B2B services: linking service loyalty and brand
equity
Papassapa Rauyruen and Kenneth E. Miller
School of Marketing, University of Technology, Sydney, Australia, and
Markus Groth
Australian Graduate School of Management, University of New South Wales and University of Sydney, Sydney, Australia
Abstract
Purpose – A significant way of achieving high profitability is to retain existing customers who contribute to the service provider’s revenue by continuously
purchasing and paying more for products and services and building brand equity to the provider. The main objective of this study is to empirically examine
and extend the knowledge underlying the linkage between service loyalty and brand equity performance outcomes in the context of business-to-business
markets. It aims to develop and empirically test a theoretical model examining the antecedents and the outcomes of service loyalty in a business-to-
business context. The model also aims to examine the relationship between service loyalty and customer share of wallet and price premium, as well as the
links between the proposed antecedents (habitual buying, trust in the service provider, and perceived service quality) and service loyalty.
Design/methodology/approach – The theoretical model was empirically tested with a sample of 294 Australian small- to medium-sized enterprises
(SMEs), using online and paper-and-pencil surveys. Respondents were owners of SMEs, financial controllers, and managers who are decision-makers in
the selection and use of courier service providers for their businesses.
Findings – Findings provide support for the theoretical model in linking drivers of service loyalty with two types of loyalty, purchase intentions (i.e.
behavioural loyalty) and attitudinal loyalty. Furthermore, the two types of loyalty are differential predictors of brand equity outcomes in that customer
share of wallet is mainly driven by purchase intentions, whereas willingness to pay a price premium is mainly driven by attitudinal loyalty.
Originality/value – The paper examines the relationship between service loyalty and willingness to pay a price premium as one key indicator of brand
equity.
Keywords Customer loyalty, Relationship marketing, Business-to-business marketing, Customer services quality, Trust
Paper type Research paper
An executive summary for managers and executive
readers can be found at the end of this article.
A steady stream of sales revenue for a service provider can be
achieved through having superior market performance
outcomes such as high market share and a high price
premium. These two indicators of market performance
outcomes are directly related to service loyalty (Aaker,
1991, 1996; Chaudhuri and Holbrook, 2001). Achieving
and maintaining a high market share and a high price
premium through attracting and retaining a loyal customer
base is particularly significant in a business-to-business
market. Nevertheless, there are opposing viewpoints in that
loyal customers are not always seen as profitable despite
arguments that loyalty makes customers less price sensitive.
Some authors argue that loyal customers, or presumably
experienced customers, are actually more expensive to serve
and that they are often demanding (see, for example, Reinartz
and Kumar, 2002). Some loyal customers, in particular
corporate customers, regularly exchange frequency of
purchase in return for lower prices. Thus, Reinartz and
Kumar (2002) argue that corporate clients expect and get
some tangible benefits for their loyalty. These authors also
provide evidence that long-term customers consistently paid
lower prices than the newer customers (between 5-7 per cent
less, depending on the product category). According to
Gardener and Trivedi (1998), this is especially true in the
retail sector. In other cases, loyal customers may be more
willing to attempt to use their purchasing power to gain a
discount, a particularly common scenario in business-to-
business markets. As a consequence, it may be argued that
loyal customers are not always willing to pay a price premium.
The main aim of this paper is to empirically examine the
relationship between service loyalty and willingness to pay a
price premium as one key indicator of brand equity.
With the higher magnitude of typical purchases of business
customers and the nature of a more rational purchasing
environment, some researchers see the loyalty of business-to-
business customers as having a significant impact on the
financial success of the supplying firms (e.g. Dwyer and
Tanner, 1999).
Accordingly, the main objective of this paper is to
empirically examine and extend the framework underlying
the links between service loyalty and brand equity outcomes
in the context of business-to-business markets. Specifically,
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0887-6045.htm
Journal of Services Marketing
23/3 (2009) 175–186
q Emerald Group Publishing Limited [ISSN 0887-6045]
[DOI 10.1108/08876040910955189]
Received: December 2005
Revised: May 2007
Accepted: May 2007
175

using Chaudhuri and Holbrook’s (2001) framework as a
guideline, the aim is to investigate the chain of effects of
antecedents of service loyalty in predicting behavioural
aspects (i.e. purchase intentions) and attitudinal aspects of
service loyalty and their subsequent impact on customer share
of wallet and willingness to pay a price premium, as two
important indicators of brand equity perceptions.
A conceptual model of service loyalty and brand
equity
The determinants of service loyalty and their subsequent
effects of brand equity in a business-to-business context are at
the centre of this research. Figure 1 shows the conceptual
model as well as the specific hypotheses tested in this
research. In the following section we discuss the proposed
relationships in detail.
Habitual buying as a predictor of service loyalty
As Langer (1997) notes, “returning to the same service supplier
or seller can be a matter of habit and convenience. It is
reassuring to buy consistently and knowing the quality – it
saves the customer time, money, disappointment and even self
blame”. Drawing on social adaptation theory, Beatty and Kahle
(1988) define habit as “repeat purchase behaviour of either a
brand or a product class, which is not necessarily a direct
function of psychological processes”. Social adaptation theory
suggests that people subjectively develop adaptive schemata
that guide their behaviour. As these schemata are enacted more
frequently in the context of stable perceptions of subjective
adaptability, they then begin to acquire characteristics of habits,
such as consistency and resistance to change in the absence of
external accommodative or internal organisation forces. In a
similar vein, Jacoby and Chestnut (1978) refer habit to “the
level of repeat purchase behaviour exhibit towards a brand”.
According to Chaudhuri (1996), the loyalty literature
generally considers habitual buying behaviour to be a
determinant of loyalty (e.g. Jacoby and Kyner, 1973).
However, habit has received little empirical attention, even
though it is an important construct from a managerial
perspective in better understanding the decision processes
underlying changes in attitudes and behaviours of customers
(Beatty and Kahle, 1988).
However, there is some evidence of habitual buying as an
important predictor of service loyalty and, ultimately, brand
equity. Beatty and Kahle (1988) studied the impact of habit
on the relationship between attitude and behaviour and found
a significant positive relationship. Jacoby and Kyner (1973),
on the other hand, proposed that brand loyalty can be a result
of habit. Furthermore, Chaudhuri (1996, 1999) proposed
and empirically determined that brand loyalty is a separate
concept from either consumer attitude or repeat buying and
concluded that brand loyalty fulfils a crucial intervening
function between consumer-based outcomes and market-
based outcomes for a brand, such as market share and price.
Chaudhuri (1995) proposed two routes of habit in
explaining brand equity and price. First, the direct route,
Figure 1 A conceptual model of service loyalty and brand equity
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
176

which relates habit to brand outcomes which is evidenced in
studies investigating the double jeopardy phenomena
(Ehrenberg, 1995). Second, the indirect route describes the
process of brand equity via the intervening variable of brand
loyalty. Based on this prior work, habitual buying is defined in
this research as a purchase behaviour that occurs out of habit
through low reconsideration and deliberation. The definition
supports the idea that business customers’ habitual buying
occurs out of low or no reconsideration and process decision.
Their pattern of buying becomes regular and habitual. This
leads to our first hypothesis:
H1. Habitual buying will be positively related to purchase
intentions.
Trust in the service provider as a predictor of
service loyalty
Given that the concept of trust plays an important role in
relationship marketing, and in particular in the context of
business-to-business markets (Blois, 1999), it is no surprise
that the construct of trust has received ample attention in the
research literature. Trust plays an important part in
maintaining profitable relationships (Svensson, 2004), thus
understanding the nature of trust and the importance of its
contribution to loyalty is of particular interest to managers
and has a major impact on how business-to-business
relationships are developed and managed.
Although a wide variety of conceptualisations and definitions
of trust exist in fields as diverse as psychology, sociology, and
business, no universally accepted definition of trust has been
adopted in the research literature. However, most authors
agree on trust being a multi-dimensional construct (see, e.g.
Ganesan, 1994; Geyskens et al., 1997; Sirdeshmukh et al.,
2002) that includes aspects of benevolence, integrity and
competence, trustworthiness, credibility, and honesty (Butler,
1991; Mayer et al., 1995; Moorman et al., 1992; Parasuraman
et al., 1985; Smith and Barclay, 1997).
In this study, we adopt Anderson and Narus’ (1990)
definition of trust as a tendency to reflect on the perceived
credibility and benevolence of the target of trust and the
buyer’s belief that the service provider and its employees will
perform actions that will result in positive outcomes and not
engage in unexpected behaviour with negative outcomes.
We regard trust as a central construct to the development of
successful service relationships in business-to-business
markets and for the achievement of service loyalty. Evidence
for the importance of trust in relationships comes from
Parasuraman et al. (1985) who examined the role of trust as a
critical success factor in successful service relationships. The
authors suggest that customers need to feel safe in dealings
with service providers and need to be assured that their
interaction is confidential in that they are able to trust their
service providers. In a similar fashion, Berry (1995, p. 242)
suggests that “relationship marketing is built on the
foundation of trust.” Several authors suggest that trust is a
major element of long term buyer-seller relationships in a
business environment and that trust provides a number of
business benefits such encouraging cooperation, increasing
long term benefits and lessening the fear of opportunistic
behaviour by one partner (Anderson and Narus, 1990; Dwyer
et al., 1987; Anderson and Weitz, 1992; Geyskens et al., 1997;
Morgan and Hunt, 1994). Thus, trust is viewed as important
because of its ability to moderate risk in the buying process
(Chow and Holden, 1997).
In the context of business-to-business marketing, trust is
similarly viewed as a focal construct, for example in the context
of industrial marketing and purchasing groups (Ford, 1990;
Hakansson, 1982). In a buyer-seller relationship, both parties
must trust one another in order to maintain the relationship. If
trust exists in a relationship, trust can reduce the cost of
negotiating an agreement and encourages the seller and the
buyer to behave in a fair manner (Bendapudi and Berry, 1997).
Empirical evidence to date suggests that trust is a significant
contributor of customer loyalty (e.g. Chaudhuri and
Holbrook, 2001; Harris and Goode, 2004; Gounaris, 2005;
Delgado-Ballester and Munuera-Aleman, 2001). Conceptually,
it has been argued that trust is an important contributor to
the kind of emotional customer commitment that leads to
long-term loyalty. Empirically, Chaudhuri and Holbrook
(2001) found that, in the context of consumer marketing,
trust plays an important role in the brand domain in that
(brand) trust is linked to brand performance through brand
loyalty. The view of brand trust as part of the brand domain
recognises that brand value can be created and developed
through the management of some aspects that go beyond
consumer’s satisfaction with the functional performance of
the products and its attributes (Aaker, 1996). Blackston
(1995) also suggests that trust can offer an appropriate
schema to conceptualise and measure a more qualitative
dimension of brand value. Delgado-Ballester and Munuera-
Aleman (2001), using customer commitment as an indicator
of customer loyalty, found empirical evidence that brand trust
has a direct effect on customer commitment and thus
indirectly can affect the level of price tolerance. Based on this
evidence, it is reasonable to conclude that trust leads to
customer loyalty and thus indirectly affects the outcomes of
loyalty behaviour (i.e. brand equity).
In addition, some authors have found an indirect linkage of
trust and customer loyalty. For example, Garbarino and
Johnson (1999) found a relationship between trust and loyalty
but the relationship was an indirect one defined through
satisfaction. Singh and Sirdeshmukh (2000) developed a
conceptual framework to understand the key mechanisms that
shape satisfaction in individual encounters and loyalty across
ongoing exchanges. The authors’ propositions included trust
as a key mediator and of pre-purchase and post purchase
processes, leading to long-term loyalty. They suggest that
trust is a crucial variable that determines outcomes at
different points in the process of exchanges and serves as the
glue that holds relationships together.
In this study, we focus on one particular type of trust, trust
in the service provider, deemed to be of particular importance
in the context of business-to-business marketing in
determining service loyalty. Thus, we offer the following set
of hypotheses:
H2. Trust in the service provider will be positively related
to purchase intentions.
H3. Trust in the service provider will be positively related
to attitudinal loyalty.
Perceived service quality as a predictor of service
loyalty
As a critical measure of organisational performance, service
quality remains at the forefront of both the marketing
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
177

literature generally and the service marketing literature
specifically (Jensen and Markland, 1996). Both practitioners
and academics are keen on accurately measuring perceived
quality in order to better understand its essential antecedents
and consequences and, ultimately, methods for improving
quality to achieve competitive advantage and build customer
loyalty (Palmer and Cole, 1995; Zahorik and Rust, 1992). A
number of models of service quality have emerged in the
literature. Two important service quality models are those of
Gro¨nroos (1984) and Parasuraman et al. (1985, 1988).
Several authors insist that the link between perceived
quality and various outcomes could be enhanced through
further empirical work. Zeithaml et al. (1996) contend that
the relationship between service quality and retention should
be documented because the financial implications for a given
company or even for a given service initiative can be
calibrated. Research further suggests that it is important to
determine the nature and strength of the relationship
between perceived service quality and loyalty for a firm
and/or different industry levels. Firm- and industry-level
assessment of the quality-service loyalty link provides useful
information to shareholders on the viability of future
performance. Some authors, for example Bloemer and
Brady and Robertson (2001), and Butcher et al. (2001),
Cronin et al. (2000), Fullerton (2005), have included service
quality in their model to explain loyalty or retention. These
authors strongly believe that service quality positively affects
important behavioural outcomes such as loyalty. Zahorik and
Rust (1992) argue that modelling perceived quality as an
influencing factor of customer loyalty will provide significant
diagnostic ability to any framework that includes customer
loyalty as a dependent construct. Previous research has
confirmed that the relationship between perceived quality
and customer loyalty exists and is positive (Anderson and
Sullivan, 1993; Cronin and Taylor, 1992; Harrison-Walker,
2001).
Nevertheless, since most of the empirical research has been
limited to the area of retail and consumer services, there is a
need to better understand the relationship of perceived quality
and service loyalty in other contexts, such as industrial
markets and business-to-business markets. This need is also
emphasised by Boulding et al. (1993), who states that research
efforts should be expanded to include industrial services and
even services within industries in order to test quality models
and propositions. Parasuraman (1998) also points out the
need for academic research – both conceptual and empirical
research on quality in business-to-business settings since most
of the quality literature is company-to-consumer rather than
company-to-company. Thus, we propose the following
hypotheses:
H4. Perceived service quality will be positively related to
purchase intentions.
H5. Perceived service quality will be positively related to
attitudinal loyalty.
Service loyalty as a driver of brand equity
Service loyalty has been a central construct in the marketing
literature and has received ample empirical attention.
Although a variety of different conceptualisations of service
loyalty are available, most definitions focus on the customer’s
willingness to visit a particular service provider again (Oliver,
1999). Future intentions (i.e. future purchase intentions) is
thus a frequently researched component of loyalty, with
loyalty often defined and/or measured as future intentions in
empirical research (e.g. Fornell, 1992; Rust and Zahorik,
1993; Zeithaml et al., 1996). Interest in the construct of
service loyalty is driven by the belief that the future behaviour
of customers is generally of more interest to service marketers
than current and/or past consumer behaviour.
As discussed earlier, loyalty is generally believed to be
related to profitability. One objective of this research is to
examine whether service loyalty also contributes to two
indicators of brand equity, customer’s share of wallet and
price premium, and thus can be regarded an important
contributor to market performance and profitability
outcomes.
As discussed, service loyalty reflects how likely a customer
will stay with a brand/service provider or will switch to
another. As loyalty increases, the threat of competitive actions
is reduced. Therefore, loyalty is generally believed to
contribute to major market performance outcomes. For
example, loyalty has been identified as one source of brand
equity that is demonstrably linked to future profits (Aaker,
1991). In other words, loyalty translates into future sales.
Buzzell et al. (1975) confirmed the link between customer
loyalty and profitability in that an increase in the level of
customer loyalty is directly related to an increase in market
share. Market share is shown to be associated with higher
rates of return on investment. In support of the notion that
loyalty leads to sales, it has also been noted that loyalty leads
to greater market share when the same brand is repeatedly
purchased by loyal consumers, irrespective of situational
constraints. He contends that it can be expected that brands
with high behavioural loyalty have higher market share
because of the higher level of repeat purchases by users.
Chaudhuri and Holbrook (2001) empirically demonstrated
that market share is a direct outcome of loyalty. These authors
found that purchase loyalty (i.e. willingness to repurchase)
leads to greater market share. Similarly, Verhoef (2003)
showed an increase of customer share of wallet in cases where
customers continue to remain with a firm. Thus, Buzzell et al.
(1975), Aaker (1991), Chaudhuri and Holbrook (2001) and
Verhoef (2003) contend that behavioral aspect of loyalty in
the form of repeat purchase and purchase intentions are a
major contributor to sales and market share.
The relationship between loyalty and market share received
further theoretical attention from the theory of “double
jeopardy” (Ehrenberg, 1995) which postulates that customer
loyalty is only a by-product of having a large market share.
This theory suggests that market share precedes loyalty
instead of loyalty preceding market share. According to
Ehrenberg (1995), the road to building market share is
through increasing penetration. This implies that it is not
necessary to build up loyalty to gain market share. Big
companies who have big market share will automatically have
a big loyal customer base. In support of this notion,
Ehrenberg (1995) provides an empirically based finding that
the bigger the brand, the more loyal its buyers will be. The
author is stating that market share has been observed to
influence purchasing behaviour in almost all categories
studied. Ehrenberg (1995) suggests that smaller brands
often attract less loyal customers among its customers than
larger brands. Other research suggests that it is unfair for less
popular items to suffer in two such ways. Hence, the name
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
178

“double jeopardy” of this theory. Consistent with this
phenomenon, Raj (1985) concluded from empirical analysis
that there is a positive relationship between a brand’s user-
share and its loyalty franchise. Raj’s (1985) results suggest
that brands with larger share of users have a proportionately
larger percentage of loyal buyers. Similarly, Rust and Zahorik
(1993) provided empirical evidence that the retention rate
(i.e. repeat purchasing) is the most important component of
market share as derived from three sources, retained market
share, market share gained from new customers and market
share obtained from new customers. Fader and Schmittlein
(1993), on the other hand, in investigating the advantage of
high share brands in loyalty, suggest that high brand share has
a significantly higher loyalty than lower share brands.
Despite some empirical support of Ehrenberg’s (1990, 1993,
1995) theory, ample of evidence suggest contrary evidence. For
example, Baldinger and Rubinson (1996) challenge the view
that loyalty is only a by-product of market share. Baldinger and
Rubinson (1996) argue that the primary determinant of a
brand’s health is relation to its ability to gain penetration rather
than develop a stable group of retained “real loyals”, especially
for market leaders or even strong secondary brands. Baldinger
and Rubinson (1996) conclude that large share brands exhibit
long-term share decline when attitudes are insufficient to
maintain loyalty and hence a company will gradually lose
market share. For 67 per cent of brands in their survey, the
authors found positive effects of both behavioural and
attitudinal loyalty in that brands with a positive behavioural
and attitudinal loyalty mix tend to increase market share, while
brands with negative behavioural and attitudinal loyalty mix
tend to decline.
Other research similarly suggests that double jeopardy does
not dictate the theory of brand loyalty. They argue that
attitudes play an important role in determining a brand’s
success. In similar vein, Farr and Hollis (1997) support the
notion that brand size does not dictate behavioural loyalty.
However, their research findings are somewhat inclusive in
that they do not find that attitudes towards the brand have a
clear relationship with long-term changes in market share.
In sum, there is conflicting theoretical support for a
proposed relationship between service loyalty and brand
equity, thus our research tries to address this gap in the
literature by providing further evidence of whether such link
exists in a business-to-business context. Indeed, Ehrenberg’s
(1995) work was mainly conducted in consumer markets (i.e.
frequently purchase products) and has mainly used
behavioural measurements such as retention (i.e. repeat
purchasing). We argue that it might be difficult to conclude
that loyalty is only a by-product of market share since he did
not take into account the customers’ psychological states and
attitude towards buying. Thus, we offer the following
hypothesis:
H6. Purchase intentions will be positively related to
customer share of wallet.
Service loyalty as a predictor of price premium
Service providers with the ability to charge extra for the
service or products that they provide will enjoy larger sales
revenue and profitability for the firm. There is a belief that
customer loyalty can bring about increased revenue for the
firm because loyal customers are willing to pay more for the
product and service of a service provider that they are
attached to. In other words, loyal customers are willing to pay
price premium for a service provider, giving the service
provider extra revenue.
Some authors have put forward the view that service loyalty
does not necessarily influence price premium. Some
practitioners and writers (e.g. Reinartz and Kumar, 2002)
have suggested that it is not always the case that service loyalty
contributes to a firm’s ability to charge a price premium for
their products and services. These authors argue that loyal
customers can be demanding and request discounts once they
get familiar with the product or service. Reinartz and Kumar
(2002) support the idea that loyalty does not necessarily bring
about a price premium. They argue that long-term corporate
customers consistently pay lower prices than newer
customers. They also found that consumers expect some
tangible benefits for their loyalty. These consumers can
develop a solid reference price and make a better judgment
about the value and therefore end up paying less. In general,
Reinartz and Kumar (2002) argue that regardless of whether
loyal customers are corporate customers or consumers, it is
hard to expect them to be less sensitive than occasional
customers.
On the other hand, there is both theoretical and empirical
support for the contrary view that suggests a link between
service loyalty and price premium. Drawing on Aaker’s
(1991) theory of brand equity, it is suggested that loyalty is
one major dimension of brand equity. Brand equity is believed
to have a significant role in generating price premium to the
brand owner. Given that a price premium is an outcome of
loyalty, a premium price may also reinforce the perceived
quality and may thus result in higher brand loyalty (Aaker,
1991).
The view that price premium is an outcome of service
loyalty is also supported by Keller (1993), who states that
“consumers with a strong, favourable attitude should be more
willing to pay premium prices for the brand”. De Chernatony
and McDonald (1998) further argue that firms with more
loyal customers have the ability to command higher prices.
They argue that customers are less price sensitive than
competitors’ customers. In addition, some practitioners, for
example, Reichheld and Sasser (1990), proposed that loyal
customers might be less sensitive to price increases than
transactional customers.
According to Aaker (1996), customer price tolerance
towards the brand/product/service can also be considered as
the firm’s price premium and can be measured in terms of
“the extra amount of money the individual will pay for the
brand in comparison to the other brands”. In line with this
view, Motameni and Shahrokhi (1998) state that price
premium can be a very effective measure of loyalty and
loyalty’s contribution. These authors suggest that price
premium should be determined by asking customers “how
much more would you be willing to pay for the brand?”
Evidence from Zeithaml et al. (1996) suggests that
consumers are willing to pay a price premium when there is
an additional bond between the customers and the service
provider. Tse (2001) provides empirical evidence based on his
research of catering services. His results demonstrate that
consumers are willing to pay an extra amount for a higher
level of service when they re-patronise. In another empirical
study, Chaudhuri and Holbrook (2001) found that the
attitudinal loyalty of customers can result in a higher relative
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
179

price paid compared to competitors. These results support
the conclusions of Aaker (1991), Keller (1993) and de
Chernatony and McDonald’s (1998) and provide evidence
that attitudinal loyal contributes to price premium rather than
behavioral loyalty.
This leads us to our final hypotheses:
H7a. Attitudinal loyalty will be positively related to price
premium 1.
H7b. Attitudinal loyalty will be positively related to price
premium 2.
Behavioural and attitudinal service loyalty as
differential predictors of brand equity outcomes
Based on the evidence discussed above, market share and
price premium are predicted outcomes of service loyalty, both
behavioural and attitudinal loyalty. However, evidence
suggests that behavioural loyalty contributes primarily to
customer share of wallet (as a key indicator of market share),
whereas attitudinal loyalty primarily contributes to price
premium. Thus, also we hypothesise positive relationships
between purchase intentions and customer share of wallet, we
do not expect purchase intentions to be a significant predictor
of price premium. Similarly, although we predict a significant
relationship between attitudinal loyalty and price premium,
we do not expect purchase intentions to be a predictor of
customer share of wallet.
Methodology
In order to test our conceptual model, we surveyed a sample
of Australian small to medium enterprises (SMEs) about their
courier delivery service providers, employing online and
paper-and-pencil surveys.
Participants
A total of 294 small to medium enterprises in Australia
participated in this study. Small to medium enterprises
comprise an economically important part in the Australian
economy, yet they have only received little research attention
in the marketing literature in the past. Given that many
different definitions and indexes are available to identify small
to medium enterprises, we used the Australian Bureau of
Statistics guideline for defining small to medium enterprises
based on employee numbers and other characteristics.
Procedure
The targeted respondents for this study were owners of
SMEs, financial controllers, and managers who are the
decision-makers in the selection and use of courier service
providers for their businesses. The courier delivery market in
Australia is very competitive, with a range of competing
service providers. Business customers typically utilise multiple
suppliers. Specifically, we chose the market of small to
medium enterprises (SMEs) for this study because of their
unique characteristics and buying behaviour that is different
from that of many large, corporate customers. The courier
service in Australia also includes parcels (packages) delivery,
and consists of services that engage in express door-to-door
delivery and pick up, transport of letters and mail-related
articles, generally in small to medium packages and parcels.
The service usually involves one or more methods of
transport. Major services and activities for business
customers usually involve customised delivery and pick-up,
intrastate, interstate and international services.
We chose two methods for data collection: mail survey and
online survey, and included incentives to ensure a successful
response rate for both the mail and online survey. First, based
on a database of small to medium Australian enterprises that
was provided by a private marketing database provider, 500
SMEs who had been contacted via telephone and agreed to
participate were sent a paper-and-pencil survey in the mail.
Out of these 500 SMEs, 50 returned a completed
questionnaire. Secondly, an invitation to participate in the
online survey was sent via e-mail to 4,000 Australian SMEs
included in the same database, resulting in an additional 254
usable questionnaires. Thus, the total sample size for this
study was 294 SMEs. As an incentive, participants received
small rewards in form of SMS credits in exchange for
participation in the study. In addition, an Australian charity
organisation authorised fundraising and provided its name
and logo as part of this study. Participating SMEs were
advised that for each completed questionnaire they returned,
the authors would make a small donation to the charity on
their behalf.
In order to develop the questionnaire items and pre-test the
questionnaire, interviews were conducted with nine industry
experts, all of which are SME customers and/or service
providers. Subsequently, a pilot survey was sent out to 50
SME owners and managers who had agreed to participate,
and ten of these surveys were returned. Based on the feedback
obtained during this stage, slight modifications were made to
the questionnaire as well as the research design.
Measures
The survey included self-report measures of habitual buying,
trust in the service provider, perceived service quality,
purchase intentions, attitudinal loyalty, customer share of
wallet, as well as two measures of price premium. All items
were measured on scales from 1 to 5, with higher numbers
indicating higher levels of the construct in question.
Habitual buying
Habitual buying is defined routine purchase behaviour that
occurs out of habit through low reconsideration and
deliberation. It reflects a repetitively performed, stable
behaviour that is not actively deliberated upon at the time
of the act (Beatty and Kahle, 1988). We measured habitual
buying with four items taken from Lichtenstein et al. (1990).
A sample item is “once we made a choice of which provider to
use, we are likely to use it without considering other
providers.” This measure showed an internal consistency
estimate of a ¼ 0:82.
Trust in service provider
Trust in the service provider was operationalised based on
McAllister (1995) and Geyskens et al. (1997), which
conceptualises trust comprising of affect based trust and
cognitive trust. Four items were taken from Roberts et al.
(2003), Macintosh and Lockshin (1997) and Geyskens et al.
(1997) to measure trust in the service provider. A sample item
is “our main provider can be trusted at all times.” The scale
demonstrated an internal consistency estimate of a ¼ 0:92.
Perceived service quality
We developed four items of overall service quality items using
the definitions of Zeithaml (1988, p. 3) as a basis: “the
B2B services: linking service loyalty and brand equity
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Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
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consumer’s judgment about a product and service’s overall
excellence or superiority”. Specifically, four items were drawn
from SERVQUAL (Parasuraman et al., 1988) and adopted in
order to fit the specific context of business-to-business
relationships. A sample item was “consistently performing the
service correctly.” This measure showed an internal
consistency estimate of a ¼ 0:87.
Purchase intentions
The operationalisation of purchase intentions for this research
was based on behavioural aspects of loyalty and was measured
with five items taken from Chaudhuri and Holbrook (2001),
Gremler and Gwinner (2000), and Sirdeshmukh et al. (2002).
A sample item includes “we will use this provider the next
time we need courier and parcels delivery services.” The scale
demonstrated an internal consistency estimate of a ¼ 0:94.
Attitudinal loyalty
Attitudinal loyalty is conceptualisated as feelings of attachment,
psychological bonds and regarding the service provider as a
first choice or preferable over other providers. Attitudinal
loyalty was measured with five items developed by Beatty et al.
1996), for example “we always consider this provider as our
first choice.” The scale demonstrated an internal consistency
estimate of a ¼ 0:93.
Customer share-of-wallet
This study follows Keiningham et al. (2003) and Verhoef’s
(2003) conceptualisation of customer share of wallet as the
percentage of the customers purchase from supplier X to the
total purchases of that category of product and services from
all suppliers.
Thus, customer share of wallet was defined as the
percentage of total customer’s purchases of products and
services from a particular service provider out of the
customer’s total purchase of courier and parcel delivery
products and services from all service providers. The method
of measuring share of wallet for this study is based on
Keiningham et al. (2003) and Verhoef (2003). Respondents
were asked the following single-item question: “what
percentage of your total spending on courier, and packages
delivery goes to your main courier providers?”
Price premium
Price premium was defined as willingness of customers to pay
extra for the service provider’s services and products. This
definition follows that of de Chernatory and McDonald’s
(1998) and Aaker (1991, 1996). The variable measures to
what extent business customers are likely to pay more and are
less likely to be price sensitive to the service provider
compared to its competitors. Price premium was measured in
two ways: price premium 1 was measured with three items. A
sample item includes “we would consider paying a bit more
for the service of the main provider.” The scale demonstrated
an internal consistency estimate of a ¼ 0:86. Price premium 2
was operationalised to measure the actual amount (as a
percentage) of price increase that business customers are
willing to pay. Thus, price premium 2 was a single-item
measure asking respondents to indicate the extra price that
they would pay on a scale ranging from 0 to 100 per cent.
Results
Means, standard deviations, and correlation coefficients of all
variables are shown in Table I. This study selected a two-step
approach (Anderson and Gerbing, 1988) for the
measurement model and structural model. First, to assess
convergent and discriminant validity of all measures, our
measurement model was subjected to confirmatory factor
analysis (CFA). An examination of the overall fit statistics for
the eight-factor model indicated that the model provided an
acceptable fit to the data: x2 ð298; n ¼ 294Þ ¼ 771:0,
p , 0.01; Comparative fit index ðCFIÞ ¼ 0:93; Incremental
fit index ðIFIÞ ¼ 0:93; Tucker-Lewis index ðTLIÞ ¼ 0:91;
RMSEA ¼ 0:072 (90 per cent confidence interval for
RMSEA ¼ 0:066 to 0.078); sRMR ¼ 0:05.
To further assess discriminant validity of the factors in the
measurement model, two types of analysis were conducted.
First, we followed procedures recommended by Bagozzi et al.
(1991) by conducting a series of CFAs to test whether for each
pair of factors in the measurement model, a two-factor model
is a significantly better fit than a one-factor model. Because a
one-factor model is nested within a two-factor model, the chi-
square difference test can be used for assessment. In all cases,
the two-factor model was a significantly better fit than the one-
factor model. Next, we followed recommendations by Fornell
and Larcker (1981) that suggests that, to demonstrate
discriminant validity, the average variance extracted for two
constructs should exceed the square of the correlation between
the constructs. Results provide further support for the
discriminant validity of the study constructs.
Next, we estimated the structural model and the
hypothesised relationships by subjecting the theoretical
model shown in Figure 1 to structural equation modelling.
The overall goodness of fit statistics shows that the structural
model fits the data well: x2 ð315; n ¼ 294Þ ¼ 910:82,
p , 0.01; Comparative fit index ðCFIÞ ¼ 0:91; Incremental
fit index ðIFIÞ ¼ 0:91; Tucker-Lewis index ðTLIÞ ¼ 0:90;
RMSEA ¼ 0:079 (90 per cent confidence interval for
RMSEA ¼ 0:073 to 0.085); sRMR ¼ 0:08. Table II shows
all the path coefficients for the structural equation modelling
analysis. The results support all but one of our hypotheses in
that all but the path between trust in service provider and
purchase intentions are significant. Specifically, the
hypothesised drivers of service loyalty are significant
predictors of both types of service loyalty, purchase
intentions and attitudinal loyalty, and explain 44 and 69 per
cent of the variance of purchase intentions and attitudinal
loyalty, respectively. Furthermore, purchase intentions are a
main driver of customer share of wallet, explaining 4 per cent
of variance of customer share of wallet. Attitudinal loyalty, on
the other hand, predicts both measures of price premium,
with 36 and 5 per cent of variance explained, respectively.
Overall, these results support our theoretical model and
provide evidence for the role of service loyalty as driver of
brand equity, assessed as customer share of wallet and price
premium, in the context of business-to-business.
In order to ensure that we identified the best fitting, most
parsimonious model, we followed suggestions by Hair et al.
(1995) in that we tested a competing model as a means of
evaluating and comparing the estimated model with a
plausible alternative model that may provide and equal or
even better fit to the data. We identified a model as the most
plausible alternative model in which we subjected our finding
that purchase intentions are mainly a driver of customer share
of wallet, whereas attitudinal loyalty is mainly a driver of price
premium, to critical examination. In this alternative model,
we included additional paths from purchase intentions to
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
181

price premium 1 and price premium 2 as well as a path from
attitudinal loyalty to customer share of wallet. Because this
alternative models is hierarchically nested, a chi-square
difference test can be employed to test which model best fits
the data. The fit of the alternative model did not significantly
improve the overall model fit (Dx2½3
¼ 3:00, p . 0.10) and
all additional path were non-significant: path coefficient for
purchase intentions ! price premium 1:0.02, ns; path
coefficient for purchase intentions ! price premium 2: 0.03,
ns; path coefficient for attitudinal loyalty ! customer share
of wallet: 20.13, p ¼ 0:06. These results provide support for
the more parsimonious, theoretical model and suggest that
purchase intentions and attitudinal loyalty are indeed
differential predictors of customer share of wallet and price
premium, respectively.
Discussion
The main aim of this paper was to examine the relationship
between service loyalty and willingness to pay a price
premium as one key indicator of brand equity. Specifically,
we investigated the chain of effects of antecedents of service
loyalty in predicting behavioural aspects (i.e. purchase
intentions) as well as attitudinal aspects of service loyalty
and their subsequent impact on customer share of wallet and
willingness to pay a price premium, as two key indicators of
brand equity perceptions. Results generally support our
theoretical model, with all but one of our hypothesised paths
confirmed by the structural equation modelling analysis, and
provide evidence for the importance of habitual buying, trust
in the service provider, and perceived service quality as
important predictors of behavioural and attitudinal loyalty.
These results suggest that service providers would benefit
from putting their efforts into building and enhancing their
relationships with customers in order to increase their trust in
the provider and to increase their perceptions of the quality of
serviced delivered in order for customers to make continuing
purchases or stay with the provider. Furthermore, results
provide evidence for the role of service loyalty plays in
forming brand equity perceptions, specifically customer share
of wallet and price premium. The most interesting finding of
the study suggests that the commonly held belief that service
quality leads to brand equity outcomes needs to be qualified.
It appears that different dimensions of customer loyalty affect
different dimensions of brand equity. Specifically, behavioural
loyalty is a predictor of customer share of wallet, as an
indicator of market performance, whereas attitudinal loyalty is
a predictor of price premium. Our findings thus suggest that
managers may benefit from taking into account different types
of loyalty in their determination of the extent to which their
most loyal customers will develop brand equity perceptions of
their services and products. Future research should further
examine these relationships in order to determine how
specifically behavioural and attitudinal loyalty differ on other
dimensions and outcomes.
The results of this study have several practical implications
for managers of service organisations, specifically in the
context of business-to-business. Most importantly,
perceptions of service quality and trust in the provider play
important roles in influencing both aspects of customer
loyalty in the business-to-business context. Thus, the results
of this study suggest that trust in a provider contributes to
attitudinal loyalty, demonstrating the importance of brand
management and the importance of portraying a good and
Table I Means, standard deviations, and intercorrelations of all study measures
M SD 1 2 3 4 5 6 7 8
1. Habitual buying 3.58 0.96 (0.82)
2. Trust in service provider 3.37 0.97 0.25 * (0.92)
3. Perceived service quality 4.75 1.22 0.24 * 0.74 * (0.87)
4. Purchase intentions 4.15 0.86 0.44 * 0.48 * 0.50 * (0.94)
5. Attitudinal loyalty 3.63 0.91 0.32 * 0.71 * 0.69 * 0.64 * (0.93)
6. Customer share of wallet 74.66 74.66 0.06 0.11 0.10 0.18 * 0.04 –
7. Price premium 1 2.92 2.92 0.37 * 0.56 * 0.57 * 0.36 * 0.51 * 20.03 (0.86)
8. Price premium 2 7.67 7.67 0.11 0.18 * 0.16 * 0.15 * 0.19 * 0.03 0.33 * –
Notes: n ¼ 294; Values along diagonal represent internal consistency estimates; *p , 0.01 (two-tailed)
Table II Path coefficients from structural equation modeling analysis
Hypothesis Impact of On Path coefficient Hypothesis supported?
H1 Habitual buying Purchase intentions 0.35 * Yes
H2 Trust in service provider Purchase intentions 20.01 No
H3 Trust in service provider Attitudinal loyalty 0.24 * Yes
H4 Perceived service quality Purchase intentions 0.47 * Yes
H5 Perceived service quality Attitudinal loyalty 0.62 * Yes
H6 Purchase intentions Customer share of wallet 0.19 * Yes
H7a Attitudinal loyalty Price premium 1 0.60 * Yes
H7b Attitudinal loyalty Price premium 2 0.21 * Yes
Note: *p , 0.01
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Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
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reliable image of an organisation as a whole. In addition,
customers engaging in repeat purchase behaviour out of habit
are likely to be more loyal in their actual behaviour, thus
increasing the likelihood of engaging in repeat buying with the
same service provider. Managers should set up systems and
processes that facilitate repurchase and reinforce purchase
habits. Disruptions to the purchase cycle through service
breakdowns should of course be avoided. Structural barriers
to purchasing and repurchase should be minimised where
feasible. The research findings also reinforce the importance
of the relationship between perceptions of service quality and
attitudinal and behavioural brand loyalty.
Furthermore, our findings shed further light on the
relationship between customer loyalty and brand equity.
Given the fact that not all loyal customers will necessarily
increase their share of wallet or willingness to pay a price
premium, results should aid marketers in identifying and
targeting groups of customers based on either their
behavioural or attitudinal loyalty, in order to be better able
to predict specific brand equity outcomes. Customer brand
loyalty deficiencies, either behavioural or attitudinal, should
be rectified according. By strategically building a loyal
customer base by focusing on specific service loyalty
dimensions, managers may be able to more actively mange
specific brand equity dimensions of their products and
services. In short, while this study reinforces the importance
of both components of loyalty, it also illustrates that both have
different outcomes attached to them.
SME service customers with high attitudinal loyalty are
more likely to pay a price premium. Therefore price discounts
offered to all customers could be counterproductive especially
where a service provider has a higher portion of its customers
with high attitudinal brand loyalty. A challenge for managers
is to develop ways to increase yield on attitudinally loyal
customers through creative price increase or at least find ways
to avoid decreasing yield through the offering price incentives
or providing substantial loyalty discounts.
This research has several limitations that need to be
addressed. First, the use of cross-sectional, self-report data
may have resulted in common method variance, although it is
unlikely that our finding of the differential strengths of the
predicted relationships between the two types of service
loyalty and brand equity perceptions are a result of common
method variance, given that the correlations between
constructs expected to be related were clearly larger than
those between constructs not expected to be related.
Secondly, we only focused on one service industry, courier
services, which may limit the generalisability of our results to
other industries and business-to-business settings.
Furthermore, we only included Australian SMEs in our
sample. Because SMEs differ from larger corporate buyers in
terms of size and other characteristics, we cannot generalise
their buying behaviour and attitudes for the whole population
of business-to-business buyers. That is, the loyalty of larger
business buyers may be different from the loyalty of SMEs.
Nevertheless, we believe that the insights derived from this
study are of value to both scholars and managers interested in
identifying the drivers of brand equity and the role that service
loyalty plays in the process.
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About the authors
Papassapa Rauyruen is currently working in an internationally
well-known finance company and also lectures part time at
Thammasat University, Thailand. She was a research fellow
at University of Technology, Sydney where she worked with
Professor Kenneth E. Miller on her research and lectured part
time in the business school. She received her PhD from
Thammasat University. Her professional experience also
includes market research, marketing and brand strategy
consultancy as well as business strategy and development in
oil and gas industry.
Kenneth E. Miller is Professor of Marketing at the
University of Technology, Sydney. He received his PhD in
Marketing at the Ohio State University. Professor Miller has
had articles published in journals such as the Journal of
Marketing Research, the Journal of Business Research, the
Journal of Retailing, the Journal of Consumer Research and the
Journal of Travel Research. His research interests include
marketing research, brand loyalty, market segmentation and
brand equity. Kenneth E. Miller is the corresponding author
and can be contacted at: ken.miller@uts.edu.au
Markus Groth is a senior lecturer in organisational
behaviour at the Australian Graduate School of
Management, which is part of the University of New South
Wales in Sydney, Australia. He received his PhD in
Management from the University of Arizona in 2001. His
research interests include service management, customer-
employee interactions, and the role of emotions in service
deliveries. His work has been published in journals such as
Journal of Marketing, Journal of Applied Psychology, Personnel
Psychology, Journal of Management, and Academy of
Management Executive.
Executive summary and implications for
managers and executives
This summary has been provided to allow managers and executives
a rapid appreciation of the content of the article. Those with a
particular interest in the topic covered may then read the article in
toto to take advantage of the more comprehensive description of the
research undertaken and its results to get the full benefit of the
material present.
Are loyal customers prepared to pay a premium for a brand
they respect and trust? Or do loyal customers expect to pay
less – using their purchasing power to get a discount? As
corporate clients expect to get some tangible benefits for their
loyalty, they may not always be willing to pay a premium. For
the provider, achieving and maintaining a high market share
and high price premium through attracting and retaining a
loyal customer base is particularly significant in a business-to-
business market.
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
185

Focusing on Australian SMEs and their relationship with
courier service providers, Papassapa Rauyruen et al. consider
these opposing views, examining the relationship between
service loyalty and willingness to pay a price premium as one
key indicator of brand equity. Specifically, they investigate the
chain of effects of antecedents of service loyalty in predicting
behavioural aspects (i.e. purchase intentions) and attitudinal
aspects of service loyalty and their subsequent impact on
customer share of wallet and willingness to pay a price
premium, as two important indicators of brand equity
perceptions.
They also address conflicting views about the proposed
relationship between service loyalty and brand equity,
asserting that it might be difficult to conclude that loyalty is
only a by-product of market share. It has been argued that it is
not necessary to build up loyalty to gain market share, and
that big companies who have big market share will
automatically have a big loyal customer base, i.e. the bigger
the brand the more loyal its buyers will be.
Rauyruen et al. discover that not all loyal customers will
necessarily increase their share of wallet or be willing to pay a
price premium. As SME service customers with high
attitudinal loyalty are more likely to pay a price premium,
price discounts offered to all customers could be
counterproductive especially where a service provider has a
higher portion of its customers with high attitudinal brand
loyalty. A challenge for managers is to develop ways to
increase yield on attitudinally loyal customers through
creative price increase or at least find ways to avoid
decreasing yield through offering price incentives or
providing substantial loyalty discounts.
By strategically building a loyal customer base by focusing
on specific service loyalty dimensions, managers may be able
to more actively manage specific brand equity dimensions of
their products and services. In short, while this study
reinforces the importance of both behavioural and
attitudinal loyalty, it also illustrates that both have different
outcomes attached to them.
Perhaps the most interesting finding of the study suggests
that the commonly held belief that service quality leads to
brand equity outcomes needs to be qualified. It appears that
different dimensions of customer loyalty affect different
dimensions of brand equity. Specifically, behavioural loyalty is
a predictor of customer share of wallet, as an indicator of
market performance, whereas attitudinal loyalty is a predictor
of price premium. Consequently, the findings suggest that
managers may benefit from taking into account different types
of loyalty in their determination of the extent to which their
most loyal customers will develop brand equity perceptions of
their services and products. Future research could further
examine these relationships in order to determine how
specifically behavioural and attitudinal loyalty differ on other
dimensions and outcomes.
Results support the importance of habitual buying, trust in
the service provider, and perceived service quality as
important predictors of behavioural and attitudinal loyalty,
suggesting that service providers would benefit from putting
their efforts into building and enhancing their relationships
with customers in order to increase their trust in the provider
and to increase their perceptions of the quality of services
delivered in order for customers to make continuing
purchases or stay with the provider.
Furthermore, results provide evidence for the role service
loyalty plays in forming brand equity perceptions, specifically
customer share of wallet and price premium.
Most importantly for managers of service organisations –
especially those in business-to-business situations –
perceptions of service quality and trust in the provider play
important roles in influencing both aspects of customer
loyalty in the business-to-business context. This suggests that
trust in a provider contributes to attitudinal loyalty,
demonstrating the importance of brand management and
the importance of portraying a good and reliable image of an
organisation as a whole. In addition, customers engaging in
repeat purchase behaviour out of habit are likely to be more
loyal in their actual behaviour, thus increasing the likelihood
of engaging in repeat buying with the same service provider.
Managers should set up systems and processes that
facilitate repurchase and reinforce purchase habits.
Disruptions to the purchase cycle through service
breakdowns should, of course, be avoided. Structural
barriers to purchasing and repurchase should be minimised
where feasible.
(A pre´cis of the article “B2B services: linking service loyalty and
brand equity”. Supplied by Marketing Consultants for Emerald.)
B2B services: linking service loyalty and brand equity
Papassapa Rauyruen, Kenneth E. Miller and Markus Groth
Journal of Services Marketing
Volume 23 · Number 3 · 2009 · 175–186
186
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