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1. Introduction
It has been well known that customer-perceived service
quality, customer value and satisfaction have been the
most important success factors of business competition for either manufacturers or service providers (e.g.,
Buzzell and Gale, 1987; Zeithaml, 1996; Bolton and
Drew, 1991; Parasuraman et al., 1988, 1991, 1997).
Such factors are becoming the priority of managers
in the increasingly intensified competition for customers in the customer-centered era of today and future (Zeithaml, 1988; Bolton and Drew, 1991; Ravald
and Gronroos, 1996; Woodruff, 1997; McDougall and
Levesque, 2000; Lapierre, 2000; Oh, 1999). However,
many different conclusions have been made regarding service quality, customer satisfaction and customer
value and related studies are rather fragmented, especially for the complicated interrelationships among
them. Furthermore, for the extant studies focusing on
the relationships among service quality, customer value
and satisfaction, few empirical studies take an disaggregated approach and examine the decomposed effects
of service quality on customer value and customer satisfaction. Thus, less is known about the relative impacts of quality-related factors on customer value and
customer satisfaction up to now. So the key drivers of
To
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2. Theoretical Background
2.1. Customer perceived service quality
Although more research findings concerning quality
have appeared in the past two decades, it is still worth
noting here that there are several distinct conceptualizations of quality (Holbrook, 1994). In marketing and
economics, quality often has been viewed as dependent on the level of product attributes. In operations
management, quality is defined as having two primary
dimensions, fitness of use2 and reliability (To what extent is the product free from deficiencies?).3 In service
literature, quality is viewed as an overall assessment
(Parasuraman, Zeithaml and Berry, 1988). The most
comprehensive definition of quality is the one proposed
by Garvin (1988) with the following eight attributes:
performance, features, conformance, reliability, durability, serviceability, aesthetics and customer-perceived
quality.4 However, since this study focuses on Chinas
mobile communication market within the telecommunication industry, durability and aesthetics may not be
relevant. As for the attribute performance, network
quality is used, since almost all the participants in the
focus groups and the pilot study believed network quality is one of the most important factors associated with
the quality of mobile communication service. Other attributes can find their counterparts in related studies of
customer perceived service quality.
In fact, with the role of customers changing gradually, customer perceived service quality has been given
increasing attention for its specific contribution to the
competitiveness of business and there have been a variety of studies on different issues concerning service
quality over recent years. Traditionally service quality
has been defined as the difference between customer
expectations and perceptions of service (Parasuraman,
Berry and Zeithaml, 1988, 1991). These researchers
believe that measuring service quality as disconfirmation (the difference between perceptions and expectations) is valid and allows service providers to identify
several gaps in the service provided. However, most
of these studies have proved a poor fit for the disconfirmation model. As a result, their SERVQUAL scale
had been criticized by more and more researchers for
its use of gap scores, measurement of expectations,
positively and negatively worded items, the generalizability of its dimensions, and the defining of a baseline
standard for good quality (Cronin and Taylor, 1992;
Brown, Churchill and Peter, 1993; Oliver, 1993). Further, problems of reliability, discriminant validity and
variance restriction exist because of the computed difference scores. As a result, some researchers have tried
to combine expectations and perceptions into a single
measure to alleviate these problems, and found that
this outperforms the SERVQUAL scale in terms of
both reliability and validity (Babakus and Boller, 1992;
Brown, Churchill and Peter 1993; Dabholkar et al.,
2000). Therefore, we will adopt the latter and measure
service quality with customer perceptions only.
2.2. Customer value
Driven by demanding customers, keen competition and
rapid technological change, more and more firms are
searching for new ways to achieve, retain, upgrade and
leverage competitive advantages. As some researchers
have concluded (Day, 1990; Slater, 1997), creating superior customer value is a major goal for market-driven
firms. In fact, delivering superior customer value is
inevitably becoming one of the most important suc-
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1990; Zeithaml, 1988) although some researchers argue that perceived value is made only of benefits (Hunt
and Morgan, 1995; Hamel and Prahalad, 1994).
On the other hand, as we have discussed above, customer value is related not only to what customers can
get, but also to what they have to give up; in other words,
customer perceived sacrifice. For example, Lapierre
(2000) identifies the key drivers of customer perceived
value and clarifies sacrifice as one of the two key factors
(the other is benefits). Sacrifice refers to what is given
up or sacrificed to acquire a product or service (Heskett, Sasser and Hart, 1997; Zeithaml, 1988). However,
not only is price considered an element of sacrifice,
but other non-monetary factors are also believed to be
closely related to sacrifice. In fact, many customers
count time rather than dollar cost as their most precious asset. Therefore, generally speaking, it is clear
that there are two broad kinds of sacrifice: monetary
costs and non-monetary costs. The former can be assessed by a direct measure of the dollar price of the
service or product and the latter can be defined as the
time, effort, energy, distance and conflict invested by
customers to obtain products or services or to establish
a relationship with a supplier (Ruyter et al., 1997).
Hypothesis 3. Customer perceived sacrifice is a key
driver of customer value.
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330
However, besides the above-mentioned relationships, customer value play an important moderating
role in the service quality-customer satisfaction relationship as well, which is tested and concluded by
Caruana et al. in 2000 although single-item measure is
used for the construct of customer value. Just as what
Ruyter et al. (1997) point out in discussing the findings
of their combined service quality/satisfaction model,
who find that an increase in service quality leads to an
increase in satisfaction, the reverse need not necessarily be the case. Low service quality may result in high
satisfaction. Customers may not always buy the highest
quality service. That is, convenience, price, availability may enhance satisfaction without actually affecting customer perceptions of quality. Similarly, there
is experiential evidence in practical business world.
Customer perceived service quality may be somewhat
lower, however, the prices are very competitive, the
value received is higher and favorable level of satisfaction can be achieved. Thus we can form the hypothesis
as follows.
Hypothesis 8. Customer value moderates the relationship between customer perceived service quality and
customer satisfaction.
4. Methodology
4.1. Sample and procedures
In order to collect enough data of high quality to
test our hypotheses, a face-to-face customer survey
was conducted by adopting the availability sampling
technique based on the measurement refinement results of the pilot study with customers of both China
Mobile and China Unicom, the two monopoly companies in China that compete with each other in the
mobile communication market. Subjects were asked
to assess items of different constructs such as factors viewed as antecedents of service quality, customer
sacrifice, customer perceived service quality, customer
satisfaction, and customer value in terms of their perceptions, based on a seven-point scale. The descriptors ranged from strongly disagree, somewhat disagree, slightly disagree, neutral, slightly agree,
somewhat agree and strongly agree. A total of 348
were considered valid and were used to develop structural equation models with a PLS-Graph.
The reason for us to choose mobile communication market in China is as follows. First, this is one
of the most important service markets but often neglected by most of previous studies. This service may
not only have significant influences on the life quality of people, but also affect the operational activities
of firms since it cannot be imagined if there were no
mobile communication between managers and managers, managers and employees, employees and employees, and so on. Second, over the last decade, the
centralized telecommunication monopoly in China has
been changed and a relatively open and free competitive market is gradually coming into being. As a result, many functional and fundamental changes have
taken place in telecommunication reforms and more
and more attention has been paid to the improvement
of customer perceived service quality, customer value
and customer satisfaction in order to build superior
competitive advantages by way of effective customer
331
Fig. 1. Service quality, customer value, satisfaction and behavioral intentions of customers: an integrated framework.
acquisition and retention with the increasingly intensified domestic competition. Furthermore, with Chinas
entry into WTO, it is inevitable for Chinas domestic
telecommunication companies to meet ever-keener foreign competition as a result of the agreement that joint
ventures can be established freely in Beijing, Shanghai
and Guangzhou, with a maximum foreign equity of
25% for the first year following Chinas entry. It has
become imperative for domestic firms to focus on the
improvement of service quality in order to deliver superior customer value, achieve higher customer satisfaction and keep customers or attract potentially profitable
new customers, which signifies the significance and urgent need of this study. Third, Chinas telecommunication industry has been growing fastest in the world
over the past 20 years and the mobile communication
market has been the most active and has attracted much
attention all over the world among so many markets in
Chinas telecommunication industry. For example, the
annual increase in GSM users in China has been over
200% since 1990, a potential market that is attracting
many giant global corporations to compete there (Tianjin Daily). Up to now, there are nearly 0.1 billion GSM
332
stage, which are shown in Table 1. For customer perceived service quality, repondents were asked to give
their assessment in term of excellent overall service,
service of a very high quality, and superior service
in every way, which were adapted from the work of
Dabholkar et al. (2000) and similar to other overall service quality indicators used elsewhere in the literature
(Cronin and Taylor, 1992). For customer value, three
items were included in the survey to ask customers to
evaluate whether overall, the chosen service is value
for money, the chosen service is worth what is given
up such as time, energy and effort (Cronin et al., 2000)
and comparing with offerings of major competitors,
the transaction with the mobile communication service
provider is a good choice. For customer satisfaction,
three items were used with endpoints completely satisfied/completely dissatified, very pleased/very displeased and absolutely delighted/absolutely terrible
(Wrestbrook, 1980; Dabholkar et al., 2000).
5. Empirical Results
There are two types of estimation techniques for an
SEM. The first type is the maximum likelihood (ML)
based covariance structure analysis method that is documented in software such as LISREL, AMOS and EQS
(Bollen, 1989; Joreskog, 1970). Another type is the partial least squares (PLS) based variance analysis method
(Chin, 1998; Fornell and Cha, 1994; Wold, 1986),
which is implemented in such programs as LVPLS and
PLS-Graph. Although the PLS method is not as popular
as the ML method in the SEM field, it does provide a
way to avoid problems of improper solutions and factor
indeterminacy as well as the violations of distributional
assumptions (Fornell and Cha, 1994) which may be
associated with the ML method. As for the testing of
moderator effects, although traditional techniques such
as analysis of variance (ANOVA, MANOVA, MANCOVA, ANCOVA) or moderated multiple regression
(MMR) are frequently used, however, they may not
be able to detect such interaction effects under conditions of measurement errors. For example, according to what has been concluded by Chin et al. (2003),
studies using analysis of variance approaches fail to
report effect size estimates on the one hand while the
regression and path analysis techniques, which do provide beta path coefficients, have few significant terms,
small effect sizes and low statistical power. By
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Loading
T-value
0.84
0.88
0.72
30.28
73.76
14.92
0.79
0.88
0.80
0.84
28.74
54.04
17.40
35.88
0.89
0.85
0.93
0.89
56.57
53.00
110.35
53.96
0.90
0.86
0.86
0.79
73.34
43.51
48.19
20.52
0.82
0.89
0.84
0.86
0.83
28.01
59.05
29.99
50.35
30.58
0.94
0.96
84.37
195.88
0.89
0.76
0.81
58.17
19.41
27.26
0.87
0.72
0.69
20.08
18.83
17.67
0.92
0.95
0.89
57.92
166.08
89.06
0.89
0.83
0.80
83.65
65.36
19.46
0.87
0.81
0.79
73.26
56.21
49.72
Composite
reliability
0.86
0.84
0.91
0.87
0.90
0.90
0.86
0.81
0.87
0.87
0.83
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Table 2. Correlation coefficients and the square root of AVE for all constructs in the study
1. Tangibles
2. Behavior intentions
3. Customer value
4. Network quality
5. Customer satisfaction
6. Reliability
7. Responsiveness
8. Assurance
9. Empathy
10 Customer perceived sacrifice
11 Customer perceived service quality
10
11
0.82
0.55
0.57
0.48
0.61
0.63
0.64
0.68
0.49
.60
0.72
0.81
0.66
0.48
0.62
0.54
0.53
0.71
0.57
.57
0.56
0.86
0.56
0.43
0.45
0.60
0.56
0.66
.51
0.49
0.89
0.50
0.45
0.49
0.39
0.42
.35
0.66
0.87
0.69
0.59
0.73
0.54
.66
0.68
0.81
0.56
0.62
0.48
.57
0.76
0.90
0.62
0.56
.60
0.67
0.84
0.64
.67
0.82
0.88
.67
0.58
0.78
.69
0.81
Notes: Interrelations are included in the lower triangle of the matrix, and the square root of AVE is on the diagonal.
335
Hypotheses
H1a
H2a
H2b
H2c
H2d
H2e
H2f
H3
H4a
H4b
H4c
H4d
H4e
H4f
H6
Customer perceived
service quality
Customer perceived
service quality
Customer perceived
service quality
Customer perceived
service quality
Customer perceived
service quality
Customer perceived
service quality
Customer value
Customer value
Customer value
Customer value
Customer value
Customer value
Customer value
Customer satisfaction
Customer satisfaction
Customer satisfaction
Customer satisfaction
Customer satisfaction
Customer satisfaction
Customer value
H9
Behavior intentions
H10
H11
Behavior intentions
Behavior intentions
H1b
H1c
H1d
H1e
H1f
Standardized
path coefficient
T -values
Assessment
Tangible
0.203
2.09
Reliability
0.269
2.27
Responsiveness
0.055
0.45
no
Assurance
0.198
2.27
Empathy
0.356
2.51
Network quality
0.265
3.06
0.301
0.023
0.006
0.141
0.523
0.251
0.375
0.139
0.296
0.045
0.410
0.041
0.203
0.137
2.55
0.059
0.01
0.94
4.26
3.64
2.36
1.51
5.18
0.54
4.29
0.26
3.66
2.38
Tangible
Reliability
Responsiveness
Assurance
Empathy
Network quality
Customer sacrifice
Tangible
Reliability
Responsiveness
Assurance
Empathy
Network quality
Customer perceived
service quality
Customer perceived
service quality
Customer value
Customer satisfaction
s
no
no
no
s
s
s
s
s
no
s
no
s
s
0.106
1.32
no
0.474
0.418
6.22
5.30
s
s
Significant
and = 0.251 and t = 3.64 respectively) while customer perceived sacrifice is the most important negative driver ( = 0.375 and t = 2.36). In contrast,
our structural equation model shows no evidence of
the relationship between empathy and customer satisfaction, and responsiveness and customer satisfaction
while the influence of reliability, assurance, tangible,
and network quality on customer satisfaction is found
to be significant, which indicates that hypothesis 4a, 4b,
4d, and 4f are strongly supported and hypothesis 4c and
4e are not supported. Among these quality-related factors, assurance is the most important driver of customer
satisfaction ( = 0.410 and t = 4.29), and reliability
comes the second ( = 0.296 and t = 5.18). For the
impacts on behavior intentions of customers, results in
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R 2 (Interaction-model) R 2 (Main-effects-model)
[1 R 2 (Interaction-model)]
Interaction model
Hypotheses
Exogenous variables
Path coefficients
T -value
Path coefficients
T -value
H5
H7
H8
0.382
0.450
6.29
8.50
0.317
0.452
0.177
3.99
4.39
2.32
Significant
Significant
0.7133
0.7591
service quality, creating and delivering superior customer value, and achieving high customer satisfaction.
Furthermore, in addition to the direct interrelationships
among customer perceived service quality, customer
value and customer satisfaction (including the mediating role of customer value between customer perceived service quality and customer satisfaction), the
moderating effect of customer value on the relationship between customer perceived service quality and
customer satisfaction is detected based on our structural equation models. Besides, we find that only the
impacts of customer value and customer satisfaction on
behavior intentions of customer are statistically supported. However, it is found that customer perceived
service quality may influence behavior intentions of
customers indirectly by affecting customer value and
customer satisfaction.
On the one hand, such findings can be used to explain the competitive behaviors of the two monopoly
mobile communication firms in China, China Mobile
and China Unicom. Although there are at present only
two players in Chinas mobile communication market,
the competition between them is more intense than
ever. They compete not only in the improvement of
customer perceived service quality based on network
quality via a large amount of investment in network extension and upgrading, but also in customer retention
and acquisition via direct and indirect price reduction
to lower customer perceived sacrifice and to deliver
superior customer value. The rationale of this is supported by our research since network quality is one of
the most important drivers of overall service quality,
customer value and customer satisfaction while customer perceived sacrifice (including price) has a significantly negative impact on customer value, and thus influences customer satisfaction and behavior intentions
of customers indirectly and negatively. Furthermore,
the competition in the mobile communication market
will, inevitably, grow much more intense in the next
few years, following Chinas formal entry into WTO
in December 2001, since a general agreement was arrived at that Chinas telecommunication service sector,
like other sectors, would allow foreign companies to
compete gradually. Thus, more foreign giants will increasingly be involved. Therefore, firms expecting to
build and maintain competitive advantages in this market must try their best to improve service quality, deliver superior customer value, achieve higher customer
satisfaction, and turn behavior intentions of customer
into the true purchasing behavior.
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338
quality alone and higher levels of quality are considered worthwhile to the extent that customers believe
that value is being enhanced. The results also provide
a basis for understanding the role of low price or low
cost strategy in customer satisfaction and intense competition since customer value will be perceived higher
with reduced customer perceived sacrifice and similar
quality level, while the contribution of perceived quality to customer satisfaction should become a little less
as a result of the negative moderating effect of customer value. Finally, although our empirical models
were developed based on the data collected in Chinas
mobile communication market, these findings can also
be applied to other industries.
Acknowledgment
We wish to acknowledge the National Natural Science Foundation of China and China-Canada University Industry Partnership Program (NSFC-CCUIPP)
(70142023), National Natural Science Foundation of
China (70202002), the National Social Science Foundation of China (02CJL004), the Sumitomo Foundation
of Japan (018006), and the Research Grants Council
of the HKSAR, China (Cityu 1129/02E). We gratefully acknowledge the three anonymous reviewers for
their valuable advice about further improvement of this
manuscript. We also wish to thank Dr. Wynne Chin of
the University of Houston for kindly permitting us to
use his PLS-Graph package.
Notes
1. Tangibles refers to the appearance of physical facilities, equipment, personnel, and written materials; reliability refers to the
ability to perform the promised service dependably and accurately; responsiveness refers to the willingness to help customers and provide prompt service; assurance refers to the employees knowledge and courtesy, and their ability to inspire trust
and confidence; empathy refers to giving caring, individualized
attention to customers (Parasuraman et al., 1988).
2. It refers to whether the product or service does what it is supposed
to do and possesses features that meet the needs of customers.
3. It represents to what extent the product is free from deficiencies.
4. Performance means a products primary operating characteristics; features refer to the additional features or the bells and
whistles of the product; conformance represents the extent to
which a products design and operating characteristics meet the
established standards; reliability indicates the probability a product will operate properly over a specified period of time under
stated conditions of use; durability means the amount of use the
consumer gets from a product before it physically deteriorates or
until replacement is preferable; serviceability refers to the speed,
competence and courtesy of repair; aesthetics shows how a product appeals to our five senses and customer-perceived quality
indicates a customers perception of a products quality based on
the reputation of the firm.
References
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Yonggui Wang is an associate professor of International Business School, Nankai University, China. He
received his second Ph.D. degree from City University of Hong Kong. He specializes in Service Operation Management & Marketing, Corporate Strategy &
Dynamic Competitive Advantages, and Customer relation Management and Business Statistics with about
ten academic papers published in leading journals such
as Journal of Engineering and Technology Management, The Journal of Management Development, International Journal of Managing Service Quality and
so on.
Yongheng Yang is an associate profesor of Quality Management in the Department of Marketing at Nanjing
University. He received his Master degree in Business
Administration from Nankai University, and PhD in
Service Operation from City University of Hong Kong.
His research interests include business statistics, service quality management, operations management, and
information system modeling.