Factors affecting consumers decision making

5541 words (22 pages) Essay

1st Jan 1970 Marketing Reference this

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In this chapter, the reasons and factors which affect the consumers’ decision while choosing the cafés will be further discussed. The previous findings in related fields such as the restaurant industry are taken as the foundation to develop the variables and conceptual framework for the research. Customer satisfaction, perceived value and customer loyalty will be measured in the research as these variables are believe to affect consumers’ choice of cafés that they patronise. There are several factors that affect customers’ satisfaction, perceived value and loyalty which include affordability, service quality, food offering, physical environment, nostalgia, brand identification, word of mouth, prestige and connectivity. These factors will be further elaborated in this chapter. Besides, many previous researchers have studied about the restaurant industry in term of customer satisfaction, brand loyalty and perceived value. However, the number of research about cafés are lesser compared to restaurants. Thus, the current study examines the selection of cafes.

2.3 Literature Review

In this section, the previous review and literatures of three dependent variables which are customer satisfaction, perceived value and customer loyalty will be reviewed. In addition, findings of the related journals will also be reviewed in this section. There are several independent variables that may affect the satisfaction, perceived value and loyalty of the cafes’ customers which include affordability, service quality, food offering, physical environment, nostalgia, brand identification, prestige and connectivity.

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Affordability shows how much do the customer afford to pay for the food and beverage offered by the café (Monroe, 1989). Service quality indicates how well the cafés can differentiate themselves among the competitor by satisfying their customers especially in the competitive industry and at the same time it shows the expectation of the customers toward the performance of the café (Chen & Hu, 2010). Food offering looks of how good the quality of the food and beverages that offered by the café (Andaleeb & Conway, 2006). Meanwhile, freshness and choices reflect how cafés add value to their business. Physical environment describe the atmosphere that customers can found at the café (Walter, Edvardsson & Ostrom, 2010). Besides, it included decoration and layout of a café. Nostalgia describes the café created an experience or atmosphere that allowed customers to remind about the past or feel nostalgic (Wilson, 2004).

Brand identification refers to customers who identify with and associate themselves with the café brand which at the same time reflect their self-identities Belk (1988). Word of mouth describes how likely the customers share about the café with others (Westbrook, 1987). Prestige refers to prestigious that customers felt after consuming at the café (Dubois & Czellar, 2002). Connectivity refers to the availability of Wi-Fi in the café and the connection strength. All of the variables that indirectly affect the customer satisfaction, perceived value and customer loyalty will be investigated and measured in the following chapter of the study.

2.3.1 Customer Satisfaction

Yuksel and Rimmington (1998) stated that determining customer satisfaction is fundamental to effective delivery of services. Besides, companies that able to gain customer satisfaction may earn an advantage over their competitors by differentiate their product and service which at the same time may lead to high customer retention and earn positive word of mouth (Yuksel & Rimmington, 1998). Furthermore, customer that satisfied with the service provided will probably share with others about their good experiences (Rahim, Osman & Ramayah, 2010).

Rahim, Osman and Ramayah (2010) defined customer satisfaction as the difference between expectation and performance. If the performance falls below the expectation, the customer is dissatisfied (Kotler & Armstrong, 2010). However, if the performance exceed the expectation, the customer is highly satisfied and even be delighted (Kotler & Armstrong, 2010). According to Rahim, Osman and Ramayah (2010), they found out that service quality is critical and have positive meaning with customer satisfaction. In order to gain customer satisfaction, the service provided by the café should be considered.

2.3.2 Perceived Value

Perceived Value is closely related to equity theory (Oliver & DeSarbo, 1988). The concept of equity is defined as customers’ evaluation of “what is fair, right, or deserved” for the perceived cost of product or service offered (Yang & Peterson, 2004, p. 802). According to Oliver and Desarbo (1988), customers will feel equitable when their ratio of outcome to input is equal to the ratio of outcome to input offered by company. At the same time, customers make comparison with competitors’ offering to measure the ratio of outcome to inputs (Yang & Peterson, 2004). Moreover, perceive value is hard to measure because it needed to recognize how product and service is value by the customers (Holbrook, 1999; Sweeney & Soutar, 2001).

In addition, customer value is critical in all marketing activity as high customer value reflect the main motivation for customer patronage (Holbrook, 1994). Yang and Peterson (2004) found out that offering high product or service value is able to generate customer loyalty through improving customer satisfaction (Yang & Peterson, 2004). In the discussion, Yang and Peterson (2004) suggested that customer perceived value can be improved through improving company representatives’ skills such as problem solving skill, understand well about customers’ need, handle problems with friendly manner and execute transactions accurately (Yang & Peterson, 2004). Meanwhile, customer may perceive the value in term of traditional perspective which is more on service quality attribute “provided based on functional value” (Chen & Hu, 2010, p. 539). At the same time, customers also emphasize in perceived symbolic value which reflecting “social, emotional, aesthetic and reputational aspects of service quality attribute during coffee consumption” (Chen & Hu, 2010, p. 539).

2.3.3 Customer Loyalty

Generally, customer loyalty is defined as “something that consumer’s exhibit to brands, services, stores, product categories and activities” (Uncles, Dowling & Hammond, 2003, p. 295). Besides, Jacoby and Kyner (1973) describe customer loyalty as “the biased, behavior response, expressed over time, by some decision making unit, with respect to one or more alternative brands.” Loyalty can be exhibited through two ways which are through behavior of the customers and through attitude such as repeat and frequent patronage to a particular shop (Rowley & Dawes, 1999).

Customer loyalty may increase company’s profitability (Bowen & Chen, 2001). According to Bowen and Chen (2001), positive correlation occurred between loyal customers and profitability. The main reason is because loyal customer will make repeat purchases (Bowen & Chen, 2001). Meanwhile, customer loyalty is consider a long term behavioral pattern and attitude which shaped by long term and many experiences over the time (Terblanche & Boshoff, 2006). Customer loyalty can be stimulated by three drivers and the three drivers are total customer satisfaction, calculative and affective commitment (Gustafsson, Johnson & Roos 2005).

Calculative commitment is defined as the “rational and economic decision making” which customer are more care about the cost and benefit in their decision making process (Gee, Coates & Nicholson, 2009, p. 360). Besides, affective commitment is a “warner and emotional factors” which customers are emphasize in trust and commitment when they made decision and customer satisfaction is described as a function of the relationship between customer expectations and experience (Gee, Coates & Nicholson, 2009, p. 360).

2.3.4 Service Quality

Service is defined as the variance degrees of service which occurred in the process of service delivery between service providers and customers (Parasuraman, Zeithaml & Berry, 1988). Besides, quality is defined as the evaluation of service delivery process and result of service (Parasuraman, Zeithaml & Berry, 1988). According to Andaleeb and Conway (2006), service quality is one of the critical attributes that driving satisfaction in the service delivery process and the result of the process is defined as service quality.

The current marketplace has become more competitive nowadays, adding superior value to products and services of the company are important as it is the best way to gain competitive advantage (Woodruff, 1997). Thus, service quality has become an important factor for the company to add value into their products and services. In addition, coffee outlets started to face big challenges as the market had become even more competitive that forced companies to find new ways to differentiate themselves (Chen & Hu, 2010). Moreover, offering good service quality is essential because it is considered basic strategy that make sure companies can survive in the industry (Dawkins & Reichheld, 1990; Parasuraman, 1985; Reichheld & Sasser,1990; Zeithaml, 1996).

According to Rahim, Osman and Ramayah (2010), service quality is one of the important factors of customer satisfaction. Based on their research, there is 43% of customers’ satisfaction change due to the service quality (Rahim, Osman & Ramayah, 2010). According to the previous research, service quality is verified to have significant positive influence on customer satisfaction (Lee, Hsiao & Yang, 2011). In addition, service that provided by the personnel or employees may have great impact on customers’ satisfaction which may also allow customers to have good experiences (Lee, Hsiao & Yang, 2011). Meanwhile, Andaleeb and Conway (2006) discussed about the importance of responsiveness in the restaurant industry. Based on their research, responsiveness is critical as it reflects how customers evaluate the performance of the restaurant which may directly influence the customer satisfaction. Responsiveness such as personnel’s appearance, knowledge on the menu and server’s attitude are important because these attributes may affect the total satisfaction of the customers (Andaleeb and Conway, 2006). Thus, the study will examine on the relationship between service quality and customer satisfaction which use to form a hypothesis as below

H1:

Service quality has impact on customer loyalty as responsiveness is the determinant of customer loyalty (Rahim, Osman and Ramayah, 2010). According to Rahim, Osman and Ramayah (2010), when there is a change in service quality, customer loyalty will increase by 45%. Meanwhile, service quality can caused positive influence on customer loyalty (Lee, Hsiao & Yang, 2011). At the same time, Andaleeb and Conway (2006) found out that responsiveness is critical to customers in restaurant industry because it showed direct impact on the customer loyalty (Andaleeb & Conway, 2006). In the study, we will examine the relationship between service quality and customer loyalty. The hypothesis is as below

H2:

Besides, service quality also may affect customer’s perceived value especially based on functional value and symbolic value (Chen & Hu, 2010). They further discuss the effect of the service quality that functional value reflects the employees’ attitude and service quality whereas symbolic value “reflects social, emotional, aesthetic and reputational aspect of service quality during coffee consumption”. (Chen& Hu, 2010, p. 539) Meanwhile, the study will examine the relationship between service quality and customers’ perceived value with the hypothesis as below

H3:

2.3.5 Food Offering

Food offering defined as the food and beverages that served in the café. At here, the food offering will be measured more into the quality of food and beverages and also choices that available in the café. According to Rijswijk and Frewer (2008), food quality is hard to define because they are “classified as credence attributes”. Basically, customer derived quality perceptions from other product cues, either intrinsically or extrinsically (Rijswijk & Frewer, 2008).

Based on Andaleeb and Conway (2006), food quality was ranked third important out of four attributes to customer satisfaction. However, food quality is not counted as the factor of individual’s decision to select café although provides better food quality may lead to higher customer satisfaction (Andaleeb & Conway, 2006). In addition, food quality is an important factor to the customer’s total evaluation of satisfaction (Qin, Prybutok & Zhao, 2010). Besides, food quality is deemed related to satisfaction within fast food restaurants (Johns & Howard, 1998). Throughout the literature review, the study showed the relationship between food offering and customer satisfaction. Thus, the hypothesis formulated as below

H4:

Besides, Chen and Hu (2009) found out that coffee quality and food and beverage factors may influence the perceived value of the customers including functional and symbolic values (Chen & Hu, 2009). Therefore, food quality is considered as attribute which can provide “value that customers perceived through a coffee consumption experience” (Chen & Hu, 2009, p. 540). In the study, the relationship between food offering and customers’ perceived value will be examined. The hypothesis developed as below

H5:

In addition, brand reputation or product quality that meet customer expectation would enhance the customer loyalty toward company product Selnes (1993). Besides, Selnes found out that strong positive relationship are shown between customer loyalty and product reputation. Furthermore, brand reputation that meets expectation will lead to customer satisfaction that may indirectly lead to customer loyalty Selnes (1993). From the previous literature review has shown the relationship between food offering and customer loyalty. Thus, hypothesis will be designed as below

H6:

2.3.6 Physical Environment

Physical environment is the place where the customers present during the service delivery process (Walter, Edvardsson & Ostrom, 2010). In advance, physical environment can be called as servicescape (Bitner, 1992). Servicescape is the man made “physical surrounding that invokes in customers a desire to stay” (Bitner, 1992, p. 67). Generally, it combined with tangible facilities that can enhance the performance of the service (Bitner, 1992). Besides, Barber and Scarcelli (2010) defined physical environment as a tangible element of service with the “appearance of physical facilities, personnel, communication materials, and other physical features” that used to deliver service.

Meanwhile, physical environment can also be divided into cleanliness or tidiness of the environment and facilities (Johnston, 1995). According to Brady and Cronin (2001), ambient conditions, facilities design and social factors may influence the perceived quality of the customer towards the physical environment. Facilities design mention about the functional, aesthetic describe how pleasing is the environment and social condition showed the frequencies and kinds of people at the setting (Raajpoot, 2002). Ryu and Jang (2008) introduce dinescape which are constructing by six elements such as “facility aesthetics, lighting, ambience, layout, dining equipment, and employees” to describe the internal dining environment of restaurant. In the study, relationship between physical environment and customers’ perceived value will be evaluated. The hypothesis formulated as below

H7:

According to Ryu and Jang (2008), facility aesthetics can enables restaurant to differentiate itself from the competitors. Besides, favorable physical environment may enhance customer perceptions toward the image of the restaurant. Meanwhile, physical environment created good experiences for customer who determined the extent to which customer to repeat their service demand, recommend to their friends and stay and spend more than initial planned (Ryu & Jang, 2008). Moreover, good experience stimulates customer loyalty and customer satisfaction (Ryu & Jang, 2008). At here, two variables will be study about both relationships with physical environment. The hypothesis will be evaluated separately which developed as below

H8:

H9:

2.3.7 Nostalgia

Nostos and Algos is the Greek words of nostalgia and it means to “return home or to one native land” (Havlena and Holak, 1991, p. 323). However, in sociological perspective, nostalgia means that “people attach meaning based on their past experiences” (Wilson, 2004, p. 23). Besides, Holbrook and Schindler (1996) defined nostalgia as “a longing for the past, yearning for yesterday” and nostalgia is the powerful attribute that may directly affect consumer preferences. Some researchers defined nostalgia as a favorable experiences, attitude and preferences of the past (Holbrook & Schindler, 1996).

According to Wilson (2004), in marketplace, advertiser used nostalgia as tools to allow consumers to recapture the past and feel the past time. In addition, nostalgia is capable to bring up lots of emotional responses such as “joy, innocence, gratitude, affection and warmth” (Muehling & Sprott, 2004, p. 26). Based on Westbrook and Oliver (1991) stated that nostalgia created emotion or feeling that may enhance consumption experiences which may influence customers’ satisfaction. According to Laverie, Kleine and Kleine (1993), “emotions are linked to consumption experiences” which may cause greater customer satisfaction is experienced. As the literature mentioned, the relationship between nostalgia and customer satisfaction will be evaluated and developed as below

H10:

2.3.8 Word of Mouth

Word of mouth is defined as the information communication that shares private opinion or evaluation of goods and services (Westbrook, 1987). Customer degree of satisfaction or dissatisfaction with the consumption experience is main reason that shapes the product or service related word of mouth (Yi, 1991).

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According to Bitner (1990), loyal and satisfied or delighted customers will spread more favorable word of mouth of the firm. They will share their experience to their friends and others about the company’s products (Bitner, 1990). Besides, Schlesinger and Heskett (1991) found out that there is positive relationship between customer satisfaction and word of mouth. Furthermore, satisfied customer will tend to spread word of mouth than dissatisfied customers (Holmes & Lett, 1977). Hence, a hypothesis is developed to test the relationship between word of mouth and customer satisfaction. The hypothesis developed as below

H11:

In the other study, Herr, Frank and John (1991), found out that “favorable word of mouth may make customer to form favorable attitude and perceived value toward company and products”. Hong and Yang (2009) stated that if a company helps their customer to achieve personal goal and satisfied with the offering, they are more likely to spread positive word of mouth and will repurchase again the company product in the future. Literature review shows there is relationship between word of mouth and perceived value. The hypothesis formulated as below

H12:

In addition, satisfied customer that spread positive word of mouth may foster customer loyalty which at the same time helps company to retain customers (James, 1999). On the other hand, Pedro (2010) found that there is a strong link between “satisfaction with food and beverage as a key driver” of positive word of mouth in service industry. Based on the literature review, the hypothesis will be study based on the relationship between word of mouth and customer loyalty. Meanwhile, the hypothesis will be developed as below

H13:

2.3.9 Brand Identification

Identification defined how an individual relate him or herself with a social entity (Bergami & Bagozzi, 2000). Besides, identification “is a cognitive measure of overlap and an entity” (Carlson, Donavan & Cumiskey, 2009, p. 372). In addition, Belk (1988) defined brand identification as customers or consumers associated themselves with a brand that reflects their personality. Moreover, Lichtenstein, Drumwright and Braig (2004) stated that strong identification may increase the customer spending and customer patronization.

According to Kuenzel and Halliday (2008), satisfaction can have impacts on brand identification especially satisfied customers. Besides, customer brand identification leads to enhanced relationship management which may facilitate repurchases ad word of mouth (Kuenzel & Halliday, 2008). In the study, the relationship between brand identification and customer satisfaction will be evaluated and hypothesis developed as below

H14:

A company can create positive word of mouth through brand identification and at the same time enhance customer brand loyalty (Kim, Han & Park, 2001). Brand identification does not have direct effect on brand loyalty but word of mouth has significantly effect on brand loyalty (Kim, Han & Park, 2001). Thus, brand identification has indirectly influence on brand loyalty or customer loyalty. Based on the literature review, there is indirect relationship between brand identification and customer loyalty. However, in the study the hypothesis will be developed as below

H15:

Service reputation can have a great impact on brand identification (Kuenzel & Halliday, 2008). If the consumers perceive the brands in reputable, they will have higher brand identification (Kuenzel & Halliday, 2008). Thus, enhances the brand loyalty of the customers (Kuenzel & Halliday, 2008). According to Kuenzel and Halliday (2008), customer that with high level of brand identification will feel proud to be the owner of the brand or satisfied when consuming the particular brand products. Other than that, brand identification is an important factor that maintain customers’ self enhancement, fulfill their self-esteem (Bhattacharya and Sen, 2003). In the literature review, there is direct relationship between brand identification and customers’ perceived value. Therefore, hypothesis will be established as below

H16:

2.3.10 Affordability

Affordability is defined how much the relative amount that customers or purchaser is able to pay (Monroe, 1989). Besides, price determined the affordability of the customers or consumers to consume something. Thus, price of the food and beverage on the menu can have great influence on customer’s decision because price reflects an individual capability to purchase (Monroe, 1989). Price is the factors which influence customer’s buying decision whether to buy or not buy a product and it is viewed as the indicator of quality in customers’ perspective (Lewis & Shoemaker, 1997).

On the other hand, affordability of an individual can be judge by the reference price or so called price scale. According to Grewal, Monroe and Krishnan (1998), reference price is a price that planted in customers’ memory which act as an indicator that reflect customer’s expectation compare to the actual price. Price may have impact on customer customer perceived value because price plays a role as the indicator for quality of the product. According to Lewis and Shoemaker (1997) found out that two different restaurants which using two different pricing strategy may create two different quality perception. Referring to the literature review, there is indirect relationship between affordability and customer’s perceived value. Therefore, the hypothesis will be developed as below

H17:

On the other hand, price expectation has a great influence on customer satisfaction. According to Andaleeb and Conway (2006), when price accordance with expectation, customer satisfaction will increase. However, when price is not accordance with expectation, customer satisfaction will drop. Price may influence the total satisfaction of the customer so the relationship between affordability and customer satisfaction will be measured and developed as below

H18:

Meanwhile, customer loyalty can be enhancing when the brand is low-priced brand (Swani & Yoo, 2010). In addition, the brand equity and purchase intention will be higher for low-priced brand (Swani & Yoo, 2010). Based on literature review, affordability has effect on customer loyalty. Thus, the hypothesis will be developed as below

H19:

2.3.11 Prestige

Prestige “is a subjective evaluative judgement about the high social status of people or inanimate objects such as brands” (Dubois & Czellar, 2002, p. 4). Besides, Bagwell and Bernheim (1996) stated that in certain context, luxury can be explained as prestige because they can be used as synonyms. In addition, Bagozzi, Gopinath and Nyer (1999) mentioned about the prestige is an evaluation judgement that often “followed by emotional reactions” such as feeling of liking, particularly aware and admire toward prestigious people or product. Simply defined, prestige is about admiration of a product or a person. Thus, if the prestige is on an object, it can be said that it is admiration toward a product or even service (Dubois & Czellar, 2002). Moreover, if the prestige is on person, it can be said that it is admiration toward the individual for their success, who they are and what they did before (Dubois & Czellar, 2002).

According to Shenkar and Yuchtman-Yaar (1997), prestige by association is an important source of prestige judgement. Besides, customers “interpret symbols associated with a brand which represent a socially shared meaning such as luxury level of certain brand as prestige symbols”. However, the symbols such as luxury does not totally represent the product can perform high performance or the perceived achievement (Shenkar & Yuchtman-Yaar, 1997). The examples given by Shenkar and Yuchtman-Yaar (1997) such as luxury restaurant does not mean that it is prestigious because the service provided are bad, the price is too expensive and others factors which may influence the brand image and reputation may lead to low prestige or even bad. Thus, from the example we can conclude that luxurious brand does not mean that it is prestigious. From the literature review, the indirect relationship between prestige and customers’ perceived value are shown. Thus, in the study the hypothesis will be developed as below

H20:

According to Steenkamp, Batra and Alden (2003), brand prestige is a product or service positioning that has relative high status which related with a brand. In addition, product prestigious for a brand can be determined by overall quality and performance (Steenkamp, Batra & Alden, 2003). According to Choi, Ok and Hyun (2010), when customer has relative high patronise frequency will actually enhance the customer’s actual brand experience. Thus, when customer has positive perception toward a product, they will have high chances to perceive that product as the product with high prestige (Choi, Ok & Hyun, 2010). Besides, customers who hold a positive evaluation toward the product are more likely to have greater customer satisfaction and repurchase intention (Wong & Zhou, 2005). In addition, prestigious product may affect customer’s belief about the brand trust which at the same time leads to higher customer satisfaction and customer loyalty directly (Choi, Ok & Hyun, 2010). Positive perception shapes customer satisfaction and the relationship between the both variables will be formulated as below

H21:

According to Bhattacharya and Sen (2003), prestigious product can satisfy customer’s self-esteem and maintain their self-enhancement. Thus, prestigious product may actually enhance the customer’s perceived value. On the other hand, prestigious brand are expected to show that the product or service have greater quality and sometime high price may even let a product or service become even more desirable (Rao & Kent, 1989). When the product is desirable and meet customer expectation, they will be delighted and most of the time they will repeat their purchases on the next transaction (Kotler and Armstrong, 2010). The relationship between prestige and customer loyalty will be measured in the study. Therefore, the hypothesis developed as below

H22:

2.3.12 Connectivity

Connectivity refers to the internet connection that available in the café. The connectivity is measured by the speed of the Wi-Fi, the signal strength of the Wi-Fi and the availability of the electricity outlets. Wi-Fi is considering as a basic facilities in urban area (Sevtsuk, Huang, Calabrese & Ratti, 2009). In Malaysia, offering Wi-Fi in café has become essential because of growing need of the market. Restaurant especially in fast food industry such as McDonalds and KFC offered Wi-Fi to their customers. At the same time, Wi-Fi is a value added facility for café to offer extra benefit for their customers such as convenience because for students, they can serve internet there whereas white collar workers can continue their works while dining at café.

Meanwhile, free accessibility of Wi-Fi has become the consideration of the customers to choose a café. The reason is because free Wi-Fi enables customers to enjoy their catting with their friends in Messenger, Facebook or even Skype. For business man, they can complete their business transaction in the café while enjoying their food there. In addition, the signal strength may affect the customer satisfaction towards the café. If the signal strength is stronger than the expectation of the customers, they will be more likely to satisfy the service offered by the café. By the way, the satisfaction may lead to the positive word of mouth that may also directly lead to positive brand image. In addition, the perceived value will be enhance due to the satisfy service offered. According to Adams and Lamptey (2009), the functional dimensions such as speed of connectivity and accessibility will affect the customers’ perceived value. From the literature review, perceived value may influence by the connectivity. Therefore, the hypothesis developed as below

H23:

Meanwhile, the café has to prepare enough electricity sockets in order to fulfill the growing customers’ need. Availability of the sockets is important as it provides convenience to the customers and at the same time adds value into the service provided by the café. Besides, speed of the Wi-Fi is important and critical as the Wi-Fi speed determine the total satisfaction of the internet users. Café should provide at least reasonable speed for normal web browsing. Speed is important since it can affect customer satisfaction (Ala’ Eddin & Hasan, 2011). Besides, Ala’Eddin and Hasan (2011) found out that download speed and user satisfaction have high correlation. In addition, customer will feel pleasant especially the speed of processing information is favorable (Ala’Eddin & Hasan, 2011). In order to study the relationship between speed of connectivity and customer satisfaction, hypothesis developed as below

H24:

Lastly, the ease to connect to Wi-Fi is important factors that determined customer satisfaction. Meanwhile, the instable connection to the Wi-Fi may let down the customers’ mood and affect the emotion of customers. The total satisfaction that customer got from café may indirectly and directly affect the brand loyalty of customers towards the café. According to James (2008) and Goldman (2010), Starbuck offered free Wi-Fi in order to increase sales and raise customer loyalty. Besides, Chief Financial Officer Peter Bocian believed that offering extra benefit such as free Wi-Fi will raise customer loyalty which is important to company especially during the economy downturn (James, 2008). Therefore, the study will examine the relationship between connectivity an

In this chapter, the reasons and factors which affect the consumers’ decision while choosing the cafés will be further discussed. The previous findings in related fields such as the restaurant industry are taken as the foundation to develop the variables and conceptual framework for the research. Customer satisfaction, perceived value and customer loyalty will be measured in the research as these variables are believe to affect consumers’ choice of cafés that they patronise. There are several factors that affect customers’ satisfaction, perceived value and loyalty which include affordability, service quality, food offering, physical environment, nostalgia, brand identification, word of mouth, prestige and connectivity. These factors will be further elaborated in this chapter. Besides, many previous researchers have studied about the restaurant industry in term of customer satisfaction, brand loyalty and perceived value. However, the number of research about cafés are lesser compared to restaurants. Thus, the current study examines the selection of cafes.

2.3 Literature Review

In this section, the previous review and literatures of three dependent variables which are customer satisfaction, perceived value and customer loyalty will be reviewed. In addition, findings of the related journals will also be reviewed in this section. There are several independent variables that may affect the satisfaction, perceived value and loyalty of the cafes’ customers which include affordability, service quality, food offering, physical environment, nostalgia, brand identification, prestige and connectivity.

Affordability shows how much do the customer afford to pay for the food and beverage offered by the café (Monroe, 1989). Service quality indicates how well the cafés can differentiate themselves among the competitor by satisfying their customers especially in the competitive industry and at the same time it shows the expectation of the customers toward the performance of the café (Chen & Hu, 2010). Food offering looks of how good the quality of the food and beverages that offered by the café (Andaleeb & Conway, 2006). Meanwhile, freshness and choices reflect how cafés add value to their business. Physical environment describe the atmosphere that customers can found at the café (Walter, Edvardsson & Ostrom, 2010). Besides, it included decoration and layout of a café. Nostalgia describes the café created an experience or atmosphere that allowed customers to remind about the past or feel nostalgic (Wilson, 2004).

Brand identification refers to customers who identify with and associate themselves with the café brand which at the same time reflect their self-identities Belk (1988). Word of mouth describes how likely the customers share about the café with others (Westbrook, 1987). Prestige refers to prestigious that customers felt after consuming at the café (Dubois & Czellar, 2002). Connectivity refers to the availability of Wi-Fi in the café and the connection strength. All of the variables that indirectly affect the customer satisfaction, perceived value and customer loyalty will be investigated and measured in the following chapter of the study.

2.3.1 Customer Satisfaction

Yuksel and Rimmington (1998) stated that determining customer satisfaction is fundamental to effective delivery of services. Besides, companies that able to gain customer satisfaction may earn an advantage over their competitors by differentiate their product and service which at the same time may lead to high customer retention and earn positive word of mouth (Yuksel & Rimmington, 1998). Furthermore, customer that satisfied with the service provided will probably share with others about their good experiences (Rahim, Osman & Ramayah, 2010).

Rahim, Osman and Ramayah (2010) defined customer satisfaction as the difference between expectation and performance. If the performance falls below the expectation, the customer is dissatisfied (Kotler & Armstrong, 2010). However, if the performance exceed the expectation, the customer is highly satisfied and even be delighted (Kotler & Armstrong, 2010). According to Rahim, Osman and Ramayah (2010), they found out that service quality is critical and have positive meaning with customer satisfaction. In order to gain customer satisfaction, the service provided by the café should be considered.

2.3.2 Perceived Value

Perceived Value is closely related to equity theory (Oliver & DeSarbo, 1988). The concept of equity is defined as customers’ evaluation of “what is fair, right, or deserved” for the perceived cost of product or service offered (Yang & Peterson, 2004, p. 802). According to Oliver and Desarbo (1988), customers will feel equitable when their ratio of outcome to input is equal to the ratio of outcome to input offered by company. At the same time, customers make comparison with competitors’ offering to measure the ratio of outcome to inputs (Yang & Peterson, 2004). Moreover, perceive value is hard to measure because it needed to recognize how product and service is value by the customers (Holbrook, 1999; Sweeney & Soutar, 2001).

In addition, customer value is critical in all marketing activity as high customer value reflect the main motivation for customer patronage (Holbrook, 1994). Yang and Peterson (2004) found out that offering high product or service value is able to generate customer loyalty through improving customer satisfaction (Yang & Peterson, 2004). In the discussion, Yang and Peterson (2004) suggested that customer perceived value can be improved through improving company representatives’ skills such as problem solving skill, understand well about customers’ need, handle problems with friendly manner and execute transactions accurately (Yang & Peterson, 2004). Meanwhile, customer may perceive the value in term of traditional perspective which is more on service quality attribute “provided based on functional value” (Chen & Hu, 2010, p. 539). At the same time, customers also emphasize in perceived symbolic value which reflecting “social, emotional, aesthetic and reputational aspects of service quality attribute during coffee consumption” (Chen & Hu, 2010, p. 539).

2.3.3 Customer Loyalty

Generally, customer loyalty is defined as “something that consumer’s exhibit to brands, services, stores, product categories and activities” (Uncles, Dowling & Hammond, 2003, p. 295). Besides, Jacoby and Kyner (1973) describe customer loyalty as “the biased, behavior response, expressed over time, by some decision making unit, with respect to one or more alternative brands.” Loyalty can be exhibited through two ways which are through behavior of the customers and through attitude such as repeat and frequent patronage to a particular shop (Rowley & Dawes, 1999).

Customer loyalty may increase company’s profitability (Bowen & Chen, 2001). According to Bowen and Chen (2001), positive correlation occurred between loyal customers and profitability. The main reason is because loyal customer will make repeat purchases (Bowen & Chen, 2001). Meanwhile, customer loyalty is consider a long term behavioral pattern and attitude which shaped by long term and many experiences over the time (Terblanche & Boshoff, 2006). Customer loyalty can be stimulated by three drivers and the three drivers are total customer satisfaction, calculative and affective commitment (Gustafsson, Johnson & Roos 2005).

Calculative commitment is defined as the “rational and economic decision making” which customer are more care about the cost and benefit in their decision making process (Gee, Coates & Nicholson, 2009, p. 360). Besides, affective commitment is a “warner and emotional factors” which customers are emphasize in trust and commitment when they made decision and customer satisfaction is described as a function of the relationship between customer expectations and experience (Gee, Coates & Nicholson, 2009, p. 360).

2.3.4 Service Quality

Service is defined as the variance degrees of service which occurred in the process of service delivery between service providers and customers (Parasuraman, Zeithaml & Berry, 1988). Besides, quality is defined as the evaluation of service delivery process and result of service (Parasuraman, Zeithaml & Berry, 1988). According to Andaleeb and Conway (2006), service quality is one of the critical attributes that driving satisfaction in the service delivery process and the result of the process is defined as service quality.

The current marketplace has become more competitive nowadays, adding superior value to products and services of the company are important as it is the best way to gain competitive advantage (Woodruff, 1997). Thus, service quality has become an important factor for the company to add value into their products and services. In addition, coffee outlets started to face big challenges as the market had become even more competitive that forced companies to find new ways to differentiate themselves (Chen & Hu, 2010). Moreover, offering good service quality is essential because it is considered basic strategy that make sure companies can survive in the industry (Dawkins & Reichheld, 1990; Parasuraman, 1985; Reichheld & Sasser,1990; Zeithaml, 1996).

According to Rahim, Osman and Ramayah (2010), service quality is one of the important factors of customer satisfaction. Based on their research, there is 43% of customers’ satisfaction change due to the service quality (Rahim, Osman & Ramayah, 2010). According to the previous research, service quality is verified to have significant positive influence on customer satisfaction (Lee, Hsiao & Yang, 2011). In addition, service that provided by the personnel or employees may have great impact on customers’ satisfaction which may also allow customers to have good experiences (Lee, Hsiao & Yang, 2011). Meanwhile, Andaleeb and Conway (2006) discussed about the importance of responsiveness in the restaurant industry. Based on their research, responsiveness is critical as it reflects how customers evaluate the performance of the restaurant which may directly influence the customer satisfaction. Responsiveness such as personnel’s appearance, knowledge on the menu and server’s attitude are important because these attributes may affect the total satisfaction of the customers (Andaleeb and Conway, 2006). Thus, the study will examine on the relationship between service quality and customer satisfaction which use to form a hypothesis as below

H1:

Service quality has impact on customer loyalty as responsiveness is the determinant of customer loyalty (Rahim, Osman and Ramayah, 2010). According to Rahim, Osman and Ramayah (2010), when there is a change in service quality, customer loyalty will increase by 45%. Meanwhile, service quality can caused positive influence on customer loyalty (Lee, Hsiao & Yang, 2011). At the same time, Andaleeb and Conway (2006) found out that responsiveness is critical to customers in restaurant industry because it showed direct impact on the customer loyalty (Andaleeb & Conway, 2006). In the study, we will examine the relationship between service quality and customer loyalty. The hypothesis is as below

H2:

Besides, service quality also may affect customer’s perceived value especially based on functional value and symbolic value (Chen & Hu, 2010). They further discuss the effect of the service quality that functional value reflects the employees’ attitude and service quality whereas symbolic value “reflects social, emotional, aesthetic and reputational aspect of service quality during coffee consumption”. (Chen& Hu, 2010, p. 539) Meanwhile, the study will examine the relationship between service quality and customers’ perceived value with the hypothesis as below

H3:

2.3.5 Food Offering

Food offering defined as the food and beverages that served in the café. At here, the food offering will be measured more into the quality of food and beverages and also choices that available in the café. According to Rijswijk and Frewer (2008), food quality is hard to define because they are “classified as credence attributes”. Basically, customer derived quality perceptions from other product cues, either intrinsically or extrinsically (Rijswijk & Frewer, 2008).

Based on Andaleeb and Conway (2006), food quality was ranked third important out of four attributes to customer satisfaction. However, food quality is not counted as the factor of individual’s decision to select café although provides better food quality may lead to higher customer satisfaction (Andaleeb & Conway, 2006). In addition, food quality is an important factor to the customer’s total evaluation of satisfaction (Qin, Prybutok & Zhao, 2010). Besides, food quality is deemed related to satisfaction within fast food restaurants (Johns & Howard, 1998). Throughout the literature review, the study showed the relationship between food offering and customer satisfaction. Thus, the hypothesis formulated as below

H4:

Besides, Chen and Hu (2009) found out that coffee quality and food and beverage factors may influence the perceived value of the customers including functional and symbolic values (Chen & Hu, 2009). Therefore, food quality is considered as attribute which can provide “value that customers perceived through a coffee consumption experience” (Chen & Hu, 2009, p. 540). In the study, the relationship between food offering and customers’ perceived value will be examined. The hypothesis developed as below

H5:

In addition, brand reputation or product quality that meet customer expectation would enhance the customer loyalty toward company product Selnes (1993). Besides, Selnes found out that strong positive relationship are shown between customer loyalty and product reputation. Furthermore, brand reputation that meets expectation will lead to customer satisfaction that may indirectly lead to customer loyalty Selnes (1993). From the previous literature review has shown the relationship between food offering and customer loyalty. Thus, hypothesis will be designed as below

H6:

2.3.6 Physical Environment

Physical environment is the place where the customers present during the service delivery process (Walter, Edvardsson & Ostrom, 2010). In advance, physical environment can be called as servicescape (Bitner, 1992). Servicescape is the man made “physical surrounding that invokes in customers a desire to stay” (Bitner, 1992, p. 67). Generally, it combined with tangible facilities that can enhance the performance of the service (Bitner, 1992). Besides, Barber and Scarcelli (2010) defined physical environment as a tangible element of service with the “appearance of physical facilities, personnel, communication materials, and other physical features” that used to deliver service.

Meanwhile, physical environment can also be divided into cleanliness or tidiness of the environment and facilities (Johnston, 1995). According to Brady and Cronin (2001), ambient conditions, facilities design and social factors may influence the perceived quality of the customer towards the physical environment. Facilities design mention about the functional, aesthetic describe how pleasing is the environment and social condition showed the frequencies and kinds of people at the setting (Raajpoot, 2002). Ryu and Jang (2008) introduce dinescape which are constructing by six elements such as “facility aesthetics, lighting, ambience, layout, dining equipment, and employees” to describe the internal dining environment of restaurant. In the study, relationship between physical environment and customers’ perceived value will be evaluated. The hypothesis formulated as below

H7:

According to Ryu and Jang (2008), facility aesthetics can enables restaurant to differentiate itself from the competitors. Besides, favorable physical environment may enhance customer perceptions toward the image of the restaurant. Meanwhile, physical environment created good experiences for customer who determined the extent to which customer to repeat their service demand, recommend to their friends and stay and spend more than initial planned (Ryu & Jang, 2008). Moreover, good experience stimulates customer loyalty and customer satisfaction (Ryu & Jang, 2008). At here, two variables will be study about both relationships with physical environment. The hypothesis will be evaluated separately which developed as below

H8:

H9:

2.3.7 Nostalgia

Nostos and Algos is the Greek words of nostalgia and it means to “return home or to one native land” (Havlena and Holak, 1991, p. 323). However, in sociological perspective, nostalgia means that “people attach meaning based on their past experiences” (Wilson, 2004, p. 23). Besides, Holbrook and Schindler (1996) defined nostalgia as “a longing for the past, yearning for yesterday” and nostalgia is the powerful attribute that may directly affect consumer preferences. Some researchers defined nostalgia as a favorable experiences, attitude and preferences of the past (Holbrook & Schindler, 1996).

According to Wilson (2004), in marketplace, advertiser used nostalgia as tools to allow consumers to recapture the past and feel the past time. In addition, nostalgia is capable to bring up lots of emotional responses such as “joy, innocence, gratitude, affection and warmth” (Muehling & Sprott, 2004, p. 26). Based on Westbrook and Oliver (1991) stated that nostalgia created emotion or feeling that may enhance consumption experiences which may influence customers’ satisfaction. According to Laverie, Kleine and Kleine (1993), “emotions are linked to consumption experiences” which may cause greater customer satisfaction is experienced. As the literature mentioned, the relationship between nostalgia and customer satisfaction will be evaluated and developed as below

H10:

2.3.8 Word of Mouth

Word of mouth is defined as the information communication that shares private opinion or evaluation of goods and services (Westbrook, 1987). Customer degree of satisfaction or dissatisfaction with the consumption experience is main reason that shapes the product or service related word of mouth (Yi, 1991).

According to Bitner (1990), loyal and satisfied or delighted customers will spread more favorable word of mouth of the firm. They will share their experience to their friends and others about the company’s products (Bitner, 1990). Besides, Schlesinger and Heskett (1991) found out that there is positive relationship between customer satisfaction and word of mouth. Furthermore, satisfied customer will tend to spread word of mouth than dissatisfied customers (Holmes & Lett, 1977). Hence, a hypothesis is developed to test the relationship between word of mouth and customer satisfaction. The hypothesis developed as below

H11:

In the other study, Herr, Frank and John (1991), found out that “favorable word of mouth may make customer to form favorable attitude and perceived value toward company and products”. Hong and Yang (2009) stated that if a company helps their customer to achieve personal goal and satisfied with the offering, they are more likely to spread positive word of mouth and will repurchase again the company product in the future. Literature review shows there is relationship between word of mouth and perceived value. The hypothesis formulated as below

H12:

In addition, satisfied customer that spread positive word of mouth may foster customer loyalty which at the same time helps company to retain customers (James, 1999). On the other hand, Pedro (2010) found that there is a strong link between “satisfaction with food and beverage as a key driver” of positive word of mouth in service industry. Based on the literature review, the hypothesis will be study based on the relationship between word of mouth and customer loyalty. Meanwhile, the hypothesis will be developed as below

H13:

2.3.9 Brand Identification

Identification defined how an individual relate him or herself with a social entity (Bergami & Bagozzi, 2000). Besides, identification “is a cognitive measure of overlap and an entity” (Carlson, Donavan & Cumiskey, 2009, p. 372). In addition, Belk (1988) defined brand identification as customers or consumers associated themselves with a brand that reflects their personality. Moreover, Lichtenstein, Drumwright and Braig (2004) stated that strong identification may increase the customer spending and customer patronization.

According to Kuenzel and Halliday (2008), satisfaction can have impacts on brand identification especially satisfied customers. Besides, customer brand identification leads to enhanced relationship management which may facilitate repurchases ad word of mouth (Kuenzel & Halliday, 2008). In the study, the relationship between brand identification and customer satisfaction will be evaluated and hypothesis developed as below

H14:

A company can create positive word of mouth through brand identification and at the same time enhance customer brand loyalty (Kim, Han & Park, 2001). Brand identification does not have direct effect on brand loyalty but word of mouth has significantly effect on brand loyalty (Kim, Han & Park, 2001). Thus, brand identification has indirectly influence on brand loyalty or customer loyalty. Based on the literature review, there is indirect relationship between brand identification and customer loyalty. However, in the study the hypothesis will be developed as below

H15:

Service reputation can have a great impact on brand identification (Kuenzel & Halliday, 2008). If the consumers perceive the brands in reputable, they will have higher brand identification (Kuenzel & Halliday, 2008). Thus, enhances the brand loyalty of the customers (Kuenzel & Halliday, 2008). According to Kuenzel and Halliday (2008), customer that with high level of brand identification will feel proud to be the owner of the brand or satisfied when consuming the particular brand products. Other than that, brand identification is an important factor that maintain customers’ self enhancement, fulfill their self-esteem (Bhattacharya and Sen, 2003). In the literature review, there is direct relationship between brand identification and customers’ perceived value. Therefore, hypothesis will be established as below

H16:

2.3.10 Affordability

Affordability is defined how much the relative amount that customers or purchaser is able to pay (Monroe, 1989). Besides, price determined the affordability of the customers or consumers to consume something. Thus, price of the food and beverage on the menu can have great influence on customer’s decision because price reflects an individual capability to purchase (Monroe, 1989). Price is the factors which influence customer’s buying decision whether to buy or not buy a product and it is viewed as the indicator of quality in customers’ perspective (Lewis & Shoemaker, 1997).

On the other hand, affordability of an individual can be judge by the reference price or so called price scale. According to Grewal, Monroe and Krishnan (1998), reference price is a price that planted in customers’ memory which act as an indicator that reflect customer’s expectation compare to the actual price. Price may have impact on customer customer perceived value because price plays a role as the indicator for quality of the product. According to Lewis and Shoemaker (1997) found out that two different restaurants which using two different pricing strategy may create two different quality perception. Referring to the literature review, there is indirect relationship between affordability and customer’s perceived value. Therefore, the hypothesis will be developed as below

H17:

On the other hand, price expectation has a great influence on customer satisfaction. According to Andaleeb and Conway (2006), when price accordance with expectation, customer satisfaction will increase. However, when price is not accordance with expectation, customer satisfaction will drop. Price may influence the total satisfaction of the customer so the relationship between affordability and customer satisfaction will be measured and developed as below

H18:

Meanwhile, customer loyalty can be enhancing when the brand is low-priced brand (Swani & Yoo, 2010). In addition, the brand equity and purchase intention will be higher for low-priced brand (Swani & Yoo, 2010). Based on literature review, affordability has effect on customer loyalty. Thus, the hypothesis will be developed as below

H19:

2.3.11 Prestige

Prestige “is a subjective evaluative judgement about the high social status of people or inanimate objects such as brands” (Dubois & Czellar, 2002, p. 4). Besides, Bagwell and Bernheim (1996) stated that in certain context, luxury can be explained as prestige because they can be used as synonyms. In addition, Bagozzi, Gopinath and Nyer (1999) mentioned about the prestige is an evaluation judgement that often “followed by emotional reactions” such as feeling of liking, particularly aware and admire toward prestigious people or product. Simply defined, prestige is about admiration of a product or a person. Thus, if the prestige is on an object, it can be said that it is admiration toward a product or even service (Dubois & Czellar, 2002). Moreover, if the prestige is on person, it can be said that it is admiration toward the individual for their success, who they are and what they did before (Dubois & Czellar, 2002).

According to Shenkar and Yuchtman-Yaar (1997), prestige by association is an important source of prestige judgement. Besides, customers “interpret symbols associated with a brand which represent a socially shared meaning such as luxury level of certain brand as prestige symbols”. However, the symbols such as luxury does not totally represent the product can perform high performance or the perceived achievement (Shenkar & Yuchtman-Yaar, 1997). The examples given by Shenkar and Yuchtman-Yaar (1997) such as luxury restaurant does not mean that it is prestigious because the service provided are bad, the price is too expensive and others factors which may influence the brand image and reputation may lead to low prestige or even bad. Thus, from the example we can conclude that luxurious brand does not mean that it is prestigious. From the literature review, the indirect relationship between prestige and customers’ perceived value are shown. Thus, in the study the hypothesis will be developed as below

H20:

According to Steenkamp, Batra and Alden (2003), brand prestige is a product or service positioning that has relative high status which related with a brand. In addition, product prestigious for a brand can be determined by overall quality and performance (Steenkamp, Batra & Alden, 2003). According to Choi, Ok and Hyun (2010), when customer has relative high patronise frequency will actually enhance the customer’s actual brand experience. Thus, when customer has positive perception toward a product, they will have high chances to perceive that product as the product with high prestige (Choi, Ok & Hyun, 2010). Besides, customers who hold a positive evaluation toward the product are more likely to have greater customer satisfaction and repurchase intention (Wong & Zhou, 2005). In addition, prestigious product may affect customer’s belief about the brand trust which at the same time leads to higher customer satisfaction and customer loyalty directly (Choi, Ok & Hyun, 2010). Positive perception shapes customer satisfaction and the relationship between the both variables will be formulated as below

H21:

According to Bhattacharya and Sen (2003), prestigious product can satisfy customer’s self-esteem and maintain their self-enhancement. Thus, prestigious product may actually enhance the customer’s perceived value. On the other hand, prestigious brand are expected to show that the product or service have greater quality and sometime high price may even let a product or service become even more desirable (Rao & Kent, 1989). When the product is desirable and meet customer expectation, they will be delighted and most of the time they will repeat their purchases on the next transaction (Kotler and Armstrong, 2010). The relationship between prestige and customer loyalty will be measured in the study. Therefore, the hypothesis developed as below

H22:

2.3.12 Connectivity

Connectivity refers to the internet connection that available in the café. The connectivity is measured by the speed of the Wi-Fi, the signal strength of the Wi-Fi and the availability of the electricity outlets. Wi-Fi is considering as a basic facilities in urban area (Sevtsuk, Huang, Calabrese & Ratti, 2009). In Malaysia, offering Wi-Fi in café has become essential because of growing need of the market. Restaurant especially in fast food industry such as McDonalds and KFC offered Wi-Fi to their customers. At the same time, Wi-Fi is a value added facility for café to offer extra benefit for their customers such as convenience because for students, they can serve internet there whereas white collar workers can continue their works while dining at café.

Meanwhile, free accessibility of Wi-Fi has become the consideration of the customers to choose a café. The reason is because free Wi-Fi enables customers to enjoy their catting with their friends in Messenger, Facebook or even Skype. For business man, they can complete their business transaction in the café while enjoying their food there. In addition, the signal strength may affect the customer satisfaction towards the café. If the signal strength is stronger than the expectation of the customers, they will be more likely to satisfy the service offered by the café. By the way, the satisfaction may lead to the positive word of mouth that may also directly lead to positive brand image. In addition, the perceived value will be enhance due to the satisfy service offered. According to Adams and Lamptey (2009), the functional dimensions such as speed of connectivity and accessibility will affect the customers’ perceived value. From the literature review, perceived value may influence by the connectivity. Therefore, the hypothesis developed as below

H23:

Meanwhile, the café has to prepare enough electricity sockets in order to fulfill the growing customers’ need. Availability of the sockets is important as it provides convenience to the customers and at the same time adds value into the service provided by the café. Besides, speed of the Wi-Fi is important and critical as the Wi-Fi speed determine the total satisfaction of the internet users. Café should provide at least reasonable speed for normal web browsing. Speed is important since it can affect customer satisfaction (Ala’ Eddin & Hasan, 2011). Besides, Ala’Eddin and Hasan (2011) found out that download speed and user satisfaction have high correlation. In addition, customer will feel pleasant especially the speed of processing information is favorable (Ala’Eddin & Hasan, 2011). In order to study the relationship between speed of connectivity and customer satisfaction, hypothesis developed as below

H24:

Lastly, the ease to connect to Wi-Fi is important factors that determined customer satisfaction. Meanwhile, the instable connection to the Wi-Fi may let down the customers’ mood and affect the emotion of customers. The total satisfaction that customer got from café may indirectly and directly affect the brand loyalty of customers towards the café. According to James (2008) and Goldman (2010), Starbuck offered free Wi-Fi in order to increase sales and raise customer loyalty. Besides, Chief Financial Officer Peter Bocian believed that offering extra benefit such as free Wi-Fi will raise customer loyalty which is important to company especially during the economy downturn (James, 2008). Therefore, the study will examine the relationship between connectivity an

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