Impact Of Perceived Service Quality On Customer Satisfaction And Brand Loyalty (A Case Study Of Honeywell Flour Mills Plc)
This research is used to explore the impact of perceived service quality on customer satisfaction and brand loyalty. The main objective of this study was to identify the service quality offerings of Honeywell Flour Mills Nig. Plc and Lister Flour Mills Ltd to their customers, to ascertain the level of customer’s satisfaction and to determine the relationship between customer service and brand loyalty. Questionnaires were used in collating respondent’s opinion. The findings of the study based on the outcome using simple descriptive percentage and Pearson moment correlation method which interpreted the trends in the companies in terms of product quality, customer’s satisfaction, brand loyalty and perceived service indicate that positive significant relationship exist between perceived service quality, customer satisfaction and brand loyalty. Customers are the most important components that make up a business without satisfying them, there will be no loyalty. Hence, some recommendations were suggested, one of which is that management must consider product quality and service quality as the foundation to build up consumer satisfaction and loyalty.
Table of Contents
- Title Page
- Table of Contents
- 1.1 Background of the Study
- 1.2 Statement of the Problem
- 1.3 Research Questions
- 1.4 Objectives of the Study
- 1.5 Significance of the Study
- 1.6 Scope of the Study
- 1.7 Limitations of the Study
- 1.8 Study Plan
- 1.9 Definitions of Key Terms
- 2.0 Introduction
- 2.1 Definitions of Customer Satisfaction, Brand Loyalty and Service Quality
- 2.1.1 Customer Satisfaction
- 2.1.2 Brand Loyalty
- 2.1.3 Service Quality
- 2.2 Theories of Consumer Motivation
- 2.2.1. Sigmund Freud Theory of Human Motivation
- 2.2.2 Maslow’s Theory of Hierarchy of Needs
- 2.2.3 Expectancy Theory: By Vroom (1964)
- 2.2.4 Equity Theory of Motivation by Adams (1965)
- 2.2.5 Opponent -Process Theory of Motivation
- 2.2.6 Incentive Theory
- 2.3 The Theory of Perception
- 2.4 Product Quality and Importance
- 2.5 Clarification of Concepts
- 3.0 This examined the authenticity of the research hypothesis and the choice of method used in analyzing the data collected
- 3.1 Historical Profile of Honeywell Flour Mills Plc and Lister Flour Mills Limited
- 3.1.1 Honeywell Flour Mills Plc.
- 3.1.2 Brief History of Lister Flour Mills Ltd.
- 3.2. Statement of Hypotheses
- 3.3 Method of Data Collection
- 3.4 Population of Study and Sample size
- 3.5. Sampling Technique
- 3.6 Method of Data Analysis
Data Presentation, Analysis and Discussion Of Result
- 4.0 Introduction
- 4.1. Demographic Data
- 4.2 Perceived Service Quality and Customer Satisfaction Analysis
- 4.3 Brand Loyalty Analysis
- 4.4 Hypotheses Testing
- 4.5 Discussion of the result
Summary, Conclusion and Recommendations
- 5.1 Summary
- 5.2 Conclusion
- 5.3 Recommendations
1.1 Background to the Study
The broad goal of every marketing organization is to achieve effectiveness in its mission and efficiency in its process. Whereas the mission is its major objective, the process is its means or method of achieving the objective. To be efficient is to maximize output from a minimum of input or resource. To be effective is to achieve the purpose of existence for the organization.
Every marketing organization has used over the years product, price, place and promotion for the pursuit of these twin facets of management. However, in more recent years greater creativity and improved scientific approaches are being employed to ensure that at every transaction the customer is receiving enhanced value through perceived service quality. Cowell (1996), defined perceived service quality as the judgment made by consumers when they compare their expectations with their perceptions of what they receive (service experience). Put differently, a service is regarded as an act, which add value to the recipient. It is also any activity or benefit that a party can offer to another, that is essentially intangible and does not result in ownership of anything. Its production may or may not be tied to a physical product. Service therefore may relate to the process involved e.g. operating systems for providing products or it may relate to the people involved and the quality of interaction with the customers.
Perceived service quality is today not given as a separate activity but is weaved into every facet of the business whether product, price, place (distribution) or promotion so that a total quality management in its broadcast sense is applicable. Kotler (2002) defines service quality “as all parts of the distribution (delivery) process which add value to the transaction, from the customer’s view point”. Service quality is designated with four characteristics. It is inseparable from the product provider, it is variable by the provider; it is perishable, meaning that it is lost anytime it is not given (utilized) and it is intangible, meaning that it is not a storable commodity.
Product or service is the main thrust for satisfying consumer needs. Today production systems are faster, able to produce more in shorter time; miniaturizations are possible and in vogue, designs look elegant, simple and compact although sophisticated in function. In all these, the consumer is being given more choice. Smart people keep creating niches for more satisfactions still for the discerning or sophisticated consumer e.g. designer wears, perfumes etc as distinct from popular brands.
Perceived service quality as a process or strategy is combined with other marketing mix to create satisfaction for the consumer and loyalty to the brand or business. No business survives for a long time without achieving these twin results. Business profitability and survival therefore force the marketer or entrepreneur to continuously challenge his/her structures, values, technology, products and offerings so that as consumers’ profiles, tastes, lifestyles, needs, etc change, so will the marketer change because any business that remains static is doomed(Brandy &Robertson, 2001).
The drive to providing excellent service quality to customers has forced fundamental changes in many organizations. Traditionally, hierarchical organizations have flattened out. Authority to act has moved from the top of the ladder to the bottom allowing employees in daily or regular contact with customers to act speedily and with assurance for the satisfaction of the customers on the spot. To be able to do this with ease, such employees have been given very broad-based training in the operations of the organization and are also supplied with relevant and up to date information with regards to what the organization intends to achieve at every point in time(Christopher, 1994).
Companies that want to be in the forefront of success in satisfying consumers engage in marketing/consumer research to identify genuine needs, the size of the market, the location of prospective buyers, their age, gender, income levels, lifestyles, religious conviction etc. The companies that know all these are usually able to produce goods or services that consumers purchase to satisfy their needs.
The centrality of customer satisfaction is found in the popular marketing epithet: “The customer is king”. This is because whereas a political king rules his empire and expects obedience and respect from his subjects, the customer king, also expects his/her wishes, need and satisfactions to be paramount in the schemes of the producer. This is why consumerism developed in modem marketing to forcefully, through legal or political means, make producers and suppliers, offer for sale, goods or services that are safe, economical affordable and dependable. In this way, business will be seen as being customer-driven (Cowell, 1996).
Brand loyalty is linked to customer satisfaction. If a producer readily produces goods or services that are safe, dependable, economical and affordable, the consumer is most unlikely to waver in purchases or seek to alternatives. This is why Liswood (2003) said that customer retention is the key to competitiveness and to driving profits, that the best measure of quality and value is customer retention.
Brand loyalty or customer retention is important for very many reasons. Firstly, if a customer keeps coming back and gives a producer all of his or her business, then that producer has met the customers’ standards and expectations. Secondly, it is more economical to manage a loyal customer than to build a new one. Thirdly, a loss of a key customer could be very grievous because a new customer may not immediately equal the revenue made from the old and lost customer. Fourthly, loyal/ retained customers are great apostles for your brands. Fifthly, customer research has found out that loyal customers are often willing to pay up to 20% more for a brand or service whereas new customers will be unwilling to pay that.
Loyalty is so much more robust than satisfaction. It is what people do, not what they say. What they say i.e. lip service, may be in the region of satisfaction. What they do i.e. repeat purchase, complaints, suggestions on improvements, advocacy – are in the sphere of loyalty. Loyalty is similar to royalty. It is dependable, predictable, respectable and profitable in the long run. That is why, for winning companies, building loyalty in customers, is not the end of the service quality chain, but the beginning and core of the total business operation.
Kotler (2002) posited that it is the best policy for a company to keep profitable and highly satisfied customers for life by using various skills and creating various programs to keep them very satisfied and dissuade them from switching. This is an important fact of marketing because a loss of a major customer can mean a loss of huge revenue, which may not be compensated for by a new customer. Kotler suggested that companies could make their customers pass through the following: First time customer Repeat customer Client Advocate Member Partner Part owner.
Being part owner is perhaps the highest position a loyal customer can occupy. A company can achieve this level of loyalty with its customers, without necessarily making the customers own shares in the organization. If on the other hand, opportunity exists for the individual, or the organization that is a customer, to purchase part or all the company in order to continue to buy or promote its products or services, so be it. Sportsmen or women, these days buy into their clubs for these reasons just as famous musicians or popular singers buy into the recording companies that promote their works (Kotler, 2002).
In the view of many marketers, usage status, usage rate and loyalty are the most important outcomes of all purchasing processes. Usage status refers to the experience of the customer relative to the product or brand. Usage rate is the frequency with which customers use and purchase a product. Often the Pareto 80/20 rule applies here, that is, 20 percent of users account for 80 percent of usage. Loyalty determines whether the customer is committed to the brand. Loyalty permits criticism or compliant. What is meant here is that a loyal customer will consider it a duty or obligation to criticize a company or brand he/she holds very dear if he/she notices something unpleasant occurring. Such criticism may be private or public but the focus and goal will be a call for improvement. Similarly, the company should welcome such criticism with openness of heart and see it as an opportunity to strengthen the faith or confidence of its loyalists.
Loyalty is not a happen chance event. It is a result of painstaking service quality and visionary leadership from the company. It is founded on a culture of excellence and a climate of respect for the individual customer in his/her feelings, tastes, emotions and all that promote self-esteem.
1.2 Statement of the Problem
The Flour Milling Industry is vibrant and with a huge production capacity. Olaniyonu, (1998)gathered that there are about 22 mills around the country. Any mill that seeks to justify its existence and effectiveness needs to have its marketing and production skills to its front burner. In this regard, below are some of the problems identified in the study.
The Nigerian customers had changed over the years. They are more educated and exposed than in the past. The fact that virtually all the mills in the country sell to the same customers and outlets makes the matter worse so what are the problems consumers face in their choice of brands? How has perceived service quality influenced the decisions of consumers in their choice of flour? How has quality packaging been effective in marketing of flour and resulting in brand loyalty from customers?
Finally customer service quality is a major tool while customer satisfaction and brand loyalty are major results to achieve. It is imperative therefore, for the organization to initiate/adopt processes, skill/technologies that have been found effective in the area of perceived service quality, customer satisfaction and brand loyalty to meet up with the current business challenges. Therefore how does a flour mill position its product vis-a-vis competitors’ products because most consumers acquire goods that are tailored to their individualized need rather than the generalized need of the market?
1.3 Research Questions
In line with our statement of problem and research objectives, the researcher would try to find answers to the following questions in the course of the research.
- Are customers pleased and happy with the service quality offerings of both Honeywell and Lister brands?
- At what level can customer perceived quality on choice of products¬?
- Can perceived quality service enhanced customers patronage and satisfaction?
- Does customer satisfaction have a relationship with service quality perception?
1.4. Objectives of the Study
The primary objective of the study is to examine the influence of perceived service quality on customer satisfaction and brand loyalty.
The other specific objective of this study includes:
- To examine the relationship between perceived service quality and customer satisfaction;
- To ascertain the relationship between customer satisfaction and brand loyalty; and
- To determine the relationship between customer service and customer satisfaction.
1.5 Significance of the Study
Gathering of this data has lead to a better understanding of the influencing level of the attributes on customer satisfaction. The results of this study did not only contribute to the awareness of the relationship between the variables but it also direct managers in the flour industry for quality improvement to increase customer satisfaction. Through the statistical analysis a conclusion on the existence of a relationship between qualities attributes of flour service provider and customer satisfaction will be more obvious.
1.6 Scope of the Study
An attempt is made to limit this research to the flour industry with particular reference to Honeywell flour mill and Lister flour mill because the study cannot cover all service companies. The study based on the two mills of flour in Ilorin and Ibadan in order to achieve effective means of perceived service quality influence on customer satisfaction and brand loyalty. This study will cover the time frame of year 2000-2014.
1.7 Limitations of the Study
Gathering of all needed data in most studies is usually met with a number of obstacles and constraints. The main constraining factor in this research is finance. This is because a lot of money was required to administer the questionnaires and time devoted to conduct the interviews was based on booked appointments which had to be followed up with repeated phone calls.
Another constraint is the lack of cooperating attitude on the part of some of the respondents particularly the dealers who are always busy attending to customers. Some of the questionnaires were not properly filled while some were not returned at all and this restricted the level of results obtained.
Despite all these, it is the researcher’s belief that if the study achieves the desired objectives, the efforts put there in would be justified. The conclusions reached so far emanate from the two hundred, (200) customers contacted. One hundred (100) were allocated to Ibadan district, while the remaining one hundred (100) were distributed to Ilorin.
The probability sample size of Ibadan is targeted through the population of staffs so as to achieve the purpose of presentation. Has to Ilorin, the population of staffs are few, so as to limit time constraints and the cost effective in achieving the desirable results. Ibadan and Ilorin were chosen due to the familiarization of staffs so as to reduce cost and time barriers.
1.8 Study Plan
The study is made up of five chapters. Chapter one is the introduction, Chapter two contains the review of relevant literature on theories influencing consumer behavior, product quality and importance which invariably lead to customer satisfaction and loyalty. Chapter three comprises of the brief history of the two companies, list of key flour mills in Nigeria. It also comprises of the methodology of data collection and information on how the data will be collected, processed and analysed. The method of analysis is also stated. Chapter four is made up of actual analysis of the collected data. Chapter five contains summary of findings conclusion and recommendations based on the findings of the study.
1.9 Definitions of Key Terms
A name, term, sign, symbol or design, or a combination of these that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors.
This is a feeling of enthusiasm or interest that makes someone determined to purchase a product or service
This is the process by which people select, organize, and interpret information to form a meaningful picture of the world
The characteristics of a product that bear on its ability to satisfy stated or implied customer needs
This is an individual’s subjectively derived favourable evaluation of an outcome and/or experience associated with consuming a product.
The characteristics of a service that bear on its ability to satisfy stated or implied customer needs
Summary, Conclusion and Recommendations
The first hypothesis of this study was that there is a significant relationship between perceived service quality and customer satisfaction. This hypothesis was justified by the statistical analysis. It means that a business keen to increase the satisfaction of its customers can adopt the strategy to increase its service offerings as defined primarily by the customers. Not increasing service offerings could jeopardize the effectiveness and success of the business. If we say the higher the level of perceived service quality, the higher the level of customer satisfaction, we can also say that the lower the level of perceived service quality, the lower the level of customer satisfaction. A low level of satisfaction is but a level to dissatisfaction. And dissatisfaction leads to divestment just as satisfaction props up investment. Customers, e.g. the bakers and dealers who perceive higher level of service from the company will have a more favourable disposition towards the company, whereas those who perceive low or extremely low levels of service would be more likely to have low or extremely low levels of satisfaction, which implies dissatisfaction.
The findings of the study supported the second hypothesis, which stated that there is a significant relationship between customer satisfaction and brand loyalty. The implication here is that customers who are more satisfied with the services derived from a brand or company will have and show higher loyalty to the brand or company while those customers whose satisfaction levels are low will demonstrate lower loyalty to the brand or company. Since loyalty is demonstrable through activities like repeat purchases, conversion of the uninitiated to the products or services, complaining for product improvement instead of defection if there is one in the brand or service, then the loyal customer is an asset to the company. All activities of the company should therefore be service driven to enhance satisfaction and thereby enhance loyalty also.
The third hypothesis stated that there is a significant relationship between perceived service quality and loyalty to the brand. The finding of the study supported this prediction. It then can be said that customers i.e. dealers and bakers who experience high service quality from a brand or company will also respond with high loyalty to the brand whereas customers who experience low service quality from the company or brand will similarly show low loyalty to the brand or company. As a result of this, it is advisable that companies seeking to give character and personality to their brands must deliver service quality items, which customers must perceive to be high and to be beneficial to them. Such services must also not be distractions or be simply incidental to the brand or company; they must in fact be so positively and closely linked that the services and brand(s) will be seen to be one and the same thing. When a customer is in need of a cake that will be delicious, fluffy, attractive, command premium price and yet be easy to bake, his/ her mind and desire should be for e.g. Honeywell flour that must have been promoted strongly like that of the company manufacturing and marketing it.
This study is conceptualized on the basis of integral customer value Management System for improved customer loyalty. Gale (1994): Managing Customer value stated that “companies succeed by providing superior customer value and value is simply quality, however the customer defines it, offered at the right price”.
Industry research shows that the customer’s perception of value is their primary decision factor. Today’s customers expect more than ever. They shop at stores for high level of service and expect similar treatment at a discount warehouse. Along with increased customer expectations, the new business environment includes rapid product changes and increased competition. Product life cycles have gone from years to months. Based on the success of one-to-one or direct marketing programmes, customers expect flexible and customised solutions.
Today, what sets great organizations apart is their commitment to drive customer-valued action throughout the organisation. These organisations have leaders with a vision of creating exceptional value for customers and shareholders. The leaders make resources available to deliver superior value. They have also designed environment where performances are evaluated based on what customer’s value. Thus any organization that is committed to a strategy of delivering what customers value will achieve goal by focusing on three strategies. (Plat, 2008)
a. A true Passion for Customers
This encourages employees to embrace an attitude of being in business to serve only the customer. It includes managerial leadership and the commitment to provide the resources employees need to take a personal ownership for resolving customer problems. It fosters a culture where employees constantly connect customer loyalty through customer focused actions and listening skills.
b. Organising Around Customers
This requires corporate and business units to structurally align around the customer. It includes effective internal and external customer communication and a commitment across all parts of the company to become customer centre.
c. A Deep Understanding of Customers.
Here, quantitative and qualitative data are collected and knowledge of what customers’ value is shared throughout the organization. This forms the foundation for key decisions. Corporate and business units’ strategies and tactics are driven from what customers’ value. While most companies measure some form of customers’ satisfaction, that measure does not predict customers’ loyalty. Customer satisfaction is an attitude. High level of customer satisfaction does not necessarily translate into repeat purchases and increased sales measurement that directly ties to repeat purchase behavior.
The goal of customer superior value management is to define and deliver superior value at superior points. Stated another way, the goal is to optimize the exchange of value between the company and its customers. Improving loyalty and profits requires an integrated customer value management system which consists of these elements.
- Entity leadership and customer advocacy function to provide an organization focus and leadership for the customer.
- Customer loyalty measurement to obtain statistically significant quantitative customer data through survey methodology.
- Qualitative Customer voice listening posts allow for a view from the streets.
- Value delivery system includes cross-functional and cross organizational process centers.
In conclusion, the use of the integrated customer value management system for improved customer loyalty and profitability will optimize the exchange of value between the company and the customer. For many organizations, the challenge of aligning a customer focused strategy within and between the organizations fiefdoms is a daunting task. However, the business payback makes the efforts more than worthwhile. Creating a system to assess and monitor customer assets will allow organizations to thrive in the new business environment.
Business is about relationships and successful businesses are about efficient, effective and successful relationships between the business and their customers. One needs the other for the satisfaction of their needs. Since people’s needs vary, business also consequently vary- vary in perceptions, knowledge and the delivery of the perceived right solutions, at the right times, in the right places, at the right costs (prices). These are all value indices and so value drives customers in the pursuit of solutions (satisfactions). To be effective every value to be provided must match the expectation of the customer. This is because perception will relate to expectation. When expectation is realized, satisfaction is generated and when satisfaction is guaranteed, loyalty develops and grows for brands or company and this could be made to translate into more business so long as the needs being satisfied persist. Thus we have an inductive chain:
- The higher the perceived quality service, the higher the satisfaction of the customer
- The higher the satisfaction of the customer the more loyal he/she is to the brand or company giving or providing satisfaction;
- The more loyal the customer, the more business he/she gives to the company
- The more experienced a person is in business, the more loyal he/she is to a successful brand
For customers, providing more business to a company is not limited to making increased purchases. It often includes introducing the product or service to others; willingness to pay slightly more than the price charged by competition- the extra payment being justified by the perceived higher service quality. Studies have shown that customers are willing to pay as much as 20% more for a brand or service they are loyal to, than switching to competitors brand. Frazer (2001) “always in the world, there will be someone who can make things cheaper. Happily, however low prices are not always the answer to competitiveness. People buy whatever they believe meets their needs. They don’t always buy the cheapest”.
Customer service is described as “high touch” not necessarily “high tech” because at the end of the day, a company’s main competitive advantage is its relationships with customers, business partners and employees. The real waste products on the scrap heap of today’s business world are broken promises and failed relationships. If the results you want are for your customers to thank you, your partners to trust you, your employees to love you, then you can achieve this with effective relationship management. It is not a gimmick; it is a method- American Management Review, April 1998; (Relationship Management). Some of the methods are in (perceived) service quality. For example you see your customers as assets to be nurtured and developed not as raw materials to mine, use, consume and or, throw away.
Customer service focuses on where and how customers interact with the company. That, in turn means focusing on the workers who actually create or deliver that customers value-e.g. safe and comfortable transportation, fitting, attractive and comfortable clothes, safe and comfortable hotel room, decent and tasty meals, hygienic and consistently good flour, etc. Hire the right employees, train them and provide them with the right equipment and information they need to do the job. Design work to fit and support workers’ (employees) effort and to maximize the impact of the value they create. There is no business that does not deliver service. It is either a direct service-business or a service delivered with a product. In either case, the service should build satisfaction and / or loyalty.
Equipped employees are often hostile and agitated personalities unwilling or unable to interact or help others. Yet customer satisfaction and loyalty and so, company’s profits are enhanced or diminished by employees who are in direct or even indirect contact with customers. A recent research in customer loyalty in the service industry conducted by forum corporation, in U.S., shows that only 14% of customers who stop patronizing service businesses do so because they are dissatisfied with the product they purchased. The vast majority i.e. more than 75% defects because they find service people indifferent or unhelpful.
Customers are the most important of the components that make up a business. Other components- employees, products, technology and processes are to service the customers; to provide them with the satisfaction of their needs whatever these may be. Without satisfaction, there would be no loyalty. Any or all of the following- product, price, delivery service and recognition may create customer loyalty. If the place of all these is understood, they may be packaged under customer service quality which will be at the front burner in all activities of the organizations.
The results of the research illustrate that Perceived service quality mainly affects consumer loyalty through satisfaction. Consumers’ perception about service quality and product quality are almost equally important to build up their satisfaction. It is in the light of the findings of this study that the following recommendations are made;
- Management must consider product quality and service quality as the foundations to build up consumer satisfaction and loyalty and to build up price fairness as an add-on value to consumers so as promote loyalty and increase sales.
- Since relationship between service quality and customer satisfaction is positive, it is recommended that company should adopt a medium for review of their products by customer either yearly, monthly or period that will be convenient.
- However, since business is dynamic and changing, it is also recommended that the companies should not rest on their oars or stop for commendations. They should continually raise their bars of standard so that they remain ahead of competition, particularly in the area they have chosen for product leadership. While doing this with tremendous zeal, skill and knowledge, they need to rise to industry standards in building customer intimacy and operational excellence.
- More experience work force should be employed in order to bring initiative into flour production and increase the quality of flour which will in turn increase the company turnover. On the other hand the profitability of the firm will increase.
- Companies should also give trainings, empowerment, discretionary powers, adequate information, proper knowledge and appropriate rewards or incentives to all employees, particularly those in regular contacts with the customers.
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