A study on the effect of service quality on customer loyalty (Case Study: Chain Restaurant Collection )

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1 Applied mathematics in Engineering, Management and Technology 2 (5) 2014: A study on the effect of service quality on customer loyalty (Case Study: Chain Restaurant Collection ) 1* HOOMAN MORADTALAB, 2 LEILA GHASEMPOUR 1* Department of management, University of Olom Fonon Babol, Mazandaran, Iran. Hooman_lop@yahoo.com 2 Department of management, University of Olom Fonon Babol, Mazandaran, Iran. Abstract: This study examines the impact of service quality on customer satisfaction and loyalty in a chain restaurant. The study tools were developed in three parts (service quality, satisfaction and loyalty). 150 customers were selected through stratified cluster sampling for field survey of research and completed the questionnaire. It was observed that there is a significant relationship between the dimensions of service quality (tangible features, reliability, responsibility, trustworthiness and empathy) on customer satisfaction and loyalty. Furthermore, after analyzing the data, it was determined that dimensions of empathy, reliability and responsiveness explain the changes percentage in the dependent variable (customer loyalty and satisfaction). 1.Introduction Today, understanding and predicting customer needs possess specific importance and priority for organizations and the customer is considered as key factor in the organizations and the direction of all the goals, strategies and organizational resources are profitable around the center of to attraction and keeping customers (Muzahid & Parvez, 2009). Therefore, the issue of preservation and strengthening customer loyalty has been discussed for companies concerned with the preservation and development of their competitive position in the market as a strategic challenge and they also have been spend many costs for understanding the concept and achieving practical approaches to enhance it; Because of intensified competition and approaches of quality and quantity of products and services that is located in the customers constituency, providing products or services that could be of interest to clients and make them the permanent customers of organization, is considered vital and necessary (Ramzi & Badaruddin, 2010). As many parts of the adult industry, competitive advantage by providing high quality services, is an important rule of survival of the business. Furthermore, the restaurant industry, have not been excluded from increasing competition and rising consumer expectations of quality (Kivela, Inbakaran and Reece, 1999). In Iran, the restaurant industry has been undergoing great changes and increased competition. The restaurant is an important industry but often is ignored in the study of investigators. The fact is the "restaurant business" is considered as a business where the quality of provided services is playing a major role in customer loyalty. Although stabilization of services quality is difficult in it because it is possible that customers experience different quality with each visit, and at the result this matter influences on the level of their satisfaction and intention to buy again, and finally the customer's loyalty (Nobuyuki & Herbert, 2004). On the one hand maintaining old customers is less expensive than to attract new customers. Given these issues, the main objective of this study is to examine the impact of service quality on customer loyalty in the chain restaurants Pedarekhoob in Iran. 2.Review of the Literature 2.1.Customer Loyalty 90

2 Loyalty refers to a strong commitment to repurchase the best product or service in the future, so that the brand or product, despite the impacts and efforts of competitors' potential marketing, is purchased. If we want to express a more detailed definition of customer loyalty, it is the case that loyalty is divided into three distinct parts: - Cognitive loyalty: It leads to customer behavior and is concerned with the customer believe; - Emotional loyalty: It leads to customer commitment and trust and is concerned with his feeling. - Action loyalty: It is concerned with the customer intention for buying action in the future (Kerti, 2011). Unfortunately, most old commercial organizations have not considered the new methods of customer relations and have lost most of their customers (Donio ', 2006). Loyal customers or valued clients, who are our old customers, should be always emphasized in organizations. The organizations should prevent defection of customers, attract customer's confidence and trust by providing an effective team working and meet his key demands and improve him from a regular and satisfied customer to a loyal and value one and guarantee their long-term benefits. Today, there is a strong tendency for loyalty marketing. The companies in most industries are studied for evaluating and implementing the loyalty strategies and targeting it in order to create and promote strong relationships with their best customers (Caruana, 2002). 2.2.Customer Satisfaction Customer satisfaction is considered as the internal measures of organizations that is orientated toward satisfying customer demands and shows the improvement direction of products / services quality. According to Zhu Ran, customer satisfaction is a state that the customer feels the product features are based on his feelings. Dissatisfaction also is a condition where the product's defects and flaws cause customer's irritation, complain and criticism (Choi et al., 2004). Lingfield considers customer satisfaction emotional in terms of psychological that at the result the comparison between the given products with the needs and demands of customers and society's expectations in the relation with the product is achieved. The customer satisfaction is defined as an individual view which is raised from the constant comparisons between actual performance of organization and expected performance of the client (Tseng, 2010). Tapfer stated that customer satisfaction does not depend on the type of organization's business or the organization's position in the market, but it is depends on the organization's ability to provide expected quality of the customer. She believes that customer satisfaction or dissatisfaction is resulted from the difference between customer expectations and the quality he has received (Kerti, 2011) Services Quality Today the consumers are looking for quality. Their demands for "goods and services" with high quality in exchange for low cost goods and services are increasing (Vanpariya & Ganguly, 2012). Today, quality is not only meant to accommodation of construction with standards and design, but rather "it is a set of features and abilities which is effective in providing and meeting "clear" and "implicit" needs of customers". In other words, quality means "the final matching of product with customer's demand" and is considered as the most important factor in maintaining the organization; so if we disregard this principle, the existence of organization will be in danger in the short time, and conversely, considering it will give the client the necessary motivation to purchase (Elangovan & Sabitha, 2012). The customers evaluate services quality which they received based on several dimensions. Professor Leonard Berry Berker from Texas A & M University, who is one of major experts in service quality, has conducted many researches about the value of service quality with the help of his colleagues (Dharmalingam et al., 2011). Their researches suggest that the customers recognize the following dimensions as main factors of service quality briefly: 1. Tangible Features, 2. Assurance, 3. Responsiveness, 4. Reliability, 5. Empathy. Nowadays, organizations have found that providing services with quality to customers is of the organizations leading issues in the coming years (Gopalakrishnan, 2011). 91

3 Applied mathematics in Engineering, Management and Technology 2014 H Moradtalab et al H. 2.4.Research Conceptual Model The following comprehensive model has obtained from studies and this complete model is shown in Figure 1. Empathy Responsiveness Customer Loyalty Customer Satisfaction Service Quality in restaurant Assurance Tangibility Reliability Fig. 1. Research Conceptual Model Based on the proposed model, the following objectives are followed in the present study: 1. Study of customer perception of restaurant service quality dimensions 2. Assessing the impact of service quality dimensions on customer satisfaction and loyalty 3. Methodology In order to achieve the proposed sed objectives of the research, the present experimental study was conducted by collecting primary data through questionnaires. The questionnaire consists of three parts; The first part consists of twenty-four four items with variable quality of tangible servic services es (4) assurance (5) responsiveness (5), reliability (3), empathy (5) and value added services (2), The second part consists of five variables for customer satisfaction and the third part contains five variables for customer loyalty. All of these variables with Likert quintuple scale (from extremely disagree (1) to extremely agree (5)) were measured. In this study, stratified cluster sampling method was used. First, we have divided Tehran into five regions in this research and then a branch was randomly selected from each region. So that 30 people were questioned in each region (branch) by explaining the purpose of the present study. 4. Data Analysis Statistical tools like percentage analysis, correlation and multiple regression analysis were used to analyze the collected data. The collected data were analyzed with SPSS Since the perception of service quality is based on the personal opinions of the customers, in total of 150 customers interviewed, 44 people (about 29 percent) have used the restaurant twice a month. After identifying the study dimensions, the measure of each selected factor and its reliability was assessed using Cronbach's alpha reliability test. Cronbach's alpha of considered factors was achieved 0.89 that indicates acceptable reliability. 92

4 Table 1: Reliability statistics for the variables Reliability Statistics Cronbach's Alpha Number of Variables Analysis of the Operation Average of Services Quality Dimensions The average of services quality dimensions is defined by variable average of each dimension. In Table 2, the operation average of five dimensions of services quality, the results show that after tangible (4.53) and then responsiveness (4.48) and empathy (4.31) had the highest performance. It is concluded from the evaluation scores that the reliability dimension with possessing the lowest score needs to more focus and resources to improve operation. Table 2: Performance of mean score of service quality factors Service Quality Dimensions mean score Empathy 4.31 Responsiveness 4.48 Assurance 4.56 Tangibility 4.53 Reliability The impact of service quality dimension on customer satisfaction Table 3 shows the effect of service quality dimensions on customer satisfaction that empathy and responsiveness have significant impact. The increase of a unit in the mentioned dimensions increases of customer satisfaction from restaurant. Changes in the related independent variables express the change of customer satisfaction as percent. Table 3: Antecedents of customer satisfaction - Step wise regression analysis results Standardized Dependent Variables Beta) Independent Regression Variables Coefficients (Bt-Value P-Value Constant Empathy Responsiveness Assurance Customer Satisfaction Tangibility Reliability R Adjusted R F Value Sample Size The Impact of Service Quality Dimensions on Customer Loyalty To assess the impact of service quality dimensions on customer loyalty, we observed that responsiveness and assurance have meaningful impact. The increase of a unit in the mentioned dimensions increases of customer loyalty to restaurant. Change in the related independent variables express the change of customer loyalty as percent. The results are shown in Table 4. 93

5 Table 4: Antecedents of customer loyalty- Step wise regression analysis results Standardized Dependent Variables Beta) Independent Regression Variables Coefficients (Bt-Value P-Value Constant Empathy Responsiveness Assurance Customer loyalty Tangibility Reliability R Adjusted R F Value Sample Size The impact of customer satisfaction on customer loyalty Table 5 shows the effect of customer satisfaction on customer that only the selection of restaurant has a significant impact. The increase of a unit in the mentioned variable increases of customer loyalty to restaurant. The change in the related independent variable expresses the change of customer loyalty as percent. Table 5: Antecedents of customer loyalty - Step wise regression analysis results for individual variables of customer satisfaction Standardized Dependent Variables Beta) Independent Regression Variables Coefficients (Bt-Value P-Value Customer loyalty Constant Considering everything, I am satisfied with my restaurant I am satisfied with the personal contact with staff Choice of mine to use this restaurant is good My experience with this restaurant has been enjoyable. My restaurant always meets my expectations R Adjusted R F Value Sample Size

6 5. Discussion and Conclusion Applied mathematics in Engineering, Management and Technology 2014 In recent years, different economical businesses, from small companies which are newly established to multinational companies have realized the importance of customer loyalty. All of them have learned that keeping current customers is more profitable than attracting new customers; as a result marketing departments have desisted of spending time and money on causeless advertising and have focused on the techniques of maintaining the customer. We have examined the impact of service quality on customer satisfaction and loyalty of a chain restaurant in this study. By analyzing the impact of service quality on customer satisfaction, we observed that the reliability has the highest average among the five dimensions of service quality. The restaurant should focus on increasing the reliability of customers because it has the lowest average. According to the relationship between the dimensions of service quality and customer satisfaction and loyalty, the dimensions of responsiveness, assurance and empathy has a significant impact and also express the changes in considered dependent variables. Focus on customer satisfaction and loyalty in an organization means the main focus of the organization on intangible aspects of its service performance. The results of this study clear that the quality operation in the services has a positive impact on customer satisfaction and loyalty Limitations and future researches In this study, however, we examine the consumer's perspective of service quality and its impact on customer satisfaction and loyalty in a chain restaurant, but by considering more diverse number of restaurants and their customers, different behave of restaurants in attracting their customer satisfaction and loyalty could be studied more accurate and more precise results could be achieved. Therefore, it is recommended for future work that several renowned restaurants and a wide range of their clients be considered for examining this relationship. Also the affect of service quality dimensions on other service businesses can be reviewed. References Akbar, Mohammad Muzahid; Parvez, Noorjahan Impact of Service Quality, Trust and Customer Satisfaction on Customer Loyalty. ABAC Journal 29(1), pp Al-Rousan, M. Ramzi; Badaruddin, Mohamed Customer Loyalty and the Impacts of Service Quality: The Case of Five Star Hotels in Jordan, International Journal of Human and Social Sciences, 5. pp Caruana, A. (2002). Service Loyalty: The Effects of Service Quality and the Mediating Role of Customer Satisfaction. European Journal of Marketing, 36(7/8), pp Dharmalingam, S., Ramesh, R. and Kannan, K.V. (2011). Investigating the Service Quality Dimensions to Customer Satisfaction and Loyalty of New Private Sector Banks in Tamilnadu An Empirical Study. Research journal of Social Science and Management, 4 (1), pp Donio, J. (2006). "Customer satisfaction and loyalty in a digital environment: an empirical test", Journal of Consumer Marketing, (23), pp Elangovan, R., and Sabitha, K. (2012). Customers Perception towards Internet Banking Services- A Study with Reference to Puducherry Territory. Sankhya-International journal of Management and Technology, 2 (2), pp Gopalakrishnan, J., Mishra, B. B., Gupta, V. K. and Vetrivel, A. (2011). The Impact of Service Quality and Customer Satisfaction on Customer Retention in the Indian Banking Industry: An Empirical Analysis. Research Journal of Social Science and Management, 1 (3), pp Ismail, I. & Haron, H. (2006). "Service quality, client satisfaction and loyalty towards audit firms: Perceptions of Malaysian public listed companies", Managerial Auditing Journal, (21), pp Kivela, J., Inbakaran, R., and Reece, J. (1999). Consumer Research in the Restaurant Environment, Part 1: A Conceptual Model of Dining Satisfaction and Return Patronage. International Journal of Contemporary Hospitality Management, 11(5), pp Kerti Yasa Pengaruh Kualitas Layanan Terhadap Loyalitas Melalui Kepuasan Wisatawan (Studi pada Kawasan Industri Pariwisata Nusa Dua). 95

7 Nobuyuki, O. and Herbert, D. (2004). Service Quality and its Effects on Customer Satisfaction and Customer Behavioral Intention: Hotel and Ryokan Guests in Japan. Asia Pacific Journal of Tourism Research, 9 (2), pp Tseng, C.L Strategic Factors of Loyalty-Based CRM : Alignment Affection, and Adjustment, Paper accepted at 3rd International Conference on Information Sciences and Interaction Science, Chengdu, China. Vanpariya, B. and Ganguly, P. (2012). SERVQUAL versus SERVPERF: An Assessment from Indian Banking Sector. TIMS-QUEST, 1(1), pp