A study on customer satisfaction, service quality and company image: an empirical analysis.

Ismail, Hishamuddin ; Abdullah, Nor Asiah

INTRODUCTION

The term image is currently used in a variety of contexts, i.e. corporate image, brand image, public image, self-image, restaurant image, store image, and so on. As a whole, an image can be defined as, "the sum of belief, ideas and impressions that a person has of an object" (Kotler & Clark, 1987). Consumers in particular, develop knowledge systems to interpret their perceptions of companies. As such, corporate image is believed to have the same characteristics as a self-schema influencing the buyers' purchasing decision.

Corporate image has become an issue of attitudes and beliefs with regards to awareness and recognition (Aaker, 1991). Similarly, good corporate image may stimulate the customers' mood and purchasing behavior toward a company by simplifying their decisions. Fornell (1992) in his study found that corporate image has some influence on customer satisfaction and consumer behaviour. In addition, Gronroos (1990) stressed that customers' perceptions of service are also affected by the corporate image. For a service company, the perception of image could be derived from the technical and functional components of service, fueled by any marketing promotion that takes place (Gronroos, 1990). If the perception of the company's image is favorable, minor mistakes would be tolerated, but if the mistakes occur often, then the image of the company will be tarnished.

Beyond impressions of the immediate service encounter and evaluations of service evidence, customer perceptions to some extent can be influenced by the reputation of the organization or the company's image (Ziethmal & Bitner, 1996). Numerous definitions of image can be found in the psychological and marketing literature. Image has been described as subjective knowledge (Boulding, 1956) and as an attitude (Hirschman, Greenberg, & Robertson, 1978). Erickson, Johannson, and Chao, (1984) had identified image as a combination of product characteristics that are different from a physical product but nevertheless identifies with the product.

The most acceptable definition of image for service industries is by Keller (1993) who defined image as perceptions of an organization reflected in the associations held in consumers' memories. Gronroos (1994) argues that image is of utmost importance to service firms and is to a great extent determined by customers' assessment of the service they received. Indeed, since services are intangible and based on performances, a better understanding on the components of image promises to help management improve the competitive performance of their firm. Therefore, prerequisite to image management is therefore, the understanding of the process by which image is formed through the customers' beliefs and attitudes with regard to a firm's products or services.

The association between corporate image and the product can be very concrete. For example, in the transportation services the consumer will associate a company's image with the number of trips per day; easy and fast access to server for internet service providers and for financial related services the customer will compare the hours of operations between the service providers. It can also be less concrete and even more emotional, such as excitement, trustworthiness, tradition, and fun. Kennedy (1977) categorized the principles of image into two parts, i.e. functional and emotional. According to him, the functional component is related to tangible cues that can be measured more easily, while the emotional component is associated to psychological states that are manifested by feelings and attitudes.

In this context corporate image becomes an issue of attitudes and beliefs with regard to awareness and recognition (Aaker, 1991), customer satisfaction and consumer behavior (Fornell, 1992). Corporate image can be an extrinsic information cue for both existing and potential buyers and may or may not influence customer loyalty (e.g. willingness to provide positive word-of-mouth). Corporate image is consequently assumed to have an impact on customers' choice of company when service attributes are difficult to evaluate. Corporate image is established and developed in the consumers' mind through communication and experience. Corporate image is believed to create a halo effect on customers' satisfaction judgment. When customers are satisfied with the services rendered, their attitude toward the company is improved. This attitude will then affect the consumers' satisfaction with the company.

Based on the above discussion and arguments, in relation to customer satisfaction, service quality and a customer's perception of company image, the following hypotheses will be examined:

H1: There will be a positive relationship between sales executive, A&P programs, Primatel image and operators' attitudes and customer satisfaction for digital leased line service in the telecommunication industry.

H2: The relationship between sales executive factor and customer satisfaction will be greater then those of A&P programs, Primatel image and operators' attitudes and customer for digital leased line service in the telecommunication industry.

Notwithstanding this, there is a lot of arguments about the principles of corporate image. Gronroos (1984) argued that corporate image is built mainly by technical and functional qualities. In his argument, the technical quality refers to what the customer actually receives from the actual service experience. However, most researchers believe that the functional quality of service encounter plays a significant role in determining the image of the service providers. For example, Baker (1987) contended that atmospherics have considerable influence on employee motivation and the quality of the service encounter. Similarly, Crosby, Evan and Cowles, (1990) noted that the performance of contact personnel is indicative of the level of quality offered by the service firms.

Interestingly, the service encounter is seen to be the integral part in service quality factors identified by Parasuraman et al. (1988). He classified the 13 scale items in SERVQUAL i.e. responsiveness, assurance and empathy which related directly to the service encounter personnel. The assumption is that the higher level of satisfaction derived from each service encounter will be viewed as having a positive effect on corporate image assessment. Nguyen and LeBlanc (1998) had investigated the relationship between quality of service and corporate image for the financial services. They found that a very strong path existed between the two variables. This finding suggests that customers receiving higher levels of service quality during service delivery will form a favorable image of the firm. Based on this analysis, the study will confirm the following hypothesis:

H3: The relationship between functional quality and company image will be greater than the association between technical quality and company image for digital leased line service in the telecommunication industry.

RESEARCH METHOD

Sampling

The population of the study was Digitaline II subscribers in Malaysia. Digitaline II is a version of digital leased line offered by Telekom Malaysia (TMB) since 1994. The current trend shows that there are two main subscribers of Digitaline II i.e. CBC and MBC. CBC are corporate and business customers who contribute over RM1 million in revenue to TMB while MBC refers to major business customers whose revenue contribution is between RM100,000 and RM 1 million. As of December 1998, there are about 284 CBC customers and 416 MBC customers using the service with the total number of 4,092 circuits. In selecting the market research survey sample, the stratified random sample of probability sampling was utilized. In this situation, the researcher draws a sample of groups to be interviewed based on identified criteria. The criteria was used to ensure more reliable results. It will make sure that the sample is a representative sample of the Digitaline II customers. The criteria is:

External current Digitaline II customers excluding the other service providers. This criteria is needed to ensure that there will be no bias-ness in the overall result.

The banking, finance, manufacturing, petroleum, government-owned, transport, retail and distribution industries

All the above respondents must be located within the major towns in Malaysia.

Subscribing more than one Digitaline II from Telekom Malaysia.

Based on the criteria, the questionnaires were distributed to 245 respondents by using three data collection techniques i.e. personal interview, telephone interview and mail survey. However, only 150 questionnaires were usable for data analysis.

Measurement

Using the structured questionnaire, the study measures the basic constructs--company image (CM), customer satisfaction (CS), functional quality (FQ) and technical quality (TQ). To ensure the content validity of the measures, a thorough review of the relevant literature was undertaken. Face validity of the questionnaires was established by interviewing five senior representatives from each department who have direct involvement in Digitaline II i.e. sales, product and technical department. The responses received were positive and some changes were made based on their suggestions.

RESULT AND DISCUSSION

The result shows that the hypothesis H1 which states that there is a positive relationship between the company image factors and the overall customer satisfaction is acceptable. The correlation coefficient (R) shows the values range between 0.526 and 0.577. This result is in line with the finding of Nguyen and LeBlanc (1988) who asserted that a higher level of customer satisfaction leads to a favorable customer assessment of corporate image.

The result also clearly indicates that all the factors under company image show a positive relationship with customer satisfaction level where CM1 (sales executive) has the highest correlation with R=0.577 while the CM3 (outlet service) has the lowest correlation of R=0.526. This result, therefore supports hypothesis H2 which proposes that the relationship between sales executive (CM1) and customer satisfaction will be greater than other company image factors understudy. This is due to the reason that majority of the respondents are either corporate or major business customers in which Telekom Malaysia had assigned individual sales executive to take care of them personally. In this situation, their telecommunication-related problems would be channeled through the respective sales executives and therefore the interactions with the outlet services (CM3) are very limited.

The multiple regression 'stepwise method' had been performed by using SPSS (version 9) to establish which of the four company image factors can be considered as main predictor of customer satisfaction. Table 1 illustrates the model summary in which two models were identified. From the result, it can be inferred that model two is the better model since it gives the highest R-value (R=0.593) when compared to the first model (R=0.577). Two factors had been omitted from the analysis i.e. CM2 (advertising and promotional programs) and CM3 (outlet services) since they do not explain the dependent variable (customer satisfaction) very well.

The results on the analysis of variance in the regression analysis found model 2 to be a better model. In this situation, ANOVA was utilized to test the null hypothesis that no linear relationship exists between the dependent variable (customer satisfaction) and the independent company image factors (CM1 and CM4). The results indicate that since the observed significance level is less than 0.05, the null hypothesis which states that there is no linear relationship between customer satisfaction and the two corporate image factors (CM1 and CM4) cannot be accepted (Norusis, 1997). Moreover, since the 'F-value' is greater than 3.00 (for [n.sub.1]=2, [n.sub.2] = [varies]), the null hypotheses can be rejected at 95% confidence interval. Thus, this result became another empirical evidence that supports the hypothesis H2 because it indicates the importance of sales executive as one of the main predictors of customer satisfaction.

The value of [R.sup.2] of 0.351 for model number two indicates that only 35.1% of the observed variability in customer satisfaction is explained by the two identified factors namely CM1 (Sales Executive) and CM4 (operators' attitudes). Similarly, with the high residual value as compared to the regression value in ANOVA, it suggests that further research should be undertaken to analyze other factors that might influence company image. Thus, the result shows that with regard to the company image, sales executive and operators' attitudes are the main predictors that would affect the customers satisfaction level. However, the low R2 value and high residual value as reported in the finding indicate that there are other company image factors that could be the main predictors which are not included in this study.

Table 2 shows the regression coefficient for model two. The coefficients for the independent variables are listed in the column labeled Beta (column under standardized coefficient). From this table, the estimated regression equation can be read as:

CS = 1.261 + 0.416CM1 + 0.210CM4

In general, it can be inferred that all the independent items under the company image have a positive coefficient which means that the predicted value of the dependent variable (CS) increases when the value of the independent variables increase (CM1 and CM4). The regression equation indicates that on a five-point scale for customer satisfaction, the level has the constant value at 1.261 (dissatisfied) if no initiatives are taken to increase the level of the independent items i.e. CM1 and CM4. However, effort must be concentrated on the sales executive performance since it has higher coefficient beta of [beta] = 0.416 when compared to CM4 ([beta] = 0.210).

Tests between the instrumental performance (akin to functional quality) and expressive performance (akin to technical quality) of services suggest that the first type of performance is necessary, but it is not a sufficient condition for satisfaction in this study (referring to the testing on H3). Gronroos (1984) argued that functional quality appears to be the most important facet of perceived service towards a company's image. Thus, it is also important to study if any relationship exists between the functional quality and company image.

Table 3 reveals the result of regression analysis 'enter-method' that analyses the possible relationships between functional quality, technical quality and individual company image factor. With regard to the association between functional quality and company image factors, the result shows that the calculated R values are between 0.615 and 0.792 where the CM1 factor recorded the highest R value of 0.792. The CM2 factor had the lowest regression coefficient of R=0.615. Since the regression coefficient value is well above the 0.5 mark for all the company image factors, it can be inferred that functional quality will have a direct and positive impact on company's image.

In contrast, when the authors study the relationship between technical quality and company's image factors, the result indicates the regression value between 0.414 and 0.507 for all company's image factors. Similar to the finding for functional quality, the result shows that CM1 recorded the highest value when compared to other company image factor. This result confirmed and proved that human interaction in company image plays a very significance roles in assessing the functional quality or technical quality.

Based on the above findings, it can be concluded that the relationship between functional quality and company image will be greater than the association between technical quality and company image particularly for Digitaline II in the telecommunication industry. Thus, hypothesis H3 is substantiated. This finding indicates that both dimensions of service quality are related to the perception of company's image. In this situation, the assessment on quality will be better if the customer has positive perception on company image.

CONCLUSION

Image is another determinant that needs to be considered by the organization to ensure customer satisfaction (Gronroos, 1990). The term image is currently used in a variety of contexts i.e. corporate image, brand image, public image, self- image, restaurant image and so on. In general, an image can be defined as "the sum of beliefs, ideas, and impressions that a person has of an object" (Kotler & Clarke, 1987). In order to compete successfully in a competitive market, the company must define how quality is perceived by consumers and determined in what way service can be influenced by their perceptions. Consumers may not only be concerned with the actual product that they receive but also the process accompanying the delivery of the product. As such, the image of sales office or sales outlets will be of greatest importance for most service firms.

Overall the result clearly indicates that the respondents agreed that operators' attitudes, modern outlet services, advertising and promotional programs and sales (account) executive performance will create a positive image of the company. The study also proved that the relationship between overall corporate image and customer satisfaction does exist. This result is in line with Gronroos (1990) who stressed that customers' perception of service is also affected by the corporate image. He argued that image is of utmost importance to service firms and is to a great extent determined by customers' assessment of the service they received. Better understanding of the component of image promises to help management to improve the competitive performance of the firm since service is intangible and to some extent the level of satisfaction will depend on performances (Gronroos, 1984).

In addition, the result also indicates that customer satisfaction level will depend greatly on company's image factors particularly for CM1 and CM4. The finding indicates that when measuring a company's image with the objective to increase customer satisfaction, human interaction factors (sales executives' performance and operators' attitudes) play major roles in determining the level of customer satisfaction. However, further analysis using multiple regression between customer satisfaction and all the independent factors in the study, found two items i.e. CM1 (sales executive) and CM4 (operators' attitudes), to be the important predictors for customer satisfaction level. In the analysis, CM4 had recorded the highest coefficient value of [beta] = 0.388 when compared to other identified factors in the model. The result indicates that the betterment towards the operators' attitude will to a great extent improve the customer satisfaction level.

This study was completed with a moderate sample size. This is due to the fact that, there were only 700 subscribers of Digitaline II as of December 1998. The result in this study could not be generalized because it was limited to digital leased line service (Digitaline II) offered by TM. However, since TM controlled 98% of the market share for digital leased line service, the result could be generalized for that particular market. Thus, it is useful as a guideline for any telecommunication service provider which has the intention to offer similar service to their customers in the future. The result in this study could also be adopted as a benchmark especially for companies that had already launched their digital leased line to customers.

Future research must try to investigate other company's image factors that might influence customer satisfaction. This is very important since the R2 value that explains the variation between the dependent and independent variable that was found in the current investigation is very low. Thus, initial study to identify other company's image factors should be carried out prior to empirical research.

Since the current study only focused on digital leased line service, future research to analyze the relationship between company's image, customer satisfaction and service quality within the telecommunications industry in Malaysia is required to confirm the result of the current investigation. In relation to this, future researchers are encouraged to take into consideration all the services offered in the telecommunications market and expand their scope to include all major telecommunication service providers in Malaysia.

REFERENCES

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Hishamuddin Ismail, Multimedia University, Malaysia

Nor Asiah Abdullah, Multimedia University, Malaysia

Table 1:Multiple Regression for Customer Satisfaction--Model
Summary Statistic

 ANOVA

 Model/ R- Regre- F- Sig.
 Predictors value ssion Residual value value

1 CM1 (a) 0.577 47.981 95.913 74.038 0.000
2 CM1 (a), 0.593 50.575 93.319 39.834 0.000
 CM4 (b)

(a) CM1 = Sales Executive

(b) CM4 = Operators' Attitudes

Table 2:Regression Coefficient for Model # 2

 UC * SC **

 Std.
Variables B Error Beta

Constant 1.261 0.282
Sales Executive (CM1) 0.419 0.105 0.416
Operators' Attutudes (CM4) 0.205 0.106 0.210

 T-
Variables value Sig.

Constant 4.472 0.000
Sales Executive (CM1) 4.005 0.000
Operators' Attutudes (CM4) 2.005 0.045

* UC = Unstandardized Coefficient

** SC = Standardized Coefficient

Table 3: Regression analysis between functional quality,
technical quality and company image factors

 Functional Quality

Company Image Factor R R Square
Sales Executive (CM1) 0.792 0.627
A&P Programs (CM2) 0.615 0.378
Outlet Services (CM3) 0.676 0.457
Operators' Attitudes (CM4) 0.768 0.589
Overall CM * 0.771 0.594

 Technical Quality

Company Image Factor R R Square
Sales Executive (CM1) 0.507 0.257
A&P Programs (CM2) 0.466 0.217
Outlet Services (CM3) 0.414 0.171
Operators' Attitudes (CM4) 0.446 0.199
Overall CM * 0.486 0.237

* Overall CM represents the average for all the company image
factors rating for each respondent.

Company The respondents were asked to evaluate four factors
image. that are related to the company image i.e. sales
 executive (CM1), advertising and promotional programs
 (CM2), outlet services or Primatel (CM3), and
 operators' attitude (CM4). All respondents have to
 indicate the extent to which they agree or disagree
 with the statements concerning all the above factors.
 The initial result for inter-item reliability of
 [alpha] = 0.8465 indicates that all the factors in
 the company image form a single, strongly cohesive
 and conceptual construct. The value recorded is also
 above the acceptable range of [alpha] = 0.7
 (Nunnally, 1978).

Customer The respondents were asked on their overall
satisfaction. satisfaction towards Digitaline II which is measured
 by using five point Likert scale from "1-strongly
 dissatisfied" to "5-strongly satisfied' where the
 rating 3 is for the customer who "feel neutral".

Functional The concept for service quality used in this
and technical questionnaire is the concept introduced by Gronroos
 (1990). He proposed that service quality consists of
 two dimensions, i.e. technical quality and functional
 quality. Technical quality refers to the quality of
 products or services delivered to customers. The
 respondents were asked about their perception of
 the overall quality of Digitaline II performance.
 Functional quality refers to how the quality
 service is delivered which includes the overall
 perception of the service quality. The term "service
 quality" is generally interpreted as how the
 customers are treated by the service provider before
 and after the actual products or services are
 installed. The standard measure used to evaluate both
 the technical and functional qualities is the five
 point Likert scale of "1-Poor" to "5-Excellent".