We address the following questions that are becoming increasingly important to managers in service industries: Are the levels of customer satisfaction and loyalty for the same service different when customers choose the service online versus offline? If yes, what factors might explain these differences? How is the relationship between customer satisfaction and loyalty in the online environment different from that in the offline environment? We propose a conceptual framework and develop hypotheses about the effects of the online medium on customer satisfaction and loyalty and on the relationships between satisfaction and loyalty. We test the hypotheses through a simultaneous equation model using two data sets of online and offline customers of the lodging industry. The results are somewhat counterintuitive in that they show that whereas the levels of customer satisfaction for a service chosen online is the same as when it is chosen offline, loyalty to the service provider is higher when the service is chosen online than offline. We also find that loyalty and satisfaction have a reciprocal relationship such that each positively reinforces the other, and this relationship between overall satisfaction and loyalty is further strengthened online.
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