Relationship between Service Quality, Brand Images and Customer Loyalty

1434 words (6 pages) Essay

1st Jan 1970 Marketing Reference this

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There are several independent variables that can be related between the service quality, brand images and customer loyalty. Customer loyalty can be related to the customer satisfaction, trust and image of brand. Brand image can related to the customer’s loyalty, customer satisfaction, trust, and word mouth to mouth. The service quality usually related to the customer’s loyalty, customer expectation and customer satisfaction. However, in these discussion only three relationships determines namely the customer satisfaction, customer loyalty, trust, customer expectation and perception.

2.4.1 Customer satisfaction

Customer satisfaction can be defined as the customer reaction to the state of fulfillment of their expectation and needs, customer judgment towards service and products quality (Hallowell, 1996; Oliver, 1997 and Zeithhamal and Bitner, 2000). Satisfaction is important as the principle purpose of the business is to create satisfied customers (Drucker, 1954). Satisfied customers lead to higher future profitability (Anderson et al., 1994). Satisfied customers are more willing to pay price premiums, provide recommendations and maintain loyalty towards the company (Reichheld, 1996). Higher customer satisfaction leads towards higher levels of customer retention and loyalty (Fornell, 1992) and lowers costs related to defective goods and services (Anderson et al., 1997).

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Customers that experience a higher level of satisfaction with a company are likely to remain with their existing providers and maintain their subscription that leads to future revenue for the company (Fornell, 1992 and Anderson et al., 1994). However, customer satisfaction, while positively influencing customer loyalty, is not always a sufficient condition and in some cases it fails to produce the expected effect (Kim et al., 2004). Hence, researcher suggest that it is necessary to analyze other potential influential factors, as what makes a person satisfied may not make a person loyal (Gerpott et al., 2001). Thus, it is necessary to determine customer’s satisfaction and loyalty towards service and products.

The significance of customer loyalty is that it is closely related to the company’s continued survival and to strong future growth (Fornell, 1992). Hence, for a company to maintain a stable profit level when subscription level has reached saturation point, the market is mature and competition is fierce, a defensive strategy which strives to retain existing customers is more important than an aggressive one (Fornell, 1992 and Ahmad and Buttle, 2002).

2.4.2 Customer Loyalty

2.4.2.1 Customer Loyalty and Brand Image

Pearson (1996) has defined customer loyalty as the mid set of the customers who hold favorable attitudes towards a company commit a repurchase the company’s product or service and recommend the product or service to others. The younger adults is very dynamic and their decision-making is complicated (Wood, 2004). Many of them have less experience and involvement with brands (Howell, 2004), therefore, this segments is assumed to be less brand loyal. If the young adults have not used a product repeatedly, it is assumed to be difficult to associate them being a loyal customer at all. With the positive image of the product in the consumer minds, only than individuals can be considered loyal towards a certain brand (Shukla, 2009). This means that the feeling goods about the brand and being a user of the brand may yield repeat purchase. However, as customers are increasingly facing more and more choices to enable them make a variety or specific decisions, loyalty and relationship play less and less important for customers (Anonymous, 2009).

According to Anonymous (2009), customer engagement or customer service is used as a factor to determine customers’ loyalty instead. An informed choice will increase customer loyalty when things go well; hence both the firm and the customer are in win-win situation (Lawler, 1992). When firms manage complaints well, the customers will not only continue to stay with them but the existing customers will extend personal referrals towards to the firm (Goodman, 2006). According to Mitchell and Imrie (2011), it seems that consumers tent to be grouped together and are people who are emotionally connected by similar consumption value and usage. This is known as consumer tribe. It was also found that at any one point in time, based on the situation and environment that they are in, an individual may belong to multiple tribes at the same time express different aspects of their identity. This calls for marketers’ to look beyond conventional marketing theory and by providing a means to segment groups of consumers based on meaningful shared characteristics.

2.4.2.2 Customer Loyalty and Service Quality

Service quality is defined as the result of comparison between customers’ expectation about the service and their perception of the way the service has been performed (Grönroos, 1984; Parasuraman et al., 1985, 1988, 1991, 1994); described as the “delivery of excellent or superior service relative to the customer expectation” (Zeithaml and Bitner, 1996); as well as the customers’ interpretation of their experience (Garavan, 1997). It is viewed as a multidimensional construct (Johnston et al., 1995); and as overall assessment (Wang and Lo, 2003).

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Service quality creates an essential ingredient for establishing and maintaining loyal and profitable customer base (Rust et al., 1995; Zeithaml, 2000) and acts as the driving force for productivity and profitability (Edvardson et al., 1994). Achieving the right quality could be done through do-it-yourself production systems; customer education; and individual preferences and perceptions. Service quality data is very useful in attaining service improvement (Shaw and Haynes, 2004) and could be considered as the root of customer satisfaction (Yavas et al., 2004).

2.4.3 Trust

Trustworthiness is one criterion for measuring the value of the partner (Doney et al., 1997). Spekman (1988) calls trust a cornerstone of the strategic partnership. Morgan and Hunt (1994) posit that trust is a major determinant of relationship commitment: brand trust leads to brand loyalty because trust creates exchange relationship that is highly valued. Chauduri and Holbrook (2001) have showed that brand trust is directly related to both purchase and attitudinal loyalty. Many authors have accented that trust is important in conditions of uncertainty (Moorman et al., 1992; Doney et al., 1997; Dwyer et al., 1987; Morgan et al., 1994). Uncertainty may be caused by dependence or large choice: people tend then to prefer popular or familiar brands or partner.

2.4.4 Customer Expectation and Perception

Perception is an opinion of something viewed and assessed by a person. It might vary from person to person, as everyone has different beliefs towards certain services and products (Bitner et al., 1997) that play a role in determining customer satisfaction (Lovelock, 1996). By adjusting customer expectation and perception, customer satisfaction and customer loyalty can be influenced. In fact, satisfaction refers to the customer’s positive perception of the value received (Hallowell, 1996) and is measured based on expectation and perception (Zeithamal and Bitner, 2000). Customer perception of service quality are generally subjective, nonetheless it does provide valuable information and another useful tool for market monitoring and development (Toh, 2002).Customer perception, customer satisfaction and customer loyalty are closely linked with one another.

In order to retain customers, it is important to meet customer expectation, which is confirmation or positive disconfirmation of expectation and this creates the foundation for confirmation and disconfirmation theory to be applied in this study. With the intention of keeping the customer loyal, satisfied and to achieve excellent performances in fierce competition, it is essential for the telecommunication companies in Malaysia to find out what the customer’s perception is towards them. By applying confirmation-disconfirmation theory: their customer is in a neutral feeling as confirmation occurs due to performance being better than standard, meaning they are satisfied with the services; or they are dissatisfied because of negative disconfirmation, meaning the performance is worse than the standard (Oliver, 1980).

There are several independent variables that can be related between the service quality, brand images and customer loyalty. Customer loyalty can be related to the customer satisfaction, trust and image of brand. Brand image can related to the customer’s loyalty, customer satisfaction, trust, and word mouth to mouth. The service quality usually related to the customer’s loyalty, customer expectation and customer satisfaction. However, in these discussion only three relationships determines namely the customer satisfaction, customer loyalty, trust, customer expectation and perception.

2.4.1 Customer satisfaction

Customer satisfaction can be defined as the customer reaction to the state of fulfillment of their expectation and needs, customer judgment towards service and products quality (Hallowell, 1996; Oliver, 1997 and Zeithhamal and Bitner, 2000). Satisfaction is important as the principle purpose of the business is to create satisfied customers (Drucker, 1954). Satisfied customers lead to higher future profitability (Anderson et al., 1994). Satisfied customers are more willing to pay price premiums, provide recommendations and maintain loyalty towards the company (Reichheld, 1996). Higher customer satisfaction leads towards higher levels of customer retention and loyalty (Fornell, 1992) and lowers costs related to defective goods and services (Anderson et al., 1997).

Customers that experience a higher level of satisfaction with a company are likely to remain with their existing providers and maintain their subscription that leads to future revenue for the company (Fornell, 1992 and Anderson et al., 1994). However, customer satisfaction, while positively influencing customer loyalty, is not always a sufficient condition and in some cases it fails to produce the expected effect (Kim et al., 2004). Hence, researcher suggest that it is necessary to analyze other potential influential factors, as what makes a person satisfied may not make a person loyal (Gerpott et al., 2001). Thus, it is necessary to determine customer’s satisfaction and loyalty towards service and products.

The significance of customer loyalty is that it is closely related to the company’s continued survival and to strong future growth (Fornell, 1992). Hence, for a company to maintain a stable profit level when subscription level has reached saturation point, the market is mature and competition is fierce, a defensive strategy which strives to retain existing customers is more important than an aggressive one (Fornell, 1992 and Ahmad and Buttle, 2002).

2.4.2 Customer Loyalty

2.4.2.1 Customer Loyalty and Brand Image

Pearson (1996) has defined customer loyalty as the mid set of the customers who hold favorable attitudes towards a company commit a repurchase the company’s product or service and recommend the product or service to others. The younger adults is very dynamic and their decision-making is complicated (Wood, 2004). Many of them have less experience and involvement with brands (Howell, 2004), therefore, this segments is assumed to be less brand loyal. If the young adults have not used a product repeatedly, it is assumed to be difficult to associate them being a loyal customer at all. With the positive image of the product in the consumer minds, only than individuals can be considered loyal towards a certain brand (Shukla, 2009). This means that the feeling goods about the brand and being a user of the brand may yield repeat purchase. However, as customers are increasingly facing more and more choices to enable them make a variety or specific decisions, loyalty and relationship play less and less important for customers (Anonymous, 2009).

According to Anonymous (2009), customer engagement or customer service is used as a factor to determine customers’ loyalty instead. An informed choice will increase customer loyalty when things go well; hence both the firm and the customer are in win-win situation (Lawler, 1992). When firms manage complaints well, the customers will not only continue to stay with them but the existing customers will extend personal referrals towards to the firm (Goodman, 2006). According to Mitchell and Imrie (2011), it seems that consumers tent to be grouped together and are people who are emotionally connected by similar consumption value and usage. This is known as consumer tribe. It was also found that at any one point in time, based on the situation and environment that they are in, an individual may belong to multiple tribes at the same time express different aspects of their identity. This calls for marketers’ to look beyond conventional marketing theory and by providing a means to segment groups of consumers based on meaningful shared characteristics.

2.4.2.2 Customer Loyalty and Service Quality

Service quality is defined as the result of comparison between customers’ expectation about the service and their perception of the way the service has been performed (Grönroos, 1984; Parasuraman et al., 1985, 1988, 1991, 1994); described as the “delivery of excellent or superior service relative to the customer expectation” (Zeithaml and Bitner, 1996); as well as the customers’ interpretation of their experience (Garavan, 1997). It is viewed as a multidimensional construct (Johnston et al., 1995); and as overall assessment (Wang and Lo, 2003).

Service quality creates an essential ingredient for establishing and maintaining loyal and profitable customer base (Rust et al., 1995; Zeithaml, 2000) and acts as the driving force for productivity and profitability (Edvardson et al., 1994). Achieving the right quality could be done through do-it-yourself production systems; customer education; and individual preferences and perceptions. Service quality data is very useful in attaining service improvement (Shaw and Haynes, 2004) and could be considered as the root of customer satisfaction (Yavas et al., 2004).

2.4.3 Trust

Trustworthiness is one criterion for measuring the value of the partner (Doney et al., 1997). Spekman (1988) calls trust a cornerstone of the strategic partnership. Morgan and Hunt (1994) posit that trust is a major determinant of relationship commitment: brand trust leads to brand loyalty because trust creates exchange relationship that is highly valued. Chauduri and Holbrook (2001) have showed that brand trust is directly related to both purchase and attitudinal loyalty. Many authors have accented that trust is important in conditions of uncertainty (Moorman et al., 1992; Doney et al., 1997; Dwyer et al., 1987; Morgan et al., 1994). Uncertainty may be caused by dependence or large choice: people tend then to prefer popular or familiar brands or partner.

2.4.4 Customer Expectation and Perception

Perception is an opinion of something viewed and assessed by a person. It might vary from person to person, as everyone has different beliefs towards certain services and products (Bitner et al., 1997) that play a role in determining customer satisfaction (Lovelock, 1996). By adjusting customer expectation and perception, customer satisfaction and customer loyalty can be influenced. In fact, satisfaction refers to the customer’s positive perception of the value received (Hallowell, 1996) and is measured based on expectation and perception (Zeithamal and Bitner, 2000). Customer perception of service quality are generally subjective, nonetheless it does provide valuable information and another useful tool for market monitoring and development (Toh, 2002).Customer perception, customer satisfaction and customer loyalty are closely linked with one another.

In order to retain customers, it is important to meet customer expectation, which is confirmation or positive disconfirmation of expectation and this creates the foundation for confirmation and disconfirmation theory to be applied in this study. With the intention of keeping the customer loyal, satisfied and to achieve excellent performances in fierce competition, it is essential for the telecommunication companies in Malaysia to find out what the customer’s perception is towards them. By applying confirmation-disconfirmation theory: their customer is in a neutral feeling as confirmation occurs due to performance being better than standard, meaning they are satisfied with the services; or they are dissatisfied because of negative disconfirmation, meaning the performance is worse than the standard (Oliver, 1980).

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