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CHAPTER 4

LITERATURE REVIEW

4.1 Introduction

This chapter discusses the literature on service quality, service quality

dimensions in retail environment, assessing the relationship between service

quality and customer loyalty, the impact of service quality on customer

satisfaction, service quality and competitive advantage.

4.2 Service Quality

Lehtinen and Lehtinen (1982) defined service quality in terms of physical

quality, interactive quality and corporate (image) quality. They also suggested

that when compared with the other two quality dimensions, corporate quality

tended to be more stable over time.

Thereafter, in 1983 Gronroos elaborated service quality as both technical and

functional, the first signifies what the customer gets and the latter how the

customer receives the service. When a customer assessed service quality, the

company’s profile or image acts a “filter”. If a company had a positive image,

it is easier to overlook smaller mistakes in its service delivery; to regard them

as temporary disturbances.

Lehtinen (1983) explained service quality in terms of “process quality” and

“output quality”. Process quality is judged by a customer during a service,

whereas output quality is judged by a customer after a service has been

performed.

In today’s business environment, Service quality is considered as the top

priority for organization. It not only provides the competitive advantage, but it

is also a very important factor to sustain growth (Ladhari, 2009). Today

consumer expect qualitative service which creates pressure on business to have

a better understanding and evaluation of service quality (Wisniewski &

Wisniewski, 2005). In the past 30 years there has been considerable interest

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and debate among academics and professionals in the literature for defining

and measuring service quality (Martinez & Martinez, 2010). Researchers,

academicians and marketers are interested in the area of service quality because

it is a very important factor related to costs, customer satisfaction (Howat et al.

2008, Chen, 2008), customer loyalty and retention (Prayag, 2007, Wong &

Sohal 2003, Bontis & Booker, 2007, Sureshchandra et al. 2002). Different

researches show that service quality has an impact on company performance,

which attracts new customers (Seth et al. 2005) and help organisation to earn

higher profits. There is a clear connection between improving service quality

and higher profit (Johnson et al. 2008). Service quality in retailing is different

from any other product or service environment (Mehta et al., 2000; Vazquez et

al., 2001; Finn et al., 2004; Gagliano and Hathcote, 1994). Research show that

one of the most important factors that affect the consumer’s choice of store for

purchasing grocery, is service quality (Swoboda et al., 2007).

Several authors have discussed the unique importance of Service quality to

service firms (Normann, 1984, shaw 1978) and demonstrated its positive

relationship with profits, increased market share, return on investment,

customer satisfaction and future purchase intensions (Anderson, Fornell and

Lehmen 1994, Boulding et.al, 1993, Buzzell and Gale 1987, Rust and Oliver,

1994). One obvious conclusion is that firms with superior quality services

outperform those marketing inferior quality services.

According to H, De Vries, J. (2001), quality of services can be judged from its

various dimensions (e.g. reliability, availability, performance, service ability,

reputation, security, competent staff, responsiveness and courtesy, technical

facilities, operational facilities, technical procedure and communication).

Universal dimensions determining the quality of services as received by

customers is- tangibility, reliability, responsiveness, assurance and empathy

(Zeithml & Berry, 1985, Cronin and Taylor, 1992). The fundamental aspects of

service quality are reliability, responsiveness, competitiveness, access,

courteous, communication, security, understanding and Tangibles (Oberoi and

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Hals, 1990). A study by Baker, Grewal and Voss (2002) confirmed that service

quality was a key determinant of store image.

Gani and Bhatt (2003) in a comparative study of service quality in commercial

banks concluded that service quality of foreign banks was much better than of

Indian bank and suggested heavy investment by Indian banks in tangibility

dimension to improve the quality of service.

Shashank Mehra (2006) in his study of Grocery store (Reliance Fresh and Big

Bazaar) suggested that Reliance fresh has a chance to improve on its parking

facility and Big Bazaar has to improve their overall service quality.

Chowdhary and Prakash (2007) suggested that generalization of quality

dimension was not possible among all type of service taken together.

Professor Wang Chunxiao (1999) proposed that the services quality is

composed of environmental quality, technical quality, emotional quality,

relationship quality and communication quality through empirical study on the

hospitals. Professor Fan Xiucheng(1999) found that service quality is embodied

by technical quality and interactive quality. In addition, many scholars carried

out exploratory studies on hotels industry (Zhu Hang, et al, 1999; Wang

Chunxiao, 1999; Zhang Lili, 1995; Dang Zhongcheng, etc., 2002). As the

service industries themselves are different, their findings can not be applied to

the retail industry. Su Qin,et al (2007) in his paper “an empirical study on

customer service quality and relationship quality based on the interactive

model”, clearly discussed the relation and influence between the interaction

quality and customer service quality.

4.3 Service Quality Dimensions and effect on Consumer’s

Perception

Service quality is a critical component of customer perceptions about the

service. Customers perceive services in terms of its quality and how satisfied

they are overall with their experiences (Zeithaml, 2000). As thus, service

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quality is defined as customers’ perception of how well a service meets or

exceeds their expectations (Czepiel, 1990). In the retail context, perceptions of

service encounters accumulate over time and a customer’s relationship with an

organization are a continuation of exchanges or interactions both past and

present (Czepiel, 1990). When customers evaluate retail service, they compare

their perceptions of the service they receive with their expectations. Customers

are satisfied when the perceived service meets or exceeds their expectations.

They are dissatisfied when they feel the service falls below their expectations

(Levy and Weitz, 2005).

Customer perception has been defined as a customer’s overall impression of

the relative inferiority/superiority of an organization and its services (Bitner &

Hubbert, 1994). This perception is influenced by many factors such as

employees performance, facilities, price of products and quality of service

offered among other factors (Gagliano & Hathcote, 1994; Naylor & Frank,

2000; Sheinin & Wagner, 2003;Shaw & Haynes, 2004). Further, due to

technological developments, affluence and rise in levels of education,

customers perceptions are greatly changing calling for organizations to have

concerted effort to understand these perceptions. Retail image on the other

hand refers to how a retailer is perceived by customers and other parties.

Numerous factors contribute to a retail image.

A review of the literature on store image research revealed that it is quite

extensive (Doyle& Fenwick 1974; Jain & Etgar 1976: King & Ring 1980;

Chowdhury et al 1998), with some research efforts having attempted to explore

the evolution of store image information (Mazursky and Jacoby 1986); and

others seeking to conduct a meta-analysis of retail patronage studies (Pan &

Zinkhan 2006). Consumers perception of store image is based, in part, on

functional qualities that the store may possess, and by other, less tangible or

psychological attributes (Lindquist 1974). Lindquist analyzed over 20 studies

dealing with store image formation and identified 35 different aspects that in

reveal any prior studies where clustering techniques had been used to study

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consumers perceptions of stofluence store image formation. These were

grouped into nine broad categories, including: merchandise, service, clientele,

physical facilities, convenience, promotion, store atmosphere, institutional

attributes, and post-transaction satisfaction. Mazursky and Jacoby (1986)

conducted a similar analysis and verified that “merchandise related aspects”

(such as quality, pricing and assortment), and “service related aspects” (such as

quality in general and salesperson’s service) are among the most important

components of store image.

Rushchano (1997) investigated the relationship between US and THAI

corporate consumers’ perceptions of telephone service quality and satisfaction

with telephone service. Results of the study indicated that perceived telephone

service quality in terms of reliability of service, responsiveness of service

provider, competence of service provider, accessibility of service provider,

courtesy of service employee and technological aspects were differently related

to US and THAI corporate consumers satisfaction in terms of availability of

service, punctuality of service installation, problem elimination, punctuality of

repair service, accessibility of public telephone and price and value.

Rhoades et al. (1998) examined the service quality of 26 US airlines for the

period 1987-1996 using data from lts indicated that there had been

improvement in the service quality of tthe Department of Transportation’s Air

Travel Consumer Report. The resuhe industry overall. Further, there were

significant differences between the service quality of major and regional

airlines. Regional airlines performed much worse on all measures of service

quality.

Kincade, Woodard, Ginger and Haseun (2002) studied buyer- seller

relationships for promotional support in the apparel sector which was critical

for success. The purpose of the study was to describe the promotional activities

offered to apparel retailers by manufacturers. The study found out that the

retailers perceptions of the offering frequency and importance of the

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promotional support and investigated the relationship between offering

frequency and perceptions of importance. It was found that monetary support

was regarded as the most important promotional support.

Spanish consumers perceptions of US apparel specialty retailers products and

services was studied by Hyllegard, Eckman, Descals, and Borja (2005). The

study focused that specialty retailers success in international markets is

contingent upon their knowledge of culturally- defined values, norms and

behaviour that influence consumer decision making and impact acceptance of

products and services. It was found that customers perception differed

regarding product quality, products assortment, quality of customer service etc.

The role of store attributes in understanding the consumer patronage behaviour

is widely explored across the world. Martineau (1958) categorized store

attributes into two main categories: functional and psychological. The

functional category included attributes viz., location, assortment of products

and store layout. The psychological category represented the feelings generated

by the functional elements of the store. The study highlighted that functional

category gains more attention in the store choice than the psychological

category. Fisk (1961) identified attributes such as location accessibility,

merchandise suitability, value for price, sales efforts and store service. In a

subsequent study, Berry (1969) identified three general factors that

predominantly influenced consumer's store choice regardless of store type viz.,

quality and variety of merchandise, sales staff, and store atmosphere. A

prominent and widely-cited work on the topic of store image was Lindquist

(1974). Based on a review of 19 research articles, he synthesized the

framework of these studies into a set of nine groups: merchandise, service,

clientele, physical facilities, promotion, accessibility, store atmosphere,

institutional and post-transaction satisfaction. Doyle & Fenwick (1975), pro-

posed that price, product variety, one-stop shopping, quality, location of the

store, advertisement, general appearance of the store and convenience are some

of major attributes looked upon by the customers while evaluating a grocery

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store. Bearden (1977) distinguished seven attributes as potentially significant

for store patronage viz. price, quality of merchandise, assortment, atmosphere,

location, parking facilities and friendliness of staff. Arnold et al. (1983)

extended the accessibility attribute to the ease of mobility through the store and

fast checkout. Baker et al (1992) extended the literature on retail store

atmospherics for providing an experimental method that can be utilized by

retailers to examine the various aspects of store environment and its impact on

store patronage. They proposed that the affective states of pleasure and arousal

have a positive relationship with customer’s willingness to buy at a store.

Survey of customer analysis and market strategy on supermarkets and

convenience stores by Ed Watkins (1976) found that the factors that

determined selection of a supermarket by customers were prices; cleanliness;

food quality; variety; store location; employee attitude; meat quality

(freshness); produce quality (freshness) and store atmosphere. Watkins

however notes that the relative importance of all store factors identified by

supermarket customers shifted over time and between trading areas due to

economic competitive changes and shifts in customer’s priorities. The factors

of less importance in the customers choice of a supermarket arranged in a

descending order were store layout, services, checkout, specials offers,

displays, well stocked, brands available, parking, advertising, product

availability and hour open. Other factors identified as important in choice of

supermarkets in Singapore by Tan and Mehta (1994) were physical

environment which related to variables such as store decor, lighting, ambience

and layout, air conditioning, attractiveness of displays and advertising

effectiveness; and merchandise and operations consisting mainly of variables

relating to the tangible offerings of the supermarkets such as variety and quality

of merchandise, availability of desired product lines and desired package sizes.

Other variables included in this factor were operational issues such as fast

check-out service, ease of return of merchandise and low prices compared with

other stores. The third factor was staff which included variables relating to the

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helpfulness, friendliness, courtesy and training of staff and personalized

relations with staff. The fourth factor was issues related to price promotions

and included variables related to ‘sale’ items such as selection/choice,

discounts, and availability. The fifth factor related to availability of the

supermarket to include variables such as store hours and convenience. The

sixth factor related to shopping ease to include ease of movement in the store

and ease of finding items; while the seventh factor was the image relating to

reliability and reputation of the store.

Hasty and Reardon (1997) classified store attributes into three general

categories viz., accessibility (e.g., location, layout, appearance, and

knowledgeable staff), facilitation of sales (e.g., lowpriced specials, promotional

offers and accepted methods of payments) and auxiliary attributes (e.g., play

areas for children and food court). Bawa and Ghosh (1999) proposed a model

to understand the factors that account for variations in shopping behaviour

across households. The results showed that the relationship between household

characteristics and shopping behaviour is complex. Shopping may have a

recreational aspect for some households. However, for others it competes

directly with wage earning activity. Solgaard and Hansen (2003) identified

several store attributes that were considered important for the consumer's

evaluation of stores. These attributes include merchandise, assortment,

merchandise quality, personnel, store layout, accessibility, cleanliness and

atmosphere. Sinha and Banerjee (2004) attempted to correlate the distinct store

features as perceived by respondents with the true motivations of various

customers in patronising various stores. Sinha (2003) attempted to understand

shoppers from their disposition towards shopping. The study found that there

are differences in orientation of Indian shoppers from shoppers of developed

countries in the way that they value entertainment more than the functional

value. Carpenter and Moore (2006) studied the grocery shoppers’ retail format

choice in the context of US. The study identified the demographic groups who

frequent specific formats and examined the store attributes as drivers of format

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choice. Sinha and Uniyal, (2005) proposed a methodology for segmenting the

shoppers. The study found that the segments were differentiated largely on the

basis of the type of products the stores sold and the format of the stores. The

study pointed out that in an envolving retail market a store could add value

through store format design to create differentiation in the market place.

Soyoung kim and Byoungho Jin (2001) found that the U.S. respondents

perceived service quality in discount stores more favourably than did the

Korean respondents. They also expressed more favourable behavioural

intensions towards discount stores and greater satisfaction than their

counterparts. These results probably suggest that Korean consumers have not

yet established their trust and patronage toward discount stores. They also

observed that, overall, the Korean respondents tend to shop at a discount stores

less often than the U.S. respondents. It was found that Korean consumers tend

to go to large discount stores less often than the two major traditional

distribution channels in Korea super markets and small neighbourhood stores;

however, on average, consumer spend the same amount of money at large

discounts as at the other two distribution channels.

Bhatt (2005) made a comparative study in service quality perception in respect

of banks. This study was conducted in some states of northern India i.e. Jammu

and Kashmir state, Punjab state, Haryana, and Delhi. The study was limited to

five banks in north India, namely SBI, PNB, JKB, City Bank and Standard

Chartered Grind Lays Bank. Data was collected using the ‘personal contact

approach’. He concluded that Indian banks, under reference, fall much below

the perception of their customers on all dimensions of service quality.

According to Berman and Evans (2005) overall retail image is influenced by

store location, merchandise attributes, pricing, firm’s positioning, customer

service, target market, attributes of physical facilities, shopping experience,

promotion tools (such as advertising, public relations, personal selling, sales

promotion) and community service. Further, Berman and Evans (2005) note

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that a retailers image depends heavily on its ‘atmosphere’ or the psycho-logical

feeling a customer gets in that retail outlet.

C.N. Krishna Naik (2006) concluded that customers have highest expectations

on the promptness of service, accuracy of transactions, security issues and

concerns; the customer’s lowest expectations are cleanliness, ambience, etc.

Zeitham, Bitner and Glemler (2009) argue that perceptions of service quality

are the results of consumer’s comparisons of expected service with perceived

service. They contend that the gaps between expected and actual/delivered

service creates dissatisfaction. Thus, the retailers challenge is to minimize the

gaps between expected and actual by first understanding customers’

expectation and then delivering those expectations.

Huam Hon Tat (2011) found that empathy dimension contributed the highest

perception level in service quality of a fast food restaurant. It is apparent that it

is important for a restaurant to provide caring and personalized service to

customers.

Barani G (2012) experiential study examines the dimensions and their levels of

service quality that have significant effect on customer perception in organized

retailing. The results illustrated that the dimensions of service quality such as

tangible, competence, credibility, accessibility, reliability, responsiveness, and

customer knowledge were positively related to customer perception in

organized retailing. However, by using Statistic software only four factors,

namely, customer knowledge, credibility, reliability, and tangible have

significant effect on customer perception. Johan Anselmsson (2007) suggested

that Service has conventionally been a powerful competitive tool in grocery

retailing. Parasuraman described it as: the ability of the organization to meet or

exceed customer expectations. Customer expectations may be defined as the

“desires and wants of consumers” i.e. what they feel a service provider should

offer rather than would offer.

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4.4 Service Quality and Customer Loyalty

Jacoby and Kyner (1973) defined customer loyalty as a biased (i.e. non-

random), behavioural response (i.e. purchase), expressed over time, by some

decision making unit, with respect to one or more alternative brands out of a set

of such brands, and was a function of psychological processes.

Nordstrom and Swan (1976) discovered that the change in ownership resulted

in altered patterns of customer loyalty. Alteration of any market variable is

likely to upset the probability of continued loyalty. Dealer ownership was

shown to be a significant influence on customer loyalty. In particular, a change

in ownership had an impact on brand and source selections. A change in the

marketing structure variable, ownership had a significant effect on behavioural

patterns of customers. This effect was reflected in a shifting of loyalty patterns

among members of the experimental group.

Mason et al (1994) proposed that reasonable prices in a retail store induce

customer satisfaction as well as build customer loyalty. The study found that in

the retailing sector, the store having reasonable prices will often capture a large

market share.

Dick and Basu (1994) discovered that loyal customers were less motivated to

search for alternatives, were more resistant to counter-persuasion from other

brands, and were more likely to pass along positive word-of-mouth

communication about the service to other consumers. Further, they

demonstrated that loyalty was more prevalent among service customers than

among customers of tangible products. In the services context, intangible

attributes such as reliability and confidence played a major role in building or

maintaining loyalty.

Sasser and colleagues (1995) reported a strong relationship between the level

of quality offered by a supplier and the resulting loyalty displayed by

customers. Leading service organisations strived to maintain a superior quality

of service in an effort to gain customer loyalty (Zeithaml et al., 1996) therefore,

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a service organisation’s long-term survival in a market was essentially

determined by its ability to expound and retain a large and loyal customer base.

Reichheld (1996) opined that some customers were inherently more loyal than

others. He introduced a loyalty coefficient which helps in understanding

customers’ predispositions to being loyal. He also revealed that one of the

salient benefits of customer loyalty, especially for service organizations, is

word of mouth (WOM) communication. Loyal customers often generate new

business via WOM recommendations to prospective and other existing

customers of the firm.

Andreassen and Lindestad (1998) revealed that in the package tour industry

which is a complex service industry, corporate image rather than customer

satisfaction was the main predictor of customer loyalty.

Soderlund (1998) supported a positive association between customer

satisfaction and customer loyalty, but he also noted that increasing satisfaction

does not produce an equal increase in loyalty for all customers.

Andreassen (1999) proposed and tested a theoretical model focusing negative

effect, satisfaction with complaint resolution, and corporate image as

antecedents to customer loyalty. He found that satisfaction with complaint

resolution had a positive impact on customer loyalty. Complaint resolution is

thus an important element of the company’s customer retention strategy.

Second, negative affect caused by the initial service failure had a negative

impact on satisfaction with complaint resolution and customer loyalty. Finally,

corporate image had a positive impact on customer loyalty.

Stevens (2000) found that the relationship between competition and customer

loyalty becomes more intense as the level of competition rises, especially in the

services sector where there is a wide range of choices and rapidly emerging

innovative products and services.

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Kandampully and Suhartanto (2003) revealed that the quality of service was

more significant than price in segregating a service firm from its competitors

and in fostering customer loyalty.

Knox and Walker (2003) found the existence of weak but significant

relationship between the involvement and brand loyalty in grocery markets.

Another study done by Moschis, Curasi and Bellenger (2004) was that older

consumers were price - conscious, (with an often exacting memory for the

prices of frequently purchased items necessitating food stores to use frequent

price- reduction promotions), and enjoy interactions and prefered to shop in a

store where they can receive special- assistance services (such as valet parking,

delivery assistance carry- out assistance, liberal product return and refund

policies).

Lei and Mac (2005) investigated the relationship between service quality and

customer loyalty in the context of Macau, a small city in South China. Based

on an empirical study of 387 valid responses, they concluded that tangibles,

assurance, empathy and responsiveness were important determinants of

customer loyalty in the transport service sector.

Shoppers intention to remain loyal to their “primary store” was in fact

influenced by several other reasons such as frequent buyer- reward schemes,

travel distance, preference for an in- store delicatessen, size of the average

grocery bill, store signage and the level of sale assistance (Miranda, Konya,

and Havrila, 2005).

According to Akbaba (2006) service quality was an antecedent of customer

loyalty which leads to new customers, increases the company’s performance

which reduces costs and raises the organisation’s positive image.

Goswami and Mishra (2007) found that customer loyalty in grocery stores was

found to be positively related to location, cleanliness, offers, quality, helpful,

trustworthy sales people, home shopping, and negatively related to travel

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convenience. Kiranas do well on location, but poorly on cleanliness, offers,

quality and helpful and trustworthy people. Converse is true for organized

retailers.

Lenka et al. (2009) examined whether service quality of Indian commercial

banks increases customer satisfaction that fosters customer loyalty. Analysis

showed that better human, technical and tangible aspects of service quality of

the bank branches increase customer satisfaction. Human aspects of service

quality were found to influence customer satisfaction more than the technical

and tangible aspects. Increase in service quality of the banks can satisfy and

retain customers. In the Indian banking sector, human aspects were more

important than technical and tangible aspects of service quality that influences

customer satisfaction and enhances customer loyalty.

Bilal (2010) attempted to find the factors of customer loyalty and their

relationships in banking industry of Pakistan. He reported that perceived

quality, satisfaction, trust, switching cost and commitment were the factors

influencing the loyalty of the customers and also, these factors influence each

other.

Bernardo Balboni (2011) in their article demonstrates the crucial role of retail

service quality as a key activator in the formation of customer loyalty to the

store. The results prove that customers consider retail service quality as a

second-order dimension and recognize the main contribution of physical aspects

and reliability first-order dimensions.

4.5 Service Quality and Customer Satisfaction

Customer satisfaction has become the key operational goal for many

organizations. They have invested heavily improving performance in areas that

make a strong contribution to customer satisfaction. Definition of customer

satisfaction is not a static one and has envolved over time. Early endeavors to

understand customer’s post-purchase responses were directed on the

conception of cognitive dissonance (Festinger, 1957). The literature of

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satisfaction propounds satisfaction as an outcome as well as process (Yi, 1990;

and Parker and Mathews, 2001). Howard and Sheth (1969) have defined

customer satisfaction as an outcome: “the buyer’s cognitive state of being

adequately or inadequately rewarded for the sacrifices he has undergone”.

Many recent studies have linked service quality with satisfaction (Curry &

Sinclair, 2002; Van der Wal, Pampallis & Bond, 2002; Nadiri & Hussain,

2005); if services rendered meets the customer’s expectations, then this leads to

satisfaction and opposite leads to customer dissatisfaction (Curry & Sinclair,

2002).

Studies of customer satisfaction with retailers have also been prosperous with

the development of customer satisfaction measurement models, such as

customer satisfaction measurement based on the theory of service quality

(Parsuraman et al., 1985; 1988; 1991) and customer satisfaction measurement

of retailing companies from macro perspectives (Johnson and Fornell, 1991;

Fornell, 1992; Fornell, Johnson, Anderson, Cha and Bryant, 1996). Customer

satisfaction has become a primary point of differentiation in a market where

consumers typically make a weekly trip to their preferred supermarket and

spend more on this trip than at other times (Kahn and McAlister, 1997).

Satisfaction is an antecedent of service quality (Bitner, 1990; Bolton and Drew,

1991). The result of this study has support that the perceived service quality in

fact has lead to customer satisfaction. SERVQUAL has five dimensions and

each dimension is important factor in the people-based industries. The results

suggest that people-based service company must focus on all the dimensions in

SERVQUAL to improve customer’s perceptions on service quality.

Customer satisfaction has an effect on the profitability of nearly every business.

For example, when customers perceive good service, each will typically tell

nine to ten people. It is estimated that nearly one half of American business is

built upon this informal, “word-of-mouth” communication (Gitomer, 1998).

Improvement in customer retention by even a few percentage points can

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increase profits by 25 percent or more (Griffin, 1995). According to Nadiri &

Hussain (2005) Customer satisfaction increases profitability share and return

on investment. According to Levy & Weitz (2009) satisfaction is a process of

evaluating a product or service after consumption to discover whether

customer’s expectations have been met or even exceeded. When the customer’s

expectations are exceeded, the customer is highly satisfied, however, if the

customer’s expectations are not met, then the customer will feel dissatisfied

with the service (Kotler & Armstrong, 2010). Satisfation is an emotional state

of mind that reflects the benefits. Satisfied customers improve business and

dissatisfied customers impair business (Anderson & Zemke, 1998; Leland &

Bailey, 1995). Customer satisfaction is an asset that should be monitored and

managed just like any physical asset. Therefore, businesses that hope to prosper

will realize the importance of this concept, putting together a functional and

appropriate operational definition (McColl-Kennedy & Schneider, 2000). This

is true for both service-oriented and product-oriented organizations

(Sureshchander, Rajendran, & Kamalanabhan, 2001).

The University of Michigan found that for every percentage increase in

customer satisfaction, there is an average increase of 2.37% of return on

investment (Keiningham & Vavra, 2001). Most people prize the businesses that

treat them the way they like to be treated; they will even pay more for this

service. However, a lack of customer satisfaction has an even larger effect on

the bottom line. Customers who receive poor service will typically relate their

dissatisfaction to others. The average American company typically loses

between 15 and 20 percent of its customers each year (Griffin, 1995). The cost

of gaining a new customer is ten times greater than the cost of keeping a

satisfied customer (Gitomer, 1998). In addition, if the service is particularly

poor, 91% of retail customers will not return to the store (Gitomer, 1998). In

fact, if the service incident is negative, the negative effects can last years

through repeated recollection and recounting of the negative experience

(Gitomer, 1998; Reck, 1991).

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Giblon (1994) examined the relationship between service quality and supplier

market place performance and between a market orientation and supplier

market place performance. Results showed that improving customer

satisfaction improves supplier market place performance. Increasing customer

satisfaction increases customer commitment to the supplier. There was a

positive relationship between supplier quality and customer satisfaction with

the supplier: raising supplier quality raises customer satisfaction with the

supplier.

Spreng, Harrell, and MacKoy (1995) pointed out that there was a significant

relationship between satisfaction and repurchase intentions; therefore an

important consequence of customer satisfaction was increased repurchase

intentions. For example, Liu and Jang (2008) stated, “friendly and helpful

employees can also please customers and enhance their satisfaction level.

Therefore, it is reasonable to state that in order to better capture and maintain

new or current customers; restaurant’s top management must continuously

maintain their customer’s satisfaction at a favourable level. Apart from

enhancing customer satisfaction, Fast Food Restaurants (FFR) should also

guarantee quality assurance with the hope to attract more buyers through the

creation of consumer confidence, a reputation as a preferred restaurant, or a

marketing edge with a registered restaurant status. (Hooker & Casewell, 1999).

In addition, service quality and satisfaction could affect consumer’s likelihood

to recommend the store to others. This is known as word of mouth advertising.

The store can benefit from the word of mouth in terms of repurchase intensions

from customers. Thus managers should design programs that increase

consumer likelihood of recommending the restaurant to others. Incentive

programs (free coupons or special discounts) or advertising that encourage

consumers to recommend the restaurant to their friends is essential (Eugene

Jamie, 2000). Managing customer satisfaction levels is a critical strategy for

FFRs to retain their current customers and also enable them to attract more

potential customers via word of mouth (Qin & Prybutok, 2008).

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Choi (2001) investigated the influence of overall service quality on customer

satisfaction and member’s repurchase intentions at fitness clubs in Seoul, South

Korea. He also examined the influence of customer satisfaction on the level of

their repurchase intentions. The questionnaire consisted of four sections:

service quality scale, customer satisfaction scale, customer repurchase

intentions scale and demographic information. He found that the perceived

service quality factor was the most influential predictor of Customer

Satisfaction and their repurchase intention.

Customer satisfaction is a key factor in formation of customer’s desires for

future purchase. Furthermore, the satisfied customers will probably talk to

others about their good experiences. This fact, especially in the Middle Eastern

cultures are more important where the social life has been shaped in a way that

social communication with other people enhances the society (Jamal & Naser,

2002).

According to Kent and Omar (2003) satisfying the customer is important

because retail sales derive from both repeat customers and new customers.

Satisfied customers stay loyal to retailers for a longer period of time and they

tend to purchase more.

Hoyle (2007) pointed out that customers will be satisfied with a product or

service if their needs, requirements and expectations are fulfilled. Firstly, the

need for a service or product includes fulfilling the reason of the product or

service were bought or obtained. Secondly, requirements might include needs

but come after the service has been received or the product has been purchased.

Finally, expectations include needs and requirements but also include things

that have not been asked for but are expected with the service or product.

Vijay kumar and Velu (2007) in their study on critical determinants of

customers satisfaction in retail banking in India collected data from 325

customers of various retail banks to identify the determinants of customers

satisfaction in term of service quality, service feature, service problems, service

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recovery and product used and the interaction of switch over to other banks. He

found that in retail banking, core and relational features ought to be equally

weighted when managers are interested in improving customer satisfaction. In

contrast, when focus is on reducing switching intentions, considerable

emphasis should fall on core items, insuring successful problem recovery. In

this case, the influence of relational features is far less important.

Ashokan and Hariharan (2008) in their study conducted in different retail

outlets in Palakkad district found out that the customer were satisfied with the

merchandise. They expected the stores to improve the customer service and

also to design the planogram in such a way that the products could be located

easily.

Ravichandran, et al. (2010) examined the influence of perceived service quality

on customer satisfaction in private retail banking services. They concluded that

increase in service quality of the banks increases customer satisfaction which

ultimately retains valued customers.

Daniella Ryding (2011) suggested the relative importance of service quality

across two grocery store formats. It indicates that within the grocery sector,

customers expect value for money in terms of product quality, nutritional value

and service quality. If these attributes are met in relation to the customers

perceived risk, it is more likely that customer satisfaction and retention will

occur.

Other researchers such as Martin et al (2008) view customer satisfaction as

being influenced by the customer’s emotions before, during and after the

service is rendered. Interaction with the service provider or the emotional

bonding is more important in predicting repurchasing intention than the

cognitive part of satisfaction. Moreover, emotion is very important during the

interaction between the customer and the service provider, and the best

predictor of customer loyalty is the- customer’s feeling of enjoyment (Wong,

2004). It is acknowledged that customers of retail shops take pleasure in

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shopping with family and friends and looking for bargains prices which makes

shopping an enjoyable experience and makes the shopping process more than

just purchasing the required products (Rintamaki, Kuusela& Mitronen,

2007).Therefore, the physical environment and the personal interaction become

key factors in creating customers emotional value.

4.6 Service Quality and Competitive Advantage

The retail environment today is changing more rapidly than ever before

(Dabholkar, 1996). It is characterized by intensifying competition from both

domestic and foreign companies, a spate of mergers and acquisitions, and more

sophisticated and demanding customers who have great expectations related to

their consumption experiences (Sellers, 1990; Smith, 1989). Consequently,

retailers today must differentiate themselves by meeting the needs of their

customers better than their competitors. There is general agreement that a basic

retailing strategy for creating competitive advantage is the delivery of high

service quality (e.g., Berry, 1986; Hummel and Savitt, 1988; Reichheld and

Sasser, 1990).

Porter (1985) competitive advantage framework proposes two distinct

strategies - low cost and differentiation. Based on the same postulates, Day and

Wensley (1988) suggested two approaches for distinguishing competitive

advantages: customer-focused and competitor centered. In the light of these

strategies Ellis and Kelly (2001) assessed the competitive advantage of retailers

using the competitor-centered approach and suggested the use of customer-

focused approach as an area for research. While it is commonly accepted that

the concept of competitive advantage and strategy are applicable across

different industries, researchers like Miller and Knee (1993) have criticized

Porter’s concept in several aspects including the allegedly oversimplified

dichotomy of cost leadership v/s differentiation. Ellis and Kelly (1992) have

also added to this by identifying that Porter’s concept are oversimplified in the

context of retailers and that there is need for future researchers to consider the

customer-centric view in assessing the competitive advantage of retailers. The

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main reason for the competitor centric retail strategy getting outdated in retail

markets is the robust growth of technology .The key impact of technology has

been provision of greater information to the customer. Hence, a big challenge

for the retailer in the information savvy world of today is that the opportunities

for price differentiation have nearly vanished. With the wealth of information

which the customer has, it becomes imperative for the retailer to differentiate

itself qualitatively by superior customer services or better value for money to

the customer. In recognition of these facts Walter and Knee (1989) state that

companies need to be significantly more attractive to consumers than their

competitors and develop strategic positions in the market.

Wensley (1988) quoted that Competitive advantage also enables firms to attain

superior performance. Adding new dimension to the concept of competitive

advantage, Walters and Knee (1989) opined that it can be attained by those

firms who make themselves more attractive to the customers than the

competitors and establish a strategic position in the market place.

Hao Ma (1999) defined customer-centric strategy of attaining competitive

advantage as the asymmetry or differential in any firm attribute or factor that

allows one firm to better serve the customers than the others and hence create

better customer value and achieve superior performance. Many researchers

including Reicheld and Sasser (1990) have recognized that profits enhance

when strategies focus on retaining current customers. Bendapudi and Berry

(1997) also state that there is sufficient evidence to show that strategies

directed towards developing dedicated- based relationship contributes to

enhanced profits for a firm. Retail businesses in India also need to focus on

nurturing the customer base to enhance the profitability of a retail firms and

contribute to its superior performance (Economic times 2010).

Ellis and Kelly (2001) demonstrated that the concept of competitive advantage

can be utilized to assist retailers in today’s volatile environment. The

applicability of the same was discovered in Indian retail sector by Shah and

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Mehta (2007) who identified that with the retail sector clocking impressive

growth and catching up the world’s imagination, the Indian retailers were

striving hard to attain some kind of competitive advantage. Sameer Kumar

(2008) opines that with intense competition among supermarket retailers the

markets are getting saturated and there arises a need to ascertaining the

competitive advantage among the players.

In a competitive environment, service quality is critical for service firms to

maintain a stranglehold position as it is an indicator of business performance.

Based on superior service, smaller stores can compete with larger and more

dominant stores as they cannot compete on price factors. In addition, focusing

on service quality is significant in markets where product offerings are similar,

as typically found across grocery retail stores. Improvement of the quality of

services requires recognition of the service quality dimensions that are

important to retail consumers. Although the research into the dimensions used

by consumers to measure service quality in the service sector is extensive, there

is lack of empirical studies on factors of quality improvement strategies,

especially the service quality dimensions (Dabholkar et al., 1996) for the retail

sector.

4.7 Service Quality and Service Quality Models

With an argument that Parasurman et al. (1985) gap theory of service quality

was supported by little empirical or theoretical evidence, Cronin and Taylor

(1992) developed a “performance-based” service quality measurement scale

called SERVPERF. The major difference between these two scales is that

SERVQUAL operationalised service quality by comparing the perceptions of

the service received with expectations, while SERVPERF maintained only the

perceptions of service quality. The SERVPERF scale consists of 22 perception

items excluding any consideration of expectations. According to Cronin and

Taylor (1992), their unweighted performance-based SERVPERF scale was a

better method of measuring service quality. This scale’s reliability ranged

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between .884 and .964, depending on industry type, and exhibited both

convergent and discriminant validity.

Burch et al. (1995) examined the applicability of the service quality

measurement scale (SERVPERF) to the rental industry. The SERVPERF scale

was found to explain a great deal of the variation in service quality. While

satisfaction seems to have a significant positive effect on purchase intention,

service quality does not seem to have a similar effect.

Dabholkar, Thorpe and Rentz (1996) proposed an instrument based on Service

Quality which measures service quality in a retailing environment. This

instrument also captures, apart from the common dimensions that are likely to

be shared by pure service environments and retail environments, additional

dimensions of retail service quality relevant to the retail environment.

However, very few studies have utilized the instrument for evaluating service

quality of retail stores. Boshoff (1997) evaluated the reliability and validity of

the instrument in South African retail environment.

The UK sample corroborated findings from other studies, which used

SERVQUAL scale to measure service quality (Carman, 1990, Babakus and

Boller, 1992, Babakus and Mangold, 1992, Schneider et al, Cronin and Taylor,

1992, Gagliano and Hathcote, 1994, and Boshoff et al, 1995) and showed that

SERVQUAL dimensions could not be replicated. However, the Brazilian

sample confirmed the original dimension even if not with the same variable

loading in each one. The British sample aggregated three dimensions of the

original scale: reliability, responsiveness and assurance into one factor. Two

other factors were extracted, each containing three variables. Another

important finding is that service quality, future purchase intensions and

customer satisfaction are related. Customer satisfaction and overall evaluation

of service quality are related to the same factors in both samples. If customer

satisfaction is transaction based and service quality is a global attitude

(Parasuraman et al 1988), there should be differences in the weighting of these

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in the multiple regression equations. On the UK sample, customer satisfaction

and service quality are more closely related by dependability of the service. On

the Brazilian sample, service quality is more related to assurance and customer

satisfaction equally on assurance and empathy. This indicated that the Brazilian

sample was closer to the original study, as customer satisfaction being

transaction-specific. This study is important in terms that SERVQUAL five

dimensions were replicated in one of the samples. More important, the model

used was reliable and valid.

The generalizability of SERVQUAL in different service industries has also

been questioned. The applicability of SERVQUAL across different cultures is

also an issue as SERVQUAL was developed in a Western environment and,

due to cultural differences, it is likely that cultural factors will influence its

applicability. Donthu and Yoo (1998) studied the effect of the cultural

orientation of consumers on their service quality expectations. Based on

Hofstede’s dimensions of culture, they hypothesized and tested the influence of

culture on consumer service quality expectations and found that consumers

varied in both their overall expectations with regard to service quality and their

expectations of each of the service quality dimensions as a result of cultural

orientation.

Marshall et al. (1999) investigated differences in retail shopping experiences of

African- American and White residents of a middle-size city in the southern

United States. With the SERVPERF items, they reported racial differences in

retail clothing shopping experiences of African- American and White residents.

Mei et al. (1999) examined the dimensions of service quality in the hospitality

industry by extending the SERVQUAL scale to include eight new items that

specifically pertain to the hospitality industry, subsequently referred to as

HOLSERV. They found that service quality is represented by three dimensions

in the hospitality industry, relating to employees (behaviour and appearance),

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tangibles and reliability. However, the best predictor of overall service quality

is the dimension referred to as “employees”.

In 2000, Fogarty et al. measured service quality with SERVPERF in four small

retail businesses within provincial cities in South East Queensland. They

employed four different datasets, of a shortened 15-item version of the

SERVPERF scale to be called SERVPERF-M.Exploratory and confirmatory

factor analytic techniques were used to explore the dimensionality of the scale.

They suggested that the five factors can be treated as five different stages of

service quality, rather than as five qualitatively different dimensions.

Kerlin (2000) used the SERVQUAL survey instrument to assess student

satisfaction with service quality. Student expectations and perceptions of

service quality in registration, financial aid, counselling, career center and

library services were probed. It was found that students placed less emphasis

on the tangible aspects of service quality, such as appearance of facilities and

brochures and more emphasis on aspects that provide them with reliable

services and demonstrate attention to their personal needs.

Nitecki and Hernon (2000), who also used SERVQUAL to assess library

services at Yale University, where respondents ranked reliability the most

important of the five SERVPERF dimensions, and ranked empathy, one of the

relationship dimensions, to be the least important. The findings suggested that,

in high-stress environments, the more objective performance characteristics of

reliability and responsiveness rule.

Mehta et al. (2000) explored the usefulness of SERVPERF and a retail service

quality scale (the DTR scale) in measuring the service quality of different

product-service retail environments. Specifically, they investigated the relative

performance of two scales measuring the service quality of retailers where

goods purchase was the primary focus, against another where both goods and

services were equally important. Results showed that the DTR scale was

superior within the context of a “more goods and less services” environment,

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i.e. a supermarket, while SERVPERF was better for a retailing context where

the service element becomes more important, i.e. an electronic goods retailer.

Wang (2003) indicates that the two most widely used scales are the

SERVQUAL developed by Parasuraman (1988) and Retail Service Quality

Scale (RSQS) developed by Dabholkar (1996). On the application of

SERVQUAL within retail setting, Wang remarks that SERVQUAL fails to

provide a precise and efficient measure of service quality in retail settings such

as discount stores and apparel specialty stores that offer goods and services.

Wang found that there is a broad variety of experiential factor structures that

can be obtained which vary in terms of interpretability thus conflicting from

five factor structure Reliability, Assurance, Tangibility, Empathy,

Responsiveness proposed by Parasuraman (1988). Studies using RSQS in

Vietnam did not meet discriminate soundness on two factors, the personal

interaction and problem solving. Further the scale was sophisticated to four

component build consisting of service personnel, physical aspects, policy and

reliability. Wang (2003) proposes the development of a new, more consistent,

culturally bounded and precise measure of retail service quality which can be

applied globally but also helpful to retail managers in more accurate

assessment of service quality within retail stores.

Jain and Gupta (2004) assessed the diagnostic power of the two service quality

scales: SERVQUAL and SERVPERF. In fast food restaurants of Delhi, they

found the SERVPERF scale more appropriate in explaining convergent and

discriminant validity of service quality construct. However, the scale was found

deficient in its diagnostic power. It was the SERVQUAL scale which

outperforms the SERVPERF scale by virtue of possessing higher diagnostic

power to pinpoint areas for managerial interventions in the event of service

quality shortfalls.

Leen et al. (2004) aimed at validating the retail service quality (RSQS)

instrument developed by Dabholkar et al. (1996) in the Malaysian business

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setting, specifically in the context of apparel specialty stores. Findings obtained

from the confirmatory factor analysis and reliability tests indicated that all the

five dimensions of physical aspects, reliability, personal interaction, problem-

solving and policy were highly suited for measuring retail service quality in

clothing stores, also proving that the instrument was applicable in the

Malaysian culture. Through the correlation analysis, it was shown that retail

service quality is furthermore associated with future consumption behaviour in

terms of the customers’ intention to visit, purchase and recommend the stores

to others.

Lee (2007) compared two leading measurement instruments of service quality

(i.e. SERVQUAL and SERVPERF) in a cross-cultural setting. Psychometric

properties of each scale were compared in three countries of distinctive

characteristics: developed, industrialized, and developing. They concluded that

the SERVPERF scale has slightly better reliability while the SERVQUAL scale

has an edge in validity, implying the necessity of including cultural diversities

of expectations in the measurement of service quality for crosscultural studies.

Riadh Ladhari (2009) reviewed 20 years (1988-2008) of research on the

SERVQUAL scale for measuring service quality. Studies that have applied the

SERVQUAL scale in this 20-year period were examined. The paper concluded

that SERVQUAL remains a useful instrument for service-quality research. The

paper summarizes a selection of 30 applications of SERVQUAL and provides a

useful source of information on SERVQUAL and its applications.

Hollis Landrum (2009) suggest that the five dimensions of SERVPERF, which

is a subset of SERVQUAL, are both dichotomous and hierarchical, and subject

to conditioning based on user perceptions of stress and urgency. In other words,

SERVQUAL the instrument is not homogeneous, and some dimensions

potentially matter more to users than others. It is possible that such differences

are a function of the user’s state of mind. The results suggest that the

performance dimension of reliability, which refers to the ability of a firm to

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perform promised service dependably and accurately, and the dimension of

responsiveness, which is the ability to provide prompt service, consistently

rank highly in both respondent groups, while the more emotive dimensions of

tangibility, assurance and empathy are important depending on the user’s state

of mind and the circumstances.

Singh and Khanduja (2010) applied SERVQUAL methodology to identify the

gap between customer expectations and perceptions of the actual service

received taking higher education as a service industry. They outlined the major

gaps of expectations and perceptions of the faculty of higher education and

therefore presented a framework for prioritizing critical factors to close the gap.

Tan et al. (2010) used SERVQUAL model to evaluate the link between service

quality dimensions and knowledge sharing. They found that assurance and the

reliability dimensions of service quality were the two most important

dimensions and had significant positive relationship with knowledge sharing.

Dr. Wathek S Ramez (2011) finds that the study support the hypothesis that

performance scores can offer better measurement results than gap scores. The

SERVQUAL scale explains 61.002% of the cumulative variance in the overall

service quality, compared with 65.166% by the SERVPERF scale. On the other

hand, factor analysis for SERVQUAL construct produces five factors, but after

dropping the cross loading items over more than one factor, three clean factors

that include thirteen items remained. Although, the SERVPERF construct

results in a three factor solution, one factor covers three dimensions: reliability,

responsiveness and assurance. The totals of twenty items were valid. The study

findings demonstrate that the overall service quality of banking industry may

not be a function of the five dimensions as originally suggested by

Parasuraman et al. studies. Regarding the importance of service quality

dimensions, it appears that Bahraini customers rated the reliability dimension

the most important of all with average points .238, followed by responsiveness

(.208) and tangible dimension (.204), whereas Empathy dimension rated at the

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least important. Meanwhile, the results of linear regression show that the

SERVPERF dimensions explains 54.5% of the variation in the overall service

quality. Reliability is the most important influencer of overall service quality

with a coefficient score .378, followed by the responsiveness dimension (.363),

while assurance is third. The findings of this study reflect the following

managerial implications: First, systematic assessment of customer’s perceived

service quality is a vital element to formulate the service marketing strategy

over time. Such processes will enable the managers of a given bank to identify

the points of strength and weakness, relative to competitors, and consequently

investing the available resources in the dimensions that consolidate a bank’s

competitive position. Second, managers and staff of Bahraini commercial

bank’s should work together to provide customers with reliable services,

prompt responses and assured procedures. By doing so, a bank will enhance

their customer’s perceptions of overall service quality. Third, bank managers

should consider their customer’s socio-demographic characteristics to redesign

the operational system and recruit qualified people to offer a better and

consistent level of service quality.

Little is known about the service quality perceptions in India (Jain and Gupta,

2004) because the focus of research has primarily been on the developed

countries (Herbig and Genestre, 1996).

There is hardly any research done on Service Quality of super markets in

Gujarat. This is a humble attempt to bridge the research gap.