Understanding Customer Loyalty and Disloyalty The Effect of Loyalty-Supporting and -Repressing Factors (first edition sold out, 'print on demand' 60 €)

Customer loyalty has been a central topic of both marketing theory and practice for several decades. Customer disloyalty, or relationship ending, has received much less attention. Despite the close relation between customer loyalty and disloyalty, they have rarely been addressed in the same study. The thesis bridges this gap by focusing on both loyal and disloyal customers and the factors characterising them. Based on a qualitative study of loyal and disloyal bank customers in the Finnish retail banking market, both factors that are common to the groups and factors that differentiate between them are identified. A conceptual framework of factors that affect customer loyalty or disloyalty is developed and used to analyse the empirical data. According to the framework, customers’ loyalty status (behavioural and attitudinal loyalty) is influenced by positive, loyalty-supporting, and negative, loyalty-repressing factors. Loyalty-supporting factors either promote customer dedication, making the customer want to remain loyal, or act as constraints, hindering the customer from switching. Among the loyalty-repressing factors it is especially important to identify those that act as triggers of disloyal behaviour, making customers switch service providers. The framework further suggests that by identifying the sources of loyalty-supporting and -repressing factors (the environment, the provider, the customer, the provider-customer interaction, or the core service) one can determine which factors are within the control of the service provider. Attitudinal loyalty is approached through a customer’s “feeling of loyalty”, as described by customers both orally and graphically. By combining the graphs with behavioural loyalty, seven customer groups are identified: Stable Loyals, Rescued Loyals, Loyals at Risk, Positive Disloyals, Healing Disloyals, Fading Disloyals, and Abrupt Disloyals. The framework and models of the thesis can be used to analyse factors that affect customer loyalty and disloyalty in different service contexts. Since the empirical study was carried out in a retail bank setting, the thesis has managerial relevance especially for banks. Christina Nordman is associated with CERS, Center for Relationship Marketing and Service Management at the Swedish School of Economics and Business Administration. The doctoral thesis is part of the Göran Collert Research Project in Customer Relationships and Retail Banking and has been funded by The Göran Collert Foundation.

Fading Customer Relationships

This dissertation is based on the assumption that fading customer relationships are important phenomena to understand in order for companies to prevent a future relationship termination, manage a desired relationship termination, or manage the situation where the relationship strength temporarily or permanently has weakened but where the customer still stays with the same service provider. It is assumed that fading could take different forms and develop through a range of different processes. The purpose of the thesis is therefore to define and describe fading, reveal different types of fading relationship processes, and discuss the dynamics of these processes. In services literature there is a lack of research focusing on the weakening of customer relationships. Fading therefore represents a new approach to understanding issues related to the ending of customer relationships. A fading relationship process could precede a relationship ending, but could also represent a temporal weakening of the relationship without leading to termination. It thus distinguishes the concept from other concepts within ending research which focus solely on relationships that have been terminated, taking a larger aspect of the relationship into account (as a relationship could build on constant changes). A pilot study created an understanding of difficulties related to understanding and detecting fading customer relationship, which led to a follow-up study incorporating qualitative interviews in relationship dyads characterised as fading with both private banking customers and their respective financial advisor. The focus remained on the understanding of the fading process resulting in a model for analysing different types of fading processes. Four types of fading processes were also revealed; the crash landing process, the altitude drop process, the fizzle out process and the try out process. The dissertation contributes to a broadened understanding of different types of fading processes within the research area of ending relationships emphasising the dynamic aspects of the phenomenon. Managerial implications include the management of different types of fading processes and also the understanding of the financial advisor’s role in influencing the development of these processes. Helena Åkerlund is associated with CERS, the Centre for Relationship Marketing and Service Management at Hanken, Swedish School of Economics and Business Administration, Helsinki

A Relationship Mediated Theory of Internal Marketing (summary section only)

This report presents a new theory of internal marketing. The thesis has developed as a case study in retrospective action research. This began with the personal involvement of the author in an action research project for customer service improvement at a large Australian retail bank. In other words, much of the theory generating ‘research’ took place after the original project ‘action’ had wound down. The key theoretical proposition is that internal marketing is a relationship development strategy for the purpose of knowledge renewal. In the banking case, exchanges of value between employee participants emerged as the basis for relationship development, with synergistic benefits for customers, employees and the bank. Relationship development turned out to be the mediating variable between the learning activity of employee participants at the project level and success in knowledge renewal at the organisational level. Relationship development was also a pivotal factor in the motivation and customer consciousness of employees. The conclusion reached is that the strength of relationship-mediated internal marketing is in combining a market focused commitment and employee freedom in project work to achieve knowledge renewal. The forgotten truth is that organisational knowledge can be renewed through dialogue and learning, through being trustworthy, and by gaining the trust of employees in return.

Use of Customer Information: An Ethnography in Service Development

Service researchers have repeatedly claimed that firms should acquire customer information in order to develop services that fit customer needs. Despite this, studies that would concentrate on the actual use of customer information in service development are lacking. The present study fulfils this research gap by investigating information use during a service development process. It demonstrates that use is not a straightforward task that automatically follows the acquisition of customer information. In fact, out of the six identified types of use, four represent non usage of customer information. Hence, the study demonstrates that the acquisition of customer information does not guarantee that the information will actually be used in development. The current study used an ethnographic approach. Consequently, the study was conducted in the field in real time over an extensive period of 13 months. Participant observation allowed direct access to the investigated phenomenon, i.e. the different types of use by the observed development project members were captured while they emerged. In addition, interviews, informal discussions and internal documents were used to gather data. A development process of a bank’s website constituted the empirical context of the investigation. This ethnography brings novel insights to both academia and practice. It critically questions the traditional focus on the firm’s acquisition of customer information and suggests that this focus ought to be expanded to the actual use of customer information. What is the point in acquiring costly customer information if it is not used in the development? Based on the findings of this study, a holistic view on customer information, “information in use” is generated. This view extends the traditional view of customer information in three ways: the source, timing and form of data collection. First, the study showed that the customer information can come explicitly from the customer, from speculation among the developers or it can already exist implicitly. Prior research has mainly focused on the customer as the information provider and the explicit source to turn to for information. Second, the study identified that the used and non-used customer information was acquired both previously, and currently within the time frame of the focal development process, as well as potentially in the future. Prior research has primarily focused on the currently acquired customer information, i.e. within the timeframe of the development process. Third, the used and non-used customer information was both formally and informally acquired. In prior research a large number of sophisticated formal methods have been suggested for the acquisition of customer information to be used in development. By focusing on “information in use”, new knowledge on types of customer information that are actually used was generated. For example, the findings show that the formal customer information acquired during the development process is used less than customer information already existent within the firm. With this knowledge at hand, better methods to capture this more usable customer information can be developed. Moreover, the thesis suggests that by focusing stronger on use of customer information, service development processes can be restructured in order to facilitate the information that is actually used.

Tiering Effects in Third-party Logistics: A First-tier Buyer Perspective

This doctoral dissertation takes a buy side perspective to third-party logistics (3PL) providers’ service tiering by applying a linear serial dyadic view to transactions. It takes its point of departure not only from the unalterable focus on the dyad levels as units of analysis and how to manage them, but also the characteristics both creating and determining purposeful conditions for a longer duration. A conceptual framework is proposed and evaluated on its ability to capture logistics service buyers’ perceptions of service tiering. The problem discussed is in the theoretical context of logistics and reflects value appropriation, power dependencies, visibility in linear serial dyads, a movement towards the more market governed modes of transactions (i.e. service tiering) and buyers’ risk perception of broader utilisation of the logistics services market. Service tiering, in a supply chain setting, with the lack of multilateral agreements between supply chain members, is new. The deductive research approach applied, in which theoretically based propositions are empirically tested with quantitative and qualitative data, provides new insight into (contractual) transactions in 3PL. The study findings imply that the understanding of power dependencies and supply chain dynamics in a 3PL context is still in its infancy. The issues found include separation of service responsibilities, supply chain visibility, price-making behaviour and supply chain strategies under changing circumstances or influence of non-immediate supply chain actors. Understanding (or failing to understand) these issues may mean remarkable implications for the industry. Thus, the contingencies may trigger more open-book policies, larger liability scope of 3PL service providers or insourcing of critical logistics activities from the first-tier buyer core business and customer service perspectives. In addition, a sufficient understanding of the issues surrounding service tiering enables proactive responses to devise appropriate supply chain strategies. The author concludes that qualitative research designs, facilitating data collection on multiple supply chain actors, may capture and increase understanding of the impact of broader supply chain strategies. This would enable pattern-matching through an examination of two or more sides of exchange transactions to measure relational symmetries across linear serial dyads. Indeed, the performance of the firm depends not only on how efficiently it cooperates with its partners, but also on how well exchange partners cooperate with an organisation’s own business.

Shareholder/Stakeholder Value Management, Company Growth and

There has been considerable discussion in the literature about the relative merits of shareholder value management and stakeholder value management, but relatively little empirical research has been reported concerning the relationship between these types of management and financial performance. The present study puts forward a hypothesis that true shareholder value management also encompasses stakeholder value management. This combination of shareholder/stakeholder value management is hypothesised to be associated with superior financial performance and sales growth. Using a sample of chief financial officers' ratings of the contemporary management accounting techniques economic value added and the balanced scorecard to represent the two management types, the study found evidence in support of the hypothesis.

An Empirical Investigation of Value-at-Risk in Long and Short Trading Positions

This paper uses the Value-at-Risk approach to define the risk in both long and short trading positions. The investigation is done on some major market indices(Japanese, UK, German and US). The performance of models that takes into account skewness and fat-tails are compared to symmetric models in relation to both the specific model for estimating the variance, and the distribution of the variance estimate used as input in the VaR estimation. The results indicate that more flexible models not necessarily perform better in predicting the VaR forecast; the reason for this is most probably the complexity of these models. A general result is that different methods for estimating the variance are needed for different confidence levels of the VaR, and for the different indices. Also, different models are to be used for the left respectively the right tail of the distribution.

The impact of stock option incentives on investment and firm value

This paper analyzes the relations among firm-level stock option portfolio incentives, investment, and firm value based on a sample of Finnish firms during the time period 1987 – 2000. Utilizing exact and complete information regarding stock option portfolio characteristics, we find some evidence that firm investment is increasing in the incentives to increase stock price (delta) and risk (vega). Furthermore, we find strong evidence of a positive relation between both incentive effects and firm value (Tobin’s Q). In contrast, when we allow for stock option incentives, investment, and firm value to be simultaneously determined, we find no evidence that investment is increasing in incentives. However, even after controlling for endogeneity, we find that both incentive effects arising from stock option compensation display a positive and significant effect on firm value. Finally, in contradiction to earlier findings, we observe that neither Tobin’s Q nor investment drives incentives.

Activityscape Mapping: Consumer Activity Systems as Service Context

Activity systems are the cognitively linked groups of activities that consumers carry out as a part of their daily life. The aim of this paper is to investigate how consumers experience value through their activities, and how services fit into the context of activity systems. A new technique for illustrating consumers’ activity systems is introduced. The technique consists of identifying a consumer’s activities through an interview, then quantitatively measuring how the consumer evaluates the identified activities on three dimensions: Experienced benefits, sacrifices and frequency. This information is used to create a graphical representation of the consumer’s activity system, an “activityscape map”. Activity systems work as infrastructure for the individual consumer’s value experience. The paper contributes to value and service literature, where there currently are no clearly described standardized techniques for visually mapping out individual consumer activity. Existing approaches are service- or relationship focused, and are mostly used to identify activities, not to understand them. The activityscape representation provides an overview of consumers’ perceptions of their activity patterns and the position of one or several services in this pattern. Comparing different consumers’ activityscapes, it shows the differences between consumers' activity structures, and provides insight into how services are used to create value within them. The paper is conceptual; an empirical illustration is used to indicate the potential in further empirical studies. The technique can be used by businesses to understand contexts for service use, which may uncover potential for business reconfiguration and customer segmentation.

Silent Communication - A Challenge to Established Marketing Communication Practice

Purpose The paper examines the concept of silent communication and its implications in marketing communication. It defines silent communication and proposes an analytic framework enabling an expanded view of marketing communication. Design/methodology/approach By explicitly adopting a customer-oriented perspective, combined with insights from service marketing and relationship communication, the paper extends current models of marketing communication. Findings The paper identifies different types of silent communication and presents new perspectives on marketing communication. The authors outline a framework for understanding how the company can/cannot control different forms of marketing communication and discuss the implications of this. Research implications/limitations The paper concentrates on a conceptual analysis, offering a number of empirical illustrations. The conceptual development creates new research issues that should lead to a deeper understanding of customers’ meaning creation, actions and reactions. Practical implications Silent communication constitutes a managerial challenge as it is often invisible to the management. The paper points to the need to develop methods to reveal the effects of silent communication as well as create guidelines for managerially handling silent communication. Originality/value The customer-based perspective and the focus on silent communication provide a completely new approach to analysing and understanding marketing communication. The paper contributes to service marketing and marketing communication research by introducing conceptualisations of silent communication that have an interest for both academic research and practitioners.

Genetic algorithm for satellite customer assignment

The problem of assigning customers to satellite channels is considered. Finding an optimal allocation of customers to satellite channels is a difficult combinatorial optimization problem and is shown to be NP-complete in an earlier study. We propose a genetic algorithm (GA) approach to search for the best/optimal assignment of customers to satellite channels. Various issues related to genetic algorithms such as solution representation, selection methods, genetic operators and repair of invalid solutions are presented. A comparison of this approach with the standard optimization method is presented to show the advantages of this approach in terms of computation time

Customer Relationship Dissolution - What Do We Know and What Do We Need to Know?

Our paper can be seen as a supplement to Halinen-Kaila and Tähtinen' s (2000) review of different direct research approaches on the ending of exchange relationships. Our purpose is to illuminate the borderline between research explicitly focusing on ending and research implicitly considering ending of relationships. Another purpose is to give an overview of how researchers within the Nordic School of Service Management and Nordic School of Relationship Marketing have approached customer relationship ending. A third purpose is to put forward a managerial perspective and managerial issues related to relationship ending. Finally we present some conclusions regarding further research avenues concerning relationship ending.

Re-Conceptualizing Value-Creation From Industrial Business Logic to Service Business Logic

There is an urgent interest in marketing to move away from neo-classical value definitions suggesting that value creation is a process of exchanging goods for money. In the present paper, value creation is conceptualized as an integration of two distinct, yet closely coupled processes. First, actors co-create what this paper calls an underlying basis of value. This is done by interactively re-configuring resources. By relating and combining resources, activity sets, and risks across actor boundaries in novel ways actors create joint productivity gains – a concept very similar to density (Normann, 2001). Second, actors engage in a process of signification and evaluation. Signification implies co-constructing the meaning and worth of joint productivity gains co-created through interactive resource re-configuration, as well as sharing those gains through a pricing mechanism as value to involved actors. The conceptual framework highlights an all-important dynamics associated with ´value creation´ and ´value´ - a dynamics the paper claims has eluded past marketing research. The paper argues that the framework presented here is appropriate for the interactive service perspective, where value and value creation are not objectively given, but depend on the power of involved actors´ socially constructed frames to mobilize resources across actor boundaries in ways that ´enhance system well-being´ (Vargo et al., 2008). The paper contributes to research on Service Logic, Service-Dominant Logic, and Service Science.

Towards Service Logic: The Unique Contribution of Value Co-Creation

The underpinning logic of value co-creation in service logic is analysed. It is observed that three of the ten foundational premises of the so-called service-dominant logic are problematic and do not support an understanding of value-co-creation and creation that is meaningful for theoretical development and decision making in business and marketing practice. Without a thorough understanding of the interaction concept, the locus and nature of value co-creation cannot be identified. Based on the analysis in the present article it is observed that a unique contribution of a service perspective on business (service logic) is not that customers always are co-creators of value, but that under certain circumstances the service provider gets opportunities to co-create value together with its customers. Finally, the three problematic premises are reformulated accordingly.

What Can A Service Logic Offer Marketing Theory

The goods-dominated marketing model has major shortcomings as a guiding marketing theory. Its marketing mix approach is mainly geared towards buying and does not include consumption as an integral part of marketing theory. Although it is during the process of consuming goods and services that value is generated for customers and the foundation for repeat purchasing and customer relationships are laid, this process is left outside the scope of marketing. The focus in service marketing is not on a product but on interactions in service encounters. Consumption has become an integral part of a holistic marketing model. Other than standardized goods-based value propositions can be better understood when taking a servicebased approach. It is concluded that marketing based on a goods logic is but a special case of marketing based on a service logic and applicable only in certain contexts with standardized products.