Chapter 2

Literature Review

2.1 Definition of Service

A service is the intangible equivalent of an economic good. Service provision is often an

economic activity where the buyer does not generally, except by exclusive contract, obtain

exclusive ownership of the thing purchased. The benefits of such a service, if priced, are held to

be self-evident in the buyer’s willingness to pay for it. Public services are those societies as a

whole pays for through taxes and other means.

By composing and orchestrating the appropriate level of resources, skill, ingenuity, and

experience for effecting specific benefits for service consumers, service providers participate in

an economy without the restrictions of carrying stock (inventory) or the need to concern

themselves with bulky raw materials. On the other hand, their investment in expertise does

require consistent service marketing and upgrading in the face of competition which has equally

few physical restrictions. Many so-called services, however, require large physical structures and

equipment, and consume large amounts of resources, such as transportation services and

military.

The generic clear-cut and complete, concise and consistent definition of the service term

reads as follows:

A service is a set of one time consumable and perishable benefits

(i) delivered from the accountable service provider, mostly in close coactions with

his internal and external service suppliers

(ii) effectuated by distinct functions of technical systems and by distinct activities of

individuals, respectively

(iii) commissioned according to the needs of his service consumers by the service

customer from the accountable service provider

(iv) rendered individually to an authorized service consumer at his/her dedicated trigger

(v) consumed and utilized by the triggering service consumer for executing his/her

upcoming business activity or private activity.

2.2 Service Characteristics

Services can be paraphrased in terms of their generic key characteristics.

(1) Intangibility. Services are intangible and insubstantial: they cannot be touched,

gripped, handled, looked at, smelled, tasted or heard. Thus, there is neither potential nor need for

transport, storage or stocking of services. Furthermore, a service cannot be resold or owned by

somebody, neither can it be turned over from the service provider to the service consumer nor

returned from the service consumer to the service provider. Solely, the service delivery can be

commissioned to a service provider who must generate and render the service at the distinct

request of an authorized service consumer.

(2) Services are perishable in two regards: (i) The service relevant resources, process and

systems are assigned for service delivery during a definite period in time. If the designated or

scheduled service consumer does not request and consumer the service during this period, the

service cannot be performed for him. From the perspective of the service provider, this is a lost

business opportunity as he cannot charge any service delivery; potentially, he can assign the

resources, processes and systems to another service consumer who requests a service. Examples:

The hair dresser serves another client when the scheduled starting time or time slot is over. An

empty seat on a plane never can be utilized and charged after departure. (ii) When the service has

been completely rendered to the requesting service consumer, this particular service irreversibly

vanishes as it has been consumed by the service consumer. Example: the passenger has been

transported to the destination and cannot be transported again to this location at this point in

time.

(3) Inseparability: The service provider is indispensable for service delivery as he must

promptly generate and render the service to the requesting service consumer. In many cases, the

service delivery is executed automatically but the service provider must preparatorily assign

resources and systems and actively keep up appropriate service delivery readiness and

capabilities. Additionally, the service consumer is inseparable from service delivery because he

is involved in it from requesting it up to consuming the rendered benefits. Examples: The service

consumer must sit in the hair dresser’s shop & chair or in the plane & seat: correspondingly, the

hair dresser or the pilot must be in the same shop or plane, respectively, for delivering the

service.

(4) Simultaneity: Services are rendered and consumed during the same period of time. As

soon as the service consumer has requested the service (delivery), the particular service must be

generated from scratch without any delay and friction and the service consumer instantaneously

consumes the rendered benefits for executing his upcoming activity or task.

(5) Variability: Each service is unique. It is one-time generated, rendered and consumed

and can never be exactly repeated as the point in time, location, circumstances, conditions,

current configurations and/or assigned resources are different for the next delivery, even if the

same service consumer requests the same service. Many services are regarded as heterogeneous

or lacking homogeneity and are typically modified for each service consumer or each new

situation. Example: The taxi service which transports the service consumer from his home to the

opera is different from the taxi service which transports the same service consumer from the

opera to his home – another point in time, the other direction, may be another route, probably

another taxi driver and cab.

Each of these characteristics is retractable per se and their inevitable coincidence

complicates the consistent service conception and makes service delivery a challenge in each and

every case. Proper service marketing requires creative visualization to efficiency evoke a

concrete image in the service consumer’s mind. From the service consumer’s point of view,

these characteristics make it difficult, or even impossible, to evaluate or compare services prior

to experiencing the service delivery.

Mass generation and delivery of services is very difficult. This can be as a problem of

inconsistent service quality. Both inputs and outputs to the processes involved providing services

are highly variable, as are the relationships between these processes, making it difficult to

maintain consistent service quality. For many services there is labor intensity as services usually

involve considerable human activity, rather than a precisely determined process; exceptions

include utilities. Human resource management is important. The human factor is often the key

success factor in service economies. It is difficult to achieve economies of scale or gain dominant

market share. There are demand fluctuations and it can be difficult to forecast demand. Demand

can be reason, time of day, business cycle, etc. There is consumer involvement as most service

provision requires a high degree of interaction between service consumer and service provider.

There is a consumer-based relationship based on creating long-term business relationships.

Accounts, attorneys, and financial advisers maintain long-term relationship with their clients for

decades. These repeat consumers refer friends and family, helping to create a client-based

relationship.

2.3 Service Specification

Any service can be clearly and completely, consistently and concisely specified by means

of following 12 standard attributes which conform to the MECE principle (Mutually Exclusive,

Collectively Exhaustive).

(1) Service Consumer Benefits

(2) Service-specific Functional Parameters

(3) Service Delivery Point

(4) Service Consumer Count

(5) Service Delivering Readiness Times

(6) Service Consumer Support Times

(7) Service Consumer Support Languages

(8) Service Fulfillment Target

(9) Service Impairment Duration per Incident

(10) Service Delivering Duration

(11) Service Delivery Unit

(12) Service Delivering Price

The meaning and content of these attributes are:

(1) Service consumer benefits describe the (set of) benefits which are triggerable,

consumable and effectively utilizable for any authorized service consumer and which are

rendered to him as soon as he triggers one service. The description of these benefits must be

phrased in the terms and wording of the intended service consumers.

(2) Service-specific functional parameters specify the functional parameters which are

essential and unique to the respective service and which describe the most important

dimension(s) of the servicescape, the service output or the service outcome, e.g., maximum e-

mailbox capacity per registered and authorized e-mailing service consumer.

(3) Service delivery point describes the physical location and/or logical interface where

the benefits of the service are triggered from and rendered to the authorized service consumer. At

this point and/or interface, the preparedness for service delivery readiness can be assessed as

well as the effective delivery of each triggered service can be monitored and controlled.

(4) Service consumer count specifics the number of intended, clearly identified, explicitly

named, definitely registered and authorized service consumers which shall be and/or are allowed

and enabled to trigger and consume the commissioned service for executing and/or supporting

their business tasks or private activities.

(5) Service delivering readiness times specify the distinct agreed times of every day of

the week when (i) the described service consumer benefits are (a) triggerable for the authorized

service consumers at the defined service delivery point and (b) consumable and utilizable for the

authorized service consumers at the respective agree service level, (ii) al the required service

contributions are aggregated to the triggered service, and (iii) the specified service benefits are

completely and terminally rendered to any authorized triggering service consumer without any

delay or friction.

(6) Service consumer support times specify the determined and agreed times of every day

of the week when the triggering and consumption of commissioned services is supported by the

service desk team for all identified, registered and authorized service consumers within the

service customer’s organizational unit or area. The service desk is/shall be the so called the

Single Point of Contact (SPoC) for any authorized service consumer inquiry regarding the

commissioned, triggered and/or rendered services, particularly in the event of service denial, i.e.,

an incident. During the defined service consumer support times, the service desk can be reached

by phone, e-mail, web-based entries, and fax, respectively. The time data are specified in 24 hour

format per local working day and local time, referring to the location of the intended service

consumers.

(7) Service consumer support languages specify the national languages which are spoken

by the service desk team(s) to the service consumers calling them.

(8) Service fulfillment target specifies the service provider’s promise of effectively and

seamlessly deliver the specified benefits to any authorized service consumer triggering a service

within the specified service delivery readiness times. It is expressed as the promised minimum

ratio of the count of successful individual service deliveries related to the count of triggered

service deliveries. The effective service fulfillment ratio can be measured and calculated per

single service consumer or per service consumer group and may be referred to different time

periods (work hour, work day, calendar week, work month, etc.).

(9) Service impairment duration per incident specifies the maximum allowable elapsing

time between (i) the first occurrence of service impairment, i.e., service quality degradation,

service delivery disruption or service denial, whilst the service consumer consumes and utilizes

the requested service, (ii) the full resumption and complete execution of the service delivery to

the content of the affected service consumer.

(10) Service delivering duration specifies the promised and agreed maximum allowable

period of time for effectively rendering all specified service consumer benefits to the triggering

service consumer at his currently chosen service delivery point.

(11) Service delivery unit specifies the basic portion for rendering the defined service

consumer benefits to the triggering service consumer. The service delivery unit is the reference

and mapping object for the Service Delivering Price, for all service costs as well as for charging

and billing the consumed service amounts to the service customer who has commissioned the

service delivery.

(12) Service delivering price specifies the amount of money the commissioning service

customer has to pay for a distinct service delivery unit or for a distinct amount of service

delivery units. Normally, the service delivering price comprises two portions: (i) a fixed basic

price portion for basic efforts and resources which provide accessibility and usability of the

service delivery functions, i.e., service access price, and (ii) a price portion covering the service

consumption based on (a) fixed flat rate price per authorized service consumer and reference

period for an unlimited amount of consumed services, (b) staged prices per authorized service

consumer and reference period for staged amounts of consumed services, and (c) fixed price

single consumed service delivering unit.

2.4 Service Delivery

The delivery of a service typically involves six factors:

(1) The accountable service provider and his service suppliers (e.g., the people)

(2) Equipment used to provide the service (e.g., vehicles, cash registers, technical

systems, computers systems)

(3) The physical facilities (e.g., buildings, parking, waiting rooms)

(4) The requesting service consumer

(5) Other customers at the service delivery location

(6) Customer contact

The service encounter is defined as all activities involved in the service delivery process.

Some service managers use the term “moment of truth” to indicate that defining point in a

specific service encounter where interactions are most intense. Many business theorists view

service provision as a performance or act (sometimes humorously referred to as dramalurgy,

perhaps in references to dramaturgy). The location of the service delivery is referred to as the

stage and the objects that facilitate the service process are called props. A script is a sequence of

behaviors followed by all those involved, including the client(s). Some service dramas are tightly

scripted, other are more ad lib. Role congruence occurs when each actor follows a script that

harmonizes with the roles played by the other actors. In service industries, especially health care,

dispute resolution, and social services, a popular concept is the idea of the caseload, which refers

to the total number of patients, clients litigants, or claimants that a given employee is presently

responsible for. On a daily basis, in all those fields, employees must balance the needs of any

individual case against the needs of all other current cases as well as their own personal needs.

The dichotomy between physical goods and intangible services should not be given too

much credence. These are not discrete categories. Most business theorists see a continuum with

pure service on one terminal point and pure commodity good on the other terminal point. Most

products fall between these two extremes. For example, a restaurant provides a physical good

(the food), but also provides services in the form of ambience, the setting and clearing of table,

etc. And although some utilities actually deliver physical goods – like water utilities which

actually deliver water – utilities are usually treated as services. In a narrow sense, service refers

to quality of customer service: the measured appropriateness of assistance and support provided

to a customer. This particular usage occurs frequently in retailing.

The following is an incomplete list of service industries, grouped into rough sectors.

Parenthetical notations indicate how specific occupations and organizations can be regarded as

service industries to the extent they provide an intangible service, as opposed to a tangible good.

(1) Business function (that apply to all organizations in general)

(i) consulting

(ii) customer service

(iii) human resources administrators (providing services like ensuring that

employees are paid accurately)

(2) Childcare

(3) Cleaning, repair and maintenance services

(i) janitors (who provide cleaning services)

(ii) gardeners

(iii) mechanics

(4) Construction

(i) carpentry

(ii) electricians (offering the service of making wiring work properly)

(iii) plumbing

(5) death care

(i) coroners (who provide the service of identifying cadavers and

determining time and cause of death)

(ii) funeral homes (who prepare corpses for public display, cremation or

burial)

(6) dispute resolution and prevention services

(i) arbitration

(ii) courts of law (who perform the service of dispute resolution backed by

the power of the state)

(iii) diplomacy

(iv) incarceration (provides the service of keeping criminals out of society)

(v) law enforcement (provides the service of identifying and apprehending

criminals)

(vi) lawyers (who perform the services of advocacy and decision-making in

many dispute resolution and prevention processes)

(vii) mediation

(ix) military (performs the service of protecting states in disputes with

other states)

(x) negotiation (not really a service unless someone is negotiation on

behalf of another)

(7) education (institutions offering the services of teaching and access to

information)

(i) library

(ii) museum

(iii) school

(8) entertainment (when provided live or within a highly specialized facility)

(i) gambling

(ii) movie theatres (providing the service of showing a movie on a big

screen)

(iii) performing arts productions

(iv) sexual services

(v) sport

(vi) television

(9) fabric care

(i) dry cleaning

(ii) self-service laundry (offering the service of automated fabric cleaning)

(10) financial services

(i) accountancy

(ii) banks and building societies (offering lending services and

safekeeping of money and valuables)

(iii) real estate

(iv) stock brokerages

(v) tax preparation

(11) food service industry

(12) personal grooming

(i) hairdressing

(ii) manicurist/pedicurist

(iii) body hair removal

(iv) dental hygienist

(13) health care (all health care professions provide services)

(14) hospitality industry

(15) information services

(i) data processing

(ii) database services

(iii) interpreting

(iv) translation

(16) risk management

(i) insurance

(ii) security

(17) Social services

(i) social work

(18) transport

(19) public utility

(i) electric power

(ii) natural gas

(iii) telecommunications

(iv) waste management

(v) water industry

2.5 Service Quality

Research on service quality is now of major concern to industries such as the

tourism/hospitality industry, which are basically ‘people-oriented’. There is widespread

agreement in the general service management literature that the provision of service quality is

concerned with generating customer satisfaction. Grönroos (1984), Parasuraman, Zeithaml &

Berry (1985), and Johnston (1988) define service quality in terms of customer satisfaction, that

is, the degree of fit between customers’ expectations and perceptions of service. Other authors

attempt to deal more specifically with the issue of service quality measurement. Smith (1982)

argues in support of the proposition that service quality is difficult to quantify, and identifies

measures used in manufacturing firms. Voss (1985) proposed that it is the intangible aspects of

the service package which are most difficult to measure, and concludes that as a result service

quality tends to be ignored. Johnston & Morris (1985) argue that service organizations tend to

measure only what is easy to measure and quantify, and shy away from the use of soft,

qualitative measures. Kaplan (1983) argues similarly but for manufacturing businesses, that there

is a tendency to measure only what is easily quantifiable (such as financial performance and

productivity) even though other aspects such as quality, innovation and flexibility may be crucial

to a company’s competitive success. In industries such as tourism/hospitality however, they deal

with issues that are less quantifiable than manufacturing.

A variety of authors agree that measures of service quality may either be hard or soft.

Hard measures are those which are said to be quantifiable or objective; for example, computer

downtime or the proportion of telephone calls answered. Soft measures are those which are more

likely to be qualitative, judgmental, and subjective and based on perceptual data, for example,

customers’ satisfaction with speed of service or managers’ assessment of staff attitude towards

customers. Soft measures of service quality are particularly relevant to the measurement of the

quality of intangible aspects of service. Silvestro et al. (1990) posit that information on service

quality can be gathered from internal and/or external data sources. Internal data are those

generated by the staff or management inside an organization, enabling the organization to ensure

that it is meeting its own internal specification of service quality.

However, internal measurement of service quality alone may be of little value if an

organization has no means of assessing whether or not the service levels set internally are

generating customer satisfaction. Silvestro et al. (1990) point out that customers also inevitably

assess the quality of the service during and after its provision. Their assessments result in a level

of customer satisfaction. Thus service organizations may measure service quality not only on the

basis of their own internal data but also by using external data, by monitoring customer

satisfaction. Whilst the measurement of customer service perceptions are now widespread in

tourism/hospitality, an understanding of managements’ perception of guest expectations, as well

as staff responses to such management expectations, are yet to be explored. Hochschild (1983)

has described the work performed by service providers as ‘emotional labor’ that requires them to

subsume their own feelings to the goals of their employer and the immediate needs of a paying

customer. Indeed, she described service encounters as the commercialization of human feeling,

and warns of the individual and social effects that may engender. Klaus (1985) has described

service encounters as interlocking behavior composed of task and ‘ceremonial’ elements, in

which the former are the economic exchange elements and the latter the psychological need

satisfaction that provider and customer provide each other. Surprenant et al. (1983) apply social

interdependence theory to describe the service encounter, along with McCallum & Harrison

(1985). Interdependence theory holds that the behaviors of each party have an effect on the

outcomes received by the other. It further suggests a framework for analyzing the balance of

dependence or interdependence that shapes the nature and content of the interaction. Key to the

issue of dependence and interdependence is the possession of market-place power and the

strategy of the organization, as noted by Czepiel (1992).

The service quality construct is mostly conceptualized in the context of service marketing

literature (Lee, Lee & Yoo, 2000). Therefore, it deals with the concept of perceived service

quality. According to Zeithaml, Parasuraman & Berry (1990), perceived service quality is the

extent to which a firm successfully serves the purpose of customers. Customers determine the

perceived or cognitive value of service based on their experience with the service delivered.

Ghobadian, Speller & Jones (1994) stated that customers’ expectations, service delivery process

and service outcome have an impact on perceived service quality. Yoo & Park (2007) found that

employees, as an integral part of the service process, are a critical element in enhancing

perceived service quality. Furthermore, Edvardsson (2005) pointed out that service quality

perceptions are formed during the production, delivery and consumption process. The author

concluded that customers’ favorable and unfavorable experience, as well as their positive and

negative emotions may have an important impact on perceived service quality. Similarly, O’Neill

& Palmer (2003) have reported that customers’ perceptions of service quality may, to a large

extent, be influenced by the degree of their prior experience with a particular service.

In the hospitality industry, several studies have examined hotel attributes that guests may

find important when evaluating the performed service quality. Literature suggests that

cleanliness (Atkinson 1988; Knutson 1988; Gundersen, Heide & Olsson 1996), security and

safety (Atkinson, 1988; Knutson, 1988; Gundersen et al. 1996), employees’ empathy and

competence (Atkinson 1988; Knutson 1988; Barsky & Labagh 1992; Gundersen, Heide &

Olsson 1996; Choi & Chu 2001; Markovi´c 2004), convenient location (Knutson 1988; Barsky &

Labagh 1992), value for money (Atkinson 1988; Gundersen, Heide & Olsson 1996; Choi & Chu

2001) and physical facilities (Choi & Chu 2001; Markovi´c 2004) are attributes that hotel guests

perceive as being important.

It should be noted that according to some authors, perceived service quality has been

accepted as an antecedent of customer satisfaction (Churchill & Suprenant 1982; Oliver 1997).

What is more, Rowley (1998) argued that perceived service quality is an attitude related to, but

not the same, as satisfaction. It is evident that the relationship between these two concepts is

complex and that they have a causal ordering.

2.6 Quality in the Hospitality Services

Quality is an important topic in management and marketing research but there is no

agreed definition of the word among scholars and practitioners. Faced with the great number of

points of view, Garvin (1988) describes several categories of the way in which the concept can

be defined. A first perspective is that high quality is identified by customers with the help of their

senses, for example by looking to the furniture design in a hotel room, by testing the food, by

perceiving the atmosphere of a restaurant. A more technical point of view is represented by

definitions based on `superior product/service attributes`, or those underlining `conformance to

specification` which involves carrying out operations with zero defects. Finally, other definitions

are customer-oriented. So, it is recognized that the customer decides what quality means based

on the fitness for use from his/her perspective, or on the basis of the best value received for

his/her money.

Service quality is considered the life of hotel (Min & Min, 1996) and core of service

management (Chen, 2008). Service quality is related with customer satisfaction (Shi & Su, 2007)

and customer satisfaction is associated with customers revisit intention (Han, Back & Barrett,

2009). If an effective image is portrayed to customers, it will create competitive advantage for

hotel (Ryu, Han & Kim, 2008). As a result of service development process three concept of

service is composed and these three steps are service process, system and service resources-

structure (Edvardsson, 1997). Marketing is the main factor that only focused on the customer

satisfaction (Flint, Woodruff & Gardial 1997; Peter & Olson 1996). Customer satisfaction plays

an important role in financial performance of hotel (Nilssom, Johnson & Gustafsson, 2001). In

hotel industry, as service has direct interaction with customers, that is why customer satisfaction

can be a replication of service quality in hotels (Shi & Su, 2007). There are some factors that

have significant role in measuring customer association with hotel: age, gender, income and

culture (Ryu, Han & Kim, 2008). Hotel performance is directly allied to service quality

improvement. There is a significant relationship exist between improvement in service quality

and hotel performance change (Narangajavana & Hu, 2008). High level development tools are

used for the satisfaction of multiple users about service and quality (Hope & Wild, 1994). The

key problem lies with hotel manager is to retain and fascinate customers (Shi & Su, 2007).

Customers revisit intention and emotions are mediated by customer satisfaction (Han, Back &

Barrett, 2009). Customer satisfaction plays a role of mediator in perceived value of hotel and

behavioral intention (Ryu, Han & Kim, 2008). Both public and private sectors have reviewed the

service quality and to fulfill their demand, customer-focused approach was highly practiced

(Pyon, Lee & Park, 2009). The managers of hotels are key element of decision makers. It is

necessary to scrutinize the perceptions of hotel managers about hotel ranking and they should

correlate it with improving service quality and performance (Narangajavana & Hu, 2008). Hotel

managers should focus on keeping the number of service failure low and observe customer

complaints constantly (Min & Min, 1996). For improving service quality, four aspects were

identified: (1) service delivery, (2) hotel employees, (3) guest amenities and surroundings, and

(4) prestige (Narangajavana & Hu, 2008). There are many aspects of service performance and

quality, some of them are: (1) Service quality of reception hall, guestroom and restaurant, (2)

Technique of employee, (3) Decoration and atmosphere of hall, guestroom and restaurant (Han,

Back & Barrett, 2009; Ryu, Han & Kim, 2008), (4) Safety of room and courtesy of attendants,

and (5) Savor and variation of food (Han, Back & Barrett, 2009; Shi & Su, 2007). For providing

good quality service, employee management is a critical issue for organizations. It affects

business results directly (Nilssom, Johnson, & Gustafsson, 2001). Quality service values

customers' satisfaction and is necessary step for a competitive advantage (Berry, Parasuraman, &

Zeithaml; Adsit & Hater; Vanetti & Veale, 1993) and service quality is affirmative to please the

attitude of consumers toward the noticeable utility value in the future (Lin, 2007). In every

organization service and quality plays a vital role for every customers (Brombacher, 2000).

Customer is the main person who defines the quality (Berry, Parasuraman, & Zeithaml; Adsit &

Hater; Vanetti & Veale, 1993). For providing good quality service to customers, it is necessary

for hotel managers to understand the expectations of its customers (Shi & Su, 2007; Nilssom.

Johnson & Gustafsson, 2001) and then develop such programs that can address issues of

customers (Narangajavana & Hu, 2008) and bring improvement in service quality (Chen, 2008).

Expectation is based on the customer's demands and values but company's image or status in the

market also plays an important role (Edvardsson, 1997). To identify and enumerate “what drives

what” will track towards quality improvement, reduction in cost and ultimately customer

satisfaction (Buckley & Chillarege, 1995). To measure customer behavioral intention: hotel

image, value and customer satisfaction should be included (Ryu, Han & Kim, 2008). Service is

able to collect vital information about the behavior of products in dealings with customers

(Petkova, Sander & Brombacher, 2000). Service quality has an encouraging effect on the attitude

of consumers toward the professed transaction value in the future (Lin, 2007). Customers'

behavioral intention shows great interest in being influenced by service quality (Zeithaml, Berry

& Parasuraman, 1996). Service quality improvement with changing requirements of customers

can be done with team work (Chen, 2008). When customers face any problem related to service,

like unclean room, uncomfortable room temperature and non-functioning phone lines, then these

problems must be resolved within now time (Min & Min, 1996). Reception hall is considered the

most important source of customer satisfaction (Shi & Su, 2007). Program to progress service

quality should comprise issues of customer dissection, service provided, culture of hotel,

communication with customers, recruitment and training of service employees, and their

appraisal system. To bring improvement in service quality, there is a need to emphasis on

tangible and intangible assets (Narangajavana & Hu, 2008). For hotel managers, it is not

necessary to just get room related revenue, but revenue can be generated by improving service

related facilities like better service production, error free delivery, upgrading guest facilities and

augmenting prestige of hotel (Narangajavana & Hu, 2008). Hotel employees generally perceive

that only two things are important in service quality; one is cleanliness of room and other is

courtesy of employees (Shi & Su, 2007), but other aspects that make a standard of hospitality

and important for service quality improvement are atmospheric impression and decoration of

hotel (Shi & Su, 2007) along with previous two aspects (Min & Min, 1996). Customers demand

and expectations continue to change according to market that is why hotel managers must timely

know those expectations and improve their service quality accordingly (Chen, 2008). Besides

this, different customers have different perception of service quality, so there is a need to cater

this problem also (Shi & Su, 2007). Customer’s expectation about quality and for inexpensive

products is higher (Petkova, Sander & Brombacher 2000). Service quality should be sensitive to

changes in room like temperature, comfort and atmosphere, but insensitive to changes in room

size and fixtures (Min & Min, 1996). Three things are included in service standardization: (1)

service quality standardization, (2) service method standardization, and (3) service process

proceeding (Chen, 2008). In a development methodology there are four stages which include

requirements analysis, knowledge acquisition, system development, and system assessment.

When service quality is improved, then it will lead to customer satisfaction that will result in

good business results (Johnson & Gustafsson, 2001). There is a difference of culture among

countries that have different quality expectations. The higher the difference in culture is, the

higher the technical quality will be in performance than that of functional quality, while the

lower the difference in culture is, the higher the functional quality will be in performance than

that of technical quality (Lin, 2007). Research about service and quality shows that many

companies are to increase the impact of service quality on profits (Zeithaml, Berry &

Parasuraman 1996). The service company introduces a service concept and this concept contains

attractive added-value which is suitable to the customer's needs. Resources is needed for the

service process that must provided by the service system (Edvardsson, 1997). Hotels that

recognize high pressure in the competitive environment tend to adopt standardized management

systems more willingly than hotels that fail to extricate such pressure (Alonso-Almeida &

Rodríguez-Antón, 2011).

2.7 Customer Satisfaction and Loyalty

Customer satisfaction is one of the most popular phrases in business, with over 72 million

links on the Internet and also a very broad subject that is interpreted in many ways in business

practices and in academic literature. The word “satisfaction” seems to derive from Latin words

satis (enough) and facere (to do or make) (Oliver, 1997). Expectation is an important part of the

satisfaction process and is the “anticipation of future consequences based on prior experience,

current circumstances, or other sources of information.” Expectation can be many things varying

from wishes to hopes (Oliver, 1997; Bolton & Drew, 1991).

Katona (1975) notes that satisfaction “depends not only on the quality of the product, but

also what the person whose satisfaction is studied expects from the product.” Mihelis et al.

(2001) argue that customer satisfaction is a dynamic parameter of the business organization and

is affected by the changes in customer’s preferences and expectations. Similarly, Anderson and

Sullivan (1993) suggest that “customer satisfaction is the overall or global judgment regarding

the extent to which product or service performance matches expectations”. According to Oliver

(1997), “satisfaction is the consumer fulfillment response. It is a judgment that a product or

service feature, or product or service itself, provided (or is providing) a pleasurable level of

consumption related fulfillment, including levels of under- or over fulfillment.” Consumer

Satisfaction is also defined as a post-consumption evaluation that a chosen alternative at least

meets or exceeds the expectations. Dissatisfaction, on the other hand, is the outcome of

negatively confirmed expectations (Engel, Blackwell, & Miniard, 1990).

Giese and Cote (2000) identify three common elements in different consumer satisfaction

definitions: “(1) consumer satisfaction is a response (emotional or cognitive); (2) the response

pertains to a particular focus (expectations, product, consumption experience, etc.); and (3) the

response occurs at a particular time (after consumption, after choice, based on accumulated

experience, etc.).”

“Loyalty is another concept that is easy to discuss in everyday conversation, but becomes

more obtuse when it is analyzed for meaning” (Oliver, 1997). Oliver (1997) suggests that

“customer loyalty is a deeply held commitment to re-buy or re-patronize a preferred product or

service consistently in the future, despite situational influences and marketing efforts having the

potential to cause switching behavior.” Jones and Sassers (1995) argue that there are two types of

loyalty: “true long-term loyalty” and “false loyalty” in which customers seem to be loyal until

certain benefits are exhausted like using all frequent-flier miles.

According to Reichheld (2001) “loyalty is not bribery or hostage taking. It is about

earning people’s enthusiastic commitment to a relationship that will improve their lives over the

long term.” After all “loyalty is about the future, and not the past”. As widely agreed (e.g.,

Reichheld, 1993, 1996, 2001; Oliver, 1997; Heskett, Sasser, & Schlesinger, 1997) there are many

positive effects of customer loyalty such as revenue growth due to repurchases as well as

referrals, cost decline due to lower acquisition costs and serving experienced customers, and

increase in employee retention due to job satisfaction and pride.

2.8 Selected Elements in Customer Satisfaction

To determine the elements of customer satisfaction, among many others, the following

resources are used. These sources are actually a combination of different angles like services

marketing (Zeithaml & Bitner, 2003), emotion marketing (Robinette, Brand, & Lenz, 2001),

strategic marketing (Rust, Zeithaml, & Lemon, 2000), and (marketing) strategy (Treacy &

Wiersema, 1995).

Zeithaml and Bitner (2003) in Services Marketing identify three major dimensions of

customer satisfaction: Price, product quality, and service quality. Service quality has also three

sub dimensions: interaction quality, outcome quality, and physical environment quality. Also

these sub dimensions are analyzed by five other dimensions known as SERVQUAL:

Responsiveness, assurance, empathy, tangibles, and reliability (Parasuraman, Zeithaml, & Berry,

1988; Zeithaml & Bitner, 2003).

Table 2.1 Dimensions of SERVQUAL

Responsiveness Willingness to help customers and provide prompt service.

Assurance Employees’ knowledge and courtesy and their ability to inspire

trust and confidence.

Empathy Caring, individualized attention given to customers.

Tangibles Appearance of Physical facilities, equipment, personnel, and

written materials.

Reliability Ability to perform the promised service dependably and

accurately.

Robinette, Brand and Lenz (2001) in Emotion Marketing identify five customer

satisfaction and value dimensions. In their definitions the rational value dimensions are product

and money; and the emotional value dimensions are equity (trust), experience (relationship), and

energy (convenience). Rust, Zeithaml and Lemon (2000) in Driving Customer Equity define

customer equity in three areas. Firstly, value equity is the customers’ objective evaluation of the

firm’s offerings, and includes quality, price, and convenience. Secondly, brand equity is the

customer’s subjective view of the firm and its offerings, and includes awareness, attitudes, and

perceptions toward the brand. Finally, retention equity or relationship equity is the customer’s

view of the strength of the relationship between the customer and the firm, and it includes

loyalty, special recognition, affinity, community, and knowledge programs. The focus of the

firm, however, may vary among industries. For example in telephone service industry the value

equity may be the key driver, in consumer package goods the brand equity, and in banking the

retention equity.

Treacy and Wiersema (1995) in ‘The Discipline of Market Leaders’ set three value

disciplines: (1) Operational excellence (best total cost): providing customers with reliable

products or services at competitive prices, delivered with minimal difficulty or inconvenience;

examples: McDonalds, Wal-Mart. (2) Product leadership (best product): providing products that

continually redefine the state-of-the-art; examples: Starbucks, Intel. And (3) Customer intimacy

(best total solution): selling the customer a total solution, not just a product or service, by

building bonds with customers like those between good neighbors; examples: Ritz Carlton,

Airborne Express. Treacy and Wiersema (1995) designate the following dimensions that matter

for customers: Price, product quality, product features, service convenience, service reliability,

expert advice, and support services.

As the sources analyzed above use a different combination of satisfaction

elements/dimensions, the following six items are selected (judgmentally): Price, Product,

Convenience, Service Quality, Service Treatment, and Positive feelings towards the firm or

brand. These items are not only common denominators of the four main sources, but also

frequently used, albeit with different combinations, in many sources as well as being widely used

in common customer satisfaction questionnaires.

Price or money or cost item is used by all the sources analyzed above and by many others

(Oliver, 1997; Rust, Zeithaml, & Lemon, 2000; Treacy & Wiersema, 1995; Robinette, Brand, &

Lenz, 2001). Price also covers the attractiveness of interest rates in banking or fees paid for

services.

Product is another item that is used by all sources analyzed (Rust, Zeithaml, & Lemon,

2000; Treacy & Wiersema, 1995; Robinette, Brand, & Lenz, 2001). Product also covers the

features or conditions of service products.

Convenience (accessibility and ease of being customer) is used in Rust, Zeithaml and

Lemon (2000), Robinette, Brand and Lenz (2001), Treacy and Wiersema (1995), and in

Parasuraman, Zeithaml and Berry’s (1988) service quality.

Service Quality (reliable, accurate, and timely services) is one of the five dimensions

used in SERVQUAL (Parasuraman, Zeithaml & Berry, 1988) and is also regarded as an

important attribute of customer satisfaction (Oliver, 1997; Zeithaml & Bitner, 2003). Treacy and

Wiersema (1995) also use this item. According to Bitner, Booms and Mohr (1994) service

reliability is considered as the single most important dimension used by consumers to judge

service quality. Service Treatment (the way firm treats customers) is used as empathy and

responsiveness in SERVQUAL, as experience in Robinette, Brand and Lenz (2001), and as

customer intimacy in Treacy and Wiersema (1995). Also Pine and Gilmore (1999), Freemantle

(1998), Barlow and Maul (2000) describe similar concepts under the experience framework. As a

recent survey among 1021 banking customers in 6 European countries indicates “53% of the

respondents believe that the image and character of the bank primarily resides in its telephone

manner” (Efma, 2005). Similarly, a Belgian GSM network provider survey reveals that

“friendliness” is still the most important ‘customer satisfier.’

Positive Emotions towards the firm is analyzed as ‘brand attitudes’ by Rust, Zeithaml and

Lemon (2000), as ‘trust’ by Robinette, Brand and Lenz (2001), and as ‘customer intimacy’ in

Treacy and Wiersema (1995). Parasuraman, Zeithaml and Berry (1988) cover similar issues

under the ‘empathy’ dimension in SERVQUAL. Moreover, Oliver (1997) and Freemantle (1998)

also underline the importance of this dimension. Jones and Farquhar (2003) relate customer

attitudes towards a company with customer loyalty. Gobe (2001) argues that “the biggest

misconception in branding strategies is the belief that branding is about market share when it is

really always about mind and emotions share.”

2.9 Cognitive vs. Emotional Dimensions in Customer Satisfaction and Loyalty

Oliver (1997) suggests that “…the overly simplified question “Are you satisfied?” does

not tap into the complexity of the satisfaction response. Because satisfaction can mean a variety

of things, researchers are advised to determine the cognitive (processing states) and affective (the

emotions) substrata of the satisfaction response” (Allen & Wilburn, 2002). Wetzels (1999) also

distinguishes satisfaction in two similar dimensions: affective and calculative.

Cognitive satisfaction, to begin with, is how customers rationally calculate the product or

services they are receiving. This dimension has many similarities with the concept of (perceived)

value or utilitarian benefits, which are mostly related with the objective product attributes like

product quality and price. Customers, based on their experiences with the product or services,

evaluate constantly whether or not they receive a good value for what they gave up (or paid).

Emotional satisfaction, conversely, is the hedonic or experiential benefits that customers

cannot calculate rationally or objectively. It is about trust and relationship (Robinette et al.,

2001). It is the ambiance of a restaurant. It is the sense of belongingness to a firm, or happiness

of being a customer of the firm. It is the feeling that indicates whether the product or service

received is ‘a good choice’. It is, for instance, the way a firm treats its customers, or positive

customer emotions towards the firm. It is similar in definition to the “cult of the customer”, “you

will know it when you see it, and you will miss it when it’s gone” (Treacy & Wiersema, 1995).

Oliver (1997) suggests that satisfaction in consumer contexts responds to both cognitive

knowledge of the outcomes of purchasing, and the emotions that accompany these outcomes and

related events. When both are present and similarly valenced, synergy occurs such as in the form

of customer loyalty. Numerous studies confirming this suggest that a strong customer loyalty is

only possible if customers are cognitively and emotionally satisfied (e.g., Wetzels, 1999; Oliver,

1997; Mano & Oliver, 1993; Jones & Sassers, 1995; Robinette, Brand, & Lenz, 2001). Mano and

Oliver (1993) argue that, “both conceptually and empirically, product satisfaction is naturally

tied to cognitive judgments [thinking] and to affective [feeling] reactions elicited in

consumption.”

Emotions and cognition is interrelated, although there are debates on which one comes

first or which one is more important. Wetzels (1999) study indicates that calculative commitment

is somewhat weaker than affective commitment. In other words, functional satisfaction such as

good pricing or convenient location supplier emerges. On the other hand, a balanced and honest

[even emotional] relationship with the customers will create affective commitment and this

would create more satisfied customers which in turn create a long-lasting profitable relationship

for both parties.

As affective (emotional) and cognitive factors are widely accepted in the customer

satisfaction and loyalty process, it would also be valuable to analyze them in customer contact

settings. Therefore, the following questions should be considered:

(1) What are the elements of emotional and cognitive satisfaction?

(2) What is the role of emotional and cognitive satisfaction in:

(2a) Customer contacts (transactional satisfaction)?

(2b) General satisfaction?

(2c) Customer loyalty (intentions)?

2.10 Transactional vs. General Dimensions in Customer Satisfaction and Loyalty

When the time horizon is taken into account, there are two different conceptualizations of

customer satisfaction: transaction specific satisfaction and general (cumulative) satisfaction (e.g.,

Oliver, 1997; Sharma et al., 1999; Rust, Zahorik, & Keiningham, 1995; Anderson, Fornell, &

Lehman, 1994; Parasuraman, Zeithaml, & Berry, 1994). The former is event specific and can be

defined as the post consumption evaluative judgment of a particular transaction. The latter form

of satisfaction is about all previous transaction experiences over time. General satisfaction is thus

the outcome of a learning experience over time.

Anderson, Fornell and Lehman (1994) argue that ‘cumulative satisfaction’, rather than

‘transaction-specific satisfaction’, is a more fundamental indicator of the firm’s past, current, and

future performance. Rust, Zahorik and Keiningham (1995) suggest that “there are good reasons

to select either option” and argue that ‘cumulative focus’ better correlates with retention, but

‘transactional focus’ better reflects quality improvements and provides a more accurate picture of

the current performance of the company. According to Parasuraman, Zeithaml and Berry (1994),

components of transaction-specific evaluations that lead to ‘transaction satisfaction’ are the

evaluations of ‘service quality’, product quality’ and ‘price’. Components of global evaluations

are the aggregation of transaction experiences.

Transactional satisfaction refers to the customer satisfaction with regard to the last

transaction with firms’ contact centers (i.e., satisfaction with the last contact). Froehle and Roth

(2004) use a similar construct in their new measurement scales for evaluating perceptions of the

technology-mediated customer service experience: “Attitude towards contact episode… [which]

reflects the customer’s overall attitude towards the entire contact”. ‘General satisfaction’ on the

other hand, refers to the ‘overall satisfaction’ of customers with all satisfaction elements and

dimensions (i.e., satisfaction with being a customer of the firm).

The term ‘cumulative satisfaction’ is reserved for a future longitudinal research which

will analyze the aggregation effect of ‘transactional satisfactions’ on the ‘general satisfaction’

and ‘loyalty intentions.’ As transactional and general factors are widely accepted in the customer

satisfaction and loyalty process, it would also be valuable to analyze them in customer contact

settings. Therefore, the following questions should be considered:

(3) What is the role of transactional and general satisfaction in customer loyalty

(intentions)?

(4) What is the role of transactional satisfaction:

(4a) in general satisfaction?

(4b) in customer loyalty (intentions)?

(5) What is the role of time in evaluating transactional satisfaction?

2.11 Emotions and Customer Satisfaction

Emotion is a fairly new topic in consumer behavior and the role of emotion has gained a

major role in understanding the consumption experience in the last decade (Oliver, 1997).

Emotion is also linked to consumer’s satisfaction response and indirectly to repurchase intent

(Edwardson, 1998) argues that “customer satisfaction measurement and research, as commonly

applied, needs to now move to the next stage and consider the specific and unique consumer

emotions and emotional knowledge structures that comprise the variety and richness of the

consumer experience.”

Liljander and Bergenwall (1999) identify three main research streams dealing with

emotions and satisfaction: “(1) satisfaction is in itself seen as an emotional response to a

product… (2) emotions are treated as a mediator between cognitive evaluations… and (3)

emotions are modelled as an independent factor contributing to the level of perceived

satisfaction.” As their research indicates, emotions that consumers associate with the service play

an important role in forming satisfaction, and positive emotions enhance satisfaction.

Zeithaml and Bitner (2003) analyze emotion and mood as part of the service purchase

and consumption stage and note that: (1) Customers with positive moods are more willing to

participate in behaviors that help service encounters succeed. (2) Moods and emotions enhance

and amplify experiences making them either more positive or negative. (3) Moods and emotions

affect the way the service is consumed and how it will be remembered. Van Dolen and

colleagues’ (2001) research similarly indicates that “positive emotions contribute positively,

while negative emotions contribute negatively to satisfaction.”

Oliver investigated (1997) the emotions that would likely be associated with an

expectancy disconfirmation framework. In this framework, higher expectations require higher

performances for creating positive effects and emotions. Expectations thus play an important role

in forming the satisfaction (e.g., Anderson & Sullivan, 1993; Oliver, Rust & Varki, 1997;

Anderson, Fornell, & Lehman, 1994) as well as in forming the associated emotions. In Oliver’s

words, “positive encounters will create positive expectations which, in turn, will enhance the

likelihood of interpreting the next encounter as positive” (Oliver, 1997).

Oliver’s research (1997) concludes, however, that the questions of “whether satisfaction

is an emotion” and “the emotional role of satisfaction in consumption” have not been answered

due to the contradictory findings in the literature. As he suggests “…the overly simplified

question “Are you satisfied?” does not tap into the complexity of the satisfaction response”.

2.12 Emotions and Customer Contacts

Chase and Dasu (2001) suggest that practitioners have not carefully considered the

underlying psychology of service encounters -- the feelings that customers experience during

these encounters, feelings so subtle they probably could not be put into words. As Edwardson

(1998) similarly asks, “has anyone bothered to ask customers how they actually feel?” Anderson

and Sullivan (1993) propose that “quality which falls short of expectations has a greater impact

on satisfaction and repurchase intentions than quality which exceeds expectations.” They further

argue that “an important component of managing satisfaction is the ability to control the impact

of negative disconfirmation through complaint handling and effective customer service.”

A recent study (Beaujean, Davidson, & Madge, 2006) shows that “a big prize awaits

companies that can develop deeper and more lasting relationships with their customers. Yet

many businesses rely too much on IT and perform poorly on the front line. The key to correcting

frontline performance is the consistent handling of moments of truth -- those few interactions

(for instance, a lost credit card, a cancelled flight, a damaged piece of clothing, or investment

advice) where customers have an unusual amount of emotional energy invested in the outcome.”

Chase and Dasu (2001) note that behavioral science, applied with equal doses of empathy

and imagination, can improve service delivery. More importantly, it can change the impressions

that customers remember, refer back to, and pass on to future customers. Barlow and Maul

(2000) propose that there is a chance of creating positive emotional value when frontline staff is

aware of customer’s emotional state. Van Dolen and colleagues (2001) suggest that training,

motivating, and rewarding CSRs to evoke positive emotions in customers has the potential for

raising overall customer satisfaction and profits. Freemantle (1999) argues that if customers like

a company and its people, there is a higher probability that they will buy from that company.

Therefore, “the degree to which customers like your company (and its people) is a function of

the emotional value you add to the relationship”. For example, an insurance company tripled the

success of referral requests by creating emotional relationship with its customers. After a positive

contact CSR were just sending a postcard, saying “good clients are appreciated,” with a reply

card asking if the client has a friend or relative to refer (Robinette, 2001). It appears thus that

emotions play an important role in creating stronger relationships with customers, and that it is

desirable to evoke positive emotions when customers are dealing with firms frontlines such as

contact centers.