4.

Introduction

This chapter aims to present the proposed conceptual model developed for the study and describes the research hypotheses that will be subjected to empirical testing in the following chapters. The preceding chapter examined the body of existing knowledge pertinent to the customer satisfaction research field. Upon reviewing the previous literature that relates to and underlies the concepts of customer satisfaction and behavioural intentions, it appears that no study has examined the full set of interrelationships among performance, disconfirmation, satisfaction, overall

satisfaction, perceived value, purchase decision involvement, perceived equity, relational commitment and behavioural intentions. Furthermore, there is adequate theoretical and empirical evidence to support the value of exploring and examining the constructs proposed in the present study. This thesis, therefore, is an attempt to fill a gap in the literature as well as to respond to calls made by previous researchers to further explore specific research directions, and to investigate interrelationships among particular constructs which are recognised to have been overlooked by prior studies. To achieve this objective, a conceptual model has been developed to explain the determinants, formation process and consequences of consumer satisfaction, and subsequently the hypothesised relationships among the constructs pertinent to this study.

This chapter is organised into five sections; 4.1 is the introduction, followed by section 4.2, which introduces and describes the conceptual model developed for the study and consequently exemplifies the proposed model. Section 4.3 briefly illustrates the theoretical framework employed for the study, presents the conceptualisation of each variable specifically from the perspective of the study context, discusses their roles and effects on customer satisfaction judgements and proposes relevant hypotheses. In turn, the arguments supporting the hypothesised linkages depicted in the conceptual model are presented. Subsequently, Section 4.4 focuses on other related constructs which are integrated in the EDP and proposed hypotheses to test the relationships of constructs stipulated in the conceptual model are presented. Finally, Section 4.5 presents the chapters conclusions, which highlight the key issues derived from the discussions in the prior sections.

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4.2

The Development of the Conceptual Model

Consumer satisfaction study has advanced at an accelerating pace and a tremendous amount of literature has been published since it became an important field of study (Giese and Cote 2000; Halstead et al. 1994; Yi 1990). It has been observed that previous research on customer satisfaction has used a variety of structures and models that have been developed through the integration of several different theories and paradigms in the effort to explain the constructs for different consumption settings and a variety of product classifications (Erevelles and Leavitt 1992). Nonetheless, it is surprising to discover that there has been an almost total lack of attention devoted to studying customer satisfaction from the consumption system perspective, with notable exceptions including the work of Duhaime (1988) and Mittal et al. (1999), who investigate the automobile distribution system, and Singh (1991), whose work focuses on the health service delivery system.

The most widely adopted description of customer satisfaction is from the perspective of a process; an evaluation of the difference between what is received and what is expected (Oliver 1980a, 1981; Tse and Wilton 1988). This perspective emphasises the antecedents and consequences of satisfaction. Oliver and DeSarbo (1988, p.495) argue that, more than others in related disciplines, consumer researchers have advanced and tested the processes underlying satisfaction, placing less emphasis on (its) content. Simply put, the majority of the existing customer satisfaction studies have adopted the process approach; hence the structure of satisfaction (content and dimensions) has been neglected, and in a similar voice, Singh (1991) strongly proposes that future research should take this route. Therefore, in response to repeated calls for more satisfaction studies to adopt the structural perspective, the current study adopts the system approach, which will give attention to both the structure (content and dimension) and the process, in an attempt to offer better insights into customer satisfaction.

4.2.1

The Consumption System Approach

Five decades ago, Grether (1950) maintained that for the continued development of the marketing discipline, two things should be given priority: better techniques for analysing marketing data and the development of a conceptual framework that could enhance understanding of marketing phenomena in an orderly and holistic manner (cf. 126

Reidenbach and Oliva 1981). Furthermore, it was argued that by taking the holistic approach, marketers could gain better insights into understanding the structure and marketing processes in various setting and conditions, and it could additionally assist in true theory development (Reidenbach and Oliva 1981). Along these lines, Wong and Kanji (2001) convincingly advocate that by adopting the system approach in customer satisfaction research, a better perspective will be achieved in terms of defining and explaining the satisfaction formation process; specifically, it is easily understood by the practitioners. They further point out that the system approach could demonstrate how antecedents and consequences of customer satisfaction are incorporated into a holistic, big picture customer satisfaction framework. Above all, this framework could impart important information concerning the reasons given by customers for their satisfaction judgements and how these influenced their future behavioural intentions. Mittal et al. (1999) observed that more business organisations are progressively offering consumption systems rather than just products or services only. A good example is that retailers today are offering The Total Shopping Experience, which incorporates merchandise and services, together with a stimulating and exhilarating store environment (Babin et al. 2003; Chebat 2003 and Michon 2003; Webster 2000). Similarly, restaurants are offering a Dining Experience, which takes into account the food served, services, convenience and atmospheric characteristics in their attempts to entice customers to patronise their restaurants (Kivela 1999). Additionally, Gummesson (2002) describes the fact that in todays market situation, the total offering not only includes merchandise and services; it is now necessary to include information technology as well. Inevitably, information pertaining to products, services and suppliers is becoming essential in the network economy1. It is widely accepted that a system is conceptualised as a complex phenomenon which entails several subsystems that work in tandem and occurs over a period of time (Mittal et al. 1999). The consumption system is viewed as an integration of product and service subsystems coupled with a pattern of consumption in which it could take place in multiple episodes over a certain time period (Mittal et al. 1999). In turn, the subsystems are integrated, self-regulating and act as a whole and with a purpose (Reidenbach and Oliva 1981). From the consumer marketing perspective, products and services provided

Marketing based on interaction within network of relationships, which is fundamentally reinforced by the networks of the Internet and mobile telecommunications.

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by agents or salespersons or/and firms are the key subsystems (Crosby and Stephens 1987; Duhaime 1988; Mittal et al. 1999) within the consumption system. Accordingly, Mittal et al. (1999) suggest that there are three basic elements of the consumption system: attribute-level evaluation, satisfaction and behavioural intentions. By examining explicitly how satisfaction with these subsystems (product, services and firm) interacts in forming favourable/unfavourable behavioural intentions, crucial information could be unveiled to the management for use in allocating resources between these three key factors (Mittal et al. 1999; Pritchard et al. 1999; Westbrook 1981). The consumption system2 investigated in the current research is the distribution system for a consumer personal product (beauty care and healthcare). The distribution system is defined as the set of stores and/or dealers selling a particular product category to consumers (Duhaime 1988). Generally, consumer satisfaction evaluation is viewed as part of the consumption process, as a response to or judgement of consumption experience related to products, services or institutions (Mittal et al. 1999).

4.2.1.1

Subsystems in the Direct Sales Channel

Oliver (1997) points out that the key to achieving high levels of satisfaction is to understand customers needs so that the firm can develop and deliver distinctive products and services to meet those needs. Therefore, the direction undertaken by the present study is to unravel customers satisfaction judgements by taking the system approach, which will further disentangle pertinent factors at the subsystem level and specific features at the attributes level. The direct sales channel is a form of non-store retailing; hence, the retail store is not part of the business model (see Chapter 2). The direct sales channel is essentially comprised of three interacting subsystems, namely the product, the direct seller and the direct sales company.

It is important to note that distribution system and consumption system will be used interchangeably in this thesis. Dist ribution system is expressed from the point of view of the institution or company, whereas consumption system is used when described from the consumer perspective.

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The product purchased by customers from the direct sales channel is considered very important in determining their satisfaction at the subsystem level (product satisfaction). In the product aspect, the products salient attributes affect customer satisfaction. The attributes are basically factors that affect customer satisfaction, such as extrinsic and intrinsic attributes. Extrinsic attributes are associated with product-related attributes such as price, brand name and packaging, which are not part of the physical product. In contrast, intrinsic attributes are product-related attributes, such as the product colour, taste and effectiveness (Richardson et al. 1994). Accordingly, Richardson et al. posit that intrinsic cues such as actual product ingredients, texture or aroma are more important determinants of the real quality of grocery products than are extrinsic cues. As such, in the present thesis, it is reasonable to contend that whether the product performs as claimed, product effectiveness, product multifunctionality and product guarantee are framed as product quality. As described earlier, in the direct sales distribution system, there is no store; therefore, it is important for the direct seller, whom the consumers are in personal contact with during the sales transaction, to initiate sales and subsequently generate repeat sales. Aside from this, they also operate as middlemen, carrying out marketing process functions such as taking orders, delivering and serving and offering after-sales services to their customer directly. In essence, the direct sellers play a vital role in the success of their business organisation; therefore, they are viewed as a subsystem in the overall business model. Petty et al. (1983) maintain that product performance is an important determinant or driver of overall customer satisfaction, but it is assumed not to be the only one. They assert that satisfaction is also derived from indirect peripheral influence, such as interaction with the salesperson. Furthermore, it is recognised that in contemporary marketing, a significant theme has emerged; this trend exemplifies that customer orientation focuses not only on what buyers receive (technical product attributes) but also on how buyer and seller interact (interpersonal process attributes) (Humphreys and Williams 1996, p.47). This statement holds especially true in the direct sales system; it suffices to say that the direct sellers performance is a vital part of the total experience offered by the direct sales channel. Therefore, based on the aforementioned arguments, the direct seller is included as a subsystem in the proposed conceptual model.

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The direct sales company typically does not make direct contact with their customers. As previously mentioned, most of the marketing and servicing functions are conducted by the direct sellers. However, under certain circumstances, for instance if product servicing is not the responsibility of the direct seller or dealer but that of the manufacturer, then the distribution system for the product also includes the outlet where the product is to be repaired or serviced. For example, even though the direct seller acts as a middleman in the purchase transaction, the direct sales company is accountable to honour product warranty, product return and other related corporate services. Hence, in certain situations the direct sales consumers have to deal directly with the company concerned. A growing body of literature has acknowledged the importance of person-tofirm relationships (Garbarino and Johnson 1999; Hess et al. 2003; Nijssen et al. 2003), which could be a contributing factor to customer satisfaction. It is believed that the company itself is important because the customer may use the company image to provide surrogate cues in his/her purchase decision process. The judgement of the company could be based on the companys general practices, ethics, social responsibility as well as customer service quality. In his study, which was based on the EDP, Oliver (1980) provides empirical evidence that suggests that corporate image impacts directly on customer loyalty, of which customer satisfaction is an antecedent. In a similar voice, Bolton and Drew (1991) and Johnson and Fornell (1991) suggest that corporate image has a cumulative effect on customer satisfaction /dissatisfaction. Furthermore, Andreassen and Lindestad (1996) point out that corporate image has been found to be significantly associated to customer loyalty and positively related to customer satisfaction. In line with this contention, in the current study corporate image and corporate customer service have been proposed as factors that contribute to company performance. In essence, it appears that the real value of company satisfaction could be as a driver to overall satisfaction. Based on the above rationale, the direct sales company has been integrated as a subsystem within the direct sales distribution system. Next, we will introduce the proposed conceptual model, present the supporting arguments for proposed linkages among constructs, and then the hypothesis statements will be put forward.

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4.2.2

The Conceptual Model

Sekaran (2000) proposes that a model must be developed after conducting the exploratory interview, completing a literature survey and determining the research problem. Furthermore, Yin (1994) advocates that theoretically-based hypotheses or propositions must be devised prior to data collection. As a consequence, the researcher will be able to commence data collection with an initial set of predetermined concepts derived from the theoretical propositions and conceptual framework which will be linked to the research questions and objectives (Miles and Huberman 1994). A model is regarded as a simplified but meaningful replica of the phenomena it is anticipated to specify. It specifies the components virtually and represents the nature of the relationships between those components (Chien 1996), and is generally portrayed as a framework for analysis which is employed to predict the way entire components would work under specified conditions. It is a widely accepted view that the model conceptualisation is the most important part of any research. Accordingly, in defining the functions of the theoretical framework, Sakaran (2000, p. 91) states: Theoretical framework is a conceptual model of how one theorises or makes logical sense of the relationships among the several factors that have been identified as important to the problem. This theory flows logically from the documentation of previous research in the problem area. Integrating ones logical beliefs with published research, taking into consideration the boundaries and constraints governing the situation, is pivotal in developing a scientific basis for investigating the research problem.

In addition, Seale (1999) suggests that researchers could execute a theoretical speculation which offers an avenue for generating ideas in an endeavour to seek original ways of addressing issues and problems that otherwise might seem outdated. As such, researchers must become experts in exploring and recognising research gaps in the existing literature and subsequently formulating a theoretical framework which discusses the interrelationships among constructs that are envisaged to be integral to the dynamics of the research context being scrutinised. The basic assumption is that by constructing the conceptual model, it could help researchers to explicate the specific linkages and the causal directions of the constructs investigated in their study. As a consequence, it could also improve their understanding of the dynamics of the phenomenon they are investigating (Sakaran 2000). From the conceptual framework, 131

testable hypotheses can be formulated and then subsequently tested through suitable statistical analytical techniques to determine the validity of the theory postulated by the researchers. Suffice to say, the conceptual model is the crux on which the entire research rests, and developing a good conceptual model is vital to the research problem being scrutinised (Sakaran 2000). In view of the suggestions presented above, a conceptual model has been developed for the thesis which aims to address the research problems identified in the study context. It has been suggested that progress towards a better understanding of consumer satisfaction will only come with the development of better models of the satisfaction structure and consequently its determination process (Singh 1991). Consistent with this view, the current research framework is designed to adopt the system approach. The structure of the system is examined, and then the key determinants of customer satisfaction at the subsystem/component levels as well as the overall satisfaction abstractions, are identified. Ultimately, it is the aim of this research to analyse how the constructs in the proposed conceptual model are associated and ascertain their influence on overall satisfaction and behavioural intentions. In order to examine these interrelationships, a model demonstrating the anticipated linkages between constructs has been developed. The links between the constructs are the set of hypotheses that the research must establish a priori. In chapter 7, these hypotheses will be tested using Structural Equation Modelling techniques to determine whether they are supported or rejected. Since incorporating all the plausible constructs that may influence customer satisfaction would result in an unmanageable research study, a literature search was undertaken to identify the key drivers of customer satisfaction and to determine their significant consequences. As a result of this literature search on customer satisfaction and related studies, fifteen constructs have been identified and selected for integration into a coherent conceptual model of determinants and consequences of customer satisfaction with specific reference to a consumption system approach. The research model and hypotheses are in line with the research questions formulated in chapter one (Table 1.2, p.20). The conceptual model of this thesis and the hypothesised relationships among constructs are depicted in a path diagram format (see Figure 4.2). This conceptual framework pictorially demonstrates the series of causal relationships of constructs under study. The 132

hypothesised relationships in the model have been based on a substantive theoretical framework, arguments, suggestions, current research thinking and directions, which have already been reviewed in the preceding chapters (Chapter 2 and 3). Generally, a path diagram is comprised three main elements; these are rectangles, ellipses and arrows. The rectangles, which are not featured in Figure 4.2, represent the indicators of the latent constructs. The ellipses represent both independent and dependent latent variables while arrows depict associations among the variables. There are two types of arrows; straight and curved. Straight arrows pointing in one direction indicate the direction of the hypothesised association; that is, from predictor to outcome or consequence. On the other hand, curved lines with arrow-heads in two directions depict a non-directional path or association that represents correlations between independent or exogenous variables (Hoyle 1995). In the focal conceptual model, relationships among exogenous constructs, namely Direct Seller Performance, Product Performance, Company Performance and Purchase Decision Involvement proposed are recognised in this fashion.

Figure 4.2 illustrates that there are eleven endogenous variables integrated to form a comprehensive model, which incorporates three subsystems, in the consumption system investigated in this study. They are Direct Seller Disconfirmation, Satisfaction, Product Product

Disconfirmation,

Company

Disconfirmation,

Direct

Seller

Satisfaction, Company Satisfaction, Overall Satisfaction, Perceived Value, Perceived Equity, Relational Commitment and Behavioural Intentions.

Figure 4.2 depicts a path diagram of the conceptual model of customer satisfaction from a consumption system perspective. It is primarily built on the ExpectancyDisconfirmation Theory. The research gaps and key issues identified from an extensive review of the literature provide the foundations for directly addressing the research problems stated in Section 1.3 1) How are customer satisfaction and how are customer satisfaction and behavioural intentions constructed and associated in the direct sales consumption system? 2) What are the roles of purchase decision involvement, perceived value, perceived equity and relational commitment in influencing customer satisfaction judgement and behavioural intentions when integrated into the traditional Expectancy Disconfirmation Paradigm?

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Figure 4.2: The Conceptual Model with the Hypothesised Paths

H24 perceived equity H23 H22 H7 direct seller performance H18 perceived value H19 product performance H11 H5 product disconfirmation H16 Purchase Involvement H2 H17 H3 H1 H8 product satisfaction H15 H14 H21 H10 direct seller disconfirmation H4 H13 direct seller satisfaction H25

relational commitment

H26 H20 overall satisfaction

H27

behavioural intentions

H9 company performance H12 company disconfirmation H6

company satisfaction

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In sum, the thesis proposes that overall satisfaction experienced by the direct sales customers is the key mediating construct between direct seller satisfaction, product satisfaction, company satisfaction, perceived value and behavioural intentions. The role of satisfaction as a key precursor to behavioural intentions is well established (Anderson et al. 1994; Cronin and Taylor 1992; Garbarino and Johnson 1999; Johnson et al. 2003; Zeithaml et al. 1996) and in turn it is hypothesised that behavioural intention is a function of overall satisfaction and relational commitment.

The decision to delineate which variables are exogenous or endogenous is primarily determined from a review of the extensive literature from the customer satisfaction and relational selling (marketing) research stream. Essentially, most of the hypothesised associations and effects among constructs in the proposed model were drawn from the theoretical and empirical evidence of previous studies. It is important to note that certain of the proposed relationships have been speculated by the author, since there was no empirical evidence in the existing literature to substantiate them. Nevertheless, this element of newness offers a promising opportunity to add knowledge to the existing literature. The hypothesised relationships among variables and their influences on satisfaction and other post-consumption outcomes will be described and discussed in detail (Section 4.3 and Section 4.4).

4.3

Theoretical Perspective of EDP

The design of the conceptual framework was guided predominantly by EDP theory, whilst the equity theory construct (i.e. perceived equity), perceived value, purchased decision involvement and the relational selling paradigm construct (i.e. relational commitment) were incorporated in order to expand the traditional EDP. The rationale for adopting the EDP has been explained and rationalised in chapter 3 (see Section 3.2). Despite EDP theory dominating customer satisfaction research and having been tested for applicability in various contexts, it has not yet been tested at the system level, except by Duhaime (1988) in his study with regard to the automobile distribution system. Application of this theory at this level concerns the operation of the marketing system at large, which includes the activities and firms involved in the manufacturing, distribution and servicing of all goods and services offered in the marketplace.

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4.3.1 4.3.1.1

Core Constructs of EDP Perceived Performance

Perceived performance is the (subjective) evaluation of the product or services performance following the consumption experience. This is consistent with Czepiel et al.s (1990) definition of performance, in which they described it as functional and performance-delivery elements in customer satisfaction process. Therefore, this thesis has conceptualised perceived performance as subjective evaluation of the functional aspect of the core product (i.e. the attributes of health and beauty care products), which is comprised of both the intrinsic (i.e. effectiveness) and extrinsic (i.e. price) characteristics. The performance-delivery elements are the direct salespersons characteristics, services offered and personal interaction and the direct sales companys image and corporate services offered. Drawing upon existing literature on the impact of performance on satisfaction, this thesis will expand the conceptual model by including the direct influence of perceived performance on satisfaction, as portrayed in Figure 3.3. Hence, it is conjectured that the effect of perceived performance on satisfaction are both direct and indirect for all three subsystem levels (product, direct seller and organisation). This study will test the hypotheses that stipulate that satisfaction would be related to disconfirmation and perceived performance at attribute as well as subsystem levels.

4.3.1.2

Disconfirmation

Generally, the reported relationships between disconfirmation and satisfaction are significant and robust across product, service, setting and research inquiry method (see Appendix 3.1). The dominance of disconfirmation is supported by Yi's (1990) review, in which he extensively covered the role of disconfirmation in the satisfaction literature. In addition, there is evidence within the consumption systems approach that product and service subsystems could influence each other. This phenomenon is known as crossover effects (Mittal et al. 1999). For example, Westbrook (1981) reports a significant relationship between satisfaction with the retailer and satisfaction with the product purchased from the retailer, and Oliver and Swan (1989b) observe that satisfaction with the car dealer significantly effects satisfaction with the car, while

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Crosby and Stephens (1987) reveal that product satisfaction is affected not only through product judgement and information but also through interaction with the salesperson. Crosby and Stephens (1987), Crosby et al. (1990) and Lambert et al. (1997) found that satisfaction with a salesperson is positively related to satisfaction with the selling institutions. In sum, customer satisfaction with the salesperson can positively influence satisfaction with the product and the selling organisation. Based on this research evidence, it is proposed that crossover effects are expected to transpire among product, direct seller and company disconfirmation. It is worth noting that this research empirically examines these crossover effects among disconfirmation constructs for the first time. As such, these relationships will be formally tested in the following hypotheses: H1: In the direct sales consumption system, product disconfirmation is positively related to direct seller disconfirmation. In the direct sales consumption system, product disconfirmation is positively related to direct sales company disconfirmation. In the direct sales consumption system, direct seller disconfirmation is positively related to direct sales company disconfirmation.

H2:

H3:

4.3.1.3

Disconfirmation Satisfaction

There is adequate empirical evidence demonstrating that disconfirmation plays a significant role in the customer satisfaction process (Spreng et al. 1996; Swan and Trawick 1981; Tse and Wilton 1988). For example, Petterson et al. (1997) found that the influence of disconfirmation on satisfaction is greater than the influence of performance on satisfaction. On the basis of the previously cited empirical evidence, disconfirmation-satisfaction relationships at three subsystem levels are hypothesised in the thesis conceptual framework. Accordingly, the following hypotheses are offered: H4: In the direct sales consumption system, direct seller disconfirmation is positively associated to direct seller satisfaction. In the direct sales consumption system, direct sales product disconfirmation is positively associated to direct sales product satisfaction. In the direct sales consumption system, direct sales company disconfirmation is positively associated to direct sales company satisfaction. 137

H5:

H6:

With reference to the aforementioned contention, the present thesis defines customer satisfaction as post-consumption evaluation and affective response to the total consumption experience. It is expected that the outcome of this feeling will influence consumers behavioural intentions, such as the decision of whether or not to continue engaging in shopping/purchasing through the same consumption channel (which may extend over time and involve multiple consumption events). As previously mentioned (Section 4.2.1.1), satisfaction judgement will be derived from three main aspects (subsystems). In summary, these three subsystems of satisfaction will ultimately converge into overall satisfaction with the direct sales channel.

4.3.1.4

Performance Satisfaction

The performancesatisfaction relationship has been discussed from a theoretical perspective in Chapter 3 (Section 3.2). Performance has been strongly established to be positively associated with customer satisfaction (Churchill and Surprenent 1982; Halstead et al. 1994; Liljander and Strandviks 1993, 1995; Oliver and DeSarbo 1988; Spreng and Olshavsky 1991; Yuskel and Remmington 1998). More recent studies strongly argue that performance effects should be modelled directly, rather than through a disconfirmation route (Brady et al. 2002; Page and Spreng 2002). Referring to these arguments and the supporting evidence presented above, therefore, the direct relationships between performance and satisfaction at three subsystem levels are hypothesised in the present conceptual model. These specific hypotheses are formally stated as follows: H7: The higher the performance level of the direct seller, as perceived by the customer, the more satisfied he/she will be with the direct seller. The higher the performance level of the direct sales product, as perceived by the customer, the more satisfied he/she will be with the product. The higher the performance level of the direct sales company, as perceived by the customer, the more satisfied he/she will be with the company.

H8:

H9:

4.3.1.5

Performance Disconfirmation Satisfaction

Theoretical discussions on the performance-disconfirmation-satisfaction relationships were presented in Chapter 3 (Section 3.2). It is generally conjectured, all things being 138

equal, that the higher the perceived performance, the higher the possibility that expectations will be exceeded, thus resulting in a positive relationship between performance and disconfirmation (see Figure 3.3). Accordingly, the following hypotheses are offered: H10: In the direct sales consumption system, the direct sellers performance, as perceived by the customer, is positively related to direct seller disconfirmation. H11: In the direct sales consumption system, the product performance, as perceived by the customer, is positively related to product disconfirmation. H12: In the direct sales consumption system, the direct sales organisation performance, as perceived by the customer, is positively related to direct sales company disconfirmation.

4.3.2

Overall Satisfaction

In this thesis, overall satisfaction is portrayed as a central construct in the conceptual model (see Figure 4.2.). Overall satisfaction is viewed as composite satisfaction", and at this satisfaction level it also refers to global satisfaction, which is specifically derived from satisfaction with facets of the goods or service (see, for example Duhaimee 1988; Mittal et al. 1999; Singh 1991; Spreng et al. 1996). Rust and Oliver (1994, p. 15) conceptualise overall satisfaction as product and service elements jointly affect satisfaction. Accordingly, Humpreys and Williams (1996, p.48) view the overall satisfaction construct as the relative effects of technical product attributes and interpersonal process attributes on overall customer satisfaction. In their recent research, Mittal et al. (1999) illustrate how satisfaction with products or service attributes and processes are integrated into overall satisfaction judgements. In sum, it appears that different aspects of consumption experience (e.g. product, service, institution) evaluations are summarised together in some fashion to produce an overall assessment of satisfaction.

Consistent with these conceptualisations of overall satisfaction by previous studies, this thesis defined overall satisfaction in the direct sales consumption setting as a summary satisfaction which was derived from direct seller satisfaction, direct sales product satisfaction and finally satisfaction with the direct sales company. Put simply, the

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overall satisfaction evaluation is a function of three separate yet integrated evaluation processes. It is summarised in the following testable hypotheses: H13: In the direct sales consumption system, satisfaction with the direct seller experienced by the customer will positively affect his/her overall consumption satisfaction. H14: In the direct sales consumption system, satisfaction with the direct sales product experienced by the customer will positively affect his/her overall consumption satisfaction.

H15: In the direct sales consumption system, satisfaction with the direct sales company experienced by the customers will positively affect his/her overall consumption satisfaction.

In the next section, the conceptualisation of these variables (perceived value, purchase decision involvement, perceived equity, relational commitment, and behavioural intentions) will be presented, and subsequently the interrelationships among them are hypothesised (see Figure 4.2). These variables have been discussed in Chapter 3, (Sections 3.4, 3.5, 3.6, 3.7, and 3.8) but are summarised in turn below.

4.4

Integration of Other Constructs into the EDP

A fairly consistent pattern has emerged in the customer satisfaction research stream, in which it was observed that most theoretical frameworks adopted by previous studies were variations of Olivers (1980a) EDP. For example, advanced models and approaches have been developed (Woodruff et al. 1983; Spreng et al. 1996; Oliver and Swan 1989) to impart better insights into the understanding of customer satisfaction. Parallel with this emerging research trend, the current study introduces a conceptual model that expands the traditional EDP by incorporating new variables derived from equity theory (i.e. perceived equity), purchase decision involvement, perceived value and relational selling key constructs (i.e. relational commitment) from the perspective of the consumption system approach.

4.4.1

Purchase Decision Involvement (PDI)

It was noted by Granbois (1993) that there is a widely acceptable notion that in both satisfaction and the mainstream consumer research, product characteristics should be 140

taken into account when developing a satisfaction model. Furthermore, Antil (1984), Churchill and Suprenant (1982) and Patterson (1993) all suggest that the relationship between product performance and satisfaction could be significantly influenced by the degree of customer involvement with the product type/class under study. In brief, this study attempt to examine the influence of PDI in the formation of customer satisfaction judgements. Discussions on the relevance of PDI in customer satisfaction judgements were presented in Chapter 3 (Section 3.4.3). It is anticipated that PDI is best conceptualised as an exogenous construct in the proposed satisfaction model, and this study will investigate its impact on perceived value as well as its role as a determinant of the customer satisfaction with the direct sales product. These proposed relationships are hypothesised as follows: H16: Purchase decision involvement is positively associated with perceived value. That is, the more involved is the customer with the product decision, the higher the level of his/her perceived value. Purchase decision involvement is positively associated with product satisfaction. That is, the more involved is the customer with the product decision, the higher the level of product satisfaction.

H17:

4.4.2

The Antecedents and Impacts of Perceived Value3 on Satisfaction

It has been suggested by Spreng et al. (1993) that in developing satisfaction models, a distinction must be made between two types of perceived value: 1) perceived value based on expectations (prior to purchase), and 2) perceived value based on perceived performance (after purchase and use have occurred). In view of these suggestions, the current study will conceptualise perceived value on the basis of performance judgement, since the evaluation is conducted after consumption has occurred. For example, consumers who purchased diet supplementary products were probably convinced by the direct seller (salesperson), during the sales demonstration, of the innovativeness of the product through testimonials from experts and those who had tried it before, plus its promise of great value. If this assumption is to be applied to the expectancy disconfirmation model, perceived value is positioned as a consequence of perceived performance rather than expectation, and as mentioned earlier, we associate our

perceived refers to the facts that it is the customers belief that counts and not the factual real ity (Davies et. al. 1999)

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proposed theoretical framework as a post-purchase consumption experience. This thesis will consider quality judgements to be a function of performance evaluation; hence, this assumption will be used as guidance in the formulation of the following hypotheses. Therefore, building on the discussions and supporting evidence mentioned above, this study proposes that both the direct seller and product performance aspects will be positively related to perceived value. The hypotheses to capture these associations are formally stated as follows: H18: In the direct sales consumption system, the direct sellers level of performance is positively related to the perception of value by the customer. In the direct sales consumption system, the product level of performance is positively related to the perception of value by the customer.

H19:

This study expands the understanding of a critical linkage and sets the stage for additional effort in addressing how value assessments beget feelings of satisfaction. The relationships between perceived value and satisfaction have been suggested by several scholars (Athanassopoulos 2000; Kristensen et al. 1999; Patterson and Spreng 1997; Webb and Jagun 1997). For example, Cronin and Taylor (1992) suggest that convenience, good value for money and availability might enhance customer satisfaction and subsequent behaviour intentions, and Fornell et al. (1996) posit that perceived value is the determinant of overall customer satisfaction. Indeed, in their recent empirical study, McDougall and Levesque (2000) presented evidence that perceived value was a significant determinant of customer satisfaction and its impacts on loyalty and switching intentions worked entirely through customer satisfaction. It is sufficient to say that most studies confirm that perceived value has a positive impact on customer satisfaction. Therefore, it is possible to suggest that perceived value is positively associated with overall satisfaction. The hypothesis to capture these associations is formally stated as follows: H20: The perception of value derived from the direct sales consumption experience has a positive effect on overall satisfaction. That is, the higher the perceived value, the higher the level of overall satisfaction.

On the surface, there is considerable merit to the view that by creating and offering value to customers, this might lead them to feel they are equitably treated and as a 142

consequence experience pleasurable feelings (Oliver 1997). Intuitively, it is reasonable to believe that consumers who perceive that they have obtained high value from their consumption experience from the direct sales channel perhaps think they have been treated equitably and thus feel satisfied (Oliver and Swan 1989b). This will be reflected in a positive association between perceived value and perceived equity. Despite this prevailing assumption, to the best of our knowledge no prior research has been undertaken to test this proposition empirically. Therefore, a hypothesis to capture the association between perceived value and perceived equity is formally stated as:

H21:

The perception of value derived from the direct sales consumption experience has a positive effect on perceived equity. That is, the higher the perceived value, the higher the perceived equity.

4.4.3

Perceived Equity4

In the research context, (i.e. the direct sales industry) customers are primarily approached by direct sellers on a personal or group basis. As such, customers expect the salesperson (direct seller) to be knowledgeable about the product and services they sell and offer a fair deal in terms of price and other after-sales services. Therefore, it is anticipated that the equity construct is related to the direct seller aspect rather than the product or company (see Figure 4.2). Perceived equity (fairness) is hypothesised as an outcome of direct seller performance evaluation but not as an exogenous construct, because customers must presumably have experience which acts as a benchmark in judging the direct sellers personal and sales quality. Furthermore, because what is received, or the outcome, is one side of the equity construct, it could be expected that perceptions of performance (i.e. what is received) should be positively correlated with fairness. Patterson et al. (1997) provide supporting evidence that perceived performance have a positive effect on fairness judgement. On the basis of these findings, therefore, the thesis formally proposes this relationship as follows:

perceived refers to the facts that it is the customers belief that count and not the factual reality (Davies et. al., 1999 )

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H22:

Direct seller performance is positively associated with consumer perception of equity. That is, the higher the direct sellers performance, the higher the level of perceived equity.

It is believed that consumers will feel less satisfied and hence display a less positive attitude if they perceive that they have not be treated equitably by their sellers. In general, previous research has suggested that fair interpersonal treatment contributes to satisfaction evaluation (Bitner et al. 1990; Tyler 1987). In addition, customers perception of equitable treatment could be translated into satisfaction judgements and subsequently affect future purchase intentions (Fisk and Young 1985; Mowen and Grove 1983: Swan and Oliver 1985). Therefore, consistent with the evidence presented by previous scholars, it is reasonable to expect that perceived equity will affect the customers satisfaction with the direct seller with whom he/she interacted during the sales transaction. Accordingly, the following hypothesis is offered: H23: Perceived equity is positively associated with the customers satisfaction with the direct seller. That is, the higher the perceived equity, the higher the level of satisfaction with the direct seller.

Given the central role of equity in the relationship-building process, it is apparently an important antecedent to customer satisfaction. Furthermore, there is empirical evidence that reports that it is appropriate to associate equity with the customer-salesperson interpersonal relationship (see, for example, Johnson et al. 2001; Oliver and DeSarbo 1988; Oliver and Swan 1989a, 1989b). In concordance with the empirical findings by Johnson et al. (2001), this thesis investigates the consequence of perceived equity, or to be more precise, relational commitment. This proposed relationship is formally presented as H24 in section 4.4.4.

4.4.4

Relational Commitment

Corresponding with the review of literature presented in Chapter 3 (Section 3.7) and evidence offered by previous studies on the positive impact of satisfaction on relational commitment (Garbarino and Johnson 1999; Johnson et al. 2001 and Schlentrich 2001), 144

it is reasonable to ascertain whether this relationship holds in the current study context. Hence, the following hypotheses are offered: H24: H25: In the direct sales consumption system, perceived equity is positively associated with relational commitment. In the direct sales consumption system, direct seller satisfaction is positively associated with relational commitment.

4.4.5

Behavioural Intentions

Previous studies have provided empirical evidence that relationship commitment motivates customers to engage in certain favourable behaviour (Bloemer and Odekerken-Schrder 2002; Hennig-Thurau and Klee 1997; Johnson et al. 2001). Macintosh and Locksin (1997) found that interpersonal relationships, trust and commitment to the salesperson have a positive effect on repurchase intentions, and similarly, Bloemer and Schrder (2002) provide evidence that relational commitment is significantly related to purchase intentions, followed by price insensitivity and engagement in positive word of mouth. It is worth noting that Priluck (2003), in his empirical work, demonstrates that consumers who engaged in relational exchanges were more satisfied, more committed and trusted the marketer more, even when faced with poor product performance, than those customers engaged in discrete transactions (mere exchange of money for a product or services). Hence, consistent with the aforementioned findings, it is possible to hypothesise that:

H26:

In the direct sales consumption system, relational commitment is positively associated with behavioural intentions.

Sufficient evidence to suggest that customer satisfaction is significantly related to future behavioural intentions (see Section 3.8). Suffice it to say that generally, overall satisfaction is the primary precursor of favourable behavioural outcomes, this link is undeniably well evidenced. Therefore, this study attempts to verify the relationship between overall customer satisfaction and behavioural intentions. The evidence presented above purports the following hypothesis:

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H27:

In the direct sales consumption system, overall satisfaction is positively associated with behavioural intentions.

4.5

Concluding Remarks

The conceptual model illustrated in Figure 4.2 pictorially illustrates how the core constructs (performance, disconfirmation and satisfaction) at the subsystem level integrate with other constructs as they lead to behavioural intentions. Precisely, the proposed framework untangles the determinants for product satisfaction, direct seller satisfaction and company satisfaction and subsequently demonstrates how these constructs jointly impact upon the pivotal construct, overall satisfaction. In turn, the determinants of relational commitment and behavioural intentions are also illustrated in the proposed model. Most importantly, the proposed framework clearly highlights the twenty seven hypotheses linking the constructs examined in this study. In essence, the model represents an attempt to ascertain structural characteristics (determinants and consequences) of a consumption system, and consequently provides guidelines for the data collection and pertinent analysis, which will be discussed in the next chapter. Subsequently, the hypotheses formulated specifically for this study will be subjected to empirical testing (Chapter 7, Part II) after assessing their validity and reliability (Chapter 7, Part1).

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