The Effect of Use of Electronic Stock Market Trading on Customer Attitudes and Behaviours: An Empirical Investigation

Given the importance of customer relationship to service businesses and the recent development of electronic commerce (EC), a critical research agenda that requires attention is whether there is a significant link between EC-related investments and customer relationship. A better understanding of the relationship between EC and customer relationship may provide service firms with information to decide the future of EC arrangements. This research assesses the importance of EC as a strategic driver of customer relationship for stock brokerage firms. This explains the underlying processes through which customers' use of electronic trading leads to improvements in service quality and higher levels of satisfaction, and ultimately to such desired outcomes as attitudinal loyalty and actual retention. Empirical data were collected from an intercept field survey of 162 customers of two major Taiwanese stock trading brokers. Our results show that greater use of electronic trading is strongly associated with high levels of perceived quality and actual retention. In addition, the path model reveals service quality having the greatest mediating effect on overall satisfaction and actual retention. The investments for EC can be only important to stock brokerage firms to the extent that they influence certain relationship outcomes, such as service quality, overall satisfaction, attitudinal loyalty and actual retention. 1. Introduction As competition has become more intense, many business organizations have realized that the customer is the foundation of business to keep it in existence (Bowen & Schneider, 1999). In particular, in the financial service sector where customer acquisition costs are significantly higher than retention costs (Ennew & Binks, 1996), an organization's ability to remain in business and produce superior organizational performance is becoming a function of its competitiveness and its ability to win customers from the competition and retain them. The growing interest in building and maintenance of strong customer relationship is of primary concern for the financial service sector for several reasons. First of all, some business analysts have suggested that the cost of recruiting a new customer is five times more than the cost of retaining an existing customer (Mittal & Lassar, 1998; Krishnan et al., 1999; Zeithaml, 2000). Doing business with existing customers saves money on a variety of acquisition costs associated with advertising, personal selling pitch to new prospects, setting up new accounts, explaining business procedures to new customers, and inefficient dealing during the customer's learning process (Mittal & Lassar, 1998). Furthermore, loyal existing customers are likely cost less to service because costs can be amortized over a longer customer lifetime (Gwinner et al., 1998; Zeithaml, 2000). Second, existing loyal customers benefit a firm, result in predictable sales and profit streams, and are more likely to purchase additional goods and services or pay more for them(Grinner et al., 1998). According to Kalakota and Whinston (1997), the importance of attracting, pleasing, and keeping customers is as old as the notion of marketing itself. What is new is the use of technology for the active management of a firm's current customer base as a strategic asset. Gordon (1998) also recognizes the role of information technology and its key components, including mass customization, is simply not possible without the enabling effects of technology to store, retrieve, process, communicate and analyze customer data. As a matter of fact, information technology has always played a role in attracting and keeping customers (Duncan & Moriarty, 1998) and is shaping firm-customer interaction (Bitner et al., 2000; Parasuraman & Grewal, 2000; Oliva et al., 2003). Information technology has really revolutionized the concept of delivering services and redefined the customer interface (Roth & Jackson, 1995; Heskett et al. …