Customer satisfaction and loyalty in the eyes of new and repeat customers. Evidence from the transport sector




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НазваниеCustomer satisfaction and loyalty in the eyes of new and repeat customers. Evidence from the transport sector
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Pantouvakis & Lymperopoulos

Customer satisfaction and loyalty in the eyes of new and repeat customers. Evidence from the transport sector.


Angelos Pantouvakis1, University of Ioannina

Konstantinos Lymperopoulos, University of Aegean


Purpose – The purpose of this research is to attempt to explore the relative importance of the physical and interactive elements of service on overall satisfaction, particularly when these elements are moderated by the point of view of repeat and new customers. Evidence is drawn from the transport sector industry.


Design/methodology/approach – The data for this study come from 388 ferry passengers Regression analysis was used to test the influence of each parameter and SEM employed to assess the moderating effects of repeat patronage on satisfaction.


Findings – The results suggest that the physical elements of the service are of greater importance in determining customer evaluations on overall satisfaction than interactive features of service. The results also suggest that these effects are not just direct but also moderated by the repeat use of the service. Finally both elements are very good predictors of overall satisfaction.


Research limitations/implications –As results are obtained from only one industry generalisations should be drawn with care.


Practical implications – The presumption of managers when looking at satisfaction as the primary, even sole gauge of customer loyalty appears to be erroneous. The consequence is potential misallocations of resources due to myopic focus on customers’ satisfaction increase. Our findings suggest that attention should be given to increasing the loyalty of passengers/customers.


Originality/value – This study suggests a moderating role for the repeat and new customers in the satisfaction- loyalty relationship and implies that to maximize investments in service improvements based on a focus on increasing physical satisfaction rather than seeking to develop an interactive “delight” to the customer.


INTRODUCTION


Services are by their very nature intangible and thus their assessment and subsequent evaluation cannot be achieved prior to their consumption; this justifies their classification as “experience” products (Nelson, 1974). This results in high uncertainty in customers’ minds, forcing them to concentrate on certain quality signals or service attributes to decrease information asymmetries. Relationship marketing has thus emerged as an exciting area of marketing that focuses on building long-term relationships with customers and other parties. In the relationship marketing literature there is a general agreement that the quality and the satisfaction of the relationship between buyer and seller are important determinants of the permanence and intensity of the relationship and the success of the firm (Berry, 1995; Goff et al., 1997). Although academics and practitioners recognize the importance of the relationship between the involved parties, there is little empirical evidence regarding the quality and the satisfaction of the relationship. This relationship quality may become a prerequisite to satisfaction (Caceres and Paparoidamis, 2007). However in long term relationships perceived satisfaction and perceived quality tend to merge into an overall evaluation of relationship satisfaction. (Leverin and Liljander, 2006)

The multidimensionality of relationship satisfaction is grounded in the literature (Crosby and Stevens, 1987; Bowen and Schneider, 1988; Bejou et al., 1998). Oliver and Rust (1994) in explaining satisfaction with the offering, have, like others, introduced the intangible element with its more materialised part of the service product into the equation. The influence of these tangibles and intangibles upon service quality is a widely debated issue in the marketing literature despite the apparent lack of consensus on the relative importance of every dimension. Few studies (Brady and Cronin, 2001, Kang and James, 2004, Reimer and Kuehn, 2005, Kang, 2006) consider the effect of the servicescape (tangibles) and the intangibles in its impact on service quality. Some authors advocate for the larger role that process quality factors play in perceptions of quality compared to the tangible ones (Cronin and Taylor, 1992, Parasuraman et al., 1991, Dabholkar et al., 1996) while others (e.g. Oberoi and Hales, 1990, Lewis 1991, Turley and Fugate, 1992, Santos, 2002) support exactly the opposite. There is little if any evidence in the literature linking or relating these two attributes directly to satisfaction.

Moreover the role of purchase behavior as an antecedent of satisfaction from the service and its physical and interactive elements have received even less attention, although numerous studies (Anderson et al., 1994; Cronin and Taylor, 1992, Zeithaml et al., 1996) assumed that previous or past experiences is a primary determinant of customer satisfaction. A deeper understanding of the interactions among customer satisfaction, physical and interactive elements and customer repeat patronage should go a long way in improving management effectiveness in the service sector.

The purpose of this study is therefore to assess the influence of physical and interactive elements of service on overall satisfaction, particularly when these elements are moderated by the point of view of new and repeat customers. The evidence is drawn from the transport sector, specifically the coastal shipping one. To reach this objective, this study will begin with a synthesis of the literature. It will then explain the method employed to assess the purpose of the study. The paper will conclude with the presentation and discussion of the results of the study.


Conceptual Background


Relationship satisfaction


Due to the specific character of services, the development of customer relationships is important in a range of service markets. Factors other than the obvious interactive elements of the offering should be included in the relationship equation. In this way, relationships may be managed and developed in order to achieve higher customer satisfaction. Customer satisfaction is recognised as a key intermediary objective in service operations representing an affective self evaluation based on price and quality trade offs (Roest and Pieters, 1997) Rust and Oliver (1994) were the first to define satisfaction as “the customer’s fulfillment response” which is both an evaluation and an emotion-based response to a service. Crosby and Stevens (1987) referred to relationship satisfaction as a multi-dimensional construct which is a prerequisite for relationship quality with three distinct levels: satisfactory interaction with the personnel, satisfaction with the core service, and satisfaction with the organisation. All levels contribute to overall satisfaction with the relationship between buyers and sellers. In the same line of multi-attribute conceptualisation of satisfaction are Cronin et al. (2000) who identified, among other elements, interest, enjoyment, surprise and anger.


Loyalty


The conceptualisation of loyalty has evolved over the years, starting from an emphasis on what is defined as behavioural loyalty. The notion that:

“… No consideration should be given to what the subject thinks nor is what goes on in his central nervous system, his behaviour the full statement of what brand loyalty is…” (Tucker, 1964, p32) is used to measure loyalty only by its outcome. The behavioural concepts of loyalty, which strictly look at repeat purchase behaviour (Cunningham 1956; Tucker, 1964), are the proportion of purchase, sequence of purchase and probability of purchase (Jacoby and Chestnut, 1978). Jacoby (1971) provided a theoretical single-scale framework incorporating an attitudinal component while Dick and Basu (1994) decomposed the loyalty construct to its “relative attitude” and “patronage behaviour” characteristics. Gremler and Brown (1996) defined service loyalty as incorporating “purchase,” “attitude” and “cognition” Zins’ (2001) study of the airport sector identified three aspects of loyalty: 1) behavioural; 2) attitudinal; and 3) a composite of the two.


The servicescape environment or the physical evidence


The simultaneous production and consumption of services usually requires the customer to enter the facility in which the service is offered before he/she can make the purchase decision. Therefore the physical environment is a surrogate for the intangible service performance (Ward, 1992).

A wide body of work has shown that physical environments, or servicescapes, in which the services are delivered and where the seller and the provider interact, play an important role in customers’ evaluation of the service (Bitner, 1992, Baker, 1986, Zeithaml and Bitner 1996, Brady and Cronin, 2001). Servicescapes may be defined as the tangible or physical components of the service product that provide nudge to consumers and create an immediate perceptual image to customers’ mind (Kotler, 1978). It includes the exterior and interior design, ambient conditions and other communication material (Bitner, 1992, Baker, Grewal and Parasuraman, 1994, Reimer and Kuelhn, 2005) Parasuraman et al. (1991) included in their work the “tangibles” dimension, comprising the appearance of the facilities, the equipment, the personnel and the communication material. Their dimension corresponds to the servicescape element of services. Lehtinen and Lehtinen (1982) related the physical dimension of service quality to the tangible elements of the service.

Many works have identified the servicescape as an important determinant of consumer service evaluations. Levitt (1981) for example, noted that when customers evaluate a service, they always depend on their impression of the physical environment, or tangibles. Crane and Clarke (1988) reported that the servicescape influences perceptions in four industries. Oberoi and Hales (1990) noted the importance of tangibles or physical quality in customers’ perceptions. In their study of a bank, Parasuraman et al. (1988) proposed that customers’ perception of tangibles is more important than in product repair or maintenance. Finally, Lewis (1991) suggested that for the majority of respondents, tangible dimensions in banking service as physical safety, location are important factors.


The interactive dimension


Interactive quality refers to the interaction (automated or animated) between a customer and a provider (or the provider’s representatives) (Lehtinen and Lehtinen, 1982). This definition is close to what Gronroos (1982) has identified as functional quality, or “how” the service is provided. Berry et al. (1985) and Parasuraman et al. (1985) introduced the service delivery process evaluations during the performance of the service. Swartz and Brown (1989) argued for the “what” and “how” dimensions of service quality depending on the time of performance. These two-way interactions have been identified as a key element in a service exchange (Czepiel, 1990). Brady and Cronin (2001) found that perceptions of service interactions directly contribute to service quality. The behaviour and performance of any buyer-seller contact can have a significant bearing on the quality of customer relationship (Bowen and Schneider, 1988; Lenginick-Hall, 1996). Others recognise the increased importance of the interactive process between the buyer and the seller plays to the quality of service (Brown et al., 1994; Svensson, 2001a, 2002; Heskett et al., 1990; Echeverri, 1990; Gummesson, 1995; Larsson-Mossberg, 1994; Gzepiel, 1990; Gronroos, 2000). As Gronroos (2001) stated, services are processes and not things, and thus, during the partly production and consumption of these processes, consumers arrive at an opinion about the service. Svesson (2004) concurs that services must be viewed from an interactive perspective.


The Formulation of Hypotheses


A popular conceptualisation of the service quality dimensions has been offered by Rust and Oliver (1994) They found that the perception of the offering may be decomposed to its i/ customer- employee characteristics, ii/ the service environment and iii/ the outcome of the offering per se. Brady and Cronin (2001) provide empirical confirmation from four industries, supporting Rust and Oliver’s theoretical approach. This approach is similar to Gronroo’s (1982) contention of technical and physical quality of the service or Lehtinen and Lehtinen’s (1982) approach for physical and interactive quality (the “Nordic perspective”). They have also stated that service quality is defined by the customer’s perspective on an organisation’s technical and functional quality and the service environment. Parasuraman et al. (1985, 1988) suggested SERVQUAL as the five-factor instrument to measure service quality. Despite its widespread use, strong criticisms appear regarding its five factors structure (Cronin ant Taylor, 1992, Bababkus, 1993) Mels et al. (1997) found a two-factor solution. The first, “intrinsic quality,” describes the human interaction of the service (interactive quality) and the other, “extrinsic quality,” describes the physical aspects of the service (physical quality). Gotlieb et al. (1994) also proposed a two-dimensional construct for measuring service quality, incorporating a focal (direct or interactive) and a contextual (background or physical) stimuli. Yup and Sweeny (2007) confirmed that Service Quality comprises two kinds of service elements– tangible and process. Caceres and Paparoidamis (2007) found that perceptions of technical and functional quality are direct influences on relationship satisfaction.

Several researchers (Bitner, 1990, Boulding et al., 1993, Taylor and Baker, 1994) concur that service quality and satisfaction are distinct constructs although there is no causal ordering in the literature (Bolton and Drew, 1991). Dabholgar (1995) has argued for the antecedent role of service quality and satisfaction depending on the situation and the characteristics (cognitive or affective) of the consumer. Olorunniwo et al. (2006), Kang and James (2004), Cronin and Taylor (1992), Spreng and Mackoy (1996) are among many researchers who agree that those two are distinct constructs and that service quality leads to satisfaction .

There are three notable distinctions between the two constructs: i/ the base of comparison of expectations where service quality refers to “ideal” offering while satisfaction seeks the “real or will” (Parasuraman et al., 1988); ii/ satisfaction assessments require customer experience with the service while quality does not (attitude) (Oliver, 1993, Cronin and Taylor, 1994); iii/ although quality dimensions are fairly specific, those of satisfaction are broader and poorly defined.

While most of the literature supports this dichotomy between service quality and satisfaction, certain discrepancies still remain. The expectancy/ disconfirmation approach has been heavily criticized. The alternative approach notes that measurement of customers’ perception of performance of a service provides adequate assessment for the service (Gronroos, 1988, Cronin and Taylor, 1992, Bebko, 2000) and preference to perception only measures is clearly evident in the marketing literature (Cronin et al., 2000, Zeitham et al., 1996, Olorunniwo et al., 2006). The belief that service quality is an attitude is based on a summation of customers’ beliefs and evaluations (Brady and Cronin, 2001, PZB, 1988). According to Garuana et al. (2000), and Churchill and Suprenant (1982), the operationalisation of satisfaction is similar to an attitude, as it can be assessed as satisfaction with the attributes of the product or the service. Therefore satisfaction can be examined at a service encounter or transaction- specific and at a relationship-specific (attitude) level (Bitner and Hubert, 1994, Oliver, 1997) Finally Gronroos (2001) argues that “…I never thought that the perceived service quality model would be anything other than a conceptual model that would help researchers and practitioners to understand the need- satisfying elements of a marketing context in a service context…I imagined that how well perceived service quality dimensions serve customers’ could and should be measured with customer satisfaction with the service…” (p.151) He has therefore introduced the “technical” and “functional” features of services instead of technical and functional dimensions of quality in an attempt to avoid the confusing and time-consuming discussion of the relationship between service quality and customer satisfaction.

It is therefore logical to assume that service quality and relationship satisfaction are closely related and that the principal dimensions of one will accommodate the explanation of the other.

In line with the Rust and Oliver (1994) and Bitner and Hubert (1994), we adopt the term “overall relationship satisfaction” as the cumulative effect of a set of discrete service encounters or transactions with the provider over time and course of the relationship and not as the outcome of a specific transaction.

In this light, it makes sense to agree with Wakefield and Blodgett (1999) and Reimer and Kuehn (2004) and to use a two-factor model to characterize overall perception of satisfaction: one representing the intangibles and the other representing the servicescape.

We therefore propose the following hypotheses:

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