Abstract: Customer loyalty in services is the focus of the research. The research problem sought to determine both indirect and indirect effects of relational outcomes on customer loyalty, conceptualised as a psychological state. Relational outcomes are defined as: the thoughts, feelings, and relationships perceived by customers arising from the interaction with a service employee. This class of variable is differentiated from other relational factors such as the characteristics of the actors in the interaction and their behaviours. The effects of relational outcome antecedents were compared to service evaluation antecedents such as customer satisfaction, quality, and value. Customer loyalty was modelled as a psychological state and grounded in the unique characteristics of services. The pioneering work of Kingstrom (1983) was used as a basis for extending the literature.--Customer loyalty is an important variable for both services marketing researchers and industry. Accordingly, the research was justified on both theoretical and managerial grounds. Four factors inspired the identification of the research gap: a lack of service loyalty research grounded in service characteristics, lack of studies that conceptualised loyalty as a psychological state, inadequacy of service evaluation measures to predict customer loyalty, and the perceived importance of social interaction to service outcomes.--Data collection included pilot studies, re-analysis of published literature, and three major studies. In the first major study, 23 informants provided insights into the nature of three specific relational outcomes: friendship, social comfort, and social regard. The second study was a cross-sectional survey of 190 hair-dressing customers. The specific relationships between friendship, social regard, social comfort, value for money, service encounter satisfaction, perceived core service quality, and customer loyalty were established in this study. New scales were also developed for friendship, social regard, social comfort, and customer loyalty. A third study collected survey data from 406 customers of hairdressing salons, cafes, and naturopathic clinics. Hypothesised relationships were tested through three nested structural equation models.--The results indicate that relational outcomes in general are important to customer loyalty. Their effects on loyalty as a psychological state are both direct and indirect. The strength of the effects of relational outcomes on loyalty compares favourably with the effects of service evaluation measures on loyalty. The construct of friendship between individual customer and service employee was found to be related significantly and positively with customer loyalty. The effect of personal friendship appears to have as strong an effect as perceptions of core quality and service encounter satisfaction.--Another major finding was that the two relational outcomes of social comfort and social regard both had an indirect influence on customer loyalty. This effect was mediated through the service evaluation constructs of perceived core service quality and service encounter satisfaction. Social comfort affected both quality and satisfaction whereas social regard only influenced quality. However, the impact of social regard on core quality was substantial. Friendship was not found to have a significant relationship with either quality or satisfaction. These findings suggest that there is a temporal dimension to the influence of relational outcomes. Both social regard and social comfort appear to be more important in the early stages of customer-service provider interaction. It also appears that customers evaluate the core quality of everyday services such as hair salons, cafes, and naturopaths using social cues such as feeling well regarded.--A further major finding was the lack of a significant relationship between value for money and psychological loyalty in both quantitative studies. Effects of quality, satisfaction, and friendship appear to be important to loyalty development whereas customer value is not. This finding suggests that value for money may be related directly to actual purchase behaviour or repurchase intentions rather than mediated through psychological feelings of loyalty. Hence, evaluations which reflect pricing considerations are less likely to be associated with psychological loyalty than more relationally oriented constructs.--The findings indicate important implications for both marketers and researchers. Marketing strategists need to be clear about pursuing either a loyalty or a value for money strategy. The former may not result from the latter. Relational outcomes lead to psychological loyalty but their interactive effects operate differently. Friendship with a service employee provides a direct contribution to loyalty development. Whereas social regard and social comfort affect customers' evaluation of the service. Pursuing a relational strategy will have implications for the way frontline staff are selected and trained. Theoretical implications include: using the relational outcomes as a basis for middle range theory development, support for the linear-additive measurement approach, use of laddering techniques to determine relevant influencing variables, and additional explanatory power to the service recovery literature.--In conclusion, a unidimensional construct of psychological loyalty, grounded in service characteristics, was developed, tested, and evaluated for wide application to service industries. Three specific relational antecedents: Friendship, social regard, and social comfort were found to be important to the development of customer loyalty. The research highlighted how these relational outcomes interacted with service evaluation measures to produce loyal customers. Accordingly, Kingstrom's (1983) work has been extended.