Asia Pacific Management Review 16(1) (2011) 31-50
www.apmr.management.ncku.edu.tw
Inertia: Spurious Loyalty or Action Loyalty?
Li-Wei Wu*
Department of International Business, Tunghai University, Taiwan
Received 3 March 2009; Received in revised form 17 June 2009; Accepted 16 September 2009
Abstract
Although much research on customer behaviors has demonstrated the positive role of
inertia in the action loyalty phase, previous studies on inertia still emphasize the spurious
dimension of customer loyalty. This study seeks to analyze how inertia varies with differing
levels of alternative attractiveness, relationship length, and commitment in affecting customer
loyalty. The results suggest that alternative attractiveness decreases the effect of inertia on
customer loyalty. On the other hand, although commitment and relationship length strengthen
the relationship between inertia and customer loyalty, only commitment provides resistance to
attractiveness from alternative offerings and generates action loyalty.
Keywords: Inertia, alternative attractiveness, commitment, customer loyalty
1. Introduction
Building customer loyalty has become a primary goal, as high customer loyalty translates
to retention of existing customers (Zeithaml et al., 1996). It is more cost and revenue effective
to retain current customers than attract new ones (Reichheld and Sasser, 1990). The most
commonly studied antecedents of customer loyalty include satisfaction, trust, commitment,
and switching barriers (Jones et al., 2000; Lee et al., 2001; Morgan and Hunt, 1994; Ping,
1993; Sharma and Patterson, 2000). Although many studies demonstrate the importance of
inertia (Colgate and Lang, 2001; Rust et al., 2004), relatively little research on customer
loyalty has considered it (White and Yanamandram, 2004).
Based on repeated patronage and relative attitude, Dick and Basu (1994) proposed four
types of customer loyalty: Loyalty, spurious loyalty, latent loyalty, and no loyalty. Inertia is a
primary component of spurious loyalty (Dick and Basu, 1994). Obviously, much of inertia
research about customer loyalty still emphasizes such spurious dimension of loyalty
(Gounaris and Stathakopoulos, 2004; Huang and Yu, 1999). In this tradition, many studies
focus on the instability in the relationship between inertia and customer loyalty (Gupta et al.,
1996; Kim et al., 2008; Ranaweera and Neely, 2003). On the other hand, Oliver (1999)
conceptualized the four-stage model of loyalty, which is comprised of sequential phases in the
development of customer loyalty, namely: Cognitive-affective-conative-action. Specifically,
in the action loyalty phase, customers possess not only a stable disposition but also an inertial
repurchasing pattern, because action inertia develops and facilitates loyalty behaviors
(Evanschitzky and Wunderlich, 2006; Oliver, 1999).
Basically, if the service providers are similar in terms of their offerings and lack any
differentiation of alternatives, customer loyalty is therefore more related to inertia than
positive attitude (Kahn and Schmittlein, 1992; Vogel et al., 2008). In addition, relationship
*
Corresponding author. Email: [email protected]
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L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
length and commitment may intuitively seem to be closely associated, and in the same way
strengthen such inertial repurchasing behaviors. However, the market is not a static entity, and
thus there is a need for dynamic models of customer relationships. Therefore, this study
addresses the following two questions: “What makes inert customers loyal even in the
presence of high alternative attractiveness?” and “Is commitment or relationship length
successful in translating spurious loyalty to action loyalty in the presence of high alternative
attractiveness”? Therefore, this study specifically shows how alternative attractiveness,
relationship length, and commitment moderate the effect of inertia on customer loyalty.
Furthermore, this study also considers how the influences of commitment and relationship
length on the inertia-loyalty relationship will change as alternative attractiveness increases.
As noted previously, perceptions of inertia still remain divided, and the relationships
among inertia, spurious loyalty, and action loyalty have not been satisfactorily explained. In
particular, spurious and action loyalty have the same forms of inertial repurchasing behaviors.
As a result, it is more challenging for a service provider to distinguish spurious loyalty and
action loyalty. A unique contribution of this study is to analyze and elucidate these seemingly
indistinguishable relationships, and thus help to differentiate action loyalty from spurious
loyalty.
2. Literature review
Based on the literature review, this study develops a framework linking inertia, alternative
attractiveness, relationship length, and commitment to customer loyalty (see Figure 1). This
framework has three main features. First, it examines the main effects of inertia, alternative
attractiveness, relationship length, and commitment on customer loyalty. Second, it
investigates three two-way interaction effects (inertia * alternative attractiveness, inertia *
relationship length, and inertia * commitment) on customer loyalty. Third, it analyzes two
three-way interaction effects (inertia * relationship length * alternative attractiveness and
inertia * commitment * alternative attractiveness) on customer loyalty.
Figure 1. Conceptual framework.
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2.1 Customer loyalty
Customer loyalty appears to consist of both behavioral and attitudinal dimensions (Jacoby
and Chestnut, 1978). The behavioral dimension of customer loyalty has been interpreted as a
form of repeat purchasing behaviors directed towards a particular product or service (Jacoby
and Chestnut, 1978). The attitudinal dimension of customer loyalty includes a degree of
positive attitude in terms of some unique value associated with a particular product or service
(Jacoby and Chestnut, 1978). Dick and Basu (1994) suggested that customer loyalty may be
an outcome of both favorable attitude and repeat patronage. Spurious loyalty exists when
customers show behavioral but not attitudinal loyalty (Dick and Basu, 1994). Numerous
studies have argued for the superiority of the attitudinal loyalty, because it ultimately explains
why some customers are not easily influenced by alternative attractiveness (Bloemer and
Kasper, 1995; Dick and Basu, 1994).
2.2 Main effects
2.2.1 Inertia
Inertia is described as a consistent pattern of repurchasing the same brand almost every
time a customer shops, where a brand is bought out of habit merely because less effort is
required (Solomon, 2004). In this sense, inertia is defined as a condition of the repurchasing
behaviors being undertaken passively and without much thought (White and Yanamandram,
2004). The underlying reason is that inertia occurs on the basis of situational cues and reflects
a non-conscious process (Huang and Yu, 1999). Meanwhile, inertia is also characterized as a
habitual attachment that is to a large extent unemotional, indifferent, and convenience driven
(Gounaris and Stathakopoulos, 2004; Lee and Cunningham, 2001; White and Yanamandram,
2004). Moreover, inertia reflects some consequent behaviors. For example, Chintagunta (1998)
assumed that a given customer is either a variety seeker or a variety avoider, and defined an
inert customer as the latter. Generally speaking, inert customers are typified as lazy, inactive,
or passive (Beckett, 2000; Bozzo, 2002). Thus, inertia is described as the absence of goaldirected behaviors (Zeelenberg and Pieters, 2004). Furthermore, inert customers are seen to
avoid making new purchasing decisions (White and Yanamandram, 2004), avoid learning
new service routines and practices, and avoid making price comparisons among alternatives
(Pitta et al., 2006). In other words, inert customers prefer the status quo (Ye, 2005).
Despite the perceived negative aspects of inertia, Oliver (1999) argued that action loyalty
is accompanied by an additional desire to overcome obstacles that might prevent action. If
this engagement is repeated, action inertia develops. Thus, action inertia is defined as the
facilitator of repurchasing behaviors (Oliver, 1999). Once customers experience action inertia,
they have habitual and routine repurchasing behaviors. Corstjens and Lal (2000) explained
that action inertia is due to the psychological commitment to prior experiences and customers’
desire to minimize their cost of thinking. It helps customers maintain loyalty by simplifying
the decision-making process and saving the cost of making decisions (Vogel et al., 2008). In
other words, customers in the action loyalty phase experience action inertia and have the
desire to maintain the highest level of customer loyalty.
Drawing on these conceptualizations, there are some significant differences between
spurious and action inertia customers who are both exhibiting loyal behaviors. Spurious
inertia is due to passive service patronage, and exists without true loyalty (Ganesh et al., 2000;
Huang and Yu, 1999). This non-conscious form of inertia is distinguished from action inertia
by the degree of engagement and commitment involved in the relationship. In sum, it has
been argued that customer loyalty may also be the result of inertia (Anderson and Srinivasan,
2003; Beckett et al., 2000; Colgate and Lang, 2001; Roy et al., 1996; Sheth and Parvatiyar,
1995; Yanamandram and White, 2006). Therefore, it is hypothesized that:
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H1: Inertia has a positive effect on customer loyalty.
2.2.2 Alternative attractiveness
Alternative attractiveness is defined as a customer’s estimate of the likely satisfaction
available in an alternative relationship (Ping, 1993). Alternative attractiveness can be
characterized by four dimensions, as follows: The number of available alternatives, the degree
of differences among alternatives, the degree of difficulty in understanding various
alternatives, and the degree of difficulty in comparing the alternatives (Anderson and Narus,
1984). A lack of attractive alternatives has been suggested to be favorable to developing
customer loyalty (Jones et al., 2000; Ping, 1993). In other words, if customers are either
unaware of alternatives or simply do not perceive them as any more attractive than their
current service provider, then they are likely to stay in the current relationship (Bendapudi
and Berry, 1997; Jones et al., 2000; Ping, 1993; Ranaweera and Prabhu, 2003; Sharma and
Patterson, 2000). Conversely, customers may decide to terminate the current relationship and
switch to a new service provider if they perceive the alternatives to be more attractive
(Liljander and Roos, 2002). Thus, it is hypothesized that:
H2: Alternative attractiveness has a negative effect on customer loyalty.
2.2.3 Relationship length
Relationship length is defined as the duration from the starting date that customers have
developed a relationship with their service provider, usually measured in years (Bolton, 1998).
The effects of relationship length on trust, commitment, and relationship performance have
been examined in a number of studies (Anderson and Weitz, 1992; Doney and Cannon, 1997;
Ganesan, 1994). Basically, relationship length facilitates the customers’ ability to predict the
service provider’s future behaviors (Doney and Cannon, 1997). In other words, long-term
customers get to know the service provider on a personal level, and have less anxiety about
service performance. Consequently, a long-term relationship may foster higher levels of trust,
thus leading to a lock-in effect. Gwinner et al. (1998) suggested that a long-term relationship
leads to additional benefits for customers, such as increased confidence in the product, social
engagement, and improved opportunities for customization. Therefore, as Ganesan (1994)
noted, relationship length is likely to affect the customers’ expectations that the relationship
will continue. In addition, Dwyer et al. (1987) suggested that a relationship develops over
time from an awareness phase to a commitment phase, and ultimately to a higher stage of
customer loyalty. In other words, a long-term relationship is associated with positive
outcomes (Verhoef, 2003). On the other hand, relationship length also leads to the
accumulation of switching barriers as perceived by customers, which in turn can affect loyalty
(Jones et al., 2002). Furthermore, if there is an ongoing relationship, loyalty increases profits
over time (Reinartz and Kumar, 2000).
In the retail banking market, significant relationship length between banks and customers
is a common feature (Beerli et al., 2004). For example, a relationship might begin with a
savings account opened in childhood, extend to a checking and credit account, and develop to
loans and other financial instruments over time (Bell et al., 2005). Similarly, Sheth and
Parvatiyar (1995) found that relationship length may inhibit customer switching in retail
banking. Therefore, it is hypothesized that:
H3: Relationship length has a positive effect on customer loyalty.
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2.2.4 Commitment
The definition of commitment is an enduring desire to maintain a valued relationship
(Moorman et al., 1992). Along the same lines, Morgan and Hunt (1994) defined commitment
as an exchange party's belief that a relationship is important enough to warrant maximum
efforts at maintaining it. Commitment has both affective and calculative components in the
marketing literature (Bansal et al., 2004; Gundlach et al., 1995). Affective commitment is
defined as a psychological attachment to a service provider (Gundlach et al., 1995), while
calculative commitment emphasizes switching costs, or the difficulty in replacing a
relationship (Gundlach et al., 1995). Calculative commitment was not tested in this study
because the emphasis of this work is on whether customers want to remain with the service
provider rather than whether they need to do so. Furthermore, Evanschitzky et al. (2006)
found that calculative commitment is a less enduring source of loyalty compared with
affective commitment. Consistent with Morgan and Hunt (1994), commitment is
operationalized as affective commitment.
Oliver (1999) defined customer loyalty as “a deeply held commitment to repurchase a
preferred product consistently in the future, despite situational influences and marketing
efforts having the potential to cause switching behaviour”. Commitment is the highest level of
customer loyalty (Dwyer et al., 1987). Beatty et al. (1988) stated that commitment and loyalty
are related, but, by definition, they are separate and distinct constructs, with commitment
leading to customer loyalty. Commitment and customer loyalty are distinguished in that
commitment measures a psychological attachment, while customer loyalty seeks likely future
patronage of a particular service provider. Similarly, a substantial body of research has
demonstrated that commitment has a positive effect on various loyalty dimensions, including
repurchasing intention, customer retention, word-of-mouth, share of wallet, and expansion
and enhancement of the relationship (Bendapudi and Berry, 1997; Brown et al., 2005;
Garbarino and Johnson, 1999; Gundlach et al., 1995; Morgan and Hunt, 1994; Sheth and
Parvatiyar, 1995; Verhoef et al., 2002). Thus, it is hypothesized that:
H4: Commitment has a positive effect on customer loyalty.
2.3 Two-way moderating effects
2.3.1 The moderating effect of alternative attractiveness
The moderating effect of alternative attractiveness on customer loyalty has been
confirmed in earlier literature (Jones et al., 2000; Sharma and Patterson, 2000). Specifically,
this study bases the expectation for the moderating effect of alternative attractiveness between
inertia and customer loyalty on Ranaweera and Neely’s (2003) proposition that the effect of
inertia on customer retention could be determined by the competitive structure of the industry.
The underlying reason can be explained by Newton's law of inertia, which states that an
object persists its state of rest or of uniform motion as long as it is not acted upon by an
external force. In other words, the assumption of the fact that inert customers are lazy,
inactive, and passive is based on little or none alternative attractiveness existing along
customers’ direction of repurchasing. Consequently, in a highly competitive marketplace,
customers choose alternative brands in spite of past habitual pattern because spurious loyalty
customers are more prone to switching (Bloemer and Kasper, 1995; Dick and Basu, 1994).
Similarly, Beckett et al. (2000) indicated that increased competition erodes inertia. In
addition, habitual customers display only behavioral loyalty, and are very likely to switch
service provider if their routine purchasing pattern is disrupted (Knox, 1997). Due to the fact
that inertia is highly volatile and susceptible to alternative attractiveness (Gupta et al., 1996;
Huang and Yu, 1999), the relationship between inertia and customer loyalty is easily
terminated by alternative attractiveness breaking customers’ inertial repurchasing patterns
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(Gounaris and Stathakopoulos, 2004; Huang and Yu, 1999; Yanamandram and White, 2006).
In other words, alternatives with a better price, more convenient location, and a fuller range of
services, among other factors, can easily change customers’ repurchasing behaviors based on
inertia (Wathne et al., 2001). In addition, Ansari and Mela (2003) found that purchasing on
the Internet lessens inertia in customer loyalty, because of the ready availability of alternative
sources and lower switching costs found online. As such, under the condition of high
alternative attractiveness, even inert customers are induced to switch. In contrast, if the
attractiveness of alternatives is relatively low, inertia can be stably transformed into customer
loyalty (Egan, 2000). Thus, it is hypothesized that:
H5: Inertia has a weaker positive effect on customer loyalty when alternative
attractiveness is high than when alternative attractiveness is low.
2.3.2 The moderating effect of relationship length
Verhoef et al. (2002) found that relationship length moderates the relationship between
relational constructs and the number of service purchases. Coulter and Coulter (2002) and
Gounaris and Venetis (2002) also referred to relationship length as the moderator of the
relationship between service quality and trust. The findings of these studies suggest that as
relationship length increases, customers become more familiar and experienced in interacting
with the service provider and their procedures. With increased interactions and learning
processes, customers have greater confidence in their evaluations and are more likely to use
past experience or inertia to evaluate service performance (Richins and Bloch, 1986). In
addition, although inertial behaviors are unstable and unpredictable (Kim et al., 2008), longer
relationships facilitate the customer's ability to predict the service provider’s intention and
provide assurance that the provider's future behaviors will reflect its past behaviors (Doney
and Cannon, 1997). Therefore, relationship length might indicate a level of customer inertia
that would be associated with greater loyalty (Colgate and Lang, 2001). As such, relationship
length can enhance the effect of inertia on customer loyalty. Therefore, it is hypothesized that:
H6: Inertia will have a stronger positive effect on customer loyalty when relationship
length is high than when relationship length is low.
2.3.3 The moderating effect of commitment
In most studies focusing on spurious loyalty, inertia involves little emotional involvement,
little personal investment, and little commitment (Anderson and Srinivasan, 2003; Campbell,
1997; Gounaris and Stathakopoulos, 2004; Huang and Yu, 1999; O’loughlin and Szmigin,
2007; White and Yanamandram, 2004). Spurious loyalty reflects repurchasing behaviors
undertaken passively and without much thought, rather than a commitment to the service
provider. Indeed, the fact that inert customers are sensitive to attempts by alternatives to
attract them may result from lower commitment, which causes the variability of the
relationship between inertia and customer loyalty. In fact, commitment represents the
continued stability of a relationship (Anderson and Weitz, 1992). In addition, customers’
levels of commitment to the service provider would sustain inertial repurchasing, and once
customers reach action inertia, variety-seeking behaviors relating to alternatives are
diminished (McMullan and Gilmore, 2003). In sum, action loyalty is commitment to the
action of repurchasing on an ongoing basis (Oliver, 1999). Thus, it is hypothesized that:
H7: Inertia has a stronger positive effect on customer loyalty when commitment is high
than when commitment is low.
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2.4 Three-way moderating effects
The preceding discussion has separately considered the moderating effects of alternative
attractiveness, relationship length, and commitment on customer loyalty. It is expected that
there is also the potential for two three-way moderating effects between these constructs. This
possibility arises from the fact that customers at any one time may have different
combinations of relationship length, commitment, and alternative attractiveness. The
inclusion of alternative attractiveness for the three-way moderating effects not only provides
useful information to understand the difference between relationship length and commitment,
but also to differentiate action loyalty from spurious loyalty. Most importantly, the three-way
moderating effects provide a better understanding of the temporal stability of inertia. Under
the condition of low alternative attractiveness, the inclusion of relationship length allows for
stability with regard to spurious loyalty. Under the condition of high alternative attractiveness,
this temporal stability of inertia can be easily undermined by alternative attractiveness,
because the service provider is not closely tied to those customers' belief systems (Knox,
1997). Consequently, commitment alone is what provides the strong foundation for action
loyalty. Therefore, this study considers a higher resistance to alternative attractiveness as a
distinguisher of action loyalty from spurious loyalty, and investigates whether action loyalty
can be achieved by commitment rather than by relationship length. Where relationship length
fails to predict action loyalty, commitment may succeed. In the following section, the possible
thee-way moderating effects will be discussed in more detail.
2.4.1 The moderating effects of relationship length and alternative attractiveness
Customer loyalty is basically a construct that has both attitudinal and behavioral elements,
whereas relationship length is viewed as a behavioral construct (Wangenheim, 2003). As
Reinartz and Kumar (2000) argued, relationship length cannot drive the lifetime value of a
customer. Similarly, relationship length has no effect on customer share development
(Verhoef, 2003). Thus, there may be a large number of long-term customers that are not
necessarily attitudinally loyal (Wangenheim, 2003). In addition, relationship length is not
always the same as a long-lasting relationship, which implies a certain degree of commitment
between customers and service providers. Without commitment, even inert customers with
long-term relationships can be easily attracted by alternative attractiveness. The underlying
reason is that long-term customers sometimes may remain in a relationship because it is hard
for them to leave, perhaps due to switching barriers, but they will still look to get out of the
relationship when given an opportunity (Fullerton, 2005). In addition, as customers gain more
knowledge about the particular service industry over time, it increases the opportunities for
them to compare offerings on the basis of alternatives. Therefore, relationship length has a
much more limited role to play in strengthening the stability of inertia under the condition of
high alternative attractiveness. In other words, with a lack of alternative attractiveness, the
positive moderating relationship, which was addressed in H6, will remain in the same
direction and strengthen. However, the positive moderating effect of relationship length,
which was also addressed in H6, will weaken if alternative attractiveness increases. Therefore,
it is hypothesized that:
H8: The positive moderating effect of relationship length on the relationship between
inertia and customer loyalty will reduce as alternative attractiveness increases.
2.4.2 The moderating effects of commitment and alternative attractiveness
Oliver (1999) conceptualized the most intense phase of customer loyalty as action loyalty.
In the action loyalty phase, action inertia develops, and customers exhibit high levels of
commitment to the action of repurchasing. In such cases, committed customers are believed to
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be less motivated to search for alternatives and to possess a higher resistance to alternative
attractiveness (Bettencourt, 1997; Evanschitzky and Wunderlich, 2006; Oliver, 1999; Sheth
and Parvatiyar, 1995; Zeithaml et al., 1996), and this is because commitment represents
mutuality and the forsaking of other options (Gundlach et al., 1995). Furthermore, the essence
of commitment is stability, and it represents a willingness to make short-term sacrifices to
realize long-term benefits (Anderson and Weitz, 1992; Morgan and Hunt, 1994). For
customers with higher levels of commitment to a relationship, the long-term benefits that
customers receive from their current service provider are not easily provided and replaced by
the potential alternatives.
In contrast, Oliver (1999) conceptualized cognitive loyalty as a shallow type of loyalty. In
the cognitive loyalty phase, customers with low commitment are more likely to be driven by
cognitive beliefs which are directed at the costs and benefits of an offering, and not at the
service provider itself (Dick and Basu, 1994; Oliver, 1999). Therefore, customers are likely to
switch once they perceive alternative offerings as being superior with respect to the costbenefit ratio. High alternative attractiveness will not reduce the positive moderating effect of
commitment on the relationship between inertia and customer loyalty. Thus, the positive
moderating relationship, which was addressed in Hypothesis 7, remains unchangeable
although alternative attractiveness increases. Thus, it is hypothesized that:
H9: The positive moderating effect of commitment on the relationship between inertia
and customer loyalty will not reduce as alternative attractiveness increases.
2.5 Control variables
Although this study focuses on inertia, alternative attractiveness, relationship length, and
commitment with regard to customer loyalty, previous studies suggest that demographic
variables (age, gender, and income) (Homburg and Giering, 2001) and the total number of
products purchased from the existing service provider (Verhoef et al., 2001) also affect
customer loyalty, and these represent significant alternative explanations for the development
of loyalty.
3. Methodology
3.1 Data collection and sampling
The retail banking industry was chosen as the point of analysis in this study for two
reasons. First, the retail banking market has been characterized by strong customer inertia
(Colgate and Lang, 2001; Garland, 2002). Second, given a wide variety of alternatives among
financial services in Taiwan, it is easy for customers to switch banks. Therefore, retail
banking is an ideal industry with which to investigate the effects of inertia, alternative
attractiveness, relationship length, and commitment on customer loyalty.
This study used a quota sampling method, based on the target banks’ number of branches
in Taiwan. A total of 700 self-reported surveys were distributed by banking salespeople at
service counters to individual customers. To overcome the difficulty posed by respondents'
having multiple banks, the respondents were asked to report their major bank. In this study,
major bank was defined as a customer's sole bank or that bank where most of their banking
business was done. If a customer's major bank was not one of the target banks, then the
survey process was discontinued. Furthermore, to increase the response rate, salespeople and
customers were each given financial incentives and gifts to participate in this study. The
surveys were conducted in the three largest cities in Taiwan, namely Taipei, Taichung, and
Kaohsiung. Respondents from large, medium, and small-sized; local and foreign; financial
holding company and non-financial holding company based banks were all represented in the
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sample. Therefore, the sample characteristics appear to be representative of retail banking
customers in Taiwan.
A total of 514 responses were returned, which represented a 73.4% response rate. After
excluding 55 incomplete responses, the final sample size was 459. The details of the
respondents are as follows: gender (male, 43.4%; female, 56.6%), age (less than or equal to
30 years of age, 35.6%; 31-40 years of age, 37.7%; 41-50 years of age, 17.3%; greater than or
equal to 51 years of age, 9.40%), annual income (less than or equal to US $10,000, 16.6%;
US $10,001-US $17,000, 38.1%; US $17,001-US $27,000, 28.7%; greater than or equal to
US$27,001, 16.6%), the number of banking products purchased (less than or equal to two
products, 54.9%; three or four products, 32.6%; greater than or equal to five products, 12.5%),
and relationship length (less than or equal to five years, 57.8%; six to ten years, 28.0%; eleven
to twenty years, 12.6%; greater than or equal to twenty-one years, 1.6%).
3.2 Measures
All measures used in this study were adopted from existing scales. All constructs used a
five-point Likert-type scale with the descriptive equivalents ranging from Strongly Disagree
(a) to Strongly Agree (e). For the measurement of customer loyalty, five items were adopted
from Zeithaml et al. (1996), while the measure of commitment included five items taken from
Morgan and Hunt (1994). Three items to measure alternative attractiveness were adopted
from Jones et al. (2000) and Ping (1993) and three items to measure inertia came from
Ranaweera and Neely (2003) and Anderson and Srinivasan (2003). Relationship length was
measured by asking respondents how long (in years) they have maintained relationships with
their major banks. In this study, one banking manager and two researchers reviewed the initial
items and the definitions of all the constructs. According to their suggestions, several items
were adapted to suit the banking environment. The questionnaires were pretested with 74
EMBA students, and one item was dropped due to low Cronbach’s alpha, item-to-total
correlations, and loading of exploratory factor analysis.
3.3 Confirmatory factor analysis
Finally, confirmatory factor analysis (CFA) was performed to test the measurement model
using LISREL 8.52. In the CFA, this study utilized all independent, dependent, and moderator
variables, with the 16 individual measurement items serving as construct indicators (see
Appendix A). The CFA revealed a relative fit to the data (χ2(98) = 485.80 (p < 0.05), GFI =
0.87, CFI = 0.94, NFI = 0.93, NNFI = 0.93, PNFI = 0.76, RMR = 0.04), thus confirming the
efficacy of our measurement model. In assessing reliability, composite reliabilities and the
Cronbach’s alpha for each construct were also computed. The Cronbach’s alpha of inertia,
alternative attractiveness, commitment, and customer loyalty were all greater than 0.80,
supporting the reliability of the measurement. In addition, all composite reliability estimates
were greater than 0.80, and all average variance extracted (AVE) estimates were greater than
the recommended value of 0.50 (Fornell and Larcker, 1981).
As evidence of convergent validity, all the items had significant loadings on their
respective constructs (Anderson and Gerbing, 1988). Discriminant validity was assessed for
two constructs by constraining the estimated correlation parameter between two constructs to
a value of 1.0, and then performing a chi-square difference test on the values for the
constrained and unconstrained models (Anderson and Gerbing, 1988). A significantly lower
χ2 value for the unconstrained model was found, thus indicating that discriminant validity was
achieved. Table 1 shows the means, standard deviations, and correlations matrix for the
constructs. Appendix A summarizes the results of the item description, factor loading, AVE,
and reliability test.
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Table 1. Means, standard deviations, and correlations.
Variables
1. Inertia
2. Alternative attractiveness
3. Relationship length
4. Commitment
5. Customer loyalty
*p < 0.05
Mean
3.530
3.405
5.990
3.607
3.539
SD
0.727
0.889
4.920
0.677
0.656
1
1
0.112
0.169*
0.159*
0.151*
2
3
4
5
1
-0.114*
-0.138*
-0.253*
1
0.197*
0.336*
1
0.419*
1
Due to the self-reported nature of the data, there was a potential for common method
variance, and so the Harman one-factor test was conducted to determine the extent of this.
The unrotated factor analysis showed that the first factor accounted for only 33.42 percent of
the variance. Based on the results of the Harman's one-factor test, the common method
variance was not considered significant (Podsakoff et al., 2003).
4. Results
4.1 Hierarchical moderated regression
Four basic techniques are used to examine the moderating effect: (a) SEM multigroup
analysis, (b) SEM product terms analysis, (c) regression multigroup analysis, (d) hierarchical
moderated regression analysis. Hierarchical moderated regression analysis was used to test
the hypotheses for two primary reasons. First, the relatively straightforward predicted
relationships between dependent, independent, and moderator variables (Cohen et al., 2003).
Second, numerous two-way and three-ways moderating relationships were investigated in this
study, with Kenny and Judd (1984) recommending the avoidance of SEM in complicated
moderating tests.
All scales were averaged to form a composite. To examine individual moderating effects,
the data were mean-centered to avoid multicollinearity when multiplying the moderating
variables (alternative attractiveness, relationship length, and commitment) by inertia. The
variance inflation factor (VIF) was tested for collinearity among variables by calculating for
each of the regression coefficients, and these were well below the cutoff value of 10
recommended by Neter et al. (1990). The hypotheses were tested by estimating the following
equation using multiple regression analysis:
Yi = β0 + Σ βk-j Kji + β1Ini + β2 AAi + β3 RLi + β4Ci + β5(Ini * AAi) + β6(Ini * RLi) +
β7(Ini * Ci) + β8(Ini *RLi*AAi) + β9(Ini *Ci*AAi) + εi
where Y = customer loyalty; Kj = control variables (j = 1, 2,…,4); In = inertia; AA =
alternative attractiveness; RL = relationship length; C = commitment; ε = error term; i =
respondent.
In Model 1, only the control variables were entered. In Model 2, the main effect variables
were entered along with the control variables. Model 3 included the control variables, main
effect variables, and three two-way interaction terms. Model 4 included the control variables,
main effect variables, three two-way interaction terms, and two three-way interaction terms.
The explanatory power of Model 4 (R2= 0.369) was higher than that of either Model 1 (R2=
0.097), Model 2 (R2= 0.317), or Model 3 (R2= 0.351). First, the explanatory power of Model 2
was higher than that of Model 1 (ΔR2= 0.220, ΔF = 36.101, p < 0.05). Second, the inclusion
of three two-way interaction terms caused a significant improvement in the explanatory power
of Model 3 over Model 2 (ΔR2= 0.034, ΔF = 7.950, p < 0.05). Finally, the inclusion of two
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L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
three-way interaction terms explained a significant improvement in the explanatory power of
Model 4 over Model 3 (ΔR2= 0.018, ΔF = 6.133, p < 0.05). It could thus be concluded that
inertia, alternative attractiveness, relationship length, and commitment, three two-way
interaction terms, and two three-way interaction terms had significant effects on customer
loyalty. Model 4 shows the results of the hypotheses testing.
4.2 Hypotheses testing
One of the four control variables was found to be significantly related to customer loyalty.
Specifically, the number of products purchased (β = 0.071, p < 0.05) had a significant positive
effect on customer loyalty. Furthermore, the effects of inertia (β = 0.076, p < 0.05), alternative
attractiveness (β = -0.112, p < 0.05), relationship length (β = 0.015, p < 0.05) and
commitment (β = 0.307, p < 0.05) on customer loyalty were all significant. Inertia,
relationship length, and commitment had positive effects on customer loyalty, while
alternative attractiveness had a negative effect on it. Therefore, H1, H2, H3, and H4 were
supported.
Consistent with H5, the interaction effect of inertia and alternative attractiveness was
significant and negative (β = -0.076, p < 0.05). The negative sign of the coefficient indicates
that under conditions of high alternative attractiveness, the effect of inertia on customer
loyalty decreases. The interaction effect of inertia and relationship length was significant and
positive (β = 0.014, p < 0.05), as was the interaction effect of inertia and commitment (β =
0.037, p < 0.05). These two positive signs of the coefficient indicate that under conditions of
high relationship length and high commitment, the effect of inertia on customer loyalty
increases. Thus, H6 and H7 were supported.
Observing the three-way interaction terms, although the three-way interaction effect
between inertia, relationship length, and alternative attractiveness was not significant, the sign
of the coefficient was changed from positive (β = 0.014, p < 0.05) for the two-way interaction
effect (inertia * relationship length) to negative (β = -0.001, p > 0.05) for the three-way
interaction effect (inertia * relationship length * alternative attractiveness). Even though
consistent with our suggestion, H8 was not supported. On the other hand, the sign of the
three-way interaction effect between inertia, commitment, and alternative attractiveness still
remained positive and significant (β = 0.151, p < 0.05). This indicates that the positive
moderating effect of commitment on the relationship between inertia and customer loyalty
will not be influenced by rising alternative attractiveness. Thus, H9 was supported.
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L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
Table 2. Regression results.
Dependent variable:
Customer loyalty
Control variables:
Gender
Age
Income
The number of products
purchased
Main effects:
Inertia (In) (H1)
Alternative attractiveness
(AA) (H2)
Model 1
β
Model 2
t
-0.044
0.010*
0.060*
-0.737
3.244
2.246
0.088*
4.110
Relationship length
(RL) (H3)
Commitment (C) (H4)
Two-way interactions:
(In)×(AA) (H5)
(In)×(RL) (H6)
(In)×(C) (H7)
Three-way interactions:
(In)×(RL)×(AA) (H8)
Model 3
Model 4
β
t
β
t
β
t
-0.075
0.005
0.024
-1.416
1.829
1.014
-0.066
0.004
0.011
-1.279
1.446
0.457
-0.071
0.004
0.000
-1.371
1.505
0.015
0.073*
3.765
0.074*
3.886
0.071*
3.760
0.068
1.840
0.070
1.910
0.076*
2.071
-0.142*
-4.760
0.106*
-3.398
-0.112*
-3.564
0.020*
3.280
0.013*
2.048
0.015*
2.254
0.338*
8.415
0.322*
8.128
0.307*
7.788
-0.068
0.011
0.058*
-1.936
1.725
3.256
-0.076*
0.014*
0.037*
-2.005
2.101
2.012
-0.001
-0.328
0.151*
(In)×(C)×(AA) (H9)
2
R
2
0.097
0.317
0.220
36.101
△R
△F value
0.351
0.034
7.950
3.110
0.369
0.018
6.133
* p < 0.05
4.3 Additional analysis
The moderating effects in the hypotheses were additionally assessed by the regression
multigroup analysis (Arnold, 1982). The procedure adopted was to divide the total sample
into two subgroups on the basis of high/low alternative attractiveness. The sample size was n
= 280 for the high alternative attractiveness subgroup, and n = 179 for the low alternative
attractiveness subgroup. Referring to Table 3, inertia had a stronger effect on customer loyalty
under the condition of low alternative attractiveness (β = 0.176, p < 0.05) rather than high
alternative attractiveness (β = 0.004, p > 0.05). Interestingly, the interaction effect of inertia
and commitment was significant and positive under the condition of low alternative
attractiveness (β = 0.053, p < 0.05) and high alternative attractiveness (β = 0.036, p < 0.05).
However, the interaction effect of inertia and relationship length was significantly positive
under the condition of low alternative attractiveness (β = 0.029, p < 0.05). However, under the
condition high alternative attractiveness, the interaction effect of inertia and relationship was
not significant (β = 0.014, p > 0.05). Therefore, regression multigroup analysis was clearly to
observe how the effect of inertia on customer loyalty varies with differing levels of
commitment and relationship length that are likely to change due to customers’ alternative
attractiveness.
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L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
Table 3. Regression results.
Low
alternative attractiveness
Dependent
variable:
Customer
loyalty
Model 1
Model 2
High
alternative attractiveness
Model 3
Model 1
Model 2
Model 3
β
t
β
t
β
t
β
t
β
t
β
t
-0.006
0.008*
0.074*
-0.074
2.142
2.177
-0.040
0.002
0.048
-0.569
0.447
1.553
-0.036
0.002
0.029
-0.533
0.586
0.964
-0.089
0.010*
0.041
-1.063
2.274
1.071
-0.106
0.008*
-0.003
-1.421
1.994
-0.091
-0.085
0.007
-0.013
-1.161
1.774
-0.390
0.097*
3.356
0.057*
2.148
0.055*
2.152
0.117*
3.987
0.089*
3.288
0.083*
3.100
0.209*
4.502
0.176*
3.764
0.010
0.179
0.004
0.076
0.023*
2.878
0.023*
2.762
0.026*
3.016
0.021*
2.299
0.173*
3.039
0.178*
3.234
0.422*
7.787
0.393*
7.290
0.029*
0.053*
3.802
3.097
0.014
0.036*
1.373
2.879
Control
variables:
Gender
Age
Income
The number
of products
Main
effects:
Inertia (In)
Relationship
length (RL)
Commitment
(C)
Two-way
interactions:
(In) × (RL)
(In) × (C)
R2
2
ᇞR
0.147
△F value
0.364
0.217
19.439
0.417
0.053
7.685
0.108
0.310
0.202
26.452
*p < 0.05
5. Discussion
The results of this study have important contributions to the relationship and services
marketing literature. First, this study constitutes an important first step in understanding the
broadening role of inertia under the different conditions. Most importantly, this study adds to
the existing literature on inertia beyond its typical focus on limited to spurious loyalty and
manages to distinguish the role of inertia related to spurious loyalty and action loyalty.
Furthermore, it adds to a better understanding of the positive role of inertia in the action
loyalty phase. This study reveals that without commitment, loyalty based on inertia is
unstable and remains just spurious loyalty. Furthermore, the role of relationship length is
merely to strengthen and stabilize such spurious loyalty. In contrast, inertia in the action
loyalty phase must be sustained by strong commitment.
Second, the interaction effects of inertia, alternative attractiveness, relationship length,
and commitment on customer loyalty may help to explain inconsistent findings with regard to
inertia in previous studies. For example, Yanamandram and White (2006) found a positive
relationship between inertia and customer loyalty, while Ranaweera and Neely (2003) found
43
0.341
0.031
6.323
L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
no relationship between inertia and customer loyalty. A possible reason for these inconsistent
findings is that previous studies may have ignored the moderating roles of alternative
attractiveness, relationship length, and commitment concurrently. Just as Huang and Yu (1999)
noted, inertia is rather fragile and vulnerable to alternative attractiveness. Higher alternative
attractiveness not only has a direct negative effect on customer loyalty, but also decreases the
effect of inertia on such loyalty. High alternative attractiveness can provide a reasonable
explanation for the lack of a significant relationship between inertia and customer loyalty in
Ranaweera and Neely’s (2003) model.
On the basis of the empirical results, the stability of inertia results from not only
relationship length, but more especially, commitment. However, the stability of inertia from
relationship length will be reduced as alternative attractiveness increases. In contrast, the
stability of inertia from commitment will not be affected as alternative attractiveness increases.
The underlying reason is that a large number of long-term customers without commitment are
not necessarily attitudinally loyal (Wangenheim, 2003). Without commitment, alternative
attractiveness can easily break long-term customers’ inertial repurchasing behaviors and
encourage customers’ switching (Gupta et al., 1996; Huang and Yu, 1999; Liljander and Roos,
2002). Obviously, relationship length, while important, is less so than commitment in
solidifying inertia-customer loyalty relationship. In sum, relationship length is not very
successful in translating spurious loyalty to action loyalty. Instead, commitment should be of
primary concern in terms of solidifying the relationship between inertia and customer loyalty,
and it involves converting spurious loyalty to action loyalty.
Third, the moderating effects of alternative attractiveness and commitment specify the
contingent conditions under which inertia could be stable or unstable. Customer loyalty can
be described along a continuum from spurious to action loyalty on the basis of commitment
and alternative attractiveness. If the moderating effect of commitment is more powerful than
the moderating effect of alternative attractiveness, inertia exerts a stronger effect on customer
loyalty because commitment acts to generate action inertia. On the other hand, if commitment
is lacking, the moderating effect of alternative attractiveness is stronger than the moderating
effect of commitment. In such cases, inertia becomes unstable because alternative
attractiveness can easily break off customers’ inertial repurchasing behaviors and encourage
customers’ switching (Liljander and Roos, 2002; Pitta et al., 2006). In sum, inert customers
without commitment will easily terminate the relationship when alternative offerings appear
to provide superior value, and this characterizes Dick and Basu’s (1994) spurious loyalty.
However, the relationship between inertia and customer loyalty based on high levels of
commitment on the customers’ part is less sensitive to alternative offerings, and customers in
this case are most likely to maintain loyalty, and this characterizes Oliver’s (1999) action
loyalty.
6. Managerial implications
The results of this study have important implications in the field of relationship and
services marketing. As inertia, alternative attractiveness, relationship length, and commitment
are the main antecedents of customer loyalty, banking managers should take these into
account and develop appropriate actions. Understanding why inert customers stay will help
banking managers objectively analyze potential strategies and tactics to improve customer
loyalty. Especially, the behavioral aspects of action loyalty and spurious loyalty are the same.
Therefore, this study suggests that action loyalty, which is different spurious loyalty, is a
consequence of commitment. Merely spurious loyalty customers may exhibit loyal behaviors.
Conversely, action loyalty customers not only exhibit loyal behaviors, they are also
emotionally involved in a continuing relationship.
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L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
It is not surprising that there is a relatively high level of inertia among banking customers.
However, inert customers should not be perceived as being a homogeneous segmentation
(Howcroft et al., 2007). Some are passive, lazy, and indifferent. Some are old customers.
Others may result from commitment. For example, Howcroft et al. (2007) referred action
inertia customers as those who have high levels of confidence and satisfaction with their
financial provider. Action inertia bred by commitment develops as customers’ decision
making becomes more formalized, which further reduces their responsiveness to change
(Vogel et al., 2008). In general, past behaviors in the relationship might represent the inertia
effect (Rust et al., 2004). Thus, the identification of past behaviors may explain the reasons of
inertia and has particular implications for managing inertia.
Under the condition of low alternative attractiveness, inertia definitely deters customers
actively from searching for alternatives (Egan, 2000). Therefore, it is suggested that in terms
of strategy, banking managers should place special emphasis on differentiation from
alternative offerings to reduce perceived alternative attractiveness, as this may sustain the
relationship between inertia and customer loyalty. Such a relationship may be temporary if
banking managers cannot effectively defend the violation of alternative attractiveness,
specifically in the more mature areas of the banking industry, where alternatives constantly
offer more attractive offerings.
Under the condition of high alternative attractiveness, banking managers should realize
that inertia becomes unstable. Most importantly, although commitment and relationship
length may act as complements to inertia in strengthening customer loyalty, there is a need to
differentiate stability of inertia from relationship length or commitment. The findings
highlight for banking managers that relationship length may only strengthen spurious loyalty,
and may not be very successful in translating it to action loyalty. In other words, regardless of
relationship length, banking managers should continuously make sure that customers have
affective commitment. Thus, the development of commitment is a key objective for banking
managers. Real action loyalty can be achieved by fostering commitment. Inert customers
experiencing high levels of commitment to the bank are more likely to maintain action loyalty
than inert consumers who do not feel committed to it. The role of commitment is to aid in
transforming unstable inertia in the spurious loyalty phase into stable inertia in the action
loyalty phase. Therefore, banking managers may develop commitment through open
communication, shared values, satisfaction, trust, and identification to strengthen customer
loyalty (Garbarino and Johnson, 1999; Morgan and Hunt, 1994).
7. Research limitations and directions for future research
The most significant limitation of this study is the cross-sectional and self-reported data.
The use of such data may have led to overestimation of the considered relationships because
of common method variance. In addition, some of the managerial and research implications
would greatly benefit from a longitudinal investigation. Commitment and inertia may develop
over time (Reinartz and Kumar, 2000), and these effects are only likely to be observed with a
longitudinal research design. As a result, this study cannot draw strong conclusions regarding
the true dynamic effects.
Second, this study took place within a single-service setting and geographic area. As a
result, the findings of this study may not generalize to other service industries and other
countries. For the purpose of cross-validation, additional exploration of the relationships
needs to be extended beyond the sample and setting reported here. For example, in businessto-business relationships, as the specific assets are involved for both parties, inertia rapidly
develops. Inertia in such situations does show stability (Hertz, 2006). In contrast, with the
rapid development of Internet technology, Harris (2000) argued that online purchasing may
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L.-W. Wu / Asia Pacific Management Review 16(1) (2011) 31-50
be eroding inertia. In future work, this study should be replicated in other service industries,
Internet channels, and other countries.
Third, this study may have omitted some variables that could help explain inertia and
customer loyalty. More comprehensive models that take into account the antecedents of
inertia, such as convenience, variety-seeking, the loss of the personal relationship, and the
loss of advantages associated with previous loyalty (Bozzo, 2002; Lee and Cunningham, 2001;
Lee et al., 2001), could be developed. In addition, like inertia, switching cost reveals a close
relatedness to status quo. Whereas switching costs implicitly assumes a rational, explicit
decision to stay with the service providers, inertia diverges from this explicit decision and
instead occurs because customers engage in habitual buying behaviors (Wieringa and Verhoef,
2007). Accordingly, it is likely that those additional variables might help explain key
relationships further.
Fourth, As Oliver (1999) argued, action loyalty is accompanied by an additional desire to
overcome obstacles that might prevent action. In this study, action loyalty customers are
found to show a higher level of resistance to alternative attractiveness. However, does a much
greater violation, such as negative information, detach such inertial repurchasing behaviors?
Future studies can develop Ahluwalia et al. (2000) study to design an experiment to
empirically investigate whether action loyalty customers can tolerate negative information.
Finally, the measures of inertia did not perform as well as some of the other measures.
Based on CFA analysis, the loading of the third scale item was less than 0.7 (see the
Appendix). Future research should involve improved measures of inertia.
Acknowledgements
This author sincerely appreciates for the precious comments from the four anonymous
reviewers and the financial aid from the National Science Council (NSC 97-2410-H-029-001).
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