Relationships of service quality, service value and customer loyalty - A study of domestic airline service

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RELATIONSHIPS OF SERVICE QUALITY, SERVICE VALUE AND CUSTOMER 
LOYALTY - A STUDY OF DOMESTIC AIRLINE SERVICE 
Tran Th Phuong Thao, Pham Ngoc Thuy 
University of Technology, VNU-HCM 
(Manuscript Received on April 04th, 2011, Manuscript Revised September 21st, 2011) 
ABSTRACT: For several decades, improving service quality has been considered the best way 
to enhance customer satisfaction that leads to increase customer loyalty. However, customer 
satisfaction that is viewed as the most important factor to determine customer loyalty, does not always 
lead to success. Moving marketing from customer satisfaction orientation to customer value orientation 
has recently been being a central issue in service marketing. Given these situations, this study aims to 
explore the relationships between service quality, service value and customer loyalty. Its purpose is to 
test whether service value should be an alternative to determine customer loyalty beside customer 
satisfaction. Results of SEM analysis based on a sample of 308 passengers using airlines service in Ho 
Chi Minh City show that there are two factors of service quality with significantly positive impacts on 
customer loyalty through such an intermediary as service value. 
Key words: Service quality, service value, customer loyalty, domestic airline service, Vietnam. 
1. INTRODUCTION 
Nowadays, providing superior values of 
service to customers is viewed as the best way 
to gain competitive advantages in business 
world (Woodruff, 1997). Service value is 
known as a critical factor that affects a 
customer’s decision-making process (Rust and 
Oliver, 1994; Sweeney et al., 1999). Heskett et 
al. (1994) and Jen & Hu (2003) indicated that 
service value is very important factor in 
differentiating a firm’s service to others. In 
addition, following the S-D logic perspective 
(Vargo and Lusch, 2004), some scholars stated 
that service and value are viewed as two 
logically inseparable concepts which qualify as 
candidates for the title as the preeminent 
marketing concept (Gronroos, 2008; Babin and 
James, 2010). Thus, creation of customer value 
becomes an important topic that takes many 
scholars’ attention. Some of them even 
suggested moving marketing away from a 
focus on creating customer satisfaction to 
creating customer value (Ngo and O’Cass, 
2010). However, there are few studies that 
investigate the antecedents and the 
consequences of service value (Cronin et al., 
2000; Sweeney et al., 1999). 
On the other hand, for the last three decades, 
researchers and practitioners have made their 
efforts to determine the key role of service 
quality to customer purchase behaviors; their 
recommendations help providers give services 
meet customer expectations. Therefore, service 
quality is an important element to contribute to 
essential strategy for success and survival in 
competitive environment (Blackwell et al., 
2001; Kotler, 2000), if the quality of services is 
not valued, it only remains the quality. 
However, if quality is valued, then it becomes 
the value. This value helps to determine the 
strength and direction of the relationship that 
exists between a particular service and a 
specific customer (Frondizi, 1997). In the 
purchasing process, customers encode their 
perceptions of value as synopsis of relevant 
service information, and purchase service 
based on their assessment of this information. 
Enhancing value is a strategy that companies 
need to emphasize (Kashyap and Bojanic, 
2000), but few empirical studies have done to 
address the effect of service quality on service 
value (Gallarza and Saura, 2006). Therefore, 
this study aims to empirically test the 
relationships of service quality and service 
value in customer post purchase process, i.e. 
customer loyalty. 
The empirical setting of this research is 
domestic airline services in the transition 
economy of Vietnam. During recent years, 
Vietnamese airlines industry has developed 
quickly with various brands participating in 
this market. To sustain competitive advantage, 
an appropriate strategy to attract and retain 
their customers should be developed. This 
study has a hope to provide a better 
TAÏP CHÍ PHAÙT TRIEÅN KH&CN, TAÄP 14, SOÁ Q2  2011 
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understanding of customer’s behaviors to 
marketers in domestic airlines industry. 
2. LITERATURE BACKGROUND AND 
HYPOTHESES 
2.1 Service quality 
Service quality is an important issue in 
service management. Many studies have been 
undertaken to understand and identify this 
construct in the last three decades. However, 
conceptualization and measurement of service 
quality perceptions have been controversial 
topics in service marketing literature until now. 
Two main dominant schools of service quality 
perceptions which researchers have generally 
adopted are the Nordic school (Gronroos 1982, 
1984) and the American School (Parasuraman, 
Zeithaml, and Berry 1988). The first school 
posed that service quality stemed from the 
comparison of perceived service quality with 
expected service quality. Service quality 
consists of two dimensions, i.e. functional and 
technical quality (Gronroos 1982, 1984). 
Technical quality or service outcome quality 
represents the information of whether the 
service meets customers’ expectations; 
functional quality or service process quality 
refers to the customers’ perceptions of 
interactions that happen during service delivery 
process. The second perspective defined 
service quality as the gap between customer’s 
normative expectations for the service with 
their perceptions of the service performance 
(Parasuraman, Zeithaml, and Berry, 1988). 
These authors provided a measurement named 
SERVQUAL, with five dimensions: tangibles, 
reliability, responsiveness, assurances and 
empathy. SERVQUAL measurement has been 
widely cited by many scholars in service 
marketing literature and used quite widespread 
in many industries (Brown et al., 1993). 
Nevertheless, this measurement has also been 
subject to criticism (Asubonteng et al., 1996) 
because of only focusing on the service 
delivery process and neglecting the service 
encounter outcomes (Gronroos, 1990); lacking 
validity of the model, particularly the 
dependence or independence of the five 
dimensions (Babakus and Boller, 1992; Cronin 
and Taylor, 1992). Therefore, this study 
follows the Nordic school to investigate service 
quality based on two dimensions, service 
outcome and service process. 
2.2 Service value 
Service value has been judged to be one of 
the most important elements of differentiation 
in service marketing strategies (Jen and Hu, 
2003) and is considered as a significant factor 
in consumer decision making process 
(Sweeney et al., 1999). Zeithaml (1998) 
defined perceived value is the customer’s 
overall assessment of the utility of a service 
based on what is given and received. Service 
value of the same service offered might be 
perceived differently by different customers. 
For what is received, some customers focus on 
service quality, others need more convenient in 
using service. For what is given, some are 
concerned with their payment, others focus on 
their time and efforts. Based on trade-off 
principle of Zeithaml (1988) and the process – 
outcome approach that is used to conceptualize 
the service value in this study has its root in 
Gronroos (2001), the measurement scale of 
service value in this study is divided by two 
interrelated components, namely process value 
(or functional value) and outcome value (or 
technical value). This conceptualization was 
also supported by Babin et al (1994) who 
suggested a bi-dimensional representation of 
value. 
2.3 Relationship between service quality 
and customer loyalty 
Loyalty is defined as “a deeply held 
commitment to rebuy or repatronize a preferred 
product/service consistently in the future, 
thereby causing repetitive same-brand or same 
brand-set purchasing, despite situational 
influences and marketing efforts having the 
potential to cause switching behavior” (Oliver, 
1999, p. 34). Customer loyalty is considered as 
an important indicator of the likely success of a 
business (Butcher et al., 2001; Oliver, 1999). 
Customers who are loyal with a firm tend to 
repurchase and/or say good thing about it. 
Although, there is no general theoretical 
framework covering all aspects of customer 
loyalty, many researchers and practitioners 
believe that service quality is an antecedent of 
loyalty (Gremler and Brown, 1997). Previous 
research findings support the positive influence 
of service quality on customer loyalty (Cronin 
et al., 2000; Parasuraman and Grewal, 2000; 
Zeithaml et al., 1996). However, the precise 
loyalty implications of service quality are still 
TAÏP CHÍ PHAÙT TRIEÅN KH&CN, TAÄP 14, SOÁ Q2  2011 
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unresolved and vary across industries (Cronin 
et al., 2000). While Boulding et al. (1993) 
found the positive relationship between service 
quality and repurchase intentions and 
willingness to recommend, the study by Cronin 
and Taylor (1992) showed that there was no 
relationship between service quality and 
repurchase intentions. The result of Lee and 
Cunningham’s (1996) research in airline 
industry demonstrated that service quality 
positively correlated with customer loyalty. 
Given this diversifying results, this studies 
proposes and test the relationship between the 
service quality and loyalty: 
H1. There is a positive impact of service 
quality on customer loyalty towards a service. 
2.4 Relationship between service quality 
and service value 
Zeithaml (1988) indicates that there is a 
positive impact of service quality on the 
perceived value, and correlates positively with 
purchasing decisions. With the emerging of S-
D logic perspective (Vargo and Lusch, 2004), 
many researcher consider value as a core 
element in market exchange; service and value 
are two logically inseparable concepts which 
qualify as candidates for the title as the 
preeminent marketing concept (Gronroos, 
2008; Babin and James, 2010). Thus, creation 
of customer value becomes an important topic 
that takes many scholars’ attention. Some 
marketing scholars even suggest to change 
from creating customer satisfaction to creating 
customer value (Ngo and O’Cass, 2010). 
Frondizi (1997) argues that if the quality of 
service is valued, then it becomes the value 
which helps to determine the relationship 
between a particular service and a specific 
customer. Although, the impact of service 
quality on service value is increasingly 
discussed in marketing service (Lee et al., 
2005), few empirical studies have done to 
address this relationship (Gallarza and Saura, 
2006). Given these above situations, it is 
proposed that: 
H2: There is a positive impact of service 
quality on service value. 
2.5 Relationship between service value 
and customer loyalty 
Loyalty is strongly linked to customer value 
which is a major contributor to purchase 
intention (Chang and Wildt, 1994). Customers 
stay with a provider as long as it offers them 
superior value compared to others (Khalifa, 
2004). Based on the cognitive-based 
perspective of the value construct, some 
authors posit a direct impact of customer value 
on behavioral outcome, neglecting the role of 
satisfaction (Zeithaml, 1988). Customer value 
is a significant antecedent of loyalty while 
customer satisfaction is not (Gan et al., 2006). 
The critical role of service value toward 
customer loyalty has been mentioned by many 
empirical studies (Bolton and Drew, 1991; 
Sirdeshmukh et al., 2002). However, there is no 
general theoretical framework covering all 
aspects of customer loyalty (Shan et al., 2003), 
many scholars indicated that antecedents of 
customer loyalty are service quality customer 
satisfaction (Cronin et al., 2000; Parasuraman 
and Grewal, 2000; Zeithaml et al., 1996). 
Given this diversifying results, this study 
proposes and test the relationship between the 
service value and loyalty: 
H3. There is a positive impact of service 
value on customer loyalty towards a service. 
3. METHODOLOGY 
The model and hypotheses are tested by 
using the data collected fromVietnamese 
passengers who have used domestic airline 
services within 6 months. The survey was 
conducted by using convenience sampling 
method with a structured questionnaire. The 
scales measuring the constructs in the model 
were adopted from previous studies with 
necessary adjustments to accommodate the 
particular empirical research context (i.e. 
domestic airlines services). Measurement 
scales for the two dimensions of service quality 
were adjusted from Gronroos’ scales (1982). A 
customer loyalty scale was adopted from 
Zeithaml et al. (1996). Measurement scales for 
the two components of service value were 
adjusted from those developed by Zeithaml 
(1988). These scales (see Table 1), which were 
translated into Vietnamese using a translated 
and back-translated procedure, are five Likert 
type. The two translators were university 
academics who are fluent in both languages. 
4. RESULTS 
A total of 308 usable questionnaires are 
obtained and used for this study. Data 
TAÏP CHÍ PHAÙT TRIEÅN KH&CN, TAÄP 14, SOÁ Q2  2011 
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collection method is convenient sampling with 
face-to-face interviews using a structured 
questionnaire. This sample consists of 55.5% 
male and 45.5% female passengers on three 
domestic airlines operating in Vietnam 
(Vietnam Airlines, Jetstar Airlines and Mekong 
Airlines). The age group of 18-25 accounts for 
30.8%, of 26-35 is of 35.4%, and 33.7% are 
above 35 of age. The monthly incomes of the 
respondents which lower than 5 million VND 
accounts for 51.3% and 48.7% are above 5 
million VND. About 68.8% of the respondents 
have flied at least twice a year. The majority 
(69.7%) of the respondents pay air ticket fees 
by their own money, the rest get money from 
their bosses. 
Exploratory factor analysis (EFA) was first 
employed to have preliminary indications of 
unidimensionality, and construct validity. This 
procedure was carried out in two stages, the 
first was on the individual scales and the 
second was on all scales combined. The results 
showed that 1 out of 22 items were eliminated 
from the original scales due to low loading. 
Then confirmatory factor analysis (CFA) was 
conducted, using AMOS software program 
(Arbuckle and Wothke, 1999), on the full 
measurement model which represent relations 
among all constructs and related items. CFA 
results showed that 4 out of 21 items were ... two 
components of Service quality (second-order 
construct) contribute unequal to this aggregate 
construct. The standardized regression 
coefficient of Process quality is 0.889 (p=0.01), 
greater than Outcome quality is 0.636 (p=0.01). 
For Service value (second-order construct), the 
standardized regression coefficients of 
Outcome value and Process value are, 
respectively, 0.761 (p=0.01) and 0.637 
(p=0.01). This also indicates the unequal 
contributions of the two components to Service 
value. 
5. DISCUSSION 
This research attempts to empirically 
investigate the role of service value in customer 
decision and choice (Sweeney et al., 1999) 
which only few empirical studies have 
investigated its antecedents and consequences 
(Riadh and Miguel, 2008). In addition, only 
few researches have tested the relationships 
between service quality, service value and 
behavioral intentions (Durvasula et al., 2004). 
Therefore, the findings of this research enhance 
the understanding of the increasing importance 
of service value in inseparable service 
industries, where the performance of the 
service requires the participation of customers 
(i.e. airlines services). It also empirical test the 
relationships between service value, service 
quality and customer loyalty. The empirical 
results show that, service value has a direct 
impact on post-purchase states of customers – 
customer loyalty. This notices that service 
value is one of the key determinants of 
customer attitudes and behavior after 
consuming a service. For two components of 
service value, outcome value gives higher 
explanation of service value than process value. 
 This study also confirms the role of service 
quality as an antecedent of service value, which 
together explains the level of customer loyalty. 
In other words, service quality has indirectly 
significant impact on customer loyalty via 
service value. Theoretically this result supports 
the four hierarchical levels in customer’s 
cognitive structure on the service (Zeithaml, 
1988) in which service value is the higher level 
of service quality. Therefore, providing good 
service quality to customer would lead to 
increase customer perceived value and develop 
long lasting relationships with them. However, 
this study indicates that service quality does not 
directly affect customer loyalty. It supports the 
findings of Cronin and Taylor (1992). 
Moreover, with the remarkable development of 
Vietnamese airlines industry, passengers can 
choose which airlines that they assess its 
service is valuable to them. Consequently, 
TAÏP CHÍ PHAÙT TRIEÅN KH&CN, TAÄP 14, SOÁ Q2  2011 
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managers may need to emphasize on both 
service quality and service value rather than 
focusing only on service quality. This notice 
totally supports the co-creation value concept 
in S-D logic perspective of Vargo and Lusch 
(2004). 
6. CONCLUSION 
This study provides insight in the service 
value substituting customer satisfaction to 
become a basic framework that customers use 
to judge the company performance. The results 
also confirm that solely improving service 
quality would not help service providers 
sustain their long term relationship with 
customers. Service quality should be see as an 
encouraging factor that significant impacts on 
customer perceived value and leads to 
customer loyalty. 
From managerial point of view, 
understanding the importance of service value 
with two components of process and outcome 
value in contributing to the overall customer 
perceived value would help marketers know 
how to improve their performance. This helps 
service providers allocate their limited 
resources and efforts in delivering service, 
communicating service offers, and interacting 
with customers during the service process. In 
the case of domestic airlines services in 
Vietnam, with an acceptable price setting, it is 
difficult to enhance customer loyalty if only 
focusing on improving service quality. It is 
better if the efforts are based on customers’ 
assessment of service value to adapt their 
expectations. 
Beside the above contributions of this study, 
it also has a number of limitations that require 
future researches concern. First, 
the generalization of the results is not high due 
to data collected from only domestic airline 
passengers in Ho Chi Minh City. It should be 
conducted for passengers from all regions of 
Vietnam. Second, the results come from a 
survey of one industry, domestic service 
airlines, so it needs to perform for other service 
industries (i.e. retailing service, banking 
service...) to re-evaluate the results of this 
study. Third, the discussion of whether the 
service value can substitute customer 
satisfaction in explaining customer loyalty is 
only based on a model in which customer 
satisfaction factor does not exist. Therefore, 
another model including this factor should be 
undertaken for fully assessment. 
QUAN H GIZA CHT LƯVNG DGCH VC, GIÁ TRG DGCH VC VÀ LÒNG TRUNG 
THÀNH CA KHÁCH HÀNG - DGCH VC HÀNG KHÔNG N
I ĐGA. 
TrBn Th Phương Tho, Ph9m Ng7c Thúy 
Trư+ng Đi hc Bách khoa, ĐHQG-HCM 
TÓM T
T: Trong nhi*u th
p k qua, ch2t lư9ng d?ch vA ñư9c xem là cách th3c tt nh2t ñ) gia 
tăng lòng trung thành khách hàng thông qua vic làm cho h c-m th2y hài lòng. M:c dù, s1 hài lòng 
c5a khách hàng ñư9c xem là yu t quan trng nh2t dZn ñn lòng trung thành c5a h, tuy nhiên khi 
khách hàng hài lòng vi d?ch vA không ph-i lúc nào h cũng trung thành vi d?ch vA ñó. Vì th, m$t s 
nhà nghiên c3u ñ* ngh? rRng nên t
p trung vào yu t giá tr? d?ch vA mà khách hàng quan tâm thay vì 
t
p trung làm hài lòng h. Đ) ki)m ñ?nh gi- ñ?nh trên, nghiên c3u này ñư9c th1c hin nhRm xem xét 
mi quan h gia ch2t lư9ng d?ch vA, giá tr? d?ch vA và lòng trung thành c5a khách hàng. Các mi quan 
h này ñư9c ki)m ñ?nh vi 308 khách hàng s dAng d?ch vA hàng không n$i ñ?a Vit Nam t#i thành ph 
H0 Chí Minh. Kt qu- nghiên c3u cho th2y hai thành phNn ch2t lư9ng d?ch vA có -nh hư4ng tích c1c 
lên lòng trung thành c5a khách hàng thông qua yu t trung gian là giá tr? d?ch vA. 
Keywords: Ch2t lư9ng d?ch vA, Giá tr? d?ch vA, lòng trung thành khách hàng, d?ch vA hàng 
không n$i ñ?a, Vit Nam. 
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