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Zeithaml et al well-known quoted from Richard L. Oliver, distinguished expert and long-time writer and researcher on the topic of customer satisfaction: “Everyone knows what satisfaction is, until asked to give a definition. Then, it seems, nobody knows”. This unique expression frames the challenge of defining and refining concepts of customer satisfaction. Oliver’s characterization of satisfaction is that satisfaction is the consumer’s fulfillment response, the degree to which the level of fulfillment is pleasant or unpleasant.
Zeithaml et al (2000) defined satisfaction as the customer’s evaluation of a product or service in terms of whether that product or service has met their needs and expectation (Zeithaml et al,
2000). Failure to meet customers’ needs and expectations is assumed to result in dissatisfaction with the product or service.
By meeting and even exceeding its customers’ expectations of value, a company creates customer satisfaction. Customer satisfaction can be defined as the state in which the customer perceives that a company’s products and service meet or exceed the customer expectations and satisfy all of his needs. Satisfied customers generally are more likely to become loyal customers (Allen et al, 2003).
The greater the satisfaction level of a company, the more benefit the company will realize. A Japanese quality control expert – Noriaki Kano, cited by Allen et al (2003), described satisfaction in terms of the following three levels of perceived value:
â€¢ Expected quality is the basic level of quality that must be met for a customer to be satisfied and continue to do business with a company. By meeting this standard, the company does not excite the customer because the customer expected this standard. However, if the company does not meet the standard, serious customer dissatisfaction can result.
â€¢ Desired quality is the level of quality that, when delivered, results in increased customer satisfaction and, when not delivered, results in increased customer dissatisfaction.
â€¢ Excited quality is the level of quality that “wows” a customer. A customer that is not excited is not necessarily dissatisfied because the customer does not know what he is missing. However, an excited customer is usually highly satisfied.
2.2 Service Quality
By definition, service quality is the difference between expected service and perceived service (Parasuraman et al, 1985). To examine service quality, Parasuraman et al (1985) has introduced a comprehensive model called the Gaps Model of Service Quality. Figure 2.1 illustrates the Gaps Model of Service Quality.
Gaps Model of service quality is based upon a framework of five potential service quality gaps (Parasuraman et al, 1985). The five gaps can prevent business from providing exceptional services. The first four are those on the provider side of service. Analyzing these four gaps can help a company determine the reasons for differences between expected service and perceived service, and take step s toward eliminating the gap that is always most apparent to the customer: Gap 5 – the service gap. These gaps are:
Gap 1: the difference between customer expectations of service and management perceptions of those expectations
Gap 1 arises from management’s lack of full understanding about how customers formulate their expectations on the basis of a number of sources: advertising, past experience with the firm and its competitors, personal needs, and communication with friends.
Gap 2: the difference between management perceptions of customer expectations and service quality expectations
Gap 2 results from management’s inability to formulate target levels of service quality to meet perception of customer expectations and translate these into workable specification. This gap may result from a lack of management commitment to service quality or a perception of the unfeasibility of meeting customers’ expectations.
Gap 3: the difference between actual service quality specifications and the service actually delivered
Gap 3 can arise for number of reasons, including lack of team work, poor employee selection, inadequate training, and inappropriate job design.
Gap 4: the difference between service delivery and what is communicated to customers.
Gap 4 arises when a company promises its customers a high quality service than it can provide.
Gap 5: the difference between customer expectations and perceptions – The Service gap
Gap 5 is the central focus of the Gaps Model of Service Quality. The idea is that firms will want to close this gap to satisfy their customers and build long-term relationships with them. To do so, the first four gaps must be closed. Another way to reduce gap 5 is to change customer expectation by educating customers about the company’s products and levels of service it provides, as well as continually improving service.
Management perceptions of customer expectations
Source: Zeithaml & Bitner (2000)
Measuring service quality is a challenge because it is determined by many intangible factors. Unlike a product with physical features that can be objectively measured, service quality contains many psychological features. The authors of the Gaps Model of Service Quality developed a multiple-items scale called SERVQUAL for measuring the service quality. The principal measure of service quality attempts to measure the service gap in terms of different dimensions. Those service dimensions are typically used by customers to judge the quality of services they received. Parasuraman et al (1985) firstly defined the service gap for 10 dimensions: tangibility, reliability, responsiveness, competence, courtesy, credibility, security, access, communication, understanding and knowing the customers. In 1988, in refinement, Parasuraman et al reduced from 10 dimensions to 5 dimensions: tangibility, reliability, responsiveness, assurance, empathy.
â€¢ Tangibility: Appearance of physical facilities, equipment, personnel, and communication materials.
All of these provide physical representations or images of the service that customers, particularly new customers, will use to evaluate quality (Zeithaml et al, 2000).
â€¢ Reliability: Ability to perform the promised service dependably and accurately.
In its broadest sense, reliability means that the company delivers on its promises – promises about delivery, service provision, problem resolution, and pricing. Customers want to do business with companies that keep their promises, particularly their promises about the core service attributes (Zeithaml et al, 2000).
â€¢ Responsiveness: Willingness to help customers and provide prompt service.
This dimension emphasizes attentiveness and promptness in dealing with customer requests, questions, complaints, and problems. Responsiveness is communicated to customers by the length of time they have to wait for assistance, answers to questions, or attention to problems. Responsiveness also captures the notion of flexibility and ability to customize the service to customer needs (Zeithaml et al, 2000).
â€¢ Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence.
This dimension is likely to be particularly important for services that the customer perceives as involving risks or about which they feel uncertain about their ability to evaluate outcomes, for example, banking, and insurance. Trust and confidence may be embodied in the person who links the customer to the company, for example, insurance agents (Zeithaml et al, 2000).
â€¢ Empathy: Caring, individualized attention the firm provides its customers.
The essence of empathy is conveying that customers are unique and special. Customers want to feel understood by and important to firms that provide service to them (Zeithaml et al,
Table 2.1 illustrates the relationships between the original 10 dimensions and the refined 5 dimensions
Table 2.1: The relationships between 10 original dimensions and 5 refined dimensions of
Competence; Courtesy; Credibility; Security
Access; Communication; Understanding and
2.3 Customer Satisfaction and Service Quality
Practitioners and writers tend to use the terms “satisfaction” and “quality” interchangeably, but researchers have attempted to be more precise about the meaning and measurement of the two concepts, resulting in considerable debate. Consensus is growing that the two concepts are fundamentally different in terms of their underlying causes and outcomes.
Customer satisfaction refers to the degree to which customers derive value from the quality of products and services provided by a firm. Service quality, on the other hand, refers to the performance of the provider, in terms of the technical quality of what is provided and the functional quality of how it is provided (Lassar et al, 2000).
However, the intangibility of services means that a customer’s perceptions of both service quality and customer satisfaction may be intertwined.
Satisfaction is generally viewed as a broader concept while service quality assessment focuses specifically on dimensions of service. Based on this view, perceived service quality is an element of customer satisfaction (Zeithaml et al, 2000). Figure 2.2 illustrates the distinctions between the two concepts. As shown in Figure 2.2, service quality is a focused evaluation that reflects the customer’s perception of specific dimensions of service: tangibility, reliability, responsiveness, assurance, empathy. Satisfaction is more inclusive, it is influenced by perceptions of service quality, product quality, and price as well as situational factors and personal factors.
Figure 2.2 Customer perceptions of quality and customer satisfaction
Source: Zeithaml & Bitner (2000)
In an attempt to measure customer satisfaction in financial services and investigate the link with service quality, Krishnan et al (1999) designed a questionnaire instrument to investigate four
distinct factors relating to the customer experience of a firm’s offering in terms of personal contact, usage of telephone and IT systems, product performance, and periodic financial statements. In the case of financial services, where the products are intangible and are sampled
only rarely, the services accompanying the product will often form the main determinant of overall satisfaction (Krishnan et al, 1999). Lassar et al (2000) attempted a similar investigation but provided separate measures of customer satisfaction of the firm’s technical offerings in terms of product and system performance and functional offerings in terms of the interface with front-office staff. The results confirm the findings of previous research that customer satisfaction with a company’s services is determined to a large degree by the quality of service that the customers receive (Parasuraman et al, 1985; Cronin et al, 1992). However, little formal research appears to have been conducted which attempt to investigate the link between dimensions of service quality to customer satisfaction, especially in each specified service industry (Lassar et al, 2000).
In the context of Vietnam life insurance market, this kind of financial service is rather young. It is useful to have a research that attempts to measure service quality in life insurance and to investigate the link between service quality dimensions to customer satisfaction because it appears that there are very few researches on that topic in Vietnam. The research model of this study will be developed and introduced in the following section.
2.4 Research model
In this study, Customer Perceptions of Quality and Customer Satisfaction Model (Zeithaml et al,
2000) depicted in the Figure 2.2 is the basis for the development of the research model and accompanying hypotheses. Figure 2.3 depicted the research model of this study.
This model consists of five service quality dimensions (tangibility, reliability, responsiveness, assurance, and empathy) and a concept of customer satisfaction. A set of hypotheses were developed surrounding major variables (service quality dimensions and customer satisfaction). Then, the effect of these variables was examined.
Figure 2.3 The model of service quality and customer satisfaction
â€¢ Tangibility: this dimension is the physical aspects of a life insurance company, its employees and agents. Tangibility in life insurance service includes: the appearance of buildings, offices, and other physical facilities; the appearance of company’s staffs and agents; the quality and appearance of any supplies, equipments, or other items used to provide service, such as forms, contracts, and marketing brochures.
Based on the model depicted in Figure 2.3, the higher the customers appreciate the appearance of physical facilities, equipment, personnel, and communication materials the higher level of customer satisfaction is. Therefore, the first hypothesis is,
H1: Tangibility has a positive effect on customer satisfaction in life insurance industry in
â€¢ Reliability: performing the promised service consistently and accurately. Reliability in life insurance service includes maintaining accurate customers’ records; ensuring error-free documents, contracts, billing; providing accurate consultancy; paying claims (paying the policy proceeds following the insurable events) satisfactorily as promised in the contract; satisfactorily settling customers’ complaints; and so on.
Based on the model depicted in Figure 2.3, the higher the customers appreciate the ability to perform the promised service dependably and accurately the higher level of customer satisfaction is. Therefore, the second hypothesis is,
H2: Reliability has a positive effect on customer satisfaction in life insurance industry in
â€¢ Responsiveness: implies a willingness to help customers and an ability to provide them with prompt service. Responsiveness in life insurance service includes: the willingness of agents and staffs to help customers; quick response to customers’ complaints, questions and concerns; reminding customers when premium falls due; informing customers of the turn- around time of each transaction; deliver satisfactory customers care programs; provide customers with easy access to information that they need; allow customers to conduct as many transactions as necessary during a single call; and so on.
Based on the model depicted in Figure 2.3, the higher the customers appreciate the willingness to help customers and the ability to provide prompt service the higher level of customer satisfaction is. Therefore, the third hypothesis is,
H3: Responsiveness has a positive effect on customer satisfaction in life insurance industry in Vietnam
â€¢ Assurance: refers to the competence (knowledge and skills), the credibility of agents/staffs (their ability to convey trust and confidence), the courtesy and respect they show to customers, insurers’ credibility (financial capability, being well-known), and the level of confidentiality of customers’ private information.
Based on the model depicted in Figure 2.3, the higher the customers appreciate the level of knowledge and courtesy of company’s staffs/agents and the higher the customers appreciate the ability to inspire trust and confidence the higher level of customer satisfaction is. Therefore, the fourth hypothesis is,
H4: Assurance has a positive effect on customer satisfaction in life insurance industry in
â€¢ Empathy: caring, individualized attention the insurers, staffs, agents provide its customers.
Empathy in life insurance includes: provide customers with easy contact whenever they needs; understanding customers’ true needs and concerns; caring about customers on their life events; having a strong commitment to customer communication; having sincere interest in customers; possess ability to sympathize with dissatisfied customers; and so on.
Based on the model depicted in Figure 2.3, the higher the customers appreciate the level of caring and attention that provided the higher level of customer satisfaction is. Therefore, the fifth hypothesis is,
H5: Empathy has a positive effect on customer satisfaction in life insurance industry in
2.5 Chapter summary
In this chapter, literature on customer satisfaction and service quality that are related to the study are reviewed. Based on this literature, a research model in which shows the relationships between service quality dimensions and customer satisfaction is presented together with hypotheses. In Chapter 3, the research methodologies will be introduced which include the method of measurement scales adjustment, the methods for the assessment of measurement scales’ reliability and validity, and the method for hypotheses testing.
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