2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 

Logistics service quality impact on customer satisfaction and loyalty 1

Milorad Kilibarda, 2Milan Andrejic

Faculty of Transport and Traffic Engineering, Logistics Department, University of Belgrade, Belgrade, Serbia 1

[email protected] 2 [email protected],

Abstract:

Today, logistics research is focused on examining of logistics companies’ abilities to give service of high quality and, according to the service given, make and retain satisfied customers. Customer loyalty development is often seen as unavoidable problem in management of every company that is looking for sustainable and long-lasting presence on desired market. It is the analysis of quality, customer degree of satisfaction and loyalty in the context of logistics service this paper is focused on. It’s assumed that there is a positive relation between the logistics service quality, satisfaction and loyalty of customer. Having analyzed different approaches that can be found in literature, conceptual model is developed with an aim to identify factors that have an impact on loyalty of logistics services customer. Special attention is given to attributes of logistics service quality. On the basis of the developed model, empirical researches are conducted on Serbia’s market the results of which are, together with critical analysis, presented in this paper. Keywords: logistics service, quality, satisfaction, loyalty

1. Introduction Previously, logistics is mainly looked at as a costs generator. This traditional logistics comprehension started changing at the end of twentieth century, since the logistics researches based on marketing principles started analyzing logistics companies’ abilities to achieve greater degree of customer satisfaction and loyalty through services quality. Today, many companies use logistics as competitive advantage on market, mostly because of visible and material service and the impact on end-user and customer. So for example, Novack and others (1994) state that logistics services and processes can successfully be used for creation of new value for customer and service provider. Through service quality: market share is increased, effective system based on customer feedback is created, positive impact on customer

2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 

satisfaction and loyalty is provided and competitive advantage is achieved in many segments and parts of market. However, in past, this problem isn’t given necessary attention. Traditional logistics research approach is concerned with study of stock levels, objects’ location, and business logistics network design. Less attention is given to the so called ‘’soft’’ concepts such as quality, satisfaction and loyalty. This paper defines framework for research of relation between service quality, satisfaction and customer quality. The paper consists of three parts. In the first part a shorter description of research problem is given, aims are defined and the research assumptions. In the second part the conceptual part of the research is defined, and in the third one the results of the empirical researches are presented. At the end, conclusion is given.

2. Problem description Challenge is not in creation of the high quality services and making customers be satisfied, because many competitors are able to do that, but in making loyal and profitable customers. Loyalty means that customer, during a longer period of time, buys and uses specific service structure and has positive attitudes towards company and its offers. Companies are in constant dilemma about what shall be done in order to gain true and loyal customers. Everybody agrees that service quality and satisfaction are main prerequisites for customer loyalty. If customer is satisfied, it’s logical that he should buy - use the same service of a company again. However, that doesn’t happen always, since satisfaction is not the only prerequisite for loyalty. A customer can be satisfied until a competitive service appears the quality and price of which are more attractive. A customer too can have positive attitudes toward a company and not to be satisfied with a service and vice versa. That means that satisfied customer still can change a company. It is necessary to bear in mind that modern customers are rarely characterized with lifetime loyalty, or any other kind of loyalty for that matter, to one offer or one company. That’s why relations between specific factors and dimensions of customer loyalty shall be explored and analyzed. This paper’s aim is to show the logistics service quality impact on customer satisfaction and loyalty. Namely, in marketing literature customer loyalty is considered to be one of the main repercussions of service quality and customer satisfaction. The greatest number of studies in the past dealt with quality – satisfaction relation and today, scientific focus is redirected from satisfaction over loyalty to company’s profit. Profit degree increase is the main aim of all the activities from the service quality and customer satisfaction management domain. Available scientific researches strongly support thesis on positive impact of service quality and customer satisfaction on customer’s intended behavior (for example Parasuraman et. al. 1994). In order to more precisely examine the impact of service quality on customer quality and provider’s business success, one should, in the chain of satisfaction and profit, examine relations between: quality and satisfaction and loyalty of service. Croinin i Taylor (1992) identified positive correlation between service quality and future purchase intension. Parasuraman et al. (1994) in many

2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 

studies found positive side of relation between customer’s perception of service quality and competence to recommend service company to acquaintances. Similar to Boulding el al. (1993) they confirmed positive correlation between service quality, future purchase intention and recommendation giving. The question is how comprehension of logistics service quality impact loyalty between logistics provider and customer. Conclusion can be made that the more positive the logistics service perception is, the greater the loyalty is. However, in reality, the relations are more complex because, besides the quality, a series of other dimensions have an impact on satisfaction and loyalty. In the next part of the paper the conceptual model is presented that explains in detail relations between logistics service quality, customer satisfaction and loyalty.

3. Conceptual research model Bearing in mind previous review, the model is defined that considers and describes relations within satisfaction and profit chain, with the main emphasis put on relations within conceptual quality-satisfaction-loyalty network. It is assumed that these relations are not a priori direct and linear but it's about asymmetrical relations. Besides the service quality, there are other decisive factors that have an impact on customer satisfaction and loyalty, such as: prices (costs) of services, provider's relation with customer, competition, changing provider costs. For these reasons, the model is conceived which main structure is showed in the picture 1. S2

S1

D1

S3

L1

L2

L3

D2 D3 D4

Service Quality (SQ)

Customer Satisfaction (CS)

Loyalty (L )

D5 Cp

Pc

CC

CO

Picture 1. Conceptual research model

Logistics service quality is presented through five key dimensions of SERVQUAL model: D1 – reliability, D2 – responsiveness, D3 - competence, D4 - empathy, D5 – tangibility. Through the aforementioned dimensions and SERVQUAL questionnaire (Parasuramman et al. 1994) observed and

2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 

expected service quality is determined, and difference between these two values is service quality measure. Service quality has direct impact on satisfaction and indirect one, through satisfaction, on customer loyalty. It has been assumed that customer satisfaction is created on the basis of three key elements: SQ—Service Quality, SP – Service Price and PC – Provider's Relation with Customer. Depending on relations within the elements listed, customer can feel different degrees of satisfaction. So for example, three sets of customers can be distinguished: S1 - ''dissatisfied'' customers, S2 ''satisfied'' customers and S3 - ''enthusiastic’’ customers. Customer loyalty directly depends on the degree of satisfaction. It is assumed that ''dissatisfied'' customers would in small percent be loyal, while with ''satisfied'' ones the percent is significantly higher, and ''enthusiastic'' customers are loyal to the fullest extent (Kilibarda, 2011.) Besides service quality (SQ) and customer satisfaction (CS), customer loyalty is directly affected by relation between provider and customer (RC), changing provider costs (CC) and competitive offer (CO). As basic measures of customer loyalty can be taken: L1 – repeated use of services (real customer behavior), L2 – future use of services (intended behavior) and L3 recommendation of providers to friends and acquaintances.

4. Research results The model presented is applied and tested on an example of one shipping company from Belgrade that provides wide range of logistics services in international trade flows. For data collecting, web-based survey method is used, in accordance with guidelines established in paper Griffis et. al (2003). Sample of 30 customers has been chosen randomly. Examinees are contacted via e-mail and asked to fill in a questionnaire online. In order to increase response rate, examinees were friendly reminded and encouraged to fill in the questionnaire. 5 out of 30 e-mails were returned unfilled and therefore deleted from the sample which resulted in net potential sample having 25 examinees. 20 questionnaires were filled in and returned out of that number. Most examinees are logistics managers (82.6%), while 11.7% are vice presidents, presidents or general managers of the company. The rest of 5.7% examinees are employed in different logistics positions. Evaluation of variable and their factors in questionnaire were made through five-point Likert scale. Factor structure, reliability and validity of questionnaire have been tested with confirmatory factor analysis (CFA), the results of which are shown in table 1. The results obtained shows that each of three variables presents high degree of total factor variation (quality 64.65 %, satisfaction 71.73%, loyalty 67.64%). In such situations, solution that is considered acceptable is the one that explains more that 60% of total variation (Hair at el. 1998). Measuring instrument reliability is determined via Cronbach’s alpha coefficient values of which goes from 0.786 to 0.876. Since those values are much higher than 0.7,

2nd INTERNATIONAL CONFERENCE ON SUPPLY CHAINS

 

it’s considered that reliability requirement is fulfilled and that the measuring instrument is acceptable (Nunnally and Bernstein, 1994). Convergent validity and dimensionality of measuring instrument have been tested via factor loadings that show connection between factors and associated variables. Standard factor loadings in each case are over 0,5 (p