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Logistics Service Quality Impact on Customer Satisfaction and Loyalty

Conference Paper · January 2012

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 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

Logistics service quality impact on customer satisfaction

and loyalty

1
Milorad Kilibarda, 2Milan Andrejic

Faculty of Transport and Traffic Engineering, Logistics Department, University of Belgrade,

Belgrade, Serbia

1
m.kilibarda@sf.bg.ac.rs 2 m.andrejic@sf.bg.ac.rs,

Abstract:
Today, logistics research is focused on examining of logistics companies’
abilities to give service of high quality and, according to the service given,
make and retain satisfied customers. Customer loyalty development is often
seen as unavoidable problem in management of every company that is
looking for sustainable and long-lasting presence on desired market. It is the
analysis of quality, customer degree of satisfaction and loyalty in the context
of logistics service this paper is focused on. It’s assumed that there is a
positive relation between the logistics service quality, satisfaction and loyalty
of customer. Having analyzed different approaches that can be found in
literature, conceptual model is developed with an aim to identify factors that
have an impact on loyalty of logistics services customer. Special attention is
given to attributes of logistics service quality. On the basis of the developed
model, empirical researches are conducted on Serbia’s market the results of
which are, together with critical analysis, presented in this paper.

Keywords: logistics service, quality, satisfaction, loyalty

1. Introduction
Previously, logistics is mainly looked at as a costs generator. This traditional
logistics comprehension started changing at the end of twentieth century,
since the logistics researches based on marketing principles started analyzing
logistics companies’ abilities to achieve greater degree of customer
satisfaction and loyalty through services quality. Today, many companies use
logistics as competitive advantage on market, mostly because of visible and
material service and the impact on end-user and customer. So for example,
Novack and others (1994) state that logistics services and processes can
successfully be used for creation of new value for customer and service
provider. Through service quality: market share is increased, effective system
based on customer feedback is created, positive impact on customer
 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 
satisfaction and loyalty is provided and competitive advantage is achieved in
many segments and parts of market. However, in past, this problem isn’t
given necessary attention. Traditional logistics research approach is
concerned with study of stock levels, objects’ location, and business logistics
network design. Less attention is given to the so called ‘’soft’’ concepts such
as quality, satisfaction and loyalty. This paper defines framework for research
of relation between service quality, satisfaction and customer quality. The
paper consists of three parts. In the first part a shorter description of research
problem is given, aims are defined and the research assumptions. In the
second part the conceptual part of the research is defined, and in the third
one the results of the empirical researches are presented. At the end,
conclusion is given.

2. Problem description
Challenge is not in creation of the high quality services and making customers
be satisfied, because many competitors are able to do that, but in making
loyal and profitable customers. Loyalty means that customer, during a longer
period of time, buys and uses specific service structure and has positive
attitudes towards company and its offers. Companies are in constant dilemma
about what shall be done in order to gain true and loyal customers. Everybody
agrees that service quality and satisfaction are main prerequisites for
customer loyalty. If customer is satisfied, it’s logical that he should buy - use
the same service of a company again. However, that doesn’t happen always,
since satisfaction is not the only prerequisite for loyalty. A customer can be
satisfied until a competitive service appears the quality and price of which are
more attractive. A customer too can have positive attitudes toward a company
and not to be satisfied with a service and vice versa. That means that satisfied
customer still can change a company. It is necessary to bear in mind that
modern customers are rarely characterized with lifetime loyalty, or any other
kind of loyalty for that matter, to one offer or one company. That’s why
relations between specific factors and dimensions of customer loyalty shall be
explored and analyzed.
This paper’s aim is to show the logistics service quality impact on
customer satisfaction and loyalty. Namely, in marketing literature customer
loyalty is considered to be one of the main repercussions of service quality
and customer satisfaction. The greatest number of studies in the past dealt
with quality – satisfaction relation and today, scientific focus is redirected from
satisfaction over loyalty to company’s profit. Profit degree increase is the main
aim of all the activities from the service quality and customer satisfaction
management domain. Available scientific researches strongly support thesis
on positive impact of service quality and customer satisfaction on customer’s
intended behavior (for example Parasuraman et. al. 1994). In order to more
precisely examine the impact of service quality on customer quality and
provider’s business success, one should, in the chain of satisfaction and
profit, examine relations between: quality and satisfaction and loyalty of
service. Croinin i Taylor (1992) identified positive correlation between service
quality and future purchase intension. Parasuraman et al. (1994) in many
 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 
studies found positive side of relation between customer’s perception of
service quality and competence to recommend service company to
acquaintances. Similar to Boulding el al. (1993) they confirmed positive
correlation between service quality, future purchase intention and
recommendation giving.
The question is how comprehension of logistics service quality impact
loyalty between logistics provider and customer. Conclusion can be made that
the more positive the logistics service perception is, the greater the loyalty is.
However, in reality, the relations are more complex because, besides the
quality, a series of other dimensions have an impact on satisfaction and
loyalty. In the next part of the paper the conceptual model is presented that
explains in detail relations between logistics service quality, customer
satisfaction and loyalty.

3. Conceptual research model

Bearing in mind previous review, the model is defined that considers and
describes relations within satisfaction and profit chain, with the main emphasis
put on relations within conceptual quality-satisfaction-loyalty network. It is
assumed that these relations are not a priori direct and linear but it's about
asymmetrical relations. Besides the service quality, there are other decisive
factors that have an impact on customer satisfaction and loyalty, such as:
prices (costs) of services, provider's relation with customer, competition,
changing provider costs. For these reasons, the model is conceived which
main structure is showed in the picture 1.

S1 S2 S3 L1 L2 L3
D1

D2

Service
D3 Quality Customer Loyalty
(SQ) Satisfaction (L )
(CS)
D4

D5

Cp CC CO
Pc

Picture 1. Conceptual research model

Logistics service quality is presented through five key dimensions of

SERVQUAL model: D1 – reliability, D2 – responsiveness, D3 - competence,
D4 - empathy, D5 – tangibility. Through the aforementioned dimensions and
SERVQUAL questionnaire (Parasuramman et al. 1994) observed and
 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 
expected service quality is determined, and difference between these two
values is service quality measure. Service quality has direct impact on
satisfaction and indirect one, through satisfaction, on customer loyalty. It has
been assumed that customer satisfaction is created on the basis of three key
elements: SQ—Service Quality, SP – Service Price and PC – Provider's
Relation with Customer. Depending on relations within the elements listed,
customer can feel different degrees of satisfaction. So for example, three sets
of customers can be distinguished: S1 - ''dissatisfied'' customers, S2 -
''satisfied'' customers and S3 - ''enthusiastic’’ customers. Customer loyalty
directly depends on the degree of satisfaction. It is assumed that ''dissatisfied''
customers would in small percent be loyal, while with ''satisfied'' ones the
percent is significantly higher, and ''enthusiastic'' customers are loyal to the
fullest extent (Kilibarda, 2011.) Besides service quality (SQ) and customer
satisfaction (CS), customer loyalty is directly affected by relation between
provider and customer (RC), changing provider costs (CC) and competitive
offer (CO). As basic measures of customer loyalty can be taken: L1 –
repeated use of services (real customer behavior), L2 – future use of services
(intended behavior) and L3 recommendation of providers to friends and
acquaintances.

4. Research results
The model presented is applied and tested on an example of one shipping
company from Belgrade that provides wide range of logistics services in
international trade flows. For data collecting, web-based survey method is
used, in accordance with guidelines established in paper Griffis et. al (2003).
Sample of 30 customers has been chosen randomly. Examinees are
contacted via e-mail and asked to fill in a questionnaire online. In order to
increase response rate, examinees were friendly reminded and encouraged to
fill in the questionnaire. 5 out of 30 e-mails were returned unfilled and
therefore deleted from the sample which resulted in net potential sample
having 25 examinees. 20 questionnaires were filled in and returned out of that
number. Most examinees are logistics managers (82.6%), while 11.7% are
vice presidents, presidents or general managers of the company. The rest of
5.7% examinees are employed in different logistics positions. Evaluation of
variable and their factors in questionnaire were made through five-point Likert
scale.
Factor structure, reliability and validity of questionnaire have been tested
with confirmatory factor analysis (CFA), the results of which are shown in
table 1. The results obtained shows that each of three variables presents high
degree of total factor variation (quality 64.65 %, satisfaction 71.73%, loyalty
67.64%). In such situations, solution that is considered acceptable is the one
that explains more that 60% of total variation (Hair at el. 1998). Measuring
instrument reliability is determined via Cronbach’s alpha coefficient values of
which goes from 0.786 to 0.876. Since those values are much higher than 0.7,
 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 
it’s considered that reliability requirement is fulfilled and that the measuring
instrument is acceptable (Nunnally and Bernstein, 1994). Convergent validity
and dimensionality of measuring instrument have been tested via factor
loadings that show connection between factors and associated variables.
Standard factor loadings in each case are over 0,5 (p<0,01), which provides
support for convergent validity of the variables observed (see Fornell and
Larcker, 1981).
Table 1. Questionnaire factor analysis

Variable Corbach s Variance Factors Factor loadings

alpha Extracted (p<0,01)
(%)
Reliability 0.763
Service Responsivene 0.827
0.786 64.65 0.796
quality ss
Competence 0.852
Empathy 0.837
Tangibility
Customer Quality 0.774
Satisfaction Price 0.815
0.837 71.73 0.7889
Relation
Satisfaction 0.835
Relation 0.776
Customer 0.876 67.64 0.795
Costs
loyalty 0.747
Competition

In table 2 correlation and descriptive statistics for variables study matrix

is shown, where average of all three variables range over third out of five
points of Likert scale. Standard deviation for variables ranges from 0.43 to
0.52 which indicates consistency of the answer. Value of correlation range
between the variables ranges from 0.65 to 0.81. Strong coherence of
variables indicates important connection and interdependence between
quality, satisfaction and loyalty. Correlation coefficient between service quality
and satisfaction is 0.81 and between service quality and loyalty 0.65. The
values given confirm strong impact of logistic services quality on customer
satisfaction and loyalty.

Table 3. Statistic characteristics and variable correlation coefficient

Correlation coefficient
 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 
Variables μ σ Service Customer Custome
Quality Satisfaction r Loyalty

Service quality 3.76 0.43 1

Customer satisfaction 3.65 0.47 0.81 1

Customer loyalty 3.34 0.52 0.65 0.76 1

5. Conclusion
It is the analysis of the resulting chain between logistics service and
satisfaction that this paper was intended for. Model that starts with logistics
service and ends with loyalty going through satisfaction prism was suggested.
Besides that, other factors were identified that, besides quality, have an
impact on customer satisfaction and loyalty. Empirically, the use of models
and the results obtained clearly confirm the starting assumption of the
research and indicate very strong impact of logistics service quality on
customer satisfaction and loyalty. However, because of considered problems
complexity, further model superstructure and research expansion in two
directions are necessary. First, the sample considered is limited to one
company and certain number of customers. In order to make it representative,
a sample has to be expanded to different logistics companies, as well as to
different customers and market segments. Second, besides the logistics
service quality analysis, it is necessary to simultaneously observe impact of
other variables, such as: prices, competition, relations toward customer,
changing provider costs and others. Besides the defects listed, the authors
consider the results of this paper to be contribution and good base for further
researches of the problem mentioned.

Acknowledgment

This work was partially supported by the Ministry of Science and

Technological Development of the Republic of Serbia, through the project TR
36006, for the period 2011-2014.

References
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 2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 
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