RAMON M. DURANO SR.

FOUNDATION – SCIENCE AND

TECHNOLOGY EDUCATION CENTER

Banaba, Guinsay, Danao City

S.Y. 2017 – 2018

The Impact of Customer Service Quality on

Customer Satisfaction and Loyalty

Among Educational Supply

Stores in Danao City

Levi Emmanuel V. Bravo

Rhey E. Durano
Genelyn C. Cola
Jocelie B. Garrido
Hanna Ashley T. Napiñas
Khriste Lei R. Santillan
Mary Clare M. Vallespin
Mere An P. Villena
Researchers

Carlo C. Roble
Research Adviser
The Impact of Customer Service Quality on
Customer Satisfaction and Loyalty
Among Educational Supply
Stores in Danao City

by

Levi Emmanuel V. Bravo

Rhey E. Durano
Genelyn C. Cola
Jocelie B. Garrido
Hanna Ashley T. Napiñas
Khriste Lei R. Santillan
Mary Clare M. Vallespin
Mere An P. Villena

Submitted to the Faculty of the

Ramon M. Durano Sr. Foundation – STEC
in partial fulfillment of the requirements
for Practical Research 3

February 2018
 ACKNOWLEDGMENT

The researchers would like to extend their heartfelt gratitude to:

Mr. Carlo Roble, the research adviser, for guiding and supporting the researchers

throughout this research project and for the needed knowledge in making a research

paper.

Mrs. ErlindaErmita, for encouraging the researchers to finish the study.

Mr. Jorge A. Noya, school head of RMDSF-STEC, for supporting the researchers

to pursue this study.

To our respondents – students, teachers, parents and office workers, for

cooperating in our research survey. Without you, the researchers cannot gather the

data needed for the completion of the study.

To Mr. Baltazar M. Bravo, Jr. & Mrs. Annalie V. Bravo; Mr. Eldebrando L. Durano

& Mrs. Concepcion E. Durano; Mr. Raul C. Cola & Mrs. Merlyn C. Cola; Mr. Allen N.

Garrido & Mrs. Josie B. Garrido; Mr. Jimmy G. Napiñas & Mrs. Leonida T. Napiñas; Mr.

Dante C. Santillan & Mrs. Lee R. Santillan; Mr. Laddy N. Vallespin, Sr. & Mrs. Vilmalin

M. Vallespin; and Mr. Naciancino L. Villena, Sr. & Mrs. Julieta P. Villena, the

researchers‘ parents, for the moral and financial support.

The researchers‘ classmates, for encouraging the researchers to pursue this

study and for motivating the researchers in making this study.

Most of all, to our Almighty Father for encouraging the researchers all throughout

the project and for giving the researchers the needed knowledge and strength to make

this study a success.

Thank you very much! We wish you all the best and may God bless us all!

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 TABLE OF CONTENTS
Content Page

ACKNOWLEDGMENT ................................................................................................................. i
TABLE OF CONTENTS .............................................................................................................. ii
LIST OF TABLES....................................................................................................................... iv
LIST OF GRAPHS ...................................................................................................................... v
LIST OF STATISTICAL TABLES ............................................................................................... vi
ABSTRACT ............................................................................................................................... vii
CHAPTER I: THE PROBLEM AND ITS BACKGROUND ........................................................... 1
Rationale ................................................................................................................................ 1
Statement of the Problem ....................................................................................................... 3
Main Problem ...................................................................................................................... 3
Specific Problems ............................................................................................................... 4
Significance of the Study ........................................................................................................ 4
Scope and Delimitation ........................................................................................................... 6
Definition of Terms ................................................................................................................. 6
CHAPTER II: REVIEW OF RELATED LITERATURE ................................................................. 7
Definition of Customer Service and Quality Customer Service ............................................... 7
Factors Affecting Quality Customer Service / Determinants to Quality Customer Service ....... 8
Reliability ............................................................................................................................ 8
Responsiveness.................................................................................................................. 8
Competence ....................................................................................................................... 8
Access ................................................................................................................................ 9
Courtesy ............................................................................................................................. 9
Communication ................................................................................................................... 9
Credibility ............................................................................................................................ 9
Security ..............................................................................................................................10
Understanding / Knowing the Customer .............................................................................10
Tangibles ...........................................................................................................................10
Significance of Quality Customer Service ..............................................................................10
Definition of Customer Satisfaction ........................................................................................11
Barriers to Customer Satisfaction ..........................................................................................12
Product Barriers to Customer Satisfaction..........................................................................13

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 Personnel Barriers to Customer Satisfaction ......................................................................14
Factors Affecting Customer Satisfaction / Determinants of Customer Satisfaction .................15
Price ..................................................................................................................................15
Product Quality ..................................................................................................................15
Value Added Services ........................................................................................................16
Customer Demand Fulfillment ............................................................................................17
Complaint Entertainment....................................................................................................17
Net Promotion ....................................................................................................................17
Definition of Customer Loyalty ...............................................................................................18
Purchasing Frequency .......................................................................................................18
Switching Activity ...............................................................................................................18
Store Image .......................................................................................................................19
Relationship between Customer Satisfaction and Loyalty ......................................................19
Importance of Customer Satisfaction and Loyalty ..................................................................19
Impact of Customer Satisfaction and Loyalty on Profitability ..................................................21
Effect of Customer Service Quality on Customer Satisfaction and Loyalty .............................25
Customer Relationship Marketing ..........................................................................................26
CHAPTER III: METHODOLOGY ...............................................................................................28
Research Design ...................................................................................................................28
Sampling Method ..................................................................................................................28
Data Collection ......................................................................................................................28
Data Analysis ........................................................................................................................30
CHAPTER IV: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA ...................31
Specific Problem No. 1 ..........................................................................................................31
Specific Problem No. 1.2 .......................................................................................................33
Specific Problem No. 2 ..........................................................................................................36
CHAPTER V: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS ........39
Summary of Findings.............................................................................................................39
Conclusions ...........................................................................................................................41
Recommendations.................................................................................................................42
BIBLIOGRAPHY .......................................................................................................................46

iii
 LIST OF TABLES

Table Title Page

1.1 Overall rating of Customer Service and Satisfaction 31

1.2 Overall rating of Customer Service and Customer Loyalty 33

2 Overall rating of Customer Satisfaction and Loyalty 36

iv
 LIST OF GRAPHS

Graph Title Page

Percentage of the overall rating of customer service and

1.1 31
satisfaction

1.2 Percentage of the overall rating of customer service and loyalty 34

Percentage of the Overall rating of Customer Satisfaction and

2 36
Loyalty

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 LIST OF STATISTICAL TABLES

Table Title Page

The Correlation between Customer Service and Customer

1.1 32
Satisfaction

1.2 The Correlation between Customer Service and Loyalty 34

The Correlation between Customer Satisfaction and Customer

2 37
Loyalty

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 ABSTRACT

The purpose of this research was to examine the impact of customer service

quality on customer satisfaction and loyalty among the educational supply stores in

Danao City. Factors affecting quality customer service provision and any other activities

customers would regard as satisfactory were also researched. In order to obtain the

best results, the researchers adopted both descriptive and correlational research

designs because the researchers attempted to find the general attributes of the

presently existing situation and determine the frequency with which it occurs and the

correlation for association between the research variables (customer service and

customer satisfaction, and customer satisfaction and loyalty). The researchers prepared

a questionnaire to be answered by the respondents. The researchers used open-ended

questions to encourage full and meaningful answer using the respondent‘s own

knowledge and/or feelings. The researchers employed Pearson r to analyze the data.

Findings from the research revealed that there exists a high and significant correlation

between customer service quality and satisfaction, a moderate and significant

correlation between customer service quality and loyalty; and customer satisfaction and

loyalty. The researchers also found out the there exists a significant difference in the

customers‘ perceptions on quality of customer service, customer satisfaction and loyalty

among the studied educational supply stores. Reliability and responsiveness are the

factors that negatively affect the stores‘ provision of quality customer service.

Furthermore, the things that customers regard as satisfactory include store location,

ambiance and temperature. Others responded that a simple act of smiling and being

humble in times of complaint are satisfactory.

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 CHAPTER I: THE PROBLEM AND ITS BACKGROUND

Rationale

The birth of globalization led to the rise of businesses of all sorts. Among them

are from wholesale to retail enterprises. Examples of these businesses are educational

supply stores. Educational supply stores play a vital role in the lives primarily of the

students, teachers and office workers. Students run to educational supply stores

whenever school related matters are on the loose. These types of stores render a lot of

benefits when it comes to office and school related matters. Along with these comes a

demand customers seek from their service provider – satisfaction.

Businesses today compete with each other and that influences customers in the

comparisons they infer amongst these businesses, which as a result help them in the

choices they make. The kind of customer service a business provider renders or adopts

may have either positive or negative effects on the image of the company.

However, business providers are unable to relate the extent of success their

business have with regards to customer service satisfaction because of inadequate

information on how customer service improves business performance. Management

and marketing theorists underscore the importance of customer satisfaction for a

business success (McColl-Kennedy and Schneider, 2000). Good customer relationship

has an effect on the profitability of nearly every business. For example, when customers

perceive good service, each will typically tell nine to ten people.

It is estimated that nearly one half of American Business is built upon this

―informal word-of-mouth‖ communication (Gitomer, 1998). Improvement in customer

retention by even a few percentage points can increase profits by 25 percent or more

(Griffin, 1995).
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 The issue about customer service has attracted more attention in recent years

than ever before, with a big influence being the increasing sensitivity on the behalf of

the customer. It has become necessary for organization‘s to take into account what their

customers‘ wants and needs are when they develop their products and perform their

services.

The customers‘ perceptions are the facts, whether they match up with the views

of the employee of business. It is not enough to ask the customers what they think of an

organization‘s products or services and then go back to the business as usual. If a

company is serious about measuring their customers‘ expectations, finding ways to

improve their customers‘ expectations as well as customers‘ satisfaction over time

would require that they take their received feedback seriously and use the information to

the best of their ability, as the old saying goes ―the customer is always right,‖ therefore

when dealing with the subjective areas of quality service, the interpretations that matter

the most are those of the customer.

Customer satisfaction has been studied and recognized as an important factor in

the management and marketing literature in the developed world for the past few

decades.

However, little can be said about the research undertaken in developing

countries like the Philippines in the field of customer service and how it impacts on

businesses especially in retail service industries.

Little attention seems to be paid to customer service and satisfaction. This has

resulted in inadequate knowledge on its effects and consequences on business

performance in terms of customer retention and satisfaction.

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 Another important reason, which has necessitated this research, is the

competition amongst various businesses, which has empowered customers the liberty

to switch from one business enterprise to another. This is commonly found at the retail

industries. One of the basic things which are aiding them to switch is customer service.

Any organization that has satisfied customers is bound to increase customer

base and hence profitability. Satisfied customers may sell your organization either

consciously or unconsciously.

It is therefore important that service industries provide quality service to

customers so as to satisfy them, make them loyal and retain them at the end.

Most companies engaged in retail business may not know whether their business

practices have been what customers have actually desired, or aware of some customer

service practices that enhanced customer satisfaction and influenced their retention.

Inadequate literature has led to inadequate information on customer service issues in

the retail sector. Customer service as a foundation of any business entity, is also one of

the pillars of success any venture should put much regard.

Hence, the need to find out whether the kind of customer service being provided

among the educational supply stores in Danao City has any effect on customer

satisfaction and retention is pursued.

Statement of the Problem

Main Problem

The study sought to examine the impact of the quality of service being

provided by educational supply stores in Danao City on the loyalty of its customers.

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 Specific Problems

1. Does the level of customer service provided by the educational stores

in Danao City have a significant impact on customer satisfaction and

loyalty?

2. Is there a significant correlation between customer satisfaction and

loyalty?

3. What are the factors affecting quality customer service provision?

4. What other customer service activities do customers regard as

satisfactory?

Significance of the Study

This study will provide sufficient information regarding quality customer service

and its effects on customer satisfaction and loyalty in the local context of Danao City.

Local customers are enabled to express their perception whether their service

expectations are met by the service providers – educational supply stores.

Educational supply stores, being the subject of this study, will find this study

useful especially in the formulation of strategies that address customer service. This

paper will be available to them for the management to know the perception of their

customers regarding the services they have provided, to help them improve on service

quality. By finding out the actual state of customer service they have rendered to current

customers, they will be challenged to seek for a better customer service provision and

formulation of possible customer loyalty and retention strategies.

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 The customers of these educational supply stores will gain advantage of this

research as their concerns in regards to the quality of the service rendered to them will

be addressed.

Since this study is in lined with business, it will also benefit other business

service providers to make informed decisions as far as service is concerned.

Businesses can benefit from the findings of this research because this study will expose

the reasons as to why customers switch from one service provider to another.

Educational institutions, corporate entities and business policy makers will also

benefit from this research in making informed decisions when it comes to quality

customer service to satisfy the customers.

Future entrepreneurs may use this research as reference on the quality of

service they will provide to their future customers. Knowing the fact of how customer

service will affect their sales, they can prepare and immerse their staffs on hospitality

trainings and the sort.

The findings will contribute to academia knowledge in service especially on the

impact of customer service provision on customer loyalty and retention as this study

adds up to the existing stock of literature on the customer service and buying behavior

of various customers. It then serves as a source of literature to people who intend to

conduct a similar research either in the Philippines or elsewhere in the world.

The researchers and academicians will find this study useful for further

discussion and research so that they can explore and further develop their studies on

customer service, loyalty and retention.

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Scope and Delimitation

The scope of the study will include the identification of the perceptions of the

customers regarding the service being rendered to them by the educational supply

stores in Danao City. The determination of the barriers to quality service provision,

determination of the correlation of customer satisfaction and retention, and identification

of other customer service activities in which customers consider as satisfactory are also

included.

The study is limited only to achieving the study‘s objectives. Moreover, the study

only focuses on four educational supply stores in the local context of Danao City.

Definition of Terms

1. Customer service - Customer service is the act of taking care of the customer's needs

by providing and delivering professional, helpful, high quality service and assistance

before, during, and after the customer's requirements are met.

2. Customer satisfaction - Customer satisfaction is a marketing term that measures how

products or services supplied by a company meet or surpass a customer's expectation.

3. Customer loyalty - Customer loyalty is the result of consistently positive emotional

experience, physical attribute-based satisfaction and perceived value of an experience,

which includes the product or services.

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 CHAPTER II: REVIEW OF RELATED LITERATURE

This chapter reviews theoretical literature on key study variables with the aim of

identifying research gaps. It examines literature on the concepts related to quality

customer service, customer satisfaction and loyalty.

Definition of Customer Service and Quality Customer Service

Being successful in today‘s competitive environment requires both customer

service and customer satisfaction. Often confused to be synonymous, customer service

and customer satisfaction are two very distinct concepts that are interdependent. It is

possible to perform well within the field of customer service without ever attaining

customer satisfaction. Customer service is necessary to attain customer satisfaction. It

does not, however, guarantee customer satisfaction.

A hundred different people have defined customer service a hundred different

ways. But all the definitions boil down to one principle: Customer service refers to the

way a company treats a customer. According to Raphel and Neil (1995), customer

service is doing all things a company promises the customer in a way that creates

customer value. Gerson (1998) defines ‗world class customer service‘ as service which

includes the following: courtesy, competency, responsiveness, professionalism,

attractiveness, reliability, completeness of product and good communication. Ricker

(2002) further explains customer service as providing assistance or help to a person

who is asking for goods or services, from a business. Customer service is providing

tools, information, products, services or support.

Moreover, customer service is the provision of service to customers before,

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during and after a purchase. It also means serving the customer, and involves all

contact with the customer, be it face-to-face, or indirect contact (i.e. dealing with

complaint letters). According to Jamier (2002), ―Customer service is a series of activities

designed to enhance the level of customer satisfaction – that is, the feeling that a

product or service has met and/or exceeded the customer expectation.

Factors Affecting Quality Customer Service / Determinants to Quality Customer

Service

Parasuraman et al. (1985) identified ten key determinants to quality customer

service.

Reliability

Reliability involves consistency of performance and dependability. It means that

the firm performs the service right the first time. It also means that the firm honors its

promises. Specifically, it involves accuracy in billing, keeping records correctly and

performing the service at the designated time.

Responsiveness

Responsiveness concerns the willingness or readiness of employees to provide

service. It involves timeliness of service, mailing a transaction slip immediately, calling

the customer back quickly and giving prompt service (e.g., setting up appointments

quickly).

Competence

Competence means possession of the required skills and knowledge to perform

the service. It involves knowledge and skill of the contact personnel, knowledge and skill

of operational support personnel and research capability of the organization, e.g.,

8
securities brokerage firm.

Access

Access involves approachability and ease of contact. It means the service is

easily accessible by telephone (lines are not busy and they don't put you on hold),

waiting time to receive service (e.g., at a bank) is not extensive, convenient hours of

operation and convenient location of service facility.

Courtesy

Courtesy involves politeness, respect, consideration, and friendliness of contact

personnel (including receptionists, telephone operators, etc.). It includes consideration

for the consumer's property (e.g., no muddy shoes on the carpet), clean and neat

appearance of public contact personnel.

Communication

Communication means keeping customers informed in language they can

understand and listening to them. It may mean that the company has to adjust its

language for different consumers-increasing the level of sophistication with a well-

educated customer and speaking simply and plainly with a novice. It involves explaining

the service itself, explaining how much the service will cost, explaining the trade-offs

between service and cost and assuring the consumer that a problem will be handled.

Credibility

Credibility involves trustworthiness, believability, honesty. It involves having the

customer's best interests at heart. Contributing to credibility are company name,

company reputation, personal characteristics of the contact personnel and the degree of

hard sell involved in interactions with the customer.

9
 Security

Security is the freedom from danger, risk, or doubt. It involves physical safety

(Will I get mugged at the automatic teller machine?), financial security (Does the

company know where my stock certificate is?) and confidentiality (Are my dealings with

the company private?).

Understanding / Knowing the Customer

Understanding/knowing the customer involves making the effort to understand

the customer's needs. It involves learning the customer's specific requirements,

providing individualized attention and recognizing the regular customer.

Tangibles

Tangibles include the physical evidence of the service - physical facilities,

appearance of personnel, tools or equipment used to provide the service, physical

representations of the service, such as a plastic credit card or a bank statement and

other customers in the service facility.

Significance of Quality Customer Service

Quality has been defined as fitness for use, or the extent to which a product

successfully serves the purposes of consumers (Beverly et al., 2002). Customer service

is one of the organizational processes which companies perform considering the

growing competition and for attracting entrepreneurial opportunities for increasing

profitability and better access to the market and increasing the customer satisfaction

and loyalty level (Calif, 1987). According to Goofin and Price (1996) customer service

has importance because it ends in increasing product quality, gaining competitive

advantage, gaining profitable opportunities, and as a result increasing sales and

10
income.

Definition of Customer Satisfaction

Customer satisfaction is making customers happy with the quality of the products

and services received that they cannot wait to tell others about their experiences. It is all

about exceeding the promises and delighting the customers.

Customer satisfaction has been a central concept in marketing literature and is

an important goal of all business activities. Today, companies face their toughest

competition, because they move from a product and sales philosophy to a marketing

philosophy, which gives a company a better chance of outperforming competition

(Kotler, 2000).

Researchers have tried to define customer satisfaction and in general they have

defined it as a transaction process. Oliver (1981) defined satisfaction ―as a summary of

psychological state resulting when the emotion surrounding disconfirmed expectations

is coupled with the consumer's prior feelings about the consumption experience".

Kotler (2000) defined satisfaction as: ―a person‘s feelings of pleasure or

disappointment resulting from comparing a product perceived performance (or outcome)

in relation to his or her expectations‖. According to Hansemark and Albinsson (2004)

―satisfaction is an overall customer attitude towards a service provider, or an emotional

reaction to the difference between what customers anticipate and what they receive,

regarding the fulfillment of some need, goal or desire.‖

Kurtenbach (2000) explains that those who are successful in customer service

rank their customer‘s experience at the top priorities. Ettore (2001) is of the view that by

concentrating on current customers, information should be obtained to better

11
understand their view of the service provided. It has also become necessary to

understand customer satisfaction by having a clear understanding of what it means.

Customer satisfaction is defined as a cognitive and effective evaluation where some

comparison standard is compared to the actually perceived performance. If perceived

performance is less than expected, customers will be dissatisfied and on the other

hand, if perceived performance meets or exceeds customer‘s expectations, he or she

will be satisfied (Lin, 2003).

Barriers to Customer Satisfaction

Service quality is commonly noted as a critical prerequisite and determinant of

competitiveness for establishing and sustaining satisfying relationships with customers.

Previous studies suggest that service quality is an important indicator of customer

satisfaction. According to Wang and Wang, service quality is a form of an attitude,

related but not equivalent to satisfaction that results from the comparison of expectation

with performance. The customers generally use certain criteria to evaluate service

quality by examining reliability, responsiveness, assurance, empathy and physical

aspects.

No company sets out to dissatisfy a customer. Most organizations today

acknowledge that customer satisfaction is at the very least a good way to do business.

Nevertheless, companies often fall short of the expectations of the customer, creating

customer dissatisfaction or displeasure. In order to improve a company‘s performance

in regards to customer satisfaction, it is essential that an organization recognizes and

understands the barriers that exist. There are several barriers that a company must

hurdle before it can achieve customer satisfaction. The two most notable barriers are

12
product and personnel barriers.

Product Barriers to Customer Satisfaction

Product barriers exist when a company fails to appreciate the expectations

of the customer (Barsky, 1995). The first step to satisfying the customer is,

understanding what the customer anticipates about the particular service or product.

The road to customer satisfaction begins by understanding expectations. Expectations

are the product quality, service level and satisfaction that a customer anticipates

receiving from a product or service (Parasuraman et al., 1994). Expectation becomes

the standards by which a customer judges a product or service. Customer expectations

can be analyzed by examining several characteristics of expectations. Two key

components go into the formation of customer expectations: company-controlled

expectation creators and uncontrollable expectation creators (Barsky, 1995).

Company-controlled expectation creators are any actions by the company

that can be utilized by the customer to form a standard or expectation about the product

or services of the company. Companies can coordinate certain actions to modify or

create expectations by realizing what it is about, products and services, the marketing

mix, reputation and service quality that is most consequential to and remembered by

customers (Barsky, 1995).

Companies are ultimately responsible for the satisfaction or dissatisfaction

that customers experience when the customers‘ expectations are based on the actions

of the company about the products or services offered. Suppose, for example, that a

company promotes a new product, exaggerating the benefits to be achieved by

purchasing this product. A customer who views the advertising will make expectations

13
of this product. If the product fails to fulfill customer expectations, customer

dissatisfaction will result. This lack of customer satisfaction is directly related to the

exaggerated promises of the company. Uncontrollable expectation creators are any

information or the company does not directly control action that can create an

expectation of service or product quality. Examples of uncontrollable expectation

creators include word-of-mouth, actions by competitors and customer preferences

(Barsky, 1995).

Every company experiences some sort of uncontrollable expectation

creators. Instead of trying to prevent negative expectation or influence positive

expectations, a firm would be better off to allocate the resources necessary to

understand those expectations and the factors that influence them. By understanding

these expectation creators, a firm can better react to the consequences created by

them, often incorporating information from uncontrollable sources into efforts to manage

the controllable creators.

Personnel Barriers to Customer Satisfaction

Customer satisfaction is not an isolated result of an impersonal transaction

or interaction. A large part of customer satisfaction is based on the satisfaction that a

customer receives in dealing with the people involved in the process. A clothing shop

may have the top of the line clothing that fits right, is at the right price and in the latest

styles. However, if the sales associate who deals with a customer is rude, inattentive or

lacks the right knowledge, a customer will be dissatisfied with the company. Personal

barriers are very damaging to the development of customer satisfaction, essentially

because a customer‘s whole image of a company may be based on one employee‘s

14
attitude or ability. Personality or individual characteristics may limit or hamper customer

satisfaction (Barsky, 1995).

Factors Affecting Customer Satisfaction / Determinants of Customer Satisfaction

Price

According to Zeithaml (1988), from the customer view, price is what is

given up or sacrificed to obtain a product or service. Bei and Chiao (2001) indicated that

the price is defined as what is given up or sacrificed to acquire a service or product,

while Kotler and Armstrong (2012) suggested that price is the amount of money

charged for a product or a service; the sum of the values that customers exchange for

the benefits of having or using a product or service. How customers perceive a certain

price, in which the high-low price of a product can be a significant effect on a customer

intention to purchase the product. Customer will give an attention to the price paid by

other customers, no one is happy to pay more cash compared to other customers. The

fairness of the price will influence the perception of the customers and it ultimately will

influence their willingness to become a customer.

Product Quality

According to Zeithaml (1988), quality can be defined broadly as superiority

or excellence. Here, Kotler and Armstrong (2012) described that product is anything that

can be offered to a market for attention, acquisition, use, or consumption that might

satisfy a want or need, while Aaker (1994), quoted Ehsani (2015), said that quality of

product is the customer's perception of the overall quality or superiority of the product or

service, with respect to its intended purpose, relative to alternatives. Kotler and

15
Amstrong (2012) assumed that product quality is the characteristic of a product or

service that bear on its ability to satisfy stated or implied customer needs.

It is important to note that the quality of the product is not reviewed by the

company standpoint; it is seen from the perspective of the customer. Associated with

that, it raised two important factors that affect the quality of the product, namely the

expected product quality and the perceived product quality. In details, if the perceived

product quality is in line with the expectation, then the customer will perceive the

product quality as a good quality and also feel satisfied. Conversely, if the perceived

product quality is not as expected, then the quality of the product as the customer

perceived is qualified as a bad product quality. Thus, the qualification of both bad and

good product depends on the ability of the company to meet the customer expectations.

Value Added Services

Monroe (1990), defines that customer value is the buyer‘s perceptions of

value represent a trade-off between the quality or benefits they perceive in the product

relative to the sacrifice they perceived by paying the price. Therefore, Ma and Ding

(2010) and Sugiarti et al. (2013) have a different perspective concerning the customer

value, Ma and Ding (2010) thought that customer value is directly related to the benefit

that a product or service, whereas Sugiarti et al. (2013) concluded that customer value

is an evaluation of the benefits of a product or service that is perceived by customers as

Compared to what the customers had dedicated to get the product or service. Customer

value is seen as a ratio of the benefits felt by the customer along with its sacrifice. The

implementation of this sacrifice is in line with the exchange process such as transaction

costs and the risk of the products offered by the company.

16
 Henceforth, there will be a disappointment when the ratio value that is

perceived by the economic sacrifices of the customers with the products offered by the

company is not in accordance with the customer expectations. Otherwise, when the

ratio value is appropriate or exceeding the customer expectations, customers will feel

such satisfaction. In addition to this, customers feel more satisfied when an entity

creates and adds more value in the products or service offered – value added service.

Value added service refers to additional service for maximizing and adding value to

existing customer satisfaction. (Kotler and Keller, 2012; Afiff and Astuti, 2009; and

Shoki, 2012).

Customer Demand Fulfillment

Customer Demand Fulfillment or Order fulfillment is in the most general

sense, the complete process from point of sales inquiry to delivery of a product to the

customer. Sometimes order fulfillment is used to describe the narrower act

of distribution or the logistics function; however, in the broader sense it refers to the way

firms respond to customer orders (Croxton, K. L., 2003).

Complaint Entertainment

A consumer complaint or customer complaint is an expression of

dissatisfaction on a consumer's behalf to a responsible party (Landon, 1980).

Net Promotion

Word of mouth is defined as oral, person to person communication

between a receiver and a communicator whom the receiver perceives as

noncommercial concerning a brand, a product, or a service (Arndt J.A., 1968).

17
Definition of Customer Loyalty

Customer loyalty means the relationship between the relative attitude toward an

entity (service) and patronage behavior. Loyalty involves a psychological bond to the

service provider and means you are at a certain high degree of customer satisfaction

and commitment.

Customer loyalty is a crucial factor in companies‘ growth and their performance.

Loyalty is linked with the repeat business. Thus, a customer is loyal when he is

frequently repurchasing a product or service from a particular provider. Oliver defines

loyalty as ―A deeply held commitment to re-buy or re-patronize a preferred product or

service in the future despite situational influences and marketing efforts having the

potential to cause switching behavior‖ (cited by Kotler, 2000).

Factors Affecting Customer Loyalty / Determinants to Customer Loyalty

There are several factors that contribute to customer loyalty and retention. These

can include the purchasing frequency, switching activity and store image perception.

These are the factors that can be controlled and by ―controlling the controllable,‖

customer loyalty can be achieved (Ettore, 2001).

Purchasing Frequency

Frequency is defined as the number of times that a customer has made a

purchase from you (Hughes, A. M. (2006).

Switching Activity

Consumer switching behavior refers to customers abandoning a product

or service in favor of a competitor's. For example, a customer might move funds from

one bank to another if she is dissatisfied with the customer service at the first.

18
Consumer-switching behavior is an ever-present danger for a business -- if you don‘t

keep your customers happy, your competitors might directly benefit (Stan, M., 2018).

Store Image

Different relationships have been formed among various factors of the

store image and the store loyalty. Regarding the store loyalty, if the customers perceive

the store image as good, they intend to buy the next time at the same store (Bloemer;

Josee; de Ruyter; Ko, 1998).

Relationship between Customer Satisfaction and Loyalty

Customer satisfaction leads to customer loyalty, positive word-of-mouth and

ultimately, profitability. Barsky (1995) explains it best in his book, ―World Class

Customer Satisfaction‖ that by focusing on the customer, one is really concentrating on

serving and satisfying the customer‘s needs. Customer satisfaction creates customer

loyalty, which in turn means profitability. It sounds like an easy answer, but it involves a

commitment to shift service to the number one priority position.

Importance of Customer Satisfaction and Loyalty

Customer satisfaction means that the customers‘ needs are met, products and

services are satisfactory and customers‘ experiences are positive (Friday and Cotts,

1995). Customer satisfaction constitutes a cardinal indicator for assessing the success

of an enterprise. Satisfied customers are the assets that ensure a regular cash flow for

the business in the future. Satisfaction is also of great interest to practitioners because

of its important effect on customer retention. In a turbulent commerce environment, in

order to sustain the growth and market share, companies need to understand how to

19
satisfy customers, since customer satisfaction is critical for establishing long-term client

relationships (Patterson and Spreng, 1997).

The message is obvious – satisfied customers improve the business and

dissatisfied customers impair business (Anderson and Zemke, 1998). Customer

satisfaction is an asset that should be monitored and managed just like any physical

asset. Therefore, businesses that hope to prosper will realize the importance of this

concept, putting together a functional and appropriate operational definition (McColl-

Kennedy and Schneider, 2000). This is true for both service-oriented and product-

oriented organizations.

It is said that every time an individual in an organization has contact with a

customer, a risk arises. This encounter can provoke a variety of responses and these

can include (1) dissatisfaction, by not fulfilling the needs or expectations; (2)

satisfaction, by meeting the needs and expectations; or (3) delight, by exceeding the

expectations in some way (Mendzela and Craig, 1999). This meeting between the

customer and the employee is the making or breaking point of the service and the

company. As the customers identify this gap between expectations and desired levels of

service, a feeling of dissatisfaction develops (Oliver, 1980).

Eighty-six percent (86%) of senior executives from fortune 500 companies

consider customer satisfaction extremely important, ranking it higher than productivity

and company reputation (Barsky, 1995). Satisfying customers lead to repeat business.

To satisfy a customer, a company creates customer value, not just through the product

but in the way the customer is treated. Simple customer service measures, such as

smiling, welcoming a customer, thanking them and inviting them to return can make a

20
customer feel valued and appreciated. When a customer feels respected, they are more

likely to return. Finally, when a company satisfies a customer, it creates a spokesperson

for the company. A satisfied customer can be an agent of the company, promoting the

products or services offered through personal reference. Positive word-of-mouth and

personal references can influence the decision-making process of potential customers.

The perceived value from the product and the service affects customer judgment

about his/her satisfaction or loyalty with the product or the service. The significance of

customer loyalty is that it is closely related to the company‘s continued survival and to

strong future growth (Fornell, 1992). Customers that are very satisfied with a company

are very likely to remain with that company that leads to future revenue for the

company.

Impact of Customer Satisfaction and Loyalty on Profitability

Fornell (1992) enumerates several key benefits of high customer satisfaction for

the firm. In general, high customer satisfaction should indicate (1) increased loyalty for

current customers, (2) reduced price elasticities, (3) insulation of current customers from

competitive efforts, (4) lower costs of future transactions, (5) reduced failure costs, (6)

lower costs of attracting new customers and (7) an enhanced reputation for the firm.

Increased loyalty of current customers means more customers will repurchase

(be retained) in the future. If a firm has strong customer loyalty, it should be reflected in

the firm‘s economic returns because it ensures a steady stream of future cash flow

(Reichheld and Sasser, 1990). The more loyal customers become, the longer they are

likely to continue to purchase from the supplier. The cumulative value of a loyal

customer to a firm can be quite high. For example, consider the lunch habits of three

21
colleagues that regularly patronize a restaurant close to their workplace. If the average

price of a meal is $6 and the trio visits the restaurant three times a week, the annual

revenue received by the establishment is in the neighborhood of $2,700. One hundred

similarly loyal customers would be worth $90, 000. This group would be worth almost a

half million dollars over the next five years – even if they are all colluded to keep the

restaurant a secret from other potential customers. The net present value of the

expected margin from these customers reflects their asset value to the restaurant.

Increasing customer satisfaction increases the value of a firm‘s customer assets and

future profitability.

Customer satisfaction should reduce price elasticities for the current customers

(Garvin, 1988). Satisfied customers are more willing to pay for the benefits they receive

and are more likely to be tolerant of increases in price. This implies high margins and

customer loyalty (Reichheld and Sasser, 1990). Low customer satisfaction implies

greater turnover of the customer base, higher replacement costs, and, due to the

difficulty of attracting customers who are satisfied doing business with a rival, higher

customer acquisition costs. Decreased price elasticities lead to increased profits for a

firm providing superior customer satisfaction.

High customer satisfaction should lower the costs of transactions in the future. If

a firm has high customer retention, it does need to spend as much to acquire new

customers each period. Satisfied customers are likely to buy more frequently and in

greater volume and purchase other goods and services offered by the firm (Reichheld

and Sasser, 1990).

22
 Consistently providing goods and services that satisfy customers should increase

profitability by reducing failure costs. A firm that provides high customer satisfaction

should have fewer resources devoted to handling returns, reworking defective items,

and handling and managing complaints (Crosby, 1979; Garvin, 1988; Tarp, 1979,1981).

The costs of attracting new customers should be lower for firms that achieve a

high level of customer satisfaction (Fornell, 1992). For example, satisfied customers are

reputedly more likely to engage in positive word-of-mouth and less likely to engage in

damaging negative word-of-mouth for the firm (Anderson, 1994). Media sources are

also more likely to convey positive information to prospective buyers. Customer

satisfaction claims may make advertising more effective and high customer satisfaction

may allow the firm to offer more attractive warranties.

An increase in customer satisfaction also should enhance the overall reputation

of a firm. An enhanced reputation can aid in introducing new products by providing

instant awareness and lowering the buyer‘s risk of trial (Robertson and Gatignon, 1986;

Schmalansee, 1978). Reputation can also be beneficial in establishing and maintaining

relationships with key suppliers, distributors and potential allies (Anderson and Weitz,

1989; Montgomery, 1975). Reputation can provide a halo effect for the firm that

positively influences customer evaluations, providing insulation from short-term shocks

in the environment. Customer satisfaction should play an important role in building other

important assets for the firm, such as brand equity (Aaker, 1992; Keller, 1993).

Businesses recognize that keeping current loyal customers is more profitable

than having to win new ones to replace those lost. Gitomer (1998) affirms the view that

the cost of gaining a new customer is ten times greater than the cost of keeping a

23
satisfied customer. Management and marketing theorists underscore the importance of

customer satisfaction for a business‘ success (McColl-Kennedy and Schneider, 2000).

Improvement in customer retention by even a few percentage points can

increase profits by 25% or more (Griffin, 1995). The University of Michigan also found

that for every percentage increase in customer satisfaction there is an average increase

of 2.37% of return on investment (Keiningham and Vavra, 2001).

It is now a widely accepted business theory that customer retention optimizes

profitability; the cost of acquiring new customers is higher than the cost of retaining

existing customers. Therefore, the aim of a service company is to satisfy their

customers in order to stimulate them to retain and to repeat their service purchase.

Customer satisfaction has a positive effect on an organization‘s profitability. The

more customers are satisfied with products or services offered, the more are chances

for any successful business as customer satisfaction leads to repeat purchase, brand

loyalty, and positive word-of mouth-marketing. Customer satisfaction leads to repeat

purchases, loyalty and to customer retention (Zairi, 2000). Satisfied customers are more

likely to repeat buying products or services. They will also tend to say good things and

to recommend the product or service to others. On the other hand dissatisfied

customers respond differently. Dissatisfied customers may try to reduce the dissonance

by abandoning or returning the product, or they may try to reduce the dissonance by

seeking information that might confirm its high value (Kotler, 2000).

Companies need to develop strategies of how to handle dissatisfied customers.

Businesses cannot afford under any condition to lose customers, because the cost of

replacing the lost customer with a new customer is bigger. Therefore, companies must

24
find ways of winning back the unsatisfied customers by designing special programs for

service recovery. Companies should handle customer complaints with care and not

seeing them as a time consuming.

Effect of Customer Service Quality on Customer Satisfaction and Loyalty

Most people prize the businesses that threat them the way they like to be treated;

they will even pay more for this service. However, a lack of customer satisfaction has an

even larger effect on the bottom line. Customers who receive poor service will typically

relate their dissatisfaction to between fifteen and twenty others, whether consciously or

unconsciously. The average American company typically loses between 15-20% of its

customers each year (Griffin, 1995). In addition, if the service is particularly poor, 91%

of retail customers will not return to the store. In fact, if the service incident is so

negative, the negative effects can last years through repeated recollection and

recounting of the negative experience/s (Gitomer, 1998).

It has been stated that positive customer service keeps most people returning

more often than lower prices (Brownell, 1999). By concentrating on the service and

dealing with the pricing issue as efficiently as possible customers will return. Research

had shown that over 90% of unhappy customers, who have a choice, would not

repurchase goods or services from that supplier again. Within that unhappy, 90-95% will

never tell the company about their experiences, but will tell at least nine others

(Holdway, 2001). Understanding current levels of customer satisfaction and the level of

service needed to realize satisfaction for each client can produce loyal customers and

profit for the company.

25
Customer Relationship Marketing

Customers are very different nowadays, because of their exposure to

information, they are better educated, and more demanding in the products and

services they require, and they are more familiar with technology. The 21st century

consumer market raises many questions to those businesses that need to respond to

this new era of consumerism. Customer relationship marketing is a practice that

includes all marketing activities directed toward establishing, developing, and

maintaining successful customer relationships. Building and maintaining relationships

with customers has become a key strategic point with service industries. Therefore,

relationship marketing develops long-term relationships and improves corporate

performance through customer loyalty and customer retention.

A research conducted by Reichhold and Sasser (2002) of the Harvard Business

School showed that, most customers are only profitable in the second year that they do

business with you. Companies spend money on advertising and marketing and finding

out about what customers want in order to satisfy their needs and requirements.

Managers can use customer relationship management (CRM) as the single strongest

weapon to ensure that customers become and remain loyal.

Berry (1986) thinks that "Relationship marketing is the attraction, maintaining and

enhancing customer relationships. The marketing mind set is that the attraction of new

customers is merely the first step in the marketing process". Gronroos (1994) defined it:

―Relationship marketing is to identify and establish, maintain and enhance relationships

with customers and other stakeholders, at a profit, so that the objectives of all parties

are met; and that this is done by mutual exchange and fulfillment of promises‖.

26
 Relationship marketing is an approach that leads to a trusting rapport between

the parties involved in business. It is not only important to get customers and create

transactions, but also maintaining and enhancing ongoing relationships. Relationship

marketing has evolved from other marketing aspects and it has the potential to draw

together the various streams of marketing into one as a whole (Payne, 1993).

Overall, customer satisfaction translates to more profits for companies and market

share increase. The importance of customers has been highlighted by many

researchers and academicians. The principal concern of marketing is to connect with

customers by building a strong customer relationship in order to meet their

expectations.

27
 CHAPTER III: METHODOLOGY

Research Design

The study will employ both descriptive and correlational research design. The

study will make use of descriptive research design for it is concerned with describing the

nature, characteristics and components of the population being studied. There is no

manipulation of variables neither is there any search for cause and effect related to the

phenomenon. Moreover, this type of research design is used because the researchers

attempt to find the general attributes of the presently existing situation and determine

the frequency with which it occurs. Furthermore, this study will also make use of

correlational research design for the study sought to find out the correlation for

association between the research variables (customer service and customer

satisfaction, and customer satisfaction and loyalty).

Sampling Method

The study will make use of convenience sampling, a type of non-probability

sampling in which the respondents were selected at the convenience of the

researchers. Since it is impossible and impractical to know the number of customers of

the educational supply stores being studied, the researchers made no attempt, or only a

limited attempt, to ensure that the samples are an accurate representation of some

larger group or population. Hence, it was best to use convenience sampling in order to

get as many as possible customers.

Data Collection

In order to answer the research problems, data must be collected. The

researchers prepared a questionnaire to be answered by the respondents. The

28
researchers used open-ended questions to encourage a full, meaningful answer using

the respondent‘s own knowledge and/or feelings. Questionnaires were adopted by the

study as they were useful in obtaining objective data since the respondents are not

manipulated in any way by the researchers. The questionnaires were standardized by a

person who is knowledgeable in the field of business and economics – Mrs. Erlinda

Ermita, a Certified Public Accountant (CPA) and Licensed Professional Teacher (LPT) –

to ascertain the validity and reliability of the questions.

In addition, the study will make use of Likert Scale questions since it is difficult to

convert feelings into numbers as to how and what extent the respondents are loyal and

satisfied by the service rendered by educational supply stores. Likert scales are survey

questions that offer a range of answer options — from one extreme attitude to another,

like ―extremely likely‖ to ―not at all likely.‖ Compared to binary questions, which gives

only two answer options, Likert-type questions will give more granular feedback about

whether a product or service was just ―good enough‖ or ―excellent.‖ They can help

decide whether a service rendered left customers feeling ―very satisfied,‖ or ―somewhat

dissatisfied.‖

This method will let researchers uncover degrees of opinion that could make a

real difference in understanding the feedback. And it can also pinpoint the areas of

improvement of a service or product. Hence, the researchers employed Likert-type

questions.

The data collected were solely used for research purposes and were kept with

utmost confidentiality.

29
Data Analysis

The researchers used a statistical tool which is Pearson Product-Moment

Correlation Coefficient.

The researchers employed Pearson Product-Moment Correlation Coefficient or

Pearson r as the tool in analyzing the data since the study is seeking whether there

exists a significant correlation between the variables studied. The Pearson product-

moment correlation coefficient is a measure of the strength of the linear

relationship between two variables. If the relationship between the variables is not

linear, then the correlation coefficient does not adequately represent the strength of the

relationship between the variables.

30
 CHAPTER IV: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

This chapter deals with the presentation of the data gathered through the

instruments and the comprehensive analysis and interpretation of results that answer

the research problems.

Specific Problem No. 1

Table 1.1. Overall rating of Customer Service and Satisfaction

Descriptive Customer Descriptive

Customer Service
Interpretation Satisfaction Interpretation
6.096 Moderately Good 6.18000008 Moderately Satisfied

The table shows the overall rating of customer service and satisfaction of the four

stores studied. As revealed in the table, customer satisfaction got a higher rating of

6.18000008 than customer service with 6.096. Yet, the difference is negligible because

if rounded off to a whole number, they are the same and they have the same descriptive

interpretation (customers regard the services they provided as moderately good and

they are moderately satisfied with this service). This means that the quality of service

provided by a store has a directly proportional impact on customer satisfaction. If the

service rendered is of good quality, chances are, customers are also satisfied.

77.5 77.25 %

77

76.5 76.2 %
76

75.5
Customer Service Customer Satisfaction

Graph 1.1. Percentage of the overall rating of customer service and satisfaction

31
 Graph 1.1 shows the percentage of the overall rating of customer service and

satisfaction. As revealed in the graph, customer satisfaction got a higher percentage

rating of 77.25% than customer service with 76.2%. It was known in the table above that

the customer satisfaction is a little bit higher compared to customer service. Likewise, it

was also evident in the graph above.

Statistical Table 1.1. The Correlation between Customer Service and Customer

Satisfaction

Pearson r
n rs Descriptive Interpretation Computed t-value Critical t-value
50 0.78 High Correlation 8.736883903 2.01063476

As reflected in the table above, there are fifty people being surveyed; students,

teachers, parents and office workers, and the correlation coefficient between the

customer service and satisfaction is 0.78, which indicates an High Correlation. The

computed t-value is obtained in order to test the significance of the correlation. This

value 8.736883903 is obviously greater than the critical t-value of 2.01063476, which

means that there is significant association between the two variables being studied at

the .0.05 level of significance. Therefore, we can say statistically that the rate of

customer service is significantly correlated with the rate of customer satisfaction. This

simply means that if customers perceive the service rendered by the stores as of good

quality, they are more likely to be satisfied because their expectations are met.

Service quality is commonly noted as a critical prerequisite and determinant of

competitiveness for establishing and sustaining relationships with customers. Previous

studies suggest that service quality is an important indicator of customer satisfaction.

32
Hence, before customers are satisfied, they had to experience the service they want

and expect from service providers. The service mentioned encompasses both

personnel and product factors. According to Parasumaran et al. (1994), the first step to

satisfying the customer is, understanding what the customer anticipates about the

product. In addition, Barsky (1995) stressed out that personnel factors can make or

break the development of customer satisfaction; essentially because a customer‘s

whole image of the company may be based on one employee‘s attitude or ability.

Specific Problem No. 1.2

Table 1.2. Overall rating of Customer Service and Customer Loyalty

Descriptive Descriptive
Customer Service Customer Loyalty
Interpretation Interpretation
6.096 Moderately Good 5.938333334 Moderately Loyal

The table shows the overall rating of customer service and loyalty. The table

reveals a slight level of difference between customer service (6.096) and customer

loyalty (5.938333334). When rounded off to whole numbers, both variables give off the

same results and descriptive interpretation – customers perceive the services rendered

as moderately good and in turn, the customers are also moderately loyal to these

stores. This means that the quality of service provided by a store is directly proportional

with the loyalty of their customers. If the stores render quality service to their customers,

possibilities are, these customers will be loyal to the store. On the other hand, if the

service if not of good quality, then customers will switch from buying in that store and

find other stores are able to give them the kind of service they deserve. Customers

won‘t settle for less, they would purchase frequently on stores where they are the top

priority.

33
 76.5 76.2%
76
75.5
75
74.5 74.22%
74
73.5
73
Customer Service Customer Loyalty

Graph 1.2. Percentage of the overall rating of customer service and loyalty

Graph 1.2 shows the percentage of the overall rating of customer service and

loyalty. As revealed in the graph, customer service got a higher percentage rating of

76.2% than customer loyalty with 74.22%.

As discussed earlier in the table above, there is a direct proportionality that exists

between customer service and customer loyalty. Loyalty plays a pivotal role in the

survival of all businesses. Without deeply committed customers, businesses won‘t be

able to keep their heads above water in the long run. Keeping in mind how loyalty

impacts profitability would be helpful for a business to exist longer. Therefore, in order to

have a base of loyal customers, businesses should consider the importance of

customer service.

Statistical Table 1.2. The Correlation between Customer Service and Loyalty

Pearson r

n rs Descriptive Interpretation Computed t-value Critical t-value

50 0.52 Moderate Correlation 4.196086325 2.01063476

34
 As reflected in the table above, the correlation coefficient between the customer

service and loyalty is 0.52, which indicates a Moderate Correlation. The computed t-

value is obtained in order to test the significance of the correlation. This value of

4.196086325 is clearly greater than the critical t-value of 2.01063476, which means that

there is significant association between the two variables being studied at the 0.05 level

of significance. Therefore, we can say statistically that the rate of customer service is

significantly correlated with the rate of customer loyalty. This simply means that, the

more the store provides a good quality products and services, the more the customer

wants to go back to a certain store to experience the service and purchase a product

and stays loyal.

Brownell (1999) reiterates that positive customer service keeps most people

returning more often. Hence, by concentrating on the service and dealing with the

pricing issue as efficiently as possible, customers will return. Holdway, 2001 added that

if customers are unhappy, 90% of them, if given choices to switch, would not

repurchase products from the certain store again. Within that unhappy, 90-95% will

never tell the company about their experiences, but will tell at least nine other

customers. Therefore, understanding the current levels of customer service needed to

realize satisfaction for each client can produce loyal customers and profit for the

company.

Improvement in customer retention by even a few percentage points can

increase profits by 25% or more (Griffin, 1995). It is now a widely accepted theory that

customer retention optimizes profitability; the cost of acquiring new customers is higher

than the cost of retaining existing customers. Gitomer (1998) affirms the view that the

35
cost of gaining a new customer is ten times greater than the cost of keeping a satisfied

customer. Therefore, the aim of a company is to satisfy their customers in order to

stimulate them to retain them to retain and to repeat their purchases.

Specific Problem No. 2

Table 2. Overall rating of Customer Satisfaction and Loyalty

Customer Descriptive Customer Descriptive

Satisfaction Interpretation Loyalty Interpretation
6.18000008 Moderately Satisfied 5.938333334 Moderately Loyal

The table shows the average rates of customer loyalty and satisfaction. Another

negligible difference can be observed from the results of the two variables. When both

figures are rounded off, both variables give off the same results and descriptive

interpretation. The customers are moderately satisfied by the services and are

moderately loyal to these stores.

77.5
77
76.5
76
75.5
75
74.5
74
73.5
73
72.5
Customer Satisfaction Customer Loyalty

Graph 2. Percentage of the Overall rating of Customer Satisfaction and Loyalty

36
 Graph shows the Percentage of the Overall rating of Customer Satisfaction and

Loyalty. As revealed in the table, customer satisfaction got a higher percentage rating of

77.25 % than customer loyalty with 74.23 %.

As the table reflected, there seemed to have a correlation between customer

satisfaction and loyalty as can be seen from their averages. However, statistical

analysis is still needed to prove this hypothesis.

Statistical Table 2. The Correlation between Customer Satisfaction and

Customer Loyalty
Pearson r
n rs Descriptive Interpretation Computed t-value Critical t-value
50 0.66 Moderate Correlation 6.056796748 2.01063476

The table shows that the correlation coefficient between the customer

satisfaction and loyalty is 0.66, which indicates a Moderate Correlation. The computed t-

value is obtained in order to test the significance of the correlation. This value of

6.056796748 is obviously greater than the critical t-value of 2.01063476, which means

that there is a significant association between the two variables being studied at the

0.05 level of significance. Therefore, we can say statistically that the rate of customer

loyalty is significantly correlated with the rate of customer satisfaction. This simply

means that, the more the customers are being satisfied with products and service given,

the more they want to purchase again and stay loyal to a certain store.

Customer satisfaction leads to customer loyalty, positive word-of-mouth and

ultimately, profitability. Barsky (1995) explains that by focusing on the customer, one is

really concentrating on serving and satisfying the customer‘s needs. Customer

satisfaction creates customer loyalty, which in turn means profitability. It sounds like an

37
easy answer but it involves a deep commitment to shift service to the one priority

position.

Fornell (1992) added that the perceived value from the product and the service

affects customer judgment about his satisfaction or loyalty with the product or the

service. The significance of customer loyalty is that it is closely related to the company‘s

continued survival and to strong future growth. Customers that are very satisfied with a

company are very likely to remain with that company that leads to future revenue for the

company.

38
 CHAPTER V: SUMMARY OF FINDINGS, CONCLUSIONS AND

RECOMMENDATIONS

In this final chapter, a summary of the results that came out in reference to the

research questions are presented. This is followed by conclusion and recommendations

for the stores and in case of future researches.

Summary of Findings

This study was taken with the general objective of determining the impact of

customer service quality on customer satisfaction and loyalty among the educational

stores in Danao City. The study sought to provide answers to this basic objective by

answering the following sub-questions:

1. Does the level of customer service provided by the educational stores in Danao City

have a significant impact on customer satisfaction and loyalty?

Yes, according to the graphs and tables from Chapter 4, the researchers can say

statistically that the overall rating of customer service is significantly correlated with the

overall rating of customer satisfaction. This simply means that, the more the customers

want the service provided by a certain store, the more they feel satisfied because the

store meets its customer‘s expectation.

The overall rating of customer service is significantly correlated with the overall

rating of customer loyalty. The more the store provides good quality products and

services, the more the customer wants to go back to a certain store to experience the

service and purchase a product and stays loyal.

39
2. Is there a significant correlation between customer satisfaction and loyalty?

The overall rating of customer satisfaction is significantly correlated with the

average rate of customer loyalty. This simply means that, the more the customers are

being satisfied with products and services given, the more they want to purchase again

and stay loyal to a certain store.

3. What are the factors affecting quality customer service provision?

From literature, barriers to quality customer service provision can be from the

management of the company, the systems and processes, the working environment,

the employee themselves or communication.

Responses show that Reliability and Responsiveness had the lowest average,

both with only 5.4, corresponding to a Slightly Good descriptive interpretation. Indeed,

these two things are very important factors that affect the quality of the customer service

provided as customers easily get irritated especially when store staffs don‘t entertain

them and do not address their needs immediately. They also get dismayed when store

personnel aren‘t consistent.

4. What other customer service activities do customers regard as satisfactory?

Based from the survey, some customers regard the store location, ambiance and

temperature as satisfactory. It will cost little to no effort of going to the store if the store

is near and very accessible. It will only cost them minimum fare. Some customers

regard the ambiance because of the customers will feel comfortable and at ease when

the store ambiance is good and not chaotic. Others also regard the store temperature

as satisfactory because if the store is very humid, the customers easily become irritated

and temperamental.

40
 Other customers regard smiling as satisfactory. When personnel smile at

customers, it makes customers feel at home and easy to communicate their needs. It

imposes to them a feeling of warmness and comfort.

Others consider personnel being humble at times of dispute and complaints as

satisfactory. This is an implication of the saying ―the customer is always right.‖

Customers want store staffs to just listen to their complaints and not negate or add fuel

to the existing fire as it may lead to a bigger dispute.

Conclusions

The purpose of this study was to find out whether quality customer service is

practiced by the four subject educational supply stores in Danao City.

Based on the data gathered, after the statistical analyses and from the findings

above, the following conclusions were drawn:

1.1 There is a high and significant correlation between customer service quality and

satisfaction implying a substantial impact of customer service quality in the attainment of

customer satisfaction.

1.2 There is a moderate and significant correlation between customer service quality

and loyalty inferring another essential impact of customer service quality in realizing

customer retention.

2. There exists a moderate and significant correlation between customer satisfaction

and loyalty concluding that if customers are satisfied, they are more likely to become

loyal and frequently purchase on that store. These customers are less likely to switch

from buying at the certain he/she is loyal to.

41
3. Even though there are few barriers to customer service provision from the stores, it

has not negatively affected the service provision of the stores and so satisfaction of

customers is also not negatively affected.

4. The other customer service activities that customers regard as satisfactory include

store location, ambiance and temperature. Others responded that a simple act of

smiling and being humble in times of complaint are satisfactory.

Recommendations

Recommendations for the Improvement of the Subjects

Customer service is a very important issue as far as service delivery in today‘s

industry is concerned, more so when competition is so great in the business sector. To

stay in competition, service providers must set goals straight. But to be ahead of

competitors or to remain in competition service providers must give more than the

expectation of customers so as to delight them. Hence, the researchers recommend the

following for the improvements of the subjects:

1. The researchers recommend the stores to have this research as an assessment of

the quality of service they have rendered to their customers.

2. The researchers recommend the stores to use this study as a guide to maximize their

strengths as a business and work on their weaknesses. Specifically on:

2.1 The indicators of customer service quality:

a. Reliability – The stores should remain consistent in rendering their

performance and should keep their promises to their customers because a failed

promise may be fatal to the business.

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 b. Responsiveness – The stores‘ personnel should be trained, if not formally, at

least they are taught on how to respond to their customers quickly and rightly. The

stores should know who came in first and last in order to know who to prioritize.

c. Competence – This is also one factor that falls on the personnel‘s‘ side. If not

formally trained, at least the personnel can give and show what the customers expect

from them.

d. Access – This is something that the stores cannot change. Next time, when

businessmen put up a business of their own, they should consider if the business is

located strategically.

e. Courtesy – Personnel should be taught to be polite and if possible, impose a

nice aura (smiling and greeting) and not be rude in approaching the customers.

f. Communication – The personnel should know how to communicate with their

customers, how to assist, inform and listen to them.

g. Credibility – The business should have the customers‘ best interests at heart

which means that businesses should not take advantage of their customers.

h. Security – Aside from having a guard for the store, personnel should make

their customers secured and comfortable.

i. Understanding/Knowing the Customer – The personnel should know the

specific requirements of the customer, giving them individualized attention.

j. Tangible – Nobody likes a chaotic store. The stores should know how to

physically arrange their products to make it appear well-arranged and clean in the eyes

of the customers.

2.2 The indicators of customer satisfaction:

43
 a. Pricing – The stores should keep their prices competitive in order to remain in

the competition because customers are very price-sensitive

b. Product Quality – If the stores should give the best service quality, this also

means giving the product with the best quality. Giving an old stock that may easily be

destroyed is detrimental to the business. What is losing the profit of that old stock

compared to losing the customer at once, who will tell a number of people about their

bad experience?

c. Value Added Service – To the greatest extent, the stores should add value to

the products they offer through giving freebies, etc.

d. Customer Demand Fulfillment – This is a mixture of pricing and quality.

Customers love to buy cheap products but with great quality.

e. Complaint Entertainment – The stores should not be afraid of complaining

customers, they are tools for self-correction. They should be treated positively.

f. Net Promotion – This should be the ultimate goal of the stores, to make their

customers‘ mouths advertise them positively to others.

2.3 The indicators of customer loyalty:

a. Purchasing Frequency and Switching Activity – The stores should keep their

customers from coming back and keep them from going to other stores. These stores, if

possible, should have promotions, freebies, etc.

b. Store Image – These stores should build goodwill towards their customers.

3. The researchers also recommend to future businessmen and entrepreneurs to

consider the customer service quality that they will render to their customers.

Recommendations for Further Research

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1. The researchers recommend future researchers to use this study as a reference in

studying the impact of customer service on customer satisfaction and loyalty on other

subjects of study and not just educational supply stores.

2. The future researchers are advised to widen the scope of the study, increasing the

number of stores researched and the number of respondents surveyed.

3. The researchers recommend future researchers to look for more indicators or

determinants of quality customer service, customer satisfaction and loyalty.

45
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