CHAPTER 1

Introduction

1.1. Background of study

The service sector plays an increasingly important role in current global economies. It
contributed 80 percent of the 2002 Gross National Product (CIA World Fact Book, 2003) and
accounts for nearly 80 percent of the US workforce (Fitzsimmons and Fitzsimmons, 2004).
As attention is being focused more and more on this sector, it becomes more competitive over
time. To be competitive in today's business, a service firm should have an effective indicator
to measure its business performance. While the sales volume is criticized as a lagging
indicator which provides very little information about its effect on firm performance,
purchase intention is an alternative performance indicator to explore the likelihood that
customers will purchase services of a firm before the actual purchase is made (Balduaf et al,
2003). Moreover, a service firm that clearly understands the decision making process of its
customers would be able to optimize its marketing strategies and, in turn, gain more
competitive advantage than its competitors (Colias, 2005). Therefore, consumer perception
and intention to select a service firm has been of interest for years (Richarme, 2005). It is
undoubtedly true for a service industry, that quality of service directly affects service
evaluation and selection. However, other factors are also considered as having an influence
on service selection. Woodall (2003) suggested that service quality together with physical
attributes of the product, price, and brand are associated with the product acquisition while
Dodds et al., (1991) indicated that a brand is strongly related to the evaluations of the product
in quality judgment, price evaluation, value interpretation, and, consequently, purchase
probability (Stader and Shaw, 1999; Donthu, 1999).

TOM N TOM coffee shops as part of many chains across Bangkok that targets students and
working people in areas of Bangkok by offering a variety of coffee, coffee free drinks and
snacks, it's menu of drinks fuses influences from around the world, drinks are characterized by
2daring flavor combinations, which showcase an external influence of western coffee drinkers
in Bangkok such as beverages , bakery product and merchandize with reasonable price to
customers, and realizes in the importance service quality to meet customers’ expectations. The
coffee shop has an estimated customers of 6,000 people per month, or 200 people per day.

There are several components of service quality based on tangible cues such as the service
facility, equipment, and personnel. In a 1988 Gallup survey on adult consumers’ perceptions
of quality, the most frequently mentioned attributes for determining the quality of services were
courtesy, promptness, attitude, and satisfaction of needs (Flaherty, 1988). One of the
conclusions of the study was that a lag existed between improvements in quality and the
consumer perception of these quality improvements. Perceived quality can be defined as the
perceived ability of a service to provide satisfaction relative to the available alternatives. It is
critical in services to address perceived quality (rather than assume quality) because of the
difficulty, due to the intangible nature of services, in assessing objective quality (Akira
Takahashi NTT Service Integration Labs. 2007). The purpose of this project is to examine the
applicability of a previously established instrument for measuring service quality
(SERVQUAL) in assessing customer perceptions of service quality towards TOM N TOMS
coffee shop in Phaya Thai Area of Bangkok.

This research studies the customer perceptions towards service quality of TOM N TOMS
coffee shop in view of an interesting case study that can use the results obtained for a service
development and improvement in the future.

1.2. The Research problems

Coffee Shop industry in Thailand saw an improving performance with 5% current value terms
growth in 2012, driven by the healthy performance of chained Asian full-service coffee shops,
such as Black Canyon Coffee, Coffee World, and Starbucks Coffee. There is a huge number
of operators among full-service coffee shops in Thailand. Big Operators dominate with a 65%
value share of overall sales value. However, independent operators continue to lose share to
chained operators, with chained players more active in terms of outlet expansion, menu
innovation and promotional campaigns, which help support strong growth and branding. Many
independent operators have been very cautious in terms of outlet expansion. Furthermore, a
large number of small independent operators were out of the market over the past three years,
underpinned by the flood crisis of 2011 as well as political instability over 2012-2013 (Full-
Service shops in Thailand 2015).

The main issues facing in the coffee shops is that how to increase patronage and profits in the
established restaurants to overcome during this situation, and how to provide the best service
to meet customers’ satisfaction, Starbucks maintained its leading position among chained

This research has to apply SERVQUAL to measure customer perceptions towards TOM N
TOMS coffee shop in Phaya Thai area of Bangkok who is part of the chains of stores . The four
main reasons influencing a decision to return to TOM N TOMS restaurant are quality of
beverages, service, price, and atmosphere (Mill, 2001, P. 173). Chapman (2008, P. 2) stated
that “the quality of drinks is the most critical factors” to consumers at coffee shops, however,
other attributes such as value and service quality.

1.5. Research Significance

This study will be a significant endeavor which will benefit TOM N TOM Coffee Shop and
other coffee shops operators in Thailand, of excellent working environment in the workplace
and motivation of customers and employees. This study will also be beneficial to students,
instructors and the society involved in the hospitality industry. By understanding the needs of
customers and benefit of quality service, TOM N TOMS coffee shop be assured of a
competitive advantage. Moreover, this research will provide recommendations on how to
evaluate the performance of a similar coffee shops in accordance to the service quality. Due to
Bangkok have denominations of people of different ethics, TOM N TOMS coffee shops has
keep things simple, with classic beverage menus such as Java chip TomNccino, Cinnamon
mocha TomNcc, Caramel TomNccino,Vanilla Tom N ccino

This study will be helpful to coffee shops and tourism industry in Thailand on training and
informing the employees in the area of service quality, to retain regular customers who visit’s
the coffee shops. It will also serve as a future reference for researchers on the service quality
in the hospitality industry as a reference on their studies. And importantly, this research will
educate individual restaurant operators on deciding on how to apply service quality
(SERVQUAL) to promote its business.
1.6. Conceptual Framework

Figure 1.6 Conceptual framework of this study

Word of Personal Past

mouth Experience
Service Quality Needs

1. Tangibility

2. Reliability Expected

Service
3. Responsiveness Customers
Perceptions
4. Assurance

Perceived
5. Empathy
Service

Source: (Gronroos 1982, and Lehtinen 1982) A conceptual model of Service Quality and it's
implication for future research (SERVQUAL)
1.7. Hypothesis of Study

1.7.1. Major research question:

1. How do the customers who have experience with TOM N TOMS coffee shops
currently perceive the quality of services of the company?

1.7.2. Sub-question development:

1. What the expectation levels regarding to service quality at TOM N TOMS coffee shop in
customer mind?

2. What are the main problems related to service quality issues in dining at TOM N TOMS
Coffee shop?

3. What are the implications for managing and improving quality of service at TOM N TOM
coffee shop?

1.7.3. Assumptions

This research realized to validity and reliability of research, therefore, the assumptions were
made for this study as following:

1. This study is conducted on assuming that on standard and sufficient service level, customers
are experiencing in unsatisfactory respecting to some service quality provided at TOM N
TOMS coffee shop.

2. Respondents used for this study are truthful.

3. Respondents’ views effect the reality they experienced.

4. The data obtained and data analyzed are only appropriate and valid for the research design
in this study.
1.7.4. Benefits of Research

The benefits of this study are to understand the consumer perceptions towards service quality
of the TOM N TOMS coffee shops that the company can use the results to develop the quality
of service to complete with competitors, and to understand the main problems related to service
quality issues from the perspective of consumers who experienced it for success in delivery
good service and improve the services to more efficiency and effectiveness. Moreover, the
business owner can use the valuable information from this study as a guideline for
development the business strategies to best serving to customers’ need.

Lovelock & Wright (1999) found that there are many benefits of customer satisfaction and
service quality. Moreover, the great quality of service bring about customer satisfaction that
results in high rate of customer loyalty (Naumann & Giel, 1995, P. 5), and increase a firm
profitability (Bateson, 1995, P. 581; Zeithaml et al., 2006, P.114-116), gain market share (Reid
& Bojanic, 2001, P. 39), differentiate from competitors (Palmer & Cole, 1995, P. 72; Reid &
Bojanic, 2001, P. 39); therefore, restaurants need to improve a service quality to satisfy their
customer (Zeithaml et al., 2006, P.114-116).

1.8. Definitions of Terms

Service quality: Service quality is customer’s perceptions about quality based on long-term
and overall evaluation of performance (Lovelock & Wright, 1999, P. 92; Reid & Bojanic,
2001, P. 39; Zeithaml et al. 2006, P. 106).

Perceptions: Perception is an individual’s attitudes after they have received services (Reid &
Bojanic, 2001, P. 73).

Expectations: Expectations are beliefs of an individual about service performance before them
receives the actual service delivery (Zeithaml et al., 2006, P. 81).

Reliability: The ability to perform the promised service accurately with consistency of
performance, such as commit the service right the first time, and give a service as its promises
(Bateson, 1995, P. 562; Palmer & Cole, 1995, P. 152; Zeithaml et al., 2006, P. 116-117).

Assurance: The courtesy (i.e. politeness, respect, friendliness) of employees and competence
- skill and knowledge to perform the service of employees, as well as their ability to obtain
trust and confidence (Bateson, 1995, P. 562; Palmer & Cole, 1995, P. 152; Zeithaml et al.,
2006, P. 116-117).

Tangibles: The factors such as physical environment, the décor of the restaurant, facilities,
and the appearance of the employees in neat, equipments and materials used to provide the
service (Bateson, 1995, P. 562; Palmer & Cole, 1995, P. 152; Zeithaml et al., 2006, P. 116-
117).

Empathy: Employees’ willingness to go beyond customer needs and they can delivery some
extra services such as providing personal caring, individual attention, and recognizing the
regular customers (Bateson, 1995, P. 562; Palmer & Cole, 1995. P. 152; Zeithaml et al., 2006,
P. 116-117).

Responsiveness: Providing prompt service to customers with willingness, promptness in

dealing with customers’ requests, questions, complaints and problems (Bateson, 1995, P. 562;
Palmer & Cole, 1995, P. 152; Zeithaml et al., 2006, P. 116-117).