This research constructs a scale to measure the perceived quality of Haidilao hot pot restaurant, and then evaluates the relationships among perceived quality, customer satisfaction and customer retention by the structural equation model and multiple regression analysis. The main findings are as follows: (1) Both perceived service quality and perceived product quality positively influence customer satisfaction significantly, moreover, perceived service quality imposes greater impact on customer satisfaction than perceived product quality in the hot pot industry. (2) Customer retention is significantly directly influenced by perceived service quality and customer satisfaction, but there was no significantly direct effect between perceived product quality and customer retention. (3) Service empathy is the most vital dimension of perceived quality to influence customer satisfaction and customer retention, which followed by service responsiveness and assurance, special product, service tangibles, and general product
The Relationships Among Perceived Quality, Customer Satisfaction and Customer Retention: An Empirical Research on Haidilao Restaurant Jing WANG Lijuan CHENG School of Economics and Management Beihang University Beijing, China Jim08@buaa.edu.cn School of Economics and Management Beihang University Beijing, China Chenglijuan1985@hotmail.com Abstract—This research constructs a scale to measure the perceived quality of Haidilao hot pot restaurant, and then evaluates the relationships among perceived quality, customer satisfaction and customer retention by the structural equation model and multiple regression analysis The main findings are as follows: (1) Both perceived service quality and perceived product quality positively influence customer satisfaction significantly, moreover, perceived service quality imposes greater impact on customer satisfaction than perceived product quality in the hot pot industry (2) Customer retention is significantly directly influenced by perceived service quality and customer satisfaction, but there was no significantly direct effect between perceived product quality and customer retention (3) Service empathy is the most vital dimension of perceived quality to influence customer satisfaction and customer retention, which followed by service responsiveness and assurance, special product, service tangibles, and general product Keywords- Perceived quality; Customer satisfaction; Customer retention I INTRODUCTION Haidilao restaurant is a very famous brand of the hot pot catering industry in China, because it can offer customers the extraordinary perceived quality, especially the perceived service quality Some researchers of marketing have paid attention to this restaurant from the perspective of case study; however, they just describe the successful phenomenon qualitatively but not analyze the inherent principles quantitatively In recent years, perceived quality has attracted the considerable interests of both practitioners and researchers mainly in services marketing (Cronin & Taylor, 1992; Parasuraman, Zeithaml & Berry 1996) Most of them believe that high perceived quality contributes to higher customer satisfaction and leads to the customer retention Previous studies of marketing have presented that the core competitive advantage of the enterprise is the enhancement of customer satisfaction and customer retention (Patterson & Spreng, 1997; Landrum & Prybutok, 2004) Thus better understanding the relationships among perceived quality, customer satisfaction and customer retention will not only help academics develop 978-1-4577-2025-3/12/$26.00 ©2012 IEEE the model of customer decision making but also provide suggestions to practitioners for acquiring more customers Since the number of academic studies on perceived quality of the Haidilao restaurant is still limited, this study attempts to design a scale for measuring the perceived quality of it and further examines the relationships among perceived quality, customer satisfaction, and customer retention to find out which dimensions of perceived quality are significantly correlated with customer satisfaction and customer retention The results can provide valuable reference information for the whole catering industry or other service providers to enhance their perceived quality and customer satisfaction II LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT 2.1 Perceived quality As quality is a multidimensional concept that cannot be easily defined or measured, a distinction can be made between objective quality and perceived quality Objective quality refers to the actual technical excellence of the product that can be verified and measured (Monroe & Krishman 1985) In contrast, perceived quality is the consumer’s judgment about a product’s overall excellence or superiority (Zeithaml 1988) Most of the definitions in the marketing literature stress that quality are consisted of tangible product quality and intangible service quality Hence the perceived quality can also be classified as perceived product quality and perceived service quality Product quality can be measured by some specific criterions varying with different industries The focus of this article is to measure the perceived quality of the hot pot industry Though the hot pot product is highly homogeneous, various restaurants can also supply some special products Hence, the product quality can be classified into two dimensions, that is, general product and special product Service quality is very difficult to be defined and measured due to the intangibility, and the prevailing instrument is called SERVQUAL model which is developed by Parasuraman et al (1988) This model measures service quality by calculating discrepancy between customers’ expectations and their perceived performance of a service, including five dimensions, namely tangibles, responsiveness, reliability, assurance, and empathy Although the model has drawn attention from the academic and the practical circles, many scholars have questioned about the conceptual framework and measurement method of this model For instance, Cronin and Taylor (1992) pointed out that using SERVPERF model (the perceived service performance in SERVUQAL) to measure service quality produces better results of reliability, validity, and predictive power than using SERVQUAL Some other scholars (Boulding et al.,1993; McAlexander et al.,1994; Zeithaml et al.,1996) also verified that SERVPERF is more accurate than SERVQUAL in the measurement of service quality So, this study will apply SERVPERF scale to measure the perceived service quality of Haidilao restaurant, moreover, the service quality is composed of the same five dimensions as the SERVUQAL model It can be concluded that the measurement of perceived quality are consisted of seven dimensions, which are general product, special product, service tangibles, service responsiveness, service reliability, service assurance, and service empathy respectively (See Figure1) Perceived Quality Perceived Product Quality general product special product Perceived Service Quality tangibles responsiveness reliability assurance empathy Composed Or Figure Components of perceived quality 2.2 The effect of perceived quality on customer satisfaction The importance of customer satisfaction and perceived quality to service firms is evident (Jones and Sasser, 1995) And the terms perceived quality and satisfaction have been used interchangeably, especially among practitioners However, Rust and Oliver (1994) proposed that perceived quality and satisfaction differ in two ways: perceived quality is a more specific concept based on product and service features, while satisfaction can result from any dimension (e.g loyalty, expectations) In addition, perceived quality can be controlled to a certain degree by a company while satisfaction can not Thus, it is suggested that “when perceived quality and satisfaction are regarded as overall assessments, perceived quality is understood as an antecedent of satisfaction and therefore precedes it” (Llusar, Zornoza & Tena 2001, p.721) Previous studies of conventional retailing have pointed out that perceived service quality positively influences customer satisfaction (Cronin et al., 2000; Johnson & Fornell, 1991) Similar conclusions have been proposed in the studies on the relationship between perceived product quality and customer satisfaction (Bei & Chiao, 2001; Tsiotsou, 2005) Thus, Hypothesis and Hypothesis are proposed as follows: H1: Perceived service quality positively influences customer satisfaction H2: Perceived product quality positively influences customer satisfaction 2.3 Customer retention Customer retention can be regarded as the favorable behavioral intentions that consumers will purchase the goods or services at the same store and deliver their use experiences to friends and relatives (Cronin et al., 2000; Zeithaml et al., 1996) Zeithaml et al.(1996) compiled a list of specific favorable behavioral intentions, including loyalty, switching intentions, willingness to pay more, external response, and internal response Boulding et al (1993) used repurchase intention and word of mouth (WoM) to evaluate customer behavioral intentions Repurchase intention is the process of an individual purchasing goods or services from the same firm (Hellier et al 2003), and the reason for repurchase is primarily based on past purchase experiences Compared with attracting new customers, enterprises can spend less on marketing to retain old customers WoM is a process in which consumers who have used a certain product or service pass their experiences through word of mouth to consumers planning to purchase the product or service (Westbrook, 1987) Consumers who have not experienced or fully understood the properties of a certain product or service may usually rely on WoM to acquire information (Bansal & Voyer, 2000) Therefore, compared with external marketing strategies, WoM is more important and influential to customer’s attitude and behavior (HarrisonWalker, 2001) Therefore, this paper conceptualizes customer retention as a higher-order construct consisting of positive word of mouth, and repurchase intention The significance of perceived quality also derives from its beneficial impact on customer retention, although different research findings have been reported Some scholars support a positive direct effect of perceived quality on customer retention (Boulding, 1993; Parasuraman et al 1996), others report only an indirect effect through satisfaction (Cronin & Taylor 1992) and yet others argue that both relationships exist (Tsiotsou 2006) In summary, there are various opinions about the relationships between the perceived quality and customer retention, but most of marketing scholars agree that a positive influence exists between these two constructs Hence, Hypothesis and are presented as follows: H3: Perceived service quality positively influences customer retention H4: Perceived product quality positively influences customer retention Furthermore, many studies of customer satisfaction have demonstrated a positive relationship between customer satisfaction and customer retention (Brady et al., 2001; Cronin et al., 2000) Consumers with a higher level of satisfaction tend to have a stronger intention to repurchase and recommend the product or service That means when customer satisfaction is enhanced, repurchase will happen more frequently Thus, Hypothesis is stated as follows: H5: Customer satisfaction positively influences customer retention Figure shows the proposed structural model based on the above literature review Perceived service quality H3 H1 Customer satisfaction Perceived product quality (3) Customer retention: Customer retention construct was measured by two-item measures adapted from the previous literature (Cronin et al.,2000), which were repurchase intention and positive word of mouth as mentioned in section 2.3 H5 H2 Customer retention H4 Figure Structural model III RESEARCH METHODOLOGY 3.1 Questionnaire design and construct measurement The questionnaire used in this article was constructed on the basis of many related literatures Several scales were borrowed from previous studies and minor modifications were made to some items to suit the context of Haidilao hot pot restaurant Particularly, SERVPERF scale is the most important reference for measuring the perceived quality After the draft was completed, a pretest was conducted on customers familiar with Haidilao restaurant to modify items with ambiguous expressions The formal questionnaire was composed of three sections: the first section intended to obtain every subject’s basic personal data, making use of nominal measurement scales; the second section measured the subject’s perception of the perceived quality constructs in the structural model, including service quality and product quality All scale items were assessed by seven-point Likert scale ranging from = “strongly disagree” to = “strongly agree”; the third section was used to investigate the respondent’s overall evaluation to customer satisfaction and customer retention Similarly, the seven-point Likert scale was adopted Owing to the superiority of the SERVPERF model in performance-based measures, it is used widely in various fields and the content validity of the questionnaire could be ensured The detailed operationalizations of the research constructs are as follows (1) Perceived quality: The construct of perceived service quality was initially grounded on the five dimensions (tangibles, responsiveness, reliability, assurance, and empathy) and was measured by 22 items adapted from Zeithaml et al.(1988) to Han et al.(2008) After the pretest was performed, these items were purified to 19 items for the same five dimensions and modified to match the services context of Haidilao restaurant 3.2 Sample selection and data collection This survey was conducted in Beijing because the Haidilao restaurant has a huge impact on the catering industry of this city The heated discussion about its superior perceived quality not only exists among consumers by word of mouth, but also spreads across the internet users mainly by microblog According to the interview with the managers of Haidilao restaurant and the consuming experiences, Haidilao is a medium-grade restaurant and most of the consumers are the white-collar employees from various industries in the age group of 25-40 Therefore, if this group of customers were selected for samples, the results would be representative of the population to some extent We delivered a number of questionnaires to the white-collar employees from different companies who had ever experienced the product and service in Haidilao restaurant The internet tools were fully applied, such as E-mail address, online survey website and microblog etc Moreover, the purpose of this study and notices were explained in advance and the necessary assistance was further provided to the respondents during the survey to reduce the occurrence of invalid response A total of 250 questionnaires were distributed, and the response rate was 100% Excluding the respondents not in the selected age group (age 25-40) and those who didn’t answer the questions completely, finally 199 valid questionnaires were obtained Among the samples collected, male respondents (55.7%) were the majority In terms of education background, bachelor degree or above accounted for 95.1% In terms of purchase times, 82.3% of them purchased times or above With respect to the occupations, there were various types ranging from information technologist to administrative personnel, and the technologist ranked first by 35% In general, the demographical characteristics of the samples can meet the research requirements and then specific data analysis and results will be presented in the following section IV DATA ANALYSIS AND DISCUSSION The construct of perceived product quality was measured based on the two dimensions (general product, special product) and items which derived from the quality definition of hot pot product made by Li et al (2010) 4.1 Factor analysis of the measurement model This article adopted structural equation modeling (SEM) to verify the proposed model and hypotheses, meanwhile, selected SPSS17.0 and AMOS17.0 as the analysis tools Thus the reliability and validity must be tested by factor analysis in order to ensure the accuracy of construct measurement (2) Customer satisfaction: Customer Satisfaction is customers’ cumulative impression on the service performance of a firm (Johnson & Fornell, 1991) In terms of catering industry, customer satisfaction is the post-purchase evaluation and affective response to the overall product and service experience in a restaurant In this paper, the perception of customer satisfaction was measured by two-item measures including product satisfaction and service satisfaction Firstly, the exploratory factor analysis (EFA) was performed to purify the scale of perceived quality for the sake of deleting the “garbage items” which not have the common core The Bartlett sphericity test revealed that KMO value was 0.94, which signified that the data was appropriate for factor analysis Then the Principal Component Analysis, with varimax rotation, eigenvalue greater than and factor loadings greater than 0.4, was used to proceed the EFA It means that the items which factor loadings are less than 0.40 would be deleted This process was iterated until an optimal result was obtained Then Cronbach’s Alpha coefficients were calculated to test the reliability of the dimensions The results of EFA showed that items were removed, and the rest of 17 items of perceived service quality converged into common factors with eigenvalue greater than Namely, the original five dimensions were simplified into dimensions which were renamed as “service tangibles”, “responsiveness and assurance”, and “service empathy” respectively The only change was that responsiveness, reliability and assurance were integrated into one dimension, and the other two dimensions remained constant Likewise, the items of perceived product quality were also analyzed by EFA and successfully converged into common factors, that is, “general product” and “special product”, which were consistent with the original proposals In summary, the measurement of perceived quality should be modified to dimensions, which were “service tangibles”, “responsiveness and assurance”, “service empathy”, “general product” and “special product” respectively The Cronbach’s Alpha coefficients for all five dimensions exceeded 0.70 (ranging from 0.77 to 0.92), providing evidence of reliability The final measurement items and factor analysis results were presented in Table The validity of the measurement model was verified by confirmatory factor analysis (CFA) in AMOS17.0 Firstly, the overall model fit indices can be gained as follows: χ2 = 320.316 (df=301 p=0.000; χ2/ df = 1.064), GFI = 0.925, AGFI = 0.850, RMR= 0.053, RMSEA = 0.041, CFI= 0.908 All the model-fit indices exceeded the respective common acceptance levels, indicating that the measurement model of perceived quality had a good match with the data collected CFA can also be used to measure the convergent validity, and discrimination validity of measurement model As shown in Table 1, the factor loadings of all the items reached the level of significance (t>5, p