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The Relationship between Service Quality and Customer Loyalty at a Telecommunication Company in Malaysia Noor Azlina Mohamed Yunus Center for Applied Management Studies Faculty of Business Management Universiti Teknologi MARA, Malaysia

Baharom Ab Rahman Center for Applied Management Studies Faculty of Business Management Universiti Teknologi MARA, Malaysia

Abdul Kadir Othman Center for Applied Management Studies Faculty of Business Management Universiti Teknologi MARA, Malaysia Abstract—Service quality is becoming the most significant aspect of business success for either manufacturers or service providers. Therefore, businesses are eager on precisely measuring service quality in understanding its crucial antecedents and consequences to accomplish competitive advantage and assemble customer loyalty. Thus, this paper is to determine the relationship between service quality and customer loyalty at a telecommunication company in Malaysia. The data were gathered through the distribution of questionnaires to the total of 306 respondents who visited and used the products or services at TMpoint Bukit Raja, Klang, Selangor. The researcher used the correlational and multiple regression methods. The result identified that there was a positive and significant relationship between service quality and customer loyalty. The most influence factor on customer loyalty was assurance followed by reliability and tangibles. Nevertheless, there was no significant influence among responsiveness and empathy on customer loyalty. The implications of the findings are

recognize the service quality condition in more detail and to use this understanding to develop further relationship with customers [5]. In fact, measuring service quality in order to better understanding is important antecedents to attain competitive advantage [1]. Further, service quality is a competitive advantage for businesses that compete in service or product sector industries [6]. In additional, the means to sustainable competitive advantage lies in delivering high quality service that in turn results in customer loyalty [4]. Service quality literature defines service quality in terms of subjectivity, attitude and perception [7]. Besides, it generally understands the relationship of service quality and customer loyalty is a major value as indicators of customer behavior such as purchase intentions and words of mouth advertising [8]. In fact, it is urgently needed for businesses to identify the key drivers of service quality and customer loyalty to know the influence on business performance and behavior intentions of customers [9]. Therefore, this study attempts to investigate the relationship between service quality and customer loyalty at a telecommunication company in Malaysia.

Keywords—Customer loyalty, service quality and telecommunication company

II. LITERATURE REVIEWS A. Customer Loyalty Today’s company should realize that having satisfied customers is not good enough [10]. They must have extremely satisfied customers [10]. Therefore, a small increase in customer satisfaction boosted customer loyalty dramatically [10]. The reason indicates that satisfying customers are not enough to retain them because even satisfied customers defect at a high rate in many industries [11]. Thus, excellent service quality is increasingly recognized as key factor affecting customer loyalty [12]. This is also supported by [6] whereby the outstanding service quality that experienced by the customer directly boosts their loyalty toward the company. Moreover, the fact that customer loyalty lies in delivering high service quality also proposed by [13]. The need for businesses to retain customers in an important issue in today’s global marketplace [14]. To

I. INTRODUCTION Service quality is normally noted as an important requirement for establishing and sustaining relationship with valued customers [1]. Many service companies including telecommunications industries have attempted to establish the nature of the relationship between service quality and customer satisfaction as well as customer loyalty [2]. Superior service quality and high customer satisfaction as well as customer loyalty are seen as main objectives by the service providers specifically telecommunication company in order to improve their business performance [4]. They struggle to recognize efficient and effective approaches in improving service quality [1]. Since service quality is answered in customer development and profitability, it is significant to

retain customers, the company must forge loyal and longterm relationships with profitable customers [14]. According to [15], they also propose that customer loyalty is quickly becoming important for the twenty-first century marketplace. In this sense, building customer loyalty is a valuable defense against competitive challenges [1]. In addition, [16] believe customer loyalty is a more helpful business approach than continuously trying to obtain new customers in order to replace the defecting customers. Clearly, it costs five times more to acquire a new customer than to retain an existing one [17]. In essence, customer loyalty is defines as the customer behaviors characterized by repeat purchases, willingness to refer others to a product or service, willingness to convince others to use a product or service and willingness to recommend product or service improvement [18]. Loyal customers are less likely to switch to other competitors because of price and they make more purchases than non-loyal customers [19]. Loyal customers also provide and spread strong word of mouth advertising [10]. Besides that, loyal customer cost less to serve, in part because they know the product and require less information [10]. Therefore, loyal customers not only require less information themselves, they also serve as an information source for other customers [10]. To summarize, it is commonly known that there is a positive relationship between customer loyalty and business profitability by increasing sales and market shares, providing opportunities for cross selling, improving customer relations and thus enhancing the corporate image ([8]; [10]). B. Service Quality Nowadays, companies must develop strategies that meet today’s customer needs that in turn will lead to business performance [20]. As an important measure of business performance, service quality can be considered the core success in today’s highly competitive world of business [2]. According to [6], service quality is a competitive advantage for businesses that participate in service sector industries. Besides, delivering of excellent service quality to customers is increasingly recognized as a key aspect that affects the company’s performance [12] Eventually, measuring service quality is vital in order to better understand its crucial antecedents and consequences in order to achieve competitive advantage and to ensure high level of customer satisfaction and customer loyalty [1]. The inspiration about service quality is also supported by [12] who stated that many businesses are facing increasing competition that forces them to search for competitive advantage, efficiency and profitable ways to compete with other competitors. Moreover, as a result of this stiff competition, service quality becomes an increasingly essential aspect in determining market shares and profitability [21]. Subsequently, service quality is able to lead companies to increased customer satisfaction and customer loyalty that thus contributes considerably to company’s performance [22]. In this sense, service quality is defined as

customer’s overall impression of the relative expectation and perception of the company and its services [23]. C. SERVQUAL Model The true key to delivering quality service that can lead to customer satisfaction and customer loyalty are by indentifying and understanding what dimensions of quality are important to the particular customers [24]. [23] initiated a research stream that many consider to be the most comprehensive investigation into service quality. SERVQUAL model has been widely utilized by managers and academics to assess customer perceptions of service quality for a variety of services such as banks, credit card companies, repair and maintenance companies as well as distance telephone companies to measure customer satisfaction and customer loyalty [1]. In essence, the SERVQUAL model proposed by [23] consists of a 22-item scale that measures the difference between customer expectations and perceptions across the various service dimensions and the resultant “gap” indicates the level of satisfaction and dissatisfaction. In short, the SERVQUAL model is based on the gap theory that is intended to measure the customer expectations for various aspects of service quality and customer perception of the service they actually received from the service company [23]. Primarily, the SERVQUAL conceptualizes service quality on the basis of the differences of five dimensions namely tangibles, reliability, responsiveness, assurance and empathy [23]. - Tangibles element includes the physical evidence of the service such as physical facilities, appearance of service providers, tools or equipment used to provide the service, physical presentation of the service and other customers in the service facility. - Reliability element involves consistency of performance and dependability. It means that the firm provides the service right at first time. - Responsiveness element concerns the willingness or readiness of employees to provide service. It involves the speed of delivering the services, speed of problem solving, consistency of dealing with problem as well as willingness of employees to respond to the customer needs. - Assurance element relates to the knowledge, competence and courtesy of service employees and their ability to convey trust and confidence. It also includes trustworthiness, believability and honesty of service personnel. - Empathy element is the caring and individualized attention provided to customers includes the approachability and ease of contact with the service providers and their efforts to understand the customers’ needs. In essence, the conceptualization of SERVQUAL model has been subjected to some severe criticism as well. According to [25], he argued that SERVQUAL model lacks of a technical-oriented dimension. In other words, there is no SERVQUAL item addressing specifically what is being provided by the service firms.

Further, others have argued that dimensions must be speaking to the particular service in question [26]. A further critique of SERVQUAL model concerns its emphasis on service and product dimensions and its neglect of other dimensions of the marketing mix especially price [27]. Conversely, [28] dismiss the need to include expectations at all and in fact claim that they are misleading. In response, they propose SERVPERF model, a perception-only model, adopting a similar dimensional framework of the original SERVQUAL. In this case, [28] defined and measured customer satisfaction as a one-item that asks for the customers’ overall feeling towards a company. Therefore, for the purpose of this study, the SERVPERF scale by [28], which is a perception-only model to represent the five SERVQUAL dimensions, will be utilized. The SERVPERF scale utilizes the 22 perceived performance items used in the SERVQUAL instrument. Essentially, SERVPERF scale has been identified as being superior in explaining variance in an overall measure of perceived service quality [29]. In addition, the added value of SERVPERF is that practitioners commonly measure determinants of customer satisfaction and customer loyalty by having their customers to assess the company’s performance [29]. D. Conceptual Framework For the purpose of this study, the independent variable is service quality that consists of tangibles, reliability, responsiveness, assurance and empathy. On the other hand, the dependent variable is customer loyalty. Therefore, this study proposed the following framework that illustrated in Figure 1. Independent Variables

Dependent variable

Tangibles Reliability Responsiveness

Customer loyalty

Assurance Empathy

Figure 2.1: A Conceptual Framework depicting the Relationship between Service Quality and Customer Loyalty at TMpoint Bukit Raja, Klang, Selangor E. Research Hypotheses The following hypotheses have been identified for the purpose in this study. H1 = Service quality significantly influences customer loyalty. H1a = Tangibles significantly influence customer loyalty. H1b=Reliability significantly influences customer loyalty. H1b = Responsiveness significantly influences customer loyalty. H1d= Assurance significantly influences customer loyalty. H1e = Empathy significantly influences customer loyalty.

III. METHODOLOGY This study was conducted to investigate the relationship between service quality and customer loyalty at TMpoint Bukit Raja, Klang, Selangor by using non-experimental correlational research design. The population of this study was the customers who visited and used the products or services of TMpoint Bukit Raja. The sampling technique used in selecting the respondents was non-probability sampling namely convenience sampling. Data were collected by means of specially designed questionnaire, which consists of close-ended questions using a 5-point Likert scale. The Section A of the questionnaire contains questions regarding respondents’ backgrounds. Section B focuses on the service quality and the questions were adapted from [23]. The Section C relates to customer loyalty provided by TMpoint Bukit Raja which was adapted from [30] and [31]. IV. FINDINGS A. Profile of Respondents The respondents were asked about their gender, race, age, marital status, education level, field of occupation and household income in order to provide a good picture of the background of respondents. The number of male respondents is slightly higher compared to the females. Most of the respondents are Malay aged between 26 – 35 years old and married. The majority of the respondents obtained a secondary school education and most of them are working at private sector and earn between RM1,000 – RM2,000 per month. B. Reliability Analysis Table 1: Cronbach’s alpha scores for the service quality, service quality dimensions and customer loyalty (n = 279) are as follows: Reliability Scales No. of Coefficient Scale (Alpha) Items (n = 279) 0.95 22 Overall service quality 0.80 4 Tangibles 0.90 5 Reliability 0.68 4 Responsiveness 0.84 4 Assurance 0.85 5 Empathy Customer loyalty 5 0.906 The Cronbach’s alpha for overall service quality is 0.95, indicating that the items measuring service quality are highly reliable. The questions for each dimensions of service quality namely tangibles, reliability, responsiveness, assurance and empathy are also highly reliable with the Cronbach’s alphas of 0.80, 0.90, 0.68, 0.84 and 0.85, respectively. Meanwhile, the alpha value for customer loyalty is 0.906 which also indicates the consistency of the measures. The findings indicate that the measures have high internal consistency. This is supported by [32] who stated that the reliability coefficient closer to 1 indicates higher internal consistency. Table 1 shows the Cronbach’s alpha scores

for service quality, service quality dimensions and customer loyalty. C. Correlation Analysis Table 2: Correlation between service customer loyalty (n = 279) N Variables 1 2 3 4 o 1 Tangibles 2 Reliability .669 ** 3 Responsiv .670 .749 eness ** ** 4 Assurance .614 .735 .711 ** ** ** 5 Empathy .597 .736 .709 .770 ** ** ** ** 6 Overall .798 .912 .873 .873 service ** ** ** ** quality 7 Customer .606 .664 .604 .664 loyalty ** ** ** ** Notes: ** Correlation is significant at the tailed).

quality and 5

6

.886 ** .624 .726 ** ** 0.01 level (2-

The result of the study specified that there was a positive and significant relationship between service quality and customer loyalty (r = 0.726, n = 279, p < 0.01). All the elements of service quality namely tangibles, reliability, responsiveness, assurance and empathy significantly correlate significantly with customer loyalty. This finding is supported by [33] which stated that the perceived service quality makes the highest contribution and positive relationship to customer loyalty. D. Results and Discussion Table 3: Multiple regression between service quality and customer loyalty (n = 279) Model Standardized t Sig. Coefficient (Beta) Overall Service .726 17.583 .000 Quality R2 .527 Adjusted R2 .526 F Values .527 Significance F 309.156 Values Durbin-Watson 2.141 H1 = Service quality significantly influences customer loyalty As shown in Table 3, the result indicates that service quality significantly influences customer loyalty at TMpoint Bukit Raja (β = 0.726, p < 0.01). Therefore, Hypothesis 1 that indicates service quality significantly influences customer loyalty is supported. This finding is consistent with the previous research conducted by [33] which specified that service quality has the direct effect and influence to customer loyalty.

Table 4: Multiple regression between elements of service quality and customer loyalty (n = 279) t Sig. Model Standardized Coefficient (Beta) Tangibles .204 3.435 .001 Reliability .234 3.168 .002 Responsiveness .028 .402 .688 Assurance .264 3.649 .000 Empathy .107 1.492 .137 R2 .538 Adjusted R2 .530 F Value .538 Significance F Value 63.591 Durbin-Watson .000 H1a = Tangibles significantly influence customer loyalty As shown in Table 4, the result indicates that tangibles significantly influence customer loyalty at TMpoint Bukit Raja (β = 0.204, p < 0.01). Therefore, Hypothesis 1(a) that states tangibles significantly influence customer loyalty is supported. This finding is supported by [9] indicated that the tangibles have significant positive influence on customer loyalty. This significant finding require service providers to provide their premises with up-to-date equipment and furniture, favorable ambience, comfortable waiting area as well as ample parking space, so that customers will feel appreciated and valued that indirectly boost their loyalty. H1b = Reliability significantly influences customer loyalty As shown in Table 4, the result indicates that reliability significantly influences customer loyalty at TMpoint Bukit Raja (β = 0.234, p < 0.01). Therefore, Hypothesis 1(b) that claims reliability significantly influences customer loyalty is supported. This finding is supported by [34] stated that reliability has positive influence on customer loyalty. Normally, the reliability element refers to the ability to perform the service dependably and accurately [23]. Thus, TMpoint Bukit Raja should ensure that its employees are able to provide dependable and accurate service at all time so that customers will feel confident and consequently contributes to enhanced customer satisfaction. H1c = Responsiveness significantly influences customer loyalty As shown in Table 4, the result indicates that responsiveness does not significantly influence customer loyalty at TMpoint Bukit Raja (β = 0.028, p > 0.01). Therefore, Hypothesis 1(c) that asserts responsiveness significantly influences customer satisfaction is rejected. Basically, responsiveness element concerns the willingness or readiness of employees to provide service [23]. It involves the speed of delivering the services, speed of problem solving, consistency of dealing with problem as well as willingness of employees to respond to the customer needs. Nowadays, the responsiveness is not longer the important element in service quality that

influences customer satisfaction due to the existence of high technology-based services such as electronic payment system, e-services and other to increase the efficiency and effectiveness in service delivery among customers [34]. The existence of high technology-based services and the acceptance of high technology strategy among customers to fulfill their customized needs and requirements indirectly reduce the human interaction between customers and employees [34]. H1d = Assurance significantly influences customer loyalty As shown in Table 4, the result indicates that assurance significantly influences customer loyalty at TMpoint Bukit Raja (β = 0.264, p < 0.01). Therefore, Hypothesis 1(d) that claims assurance significantly influences customer satisfaction is supported. This finding also strongly supported by [9] which found out that the assurance has significantly positive influence on customer loyalty. Generally, the assurance element relates to the knowledge, competence and courtesy of service employees and their ability to convey trust and confidence [23]. Therefore, TMpoint Bukit Raja should put a great deal of emphasis on this aspect so that customer loyalty can be assured. H1e = Empathy significantly influences customers loyalty As shown in Table 4, the result indicates that empathy does not significantly influences customer loyalty at TMpoint Bukit Raja (β = 0.107, p < 0.01). Therefore, Hypothesis 1(e) that asserts empathy significantly influences customer loyalty is rejected. This is because the element of empathy does not significantly influences customer loyalty due to the existence of high technology strategy which is the organization use in their service offerings to satisfy the needs of the customers such as online payment system, e-services and others. By using the technology as a means of service delivery, the human aspects that incorporated in empathy elements of the service quality are not very much emphasized by the customers [34]. Normally, the empathy element is made up of items addressing individual customer attention, convenient operating hours, having customers’ best interests at heart, understanding specific needs of customers’ and providing customers with individual attention [23]. V. CONCLUSION This study is meant to investigate the relationship between service quality and customer loyalty at TMpoint Bukit Raja, Klang, Selangor. Based on the data analysis, there was a positive and significant relationship between service quality and customer loyalty. All dimensions of service quality namely, tangibles, reliability and assurance significantly contribute to customer loyalty. Responsiveness and empathy was not a significant predictor of customer loyalty at TMpoint Bukit Raja due to the high technology strategy implemented by the company.

A. Managerial Implication Based on the findings, the current study establishes that service quality significantly influences customer loyalty at TMpoint Bukit Raja. Particularly, the elements of service quality such as tangibles, reliability and assurance significantly influence customer loyalty. According to their importance, the most influence factor on customer loyalty was assurance followed by reliability and tangibles. Therefore, the management of TMpoint Bukit Raja should highly consider in delivering excellent service quality especially through the assurance element because the excellent service quality that the customer experienced can directly boosts their loyalty without neglecting the other dimensions such as reliability and tangibles. In this sense, building customer loyalty is a valuable defense against competitive challenges. In this era of intense competition, it is familiar that the service quality is becoming the most significant aspect of business success mainly for the service providers to achieve the competitive advantage and establish customer satisfaction as well as customer loyalty. B. Research Limitations and Future Suggestions It is recommended that further studies be carried out in other sectors such as financial, hospitality and others to examine whether there are any similarities in the findings to indicate that service quality is critically and significantly influences customer loyalty. In addition, future research should be conducted using different methodology. The future research can use the longitudinal method in investigating the relationship between service quality and customer loyalty. The longitudinal method assesses changes in behavior in one group of subjects at more than one point in time. Future researchers can use the qualitative approach such as interview in gathering the research data on the issues of interest instead of using a questionnaire approach. The interviews can be useful and valuable if the research desires to obtain information that might otherwise be difficult to be obtained. The researchers are also able to recognize and aware of the interviewee’s nonverbal behaviors, the setting as well as other information that might provide helpful and useful information that might enrich the research findings. ACKNOWLEDGEMENT This paper could not have been written without the assistance and guidance from Associate Professor Dr. Baharom Ab Rahman and Dr. Kadir as my advisor and co-supervisor respectively. I would like to prolong my thanks and gratitude to my family for understanding and support. I also would like to extend my gratitude for those who are directly or indirectly involved in helping me in completing this dissertation. Your kind cooperation and contribution are highly appreciated. REFERENCES [1] W.M. Lassar, et al., "Service quality perspectives and satisfaction in private banking," Journal of Services Marketing, vol. 14 pp. 244-271, 2000.

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