The effects of perceived justice with service recovery on customer satisfaction, loyalty and word of mouth in restaurant services in ho chi minh city

As a result, the research found that four justice dimensions i.e., distributive justice, interactional justice, procedural justice, and informational justice had positive relationships w

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business -

Truong Ngoc Quang Duy

THE EFFECTS OF PERCEIVED JUSTICE WITH SERVICE RECOVERY ON CUSTOMER SATISFACTION, LOYALTY AND

WORD OF MOUTH IN RESTAURANT SERVICES IN

HOCHIMINH CITY

MASTER OF BUSINESS (Honours)

Hochiminh City – 2015

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business -

Truong Ngoc Quang Duy

THE EFFECTS OF PERCEIVED JUSTICE WITH SERVICE RECOVERY ON CUSTOMER SATISFACTION, LOYALTY AND

WORD OF MOUTH IN RESTAURANT SERVICES IN

ACKNOWLEDGEMENT

Firstly, I would like to express my deep gratitude to my supervisor, Dr Pham Ngoc Thuy, for her expertly instructions over the course Without her insight and professional guidance, I would not complete this study

I would also like to send deeply thanks to all members of ISB’s Committee for their valuable advices and constructive comments, which helped me in correcting this research

Finally, I’m so grateful my family, my close friends, and my colleagues for

encouraging and supporting me for all the time

STATEMENT OF DECLARATION

I hereby certify that this thesis and its contents are my own work and effort, as part of

my Master of Business studies All the sources of information and materials used in this study have been fully acknowledged

Signature:………

Date:………

LIST OF CONTENTS

ACKNOWLEDGEMENT ii

STATEMENT OF DECLARATION iii

LIST OF CONTENTS iv

LIST OF TABLES vi

LIST OF FIGURES vii

ABSTRACT viii

CHAPTER 1: INTRODUCTION 1

1.1 Research background 1

1.2 Statement of problem 2

1.3 Research objectives 3

1.4 Scopes of the study 3

1.5 Significance of the study 4

1.6 Thesis structure 4

CHAPTER 2: LITERATURE AND HYPOTHESES 5

2.1 Overview research context 5

2.2 Definitions of concepts 7

2.3 Relationships between main concepts 11

2.4 Proposed research model 14

CHAPTER 3: RESEARCH METHODOLOGY 17

3.1 Sample size 17

3.2 Research process 18

3.3 Pilot study results 20

3.4 Questionnaire design 26

3.5 Data analysis method 27

CHAPTER 4: DATA ANALYSIS 29

4.1 Sample characteristics 29

4.2 Validity Analysis - Exploratory Factor Analysis 31

4.3 Reliability Analysis – Cronbach’s Alpha Analysis 35

4.4 Regression Analysis 37

4.4.1 Simple regression analysis 37

4.4.2 Multiple regression analysis 40

CHAPTER 5: CONCLUSIONS, IMPLICATIONS, AND LIMITATIONS 48

5.1 Findings 48

5.2 Managerial implications 49

5.3 Limitations and future research 51

REFERENCES 52

APPENDICES 57

Appendix A: Research questionnaire (Vietnamese version) 57

Appendix B: Research questionnaire (English version) 61

Appendix C: Output summary of pilot study 65

Appendix D: KMO and Bartlett’s Test results for all variables (before and after deleted one unsuitable item) 69

LIST OF TABLES

Table 2.1: Summarize hypotheses of the research 14

Table 3.1: Original measurement scales for the variables 22

Table 3.2: Measurements comparison table 24

Table 4.1: Respondents’ demographic characteristics description 30

Table 4.2: Rotated Component Matrix of all variables (first test) 33

Table 4.3: Rotated Component Matrix of all variables (after deleted one item) 34

Table 4.4: Reliability test results for all variables 36

Table 4.5: Correlations test of simple regression analysis 38

Table 4.6: ANOVA of simple regression analysis 39

Table 4.7: Coefficients of simple regression analysis 40

Table 4.8: Correlations test of multiple regression analysis 41

Table 4.9: Model summary of multiple regression analysis 42

Table 4.10: ANOVA of multiple regression analysis 42

Table 4.11: Coefficients of multiple regression analysis 43

Table 4.12: Summary of regression analysis and hypotheses testing 46

LIST OF FIGURES

Figure 2.1: Proposed research model 15 Figure 3.1: Research process 18 Figure 4.1: Revised research model 35

ABSTRACT

Retaining customers’ loyalty and attracting new customers is the target of every company in every business In order to reach that target, their managers always try to satisfy the customers at the utmost capability However, in some unexpected circumstances, the firms cannot avoid some mistakes or service failures throughout the service process (Komunda & Osarenkhoe, 2012) Hence, satisfying customers by service recovery plays an important role in reducing the damage in relationship between the firms and customers after service failures (Kau & Loh, 2006) In the world, justice theory has been a significant approach for service recovery research (Wen & Chi, 2013) However, still little research has demonstrated its effects to customer loyalty and its relationship with word-of-mouth intentions, especially in Vietnam

According to Vietnam Competition Authority - Ministry of Industry and Trade’s annual report (2015), restaurant is one of the industries which received most of complaints The purpose of this study is to examine the effects of perceived justice to customer satisfaction with service recovery, and the relationships between customer satisfaction with service recovery, loyalty, and word-of-mouth in restaurant sector Using a structured questionnaire, a survey is conducted with 304 appropriated respondents As a result, the research found that four justice dimensions (i.e., distributive justice, interactional justice, procedural justice, and informational justice) had positive relationships with customer satisfaction with service recovery, in which, distributive justice was the factor which influenced to customer satisfaction with service recovery the most, following by interactional justice, informational justice, and procedural justice respectively Besides, the study confirms also the positive impact of customer satisfaction with service recovery to customer loyalty and word-of-mouth After these findings, the managerial implications as well as research’s limitations are also presented

CHAPTER 1 INTRODUCTION 1.1 Research background

Every company does want to satisfy their customers, to compete with the rivals by supplying high quality products and/or service, competitive price, and excellent customer services, etc… However, even a company which gained a lot of experiences in customer services cannot avoid service failures, which are identified as failures of core service, or products and policy failures (Komunda & Osarenkhoe, 2012) Service failures occur throughout the service delivery process, and possibly lead to many consequences as complaints and dissatisfactions In fact, customer complaints are natural consequences in any industry or any service activity, not only because making mistake is an unavoidable

feature of human being (Michel et al., 2009; Rio-Lanza et al., 2009), but also because of

non-human errors (Kau & Loh, 2006)

Customers, who are not satisfied with any service of the firm, tend to have antipathies to the firm, and turn to be the customers of other competitors, or even become a negative communication channel of the firm Therefore, service recovery is a very important activity, as a second effort of the firms, in order to retain the customers to the company or at least, “reduce the damage in relationship” (Kau & Loh, 2006, p.111), and to maintain a positive image of the company in customers’ mind after service failures

In order to examine the relationship between service recovery and customer satisfaction toward such activities, many researchers employ and focus on the justice theory

(Tax et al., 1998; Smith et al., 1999), meanwhile some studies examine emotional

perspective to evaluate customer satisfaction with service recovery from failures

(Varela-Neira et al., 2010; Wen & Chi, 2013) Even there are other approaches which have been

explored to explain the customers’ complaint satisfaction, including “outcome complaint satisfaction” and “process complaint satisfaction” (Stauss, 2002, p 176), or evaluating

service recovery from disconfirmation perspective (McCollough et al., 2000), perceived

justice theory provides a significant approach for service recovery research (Wen & Chi, 2013) In many studies, there are three dimensions of perceived justice in service recovery context which have been suggested are distributive justice, procedural justice, and

interactional justice (Tax et al., 1998; Smith et al., 1999) However, in recent studies,

informational justice is examined as the fourth dimension of service recovery perceived

justice (Mattila & Cranage, 2005; Varela-Neira et al., 2010; Badawi, 2012)

In line of service recovery and customer satisfaction, many researchers mention trust

as a consequence of satisfaction though its relationship with loyalty still unclear (Tax et al.,

1998; Kau & Loh, 2006) In addition, as a finding, previous studies which examined service recovery justice, have together confirmed the effects of customer satisfaction with service

recovery to customer behavior of patronage intention (Tax et al., 1998; Stauss, 2002) and

word-of-mouth (Kau & Loh, 2006; Wen & Chi, 2013)

1.2 Statement of problem

In Vietnam, restaurant industry has been developed significantly recently; serve millions of people every year, including Vietnamese and foreign travelers However, according to the Vietnam Competition Authority - Ministry of Industry and Trade’s annual report (2015) about the number of complaints of customers received in 2014, restaurant was one of the industries which received most of complaints From a preliminary survey in many restaurants in Hochiminh city, there are many complaints from customers Most of

complaints are related to the service ability (deliver wrong dishes, or not in a timely manner, etc…), staffs’ attitudes, service procedures, or about the environment (Vo & Pham, 2013)

More than that, customers usually concern about the service quality of restaurants while providing the recovery service after failures, including attitudes of employees, service time for the recovery, adequate explanations, or the results of recovery compare with their expectations, etc… These practices are interpreted in literatures of customers’ justice perception, customer satisfaction, loyalty, and word of mouth in recent researches In contrast, although many studies have analyzed the relationship between perceived justice and customer satisfaction in service failure and recovery situations, still little research has demonstrated its effects to customer loyalty and its relationship with word-of-mouth intentions

1.3 Research objectives

This study aims to examine the effects of perceived justices to customer satisfaction with service recovery, including four dimensions (i.e., distributive justice, interactional justice, procedural justice, and informational justice)

The study also investigates the relationships between customer satisfaction with service recovery, loyalty, and word-of-mouth in restaurant sector

1.4 Scopes of the study

The objects of this study are customers that visiting the restaurants, suffering service failures, and have been provided service recoveries from such restaurants in Hochiminh city The study will approach these customers, interview them for the problems, and conduct the survey in order to collect data for the research

1.5 Significance of the study

Successful service recoveries often help customers to rate the firm more favorably after the recovery than prior to the failure (Choi & Choi, 2014) There is no denying that satisfaction with service recovery is a critical factor in ensuring customer loyalty (Choi &

Choi, 2014; Stauss, 2002) Understanding of which factors effect to customer satisfaction in

service recovery take a significant role in helping the managers of restaurant services companies to achieve and retain customer loyalty, which will lead to re-purchase activities and positive word-of-mouth

1.6 Thesis structure

This thesis is structured into five chapters Firstly, introduction chapter presents an outline of this research This chapter starts with background of the research, raises the research problems which explain the motivation for doing this research Besides, this chapter raises research objectives, the scopes of study, and significances of this research in practice Secondly, chapter two reviews and summaries the literatures of related concepts from previous studies, including customer justice perception, customer satisfaction with service recovery, customer loyalty, and positive word-of-mouth This chapter also provides the relationships of these concepts, and arguments the hypotheses, and then come to proposed research model Thirdly, chapter three introduces research methodology which

is used to empirically test the research model After that, chapter four presents the results

of data analysis Finally, chapter five ends this study with discussions the research’s findings, points out limitations of this research, and suggestions for next studies

CHAPTER 2 LITERATURE REVIEW AND HYPOTHESES

This chapter is going to generalize some prominent works related to the current topic, and introduce the related literatures and concepts, which have been discovered in previous studies The mentioned concepts, including customer justice perception, customer satisfaction to service recovery, customer loyalty, and word-of-mouth, are discussed in pair,

in order to argue the hypotheses, and construct to the model

2.1 Overview research context

In previous studies, which have discovered service recovery efforts of service providers, overall satisfaction is used to explain its affections, and its relationship with

loyalty, and word-of-mouth activities (Spreng et al., 1995; Davidow, 2003) Recently,

XiaoRan and Omar (2014) examine the relationship between service recovery activities and customer overall satisfaction with recovery efforts However, their studies only demonstrate the effects of service recovery action to customer satisfaction, through justice dimensions as mediator variables, without any further consequences or customers’ responses toward such recovery activities

Another study of Kau and Loh (2006) investigates the elements including trust, word-of-mouth intention and consumer loyalty (i.e., commitment) as consequences of customer satisfaction, examined both complainants and non-complainants to compare the differences It is found that customers who satisfied originally with the service expressed greater trust and positive word-of-mouth than customers who satisfied after they received service recovery from service providers (Kau & Loh, 2006)

In recent research, Choi and Choi (2014) investigate the effects of perceived service recovery justice to customer affection, loyalty and word-of-mouth The study finds out that procedural and interactional justice perceptions significantly influence customer affection, with distributive justice perception being significant only if the failure severity is high, and customer affection influences the restoration of loyalty, which certainly lead to positive word-of-mouth Many researches, which investigate service failure and recovery, also examine and support to customer satisfaction with service recovery as a key factor that

affect to customer loyalty, commitment and repurchase activities (Tax et al., 1998; Stauss,

2002; Kau & Loh, 2006; Osarenkhoe & Komunda, 2013, Wen & Chi, 2013) This frame work is considered as a suitable model to investigate the effect of service recovery perceived justice to customer intentions after suffering service failure

In the context of this study, where restaurant service was investigated, the restaurants may face to some failures during service delivery, from small mistakes to serious faults, e.g arranging seats tardily, delivery wrong dishes, or short delivery of dishes, serving in a laggard manner, insanitary food, wrong billing, etc These failures usually occur throughout the core service process of restaurants, when the number of customers excesses the service ability of the restaurant (Vo & Pham, 2013) In this circumstance, the restaurants are required to response to the issues instantly as part of their service procedures and tasks This study will conduct a research with customers who raised the complaints and have been provided service recoveries from restaurants after service failures Other cases are excluded from the framework of this study

of the firms Service recovery activities include the explanations about the service failures, apologizing, solving the problems, and compensations (e.g., discounts, vouchers, free gifts, etc.), in a respectful, polite manner (XiaoRan & Omar, 2014)

Customer justice perception

In the service recovery context, perceived justice literature is constructed significantly when studying customer satisfaction Perceived justice is recognized as a key factor which affects the formation of customers’ evaluation on organizations’ responses to a

service failure (Tax et al., 1998; Varela-Neira et al., 2010) In many studies, perceived

justice is investigated by three independent dimensions, including distributive justice,

procedural justice, and interactional justice (Tax et al., 1998; Smith et al., 1999; Choi &

Choi, 2014)

Mattila and Cranage (2005) argue that offering the information relevant to a decision will have an opportunity to influence the outcome of people’s fairness perceptions As a result, informational justice has been conducted as a fourth dimension of customer justice perception in recent studies (Mattila & Cranage, 2005; Varela-Neira et al., 2010; Badawi,

2012) This study conducts the framework with four perceived justice dimensions, by adding informational justice, which has been ignored in service recovery literature for a long time

These four dimensions are defined as following:

 Distributive justice refers to the customer’s perception of the equity of the resources allocation, and the tangible outcome of the service provider According to Davidow (2003), distributive justice is the “fairness of the outcome of the organization’s response (p 68) At the other hand, distributive justice concerns the perceived fairness of specific outcomes of the firm’s recovery efforts (Choi & Choi, 2014) In a

study of Blodgett et al., distributive justice expresses the “perceived fairness of the

policies, procedures, and criteria used by decision makers in arriving at the outcome

of a dispute or negotiation” (as cited in Kau & Loh, 2006, p 102) According to Tax

et al (1998), distributive justice is identified with three elements, i.e., “equity, equality, and need” (p 62)

 In the current study of Varela-Neira et al (2010), procedural justice is defined as the

customer’s perception of the equity of the policies and procedures of the company to handle the complaints that lead to the obtained outcome Procedural justice is also considered as “the perceived fairness of the procedures” (p 111) while service recovery is proceeding by service providers (Choi & Choi, 2014) Five elements of procedural justice are described, i.e., “process control, decision control, accessibility,

timing/speed, and flexibility” (Tax et al., 1998, p 62)

 Another dimension is interactional justice, which refers to the manners by which customers are treated, includes elements such as “attitude, courtesy, personal

interaction” (Choi & Choi, 2014, p 111), in dealing with customers during a service recovery process As another approach of Maxham and Netemeyer, interactional justice is related to the customer’s judgments of the equity of the personal treatment,

in terms of “respect, honesty, education and dignity” (as cited in Varela-Neira et al.,

2010, p 91), or the quality of communication (Smith et al., 1999) Tax et al (1998)

listed five important elements of interactional justice, including “provision of an explanation, effort in resolving a problem, as well as politeness, concern, and honesty” (p 62) in the service recovery process

 In a current study, when informational justice literature has been explored thoroughly, Mattila and Cranage (2005) define informational justice as the

“perceived adequacy and truthfulness of information” (p 272), when explaining the cause of failures This justice relates to the validity, and focus on the fairness of

information using to clarify the reason of the events (Varela-Neira et al., 2010) In

another study, informational justice is considered as the equity of the explanations

and justifications from the firms (Ambrose et al., 2007)

Customer satisfaction with service recovery

Usually expectations, disconfirmation of expectations, and performance are used to specific buyers’ level of satisfaction (Martenson, 2007) In this context of service recovery, customer satisfaction results from an evaluation process where customers compare their previous recovery expectations with their perception of the service recovery received

(Karande et al., 2007) In general, there are two types of customer satisfaction:

transaction-based satisfaction and overall satisfaction While most of other service failure studies were

concerned with overall satisfaction (Karande et al., 2007), this study will demonstrate

customer satisfaction with service recovery (complaint handling) and its relationship with loyalty

Customer loyalty

Loyalty refers to a commitment to re-buy or re-patronize a preferred product or

service consistently in the future (Oliver et al., 1997), a commitment to maintain a

relationship with the firm, including the patronizing repeatedly to the specific service

provider, engaging in positive word-of-mouth (Sirdeshmukh et al., 2002; Lam et al., 2004)

At the other hand, customer loyalty can be understood as customer’s commitment to do business with a particular organization, purchasing their goods and services repeatedly, and recommending the services and products to friends and associates (Osarenkhoe &

Komunda, 2013)

Word-of-mouth

Word-of-mouth is an activity that customer who experienced service failure and received service recovery with give negative recommendations to others In another study, word-of-mouth is considered as “informal, person-to-person communication between a perceived noncommercial communicator and a receiver regarding a brand, a product, an organization, or a service” (Harrison-Walker, 2001, p 63) Positive word-of-mouth not only helps to attract new customers but also assists in the creation of positive image about the firm concerned (Kau & Loh, 2006)

2.3 Relationships between main concepts

Customer justice perception and customer satisfaction with service recovery

Customers assess the level of justice of the service recovery and this perception of justice which including three dimensions above influences their satisfaction with service recovery Tax et al (1998) support that perceived justice has a positive impact on satisfaction with service recovery From their study, Kau and Loh (2006) also confirm that customer justice perception is significantly and positively related to satisfaction with service recovery, and distributive justice was found to have the greatest impact on customer satisfaction

In a recent study, Siu et al (2013) investigate both customer satisfaction with the recovery and overall satisfaction with organization However, they find out that service recovery perceived justices are not totally related to overall satisfaction with organization (Siu et al., 2013) In accordance with Maxham (1998), perceived justice (including distributive justice, procedural justice, interactional justice) is positively related to not only specific transaction satisfaction, but also overall satisfaction with the firm In another study, Badawi (2012) finds out that perceived justice has a positive relationship with customer satisfaction with complaint handling, and informational justice is seen as the strongest variable to risen the level of customer satisfaction toward the service recovery In the previous studies of Mattila and Cranage (2005), Varela-Neira et al (2010), the findings support that all of four dimensions of justice, including distributive justice, procedural justice, interactional justice, and informational justice, are highly linked to and help to identify customer satisfaction with service recovery Therefore, we hypothesize:

H1: Perception of distributive justice will have a positive affect to customer satisfaction with service recovery

H2: Perception of procedural justice will have a positive affect to customer satisfaction with service recovery

H3: Perception of interactional justice will have a positive affect to customer satisfaction with service recovery

H4: Perception of informational justice will have a positive affect to customer satisfaction with service recovery

Customer satisfaction with service recovery and customer loyalty

Customer satisfaction provides a leading indicator of consumer purchase intentions and loyalty Recent researches on customer complaint focus on the overall satisfaction of customer with complaint handling of organization Many researches support to the finding that there is a strong positive relationship between the satisfaction with complaint handling and the intensions to repurchase and commitment – elements of customer loyalty (Davidow, 2013; Tax et al., 1998) The findings of Kau and Loh (2006) also confirm that satisfaction with service recovery had a strong impact on customer loyalty and also reinforce customer commitment Therefore, hypothesis is supposed:

H5: Customer satisfaction with service recovery will have a positive affect to customer loyalty

Customer satisfaction with service recovery and word-of-mouth

In the context of service failure and recovery, word-of-mouth is critical as those who think they are treated unfairly and likely to spread negative word-of-mouth (Choi & Choi, 2014) While service recovery quality can be considered as a part of overall service quality,

a recent study of Osarenkhoe and Komunda (2013) show the finding that when a service is

considered totally satisfied, it may drives customers to recommend the firm’s products or services to others

From the earlier time of service recovery study, Spreng et al (1995) demonstrate that customers, who satisfied with service recovery, are intend to use the firm’s service in the future, and would provide positive word-of-mouth Kau and Loh (2006) conclude that satisfaction with service recovery would encourage positive WOM communication In another study, it is argued that satisfied customers have a better relationship with service providers and they will spread positive word-of-mouth to other people about the service providers (Kruger & Mostert, 2014) Thus, this study hypothesizes this relationship as following:

H6: Customer satisfaction with service recovery will have a positive affect to positive word-of-mouth

Customer loyalty and word-of-mouth

In the research of Sirdeshmukh et al (2002), word-of-mouth is considered as one of

components of loyalty However, the empirical findings by Soderlund (as cited in Choi and Choi, 2014) suggest that word-of-mouth intentions should be regarded as separate constructs and that the inclusion of word-of-mouth in the conceptualization of loyalty should be avoided In this context, customers who loyal with a service supplier are likely to give positive recommendations to others and reverse, they are unlikely to give positive recommendations to others if there is no loyalty to the firm

In the study of Lam et al (2004), they support that loyal customers will recommend

the service provider, whom they are loyal to; to other customers; and probability engage in

positive word-of-mouth behavior (Komunda & Osarenkhoe, 2012) Therefore, we hypothesize:

H7: Customer loyalty will have a positive relationship with positive word-of-mouth Table 2.1: Summarize hypotheses of the research

H 1 : Perception of distributive justice will have a positive affect to customer satisfaction

with service recovery

H 2 : Perception of procedural justice will have a positive affect to customer satisfaction

with service recovery

H 3 : Perception of interactional justice will have a positive affect to customer

satisfaction with service recovery

H 4 : Perception of informational justice will have a positive affect to customer

satisfaction with service recovery.

H 5 : Customer satisfaction with service recovery will have a positive affect to customer

loyalty

H 6 : Customer satisfaction with service recovery will have a positive affect to positive

word-of-mouth

H 7 : Customer loyalty will have a positive relationship with positive word-of-mouth

2.4 Proposed research model

The framework of current study proposes the positive affection of customer perceived justice to customer satisfaction with service recovery The four dimensions of perceived justice have been mentioned in this study, including distributive justice,

procedural justice, interactional justice, and informational justice, are separately demonstrated

As discussed, this model expresses the role of customer satisfaction with service recovery as the mediator between customer justice perception and word-of-mouth, and independent variable of customer loyalty as the mediator between customer satisfaction with service recovery and word-of-mouth

Customer satisfaction with service recovery

Procedural justice

Positive word-of-mouth

Customer loyalty Distributive justice

In summary, this chapter reviews theoretical background and literatures of related concepts, including customer justice perception, customer satisfaction with service recovery, customer loyalty, and positive word-of-mouth This chapter also presents proposed research model, in which customer satisfaction with service recovery is affected by four factors, i.e distributive justice, interactional justice, procedural justice, and informational justice Then, customer satisfaction with service recovery is supposed to have influences on both customer loyalty, and positive word-of-mouth Besides, the relationship path from customer loyalty to positive word-of-mouth is also considered These factors and research model are considered carefully, based on many previous academic studies Therefore, there are seven hypotheses have been proposed in this research The next chapter will introduce the process, and methods which are used to collect and analyze the data, in order to test the hypotheses

CHAPTER 3 RESEARCH METHODOLOGY

This chapter describes the research process and methodology, from pilot survey to main survey, makes a description of choosing sample size, and presents measurement scales, which are used to develop the questionnaire

3.1 Sample size

Hair et al (2009) suggested the sample size is considered as suitable for the reliability of the research should be at least 100 and greater than five times of number of total variables for Exploratory Factor Analysis

Sample size: (n) ≥ 100 and (n) ≥ 5k (k: number of variables)

The current study had 23 variables; therefore, considered sample size should be at least: (n) ≥ 23*5=115 observations

For Structural Equation Modeling method, sample size should be as larger as better

In order to increase the efficiency of CFA and SEM analysis, author aimed to reach at least

300 of sample size

Cronbach’s alpha analysis

Confirmatory Factor Analysis

There were two stages have been carried out in this research In the first stage, pilot survey was used to adjust the measurement, and the second stage, main survey with quantitative method was used to test the model and hypotheses

In the pilot study, eight respondents who have suffered service failures, raised the complaints, and have been provided service recoveries was invited for an interview The purpose of this work was to ensure the respondents totally understand the measurements using in this study, and the comments from respondents were used to adjust original measurements, which need to be suited for specific field of this research In this phrase, the original measurements have been translated into Vietnamese by researcher, with the support

of supervisor From Vietnamese version of original measurements, researcher proceeded pilot study by in-depth interview method to collect their comments about service recovery from restaurants and to check whether they clearly understood the scales or not By this stage, researcher could find out if the original measurements were suitable for conducting the survey in specific context in Viet Nam or not

After those discussions, the comments and feedbacks of interviewees were collected

in order to modify the measurement scales (see Appendix C) As a result, output of pilot survey was employed to conduct the questionnaire which would be brought to quantitative research in next phase The five-graded Likert scale, rating from “strongly disagree” (= 1),

“disagree” (= 2), “neutral” (= 3), “agree” (= 4), to “strongly agree” (= 5), was used to measure the variables in the questionnaires

In the main survey, structured questionnaires in Vietnamese are delivered to customers who have suffered the service failure, raised the complaints, and received service recovery from middle-size restaurants in Hochiminh city, using convenience sampling method The respondents were customers in restaurants, students from universities, officers

from companies … The objects of this study were people who have suffered service failures, raised the complaints, and have been provided service recoveries from middle-size restaurants within one month from the time of interview Without any of these three conditions, respondents were not satisfied A group of five interviewers were trained in order to support for this research Via interviewers, the questionnaires were delivered directly to respondents in paper (see Appendix B) for quantitative research This stage of research has been held for one month in order to collect enough valuable questionnaires

The data, which was collected from quantitative research, has been analyzed, and filtered by Cronbach’s alpha and Exploratory Factor Analysis (EFA) method, processed by SPSS software version 20 The items which were not satisfied the validity and reliability requirements would be deleted after this testing process Thereafter, the measurement scales would be tested by Confirmatory Factor Analysis (CFA) method In order to test all the hypotheses and the relationships between factors, structural equation modeling method (SEM) would be used to identify the correlations and the impact of each perceived justice dimension to customer satisfaction with service recovery, and the relationships between satisfaction with service recovery, customer loyalty, and positive word-of-mouth

As mentioned, minimum sample size needed for data analysis was 300 Therefore, group of interviewers have carried out the research with more than 350 respondents who have suffered service failures, and raised the complaints However, only 304 respondents have been received the service recovery or feedback from restaurants As a result, 304 questionnaires were satisfied conditions for data analysis stage of this study

3.3 Pilot study results

In pilot study, in-depth interview was carried out with eight respondents respectively, who have suffered service failures, raised the complaints, and have been provided service

recoveries from restaurants These respondents were the officers and managers of different organizations, who usually come to restaurants in Hochiminh city for both business purposes and personal purposes, such as family events, meetings with friends, or just simply enjoy the dishes… The respondents had been required to describe the failures and describe how the restaurants handled the recoveries The popular failures of restaurants had been confirmed, including service ability (i.e., deliver wrong dishes or insanitary dishes, wrong billing…), staff’s bad attitudes (i.e., apathy, impoliteness…), inadequate procedures, and restaurants’ unsanitary environment

In terms of distributive justice perception in restaurant segment, respondents considered the outcomes of the service recovery as the compensations It depended on how serious the failures were The compensation was just simple as an apology from restaurant’s owner or manager; or more valuable as a free replacement dish; or a discount on the bill Secondly, procedural justice was understood as a scale to evaluate the whole process of restaurants in serving customers, from the beginning to welcome customers until them leaving the restaurants, including arranging the seat, delivering the dishes, reacting to customers’ request, handling customers’ complaints if any In addition, interactional justice,

as the third perceived justice dimension, was easily understood by respondents that how the restaurants’ staffs react to customers, their honesty and cares Finally, respondents considered informational justice as the quality of information provided by restaurants Although informational justice was less concerned by respondents, they all agreed with author that it would be better if restaurants could give them the additional information about their service capability or the possibility of any inconvenience in advance

These respondents were also requested to read and comment about the original measurement scales, which were translated into Vietnamese, in order to check if they totally

understand those measurements or not The comments of respondents to the original scales from in-depth interview (see Appendix C) were used to modify measurement scales

The measurements of three justice dimensions, including distributive justice, procedural justice, and interactional justice were adopted from previous studies of Smith et al.(1999), and Maxham and Netemeyer (as cited in Choi and Choi, 2014) While the fourth dimension, informational justice, as well as customer satisfaction with service recovery, used the measurement which were mentioned in the study of Varela-Neira et al (2010) At last, the variables of customer loyalty and word-of-mouth were approached by the measurement of Yim et al., and Wuen et al., which were employed in the work of Choi and Choi (2014) Details of adopted measurements were presented as following:

Table 3.1: Original measurement scales for the variables

Measurements References

1 Distributive justice

Smith et al.(1999) Maxham and Netemeyer (as cited in Choi and Choi, 2014)

 Given the inconvenience caused by the failure and the

time lost, the service recovery or the compensation I

received from the COMPANY was considered

reasonable

 Overall, the outcome I received from the COMPANY

in recovery to the failure has been adequate

 The outcome I received was fair

2 Interactional justice

Smith et al.(1999) Maxham and Netemeyer (as cited in Choi and Choi, 2014)

 The COMPANY’s personnel were appropriately

concerned about my problem

 The COMPANY’s personnel’s communication and

care when solving the problem has been appropriate

 The COMPANY’s personnel gave me a proper

apology and explanation about the problem

3 Procedural justice

 The COMPANY has fair policies and practices to

handle the problem

 The COMPANY has shown adequate flexibility in

dealing with the problem The company is safe to

patronize

 I feel The COMPANY responded in a timely fashion

to the problem

Smith et al.(1999) Maxham and Netemeyer (as cited in Choi and Choi, 2014)

4 Informational justice

Varela-Neira et al (2010)

 I believe the COMPANY’s explanations regarding

the causes behind the problem were reasonable

 The COMPANY communicated the details of the

service recovery thoroughly and in a timely manner

 The COMPANY tailored to my specific needs its

communication regarding the service recovery

 The COMPANY was candid in its communication of

the information offered to justify and solve my

problem

5 Customer satisfaction with service recovery

Maxham and Netemeyer (as cited in Varela-Neira et al., 2010)

 I am satisfied with the way the COMPANY provides

 In my opinion, the COMPANY has provided me with

a satisfactory answer to the problem, in this specific

occasion

6 Customer loyalty

Yim et al (as cited in Choi and Choi, 2014)

 When choosing the same product category, I

considered the company as my first choice

 I will continue to visit the company in the future

 I will continue to visit the company, even if other

alternatives are available

Table 3.2: Measurements comparison table

Variables Original measurements Modified measurements

The service recovery or the compensation

I received from restaurant was reasonable

Overall, the outcome I received from the COMPANY in recovery to the failure has been adequate

The outcome I received from restaurant has been adequate

The outcome I received was fair The outcome I received was fair

The restaurant’s personnel handled the service recovery devotedly

The COMPANY’s personnel gave me a proper apology and explanation about the problem

The restaurant’s personnel gave me a proper apology and explanation about the failure

The restaurant has flexible policies and practices to handle the service recovery I feel safe when I visit it

I feel The COMPANY responded in a timely I feel the restaurant responded to the

fashion to the problem failure quickly

Informational

justice

I believe the COMPANY’s explanations regarding the causes behind the problem were reasonable

I believe that the restaurant has reasonable explanations about the failure

The COMPANY communicated the details of the service recovery thoroughly and in a timely manner

Regarding the service recovery, the restaurant communicated the details thoroughly and quickly

The COMPANY tailored to my specific needs its communication regarding the service recovery

Regarding the service recovery, the restaurant tailored to my specific needs its communication

The COMPANY was candid in its communication of the information offered to justify and solve my problem

The restaurant was candid in providing information to justify and solve my problem

In my opinion, the COMPANY has provided

me with a satisfactory answer to the problem, in this specific occasion

The restaurant has provided me with a satisfactory answer to the failure

I will continue to visit the restaurant even

if other alternatives are available

The modified measurement scales were used to conduct the draft questionnaire Then, the draft questionnaires were delivered to 20 respondents to check if the modified measurements were well constructed and understandable or not Subsequently, all these respondents completed the questionnaires without any query Therefore, modified measurement scales were used to conduct the final questionnaire for this research

to (staffs, or managers); or kinds of failures (service ability, staffs’ attitudes, service procedures, or about the environment)

The second section investigated customers’ justice perception about service recovery activities of restaurants, customers’ satisfaction with service recovery, customer loyalty, and positive word-of-mouth activities These variables were measured with multiple items

measurement scales, which were modified in previous phase

Finally, the third section completed the questionnaire by demographic characteristics

of respondents, i.e gender, age, and income Author also wanted to find out if demographic

characteristics have any different effect to customer satisfaction with service recovery, customer loyalty, and positive word-of-mouth or not

3.5 Data analysis method:

The collected data was processed by SPSS software version 20 using enter method Various statistical tests were extracted using SPSS Firstly, the validity and reliability of the scales of this research were tested, using Exploratory Factor Analysis (EFA) and Cronbach’s Alpha analysis For validity test, Exploratory Factor Analysis (EFA) was used for identifying the relationships between measured variables, or the structure of a relatively large set of variables, as well as testing the construct validity It was a strict criterion, that the variables whose factor loadings lower than 0.5 needs to delete from the construct In this step, KMO and Bartlett’s test was also used to approve the items were adequate to measure the constructs or not For reliability test, Cronbach’s Alpha test was employed to help researchers in finding unstandardized scale items, and checking the internal consistency of scales in this research In order to satisfy the internal reliability, the value of Cronbach’s Alpha was requested to be higher than 0.6 (Nunnally & Burnstein, as cited in Nguyen, 2011) The items which were not satisfied the conditions of validity and reliability test would be deleted before testing the model and hypotheses by regression analysis

After validity and reliability testing, regression analysis was used to explore the relationship among factors of research model In this process, simple regression analysis was used to evaluate the relationship between customer satisfaction with service recovery and customer loyalty and positive word-of-mouth At last, multiple regression analysis was employed to test the affection of independent variables, including distributive justice, interactional justice, informational justice, and procedural justice, to customer satisfaction with service recovery In both regression analyses, Pearson correlation was used to test the

linear relationship between predictor variables and dependent variables For multiple regression analysis, there were many required assumptions Some assumptions need to considered, e.g., no multi-collinearity, residual or the error is normally distributed, etc

In summary, this chapter described the description of choosing sample size, presented final measurement scales, which are used to develop the questionnaires, and research process, as well as the method employed to analyze the collected data In general, this research was conducted in two phases: pilot survey (in-depth interview), and main survey (quantitative research) The in-depth interview was employed to check and modify the measurement scales Hereafter, the modified measurement was used to conduct the questionnaire for the main survey Quantitative research got total 304 valid questionnaires that were used for data analysis

CHAPTER 4 DATA ANALYSIS

Previous chapter has presented the process for doing this research, and introduced measurement scales as well as methodology to examine scales’ validity and verify the hypotheses from collected data In this chapter, results of study would be shown and analyzed with the data from 304 questionnaires of sample size Firstly, sample’s characteristics were analyzed to have a preliminary view about the sample Secondly, Exploratory Factor Analysis (EFA) and Cronbach’s Alpha testing were used to examine validity and reliability of the scale measurement At the beginning, researcher planned to employ Confirmatory Factor Analysis (CFA) with Structural Equation Modeling (SEM) method However, after EFA testing has been carried out, author found that only six factors left in the model The result of EFA showed that customers have considered two factors in suggested model, i.e., “customer loyalty”, and “positive word-of-mouth”, as only one factor Therefore, author had to adjust research model, and the new factor were named

“Loyalty_Positive word-of-mouth” Modified research model would be presented in this chapter As a result, researcher decided to use Regression analysis to test the proposed hypotheses of new research model Finally, results of hypotheses testing were also discussed

4.1 Sample characteristics

The questionnaires had been delivered to respondents, who were customers in restaurants, students from universities, officers from companies, with the support from a group of five trained interviewers These five interviewers along with the author carried out the research in many restaurants in Hochiminh city to approach the respondents and executed the interview However, only the customers who had suffered the failures within

one month from the time of survey were selected to interview In similar process, many questionnaires were gathered at many universities and companies located in Hochiminh city

From data collected from 304 conformed questionnaires by convenient sampling method, it was found that there was 45.4% of male, and 54.6% of female Young people, from 23 to 30 years old took the majority compare with other groups, with 40.8% Besides, most of respondents got fair income Two groups of income, from six to ten, and from ten to fourteen million VND, account for 71.7% It was supposed that most of customers who visit restaurants were young people, and got fair income However, this result might be affected

by the convenient sampling method of this survey

Table 4.1: Respondents’ demographic characteristics description