Chapter 6

Service Quality, Customer Satisfaction, and Value: An Examination of Their Relationships

Geoffrey N . Soutar

INTRODUCTION

A great deal of discussion has occurred in the Fields of marketing and strategy in recent years about
consumcr satisfaction and how il can be created and maintained. Most organization; now recognize the
central role that their customers’ satisfactinn plays in their long-tcrm success; hospilal ily, lcisurc, and
tourism organiLations are no cxccption. Marketch have argucd for the centralin of cuslomcr satisl‘aclion
for al least t‘orly years, giving the approach a variety nl‘ names, including the marketing concept, having
a customer oricnlation or, more recently, having a market oricnla tion. However, all of these approachcs
arguc lhat good marketing is much more than merer being concerned about customers’ needs. All agree
that managcrs musl undersland the markclplaoc in which \hcy 0pcrate, which includes not only
customers, but also competitors, governmenls, and regu latory agencies and the overall market
environment (e.g., .\'arver and Slater, 1990; Kohli and Jaworski, 1990). Further, all recognize that an
organization’s interest in satisfaction is not for its own sakc but because of a recognition that satisücd
customers give an organimlion ils best chance of achieving it< objectives, whatever they happen to be,
ax saliqücd cuq tomcrs are much more likely to come back, remain loyal, and provide positive word of
moulh. However, it is fair lo say that customer salisfac tion ha< taken pride of place in many discussions
about marketing (ag., Kotler‚ 1988). (‘nmequenlly, a great deal nl research ha< been undertaken to
understand what crcalcs and maintains customer satisfaction and to determine how il should be
measured, as il is clearly a key marketing variable.

Peters (1987) and many others have pointh out that today’s cuetomcrs are searching for quality, which
in service industrics, such as hospitality, tourism, and )cisurc, cquatcs with service quahty. Not
surprisingly, therefore, service quahty has become a maior issue tor managers in these areas, with many
people argu'mg that service quality has a central role in the success or failure of such organizations (ag.,
Luc and Hing, 1995“, Ford and Bach, 1997; Hudson and Shephard, 1998) and that successful
organizations will have to compcte on the basis of the quality of the customer survicc they provide. If an
organization succcuds in such a computitivc strategy. it has been argucd‚ it will be well rcwardcd, as it is
likely to obtain the following:
' A competitive differentiation that favors the organization ' Favomhlc word-of-mouth advertising

' Greater productivity

' Better cmploycc moralc

However, pcrhaps most important, as Bu7101| and Galc’s (1987) examination of the Profit Impact of
Marketing Strategy (PIMS) database: suggested, private seclor organizatiuns at least may achieve:

' Better proüts and rates of return

Managers must. therefore, understand how quality and satisfaction an: determined in their markctplace
and how the tw0 constructs are related, as without such an understanding, the development of
appropriate marketing Strategies and >uvicc quality programs will hc impossiblc. Further, as should he
obviouq, «such understanding cannot come from internal information alone. Quality and satisfaction
must be invc<tigatcd in the marketplace with customers, which means that ()rganizatinns must
undcrtake appropriate marketing research and have wclI-dcvclopcd and long-tcrm quality and
satislaction measurement and monitoring programs that provide management with the information
they need. As a starting point for suggesting a model of this relationship, the next section brict1y
discusscs some key aspects of service quality, while subsequent sections diacuss customer satislaction
and their relationship.

SERVICE QUALITY

The central link in most service strategics is quality, which has been a major issue for many years, dating
back at least to Deming's work in Japan
in the 19503. Ideas aboul total qualily management (TOM) and quality assurance (OA) have been well
developed over the last thirty years (e.g., Crosbv, 1979, 1984) and are a central parl of manv
organizalions’ operations. However, mosl of the early work on qualin cuncenlraled on producls. ’l'hus,
Gummesson (1989) found onlv three of [he 145 papers presented at Ihe 1988 American Socier for
Quality Control included “services” in their titles, while none of the 102 papcrs at the 1987 European
Organization for Qualit) Control did so. Deqpite thiq‚ manv service organizations have also realized that
qualit\ is essential (e.g.. Albrechl and Zcmke, 1985; Peters, 1987; Carlzon. 1987; Gronroos, 1990;
Albrecht, 1990; Berry and Parasuraman, 1991). While service organization: have recognized a need to
improve quality, and many have introduced service quality programs, xcrvicc quality is still a major
problem thai needs to be addressed, for a number of rcasons:

1. Many managch have a short-run view of the world, especialb when organizational <ystems are
designed to reward shorl-, rather than lnng-term achievemcms. Quality programs have financial and
human resource costs, especially when Hrst developed, which is a major problem il such resources are in
shorl supply, as is often the eine in lcisurc and hospitality organizations. However, as Gronroos (1990. p.
51) has poinlcd out, "quahly does 1101 0051-3 lack of quality does,” at least in [he long term,

2. Many organizations offer too many services. With limiled budgels this often means that nothing
within the organization can be done excellcnlly. However, pruning aclivilics can be an extreme!) difficult
issue aß il requires considerable change in the things people do and may require subslantial
organizational rcstructuring, all of which are costly, both financially and in human resources terms.

3. Exisling operating systems may not be efficiem or effective. As a consequence, staff find il difficult to
deal effectiver with customers, especially whcn problems arisc. Oftcn, systems are also cxpcnsivc m
rcpair or rcplacc, making choiccs in this area dil‘ficult.

4. Reasonable status may not be given 10 the “fromline lroops,” whethcr they are dcsk clerks, pool
allcndants, or housckccpcrs. Consequcnlly, these people have linie job salisfaclion or organizalional
lo;ahy and are no! inclined lo exert lhcmselves for lhcir organization when il might be required.

5. An “it’s not my job” syndromc cxists in many organizations‚ which means people lry to avoid helping
inslead of providing supporl 10 cuslomers or to other staff who are dealing with customers. Removing
this syndramc requires a major culture change, which can hc
difficuh and which must come from an organizatinn’s most senior managcrs.

6. Slaff think “cusmmers are a nuisance,” making it difficuh to develop slrong cusmmer service
programs, as they have other agendas.

Despi\c those problems, organizaüons must be concerncd with the level of service quality being
provided. If ser\ice qualin is 10 be assessed, however, '" must be operationally defined. People Fmd it
difficult to articulate what they mean by service quali\y‚ al\hough they know when they have not
received il. As Buzzcll and Galle (1987, p. 111) have nolcd, “quahly is wha\ever the cuslomcr says il is and
Ihe qualin of a parlicular good or service is whmever the customer perceives it to be." 'l11ere is even
more ambiguily aboul service quality as it

1. ie mullid‘lmemiunul;

2. has underly'mg quality dimeneions‚ some of which change over time;

3‚ is intangiblc, although ii is often assesscd lhrough tangiblc clucs (e.g., a holel’s appearance or a [our
bus"s design or seem);

4. is \hc result of both %cwicc processes and %uvicc outcomcs (i.e., it arises from how cusmmcrs are
lrcatcd and whether lhcir problems are solvcd); amd

5. depends on \he difference (or gap) between customers’ expeclalions and pcrccpt'lons.

Clearly‚ organizations must have a good understanding of their customers if they are to understand their
qualily perceptions or have a chance of suoccssfully implcmcm'mg service quality programs. They also
need know. lcdgu abou\ how and when cuslomcrs interacl wilh lhcir urganizalion und im various
Operations. Such interaclions are crilical as it is at \hese limes 1hal service qualny is assesscd and the
organization judged. Carlzon (1987) is generally given credil for this insighl, terming lhcsc inleraclions
“momcnls of truth" and arguing thai the ürsl phase in understanding service qualily is to define lhese
moments of lru\h and determine how they can go wrong.
Shoslack (1984) provided an excellent approach to developing such an understanding with her
"blueprinting” concept, which examines interac&ions from a cuqmmcr’e vicwpoinl. Carlzon (1987) also
slrcsscd thai momcnls of lru\h are more likcly \o go wrong if staff do nm have the capacity to deal with
cuslomcrs. Consequcmly, hc argucd for “cmpowcring" customer interaclion staff and giving \hem Ihe
authority to solve probleme, rather than forcing them 10 rcspond burcaucral'xcally, something lhat
hospilalily managen need to undersland more than most.

3. Remember that recruitment is at least as important when hiring front cler clerks or housekeepers as it
is when hiring managers and senior executives

4. Link compensation to performance at all levels, not just at Ihe top

Such a model requires organizations to measure their internal as well as external quality. Internal qua ity
is related to an organi1ation’s ability to attract, develop, motivatc, and retain quality employees, not for
its own sake but because the model recognizes that internal quaht_v leads to external quality, which
leads to customer satisfaction, lung-term loyalty, and prntitability. lztfeetive internal quality programs
must, therefore:

. Compete aggressiver for service talent . Offer a real vision that hrings purpose to those at the front line
. Provide training 10 equip staff to perform their service rules . Understand that good and eommitted
teams perform better . Provide real freedom for statf to solve customers’ problems . Acknowledge
achievcment publicly . Base job design on research with employees (viewing them as “eustomers")

qoxm-AWNF

Nevertheless‚ at some point, an organivation must understand how it is viewed in the markctplace and
so must measure its service quality. While a number of suggestions have been made, the SERVOL'AL
model remains the most commonly used approach. It is discu&sed briet1y in the next section.
The SERVQUAL Model

Parasuraman, Zeithaml, und Berry’s (1988) service quality model (SERVOL'AL) has been outlined in many
papers in recent years. Despite critic'tsm from a number nf dctraetors‚ SERVOL'AL remains the most
commonly used diagnoslic model for evalualing service qualil} and the development of service quality
Strategies. As mentioned previously, the SERVOUAL model asqumcs qualit) is the result of gaps between
pcnple’s expectalions and their perceptions of service performance. 'The model does not cxaminc actual
performance and so cannot be evaluated from within the organization; it can only be evaluated from
outeide. Ne! and Pitt (1993), Sateh and Ryan (1991), and Samson and Parker (1994), among many
others, have used SERVOUAI, in a vatiety ol‘ settings and found that, allhough there are some problems
with the instrument, it has good descriptive power and can generatc useful managerial insight and
understanding.

SATISFAFTION

As has already been noted, sali<laclinn has been a concern for a number of years (Cardom, 1965) and is
generally recogni1ed as ;] poslpurchase construc\ man is related 10 how much a person likcs or dislikcs u
producl or service after cxpcricncing it (Woudsidc, Frey, and Daly, 1.989). It can be del'med as an
evalualinn Ihm an “experience wm at least as good as it was supposcd to be” (Hunt, 1977, p. 459).
Sali<faction is a response to a pcrccivcd discrcpancy bclwccn prior cxpcclations amd pcrce'wcd
performance af\er consumption (Oliver, 1981; Tse and Willen, 1988). Consequcntly, managcrs need to
understand how expectations are created and how these cxpcclalions are influenced by pcople’s
consumpt'um experiences. SA\1SIAC\1UH is often described as a confirmalion of cxpcclalions ((‘admte,
Wondruff, and Jenkin9. 1987) and, while there has been some discussion as to whclhcr sa\isiuc\ion und
dissalisfaction an: oppositc polcs on [he «ame dimension (Churchill und Surprenzml, 1982). mus!
researchers seem to have acccplcd that di«alisfaclinn nnd <mi<taction ret1ccl the same conlinuum (c.g.,
Westbrook und Oliver, 1991). Customcrs are assumcd to have developed cxpcclalions prior 10 use, and
pcrceivcd performance is compared lo them: expcclalions on a “heller than” or “wnrse lhan“ model. This
comparison is “labcllcd ncga\ive disconfirmation if . . . worse than cxpcclcd, positive disconfirmalion if
heuer [han cxpcclcd, and simple conlirmalion il as expecled" (Oliver and I)cSarbo‚ 1988). However‚ al
least in some circumslanccs, salistaclion also seems to be relalcd directly to pcrccivcd performance,
which customers cvalualc on a “good” to “bad” dimcnsion (Churchill and Surprcnam. 1982; Tsc and
Willen, 1988; Bollnn and Drew, 1991). ’l'hus, pcrlormance impacts on sauslnclion directly and indircclly
(lhrough diäconfirmation).

THE SERVICE QUALITY-SATISFA (‘TION RELATIONSHIP

At the hear! nflhe discuseion is the a<sumplion that, for <crvicc market» ers, such as those in hospilalily,
tourism‚ and Icisurc, scrxicc quality impacls on salislucuon directly and. so, is the crucial variable
markclcrs need to control slralcgically if they are to hc succcqeful in the long term. This has led to
suggcslions that cuslomcr service is lhc key operalional variable and thai, if su» ice quality is improved,
cu>lomcr 5alixleclion and, hopefuh ly, profilahilily will be imprnvcd‚ a result supported by research
undcrmkcn by Getty amd Thompson (1994) and Woodsidc, Frey, and Daly (1989). The simplcst suggestcd
relationship is shown in Figure 6.1.

FIGURE 6.1. A Simpie Relationship Between Service Quality and Satisfaction

Service Quality Satcsfactlon

It should be kcpt in mind that service quality is a global mcasurc of a number of quality dimensions (e.g.
‚ the langihles, reliability, responqivenass, assurancc, and cmpa\hy dimtnsions suggcsltd in Parasuraman,
Zeitham1, und Berry’s [1988] SERVQUAL model). It has also been suggesled that satiäfied customers are
also more likely to repurchase and/or recommend the product or service to othcri, and the prior
research citcd sugge>ted thai lhis may also be true. Consequcntly, there are anlcccdcms 10 and
consequences of this simple relationship.

However, the relationship may not be as simple as Figure 6.1 depicts, ns recent research has suggesth
that service quality may be only one of a number of factors that influence "value“ and that it is value,
rather than service qualitv alone, that determines pcnplc’s willingncsc to buy and subscqucnt
satislnction. Givcn this suggestion, the present chuplur concludcs by outlining some of the research
underlakcn into the value wnslrucl and discusses its implitmt'mns fm hospilality, murism, und h:isure
mganizatinns.

THE VALUE (‘0NSTRUCT

Zeilhaml (1988, p. 14) suggested that value is a “consumer’s overall assessment of Ihe Utility ofa product
(or service) based on pcrccptions of whal is received and what is given,” which she termed a product nr
servicc’s "get" and “give" dimcnsions. The most common such definition of valuu is product quality and
price tradcoff (c.g.‚ Monroe, 1990; Cravcns et al., 1988), although some have suggested that a two-
tactor model may not be a sufücient explanalion (Schechter, 1984; Bolton and Drew, 1991) and that
other variablcs thai might impact on value are service quality, pcrccivcd risk, and image.

Sheth, Newman, and Gross (1991) have also suggested that value is a complex construct with multiple
dimensions (social, emotional, functional, cpistcmic, and conditionai) that may impacl ditt‘crcmly in
various situations. While l'unctional value has generally been presumed to be the key int1uence, Sheth,
Newman, and Gross found that the other value dimensions were int1ucnlial in some situations. For
example, while functional and social values dominntcd a dcci<ion to use filtercd or unfiltcrcd eignrcncs,
emotional value was paramount in the overall decision m smoke. Whatcvcr dimcnsinns are in [hc \;llu0
construct, il is a mcdialing variable bclwccn acrvicc quality and sali.stacliun‚ as shown in Figure 6.2.

The impliczuions 01'1his small change 10 1hc modc1 nrc signil“ucant as, if value playc a cen1ral
medialing role, in reliance nn service quality 10 generale satistactiun may be misplaccd. If customers are
more concerncd about what they gel, then service quality may play a major roh: in generaling
smi<laclmn and, more important, such customers are more 1ikc1y 10 be willing 10 pay & premium for
higher quuhly. On the other hand, il‘cuslomers are more concerned about what they give, then better
quality is unlike1y to compcnsatc for a higher price, organizations are unlikc1y to be ah1cto charge
higher prices anx1,\hus,will be unzlb1c 10 cover the additional costs inherenl in many customer service
programs. It is clearly vital that organizations understand the nature of the market and the value dcrivcd
from quality before cmharkiug nn cxpcmivc cusmmcr service programs.

Research by Bolton and Drew (1991), Dudds, Monroe, and Grcwal (1991), Baker, Ißvy, and Grcwal
(1992), and chcncy, Soular, and Johnson (1997, 1999) suggesls \hal such a model is plausible and that
managers need 10 understand Ihe much more complex rclmionships than thai implicd hy Ihe simple
service quality-salisfuclion ncxus. Service qualily still plays an importanl role but il has indirccl, as we“ as
direct, c1'1'ccls on people ’s inlenlions and salix1aclinn. Managers need to understand both types of
cffec1s if they are to develop effective customer service Strategies.

Indccd, it seems (hat value is a complex conslrucl wilh mu1l'lp1c dimcw sions thai are in1'lucnccd by
price, pcrccivcd risk, and “brand" (holcl, leur company, or whalcvcr) image, as we“ as service quality.
Swecncy, Soular, and Johnsnn's (1999) later research, underlnken in & retail environment, suggests that
service qua1ity‘s most important contribution may be indirccl, as good quulny .scrvicc rcduccs lhc risk
people feel and. so, increascs value indircclly rather (han directly. If this is true in the hospitalily, tour

FIGURE 6.2. Value As a Mediating Variable