Transcript The Impact of Strategic Service Competence Supply Chain

THE MODERATING EFFECT OF
SERVICE INNOVATION ON THE
RELATIONSHIP OF SERVICE QUALITY
AND CUSTOMER LOYALTY IN
JAKARTA FOUR STAR HOTELS
by
Diena Mutiara Lemy
Rudyanto
7/17/2015
2nd AITTEI Kuala Lumpur - Diena & Rudyanto
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Agenda
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Introduction (Purpose)
Research Gap
Problem Statement
Research Contribution
Literature Review
Research Model
Hypotheses
Variables & Operational Indicators
Method Research
Result & Discussion
Conclusion
Recomendation
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Introduction
• According to Craighead, Hult and Ketchen (2009), a key
factor in the success of firms is the extent of their
innovation capability also referred to in the literature as
innovativeness and defined as cultural readiness and
appreciation for innovation.
• Porter (1985) stated that innovation is central to
differentiation and hence, competitive advantage.
• The statement is supported by Johnson et. al. (1997) who
argued that a firm must be innovative to survive in a
volatile environment.
• Therefore, the innovation in services must be given
special attention and specific research. One of the study
regarding innovation in services was conducted by Gallouj
and Savona (2009) that focusing on a review of the
debate and a research agenda regarding innovation in
services.
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Purpose …
• This paper reports on an empirical investigation between the
relationship of Service Quality and Customer Loyalty, that is
moderated by the existence of Service Innovation.
• The aim of this research is to find out whether hotels also have to
do service innovation in order to increase the Customer Loyalty.
• The focus of the study is on developing a model of customer
loyalty, based upon previous research and a review of the
literature, which can subsequently be used in managerial actions
and follow-up studies of customer loyalty.
• Specifically, the purposes of the study are to investigate: 1. The
impact of service quality on customer loyalty; and 2. Service
Innovation moderates the relationship of service quality and
customer loyalty.
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RESEARCH GAP
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There is extensive research regarding the relationship between service quality and customer
loyalty.
Caceres & Paparoidamis (2007) conducted a study to establish a theoretical basis for evaluating a
strategic increase in customer perceptions of service/product quality. The results indicate that
perceptions of service/product performance can be viewed as antecedents to relationship
satisfaction which, in turn, affects trust, commitment, and business loyalty.
Zeithaml, Berry, and Parasuraman (1996) which focused on specific customer intentions and
conceptualized a significantly positive relation between customer perception about service quality
and their willingness to recommend the service provider to the others.
Boulding et al. (1993) stated that there are a relative correlation between service quality and
repurchase measurement and recommendation willingness.
Reichheld and Sasser (1990) that conclude about the recommendation behavior for service
provider as a result of service quality that increase customer loyalty.
However, in order to have better insights on the relationship between service quality and customer
loyalty, the considerations of the existence of some other variables that will affecting this
relationship is needed. Therefore the service innovation variable is examined to find whether this
variable has a moderating effect on the relationship between service quality and customer loyalty.
Service innovation is considered as moderating variables since some experts have defined service
innovation as not only a factor or the success of the company but also as survival kit for the
company in facing the intensified competition and environmental uncertainty (Goyal and Pitt,
2007).
This function seems to be similar with the benefits of relationship quality, as a tools to face the
competition in the industry (Ndubisi, 2007). Moreover, as being stated by Han, Kim and Srivastava
(1998) that innovation is linked to business performance, it is possible that after the innovation
takes place, the performance of the firm is getting better. Thus, the customer loyalty increased.
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Problem Statements
• Is there any positive relationship between
Service Quality and Customer Loyalty?
• Does
Service
Innovation
positively
moderated the relation on Service Quality
and Customer Loyalty?
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Research Contribution
• This study contributes to service marketing theory in several ways. First,
the results revealed contrasting empirical findings on the relationships
between Service Quality and Customer Loyalty. The relationship appears
to be positive which is intuitively same with the nature of the relationship
between these constructs. These findings must be further examined and
tested in different settings. However, this finding enriches the literature of
service marketing.
• Second, the findings that there is a moderating effects of Service
Innovation on the relationship between Service Quality and Customer
Loyalty, confirmed that Service Quality is the only effective strategic tools
to enhance the impact of Service Quality on Customer Loyalty. Research
on Service Innovation is still relatively new. Therefore, this finding gave
more insights about Service Innovation.
• By doing the research in hotel industry particularly the 4 (four) stars hotel
classes, a further examination between the relationship is going to be
carried out.
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Literature Review – Service Quality
• Service Quality is an important factor to customer satisfaction,
service provider’s reputation improvement, and tools to keep
the customers. Therefore Oliver (1999) who considered that
Customer Loyalty, Service Quality, and satisfaction is variables
related each other, and result from cognitive process, which
means if customer cognitively have a positive evaluation about
service provider, they would not easily be influenced by the
other factors.
• Wong and Sohal (2006) stated that Service Quality has become a
significant differentiator and the most powerful competitive
weapon which many leading service organizations possess.
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Literature Review – Service Quality
• Reicheld and Sasser (1990) conducted one study
related with Service Quality is the effort to find
Service Quality capability to become company’s
supporting defence through customer retention
which in the end will impact on company income.
• The findings suggested that poor Service Quality
will impact behav ioral intentions, which would
cause losing customer, unsatisfied customer or
complaining customer (Zeithaml, 2000).
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Literature Review – Service Quality
• Boulding et al. (1993) stated that there are a
relative correlation between Service Quality and
repurchase measurement and recommendation
willingness. Recommendation behavior for
service provider (Reichheld and Sasser, 1990),
willing to pay more for products or services,
preferences behavior toward one company than
others, sustainable buy, and increasing
relationship effort to some company in the future
(Rust and Zahorik, 1993) could be considered as
forms of Customer Loyalty (Zeithaml, Berry, and
Parasuraman, 1996).
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Literature Review – Customer Loyalty
• According to Bowen and Shoemaker (1998), loyal customer generally show
these common behaviors: making repeat purchase, trying other product
lines of the company, showing resistance to pull of the competition, giving
referrals, providing publicity, and serving on advisory boards.
• Yap and Sweeney (2007) studied found that both process (intangible
aspect) and tangible aspect from SERVQUAL have significant positive
effect on loyalty, value, and satisfaction. Darley, Luethge and Thatte (2008)
found a relation between service evaluation perceived by customer and
loyalty intention are stronger on female customer rather than the males
customer.
• Study by McMullan and Gilmore (2008) found that it is important to
understanding how customers with differing levels of loyalty development
may respond better to a differentiated strategy due to the effect of what
sustains and renders their loyalty vulnerable. Thus, companies must find
appropriate and tangible ways of maintaining the relationship.
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Literature Review – Customer Loyalty
• Research by de Ruyter, Wetzels, and Bloemer (1998)
that was conducted in five different service industries,
a positive relationship was found between perceived
service quality and service loyalty.
• The result was further exemplified by a study which
found that favorable perceptions of service quality
increased the likelihood of customers engaging in
behaviors beneficial to the strategic health of the firm
(Boulding et al. 1993).
• Wong and Sohal (2003) conducted a study in
hospitality industry and found a positive relationship
between the dimensions of service quality and
customer loyalty.
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Literature Review – Service Innovation
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The extensive studies of innovation are driven by the benefits that can come along
with the innovation efforts that is implemented by the organization.
Referring to Damanpour and Evan (1984), Zolfaharian and Paswan (2008) define
innovation as a respond to the environmental changes or as a tool that can bring
changes to the organization.
Another benefit of innovation was admitted by Goyal and Pitt (2007) that
considering innovation as not only a factor or the success of the company but also
as survival kit for the company in facing the intensified competition and
environmental uncertainty.
Han, Kim and Srivastava (1998) in their study found that innovation is an important
function of management because it is linked to business performance. The finding
indicates that a robust relationship, that is positive and direct relationship, exists
between innovation and performance.
Oke (2007) has reviewed some literature and found that the link between
innovation and performance had been stated by Cooper and Kleinschmidt (1987),
which found that highly innovative and incremental new products lead to superior
performance in industrial product firms.
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Literature Review – Service Innovation
• Despite the emphasis, little has been done to measure
directly how consumers perceive differences and
novelties built into the dimensions of service offerings.
• One of the measurement tools of service
innovativeness has been used by Zolfagharian and
Paswan (2008) who use consumer perception of
service innovativeness (CPSI) in the exposure stage of
the goal-setting process (Bagozzi and Lee, 1999) and
conceptualize it as a multidimensional construct,
defined as his/her evaluation of the extent to which
the elements of a service offering are new and
meaningfully differ from those alternatives.
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Research Model
Service
Innovation
H2
Customer
Loyalty
Service
Quality
H1
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Hypotheses
• H1: Service Quality has positive impact on
Customer Loyalty.
• H2: Service Innovation moderates of Service
Quality and Customer Loyalty.
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Research Method
• The population in this study was Indonesia’s Four Star in Jakarta.
• The collecting data through a structured questionnaire based on
the review of relevant literatures and an overview of the
theoretically.
• Indicators were used to explain the construct in research model by
using Likert Scale 1 – 6. Respondents (customers of the four stars
hotel) were asked to answer the questions in the questionnaire
according to the circumstance of each four stars hotel.
• In this study used the SEM (Structural Equation Modeling)’s
procedure in data processing, developing and testing the model
research.
• Operationalization of each variable’s indicators is needed in
statistical analyses and their sources are presented in Table as
follows.
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Variables & Operational Indicators
No.
1
Latent
Variabel
Service Quality
(SQ)
Indicators
-
2
Customer
Loyalty
(CL)
-
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Sources
Giving service as ensured/promised;
Givining accurate information;
Ready to help guests as needed;
Giving service in accordance to guests needs;
Giving confident suggestion to guests;
Giving confident answers to guests;
Always be aware that the guests’ needs are
the important;
Physical facility in the hotel is attractively
visual.
Caruana (2002); Wong and
Sohal (2003); Keating et
al., (2003) and Akbaba
(2006).
I always stay at this hotel;
To always stay at this hotel in the future;
To always give positive comment on this
hotel;
To always be enthusiastic to talk about this
hotel;
To always give recommendations of this hotel
to others and
When hotel service is needed this hotel is the
first to be remembered.
Gremler
and
Brown
(1996); Caruana (2002)
and Jones and Taylor
(2007)
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Variables & Operational Indicators
No.
3
Latent
Variabels
Service
Innovation
(SI)
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Indicators
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Innovation on hotel interior
Innovation on hotel administration
Innovation hotel exterior
Innovation on hotel staff behavior
Innovation on technology information
Innovation on time flexibility
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Sources
Ottenbacher and Gnoth
(2005); Victoria et al. (2005)
&Zolfagarian and Paswan
(2008).
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Validity & Reliability Test
Latent
Variabel
Standardized
Solution
Error
Variance
t-value
Service Quality
SQ1
SQ2
SQ3
SQ4
SQ5
SQ6
SQ7
SQ8
0.82
0.71
0.86
0.75
0.88
0.88
0.80
0.89
0.33
0.50
0.26
0.44
0.23
0.22
0.36
0.20
24.05
18.97
25.57
20.96
25.88
26.51
22.65
23.33
Customer
Loyalty
CL1
CL2
CL3
CL4
CL5
CL6
0.68
0.80
0.94
0.88
0.82
0.69
0.54
0.37
0.11
0.23
0.33
0.53
17.93
22.46
25.90
26.03
22.83
18.45
Service
Innovation
SQ1
SQ2
SQ3
SQ4
SQ5
SQ6
0.83
0.84
0.83
0.86
0.84
0.85
0.32
0.30
0.31
0.26
0.29
0.28
23.97
24.61
24.47
25.57
24.38
24.23
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Validity
Construct
Reliability
Variance
Extracted
Good
0,944744
0,68248
Good
0,916423
0,649438
Good
0,935442
0,707208
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Structural Model
Standardized Solution
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Structural Model
t- value
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Goodness of Fit Index
of Research Model
GOF Indices
Standardized
Indicator
Statistic Value of
GOF
Note
0 ≤ X²/df ≤ 2
1.852857
Good Fit
0.05 < RMSEA < 0.08
0.038
Good Fit
NFI
0.90 ≤ p ≤ 1.00
1.00
Good fit
NNFI
0.90 ≤ p ≤ 1.00
1.00
Good Fit
CFI
0.90 ≤ p ≤ 1.00
1.00
Good Fit
IFI
0.90 ≤ p ≤ 1.00
0.98
Good Fit
RFI
0.90 ≤ p ≤ 1.00
0.99
Good Fit
Standardized RMR
0.05 < p < 0.08
0.022
Good Fit
GFI
0.90 ≤ p ≤ 1.00
0.99
Good Fit
AGFI
0.80 ≤ p ≤ 0.90
0.95
Good Fit
X²/df
RMSEA
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Result of Hypothesis Testing
Hypothesis
Path
Standardized
Solution
t - value
Significant or not
sifnificant
Result – Data
Supporting Hypothesis
H1
SQ  CL
0.93
11.68
Significant
Yes
H2
SQ  CL
With SI as
moderating
0.28
4.99
Significant
Yes
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Final Research Model
Service
Innovation
0.93
11.68
Service
Quality
Customer
Loyalty
0.28
4.99
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Result & Discussion
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The first hypothesis is examining the relationship between Service Quality and Customer
Loyalty. The result of the hypotheses testing is the standardized solution of 0.93 and the tvalue of 11.68 indicating that there is a significant relationship between the two variables.
This finding is same with previous research results which were suggesting the positive
relationship between the two variables.
As an implication of this result, hotel industry must give serious attention to the five
dimensions of SERVQUAL: The reliability, responsiveness, assurance, empathy and tangibles.
Four of the dimensions are intangibles and mostly connected to the employee of a service
firm, in this case, hotel.
The customers’ feeling toward the employee often carries over their feeling towards the
service firm, and affecting their loyalty. If the customers have negative perception on the
employee, most probably it will make them reluctant to come back again to the hotel.
On the contrary, the positive feeling will continuously use the service from the hotel. Since
these four dimensions are intangibles, it is very important for the hotel to give tangible cues
that would affect the customer’s perceptions to the employees. Some tangible cues that can
be use are: the employee uniform, the employees grooming, and the hospitality shown by
greetings and smiles.
The tangible dimension also has a large impact on customers ‘feeling since it is the only
aspect that the customers can see. Therefore, the hotel must well manage all tangible
dimensions of a service in order to get a good impression from customers that will result on
customer loyalty.
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Result & Discussion
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The second hypothesis is hypotheses examining whether Service Innovation moderates the
relationship between Service Quality and Customer Loyalty. Results of the hypotheses testing at the
Four-Star hotel are the t-values of 4.99. The t-values are considered significant since they are higher
than 1.96. Thus, the data support the hypotheses. Thus, the moderating effect of Service
Innovation will be significant. Moreover, this result may also caused by the type of innovation
written in the indicators. Perhaps, the type of innovations written in the indicators seem to be
important for the hotel guests.
Gadrey et al. (1995) considered that service innovations can be described as new developments in
activities undertaken to deliver core service products for various reasons, e.g. to make those core
service products more attractive to consumers.
Zolfagharian and Paswan (2008) define innovation as a respond to the environmental changes or as
a tool that can bring changes to the organization.
Another benefit of innovation was admitted by Goyal and Pitt (2007) that considering innovation as
not only a factor or the success of the company but also as survival kit for the company in facing the
intensified competition and environmental uncertainty.
Han et al. (1998) in their study found that innovation is an important function of management
because it is linked to business performance. The finding indicates that a robust relationship, that is
positive and direct relationship, exists between innovation and performance.
Oke (2007) has reviewed some literature and found that highly innovative and incremental new
products lead to superior performance in industrial product firms. The superior performance then
can lead to the Customer Loyalty. These explanations can support the positive relationship of
Service Innovation and Customer Loyalty.
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Conclusion
• Identifying the impact of Service Quality on
Customer Loyalty by using Service Innovation as a
moderating variable is the main objective of this
study. The study findings suggest that compared
with Service Quality, the Service Innovation plays
an important role to enhance Customer Loyalty.
This finding is important for the hotel to give
more attention to Service Innovation in building
their strategy to achieve Customer Loyalty. Thus,
Service Quality must be regarded as a basic
requirement for hotel operations.
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Research Limitation
• This study was focused only on the intangible aspects as the antecedents
of Service Quality on Customer Loyalty with Service Innovation as a
moderating variable in the hotel industry.
• The other important factors such as brand image, price, and value, were
not included in the model since compare to the other dimensions of
Service Quality, the tangible aspects are the only dimension that can be
observed by the guests.
• This study was using a non probability sampling technique, which is called
purposive sampling.
• This research was only focusing on the guests, as the customers of the
hotel.
• Referring to Zeithaml, Bitner and Gremler (2009) the Service Innovation
being studied was not a major or radical innovation since it is only offering
new services for the currently served market, extending the service line,
improving the service and changing the service style. The next study might
giving attention to the more major and radical service innovation.
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Theoritical Implications
• This study contributes to service marketing theory in several ways.
• First, the results revealed contrasting empirical findings on the
relationships between Service Quality and Customer Loyalty. The
relationship appears to be positive which is intuitively same with
the nature of the relationship between these constructs. These
findings must be further examined and tested in different settings.
However, this finding enriches the literature of service marketing.
• Second, the findings that there is a moderating effects of Service
Innovation on the relationship between Service Quality and
Customer Loyalty, confirmed that Service Quality is the only
effective strategic tools to enhance the impact of Service Quality on
Customer Loyalty. Research on Service Innovation is still relatively
new. Therefore, this finding gave more insights about Service
Innovation.
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Managerial Practical Implications
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The study findings provided several implications for hotel staffs, managers, and the
organizations regarding the factors affecting Customer Loyalty. The implications
can be following up the findings that were confirming the previous studies as well
as the findings that were different with the previous studies.
Verma, Plaschka & Louviere (2002) suggested that the hospitality customers
usually make purchases by simultaneously evaluating several criteria. A typical
buying decision might take into account the Service Quality, delivery speed, price,
and any special buying incentives, for instance. Therefore, managers need to
understand how customers integrate, value, and trade off different product and
service attributes. By the same token, information about customer demands and
preferences must be incorporated into the design and day-to-day management of
service-delivery process.
Since service is essentially intangibles, the type of innovation that can be applied
by the organization is more difficult to be decided. The idea generation for service
innovation can be obtained by observing customers and how they use the firm’s
product and services. Besides through observation, idea for service innovation can
come from contact personnel who deliver the services and interact directly with
consumers.
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Recommendation for future research
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•
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The other important factors such as culture, brand image, price, and value, were
not included in the model since compare to the other dimensions of Service
Quality, the tangible aspects are the only dimension that can be observed by the
guests. Therefore, this study is intended to find the impact of the tangible aspects
on Service Quality and Relationship Quality, which in the end will also affect the
Customer Loyalty.
A second limitation was that this study was using a non-probability sampling
technique, which is called purposive sampling. Future research may consider
diversifying the sample and use time scales, rather than cross-sectional data. A
probability sampling might give a better foundation for generalization since this
method of sampling gives the population an equal chance to be chosen as the
subjects.
Thirdly, this research was only focusing on the guests, as the customers of the
hotel. The hotel management point of view would be an equalizer between the
opinion of the customers and the hotel management’s opinion in order to get a
more balance point of views.
Fourthly, referring to Zeithaml, Bitner and Gremler (2009) the Service Innovation
being studied was not a major or radical innovation since it is only offering new
services for the currently served market, extending the service line, improving the
service and changing the service style. The next study might giving attention to the
more major and radical service innovation.
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Your attention is highly appreciated 
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