The Relationship between Customer Satisfaction and Service Quality: a study of three Service sectors in Umeå. - PDF

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The Relationship between Customer Satisfaction and Service Quality: a study of three Service sectors in Umeå. AUTHOR: SUPERVISOR: JENET MANYI AGBOR JESSICA ERIKSSON Student Umeå School of Business Spring

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The Relationship between Customer Satisfaction and Service Quality: a study of three Service sectors in Umeå. AUTHOR: SUPERVISOR: JENET MANYI AGBOR JESSICA ERIKSSON Student Umeå School of Business Spring Semester 2011 Masters Thesis, two-years, 30hp ii ABSTRACT It is obvious that customers are important stakeholders in organizations and their satisfaction is a priority to management. Customer satisfaction has been a subject of great interest to organizations and researchers alike. In recent years, organizations are obliged to render more services in addition to their offers. The quality of service has become an aspect of customer satisfaction. It has been proven by some researchers that service quality is related to customer satisfaction. Others used service quality dimensions to evaluate service quality. What about the relationship between customer satisfaction and service quality dimensions; the relationship between service quality and its dimensions? Purpose: The main purpose of this study is to examine the relationship between customer satisfaction and service quality in service sectors with respect to the service quality dimensions. Method: Convenience sampling technique was used to collect quantitative data from customers of Umeå University, ICA and Forex to get their satisfaction levels and meaning of service quality which were substituted in the SERVQUAL model. Chisquare test was used to test the hypotheses separately and in a group. Findings: The study showed distinctive results for the relationship between service quality dimensions and service quality/customer satisfaction. ICA and Forex had significant relationship between service quality and customer satisfaction; but Umeå University had no significant relationship between service quality and customer satisfaction. Meanwhile the group result showed that: responsiveness`, empathy and reliability were significantly related to service quality; reliability` and `empathy`, were significantly related to customer satisfaction but `responsiveness` was not significantly related to customer satisfaction; meanwhile service quality was significantly related to customer satisfaction. Implication/Contribution: The findings imply that service quality is not the only factors that could lead to customer satisfaction in service sectors; that service quality dimension varies in the different service sectors. The findings suggest that to provide quality service in order to satisfy customers, organizations in this kind of service sectors need to improve on the dimensions of service quality. Also, to provide total satisfaction to customers, the service sectors need to improve on the other factors that were given as reasons for satisfaction. This study contributes to existing theories by confirming or adding value to the relationships that are involved in customer satisfaction, service quality and SERVQUAL dimensions. It provides results that could be useful to managers in business organisations for strategic planning. Key words: Customer satisfaction, Service quality, Service quality dimensions, SERVQUAL, service sectors. iii ACKNOWLEDGEMENT A single hand cannot tie a bundle says an old adage. Many people have made it possible for me to complete this work. I am grateful to all the respondents to my questionnaire. Thanks to Umeå University, Forex Bank and ICA Ålidhem Centrum for enabling me to user their customers. Thanks to Sarah Mankelow of Speedsurvey.com for uploading my questionnaires in the survey links. Special thanks to the supervisor of this work; Jessica Eriksson for the time and efforts put in directing me on what to do. Thanks to all my lecturers and administrators at Umeå University especially to Gisela Taube-Lyxzén, Rickhard lorsberg, Pontus Bergh, Lennart Widmark and Inger Alice for the administrative supports, given to me. I appreciate the care and courage from the entire Agbor Akoebot family and the Inyang family during the period of my study. Thanks to Dapi Leonie for the moral and financial supports given to me during my study period. I appreciate the efforts of Tanya Richards for translating my questionnaire, reading over my work and the moral support given to me together with Alva Öhman during my study and stay in Umeå, thank you so much. Thanks to all my friends and/or classmates, who kept me smiling during my study period; especially to Niklas Gotthardson not forgetting Ajang John for reading over my work. In all, without the protection and direction from the most high, all other supports given wouldn t have passed through. Thank you, Jehovah God, for being my refuge in life. To you I give all the Glory. iv TABLE OF CONTENTS CHAPTER 1: INTRODUCTION INTRODUCTORY BACKGROUND Importance of Customer satisfaction Reasons for researching in this area PROBLEM FORMULATION RESEARCH QUESTION PURPOSE OF THE STUDY DELIMITATION STRUCTURE OF THE THESIS... 5 CHAPTER 2: LITERATURE REVIEW AND THEORITICAL FRAMEWORK CUSTOMER SATISFACTION SERVICE QUALITY CUSTOMER SATISFACTION AND SERVICE QUALITY CONCEPTUAL FRAME WORK...14 CHAPTER 3: METHODOLOGY AUTHOR S PRECONCEPTIONS CHOICE OF SUBJECT PERSPECTIVE OF THE THESIS RESEARCH PHILOSOPHIES RESEARCH APPROACHES SAMPLING TECHNIQUE AND STRATIFICATION RESEARCH STRATEGY AND DESIGN RESEARCH DATA, DATA CAPTURE INSTRUMENT, COLLECTION METHOD DATA CLEANING DATA ANALYSIS PROCEDURE VALIDITY AND RELIABILITY ETHICAL CONSIDERATIONS...34 CHAPTER 4: EMPIRICAL FINDINGS AND ANALYSIS UMEA UNIVERSITY Sample presentation for Umeå University : Variables presentation for Umeå University : Variables and Sample characteristics for Umeå University Statistical Tests for Umeå University ICA ÅLIDHEM CENTRUM Sample presentation for ICA Ålidhem Centrum Variable characteristics for ICA Ålidhem Centrum Variable and Sample characteristics for ICA Statistical Test for ICA Ålidhem FOREX BANK Sample Characteristics for Forex Variable presentation for FOREX Variables and sample characteristics for Forex bank Statistical Test for Forest Bank GROUP PRESENTATION Group Sample population and Characteristics Group Variables presentation Group Variables and Sample characteristics Statistical Test for Group data SUMMARY OF RESULTS FROM THE STUDY VALIDITY, RELIABILITY, REPLICABILITY AND GENERALIZABILITY FOR THE STUDY DISCUSSION...62 CHAPTER 5: CONCLUSIONS, IMPLICATION AND SUGGESTIONS CONCLUSION...68 v 5.2. IMPLICATION LIMITATIONS SUGGESTIONS FOR FUTURE RESEARCH...71 REFERENCES APPENDIX Appendix 1: Statistics on past articles on customer satisfaction, service quality and service quality dimensions. Appendix 2: Reason for customer satisfaction for Umeå University Appendix 3: Reasons for dissatisfaction for Umeå University Appendix 4: Recommendation and customer satisfaction for Umeå University. Appendix 5: Service Quality rating and Sample characteristics for Umeå University Appendix 6: Reasons for customer satisfaction for ICA Appendix 7: Reasons for dissatisfaction for ICA Appendix 8: Recommendations and customer satisfaction for ICA Appendix 9: Service quality rating and sample characteristics for ICA Appendix 10: Reason for satisfaction Forex Bank Appendix 11: Reason for dissatisfaction Forex Appendix 12: Recommendations and customer satisfaction for Forex Bank Appendix 13: Service quality rating and Sample characteristics for Forex Appendix 14: Questionnaire 1: The Educational Sector (Umeå University) Appendix 15: Questionnaire 2: A Retail Shop (ICA Ålidhem) Appendix 16: Questionnaire 3: A financial sector (FOREX Bank) List of Table TABLE 1: FOUR PARADIGMS FOR THE ANALYSIS OF SOCIAL THEORY (KENT 2007 PG 49)...19 TABLE 2: PARADIGMS IN MARKETING RESEARCH (KENT 2007 PG 49)...20 TABLE 3: SERVQUAL DIMENSIONS AND SERVICE SECTORS CLASSIFICATIONS FOR THIS STUDY...25 TABLE 4: VARIABLE IDENTIFICATION...27 TABLE 5: CUSTOMER SATISFACTION AND SAMPLE CHARACTERISTICS FOR UMEÅ UNIVERSITY...38 TABLE 6: SERVICE QUALITY AND SAMPLE CHARACTERISTICS FOR UMEÅ UNIVERSITY...39 TABLE 7: SERVICE QUALITY DIMENSIONS AND SAMPLE CHARACTERISTICS FOR UMEÅ UNIVERSITY...40 TABLE 8: TEST RESULTS FOR SERVICE QUALITY AND SERVICE QUALITY DIMENSIONS FOR UMEÅ UNIVERSITY...41 TABLE 9: TEST RESULTS FOR SERVICE QUALITY AND SERVICE QUALITY DIMENSIONS FOR UMEÅ UNIVERSITY...41 TABLE 10: TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY FOR UMEÅ UNIVERISTY...42 TABLE 11: CUSTOMER SATISFACTION AND SAMPLE CHARACTERISTICS FOR ICA ÅLIDHEM...45 TABLE 12: SERVICE QUALITY AND SAMPLE CHARACTERISTICS FOR ICA ÅLIDHEM...46 TABLE 13: SERVICE QUALITY DIMENSIONS (MEANING OF SERVICE QUALITY) AND SAMPLE CHARACTERISTICS FOR ICA ÅLIDHEM...46 TABLE 14: TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY DIMENSIONS FOR ICA ÅLIDHEM...47 TABLE 15: TEST RESULTS FOR SERVICE QUALITY AND SERVICE QUALITY DIMENSIONS FOR ICA ÅLIDHEM...48 TABLE 16: TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY FOR ICA ÅLIDHEM...48 TABLE 17: CUSTOMER SATISFACTION AND SAMPLE CHARACTERISTICS FOR FOREX...51 TABLE 18: SERVICE QUALITY AND SAMPLE CHARACTERISTICS FOR FOREX...52 TABLE 19: SERVICE QUALITY DIMENSIONS AND SAMPLE CHARACTERISTICS FOR FOREX...52 TABLE 20: TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY DIMENSIONS FOR FOREX...53 TABLE 21: TEST RESULTS FOR SERVICE QUALITY AND SERVICE QUALITY DIMENSIONS FOR FOREX...53 TABLE 22: TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY FOR FOREX...54 TABLE 23: GROUP CUSTOMER SATISFACTION AND SAMPLE CHARACTERISTICS...56 TABLE 24: GROUP SERVICE QUALITY AND SAMPLE CHARACTERISTICS...56 vi TABLE 25: GROUP SERVICE QUALITY DIMENSIONS AND SAMPLE CHARACTERISTICS...57 TABLE 26: GROUP TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY DIMENSIONS...57 TABLE 27: GROUP TEST RESULTS FOR CUSTOMER SATISFACTION AND SERVICE QUALITY...58 TABLE 28: INTERNAL RELIABILITY FOR THE INDIVIDUAL ORGANIZATIONS...61 TABLE 29: INTERNAL RELIABILITY FOR GROUPED DATA...62 List of Figures FIGURE 1: CUSTOMER PERCEPTIONS OF QUALITY AND CUSTOMER SATISFACTION (WILSON ET AL., 2008, P. 79)...11 FIGURE 2: THE RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND SERVICE QUALITY FOR THIS STUDY...15 FIGURE 3: THE PROCESS OF DEDUCTION, (BRYMAN, 2008, PG 10)...20 FIGURE 4: DATA CLASSIFICATION FOR THE STUDY...31 FIGURE 5: SAMPLE PRESENTATION FOR UMEÅ UNIVERSITY...35 FIGURE 6: CUSTOMER SATISFACTION AND SERVICE QUALITY FOR UMEÅ UNIVERSITY...36 FIGURE 7: MEANING OF SERVICE QUALITY (SERVICE QUALITY DIMENSIONS) FOR UMEÅ UNIVERSITY...36 FIGURE 8: RECOMMENDATION FOR UMEÅ UNIVERSITY...37 FIGURE 9: SERVICE QUALITY RATING FOR UMEÅ UNIVERSITY...37 FIGURE 10: AGE, GENDER AND CATEGORY OF CUSTOMERS FOR ICA ÅLIDHEM...43 FIGURE 11: CUSTOMER SATISFACTION AND SERVICE QUALITY FOR ICA ÅLIDHEM...43 FIGURE 12: SERVICE QUALITY MEANING FOR ICA ÅLIDHEM...44 FIGURE 13: RECOMMENDATION FOR ICA ÅLIDHEM...44 FIGURE 14: SERVICE QUALITY RATING FOR ICA ÅLIDHEM...45 FIGURE 15: AGE, GENDER AND CUSTOMER CATEGORY FOR FOREX BANK...49 FIGURE 16: CUSTOMER SATISFACTION AND QUALITY SERVICE FOR FOREX...49 FIGURE 17: SERVICE QUALITY DIMENSION FOR FOREX...50 FIGURE 18: RECOMMENDATIONS FOR FOREX BANK...50 FIGURE 19: SERVICE QUALITY RATING FOR FOREX BANK...51 FIGURE 20: GROUP SAMPLE PRESENTATION OF THE STUDY...55 FIGURE 21: GROUP CUSTOMER SATISFACTION AND SERVICE QUALITY...55 FIGURE 22: GROUP SERVICE QUALITY DIMENSION...56 FIGURE 23: SUMMARY OF RESULTS FROM THE STUDY...60 1 CHAPTER 1: INTRODUCTION The aim of this section is to identify the research topic and to formulate research questions. Thus the chapter begins with an introductory background which includes the importance of customer satisfaction in business and the reasons for researching in this area, the research questions and purpose of the study will follow. Delimitation and structure of the report will end the chapter Introductory Background Customer satisfaction has been a subject of great interest to organizations and researchers alike. The principal objective of organizations is to maximise profits and to minimise cost. Profit maximisation can be achieved through increase in sales with lesser costs. One of the factors that can help to increase sales is customer satisfaction, because satisfaction leads to customer loyalty (Wilson et al., 2008, p. 79), recommendation and repeat purchase. Customers became very vital in business during the marketing era of the 1950s when companies could produce what they can sell and not just selling what they can produce as it was during the production era. Since the beginning of the consumption era in marketing, (business.business-key.com) the focus on customers/consumers has increased more as the consumption era also shifts to post-consumption; where organizations are obliged to render more services in addition to what they provide as offers to their customers. (David Armano, 2009). What are the qualities of these services provided to customers? Are the customers satisfied with these services? Thus, this research originated from the fact that customer/consumer is the key to business. In fact, their satisfaction is the most important tool that helps to increase sales and generate profits in the business environment. Moreover, the importance of customer satisfaction and service quality has been proven relevant to help improve the overall performance of organizations. (Magi & Julander, 1996, p. 40) Importance of Customer satisfaction From the view of operations management, it is obvious that customers play important roles in the organizational process (Lee & Ritzman, 2005, p. 92). Before the placement of strategies and organizational structure, the customers are the first aspect considered by managements. The questions asked in the strategic planning ranges from who will need to consume these offers, where are they and for how much can they buy to how to reach the customers and will it yield them maximum satisfaction? After these questions, the organization will then designs the product, segment the markets and create awareness. This does not only show the importance of customers in the business environment but also the importance of satisfying them. Customers are always aiming to get maximum satisfaction from the products or services that they buy. Winning in today s marketplace entails the need to build customer relationship and not just building the products; building customer relationship means delivering superior value over competitors to the target customers (Kotler et al., 2002, p. 391). Whether an organization provides quality services or not will depend on the customers feedback on the satisfaction they get from consuming the products, since 2 higher levels of quality lead to higher levels of customer satisfaction (Kotler & Keller. 2009, p. 169). Most companies are adopting quality management programs which aim at improving the quality of their products and marketing processes, because it has been proven that quality has a direct impact on product performance, and thus on customer satisfaction (Kotler et al., 2002, p. 8). The reason for this is to satisfy the customers. But, are the customers satisfied because of the products or service quality? I.e. are the companies providing the actual qualities perceived by the customers/consumers? Reasons for researching in this area The importance of customers in the business process has made it vital to always conduct research about customers. There has always been the need for customer research before, during and after sales, because of changes that may occur in the business process. It has been proven by an author that an organization that consistently satisfies its customers, enjoy higher retention levels and greater profitability due to increase customer loyalty (Wicks & Roethlein, 2009, p.83). For this reason every company works hard daily to win the hearts of customers by satisfying them in order that they become loyal customers to their brands in order to increase sales and profit. When customers have good perceptions about a brand, they will always choose to go for the brand, because consumers form their preferences relative to perceptions and attitudes about the brands competing in their minds. (Larreche, 1998, p. 152). To get these loyal customers, companies must create relationships with the customers. To create relationship with customers, companies need to conduct research to answer questions on how the customers make their purchasing decision and whether they are pleased with what the organization provides to them as offer in terms of product quality, service quality, price, etc. Thus customers will always prefer a product or service that gives them maximum satisfaction. But how will the organization know whether the consumers consumption habits have changed, or if they are well served? How will the organization know if competitors brands are doing better than theirs, which can trap their customers? With the increasing number of businesses and growing competitions today, each company wants to be the customers first choice. To achieve this, organizations need to answer the questions above via continuous research in this area so as to lead the organizations to their twin objective of satisfying their customers and making profits. Because customer satisfaction is the main concern of business sectors of today, their researchers are always conducting research about the customers especially on what relates to their satisfaction. Moreover, because this problem of satisfaction concerns the most unpredictable stakeholder in the business environment (the customers), who remains the main character that keeps the business in operation; and because satisfaction varies and changes among individuals, there is a need for continuous research in this area. Although there are other factors such as price, product quality etc other than service quality that determine customer satisfaction (Wilson et al. 2008, p ) my interest on service quality alone for this study is because service quality has been proven to be 3 the best determinant of customer satisfaction when it come to service sectors. Also, providing quality services is one of the main targets when it comes to management with respect of customer satisfaction in the business environment of today, meaning it is a very vital topic Problem formulation Customer satisfaction has been studied in different directions, from measurement to its relationships with other business aspects. Some researchers have provided possible means of measuring customer satisfaction (Levy, 2009; NBRI, 2009). Meanwhile other authors like Wilson et al. (2008) demonstrated some determinants of customer satisfaction to be product and service quality, price, personal and situational factors (Wilson et el., 2008, p ). Some researchers have looked into the relationship between total quality management and customer satisfaction. (Wen-Yi, et al,. 2009, p ). Because customer satisfaction is also based upon the level of service quality provided by the service provider (Lee et al., 2000, p. 226) and service quality acts as a determinant of customer satisfaction (Wilson et al., 2008, page 79-80). Other authors have brought out theories relating customer satisfaction and service quality in their researches. Wang & Hing-Po, (2002, p ) measured service quality in China s mobile phone market and emphasis on the dynamic relationship among service quality, customer value, customer satisfaction and their influence on future behaviours after the key drives of customer value and customer satisfaction are identified. In relation to the idea of Lee et al. (2000, p. 226), some authors examined the relationship between service quality, customer satisfaction, and store loyalty within the retail department store context and found out that; service quality influences relative attitude and satisfaction with department stores. (Sivadas & Baker-Prewitt 2000, p ). Because service quality is following all aspect of business, Kuo, (2003) conducted a research on service quality of virtual communit
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