The Driving Forces of Customer Loyalty: A Study of Internet Service Providers in Hong Kong

The Driving Forces of Customer Loyalty: A Study of Internet Service Providers in Hong Kong

T. C.E. Cheng (The Hong Kong Polytechnic University, Hong Kong), L. C.F. Lai (The Hong Kong Polytechnic University, Hong Kong) and A. C.L. Yeung (The Hong Kong Polytechnic University, Hong Kong)
DOI: 10.4018/978-1-60566-910-6.ch003
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Abstract

In this study we examine the driving forces of customer loyalty in the broadband market in Hong Kong. We developed and empirically tested a model to examine the antecedents of customer loyalty towards Internet service providers (ISPs) in Hong Kong. Structural equation modeling (SEM) was used to evaluate the proposed model. A total of 737 valid returns were obtained through a questionnaire survey. The results show that customer satisfaction, switching cost, and price perception are antecedents that lead directly to customer loyalty, with customer satisfaction exerting the greatest influence. Although we found that service quality significantly influences customer satisfaction, which in turn leads to customer loyalty, we did not find a direct relationship between service quality and customer loyalty. Our results also reveal that corporate image is not related to customer loyalty. Our empirical investigation suggests that investing huge resources in building corporate image can indeed be a risky strategy for ISPs.
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Theoretical Background And Hypothesis Development

Customer loyalty is a purchase behavior, which, unlike customer satisfaction, is an attitude (Griffin, 1996). Customer loyalty is concerned with the likelihood of a customer returning, making business referrals, providing strong word of mouth, as well as offering references and publicity (Bowen & Shoemaker, 1998). Loyal customers are less likely to switch to competitors in view of a given price inducement, and they make more purchases compared to less loyal customers (Baldinger & Rubinson, 1996). Although most research on loyalty has focused on frequently purchased package goods (i.e., brand loyalty), the loyalty concept is also important for industrial goods (i.e., vendor loyalty), services (i.e., service loyalty), and retail establishments (i.e., store loyalty) (Dick & Basu, 1994). As evidenced in the previous discussions, customer loyalty has been generally described as occurring when customers repeatedly purchase goods or services over time, have word of mouth, and make referrals to other customers.

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