positive impact of CED on loyalty intentions. Based on the
discussions above, following hypotheses were proposed:
H6. Positive emotions diminish the positive effect of equity drivers on loyalty intentions.
H7. Negative emotions enhance the positive effect of equity drivers on loyalty intentions.
4. Methodology
4.1 Survey design and sampling
For the purpose of this study, we collected data from the Chinese banking sector.
A store-intercept survey was conducted in the capital city of Beijing. For the collection of
responses, interviewers approached customers in or outside banks, resulting in the
collection of 661 useable questionnaires. The socio-demographic traits of the respondents
are given in Table I. A survey research questionnaire was distributed to the respondents
and all the research questions were adapted from the extant literature. The reason for
applying self-administrated questionnaire is that this technique is helpful as the
population in China is widely spread across different regions so a research questionnaire
can easily gather data within the time frame to accomplish the objectives of the study
efficiently. A pre-test was conducted on a sample of 30 randomly selected respondents
through a mall-intercept survey method. As a result of pre-test, some modifications in
sentence structure were made to better relay the meanings of the questionnaire.
4.2 Measures
A questionnaire was developed based on customer equity, loyalty and emotions literature.
The VE section following Rust et al. (2004) and Verhoef et al. (2007) scale was developed. BE
section following Verhoef et al. (2007) and Mizik and Jacobsons (2008) scale was developed,
while RE section was measured following Bügel et al. (2011) scale. Furthermore, loyalty
intentions scale was based on Gupta and Zeithamls (2006) work. The responses of the
above-mentioned variables (i.e. VE, BE, RE and loyalty intentions) were measured
using a seven-point Likert scale (1 ¼ strongly disagree to 7 ¼ strongly agree). The emotions
section was measured following the scales of Richins (1997) and Laros and Steenkamp
(2005). Three positive emotions (enthusiasm, joy and happiness) and five negative emotions
Percentage
Gender
Male 60.2
Female 38.6
Age
18–29 52.7
30–39 36.1
40–49 8.2
Income
Table I. Low 67.5
Demographic traits of Medium 21.9
the respondents High 8.8
(anger, sadness, regret, irritation and disappointed) were used to measure the responses The impact of
score (1 ¼ not at all to 7 ¼ to a very large extent). Three demographic variables were taken CED on loyalty
into the study, i.e. gender, age and income. Mean score was compared across different levels intentions
of demographic variables through parametric tests, including independent t-test (for two
groups) and one-way ANOVA (for more than two groups). Results of the t-test and ANOVA
revealed that some components of customer loyalty significantly differ when we relate them
with the components of demographic variables. For example, when t-test was performed to
check for significant differences among gender, all the values were found to be insignificant
above the threshold level of p o0.05 (Kline, 2015). Overall value equity (TVE) was found to
be significantly different between age groups (Sig. ¼ 0.038). Similarly, RE (TRE) was found
to be significantly different across all the Chinese age groups with significance level
(Sig. ¼ 0.015). Both positive and negative emotions significantly differ between all the age
groups having significant levels (Total positive emotions ¼ 0.028, Total negative
emotions ¼ 0.008) below ( p o0.05), respectively.
4.3 Statistical analysis

The proposed model and hypotheses were tested by means of hierarchical moderated
regression analysis. Composite reliability, convergent validity and discriminant validity
were checked before performing confirmatory factor analysis (CFA) for validating
purposes. In order to evaluate the natural distribution of the disturbances, a natural log
transformation was accomplished on loyalty intentions, which is the depended variable
in the study.
5. Results
5.1 Measuring instruments reliability and validity
The data collected from Chinese bank customers were checked for reliability and validity
concerns by evaluating composite reliability, convergent validity and discriminant validity.
As exhibited in Table II, the composite reliability for each construct was sufficiently above
the suggested 0.60 limit, as given by Bagozzi et al. (1998) and Fornell and Larcker (1981).
Moreover, measurement model possessed convergent validity as it fulfilled the criteria of
Hair et al. (2011), at first the values of average variance extracted should be higher than 0.50
and second the values of composite reliability should be greater than the values of average
variance extracted. The measurement model also possessed sufficient discriminant validity
by qualifying on both the criteria, as suggested by Hair et al. (2011). First, the maximum
shared variance being greater than average shared variance and average variance extracted
greater than the average variance extracted of all the constructs. To back up validity and
reliability statistics, measurement model fitness was checked by employing CFA using
AMOS 22 software. Nine common model-fit measures were employed to evaluate the
measurement model: the ratio of χ2 to degrees of freedom (df ), goodness of fit index (GFI),
adjusted goodness of fit index (AGFI), normalized fit index (NFI), Tucker–Lewis index (TLI),
comparative fit index (CFI), incremental fit index (IFI), relative fit index (RFI), IFI and root
mean square error. As per criteria laid by Hu and Bentler (1999), Thompson (2004) and
CR AVE MSV ASV NE TV TR TB PE
NE 0.933 0.735 0.110 0.067 0.857

TV 0.825 0.612 0.536 0.245 −0.133 0.783
TR 0.837 0.632 0.510 0.261 −0.331 0.616 0.795 Table II.
TB 0.772 0.630 0.536 0.281 −0.199 0.732 0.714 0.794 Reliability and
PE 0.881 0.713 0.100 0.057 −0.316 0.214 0.211 0.196 0.844 validity statistics
APJML Steiger (1998), the measurement model holds fitness if the values of fit indices are greater
than 0.90 and χ2/df is lesser than 3 and RMSEA value is lesser than 0.06. The values
in Table III show that measurement model is adequately fit for Chinese data set. The
standardized factor loadings for each item are presented in Table IV. All items sufficiently
met the criteria of possessing minimum regression weight of 0.50 and or above and were
thus retained as evident in Table IV.
5.2 Data analysis and hypothesis testing

Hypotheses H1–H3 were all validated, as shown in Table V. It was found that for Chinese
bank customer VE (β ¼ 0.105, p o0.005), BE (β ¼ 0.169, p o0.001) and RE (β ¼ 0.260,
p o0.001) all have a substantial positive impact on loyalty intentions, respectively. H4 was
accepted as there exists a significant positive impact of positive emotions on loyalty
intentions (β ¼ 0.217, p o0.001). Likewise, H5 was also sustained as negative emotions were
found to have a significant negative effect on loyalty intentions (β ¼ −0.238, po 0.001), as

portrayed in Table V.
A hierarchical moderated analysis was run to test the hypotheses. The moderated
regression analysis seeks to determine the change in R2 that results during a hierarchical
test of three regression equations. In the first regression, the dependent variable loyalty
intention is regressed on the equity drivers as the independent variable. This is followed by
a second regression of loyalty intentions with both the independent variable equity drivers
Indicator Data values
χ /df
2
2.956
GFI 0.971
AGFI 0.954
NFI 0.976
TLI 0.978
CFI 0.984
Table III. IFI 0.984
Model fitness RFI 0.967
indicators RMSEA 0.042
Standardized
Items Statements factor loadings
VE3 I can make use of the product/service of this company at any time and place I want 0.790
VE2 I can buy this product/service at places that are convenient for me 0.732
VE1 The price-quality ratio of the product/service the company is offering is good 0.823
RE3 I am very enthusiastic about the company 0.812
RE2 I attach much value to the company 0.826
RE1 I have a confidential relationship with the company 0.744
BE2 This company has an innovative brand 0.733
BE1 This company has a strong brand 0.850
P1 Happiness 0.852
P2 Enthusiasm 0.820
P3 Joy 0.860
N1 Irritation 0.867
N2 Regret 0.894
Table IV. N3 Disappointment 0.836
Standardized factor N4 Sadness 0.846
loadings for the items N5 Anger 0.841
Regression Equation 1 Regression Equation 2 Regression Equation 3
The impact of
Loyalty intention Loyalty intention Loyalty intention CED on loyalty
intentions
R2 0.172 0.210 0.227
Adj. R2 0.168 0.205 0.219
F 47.128*** 45.205*** 28.422***
Total equities
Total value equity 0.105** 0.029 −0.077
Total brand equity 0.169*** 0.138** −0.177
Total relationship equity 0.260*** 0.210*** 0.368**
Moderating variable
Positive emotions 0.217*** −0.150
Interaction
Positive total value equity 0.244
Positive total brand equity 0.712** Table V.
Positive total relationship equity −0.431 Bank data positive
Notes: **p o0.005; ***po 0.001 emotions moderation
and moderator variable emotions. In the third regression, an interaction term obtained by
multiplying the independent variable with the moderator variable is also entered. To
minimize the risk of multicollinearity resulting from the correlation, these variables have
had their data mean centered (Aiken et al., 1991; Cronbach, 1987).
While checking for positive emotions, the findings in the Table IV demonstrate
that the increase in R2 value from 0.210 to 0.227 provides evidence of the presence of the
statistically significant direct moderation effect of positive emotions (F ¼ 28.422, p o0.001).
Contrasting to our postulated relationship, positive emotions enhanced the positive
impact of only BE (β ¼ 0.712, p o0.005) on loyalty intentions. Based on these results, H6
was partially confirmed.
While evaluating negative emotions, it is inferred from Table VI that an increase in R2
from 0.221 to 0.244 provides evidence of the presence of the statistically significant direct
moderation effect of negative emotions (F ¼ 31.257, p o0.001). H7 was partially confirmed
Regression Equation 1 Regression Equation 2 Regression Equation 3

Loyalty intention Loyalty intention Loyalty intention
R2 0.172 0.221 0.244

Adj. R2 0.168 0.216 0.236
F 47.128*** 48.294*** 31.257***
Total equities
Total value equity 0.105** 0.046 0.067
Total brand equity 0.169*** 0.145*** 0.350***
Total relationship equity 0.260*** 0.201*** 0.235**
Moderating variable
Negative emotions −0.238*** 0.308
Interaction
Negative total value equity −0.053
Negative total brand equity −0.453** Table VI.
Negative total relationship equity −0.055 Bank data negative
Notes: **p o0.005 ***p o0.001 emotions moderation
APJML as it was found that after the moderation of negative emotions, only BE (β ¼ −0.453,
p o0.005) reduces the positive impact of CED on loyalty intentions. The interaction plots of
H6 and H7 are shown in Figures 2 and 3, respectively.
6. Discussion
Considering the prior discussion on the importance of emotions and equity drivers in service
encounters, this study presents empirical research that supports the link of emotional aspect
of loyalty in creating loyalty intentions. Moreover, both positive and negative emotions have
been detected as playing a vital role with respect to Chinese bank customers.
All the three CED (i.e. VE, BE and RE) had a significant positive impact on loyalty
intentions of Chinese banking customers. Similar kinds of results have also been reported by
the previous studies (Vogel et al., 2008) but in the context of western societies. This is one of
the initial studies to explore CED as antecedents of loyalty intentions with respect to eastern
banking customers. VE had a significant impact in the formation of loyalty intentions; this
contradicts the previous findings of the literature (Bao et al., 2003) which positions Chinese
consumers as more prone toward the extrinsic variables than intrinsic variables, i.e. price.
The reason for this contradiction lies in the fact that previously Chinese VE has been
explored in non-contractual settings like superstores, whereas in case of contractual settings
like banks, consumer pay heed to the price factor (Ou et al., 2014). For BE, there also exists a
significant positive relationship with loyalty intentions. These findings are consistent with
the findings of the extant literature which reveals that in China, brands have a noteworthy
5
Moderator
4.5
4
Loyalty Intentions
3.5
3 Low Positive
Emotions
2.5
Figure 2.
Positive emotions 2
strengthens the
relationship between 1.5
brand equity and
loyalty intentions 1
Low Brand Equity High Brand Equity
5 Moderator
4.5
4
Loyalty Intentions
3.5
3 Low Negative
2.5 Emotions
Figure 3.
Negative emotions 2
dampens the positive
relationship between 1.5
brand equity and
loyalty intentions 1
Low Brand Equity High Brand Equity
prominence (Henderson et al., 2003), because they help the Chinese consumers to depict their The impact of
self-worth (Liao and Wang, 2009) even in case of service settings (Wang et al., 2004). This CED on loyalty
leads to the conclusion that in China, the branding of banks paves the way toward the intentions
formation of loyalty. RE was also found to be positively related to loyalty intentions. This
finding is very much consistent with the previous literature due to the fact that Chinese
culture can be categorized as Guanxi or relationship-oriented culture (Zhai et al., 2013). For
Chinese people, relationships are at the heart of their decision making and day-to-day
activities (Luo et al., 2008). Chinese consumers prefer to maintain a close relationship with
the salesperson and are more prone to do business with firms that know them by their
names (Barnes et al., 2015).
Additionally, from the findings of this study, it was established that positive emotions
positively stimulated loyalty intentions, whereas negative emotions negatively stimulated
negative emotions. These results are consistent with the preceding literature (Han et al.,
2009; Lee et al., 2008). This finding advocates that clients’ positive and negative emotions are
vital and independent factors for defining loyalty intentions in addition to the traditional
loyalty drivers. These results confirm that both positive and negative emotions are unipolar
scales influencing customer loyalty decisions. However, there exists a scarcity of evidence in
the literature regarding the independency of positive and negative emotions (Veit and Ware,
1983). A possible explanation lies in desired and undesired happenings creating positive and
negative emotions, respectively, which may not necessarily be associated to one another
(e.g. Veit and Ware, 1983). For instance, a customer may be irritated by the bank’s noisy
atmosphere but overwhelmed by the services of its front-line employees who faithfully
helped him, thus depicting that the undesired (noisy atmosphere) and desired (helping
behavior of front-line workers) are not precisely interrelated. Consequently, positive and
negative emotions might independently exist within the customer and together explain the
variance of loyalty intentions.
We also test and confirm the moderating effect of emotions on the relationship between
equity drivers and loyalty intentions in Chinese banking customers. Positive emotions
significantly contribute toward strengthening the link between BE, VE and loyalty
intentions, whereas negative emotions lessen that relationship. Moreover, there was no
moderating effect of emotions in case of VE and RE when it comes to negative emotions.
However, these results are different from the proposed relationships regarding the
moderating effect of emotions. The reasons for these contradicting results are systematic
differences that prevail across the countries. For example, Zhang (2015) identified that in
China, there is inferior market efficiency in terms of fair pricing mechanism, low brand
trust and more importantly a weak customer–relationship–management (CRM), which
implies that there are numerous other factors apart from customer emotions that lead
toward loyalty intentions. Another way to describe these unexpected results could lie in
the notion that emotions differ primarily across cultures (Barrett, 2006; Mesquita, 2001).
There is little consensus among scholars regarding the extent of cross-cultural variability
despite the presence of empirical record, suggesting cultural variations in emotions
(Mesquita et al., 1997). Another reason could lie in the premise that individuals in
Asian cultures do not express their feelings or emotions openly in order to maintain
harmony and tend to control their emotions in public settings (Markus and Kitayama,
1991; De Mooij and Hofstede, 2011). For instance, European Americans cultures regard
pleasant emotions to be more desirable as compared to unpleasant emotions. On the other
hand, Asian cultures pay attention to positive and negative emotions almost equally
(Spencer-Rodgers et al., 2010). As emotions moderate the relation between BE and loyalty
intentions in Chinese bank customers, a possible reason for this result can be related to the
importance of brand consumption in Chinese customers, even in the service industry
(Wang et al., 2004).
APJML 6.1 Theoretical implications
Emotion primacy approach and broaden-and-built theory both are supported by means of
the findings of this study. The former infers that customers rely on emotions for decision
making and to overcome confusions (Gaur et al., 2014). While the latter one suggests that
positive experiences do not necessarily lead toward loyalty creation if customer perceives
CED negatively (Das Gupta et al., 2015), as in our study positive emotions enhanced the
positive impact of only BE on loyalty intentions. Surpassing previous research gaps in
service marketing and consumer behavior, results of this study provide unique and novel
contributions regarding the role of emotions in explaining the relationship between CED
and loyalty intentions. Findings also portray the increasing role of emotions along with
cognitive factors and lead to the endorsement of cognitive-affective models (Rufín et al.,
2012). Moreover, our study extends the work of Rust and Oliver (2000) by incorporating the
role of emotions. Also, as Fang et al. (2018) have questioned the universality of emotions, this
study provides useful insights about the emotional differences between cultures.
Another novel contribution of this study is that it investigated the moderating role of
emotions in contractual settings, i.e. banks. The literature on CRM advocates that there
exists a considerable amount of variation in consumer behavior for contractual and non-
contractual settings (Fader and Hardie, 2007). Previously, it was deemed that emotions play
a significant role in harnessing loyalty intentions of non-contractual customer’s (Shah et al.,
2012). However, our study advances the understanding of emotions by showcasing that
emotions are equally relevant in contractual settings. Simultaneously, Loureiro and
Sarmento (2018) stated that now bank managers should emphases more on “emotional
banking” because customer is now perceiving service quality through this medium.
6.2 Managerial implications

The findings of our study give rise to several managerial implications for bank service
managers in China. In China, the state-owned banking system has been abolished, resulting
in a healthy and efficient banking environment (Wang et al., 2003). Previous state-possessed
banks are now pursuing to become efficient market-oriented units (Zhou, 2004). Foreign
banks are now free to do business transactions with the locals and foreigners in the local
currency without any geographical hurdles (Wang et al., 2003). All this has resulted in
establishing an immense competition in the banking sector of China.
Bank managers are mainly concerned about the efficient trade-off of competing
marketing schemes (Rust et al., 2004). As far as the first issue is concerned, the results of
this study reveal that the managers should incorporate not only CED, but also emotions in
forming loyalty strategies for customers. Likewise, both positive and negative emotions
are sovereign loyalty drivers. From this notion, bank managers can deduce that breeding
robust positive emotions is not merely the only way to boost loyalty intentions, as evading
strong negative emotions can also serve as a tool to encapsulate loyalty. For example,
bank managers should compensate bad services by subsequently offering service
recovery, which may result in forming loyalty intentions. They may help improve
service managers in making customer perceptions more favorable in the current era of
tough budget cuts. Furthermore, bank managers should focus on service employees’
behavior with their customers and train them to handle the varying emotions of customers
in a cordial way (Kayeser Fatima and Abdur Razzaque, 2014). More importantly, the
previous literature has shed light on the importance of front-line employees extra role in
the form of job competency, benevolence and courtesy in shaping loyalty in service
settings (Biswas and Varma, 2011).
Recently, the importance of emotions in developing marketing strategies has been
highlighted (Kim et al., 2010). Thus, our study helps managers in devising strategies
according to the cultural norms and industry situation. Our study provides guidance on the
strategic combination of emotions and consumer equity drivers to foster loyalty intentions, The impact of
i.e. appropriate scenarios to use CED and emotion. When the banks are going through a CED on loyalty
deficiency in strategic synergies between equity drivers and positive emotions, the focus intentions
should be either on emotions or CED. This is useful for banks that are entering in the
Chinese market for the very first time; their main concern should be to nurture VE, BE and
RE among its customers because of their weak market position rather than focusing on
positive emotions. On the other hand, in a situation where the customers negatively perceive
the CED of banks, focusing more on positive emotions could act as a remedy, knowing the
fact that customers with positive emotions pay less heed to CED. This positive emotion can
serve as a valuable loyalty tool for banks that are losing their forte or are comparatively
fresh in the market. In banking, customers experience various service encounters across
numerous front-line employees on daily basis (Van Looy et al., 2003). To cushion the
negatively from uncontainable poor services, we recommend that bank managers should
make every effort to improve CED. To buffer the negative emotions of their customer, banks
should make the use of superior physical service facility, i.e. access, bank atmosphere,
waiting period and security level to garner customer loyalty (Srivastava and Kaul, 2016;
Lee and Mizerski, 2005). Particularly investing in RE can help to harvest loyalty intentions
as China is a collectivist society and relationships matter for them a lot (Luo, 2007).
Chinese customer’s positive emotions contribute toward enhancing the equity drivers-
loyalty link. This means that customers give more importance to equity drivers in becoming
loyal under pleasant service consumption situation, which implies that banks that fall short
in conventional equity drivers can still enhance loyalty by making customers service
consumption more favorable. Moreover, negative emotions decrease the equity
drivers-loyalty link. This means that no matter how efficient the banks perform in CED,
unfavorable service experience can reduce loyalty. Thus, bank managers should strive to
devise strategies in order to reduce negative emotions and enhance positive feelings during
service consumption encounters.
6.3 Limitations and future suggestions

As no study is without limitations, thus, future research work should strive to overcome it
and shed light on new frontiers of research. The present study’s scope is limited to the
Chinese banking sector only; therefore, future work should generalize our findings in other
service industries. Moreover, it would be interesting to see the role of emotions between
other western and eastern cultures. During service encounters, customers also interact with
technology, for example, in the case of e-banking services, thus, additional research should
test the impact of emotions in e-banking context. In addition, the relationships of emotions
with other cognitive factors, such as willingness to pay more and customer complaint
behavior, should be worth pursuing. At last, longitudinal data analysis could overcome the
shortcomings of this study.
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Corresponding author
Zohaib Razzaq can be contacted at: zohaib365@outlook.com
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Asia Pacific Journal of Marketing and Logistics

The impact of customer equity drivers on loyalty intentions among Chinese

*Related content and download information correct at time of download.

among Chinese banking customers

2. Literature review and hypotheses development

Customer Equity Driver

2.2 Drivers of loyalty intentions

emotions ¼ 0.008) below ( p o0.05), respectively.

4.3 Statistical analysis

CR AVE MSV ASV NE TV TR TB PE

NE 0.933 0.735 0.110 0.067 0.857

5.2 Data analysis and hypothesis testing

found to have a significant negative effect on loyalty intentions (β ¼ −0.238, po 0.001), as

Indicator Data values

Regression Equation 1 Regression Equation 2 Regression Equation 3

R2 0.172 0.221 0.244

6.2 Managerial implications

6.3 Limitations and future suggestions

quality and performance in Western–Hong Kong interorganizational business relationships”,

Research, Vol. 54 No. 4, pp. 482-495.

November, pp. 106-115.

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