LITERATURE REVIEW

On service quality, customer satisfaction and loyalty

Service Quality
Services are not things. McLuhan perhaps put it best and most succincly more than 20
years ago when he declared that the process is the product. We say airline when we mean air
transportation. We say movie when we mean entertainment service. We say hotel when
we mean lodging rental. The use of nouns obscures the fundamental nature of services, which
are processes not objects (Shostack, 1987, p. 34).
One characteristic of a pure service resides is its intangibility. Because of this, pure
services are essentially processes that are experiences: Services yield psychological experiences
more than they yield physical possesions (Schneider&Brown, 1995, p. 19). Of course, not all
services are pure services, many have tangible components. So services are not all intangible,
but rather arrayed on a continuum of intangibility. Also, many physical goods have an intangible
service component to them. Summing up, many products are made up of both tangible goods and
intangible delivery experiences.The experience consumers obtain from the service has an impact
on how they will perceive it. At the extremes, pure services have no tangible component and pure
goods have no intangible component. However, most fall in between. Accordingly, every
organization should be concerned with issues of service quality and service delivery.
Other service characteristics are inseparability, which states that services are produced
and consumed at the same time and cant be isolated from their provider, so it reflects the
interconnection between the service provider, customer receiving the service and customers
sharing the service experience; heterogeneity, because it is difficult to make each service
experience identical, since services are not produced by a single entity and distributed to
consumers. So the quality of services varies depending on who provides the service as well as
when, where and how they are provided. There is a strong possibility that the same question
would be answered slightly differently by different people and even by the same person at
different times (Wolack, 1998). Services production and delivery frequently involve the
interaction of both service personnel and customers, and the human element in this production
and delivery process can result in no two service instances being identical. Thus different
customers might have different demands that need to be met, or different service personnel might

go about meeting the same customer demands somewhat differently at different points in time.
Point being that service production and delivery is less standardized than the production of
goods, so heterogeneity can make services more difficult to measure; the last, but not at least,
perishability, as in the inability of storing the unused capacity for future use or sale.
While defining quality may seem easy at the first glance, it is difficult to establish a
universal definition for it. The term "quality" has a relative meaning. This is expressed by the
ISO definition: "The totality of features and characteristics of a product or service that bear on
its ability to satisfy stated or implied needs". One can say that a product has good quality when
it "complies with the requirements specified by the client". Quality is a multi-dimensional
phenomena. Thus, obtaining service quality is impossible without distinghuishing important
aspects of quality
Over time, various scholars have considered different dimensions of service
quality.Service quality is considered an important tool for a firms struggle to differentiate itself
from its competitors (Ladhari, 2008, p.172). Here it is emphasized the fact that it offers a
competitive advantage to companies that strive to improve it, bringing customer satisfaction.
The concept of service quality applied to specific travel and tourism entities such travel
agencies, airline companies, accomodation providers etc. has been receiving an increasing
attention during the last decade (Shahin and Janatyan, 2011). The concept of service quality is
still a matter of debate, the difficulty of defining it residing mostly in the characteristics,
distinguishing services from physical products (Radomir et al.,2012).
Much of the earlier work has accepted the content measured by the SERVQUAL
instrument. Parasuraman, et al. (1985) have proven themselves to be more powerful than others
in the conceptualization of the service quality. They found out that consumers perception of
quality is influenced by different gaps, which lead to service quality discrepancy. In
conceptualizing the basic service quality model, they identified 10 key determinants of service
quality as perceived by the service provider and the consumer reliability, responsiveness,
competence, access, courtesy, communication, credibility, security, understanding/knowing the
customer, and tangibility to formulate a service quality framework - SERVQUAL. In 1988 the
framework has been modified, reducing the model to only 5 determinants: reliability, assurance,
tangibles, empathy, responsiveness (RATER).
1. Responsiveness: willingness to help customers and provide prompt service;

2.
3.
4.
5.
6.

Assurance: knowledge and courtesy of employees and their ability to convey trust and
confidence;
Tangibles: physical facilities, equipment, appearance of personnel;
Empathy: caring, individualised attention;
Reliability: ability to perform the promised service dependably and accurately.
Parasuraman, et al. (1988) have claimed that the SERVQUAL is a generic scale

applicable for the measurement of service quality across services sectors. The quality perceived
in a service would be a function of the gap between customers expectations and their
perceptions of the service that is actually received.
Most of the determinants of SQ require the consumer to have had some experience in
order to evaluate their level of service quality, ranging from ideal quality, to completely
unacceptable quality. They further linked SQ to satisfaction, by pointing out that when the
expected service is greater than perceived service, perceived quality will be less than satisfactory
and will tend towards unacceptable quality; then, when expected service equals perceived
service, perceived quality is satisfactory; ultimately, when expected service is less than perceived
service, perceived quality is more than satisfactory and will tend towards ideal quality
(Parasuraman et al.,1985, p. 48)
Babakus and Boller (1992), on the other hand, assert that it might not be fruitful to
design a standard measurement scale that is applicable to a wide variety of services, and
therefore, propose the development of service quality instruments for specific services as a more
viable research strategy to pursue. Dabholkar et al. (1996, p. 14) states the following [...] it
appears that a single measure of service quality across industries is not feasible.Therefore,
future research on service quality should involve the development of industry-specific measures
of service quality. Gronroos(1990) distinguished two aspects of service,so that customers
assessment of service quality may be based on functional(the process) and technical(the
outcome) aspects. While both technical and functional outcomes are important contributors to
total service quality perceptions, the process itself, or the service delivery aspect, has been the
focus of most service quality literature in services marketing and management. When services
and service quality are discussed, the terms refer most of the times to service delivery.
However, even if it might have limitations, SERVQUAL is a widely used instrument
for service quality measurement and for measuring the eects of service quality on customer

satisfaction, but other measures could be used as well, depending of the field itself. Quality is
ultimately what the customer says it is, and for what the customer is willing to pay. (American
Society of Quality control,2011,p. 16)
Customer Satisfaction
Customer satisfaction has been a central concept in marketing literature and it is an
important goal of all business activities.Overall, customer satisfaction translates to more profit
for companies and market share increas. It serves to link processes, culminating in purchase and
consumption, with post purchase phenomena, such as attitude change, repeat purchase, and
loyalty (Surprenant and Churchill,1982). Satisfaction is a major outcome of marketing activity
and the centrality of the concept is reflected exactly by its inclusion in the marketing concept,
such as the one in which profits are generated through the satisfaction of consumer needs and
wants..
The need to translate the philosophical statement of the marketing concept into
pragmatic operational guidelines has directed attention to the development and measurement of
consumer satisfaction. In the early 1970s, consumer satisfaction began to emerge as a legitimate
field of inquiry. The US Department of Agricultures Index of Consumer Satisfaction was the
first study that reported direct information on consumer satisfaction to policy makers (Suprenant
and Churchill, 1982). Both Olshavsky and Miller (1972) and Anderson also (1973) examined
disconfirmed expectancies and their influence on product performance ratings. These two studies
along with Cardozos (1964) experiment formed the foundation for much of the later theory
testing and experimental research.
Customer satisfaction is being conceptualised as being transaction-specific, so it is
based on the customers experience on a particular service encounter (Cronin&Taylor, 1992) and
others also state that customer satisfaction is cumulative, based on the overall evaluation of
service experience (Jones&Suh, 2000). The fact that the costumer satisfaction is based on
experience with service provider and on the outcome of service, as well, is highlited in the
previous phrase. Thus, the quality of provided services is correlated to customer satisfaction.
Organisations that consistently satisfy their customers enjoy higher retention levels and
greater profitability due to increased customers loyalty (Wicks&Roethlein, 2009, p.83). Keeping
consumers satisfied is important, which can be done in different ways.In the present study,

customers opinion will be considered when evaluating the travel agencys service quality (by
considering several important quality attributes achieved already).This means customer
satisfaction will be taken into account, on specific dimensions of service quality, in order to
identify in which aspects customers are satisfied and also in what measure.
Customer loyalty
Customer loyalty is suggested as the market place currency of the twenty-first century.
(Singh and Sirdeshmukh, 2000). Ndubisi (2005) and Pfeifer (2005) pointed out that the cost of
serving a loyal customer is five or six times less than a new customer. This statement shows the
importance of customer loyalty. Walsh et al. (2005) mentioned that it is better to look after the
existing customer before acquiring new customers. Gee et al. (2008) stated the advantages of
customer loyalty are as:

The service cost of a loyal customer is less than new customers

They will pay higher costs for a set of products; and
For a company, a loyal customer will act as a word-of-mouth marketing agent
Customer loyalty relates to what customers think and do (Foss and Stone, 2001).

Loyalty could be best defined as a state of mind, a set of attitudes,beliefs, and it is developed by
approaches which develop a positive state of mind and the associated behaviours. The exchange
of information between the travel agent and the customer can be one of the keys of loyalty while
it provides a connection to the state of mind and the behaviour of the customer.
Customer delight creates an emotional tie to a product or a service, not just a rational
preference, and this creates high customer loyalty. Higher level of satisfaction generated through
high levels of service quality creates customers that are more likely to make repeated purchases,
to develop long-term relationship with their service supplier (Zairi, 2000), favorably
recommending to others the company and its services while contributing to future revenues.
The situation also applies to the tourism and travel industry. Researching the hotel industry,
Mohajerani and Miremadi (2012) concluded that perceived service quality can predict customer
satisfaction, and, furthermore, customer loyalty is a result of both service quality and customer
satisfaction. Recent studies conducted in Spain (Campo and Yage, 2007), Poland (Kobylanski,
2012), Cyprus (Katircioglu et al., 2012), Hong Kong (Kuo et al., 2013), and other
countries/regions, have reinforced the existence of significant correlations between service

quality, customer satisfaction and customer loyalty, and the positive significant impact of service
quality factors on attitudinal loyalty in the case of travel agencies and other distribution channel
members of the tourism and travel industry.
During the last decades, researchers have paid great attention to service quality, customer
satisfaction and customer loyalty, both, in general, and in tourism and tourism destination
marketing, in particular. Nevertheless, even though there are plenty of studies on service quality,
satisfaction and loyalty in several tourism and travel related industries such as airlines and hotel
industries, the literature is much scarcer when considering such issues in the case of travel
agencies (Ryan and Cliff, 1997; Fache, 2000; Katircioglu et al.,2012).
RESEARCH QUESTIONS
The research studys aim is to find to the intercorrelation between 3 variables: service
quality, customer satisfaction and customer loyalty. The study case provides a reference to the
travel agency on its customers degree of satisfaction, making use of several dimensions of the
the quality of service. The outcome will ultimately lead to the question of loialty, thereby finding
out if it is currently maintained. Also, on what can be done in order to raise the repurchasing
ratio, proposing furthermore other strategies that can be used to maintain loyalty by looking at
the services provided by the travel agency, with a view to making the overall service more
effective and efficient.
The research questions are the following:
1. what is the level of customers satisfaction
2. by measuring customers opinion and behaviour,what strategies can be used to
maintain/improve the customers loyalty towards the travel agency
METHOD
The quantitative method will be used due to the fact that the research questions require a
measurement of customers opinion and behaviour. This can be achieved by using a data process
collection and statistical methods so that the outcomes can be measured.
DATA COLLECTION
Will be gathered through a survey. The questionnaire will be developed to measure
customer satisfaction through service quality. SERVQUAL method wont be entirely used,

however, service dimensions of SERVQUAL will be adopted like responsiveness,assurance,

empathy, reliability with 2 questions each, asking the respondents to rate them on a scale from 1
to 5 in order to assess their perceived quality of the items, followed by satisfaction related
questions such as how satisfied are they with the received service, which of the SERVQUAL
dimension creates more value for them, which aspect they consider needs improved, what are
their expectations from the service/travel agent and also loyalty questions such as if they are
willing to recommend the trave agencys services to others. Their feedback will be used in order
to develop strategies which aim at increasing customer satisfaction while making them loyal.
SAMPLE
In the present research study, the sample will be drawn from the travel agencys current
customers. The aim is to distribute randomly the questionnaire to at least 100 customers, taking
into consideration the fact that is a small-sized travel agency.

ETHICAL CONSIDERATIONS
All of the participants will take part in this study voluntarily. The confidentiality and anonymity
of the research respondents will be respected.