International Journal of Hospitality Management

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1 International Journal of Hospitality Management 29 (2010) Contents lists available at ScienceDirect International Journal of Hospitality Management journal homepage: Effects of service quality and food quality: The moderating role of atmospherics in an ethnic restaurant segment Jooyeon Ha, SooCheong (Shawn) Jang * Department of Hospitality and Tourism Management, Purdue University, 700 W. State Street, West Lafayette, IN , United States ARTICLE INFO ABSTRACT Keywords: Atmospherics Service quality Food quality Satisfaction Loyalty Moderating effect Ethnic restaurant Korean restaurant This study empirically examined not only the relationship between perceived quality and satisfaction/ loyalty, but also the role of customer perceptions of atmospherics in an ethnic restaurant segment. Specifically, this study, using hierarchical regression analyses, investigated the direct effects of service quality and food quality on customer satisfaction and loyalty as well as the moderating effect of the perception of atmospherics, in Korean restaurants. As expected, this study showed that service and food quality have positive and significant effects on customer satisfaction and loyalty. This suggested that, similar to other restaurant segments, employee service and food are of great importance for ethnic restaurants as well. Verifying the moderating role of atmospherics, however, this study found that good employee service can be more effective for increasing the satisfaction and loyalty of customers with a low perception of the atmospherics compared to those with a higher perception. Further, providing quality food is particularly critical for creating customer satisfaction in ethnic restaurants where atmospherics are not satisfactory. More detailed findings and implications are also discussed. ß 2009 Elsevier Ltd. All rights reserved. 1. Introduction Previous studies have emphasized the importance of service quality and food quality in the restaurant industry, suggesting that customers perceptions of quality have a significant impact on satisfaction and positive post-consumption behaviors, including loyalty (Baker and Crompton, 2000; Olsen, 2002). High quality employee service produces higher levels of customer satisfaction, which in turn leads to higher levels of positive consumption behaviors, such as revisiting, positive word of mouth, or recommending the restaurant to others (Chow et al., 2007; Cronin et al., 2000; Oliver, 1999). Along the same lines as service quality, food quality has also been considered a fundamental element of customers dining experiences that affects customer satisfaction and determines future behaviors (Kivela et al., 2000; Namkung and Jang, 2007; Sulek and Hensley, 2004). Furthermore, previous studies have identified atmospherics as another important element of the dining experience and reported that atmospherics influence customer s emotions and expectations regarding service and food quality (Baker et al., 1994; Reimer and Kuehn, 2005; Wall and Berry, 2007). Usually, a customer first perceives the atmospherics when he or she enters a restaurant, * Corresponding author. Tel.: addresses: ha2@purdue.edu (J. Ha), jang12@purdue.edu (S.C.S Jang). which occurs before any actual services or foods are delivered. Thus, the emotions created by the perception of the atmospherics may affect the customer s reaction to the actual services and foods in restaurants (Bitner, 1990; Zeithaml et al., 1993). That is, if a customer has a high perception of the atmospherics, then customers expectations for service and food quality could also be higher. In this situation, merely providing an appropriate level of service or food may not meet customers heightened expectations, leading to lower customer satisfaction and lower loyalty behaviors. However, even if restaurant atmospherics are not satisfactory, providing excellent service and food could induce satisfaction and positive behaviors because it may easily exceed the lowered expectations created by the atmospherics. In other words, the perceived level of atmospherics could enhance or reduce the effect of perceived quality on satisfaction and positive post-consumption behaviors. Based on this rationale, the effects of perceived quality on customer satisfaction and loyalty could vary depending on the customer s perceptions of the dining atmospherics. Thus far, previous research associated with atmospherics has focused only on its direct impact on customers emotions or behaviors (Bitner, 1992; Donovan et al., 1994; Eroglu et al., 2005; Kaltcheva and Weitz, 2006; Mattila and Wirtz, 2001; Wakefield and Blodgett, 1994). However, as previously mentioned, customers reactions to the actual performances and the impact of perceived quality on consumer behavior may vary depending on /$ see front matter ß 2009 Elsevier Ltd. All rights reserved. doi: /j.ijhm

2 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) the emotions triggered by the perceived atmospherics before experiencing the actual services. In other words, atmospherics may have a moderating role in the relationship between quality perception and consumer behaviors, which differs from what previous research has suggested (e.g., Eroglu et al., 2005; Kaltcheva and Weitz, 2006; Mattila and Wirtz, 2001; Wakefield and Blodgett, 1994). To fully understand the various functions of atmospherics in service settings, it is necessary to explore the moderating role of atmospherics. Thus, one of the main purposes of this study was to identify the moderating role of perceived atmospherics in the relationship between perceived quality and satisfaction/loyalty. To measure customer perceptions of atmospherics, this study employed commonly used attributes of restaurant atmospherics: interior design, music, mood, and layout/facilities aesthetics. (Please refer to Section 3 for more details.) Among service settings, the role of atmospherics might be more pronounced if customers come to the setting for hedonic purposes (Wakefield and Blodgett, 1994). This study used an ethnic restaurant segment as the research setting because customers visiting ethnic restaurants may not only want to eat food. They may also be hoping to experience new and unique cultures via the dining environments and/or exotic foods of ethnic restaurants. These new encounters are part of the hedonic aspects of the restaurant experience. Sloan (2001) suggested that ethnic foods in the U.S. develop in four stages: exotic (e.g., Ethiopian), narrow (e.g., Korean, Vietnamese, and Mediterranean), expanding (e.g., Thai and French), and mainstream (e.g., Italian and Mexican). Among ethnic restaurant segments, this study chose the Korean restaurant segment because it belongs to the narrow stage (Sloan, 2001). Accordingly, customers still perceive Korean restaurants as exotic even though they are accessible in many parts of the U.S. This exotic aura means that customers in the U.S. can have hedonic experiences in Korean restaurants. Yet, while Korean food remains unfamiliar to many residents in the U.S., they can more easily experience Korean foods as compared to less widespread ethnic restaurant segments. Thus, we were able to collect data about customer experiences with Korean restaurants more easily compared with restaurants belonging to the exotic segment. More specifically, the objectives of this study were: (1) to test the impact of service quality on customer satisfaction and loyalty; (2) to examine the impact of food quality on customer satisfaction and loyalty; (3) to identify the moderating effect of perceived atmospherics on the relationships between service quality and satisfaction/loyalty; and (4) to test the moderating role of perceived atmospherics on the relationships between food quality and satisfaction/loyalty. 2. The literature review 2.1. Service quality As one of the most critical factors influencing customer satisfaction and future behaviors, service quality has been extensively researched within the service marketing field. Service quality is often viewed from two perspectives: the customer s cognitive evaluation of the service provided (Taylor and Baker, 1994) and a multidimensional construct created by an evaluation of attribute performance (Parasuraman et al., 1988). Service quality is usually defined as the customer s judgment of the overall excellence or superiority of the service (Zeithaml, 1988). Thus, it is the customer s subjective evaluation formed by comparing expectations and perceived performance (Bolton and Drew, 1991; Parasuraman et al., 1985, 1988). Based on this gap theory, Parasuraman et al. (1988) developed SERVQUAL as an instrument to measure service quality. SERVQUAL consists of five dimensions: reliability, responsiveness, empathy, assurance, and tangibles. Since it was first developed, numerous studies have applied SERVQUAL to assess service quality in service-related situations (Caruana et al., 2000; Lee and Lambert, 2000). Moreover, since perceived levels of service in restaurants are based on the relationship between customers and service providers (Nikolich and Sparks, 1995), customer s perceptions and evaluation of service quality may be highly dependent upon the service provider s performance during service delivery. Reliable, prompt, and assured service can be considered intangible cues that influence satisfaction and post-consumption behaviors (Brady and Robertson, 2001). Thus, in this study service quality refers to the level of service provided by restaurant employees Food quality Food quality is one of the most critical components of a dining experience (Namkung and Jang, 2007; Sulek and Hensley, 2004). Previous studies have empirically investigated the importance of food quality in restaurant settings; for example, Clark and Wood (1999) confirmed that food quality is a primary factor influencing customer loyalty in restaurant choice; Susskind and Chan (2000) insisted that from the customer s perspective, food quality is a key determinant for visiting a restaurant; Mattila (2001) considered food quality a key predictor of customer loyalty in casual-dining restaurants; Sulek and Hensley (2004) found that when compared with other aspects of the restaurant, such as environmental components and service quality, food quality is the most important element of customer satisfaction. Recently, Namkung and Jang (2007) tested the impact of food quality on customer satisfaction and behavioral intentions and found a positive linkage between food quality and satisfaction/behavioral intentions. Food quality has been measured using a number of various attributes. Kivela et al. (2000) considered several attributes of food quality such as tastiness of food, menu variety, and nutrition to examine the effect of excellent food on customer satisfaction and return patronage. Raajpoot (2002) used food presentation, serving size, menu design, and variety of food to measure product quality (food quality) in the foodservice industry. Furthermore, Sulek and Hensley (2004) stated that three general food characteristics determine food quality: safety, appeal, and dietary acceptability. Among those characteristics, appeal includes several items such as taste, presentation, texture, color, temperature, and portion size. More recently, Namkung and Jang (2007) selected presentation, menu item variety, healthy options, taste, freshness, and temperature to assess food quality Satisfaction Customer satisfaction is defined as a post purchase evaluative judgment concerning the purchase decision (Day, 1984). The most widely accepted theory to explain customer satisfaction is the Expectancy-Disconfirmation theory proposed by Lewin (1938), which posits that customers assess their satisfaction levels by comparing actual experiences or performances with their expectations. This approach to customer satisfaction is based on the cognitive process of confirmation of expectations (Oliver, 1980, 1989). The theory suggests three possible situations for customer evaluations: (1) confirmation occurs when the actual performance matches expectations; (2) positive disconfirmation occurs when the actual performance exceeds expectations, which leads to satisfaction; and (3) negative disconfirmation occurs when the actual performance is worse than expected, which leads to dissatisfaction. However, researchers have recognized that considering only the cognitive aspects of satisfaction evaluation may prove inadequate. Using a performance-based approach, many previous

3 522 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) studies have insisted that customer satisfaction incorporates cognitive judgments and affective reactions (Lin, 2004; Mano and Oliver, 1993; Westbrook and Oliver, 1991). Westbrook (1987) argued that satisfaction includes an evaluation of the consumption emotions elicited by product usage. Yi (1990) suggested that satisfaction results from processing affective component of consumption experiences. Oliver (1997) also considered customer satisfaction as the consumer s fulfillment response, the degree to which the level of fulfillment is pleasant or unpleasant, suggesting that satisfaction reflects the impact of the performance of service providers on a customer s feeling state. It seems particularly important to consider customers affective responses in restaurant settings since customers interact with service providers (Namasivayam and Mattila, 2007). Based on these conceptual studies regarding customer satisfaction, this study viewed customer satisfaction as cognitive evaluations of service/food quality and affective aspects engendered by consumption experiences Loyalty Loyalty is defined as a deeply held commitment to repurchase or re-patronize a preferred product or service consistently in the future despite situational influences and marketing efforts (Oliver, 1999). According to Jacoby and Chestnut (1978), customer loyalty can be understood by examining the beliefs, affective connections, and conative processes that orient a customer towards a product or service. Furthermore, Oliver (1999) classified loyalty into four phases: cognitive loyalty, affective loyalty, conative loyalty, and action loyalty. Cognitive loyalty focuses on the brand s performance aspects, while affective loyalty is directed toward the brand s likeability. Conative loyalty is experienced when the customer focuses on wanting to repurchase the brand and, finally, action loyalty is a commitment to repurchase the product or service. Researchers often view loyalty not only in terms of repeat purchasing (behavior), but also the customer s attitudinal state of intention towards repurchasing or re-patronizing (the likelihood of a behavior) (Evanschitzky et al., 2006). In this respect, loyalty has two distinct components: behavioral and attitudinal. Behavioral loyalty is associated with actual customer behaviors in consumption situations, which involves the measurement of past purchases or the probability of future purchase behavior based on past purchase behaviors (Ehrenberg, 1988). Attitudinal loyalty reflects the customer s psychological disposition toward the same brand or organization, which is associated with a customer s favorable attitude (Dick and Basu, 1994; Fournier, 1998; Jacoby and Chestnut, 1978). While behavioral loyalty captures cognitive behavioral patterns based on customers past consumption behaviors, attitudinal loyalty incorporates emotional attachments and affective commitments generated by previous consumption experiences. This study considered customer loyalty not just as the customer s behavior itself, but also the customer s psychological attitude toward the service organization. Accordingly, this study applied an attitudinal conception of loyalty. Also, in this study, attitudinal loyalty indicators, such as revisit intention, positive word of mouth, and willingness to recommend, were adopted from previous studies to measure customer loyalty (Mattila, 2001; Evanschitzky et al., 2006) Relationships between perceived quality and satisfaction/loyalty The conceptual relationships among service encounter constructs, such as perceived quality, satisfaction, and behavioral intentions, have been well documented (Cronin et al., 2000; Taylor and Baker, 1994). Past empirical studies have evidenced a direct link between perceived quality and satisfaction (e.g., Anderson et al., 1994; Cronin et al., 2000; Ueltschy et al., 2009)and between perceived quality and behavioral intentions (e.g., Bell et al., 2005; Bolton and Drew, 1991; Fullerton, 2005; Mohr and Bitner, 1995). Based on these theoretical foundations and empirical evidences, a limited number of studies have also examined the effects of service quality in restaurants (i.e. technical and functional factors) on satisfaction and behavioral intentions. These studies concluded that various components of restaurant service quality function differently in terms of improving satisfaction and behavioral intentions (Namkung and Jang, 2007; Liu and Jang, 2009). Along similar lines, this study attempted to identify which components of quality significantly influence satisfaction and loyalty. Thus, this study examined the relationship between perceived quality and satisfaction and the relationship between perceived quality and loyalty separately The relationship between perceived quality and customer satisfaction There has been some confusion in terms of the conceptualization of quality and satisfaction. The most widely accepted frameworks for understanding both constructs were derived from the same theoretical foundation, the Expectancy-Disconfirmation theory. This theory defines quality and satisfaction in terms of the magnitude of a customer s disconfirmation (Baker and Crompton, 2000). Given this definition, the two constructs appear to be similar. However, several researchers have attempted to distinguish between quality and satisfaction (e.g. Dabholkar, 1995; Oliver, 1993). For example, Oliver (1993) suggested that quality is primarily a cognitive response to the product or service, but satisfaction involves both cognitive and affective responses. Also, Johnson et al. (2001) claimed that quality is a specific belief evaluation and satisfaction is a more general evaluative construct. Based on a general agreement in the literature that quality and satisfaction are distinct, researchers have offered theoretical and empirical evidence for the relationship between quality and satisfaction (Cronin and Taylor, 1992; Gotlieb et al., 1994; Kim et al., 2009), suggesting that quality is an antecedent of satisfaction. This linkage is based on the appraisal-emotional response-coping framework suggested by Bagozzi (1992). When this framework is applied to service marketing contexts, it suggests that customers cognitive quality evaluations lead to more emotive satisfaction. Therefore, quality can be used as a key determinant to predict overall customer satisfaction. In a service context, service quality can be defined as having two dimensions: functional service quality and technical service quality (Grönroos, 1984). Functional service quality is associated with the interactions between the customer and service provider and between the customer and the processes through which the service is delivered. Technical service quality refers to the quality of the service output (Sharma and Patterson, 1999). In restaurant settings, functional service quality relates to the employee s performance, whereas technical service quality is associated with food quality. Previous studies have identified that these two dimensions of quality perception (service quality and food quality) have a positive relationship with customer satisfaction (Caruana et al., 2000; Cronin et al., 2000; Namkung and Jang, 2007). Based on these theoretical foundations and empirical studies, this study proposed the following hypotheses: Hypothesis 1. Service quality positively influences customer satisfaction. Hypothesis 2. Food quality positively influences customer satisfaction.

4 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) The relationship between perceived quality and customer loyalty According to Cronin and Taylor (1992) and Zeithaml et al. (1996), quality is an attitude-like construct that drives behavioral intentions. This suggests that when a customer s quality assessment is high, their behavioral intentions are likely to be more favorable. Based on this rationale, several studies have found evidence that quality perception is positively associated with customers attitudes toward an organization and their likelihood of remaining a customer (Bell et al., 2005; Anderson, 1998; Zeithaml et al., 1996). For example, Parasuraman et al. (1988) reported a positive and significant relationship between quality and willingness to recommend an organization. Boulding et al. (1993) also found a positive linkage between perceived quality and loyaltyrelated behavioral intentions including repurchase intention, positive word of mouth, and willingness to recommend. These studies suggested that quality is the primary driver of customer loyalty and loyalty-related behaviors. Similar to the relationship between perceived quality and satisfaction in restaurant service settings, two dimensions of quality perception, service quality and food quality, play an important role in customer loyalty (Bell et al., 2005). Previous studies have identified a positive relationship between employee service quality, customer loyalty and loyalty-related behaviors (Chiou et al., 2002; Fullerton, 2005; Wong and Sohal, 2003; Gonzalez et al., 2007). This relationship is based on the assumption that service quality is a cognitively evaluated and attitude-like construct that induces customer s behavioral intentions (Cronin and Taylor, 1992; Zeithaml, 1988). In addition, several studies concluded that food quality is a critical factor influencing customer loyalty and loyalty-related behaviors in restaurant settings. Clark and Wood (1999) confirmed that food quality is the most influential element of customer loyalty in terms of restaurant choice. Namkung and Jang (2007) also found that food quality is a significant component driving loyalty-related behaviors such as revisit intention, spreading positive word of mouth, and willingness to recommend to others. Thus, this study proposed the following hypotheses: Hypothesis 3. Service quality positively influences customer loyalty. Hypothesis 4. Food quality positively influences customer loyalty Atmospherics and its moderating role Kotler (1973) defined atmospherics as the effort to design buying environments to produce specific emotional effects in the buyer that enhance his purchase probability. Kotler further asserted that atmospherics can be a marketing tool to induce positive behaviors in consumption situations where products or services are consumed. Mehrabian and Russell (1974) introduced the atmospherics model (M R model) into the environmental psychology literature. The M R model is based on the Stimulus Organism Response paradigm, which suggests that the effect of the environment (S) on approach-avoidance behaviors (R) is mediated by the individual s emotional response (O) to the environment. Their conceptual framework posited that the physical environment creates positive or negative emotions in a customer that influence their impression formation regarding the organization. Researchers have empirically examined the relationship between psychological responses to atmospherics and consumer behaviors (Bitner, 1992; Donovan et al., 1994; Mattila and Wirtz, 2001; Wakefield and Blodgett, 1994; Ryu and Jang, 2007, 2008). For example, Bitner (1992) developed a conceptual framework describing three dimensions of physical environments in service settings, such as ambient conditions, space/function, and signs/ symbols/artifacts. Donovan and his colleagues (1994) tested the impact of shopping environments on shopping behaviors and found that pleasant environments lead to spending extra time and unplanned shopping. Wakefield and Blodgett (1994) also assessed the effect of consumers perceptions of atmospherics on their satisfaction and re-patronage intention levels in leisure service settings. More recently, Ryu and Jang (2008) created a diningspecific atmospheric scale and labeled it DINESCAPE. Also, using DINESCAPE, Ryu and Jang (2007) evidenced the impacts of dining environments on behavioral intentions through emotions. These empirical studies have suggested that a positive perception of atmospherics can produce more positive emotions, which leads to positive beliefs about the organization and its services or products. Furthermore, several studies identified that the physical environment of a service setting can be used as a clue as to what to expect and a basis for judging the quality of a restaurant, suggesting that the service environment has a major influence on a customer s inferences about quality (Rys et al., 1987; Parasuraman et al., 1988; Baker et al., 1994; Wall and Berry, 2007). Rys et al. (1987) concluded that environmental components were the most critical cues when customers judge restaurant quality. Parasuraman et al. (1988) identified that elements of the physical environment, such as visually appealing facilities or up-to-date equipment, were key components of customers perceptions of quality. Baker et al. (1994) also found that environmental factors provide information that customers use to infer quality and store image. Wall and Berry (2007) identified the effects of the physical environment on customer perceptions of restaurant service quality. These empirical studies suggested that the physical environment influences customer s perceptions of quality because these environmental factors are part of the consumption experience. Although atmospherics play an important role during customers dining experiences, environmental elements also have the ability to influence customers before they even experience the actual performances of service providers or service outputs, such as food. Bitner (1990) proposed that environmental factors can affect customers perceptions of the performance of service providers, as well as customers expectations regarding quality. Zeithaml et al. (1993) indicated that customers often use tangible elements as cues for the level of quality to expect before actual consumption behaviors occur. In addition, several studies indicated that the physical environment plays a role in creating a customer s pre-consumption mood before the actual service is delivered (Mattila and Wirtz, 2001; Namasivayam and Mattila, 2007), suggesting that atmospherics can positively or negatively influence mood. A customer s mood, which is triggered by the atmospherics, further influences expectations about quality and impression formation regarding the specific consumption experience. Hence, the effects of actual service quality or food quality on satisfaction and loyalty could vary depending on the psychological state evoked by the physical environment. As explained earlier, if a customer s perception of a restaurant environment is high, then their impression of the restaurant becomes more favorable even before assessing the quality of foods and services provided by the restaurant. In this case, providing good service and food may improve customer satisfaction or loyalty-related behaviors when compared with a low perception of the atmospherics. However, due to higher expectations based on the good impression made by the physical environment, even good service/food quality might not meet customers heightened expectations. Accordingly, this may ultimately lead to lower satisfaction and behavioral intentions. That is, it could be hypothesized that the pre-consumption

5 524 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) mood created by the physical environment can either enhance or attenuate the impact of service and food quality on outcome variables such as satisfaction or loyalty. Pre-consumption mood was defined in this study as the mood created by perceived atmospherics after entering the restaurant but before experiencing actual services. In order to clearly understand the role of atmospherics in the relationship between quality and customer satisfaction/loyalty, the following hypotheses were proposed: Hypothesis 5. Atmospherics moderates in the relationship between service quality and customer satisfaction. Hypothesis 6. Atmospherics moderates in the relationship between food quality and customer satisfaction. Hypothesis 7. Atmospherics moderates in the relationship between service quality and customer loyalty. Hypothesis 8. Atmospherics moderates in the relationship between food quality and customer loyalty. 3. Methodology To empirically test the proposed hypotheses, this study collected data through a web-based survey. The survey was conducted by an online marketing research company in the U.S. The company distributed the survey questionnaire to their panel members who had dined at a casual-dining Korean restaurant. The online survey form was distributed to 3,000 American customers in the U.S. and 607 usable responses were collected. The response rate was 20.23%, which is an appropriate level for web-based surveys (Couper, 1999; Schaefer and Dillman, 1998; Schuldt and Totten, 1994). The survey questionnaire consisted of several sections focused on atmospherics, service quality and food quality, satisfaction, loyalty, and demographic information. The survey included 17 questions and took approximately three to five minutes for participants to complete. To measure the affective evaluation of atmospherics at Korean restaurants, respondents were asked to rate their perception of the atmospherics. Baker (1986) proposed three dimensions of atmospherics: ambient factors (e.g., music, lighting), design factors (e.g., displays, layout), and social factors (e.g., salespeople). In this study, interior design and layout were considered design factors, and music and mood were considered ambient factors. However, social factors were not included as part of the atmospherics because this study was focused solely on the physical environment. Thus, atmospherics items included interior design, music, mood, and layout/facilities aesthetics, which were borrowed from previous studies (Baker et al., 2002; Sayed et al., 2003; Ryu and Jang, 2007, 2008; Jang and Namkung, 2009). In the next section, respondents evaluated service quality and food quality at Korean restaurants. The service quality items were adopted from DINESERV (Stevens et al., 1995), but were slightly modified to fit the Korean restaurant situation. Although DINESERV involves five dimensions of service quality, this study excluded tangibility, which is an environmental aspect, in order to more effectively differentiate service quality from atmospherics. Also, empathy, which is sharing emotions between customers and service providers, was not included because this study focused on cognitive aspect of services provided by service providers and the restaurant. Thus, service quality items included only services provided by employees. Items include, The Korean restaurant serves your food exactly as you ordered it (Service reliability), The Korean restaurant provides prompt and quick service (Service responsiveness), and The Korean restaurant has employees who can thoroughly answer your questions (Service assurance). This study defined food quality as the quality of features associated with food that is acceptable to customers. As stated in the literature review section regarding food quality, previous studies have included several items for food quality. Hence, measurement items to assess food quality, which included taste, food portion, menu variety, and healthy food options, were borrowed from previous studies (Kivela et al., 2000; Raajpoot, 2002; Namkung and Jang, 2007). The next section of the survey was designed to examine customer satisfaction regarding dining experiences at Korean restaurants. The measurement items were slightly modified from Carpenter s study (2008). As for customer s outcome behaviors, loyalty was measured using revisit intention, positive word of mouth, and willingness to recommend, which were taken from Mattila (2001) and Evanschitzky et al. (2006). All question items used in this study were measured on a 7-point Likert-type scale (1 = strongly disagree and 7 = strongly agree). Before the questionnaire was finalized, a professional in the hospitality industry and two professors who are familiar with the subject of this study reviewed the questionnaire to assure content validity. Minor revisions regarding the measurement items were made based on their suggestions. For further analysis, respondents were split into two groups based on their perception of the atmospherics. In order to analyze the data using constructs that included several items, a factor score was used for each construct. Descriptive information regarding the constructs used for all respondents, as well as the high- and lowperception of atmospherics groups, is reported in Table 1. In order to test the moderating effect of customers perceptions of atmospherics, as well as the effects of service quality and food quality on satisfaction and loyalty, hierarchical regression analyses were performed. Specifically, this study tested the moderating effects of restaurant atmospherics on the relationships between service quality and satisfaction/loyalty and on the relationships between food quality and satisfaction/loyalty. To test the moderating effects, respondents were split into two groups using a factor score for perception of atmospherics. Thus, respondents with a factor score of less than zero were assigned to the group with a lower perception of the atmospherics and those with a Table 1 Descriptive information for constructs. Constructs (Cronbach s alpha) Items All respondents High PA Low PA group group Mean SD Mean SD Mean SD Atmospherics (0.87) Interior design Korean music Mood Layout/facilities aesthetics Service quality (0.84) Service reliability Service responsiveness Service assurance Food quality (0.89) Taste Food portion Menu variety Healthy food option Satisfaction (0.97) Happiness Contentedness Overall satisfaction Loyalty (0.94) Revisit intention Positive word of mouth Recommendation

6 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) Table 2 The results of a hierarchical regression analysis for Hypotheses 1, 2, 5, and 6. Independent variable Variable in each step Standardized coefficients R 2 R 2 change F p-value Service quality Step *** SQ Step *** SQ AT Step ** SQ AT SQ AT Food quality Step *** FQ Step *** FQ AT Step * FQ AT FQ AT Note: SQ: service quality, FQ: food quality, AT: perception of atmospherics. * p < 0.1. ** p < *** p < factor score of greater than zero were assigned to the group with a higher perception of the atmospherics. In the hierarchical regression analyses, an independent variable was entered in the first step and a moderating variable was entered in the second step. The interaction term was added to the model as the third step. If the interaction term was significant, it could be determined that customers perceptions of atmospherics had a moderating effect (Cohen and Cohen, 1983). The model can be specified as follows: Y ¼ b 0 þ b 1 X 1 þ b 2 D þ b 3 X 1 D þ e; where Y is customer satisfaction or loyalty, X 1 represents service quality or food quality, D is a dummy variable for perception of atmospherics (i.e., 1: high perceived atmospherics group and 0: low perceived atmospherics group), X 1 D is the interaction between service/food quality and perceived atmospherics, b i represents regression coefficients, and e is an error term. 4. Findings and discussion 4.1. Sample profile Demographic information about the sample for this study showed that 44.8 percent were male and 55.2 percent were female. The mean age was 37.7 years, and the majority of respondents were between 20 and 49 years old (76.3 percent). Caucasian Americans accounted for 46.3 percent (n = 281) of the sample, which was the largest racial category among respondents. The rest of the respondents were Hispanic/Hispanic American (19.3 percent, n = 117), African American (18.1 percent, n = 110), Asian/Asian American (14.8 percent, n = 90), and other (1.5 percent, n = 9). Also, 90% of the respondents had visited a Korean restaurant between one and four times. In this study we defined ethnic food as foods from other countries that an individual does not eat on a regular basis. Thus, it was important for the objectives of the study that respondents were not overly familiar with Korean restaurants. Accordingly, given the likelihood that Koreans and Korean Americans may experience Korean foods quite often and not consider them an ethnic food as it is defined in the study, these populations were excluded from data collection. More than half (56.7 percent) of the respondents annual household incomes were between $20,000 and $59,999. Regarding education levels, 65.6 percent of the respondents had at least a Bachelor s degree Results of hierarchical regression analyses Quality and customer satisfaction Table 2 shows the main effects of service quality and food quality on customer satisfaction and the moderating effect of atmospherics on the relationships between service quality/food quality and customer satisfaction. In this procedure, Hypotheses 1, 2, 5, and 6 were tested. As a result of the first step of hierarchical regression analyses, service quality and food quality were found to directly influence customer satisfaction, supporting Hypotheses 1 and 2. These results indicated that higher quality service and food produces more satisfied customers in Korean restaurants, which is consistent with previous studies identifying the relationship between perceived quality and customer satisfaction (Baker and Crompton, 2000; Cronin et al., 2000; Namkung and Jang, 2007; Oliver, 1996; Olsen, 2002). This finding suggests that the service quality provided by employees and food quality (e.g., taste, menu variety, and healthy food options) are fundamental and critical factors for customer satisfaction in the restaurant business. The second step of the analyses showed the direct effect of atmospherics on customer satisfaction. Perceived atmospherics were found to directly affect customer satisfaction. Interaction terms between quality (service quality and food quality) and perceived atmospherics (PA) were estimated in the third step of the analyses. Both interaction terms were significant, supporting Hypotheses 5 and 6. The results revealed that the perceived atmospherics of Korean restaurants play a moderating role in the relationships between service quality and satisfaction and between food quality and satisfaction. It is also important to note that the standardized coefficients of the interaction terms were negative. To understand the negative sign in the moderating effect of atmospherics, a more detailed investigation was necessary. In order to further understand this moderating role, linear regression lines are graphically plotted in Figs. 1 and 2. The relationships between service quality and customer satisfaction are drawn separately for the high and low perceived atmospherics (PA) groups, respectively. As shown in Fig. 1, for all levels of service quality, customers in the high PA group had consistently higher levels of satisfaction than customers in the low PA group. This suggests that in comparison to low quality atmospherics, high quality atmospherics in Korean restaurants would be useful in

7 526 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) Fig. 1. Moderating role of atmospherics for service quality and customer satisfaction. Fig. 2. Moderating role of atmospherics for food quality and customer satisfaction. increasing customer satisfaction. However, it was also revealed that when service quality is low, the difference in customer satisfaction between the high PA group and the low PA group was prominent. As the level of service quality increased, the difference in satisfaction between the high and low PA groups dramatically diminished. In other words, the slope of the low PA line was steeper than that of the high PA line, indicating that when better quality service is provided the satisfaction of customers in the low PA group increased more rapidly than in the high PA group. As shown in Fig. 2, the exact same pattern was found in the relationship between food quality and customer satisfaction. Overall, atmospherics are important in enhancing the effect of food quality on customer satisfaction. However, the slope of the low PA line was steeper than that of the high PA line in the relationship between food quality and satisfaction. This finding indicates that food quality more effectively increases customer satisfaction levels in customers with low PA than for customers with high PA. These results do not mean that service quality and food quality are not critical for increasing customer satisfaction in restaurants with quality atmospherics, but the results revealed that high quality service and food can significantly enhance the satisfaction level of customers who have a higher perception of the atmospherics. Also, providing better quality service and food can improve customer satisfaction levels even in unsatisfactory dining environments. Therefore, providing quality service and food could be a good business strategy for ethnic restaurants where the physical environment is not satisfactory. This finding provides a meaningful message for ethnic restaurants where additional investments to upgrade the dining atmosphere are not possible Quality and loyalty Table 3 shows the direct effects of service quality and food quality on customer loyalty and the moderating effect of atmospherics on the relationships between quality (service/food quality) and loyalty. In this procedure, Hypotheses 3, 4, 7, and 8 were tested. The main impacts of service quality and food quality on loyalty were investigated in step 1. The results indicated that both service quality and food quality significantly and positively influenced customer loyalty, supporting Hypotheses 3 and 4. Similar to the impact of quality on customer satisfaction, both service quality and food quality were important factors of customer loyalty. The second step of the analyses examined the direct effect of atmospherics on customer loyalty. This step showed that customer perceptions of atmospherics directly influenced loyalty. Interaction terms between quality (service quality and food quality) and atmospherics were estimated in the third step of the analyses. As a result, only the interaction term for service quality and the perception of atmospherics was significant, supporting Hypothesis 7. This result showed that the atmospherics of Korean restaurants had a moderating effect on the relationship between service quality and customer loyalty. It is also noteworthy that the standardized coefficient of the interaction term was negative, suggesting a need to further examine this moderating role. In order to further understand the moderating effect, this study also plotted the linear regression lines of the high- and lowperception of atmospherics groups. As shown in Fig. 3, customers in the high PA group revealed a higher level of loyalty at any level of service quality than customers in the low PA group. These results Table 3 The results of a hierarchical regression analysis for Hypotheses 3, 4, 7, and 8. Independent variable Variable in each step Standardized coefficients R 2 R 2 change F p-value Service quality Step *** SQ Step *** SQ AT Step ** SQ AT SQ AT Food quality Step *** FQ Step *** FQ AT Step FQ AT FQ AT Note: SQ: service quality, FQ: food quality, AT: perception of atmospherics. *p < 0.1, **p < 0.05., ***p < 0.01.

8 J. Ha, S.C.S. Jang / International Journal of Hospitality Management 29 (2010) Fig. 3. Moderating role of atmospherics for service quality and loyalty. indicated the importance of atmospherics in ethnic restaurants, such as Korean restaurants, for creating loyal customers. Echoing the previously noted findings on satisfaction, when service quality was low, the difference in the loyalty levels between the high and low PA groups was large, but as the level of service quality increased the difference in loyalty between the high and low PA groups reduced noticeably. In other words, the slope of the low PA line was steeper than that of the high PA line. This finding indicated that when better service quality is provided customer loyalty levels increase more rapidly, even in ethnic restaurants where atmospherics are not satisfactory. Therefore, providing good employee service is essential to induce customer loyalty in ethnic restaurants that do not have enough financial resources for atmospheric renovations. On the other hand, the interaction term for food quality and atmospherics was not significant, which did not support Hypothesis 8. This finding suggested that regardless of the atmospherics level, food quality consistently improves customer loyalty. This indicated that the effect of food quality on customer loyalty is not moderated by a customer s perception of the atmospherics. Therefore, providing better quality food is equally important and effective in improving customer loyalty in both high PA and low PA situations. 5. Summary and conclusion This study examined the direct effects of service quality and food quality on customer satisfaction and loyalty, as well as the moderating effect of atmospherics, in the Korean restaurant segment. Overall, this study found that customers perceptions of quality positively influenced customer satisfaction and loyalty in Korean restaurants, as expected. This study also discovered that the effect of ethnic restaurants service and food quality on satisfaction and loyalty can differ depending on how the physical environment of the restaurant is perceived. This study uniquely contributes to the literature in the sense that it examined atmospherics as a moderator in the relationship between perceived quality and customer satisfaction/loyalty. In previous studies perceived atmospherics and perceived quality have been considered to have a direct impact on consumer behaviors based on Mehrabian and Russell s model (e.g., Baker et al., 1994; Wakefield and Blodgett, 1994; Wall and Berry, 2007). Recently, Jang and Namkung (2009) investigated customers emotions and behavioral intentions by extending the Mehrabian Russell model, in which perceived product quality and service quality were also considered as stimuli together with atmospherics. However, this study provided a different view from previous studies in terms of the role of atmospherics associated with perceived quality and satisfaction/behaviors. This study uniquely explains the role of atmospherics in creating customer s moods before the actual service is provided and also identifies how the pre-consumption mood created by atmospherics ultimately moderates the relationship between perceived quality and its outcome variables, such as satisfaction and loyalty. The findings of this study suggested that before a customer actually experiences employee services and food in restaurants, perceived atmospherics plays a significant moderating role that can change the degree of impact of quality perception on consumption behaviors. This finding extends the existing literature regarding the role of atmospherics in service settings and provides a new view point for the linkage among atmospherics, quality perception, and behaviors. This study has managerial implications as well. One of the most important findings of this study supported the hypothesized positive links among quality (service and food quality), satisfaction, and loyalty, confirming previous studies which concluded that quality is a key determinant of customer satisfaction and loyalty (e.g., Cronin and Taylor, 1992; Boulding et al., 1993). These findings suggest that regardless of the physical environment, providing better quality service and food is critical to induce customer satisfaction and loyalty. In addition, the moderating role of a customer s psychological response to the atmospherics was identified. Our study suggested that service quality and food quality can differently influence customer satisfaction and loyalty based on the customer s perception of the atmospherics. The results regarding the moderating role of atmospherics provide a positive message for ethnic restaurants that cannot renovate their dining environment due to financial difficulties. Providing better quality service and food can quickly improve the satisfaction level of customers with a low perception of the atmospherics. Practically, owners of small Korean restaurants whose financial resources are limited should pay more attention to reliable and prompt service and high quality food, including great tasting food, a varied menu, and healthy options, instead of relatively higher investments for better dining environments. The moderating effect of a customer s perception of atmospherics also existed in the relationship between service quality and customer loyalty. These results suggested that better service quality can be effective for inducing loyalty-related behaviors in customers with a relatively low perception of the atmospherics. However, it is also important to note that absolute levels of satisfaction and loyalty were higher when customers had a higher perception of the atmospherics. In other words, customers are more satisfied and have a greater possibility of becoming loyal customers in Korean restaurants where the atmospherics are satisfactory. These findings suggest that atmospherics is a critical factor for customer satisfaction and loyalty. Thus, if financial resources are available, it is imperative to create a nice dining environment at Korean restaurants in order to have a higher chance of customer satisfaction and, ultimately, loyalty. In sum, environment is one important factor influencing customers emotions, and customers perceptions of the atmospherics affect the relationship between quality perception and satisfaction and loyalty. When customers evaluate the atmospherics of a restaurant highly, the positive mood created by the atmospherics can enhance the effect of perceived quality on both satisfaction and loyalty. Therefore, the physical environment can play an important role in creating favorable emotions before any actual service is provided, which in turn enhances the relationship between quality and satisfaction and/or loyalty. These results supported the importance of atmospherics as an effective marketing tool for the Korean restaurant segment. The results of the current study provide a different perspective for understanding the effects of quality (including technical, functional, and environmental factors) on customer satisfaction and loyalty. Unlike previous studies that considered environmental factors as a component of service quality (e.g., Berry et al., 2002; Caruana et al., 2000), this study suggested that different quality dimensions, such as service quality, food quality, and environ-