The Effects of Service Quality,

Perceived Value and Customer Satisfaction

on Behavioral Intentions
Jackie L. M. Tam

ABSTRACT. Service quality, perceived value and customer satisfac-

tion are variables of high interest to marketers. These variables have
been suggested to have an influence on customers’ post-purchase be-
havior. The research presented in this article aims to examine the cru-
cial role these variables play in shaping post-purchase behavior within
the context of restaurant industry. Data were collected by means of
self-administered questionnaires. Customer satisfaction was found to be
more strongly correlated with perceived performance than disconfirma-
tion. In addition, the results of structural equations modeling revealed that
customer satisfaction had the strongest effect on behavioral intentions,
followed by perceived value. The effect of service quality on behavioral
intentions was mediated through customer satisfaction. Managerial im-
plications of these findings are discussed. [Article copies available for a fee
from The Haworth Document Delivery Service: 1-800-342-9678. E-mail address:
getinfo@haworthpressinc.com <Website: http://www.haworthpressinc.com>]

KEYWORDS. Service quality, customer behavior, customer satisfaction,

restaurant marketing

INTRODUCTION

The service industries play a significant role in most economies. Faced

with intensified competition, many firms are seeking ways to differentiate

Jackie L. M. Tam is Assistant Professor in the Department of Business Studies,

The Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong.
Journal of Hospitality & Leisure Marketing, Vol. 6(4) 2000
E 2000 by The Haworth Press, Inc. All rights reserved. 31
32 JOURNAL OF HOSPITALITY & LEISURE MARKETING

themselves from their competitors. Service quality has been suggested as a

means to develop a competitive advantage (Clow and Vorhies 1993; Brown
and Swartz 1989; Parasuraman et al. 1988). Strategic benefits of superior
quality in contributing to market share and profits have been documented in
the literature (Buzzell and Gale 1987). Studies have been conducted showing
the effects of service quality on customers’ behavioral intentions (Boulding
et al. 1993; Zeithaml et al. 1996).
Closely related to service quality is customer satisfaction. Customer satis-
faction is an important concept in the marketing literature. Its significance is
attributed to its ability in predicting post-purchase behavior. It has been found
to be a significant determinant of repeat sales, word-of-mouth and customer
loyalty (e.g., Liljander and Strandvik 1995; Anderson and Sullivan 1993;
Woodside et al. 1989). However, in recent years, there is evidence suggesting
that customer satisfaction does not necessary lead to loyalty (Jones and Sass-
er 1995). Indeed, Mittal and Lasser (1998) indicated that about 20-30 percent
of the respondents who rated at the top end of the satisfaction scale also
inclined to switch.
Perceived value is posited to be highly associated with service quality and
customer satisfaction. But the role of perceived value is left relatively unex-
plored in the field of services marketing (Ruyter et al. 1997). Perceived value
is conceptualized as a trade-off between perceived benefits relative to per-
ceived sacrifices (Monroe 1991). Parasuraman et al. (1994) stated that trans-
action satisfaction is based on customer’s evaluations of service quality,
product quality and price. Price is a major marketing element. The inclusion
of price in customer’s evaluations of service leads to a cognitive judgment of
perceived value which may have a significant influence on satisfaction, and
in turn, affect post-purchase behavior. This variable may contribute to ex-
plain the post-purchase behavior. However, a review of literature identifies
that a few studies have investigated the influence of perceived value on
behavioral intentions (Cronin et al. 1997; Patterson and Spreng 1997). This
study aims to enhance our understanding of the relationships between cus-
tomer satisfaction, service quality and perceived value and their influences on
behavioral intentions.

LITERATURE REVIEW

A majority of consumer satisfaction studies were based on the expectancy-

disconfirmation paradigm (Anderson and Sullivan 1993; Tse and Wilton
1988; Churchill and Surprenant 1982). According to Oliver (1977), discon-
firmation arises from the discrepancy between prior expectations and per-
ceived performance. It has been suggested to have an independent and addi-
tive effect on satisfaction. However, the measurement of disconfirmation
 Jackie L. M. Tam 33

varies among researchers. The two well-known measurements of discon-

firmation in the literature are ‘‘inferred disconfirmation’’ and ‘‘perceived
disconfirmation.’’ The ‘‘inferred disconfirmation’’ measure assumes that the
effects of a post-experience comparison on satisfaction can be expressed as a
function of the algebraic difference between service performance and a com-
parison standard (LaTour and Peat 1979). Parasuraman et al. (1988) adopted
this approach for assessing the quality of a service. Prakash (1984) found that
the difference score measures have low reliabilities and low correlation with
customer satisfaction. Peter et al. (1993) suggest that researchers have to be
more cautious with the use of difference scores. In other studies, Churchill
and Surprenant (1982) and Oliver (1980) attempted to measure perceived
disconfirmation on a scale with end-points labeled ‘‘better than expected’’
and ‘‘worse than expected.’’ Tse and Wilton (1988) found that perceived
disconfirmation has a stronger predictive ability than inferred disconfirma-
tion on customer satisfaction. Yi (1990) pointed out that using inferred dis-
confirmation could lead to a consistency bias in response. He argues that if
the same scale is used twice, a ceiling effect might occur which can cause
difficulty in capturing the disconfirmation.
Churchill and Surprenant (1982) were among the first to examine the
effects of expectations, disconfirmation and perceived performance on cus-
tomer satisfaction. The results varied among the types of products. For the
plant product, satisfaction was influenced by expectations, perceived perfor-
mance and disconfirmation but for the video disc player, satisfaction was
determined solely by perceived performance. Other studies have also shown
that perceived performance has a strong effect on customer satisfaction (Tse
and Wilton 1988; Liljander and Strandvik 1993; Patterson 1993). It has been
suggested that individual differences and product category differences may
affect satisfaction evaluations via expectations and perceptions of perfor-
mance (Johnson and Fornell 1991).
Service quality is an important and growing interest among academics and
practitioners. This is attributed to the significance of the service sector in
most economies. Many service firms have been using service quality as a
differentiation tool. Moreover, manufacturers and companies selling goods
also use services to augment their product offerings. The most well known
instrument for measuring service quality is SERVQUAL which was
introduced by Parasuraman et al. (1988). The SERVQUAL instrument con-
sists of two sets of 22 statements, one set aims to measure consumers’ norma-
tive expectations of service firms and the other set seeks to obtain consumers’
perceptions of the service performance of a specific firm. The instrument has
been applied across a variety of service settings, fast food restaurants (Lee
and Ulgado 1997), lodging services (Getty and Thompson 1994), restaurant
services (Bojanic and Rosen 1994) and medical services (Brown and Swartz
34 JOURNAL OF HOSPITALITY & LEISURE MARKETING

1989). However, researchers have identified the practical and psychometric

problems associated with the use of difference scores measure (Carman 1990;
Cronin and Taylor 1992; Babakus and Boller 1992; Teas 1993; Peter et al.
1993). But Parasuraman et al. (1994) defend including the set of expectations
statements in the instrument on the basis that it provides a diagnostic value to
management. On the other hand, the performance-based measure advocated by
Cronin and Taylor (1992) is a growing popular measuring instrument for
gauging service quality. According to Cronin and Taylor (1992), the perfor-
mance-based measure is twice as efficient in terms of data collection and it
provides better measurement properties than the difference scores measure.
In the recent literature, there is some consensus that service quality is
viewed as rational perception whereas customer satisfaction as an emotional
or feeling response (Rust and Oliver 1994). Some researchers view service
quality as similar to attitude (Parasuraman et al. 1988; Cronin and Taylor
1992). However, such proposition still needs to be confirmed. The general
agreement among researchers is that service quality can be viewed at two
levels. It can be viewed as an encounter quality at one level while at another
level it can be seen as global in nature (Teas 1993; Parasuraman et al. 1994).
The former refers to the quality of a specific transaction and the latter is seen
as the accumulated effect of a firm’s service over time.
The role of perceived value in consumer behavior has received far lesser
attention than service quality and customer satisfaction. Perceived value is
conceptualized as a trade-off of perceived benefits relative to perceived sacri-
fices (Monroe 1991). Other researchers have viewed the perceived benefits
as the ‘‘get’’ component which corresponds to the quality of a service as
perceived by a customer and perceived sacrifices as the ‘‘give’’ component
which corresponds to what the customer is giving up (Zeithaml 1988). Chang
and Wildt (1994) found that perceived value was a significant determinant of
repurchase intentions. Cronin et al.’s (1997) study showed that perceived
value explained the variance in purchase intentions significantly more than
perceived performance in a variety of service settings. However, the use of a
single overall evaluative statement as a measure of perceived value may
reduce the reliabilities of their results. Review of the literature identifies that
service quality, perceived value and customer satisfaction each has been
studied but an integration of these variables into a single model is rare. Thus,
the aim of this study is to investigate the relationships among these variables
and the effects of these variables on behavioral intentions. It is hypothesized
that customer satisfaction mediates the relationships of service quality and
perceived value with behavioral intentions. In other words, high perception
of service quality triggers a satisfying feeling which in turn influences repur-
chase intentions. Similarly, high perception of service value leads to greater
satisfaction, and in turn, affects repurchase intentions.
 Jackie L. M. Tam 35

RESEARCH METHODS

The service firm selected for this study was a Chinese restaurant in the
north of England. The survey instrument was developed based on a review of
the literature. Twelve attributes were identified and were evaluated by the
restaurant manager in terms of relevancy and appropriateness. Appendix I
contains the list of the attributes. The survey instrument consisted of three
sections. The first section contained a set of statements asking respondents to
evaluate the performance of each attribute with their expectations on a
7-point scale ranging from ‘‘much worse than expected’’ to ‘‘much better
than expected.’’ The middle value represents the conformance of respond-
ents’ perceptions of performance with their expectations. The first section
also included a set of statements asking respondents to assess the perfor-
mance of each attribute on a 7-point scale with the end points labeled ‘‘excel-
lent’’ and ‘‘poor.’’ The second section contained measures regarding the
perceptions of overall quality, satisfaction, perceived value and behavioral
intentions. The third section solicited respondents’ demographic information
such as sex, age, income and education. The questionnaire required about ten
minutes to complete and the respondents did not have any difficulties in
responding to the questions during the pretest. Self-administered method was
utilized.
The questionnaire with a stamped envelope was given to the diner who
had dined at the restaurant on the weekday evenings. The sample was col-
lected over three consecutive weeks in the summer of 1998. The diners were
selected using intercept method in order to avoid subjective bias in the selec-
tion. A total of 200 questionnaires were distributed and 92 usable responses
were obtained. The response rate was 46%.

ANALYSIS AND FINDINGS

The sample comprised 51 percent males and 49 percent females. A major-

ity of the respondents were married, they accounted for about 72.8 percent.
Seventy percent of respondents had attained post-secondary education or
above. In terms of the average age, the median was in the category of 36-45.
Table 1 contains the demographic characteristics of respondents.
A composite disconfirmation measure was derived by averaging the dis-
confirmation scores of the twelve attributes. Similarly, the composite perfor-
mance measure was computed by averaging the performance scores of the
twelve attributes. A single item rating scale with anchors at 7 (excellent) and
1 (poor) was used to gauge respondents’ perceptions of overall quality of the
restaurant. Customer satisfaction was measured using four items related to
36 JOURNAL OF HOSPITALITY & LEISURE MARKETING

TABLE 1. Demographic Characteristics of Respondents

Demographic Characteristics Number Percentage

Sex
Male 47 51.1
Female 45 48.9
Marital Status

Single 17 18.5
Married 67 72.8
Divorced 8 8.7
Age
18-25 17 18.5
26-35 19 20.7
36-45 24 26.1
46-55 19 20.7
56-65 13 14.0
Education Attainment
Primary level 4 4.3
Secondary level 19 20.7
Post-secondary level 24 26.1
Polytechnic / University level 25 27.2
Professional qualification 20 21.7

the service, food and overall feeling towards the experience. Perceived value
was measured using three items with respect to the service, quality and
quantity of food received relative to the price paid. Four items were used to
form a scale for behavioral intentions. These items were adapted from Zeithaml’s
(1996) study. They included word of mouth communication, repurchase intention,
preference and likely to make complaint when problems occur. The reliabilities
of these measures were evaluated by calculating coefficient alphas, customer
satisfaction (alpha = 0.8572) and perceived value (alpha = 0.9274). However,
the reliability of behavioral intentions measure was relatively lower, it was
0.6603. The coefficient alpha was improved when the item measuring ‘‘likely
to complain’’ was removed (alpha = 0.8084). Thus, this item was removed
and the three items were averaged to form a scale to measure behavioral
intentions.
Correlation analysis was performed and is presented in Table 2 which
shows that perceived performance is highly correlated with customer satis-
faction, quality, perceived value and behavioral intentions. Disconfirmation
is moderately correlated with these measures. The correlation between dis-
confirmation and customer satisfaction is 0.42 and the correlation between
perceived performance and customer satisfaction is 0.69. This result is con-
 Jackie L. M. Tam 37

TABLE 2. Pearson Correlation Matrix

Disconfirmation Performance Quality Satisfaction Perceived

Value

Performance 0.3820
Quality 0.3269 0.6711
Satisfaction 0.4217 0.6900 0.7936
Perceived Value 0.2800 0.5600 0.3974 0.4781
Behavioral 0.2034 0.5558 0.6060 0.7088 0.6150
Intentions

sistent with the results obtained in prior studies that perceived performance is
more strongly related with satisfaction than disconfirmation (Patterson 1993;
Liljander and Strandvik 1995). The correlation of perceived value with cus-
tomer satisfaction is 0.48 which is relatively higher than the correlation with
quality of 0.40. Table 2 shows that perceived value is strongly related with
perceived performance, the correlation is 0.56. This result is expected given
that perceived value is conceptualized as a trade-off between the level of
service received and the costs of using the service.
The analysis reported herein is to ascertain the effects of service quality,
perceived value and satisfaction on behavioral intentions. Regression analysis
was performed, followed by structural equations modeling via LISREL 8 (see
Table 3). In order to test the research hypothesis, the procedure suggested by
Baron and Kenny (1986) was adopted. A total of three regression analyses
were conducted, (1) customer satisfaction on perceived value and service quali-
ty; (2) behavioral intentions on perceived value and service quality; (3) behav-
ioral intentions on perceived value, service quality and customer satisfaction.
According to Baron and Kenny, there are three conditions that must be hold in
order to establish a mediation effect: (i) the independent variable must affect the
mediator in the first regression model; (ii) the independent variable must be
shown to affect the dependent variable in the second regression model; (iii) the
mediator must affect the dependent variable in the third regression model. Given
that these conditions are met, the effect of the independent variable on the
dependent variable must be less in the third model than in the second model.
The results of regression analysis suggest that customer satisfaction mediated the
relationships of service quality and perceived value with behavioral intentions.
The effect of service quality on behavioral intentions was significantly less in the
third model than in the second model.
Structural equations modeling was used to assess the relationships of these
variables with behavioral intentions. Figure 1 depicts the basic model con-
ceptualizing customer satisfaction as a mediator of the relationships of ser-
38 JOURNAL OF HOSPITALITY & LEISURE MARKETING

TABLE 3. Results of Regression Analyses

Dependent Variables Independent Variables R2 Standardized

Coefficients

Customer satisfaction Service quality 0.66 0.198 (*)

Perceived value 0.712 (*)
Behavioral intentions Service quality 0.53 0.426 (*)
Perceived value 0.447 (*)
Behavioral intentions Service quality 0.61 0.095
Perceived value 0.355 (*)
Customer satisfaction 0.466 (*)

(*) --statistically significant at the 5% level

FIGURE 1. Basic Model

Service quality

Customer satisfaction Behavioral intentions

Perceived value

vice quality and perceived value with behavioral intentions. The basic model
was compared with two alternative models which are depicted in Figure 2
and Figure 3. The results show that the third model performed the best
compared to the former two. It has a chi-square of 44.87 (p = 0.24) with 39
df, a GFI of 0.92 and a AGFI of 0.85. The results suggest that perceived value
has both direct and indirect effects on behavioral intentions.
 Jackie L. M. Tam 39

FIGURE 2. Second Model

Service quality

Customer satisfaction Behavioral intentions

Perceived value

FIGURE 3. Third Model

Service quality

Customer satisfaction Behavioral intentions

Perceived value
40 JOURNAL OF HOSPITALITY & LEISURE MARKETING

Managerial Implications and Conclusions

Customer satisfaction has long attracted the interests of many researchers
because of its significance in influencing post-purchase behavior. Inconsis-
tent with prior studies, this study showed that satisfaction is a significant
determinant of behavioral intentions. Although, customer satisfaction alone
may not be sufficient to generate repeat purchase, it is requisite in today’s
highly competitive markets. Further, this study revealed that customer satis-
faction is more strongly related with perceived performance than discon-
firmation. If management wants to enhance customers’ satisfaction evalua-
tions, it would be more beneficial in influencing customers’ perceptions of
the service performance than altering their expectations.
In the past consumer satisfaction studies, price has very often been neglected.
It is surprising given the fact that the earlier definition of customer satisfaction
was based on the rewards and costs associated with a purchase (Churchill and
Surprenant 1982). In this study, price was incorporated in the measure of per-
ceived value. Perceived value was found strongly correlated with satisfaction.
The results of regression analysis and structural equations modeling also indicate
that perceived value contributed in explaining the variation of behavioral inten-
tions. These results suggest that perceived value is an important factor in cus-
tomers’ evaluations of satisfaction and post-purchase behavior. Ravald and
Gronroos (1996) suggest using customer value as an alternative means of gain-
ing an advantage over competitors. This can be achieved by adding extra value
to the service offering. On the other hand, service quality was found exerting a
positive effect on behavioral intentions but this effect was mediated through
customer satisfaction. This study shows that perceived value contributed more in
the formation of behavioral intentions than service quality. It would be worth-
while directing the efforts to understand customers’ evaluations of service value
as its appears to be a significant determinant of post-purchase. Cronin and
Taylor (1992) argue that not all consumers would go for the highest quality
service; other factors such as price, convenience and availability of the service
are also customers’ primary considerations.

Limitations

Given the fact that this was an exploratory study, the findings need to be
cautiously interpreted. The study focused on one restaurant, thus the general-
izability of the results to other restaurants and service settings may be limited.
The overall perceived quality was measured by a single rating item; this may
attenuate the reliability of the results. Further, this study captured perceived
value as an evaluative measure containing items related to the service, quality
and quantity of food received relative to the price paid. However, there are
non-monetary costs such as time costs, search costs, physic costs (Zeithaml
 Jackie L. M. Tam 41

1988). These non-monetary costs were not included in the study and they
could be important variables in consumers’ judgments of perceived value. In
spite of the limitations discussed, this study highlights the significance of
perceived value in the formation of behavioral intentions.

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APPENDIX I

List of the Attributes

Attractive interior decoration

Quality of food
Taste of food
Amount of food
Variety of choices
Providing efficient service
Serving your food in the way you want it
Serving you in the time promised
Employees who react quickly if anything has gone wrong
Employees willing to give extra effort to handle your special requests
Employees who are always courteous and friendly
Operating business hours convenient to their customers