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Relationships and Impacts of Service Quality, Perceived Value, Customer

Satisfaction, and Image: An Empirical Study
Article in Service Industries Journal · February 2009

DOI: 10.1080/02642060802292932
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Relationships and impacts of service quality, perceived value, customer

satisfaction, and image: an empirical study
Hsin-Hui (Sunny) Hu a; Jay Kandampully b; Thanika Devi Juwaheer c
a
Hospitality Management Department, School of Tourism, Ming Chuan University, Taipei, Taiwan, Republic
of China b Department of Consumer Sciences, Columbus, OH, USA c Faculty of Law and Management,
University of Mauritius Réduit, Réduit, Mauritius
First Published:February2009
To cite this Article Hu (Sunny) , Hsin-Hui, Kandampully, Jay and Juwaheer, Thanika Devi(2009)'Relationships and impacts of service
quality, perceived value, customer satisfaction, and image: an empirical study',The Service Industries Journal,29:2,111 — 125
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The Service Industries Journal
Vol. 29, No. 2, February 2009, 111 –125
Relationships and impacts of service quality, perceived value,

customer satisfaction, and image: an empirical study
Hsin-Hui (Sunny) Hua , Jay Kandampullyb and Thanika Devi Juwaheerc
a
Hospitality Management Department, School of Tourism, Ming Chuan University, Taipei, Taiwan,
Republic of China; bDepartment of Consumer Sciences, Columbus, OH, USA; cFaculty of Law and
Management, University of Mauritius Réduit, Réduit, Mauritius
(Received 8 May 2006; final version received 6 October 2006)
In today’s world of intense competition, satisfying customers is only the base line and
may not be sufficient for survival. Management should focus on gaining customer
loyalty by enhancing customer perceptions of service quality and increasing as
Downloaded By: [Kandampully, Jay] At: 22:15 5 February 2009
perceived by the consumer value. Although previous studies have addressed the
importance of service quality, satisfaction, perceived value, and image, the precise
nature of the relationships that exist between these constructs and the understanding
of their effect on customer behaviour still remains a key issue. This empirical study
seeks to understand the relationships that exist between service quality and perceived
value and how they impact customer satisfaction, corporate image, and behavioural
intentions. The proposed model indicates that delivering high quality service and
creating superior customer value can result in achieve high customer satisfaction, thus
effecting the firm’s corporate image, and ultimately leading to consumer retention.
Keywords: service quality; customer satisfaction; perceived value; image; loyalty;

hotel customers
Introduction
Whether a firm produces products or services is no longer a debate in the board room or
among academics; the focus is centred primarily on the customer and the pursuit of
superior customer perceived service quality, value, and image. Given the global nature
of the market, competing firms are constantly seeking to project their firms’ superior
quality of service, customer-perceived value, and image in order to gain customer
loyalty. Previous researchers have indicated that service quality, customer-perceived
value, and satisfaction are some of the key success factors in gaining competitive advan-
tage within service providers (e.g. Bolton & Drew, 1991; Parasuraman, Berry, & Zeithaml,
1991; Parasuraman, Zeithaml, & Berry, 1988; Zeithaml, Berry, & Parasuraman, 1996).
These factors are becoming the priority for all managers in the increasingly intense
competition for customers in the customer-centred market today (Bolton & Drew, 1991;
Gronroos, 2001; McDougall & Levesque, 2000; Ravald & Grönroos, 1996; Vargo &
Lusch, 2004a, b; Zeithaml, 1988). Although previous researchers have studied service
quality, satisfaction, perceived value and the precise nature of the relationships that
exist between these constructs, understanding their effect on customer behaviour still
remains a key issue that require further investigation. In this paper, we propose a model
that describes the relationship between service quality, satisfaction, and perceived

Corresponding author. Email: sunny@mcu.edu.tw
ISSN 0264-2069 print/ISSN 1743-9507 online

# 2009 Taylor & Francis
DOI: 10.1080/02642060802292932
http://www.informaworld.com
112 H.-H. Hu et al.
value, taking into account the effect of the image on consumer behavioural intentions.
The proposed model implies that delivering high quality service and creating superior cus-
tomer value will result in high customer satisfaction, improving image assessments and
consumer retention.
Service quality
Over the past two decades, the theory and practice of service quality has received consider-
able attention from academics and practitioners alike. Viewed as a means by which cus-
tomers distinguish between competing organisations (Marshal & Murdoch, 2001), service
quality is known to contribute to market share and customer satisfaction (Anderson &
Zeithaml, 1984; Buzzell & Gale, 1987; Parasuraman, Zeithaml, & Berry, 1985; Zeithaml,
2000). Thus, the pursuit for service quality has become an imperative factor for all organ-
isations that are driven by the need to survive and remain competitive.
The introduction of service quality in many service firms was as an element designed to
effect competitive advantage. Moreover, the position of quality, from a customers’ point
of view, has assumed the uncompromisable core component of the service promise.
Parasuraman et al. (1988) proposed that a customer’s assessment of overall service
quality depends on the gap between expectations and perceptions of actual performance
levels. Zeithaml (1988) defined perceived service quality as the customer’s assessment
of the overall excellence or superiority of the service. Service quality is not a singular
but a multi-dimensional phenomenon (Vandamme & Leunis, 1993). Parasuraman et al.
(1988) developed a 22-item instrument, recognised as SERVQUAL, which is used
widely as a generic instrument for measuring service quality. The instrument items rep-
resent five dimensions by which consumers evaluate service quality: tangibility, reliability,
responsiveness, assurance, and empathy. Reliability largely concerns whether the outcome
of service delivery was as promised. The other four dimensions concern the process of
service delivery. SERVQUAL was developed for measuring quality across a broad spec-
trum of services. It is based on the notion of a gap between what customers expect in
terms of service quality from the providers of the service and their assessment of the
actual performance of that particular service provider. According to the SERVQUAL
model, customer assessments of service quality result from a comparison of service expec-
tations with actual performance. The SERVQUAL dimensions capture how consumers
differentiate performance on these dimensions (Bebko, 2000).
Many researchers have argued that given the nature of the service-quality construct
(especially with respect to the number of dimensions), it is highly likely that dimensions
may vary and might be industry-specific. A major concern raised by many researchers
with the SERVQUAL instrument is related to its dimensional structure. Thus, the universal-
ity of SERVQUAL’s five dimensions has been questioned (Buttle, 1996; Carman, 1990;
Cronin & Taylor, 1992). Shortcomings concerning convergent and discriminant validity
have also been noted (Buttle, 1996). It has also been argued that a performance-only
measure, such as SERVPERF, explains more of the variance in an overall measure of
service quality than does SERVQUAL (Cronin & Taylor, 1994). However, SERVQUAL
has been most widely used because it ‘provides a basic skeleton, which can be adapted or
supplemented to fit the characteristics or specific research needs of a particular organization’
(Parasuraman et al., 1988). Yet, despite the concerns over the validity of the instrument,
Buttle (1996) argues that it is still a useful tool for the measurement of service quality.
Fullerton (2003) noted the importance of further studies that test the positive relation-
ship between perceived service quality and customer commitment. One of the key interests
The Service Industries Journal 113
on service quality for both academics and practitioners has been because of the positive
relationship between service quality and consumers’ behavioural intentions. This fact
was supported by several studies (e.g., Bitner, 1990; Cronin, Brady, & Hult, 2000;
Fornell, 1992; Parasuraman et al., 1991). Bitner (1990) suggested that a high level of
service quality will lead to service loyalty. Parasuraman et al. (1991) found a positive
and significant relationship between customer’s perceptions of service quality and their
willingness to recommend the company. Fornell (1992) noted that high quality leads to
high levels of customer retention which in turn are strongly related to profitability.
Olorunniwo, Hsu, and Udo (2006) found service quality to be an important driver of
behavioural intentions. Boulding, Karla, Staelin, and Zeithaml (1993) also found positive
relationships between service quality and repurchase intentions and willingness to
recommend. In addition, Bolton and Myers (2003) investigated the determinants of price
elasticity and concluded that service quality influenced price elasticity. The results of
the study indicated that customers who receive more responsive service are less price sen-
sitive than customers who receive less responsive service. Also, customers are more
tolerant of price changes and less apt to defect to alternative suppliers when they experi-
ence highly reliable service. Customers who receive more assurance or empathy from
service representatives over time are less price sensitive than customers who receive less
assurance. Zeithaml et al. (1996) offered a conceptual model of the impact of service
quality on particular behaviours (Figure 1). Their study found that service quality is
positively associated with willingness to pay more. Customers are willing to pay more
for better quality of service. Based on the reported research, the following hypotheses
are proposed:
H1: Perceived quality has positive impacts on behavioural intentions.
Perceived value
Perceived value has gained considerable research interest as a stable construct to predict
buying behaviour (Anderson & Srinivasan, 2003; Chen & Dubinsky, 2003; Cronin et al.,
2000; Pura, 2005). Perceived value has been defined in many diverse ways, the value
Figure 1. Proposed conceptual model.

114 H.-H. Hu et al.
concept is multi-faceted and complicated by numerous interpretations, biases, and emphases

(Huber, Hermann, & Morgan, 2001). Zeithaml (1988) defined value as the consumer’s
overall assessment of the utility of a product based on perceptions of what is received and
what is given. It is the value customers perceive they receive or experience by using a
service (Bettman, Luce, & Payne, 1998). According to Vandermerwe (2003), value should
be defined by the customers, when the customers are satisfied with the total experience.
Monroe (1990) argued that buyers’ perceptions of value represent a tradeoff between the
quality or benefits they perceive in product relative to the sacrifice they perceived by
paying the price. However, by focusing on customer-oriented management, Woodruff
(1997) defined customer value as a customer’s perceived preference for and evaluation of
those product attributes, attribute performances, and consequences arising from use that
facilitate achieving of the customer’s goal and purchase in use situations. Researchers
(Cronin et al., 2000; Parasuraman & Grewal, 2000) indicate that service quality is an
important driver of perceived customer value. Based on the discussions of the definitions
of customer value, it is clear that factors influencing the benefits customers receive or
sacrifices customers have to make will cause different evaluations of customer value,
even though different customers may form different opinions over time (Bolton &
Drew, 1991; Zeithaml, 1988). What constitutes value appears to be highly personal,
idiosyncratic and may vary widely from one customer to another (Holbrook, 1994). Conse-
quently, customer value is something perceived by customers rather than objectively
determined by sellers.
Gale (1994) considers value as market-perceived quality adjusted for relative product
price. When speaking about inter-relations among the variables forming perceived value,
there has been a convergence of opinion that favourable service quality perceptions lead to
improved value attributions, and higher levels of sacrifices lead to reduced value (Cronin
et al., 2000). When evaluating the service value, consumers consider the transaction’s
specific attributes as well as the price and the quality of the service (Andreassen &
Lanseng, 1998). Thus quality-related factors may be assumed to represent most of the
positive benefit drivers of customer value, thus it is proposed here that high service
quality will ultimately lead to higher perceived value. In addition, it has been proposed
that future intentions are determined in part by perceived value. In making the decision
to return to the service provider, customers are likely to consider whether or not they
received ‘value for money’ (Bolton & Drew, 1991), and convenience in addition to
task fulfilment (Anckar & D’Incau, 2002; Carroll, Howard, Peck, & Murphy, 2002).
McDougall and Levesque (2000) proposed that perceived value contributes directly to cus-
tomer satisfaction which, in turn, leads to future intentions. Behavioural intentions have
been used by several researchers to predict loyal behaviour (Duman & Mattila, 2005;
Gremler & Gwinner, 2000). High external service value leads to customer satisfaction,
which ultimately leads to service loyalty (Heskett, Sasser, & Schlesinger, 1997). Based
on the review of the literature with regard to the concepts of service quality, perceived
value, and customer satisfaction, the following hypotheses are proposed:
H2: Service quality has positive impacts on perceived value.
H3: Perceived value has positive impacts on behavioural intentions.
Customer satisfaction
Sustainable competitive advantage in today’s competitive market is dependant on a firm’s
ability to deliver high quality of service that results in satisfied customers (Shemwell,
Yavaş, & Bilgin, 1998). Research conducted by Kim, Lee, and Yoo (2006) found that
satisfied customers exhibit loyalty and provide positive word-of-mouth. Thus, customer
satisfaction is recognised as one of the important antecedents of loyalty and hence both
academics and practitioners have considerable interest to gain better understanding
about customer satisfaction. The concept of ‘marketing’ in services is primarily concerned
with satisfying customers’ needs and wants, hence customer satisfaction can be regarded
as the heart of all marketing activities (Machleit & Mantel, 2001). However, there has been
a considerable confusion in the marketing literature as to the distinction between perceived
service quality and customer satisfaction (Anderson & Fornell, 1994). In an attempt to
clarify this confusion, Parasuraman et al. (1988) argued that ‘perceived service quality
is a global judgement, or attitude, relating to the superiority of the service, whereas satis-
faction is related to a specific transaction’ (p. 16). In addition to the transaction-specific
nature, many researchers also have emphasised the emotional nature of customer satis-
faction (e.g. Machleit, Eroglu, & Mantel, 2000; Machleit & Mantel, 2001; Westbrook,
1987). Oliver (1981) contended that satisfaction is the emotional reaction to a specific
product/service experience, and these emotional reactions come from disconfirmation of
a consumer’s perceived performance of product or service and his or her expectations
of performance (also see Mano & Oliver, 1993; Swan & Oliver, 1989; Tse & Wilton,
1988). When the perceived performance exceeds expectations, the disconfirmation
results in a positive affect (e.g. pleasure), whereas a negative affect (e.g. disappointment)
occurs when the disconfirmation is realised by expectations exceeding the perceived per-
formance. Satisfaction may also emerge as a response not only to a single experience, but
also to a prolonged set of multiple experiences.
Customer satisfaction has been defined as a cognitive or affective reaction that
emerges in response to a single or prolonged set of service encounters. It is also viewed
as the overall assessment of the service provider while future intentions are the stated like-
lihood of returning to the service provider (McDougall & Levesque, 2000). Similar to
service quality, customer satisfaction is a multi-dimensional construct. However, Cronin
and Taylor (1992) defined and measured customer satisfaction as a one-item scale that
asks for the customer’s overall feeling towards an organisation. By using a single-item
scale to measure customer satisfaction, Cronin and Taylor’s approach fails to do justice
to the richness of the construct. Instead of single-item measurement, other studies have
emphasised the multi-faceted nature of customer satisfaction and have use multiple-
item scales to measure it. Bitner and Hubbert (1994) used four items to measure custo-
mers’ overall satisfaction with the service provider. They introduced the concept of
encounter satisfaction, and devised a nine-item scale to measure it. Price, Arnould, and
Tierney (1995) measured service satisfaction by using a six-item scale, while studying
the structural model of the relationships among service provider performance, affective
response and service satisfaction. Sureshchandar, Rajendran, and Anantharaman (2002)
included five factors to measure customer satisfaction: (1) core service or service
product; (2) human element of service delivery; (3) systematisation of service delivery:
non-human element; (4) tangibles of service – servicescapes; and (5) social responsibility.
In short, the multi-dimensional nature of customer satisfaction has been used with global
measures that view overall satisfaction as a function of satisfaction with multiple experi-
ences or encounters with the service providers.
A number of studies appear to distinguish service-quality perception from customer
satisfaction judgements. Anderson and Fornell (1994) suggested that customer satisfaction
is a post-consumption experience which compares perceived quality with expected
quality, whereas service quality refers to a global evaluation of a firm’s service delivery
system. Hurley and Estelami (1998) argued that service quality and satisfaction are distinct
116 H.-H. Hu et al.
constructs, and there is a causal relationship between the two, and that perceptions of
service quality affect feelings of satisfaction which, in turn, influence future purchase
behaviour. Natalisa and Subroto (1998) examined the effects of customers’ perceptions
of service quality on the level of customer satisfaction in the airlines industry.
The measurement of the variable of customers’ perceptions of service quality comprised
of five SERVQUAL dimensions. The results indicated that customers’ perception of
service quality has positive effects on the level of customer satisfaction. Out of five dimen-
sions of service quality, the dimension of assurance has greatest effects on the level of
customer satisfaction.
The connection between perceived value and customer satisfaction has been debated in
the services marketing literature. It is contended that value has a direct impact on how sat-
isfied customers are with a supplier and that satisfaction depends on value (Ravald &
Grönroos, 1996). Zeithaml (1988) suggested that customers who perceive that they
received ‘value for money’ are more satisfied than customers who do not perceive they
received ‘value for money’. Fornell, Johnson, Anderson, Cha, and Bryant (1996) also sup-
ported a positive influence of perceived value on customer satisfaction. Consumer satisfac-
tion is generally construed to be a post-consumption evaluation dependent on perceived

quality and value. Based on the above discussions, the following hypotheses are proposed:
H4: Service quality has positive impacts on customer satisfaction.

H5: Perceived value has positive impacts on customer satisfaction.
Corporate image
Numerous definitions of image are found in the psychological and marketing literature.
Image has been described as subjective knowledge, as an attitude, and as a combination
of product characteristics that are different from the physical product but are nevertheless
identified with the product (Nguyen & LeBlanc, 1998). Image has also been described as
the overall impression left on the minds of customers (Zimmer & Golden, 1988). MacInnis
and Price (1987) described image formation as a procedure by which ideas, feelings, and
previous experiences with an organisation are stored in memory and transformed into
meaning based on stored categories. From the marketing of goods literature, it has
become clear that corporate image represents the impressions and associations, the
beliefs and attitudes that are held in consumer memory with regard to the company
(Barich & Kotler, 1991). According to Grönroos (1984), corporate image is defined as a
filter which influences the perception of the operation of the company.
The overall image of the service firm is influenced by service quality, perceived
value, and customer satisfaction. Grönroos (1984) argued that corporate image is built
mainly by technical quality what the customer receives from the service experience,
and functional quality: the manner in which the service is delivered. Nguyen and
LeBlanc (1998) tested the relationship between service quality and corporate image
and report that customers who perceive service quality over repeated service encounters
have an overall favourable image of the firm. As for the influence of perceived service
value on corporate image, Barich and Kotler (1991) proposed that a company will have a
strong image if customers believe that they are getting high value when they buy from
it. On the other hand, some authors stated that with corporate image a filtering effect
impacts a customer’s perception and customer satisfaction for the industry. Since custo-
mer satisfaction is described as a judgement made on the basis of a specific service
encounter (Cronin & Taylor, 1992), satisfaction levels derived from each service
encounter are viewed as having an effect on image assessments (Nguyen & LeBlanc,
1998).
The relationship between image and consumer behaviour consequences has remained
a matter of debate. Researches have shown that there is a direct positive relationship
between image and behavioural intentions. Corporate image serves as an important
factor influencing customer loyalty, and a favourable image can influence repeat patron-
age (Andreassen & Lindestad, 1998; Dick & Basu, 1994). A study conducted on hotel
brand loyalty found that image is an important factor, and essential to maintain a rela-
tively high rating among loyal customers. Kandampully and Suhartanto (2000) further
identified that hotel image and customer satisfaction with the performance of housekeep-
ing, reception, food, and beverage are positively correlated to customer loyalty. Also,
Nguyen and LeBlanc (1998) investigated the effects of customer satisfaction, service
quality, and value on perceptions of corporate image and customer loyalty. The results
of their study show that customer receiving higher levels of service quality will form a
favourable image. Also, customer satisfaction and image perceptions are found to
impact on service loyalty, with satisfaction having a greater influence on loyalty than
image. Moreover, Swait, Erdem, Louviere, and Dubelaar (1993) estimated consumer
reservation prices that revealed the worth of brand names. They showed that consumers
are willing to pay a higher price for higher quality brands; thus stronger brand images can
charge higher prices. Based on the review of the literature, the following hypotheses are
proposed:
H6: Service quality has positive impacts on corporate image.

H7: Perceived value has positive impacts on corporate image.
H8: Customer satisfaction has positive impacts on corporate image.
H9: Corporate image has positive impacts on behavioural intentions.
Methodology
Sample
The model was tested in the hotel industry with data collected from the customers
of selected hotels located in Mauritius. Samples consisted of customers from three
categories: namely luxury, mid-scale, and economy hotels (luxury hotel, 26%, mid-
scale hotel, 64%; and economy hotel, 10%) in Mauritius. Hotel guests were interviewed
using a structured questionnaire to find out about their perception of the quality of the
service offered by the hotel, perceived value, level of satisfaction, and their behavioural
intentions regarding the service they perceived. Mauritius is a bilingual country where
both French and English are as official languages: because of this, Mauritius is able to
attract large numbers of both English-speaking and French-speaking tourists. Hence, the
structured questionnaires were prepared in both English and French. Back translation
was used to ensure that both questionnaires communicated similar information to all
respondents (Brislin, 1970). A pilot study was conducted to establish content validity of
the questionnaire. For this, unstructured interviews were conducted with hotels guests at
the three categories of hotels. Pilot study interviews indicated that the respondents were
not able to distinguish between some of the corporate image variables. Subsequently,
the wordings to describe these variables were altered so that the information provided
was clearly understood by the respondents. Data was gathered by means of personal inter-
views with the hotel customers during a 6-week period either at the hotel itself or at tourist
attractions of Mauritius. The population was divided into different strata such as age,
118 H.-H. Hu et al.
gender, purpose of visit, frequency of visit, accompanied by children or not. In total, 1500
respondents participated in the study.
Measurement
Many of the instruments used to measure the constructs involved in this study were adapted
from the existing literature and others were developed based on the extant conceptual
studies. With regard to service quality, a multiple-item scale of SERVQUAL
(Parasuraman et al., 1988) was modified for the hotel setting with a 7-point Likert-type
scale ranging from 1 (¼ completely disagree) to 7 (¼ completely agree). The SERVQ-
UAL’s definition of service quality is suggestive of measuring service quality more directly
(Hartline & Ferrell, 1996).
Numerous studies also supported a similar measurement practice (Nguyen & LeBlanc,
1998; Ruyter, Wetzels, & Bloemer, 1998; Sivadas & Baker-Prewitt, 2000). For perceived
value, three items were adapted from Cronin et al. (2000), and an additional item devel-
oped by the researcher with 7-point Likert-type scale was used. In order to measure satis-
faction, customers were asked to state their overall satisfaction with the hotel and their
overall satisfaction with the services offered by the hotel in a 7-point Likert-type scale
with anchors of 1 (very dissatisfied) and 7 (very satisfied). Corporate image was operatio-
nalised based on the dimension of image attributes and image holistic. The dimension of
attributes was operationlised based on the guest’s perception of the hotel location, physical
facilities, interior design, price, the quality of the goods, and service provided, and staff
performance. The operationalisation of the holistic dimension of hotel image was based
on the customer’s perception of the hotel’s atmosphere, reputation, external appearance,
and the layout. A likelihood scale anchored with 1 (strongly disagree) and 7 (strongly
agree) was used to measure corporate image. Finally, to measure behavioural intentions,
three categories: repurchase intentions, willingness to recommend, and price sensitivity
were included accompanying the 7-point Likert-type scale (1 ¼ not all likely and 7 ¼
extremely likely). Construct reliability was assessed by using the Cronbach’s alpha co-
efficient. Reliabilities ranged from 0.65 to 0.94, suggesting that the construct could be
used with confidence.
Descriptive statistics including mean and standard deviation of each variable used in
the proposed model were presented. The assessment of the measurement properties of
the scales and the test of the hypothesised relationships presented in the conceptual
model were undertaken with the use of LISREL 8 (Joreskog & Sorbom, 1993). The
hypothesised relationships were then tested with the structural equation model.
Results and discussions

Descriptive analysis
A list of the responding sample’s demographic characteristics is provided in Table 1. In the
sample, 53.6% (804) of the respondents were male, and about 46.4% (696) were female.
The majority of subjects (84.4%) were vacationers, 208 (13.9%) were business travellers,
26 (1.7%) were travelling for other purposes. Nine percent (137) of the subjects were
under aged 24, 39.5% (593) were between 25 and 34 years old, 33.7% (506) were
between age 35 and 44 years, and another 17.6% (264) were above 45 years. The majority
of the subjects, 1196 (79.7%), stayed at the hotel for more than six nights. Mean scores as
well as standard deviations for service quality, perceived value, customer satisfaction,
corporate image, and behavioural intentions are shown in Table 2.
Table 1. Demographic characteristics.

Demographic variables n (%)
Gender
Male 804 (53.6%)
Female 696 (46.4%)
Age
18–24 137 (9.1%)
25–34 593 (39.5%)
35–44 506 (33.7%)
45–54 201 (13.4%)
Above 55 63 (4.2%)
Purpose of travel
Leisure 1264 (84.4%)
Business 208 (13.9%)
Others 26 (1.7%)
Number of nights
1 night 14 (1%)
2–3 nights 63 (4.2%)

4–5 nights 226 (15.1%)
6 nights or more 1196 (79.7)
Structural model
Using structural equation modelling, the relationships hypothesised in this study were
analysed. Figure 2 illustrates the structural equation model that was tested in this phase
of the analysis. Results indicate an excellent fit of the model. The x2 was insignificant
(x2 ¼ 3.814, p . 0.05). Reliance on the x2 test as a sole measure of fit in a structural
equation model is not recommended due to its sensitivity to sample size. Given its sensi-
tivity to sample size, a variety of fit statistics were applied to assess the ‘goodness of fit’ of
the model. Measures of fit included the comparative fit index (CFI), the normed fit index
(NFI), the Tucker– Lewis index (TLI), and the Root Mean Square of Approximation
(RMSEA). The three fit indexes CFI, NFI, and TLI (CFI ¼ 0.99, NFI ¼ 0.99, and
TLI ¼ 0.99) are all close to or even exceed the recommended level of 0.9 that represents
reasonable fit (Broome, Knight, Joe, Simpson, & Cross, 1997). The RMSEA is the least
Table 2. Descriptive analysis.

Variables Mean Standard deviation
Service quality 6.18 0.65
Reliability 6.02 0.81
Responsiveness 6.21 0.76
Assurance 6.19 0.72
Empathy 6.23 0.70
Tangibles 6.18 0.75
Perceived value 5.94 0.98
Customer satisfaction 6.11 0.84
Corporate image 6.14 0.89
Behavioural intention 4.82 0.79
Word-of-mouth 6.04 1.04
Purchase intention 5.74 1.36
Price sensitivity 2.67 1.45
120 H.-H. Hu et al.
Figure 2. The hypothesised model with parameter estimates.
Table 3. Fit indices for proposed model.

CFI 0.99
NFI 0.99
TLI 0.99
RMSEA 0.04
affected by sample size (Hu & Bentler, 1995), and the RMSEA index, with its value less
than 0.05, reflects a close fit. Browne and Cudeck (1993) believe that RMSEA values
between 0.0 and 0.05 indicate a close fit, less than 0.08 reflect reasonable fit, and
greater than 0.08 reflect poor fit. The value of the RMSEA equals 0.04 and is within the
range of close fit. Overall the data indicate an excellent fit for the hypothesised model.
The values are illustrated in Table 3.
Test of hypotheses
Service quality, perceived value, and customer satisfaction
Eight of the nine relationships included in the hypothesised direction were statistically
significant. The results support the relationship between service quality and perceived
value (f12 ¼ 0.50, p , 0.01). H2 was supported; thus, service quality has positive
impacts on perceived value. Moreover, service quality and perceived value were both
found to be positively related to customer satisfaction (g11 ¼ 0.25, p , 0.01;
g12 ¼ 0.50, p , 0.01). For customers, received higher level of service quality and per-
ceived superior value has strong impacts on customer satisfaction; thus, hypotheses H4
and H5 were confirmed.
Service quality, perceived value, customer satisfaction, and corporate image

The relationship between service quality and corporate image was statistically significant;
thus H6 was supported (g21 ¼ 0.20, p , 0.01). This finding suggests that customers who
received high service quality during service delivery would form a favourable image of the
hotel. Moreover, the hypothesised relationship between perceived value and corporate
image was found to be statistically significant (g22 ¼ 0.26, p , 0.01). This finding sup-
ports H7 and suggests that the hotel should have a strong image when its customers
believe they are getting high value from the services they receive. Furthermore, the
relationship between customer satisfaction and corporate image was significant. The
results support H8 and show that customer satisfaction has a direct impact on image
(b21 ¼ 0.52, p , 0.01). Additionally, service quality and perceived value were also
found to have indirect effects on image via customer satisfaction (effect ¼ 0.13,
p , 0.05; effect ¼ 0.26, p , 0.05).
Service quality, perceived value, corporate image, and behavioural intentions

Although a positive relation between service quality and behavioural intentions was
expected, the path between service quality and behavioural intentions was not significant
(g31 ¼ 20.04, p . 0.05). Service quality has no effect on behavioural intentions; thus,
H1 was not supported. However, the results nonetheless show that service quality has
an indirect effect on behavioural intentions via service satisfaction and corporate image
(effect ¼ 0.22, p , 0.05). Moreover, the relationship between perceived value and beha-
vioural intentions was statistically significant; thus, H3 was confirmed (g32 ¼ 0.22,
p , 0.01). This finding suggests that customers who received superior value from the
services of the hotel are more likely to prefer the organisation and recommend it to
others. The results also indicated that perceived value has an indirect effect on behavioural
intentions via service satisfaction and corporate image (effect ¼ 0.34, p , 0.05). Further-
more, corporate image is the primary path to behavioural intentions (b32 ¼ 0.65,
p , 0.01). The results support H9 and indicate that corporate image has a strong
impact on behavioural intentions.
Conclusions and managerial implications

The study contributes to a conceptual model that considers service quality and perceived
value as antecedents to customer satisfaction, corporate image, and behavioural intentions
towards the service firm. The results confirm that high service quality leads to superior
perceived value, customer satisfaction, and favourable perceptions of corporate image.
Customers’ perceived value was also found to affect customer satisfaction, the image of
the hotel, and customers more likely to prefer the organisation and recommend it to
others. Moreover, customer satisfaction was found to positively affect corporate image.
Additionally, analysis indicates that behavioural intentions were determined not only by
perceived value but also by the image of the firm. A favourable image can positively
affect repeat patronage.
In today’s world of intense competition, satisfying customers may not be sufficient.
Management should not just focus on improving customer satisfaction but also target
on improving the customer perceptions of overall service quality and increasing consumer
perceived value. Greater competitiveness is associated with higher levels of quality,
greater perceived value and customer satisfaction building a successful image and improv-
ing customer retention. Therefore, service providers should continuously improve both
service quality and perceived value. Managers must set quality standards that guarantee
the quality of services. The process by which services are offered to customers should
continuously be monitored to guarantee that customers have access to services at all
122 H.-H. Hu et al.
times. Also, in order to distinguish the offering from that of competitors, management
should ensure that the benefits derived from service consumption are continuously
promoted to customers.
Moreover, convincing customers that they are getting high value from the firm should
be a key advertising objective. From a managerial perspective, perceived value should be
recognised as a contributing factor to satisfaction and loyalty. Customers are mindful of
the costs of obtaining the service, and costs matter in relation to satisfaction. In competi-
tive environments, managers should not only focus on service quality; quality is just one
side of the satisfaction equation, but also carefully evaluate price competition, as it will be
reflected in customers’ assessment of perceived value. They should be aware that there
might be tradeoffs required between increasing quality and raising prices. Furthermore,
a favourable attitude in the form of image assessments should motivate customers to
resist competitive offerings. Image has been considered as a source of competitive advan-
tage. When companies have a relative attractiveness in their image, that corporate image is
significantly different from other companies within the same industry. A positive image
will not only help the company to attract customers, but will also exercise a positive influ-
ence on the trust of other interested groups.
Limitations and future research

This study provides a comprehensively integrated framework for understanding the
dynamic relationships among service-related factors: service quality, perceived value,
customer satisfaction, and behaviour intentions of customers. Any preliminary attempt
will involve a number of limitations. However, acknowledgement of these limitations
also suggests new directions for future studies. First, scales for measuring perceived
value and behaviour intentions need further development and refinement. Future research
should be directed towards fine-tuning of a tool to measure customer-perceived value and
incorporate multiple measures of the relevant constructs in order to increase the number of
items that are used for individual behaviour intentions. Secondly, this study focused on the
dynamic relationships among service-related factors in the hospitality industry. Given the
great diversity of service industries, these findings may have to be tested in different
service industries. Researchers should explore how the model works across services
categories. Thirdly, the findings need to be confirmed by further evidence from other
countries given the difference in values and cultures among different countries. Fourth,
the link between behavioural intentions and actual future behaviours remains tenuous,
in spite of limited empirical evidence (Hurley & Estelami, 1998). Therefore, further
research should also take actual actions of consumers into account. Finally, future research
should further investigate the impacts of service quality, perceived value, customer
satisfaction, and behaviour intentions on organisational performance measures such as
profitability; it should extend the integrative framework and take other variables into con-
sideration to provide managers with more useful suggestions on how to attract new and
retain the existing customers.
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Relationships and Impacts of Service Quality, Perceived Value, Customer

Article in Service Industries Journal · February 2009

Hsin-Hui Sunny Hu Jay Kandampully

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Juwaheer Thanika Devi

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Relationships and impacts of service quality, perceived value,

Keywords: service quality; customer satisfaction; perceived value; image; loyalty;

ISSN 0264-2069 print/ISSN 1743-9507 online

Figure 1. Proposed conceptual model.

concept is multi-faceted and complicated by numerous interpretations, biases, and emphases

tion is generally construed to be a post-consumption evaluation dependent on perceived

H4: Service quality has positive impacts on customer satisfaction.

H6: Service quality has positive impacts on corporate image.

Results and discussions

Table 1. Demographic characteristics.

2–3 nights 63 (4.2%)

Table 2. Descriptive analysis.

Figure 2. The hypothesised model with parameter estimates.

Table 3. Fit indices for proposed model.

Service quality, perceived value, customer satisfaction, and corporate image

Service quality, perceived value, corporate image, and behavioural intentions

Conclusions and managerial implications

ence on the trust of other interested groups.

Limitations and future research

value oriented management. Journal of Consumer Marketing, 18(1), 41–53.

Marketing, 16(4), 363–379.

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