uyung-the mediating role of trust

The effects of soft and hard service attributeson loyalty: the mediating role of trust

Seigyoung Auh

Department of Management, Marketing Section, The University of Melbourne, Australia

AbstractPurpose – Drawing on social exchange and similarity attraction theories, the purpose of this paper is to explore the effect of soft attributes (e.g. socialand relational attributes) on hard attributes (e.g. core attribute performance) in a high contact service context, namely in the hair care serviceenvironment.Design/methodology/approach – This research extends the key mediating variable model (KMVM) of Morgan and Hunt by hypothesising that, whiletrust fully mediates the effect of soft attributes on loyalty, trust only partially mediates the effect of hard attributes on loyalty. Data were collected usingthe critical incident technique from 176 students.Findings – Supports the fully mediating role of trust for soft attributes and a partially mediating role of trust for hard attributes.Research limitations/implications – Future research should test the model in contexts that involve less employee-customer contact and interaction.Originality/value – The study underscores the practical importance of investing in non-core (soft attributes such as social and relational attributes that focuson social bonding) attributes in addition to core attributes (hard attributes such as performance excellence of key service delivered) in service marketing.

Keywords Social interaction, Customer loyalty, Trust

Paper type Research paper

An executive summary for managers and executive

readers can be found at the end of this article.

Introduction

Despite the relevance and significance of non-core (soft

attributes such as social and relational attributes) and core

attributes (hard attributes such as performance excellence of

key service delivered) in service marketing, little research has

been addressed to draw any definitive conclusions as to the

relationship between these two types of attributes (Driver and

Johnston, 2001). Moreover, little do we know how these two

different kinds of attributes differentially influence trust and

loyalty within a system of cause and effect framework. To this

end, the goal of this research is to fill the void in the services

marketing literature on the above two research questions. In

other words, does social bonding between employees and

customers affect customer’s perceptions of the core service

performance and what is the process by which these social

bonding attributes such as employee-customer interaction

quality and employee-customer characteristic similarity

influence customers’ loyalty towards the service provider? Is

the process by which these social and relational attributes

affect loyalty different from the way core service performance

affects loyalty? We hope to address these inquiries from the

present study.

In service marketing, service providers deliver not only hard

attributes but also soft attributes such as ambient atmosphere,

close relationships with customers through interaction quality,

and identification through creating and sharing greater

similarities between employees and customers. Service

managers expect and anticipate that these soft attributes,

let alone the hard attributes, will exert a positive effect in

retaining customers particularly in high contact and interaction

service contexts. For example, hair salons provide not only a

soothing and relaxing atmosphere to their customers but also

train their employees to identify with and share greater

similarities with their customers to continuously gain business.

The successful coffee franchise, Starbucks, continuously

innovates to deliver an outstanding coffee consumption

experience by providing a relaxing atmosphere whereby

customers can unwind and engage in a comfortable

conversation (Kachra and Crossan, 1997). They also go out

of the way to train their employees to obtain a confident level of

coffee knowledge to engage in a quality interaction and share

commonalities of the coffee consumption experience,

especially, with coffee savvy customers.Drawing from social exchange theory and similarity

attraction theory, this paper explores the effect of soft

attributes (e.g. social and relational attributes that focus on

social bonding) on hard attributes (e.g. core attribute

performance) in a high contact service context, namely in

the hair care service industry. This research also extends the

key mediating variable model (KMVM) of Morgan and Hunt

(1994) into the service sector by hypothesising that while core

attribute performance and trust fully mediate the effect of soft

attributes on loyalty, trust only partially mediates the effect of

hard attributes on loyalty suggesting that hard attributes can

directly impact loyalty.Morgan and Hunt (1994) in their seminal paper show that

trust and commitment are key mediating variables (KMV) in

a business-to-business relationship marketing context. We

extend on this notion of trust as a key mediator and posit that

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Journal of Services Marketing

19/2 (2005) 81–92

q Emerald Group Publishing Limited [ISSN 0887-6045]

[DOI 10.1108/08876040510591394]

81

the extent to which it functions as a mediator may depend on

the type of antecedent under consideration. Although

accumulated research exists especially in the channel andbusiness-to-business context (Anderson and Weitz, 1989;

Doney and Cannon, 1997; Ganesan, 1994; Kumar et al.,1995; Morgan and Hunt, 1994), relatively scant findings areavailable in the service context (see however Crosby et al.,1990; Moorman et al., 1992, 1993 for exceptions) on the

different types of antecedents of trust and how these may havea direct or indirect effect on loyalty via trust.The result of this research is expected to contribute to our

understanding of the relationship between soft and hard

attributes. As a result, managers can better allocate resources

effectively and appropriately by knowing that the performanceof soft attributes positively influences the perceived

performance of hard attributes. On the other hand, this

paper is also expected to shed light on the limitation of softattributes versus hard attributes in influencing loyalty via the

extent to which trust is a mediator between the two types of

attributes and loyalty.This paper is organised as follows. The next section

discusses the theoretical background, social exchange theoryand similarity attraction theory, and the research hypotheses.

This is followed by the empirical results of the conceptual

model used to test the hypotheses. Finally, theoreticalcontributions, managerial implications, limitations, and

directions for future studies are discussed.

Theoretical background and hypotheses

We argue in this paper that there are two types of attributes that

contribute to developing trust (Driver and Johnston, 2001).

Driver and Johnston (2001) report that predictors of servicequality can be broadly categorised into interpersonal (soft) and

non-interpersonal (hard) attributes. They extend the work of

Johnston (1995) who shows an exhaustive list of service qualitydrivers. Some of the attributes classified as soft attributes are

those that involve more personal or human contact and

interaction such as attentiveness/helpfulness, care, courtesy, andfriendliness. On the other hand, hard attributes comprise those

such as competence, functionality, and reliability. Driver and

Johnston’s (2001) work provide support for relaters placingmore importance on soft attributes and non-relaters putting

greater emphasis on hard attributes in determining their service

quality decisions. We next discuss the details of the soft andhard attributes used in our study.Within soft attributes, a distinction is made between

interaction quality that underscores the relational and social

connectedness between employees and customers and

characteristic similarity that contribute in social bondingwith customers (i.e. human); and atmosphere of the store (i.e.

non-human). Conversely, hard attributes are mainly

concerned with the quality of the core service providedwhich we refer to henceforth as perceived performance

excellence (PPE). According to our conceptual model

depicted in Figure 1, we propose two types of humanrelated soft attributes, interaction quality and characteristic

similarity with the service provider, and one non-human

related soft attribute, store atmosphere.Drawing on the principle of reciprocity, social exchange

theory, and the similarity attraction paradigm, these softattributes are expected to positively affect PPE that we use as

the hard attribute in our model. These soft attributes are also

expected to have a positive effect on trust and an indirect effect

on loyalty via PPE and trust. In other words, the soft attributesdo not have a direct effect on loyalty but only an indirect effect

through PPE and trust. On the other hand, PPE is predicted tohave a direct effect on loyalty in addition to an indirect effect on

loyalty though trust. Loyalty in this research is consistent with

behavioural intention and captures a customer’s predispositionto repurchase the service offering (Boulding et al., 1993; Dick

and Basu, 1994; Parasuraman et al., 1991). Our loyaltyconstruct also takes into account the resilience of this

predisposition in the face of price increase (Fornell et al., 1996).The distinction between soft and hard attributes is

consistent with what Gronroos (1984) asserts as technicalquality and functional quality. Similar arguments have been

proposed in the service marketing literature for a distinctionbetween functional or core service and relational or social

aspects of a service (Goodwin and Gremler, 1996; Hennig-Thurau et al., 2000). In the following sections, we discuss the

relationships between the constructs of our conceptual modeland derive relevant hypotheses.

Interaction quality

Social exchange theory argues that resources, tangible and

intangible, are exchanged between individuals or betweengroups with the goal of enhancing, maintaining, or

dismantling relationships or interactions. This theory hasbeen used extensively to explain intimate interpersonal

relationships in the family and social psychology literature(Burgess and Huston, 1979; Floyd and Wasner, 1994). In a

business context, social exchange theory has been adopted toexplain word of mouth communication (Frenzen and

Nakamoto, 1993; Gatignon and Robertson, 1986). Theconcept of relationship closeness was investigated using social

exchange theory in an industrial buyer-seller relationship. Theidea of exchange theory is not totally new to marketing in that

Bagozzi (1975) defined marketing as exchange.In this paper, social exchange theory is used to explain the

relationship between interaction quality and PPE andbetween interaction quality and trust. Interaction quality is

defined as the positive outcome derived from exchange ofconversational and verbal information between the hair care

provider and the customer. More often than not, during ahaircut experience, the customer engages in some kind of

interaction with the hair care provider. The quality and depthof this conversational interaction will obviously range from

mere shallow greetings to in depth personal conversations.Thus, this construct captures the quality of interaction

engagement experienced by the customer from a dialogue

with the hair care provider. Albeit similar to the well knownrelationship quality construct that encompasses the

relationship derived from various and broad perspectives,this interaction quality construct is narrower in scope and

particularly taps into the quality of the relationship built fromengaging in a conversational interaction.Social exchange theory suggests that reciprocal exchange of

positive and valuable information enhances the trust,

commitment and satisfaction with the relationship. Frequentand healthy exchange is expected to bring the parties closer to

one another and foster a lasting relationship. Moreover, greaterinteraction quality is expected to facilitate interpersonal and

social bonding, which in turn is also expected to foster trust.This implies that greater interaction quality will breed greater

trust. Moreover, due to the closeness and elevated relationship

The effects of soft and hard service attributes on loyalty

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that is expected to be cultivated from greater interaction quality,

this is posited to enhance the perception of the core service

performance or PPE. In the context of this study, PPE is

defined as the customer’s perception of the hair care provider’s

ability to perform a quality haircut. This indicates the core

service that every hair salon tries to satisfactorily deliver. In the

conceptual model, this PPE refers to the hard attribute or core

service. Greater interaction quality is expected to increase the

social and interpersonal bonding between the customer and the

hair care provider, resulting in greater trust and PPE.The economic sociology literature suggests that within an

exchange relationship, a party derives utility not only from the

products and services exchanged but also from interpersonal

relationships (Wathne et al., 2001; Frenzen and Davis, 1990).

Thus, to the extent that a hair care provider makes efforts to

show care and benevolence towards their customers, this is

expected to foster the creation of psychological bonds that are

foundations for strong relationships (De Wulf et al., 2001;

Crosby et al., 1990). When customers perceive that their hair

care providers are exerting efforts to enhance interaction

quality, they often reciprocate in kind with good will or in our

case by showing greater PPE. Bagozzi (1995) argued that

according to the principle of reciprocity, people should return

good for good in proportion to what they receive. Therefore

the greater the customer feels that interaction quality is being

met, the more favourably the customer is expected to perceive

the performance of the core service delivery.Indirect support for a positive effect from interaction

quality to PPE and trust comes from the work of Gwinner

et al. (1998) who identified three types of relational benefits

(e.g. confidence, social, and special treatment benefits) that

contribute in maintaining a strong relationship between

customers and service providers. Furthermore, Beatty et al.

(1996) and Reynolds and Beatty (1999) identified two

primary types of relational benefits derived from an exchange

relationship, functional benefits and social benefits. Based on

these categorisations, it has been shown that social benefits

have a positive effect on functional benefits and satisfaction

(Gremler and Gwinner, 2000; Hennig-Thurau et al., 2002;

Price and Arnould, 1999; Reynolds and Beatty, 1999). It has

also been shown that rapport (in particular, enjoyable

interaction) positively influenced satisfaction with the service

(Gremler and Gwinner, 2000). The work of Goodman et al.

(1995) is also consistent with our argument. They found that

the performance of peripheral factors had an effect on the

perceived performance of core factors. Their results suggested

that the performance of a peripheral factor (satisfaction with

responsiveness of inquiry handling) not only had a direct

effect on overall customer satisfaction but also an indirect

effect through its effect on perceived performance of a core

factor (satisfaction with first class mail).Although interaction quality is expected to have a direct

effect on PPE and trust, it is not expected to directly affect

loyalty. We expect interaction quality to influence loyalty

indirectly through PPE and trust. Generally speaking, the

likelihood that customers will visit their hair care providers

simply based on satisfactory interaction quality is slim. The

main impetus for patronage would still be based on the

performance of the haircut and the trust that customers have

towards their hair care providers in expectation of receiving a

reliable and benevolent service during their next visit. The

above arguments lead to the following hypotheses about

interaction quality.

H1. Greater interaction quality is associated with greater

PPE.

H1b. Greater interaction quality is associated with greater

trust.

H1c. Interaction quality does not have a direct effect on

loyalty but only an indirect effect through PPE and trust.

Characteristic similarity

Research in industrial and organisational psychology has usedthe similarity attraction paradigm to explain the effect of

homogeneous groups on work performance and turnover(O’Reilly et al., 1989). Social categorisation theory (Tajfel andTurner, 1986) suggests that people with greater similarity in

social categories such as age, sex, race, and status interactmore frequently with in-group than with out-group members.

Figure 1 Proposed conceptual model


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These arguments are consistent with the well known adage,

“birds of a feather flock together”. Therefore it can be

inferred from the similarity-attraction paradigm (Baskett,

1973; Byrne, 1971) that people have the inclination to prefer

and feel more comfortable with people of similar personalities

and characteristics. In this paper, the construct of

characteristic similarity is employed to convey the notion of

similarity that the customer has with the hair care provider in

terms of tastes, conversation topic, and in more general,

simply similar people. Put differently, characteristic similarity

is about the commonality that the customer shares with its

hair care provider.In similar light, greater homophily (Ibarra, 1992) and similar

relational demography (Tsui and O’Reilly, 1989) is reasoned to

contribute to greater attraction and preference. Nicholson et al.(2001) provided empirical support for the similarity-attraction

theory. Their research showed that similarity of business value

between a buyer and a sales representative had a positive effect

on the buyer’s liking for the sales representative. In a buyer-

seller context, Smith (1998) reported that similarity in life-

stage, sex, cultural background, work attitude, and personality

had an indirect positive effect on relationship quality through

relational management.Along similar lines, Boles et al. (2000) and Crosby et al.

(1990) commonly found that the similarity between customer

and salesperson did not have a positive effect on relationship

quality. A possible nonsignificant result may be due to the fact

that people have an inherently low level of trust and

commitment towards sales people in general and required

more than just similarity to conclude that a quality

relationship exists. However, more recently, characteristics

of the salesperson relationship such as likeability and

similarity have proven to be significant antecedents to the

buying firm’s trust in the salesperson (Doney and Cannon,

1997). Thus, mixed results exist in the literature on the effect

of similarity on trust. However, both the Boles et al. (2000)

and Crosby et al. (1990) studies revealed that as the customer

perceived greater similarity between the two parties, the

salesperson was perceived to be more effective.Similar to the argument advanced for interaction quality’s

indirect effect on loyalty, we also posit that characteristic

similarity will only impact loyalty indirectly through PPE and

trust. It seems very unlikely that just because customers

perceive their hair care providers to be similar to them in

terms of taste and conversational topics, they will continue to

visit them. The dominant factor that drives customers’ loyalty

towards their hair care providers should be foremost the

quality of the haircut and the trust towards them. These two

elements should take precedence over characteristic similarity.

Therefore, greater characteristic similarity can have a direct

positive effect on PPE and trust but only an indirect effect on

loyalty via these two mediating constructs.Taken collectively, the above arguments contend that

greater similarity between the customer and the hair care

provider should enhance attraction and communication

resulting in a higher level of trust and PPE. Relationships

based on similar values and interests are likely to foster greater

identification with one another and build the platform for

trust. Based on the above arguments, we propose the

following hypotheses about characteristic similarity.

H2. Greater characteristics similarity is associated with

greater PPE.

H2b. Greater characteristics similarity is associated withgreater trust.

H2c. Characteristics similarity does not have a direct effecton loyalty but only an indirect effect through PPE andtrust.

Store atmosphere

The effect of the physical atmosphere and environment onhuman behaviour has been scrutinised in the environmentalpsychology literature (Mehrabian and Russell, 1974). Inmarketing, this concept has been successfully applied in retailsettings to show that pleasure, arousal, scent, and music canall have main and interactive effects in influencing consumerbehaviour in retail outlets (Donavan and Rossiter, 1982;Donavan et al., 1994; Dube et al., 1995, Wakefield and Baker,1998; Mattila and Wirtz, 2001). The work of Mattila andWirtz (2001) suggested that when congruency as opposed toincongruency existed between type of music and arousal levelof scent, customer’s shopping experience was enhanced.In addition to our human related soft attributes (i.e.

interaction quality and characteristic similarity), we had ameasure of the store atmosphere that we argued previously asa non-human related soft attribute. In other words, althoughnot part of the core service delivery, store atmosphere, alongwith interaction quality and characteristic similarity, isexpected to have a positive effect on PPE. More specifically,the expectation is that as customers more readily identify withthe store atmosphere, the more positive they are to perceivethe performance of the core service delivery (e.g. haircut).The rationale for this follows from the fact that the morecustomers can relate to and identify with their surroundingsand climate, the more comfortable they will feel and hencethis positive feeling is expected to carry over into theevaluations of the core service performance. Based on theabove argument, the following is proposed.

H3. Greater identification with the store atmosphere isassociated with greater PPE.

PPE and trust

Although trust has been defined in several different ways, weemploy the definition of Doney and Cannon (1997) who havedefined trust as the perceived credibility (reliability) andbenevolence (genuinely interested in other parties interest)toward the target of interest. Although this definition assumestrust as a multi-dimensional construct, empirically trust hasproven to be a global unidimensional construct (Doney andCannon, 1997; Joshi and Stump, 1999; Nicholson et al., 2001).The unidimensionality of trust is consistent with others whoview the credibility and benevolence dimensions as antecedentsrather than components of trust (Mayer et al., 1995).Consistent with the view that credibility (reliability) towards

the service provider is an antecedent rather than a componentof trust (Mayer et al., 1995) and drawing on the consequencesof service quality (Brady and Cronin, 2001), it is hypothesisedthat PPE or the perceived ability of the hair care provider todeliver a reliable and quality haircut is expected to enhancethe level of trust and loyalty towards the hair care provider.We also posit a direct effect of PPE on loyalty in addition toan indirect effect via trust. Consistent with our argument,Gruen et al. (2000) in a professional association context foundthat core service performance had a direct and positive effect


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on retention. Based on the above reasoning, the followinghypotheses are proposed.

H4. Greater PPE is associated with greater trust.H5. Greater PPE is associated with greater loyalty not only

indirectly through trust but also directly.

Trust is believed to be a critical variable that contributes tohealthy and long-term relationships (Anderson and Weitz,1989; Doney and Cannon, 1997; Garbarino and Johnson,1999; Ganesan, 1994; Morgan and Hunt, 1994). We expectthis relationship to be even stronger in service contexts thatare characterised by high and close employee-customercontact such as that in the hair care service industry(Bowen, 1990). Bowen (1990) describes a taxonomy ofservice types whereby hair care service falls into the groupcharacterised as high interaction and contact. Furthermore,we expect trust to be positively linked to loyalty especiallywhen the service process is not standardised and a certainlevel of uncertainty is present that adds to the risk of beingsusceptible to vulnerability (e.g. unexpected and bad haircutthat the customer will have to live with until the next cut)(Deutsch, 1962; Moorman et al., 1992). Thus, we expecttrust to be positively associated with loyalty.

H6. Trust has a positive effect on loyalty.

Method

The hypotheses were tested using a survey with hair careservices. Hair care service was selected for the followingreasons. First, the nature of the service category carries acertain level of employee-customer interaction in terms ofsocial bonding that is key to testing our conceptual model.Second, it has been used in past research on relationshipbuilding (Gwinner et al., 1998; Hennig-Thurau et al., 2002;Price and Arnould, 1999; Jones et al., 2002). Third, hair careservice was a category that was sufficiently familiar for oursurvey respondents (college students) to provide reliable andquality data. Finally, it was a service category that both malesand females used on a relatively consistent basis such that ourempirical results would not be biased toward either gender.The attributes and benefit categories used in the survey

were obtained using CIT, the critical incident technique(Bitner et al., 1990; Grove and Fisk, 1997; Hayes, 1998;Meuter et al., 2000). The CIT approach focuses on inputfrom the customer to develop survey items (for a detailedexplanation of the CIT, refer to Hayes, 1998). A conveniencesample of ten doctoral students was asked to list five to tenpositive experiences (likes) as well as five to ten negativeexperiences (dislikes) regarding their past or current hair careservice provider. The interviews lasted approximately 15-20minutes and were audio-taped for subsequent analysis. A totalof 100 different critical incidents were obtained from these teninterviewees, ranging from 8 to 24 per interview. The criticalincidents were then categorised by the author and a colleagueinto 39 distinct performance attributes which, in turn, werefurther categorised into the benefit-level constructs. Theclassifications were highly reliable (over 80 per cent agreementfor both attributes and benefits) and disagreements wereresolved through discussion. The benefits served as theantecedents of trust in our conceptual model. It should benoted that the attributes were identified by customersthemselves rather than by the researchers.

Table I shows the 13 attribute performance measures used to

operationalise the benefits as latent variable antecedents to trustin our model. The benefit items were constructed using ten-

point disagree to agree scales. Trust and loyalty were also

operationalised as latent variables using the measures listed inTable I. They were collected using ten-point semantic

differential and likelihood scales. The self-administered surveywas completed by 191 undergraduate business students who

earned course credit for participating. A total of 12 subjectswere deleted from the analysis due to an excessive number of

missing values. An additional three subjects were removedbecause they indicated that a family member or friend acted as

their hair care provider. Consequently, 176 subjects wereincluded in the final analysis. Males and females were about

equally represented in our sample, with 51 per cent male and49 per cent female subjects.

Results

Measurement model

Lisrel 8.50 was used for all of the analysis unless specified

otherwise. We first assessed the measurement model followed

by the structural model for hypotheses testing following theguidelines suggested by Anderson and Gerbing (1988). We first

report the results of our confirmatory factor analysis (CFA).According to our CFA results, our measurement model

suggested good fit to the data (x2ð120Þ ¼ 290:68, p , 0:001,CFI ¼ 0:93, NNFI ¼ 0:91, RMSEA ¼ 0:082). The results of

the CFA with factor loadings and t-values are summarised inTable I. All factor loadings were high and significant,

providing strong evidence for convergent validity (Bagozziand Yi, 1988). We also assessed coefficient alpha (Cronbach,

1951) and composite reliability for each of the constructs(Fornell and Larcker, 1981). Coefficient alpha ranged from

0.75 (loyalty) to 0.91 (PPE) whereas the composite reliabilityranged from 0.76 (loyalty) to 0.91 (PPE and interaction

quality). Table II summarises the results of the reliability tests.Discriminant validity was assessed in three different ways.

The first method involved constructing a 95 per cent

confidence interval around the correlation of any twoconstructs (Anderson and Gerbing, 1988). Discriminant

validity is demonstrated when this confidence interval doesnot include 1. According to this confidence interval test, none

of the confidence intervals between any two constructsincluded 1 indicating support for discriminant validity. Our

second test of discriminant validity concerned conductingmultiple chi-square difference tests (Bagozzi and Phillips,

1982). This test involves taking the chi-square differencebetween an unconstrained model (whereby the correlation

between constructs is freely estimated) and a constrainedmodel (whereby the correlation between constructs of interest

is fixed to unity). Discriminant validity is demonstrated when

the chi-square difference is significant implying that theconstrained model fits the data worse than the unconstrained

model. Table III summarises the results for all possible pairsof constructs. According to Table III, all of the chi-square

differences are significant, providing further evidence ofdiscriminant validity among the constructs.The last of the discriminant validity tests which is viewed as

the most conservative involves calculating the average

variance extracted (AVE) for any pair of constructs andcomparing this to the squared correlation between the two

constructs (Fornell and Larcker, 1981). All AVE exceeded the


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recommended level of 0.50 and ranged from 0.61 (customer

loyalty) to 0.78 (interaction quality) (Fornell and Larcker,

1981). With the exception of the discriminant validity

between trust and loyalty, all AVEs were greater than the

squared correlation between the two constructs of interest

(refer to Table II for details). However, as mentioned before,

this test is the most conservative and since discriminant

validity was established based on the prior two tests, we

cautiously proceeded with further analysis. Based on our

reliability, convergent, and discriminant validity tests, we

concluded that our measurement model met most of the

psychometric property requirements.

Structural model

We first report the fit of our proposed theoretical model to the

data. Several fit indices suggested good fit of our model to the

data (x2ð123Þ ¼ 290:38, p , 0:001, CFI ¼ 0:93, NNFI ¼ 0:91,RMSEA ¼ 0:08). One test that is very informative but often

overlooked is the comparison of fit between our proposed

theoretical model to that of our measurement model. A

Table I Items and measurement model results

Construct Description Loadings T-value�

Interaction quality 1 (strongly disagree) to 10 (strongly agree)a

IQ1 My hair care provider remembers my name 0.95 16.64

IQ2 My hair care provider remembers things about me 0.97 17.19

IQ3 I enjoy the topics that my hair care provider and I talk about 0.70 10.54

Characteristic similarity 1 (strongly disagree) to 10 (strongly agree)

CS1 My hair care provider and I are similar people 0.87 13.82

CS2 My hair care provider and I have similar tastes 0.91 14.79

CS3 My hair care provider and I like to talk about the same topics 0.78 11.88

Perceived performance excellence 1 (strongly disagree) to 10 (strongly agree)

PPE1 My hair care provider cuts my hair evenly 0.72 10.74

PPE2 My hair care provider is precise 0.90 15.10

PPE3 My hair care provider is skilled 0.90 15.03

PPE4 My hair care provider is careful 0.88 14.63

Store atmosphere 1 (strongly disagree) to 10 (strongly agree)

SA1 I have fun while I am at the shop 0.83 12.65

SA2 I like the general atmosphere in the shop 0.94 15.06

SA3 I can identify with the atmosphere in my hair care provider’s shop 0.65 9.29

Trust 1 (never) to 10 (always)

T1 The extent to which you are willing to rely on your hair care provider 0.83 13.08

T2 The extent to which you trust your hair care provider 0.92 15.34

T3 The extent to which you are willing to follow your hair care provider’s

recommendations for new hair styles

0.62 8.73

Loyalty 1 (never) to 10 (always)

L1 The likelihood that you will visit your hair care provider again 0.70 9.96

L2 In the event that your hair care provider increased the price by 10 per cent, the

likelihood that you will visit your hair care provider again at the higher price

0.86 12.68

Notes: aA DK (don’t know) response was included in all the scales to accommodate situations for no experience; �All t-tests significant at p , 0:001

Table II Inter-correlation and scale analysis for constructs

Variable Coefficient a Composite reliabilitya AVEb IQ CS SA PPE TT LOY

Interaction quality (IQ) 0.90 0.91 0.78 1.00 0.12c 0.21 0.34 0.44 0.30

Characteristic similarity (CS) 0.88 0.89 0.73 0.35 1.00 0.23 0.24 0.25 0.18

Store atmosphere (SA) 0.83 0.85 0.67 0.46 0.48 1.00 0.22 0.24 0.20

Perceived performance excellence (PPE) 0.91 0.91 0.73 0.58 0.49 0.47 1.00 0.59 0.58

Trust (TT) 0.81 0.84 0.64 0.66 0.50 0.49 0.77 1.00 0.74

Loyalty (LOY) 0.75 0.76 0.61 0.55 0.43 0.45 0.76 0.86 1.00

Notes: All correlations are significant at p , 0:001 (two-tailed tests); aComposite reliability = ðSlxiÞ2=ðSlxiÞ

2 þ S Varð1iÞ;bAVE=Slx2

i =Slx2i þ SVarð1iÞ;

cShared variances are reported in the upper half of the matrix


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finding of no significant difference between the two models

provides support for the nomological validity of our

theoretical model (Anderson and Gerbing, 1988). If the

theoretical model is successful in accounting for the observed

relations between the constructs, there will not be a significant

difference between the chi-square for the theoretical and

measurement models. This is because the measurement

model is in fact a saturated model in which all possible

specifications between constructs have been exhausted. In

contrast, our theoretical model is a constrained version of this

saturated model in that some of the relationships between

constructs have been fixed to zero. Thus, the intent of our

theoretical model was to come up with a model that was more

parsimonious than the measurement model, but at the same

time did nearly as good a job as accounting for the covariance

between the constructs. We see that this was indeed the case

because the fit of our theoretical model did not deteriorate

compared to our measurement model (measurement

model:x2ð120Þ ¼ 290:68, p , 0:001 vs theoretical model:

x2ð123Þ ¼ 290:38, p , 0:001, x2dð3Þ ¼ 0:30, p . 0:10).We now turn our attention to the results of our hypotheses

testing. Table IV summarises the results of our hypotheses

testing (H1a-H6). H1a-H1c tested the relationship between

interaction quality and PPE (H1a), interaction quality and trust

(H1b), and the indirect effect of interaction quality on loyalty

(H1c). The path coefficient between interaction quality and PPE

was positive and significant (H1a: g11 ¼ 0:40, p , 0:01).Therefore H1a was supported. The path from interaction

quality to trust was also positive and significant (H1b:g21 ¼ 0:30, p , 0:01). Finally, to test for the indirect effect of

interaction quality to loyalty, we ran a model that included the

additional path from interaction quality to loyalty. If a direct

effect exists between the two constructs, we would observe the

fit of this model to improve compared to our baseline model. On

the other hand, if no direct effect is present and only an indirect

effect is at work, the new model would not improve significantlybeyond our current baseline model despite adding the additional

path. Our results confirmed that adding the additional path

from interaction quality to loyalty did not improve the fit of themodel above and beyond the current model (x2ð123Þ ¼ 290:38,p , 0:001 vs x2ð122Þ ¼ 289:71, x2dð1Þ ¼ 0:67, p . 0:30).Therefore, H1c was strongly supported.Next, we report the results of H2a-H2c. H2a posited that

characteristics similarity would be positively associated with PPE.

As expected, the path from characteristics similarity to PPE waspositive and significant (H2a: g13 ¼ 0:26, p , 0:01). The path

from characteristics similarity to trust was also positive andsignificant, lending support for H2b (H2b: g23 ¼ 0:14, p , 0:05).For H2c, we tested the indirect effect of characteristics similarityon loyalty as we did for interaction quality. The model with the

added path from characteristics similarity to loyalty did not

significantly improve the fit of the model beyond the baselinemodel (x2ð123Þ ¼ 290:38, p , 0:001 vs x2ð122Þ ¼ 290:22,x2dð1Þ ¼ 0:16, p . 0:50). Therefore, as was the case forinteraction quality, we found strong support for an indirect

effect of characteristic similarity on loyalty through PPE and trust.Our next hypothesis involved the relationship between store

atmosphere and PPE. The path coefficient between these twoconstructs was as expected, positive and significant (H3:g12 ¼ 0:16, p ¼ 0:05). Thus, in addition to our human-related soft attributes that fostered interpersonal and social

bonding effects, store atmosphere also had a positive effect onhow customers perceived the performance of core services.

Although not hypothesised, we tested to see if adding a pathfrom store atmosphere to trust would improve the fit of our

model. The results indicated that the model would not be

improved by adding this additional path (x2ð123Þ ¼ 290:38, p ,

0:001 vs x2ð122Þ ¼ 289:83, x2dð1Þ ¼ 0:55, p . 0:30) providing

support for our conceptual model.H4 and H5 are concerned with the consequences of PPE. In

particular, H4 stated that PPE would be positively associatedwith trust. Results confirmed our hypothesis in that the path

coefficient between PPE and trust was positive and significant(H4: b21 ¼ 0:53, p , 0:01). Furthermore, PPE was positively

associated with loyalty (H5: b31 ¼ 0:27, p , 0:05). H5 alsoargued that in addition to PPE having an indirect effect on

loyalty via trust, it would also have a direct effect. This wastested by running a model that deleted the path from PPE to

loyalty and comparing it with the baseline model. If a directeffect were to be supported we would be likely to observe a

significant deterioration in fit when the direct path from PPE to

loyalty was deleted. Results confirmed our expectations in thatwhen the direct path was deleted the fit became significantly

worse (x2ð123Þ ¼ 290:38, p , 0:001 vs x2ð124Þ ¼ 296:00,x2dð1Þ ¼ 5:62, p , 0:02). Therefore, unlike interaction quality

and characteristics similarity that had only an indirect effect onloyalty through PPE and trust, PPE had both an indirect effect

and also a direct effect on loyalty. Lastly, we report the effect oftrust on loyalty. The path coefficient between these two

constructs was positive and significant, providing support forH6 (H6: b32 ¼ 0:64, p , 0:01).

Conclusion

Theoretical contribution

The results of our study make two new contributions to the

relationship and service marketing literature. The first is the

Table III Discriminant validity test

Target x2(UM)b x2(CM)c Dx2d

F(j1, j2)a 290.68 310.57 19.89

F(j1, j3) 290.68 315.42 24.74

F(j1, j4) 290.68 338.67 47.99

F(j1, j5) 290.68 308.93 18.25

F(j1, j6) 290.68 324.01 33.33

F(j2, j3) 290.68 323.07 32.39

F(j2, j4) 290.68 350.43 59.75

F(j2, j5) 290.68 323.36 32.68

F(j2, j6) 290.68 336.40 45.72

F(j3, j4) 290.68 348.58 57.9

F(j3, j5) 290.68 321.41 30.73

F(j3, j6) 290.68 333.16 42.48

F(j4, j5) 290.68 334.74 44.06

F(j4, j6) 290.68 336.44 45.76

F(j5, j6) 290.68 329.74 39.06

Notes: aConstructs: trust (j1), loyalty (j2), perceived performanceexcellence (j3), store atmosphere (j4), interaction quality (j5),characteristic similarity (j6); bUnconstrained model whereby allcorrelations between constructs are freely estimated (df = 120);cConstrained model whereby the correlation between constructs incolumn 1 are fixed to unity in the phi matrix (df = 121); dSince theconstrained model is nested in the unconstrained model, the chi-squaredifference is 1 df and the critical value is Dx2 .10.83, p , 0.001


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revelation of a positive link between soft attributes such asinteraction quality and characteristics similarity and hard

attributes such as PPE. The second is the degree to whichtrust mediates these soft and hard attributes on loyalty. Our

empirical results found that interaction quality and

characteristics similarity only had an indirect effect onloyalty that was mediated by PPE and trust. On the other

hand, PPE had both an indirect effect and also a direct effecton loyalty bypassing trust as a mediator. Subsequently, we

discuss each of the two contributions in greater detail.Although past research has shown different types of factors

that determine service quality (Driver and Johnston, 2001)

and the different types of benefits that customers can expectto receive from a relationship with service providers (Beatty

et al., 1996; Gwinner et al., 1998; Reynolds and Beatty,1999), little has been written to show the association between

interpersonal factors such as that between employees andcustomers and the performance of core services. Our results

are also in line with what Goodman et al. (1995) found. Their

findings provided support for the performance of a peripheral(i.e. non-core) service domain having a positive effect on the

performance of a core service domain. Results of our studyadd to the understanding of how different types of service

attributes are inter-related in a high-contact/interactionenvironment between employees and customers.Our positive effect from interaction quality and

characteristics similarity to PPE and trust can be interpreted

using the framework of social exchange theory and similarity

attraction paradigm. Social exchange theory argues thatreciprocal exchange of positive and valuable information

enhances the trust, commitment and satisfaction with therelationship. Positive exchange is expected to bring the parties

closer together and foster a bonding relationship. In otherwords, greater interaction quality is expected to bring about

interpersonal and social bonding, which in turn is also

expected to foster trust. The effect from interaction quality toPPE can be viewed in light of the principle of reciprocity

(Bagozzi, 1995). According to this principle, people have thetendency to return good for good in proportion to what they

receive. Therefore, the greater the customer feels that

interaction quality is fulfilled, the more favourably thecustomer is expected to perceive the performance of the

core service delivery.The results of the positive relationship between

characteristics similarity and PPE and trust are consistent

with the similarity attraction paradigm (Baskett, 1973; Byrne,1971) and with social categorisation theory (Tajfel and

Turner, 1986). These two theoretical arguments commonlypostulate that people have the tendency to gravitate towards

those of external and internal similarities. People like to be

around those of greater similarity because more often than notsimilarity breeds comfort, relatedness, and unity. As a

consequence, similarity contributes to trust and in-group vsout-group favourability.Our second contribution extends the results found in the

KMV model of Morgan and Hunt (1994) beyond a business-to-business marketing context to a service marketing arena.

The KMV model has shown that trust and commitment fullymediate the relationship between the antecedents and

consequences of trust and commitment. However, our model

supports the finding that while trust fully mediates the positiveeffect of interaction quality and characteristics similarity on

loyalty it only partially mediates the positive effect of PPE onloyalty. This adds significant richness to the KMV model by

specifying the conditions under which trust is a full or partial

mediator between its antecedents and consequences. This alsoextends our knowledge about the difference between soft and

human related attributes that bolster interpersonal and socialbonding compared to hard attributes that deal primarily with

the core service delivery per se.Our results are different from what Gwinner et al. (1998)

have found in this respect. In their study they found support

for social benefits to have a direct positive effect on loyalty.However, in their study they did not include trust in the

model. We contend that this may be one of the reasons for thisinconsistent result. When trust is added as an additional

construct into the model, personal and relational benefits

were found to have a positive effect on loyalty only throughtrust as our model suggested. Since these factors are personal

and relational in nature and have less to do with the actual

Table IV Structural model results

Hypothesis Coefficienta Chi-square difference test Fit indices

H1a: IQ!PPE (1 ) 0.40 (5.03) x2(123) ¼ 290.38

H1b: IQ ! TRUST (1 ) 0.30 (4.44) RMSEA ¼ 0.08

H1c: IQ ! LOYALTY (1 ) indirectly via PPE and TRUST x2(122)¼289.71b

x2d(1)¼0.67, p . 0.30

CFI ¼ 0.93

H2a: CS ! PPE (1 ) 0.26 (3.24) NNFI ¼ 0.91

H2b: CS ! TRUST (1 ) 0.14 (2.08)

H2c: CS ! LOYALTY (1 ) indirectly via PPE and TRUST x2(122)¼290.22c

x2d(1)¼0.16, p . 0.50

H3: SA ! PPE (1 ) 0.16 (1.96)

H4: PPE ! TRUST (1 ) 0.53 (6.05)

H5: PPE ! LOYALTY (1 ) 0.27 (2.42) x2(124)¼296.00d

x2d(1)¼5.62, p , 0.02

H6: TRUST ! LOYALTY (1 ) 0.64 (5.24)

Notes: IQ = interaction quality, PPE = perceived performance excellence, CS = characteristic similarity, SA = store atmosphere, RMSEA = root mean square errorof approximation, NNFI = non-normed fit index, CFI = comparative fit index; aValues in parentheses indicate t-values and all coefficients are significant at 0.05or less; bIndicates model where an additional path from IQ to loyalty was added to the baseline model; cIndicates model where an additional path from CS toloyalty was added to the baseline model; dIndicates model where the path from PPE to loyalty was deleted from the baseline model


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performance of the core service activity per se, we would

expect the effect of these on loyalty to diminish significantly

once trust is included in the model. This finding is consistent

with the condition for a fully mediating effect suggested by

Baron and Kenney (1996).Taken collectively, our model has revealed that relational

and social factors as well as store atmosphere have direct

effects on PPE and trust but only an indirect effect on loyalty

through these mediating variables. Conversely, unlike the soft

attributes, core service performance factors such as PPE have

both an indirect effect and a direct effect on loyalty. Next we

look at the managerial relevance of our research.

Managerial implications

The results of our study suggest several implications to

managers who desire to build a loyal customer base based on

trust in a high-contact service context. The importance of

relational and social factors emerged as valuable avenues for

managers to allocate scarce resources. Having a service

environment that is conducive to similar characteristics and

social benefits can pay dividends toward increasing loyalty

through enhanced PPE and trust. Our findings are promising

for managers who desire, but at times are met with resistance

in the organisation, to invest in human resources to help

employees better interact and serve customers. Service

organisations, especially those that engage in a high level of

face-to-face contact and interaction with customers can

particularly benefit from the findings of our model.

Interaction quality and characteristics similarity are areas

where managers can consistently train and educate their

employees to “click” with their customers.Quite often managers tend to neglect the importance of

improving relationship building by focusing on only the

performance of core services. This may in part be due to

relational/social factors not having a direct effect on loyalty as

suggested by our model. These factors work their way towards

loyalty via improved PPE and trust. As a consequence,

managers overlook this opportunity and focus more

intensively on improving PPE as this, unlike relational/social

factors, has the tendency to have a direct effect on loyalty.

However, this may be overlooking and ignoring a potentially

fruitful and rewarding investment strategy that can have

promising payoffs. Whereas the performance of the core

service may be more difficult and costly to satisfactorily

deliver, relational and social benefits through mechanisms

such as interaction quality and characteristics similarity can

be implemented with far less resource and risk. Moreover,

under certain situations where it takes time to learn and

deliver a satisfactory core service, it may pay dividends for the

organisation to focus on the relational and social benefits to

retain customers while buying time to improve on its core

service performance.In this research, PPE was a unidimensional construct that

captured the customers’s perceived hair care provider’s ability

to deliver a quality hair cut. Our findings suggest that of the

three soft attributes, interaction quality had the greatest effect

on PPE followed by characteristic similarity and store

atmosphere. This provides managers to make effective

resource allocations to make strategic priority decisions on

the various soft attributes. Obviously, the high contact and

interactive nature of the hair care industry may have dictated

which soft attributes are more or less important in influencing

PPE and therefore the relative effect of these soft attributes on

PPE may change as a function of the service category.Finally, managers can also use relationship setup costs as a

means of increasing the perceived switching costs tocustomers (Jones et al., 2002). Customers may be able to

find a hair stylist that can do just as good a job if not better at

providing an excellent haircut but it may be more difficult tofind a hair stylist that they can connect with and build a

lasting relationship. Lastly, our positive effect from storeatmosphere to PPE replicates and confirms past literature on

the effect of atmospheric and environmental psychology onconsumer behaviour (Mehrabian and Russell, 1974; Mattila

and Wirtz, 2001). This also reiterates the importance ofproviding an atmosphere and environment that customers can

identify with and feel comfortable.

Limitation and future research directions

As with all research, ours is no exception when it comes tolimitations. We used student subjects as our sample for testing

our model. We believed that the student sample was adequateand appropriate for such a study especially in the hair care

industry. Students are familiar with the service category andhair care service is a relatively high involvement experience

that enhances the quality of the data collected. However, weshould not lose sight of the fact that due to their economic

constraints, they may have no other choice but to go to thecheapest hair stylist. This would undermine the significance

of social and relational bonds that were highlighted in thispaper. Therefore, we are cautious in generalising our

conclusions too broadly from this particular research andacknowledge the need for replication on a more representative

sample (Peterson, 2001).Also, our model was tested in a single service industry that

was considered to be very high in contact and interactionbetween employees and customers (Bowen, 1990). This may

have contributed to the positive and significant effect from thesocial/relational factors such as interaction quality and

characteristics similarity to the perceived core serviceperformance. In other service industries characterised by

less interaction and relationship building activities, thelikelihood of observing such an effect may be slimmer.

Future studies can test this in diverse service categoriesaccording to the taxonomy suggested by Bowen (1990).For future research directions, several studies have looked

at constructs such as satisfaction, commitment, trust, and

loyalty simultaneously in a single model (Garbarino andJohnson, 1999; Wang, 2002). More specifically, one of the

interests drawn from such research has been to determine

whether identical or different factors lead to satisfaction,commitment, trust, and loyalty. We see these constructs as

cornerstone concepts in marketing theory and application asthey get to the heart of what it takes to make customer

acquisition and retention successful. Although, quite often,by assuming that satisfaction, trust, and commitment are all

on identical levels of abstraction or continuum and as suchused as manifest variables to operationalise relationship

quality (Baker et al., 1999; Crosby et al., 1990; Dorsch et al.,1998; Hewett et al., 2002), they can also be perceived of as

occupying different positions on a continuum. It could bethe case that satisfaction is at the lowest level while

commitment occupies the highest with trust in the middle(White and Schneider, 2000). In such a framework, we can

imagine different antecedents to have effects on satisfaction,


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trust, and commitment, which all in turn should lead to

greater loyalty. Our model takes a small step in such a

direction by confirming that when trust and loyalty are

simultaneously included in the model, relational/social

factors have an effect on trust directly and on loyalty

indirectly through trust whereas PPE affects both trust and

loyalty directly. Future research can expand our model and

others to develop an integrated framework that satisfies the

nomological validity between the above key constructs and

its antecedents.Finally, a stricter test to investigate the relationship between

the two types of service attributes using longitudinal data can

be considered. This is an important issue as the strong

relationship between the soft and hard service attributes may

be driven by common method bias-single source self reporting

data (Podsakoff and Organ, 1986). Also, we need further

studies to determine under what conditions relational/social

factors affect core service performance. This calls for a study

that examines our model across diverse service industries that

differ on the degree of interaction and contact employees have

with customers.

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Executive summary and implications formanagers and executives

This summary has been provided to allow managers and executivesa rapid appreciation of the content of this article. Those with aparticular interest in the topic covered may then read the article intoto to take advantage of the more comprehensive description of theresearch undertaken and its results to get the full benefits of thematerial present.

“Hard” and “soft” service attributes

The core aspects of a service are such “hard” attributes as theperformance excellence of the key service delivered. In hair

care, a “high contact” service context with significantinteraction between stylists and clients, they are the quality of

the haircut given. In contrast, the non-core aspects of a serviceare “soft” attributes. These can be based on “human” factors

such as the quality of the interaction between the stylist and the

customer resulting from the exchange of conversation, and thesimilarity of personality and tastes between the customer and

hair care provider. Soft attributes can also be non-humanfactors such the atmosphere in the salon.

The research focus

Auh explores whether social bonding between salon

employees and customers affects customers’ perceptions ofthe core service performance – the hair stylist’s ability to

provide a quality haircut. The author also examines theprocess by which social bonding attributes such as the quality

of conversation between employee and customer, and thesimilarities in the characteristics and outlook of employees

and customers, influence customers’ loyalty to the service

provider – the likelihood that a customer will return to thesalon. Finally, Auh investigates whether the process by which

these social and relational attributes affect loyalty differs fromthe way core service performance affects loyalty.

The research results

The research discovers that soft attributes positively affect thehard attribute of perceived performance excellence. Thesesoft attributes also have a positive effect on trust and anindirect effect on customer loyalty through perceivedperformance excellence and trust. In other words, the softattributes do not have a direct effect on loyalty, but only anindirect effect through perceived performance excellence andtrust. On the other hand, perceived performance excellencehas a direct effect on loyalty in addition to an indirect effecton loyalty through trust.Hair stylists who make an effort to show care and

benevolence to their customers foster the creation ofpsychological bonds that are foundations for strongrelationships. And the more the customer perceives that thestylist is striving to enhance the quality of the interaction, themore favourably the customer will perceive the performanceof the core service delivery. Similarly, when the customer andstylist share a common outlook on life, they are more likely tocommunicate well and trust each other, and the client is morelikely to believe he or she will get a decent haircut.But of course, the likelihood that the customer will visit a

particular stylist simply because of good conversation, orbecause of sharing with the stylist similar tastes and anoutlook on life, is slim. The main impetus for a client visitinga particular salon is still based on the performance of thehaircut and the trust the customer has towards the stylist inexpectation of receiving a reliable and benevolent serviceduring the client’s next visit.The research also reveals that the more readily the client

identifies with the salon’s atmosphere, the more positive he or sheis likely to be about the performance of the haircut. This isbecause the more the customer can relate to the surroundings andclimate, the more comfortable he or she will feel. This positivefeeling then carries over into his or her evaluation of the haircut.The hair care provider’s perceived ability to deliver a

reliable and quality haircut enhances the level of trust andloyalty towards the stylist. There is also a direct effect ofperceived performance excellence on loyalty, in addition to anindirect effect via trust. Trust, meanwhile, has a positive effecton customer loyalty.

How managers should react

Customers may be able to find a stylist who can do just asgood a job at providing an excellent haircut, but it may bemore difficult to find a stylist with whom they can connectand build a lasting relationship. Managers should invest inhelping employees better to interact with, and serve,customers. Managers should invest in training andeducating their employees to “click” with customers. Insituations where it takes time to learn and deliver asatisfactory core service, it may pay dividends for theorganisation to focus on the relational and social benefits toretain customers, while buying time to improve on the coreservice performance. Managers should provide an atmosphereand environment with which customers can identify, and inwhich they can feel comfortable.

(A precis of the article “The effects of soft and hard serviceattributes on loyalty: the mediating role of trust”. Supplied byMarketing Consultants for Emerald.)


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uyung-the mediating role of trust

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