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The impact of trust on brand loyalty: evidence from the hospitality industry

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The impact of trust on brand loyalty: evidence from the hospitality industry

Dr. Evangelos Christou
Department of Tourism Management
Technological Educational Institute of Thessaloniki Περίληψη Η αξία της ισχυρής εμπορικής επωνυμίας (brand) μιας επιχείρησης φιλοξενίας έχει αποδειχθεί εμπειρικά στο παρελθόν. Οι εμπορικές επωνυμίες των επιχειρήσεων φιλοξενίας παρέχουν τον ιδεατό νοητικό σύνδεσμο μεταξύ των πελατών και των επιχειρήσεων, και ενδέχεται να οδηγήσουν τον πελάτη σε συμπεριφορά πιστότητας (loyalty) προς την εμπορική επωνυμία. Η παρούσα μελέτη αποδεικνύει ότι ο βαθμός εμπιστοσύνης (trust) προς την εμπορική επωνυμία μιας επιχείρησης φιλοξενίας επηρεάζει άμεσα την ανάπτυξη πιστότητας εκ μέρους των καταναλωτών προς την επωνυμία αυτή. Σύμφωνα με ερευνητικές υποθέσεις που αναπτύχθηκαν και εξετάστηκαν για τις ανάγκες της παρούσας μελέτης, η εμπιστοσύνη προς την εμπορική επωνυμία μιας επιχείρησης φιλοξενίας επηρεάζεται από: τα χαρακτηριστικά της εμπορικής επωνυμίας, τα χαρακτηριστικά της επιχείρησης φιλοξενίας, και τα χαρακτηριστικά των καταναλωτών. Η σχετική έρευνα έλαβε χώρα στην Αθήνα και στην Θεσσαλονίκη, και μεταξύ άλλων απέδειξε ότι ορισμένα χαρακτηριστικά της εμπορικής επωνυμίας επηρεάζουν περισσότερο από οποιονδήποτε άλλο παράγοντα τον βαθμό εμπιστοσύνης προς την εμπορική επωνυμία. Επίσης, με βάση τα αποτελέσματα της έρευνας, παρέχονται προτάσεις για την αποτελεσματικότερη δημιουργία και διατήρηση εμπιστοσύνης προς την εμπορική επωνυμία μιας επιχείρησης φιλοξενίας. Abstract It has been established that strong brands are important in the hospitality industry. Hospitality brands provide the link between customers and the hospitality firms and customers may or may not develop a degree of loyalty to brands. The present study suggests that trust in a hospitality brand has high influence in developing of brand loyalty. Based on hypotheses developed, trust in a hospitality brand is influenced by brand characteristics, company characteristics and customer characteristics. The present survey took place in Greece and examined the attitudes of customers in Athens and Thessaloniki. The survey results demonstrate that hospitality brand characteristics appear more important in their impact on a customer’s trust in a brand. It was also established that trust in a hospitality brand is positively influencing brand loyalty. Finally, recommendations are developed for hospitality marketers in relation to building and maintaining customer trust in a brand. 1. Introduction Hospitality marketers have long been interested in the concept of brand loyalty because brand loyalty is a measure of the attachment that a customer has to a brand (Aaker, 1991). Brand loyalty brings the hospitality firm many benefits, including repeat visits and recommendations of the hospitality brand to friends and relatives. Early research on brand loyalty focused on behaviour. Brand loyalty was construed to be a subset of repeat purchase behaviour (Brown, 1952; Cunningham, 1956) and intention to repurchase. Later, researchers like Guest (1955) and Jacoby (1971) argued that brand loyalty has two components: brand loyal behaviour and brand loyal attitudes. The attitude behind the purchase is important because it drives behaviour. While brand loyal behaviour is partly determined by situational factors such as availability (Jacoby, 1971), attitudes are more enduring. Unfortunately, despite its importance, brand attitudes have not attracted a corresponding degree of research interest. A compilation of definitions and studies on brand loyalty by Jacoby and Chestnut (1978) revealed that research on brand loyal behaviour outnumbered studies on brand attitudes three to one. O’Shaughnessy (2000) suggested that underlying loyalty is always trust, a willingness to act without calculating immediate costs and benefits. Hence, loyalty to a hospitality brand involves trusting it. In hospitality marketing, the concept of trust is developed on a limited basis, though much effort has been spent in finding ways to build and maintain it. In that context, trust is built on person-to-person relationships. Trust in a hospitality brand differs from interpersonal trust because a brand is a symbol. Unlike a salesperson, this symbol is unable to respond to the consumer. To win loyalty in today’s competitive tourism markets, hospitality marketers have to embrace what is becoming second nature to business marketers (Donath, 1999) and focus on building and maintaining trust in the customer-brand relationship (Christou, 2003). Unfortunately, the concept of trust in hospitality marketing is largely unexplored. The focus of this study is to examine some factors affecting the development of trust in hospitality brands, and to explore how that trust relates to brand loyalty. By applying current interpretations of trust to hospitality brand loyalty, this study seeks to approach brand loyalty differently and to provide insights into consumers’ motivation for loyalty to hospitality brands. 2. Hospitality brand loyalty and trust Copeland (1923) appears to be the first to suggest a phenomenon related to brand loyalty, which he labelled ‘brand insistence’. Brown (1952) and Cunningham (1956) analysed summary measures of brand purchase patterns and found marked consistencies in consumers’ purchase patterns of brands of various products. They concluded that individuals exhibit strong and operative brand loyalty. Others (Lipstein, 1959; Frank, 1962; Farley, 1963) also verified the phenomenon. These spurred continuous inquiry into brand loyal behaviour. Brand loyalty is repeated purchases prompted by strong internal dispositions. Jacoby and Kyner (1988) viewed brand loyalty as a multidimensional construct involving attitudinal components and as a subset of repeat purchasing. Dick and Basu (1994) conceptualise loyalty as the strength of the relationship between the relative attitude towards a brand and patronage behaviour. Trust is the expectation of the parties in a transaction and the risks associated with assuming and acting on such expectations (Deutsch 1958). Trust is the willingness to rely on another in the face of risk; this stems from an understanding of the other party. Trust is an expectation set within particular parameters and constraints; it involves confident positive expectation about another’s motives with respect to oneself in risky situations Boon and Holmes (2001). In recent years, hospitality businesses face greater pressures as more customers become deal-loyal (Sigala, 2001, 2002, 2003). To win back loyalty hospitality marketers began to embrace the idea of building relationships with customers and winning their trust (Christou and Kassianidis, 2002). However, conceptualisations of trust in the hospitality marketing literature have generally been lacking. In the hospitality market, there are too many anonymous customers, making it unlikely that the hotel firm could develop personal relationships with each customer. Thus, hospitality marketers may have to rely on a powerful symbol (the brand) to build the relationship. 2.1. Trust in a hospitality brand: A conceptual model It is proposed in this paper that three sets of factors affect trust in hospitality brand. These three sets of factors correspond with the three entities involved in the brand-consumer relationship: the hospitality brand itself, the hospitality company behind the brand, and the customer interacting with the brand. It is also proposed that trust in a hospitality brand will lead to brand loyalty. Based on this approach, a conceptual model (Figure 1) is developed bellow. The brand’s characteristics play a vital role in determining whether a consumer decides to trust it. Drawing from previous research, it is concluded that individuals are trusted based on their reputation (Zucker, 1986), predictability (Remple et al., 1985), and competence (Andaleep and Anwar, 1996). 2.2. Development of research hypotheses Hospitality brand reputation can be developed through marketing communication; it is also influenced by product and service quality and performance. Reputation of a party can lead to positive expectations, which leads to development of reciprocity between them (Creed and Miles, 1996). If a consumer perceives that other people think that a brand is good, he may trust the brand enough to purchase it. Hence, it is hypothesised that: A customer’s perception that a hospitality brand has a good reputation is positively related to the customer’s trust in that brand (Hypothesis 1). Predictability is about a party’s ability to forecast another party’s behaviour (Doney and Cannon, 1997). A predictable hospitality brand allows its user to anticipate how it will perform at each visitation occasion. Brand predictability enhances confidence; the customer knows that nothing unexpected may happen when it is used. As such, predictability enhances trust in a brand as predictability builds positive expectations. Hence is hypothesised that: A customer’s perception that a hospitality brand is predictable is positively related to the customer’s trust in that brand (Hypothesis 2). Competent hospitality brands have the ability to solve consumers’ problems and to meet their needs. Sitkin and Roth (1998) considered ability as an essential element influencing trust. A consumer may find out about a brand’s competence through direct usage or word-of-mouth communication. Once convinced that a brand is able to solve his or her problem, a customer may be willing to rely to that brand. Therefore, it can be hypothesised that: A customer’s perception that a hospitality brand is competent is positively related to the customer’s trust in that brand (Hypothesis 3). The characteristics of the hospitality company behind a brand can also influence the extent to which the brand is trusted. Company characteristics that affect a customer’s trust in a brand are the trust in the company, its reputation and the perceived company motives and integrity (Scheer and Steenkamp, 1995). Hence it is hypothesised that: A customer’s trust in a hospitality company is positively related to the customer’s trust in that company’s brand (Hypothesis 4). If a customer perceives that other people think that the hospitality company behind a brand is known to be fair and just, that customer may feel secure in acquiring and using the company’s brand; this leads to greater trust in that brand. Anderson and Weitz (1992) in the marketing channel context support this argument. It is thus hypothesised that: A customer’s perception that a hospitality company has a reputation for fairness is positively related to the customer’s trust in that company’s brand (Hypothesis 5). The extent to which a leader’s behaviour is relevant to the followers’ needs influences confidence and trust in the leader (Jones et al., 1989); benevolence of motives is an important factor in a relationship. In the context of a hospitality brand, when a customer perceives the company behind it to be benevolent, the customer will trust that brand. Therefore, it is hypothesised that: A customer’s perception that a hospitality company has benevolent motives is positively related to the customer’s trust in that company’s brand (Hypothesis 6). The degree to which a hospitality company is judged to have integrity depends on the consistency of its past actions, credible communications about it from others, belief that it has a strong sense of justice, and the extent to which its actions are congruent with its words; integrity is an antecedent to trust (Butler, 1991; Sitkin and Roth, 1998). Hence, it is hypothesised that: A customer’s perception that a hospitality company has integrity is positively related to the customer’s trust in that company’s brand (Hypothesis 7). Similar characteristics between two parties may lead to trust; as trust begets trust, common characteristics initiate a positive, reinforcing process of interaction (Bradach and Eccles, 1997). By conforming to a customer’s opinions, values and standards a hospitality firm can earn the customer’s trust Bennet (1996). It is thus hypothesised that: Similarity between a customer’s self-concept and a hospitality brand personality is positively related to the customer’s trust in that brand (Hypothesis 8). Based on Bennet (1996), to initiate a relationship, a party must be liked by the other. To form a relationship with a hospitality brand, a customer must like it first. Therefore: A customer’s liking for a hospitality brand is positively related to the customer’s trust in that brand (Hypothesis 9). Brand experience is about a customer’s past encounters with the brand. In the development of process-based trust, reciprocity (developed through recurring exchanges) is the key (Zucker, 1986). Experience is likely to increase trust in the partner; as a customer gains more experience with a hospitality brand, he understands it better and grows to trust it more. This experience is not restricted to positive experiences; any experience improves the customer’s ability to predict the hospitality brand performance. Hence, it is hypothesised that: A customer’s experience with a hospitality brand is positively related to the customer’s trust in that brand (Hypothesis 10). Brand satisfaction is the outcome of the subjective evaluation that the chosen alternative brand meets or exceeds expectations (Bloemer and Kasper, 1995). In a continuing relationship, satisfaction with past outcomes indicates equity in the exchange; this increases the perception of the exchange partner’s benevolence and credibility (Ganesan, 1994). Therefore, it is hypothesised that: A customer’s satisfaction with a hospitality brand is positively related to the customer’s trust in the brand (Hypothesis 11). An important determinant of an individual’s behaviour is other individuals’ influence (Bearden et al., 1989); social influence is an important determinant of consumer behaviour. This is reflected in models of consumer decision-making that incorporate social norms (Ajzen and Fishbein, 1980) and interpersonal considerations (Miniard and Cohen, 1993) as antecedents of behavioural intentions. Consumers may purchase products to conform with peer groups, in response to concerns of what others think of them (Bearden et al., 1989), or because others have provided credible information about a product (Cohen and Golden, 1987). Thus it is hypothesised that: Peer support for a hospitality brand is positively related to a customer’s trust in that brand (Hypothesis 12) . In this study, hospitality brand loyalty is conceptualised as behavioural intention to adopt a brand of a hospitality product and to encourage others to adopt that brand. When a customer trust a hospitality brand and is willing to rely on it, that customer may form a positive buying intention towards the brand. Hence, it is hypothesised that: A customer’s trust in a hospitality brand is positively related to the customer’s loyalty to that brand (Hypothesis 13). 3. Research methodology The target population for the study was Greek consumers who have made a purchase decision for any hospitality product or service. Quotas on gender and age, corresponding to the distribution of Greek residents, were used to ensure a representative distribution of participants in the sample. A shopping-mall intercept survey was used; the method has merits in speed, economy, and control of respondent type. Three shopping malls were selected in Athens and two in Thessaloniki in Greece. Two interviewers and 30 questionnaires were assigned to each mall – a total of 150 questionnaires. The interviewers were briefed on the quota sampling method and given instructions on the respondent interviewing process. Respondents were asked to identify a hospitality brand for which they had often made a visitation/purchase decision. They were then requested to think about that hospitality brand as they completed the entire questionnaire. The measures of each construct were from a variety of sources; some were established measures while others were modified or developed for this study. A new scale was developed to measure perceived brand reputation; it was measured by tapping the respondent’s perception of how the hospitality brand is known to be and what other individuals have said about the brand. Brand predictability involved items measuring the hospitality brand’s consistency in quality and the extent the respondent perceived the brand to perform as expected (Remple et al., 1985). Brand competence involved items to measure the hospitality brand’s perceived relative competence. Trust in the company was measured by tapping the respondent’s faith in the hospitality company (Larzelere and Huston, 1992) Company reputation was measured by asking respondents to rate the hospitality company in terms of its reputation for fairness and honesty (Anderson and Weitz, 1996). Perceived motives of the company were operationalised by creating a new scale. The perceived integrity of the company was operationalised by tapping perceptions of the hospitality company’s values in areas such as ethics, honesty, and consistency of its actions with its promises. For measuring the extent of similarity between the consumer’s self-concept and the brand’s personality, respondents rated themselves and the hospitality brand along two identical scales adopted from Malhotra (1991). The difference in scores for each item in the scale indicates the difference between the respondent’s self-concept and hospitality brand’s perceived personality. Brand liking involved measuring consumer’s preference for the hospitality brand over others, and by asking directly if he liked the brand. Brand experience examined respondents’ usage/visitation of the hospitality brand, from the first time they recalled using the brand. Brand satisfaction involved adapting Westbrook and Oliver’s (1996) relevant twelve-item scale. Peer support was measured by asking the respondent if friends supported/recommended the hospitality brand visitation/purchase. Trust in the brand involved asking respondents if the hospitality brand is doing what it is supposed to do and if they are willing to rely on it – scales were adapted from Remple et al.’s (1985) study. All constructs’ items were ordered randomly. 7-point Likert scales were used where possible; the remaining questions were either open-ended or required the ticking of relevant boxes. The questionnaire was administered to 34 individuals for pre-testing. 4. Results and hypotheses testing There were 144 usable questionnaires, and the general profile of the respondents was comparable to the distribution of gender, age, race, income and education of Geek residents. There were an almost equal proportion of male (47.8%) and female (52.2%) respondents, and they were aged 18 to 74 years. The gross household median monthly income was €1,500-2,000. Seventeen hospitality brands and twenty-three hospitality product types were named in the survey. Examination of Pearson’s correlation matrix for all the items revealed no problems with convergent and discriminant validity. Scale items belonging to the same construct had higher correlations (coefficients ranged from 0.51 to 0.93), while those relating to different constructs had lower correlations (coefficients ranged from 0.38 to 0.44). Construct validity of the measures was examined through factor analysis; a factor loading of at least 0.3 was used to identify whether a variable is part of a factor (Nunnally, 1978). Items meant to measure the same construct clustered together, suggesting that they measured the same conceptual space. Factor loadings for the variables ranged from 0.487 to 0.653, satisfying Nunnally’s (1978) 0.3 threshold. Cronbach coefficient alpha was calculated in order to examine internal consistency and the reliability of the scales; a Cronbach alpha of 0.70 or higher is sufficient (Nunnally, 1978). All scales used exceeded the reliability threshold of 0.70 Cronbach alpha. Pearson’s correlation coefficients for the corresponding variables specified in the hypotheses are presented in Table 1. The results support all the hypotheses, Hypothesis 1 to Hypothesis 13. Hence, it has been established that all the proposed brand, company, and consumer-brand characteristics influence trust in an on-line brand. It was also established that trust in an on-line brand lead to brand loyalty. The correlation coefficient between the two variables is 0.86 and the percentage of variation shared by the two variables or the coefficient of determination is 0.788. To examine the significance of the model formed by the hypotheses (Figure 1), regression analysis was performed; trust in a hospitality brand was the dependent variable while the hospitality brand, hospitality company and consumer-brand factors were independent variables. The model was significant at p < 0.01 level and the adjusted R2 was 0.922. In addition, the independent variables were checked for multicollinearity (where two or more independent variables used in the regression are correlated). All correlations among the independent variables did not exceed the threshold of 0.90 which is indication of collinearity (Hair et al., 1995). Also, pairwise and multiple variable collinearity was assessed by calculating the variance inflation factor (VIF), which tells the degree to which each independent variable is explained by the others; large VIF values (over the threshold of 10) denote high multicollinearity (Hair et al., 1995). All VIF values found were bellow 10 hence, did not exceed the acceptable threshold. Five constructs were significant (at p < 0.05 level) in explaining trust in a hospitality brand. These constructs, found to be important (as their respective beta coefficients indicated), are hospitality brand predictability, hospitality brand liking, hospitality brand competence, hospitality brand reputation and trust in hospitality company. 3.1. Further discussion and managerial implications Through this study it has been established that a hospitality brand contributes to behavioural intention of brand loyalty. Hence, it is worthwhile for hospitality marketers to build consumer trust in their brand. Hospitality brand characteristics, particularly brand predictability, brand competence and brand reputation, are relatively more important in establishing and maintaining customer’ trust in a hospitality brand. Hospitality brand liking and trust in the hospitality company were also important factors. The achievement of hospitality brand predictability requires consistency; this asks for ensuring the consistent quality of every product and service sold by the hospitality firm. It also requires stringent operating and quality control procedures. To achieve hospitality brand predictability, marketers should try not to make too many drastic changes to products and services too frequently; if major product changes are necessary, hospitality marketers should communicate to customers carefully regarding the changes, so that they know what to expect from the modified product or service. Brand predictability can also come from repeated interactions between the customer and the hospitality brand. Marketers should try to provide as many opportunities for customers to interact with the hospitality brand as possible. In addition, brand predictability can be developed through consistent communications with customers; hospitality marketers should ensure that they are saying fairly similar things about the product to consumers through all different communication channels used. Marketers should also be careful about making promises regarding their hospitality brand because if these promises are broken then customers may perceive the brand as being unpredictable. Trust in hospitality brand competence is usually perceived as domain-specific (Zand, 1982); hence, hospitality companies should try to establish their competence in a few key areas, and manage their brands within these. Marketers should carry out research to find out consumers’ needs and concerns related to the product area, so they can develop competence which are relevant to them. In addition, marketers should make judicious use of key opinion leaders, who are viewed as authorities in specific areas, to speak on behalf of the company’s hospitality brand. For developing and maintaining a good reputation for a brand, it is essential that the brand please its customers; this calls for genuine quality and delivering on its promises. Other efforts include all marketing communications and promotion, and customers should be encouraged to spread positive word-of-mouth. Complaint handling is also important, in order to avoid negative word-of-mouth. There should be a publicised channel through which feedback can be easily directed, so unhappy customers can easily contact the hospitality company. The aesthetic and functional aspects of the hospitality brand cannot be overlooked. Marketers should make sure that the hospitality installations do not just focus on their technical aspects alone, but should also consider its appearance and aesthetic aspects as well. Marketers can also develop brand liking by associating the hospitality brand with situations in which customers have positive feelings. Also, the brand can be associated with a well-liked person or opinion-leader. 4. 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