The effect of communication and price dynamics on the loyalty - profitability relationship : an empirical investigation in the service industry

For decades achieving enduring profitability through customer loyalty has been the central thrust of service management research and marketing endeavors. Yet the actual interrelationships and drivers of the loyalty – profitability chain are quite unexplored, and literature yields contradictory findings. The purpose of this thesis is to analyze the impact of customer loyalty on profitability metrics and the role of communication and price dynamics in this relationship. Using a quantitative-based research design, this study tests the direct effects among the loyalty – profitability chain and three moderating variables with survey data from customers in a high-contact service setting. The empirical results show that both dimensions of customer loyalty, attitudinal and behavioral loyalty, have no effect on customers’ basic spending. However, there is a positive impact on additional service spending and tipping behavior to some extent. In addition, the moderating roles of customer engagement (CE), communication quality, and perceived price-quality ratio are partly supported. This thesis decisively contributes to the understanding of profitable customer loyalty and emphasizes the importance of communication and price factors in service industries. Implications for theory and management are derived and directions for future research are sketched.
submitted by Theresa Schönherr
Masterarbeit University of Innsbruck 2019