DOI: 10.1002/mar.

21096

RESEARCH ARTICLE

The effect of service quality on customer satisfaction, loyalty,

and happiness in five Asian countries

Taeshik Gong1 Youjae Yi2

1 Hanyang University ERICA

2 Seoul National University

Correspondence
Taeshik Gong, College of Business and
Economics, Hanyang University ERICA,
55 Hanyangdaehak-ro, Sangnok-gu, Ansan
Gyeonggi-do, 15588, Republic of Korea.
Email: gongts@hanyang.ac.kr
Abstract
This research investigates and validates the cross-national applicability of a service quality model
in five Asian countries: China, Hong Kong, Japan, South Korea, and Singapore. The objectives of
this research are to establish whether or not a service quality model can be conceptualized in
the same way across Asian countries and to explore whether or not scores on the items can be
meaningfully compared among the Asian countries. The findings show that overall service qual-
ity has a positive influence on customer satisfaction, which in turn leads to customer loyalty and
customer happiness and that the general pattern of structural paths is valid in the five countries.
Furthermore, the comparisons of paths show that most of them are not significantly different
across the five countries. The results of this study reveal four key findings. First, customer well-
being or happiness was driven by service quality. Second, customer loyalty was driven by service
quality across the five Asian countries, demonstrating that the economic values of service quality
could be applied to Asian countries just as they are in North American and European countries.
Third, customer satisfaction was driven by service quality. Fourth, customer income increased the
effect of service quality on customer happiness via customer satisfaction in China, Hong Kong, and
South Korea.

KEYWORDS
cross-national analysis, customer happiness, customer loyalty, customer satisfaction, service
quality

1 INTRODUCTION
As service quality models accumulate in North America and Europe
(Brady & Cronin, 2001; Grönroos, 1984; Parasuraman, Zeithaml, &
Berry, 1988), so do questions concerning their applicability to Asia.
These questions are even more pronounced as the world becomes
an interdependent service marketing system and the globalization of
service businesses results in increased competition among multina-
tional firms. As such, it becomes increasingly important to examine
the cross-national applicability of service quality models developed in
North America and Europe to Asia (Durvasula, Andrews, Lysonski, &
Netemeyer, 1993; Netemeyer, Durvasula, & Lichtenstein, 1991). Most
constructs and theories of service quality have been developed and
tested exclusively in North America and Europe. Thus, it is unknown
whether the theory, constructs, measures, and relationships among
constructs are culturally bound. Although many scholars have called
for an examination of the applicability of these theories to Asia (Blut,
2016; Collier & Bienstock, 2006), few studies have actually done so.
There is a need to test models cross-nationally because researchers
have assumed that North America and Europe-based concepts and
models are relevant to Asia without an actual validation of model con-
structs. This assumption can lead to invalid cross-national inferences
(Durvasula et al., 1993).
The purpose of this study is thus to test the applicability of service
quality models to Asia. More specifically, the current study puts for-
ward a service quality scale. This research investigates and validates its
cross-national applicability in five Asian countries: China, Hong Kong,1
Japan, South Korea, and Singapore. The objectives of this research are
to establish whether or not a service quality model can be conceptu-
alized in the same way across Asian countries and to explore whether
or not scores on the items can be meaningfully compared among the
Asian countries. Therefore, metric equivalence is analyzed. In addition,
this study examines whether the relationships among constructs in a
service quality model are applicable across Asian countries. Further-
more, the present study conducts an importance–performance map
analysis (IPMA) (Ringle & Sarstedt, 2016). IPMA contrasts the struc-
tural model's total effects, representing the predecessor constructs’
importance, with their average values of the latent variable scores
indicating their performance to identify predecessors that are rela-
tively more important to the target construct and highlight significant

Psychol Mark. 2018;1–16. wileyonlinelibrary.com/journal/mar 

c 2018 Wiley Periodicals, Inc. 1
2 GONG AND YI
areas for improving management activities (Ringle & Sarstedt, 2016;
Schloderer, Sarstedt, & Ringle, 2014). These findings, therefore, pro-
vide managers with specific information about measures they need to
take to increase customer happiness (Hock, Ringle, & Sarstedt, 2010).
In addition, while much of the extant research on service quality has
focused on enhancing customer loyalty, little research has focused on
increasing social performance such as customer happiness and well-
being. That said, lately there has been a substantially increased inter-
est in examining the relationship between service quality and customer
well-being. Interestingly, recent research has called for more focus on
improving customer well-being through transformative service. This
topic was one of 12 service research priorities (Ostrom et al., 2015).
Therefore, the present research examines how service quality affects
customer happiness. This study also tests the moderating role of cus-
tomer income in the relationship between overall service quality and
customer happiness through customer satisfaction. The article opens
by reviewing the literature on the conceptualization and measurement
of service quality models. The research methodology is explained, fol-
lowed by an analysis of empirical research. Finally, the findings are dis-
cussed and the managerial implications are drawn.
2 THEORY AND HYPOTHESES
2.1 Service quality model
In the service marketing literature, there has been considerable
progress in discussing how service quality should be measured. First,
Grönroos (1984) argues that service quality consists of two dimen-
sions: technical quality and functional quality. Technical quality refers
to what customers receive as a result of their interactions with a ser-
vice firm. This aspect can be called the outcome quality dimension. On
the other hand, functional quality represents how the service is deliv-
ered. In other words, the way service employees interact with cus-
tomers has an impact on customers’ view of the service. This aspect is
called the interaction quality dimension.
Second, Parasuraman et al. (1988) propose five dimensions of ser-
vice quality. More specifically, (1) tangibles are appearances of physical
elements, (2) reliability is dependable and accurate performance, (3)
responsiveness is promptness and helpfulness, (4) assurance is cred-
ibility, security, competence, and courtesy, and (5) empathy is easy
access, good communication, and customer understanding. To measure
service quality, they develop a survey instrument called SERVQUAL,
which is based on the premise that customers evaluate a firm's ser-
vice quality by comparing their perceptions of its service with their
own expectations (Sivakumar, Li, & Dong, 2014). That is, SERVQUAL
measures the service quality as the gap between expectation and per-
formance. Meanwhile, Cronin and Taylor (1992) point out that lit-
tle theoretical and empirical evidence supports the relevance of the
expectations–performance gap as the basis for measuring service qual-
ity. Instead, they argue the superiority of simple performance-based
measures of service quality (Babakus & Boller, 1992; Park & Yi, 2016).
Accordingly, they develop the performance-only measure (SERPERF)
as an alternative to the SERVQUAL measure. They conclude that the
SERVPERF scale is efficient compared to the SERVQUAL scale. Fur-
ther, they show that the analysis of the structural models supports
the theoretical superiority of the SERVPERF scale. Expanding beyond
the question of “Is SERVPERF superior to SERVQUAL?” Park and Yi
(2016) ask the question: “When is SERVPERF superior to SERVQUAL?”
By comparing the two approaches from an analytic perspective,
Park and Yi (2016) show that SERVPERF is superior to SERVQUAL
when the effect of performance on customer satisfaction is greater
than the effects of expectation on performance and customer satis-
faction or when customers are heterogeneous in the evaluation of
expectation.
Third, Brady and Cronin (2001) adopt Rust and Oliver (1994) view
that customers evaluate service quality based on three dimensions: (1)
the customer–employee interaction, (2) the physical environment, and
(3) the outcome. In addition, they adopt Dabholkar (1996) view that
service quality has a hierarchical factor structure. More specifically,
Dabholkar (1996) proposes that customers think of service quality at
different levels, such as the dimension level and the overall level. They
argue that service quality dimensions are distinct but highly correlated.
Thus, they conclude that service quality dimensions share an underly-
ing theme and that a common higher-order factor is present, which is
called overall service quality. In their effort to synthesize these concep-
tualizations, Brady and Cronin (2001) propose the hierarchical service
quality model. Here, service quality is viewed as a hierarchical factor
structure. That is, there is a common higher order factor called overall
service quality, and it consists of three dimensions: performance qual-
ity, delivery quality, and physical environment quality. Since this is the
first measure synthesizing all major prior conceptualizations, it is the
most fruitful approach to service quality assessment to date (Dagger,
Sweeney, & Johnson, 2007; Pollack, 2009; Yi & Gong, 2008).
According to Grönroos (1984), the performance (outcome) quality
dimension refers to the result of the service transaction. It is con-
cerned with what the customer actually receives from the service
transaction. Prior studies show that performance quality is a signifi-
cant determinant of overall service quality and the addition of outcome
quality significantly improves the explanatory power and predictive
validity of the service quality model (Powpaka, 1996). Furthermore,
Bolton and Drew (1991) assert that service performance levels are
inputs to customers’ perceptions of overall service quality. In addition,
Brady and Cronin (2001) argue that there is a consensus that the per-
formance quality of a service encounter significantly affects customer
perceptions of overall service quality. Thus, the following hypothesis is
proposed:
H1: Perceptions of the quality of service performance directly con-
tribute to overall service quality perceptions.
Service delivery quality focuses on customers’ perception of the
employee–customer interactions that take place during service deliv-
ery (Grönroos, 1984). Interpersonal interactions have an influence
on customer perceptions of overall service quality because of the
intangibility and inseparability of services (Brady & Cronin, 2001).
More specifically, customers evaluate overall service quality based on
their perception of employees’ responsiveness, empathy, reliability,
and professionalism (Ekinci & Dawes, 2009). Choi and Kim (2013) also
GONG AND YI
suggest that interpersonal interactions have a critical impact on cus-
tomer perception of overall service quality. Thus, the following hypoth-
esis is proposed:
H2: Perceptions of the quality of service delivery directly contribute
to overall service quality perceptions.
Brady and Cronin (2001) report that services require the cus-
tomer to be present during the process and that the surrounding
physical environment can serve as an important basis for customers’
evaluations of the overall quality of the service encounter. Baker,
Parasuraman, Grewal, and Voss (2002) show that the physical store
environment can affect customer service quality evaluations. Bitner
(1992) argues that the physical environment, such as the type of office
furniture and the décor, may influence a client's beliefs about a lawyer's
performance or overall service evaluations because the perceived
servicescape elicits cognitive responses. In-store cleanliness is asso-
ciated with the service quality of a shopping environment. Customers
utilize environmental cues to make inferences about the quality of
products/services (Chao, 2008). Thus, the following hypothesis is
proposed:
H3: Perceptions of the quality of the service environment directly
contribute to overall service quality perceptions.
2.2 Service quality and its consequences
Researchers see service quality as having an important influence
on customer satisfaction, customer loyalty, and customer happiness.
According to Lazarus's theory of emotion and adaptation (Lazarus,
1991), the appraisal processes of situational conditions lead to emo-
tional responses, which in turn induce coping activities: appraisal →
emotional response → coping (Bagozzi, 1992). Adapting this theory to
a service context, it is likely that the overall service quality appraisal
precedes emotional responses such as customer satisfaction. Further,
in the presence of a particular emotion, coping responses such as intent
to maintain and enjoy the outcome are possible (e.g., customer loyalty
and customer happiness) (Cronin, Brady, & Hult, 2000). The service
literature reports empirical results suggesting that customer satisfac-
tion is an intervening variable that mediates the relationship between
overall service quality perception and customer loyalty (Taylor & Baker,
1994). In addition, Szymanski and Henard (2001) conduct a meta-
analysis and document that performance (e.g., overall service quality)
positively affects customer satisfaction and that the outcome of cus-
tomer satisfaction is customer loyalty (e.g., word-of-mouth and repur-
chase intentions). Furthermore, Hellier, Geursen, Carr, and Rickard
(2003) find that overall service quality influences customer satisfac-
tion, which in turn leads to customer loyalty. Early research identifies
customer satisfaction as the main predictor of customer loyalty (Hume
& Mort, 2010; Patterson, Johnson, & Spreng, 1997; Sweeney, Soutar, &
Johnson, 1999).
All in all, it is expected that overall service quality is an antecedent
of customer satisfaction and that satisfied customers are more likely
to engage in positive word-of-mouth and repurchase (Pollack, 2009).
Thus, the following hypotheses are proposed:
3
H4: Overall service quality is positively related to customer satisfac-
tion.
H5: Customer satisfaction is positively related to customer loyalty.
2.3 Customer happiness
Service has been firmly established as a critical means for enhancing
firm performance. Furthermore, service now dominates the lives of
consumers and therefore marketers have the opportunity to improve
consumer happiness and begin to concentrate on enhancing customer-
related outcomes as well (Anderson et al., 2013; De Keyser & Lariviere,
2014). The primary focus of service marketing has thus shifted from
satisfying customer needs to enhancing customer happiness. In
other words, the purpose of service marketing has been broadened
and centered on the improvement of customer happiness beyond
customer satisfaction (Sirgy, Samli, & Meadow, 1982). This emerging
area has been referred to as transformative service research, which
is defined as any research that investigates the relationship between
service and customer happiness aiming at improving the lives of
customers (Anderson & Ostrom, 2015). In a similar manner, a social
marketing perspective emphasizes that marketing should deliver value
to customers in a way that improves customers’ happiness. Therefore,
under the social marketing concept, firm performance is measured
by social outcomes such as customer happiness (Su, Swanson, &
Chen, 2016). Furthermore, the social marketing concept assesses the
societal impact of service marketing on customer happiness (Dagger &
Sweeney, 2006).
Customer happiness is conceptualized as customers’ perception of
the extent to which their well-being and quality of life are enhanced.
Thus, customer happiness reflects the culmination of customers’
subjective evaluation of their current life circumstances (Dagger &
Sweeney, 2006; De Keyser & Lariviere, 2014; Hellén & Sääksjärvi,
2011). Dagger and Sweeney (2006) point out that a series of ser-
vice encounters results in perceptions that form the basis of cus-
tomers’ satisfaction evaluation, which in turn leads to customer reac-
tions such as customer happiness. In addition, Sweeney, Danaher, and
McColl-Kennedy (2015) suggest that customer satisfaction with con-
crete events spills over to life domains, which in turn leads to cus-
tomer happiness. In a similar logic, the bottom-up theory of customer
happiness states that customer satisfaction with the specific service
encounter spills over upward to the overall service satisfaction, which
in turn spills over upward to the most superordinate domain of cus-
tomer life satisfaction such as customer happiness (Neal, Uysal, & Sirgy,
2007).
Although the extensive body of research on customer loyalty has
focused primarily on benefits to the firm, customer loyalty can also
result in benefits to the customer in the form of customer happiness
(Aksoy et al., 2015). According to Aksoy et al. (2015), the primary
role of customer loyalty is to make customers happy because the core
principle of customer loyalty is to connect friends and family, which
are the primary determinants of customer happiness (Nicolao, Irwin,
& Goodman, 2009). Gilbert (2005) asserts that friends and families
offer strong social connections, interactions, and a sense of security,
all contributing to customer happiness. Furthermore, customer loyalty
4 GONG AND YI
Performance
service quality
H1
Delivery H2 Overall
service quality service quality
H3
Environment
service quality
FIGURE 1 Conceptual framework
is driven by the interactions that customers develop with employees,
which in turn lead to customer happiness. All individuals have needs
for belonging and interdependence, and these needs can be fulfilled
through customer loyalty, which can be defined as a desire to maintain
the relationship (Aksoy et al., 2015). In addition, customers develop
affectionate bonds with services, which in turn lead to customer loy-
alty, which is argued to be a catalyst for customer happiness (Yim, Tse,
& Chan, 2008). This view is also supported by Orth, Limon, and Rose
(2010) who find that customer loyalty toward the service arouses cus-
tomer happiness. Furthermore, a customer's interaction with the ser-
vice employee may arouse positive emotions, which in turn lead to
customer loyalty. Interestingly, rewarding experiences with services
through customer loyalty make the customer feel better. Finally, hap-
piness results from customers’ repeated experience with services, that
is, customer loyalty (Bettingen & Luedicke, 2009). Thus, the following
hypotheses are proposed:
H6: Customer satisfaction is positively related to customer happi-
ness.
H7: Customer loyalty is positively related to customer happiness.
Figure 1 provides a conceptual model of service quality and illus-
trates the hypothesized relationships among the key constructs.
3 METHOD
3.1 Sample and procedures
Data were collected through a survey that was distributed to con-
sumers in each of the five countries: China, Hong Kong, Japan, South
Korea, and Singapore. Quota sampling was used to generate samples
that were representative of the population in terms of age and gender.
China, Hong Kong, Japan, South Korea, and Singapore served as the
countries of study because they share similar cultural values and norms
(Hofstede, Hofstede, & Minkov, 2010). Finding differences between
countries with similar cultural backgrounds allows us to make a more
convincing argument than conducting the same study across countries
that differ greatly in cultural background. Moreover, using countries
with highly disparate cultural backgrounds could introduce significant
biases into our samples, which could limit the possibility of generalizing
the findings.
Customer
loyalty
H5
H4 Customer H7
satisfaction
H6
Customer
happiness
The demographics of the sample are presented in Table 1 The sam-
ple consists of 175 (China), 178 (Hong Kong), 172 (Japan), 180 (South
Korea), and 174 (Singapore) valid responses. The unit of analysis of
this study is an individual shopper who had made three purchases
within three months at a major department store at the time of data
collection. Self-administered questionnaires were used as the method
of data collection. The potential respondents were approached when
they were leaving department stores and asked to participate in a short
survey by a study assistant. They were informed about the investiga-
tion and told that the individual responses were to be kept strictly con-
fidential. A study assistant waited while participants completed the
research questionnaires.
As the survey was conducted in five countries, five versions of the
questionnaire were administered. The questionnaire, originally writ-
ten in English, was translated into Mandarin Chinese, Cantonese Chi-
nese, Japanese, and Korean by bilingual people whose native language
was Mandarin Chinese, Cantonese Chinese, Japanese, or Korean,
respectively. These translated questionnaires were then translated
back into English by another bilingual person whose native language
was Mandarin Chinese, Cantonese Chinese, Japanese, or Korean,
respectively. These two English versions were then compared and no
item was found to contain a specific cultural context in terms of lan-
guage (Brislin, 1980). The questionnaire was pretested with 20 shop-
pers at the department store, and there were no major problems with
understanding or wording.
3.2 Instrumentation
The research derived measures for key constructs from existing scales
in the literature. All constructs were measured with items using 9-point
Likert scales ranging from 1 = strongly disagree to 9 = strongly agree.
Measurement scales for all constructs are summarized in Table 2. Ser-
vice quality questions were from Dabholkar, Thorpe, and Rentz (1996)
as well as Brady and Cronin (2001). More specifically, performance ser-
vice quality was measured by six items that assessed the availability,
quality, differentiation of merchandise, the extent to which service was
customer-oriented, and the extent to which new products were pro-
vided compared to others. Delivery service quality was measured by
six items that assessed the extent to which employees gave prompt,
courteous, individual, voluntary, and knowledgeable service to cus-
tomers. In addition, these items assessed the extent to which employ-
ees were able to handle customer complaints directly and immediately
GONG AND YI 5

TA B L E 1 Demographic profile of respondents

Percent
China Hong Kong Japan South Korea Singapore
Gender Male 25.71 25.84 26.16 26.10 25.86
Female 74.29 74.16 73.84 73.90 74.14
Age 20–29 18.28 17.98 18.02 18.30 18.39
30–39 31.43 31.46 31.98 31.70 31.61
40–49 31.43 31.46 31.98 31.70 31.61
50–59 18.86 19.10 18.02 18.30 18.39
Education level Secondary 10.28 41.01 18.02 27.80 38.51
Bachelor 74.86 48.88 73.26 63.80 50.00
Master/Ph.D. 14.86 10.11 8.72 8.70 11.49

on the site. Environment service quality was measured by six items that
assessed the extent to which the department store had a professional,
modern-looking, and convenient appearance. In addition, these items
assessed the extent to which customers perceived a positive physical
environment, parking places that were large and convenient, and a lay-
out that made it easy to find products.
Overall service quality and customer satisfaction were measured
using a one-item scale because these constructs are easily understood
and imagined (e.g., overall service quality, overall customer satisfac-
tion) (Bergkvist & Rossiter, 2007; Rossiter, 2002). Customer loyalty
was measured by a two-item scale. These items were “I will say posi-
tive things about XYZ to other people” and “I intend to continue doing
business with XYZ” (Zeithaml, Berry, & Parasuraman, 1996). Finally,
customer happiness was measured by two items, “My quality of life is
enhanced by doing business with XYZ” and “I think XYZ contributes
to customers’ happiness” (Dagger & Sweeney, 2006; Sweeney et al.,
2015).
4 RESULTS
The present study used the SmartPLS 3 software (Ringle, Wende,
& Becker, 2015) to validate the measurement model and test the
hypotheses. Partial least squares structural equation modeling (PLS-
SEM) is a composite-based approach to structural equation modeling
(SEM) that forms composites as linear combinations of their respec-
tive indicators, which in turn serve as proxies for the conceptual vari-
ables (Hair, Hult, Ringle, & Sarstedt, 2017). Recent research argues
that employing modeling constructs as composites is a more realistic
approach to measurement (Sarstedt, Hair, Ringle, Thiele, & Gudergan,
2016). Furthermore, this study focuses on predicting customer satis-
faction, customer loyalty, and customer happiness via service quality,
which calls for the use of PLS-SEM as a prediction-oriented approach
to SEM (Hair, Hult, Ringle, Sarstedt, & Thiele, 2017).
Assessment of the measurement models includes composite reli-
ability to evaluate the internal consistency and average variance
extracted (AVE) to evaluate the convergent validity. Assessment
of measurement models also involves discriminant validity. The
heterotrait–monotrait (HTMT) ratio of correlations can be used to
examine discriminant validity (Hair, Hult, Ringle, & Sarstedt, 2017;
Henseler, Ringle, & Sarstedt, 2015; Voorhees, Brady, Calantone, &
Ramirez, 2016). The composite reliabilities for all variables exceed the
cutoff value of 0.70, and the AVE for all focal variables exceeds the 0.50
benchmark, demonstrating that each construct has acceptable psycho-
metric properties. In support of the convergent validity of the scales,
all indicators load significantly (p < 0.05) and substantially (>0.70) on
their hypothesized factors (see Table 2). Furthermore, all HTMT val-
ues are lower than the threshold value of 0.85. In addition, neither of
the 95% bias-corrected and accelerated confidence intervals (CIs) of
the HTMT ratio of correlations statistic includes the value 1.00 (see
Table 3), thus supporting discriminant validity.
This study relies on one source of data, that is, ratings by customers,
so potential common method bias is statistically controlled (MacKen-
zie, Podsakoff, & Jarvis, 2005). First, following the procedure suggested
by Williams and Anderson (1994), a method factor was added with
all indicators for all latent variables loading on this factor. The struc-
tural results are consistent with the original structural model for all five
countries. This study also implemented the procedure used by Liang,
Saraf, Hu, and Xue (2007). The results show that method factor load-
ings are not significant and the ratio of substantive variance to method
variance is more than 100:1 for all five countries, which means that
common method bias is not a serious issue.
Henseler, Ringle, and Sarstedt (2016) advocate the test of mea-
surement invariance before performing a multigroup analysis between
two or more groups when using SEM. They suggest the measurement
invariance of composites (MICOM) that is suitable for PLS-SEM. Given
that the current study aims to compare a model over two groups
via PLS-SEM, MICOM was adopted. MICOM is a three-step process
involving (1) configural invariance assessment (i.e., equal parameteri-
zation and way of estimation), (2) compositional invariance assessment
(i.e., equal indicator weights), and (3) assessment of equal means and
variances. If configural and compositional invariance are established,
partial measurement invariance is also established. If partial measure-
ment invariance is confirmed, one can compare the path coefficient
estimates across the groups.
Step 1 of the MICOM procedure, configural invariance, was estab-
lished because the PLS path model setups are equal across the five
countries, and group-specific model estimations draw on identical
algorithm settings. Next, to establish compositional invariance (step
2), the original composite score correlation c was compared with the
 6

TA B L E 2 Measurement model

China Hong Kong Japan South Korea Singapore

Construct/indicator Loadings Reliability AVE Loadings Reliability AVE Loadings Reliability AVE Loadings Reliability AVE Loadings Reliability AVE
Performance 0.92 0.67 0.93 0.67 0.92 0.67 0.93 0.70 0.91 0.63
1. XYZ has merchandise 0.86 0.88 0.83 0.86 0.79
available when the
customers want it.
2. XYZ offers high quality 0.87 0.87 0.88 0.86 0.89
merchandise.
3. The service of XYZ is 0.90 0.87 0.87 0.90 0.83
customer-oriented.
4. I achieve my purpose 0.88 0.88 0.86 0.87 0.75
when I use the service of
XYZ.
5. XYZ continuously 0.70 0.78 0.70 0.72 0.73
provides new products
compared to others.
6. XYZ provides 0.70 0.75 0.78 0.79 0.75
differentiated services
that others do not.
Delivery 0.96 0.70 0.97 0.84 0.96 0.78 0.96 0.80 0.96 0.79
1. Employees of XYZ have 0.83 0.89 0.88 0.82 0.89
the knowledge to answer
customers’ questions.
2. Employees of XYZ are 0.84 0.92 0.90 0.90 0.92
consistently courteous
with customers.
3. XYZ gives customers 0.87 0.94 0.89 0.89 0.92
individual attention.
4. The attitude of XYZ's 0.87 0.93 0.83 0.92 0.85
employees demonstrates
their willingness to help
me.
5. Employees of XYZ give 0.92 0.93 0.91 0.93 0.91
prompt services to
customers.
6. Employees of XYZ are 0.86 0.90 0.89 0.90 0.84
able to handle customer
complaints directly and
immediately.
(Continues)
GONG AND YI
TA B L E 2 (Continued)

China Hong Kong Japan South Korea Singapore

GONG AND YI

Construct/indicator Loadings Reliability AVE Loadings Reliability AVE Loadings Reliability AVE Loadings Reliability AVE Loadings Reliability AVE
Environment 0.93 0.70 0.95 0.75 0.93 0.70 0.92 0.67 0.94 0.73
1. Employees of XYZ have a 0.86 0.89 0.89 0.82 0.89
neat, professional
appearance.
2. I would rate XYZ's 0.86 0.88 0.90 0.88 0.90
physical environment
highly.
3. XYZ has modern-looking 0.88 0.88 0.84 0.86 0.88
equipment and fixtures.
4. XYZ has clean, attractive, 0.9 0.87 0.87 0.85 0.90
and convenient public
areas (restrooms, fitting
rooms).
5. XYZ provides plenty of 0.82 0.88 0.76 0.82 0.79
convenient parking for
customers.
6. The store layout of XYZ 0.74 0.81 0.71 0.70 0.75
makes it easy for
customers to find what
they need.
Overall service quality 1 1 1 1 1 1 1 1 1 1
1. I believe XYZ offers 1 1 1 1 1
excellent service.
Customer satisfaction 1 1 1 1 1 1 1 1 1 1
1. Overall, I am satisfied 1 1 1 1 1
with XYZ.
Customer loyalty 0.94 0.89 0.95 0.90 0.90 0.81 0.96 0.92 0.97 0.94
1. I will say positive things 0.95 0.94 0.88 0.96 0.96
about XYZ to other
people.
2. I intend to continue 0.95 0.95 0.91 0.96 0.96
doing business with XYZ.
Customer happiness 0.96 0.92 0.96 0.92 0.96 0.92 0.96 0.93 0.97 0.94
1. My quality of life is 0.94 0.96 0.96 0.97 0.97
enhanced by doing
business with XYZ.
2. I think XYZ contributes 0.94 0.96 0.96 0.96 0.96
to customers’ happiness.
7
8 GONG AND YI

TA B L E 3 Discriminant validity assessment results

Variable Performance Delivery Environment Service quality Customer satisfaction Customer loyalty
Delivery China [0.78, 0.92]
Hong Kong [0.79, 0.91]
Japan [0.84, 0.94]
South Korea [0.68, 0.88]
Singapore [0.73, 0.87]
Environment China [0.67, 0.89] [0.71, 0.89]
Hong Kong [0.76, 0.88] [0.75, 0.87]
Japan [0.57, 0.81] [0.56, 0.82]
South Korea [0.56, 0.79] [0.55, 0.82]
Singapore [0.69, 0.86] [0.79, 0.92]
Service quality China [0.72, 0.93] [0.71, 0.88] [0.56, 0.83]
Hong Kong [0.71, 0.85] [0.79, 0.89] [0.75, 0.86]
Japan [0.71, 0.85] [0.70, 0.84] [0.69, 0.85]
South Korea [0.74, 0.87] [0.74, 0.86] [0.58, 0.79]
Singapore [0.63, 0.84] [0.66, 0.86] [0.68, 0.86]
Customer satisfaction China [0.75, 0.92] [0.66, 0.84] [0.55, 0.80] [0.74, 0.91]
Hong Kong [0.72, 0.85] [0.80, 0.89] [0.68, 0.83] [0.76, 0.84]
Japan [0.71, 0.86] [0.71, 0.85] [0.66, 0.83] [0.79, 0.86]
South Korea [0.70, 0.88] [0.76, 0.88] [0.55, 0.77] [0.71, 0.84]
Singapore [0.58, 0.81] [0.61, 0.84] [0.52, 0.82] [0.75, 0.94]
Customer loyalty China [0.78, 0.95] [0.63, 0.84] [0.60, 0.85] [0.68, 0.86] [0.73, 0.87]
Hong Kong [0.63, 0.82] [0.68, 0.84] [0.67, 0.82] [0.79, 0.89] [0.77, 0.89]
Japan [0.77, 0.95] [0.72, 0.89] [0.76, 0.96] [0.72, 0.87] [0.69, 0.85]
South Korea [0.62, 0.83] [0.66, 0.84] [0.59, 0.86] [0.66, 0.83] [0.69, 0.85]
Customer happiness Singapore [0.46, 0.72] [0.56, 0.82] [0.60, 0.82] [0.70, 0.84] [0.64, 0.83]
China [0.78, 0.97] [0.71, 0.92] [0.61, 0.88] [0.69, 0.87] [0.71, 0.86] [0.70, 0.87]
Hong Kong [0.74, 0.88] [0.80, 0.91] [0.72, 0.86] [0.74, 0.86] [0.73, 0.85] [0.72, 0.87]
Japan [0.73, 0.88] [0.65, 0.83] [0.75, 0.88] [0.63, 0.84] [0.62, 0.84] [0.73, 0.85]
South Korea [0.57, 0.77] [0.68, 0.82] [0.57, 0.78] [0.65, 0.82] [0.63, 0.83] [0.71, 0.85]
Singapore [0.59, 0.83] [0.55, 0.81] [0.61, 0.83] [0.71, 0.86] [0.69, 0.86] [0.75, 0.90]

Notes: The numbers in brackets are the 95% bias-corrected and accelerated confidence intervals of the HTMT statistic.

empirical distribution of the composite score correlation resulting
from the permutation procedure (cu ) with 1000 permutations and a
5% significance level for each combination of countries. If c exceeds the
5% quantile of cu , compositional invariance is established. The results
in Table 4 show that partial measurement invariance is established
among all five countries, thus allowing for a multigroup analysis that
compares the path coefficients among the samples from these five
countries to identify significant differences. However, this study did
not assess the equality of the composite mean values and variances
(step 3) because the purpose of this study is to focus on cross-country
comparisons and not to pool the data.
Table 5 lists the beta coefficients for five countries, along with the
R2 value for each endogenous construct. The models demonstrate
good explanatory power, as the R2 values range from 0.53 to 0.87
(Henseler, Hubona, & Ray, 2016). The bootstrapping analyses using
5000 samples show that all the path coefficients are significant, sup-
porting all the hypotheses. Finally, in light of the partial measurement
invariance, the samples from five countries were compared by means
of multigroup analysis. In the first step, the omnibus test of group dif-
ferences was applied to assess if the path coefficients are equal across
the five groups. The analysis reveals that, in respect of all five structural
model relations, the null hypothesis that the seven path coefficients
are equal across the five groups can be rejected. These results suggest
that, in respect of all relationships, at least one path coefficient differs
from the remaining four across the five countries (Sarstedt, Henseler,
& Ringle, 2011). Next, Table 6 shows the differences in seven path
coefficient estimates across five countries and provides the results of
multigroup comparison. The analysis shows that path coefficient esti-
mates are partially invariant across the samples from five countries, as
only two path coefficient estimates are significantly different.
Furthermore, this study uses an IPMA to extend the PLS-SEM
results by taking the performance of each construct into account. The
results permit the identification of determinants with a relatively high
importance and relatively low performance. These determinants with
GONG AND YI 9

high importance and low performance are major improvement areas

Quan-
South Korea vs.

tile of

0.997

0.998

1.000

1.000
1.000

1.000

1.000
that should be addressed by marketing activities (Schloderer et al.,

5%

cu
2014). Figures 2–6 show the IPMA results for five countries, respec-
Singapore tively. When the IPMA results are analyzed, the prioritization of man-

0.999

0.999

1.000

1.000
1.000

1.000

1.000
agerial activities of high importance becomes obvious.

c
Quan- More specifically, the importance–performance map for China
tile of

0.997

0.999

1.000

1.000
1.000

1.000

0.999
(Figure 2 shows that in comparison with other service quality dimen-
5%

cu
Singapore

sions, the performance quality's importance is the highest. In other

Japan vs.

0.998

1.000

1.000

1.000
1.000

1.000

1.000
words, a one-unit increase in the performance quality's performance
from 70.22 to 71.22 would increase the performance of customer
c

happiness by 0.47 points. Hence, when managers wish to improve

Quan-
Japan vs. South

tile of

0.997

0.997

1.000

1.000
1.000

1.000

1.000
the performance of customer happiness by means of overall service
5%

cu

quality, their first priority should be to improve performance qual-

Korea

0.999

0.999

1.000

1.000
1.000

1.000

1.000
ity because this construct has the highest importance among service
c

quality dimensions. On the other hand, Figure 3 for Hong Kong shows
that delivery quality has the highest importance among service qual-
Quan-
tile of

0.998

0.999

1.000

1.000
1.000

1.000

1.000
Hong Kong vs.

5%

ity dimensions but a relatively low performance. Thus, it is obvious

cu
Singapore

that improvement of the delivery quality is a top priority for Hong

0.999

1.000

1.000

1.000
1.000

1.000

1.000

Kong. Interestingly, Figure 4 shows that environment quality has the

c

highest importance among service quality dimensions and a relatively

Quan-
tile of

0.998

0.999

1.000

1.000
1.000

1.000

1.000

high performance in Japan. Thus, improvement of delivery quality is

Hong Kong vs.

5%
South Korea

cu

not a top priority in Japan. In addition, Figure 5 shows that in South

Korea, delivery quality and performance quality are important, but
1.000

0.999

1.000

1.000
1.000

1.000

1.000

their performance is rather low. Therefore, managers in South Korea

c

should devote efforts toward improving these service quality dimen-

Quan-
tile of

0.998

0.999

1.000

1.000
1.000

1.000

0.999
Hong Kong vs.

sions. Lastly, Figure 6 shows that in Singapore, service quality dimen-

5%

cu

sions are rather similar in terms of their importance and performance.

Therefore, resources should be equally allocated to service quality
Japan

0.999

0.999

1.000

1.000
1.000

1.000

1.000

dimensions in Singapore. Beyond service quality dimensions, across

c

five countries, customer satisfaction has the highest importance, cus-

Quan-
tile of

0.998

0.999

1.000

1.000
1.000

1.000

1.000

tomer loyalty has the second highest importance, and overall service
5%

cu
Singapore

quality is the third priority, except for in Japan.

China vs.

0.999

1.000

1.000

1.000
1.000

1.000

1.000

In addition to the theoretically hypothesized paths illustrated in

Figure 1 this study also tests the potential moderating effect on
Notes: If c < 5% quantile of cu , compositional invariance requirements are violated.
c

the key path in an exploratory way. The current research performs

Quan-
China vs. South

tile of

0.998

0.998

1.000
1.000

1.000
1.000

1.000

this analysis with customer income, which was measured by asking

5%

cu

“how much money does your household earn monthly?” (1 = less

Korea

1.000

0.999
1.000

1.000

1.000
1.000

1.000

than 150 USD, 2 = 151–200 USD, 3 = 201–250 USD, 4 = 251–

Measurement invariance (MICOM) assessment

300 USD, 5 = 301–400 USD, 6 = 401–500 USD, 7 = 501–600 USD,

c

8 = 601–700 USD, 9 = 701–800 USD, and 10 = more than 801

Quan-
China vs. Japan

tile of

1.000

0.998
0.998

1.000

1.000
1.000

1.000
5%

USD). Prior research argues that people with higher income tend to
cu

be happier than those with lower income because those with higher
1.000

0.999
0.999

1.000
1.000

1.000
1.000

income are better able to fulfill their aspirations and feel better off
c

(Blanchflower & Oswald, 2004; Easterlin, 2001). Previous research

Quan-
tile of

0.998

0.999
1.000

1.000
1.000

1.000
1.000

also shows that upper-income customers have lower expectations

China vs. Hong

5%

cu

about service quality than middle- and lower-income customers, which

in turn increase customer satisfaction and customer happiness (Scott &
0.999

1.000
1.000

1.000
1.000

1.000
1.000
Kong

Shieff, 1993).
c

Therefore, this study tested the moderating effect of customer

Customer loyalty

income on the relationship between overall service quality and cus-

Service quality

satisfaction
Performance

Environment

happiness

tomer happiness mediated by customer satisfaction. A moderated

Customer

Customer
TA B L E 4

Variable

Delivery

mediation analysis was performed using the PROCESS macro (Model

14; Hayes, 2015), with overall service quality as the independent vari-
able, customer satisfaction as the mediator, customer income as the
10 GONG AND YI

TA B L E 5 Results of the country-specific structural model

Path relationships China Hong Kong Japan South Korea Singapore

H1: Performance→service quality 0.34*** 0.14*** 0.31*** 0.38*** 0.28***
H2: Delivery→service quality 0.35*** 0.48*** 0.25** 0.38*** 0.28**
H3: Environment→service quality 0.23*** 0.30*** 0.36*** 0.16* 0.32***
H4: Service quality→customer satisfaction 0.89*** 0.90*** 0.93*** 0.89*** 0.87***
H5: Customer satisfaction→customer loyalty 0.75*** 0.78*** 0.76*** 0.74*** 0.73***
H6: Customer satisfaction→customer happiness 0.35*** 0.48*** 0.18* 0.39*** 0.41***
H7: Customer loyalty→customer happiness 0.50*** 0.34*** 0.69*** 0.44*** 0.48***
R2
Service quality 0.69 0.73 0.71 0.72 0.66
Customer satisfaction 0.80 0.81 0.87 0.80 0.76
Customer loyalty 0.57 0.61 0.59 0.55 0.53
Customer happiness 0.64 0.61 0.71 0.60 0.68

Notes: * p < 0.05; ** p < 0.01; *** p < 0.001.

second-stage moderator, and customer happiness as the dependent
variable. As Table 7 shows, the results suggested a significant inter-
action effect between customer satisfaction and customer income in
three countries: China, Hong Kong, and South Korea. The index of mod-
erated mediation indicated that CI did not include zero in China (CI
[0.04, 0.07]), Hong Kong (CI [0.00, 0.07]), and South Korea (CI [0.01,
0.04]). In other words, the indirect effect of service quality on customer
happiness via customer satisfaction is moderated by customer income
in these three countries. In contrast, the index of moderated media-
tion included zero in Japan (CI [−0.04, 0.04]) and Singapore (CI [−0.03,
0.03]), and the interaction effect of customer satisfaction and customer
income was insignificant, suggesting no moderation effect of customer
income (Hayes, 2015).
To probe the moderation of the indirect effect, a spotlight analysis
was run (Spiller, Fitzsimons, Lynch, & McClelland, 2013). Using the beta
coefficient estimates, the bottom of Table 7 shows the indirect effect
of service quality on customer happiness via customer satisfaction at
low (−1 SD), moderate (mean), and high (+1 SD) levels of customer
income. Focusing on the three countries with significant moderation
effects (i.e., China, Hong Kong, and South Korea), the indirect effects of
service quality on customer happiness via customer satisfaction were
all significant at low (−1 SD), moderate (mean), and high (+1 SD) levels
of customer income. Furthermore, the indirect effect was stronger for
customers with higher income. For example, in Hong Kong, the effect is
0.23 when customer income is low (one SD below the mean), whereas it
is 0.41 when customer income is high (one SD above the mean). A sim-
ilar pattern was found in China and South Korea. Taken together, cus-
tomer income seems to increase the effect of service quality on cus-
tomer happiness via customer satisfaction in China, Hong Kong, and
South Korea.
5 CONCLUSION AND IMPLICATIONS
The current study examines whether the relationships between ser-
vice quality and its consequences, such as customer satisfaction,
loyalty, and happiness, are applicable across the five countries in Asia
considered in this study. The service quality model has been developed
in countries such as the United States and Europe, and there has been a
need for testing this model in Asian countries. By doing so, researchers
could examine the applicability of the service quality model to Asian
countries. The cross-cultural psychology literature suggests that the
metric invariance and the relationships among constructs in a model
must be established for a model to be applicable across countries
(Durvasula et al., 1993). Accordingly, this study used a national-
level analysis and a multigroup analysis to examine the model cross-
nationally in five Asian countries. The results suggest that overall ser-
vice quality has a positive influence on customer satisfaction, which in
turn leads to customer loyalty and customer happiness, and that the
general pattern of structural relationships is valid for the five countries.
Furthermore, the comparisons of paths show that most of them were
not significantly different across five countries. However, there were
two paths that were significantly different. For instance, the path from
performance quality to overall service quality was significantly differ-
ent between China and Hong Kong. In addition, the path from customer
satisfaction to customer happiness was significantly different between
Hong Kong and Japan.
It can be noted that this research is the first cross-national com-
parative study of service quality and customer satisfaction in the five
Asian countries. According to a review of cross-cultural customer stud-
ies, most previous studies involve only two countries (Sin, Cheung, &
Lee, 1999). Thus, previous studies may have limited value compared
to studies done in several countries. Studies done in several countries
could provide researchers a deeper understanding of the effects of
country on service quality models. Hence, this study empirically exam-
ined the service quality model using data collected from five Asian
countries: China, Hong Kong, Japan, South Korea, and Singapore. Over-
all, the results support the proposed model of service quality for China,
Hong Kong, Japan, South Korea, and Singapore. As expected, service
performance, service delivery, and service environment were found
to be determinants of overall service quality perceptions. In addition,
overall service quality perceptions were found to be a determinant of
 GONG AND YI

TA B L E 6 Multigroup comparison test results

Relationship
China vs. Hong China vs. South China vs. Hong Kong vs. Hong Kong vs. Hong Kong vs. Japan vs. South Japan vs. South Korea vs.
Kong China vs. Japan Korea Singapore Japan South Korea Singapore Korea Singapore Singapore
│diff │p-value │diff │p-value │diff │p-value │diff │p-value │diff │p-value │diff │p-value │diff │p-value │diff │p-value │diff │p-value │diff │p-value
Performance→ 0.44 0.00*** 0.26 0.02 0.19 0.06 0.29 0.89 0.19 0.95 0.25 0.99 0.15 0.94 0.07 0.78 0.04 0.37 0.10 0.55
service quality
Delivery→ 0.18 0.92 0.05 0.36 0.08 0.72 0.02 0.44 0.24 0.93 0.10 0.20 0.21 0.55 0.13 0.95 0.03 0.59 0.10 0.65
service quality
Environment→ 0.26 0.99 0.33 0.99 0.13 0.84 0.29 0.44 0.07 0.77 0.14 0.09 0.02 0.58 0.20 0.65 0.04 0.35 0.16 0.43
service quality
Service quality→ 0.02 0.75 0.05 0.97 0.01 0.62 0.01 0.43 0.03 0.85 0.01 0.43 0.03 0.29 0.04 0.99 0.06 0.11 0.02 0.87
customer
satisfaction
Customer 0.01 0.62 0.00 0.48 0.03 0.32 0.04 0.26 0.02 0.38 0.04 0.22 0.05 0.18 0.02 0.97 0.04 0.28 0.01 0.99
satisfaction→
customer loyalty
Customer 0.16 0.93 0.14 0.09 0.07 0.72 0.09 0.82 0.30 0.00** 0.09 0.25 0.07 0.24 0.21 0.95 0.22 0.98 0.02 0.99
satisfaction→
customer
happiness
Customer loyalty→ 0.21 0.83 0.14 0.91 0.11 0.16 0.07 0.23 0.34 0.99 0.09 0.77 0.14 0.90 0.25 0.88 0.21 0.92 0.04 0.78
customer
happiness

Notes: ** p < 0.01; *** p < 0.001.

11
12 GONG AND YI

80 80

75 75
Loyalty
70 Performance 70 Loyalty
Environment Environment
SQ
Performance

Performance
CS
65 65 CS
SQ
Delivery Performance
60 60 Delivery

55 55

50 50
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
Importance Importance

F I G U R E 2 Importance–performance map analysis for China [Color F I G U R E 5 Importance–performance map analysis for South Korea
figure can be viewed at wileyonlinelibrary.com] [Color figure can be viewed at wileyonlinelibrary.com]

80 80

75 75 Loyalty
Loyalty

70 Environment
70 CS

Performance
Delivery
Performance

Environment SQ
65 Performance
65
SQ CS
Performance Delivery
60 60

55 55

50 50
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
Importance Importance

F I G U R E 3 Importance–performance map analysis for Hong Kong F I G U R E 6 Importance–performance map analysis for Singapore
[Color figure can be viewed at wileyonlinelibrary.com] [Color figure can be viewed at wileyonlinelibrary.com]

80
that can be accomplished by means of general convergence (Calantone,
75 Schmidt, & Song, 1996).
Because of the recent increase in the globalization of the service
70 Loyalty
Performance

business, marketers have a growing need for cross-national constructs

Environment
65 SQ CS and measures that are reliable, valid, and applicable across countries.
Globalization of markets has resulted in increased competition among
60 Delivery
Asian brands. Maintaining consistently high quality services is a pow-
Performance
55 erful means of increasing the overall performance of a global Asian
enterprise (Ostrom et al., 2015). Measures with sound psychometric
50
properties across Asian countries will facilitate service marketing
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
Importance strategies in Asian markets (Netemeyer et al., 1991). This study exam-
ines the measures of service quality, customer satisfaction, customer
FIGURE 4 Importance–performance map analysis for Japan [Color
loyalty, and customer happiness in a cross-national context. Strong
figure can be viewed at wileyonlinelibrary.com]
support for these constructs’ psychometric properties is found across
five Asian countries.
customer satisfaction. Customer satisfaction was found to be a deter- Given recognition of the impact of service marketing on social per-
minant of customer loyalty and customer happiness. Finally, customer formance (e.g., transformative service research, customer well-being
loyalty was found to be a determinant of customer happiness. These or happiness) (Anderson et al., 2013), the present study represents an
results provide strong evidence for the cross-country stability of the important step forward. The results of this study reveal three key find-
service quality model (Cadogan, Diamantopoulos, & De Mortanges, ings. First, social performance, such as customer happiness, was driven
1999). Cook and Campbell (1979) note that to demonstrate robust by service quality. This finding makes a key contribution to the service
causal relationships, using one sample of respondents is not appropri- literature, extending the understanding of service co-creation beyond
ate. The current study tests the model using data collected from five economic indicators. This finding is significant, especially because
countries to increase the confidence of a robust causal relationship the role of customer happiness as an outcome of service quality is
GONG AND YI 13

TA B L E 7 Conditional indirect effects of service quality on customer happiness through customer satisfaction

Country China Hong Kong Japan South Korea Singapore

Predictor Effect
Customer satisfaction
Constant 0.19 0.51** 0.29 0.60*** 1.16***
Service quality 0.95*** 0.92*** 0.96*** 0.91*** 0.84***
Customer happiness
Constant 1.18 2.47** 0.89 0.86 0.93
Customer satisfaction 0.36* 0.09 0.25 0.33* 0.36*
Service quality 0.41*** 0.51*** 0.47* 0.39*** 0.45***
Income −0.13 0.24* 0.02 −0.04 0.05
CS × Income 0.02* 0.04* 0.01 0.02* −0.00
Income Boot indirect effect
−1 SD 0.37 CI [0.15, 0.62] 0.23 CI [0.01, 0.47] 0.26 CI [−0.05, 0.59] 0.35 CI [0.18, 0.57] 0.29 CI [0.11, 0.52]
Mean 0.41 CI [0.20, 0.63] 0.32 CI [0.13, 0.56] 0.27 CI [−0.02, 0.57] 0.36 CI [0.22, 0.61] 0.29 CI [0.14, 0.52]
+1 SD 0.45 CI [0.21, 0.71] 0.41 CI [0.21, 0.65] 0.30 CI [−0.03, 0.61] 0.43 CI [0.24, 0.65] 0.28 CI [0.13, 0.54]
Index of moderated mediation 0.02 CI [0.04, 0.07] 0.03 CI [0.00, 0.07] 0.01 CI [−0.04, 0.04] 0.02 CI [0.01, 0.04] −0.00 CI [−0.03, 0.03]

Notes: * p < 0.05; ** p < 0.01; *** p < 0.001.

not well investigated, despite the growing interest in transformative
service, which enhances customer happiness (Garma & Bove, 2011;
Guo, Arnould, Gruen, & Tang, 2013; Mick, Pettigrew, Pechmann, &
Ozanne, 2012). Apparently, there is a need for firms to move beyond
financial performance and evaluate firm performance according to
social performance. Second, customer loyalty was driven by service
quality across the five Asian countries, demonstrating that the eco-
nomic values of service quality could be applied to Asian countries as
well as North American and European countries. Third, individual per-
formance, such as customer satisfaction, was driven by service quality.
All in all, the present study highlights the crucial role of service quality
in enhancing social, firm, and individual performances by meeting cus-
tomer needs during service co-creation. This understanding makes an
important contribution to service research.
The findings of this study highlight the value of measuring service
quality, primarily because service quality enhances customer satisfac-
tion, customer loyalty, and customer happiness. The three dimensions
of service quality (performance, delivery, and environment) were found
to influence overall service quality universally for five Asian countries.
Nevertheless, the relative importance of the three quality dimensions
seems to vary slightly across the five countries. Thus, managers should
have flexibility and strategy in resource allocation when they want to
increase overall service quality depending on the countries in which
they operate. Indeed, performance quality, delivery quality, and envi-
ronment quality play a key role in the development of overall service
quality, which in turn increases customer satisfaction, customer loy-
alty, and customer happiness. Nevertheless, managers should focus
on improving specific service quality dimensions based on the find-
ings of IPMA of this study. For that purpose, managers might want
to segment their Asian customer base according to levels of service
quality. Such segmentation would enable firms to allocate a larger
amount of resources to customers who need more support in forming
positive customer happiness. Further, they should constantly monitor
service quality and internal processes. The proposed scales could be
used as diagnostic tools to identify specific areas where improve-
ments are needed and pinpoint aspects of the firm's service quality
that require work. In addition, the service quality scale can easily be
added to the annual satisfaction survey or questionnaires for loyalty
programs. Service quality information would be useful for managers in
investigating customer happiness or well-being. Databases containing
the level of service quality could be used to enhance the level of cus-
tomer happiness (Hellén & Sääksjärvi, 2011).
This paper also shows that customer income can influence the indi-
rect effect of overall service quality on customer happiness through
customer satisfaction. Specifically, customer income is found to mod-
erate the mediating effect of customer satisfaction on customer hap-
piness. Nevertheless, the moderating effect of customer income var-
ied across countries; the moderation effect was significant in China,
Hong Kong, and South Korea, but not in Japan and Singapore. That
is, although the overall service quality model is robust across the
countries, the particular moderation effect of customer income varies
across the countries. Furthermore, in the three countries where the
moderating effect of customer income exists, customer income tends
to magnify the effect of customer satisfaction on customer happiness.
That is, as customer income increases, the importance of customer sat-
isfaction becomes higher in achieving customer happiness. Consider-
ing that little research has investigated the moderating role of cus-
tomer income in the service quality model, the findings of this study
might be meaningful.
This study is not without limitations. It only addresses one service
(the department store). Future studies should seek to extrapolate the
analysis into other service areas. Further research should also con-
sider the role that unobservable traits such as personality or lifestyle
play in explaining service quality and customer happiness. It could be
argued that segments identified by means of specific unobservable
variables are usually more homogenous and their customers respond
14
consistently to marketing actions, but customers in these segments are
difficult to identify from variables that are measured (Schloderer et al.,
2014). Using a similar logic, it is possible that the importance of various
service quality factors differs with regard to how often they visit the
department store due to habituation effects. Future research should
therefore consider this issue by segmenting the data along such behav-
ioral variables (Hock et al., 2010). The study also presents a cross-
sectional evaluation of service quality, but a longitudinal study could
enrich the findings and generate a deeper understanding of the dynam-
ics of service quality (Rindfleisch, Malter, Ganesan, & Moorman, 2008).
Future research using experiments may detect accurately more the
causality between service quality, customer satisfaction, customer loy-
alty, and customer happiness.
ACKNOWLEDGMENT
This work was supported by the research fund of Hanyang University
(HY-2017-G).
ENDNOTE
1 Although Hong Kong is a part of China, it is politically & culturally dis-
tinct from China. It is a separately administered region that has its own
currency and culture. Hence it is treated as a different country in this
paper.
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How to cite this article: Gong T, Yi Y. The effect of ser-
vice quality on customer satisfaction, loyalty, and happiness in
five Asian countries. Psychol Mark. 2018;1–16. https://doi.org/
10.1002/mar.21096