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Quality and Customer Satisfaction Spillovers in the Mobile Telecoms Industry

Y. Ding, K. H. Chai
Department of Industrial and Systems Engineering, University of Singapore, Singapore
(dy@nus.edu.sg, iseckh@nus.edu.sg)
Abstract - Customer needs are increasingly fulfilled by a
seamless integration of products and services. Complexity
grows for firms to understand customers since their
perception of firm performance can be affected by either
product manufacturers or service providers. Our study is
attempting to identify possible spillover effects of quality and
customer satisfaction between products and services.
Potential moderators such as affective commitment and
consumer knowledge will also be examined. Our discussion
shows that firms working closely together in delivering
solutions to customers need to consider the influence of their
partners product or service quality and satisfaction level as
well. This may enhance understanding of customer
satisfaction and loyalty of their own companies.
Keywords Associative networks, loyalty, quality,
satisfaction, spillover.

I. INTRODUCTION
Companies are constantly searching for better ways to
sustain competitive edge. In their seminal work, Vargo
and Lusch [1] claimed that the entire business
environment is increasingly shifting from the traditional
tangible goods exchange to mostly intangible, knowledgeintensive service offerings. They urge both practitioners
and scholars to adopt a service-dominant (S-D) logic,
which redefines the role of goods as a distributional
mechanism for services and emphasizes that value can
only be realized by consumption of products or services or
both. Thus, in the cases where the effective use of a
product relies on the service as much as on the product
itself, it is crucial to ensure the seamless integration of
them. Poor quality in either products or services can
deteriorate the overall value.
A typical industry is the mobile telecommunications
where a communication experience requires both a
handset and a network to properly function simultaneously.
Moreover, latest advancement has witnessed that a third
component, software applications, is increasingly
important in this ecosystem. Usually installed in a
smartphone, these applications can turn a handset into a
multipurpose device, such as GPS, music player, web
browser and many others which may be beyond our
imagination. However, none of these phenomena has been
fully addressed in the quality and customer satisfaction
literature although this stream of research has been
proceeding for nearly three decades. Adequate
understanding of the quality, customer satisfaction and
loyalty link has mostly been shown in a single firm, or
pure service, or pure product context; however, studies on

978-1-4244-4870-8/09/$26.00 2009 IEEE

managing both products and services and their synergy


effects are rare. With more parties, either within the same
organization or from different organizations, collectively
proposing value-in-use, such as recent entrance of mobile
applications providers, the complexity of understanding
and maintaining customer relationship is sure to magnify.
Moreover, the importance of addressing this gap is further
underscored by the fact that service elements in an
offering is increasing as more product manufacturers have
transformed to service providers and firms are now
dedicated to creating a holistic delightful experience [2].
Therefore, an urgent need emerges for more scholarly
research in this area. This study aims to attain some
insights on the spillovers of quality perceptions and
customer satisfaction of different parties based on
observations from the mobile-telecoms industry.
The remainder of this article is structured as follows.
A comprehensive review of relevant key concepts and
theoretical foundations is first conducted, followed by
hypotheses development. It is concluded with potential
contributions and limitations.
II. LITERATURE REVIEW
A. Relationship between Quality, Satisfaction and Loyalty
In the early 1990s, results on the causal order of
quality and customer satisfaction were mixed. Several
studies reported that service quality is an outcome of
customer satisfaction [3,4]. However, later on the view
that quality precedes customer satisfaction becomes
prevalent among researchers [5]. Further studies show that
the influence of quality on loyalty intention is indeed
mediated (e.g., [5,6]) by customer satisfaction. Such
mediation mechanism has its root in consumer behavior
research that cognitive evaluations precede emotional
responses followed by intentions [7]. This is also
consistent with normal decision making process. This
model (i.e. customer satisfaction as a mediator) is
accepted as a basis for developing our spillover effects
framework.
B. Spillover Effects
Early explorations of spillover effects between
products and services are mostly in the retailing context.
Significant influence of in-store services on product
quality perceptions was found [6]. Later on researchers
began to notice the spillover effects between independent
product and service providers. Archer and Wesolowsky [8]
concluded that owners tend to be more tolerant to negative

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vehicle incidents than negative service encounters; on the


other hand, positive service encounters can counteract
negative vehicle incidents and build up loyalty. Taking a
step further, Mittal et al. [9] found that product
satisfaction affects intentions toward service provider
more than does service satisfaction after owing the car for
some period of time.
Overall, research on spillover effects is not common
in extant customer satisfaction literature. However, a
considerable amount of studies have been conducted in
branding, such as brand alliances, and brand extension.
Theories and findings in brand spillovers can shed some
lights on quality and customer satisfaction spillovers. First,
spillover effects usually occur when a link, either weak or
strong, exists between the focal parties. For instance,
Votolato and Unnava [10] found that negative cobranding
spillover exists only when the host brand was culpable for
the misdeeds of its partner brand. Second, spillover effects
are characterized by strength and directionality [11].
Three patterns of asymmetries, unidirectionality, unequal
magnitude, and positivity or negativity effects, can be
expected based on the two features. Moreover, further
exploration of possible moderators is critical to enhancing
the understanding of the spillover process and providing
more precise measure of the outcomes (i.e., spillover
effects).
C. Associative Network Theory
One possible way to examine spillover effects is to
understand how human brains organize and process
information. The predominant theory on this is the
associative network theory [12]. According to this theory,
our memory is represented by complex networks
comprised of nodes and numerous links connecting them
(see Fig. 1). Nodes are the basic information storage units,
which contains brands, product attributes, evaluations, and
many others. A more accurate and comprehensive
understanding of any concept requires a search in the
networks not only obtaining information in each node,
but also keeping aware of the links between them [12].
Links are characterized by directionality and strength,
which is the same as the two features of spillover effects.
As the simplified associative network displayed in Fig. 1,
linkages between any pair of nodes can point in both
directions; and strength of linkages varies as associations
differ. In some cases, spillover may just emanate from one
node to another but not the opposite. To exemplify, as is
shown in Fig. 1, although a strong link exists from Service
A to Product A, no significant association from the
opposite is observable. In addition, strength of
associations depends on both quality (the manner of
thinking) and quantity (amount of thinking) of information
procession. When a concept is recalled repeatedly and
elaborated in every detail, the associations will be
strengthened.

Product A

Product C

Product B

Service A

Strong Association
Weak Association
No Significant Association

Fig. 1. A schematic representation of an associative network

Information processing of spillovers includes two


sequential steps: retrieval and updating. Retrieval is
facilitated by a process named spreading activation from
node to node [12]. Activation of one node (referred to as
the source node) by external information (e.g., a
negative or delighting experience) will immediately
spread to its connected nodes (referred to as the
destination nodes), from which further expanding to the
nodes linked to them (i.e., destination nodes), and so on.
The extent of activation is largely determined by the
content of the external information and the manner that
those nodes are organized in the network (i.e.,
directionality and strength of the associations). After
retrieval, updating of those activated nodes will finally
generate the outcomes of spillover effects [11]. It is a
learning and improving process involving the integration
of existing information contained in the node with the new
valenced message. The updated information can be
enduring in the sense that it decays slowly in our memory
[13]. This indicates that the aforementioned information
processing is not a transient phenomenon; its effects can
last long. It is important to clarify this because the
conceptualization and measurement of quality, satisfaction
and loyalty intentions are from a long-term (global)
perspective, rather than based on a specific transaction.
III. HYPOTHESES DEVELOPMENT
A. Spillover Effects
Attitudes can be conceived as a set of related feelings,
memories and beliefs about an object [14]. Affection,
cognition and behavioral intentions are close correlates of
attitudes [15]. Thus, quality, cumulative satisfaction and
loyalty intentions are regarded as attitude-like concepts in
this study. Consistent with associative network theory,
attitudes are represented in memory by (1) an object label,
(2) an evaluative summary, and (3) a knowledge structure
supporting that evaluation [15]. Such an associative
structure of attitudes is further demonstrated in an
experiment by Tourangeau et al. [14]. They found that
activation of attitudes toward one issue can facilitate
activation of attitudes toward other relevant issues (i.e.,
faster reaction).
Based on these arguments, both handsets and network
operators can be conceptualized as connected label nodes.
Each label node is strongly associated with quality

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perception, satisfaction and loyalty intentions nodes.


According to the quality-satisfaction-loyalty framework,
links also exist pointing from quality node to satisfaction
node and from satisfaction node to loyalty intentions node.
Observation of the target object (e.g., breakdown of a
handset) will spontaneously activate the quality node, and
consequently satisfaction node and loyalty node. This is a
mental process of establishing the quality-satisfactionloyalty links within an individual object. On the other
hand, due to close associations between handsets and
networks as discussed before, satisfaction with the
network might also be spreading-activated by quality
evaluation of the handset besides the direct influence from
quality perception of the network. Likewise, loyalty
intentions toward the network are susceptible to change in
satisfaction levels with the handset as well. In a similar
vein, observation from network-relevant events can also
impact handset evaluations. Integrating the positive
relationships found between quality and satisfaction and
between satisfaction and loyalty [5], following hypotheses
are postulated:
H1a: Handset quality positively affects customer
satisfaction with the network.
H1b: Network quality positively affects customer
satisfaction with the handset.
H1c: Customer Satisfaction with the handset
positively affects loyalty intentions toward the network.
H1d: Customer Satisfaction with the network
positively affects loyalty intentions toward the handset.
B. Direct Effects versus Spillover Effects
Relationships between quality, customer satisfaction
and loyalty within a single firm (referred to as direct
effects) have been extensively examined in extant
literature in various contexts. However, no one compares
the magnitude of direct effects with spillover effects.
Research on attitude and information integration [15]
argues that the level of updating is determined by message
memory (i.e., information from the source node) and prior
message in the node. For direct effects, the external
information (i.e., original information) directly acts upon
the source node (e.g., if a user believes an incident is a
result of low handset quality, the handset node will be first
activated); while spillover effects is caused by the
message spreading along the path from the source node to
the destination node. As suggested by Collins and Loftus
[12], activation spreads along the links in a decreasing
gradient, that is, only part of the message from the source
node can be preserved depending on the distance and
strength of the paths. Therefore, I postulate that direct
effects are larger than spillover effects.
H2a: The direct effect between network quality and
customer satisfaction with the network is larger than the
spillover effect between network quality and customer
satisfaction with the handset.

H2b: The direct effect between handset quality and


customer satisfaction with the handset is larger than the
spillover effect between handset quality and customer
satisfaction with the network.
H2c: The direct effect between customer satisfaction
with the network and loyalty intentions toward the
network is larger than the spillover effect between
customer satisfaction with the network and loyalty
intentions toward the handset.
H2d: The direct effect between customer satisfaction
with the handset and loyalty intentions toward the handset
is larger than the spillover effect between customer
satisfaction with the handset and loyalty intentions toward
the network.
C. The Moderating Effects of Consumer Knowledge
People naturally search for the causes of events they
encounter, which is related to their knowledge of the
specific field. We propose that consumer knowledge
moderates the spillover effects between quality and
satisfaction for two reasons. First, as noted by Payne [16],
people tend to utilize heuristics when facing cognitively
demanding tasks. Hence, consumer judgment is usually a
balance between objective attributes and heuristics.
Advanced consumer knowledge can, to some extent,
enhance confidence when purchasing or assessing a
product or service [17]. Those experienced users may
evaluate a service on relatively objective criteria, and less
resort to simple heuristics. However, decision making by a
mobile user lack of relevant knowledge may heavily rely
on cues such as brand reputation and word of mouth.
Secondly, more knowledgeable mobile users are supposed
to better understand underlying processing mechanism of
handsets and networks. Therefore, they are more capable
of correctly identifying the reason of a smooth or an awful
communication experience. More correct and rational
judgment may limit the effect within the boundary of the
attributed products or services, thus reducing spillovers.
Since quality usually refers to evaluations of specific
characteristics of a product or service, relevant knowledge
(e.g., knowledge of handsets and networks in the mobiletelecoms industry) is required. However, no evidence
shows such knowledge is necessary in global satisfaction
and loyalty formation. Thus, the moderating effects of
consumer knowledge are constrained within spillovers
between quality and customer satisfaction.
H3a: The spillover effect between network quality and
satisfaction with the handset will be weaker (stronger)
when users are highly (less) knowledgeable on mobile
telecoms.
H3b: The spillover effect between handset quality and
satisfaction with the network will be weaker (stronger)
when users are highly (less) knowledgeable on mobile
telecoms.

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D. The Moderating Effects of Affective Commitment


Affective commitment is defined as the emotional or
psychological attachment to a product or service [18]. It
basically addresses the question: How strongly do I feel
about my relationship with this brand? Affective
commitment is regarded as a close antecedent of loyalty in
several studies [19]. Therefore, we hypothesize
H4a: Network commitment positively affects loyalty
intentions toward the network.
H4b: Handset commitment positively affects loyalty
intentions toward the handset.
More importantly, high commitment can also shield
the target product or service from negative information.
As noted in the associative network theory, updating of a
node is not only determined by the new information, but
also depends on the existing beliefs and attitudes, which
actively guide processing of new information. This
ensures that attitude has a certain degree of consistency
and is psychologically stable. Deviation from an existing
attitude may involve a high psychological cost since it
requires cognitive reordering and rethinking of a prior
knowledge. Hence, consumers tend to pursue cognitive
consistency when encountering conflicting information,
which constitutes a defense mechanism [20]. Therefore, in
an associative network, information from the source node
may be prevented from spreading to the end nodes or
simply being ignored while updating if it contradicts to
consumers existing attitudes.
H5a: When handset commitment is high (low),
spillover effects from satisfaction with the network to
loyalty intentions toward the handset will be stronger
(weaker) given positive information, but weaker (stronger)
given negative information.
H5b: When network commitment is high (low),
spillover effects from satisfaction with the handset to
loyalty intentions toward the network will be stronger
(weaker) given positive information, but weaker (stronger)
given negative information.
E. Control Variables
User type (i.e., prepaid users and postpaid users) is
controlled in this study since it is supposed to significantly
affect the results. In an associative network, the strength
of the linkage between a handset node and a network node
can differ. Specifically for mobile users, those who
purchase their handset from the operator retail shop may
perceive closer relationship between the handset and
operator. As a result, the chance of being spreadingactivated is higher and the information preserved from the
source node to the end node is more complete. Therefore,
spillover effects are likely to be more significant for
postpaid users than prepaid users.

Fig. 2. Conceptual framework

Fig. 2 presents all the hypothesized relationships.


IV. CONCLUSION
Our study aims to obtain a better understanding of
quality, customer satisfaction and loyalty links by
introducing spillovers effects. Built on the theory of
associative networks and customer satisfaction as a
mediator model, it extends the well established qualitysatisfaction-loyalty relationships to a multi-firms setting
wherein products and services may interact. In addition,
possible moderators are proposed to further understand the
characteristics of spillovers. Knowledgeable consumers
are less likely to be affected by large spillovers; while
information of a brand consistent with consumers
commitment level may be more actively processed.
Although empirical results are yet to be obtained,
literature review and our conceptual discussion suggest
that firms working closely together in delivering solutions
to customers need to consider the influence of their
partners product or service quality and satisfaction index
as well. This may enhance understanding of customer
satisfaction and loyalty of their own companies. Besides,
dedication to enhancing consumer commitment may not
only protect firms reputation from their own occasional
misdeeds, but also shield off negative information from
other relevant firms.
However, some boundaries should be highlighted
when interpreting our propositions. First, loyalty is usually
defined along two dimensions, namely attitudinal loyalty
and behavioral loyalty [18]. However, as many other
studies, only the former is considered in this study. The
main reason is that our study focuses on psychological
process, which may influence but not decisively predict
real behavior. Some external factors, such as location,
time constraint and promotion can also lead to purchasing
behavior.
Second, not every aspect of customers experience
with handset or network is investigated. As is known to us,

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besides selling mobile phones, handset manufacturers also


offer after sale services. Nevertheless, generally only a
small portion of customers will use maintenance or repair
services since most mobile phones have good quality and
their performance is relatively reliable. Hence, after sale
services are not included in our study. Smartphone users
are also excluded as their usage experience can be very
different from ordinary handsets owners. For network
operators, although several other types of services can be
identified, such as hotline, online, and in-store services,
they are mostly supporting services but not the core
offerings. Besides, the usage of these supplementary
services tends to be highly uneven, which will greatly
increase the difficult of sampling and understanding of
their impact on the formation of overall quality perception.
Moreover, inclusion of all types of services would result
in a much more complex model than the current one.
Higher model complexity may be not statically and
theoretically manageable. For example, an incredibly
larger sample size is needed and problems may occur at
model estimation. In addition, such a model may be lack
of focus because too many latent variables are included.
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