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The Effect of Service Quality on Customer Satisfaction, Loyalty, and Happiness in Five
Asian Countries
Taeshik Gong*
College of Business and Economics
Hanyang University ERICA
55 Hanyangdaehak-ro, Sangnok-gu, Ansan
Gyeonggi-do, 15588, Republic of Korea
Phone: +82 (0)31 400 5658
Fax: +82 (0)31 400 5591
Email: gongts@hanyang.ac.kr
Youjae Yi
College of Business Administration
Seoul National University
1 Gwanak-ro, Gwanak-gu, Seoul, 08826, Republic of Korea
Tel: +82 (0)2 880 6941
Fax: +82 (0)2 880 3154
Email: youjae@snu.ac.kr
11 October 2017
*Corresponding author
The Effect of Service Quality on Customer Satisfaction, Loyalty, and Happiness in Five
Asian Countries
ABSTRACT
This research investigates and validates the cross-national applicability of a service quality
model in five Asian countries: China, Hong Kong, Japan, South Korea, and Singapore. The
objectives of this research are to establish whether or not a service quality model can be
conceptualized in the same way across Asian countries and to explore whether or not scores
on the items can be meaningfully compared among the Asian countries. The findings show
that overall service quality has a positive influence on customer satisfaction, which in turn
leads to customer loyalty and customer happiness and that the general pattern of structural
paths is valid in the five countries. Furthermore, the comparisons of paths show that most of
them are not significantly different across the five countries. The results of this study reveal
four key findings. First, customer well-being or happiness was driven by service quality.
Second, customer loyalty was driven by service quality across the five Asian countries,
demonstrating that the economic values of service quality could be applied to Asian countries
just as they are in North American and European countries. Third, customer satisfaction was
driven by service quality. Fourth, customer income increased the effect of service quality on
customer happiness via customer satisfaction in China, Hong Kong, and South Korea.
cross-national analysis
3
The Effect of Service Quality on Customer Satisfaction, Loyalty, and Happiness in Five
Asian Countries
INTRODUCTION
As service quality models accumulate in North America and Europe (Brady &
Cronin, 2001; Grönroos, 1984; Parasuraman, Zeithaml, & Berry, 1988), so do questions
concerning their applicability to Asia. These questions are even more pronounced as the
world becomes an interdependent service marketing system and the globalization of service
developed in North America and Europe to Asia (Durvasula, Andrews, Lysonski, &
Netemeyer, 1993; Netemeyer, Durvasula, & Lichtenstein, 1991). Most constructs and theories
of service quality have been developed and tested exclusively in North America and Europe.
Thus, it is unknown whether the theory, constructs, measures, and relationships among
constructs are culturally bound. Although many scholars have called for an examination of
the applicability of these theories to Asia (Blut, 2016; Collier & Bienstock, 2006), few studies
have actually done so. There is a need to test models cross-nationally because researchers
have assumed that North America and Europe-based concepts and models are relevant to Asia
without an actual validation of model constructs. This assumption can lead to invalid cross-
The purpose of this study is thus to test the applicability of service quality models to
Asia. More specifically, the current study puts forward a service quality scale. This research
investigates and validates its cross-national applicability in five Asian countries: China, Hong
4
Kong1, Japan, South Korea, and Singapore. The objectives of this research are to establish
whether or not a service quality model can be conceptualized in the same way across Asian
countries and to explore whether or not scores on the items can be meaningfully compared
among the Asian countries. Therefore, metric equivalence is analyzed. In addition, this study
examines whether the relationships among constructs in a service quality model are
applicable across Asian countries. Furthermore, the present study conducts an importance-
performance map analysis (IPMA) (Ringle & Sarstedt, 2016). IPMA contrasts the structural
model’s total effects, representing the predecessor constructs’ importance, with their average
values of the latent variable scores indicating their performance to identify predecessors that
are relatively more important to the target construct and highlight significant areas for
improving management activities (Ringle & Sarstedt, 2016; Schloderer, Sarstedt, & Ringle,
2014). These findings, therefore, provide managers with specific information about measures
they need to take to increase customer happiness (Hock, Ringle, & Sarstedt, 2010). In
addition, while much of the extant research on service quality has focused on enhancing
customer loyalty, little research has focused on increasing social performance such as
customer happiness and well-being. That said, lately there has been a substantially increased
interest in examining the relationship between service quality and customer well-being.
Interestingly, recent research has called for more focus on improving customer well-being
through transformative service. This topic was one of twelve service research priorities
(Ostrom et al., 2015). Therefore, the present research examines how service quality affects
customer happiness. This study also tests the moderating role of customer income in the
relationship between overall service quality and customer happiness through customer
1
Although Hong Kong is a part of China, it is politically & culturally distinct from China. It
is a separately administered region that has its own currency and culture. Hence it is treated
as a different country in this paper.
5
satisfaction. The article opens by reviewing the literature on the conceptualization and
an analysis of empirical research. Finally, the findings are discussed and the managerial
In the service marketing literature, there has been considerable progress in discussing
how service quality should be measured. First, Grönroos (1984) argues that service quality
consists of two dimensions: technical quality and functional quality. Technical quality refers
to what customers receive as a result of their interactions with a service firm. This aspect can
be called the outcome quality dimension. On the other hand, functional quality represents
how the service is delivered. In other words, the way service employees interact with
customers has an impact on customers' view of the service. This aspect is called the
Second, Parasuraman et al. (1988) propose five dimensions of service quality. More
specifically, (1) tangibles are appearances of physical elements, (2) reliability is dependable
and accurate performance, (3) responsiveness is promptness and helpfulness, (4) assurance is
credibility, security, competence, and courtesy, and (5) empathy is easy access, good
survey instrument called SERVQUAL, which is based on the premise that customers evaluate
a firm's service quality by comparing their perceptions of its service with their own
expectations (Sivakumar, Li, & Dong, 2014). That is, SERVQUAL measures the service
quality as the gap between expectation and performance. Meanwhile, Cronin and Taylor
(1992) point out that little theoretical and empirical evidence supports the relevance of the
expectations-performance gap as the basis for measuring service quality. Instead, they argue
6
the superiority of simple performance-based measures of service quality (Babakus & Boller,
1992; Park & Yi, 2016). Accordingly, they develop the performance-only measure
SERVPERF scale is efficient compared to the SERVQUAL scale. Further, they show that the
analysis of the structural models supports the theoretical superiority of the SERVPERF scale.
Expanding beyond the question of “Is SERVPERF superior to SERVQUAL?” Park and Yi
(2016) ask the question: “When is SERVPERF superior to SERVQUAL?" By comparing the
two approaches from an analytic perspective, Park and Yi (2016) show that SERVPERF is
than the effects of expectation on performance and customer satisfaction or when customers
Third, Brady and Cronin (2001) adopt Rust and Oliver (1994) view that customers
evaluate service quality based on three dimensions: (1) the customer-employee interaction,
(2) the physical environment, and (3) the outcome. In addition, they adopt Dabholkar (1996)
view that service quality has a hierarchical factor structure. More specifically, Dabholkar
(1996) proposes that customers think of service quality at different levels, such as the
dimension level and the overall level. They argue that service quality dimensions are distinct
but highly correlated. Thus, they conclude that service quality dimensions share an
underlying theme and that a common higher-order factor is present, which is called overall
service quality. In their effort to synthesize these conceptualizations, Brady and Cronin
(2001) propose the hierarchical service quality model. Here, service quality is viewed as a
hierarchical factor structure. That is, there is a common higher order factor called overall
service quality, and it consists of three dimensions: performance quality, delivery quality, and
physical environment quality. Since this is the first measure synthesizing all major prior
7
(Dagger, Sweeney, & Johnson, 2007; Pollack, 2009; Yi & Gong, 2008).
to the result of the service transaction. It is concerned with what the customer actually
receives from the service transaction. Prior studies show that performance quality is a
significant determinant of overall service quality and the addition of outcome quality
significantly improves the explanatory power and predictive validity of the service quality
model (Powpaka, 1996). Furthermore, Bolton and Drew (1991) assert that service
performance levels are inputs to customers’ perceptions of overall service quality. In addition,
Brady and Cronin (2001) argue that there is a consensus that the performance quality of a
service encounter significantly affects customer perceptions of overall service quality. Thus,
H1: Perceptions of the quality of service performance directly contribute to overall service
quality perceptions.
interactions that take place during service delivery (Grönroos, 1984). Interpersonal
the intangibility and inseparability of services (Brady & Cronin, 2001). More specifically,
responsiveness, empathy, reliability, and professionalism (Ekinci & Dawes, 2009). Choi and
Kim (2013) also suggest that interpersonal interactions have a critical impact on customer
H2: Perceptions of the quality of service delivery directly contribute to overall service quality
perceptions.
8
Brady and Cronin (2001) report that services require the customer to be present
during the process and that the surrounding physical environment can serve as an important
basis for customers’ evaluations of the overall quality of the service encounter. Baker,
Parasuraman, Grewal, and Voss (2002) show that the physical store environment can affect
customer service quality evaluations. Bitner (1992) argues that the physical environment,
such as the type of office furniture and the décor, may influence a client’s beliefs about a
elicits cognitive responses. In-store cleanliness is associated with the service quality of a
shopping environment. Customers utilize environmental cues to make inferences about the
H3: Perceptions of the quality of the service environment directly contribute to overall
emotion and adaptation (Lazarus, 1991), the appraisal processes of situational conditions lead
response → coping (Bagozzi, 1992). Adapting this theory to a service context, it is likely that
the overall service quality appraisal precedes emotional responses such as customer
satisfaction. Further, in the presence of a particular emotion, coping responses such as intent
to maintain and enjoy the outcome are possible (e.g., customer loyalty and customer
happiness) (Cronin, Brady, & Hult, 2000). The service literature reports empirical results
suggesting that customer satisfaction is an intervening variable that mediates the relationship
between overall service quality perception and customer loyalty (Taylor & Baker, 1994). In
addition, Szymanski and Henard (2001) conduct a meta-analysis and document that
9
performance (e.g., overall service quality) positively affects customer satisfaction and that the
intentions). Furthermore, Hellier, Geursen, Carr, and Rickard (2003) find that overall service
quality influences customer satisfaction, which in turn leads to customer loyalty. Early
research identifies customer satisfaction as the main predictor of customer loyalty (Hume &
Mort, 2010; Patterson, Johnson, & Spreng, 1997; Sweeney, Soutar, & Johnson, 1999).
satisfaction and that satisfied customers are more likely to engage in positive word-of-mouth
and repurchase (Pollack, 2009). Thus, the following hypotheses are proposed:
Customer Happiness
Service has been firmly established as a critical means for enhancing firm
performance. Furthermore, service now dominates the lives of consumers and therefore
marketers have the opportunity to improve consumer happiness and begin to concentrate on
enhancing customer-related outcomes as well (Anderson et al., 2013; De Keyser & Lariviere,
2014). The primary focus of service marketing has thus shifted from satisfying customer
needs to enhancing customer happiness. In other words, the purpose of service marketing has
been broadened and centered on the improvement of customer happiness beyond customer
satisfaction (Sirgy, Samli, & Meadow, 1982). This emerging area has been referred to as
transformative service research, which is defined as any research that investigates the
relationship between service and customer happiness aiming at improving the lives of
customers (Anderson & Ostrom, 2015). In a similar manner, a social marketing perspective
emphasizes that marketing should deliver value to customers in a way that improves
customers’ happiness. Therefore, under the social marketing concept, firm performance is
10
measured by social outcomes such as customer happiness (Su, Swanson, & Chen, 2016).
Furthermore, the social marketing concept assesses the societal impact of service marketing
which their well-being and quality of life are enhanced. Thus, customer happiness reflects the
culmination of customers’ subjective evaluation of their current life circumstances (Dagger &
Sweeney, 2006; De Keyser & Lariviere, 2014; Hellén & Sääksjärvi, 2011). Dagger and
Sweeney (2006) point out that a series of service encounters results in perceptions that form
the basis of customers’ satisfaction evaluation, which in turn leads to customer reactions such
that customer satisfaction with concrete events spills over to life domains, which in turn leads
to customer happiness. In a similar logic, the bottom-up theory of customer happiness states
that customer satisfaction with the specific service encounter spills over upward to the overall
service satisfaction, which in turn spills over upward to the most superordinate domain of
customer life satisfaction such as customer happiness (Neal, Uysal, & Sirgy, 2007).
Although the extensive body of research on customer loyalty has focused primarily
on benefits to the firm, customer loyalty can also result in benefits to the customer in the form
of customer happiness (Aksoy et al., 2015). According to Aksoy et al. (2015), the primary
role of customer loyalty is to make customers happy because the core principle of customer
loyalty is to connect friends and family, which are the primary determinants of customer
happiness (Nicolao, Irwin, & Goodman, 2009). Gilbert (2005) asserts that friends and
families offer strong social connections, interactions, and a sense of security, all contributing
customers develop with employees, which in turn lead to customer happiness. All individuals
have needs for belonging and interdependence, and these needs can be fulfilled through
11
customer loyalty, which can be defined as a desire to maintain the relationship (Aksoy et al.,
2015). In addition, customers develop affectionate bonds with services, which in turn lead to
customer loyalty, which is argued to be a catalyst for customer happiness (Yim, Tse, & Chan,
2008). This view is also supported by Orth, Limon, and Rose (2010) who find that customer
loyalty toward the service arouses customer happiness. Furthermore, a customer’s interaction
with the service employee may arouse positive emotions, which in turn lead to customer
loyalty. Interestingly, rewarding experiences with services through customer loyalty make the
customer feel better. Finally, happiness results from customers’ repeated experience with
services, i.e., customer loyalty (Bettingen & Luedicke, 2009). Thus, the following hypotheses
are proposed:
METHOD
Data were collected through a survey that was distributed to consumers in each of the
five countries: China, Hong Kong, Japan, South Korea, and Singapore. Quota sampling was
used to generate samples that were representative of the population in terms of age and
gender. China, Hong Kong, Japan, South Korea, and Singapore served as the countries of
study because they share similar cultural values and norms (Hofstede, Hofstede, & Minkov,
2010). Finding differences between countries with similar cultural backgrounds allows us to
make a more convincing argument than conducting the same study across countries that differ
greatly in cultural background. Moreover, using countries with highly disparate cultural
12
backgrounds could introduce significant biases into our samples, which could limit the
The demographics of the sample are presented in Table 1. The sample consists of 175
(China), 178 (Hong Kong), 172 (Japan), 180 (South Korea), and 174 (Singapore) valid
responses. The unit of analysis of this study is an individual shopper who had made three
purchases within three months at a major department store at the time of data collection. Self-
administered questionnaires were used as the method of data collection. The potential
respondents were approached when they were leaving department stores and asked to
participate in a short survey by a study assistant. They were informed about the investigation
and told that the individual responses were to be kept strictly confidential. A study assistant
As the survey was conducted in five countries, five versions of the questionnaire
were administered. The questionnaire, originally written in English, was translated into
Mandarin Chinese, Cantonese Chinese, Japanese and Korean by bilingual people whose
respectively. These translated questionnaires were then translated back into English by
another bilingual person whose native language was Mandarin Chinese, Cantonese Chinese,
Japanese or Korean, respectively. These two English versions were then compared and no
item was found to contain a specific cultural context in terms of language (Brislin, 1980). The
questionnaire was pre-tested with 20 shoppers at the department store, and there were no
Instrumentation
The research derived measures for key constructs from existing scales in the
literature. All constructs were measured with items using 9-point Likert scales ranging from 1
13
= strongly disagree to 9 = strongly agree. Measurement scales for all constructs are
summarized in Table 2. Service quality questions were from Dabholkar, Thorpe, and Rentz
(1996) as well as Brady and Cronin (2001). More specifically, performance service quality
was measured by six items that assessed the availability, quality, differentiation of
merchandise, the extent to which service was customer-oriented, and the extent to which new
products were provided compared to others. Delivery service quality was measured by six
items that assessed the extent to which employees gave prompt, courteous, individual,
voluntary, and knowledgeable service to customers. In addition, these items assessed the
extent to which employees were able to handle customer complaints directly and immediately
on the site. Environment service quality was measured by six items that assessed the extent to
which the department store had a professional, modern-looking, and convenient appearance.
In addition, these items assessed the extent to which customers perceived a positive physical
environment, parking places that were large and convenient, and a layout that made it easy to
find products.
Overall service quality and customer satisfaction were measured using a one-item
scale because these constructs are easily understood and imagined (e.g., overall service
quality, overall customer satisfaction) (Bergkvist & Rossiter, 2007; Rossiter, 2002). Customer
loyalty was measured by a two-item scale. These items were “I will say positive things about
XYZ to other people” and “I intend to continue doing business with XYZ” (Zeithaml, Berry,
& Parasuraman, 1996). Finally, customer happiness was measured by two items, “My quality
of life is enhanced by doing business with XYZ” and “I think XYZ contributes to customers’
RESULTS
14
The present study used the SmartPLS 3 software (Marc Ringle, Wende, & Becker,
2015) to validate the measurement model and test the hypotheses. PLS-SEM is a composite-
based approach to SEM that forms composites as linear combinations of their respective
indicators, which in turn serve as proxies for the conceptual variables (Hair, Hult, Ringle, &
Sarstedt, 2017). Recent research argues that employing modelling constructs as composites is
a more realistic approach to measurement (Sarstedt, Hair, Ringle, Thiele, & Gudergan, 2016).
Furthermore, this study focuses on predicting customer satisfaction, customer loyalty and
customer happiness via service quality, which calls for the use of PLS-SEM as a prediction-
oriented approach to SEM (Hair, Hult, Ringle, Sarstedt, & Thiele, 2017).
internal consistency and average variance extracted (AVE) to evaluate the convergent
validity (Hair, Hult, Ringle, & Sarstedt, 2017; Henseler, Ringle, & Sarstedt, 2015; Voorhees,
Brady, Calantone, & Ramirez, 2016). The composite reliabilities for all variables exceed the
cutoff value of 0.70, and the AVE for all focal variables exceeds the 0.50 benchmark,
demonstrating that each construct has acceptable psychometric properties. In support of the
convergent validity of the scales, all indicators load significantly (p < 0.05) and substantially
(> 0.70) on their hypothesized factors (see Table 2). Furthermore, all HTMT values are lower
than the threshold value of 0.85. In addition, neither of the 95% bias-corrected and
accelerated confidence intervals of the HTMT ratio of correlations statistic includes the value
This study relies on one source of data, i.e., ratings by customers, so potential
common method bias is statistically controlled (MacKenzie, Podsakoff, & Jarvis, 2005).
First, following the procedure suggested by Williams and Anderson (1994), a method factor
was added with all indicators for all latent variables loading on this factor. The structural
results are consistent with the original structural model for all five countries. This study also
implemented the procedure used by Liang, Saraf, Hu, and Xue (2007). The results show that
method factor loadings are not significant and the ratio of substantive variance to method
variance is more than 100:1 for all five countries, which means that common method bias is
Henseler, Ringle, and Sarstedt (2016) advocate the test of measurement invariance
before performing a multigroup analysis between two or more groups when using SEM. They
suggest the measurement invariance of composites (MICOM) that is suitable for PLS-SEM.
Given that the current study aims to compare a model over two groups via PLS-SEM,
MICOM was adopted. MICOM is a three-step process involving (1) configural invariance
assessment (i.e., equal parameterization and way of estimation), (2) compositional invariance
assessment (i.e., equal indicator weights), and (3) assessment of equal means and variances.
also established. If partial measurement invariance is confirmed, one can compare the path
Step 1 of the MICOM procedure, configural invariance, was established because the
PLS path model setups are equal across the five countries, and group-specific model
(step 2), the original composite score correlation c was compared with the empirical
distribution of the composite score correlation resulting from the permutation procedure (cu)
with 1,000 permutations and a 5% significance level for each combination of countries. If c
16
exceeds the 5% quantile of cu, compositional invariance is established. The results in Table 4
show that partial measurement invariance is established among all five countries, thus
allowing for a multigroup analysis that compares the path coefficients among the samples
from these five countries to identify significant differences. However, this study did not
assess the equality of the composite mean values and variances (step 3) because the purpose
of this study is to focus on cross-country comparisons and not to pool the data.
Table 5 lists the beta coefficients for five countries, along with the R2 value for each
endogenous construct. The models demonstrate good explanatory power, as the R2 values
range from 0.53 to 0.87 (Henseler, Hubona, & Ray, 2016). The bootstrapping analyses using
5,000 samples show that all the path coefficients are significant, supporting all the
hypotheses. Finally, in light of the partial measurement invariance, the samples from five
countries were compared by means of multigroup analysis. In the first step, the omnibus test
of group differences (OTG) was applied to assess if the path coefficients are equal across the
five groups. The analysis reveals that, in respect of all five structural model relations, the null
hypothesis that the seven path coefficients are equal across the five groups can be rejected.
These results suggest that, in respect of all relationships, at least one path coefficient differs
from the remaining four across the five countries (Sarstedt, Henseler, & Ringle, 2011). Next,
Table 6 shows the differences in seven path coefficient estimates across five countries and
provides the results of multigroup comparison. The analysis shows that path coefficient
estimates are partially invariant across the samples from five countries, as only two path
Furthermore, this study uses an IPMA to extend the PLS-SEM results by taking the
performance of each construct into account. The results permit the identification of
determinants with a relatively high importance and relatively low performance. These
determinants with high importance and low performance are major improvement areas that
show the IPMA results for five countries, respectively. When the IPMA results are analyzed,
More specifically, the importance-performance map for China (Figure 2) shows that
in comparison with other service quality dimensions, the performance quality’s importance is
the highest. In other words, a one-unit increase in the performance quality’s performance
from 70.22 to 71.22 would increase the performance of customer happiness by 0.47 points.
Hence, when managers wish to improve the performance of customer happiness by means of
overall service quality, their first priority should be to improve performance quality because
this construct has the highest importance among service quality dimensions. On the other
hand, Figure 3 for Hong Kong shows that delivery quality has the highest importance among
service quality dimensions but a relatively low performance. Thus, it is obvious that
improvement of the delivery quality is a top priority for Hong Kong. Interestingly, Figure 4
shows that environment quality has the highest importance among service quality dimensions
and a relatively high performance in Japan. Thus, improvement of delivery quality is not a
top priority in Japan. In addition, Figure 5 shows that in South Korea, delivery quality and
performance quality are important, but their performance is rather low. Therefore, managers
in South Korea should devote efforts toward improving these service quality dimensions.
Lastly, Figure 6 shows that in Singapore, service quality dimensions are rather similar in
18
terms of their importance and performance. Therefore, resources should be equally allocated
to service quality dimensions in Singapore. Beyond service quality dimensions, across five
countries, customer satisfaction has the highest importance, customer loyalty has the second
highest importance, and overall service quality is the third priority, except for in Japan.
also tests the potential moderating effect on the key path in an exploratory way. The current
research performs this analysis with customer income, which was measured by asking “how
much money does your household earn monthly?” (1 = less than 150 USD, 2 = 151– 200
USD, 3 = 201 – 250 USD, 4 = 251-300 USD, 5 = 301-400 USD, 6 = 401 – 500 USD, 7 = 501
– 600 USD, 8 = 601 – 700 USD, 9 = 701 – 800 USD, and 10 = more than 801 USD). Prior
research argues that people with higher income tend to be happier than those with lower
income because those with higher income are better able to fulfill their aspirations and feel
better off (Blanchflower & Oswald, 2004; Easterlin, 2001). Previous research also shows that
upper-income customers have lower expectations about service quality than middle- and
Therefore, this study tested the moderating effect of customer income on the
relationship between overall service quality and customer happiness mediated by customer
satisfaction. A moderated mediation analysis was performed using the PROCESS macro
(Model 14; Hayes, 2013), with overall service quality as the independent variable, customer
satisfaction as the mediator, customer income as the second-stage moderator, and customer
happiness as the dependent variable. As Table 7 shows, the results suggested a significant
interaction effect between customer satisfaction and customer income in three countries:
China, Hong Kong, and South Korea. The index of moderated mediation indicated that
confidence interval did not include zero in China (CI [.04, .07]), Hong Kong (CI [.00, .07]),
19
and South Korea (CI [.01, .04]). In other words, the indirect effect of service quality on
customer happiness via customer satisfaction is moderated by customer income in these three
countries. In contrast, the index of moderated mediation included zero in Japan (CI
[-.04, .04]) and Singapore (CI [-.03, .03], and the interaction effect of customer satisfaction
and customer income was insignificant, suggesting no moderation effect of customer income
(Hayes, 2015).
To probe the moderation of the indirect effect, a spotlight analysis was run (Spiller,
Fitzsimons, Lynch, & McClelland, 2013). Using the beta coefficient estimates, the bottom of
Table 7 shows the indirect effect of service quality on customer happiness via customer
satisfaction at low (-1 SD), moderate (mean), and high (+1 SD) levels of customer income.
Focusing on the three countries with significant moderation effects (i.e., China, Hong Kong,
and South Korea), the indirect effects of service quality on customer happiness via customer
satisfaction were all significant at low (-1 SD), moderate (mean), and high (+1 SD) levels of
customer income. Furthermore, the indirect effect was stronger for customers with higher
income. For example, in Hong Kong, the effect is .23 when customer income is low (one
standard deviation below the mean), whereas it is .41 when customer income is high (one
standard deviation above the mean). A similar pattern was found in China and South Korea.
Taken together, customer income seems to increase the effect of service quality on customer
happiness via customer satisfaction in China, Hong Kong and South Korea.
The current study examines whether the relationships between service quality and its
consequences, such as customer satisfaction, loyalty, and happiness, are applicable across the
five countries in Asia considered in this study. The service quality model has been developed
20
in countries such as the U.S. and Europe, and there has been a need for testing this model in
Asian countries. By doing so, researchers could examine the applicability of the service
quality model to Asian countries. The cross-cultural psychology literature suggests that the
metric invariance and the relationships among constructs in a model must be established for a
model to be applicable across countries (Durvasula et al., 1993). Accordingly, this study used
five Asian countries. The results suggest that overall service quality has a positive influence
on customer satisfaction, which in turn leads to customer loyalty and customer happiness, and
that the general pattern of structural relationships is valid for the five countries. Furthermore,
the comparisons of paths show that most of them were not significantly different across five
countries. However, there were two paths that were significantly different. For instance, the
path from performance quality to overall service quality was significantly different between
China and Hong Kong. In addition, the path from customer satisfaction to customer
It can be noted that this research is the first cross-national comparative study of
service quality and customer satisfaction in the five Asian countries. According to a review of
cross-cultural customer studies, most previous studies involve only two countries (Sin,
Cheung, & Lee, 1999). Thus, previous studies may have limited value compared to studies
done in several countries. Studies done in several countries could provide researchers a
deeper understanding of the effects of country on service quality models. Hence, this study
empirically examined the service quality model using data collected from five Asian
countries: China, Hong Kong, Japan, South Korea, and Singapore. Overall, the results
support the proposed model of service quality for China, Hong Kong, Japan, South Korea,
and Singapore. As expected, service performance, service delivery, and service environment
These results provide strong evidence for the cross-country stability of the service quality
model (Cadogan, Diamantopoulos, & De Mortanges, 1999). Cook and Campbell (1979) note
that to demonstrate robust causal relationships, using one sample of respondents is not
appropriate. The current study tests the model using data collected from five countries to
increase the confidence of a robust causal relationship that can be accomplished by means of
Because of the recent increase in the globalization of the service business, marketers
have a growing need for cross-national constructs and measures that are reliable, valid, and
among Asian brands. Maintaining consistently high quality services is a powerful means of
increasing the overall performance of a global Asian enterprise (Ostrom et al., 2015).
Measures with sound psychometric properties across Asian countries will facilitate service
marketing strategies in Asian markets (Netemeyer et al., 1991). This study examines the
measures of service quality, customer satisfaction, customer loyalty, and customer happiness
the present study represents an important step forward. The results of this study reveal three
key findings. First, social performance, such as customer happiness, was driven by service
quality. This finding makes a key contribution to the service literature, extending the
especially because the role of customer happiness as an outcome of service quality is not well
investigated, despite the growing interest in transformative service which enhances customer
happiness (Garma & Bove, 2011; Guo, Arnould, Gruen, & Tang, 2013; Mick, Pettigrew,
Pechmann, & Ozanne, 2012). Apparently, there is a need for firms to move beyond financial
customer loyalty was driven by service quality across the five Asian countries, demonstrating
that the economic values of service quality could be applied to Asian countries as well as
North American and European countries. Third, individual performance, such as customer
satisfaction, was driven by service quality. All in all, the present study highlights the crucial
role of service quality in enhancing social, firm, and individual performances by meeting
The findings of this study highlight the value of measuring service quality, primarily
because service quality enhances customer satisfaction, customer loyalty, and customer
happiness. The three dimensions of service quality (performance, delivery, and environment)
were found to influence overall service quality universally for five Asian countries.
Nevertheless, the relative importance of the three quality dimensions seems to vary slightly
across the five countries. Thus, mangers should have flexibility and strategy in resource
allocation when they want to increase overall service quality depending on the countries in
which they operate. Indeed, performance quality, delivery quality, and environment quality
play a key role in the development of overall service quality, which in turn increases
should focus on improving specific service quality dimensions based on the findings of IPMA
of this study. For that purpose, managers might want to segment their Asian customer base
according to levels of service quality. Such segmentation would enable firms to allocate a
23
larger amount of resources to customers who need more support in forming positive customer
happiness. Further, they should constantly monitor service quality and internal processes. The
proposed scales could be used as diagnostic tools to identify specific areas where
improvements are needed and pinpoint aspects of the firm’s service quality that require work.
In addition, the service quality scale can easily be added to the annual satisfaction survey or
questionnaires for loyalty programs. Service quality information would be useful for
of service quality could be used to enhance the level of customer happiness (Hellén &
Sääksjärvi, 2011).
This paper also shows that customer income can influence the indirect effect of
customer happiness. Nevertheless, the moderating effect of customer income varied across
countries; the moderation effect was significant in China, Hong Kong, and South Korea, but
not in Japan and Singapore. That is, although the overall service quality model is robust
across the countries, the particular moderation effect of customer income varies across the
countries. Furthermore, in the three countries where the moderating effect of customer
income exists, customer income tends to magnify the effect of customer satisfaction on
customer happiness. That is, as customer income increases, the importance of customer
satisfaction becomes higher in achieving customer happiness. Considering that little research
has investigated the moderating role of customer income in the service quality model, the
This study is not without limitations. It only addresses one service (the department
store). Future studies should seek to extrapolate the analysis into other service areas. Further
research should also consider the role that unobservable traits such as personality or lifestyle
24
play in explaining service quality and customer happiness. It could be argued that segments
identified by means of specific unobservable variables are usually more homogenous and
their customers respond consistently to marketing actions, but customers in these segments
are difficult to identify from variables that are measured (Schloderer et al., 2014). Using a
similar logic, it is possible that the importance of various service quality factors differs with
regard to how often they visit the department store due to habituation effects. Future research
should therefore consider this issue by segmenting the data along such behavioral variables
(Hock et al., 2010). The study also presents a cross-sectional evaluation of service quality, but
a longitudinal study could enrich the findings and generate a deeper understanding of the
dynamics of service quality (Rindfleisch, Malter, Ganesan, & Moorman, 2008). Future
research using experiments may detect accurately more the causality between service quality,
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Percent
Table 4.
Delivery 1.000 1.000 .999 .998 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
Environment 1.000 .999 .999 .998 .999 .998 1.000 .999 .999 .999 .999 .999 1.000 .999 .999 .997 1.000 .999 .999 .998
Service 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
quality
Customer 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
satisfaction
Customer 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 .999 1.000 1.000 1.000 1.000 1.000 1.000 1.000 .999 1.000 1.000
loyalty
Customer 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000
happiness
Notes: If c < 5% quantile of cu, compositional invariance requirements are violated.
38
R2
Service quality .69 .73 .71 .72 .66
Customer satisfaction .80 .81 .87 .80 .76
Customer loyalty .57 .61 .59 .55 .53
Customer happiness .64 .61 .71 .60 .68
Notes: * p < 0.05; **p < 0.01; ***p < 0.00
39
Table 6.
Table 7.
Conditional indirect effects of service quality on customer happiness through customer satisfaction
Performance Customer
1 service quality loyalty
H1
H5
H3
H6
Environment Customer
service quality happiness
42
Figure 2.
80
75
Loyalty
70 Performance SQ
Environment
Performance
CS
65 Delivery
60
55
50
0.0 0.2 0.4 0.6 0.8
Importance
43
Figure 3.
80
75 Loyalty
70
Performance
Environment
SQ CS
65 Delivery
Performance
60
55
50
0.0 0.2 0.4 0.6 0.8
Importance
44
Figure 4.
80
75
Loyalty
70
Performance
SQCS
Environment
65
Delivery
60 Performance
55
50
0.0 0.2 0.4 0.6 0.8
Importance
45
Figure 5.
80
75
70 Loyalty
Performance
Environment
SQ CS
65
Performance
Delivery
60
55
50
0.0 0.2 0.4 0.6 0.8
Importance
46
Figure 6.
80
75 Loyalty
70 Environment SQ CS
Performance
Delivery
65 Performance
60
55
50
0.0 0.2 0.4 0.6 0.8
Importance