Commitment, Loyalty And Customer Lifetime Value: Investigating The Relationships Among Key Determinants

Abstract

Using the theoretical underpinnings of relationship marketing, this study examined the relationships among various constructs relating to the management of a firm’s customers. In particular, the study investigated the multidimensional constructs of commitment and loyalty and the effect of a loyalty program on these dimensions. The study explored the relative impacts of affective and continuance commitment on these two dimensions of loyalty in a business-to-business context for a pharmaceutical distribution company.Reseasrchers have argued that affective commitment, being predicated on free choice and emotional attachment, should result in more enduring relationships compared to continuance commitment, which is based on economic benefits and the lack of viable alternatives that raise the exit barriers. The value of continuance commitment remains unclear as it is argued that continuance commitment can both enhance, as well as undermine, marketing relationships. Researchers have also argued that loyalty programs are likely to be more successful if they include, in their design, a greater emphasis on building emotional ties than promoting economic benefits. A self-administered survey was employed among 151 customers of a pharmaceutical distribution company and the results analyzed using structural equation modeling (SEM) with Partial Least Square (PLS-Graph 3.0 Build 1130) for inferential analysis and SPSS version 16.0 for descriptive analyses. The results supported the theorized view that affective commitment has a greater impact on loyalty than does calculative commitment. The results, however, did not support the theorized positions of a significant impact of calculative commitment on loyalty, and there was also no empirical evidence that a loyalty program impacts commitment or customer lifetime value. The managerial and research implications of the study are also presented.