International Journal of Hospitality Management 29 (2010) 405412

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International Journal of Hospitality Management

journal homepage: www.elsevier.com/locate/ijhosman

The effect of relational benets on perceived value in relation to customer loyalty:

An empirical study in the Australian coffee outlets industry
Po-Tsang Chen *, Hsin-Hui Hu
Ming Chuan University, Hospitality Management, 5 De-Ming Rd., Gui-Shan, Taoyuan 333, Taiwan

A R T I C L E I N F O

A B S T R A C T

Keywords:
Relational benets
Perceived value
Customer loyalty
Coffee outlets

Retaining and cultivating customer loyalty has become increasingly important for coffee outlet
marketers and operators due to the highly competitive environment. This study aims to develop and test
a model investigating how relational benets enhance perceived value to win customer loyalty. Using a
self-administered questionnaire survey, 949 respondents from coffee outlets were used for this study.
The ndings show that relational benets have direct effect on perceived value and customer loyalty. In
addition, relational benets also have indirect effect on loyalty via perceived value. Finally, perceived
value positively inuenced customer loyalty. The ndings suggest that coffee outlet operators with a
better understanding of their customers perceptions, and help them in developing competitive
strategies that differentiate themselves from competitors and win customer loyalty in an aggressive
market.
2009 Elsevier Ltd. All rights reserved.

1. Introduction
Competition in the Australian coffee outlet industry has
intensied due to the invasion of international chain coffee outlets
in recent years. A report by Parker (2005) predicted that the coffee
demand in Australia will increase from US$268.57 million in 2006
to US$307.13 million in 2011, ranking it among the worlds top 18
countries. Attempting to occupy stronger positions in the
Australian coffee outlet market, the three US chains, Gloria Jeans,
Starbucks and The Coffee Bean, entered a new phase of expansion
(Lloyd, 2002). In 2002 this resulted in a coffee retailing war in
which Gloria Jeans and McDonald Family Restaurants rst
introduced television advertising to promote coffee outlets. As
Schirato, Vittoria coffee chief warned that Australias local cafes are
under threat from large chains and they really need to start doing
things differently (Smedley, 2004, p. 37).
According to Ball (2005), these outlets were operating in a
crucially competitive environment, in which competition was not
only coming from an increasing number of independent coffee
outlets, but also from increasingly expanding chain coffee outlets.
This expansion in the industry for both independent and chain
coffee outlets could not have existed without customer demand.
Customer loyalty is a crucial component for survival, with loyal
customers sustaining business operations. Thus, the necessity of
increasing this market for the development of the coffee outlet

* Corresponding author.
E-mail address: ptchen@mail.mcu.edu.tw (P.-T. Chen).
0278-4319/$ see front matter 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.ijhm.2009.09.006

industry has created a need for information on the behavior of

coffee outlet customers in regard to customer loyalty.
Mattila (2004) and Oh et al. (2004) suggested that research
topics including service quality, relationship marketing, and
perceived value are crucial areas for research within the domain
of customer loyalty in hospitality. Previous studies on customer
loyalty have focused on service quality and customer satisfaction
(Zeithaml et al., 1996), and on relational benets as a relationship
marketing approach to customer loyalty (Gwinner et al., 1998;
Hennig-Thurau et al., 2002). However, these studies have
neglected to provide insights into the reasons perceived value is
so important in relationship marketing research.
Customers are rarely motivated in the rst instance by the
attributes of a service or product, but rather by the benets those
attributes bring with them (Liang, 2004). It is important to realize
that different customers may attach different values to these
benets. Customer behavior is an eclectic eld involving dynamic
interactions and exchanges (Mattila, 2004, p. 449) and is better
understood when analyzed via perceived value (Heskett et al., 1997;
Woodruff and Gardial, 1996). According to this view, relational
benets may strongly enhance value aspects of the evaluation
process, where each party exchanges something of value to
inuence loyalty. Therefore, this study aims to ll the gap by
investigating the effect of relational benets on perceived value to
win customer loyalty. It is hoped that this study will provide the
coffee outlet operators a better understanding of customers
behavior, and assist them in mapping out their distinctive marketing
strategies in order to achieve and maintain a superior competitive
position in the coffee outlet industry.

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2. Literature review
2.1. Relational benets
Relationship marketing, which focuses on approaches to
building, developing and maintaining a successful relational
exchange (Gronroos, 1994; Morgan and Hunt, 1994), is changing
marketing orientation from attracting short-term, discrete transactions to retaining long-lasting, intimate customer relationships.
Czepiel (1990) has pointed that customer relationship exchanges
are particularly important because customers expect to receive
additional benets as a result of engaging in interpersonal focus.
These benets that are interpersonal in nature have been termed
relational benets in the literature, and accrue to those
customers who are engaged in continuing relationships with the
service provider and its personnel (Gwinner et al., 1998; HennigThurau et al., 2002).
Gwinner et al. (1998) conducted in-depth interviews and
quantitative studies to examine the benets customers receive
from relational exchanges. Their ndings from the qualitative
study rst revealed four relational benets in terms of the
psychological (Bitner, 1995; Morgan and Hunt, 1994), social (Berry,
1995; Price and Arnould, 1999), economic (Peterson, 1995) and
customization benets (Barlow, 1992; Crosby, 1991). Subsequently they empirically identied a typology of three relational
benets: condence benets (psychological), social benets, and
special treatment benets (economic and customization). Condence benets in association with psychological benets refer to
perceptions of reduced anxiety and comfort in knowing what to
expect in the service encounter. Social benets, which pertain to
the emotional part of the relationships and focus on personal
recognition of customers by employees and the development of
friendships between customers and employees, are obtained by
customers who have long-term relationships with service rms.
Special treatment benets, which take the form of relational
customers receiving price breaks, faster service, or individualized
additional services, are recognized as the idea of relationship
marketing for customer focus and customer selectivity.
The above literature suggests that relational benets exist and
are derived from relationship exchange. Exchange has been
accepted as a core concept of the marketing discipline (Bagozzi,
1975). Marketing exchanges take place because all parties involved
expect to gain value in the exchange. Value has been the
fundamental basis for all marketing activity (Holbrook, 1994, p.
22). Although researches on relational benet focused only on the
benets of service relationships (Gwinner et al., 1998; HennigThurau et al., 2002), but they ignored the effect of relational
benets on customer perceived value to inuence customer
loyalty. Based on exchange theory, this study thus argues that
customers may gain better value, enhanced by relational benets
through relational exchanges. Thus, the following section will
review the literature of perceived value.
2.2. Perceived value
Although numerous denitions of perceived value exist, the
denition of Zeithaml (1988, p. 14) is the most universally
accepted trade-off denition of perceived value in the literature.
The uni-dimensional conceptualization strategy is effective and
straightforward, but it cannot discern the complex nature of
perceived value. As noted by Sweeney and Soutar (2001), a more
sophisticated measure is needed to understand how consumers
value products and services (p. 207). In fact, it is important to
understand the value concept in an integrative approach, because
one can understand a given type of value only by considering its
relationship to other types of value (Holbrook, 1999).

Past research conceptualizing perceived value as simply a

trade-off between quality and price is not sufcient to gain
competitive advantage (Rintamaki et al., 2006). Perceived value
is operationalized in some hospitality literature and marketing
literature with a single-item scale in measuring customer
perceived value in terms of value for money or functional value.
Al-Sabbahy et al. (2004) insisted that the single items cannot
address the concept of perceived value. Thus, a number of
researchers argued that perceived value is more complex, that a
multi-dimensional approach of value perceptions should be
considered by scholars and managers, and that customer
choice is the result of multiple value perceptions (e.g. Petrick,
2002).
Although a number of value perceptions have been identied in
the literature (i.e., functional, emotional, and social), there appear
to be two universal value perceptions more appropriate to
consumer behavior (Sheth, 1983). Sheth (1983) proposed two
shopping motives: functional motives related to tangible needs
such as convenience, quality, and price, and non-functional
motives related to intangible wants concerning reputation, and
social and emotional needs for interaction. Further to this, Bhat and
Reddy (1998) pointed out that functional value satises practical
needs while symbolic value satises customers self-enhancement
and sensory pleasure needs. Moreover, the view discussed above is
also bolstered by Rust et al. (2000) indicating that customer choice
is inuenced by the perception of functional value, which are
formed primarily by perceptions of quality, price, and convenience.
On the other hand, the hedonic school posits that the symbolic
value has its origin in the emotional or experiential appraisal of the
brand (Rust et al., 2000; Vazquez et al., 2002).
Table 1 presents multiple dimensions of perceived value
identied by previous studies and shows that customers perceived
value in terms of their functional aspects: efciency-convenience
and excellence-quality in the typology of Holbrook (1999);
functional value in Sheth et al. (1991); utilitarian in Babin et al.
(1994); cognitive in Gronroos (1997); acquisition in Grewal et al.
(1998); price and quality in Sweeney and Soutar (2001); quality,
monetary and behavioral price in Petrick (2002); service excellence-quality, and efciency and price in Mathwick et al. (2002);
utilitarian-quality and price in Tsai (2005); functional value in
Sanchez et al. (2006); and utilitarianmonetary saving and
convenience in Rintamaki et al. (2006). They also perceived value
in terms of symbolic aspects: fun-play and aesthetics in Holbrook
(1999); social and emotional value in Sheth et al. (1991); hedonic
value in Babin et al. (1994); emotional in Gronroos (1997); social
and emotional in Sweeney and Soutar (2001); emotional and
reputation in Petrick (2002); aesthetics and playfulness in
Mathwick et al. (2002); affective and symbolic in Tsai (2005);
social and emotional in Sanchez et al. (2006); and social and
hedonic in Rintamaki et al. (2006).
The growing body of conceptual knowledge about perceived
value is quite fragmented, with different points of view advocated,
and no widely accepted way of pulling them all together and
applying them to service settings (Rintamaki et al., 2006). This
study argues that based on the literature, customer perceived
value has both functional and symbolic dimensions. Functional
value is therefore dened in this study as an overall assessment of
value incorporating quality, the traditional value for money, and
convenience characteristics. This type of value represents the
customers perception of quality in terms of goods and services
received from the coffee outlet, the price paid for those goods and
service, and the time saving to receive them. Symbolic value is
dened as an overall representation of experiential value
perceptions from the social, emotional, the aesthetic, and
reputation aspects. This value represents the customers impression on others, perception of delight or pleasure, enjoyment of the

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407

Table 1
Multi-dimensional approach to perceived value.
Authors (s)

Conceptualization/dimensions of perceived value

Research context

Sheth et al. (1991)

In consumer goods (e.g. cigarettes)






Babin et al. (1994)




Gronroos (1997)




Grewal et al. (1998)




Holbrook (1994, 1999)










Sweeney and Soutar (2001)





Petrick (2002)







Mathwick et al. (2002)





Tsai (2005)




Sanchez et al. (2006)




Rintamaki et al. (2006)





Functional value
Social value
Emotional value
Epistemic value
Conditional value
Utilitarian value
Hedonic value
Cognitive
Emotional
Acquisition
Transaction
Efciency
Excellence
Status
Esteem
Play
Aesthetics
Ethics
Spirituality
Functional dimension (price and quality)
Social dimension
Emotional dimension
Quality
Monetary price
Behavioral price
Emotional
Reputation
Aesthetics (visual appeal and entertainment)
Playfulness (escapism and enjoyment)
Service excellence
Customer ROI (efciency and price)
Utilitarian (quality and monetary price)
Affective (emotional and behavioral price)
Symbolic (reputation)
Functional value (installations, professionalism,
quality, and price)
Emotional
Social
Utilitarian (monetary saving and convenience)
Social (status and self-esteem)
Hedonic (entertainment and exploration)

visual appeal, and reputation of outlet, involved with the

consumption experience.
2.3. Loyalty
Customer loyalty, a key variable, is concerned with the
likelihood of a customer returning, making business referrals,
providing strong word-of-mouth, as well as providing references
and publicity (Bowen and Shoemaker, 1998; Tam, 2004). The
literature review has pointed out that although loyalty has been
dened in various ways, there are two main approaches:
behavioral and attitudinal (Chaudhuri and Holbrook, 2001; Dick
and Basu, 1994; Zeithaml, 2000). The rst approach considers
loyalty as behavioral (Ehrenberg et al., 1990; Kahn et al., 1986),
assuming that repeated purchasing can capture the loyalty of a
customer towards the brand of interest. Behavioral loyalty is
expressed as repeated transactions. This approach, however,
cannot distinguish between true loyalty and spurious loyalty.
Researchers who have studied the two-dimensional approach
suggest that focusing on behavior alone (i.e., repeat purchases)
cannot capture the reasons behind the purchases. That is, by
studying behavior alone, one does not know whether the repeat
purchases stem merely from, say, convenience, monetary incentives, or whether the customer really maintains attitudinal loyalty
(Dick and Basu, 1994; Pritchard and Howard, 1997).

In a shopping setting
Theoretical
Assesses perceived value of bicycle
Theoretical

Assesses perceived value of consumer durable goods

Assesses perceived value of service

Assess consumer experiential value in the catalogue

and internet shopping setting

Assesses consumers perceived value on products

(e.g. computers, coffee, denim wear)

Assesses a tourism product

Assesses the value of department store shopping

The attitudinal approach suggests that attitude should be

included along with behavior to dene loyalty. However, Dick and
Basu (1994) argued attitudinal scales serve as a more valuable
means to recognize the determinants of customer loyalty than
behavior scales and therefore, have a primary advantage of over
behavior scales. Assael (1992) dened loyalty as a favorable
attitude towards a brand, thus resulting in consistent purchases of
the brand over time, supported by Keller (1993).
Several researchers have used attitudinal measures of customer
loyalty (Butcher et al., 2001; Lee et al., 2005). Lee and Cunningham
(2001) have argued that attitudinal measures have an advantage
over behavioral measures (e.g. repeat patronage) in that they can
provide greater understanding of the factors associated with the
development of loyalty (Oliva et al., 1992; Riley et al., 2001).
Rundle-Thiele and Bennett (2001) also argued that attitudinal
loyalty measures would be useful in service markets, since
attitudinal measures can identify a customers favorable attitude
towards a company in the service context. Dick and Basu (1994)
proposed that customer preference is central to a loyalty
conceptualization. Their view is supported by Butcher et al.
(2001) indicating that loyalty conceptualization is customer
preference for the service ahead of competition. Therefore, the
present study dened loyalty as a customers favorable attitude of
enduring psychological attachment, resulting in preference,
towards the provider based on experience.

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3. Conceptual framework and hypotheses

3.1. Relational benets and perceived value
Perceived value is the consumers overall assessment of the
utility of a product based on perceptions of what is received and
what is given (Zeithaml, 1988, p. 14). Customers are more likely to
stay in a relationship when the gets (specic benets) exceed the
gives (monetary and non-monetary costs). In addition, Ravald and
Gronroos (1996) have suggested that value assessments should
take into account relationship benets for relationship exchange.
When rms can consistently deliver value from the customers
point of view, clearly the customer benets and has an incentive to
stay in the relationship. Beyond the specic inherent benets of
receiving service value, customers also benets in other ways from
long-term associations with rms. Lovelock (2001) suggested that
perceived value could be enhanced by either adding benets to the
service or by reducing outlays associated with the purchase and
use of the service. Liljander (2000, p. 165) noted that perceived
relationship benets add to the perceived value of the product
because the relationship is strengthened when customers perceived benets beyond their satisfaction with the core product
(Gwinner et al., 1998). On the other hand, the value concept is
closely linked to the exchange theory of marketing (Bagozzi, 1975;
Juttner and Wehrli, 1994). Marketing exchanges take place
because all parties involved expect to gain value in the exchange.
Exchange processes with mixed meaning integrate utilitarian and
symbolic values (Juttner and Wehrli, 1994). The more benets the
customer received, the greater value customers received. Therefore, this study proposes the following hypothesis.
Hypothesis 1. Relational benets will have positive effects on
perceived value.
3.2. Relational benets and customer loyalty
Researchers contend there is a strong relationship between
relational benets of the customer-provider and customer loyalty
(Gwinner et al., 1998; Hennig-Thurau et al., 2002; Reynolds and
Beatty, 1999). For example, Gwinner et al. (1998) found that
dimensions of relational benets such as condence benet, social
benets, and special treatment benet have signicant relationships
on outcomes such as loyalty and positive word-of-mouth. In line
with these ndings, Hennig-Thurau et al. (2002) also conrmed that
relational benets positively inuence customer loyalty.
According to Mintzberg (1994), the appropriateness of relational strategy (e.g. relational benets) is related to customer
perceived value. Additionally, perceived value is regarded as the
fundamental basis for all marketing activities (Holbrook, 1994) and
the customers overall assessment of products and services
(Zeithaml, 1988). Thus, this study argues that marketing strategy
of relational benets is assessed and judged by perceived value. It
can be therefore expected that relational benets inuencing
customer loyalty via perceived value is pivotal to establish
customer relationships exchange, based on the exchange theory
perspective. Thus, this leads to the following hypothesis.

et al., 1997; Jayanti and Ghosh, 1996; Woodruff, 1997). Perceived

value has been found to inuence purchase intensions (Brady and
Robertson, 1999; Cronin et al., 1997; Sweeney et al., 1997). Oh
(2000a), in particular, indicates that the concept of customer value
is crucial for the restaurant industry. Results of Ohs (2000b) study
illustrate the importance of customer value as a powerful predictor
of customer loyalty in dining decision processes. Kwun and Oh
(2004) found that perceived value had a positive impact on
customer loyalty in the restaurant industry. Tam (2004) also found
that perceived value was shown to have a positive effect on
customer loyalty in the restaurant industry. Perceived value is an
important concept, as it is believed to have an inuence on
customer loyalty. Based on the above discussion, the following
hypothesis related to perceived value and customer loyalty can be
proposed.
Hypothesis 3. Perceived value positively inuences customer loyalty.
Based on above literature review, this study proposed a model
integrates relational benets, perceived value, and customer
loyalty. The proposed model is presented in Fig. 1 showing the
effect of relational benet on perceived value which in turn
inuences customer loyalty.
4. Methodology
4.1. Survey instrument
A self-administrated questionnaire was design to test the effect
of relational benets on perceived value to inuence customer
loyalty. The questionnaires were rst checked by a panel of experts
to assess whether there were misunderstandings or ambiguities of
expressions to check for content validity. In an attempt to establish
the reliability of the measures effectively, a pilot study with coffee
outlet customers was then conducted to deal with such matters as
instructional clarity, item clarity, and relevance.
The relational benets scale consists of 9 items representing
condence, social and special treatment benets adapted from
(Gwinner et al., 1998). A total of 14 items was used to measure two
dimensions of perceived value. The measures for functional and
symbolic dimensions of perceived value were mainly adapted from
Petrick (2002) and Sweeney and Soutar (2001) except for an
aesthetics element of symbolic value adapted from Mathwick et al.
(2002). The customer loyalty scale consists of ve items with two
items measuring word-of-mouth, adapted from Lee et al. (2005), and
three items representing preference, adapted from Butcher et al.
(2001), which are related to the hospitality industry and are
appropriate to apply in the coffee outlet industry. All measures
employed ve-point scales ranging from 1 (strongly disagree) to 5

Hypothesis 2. Relational benets positively inuence customer

loyalty.
Hypothesis 2a. Relational benets have indirect effect on customer loyalty via perceived value.
3.3. Perceived value and customer loyalty
Perceived value is an important concept, as it is believed to have
an inuence on customer loyalty (Chang and Wildt, 1994; Cronin

Fig. 1. Conceptual framework of relational benets, perceived value, and customer

loyalty.

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 405412

(strongly agree). Demographic information includes gender, age,

occupation, and education.

409

Table 2
Measurement scale and reliability.
Cronbachs a

Constructs and items

4.2. Data collection

Having considered the data collection requirements of this
study such as a need of large sample of customers and quantities of
coffee outlets, it would be appropriate to employ the eld survey
with a self-administered questionnaire as the primary data
collection technique for this study. The eld study method was
chosen in order to gain information directly from individuals at the
coffee outlet settings. As such, their feelings and perceptions about
the setting with respect to relational benets, perceived value, and
loyalty are likely to be clearly in mind (Danaher and Mattsson,
1994). This study involved the administration of the questionnaire
to a convenient selection of customers comprising the sample for
this study from chain and independent coffee outlets in
Melbourne. Convenience samples are the most common form of
sampling design in social science research (Mohr, 1990) and
popular in service marketing (Bettencourt, 1997; Widing et al.,
2003). The surveys were conducted onsite, the sampling target
being collected during all operating hours. Customers who agreed
to participate would be provided with a survey to complete, which
was collected before they left the coffee outlet. A total of 949 valid
responses were used for data analysis.
4.3. Statistical analysis
The model and the hypotheses were simultaneously tested by
structural equation modeling (SEM). Internal consistency reliability, convergent validity, and discriminant validity were examined before conducting conrmatory factor analysis for validating
proposed measurement indexes. The structural model was then
estimated with LISREL VIII.
5. Results

Relational benets
Condence benet
Have condence
Know what to expect when I go in
Get high level of service
Social benet
Recognized by employee(s)
Being familiar with employee(s)
Have developed a good friendship with employee(s)
Special treatment benet
Offer discounts to regular customer
Offer better service to regular customer
Make great efforts for regular customers

0.76

0.90

0.85

Perceived value
Symbolic value
Improves the way I am perceived
Helps me make a good impression on people
Makes me feel delighted
Is appealing
Gives me pleasure
Is stylish
Is well thought of
Has a good reputation
Functional value
Is convenient for me
Is easy to locate
Provides good service at a reasonable price
Is consistent
Is outstanding
Offer good value for money

0.88

0.84

Customer loyalty
Word-of-mouth
Say positive thing
Recommend to someone
Preference
Being my rst choice
Care about the success
Being a loyal customer

0.84

0.87

5.1. Prole of respondents

The demographic prole of the sample indicates that the gender
of the respondents was evenly distributed, representing 52.6% of
female and 47.4% male, and the dominant age group of the
respondents was 2544 years (47.5%), followed by 1624 years
(36.0%), 4562 years (13.2%), and 63 years and older (3.3%)
respectively. Students accounted for nearly 40% of the respondents. The other occupation groups of respondents on the white
collar level were director/manager and professional/technical
personnel representing 27.7% of the respondents and the blue
collar level was represented by clerical/administration, service/
sales accounts and manual/craft workers accounting for 18.6% of
the respondents. Housewives, unemployed, and retired people
represented only a small fraction of the respondents.
In terms of level of education, almost 63.4% of the respondents
had a university degree or above, followed by TAFE/college (19%),
and secondary education (15.1%), whereas primary education
(1.3%) made up the smallest group. The Cronbachs alpha of each
construct is between 0.76 and 0.90 which exceeded the
recommended level of 0.7 (Hair et al., 1995). The results showed
high reliability in Table 2. Since measurement scales showed
acceptable reliability, multiple scale items then are summated to
create a summated scale for each variable for further analysis.
5.2. The measurement model
The two-step procedure proposed by Anderson and Gerbing
(1988) was employed to ensure an adequate measurement and

structural model. The joint conrmatory factor analysis (CFA; with

all constructs included simultaneously) reveals that the chi-square
for the overall model is 227.42 (df = 11. p < 0.05). Other t indices,
including the comparative t index (CFI = 0.95), root mean square
error of approximation (RMSEA = 0.08), goodness-of-t index
(CFI = 0.95), and non-normed t index (NNFI = 0.90), are satisfactory because they are equal to or better than recommended values.
Thus, the proposed model provides a reasonable explanation of the
observed covariance among the constructs. In addition, we
assessed the validity, reliability, and discriminant validity of the
measures. As we show in Table 3, the CFA results lend strong
support to the convergent validity of all measures, because all
estimated loadings of the indicators for the underlying constructs

Table 3
Conrmatory factor analysis results and relevant composite reliability.
Constructs and items

Loading

T-value

Relational benets
Social benet
Special treatment benet
Condence benet

0.57
0.52
0.60

17.85
16.14
18.54

Perceived value
Symbolic value
Functional value

0.75
0.61

23.89
19.78

Customer loyalty
Word-of-mouth
Preference

0.70
0.82

24.13
28.49

Composite reliability
0.61

0.63

0.72

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410

Table 4
Correlation coefcients, squared correlations, and AVE.
Variable

Mean

S.D.

RB

PV

Relational benets (RB)

Perceived value (PV)
Customer loyalty (CL)

3.29
3.62
3.51

0.91
0.74
0.93

1
0.49a (0.24)
0.51a (0.26)

1
0.59a (0.35)

a
b

CL

AVEb

0.56
0.68
0.77

All correlation coefcients were signicant at the 0.05 level.

All AVE exceed 0.50, showing construct validity.

Fig. 2. Results of structural equation modeling.

Table 5
Structural model results.

Relational benets ! perceived value

Relational benets ! customer loyalty
Perceived value ! customer loyalty
Goodness-of-t statistics
CFI
GFI
NNFI
RMSEA
Chi-square

g11
g21
b21

Coefcient

S.E.

T-value

0.86**
0.37**
0.53**

0.03
0.03
0.03

19.02
2.82
3.90

0.95
0.95
0.90
0.08
227.42

*p < 0.05, **p < 0.01

are statistically signicant at the 0.05 level (Gefen et al., 2000).To

examine the internal validity of the measurement model, we
calculated the composite reliability (CR) and average variance
extracted (AVE) (Fornell and Larcker, 1981). All the CRs, shown in
Table 3, are above the recommended 0.6 level (Nunnally and
Bernstein, 1994). The AVEs of all constructs, which represent the
amount of variance captured by the constructs measures relative
to measurement error and the correlations among the latent
variables, are higher than the 0.5 cutoff recommended by Fornell
and Larcker (1981) for each construct. The internal validity of the
measurement model appears adequate. Furthermore, we conducted Fornell and Larckers (1981) test for discriminant validity
by comparing the AVE estimate for each construct with the
squared correlation between any two constructs. The AVEs are
higher than the squared correlations, conrming the discriminant
validity of the constructs (see Table 4). Therefore, the measurement model meets all psychometric property requirements.
5.3. Structural model results and test of hypotheses
Structural equation modeling using LISREL VIII (Joreskog and
Sorbom, 1993) was used to test the hypothesized model. The
results presented in Table 5 show that Chi-square is signicant
(x2(11) = 227.42, p < 0.05). As the Chi-square is not independent of
sample size (Bollen, 1989; Joreskog and Sorbom, 1993), we did not
rely solely on the Chi-square to test the proposed model. The CFI
(Comparative Fit Index), GFI (Goodness-of-Fit Index), and NNFI
(Non-Normed Fit Index) have been recommended to counteract
the inuence of sample size. A rule of thumb is that these indexes

should be greater or equal to 0.90 (Benter and Bonett, 1980). On

that basis (CFI = 0.95, GFI = 0.95, NNFI = 0.90) the authors decided
that the data tted the model well. Given the large sample size the
Root Mean Square Error of Approximation (RMSEA) might provide
even a better indication of goodness-of-t (Steiger, 1990). The
value of the RMSEA equals 0.08 which is the recommend cut-off
value of 0.08. Thus overall the data indicate an excellent t for our
hypothesized model.
Fig. 2 presents the structural model results for the model. As
hypothesized, the relationship between relational benet and
perceived value was statistically signicant (g11 = 0.86, t = 19.02,
p < 0.01); thus H1 was supported. This nding suggests that
customers who received high level of relational benet during
service delivery would perceive higher value of the coffee outlet. As
anticipated, a positive relation between relational benet and
customer loyalty was signicant (g21 = 0.37, t = 2.82, p < 0.01).
Relational benet has direct effect on customer loyalty; thus, H2
was supported. Additionally, the mediating effect of perceived
value in the relationship between relational benet and customer
loyalty was also found to be signicant (effect = 0.46, t = 3.39,
p < 0.05). Relational benet was found to have indirect effects on
customer loyalty via perceived value, thus supporting H2a. Finally,
perceived value is the primary path to customer loyalty (b21 = 0.53,
t = 3.90, p < 0.01). The results support H3 and indicate that
perceived value has a strong impact on customer loyalty.
6. Conclusion and implication
The objectives of this study were achieved both theoretically
and empirically. This study presents preliminary evidence
investigating the effect of relational benets on perceived value
to win customer loyalty. The results of this study have demonstrated that relational benets are found signicantly related to
perceived value and indirectly inuence customer loyalty via
perceived value. Relational benets play an important role in
enhancing the value perceptions of customers. The ndings
suggest that customers judge the functional value based on all
dimensions of relational benets, which also can add symbolic
value for the customers through the interaction with the service
providers. The explanation for the relationship between relational
benets and perceived value could be that customers come to
know that each time they visit a coffee outlet, they know what to

P.-T. Chen, H.-H. Hu / International Journal of Hospitality Management 29 (2010) 405412

expect and they will be recognized by employees who provide a

great service to them. The customers have condence that they
will have a quality consumption experience each time they visit
the coffee outlet and know that the employees will greet them by
name and offer better service to them. It is believed that customers
judge their value perceptions through these relational benets in
terms of functional value and also symbolic value. Therefore, it is
apparent that as customers continue to receive relational benets,
particularly condence benets, every time they come in contact
with the coffee outlet providers, they become aware of functional
and symbolic value perceptions.
Furthermore, this study, as expected, supports that relational
benets have direct effect on customer loyalty (Hennig-Thurau
et al., 2002). It goes without saying that the more positive
perception customers showed on relational benets, the more
positive attitude customers showed on loyalty. In other words,
such customer loyalty may require the perception of a high quality
service with special emphasis on relational benets. The above
ndings in understanding customers consumption experience of
coffee outlets may serve as the foundation for coffee outlet
operators to improve their marketing strategies to gain competitive advantages. On the other hand, this study also found that
relational benets have indirect effect on customer loyalty through
perceived value. In view of the results obtained, we can say that
perceived value play an important role between relational benets
and customer loyalty. It seems therefore that perceived value
captures the fundamental effect, above relational benets, and
projects them onto loyalty, acting as a mediating variable.
This study empirically supports the nding that perceived value
plays an important role in inuencing customer loyalty (Cronin
et al., 2000; McDougall and Levesque, 2000). It is important to
highlight that the study has adopted the multi-dimensional
approach beyond the value for money to perceived value. This
study identied that not only perceived functional value but also
perceived symbolic value are signicant predictors of customer
loyalty. The ndings have enabled this study to expand existing
knowledge of the value perceived by the customer visiting coffee
outlets in particular, by comparing the different value perceptions.
Compared to previous studies which view value for money as
functional value to inuence customer loyalty (e.g. McDougall and
Levesque, 2000; Tam, 2004), the ndings of this study reveal that
symbolic value involving how a customer can improve the way
they are perceived and how they gain pleasure in a stylish coffee
outlet with a good reputation is a determinant value perception
beyond the functional value in the prediction of customer loyalty.
Previous studies focusing on functional value itself reach limited
interpretation of how perceived value can affect customer loyalty.
The results suggest that researchers should study customer loyalty
not only as functional value but also symbolic value. The ndings
also suggest that customer loyalty can be generated through
improving functional value as the bedrock and then building on top
of this with symbolic value. The ndings imply that marketers
should not solely compete in price, location, and quality of
functional value, but should differentiate their products and
services from other competitors by providing symbolic value
perception derived from social, emotional, aesthetics, and reputational aspects to attract and retain customers. Thus, it is believed
that the relationships between perceived value and customer
loyalty will be more thoroughly comprehended with functional
and symbolic value perceptions, especially enhanced by relational
benets in an increasingly competitive.
This study provides a comprehensive view for coffee outlets to
review their competitive advantages in relation to how the
customers responded to their consumption experience, helping
marketers and operators to provide benets and value in their
products and service offering, and further rene and adjust their

411

marketing strategies to meet customers desires and needs

effectively, ultimately to win customer loyalty. Finally, the model
built for the present study is empirically tested from coffee outlet
industry. This study could then be extended to other aspects of the
hospitality industry where there exists competition across country
or cultural comparison.
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