Service personalization and loyalty

Purpose To investigate the effect of service personalization on loyalty, and to measure some of the psychological dynamics of the process. Design/methodology/approach Structural equation modeling. Findings It is shown that the effect of service personalization on loyalty exists, but that the effect is not all direct. Personalization works through improving service satisfaction and trust. Personalization and improved communication act together in such a way that they account for the variance in loyalty that would be otherwise explained by corporate image. Research limitations/implications Data, though comprising a very large probability sample, are from one economic sector in one European country. Practical implications Service personalization is a powerful way to retain customers in its own right. In addition, the other results show that personalized service can partially replace the effects of communication and corporate image on loyalty. This argues that personalized service can be a powerful addition to mass communications. Originality/value Growing conventional wisdom in marketing argues that customer loyalty is responsible for large fractions of the profits of many service businesses. Constructs such as satisfaction, trust, customer collaboration, customer interaction, firm image, personalization, learning relationships, and so forth, have all been proposed as intermediate objectives, or as tools to build loyalty. Yet, to date, only some of these constructs have been measured and shown to be related to loyalty. This paper fills a portion of the empirical gap by showing that service personalization, indeed, affects loyalty, above and beyond the other explanatory variables.