EFFECT OF SERVICE QUALITY ON BRAND IMAGE OF LOGISTIC FIRMS

TOM OGALLO MUOK

PROPOSAL SUBMITTED TO THE DEPARTMENT OF ENTREPRENURSHIP AND

TECHNOLOGY, LEADERSHIP AND MANAGEMENT IN THE SCHOOL OF
ENTREPRENURESHIP, PROCUREMENT AND MANAGEMENT IN PATIAL
FULFILMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION OF THE JOMO KENYATTA
UNIVERSITY OF AGRICULTUREAND TECHNOLOGY.

JULY 2018
 STUDENT’S DECLARATION

This proposal is my original work and has not been presented for a degree in any other
University.

Signature…………………….. Date ……………………………..

TOM OGALLO MUOK

HDB 333-C005-1133/2016

This proposal has been submitted for examination with my approval as University Supervisor.

Signature………………… Date………………………..

DR. BENEDICT MUTUKU

JKUAT, KENYA

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 DEDICATION
This thesis paper is dedicated to my dear wife Caroline, children Lynnet, Ruth, Mitchel and
Hadrial Ogallo and, and my mentor Dr. Shadrack Wasike. Your constant encouragement and
support motivate me to the best I can.

iii
 ACKNOWLEDGEMENT
I first thank the almighty for providing me with strength and ability to pursue my course up to
this level. My heartfelt gratitude also goes to my supervisor, Dr.Mutuku for his overwhelming
support, selfless dedication and his availability for consultation. I also acknowledge contribution
of the Jomo Kenyatta University Agriculture and technology for providing me with knowledge
for the success of my project research. I also sincerely thank my entire family for their moral
support and encouragement.

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 TABLE OF CONTENTS

STUDENT’S DECLARATION....................................................................................................ii

DEDICATION..............................................................................................................................iii

ACKNOWLEDGEMENT...........................................................................................................iv

LIST OF FIGURES.....................................................................................................................vii

LIST OF ACRONYMS/ABBREVIATIONS...........................................................................viii

DEFINITION OF TERMS..........................................................................................................ix

ABSTRACT....................................................................................................................................x

CHAPTER ONE............................................................................................................................1

INTRODUCTION.........................................................................................................................1

1.1 Background of the Study.......................................................................................................1

1.2 Statement of the problem.......................................................................................................4

1.3 Objectives of the study..........................................................................................................5

1.3.1 General objective............................................................................................................5

1.3.2 Specific objectives..........................................................................................................5

1.4 Research questions.................................................................................................................6

1.5 Significance of the study.......................................................................................................6

1.6 Scope of the Study.................................................................................................................6

CHAPTER TWO...........................................................................................................................7

LITERATURE REVIEW.............................................................................................................7

2.1 Introduction............................................................................................................................7

2.2 Theoretical Review................................................................................................................7

2.2.1 Relationship Marketing Theory......................................................................................7

2.2.2 Social exchange Theory..................................................................................................8

2.3 Conceptual framework...........................................................................................................9

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 2.4 Review of variables.............................................................................................................10

2.4.1 Customer perception.....................................................................................................10

2.4.2. Reliability....................................................................................................................12

2.4.3 Customer satisfaction....................................................................................................12

2.4.4 Price..............................................................................................................................12

2.4.5 Brand image..................................................................................................................13

2.5 Empirical Review................................................................................................................14

2.6 Critique of Existing Literature.............................................................................................15

2.7 Research Gaps.....................................................................................................................16

2.8 Summary..............................................................................................................................16

CHAPTER THREE.....................................................................................................................17

RESEARCH METHODOLOGY...............................................................................................17

3.1 Introduction..........................................................................................................................17

3.2 Research Design..................................................................................................................17

3.3 Target Population.................................................................................................................17

3.4 Data Collection Methods.....................................................................................................17

3.5 Conclusions..........................................................................................................................18

3.6 Recommendations................................................................................................................19

3.7 Suggestion for further study................................................................................................20

REFERENCES............................................................................................................................21

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 LIST OF FIGURES
Fig 2.1: Conceptual Framework…………………….…………………………………….…13

vii
 LIST OF ACRONYMS/ABBREVIATIONS

MDS -Multi Dimensional Scaling

RM -Relationship Marketing

SERVPERF -Service Performance

SERVQUAL –Service Quality

SET -Social Exchange Theory

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 DEFINITION OF TERMS
Agency theory; is a management approach where one individual (the agent) acts on behalf
of another (the principal) and is supposed to advance the principal’s
goals (Judge, 2005).

Customer satisfaction; It is the customers’ evaluation of a product or service in terms of

whether that service has met their needs and expectations (Zeithaml &
Bitner, 2006).

Organization image; Concern the knowledges, feelings and beliefs about an organization that
exist in the thought of its audience (Hatch & Schultz, 2007).

Perceived quality; According to Zaithaml (2005), it refers to a consumer’s feeling of a

product’s supremacy.

Service quality; Focus on meeting customer’s needs and requirements and also how well
the service matches customer’s expectations (Lewis, 2003).

Trust; The belief, that an individual or entity can be relied on to keep their word
and promise, explicit or implicit (Lewis & Chambers, 2005).

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 ABSTRACT
With increasing competition in the business world, gaining the loyalty of consumers is very

important, because of loyal customers can benefit the company. Loyalty can make consumers

use the product again, and will recommended it to others. Consumer loyalty is itself a deeply

held commitment to purchase or support returning a product or service like in the future despite

the influence of circumstances and marketing efforts could potentially cause customers to switch.

To gain customer loyalty, companies can apply for service quality in accordance with the

expectations of consumers in order to create a positive brand image in the minds of consumers,

so that the brand can be more trusted and able to increase customer loyalty. This study sought to

examine the effect of service quality on brand image of logistic firms in Mombasa County. The

study specifically looked at how customer perception, reliability, customer satisfaction and price

affect brand image. This study was guided by relationship marketing theory and social exchange

theory. Secondary data was used in data collection of this paper. Based on the study findings, it

is concluded that empathy, responsiveness and reliability perceptions were drivers to building

logistic firm brand image. Also this study concludes that consumer perception of reliability

positively influence firms’ brand image. The study recommends that logistic firms should have a

better understanding of what their customer needs are and what the customers expect from the

services provided by the firms in terms of service quality. The logistic firm managers should

identify the gap prevails between the perceived service quality and actual service quality of

logistic services provided to customers and find effective ways to enhance customer satisfaction

with respect to important service quality features.

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CHAPTER ONE

INTRODUCTION
1.1 Background of the Study
The service industry is among the oldest and most diverse industries in the world. Services vary
in many ways and include various stages. Lovelock and Wirtz (2007) defined service is as “an
act or performance made by one party to another although the process may be tied to a physical
product, the performance is transitory, often intangible in nature and does not normally result in
ownership of any of the factors of production”. It is an economic activity that creates value and
provides benefits for customer at specific time and place by bringing about a desired change in or
on behalf of the recipient of the service.

According to Gronroos (2006) service quality is the result of an evaluation process, which helps
consumer compare his expectations with his perception of the service received; in other words,
he places the perceived service and the expected service opposite one another. Javalgi et al.,
(2006) claimed that during the decision-making process, customers have very few cues while
buying services while an established brand performed as crucial role in form of risk reducer and
purveyor which makes the decision-making process easier (Davis, 2007; Kayaman & Arasli,
2007). According to Lewis and Booms, (2005) service quality is a benchmark in determining
how well the level of services provided able to match the expectations of customers. Therefore,
when consumers are satisfied with the services provided will create loyalty and can make
consumers use the product again, even be happy to recommend it to others. As the research
results obtained by Dean (2007), in the communications industry in Australia, that by providing
consistent service and focus on customer needs and provide added value to the consumer, it will
create loyalty to the company.

Service quality has various dimensions and each customer place different level of importance on
each dimensions of service quality. The service providers’ perception of service quality may be
quite different from what customers perceive as service quality. Therefore, if banks are to

1
compute in providing quality service to customers, it is important to understand the customer
perception and expectation of quality service. Further they should identify themselves with at
least one of the dimensions of service quality that they think it will drive customers’ perceived
service quality satisfaction, loyalty, and retention (Mensah, 2013).Service has intangible feature
unlike products or goods that have shape and is a series of activities of a person or organization
delivering value to another person or organization (Gronross, 2005). It has the characteristic of
becoming extinct after providing service and has corresponding time of supply and demand.
Service quality is defined as the level of subjective expectation of received service through
comparison of level of service expected by customers before supply and sensed level after
receiving actual service. It can be said that level of service quality is high if difference between
expected level and perceived level is small and that level of service quality is low if the
difference is large (Smith & Huston, 2005 ; Parasuraman et al., 2006).

Value of the firm can be determined by adding up all its customer value (Wayland & Cole,
2007), which is derived from relationships between the organization and customers. The
magnitude of the value of company depends on the depth and width of the relationship. Today’s
advanced information technologies by which the company can manage customer relationships at
personal level, lead corporate to make the relationship more effective than ever (Zeithaml &
Binter, 2008).By providing good quality services and meet the expectations of consumers it will
also create a positive brand image in the minds of consumers, so that the brand can be more
trusted and able to increase customer loyalty. Because the brand image is a set of beliefs, ideas
and impressions of a person to a particular brand (Kotler & Keller, 2009). With a positive brand
image will make consumers become increasingly believe in the products so as to create loyalty,
as research conducted by Chen (2010) in the electronics industry in Taiwan and showed that, if a
product has a positive brand image in the public's mind then consumers will be loyal because
they believe in the product.

Service serves as the most salient phenomenon that customers can experience and perceive.
Hence, quality of firm’s service mainly builds up the image of that particular brand. Similarly,
Nguyen and LeBlanc (2006) explained that overall brand image of the company is formed by the

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combined perceptions of service quality as a result of frequent service experiences. Many
researchers (e.g. Gummesson & Grönroos, 2006) reported brand image to be the key factor in the
evaluation of overall service quality. Keller (2005) studied brand image as a perception, held in
consumer memory, of an organization which serves as a filter to influence the perceptions related
to operational aspects of the organization. In his study of airline service, Ostrowski et al., (2005)
argued, “positive experience over time (following several good experiences) will ultimately lead
to positive image”. Kim and Kim (2005) observed that “brand image and service quality
perceptions share too many features”. Aydin and Ozer (2005) found that perceived service
quality directly determines the perception of brand image.

Parasuraman et al. (2006) discovered a new model for measuring service quality provided by
various organizations especially in banking sector. In this proposed model of service quality
measurement, gap analysis is used to find the difference between customers' expected service
performance and actual service performance. Thus when the expected level of service to be
provided to the customers are greater than the actual level of service provided by any
organization, then the service quality offered is considered as low and vice versa. This model
was developed initially to measure customer perception of service quality for the banking and
financial services but later refined to sectors such as hospitality, telecommunications and
healthcare. Despite some arguments on this service quality model, the determinants accounted
for measuring service quality are found to be reliable and could be used in various situations and
been practiced by many researchers.

Kandampully and Hu (2007) stated that corporate image consisted of two main components; the
first is functional such as the tangible characteristics that can be measured and evaluated easily.
The second is emotional such as feelings, attitudes and beliefs the one have towards the
organization. These emotional components are consequences from accumulative experiences the
customer have with the passage of time with the organization. Although service quality as
“perceived by customers” (Zeithaml et al., 2005), but the service provider is the one who create
and deliver the service. Service providers are the organization’s ambassadors; because they hold
the ultimate balance of quality in service in the customers’ mind (Surprenant & Solomon, 2005).

3
In fact they act as a boundary-spanning that links commercial organizations from inside and
outside by obtaining information and disseminating this information to all parties; this is also
known as "Discretionary behaviour", or "Travelling the extra mile for the customer beyond the
call of duty" (Chung & Schneider, 2005; Solent, 2006; Slatten, 2008).

GrÖnroos (2006) emphasized the extreme importance of brand image for service firms because
when the customers use service, they see the firm and its resources by their judgment of the
interaction between them and their service providers. His findings depicted that the customers
formulate image as they see the components of the firm and develop their perceptions. The
definition by Kurtz and Clow (2006), “the overall or global opinion customers have of a firm or
organization” depicts threat customers show high tendency of patronizing the firm if they
develop high perceptions of its image. Logistics service quality is satisfying the demand of
customers who receive logistics service (Mentzer et al., 2001) in which it is a significant tool that
can lead success of a company by increasing firm flexibility and improve level of service supply
that it can be considered as an essential factor to secure competitive advantage among
competitive firms (Stank et al., 2006).

By providing good quality services and meet the expectations of consumers it will also create a
positive brand image in the minds of consumers, so that the brand can be more trusted and able
to increase customer loyalty. Because the brand image is a set of beliefs, ideas and impressions
of a person to a particular brand (Kotler & Keller, 2009). The construct of service quality has
spurred scholarly debate with extant literature revealing absence of consensus on the
measurement of service quality, owing to service intangibility, heterogeneity and
multidimensionality (Navarro et al., 2005). Empirical review by Kang and James (2004) and Kay
and Pawitra (2006) points at convergence in thought that the Service Quality (SERVQUAL)
model pioneered by Parasuraman, Berry, and Zeithaml (2005) is widely acceptable in the
measurement of service quality. Despite its widespread use, scholars continue to question its
completeness, operationalization and conceptualization (Sureshchandar, Rajendran &
Anatharaman, 2007)

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1.2 Statement of the problem

The quality of logistics service is an important key marketing concept that helps to create brand
value (Mentzer, Flint, & Hult, 2001). Delivering the finished goods to consumers is a critical
activity in any business. Moreover, it is crucially important to identify customer-related activities
such as order receiving, sales and marketing, and processing, and shipment of the ordered goods
(Mentzer & Williams, 2001). However, many studies on logistics service quality have focused
on exploring the relationship between logistics service quality, customer satisfaction, and
customer loyalty (Lin, Luo, Cai, Ma, & Rong, 2016)

Previous studies have given more attention on the aspect of perception and corporate image
(Muliner et al., 2007; Oliver, 2005; Caruana, 2006); service quality and customer satisfaction
(Andreassen & Lindestad, 2006); Luoma and Goodstein, 2006; Waddock& Graves, 2007); and
some earlier studies have investigated multi dimensions of service quality (e.g. Cunningham,
2006; Day, 2009; Kostecki, 2004; Tucker, 2005). This may cause some degree of inconsistency
in the results. Finally, there are only a few non-US empirical studies (Oliver, 2005; Caruana,
2006; Ghazali, 2007; Haniffa & Cooke, 2006). A closer inspection of the current literature
focusing on Kenya shows that the previously mentioned concepts have been researched mainly
in one discipline: customer satisfaction. Following the recommendation of Oliver (2005) for
future research emphasizing the lack of study on service quality in Kenya, a good deal of
attention has been paid to the issue in recent years (Caruana, 2006). However, these studies have
examined only the relationship between service quality and customer satisfaction. Therefore,
additional research is required to further clarify the relationship between service quality and firm
brand image within a wider and interdisciplinary scope.

Besides, logistic firms have flourished and stiff competition has been witnessed over the last 5
years. In order for the firms to survive the competition, they need to embrace service quality in
order to build brand image. Besides, on the premise of the study background and emergent issues
on the relationship between service quality and brand image, knowledge gaps were identified.

5
Key amongst them was that while previous studies examined the relationship between service
quality and customer satisfaction, this study adopted an integrated approach and sought to
establish the effect of service quality on brand image of logistics firms in Mombasa County.

1.3 Objectives of the study

1.3.1 General objective
The general objective of the study is to establish the effect of service quality on brand image of
logistic firms.

1.3.2 Specific objectives

i. To establish the effect of customer perception on brand image of logistic firms

ii. To determine the effect of reliability on brand image of logistic firms.
iii. To determine the effect of customer satisfaction on brand image of logistic firms.
iv. To find out the effect of price on brand image of logistic firms.

1.4 Research questions

1. What is the effect of customer perception on brand image of logistic firms?
2. What is the effect of reliability on brand image of logistic firms?
3. What is the effect of customer satisfaction brand image of logistic firms?
4. What is the effect of price on brand image of logistic firms?

1.5 Justification.
The study findings are invaluable to logistic firms because they can aid service managers in
designing services that are market driven to meet customer expectation while optimizing firm
performance. The outcome of this study is to supplement the existing store of knowledge on the
subject and serve as a channel for further research on innovative ways of gaining competitive
advantage for the overall academic well-being of the nation. The importance of delivering
superior service quality is becoming increasingly magnified as competition intensifies
throughout the service industry. A superior service quality is today’s most attractive bait for
6
acquiring and retaining customers. The benefits to customers are that they can attain better
service and loyal to the company. The study will also be very useful to other researchers
interested in the area, that is, the outcome of this study will serve as a base for academicians who
might want to conduct further studies in service quality dimensions.

1.6 Scope of the Study

There are 868 logistics firms in Mombasa county (Kenya revenue Authority public
notice,2018).This study will be limited to service quality on brand image of logistic firms in
Mombasa County and the study will target 15 logistic firms within Mombasa Island.Data will be
gathered from the selected firms’ financial reports for the period of 3 years. The choice of the
location provided convenience since the researcher is based in Mombasa

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 CHAPTER TWO

LITERATURE REVIEW
2.1 Introduction

In this chapter, the theoretical underpinnings of the study were discussed in the second section
following this introductory section. In the theoretical background, current theories in the area of
relationship marketing quality and behavioural intentions were reviewed and linked to the
current study. In the third section, the conceptual framework that shows the graphical
relationship between the independent and dependent variables of the study was presented and
discussed. Empirical review of prior studies by scholars in the area of relationship marketing
quality and its influences customer behavioural intentions in relation to the independent variables
of the study was done and presented in section four of this chapter. In sections five, six and seven
respectively, critique of
existing literature, identified research gaps and a summary of the literature reviewed
were presented.

2.2 Theoretical Framework

2.2.1 Relationship Marketing Theory

The term relationship marketing (RM) was coined by Berry (1983) as attracting, maintaining,
and enhancing customer relationships. Similarly, Morgan and Hunt (1994) define it as all the
marketing activities that establish, develop, and maintain successful relational exchanges. RM
has been extensively discussed in the marketing literature, and has been an area of interest for
many marketing researchers (Kumara, Bohling & Laddac, 2003). Loyalty is a central concept to
the relationship marketing paradigm because retaining customers over their life contributes to
enhanced profitability (McIlroy & Barnett 2000; Hart, 1999) due to lower costs resulting from
acquiring new customers.

RM theory began to emerge when there was a shift from viewing market exchange as a
transactional phenomenon to viewing it as on-going relationships. Subsequently, the emphasis

8
focused on the external relationships of a company, particularly customer relationships. Within
the marketing discipline, the four traditions that have contributed most to understanding RM
include business-to-business marketing, marketing channels, services marketing, and database
and direct marketing (Möller & Halinen, 2006). The scope of RM includes a firm’s relationships
within the firm, with its customers, suppliers, other stakeholders, and sometimes even
competitors (Webster, 2006). Constructs associated with RM include dependence (Dwyer,
Schurr & Oh, 2003), trust and commitment, communication, cooperation, (Morgan & Hunt,
2004), and equity (Evans & Laskins, 2004). Other RM inputs include understanding customer
expectations, building service partnerships, total quality management, and empowering
employees (Evans & Laskins, 2004).

According to Evans and Laskins (2003), a firm focusing on RM can exploit the total product
concept and maintain stronger advantages. To be more competitive, firms need augmented
products which offer customers more than what they think is needed. However, augmenting
physical products alone can be copied by competitors. Therefore, RM can provide a more
intangible, yet stronger, long-term customer benefit that may be difficult to match. Because of
this, marketing research has also focused on the outcomes of RM. Effective RM leads to a
higher percentage of satisfied customers, increased customer loyalty, a perception on the part of
a firm’s customers that it is offering better quality products, and increased profits on the part of
the seller (Evans & Laskins, 2004).

2.2.2 Social exchange Theory

Social exchange theory has been identified as a useful theoretical basis for explaining customer
loyalty (Wangenheim, 2003). According to social exchange theory (SET), firms maintain or exit
exchange relationships depending upon expectations about costs and benefits of the relationship,
weighted against the expected benefits of alternative relationships. Therefore, when a firm has
multiple options, it will choose the most beneficial relationship, and it will remain as long as
expectations regarding costs and benefits regarding the current relationship surpass a certain
threshold (Wangenheim, 2003). Expectations about future costs and benefits are mainly

9
influenced by prior experiences in the relationship and depend on past experience, so satisfying
experiences increase the motivation to remain in the relationship (Wangenheim, 2003).

The basic SET assumption is that parties enter into and maintain relationships with the
expectation that doing so will be rewarding (Blau, 1968). After a review of the social exchange
theory literature, Lambe, Wittmann & Speckman (2001) postulate that 1) exchange interactions
result in economic and/or social outcomes, 2) those outcomes are compared over time to other
exchange alternatives to determine dependence on the exchange relationship, 3) positive
economic and social outcomes over time increase the partners’ trust of each other and
commitment to maintaining the exchange relationship, and 4) positive exchange interactions over
time also produce relational exchange norms that govern the exchange partners’ interactions.
Therefore, social exchange theory assumes self-interested actors who transact with other self-
interested actors to accomplish individual goals that they cannot achieve alone (Lawler & Thye,
2002).

The “satisfactory-ness” of the rewards that a party gains from an exchange relationship is judged
relative to some standard, which may vary from party to party. One may place more emphasis
on economic rewards while another is concerned with trust in the trading partner (Lambe,
Wittmann & Speckman, 2001). Therefore, many common exchange relations imply that
emotions both enter and pervade social exchange processes (Lawler & Thye, 2002). For
example, supply chain partnerships may thrive because they produce positive feelings such as
confidence or pleasure. They further contend that “emotional dynamics have a more central role
in social exchange than typically assumed.” However, while SET accommodates the process of
building affect in exchange interactions, it also incorporates the opposite process of power
relations (Emerson, 1962; Jancic & Zabkar, 2002). For instance, an exchange partner without
other alternatives may be forced to enter into further exchanges with an asymmetrical power
distribution characterized by negative exchange from the other party.

2.2.3 The rater Model theory

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Commercial businesses like to be able to assess in advance what their customers expect from the
product and/ or services they buy. The RATER model is a convenient method to measure
customer expectations. (Valarie Zeithaml, A. Parasuraman and Leonard Berry 1990).They first
mentioned the RATER model in their book ‘Delivering Quality Service’ from 1990. Companies
can use the RATER model to improve their individual services. They need customer information
that they can obtain using the RATER model. Measurement of service quality in the public
sector, from a best value perspective, should take into account customer expectations of the
service as well as perceptions of the service. The most widely used generic measure of service
quality is SERVQUAL, developed by Parasuraman et al., (1985).

To achieve quality service delivery certain aspects or dimensions of service quality, based on
SERVQUAL or RATER model, should be observable among the customers. SERVQUAL
instrument comprises 22 statements used to assess service quality across five dimensions:
Tangibles, Reliability, Responsiveness, Assurance, and Empathy, with each statement used twice
that is once to measure expectations and once to measure perception. Tangibles refers to the
physical evidence of the service such as appearance of physical facilities, tools and equipment
used to provide the service, appearance of personnel and communication materials. Reliability is
the ability to perform the promised service in a dependable and accurate manner. That is the
service being performed correctly on the first occasion, the accounting being correct and records
being up date. Responsiveness refers to willingness of employees to help customers and provide a
prompt timely service. Assurance refers to knowledge and courtesy of employees and their ability to
convey trust and confidence. Empathy refers to care and individualized attention the firm provides to
customers (Parasuraman et al., 1994) © Obulemire, King’ori & Alala Licensed under Creative Common
Page 8

SERVQUAL however, has been subject to significant psychometric examination, with three

criticisms identified. First, its dimensionality and applicability to specific service settings have

been questioned in replication studies (Babakus and Mangold, 1992). In a replication study,

Cronin and Taylor (1992) reported that the five-dimension structure of SERVQUAL could not

be confirmed in any of their samples. Second, the use of the expectation-perception

11
disconfirmation approach has also been questioned. Third, others argue that a generic instrument

like SERVQUAL is not appropriate for measuring service quality across different industries

(Babakus and Boller, 1992).

12
For example, McAlexander et al. (1994) reported that SERVQUAL was not accurate to assess
customers’ perceptions of service quality in health care service.
Despite its limitations, SERVQUAL has been extensively applied by both academics and
practitioners, and used as the theoretical foundation for further research in different industries
(Carman, 1990).

RATER MODEL THEORY

Reliability

Responsiveness

Assurance

RATER

Empathy

Tangibles

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In China, Lassar et al. (2000) administrated SERVQUAL along with the Technical/Functional
Quality model to 65 banking customers in an effort to empirically compare their ability to predict
levels of customer satisfaction. It was found out that the Technical/Functional Quality model was
a superior predictor of customer satisfaction compared to SERVQUAL. This might be one of the
limiting factors in the application of SERVQUAL when measuring customer satisfaction.
Despite this, a study done by Brunetto and Wharton (2007) on the relationship between
employees service delivery and customer satisfaction resulted in inverse relationship where
employees were at least slightly dissatisfied with communication frequency, directness and bi-
direction, and even more dissatisfied with the mode of communication processes (face-to face,
email, manuals etc). As a result, employees slightly agreed that they did experience ambiguity in
relation to customers, their supervisors and ethical issues. These communication variables
accounted for 41 percent of employees’ level of ambiguity in relation to customers, 34.1 percent
in relation to supervisors and 37.3 percent in relation to ethical issues.

2.2.4 Parasuraman Gaps Model

Service quality is a function of the differences between expectation and performance along the
quality dimensions (Parasuraman et al. 1985). Customer perceptions are needed to be met and
exceeded. It requires from companies to study the buyer behavior of their existing and potential
customers and to devise programs and initiatives to offer superior customer service. Customer
services expectations consist of two levels: desired and adequate. Desired level of expectations is
the level of service a customer wanted to be performed, while the adequate level of expectation
is the “acceptable” level of service by the customer. (Parasuraman et al 1991, p.42),

According to Brown and Bond (1995), "the gap model is one of the best received and most
heuristically valuable contributions to the services literature". The model identifies seven key
discrepancies or gaps relating to managerial perceptions of service quality, and tasks associated
with service delivery to customers. The first six gaps (Gap 1, Gap 2, Gap 3, Gap 4, Gap 6 and
Gap 7) are identified as functions of the way in which service is delivered, whereas Gap 5
pertains to the customer and as such is considered to be the true measure of service quality. The
Gap on which the SERVQUAL methodology has influence is Gap 5.

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A service quality model, highlighting the main requirements for delivering high quality service
which identifies five gaps as causes for unsuccessful service delivery. Gap between expectation
of client and perception of management. In order to be able to exceed customer expectations, and
in this way to insure customer satisfaction service company management has to have a clear and
accurate perception about customer expectations. A lack of such knowledge creates a gap that
can be one of the main reasons for service customers not being satisfied. Gap between perception
of management and service quality specification. Even if management accurately perceive
customer expectations there are still chances of customer dissatisfaction that can be caused by
the gap in planning quality of the service. Gap between specification of quality and the delivery
of service (Parasuraman et al 1985, pp.41-50)

 Customer dissatisfaction relates to the failure of efficiently specified quality service due to
various reasons, including incompetent workforce, and inefficient working conditions. The gap
between the delivery of service and external communications. In cases where service company
employees have relevant skills and willingness to offer efficiently specified quality service, still
customers may be left unsatisfied due to external factors Gap between perceived and expected
service. Lastly, one of the common causes for customer dissatisfaction in service sector relates to
the gap between what customers expect from the service and what they think they have received
(Parasuraman et al 1985, pp.41-50)

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GAP MODEL THEORY

Personal Necessities
Post Experience
Interpersonal
Communication

Expectations of Service

USER
GAP 5

Perception of Service

Service Delivery
External communication with the
(Including contacts before and
users
after)

GAP 3
[Type a quote from the GAP 4
Translation of the perception in
specifications of quality of the service MANAGER

GAP 2

Management perception of user expectations

Figure 1 GAP Model16of Service Quality

Parasuraman GAP MODEL
2.3 Conceptual framework

A conceptual framework is a visual or written product, one that, “explains either graphically or
in narrative form, the main things to be studied, concepts, or variables and the presumed
relationship among them (Lee & Wang, 2006). This study was guided by the variables as
conceptualized overleaf by the researcher. It consists of the dependent variable and independent
variable

Conceptual Framework

Customer Perception
- Responsiveness
- Empathy
- Assurance Reliability
Brand Image
- Speed
- Loyalty - Repeat purchase
- Tangibility - Loyalty

Customer Satisfaction
- Value
- Affection
- Cognitive

Dependent variable
Price
- Pricing policy
- Cost
- Pricing strategy

17
Independent Variable

2.4.1 Customer perception

Perceived value is considered as one of the most important means of differentiation in the service
marketing strategies (Ladhari & Morales, 2008) and is one of the most important tools to achieve
competitive advantage and a key factor in the strategic management. There are many definitions
for the perceived value in the literature, as Zeithaml (2006), notes that value is the overall
assessment of customer about the desirability of a product based on his/her perceptions about the
receipts and payments (Boksberger & Melsen, 2011). According to Parasuraman et al., (1985),
perceived value is a purely personal and subjective concept (Roig et al., 2006). Lichtenstein et
al., (1993), define the perceived value as the quality that the customer acquires instead of a paid
cost (Mollahoseini & Jabbarzadeh, 2011). Butts and Good Stein (1996), consider the perceived
value of the customer as a mental commitment created between the customer and the
manufacturer after using the product. Muliner et al., (2007), call the perceived value as a
dynamic variable that is experienced after taking the product and includes mental reactions.
Brodie et al. consider the customer’s perceived value as dependent to the received service and
quality and the paid costs (Brodie et al., 2009). Rust et al. state that the perceived value factors
involve the quality of the products and services, price (such as low price, discounts and sales),
and facilities (such as store location, availability, and ease of use) (Rust et al., 2004).

According to de Reuter et al., (2002), perceived value have 3 dimensions: emotional, functional
and logical. The emotional value includes a person’s emotional evaluation of the service

18
experienced. The functional value involves the operational areas of service and the logical value
includes the quality of service and price. Sweeney and Soutar (2001), considered the functional,
social, and emotional dimensions as important for perceived value. The social dimension is the
acceptance and desirability in the relationships between a person and his social environment. The
emotional dimension includes feelings or emotional conditions that have been shaped based on
consumption experience. The functional dimension of the perceived desirability is one of the
characteristics of the product or service. In this study, three dimensions of functional value,
social value, and emotional value (Sweeney & Soutar, 2001) have been used to evaluate the
perceived value.

Perceived quality is a component of brand value. Zeithaml (2005) defines perceived quality as a
consumer’s feeling of a product’s supremacy. It is a competitive necessity and companies have
turned it into a strategic weapon (Atilgan, Aksoy, & Akinci, 2005). Consumers’ judgment about
quality can be influenced by personal product experiences, personal needs, and consumption
condition. Consumer notices brand’s supremacy when he/she feels high-perceived quality
through a long-term product usage (Yoo, Donthu, & Lee, 2000). Thus, consumer would prefer to
buy product which gives high- perceived quality compared to other brands (Zeithaml, 2006).
Perceived quality is valuable in several ways. In many situations, perceived quality of a brand is
the main reason to buy. Moreover, it enables to charge a premium price (Tuominen, 2007).

The greater extend perception of positive, negative, cognitive and affective images of a brand
can be achieved through a free-choice technique. Matthiesen and Phau (2010) suggested that the
perception about the brand varies among different channel members. The variation in brand
image occurs due to the presence of differentiation among the perception of brand among
wholesalers and retailers. Even though the whole attitude of the end consumers’ is positive
towards the Hugo Boss brand but the consumers fondness to buy the Hugo Boss brand appearing
to be comparatively low down as the trend is being seen that the consumers are liking the other
brands. The customer satisfaction is directly affected through the price perception and is
indirectly being influenced by the perception of price fairness.

19
The outcome of the study also signifies that the perceived price fairness is negatively influenced
by the consumers' vulnerability, which has been provoked by a perceived demand supply
association and the necessity from the customer’s point of view Herrmann, Xia, Monroe and
Huber (2007). Imran, Safwan, Rehman, Afzal, Ali and Ali (2010) found that price reasonability
and consumer satisfaction are significantly associated with each other. The customers can switch
to any other cellular service provider who offers fair prices this reveals that the consumers can be
hold on to for a longer duration by offering them the fair prices so; the customer satisfaction is
caused by the fairness of price. Peng and Wang (2006) proposed that for buying the product and
services the customer has to pay some price which the financial cost for the customer is. Price is
the important factor which persuades the customer decision for buying the products and services.
Perceive price play a vital role in deciding from whom to get the service. Every consumer has its
own needs and wants which are different from the others and this factor influence that to what
extent they want to pay for the goods and services. So, for the same products and services the
price perceptions of every customer differentiate from the others and the customers who
perceived high prices may affect their purchasing possibilities.

2.4.2. Reliability
Choi and Hartley (1996) in a study of the supplier-selection practices in the US auto industry
found that quality and delivery formed a single construct that was viewed as the most important
supplier selection criteria. Lockamy (1993) in a study of six manufacturing firms reported that all
firms used on time delivery not only as a metric in their distribution function but also as a
performance measure used for value-evaluating delivery lead time management. Handfield and
Pannesi (1992) defined a path analysis model to test the impact of production plan goals,
inventory goals, master production schedule performance, forecasting accuracy and the number
of end items on delivery reliability. All factors except forecasting accuracy had a significant
effect on delivery reliability having explained approximately 55 percent of the variance in a
sample 285 manufacturing firm.

20
2.4.3 Customer satisfaction

Several studies have verified that consumer's satisfaction has positively influenced loyalty (e.g.
Ismail, Hasnah, Ibrahim, & Isa, 2006; Da Silva & Syed Alwi, 2006; Anderson & Sullivan, 1993;
Chiou et al., 2002; Bloemer & Ruyter, 1998: Yang & Peterson, 2004). When consumers are
satisfied with the product/brand, they are more likely to recommend the product to others, are
less likely to switch to other alternative brand, and are likely to repeat purchase (Bennett &
Rundle-Thiele, 2004). Empirical evidence in retail/store image studies confirmed that
satisfaction has strongly influenced loyalty intention such as intention to recommend (e.g.
Nguyen & LeBlanc, 1998; Kandampully & Suhartanto, 2000), intention to repurchase
(Kandampully & Suhartanto, 2000) and intention to revisit the store (e.g. Bloemer & Ruyter,
1998).

2.4.4 Price
Some measures of behavioral loyalty address a respondent’s reaction to potential price increases.
Measures include items about paying a higher price than competitors charge for the benefits
currently received (Zeithaml, Berry & Parasuraman, 1996) and being prepared to pay more for
higher quality products or services (Too, Souchon & Thirkell, 2001, Verhoef, Franses &
Hoekstra, 2002). Some combine a continuity perspective and ask about continuing to do
business if prices increase somewhat (Zeithaml, Berry & Parasuraman, 1996) and others measure
tendencies to switch to another provider if prices were lower (Ganesh, Arnold & Reynolds,
2000).

According to Oliver (1997) mostly the price is being judged by the consumers in accordance to
the service quality which in turn creates the satisfaction or dissatisfaction, which depends on the
principle of equity. The consumer wants to do the deal with the service provider in the case when
the price is being perceived by the consumer’s price fairness. Cheng et al., (2008) suggested that
there are two ways in which the price perception can be calculated. One of them is price
reasonableness, which tells that how the costumers perceive the price while relating it to the
competitors. The second one is: value for money that involves the comparative position of the
service provider according to the price. Commonly, the services which are of high quality are

21
well thought to be of more cost than those which are of low quality (Chitty et al., 2007).
According to many researchers the customer satisfaction and trust is being influenced by the
price perception (Oliver, 1997; Peng & Wang, 2006; Chengetal., 2008; Kimetal., 2008).The
major reason of customers switching is the issue of price, for instance the high, unreasonable and
unreliable pricing policies (Peng & Wang, 2006).

2.4.5 Brand image

Brand image can be measured from the physical appearance of a product or service. This
physical appearance can lead to the high-low perception in the customers’ mind (Martinez,
2002). Furthermore, Keller (2009) suggests Multi Dimensional Scaling (MDS) approach to
measure brand image. This includes the whole elements of brand image, such as favorability of
brand association, strength of brand association, and uniqueness of brand association.

Brand image has been conceptualized and operationalized in several ways (Reynolds & Gutman,
1984; Faircloth et al., 2001). It has been measured based on attributes (i.e. Koo, 2003;
Kandampully & Suhartanto, 2000); brand benefits/ values (i.e. Hsieh et al., 2004; Roth, 1995;
Bhat & Reddy, 1998); or using Malhotra's (1981) brand image scale (i.e. Faircloth et al., 2001).
Measuring image based on the above definition would help marketers to identify the strengths
and weaknesses of their brand as well as consumers' perceptions toward their product or services.

Earls et al., (2004) also say that strong brand image can make customers loyal. But whenever
customers’ needs change and the brand cannot respond these changing needs, according to Steel
(2004), customers will tend to switch another brand (in Miller & Muir, 2004). Building a positive
brand image can influence repeat purchase because a strong brand image can lead to customer
loyalty. Furthermore, Schultz (2005) states that customers who are loyal to certain brand will
recommend it to other people and not easily influenced by competitors to make purchases (in
Sondoh et al., 2007).

2.5 Empirical Review

According to research conducted by the Dean (2007), if the quality of the services provided by
the company better than expected consumer it will create customer loyalty to the company. In

22
another study also found the same thing, that the quality of services provided with excellent will
give a positive impression and make customers more loyal (Ivanauskiene, 2014; Huang, 2014;
Amiruddin, 2013). Therefore, the quality of services provided to consumers is a matter that
needs to be considered by the company so as to increase consumer loyalty to a product.

Based on the results of research conducted by Almendros (2014), argued that good quality
services are often the benchmark in creating a positive brand image for a company. This
statement is also supported by the results of other studies which state that first interaction when
customers receive the quality of service will determine how the brand image is formed in the
minds of consumers (Huei, 2015; Hashmi, 2014; Benazira, 2012; Malik, 2011). From various
studies that have been done, it can be concluded that the quality of services provided to
consumers will determine how the brand image formed in the minds of consumers.

Research conducted by Lee (2014), states that a good brand image positively affect the level of
consumer loyalty to a company. Likewise expressed by the results of other studies, if a positive
brand image has been embedded in the minds of consumers, will have a very big role in shaping
consumer loyalty (Agyei, 2014; Chang, 2014; Ishaq, 2014; Kavosh, 2014; Chao, 2015). From
various studies that have been done, it can be concluded that the brand image is formed in the
minds of consumers will determine the level of customer loyalty to a company.

Aydin et al. (2005) conducted a study in the GSM mobile telephony sector to measure the effects
of customer satisfaction and trust on customer loyalty and the direct and indirect effect of
switching cost on customer loyalty and found that the switching cost factor directly affects
loyalty, and has a moderator effect on customer satisfaction and trust. Therefore, it plays a
crucial role in wining customer loyalty. Furthermore, trust has more importance than customer
satisfaction in engendering loyalty, since trust contains belief in the product and service, which
provides positive outcomes not only in the present but also in the future; however customer
satisfaction does not contain this dimension.

Yu et al. (2006) explored the relationship among service quality, customer satisfaction and
customer loyalty of the leisure industry to provide operators with a reference as to how to

23
improve their quality. According to their results, the partial demographic statistics variable has a
significant relationship with service quality, customer satisfaction and customer loyalty of the
leisure industry while significant differences show between importance and satisfaction of
service quality of the leisure industry. In addition, both satisfaction of leisure industry service
quality and overall customer satisfaction have significant relationship with customer loyalty (Yu
et al. used SERVPREF instead of SERVQUAL).

Turk and Avcilar (2009) investigated the effects of service quality of audit firms on customer
satisfaction and behavioural intentions. They found that customer satisfaction mediates perceived
service quality dimensions and customer loyalty. They also found that assurance is the most
important dimensions dimension of the service quality of audit firms followed by reliability,
responsiveness, empathy, and lastly tangibles. Thus managers in this case should focus on
employees' knowledge, courtesy, ability to deliver the promised service dependably and
accurately and their ability to help customers and provide service willingly in order to improve
the service quality. Their results confirm the path that stated that perceived service quality is the
antecedent of customer satisfaction in predicting behavioural intentions; however, it does not
have a direct effect on behaviour intentions.

2.6 Critique of Existing Literature

Majority of the studies: Yu et al. (2006); Turk and Avcilar (2009); Aydin et al. (2005); Huei,
2015; Hashmi, 2014; Benazira, 2012; Malik, 2011, examined service quality and its effect on
customer satisfaction. Furthermore, many relevant studies have focused more on developed
economies making it difficult to generalize their findings to the developing countries. The
current research attempted to bridge this gap by addressing the relationship between service
quality and brand image at logistic companies in Mombasa County.

2.7 Research Gaps

The literature shows that there is a scant research which has been done on the effect of service
quality on brand image in logistics firms. However, literature has shown very little concerning
the direct impact of service quality on enhancing image of logistic firms. Many research (e.g
Muturi, 2012; Ivanauskiene, 2014; Huang, 2014; Amiruddin, 2013) that have been done majorly

24
dwell on the service quality impact on satisfaction and customer loyalty. This paper sought to
explore more on the actual impact of service quality on brand image of logistic firms.

2.8 Summary
This chapter presented a theoretical foundation of the study, reviewed empirical literature on
service quality and measurement of brand image. The chapter also summarized literature on the
topical issues and identified knowledge gaps manifest from literature review. The chapter further
presented the conceptual framework and outlined conceptual questions of the study.

25
 CHAPTER THREE

RESEARCH METHODOLOGY
3.1 Introduction
The purpose of this chapter was to comprehensively explain the research methodology. Research
methodology refers to the method by which data is gathered for a research project. It is the
blueprint for the collection, measurement and analysis of data in order to achieve the objectives
of a research project. For a study to generate replicable and objective research results, it should
follow the principles of scientific research which are defined as systematically and empirically
based procedures (Cooper & Schindler, 2006).

3.2 Research Design

Research design is an overall plan for the methods to be used to collect and analyze the data of a
research study (Hair et al., 2008). Newing (2011) states that a research design is a general plan or
strategy for conducting a research study to examine specific testable research questions of
interest. This study employed explanatory research design. In general, an explanatory study is a
quantitative method of research in which you have two or more quantitative variables from the
same group of subjects, and you are trying to determine if there is a relationship (or co variation)
between the variables. Mugenda and Mugenda (2008) explain that explanatory research is used
to explore the relationship between variables and this is consistent with this study which sought
to examine the relationship between service quality and brand image of logistic firms in
Mombasa County.

3.3 Target Population

Target population in statistics is the specific population about which information is desired.
According to Ngechu (2006), a population is a well-defined or set of people, services, elements,
events, group of things or households that are being investigated generalize the results. The
target population for this research study was management staff of selected logistic firms within
Mombasa Island.

3.4 Data Collection Methods

Data collection is the process of acquiring subjects and gathering information needed for a study;
methods of collection can vary depending on the study design, (Kothari, 2006). This research

26
study used only secondary data which was primarily collected from the firm’s archives and also
through review of both empirical and theoretical data from books, journals, dissertations,
magazines and the internet.

3.5 Conclusions
The following conclusions were based on the reviewed empirical literature and secondary data
obtained from selected logistic firms within Mombasa Island in Mombasa County. The main
goal of current research was to ascertain the effect of service quality on brand image of logistics
firms in Mombasa County.

3.5.1 Effect of customer perception on brand image of logistic firms

According to results, it can be concluded that only empathy, responsiveness and reliability
perceptions were drivers to building logistic firm image. Interestingly, perceived assurance and
tangibles did not contribute anything significant in nurturing organization image. This finding
supports Andreassen and Lindestad’s (2006) contention that the perception of service quality was
an important factor in influencing image because services were difficult to evaluate. In addition,
this result supports Zeithaml’s (2005) proposition that service quality was customers’ judgment
about the overall excellence or superiority of a service or, in other words, the image. The study
results support Kayaman and Arasli’s (2007) findings that brand image developed from all of
customers’ service experiences. These results are partially in agreement with Kayaman and
Arasli (2007) observations that reliability and empathy perceptions have a developmental role in
brand image.

3.5.2 Effect of reliability on brand image of logistic firms

From the empirical findings, reliability and responsiveness had significant impact on customer
satisfaction hence brand image, where an increase in them by 0.146 and 0.056 respectively will
cause an increase in the organization image. This study concludes that consumer perception of
reliability positively influence brand image.

3.5.3 Effect of customer satisfaction on brand image of logistic firms

For this study, the satisfaction response was reflected towards the level of affection for the brand
which is in line with the suggestions by Jacoby and Chestnut (2006) and Oliver (2007). Oliver

27
(2007) noted that consumers at the affective stage would develop a positive attitude towards the
brand or liking the brand as a result of satisfactory repetitive usage over time. Findings in this
study also revealed that satisfaction plays a role in enhancing organization image. It was
concluded that logistic consumers will be more loyal to that particular logistic firm when they
are satisfied. As such, the result of this study is consistent with those previous studies in
retail/store and hotel setting (e.g. Da Silva & Syed Alwi, 2006; Bloemer & Ruyter, 2004;
Nguyen & LeBlanc, 2002; Kandampully & Suhartanto, 2005).

The results showed a significant effect between the service quality on the brand image, customer
satisfaction, brand equity, and customer loyalty. The results of this study support the research by
Liao (2009) the quality of services significantly affect the customer satisfaction, customer
loyalty. A study by Teck et al. (2012) also suggests a significant impact on the quality of service
to the brand image. This study therefore concludes that customer satisfaction strongly enhances
brand image.

3.5.4 Effect of price on organization image of logistic firms

The results of this study suggest that price is correlated to brand image. Therefore this study
concludes that changes in price will have a corresponding change on brand image.

3.6 Recommendations
1. The study recommends that logistic firms should have a better understanding of what
their customer needs are and what the customers expect from the services provided by the
firms in terms of service quality.
2. The logistic firm managers should identify the gap prevails between the perceived service
quality and actual service quality of logistic services provided to customers and find
effective ways to enhance customer satisfaction with respect to service delivery
reliability.
3. Because there is a stiff competition in logistics sector in Mombasa County, customer
service, by exceeding the required needs of customers, is the most vital component for
each logistic firm and firm managers need to emphasize on ways to lower costs without
compromising the service quality in order to build strong brand image.
4. Overall customer's satisfaction was found to fully mediate the relationship between
functional image benefits and loyalty intention. Therefore this study recommends that in

28
 order to maintain and build loyalty customers, marketers must focus on efforts to improve
satisfaction among its customers while at the same time strengthen their brand functional
appeal strategy.

3.7 Suggestion for further study

The current research has several limitations. The study was conducted only on logistic firms in
Mombasa County using secondary data so the researchers should take other categories of service
firms to conduct comparative analysis across diverse classifications. To have more confidence in
cause-effect relationship between perceived service quality and brand image, longitudinal
research design should be considered in future investigations. Triangulation regarding data
information sources, data collection methods and analytical techniques is advised to future
researchers.

29
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