It has been well known that customer-perceived service quality, perceived value and customer satisfaction have been the most important success factors of business competition for service providers (Buzzell and Gale, 1987).

Figure The relationship between perceived service quality, perceived value and customer satisfaction

Introduction of Perceived Value

The definition of perceived value by Zeithaml is the most widely accepted, Zeithaml (1988a) defined value as four dimensions: value is low price; value is whatever I want in a product; value is the quality I get for the price I pay; and value is what I get for what I give and indicated that perceived value can be viewed as the customer’s overall assessment of the utility of a product or service based on the perception of what is received and what is given. (16) Zeithaml (1988b) also showed that perceived value is influenced by service quality, and Lapierre et al. (1999) suggested that perceived value in a service results in part from service quality. The figure 2 is the list of definition of perceived value.

Table Definition of Perceived Value

Source: Understanding Channel Purchase Intentions: Measuring Online and Offline Shopping Value Perceptions

A fundamental base for the conceptualization of perceived value of a service was developed by Zeithaml (1988). Focus groups and in-depth consumer interviews were utilized in her research to investigate the relationships between consumers’ perceptions of price, quality and value.

The focus groups were used to determine the salient attributes and variables related to perceived value, and the links among product, attributes, quality and value were revealed by the interviews. During the interviews, open ended questions were utilized to examine the information needed to make judgments about quality and value (i.e., advertising and packaging).

The results of her research showed that the perceived quality leads to perceived value. Both intrinsic (i.e., how the purchase makes you feel) and extrinsic attributes (i.e., reputation of the product/service), as well as price, were found that related to perceived quality positively. The variables moderation of perceived value included perceived sacrifice (non-monetary price), extrinsic attributes and intrinsic attributes. Overall, Zeithaml indicated that quality, price (monetary and non-monetary), reputation of the product/ service and how the product /service makes one feel (emotional response) were dimensions related to perceived value.

Figure A means-end model relating price, quality, value and purchase

Source: Zeithaml, 1988, p.4

Likewise, the Profit of Impact Marketing Strategies (PIMS) study explained value as the relationship between quality and price (Buzzell & Gale, 1987). They conceptualized “perceived relative value” of the total package of products and services is critical competitive success that influence customer behavior. Relative value is the value received from one products or service when compare with similar offerings. According to Bojanic (1996), relative perceived value can be categorized in three possible value positions: (1) offering comparable quality at a comparable price, (2) offering superior quality at a premium price, or (3) offering inferior quality at a discounted price. Thus, perceived value may be altered if internet service providers changes what they are doing, a competitor changes what they are doing, or if consumer’s desires or needs change.

In recent, Parasuraman and Grewal (2000) divided perceived value into four value types: acquisition value, transaction value, in-use value and redemption value.

Acquisition Value

It emphasizes the benefits gained for the monetary price given by acquiring and using the product or services. The predicted value is based on the expected benefits and costs related to product purchase, use and disposition.

Transaction Value

It refers to the pleasure and satisfaction the consumer receives by purchasing the products and services at a good price when compare to the customer’s internal reference price. Consumers may have additional pleasure if they get a good deal during purchasing process.

In-use Value

In-use value involves the utility derived from using the product/service by evaluating the actual benefits and costs related to its use.

Redemption Value

It relates to residual benefit received of service termination.

Each of the four dimensions are vary in different times of the product or services life. Acquisition and transaction value are most salient during purchase, whereas in-use value and redemption value are more relevant after purchase. . (a multi-dimensions)

However, it has been argued that perceived value are hard to quantify (Semon, 1998). The perception of value has often been analyzed with a self-reported, one-dimensional measure (Gale, 1994). The problem with a single-item measure is that it assumes that consumers have a shared meaning of value. According to Zeithaml (1988), she stated “quality and value are not well differentiated from each other and from similar constructs such as perceived worth utility”. Therefore, it has been disputed that there are lack of validity with single-item measures of perceived value (Woodruff and Gardial, 1996). Another inherent problem is that one-dimensional measures result in the knowledge of how well one is rated for value, but no specific direction is provided on the value improvement. Hence, multidimensional scales for measuring perceived value are necessary. While multiple scales have been generated for measuring the perceived value of tangible products, recently scales have been created for measuring the perceived value of less tangible products (services). Because broadband network is a service, a scale that has been developed specifically for measuring customer’s perception of value is the SERV-PERVAL scale (Petrick, 2002). This multidimensional-scale consists of 5 areas; Quality, Emotional Response, Monetary Price, Behavioral Price and Reputation.

In developing the SERV-PERVAL scale, the dimensions of perceived value were identified based on the concept of comparing what a customer “receives”, with what the customer “gives” for the attainment of a product or service (Zeithaml, 1988; Bojanic, 1996; Grewal et al., 1988; Parasuraman and Grewal, 2000). (Cruise Tourism)

Zeithaml (1988c) described perceived value as tradeoff of salient of ‘give’ and ‘get’ components(10) and Drew and Boltion (1987) also indicated that perceived value as a cognitive tradeoff between perceptions of quality and sacrifice. Quality has been identified as the ‘gets’ feature, whereas sacrifice has been identified as the ‘gives’ (16) It shows that gets is what customers can get or received from internet service provider in terms of perceptions of service quality, such as customer services and gives is what is given up or sacrificed, such as price, to acquire a service. According to Cravens, Holland, Lamb and Moncrieff (1988), the trade-off between price and quality is most general definition of value. So the price and quality has the significant impact on the perceived value. Petrick (2002) identified two dimensions related with what a customer ‘gives’ to obtain service. The first dimension was ‘perceived price’, this dimension reveals how customers encode the monetary price that they paid for the broadband services, such as was it expensive or inexpensive.

The other dimension ‘give’ identified by Petrick (2002) is related to the evaluation of non-monetary costs associated with the purchase of service. Non-monetary costs include such things as time, search, costs, brand image and convenience. It is therefore a combination of both perceived monetary and non-monetary costs that equivalent to consumers’ overall perceived sacrifice, which, in turn, affects their perception of product or service value.

With regard to what a customer ‘receives’, past research has identified emotional response, or the joy received from purchase. For the development of the SERV-PERVAL scale, emotional response was defined as a descriptive judgment regarding the pleasure that service gives the purchaser (Sweeney et al., 1998). Quality dimension has identified as customer’s judgment about the broadband service’s overall excellence or superiority (Zeithaml, 1988). Reputation was defined as the prestige or status of service, as perceived by the purchaser, based on the image of the internet service providers (Dodds et al., 1991). Thus, it could be argued that the value dimensions of what a customer receives from the purchase of a service include: the emotional response to the service, quality received from the service and the reputation of the service appeared. While the dimensions related to what is given, consist of monetary and non-monetary (behavioral) price.

Introduction of Service Quality

Service quality is a multi-dimensional concept (Jamal & Naser, 2002); it means different things to different people (Bennington & Cummane, 1998) (13). Service quality defined as a consumer’s judgment about a product’s overall excellence (Zeithaml, 1988). There are numerous different “definitions” of service quality. It can be conceptualized as the overall assessment of the difference between perception and expectation of service delivery (Parasuraman et al., 1988; Bolton and Drew, 1991). The common definition of service quality is service meets customers’ needs or expectations (Lewis and Mitchell, 1990; Dotchin and Oakland, 1994a; Asubonteng et al., 1996; Wisniewski and Donnelly, 1996). Service quality can thus be defined as the difference between customer expectations of service and perceived service. If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs (Lewis and Mitchell, 1990) (Servqual). The SERVQUAL approach is the most common method for measuring service quality in order to ascertain any actual or perceived gaps between customer expectations and perceptions of the service offered.

Model of Service Quality Gaps

In order to measure a customers’ perception of the service quality, the well-known approach is referred as SERVQUAL (Parasuraman et al, 1991, 1988). There are seven major gaps in the service quality concept, which are shown in Figure. The model is an extention of Parasuraman et al. (1985). According to the following explanation (ASI Quality Systems, 1992; Curry, 1999; Luk and Layton, 2002), the three important gaps, which are more associated with the external customers are Gap1, Gap5 and Gap6; since they have a direct relationship with customers.

Gap1: Customers’ expectations versus management perceptions: as a result of the lack of a marketing research orientation, inadequate upward communication and too many layers of management.

Gap2: Management perceptions versus service specifications: as a result of inadequate commitment to service quality, a perception of unfeasibility, inadequate task standardisation and an absence of goal setting.

Gap3: Service specifications versus service delivery: as a result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork.

Gap4: Service delivery versus external communication: as a result of inadequate horizontal communications and propensity to over-promise.

Gap5: The discrepancy between customer expectations and their perceptions of the service delivered: as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences.

Gap6: The discrepancy between customer expectations and employees’ perceptions: as a result of the differences in the understanding of customer expectations by front-line service providers.

Gap7: The discrepancy between employee’s perceptions and management perceptions: as a result of the differences in the understanding of customer expectations between managers and service providers. (13)

Figure Model of Service Quality Gaps

Source: Parasuraman et al., 1985; Curry, 1999; Luk and Layton, 2002

1.2.2 SERVQUAL instrument

This instrument was based on the gap theory developed by Parasuraman et al. (1985). In the earliest stage of SERVQUAL, there were ten components of service quality. They were tangibles, reliability, responsiveness, communication, credibility, security, competence, courtesy, understanding/ knowing the customer, and access (Parasuraman et al., 1985). In the later studies, these dimensions were consolidated into five dimensions: tangibles, reliability, responsiveness, assurance and empathy (Buttle, 1996). These five dimensions were also considered as the skeleton of SERVQUAL (Bahia & Nantel, 2000). (13)

The five dimensions into a service quality model are illustrated as follows,

Tangibles – appearance of physical facilities, personnel and materials

Reliability – ability to deliver promised service dependably and accurately

Responsiveness – willingness to provide prompt services

Assurance – ability to inspire trust and confidence

Empathy – caring about customer and individualized attention to customers

To confirm the validity of SERVQUAL model in the evaluation of service quality, Zeithaml et al (2006) stated that “service quality is a focused evaluation that reflects the customers perception of reliability, assurance, responsiveness, empathy, and tangibles”. (Relationship among service quality)

Introduction of Customer Satisfaction

Maximize the customer satisfaction is the important goal of all company. As customer satisfaction is related to the perception and expectation of the customer, level of satisfaction increases when the quality of service exceeds needs and expectation of the customer. Customer satisfaction is an overall positive or negative feeling about the net value of services received from a supplier (Woodruff, 1997a). Woodruff (1997b) argues that perceived value represents customer cognition of the nature of relational exchanges with their suppliers, and satisfaction reflects customers’ overall feeling derived from the perceived value. Customer satisfaction can be defined as a consumer’s fulfillment response; it is judgment that ‘a product or service feature, or product or service itself, provides a pleasurable level of consumption-related fulfillment’ (Oliver, 1997; Zeithaml and Bitner, 2000).

Boshoff and Gray (2004) point out that satisfaction is not inherent in the product or the service itself; rather, satisfaction primarily depends on the customer’s perceptions of the attributes of the product or service as they relate to that individual. Therefore, different customers will express varying levels of satisfaction for the same experience or service encounter (Ueltschy et al, 2007). (Relationship among service quality)

In marketing literature, the concept of customer satisfaction is the main outcome of marketing practices and occupies an important position in both theory and practice (Churchill and Surprenant, 1982). Satisfaction is the consumer’s good judgment about pleasure versus displeasure (Moliner et al., 2007). Moliner et al. (2007) pointed out two ways:

Cognitive nature (which is the comparison between expectations and performance)

Affective nature (association with feeling of pleasure)

Lenka, Suar and Mohapatra (2009) called technology and tangible aspects of service quality the attributes of the service firm as ‘hard quality’ and customers’ satisfaction is a combination of two responses such as cognitive and affective response to service encounters while, service quality is the overall assessment of a firm’s service delivery system. So, service quality is the delivery of services while satisfaction is customers’ experiences with services. Customers’ assessment of the product/service depends on its demand and the availability of alternative services in the market and information available to the customer. The customer then makes a comparison on the basis of these factors (Lenka et al, 2009). During the evaluation process if customers’ expectations are met with the service; they are more likely to feel satisfied with the service. Positive perception of service quality is the indication of the customers’ satisfaction (Lenka et al, 2009). Generally, customer satisfaction is affected by customer expectations or hopes prior to receiving a service and can be calculated by the following equation given by Parasuraman et al, (1988): Customer Satisfaction, Perceived Service Quality and Mediating Role of Perceived Value

Figure The Equation of Customer Satisfaction

1.4 The relationship between perceived value and service quality

Customer perceived value is also what customers want from the product or service. In many cases, quality of the product or service and the benefits it offers often become customer perceived value drivers (Bolton and Drew, 1991; Zeithaml, 1988). Many studies support this association. (e.g. Andreassen and Lindestad, 1998 ; Chang and Wang,2011; Edward & Sahadev,2011; Erdem and Swait,1998; Hellier et al.,2003; lai et al, 2009).

1.5 The relationship between service quality and customer satisfaction

Yi (1990) believes that service quality is a vital determinant of customer satisfaction. The rationale behind this belief is that high-quality services offered by a firm would lead to customer satisfaction. This is perceived as a common phenomenon in service industry. The nature of this service quality and satisfaction link is viewed as linear, demonstrating that higher levels of service quality result in higher levels of satisfaction (Pollack, 2008). Shin and Kim (2008) maintain that service quality is a customer’s overall impression of the relative efficiency of the service provider. (Relationship among service quality)

They add that service quality is significantly related to customer satisfaction. Also, several empirical studies confirm that a higher level of service quality is related to a higher level of customer satisfaction (Andreassen and Lindestad, 1998; Chang and Wang, 2011; Cronin et al, 2000; Deng et al,2010; Fornellet al., 1996; Edward & Sahadev,2011; Oliver, 1999; Saha and Theingi,2009; Spreng and Mackoy, 1996 ; Yang et al., 2009;Wang,2010).

Service quality improvement becomes the most critical issue in the service industry since it can improve the productivity, decrease the cost, build customer satisfaction, and increase profits to firms (Marquardt, 1989; Power, 1992). Service quality plays an important role in maintaining the customer satisfaction because if the ISP dissatisfied the customer and there is not only one choice for customer to choose, they may switch their existing service provider to other competitor. Thus, in order to understand the importance of the service quality, it is necessary to determine customers are satisfied with their ISP and the services provided. Moreover, service quality is usually considered as an antecedent of customer satisfaction in the ISP business. Service quality is an important issue in service management (Clottey et al, 2008); besides, with the development of the service sector, the notion of service quality has become increasingly significant (Ma et al, 2005). In the related literature, Plausible definitions for service quality have been suggested, Parasuraman et al (1988), define Customer perceived service quality as a global judgment or attitude related to the superiority of a service relative to competing offerings.

1.6 The relationship between perceived value and customer satisfaction

Fornell et al., (1996) state that the main two determinants of customer satisfaction are perceived quality and perceived value. Woodruff (1997) reports that the perceived value reflects the customers’ cognitive perception of the relational exchange with their providers and satisfaction mirrors the general feeling derived from the value perceived by the consumer. Roig et al, 2009 state that perceived value has an indirect effect on loyalty via satisfaction. There also exists empirical evidence demonstrating the positive relationship between perceived value and satisfaction (Anderson & Mittal, 2000; Chang and Wang,2011; Cronin et al., 2000; Edward & Sahadev,2011; Hellier et al.,2003; Hume & Mort, 2010; Lai et al,2009; Lam et al., 2004; Roig et al,2009; Yang & Peterson, 2004)

According to Rust and Oliver (1994), value is an encounter-specific input to customer satisfaction.Anderson, Fornell, and Lehmann (1994), and Ravald and Grönroos (1996) argued that value is related to customer satisfaction. Cronin et al. (2000) showed that perceived value is a significant predictor of satisfaction. Fornell, Johnson, Anderson, Cha, and Bryant (1996) and McDougall and Levesque (2000) contended that perceived value is directly and positively related to customer satisfaction. As customer satisfaction reflects the level of feelings and perceptions towards the service provider, so that a high level of perceived value may directly influences the customer satisfaction. (Relationship among service quality)

Figure Conceptual model

1.7 Loyalty

1.8 Switching Costs

Research Methodology

5.1 Pilot Test

Research Analysis

Research Findings

Conclusion and Recommendations

Limitations

Appendices

Reference Lists