Customer Loyalty and Service Quality

I NT E RNAT I ONE L L A HANDE L S HÖGS KOL ANHÖGSKOLAN I JÖNKÖPING Servi ce Tangi bi l i t y and Cust omer Loyal t y: I s t here a rel at i onshi p? Master`s thesis within Business Administration Author: Joanna Magnusson Llin Sundin 1utor: Karl Lrik Gustaísson Jonkoping May 2005 J ÖNKÖP I NG I NT E RNAT I ONAL BUS I NE S S SCHOOL Jonkoping Uni·ersity Servi ce Tangi bi l i t y and Cust omer Loyal t y: I s t here a rel at i onshi p? Master`s thesis within Business Administration Author: Joanna Magnusson Llin Sundin 1utor: Karl Lrik Gustaísson Jonkoping May 2005 Master’s Thesis within Business Administration Title: Service Tangibility and Customer Loyalty: Is there a relationship? Author: Joanna Magnusson & Elin Sundin Tutor: Karl Erik Gustafsson Date: 200S-0S-3J Subject terms: Service marketing, tangibility, customer loyalty. Abstract Background and problem: 1he ser·ice industry is steadily growing and is today contributing more to o·erall growth in Sweden than the manuíacturing industry. Ser·ices are diííerentiated through being heterogenic, perishable, inseparable and intangible. As a result, they are more diííicult íor customers to assess on beíorehand. 1his also aííects marketing oí ser·ices. A study suggested that the relationship between intangibility and loyalty would be interesting to in·estigate because to make ser·ices more tangible, loyalty may also be aííected. Purpose: 1he purpose oí this thesis is to in·estigate ií there exist a relationship between ser·ice tangibility and customer loyalty. Irame of reference: In the írame oí reíerence, theory concerning ser·ice characteristics, tangibility oí ser·ices, ser·ice quality and loyalty will be presented. Method: 1o íulíil our purpose, we ha·e chosen a quantitati·e method. A questionnaire was carried out in Jonkoping where 240 respondents participated. 1he results was then calculated employing the statistical program SPSS. Conclusion: Our results show that there exist a signiíicant relationship between ser·ice tangibility and loyalty in three oí the six in·estigated ser·ice industries: dentistry, tra·el agency and restaurants. 1he relationships are negati·e meaning but deciding causality could not be done. In the others, hairdresser, banks and the Swedish employment agency, no signiíicant relationship was íound. i Table of Content 1 Introduction .......................................................................... 4 1.1 Background................................................................................... 4 1.2 Problem discussion ....................................................................... 5 1.3 Purpose......................................................................................... 5 1.4 Previous Research........................................................................ 5 1.5 Definition of a Service Firm........................................................... 6 1.6 Delimitations.................................................................................. 7 1.7 Disposition..................................................................................... 8 2 Frame of Reference.............................................................. 9 2.1 Service Definition .......................................................................... 9 2.1.1 Service Classification.......................................................... 9 2.1.2 Service Characteristics..................................................... 10 2.2 The Tangibility Continuum........................................................... 11 2.3 Tangibility of Services ................................................................. 12 2.4 Service Quality ............................................................................ 13 2.5 Service Quality Model ................................................................. 14 2.6 Customer Loyalty ........................................................................ 15 2.6.1 The Service Profit Chain................................................... 16 2.6.2 Customer Satisfaction and Customer Loyalty................... 17 2.6.3 Customer Loyalty and Profitability .................................... 18 2.7 Theory Summary......................................................................... 18 3 Methodology....................................................................... 20 3.1 Positivism and Interpretivism....................................................... 20 3.2 Method for data gathering ........................................................... 21 3.2.1 Survey Method.................................................................. 21 3.2.2 Questionnaire Design ....................................................... 22 3.3 Sampling ..................................................................................... 23 3.4 Non Response ............................................................................ 25 3.5 Data handling.............................................................................. 26 3.6 Validity and Reliability ................................................................. 27 3.7 Criticism against used method .................................................... 28 4 Empirical Findings and Analysis....................................... 29 4.1 Method of Analysis...................................................................... 29 4.2 Restaurants................................................................................. 30 4.2.1 Tangibility ......................................................................... 30 4.2.2 Loyalty .............................................................................. 31 4.3 Hairdressers................................................................................ 33 4.3.1 Tangibility ......................................................................... 33 4.3.2 Loyalty .............................................................................. 34 4.4 Travel Agencies........................................................................... 35 4.4.1 Tangibility ......................................................................... 35 4.4.2 Loyalty .............................................................................. 36 4.5 Dentistry...................................................................................... 37 4.5.1 Tangibility ......................................................................... 37 4.5.2 Loyalty .............................................................................. 38 ii 4.6 Banks .......................................................................................... 40 4.6.1 Tangibility ......................................................................... 40 4.6.2 Loyalty .............................................................................. 41 4.7 The Swedish Employment Agency.............................................. 43 4.7.1 Tangibility ......................................................................... 43 4.7.2 Loyalty .............................................................................. 44 4.8 Overall Service Analysis.............................................................. 46 4.8.1 Loyalty and Intangibility Graph ......................................... 46 4.8.2 Tangibility Continuum....................................................... 48 5 Conclusions and Final Discussion.................................... 50 5.1 Conclusions................................................................................. 50 5.2 Final Discussion.......................................................................... 50 5.3 Suggestions for further studies.................................................... 51 6 List of references................................................................ 53 Appendices .............................................................................. 57 iii Figures Figure 1-1 Disposition. ................................................................................... 8 Figure 2-1 The tangibility continuum and customer evaluation (Rushton & Carson, 1989).................................................................................. 12 Figure 2-2 Total perceived quality (Grönroos, 2000).................................... 14 Figure 2-3 A remodelled service-profit chain (Heskett et al., 1994).............. 16 Figure 4-1 Restaurants’ loyalty and intangibility rate.................................... 30 Figure 4-2 Hairdressers’ loyalty and intangibility rate................................... 33 Figure 4-3 Travel agencies’ loyalty and intangibility rate. ............................. 35 Figure 4-4 Dentists’ loyalty and intangibility rate. ......................................... 37 Figure 4-5 Banks’ loyalty and intangibility rate. ............................................ 40 Figure 4-6 The Swedish Employment agency’s loyalty and intangibility rate.43 Figure 4-7 Loyalty and Intangibility Graph.................................................... 46 Figure 4-8 Tangibility Continuum. ................................................................ 48 Appendices Appendix 1 Survey – Swedish version......................................................... 57 Appendix 2 Survey – English version........................................................... 59 Appendix 3 Correlation Outputs ................................................................... 61 Introduction 4 1 Introduction 1be ivtroavctiov cba¡ter ae.cribe. tbe cbo.ev ¡robtev, bac/grovva ava ¡vr¡o.e of tbi. tbe.i.. ívrtbervore, a ai.¡o.itiov of tbe .tva, i. ¡re.evtea. 1.1 Background 1he importance oí ser·ices has increased during the last decades in de·eloped countries. Many íactors underlie the change írom a dominating manuíacturing sector towards a society where ser·ices dominate. Globalisation, changing patterns in go·ernmental regulation, pri·atisation, technological inno·ations and growth oí íranchising ha·e all contributed to this dynamic mo·ement ,Lo·elock, 1991,. In 2003, the Swedish ser·ice industry contributed more to growth than the manuíacturing industry. 1his was, according to NU1LK`s ,1he Swedish business de·elopment agency, general director, a ¡araaigvatic .bift ava ove of tbe targe.t rerotvtiov. iv tbe ´reai.b ecovovic bi.tor,` ,cited in Petersen, 2005, p. 2,. 1he Swedish ser·ice sector has indeed expanded rapidly in recent decades. Currently, ¯5 ° oí all employment is within this sector. Moreo·er, ií adding ser·ices that are parts oí the manuíacturing and constructing sectors, ser·ice employees account íor around 85 ° oí total employment in Sweden ,Sweden.se, 2005,. 1hese íigures also show the importance oí the steadily growing íield oí ser·ice marketing. In addition, theorists mean that due to ser·ices` speciíic characteristics, it is necessary to use ser·ice oriented marketing approaches instead oí creating and applying marketing theories that are based on tangible products ,e.g. Gronroos, 2000, Rushton & Carson, 1989,. 1he most írequently cited and widely used set oí ser·ice characteristics are heterogeneity, perishability, inseparability and intangibility ,e.g. Gronroos, 2000, Kotler, Armstrong, Saunders & \ong, 2002, Rushton & Carson, 1989,. It is argued by theorists that intangibility is the most critical and unique character íor a ser·ice, because intangibility is aííecting customers` as well as management`s assessment oí a ser·ice ,e.g. larte & Dale, 1995, Johns, 1999, McDougall & Snetsinger, 1990, Rushton & Carson, 1989, Santos, 2002,. McDougall and Snetsinger ,1990, make a clear distinction between the concepts oí tangibility and intangibility by deíining tangibility as tbe aegree to rbicb a ¡roavct or .errice cav ¡roriae a ctear covcrete ivage` ,p. 2¯, and intangibility as tbe tac/ of ¡b,.icat eriaevce` ,p. 28,. 1hey mean that customers respond and translate a ser·ice`s intangibility as, íor example, being riskier and diííicult to e·aluate. In turn, this acknowledgement denotes that intangibility has a direct iníluence on customers. McDougall and Snetsinger ,1990, also imply that management addresses intangibility through stressing tangible cues and making communications more ·i·id. 1hus, ser·ice pro·iders are íocusing on making ser·ices more tangible to iníluence consumers` decision- making so that they can grasp and e·aluate a ser·ice on beíorehand ,Johns, 1999, McDougall & Snetsinger, 1990, Rushton & Carson, 1989,. 1he concept oí tangibility in ser·ice industry could then be considered as fvvaavevtat to tbe avat,.i. ava ¡ractice of .errice var/etivg` ,McDougall & Snetsinger, 1990, p. 39,. lence, to tangibilize the intangible ser·ice is to be considered as a key to success íor ser·ice pro·iders ,Reddy, Buskirk & Kaicker, 1993,. In connection to a ser·ice`s intangibility, it is recommended, as a íurther study, to in·estigate in the relationship between the le·el oí a ser·ice`s degree oí tangibility and loyalty ,McDougall & Snetsinger, 1990,. 1his because not only is the ser·ice industry expanding, trends also indicate that customers are becoming increasingly sophisticated, Introduction 5 iníormed and demanding. lence, customers are looking íor better ·alue in the ser·ices and the products that they purchase ,Gronroos, 2000,. Due to rapid technological de·elopment, íirms are enabled to create ser·ices more easily, which in turn intensiíy competition. In addition, borders between countries are íading because oí globalisation and trade liberalisation policies, which íorces ser·ice companies to compete also on the global arena. 1here is an increased ser·ice competition, which means that it is not enough in today`s market to compete with just the core solution oí a ser·ice ,Gronroos, 2000,. In order to become competiti·e, there is a need to pro·ide a total ser·ice oííering ,Gronroos, 2000,. lence, a customer`s selection criteria are today based on both tangible and intangible entities ,larte & Dale, 1995,. 1o attract and retain customers, some companies choose to in·est and boast their relationship with existing customers. According to Soderlund ,2003,, there has been a de·elopment within marketing, instead oí putting customers in íocus, a ser·ice organisation is now placing loyal customers in centre oí attention. 1he importance oí customer loyalty is íurther emphasised by Cook ,1996, who means that if ,ov cav`t /ee¡ tbe cv.tover. ,ov bare, ,ov aov`t ae.erre av, ver ove.` ,p. xi,. 1his is a statement that coheres with Reichheld`s ,199¯, notion that vvtvat, earvea to,att, i. a ¡orerfvt, bv.ive..·bvitaivg force` ,p. 19,. lence, creating customer ·alue is becoming the centre oí any business strategy ,Reichheld, Markey & lopton, 2000,. 1.2 Problem discussion Because competition íor customers is now íiercer than beíore, being able to market ser·ices properly is becoming increasingly important. 1heorists indicate that companies could strengthen their ser·ice oííer by attempting to decrease ser·ice intangibility and thereby making it easier íor customers to e·aluate and examine what has been bought ,e.g. Johns, 1999, McDougall & Snetsinger, 1990, Rushton & Carson, 1989,. Such strategies are needed in order to sur·i·e on the market and íulíil customers` expectations oí the ser·ice. In addition, a ser·ice pro·ider should also íocus on increasing customer loyalty since this will increase re·enues and proíitability ,leskett, Jones, Lo·eman, Sasser & Schlesinger, 1994,. 1o boost loyalty and to increase a ser·ice`s degree oí tangibility thereíore ought to occur simultaneously within a ser·ice organisation. Deri·ed írom these ongoing trends, could it be there exist a relationship between these two important aspects oí ser·ice marketing· Ií so, to enhance loyalty, ser·ice companies must also market their ser·ices with the purpose oí making them more tangible. Could it be that increasing the degree oí tangibility oí a ser·ice will enhance customer loyalty or ·ice ·ersa· 1.3 Purpose 1he purpose oí this thesis is to in·estigate ií there exist a relationship between ser·ice tangibility and customer loyalty. 1.4 Previous Research Deri·ed írom the problem discussion abo·e, it is ·alid to claim that ser·ice marketing, with special íocus on ser·ice intangibility, is currently being elaborated upon. In particular, three researchers ha·e contributed to ser·ice tangibility and customer loyalty. Since this thesis is linking and making use oí their de·eloped sur·eys, the researchers and their studies will be Introduction 6 introduced below. 1he actual usage oí the sur·eys will be íurther commented upon in section 3.2.2. 1wo oí the theorists that ha·e made an input to the íield oí ser·ice marketing are Gordon l.G. McDougall, a Proíessor oí Marketing in the School oí Business and Lconomics at \ilírid Laurier Uni·ersity in Canada and Douglas \. Snetsinger, an Assistant Proíessor oí Marketing in laculty oí Management at Uni·ersity oí 1oronto ,McDougall & Snetsinger, 1990,. 1heir pre·ious works ha·e appeared in well-known academic journals such as Journal oí Marketing, Journal oí Consumer Beha·iour and Journal oí Marketing Research ,McDougall & Snetsinger, 1990,. McDougall and Snetsinger ,1990, made a study, which built on pre·ious marketing prescriptions on managing ser·ice intangibility. 1his study made two distincti·e contributions to ser·ice tangibility. lirst, it de·eloped a system to measure the rate oí tangibility. Second, it extended the ·alue oí tangibility to a more competiti·e le·el. By introducing a measurement system, McDougall and Snetsinger ,1990, were able to place diííerent kinds oí products and ser·ices along a tangibility continuum. 1heir studies de·eloped írom considering only product classes to in·ol·e company le·el, brand le·el and segment le·el. McDougall and Snetsinger ,1990, started their studies by generating a sample oí items that could be used to measure tangibility. Aíter preliminary tests, reliability oí a tangibility continuum was oí satisíaction and 9 statements were selected to measure tangibility. Using a quantitati·e method, a con·enience sample, consisting oí 55 respondents, was drawn to test the reliability oí this proposed scale. Lach oí the respondents were asked to e·aluate nine products and ser·ices at product class le·el. In accordance with was what expected, most ser·ices were rated toward the intangible end. 1hese statements were later scaled down írom 9 to 5, to simpliíy the continuum scale. lurther, a second empirical study was made including 122 respondents employing a con·enience sample. 1he new results pro·ed that the reduced amount oí statements also pro·ided reliability and was consistent with pre·ious results. It is suggested as íurther research, to in·estigate ií there exist a relationship between ser·ice tangibility and loyalty. In order to continue McDougall`s and Snetsinger`s ,1990, study, this thesis also makes use oí a sur·ey that is created to measure customer loyalty, which was de·eloped by lred Reichheld. le is the íounder oí Bain & Company`s Loyalty Practice, which helps clients to impro·e customer, employee, partner, and in·estor loyalty. lis pioneer work has quantiíied the linkage between loyalty, proíits, and growth. Reichheld is well known within his íield oí research. In 2003, the Consulting Magazine recognized him as one oí the world`s top 25 consultants. Reichheld created a tool to monitor and diagnose organisational relationships, which is called the Loyalty Acid 1est Sur·ey. 1his sur·ey, using a quantitati·e method, has been administered to a large sample oí customers and employees írom loyalty-leading companies such as Vanguard, larley-Da·idson and SAS. ,Bain & Company, 2005, 1.5 Definition of a Service Firm Johns ,1999, means that words are a medium in which concepts íorm and de·elop. Relating this notion to ser·ices, Johns ,1999, states that tbe e·tev.ire v.e of tbe rora .errice` aevov.trate. tbe iv¡ortavce of tbi. etv.ire covce¡t ava .vgge.t. a ra¡ia rate of erotvtiov ava aereto¡vevt` ,p. 959,. 1hus, it means that it is hard to pro·ide a general description that coheres with all existing perceptions. lowe·er, it is required to pro·ide a broad deíinition so that the purpose oí the thesis can be íully understood. \ithin the theoretical íramework, there will Introduction ¯ be a more extensi·e discussion, which will touch upon diííerent kinds oí ser·ices and their characteristics. As will be íurther explained in section 2.2 when discussing ser·ice characteristics, products can ha·e intangible attributes and ser·ice output can ha·e tangible components, which makes it e·en more diííicult to distinguish and deíine a ser·ice and a ser·ice industry. 1hereíore, to separate ser·ice` and manuíacturing` industries it is necessary to look at the ser·ice and manuíacturing ideas. 1he ser·ice` idea íocuses upon customer relationships and aims to meet markets through actions. 1he manuíacturing` idea íocuses upon inputs and aims to meet markets through a tangible output ,Johns, 1999,. Johns ,1999, means that the word ser·ice is oíten used to denote an industrial sector that aoe. tbivg. for ,ov` ,p. 959,. lence, when íurther reíerring to ser·ice industries we will group ser·ice organisations that pro·ide similar core ser·ices ,see íurther chapter 2,. lor example, banks are in a ser·ice industry that pro·ides íinancial ser·ices. According to Gronroos ,1998,, ser·ice íirms do not ha·e ¡roavct. iv tbe forv of ¡re¡roavcea .otvtiov. to cv.tover.` ¡robtev.; tbe, bare ¡roce..e. a. .otvtiov. to .vcb ¡robtev.` ,p. 330,. Ser·ice íirm, ser·ice organisation, company and ser·ice pro·ider will be used interchangeably. 1.6 Delimitations Due to the number and di·ersity oí ser·ice pro·iders present in the ser·ice industry as a whole, we ha·e chosen to limit our study to six ser·ice industries: restaurants, hairdressers, tra·el agencies, dentistries, banks and the Swedish employment agency. 1he reason íor selecting these speciíic industries will be discussed in section 3.3. Introduction 8 1.7 Disposition Abo·e, the background and problem discussion ha·e lead to the purpose oí this thesis. In the íollowing chapter, the theoretical íramework íor the thesis will be introduced. \ithin this chapter, ser·ices` distinct characteristics will be discussed with íocus on their intangible íeature. 1his will lead to a continuum that displays ser·ices` degree oí tangibility. Diííerent theorists` ·iews oí tangibility will also be presented. lurther, ser·ice quality and its links to customer satisíaction and loyalty are being elaborated upon. In chapter three, our choice oí method is presented. Positi·ism and interpreti·ism are described in order to establish and moti·ate our choice oí method. Reliability and related terms are linked to the study in order to pro·e quality oí deri·ed results. 1he use and íormation oí questionnaires will also be described and e·aluated. 1he results deri·ed írom questionnaires are displayed in chapter íour. 1hey are directly applied to the theoretical íramework to íorm the analysis oí the study. linally, conclusions will be drawn and presented, which in turn will be íollowed by a íinal discussion that contains suggestions to íurther research on the subject. ligure 1-1 Disposition. lrame oí Reíerence 9 2 Frame of Reference 1be fottorivg cba¡ter ritt ¡re.evt tbe frave of referevce for tbi. tbe.i.. íir.tt,, b, v.ivg aifferevt tbeori.t.` ¡er.¡ectire., a .errice i. beivg aefivea iv oraer to aee¡ev tbe vvaer.tavaivg for tbe .vb;ect ava to ai.¡ta, tbe cov¡te·it, of .errice.. 1o ¡rore tbe rariet, of .errice., cta..ificatiov ava cbaracteri.tic. are ¡re.evtea. 1bereafter, .errice.` ivtavgibte ava tavgibte featvre. ritt be ai.cv..ea, .ivce .vcb a ai.cv..iov teaa. to av vvaer.tavaivg of tbe ravge of .errice. ritbiv tbe .errice ivav.tr,. 1bere are certaiv tiv/. betreev tavgibitit,, .errice qvatit,, .ati.factiov ava to,att,. 1berefore, att tbe.e a.¡ect. are ivtere.tivg ritb referevce to tbe ¡vr¡o.e of tbi. tbe.i.. 2.1 Service Definition Marketing methods ha·e historically been directed towards how tangible products best should be promoted towards the íinal customers. 1he reason íor why ser·ices were not equally popular was that they were considered as add-on` to the real product and thus added little ·alue compared to tangible products ,Gronroos, 2000,. As the ser·ice sector has grown increasingly larger in de·eloped countries, marketing research now includes many aspects oí how ser·ices best should be marketed related to subjects such as ser·ice quality, experiences, design and deli·ery ,Brown, lisk & Bitner, 1994,. Beíore mo·ing deeper into ser·ice marketing research, it is proper to start with deíining what a ser·ice is and how it diííers írom a tangible good. A ser·ice can be deíined as av, actirit, or bevefit tbat ove ¡art, cav offer to avotber rbicb i. e..evtiatt, ivtavgibte ava aoe. vot re.vtt iv tbe orver.bi¡ of av,tbivg` ,Kotler et al., 2002, p. 832,. lowe·er, e·en though ser·ices are claimed to be intangible, there are diííerent degrees oí how intangible a ser·ice is. Gronroos ,2000, adds that a ser·ice is a ¡roce.. cov.i.tivg of a .erie. of vore or te.. ivtavgibte actiritie. tbat |.| ta/e ¡tace iv ivteractiov. betreev cv.tover ava .errice ev¡to,ee. ,p. 46,. 1ogether these two ser·ice deíinitions pro·ide a íuller ·iew than each does separately. lence, both Kotler et al.`s ,2002, and Gronroos`s ,2000, ·iews will be employed when íurther reíerring to ser·ices. It is suggested that we can examine goods and ser·ices using the tangibility continuum where each good or ser·ice is placed along a horizontal axis based on intangible,tangible dominant aspects ,McDougall & Snetsinger, 1990, Kotler et al., 2002,. In between these extremes are ser·ices and products that consist oí both tangibles as well as intangibles. 1he tangibility continuum will be íurther described in section 2.2. Gronroos ,2000, argues that the way ser·ice is deíined is outdated in that ser·ices are ·iewed as something pro·ided by a certain organisation. Ií looking at ser·ice in another way than the deíinition by Kotler et al. ,2002, abo·e it is arguable that customers do not buy goods or ser·ices at all but offerivg. cov.i.tivg of gooa., .errice., ivforvatiov, ¡er.ovat attevtiov ava otber cov¡ovevt. ,Gronroos, 2000, p. 3,. Gronroos ,2000, means that by adapting this deíinition, a ser·ice can be considered as something added to these oííerings that creates ·alue íor costumers. Regardless oí what a íirm produces, it is crucial to make sure that customers engage in ·alue-creating processes aíter they ha·e purchased the sought-aíter solution. Beíore ·alue is created, the ser·ice oííer has not pro·ided anything to anyone, thus, ·alue cannot be created until aíter it is purchased. 2.1.1 Service Classification As presented abo·e, there are diííerent ways to deíine what a ser·ice is. Gronroos ,2000, distinguishes between three groups oí ser·ices, core ser·ices, íacilitating ser·ices and lrame oí Reíerence 10 supporting ser·ices. A core ser·ice is the reason íor why a íirm exists on the market. Ne·ertheless, simply oííer a core ser·ice is not enough, íurther ser·ices ha·e to be added reíerred to as íacilitating ser·ices since they íacilitate the use oí the core ser·ice. Ií these are not present, core ser·ice cannot íunction properly. Lastly, supporting ser·ices are also additional but íulíil another purpose compared to íacilitating ser·ices. 1hey intend to increase the ·alue oí the ser·ice and, hence, make it more competiti·e. Gronroos`s ,2000, way oí classiíying ser·ices, are deri·ed írom a íirm`s point-oí-·iew. 1aking the other perspecti·e, írom a customer`s standpoint, a ser·ice can be classiíied diííerently. Stell and Donoho ,1996, di·ide ser·ices into íour diííerent categorises, con·enience ser·ices, preíerence ser·ices, shopping ser·ices and speciality ser·ices. Con·enience ser·ices are inexpensi·e, purchased írequently and with little in·ol·ement. Preíerence ser·ices diííer írom con·enience ser·ice because they ha·e been more diííerentiated through marketing acti·ities. 1he two last categories engage customers in higher in·ol·ement when purchasing ser·ices ,Stell & Donoho, 1996,. By displaying these diííerent ser·ice classiíications, it is clearer shown that the word ser·ice is di·erse. Moreo·er, as seen abo·e, ser·ices can be deíined diííerently depending on what kind oí ser·ice implied and which perspecti·e taken ,Gronroos, 2000, Stell & Donoho, 1996,. \ithout going any íurther into these diííerent kinds oí classiíications and perspecti·es, it is an acknowledgement to be aware oí. Researchers ha·e also attempted to distinguish ser·ices írom products by bringing íorth ser·ice characteristics. 2.1.2 Service Characteristics Many characteristics oí ser·ices ha·e been discussed in the literature. 1hese discussions ha·e mainly e·ol·ed írom comparison with tangible goods. Stell and Donoho ,1996, argue that as many as 19 attributes ha·e been used when attempting to classiíy ser·ices. 1he most írequently discussed are ser·ice intangibility, heterogeneity, perishability and inseparability ,e.g. Gronroos, 1998, Kotler et al., 2002, Rushton & Carson, 1989,. Intangibility means that ser·ices can neither be touched nor e·aluated beíore consumption as with tangible goods. Moreo·er, depending on who consumes the ser·ice, it will be percei·ed and experienced diííerently. 1his leads to the characteristics oí heterogeneity. A ser·ice perishes aíter consumption and it can neither be produced nor stored beíore consumption, hence, it is being consumed and produced simultaneously ,Rushton & Carson, 1989,. 1his leads to the problem oí unused capacity and the re·erse problem ií demand exceeds supply when no in·entories can be stored as a backup ,Lo·elock, 1991,. 1ransíerring oí ownership cannot take place when purchasing a ser·ice because oí its intangibility aspect ,Gronroos, 2000,. Intangibility and heterogeneity are not just speciíic íor ser·ices while perishability and inseparability deri·es írom the most important characteristic oí ser·ices, the process nature ,Gronroos, 1998,. Lo·elock ,1991, adds some íurther characteristics oí ser·ices: personnel, time and distribution channels. le says that people are a part oí the product in that they do not simply come in contact with the ser·ice personnel but also with other customers. 1ime also play a crucial role in ser·ice deli·ery because customers ha·e to be present íor the ser·ice to be deli·ered, thus, waiting times cannot be too long. lurthermore, ser·ices employ diííerent distribution channels compared with physical goods. Because oí the intangible characteristic, electronic channels are used largely it can also be that ser·ice íactory, retail outlet and point oí consumption are bundled together into one channel. ,Lo·elock, 1991, lrame oí Reíerence 11 Gronroos ,1998, 2000, argues that ser·ices are produced in processes consisting oí series oí acti·ities where customers interact with production resources, which lead to a solution to the customer`s problem. As a result, consumption oí ser·ices is a process rather than outcome consumption since consuming the ser·ice does not in·ol·e any direct outcome in the same way as when a more tangible good is purchased. Con·ersely, consuming ser·ices is a process oí producing the ser·ice and the customer act as a participant. Adapting this ·iew oí ser·ices also leads to other characteristics oí the marketing mix oí ser·ices. Rust, Zahorik and Keiningham ,1996, state that the marketing mix íor ser·ices adds three P`s to the existing 4 ,product, price, place and promotion,, people, physical e·idence and process. People reíer to the inseparability aspect in that personal interaction has to take place between the customer and the employee. Physical e·idence addresses the tangible íeatures oí ser·ices such as physical surroundings and other ·isible cues in the ser·ice en·ironment. Ser·ice intangibility is the characteristic that has been most widely discussed ,e.g. larte & Dale, 1995, Johns, 1999, McDougall & Snetsinger, 1990, Rushton & Carson, 1989, Santos, 2002,. Gronroos ,1998, argues that e·en tangible products can ha·e certain intangibility íeatures connected to them, hence, it is said that intangibility is not exclusi·ely a ser·ice characteristic. 1he diííerence is that products can ha·e more or less tangible íeatures attached to them and that the proportion oí intangibles ·ersus tangibles diííers ,Rushton & Carson, 1989,. Despite this, intangibility is connected to how pure goods and pure ser·ices diííer írom each other. Intangibility leads to problems when communicating to potential customers what the ser·ice can oííer. 1hus, by íocusing on marketing tangible cues to customers, the insecurity connected to intangibility can be reduced ,Rust et al., 1996,. Intangibility diííers a lot between diííerent ser·ices and thereíore this problem poses greater challenges íor some but less íor others. Santos ,2002, argues that íew products are completely tangible or intangible. 1hus, a distinction between manuíactured products and ser·ices becomes less clear. 1hereíore, the statement írom Payne ,1993, that a ser·ice has a tevaevc, towards intangibility, heterogeneity, inseparability and perishability. lrom similar ideas, the tangibility` continuum was de·eloped, which will be íurther described in the next part. 2.2 The Tangibility Continuum As mentioned abo·e, there is a belieí that products as well as ser·ices ha·e certain elements oí intangibility and tangibility ,Gronroos, 1998, Le·itt, 1981, Santos, 2002,. Le·itt ,1981, adds that ha·ing a higher proportion oí tangibles will reduce risk when trying to communicate the ser·ice towards prospecti·e customers. larte and Dale ,1995, agree with this notion and mean that tangibility and intangibility íeatures are weighted diííerently, depending on what kind oí ser·ice or product that is concerned. lence, ·iewing a ser·ice as purely intangible and a product as tangible is not a suííicient distinction. Shostack ,cited in Santos, 2002, de·eloped a tangibility continuum ,see íigure 2-1, based on this idea. It was íormed to be able to classiíy ·arious industries írom tangible dominant to intangible dominant. It also displays that the ser·ice industry itselí is not a homogenous group, it does exist a ·ariation in their intangible íeatures ,Johns, 1999,. lrame oí Reíerence 12 ligure 2-1 1he tangibility continuum and customer e·aluation ,Rushton & Carson, 1989,. In addition to the continuum thoughts, theorists mean that ser·ices and products each contain a certain number oí search, experience and credence qualities ,see íigure 2-1,, which in turn contribute to the degree oí tangibility ,e.g. McDougall & Snetsinger, 1990, Moorthia, 2002, Zeithaml, 1991,. lence, these qualities indicate that it is not possible to make a complete separation oí products and ser·ices. Search qualities reíer to a ser·ice`s ability to be seen, touched and tasted. lor this reason, these are attributes, which can be determined beíore the actual purchase ,Zeithaml, 1991,. Lxperience qualities are more intangible than search qualities. Because oí the higher le·el oí intangibility, ser·ices or goods with experience qualities cannot be assessed until they ha·e been purchased. Credence qualities consist oí the most intangible íeatures, which might not be e·aluated e·en aíter the actual purchase. 1hus, what might diííerentiate a ser·ice írom a tangible product in this case is that a ser·ice contains less search qualities ,Moorthia, 2002,. 2.3 Tangibility of Services According to McDougall and Snetsinger ,1990,, tangibility is deíined as tbe aegree to rbicb a ¡roavct or .errice cav ¡roriae a ctear covcrete ivage` ,p. 2¯,. 1hey in·estigate in the deíinition íurther and state that tangibility has both a physical and a mental component. Larly discussions were more concerned with the physical component because theorists were more interested in a customer`s examination and e·aluation beíore purchasing a ser·ice. 1he mental component reíers to customers` ability to grasp mentally what they will recei·e ií they purchase the ser·ice. In turn, tangibility within the continuum ,see íigure 2-1,, is reíerring to what extent a ser·ice can pro·ide a clear and concrete image. ,McDougall & Snetsinger, 1990, It is also claimed that there is a need to make a distinction between the terms tangibles and tangibility. 1angibles are deíined as tbe ¡b,.icat eriaevce of tbe .errice` ,McDougall & Snetsinger, 1990, p. 31, and tangibility íeatures íocus more on the ability to ·isualise the ser·ice. In addition to McDougall`s and Snetsinger`s ,1990, tangible deíinition, Rushton and Carson ,1989, mean that there are two kinds oí tangibles, the tangible surrogate íeatures and the tangible beneíits. 1he tangible surrogate is the surrounding oí the intangible ser·ice and the tangible beneíits could be seen as the physical result, which the customer recei·es írom the ser·ice períormance. lowe·er, deri·ed írom Rushton`s and Carson`s ,1989, research, this di·ision is not clear íor practitioners in the ser·ice-marketing íield. lrame oí Reíerence 13 1he abo·e-mentioned tangibility deíinition will be used within this thesis. lowe·er, using this deíinition does not mean that ser·ices` tangibles will be neglected. Because it is claimed that tangibles ha·e an iníluence on customers` ability to create a mental picture oí a ser·ice on beíorehand. McDougall and Snetsinger ,1990, mean that tangibles contribute in part to the o·erall tangibility oí the ser·ice. Consequently, they are iníluencing customers` e·aluation oí a ser·ice prior purchase. 1here is a general notion that key to success is to make the ser·ice intangibility more tangible ,Reddy et al., 1993,. By knowing the degree oí a ser·ice`s tangibility, íirms can become aware oí their competiti·e position in the market. Deri·ed írom this understanding, the company can íocus more thoroughly on strengthening the ser·ice oííer ,McDougall & Snetsinger, 1990,. By making the ser·ice more tangible, the customer is able to make an e·aluation oí it beíore and aíter the purchase ,Rushton & Carson, 1989, McDougall & Snetsinger, 1990,. lence, there seems to be a general understanding that customers íocus their assessment oí a ser·ice upon a ser·ice`s diííerent kinds oí tangible íeatures. 1his coheres with the statement that tbe tavgibte a.¡ect. act a. .igvifier. of .errice qvatit, ava tbat ivtavgibte .errice a.¡ect. cav be a..e..ea tbrovgb tbev` ,Johns, 1999, p. 962,. 2.4 Service Quality Beíore making a ser·ice more tangible, an organisation should identiíy customer expectations regarding desired ser·ice quality ,Reddy et al., 1993,. 1his because there is a certain trade-oíí between an ideal ser·ice le·el and costs in·ol·ed in pro·iding such le·els oí ser·ice. On the one hand, to gi·e exemplary treatment to a patient in a hospital can be too costly and impossible due to lack oí skilled personnel. On the other hand, oííering basic ser·ices without any additional extras might perpetuate a negati·e image oí a company, which in turn could lead to market íailure ,Reddy et al., 1993,. 1hereíore, being aware oí what customers expect gi·e organisations opportunities to in·est the right amount oí resources to pro·ide ser·ices oí good quality. 1he relationship between ser·ice ·alue and tangibility is íound in studies by Santos ,2002,. Deri·ed írom her empirical íindings, it was concluded that the degree oí tangibility or intangibility does ha·e a signiíicant eííect on consumers` perception oí ser·ice quality. 1he intention with Santos`s ,2002, research was to test the hypothesis that there exist a positi·e relationship between tangibility and percei·ed ·alue. 1his hypothesis was put íorward because tangibles can be seen as a airect e·¡o.itiov ava e·¡ticit ¡re.evtatiov of .errice qvatit,` ,Santos, 2002, p. 295,. By making reliable questionnaires concerning ser·ice quality and in·estigations in managerial implications through qualitati·e inter·iews, Santos ,2002, came to accept the hypothesis. Santos ,2002, íurther argues that consumers might actually recognise the tangible aspect oí the ser·ice as more important than the actual consumed ser·ice. 1he researcher supports this notion by presenting a restaurant example, where tangibles ,such as íood, might be considered more important than the actual intangible ser·ice. It is also stated that the more tangible components a ser·ice has, the more do the tangibles contribute to ser·ice quality ,Santos, 2002,. lowe·er, Santos ,2002, also detected that the opposite is equally true, when ser·ices in·ol·e actions, which are directed towards intangible assets such as insurances, consumers might percei·e ·alue oí a ser·ice as more important. lrame oí Reíerence 14 2.5 Service Quality Model Ser·ice quality could be deíined as rbaterer tbe cv.tover ¡erceire. it to be` ,Gronroos, 2000, p. 63, or as ove forv of ratve cov.vver. receire iv cov.vv¡tiov. erevt.` ,Oli·er, 1993, p. 6¯,. \hiche·er deíinition that is preíerred, the customer`s role in the quality assessment is emphasised. 1here are also indications that ser·ices` characteristics ,inseparability, perishability, intangibility and heterogeneity, make quality oí a ser·ice unique to the customer ,Gronroos, 2000,. In turn, this means that all customers experience ser·ices diííerently and all ha·e diííerent expectations on ser·ices` outcome. ligure 2-2 1otal percei·ed quality ,Gronroos, 2000,. 1he quality that the customer percei·es consists oí technical and íunctional quality ,see íigure 2-2,. 1echnical quality is what` the customer recei·es in the interaction with the ser·ice pro·ider and íunctional quality is how` the customer recei·es the ser·ice. 1hese two dimensions are claimed to aííect experienced ser·ice quality. 1he company`s image is acting as a íilter between the two quality dimensions and the experienced quality and can thereíore aííect the perception oí quality. Gronroos ,2000, means, on the one hand, that ií the company íor example makes a minor mistake, can a ía·ourable image lessen the damage. On the other hand, ií an image is negati·e, the mistake can ha·e a greater impact on the experienced quality than it otherwise would ha·e. Moreo·er, an organisation, which is competing with a technical quality strategy, is only successíul ií no competitor is able to copy the same technical solution. 1his is diííicult, since many organisations are able to produce similar kind oí technical quality. lence, an organisation must íocus on how the actual ser·ice is deli·ered. By de·eloping a ser·ice`s íunctional quality, the organisation adds some extra ·alue to the customer, which increases its competiti·e edge. ,Gronroos, 2000, In addition to Gronroos`s ,2000, notion oí percei·ed ser·ice quality, Santos ,2002, íindings also pro·e that the degree oí tangibility is iníluencing customers` e·aluation oí ser·ice lrame oí Reíerence 15 quality. In turn, this would mean that by making ser·ices more tangible, ser·ice pro·iders could make an impact on the expected or experienced ser·ice quality. lor example, being aware oí how technical and íunctional quality can appear more tangible might iníluence customers` ser·ice e·aluation. Gronroos`s ,2000, perception oí ser·ice quality has been íurther elaborated upon by íor example Bitner ,1992,. Bitner ,1992, wishes to add where` to the two ser·ice quality dimensions, what` and how`. She means that the physical en·ironment, in which the ser·ice is deli·ered and consumed, has an impact in customer`s ·iew oí the ser·ice experience. Bitner ,1992, labels this dimension as the ser·icescape`. 1he di·ision oí experienced and expected quality indicates that ií the customer has no presumptions concerning the ser·ice, technical and íunctional quality will íorm the percei·ed quality. lowe·er, a customer, who is being iníluenced by diííerent channels on beíorehand, is expecting some kind oí quality. Marketing communication, sales, image, word oí mouth, public relations and customer needs and ·alues are, according to Gronroos ,2000, aííecting expected quality. 1otal percei·ed quality is thereíore the link between experienced and expected quality ,Gronroos, 2000,. Gronroos ,2000, means that tbe teret of totat ¡erceirea qvatit, i. vot aetervivea .iv¡t, b, tbe teret of tecbvicat ava fvvctiovat qvatit, aivev.iov., bvt ratber b, tbe ga¡ betreev tbe e·¡ectea ava e·¡erievcea qvatit,` ,p. 68,. 1he percei·ed ser·ice quality model also indicates that there is a certain balance between what ser·ice the customer actually recei·es and what ser·ice the customer expected. So, ií promising íor example excellent quality through diííerent kinds oí communication channels this is what the customer is expecting. In turn, this would then mean that ií the company cannot íulíil the promised le·el oí quality, the expectation oí the ser·ice is not met and the customer will percei·e low quality ,Gronroos, 2000,. 1his could be linked with the so called gap model`, explored by Zeithaml, Berry and Parasuraman ,1988,. It shows that there is a gap between the expected and experienced ser·ice ií they are not consistent. 1he result oí this gap could be negati·ely coníirmed quality, bad word oí mouth, negati·e impact on corporate or local image and lost business ,Gronroos, 2000,. Bergman and Kleísjo ,2003, think that this determination oí good and bad quality is e·en more complex. 1hey mean that ií a customer was expecting low quality, a company that succeeds in meeting the customer`s expectations would still pro·ide low quality. lowe·er, ií succeeding to íulíil customers` expectations by pro·iding quality oí satisíaction, customer loyalty can be enhanced ,leskett et al., 1994,. 2.6 Customer Loyalty A general deíinition oí loyal customers is tbo.e rbo rebovgbt a brava, cov.iaerea ovt, tbat brava, ava aia vo brava·retatea ivforvatiov .ee/ivg` ,Oli·er, 1999, p. 2,. Oli·er ,1999, criticizes such deíinitions, he means that they suííer írom the problem oí recording what the consumer does and do not go íurther into the psychological meaning oí loyalty, which is equally important. \hile reíerring to a widely stretched concept oí loyalty, Soderlund ,2003, agrees with Oli·er`s ,1999, notion that it is not easy to deíine. Soderlund ,2003, explores the concept oí loyalty íurther and means that there are certain denominators oí loyalty. lirstly, loyalty is deri·ed írom an actor with a will. Secondly, loyalty is assuming some kind oí object that the actor directs towards. linally, loyalty is concerned with a relationship o·er time. Soderlund ,2003, means that this relationship is detected in two diííerent worlds, the physical and the mental. In the physical world, an indi·idual`s beha·iour in relation to the lrame oí Reíerence 16 object can be obser·ed. In the mental world, an indi·idual`s attitudes and intentions in relation to the object are concerned. Oli·er ,1999, captures in his loyalty deíinition, the abo·e-mentioned reílections and perspecti·es oí loyalty. le deíines it as a aee¡t, beta covvitvevt to rebv, or re¡atrovi¸e a ¡referrea ¡roavct,.errice cov.i.tevtt, iv tbe fvtvre, tbereb, cav.ivg re¡etitire .ave·brava or .ave brava·.et ¡vrcba.ivg, ae.¡ite .itvatiovat ivftvevce. ava var/etivg effort. barivg tbe ¡otevtiat to cav.e .ritcbivg bebariovr ,Oli·er, 1999, p. 2,. 2.6.1 The Service Profit Chain Organisations, which are acting on íree markets, are encountering intense competition and demanding customers ,Gronroos, 2000,. 1o be able to sur·i·e and create a long-term growth and proíit, it is acknowledged by theorists that organisations need to build and nourish mutual and earned loyalty ,e.g. Gronroos, 2000, Reichheld, 199¯, Reichheld et al., 2000, Soderlund, 2003,. 1o pro·e that loyalty is indeed something íor organisations to in·est resources in, there are certain linkages between customer satisíaction and loyalty ,see íigure 2-3 link 1, and between customer loyalty and proíitability ,see íigure 2-3 link 2, that need to be in·estigated. Soderlund ,2003, supports this notion by claiming that proíitability is one oí the most central reasons íor why organisations íocus on customer loyalty. In addition, these linkages are being identiíied in a so-called ser·ice-proíit chain de·eloped by leskett et al. ,1994,. 1his chain includes many ·ariables and linkages and stretches írom internal to external conditions, írom employees to customers. One oí the reasons íor creating the ser·ice-proíit chain was to pro·e the importance íor ser·ice-oriented organisations to put customers and employees íirst. leskett et al. ,1994, mean that when organisations manage to prioritize these two stakeholders, a shiít will occur in the way they manage and measure success. 1he ser·ice-proíit chain establishes relationships between proíitability, customer loyalty and employee satisíaction, loyalty and producti·ity. 1hus, it is claimed that proíit and growth are stimulated by customer loyalty, which in turn is a result oí customer satisíaction. Satisíaction depends on the customer`s perception oí ser·ice ·alue. Moreo·er, since it is employees together with customers that are producing and creating ser·ice ·alue, their satisíaction, loyalty and producti·ity are also iníluencing the ·alue generating process. \ithin this section, more íocus will be put on the external aspects oí the chain, the relationships between an organisation and its customers ,see íigure 2-3,. 1hereíore, the chain is not shown in total. 1his is done since the purpose oí the thesis is partly to study customer loyalty not employee loyalty. L·en though the internal employee-oriented linkages are not being íurther examined, it is important to be aware oí their existence because they are iníluencing the external customer-oriented linkages ,leskett et al., 1994,. ligure 2-3 A remodelled ser·ice-proíit chain ,leskett et al., 1994,. lrame oí Reíerence 1¯ 2.6.2 Customer Satisfaction and Customer Loyalty Satisíaction is closely related to ser·ice quality. It has e·en been claimed that the two concepts are so entangled that there is actually no diííerence between them ,Gronroos, 2000,. Oli·er ,1993,, contrastingly, means that in order íor customers to be able to e·aluate satisíaction, it has to be experienced, which distinguishes satisíaction írom quality. Another íactor that separates the two terms is that setting standard íor satisíaction is harder compared to quality. Gustaísson, Nilsson and Johnson ,2003, state that satisíaction is the customer`s o·erall e·aluation oí the consumption experience. 1his coheres with Kotler`s and Armstrong`s ,2004, deíinition oí satisíaction. 1hey propose that customer satisíaction with a purchase depends on how well the ser·ice`s períormance li·es up to the customer`s expectations. Being able to customize the ser·ice to the needs oí the customer can increase satisíaction ,Gustaísson et al., 2003,. 1hey imply that employee management, process orientation and customer orientation are together iníluencing customers` satisíaction. A manager must thereíore understand customers` needs and expectations to make an impact on satisíaction. 1wo distinct íactors dri·e customer loyalty. lirst, there are íactors that satisíy customers` needs and thereby enhance their desired relationship. Secondly, íactors that limit a customer`s alternati·es to the chosen supplier dri·e customer loyalty ,Soderlund, 2003,. 1his di·ision coheres with Butscher`s ,1998, statement that tbe ovt, ra, to bvita tovg·terv retatiov.bi¡ i. to e.tabti.b reat retatiov.bi¡. ba.ea ov evotiov. ava trv.t, b, offerivg vviqveve.. ava bigb ¡erceirea ratve iv ,ovr to,att, ¡rograv` ,p. 4,. lence, the customers who are most satisíied are the ones who stay loyal ,Gronroos, 2000, Soderlund, 2003,. Moreo·er, ií outcome oí a ser·ice is more ía·ourable than expected, satisíaction can increase ,Gronroos, 2000,. Linked to quality, it is necessary íor a company to realise that a customer could be satisíied with low quality because this could also lead to customer loyalty. In turn, this would mean that disloyal customers are discontent with the ser·ice. lowe·er, there are cases where customers, despite dissatisíied with the supplier, stay loyal. 1his state oí loyalty is reíerred to as íalse loyalty` ,Soderlund, 2003, p. ¯4, and exists due to diííerent kinds oí barriers such as budget restraints and iníormation barriers. 1hus, the connection between high satisíaction and high loyalty is questionable, since there are customers who are satisíied but yet switch between suppliers ,Soderlund, 2003,. Customers that will stay loyal are those that gi·e satisíaction top scores ,Gronroos, 2000,. According to leskett et al. ,1994,, leading companies are currently trying to quantiíy customer satisíaction. An analysis, períormed by a ser·ice organisation called Xerox, íound that the relationship between scores and actual loyalty diííered greatly depending on whether customers were ·ery satisíied or satisíied ,leskett et al., 1994,. It was íurther detected that customers who ga·e satisíaction top scores were six times more likely to repurchase ,leskett et al., 1994,. Deri·ed írom this study, a graph was de·eloped that displayed the relationship between satisíaction and loyalty. It indicated that there is a positi·e relationship between the two ·ariables, which means that ií satisíaction increases so will loyalty and ·ice ·ersa. Very satisíied customers that held a 100-percentage loyalty are considered as apostles and the ones who are most dissatisíied with the ser·ice are considered as terrorists, which reíer to customers that are so discontented that they speak badly oí the ser·ice. In between the two extremes is the so-called zone oí indiííerence` ,Gronroos, 2002, leskett et al., 1994,. As the label indicates, customers within this zone are neither to be considered as apostles nor as terrorists. lrame oí Reíerence 18 2.6.3 Customer Loyalty and Profitability As pre·iously mentioned, a major reason íor in·esting in diííerent kinds oí customer loyalty programmes is the notion that loyalty leads to proíitability ,Soderlund, 2003,. In addition, most executi·es ·iew proíitability as the most important íactor in sur·i·al oí their business ,Reichheld et al., 2000,. It is claimed that companies, which do not realise the importance oí loyalty, are aoovea to av v¡bitt .trvggte agaiv.t tor·grortb ecovovic. of ai.to,att, ava ¡er¡etvat cbvrv` ,Reichheld, 199¯, p. 19,. Soderlund ,2003, means that the customer`s willingness to return to the supplier and its accumulation oí knowledge and experience oí the organisation and its oííerings, are íactors that also strengthen the connection between loyalty and proíitability. 1here are estimations, which pro·es that a : ¡ercevt ivcrea.e iv cv.tover to,att, cav ¡roavce ¡rofit ivcrea.e. frov 2: ¡ercevt to º: ¡ercevt` ,leskett et al., 1994, p. 639,. 1his means that companies should consider their quality oí market shares as much as the quantity oí market shares, when measuring customer loyalty. lurthermore, it seems as the a·erage proíit per customer actually grows o·er the íirst years oí a company`s and a customer`s relationship ,Gronroos, 2000,. 1he reasons íor this increase can be explained by reíerring to the economic eííects oí customer loyalty, acquisition costs, re·enue growth, cost sa·ings, reíerrals and price premiums ,Gronroos, 2000,. Reichheld et al. ,2000, also detected the linkages between customer loyalty, ·alue and proíits. 1he íirst eííect is between loyalty and retention rate. According to the researchers, loyalty reliably measures whether superior ·alue has been deli·ered. Next, loyalty initiates economic eííects such as re·enue and market share growth, customer acquiring costs decrease and employee retention rate increases. 1he third eííect implies that when costs go down and re·enues up, proíit increases. 2.7 Theory Summary 1here are aspects that theorists seem to emphasize and agree upon, when trying to establish what actually separates a ser·ice írom a tangible product. 1he most írequently discussed íeatures are ser·ices` heterogeneity, perishability, inseparability and intangibility ,i.e. Gronroos, 1998, Kotler et al., 2002, Rushton & Carson, 1989,. Ser·ice deíinitions, classiíications and characteristics ha·e e·ol·ed, been modulated and been e·aluated upon. Bringing up these kinds oí discussions in the thesis will, thereíore, gi·e a deeper understanding íor ser·ices` complexity and di·ersity. Intangibility has been most emphasized and is the characteristic that separates pure products írom pure ser·ices. Inserting this speciíic characteristic in a continuum scale, display ser·ices wide range. 1he tangibility continuum also distinguishes ser·ices with credence, experience and search qualities. Moreo·er, it has been accentuated within the theoretical íramework that pure intangible ser·ices can neither be touched nor e·aluated beíore consumption. 1his challenges marketers, since already established marketing approaches, íocusing on pure tangible products, need to be reíormed to suit ser·ices ,Gronroos, 2000,. In addition, trying to make a ser·ice more tangible could íacilitate e·aluation oí percei·ed quality, thus, narrow the gap between experienced and expected quality ,Gronroos, 2000, Santos, 2002, Zeithaml et al., 1988,. Studies períormed by Santos ,2002, indicate that there is indeed a positi·e relationship between tangibility and quality. lence, ser·ice pro·iders could choose to íocus on making ser·ices more tangible and thereby iníluencing either expectations or experiences oí a ser·ice. 1he percei·ed quality model outlines what is iníluencing a customer`s ser·ice quality perception. Ií using these íactors to make ser·ices more tangible, lrame oí Reíerence 19 the customers become more aware what to expect írom the ser·ice and can easier e·aluate the experienced ser·ice. In turn, ser·ice quality can be reached since customers` expectations are íulíilled. In turn, satisíaction and quality are closely intertwined ,Gronroos, 2000,. Connecting this notion to the ser·ice-proíit chain creates an understanding íor the linkages between customer satisíaction, loyalty and proíitability. It also pro·ides an understanding íor why proíit-oriented ser·ice organisations should íocus on loyal customers as well as creating good quality ser·ices. Stri·ing aíter loyalty also points to that organisations should establish what customers wish íor and íulíil such requests ,Gronroos, 2000,. Methodology 20 3 Methodology 1bi. cba¡ter ae.cribe. ¡o.itiri.v ava ivter¡retiri.v iv oraer to votirate tbe cboice of vetboa. ít i. iv¡ortavt to aao¡t vetboa. accoraivg to rbat i. beivg .tvaiea. Moreorer, tbe ¡vr¡o.e of tbi. tbe.i. .bovta aetervive tbe cboice of vetboa. ít .bovta tberefore carefvtt, be cov.iaerea rbev eratvativg rbetber to v.e a qvatitatire or qvavtitatire vetboa. 3.1 Positivism and Interpretivism Depending on what perspecti·e employed when conducting research, diííerent results can be reached. 1hereíore, it is important íor e·ery researcher to clearly state his or her ·iew oí the world. It can be assumed that people obser·ing the same thing would come to the same conclusion but it is not the case ,Chalmers, 1999,. 1his is because we interpret things diííerently depending on our glasses used. \e will here discuss the most írequently employed glasses, positi·ism and interpreti·ism, and thereaíter state which one we will make use oí when conducting our research. Positi·ism was íirst de·eloped írom the philosopher Comte`s thoughts ,cited in Lgidius, 1986,. le argued that scientiíic knowledge should be deri·ed by using mathematical methods and through this method enabling production oí objecti·e data ,Lgidius, 1986,. Positi·ism rests on three basic principles, the social world exists externally and should thereíore be obser·ed objecti·ely, research is ·alue-íree and the researcher is independent írom the object under study ,Blumberg, Cooper & Schindler, 2005,. In positi·ism, theory is generated by íirstly stating hypotheses concerning íundamental laws and by obser·ations either support or reject the hypotheses. Research is done through obser·ing the external world objecti·ely and thereby sees how a íundamental law íits with society. 1he aim is to generalise íindings so that they are applicable to the rest oí the world. Research is ·alue- íree because íacts are external and remain uniníluenced by the researcher. 1hus, researchers examining simultaneously the same phenomenon should arri·e to the same conclusion ,Blumberg et al., 2005,. Criticism against positi·ism has pointed at weaknesses such as the íact that organisations and groups are social units which cannot íully be in·estigated by only using numbers to describe how íactors are aííecting people`s beha·iour in certain situations. Critics, such as Popper and Kuhn ,cited in Lgidius, 1986,, argued that this leads to alienation oí humans since they are not treated as people but more like data without belieís or opinions. As a result, interpreti·ism de·eloped as a substitute íor positi·ism. Unlike the positi·istic researchers, interpreti·ists hold the ·iew that the social world cannot be in·estigated by employing the same methods used in natural science and, hence, propose another way to conduct research. Interpreti·ists ·iew the world as socially constructed and it is only gi·en meaning by people interacting in this social world. lurther, researchers must be part oí the social world under study, thus, interact with people in the situation rather than simply obser·ing. As opposed to positi·istic researchers, interpreti·ists are largely dri·en by interest ,Blumberg et al., 2005,. 1heir arguments against positi·ism are that simply employing íundamental laws is not enough íor understanding a complex phenomenon. Gi·en that people construct their social world, the researcher has to engage in it in order to understand it properly. Ií research was to be repeated, it would not necessary generate the same result because people might do ·arious interpretations. Instead, research will de·elop and deepen when understanding oí a certain phenomena increases ,Lgidius, 1986,. Methodology 21 1he reason íor discussing these diííerent approaches is that how research is conducted will depend on which perspecti·e that is chosen. Ií deciding on positi·ism, research íocuses on in·estigating objecti·e íacts and in practice construction is usually done by employing quantitati·e methods ,Blumberg et al., 2005,. Research conducted írom an interpreti·e angle would put more emphasis on interpretations and subjecti·e meanings in order to detect what is going on in the in·estigated situation. Our standpoint will be somewhere in between the discussed ·iews. By applying a quantitati·e method, we will gather data concerning many people`s ·iews without doing any deeper in·estigation on a smaller sample. lowe·er, since collected data will deri·e írom people`s belieís and attitudes, we can argue that we do not apply positi·ism to its extremes. Blumberg et al. ,2005, state that the realism ·iew is somewhere in between positi·ism and interpreti·e ·iew. Principles are taken írom both ·iews, the statement that research can be conducted as within social science is taken írom positi·ism. Realists also hold the ·iew that in order to understand people`s beha·iour we ha·e to acknowledge the subjecti·ity inherent in humans which deri·es írom the interpreti·e ·iew. 1hus, we will conduct our research írom a realism point oí ·iew because we are neither íully positi·ists nor interpretati·e. 3.2 Method for data gathering Method is a broad deíinition, which can be seen as a íramework íor how to engage with empirical material ,Al·esson & Deetz, 2000,. As stated abo·e, we ha·e decided to employ the quantitati·e method íor our primary data collection. A qualitati·e method is oíten employed when interpretations and non-statistical data is a·ailable ,Ghauri, Gronhaug & Kristianslund, 1995,. Contrastingly, quantitati·e methods oííer better conditions íor strict scientiíic testing ,Ruyter & Scholl, 1998,. Quantitati·e method is used when data is collected and processed analytically. Data is numerically coded and the researcher is íorming statistical results ,Lek·all & \ahlbin, 2001,. 1he quantitati·e method is appropriate to use when there is a need to generalise and apply the sample data to the population in order to íind patterns and trends ,Da·idsson & Patel, 2003,. Because the purpose oí our thesis is to generate theory by sur·eying people`s opinions concerning ser·ice tangibility in connection to customer loyalty, we ha·e chosen to in·estigate a larger sample rather than just a íew, and belie·e that the quantitati·e method is most suitable íor our purpose. In order to collect secondary data, we ha·e conducted a literature re·iew. Blumberg et al. ,2005, mean that an accumulation oí pre·ious knowledge within the íield oí interest is oí importance so that the study can be embedded in the context oí current research. In accordance with the suggestion írom Blumberg et al. ,2005,, we ha·e searched íor literature within databases where academic articles can be íound and in textbooks. By using prior research, we ha·e íound a method íor how we, by using existing theories, can generate new theory in order to íulíil our purpose. 3.2.1 Survey Method In order to conduct an in·estigation with scientiíic ·alue, it is important to choose a suitable method to assure that correct data will be gathered íor the chosen purpose ,Backham, 1998, Lriksson & \iederheim-Paul, 1999, L·jegard, 1996, Lundahl & Skär·ad, 1982,. \hat data to use, which method to use íor collecting data and how it should be analysed are important decisions, which will be discussed in the íollowing paragraphs. Methodology 22 1he most suitable method íor primary data gathering was the sur·ey method, applied írom a quantitati·e perspecti·e. Lmploying the sur·ey method íor primary data gathering can in·ol·e diííerent ways oí conducting the questioning. Depending on what kind oí iníormation is required, desired data type and the characteristic oí the sample unit will decide how the sur·ey is conducted ,Blumberg et al., 2005,. 1he main strength oí sur·eys íor collecting primary data is its ·ersatility, it can be períormed in a number oí ways. Cooper and Schindler ,2003, state that when researching opinions or attitudes about something, sur·eying gi·es the best results. 1he two most írequently employed sur·ey methods are communication and obser·ation. Due to time restraints, we chose to sur·ey people`s attitude using the communication approach. It requires less time and eííort compared to the obser·ation method ,Blumberg et al., 2005,. Communication with sampled units can be done either through personal inter·iews, phone inter·iews or selí- administered questionnaires ,Cooper & Schindler, 2003,. Because time as well as costs is limited, the most beneíicial method íor us to use is selí-administered questionnaires, which are handed out to the sampled respondents. It gi·es us ad·antages such as rapid data collection, possibility to reach respondents otherwise unreachable and the costs in·ol·ed are low ,Cooper & Schindler, 2003,. Selí-administered questionnaires can be deli·ered to respondents both electronically or personally. 1he inter·iewer usually distributes the questionnaires personally in a pre-determined en·ironment ,Cooper & Schindler, 2003,, which was the procedure we chose. 3.2.2 Questionnaire Design In order to gather and compare data in an eííicient way, a highly standardised and structured questionnaire with close-ended questions and answers was constructed. 1his is in line with Andersson ,1995,, who states that close-end questions are appropriate to use in a questionnaire. Additionally, close-ended questions tend to ha·e a higher response rate than open-ended ones. All questions except one are rating questions. 1his is suitable when collecting data concerning opinions ,Saunders, Lewis & 1hornhill, 2003,. 1he íirst question, relating to gender and age, is more oí a category question since the respondents are asked to choose the category to which they belong. 1he questionnaire consists oí 3 parts and 16 questions 1 . \e aimed at keeping the number oí questions as íew as possible to íacilitate collection oí responses and to keep the respondent`s interest throughout the questionnaire. Still, the questions are in line with McDougall`s and Snetsinger`s ,1990, and Reichheld`s ,Bain & Company, 2005, used tests. lirstly, we wanted to collect some iníormation about the respondents. 1his is done to íacilitate íor the respondents to answer the initial questions and capture their interest ,Andersson, 1995, Christensen, Andersson, Lngdahl & laglund, 2001,. Respondents were asked general questions concerning gender and age. Because questioning a person`s age can be percei·ed unpleasant íor some people, it is suggested to create classes oí age in order to make it easier íor the respondents to answer the question ,1rost, 2001,. lowe·er, since the aim is not to exactly know age oí each respondent, we belie·e it íacilitates íor the respondents ií age was di·ided into pre-determined classes ,see section 3.3,. 1he second part is related to intangibility oí ser·ices and the third relates to loyalty. \e ha·e used questions suggested by theorists working in these areas. McDougall and Snetsinger ,1990, conducted a study concerning intangibility oí ser·ices by using diííerent 1 See Appendix 1 and 2 Methodology 23 statements ,see section 1.4,. Respondents were asked to choose the statement which best íitted with the ser·ice they were asked to e·aluate. li·e diííerent statements were used on a so-called`tangibility scale` ,Rushton & Carson, 1989,. 1his is in line with the suggestion írom Saunders et al. ,2003, not to include more than 5 categories to choose among. In the questionnaire, the statements ha·e been directly translated. Some problems occurred íor the respondents regarding how the statements should be interpreted. Due to the complexity oí the subject under in·estigation, we expected this and thereíore assisted them by explaining the meaning oí tangible` and intangible` to íacilitate íor the respondents. 1angibility is in the questionnaire cohering with McDougall`s and Snetsinger`s ,1990, deíinition mentioned in section 2.3. In the third part, where loyalty was the main topic, we used the Loyalty Acid 1est ,see section 1.4, de·eloped by Reichheld ,Bain & Company, 2005,. Because we are not in·estigating a speciíic company, we decided to exclude one question that we thought was too hard íor the respondents to answer. Company has a winning strategy` was the question we decided to exclude due to the diííicultness in·ol·ed in answering this question. Apart írom that, the test was applicable to our sur·ey. low many alternati·es to include in a questionnaire is one question to consider when respondents are asked to rate statements. Reichheld ,Bain & Company, 2005, included 10 alternati·es in his loyalty test and we ha·e decided to adapt to this since we want to change the test as little as possible. By gi·ing the respondents 10 alternati·es, they were obliged to choose side. \e also deliberately decided to exclude alternati·es such as no opinion` to compel the respondents to state their opinion. Acknowledging that this may also be a disad·antage ií some questions are percei·ed hard to answer by the respondents but they ha·e to pro·ide an answer anyhow. Despite this, we decided not to include the no opinion` alternati·e. lor each respondent, we calculated a mean loyalty ·alue based on the questions in the third part. In addition, a mean was also calculated on some speciíic questions to highlight certain aspects oí loyalty and intangibility in the analysis part. Both physical and mental world oí loyalty, discussed by Soderlund ,2003,, will be reíerred to in the questionnaire. 1he physical world relates to indi·idual`s beha·iour while the mental world is concerned with attitudes and intentions ,Soderlund, 2003,. Beíore the questionnaire is conducted, it is important to do a pilot study ,Saunders et al., 2003,. 1he purpose oí this is to reíine and test the questions so that they are íully understandable and ensure that proper data is collected. lor smaller research studies, a sample oí 10 is suggested to be enough íor a pilot study ,Saunders et al., 2003,. 1hus, we handed out a draít oí our questionnaire to 10 persons and asked íor íeedback. 1his resulted in some small language corrections to íacilitate understanding oí the questions. \e also changed the intangibility,tangibility arrow and added some íading íeatures to íacilitate íurther the understanding oí tangible and intangible, aware that these are complex terms. lurthermore, a pilot study also ga·e the possibility to test the data in the statistical program, SPSS, to check ií the ·ariables were adequately chosen. A test oí our 10 collected samples did not result in changes with SPSS. 3.3 Sampling \hen the goal is to determine and in·estigate something speciíic concerning a population, a sample is usually made ,Lind, Marchal & Mason, 2001, 1rost, 2001,. It is preíerred to include all the elements in the population in order to produce true results about the population. lowe·er, due to problems such as the impossibility to check all elements in the population, time restraints and costs in·ol·ed, it is more con·enient to draw a sample Methodology 24 ,Swiít, 2001,. 1he result írom the selected sample is assumed representati·e íor the whole population and hence conclusions can be drawn írom the calculated sample estimators ,Cooper & Schindler, 2003,. lowe·er, it is important to acknowledge the íact that when sampling the population we cannot tell e·actt, what the population thinks but rather e.tivate íeatures oí the target population ,Swiít, 2001,. 1he main ad·antages with using sampling in·ol·e lower costs and a íaster way oí collecting data ,Cooper & Schindler, 2003,. \hen reíerring to the population, we imply the totat cottectiov of etevevt. abovt rbicb re ri.b to va/e .ove ivferevce ,Cooper & Schindler, 2001, p. 163,. 1hus, in this thesis, the population consists oí all people in Sweden that ha·e used a ser·ice írom one oí our selected ser·ice industries. \e also chose to limit the population and only include persons between 18 and ¯9 years old. 1he lower bound was set because this is when persons in Sweden are becoming oí age. 1he upper bound was set because oí getting proportionate groups oí 15 year inter·als in each age group. \hen selecting what ser·ices to use, we employed the tangibility and intangibility continuum discussed in chapter 2.2 and shown in íigure 2-1. \e wanted to ha·e ser·ices that were considered high in experience or credence qualities. 1he reason íor not including ser·ices with search qualities is that these are more similar to tangible products than ser·ices. \e also belie·e that respondents would ha·e been coníused about the diííerence between products and ser·ices characteristics in these cases. In addition, it was decided that all ser·ices connected to the selected ser·ice pro·iders was to be used. 1his because our intention was to in·estigate the relationship between tangibility and customer loyalty and thus separating ser·ices would make results more diííicult to interpret. 1his also coheres with the Loyalty Acid 1est, which consider all ser·ices within a ser·ice industry ,Bain & Company, 2005,. Lxamples oí ser·ices with experience qualities are restaurant meals, holidays, haircuts and childcare ,Rushton & Carson, 1989,. lrom this section, we ha·e chosen to include restaurant meals, holidays and haircuts because these are ser·ices that most people ha·e experienced. lowe·er, we are reíerring to restaurants, tra·el agencies and hairdressers to capture all ser·ices pro·ided. Ií including childcare, the population would ha·e decreased substantially, which is why it was decided not to in·estigate this sector. Ser·ices with credence qualities include tele·ision repair, legal and íinancial ser·ices, dentistry, car repair and medical diagnosis. \e ha·e selected dentistry and íinancial ser·ices írom this category. Again, the reason íor this is that we belie·e that most people ha·e been in contact with these ser·ices compared to tele·ision repair, car repair, medical diagnosis and legal ser·ices, which will thus íacilitate sampling oí the population. As abo·e, we will reíer to banks instead oí íinancial ser·ices. In addition, we ha·e also decided to include the Swedish employment agency because we íound it interesting to include a ser·ice company, which is monopolistic and state- controlled. \e belie·e this will add a íurther dimension to our study since it pro·ides us with the opportunity to in·estigate a ser·ice pro·ider that diííers írom the others in the study. Another way to conduct the study could ha·e been to simply in·estigating íor instance the banking industry and look at the diííerent ser·ices they oííer. lowe·er, we decided to look at diííerent ser·ice industries to see ií there are similarities in the relationship between tangibility and customer loyalty. 1he íact that not all respondents might reíer to the similar ser·ice may lead to less ·alidity. 1he same questionnaire was used in all chosen ser·ice sectors e·en ií some questions were less rele·ant íor some sectors. lowe·er, since we used tests de·eloped by prominent researchers within the in·estigated areas, it was decided more correct not to change the test between the sectors. Methodology 25 Systematic probability sampling was used when sampling the population. 1his entails selecting samples at regular inter·als írom the sampling írame ,Saunders et al., 2003,. Since we are not aware oí exactly how large the total population is, we are not able to calculate the sampling íraction, which would ha·e decided how large proportion oí the total population we would ha·e to select. Instead, we asked e·ery 10 th person to a·oid biases in the sampling. \hen collecting samples íor banks, hairdressers, tra·el agencies, dentistry and restaurants, we decided not to go to a speciíic bank or restaurant since this would ha·e led to biases in our results. 1hus, we decided to sample in a more general en·ironment, were we could íind respondents that had ·isited diííerent types oí ser·ice pro·iders. 1he largest shopping centre in Jonkoping, A6, was decided to be the best place íor conducting our sur·ey. It was conducted between the 14 th and 18 th oí April during daytime and on the same place on all occasions. \hen sampling respondents that ha·e been using ser·ices írom the Swedish employment agency, we decided that it was best to do the sampling there due to the potential unpleasantness in·ol·ed ií asking people elsewhere. Since the population there was relati·ely small, we decided that because oí time restraints not to sample e·ery 10 th person but instead e·ery person entering the employment agency. 1his is instead a con·enient sample since we included e·eryone who was con·enient íor our study. 1rost ,2001, states that this sample method is used to gain a strategic sample. 1he sampling was done on the 15 th and 18 th oí April. low many samples to draw írom each selected industry also had to be decided. Because our study is quantitati·e and more towards positi·ism, the aim is to make generalisations rather than more deeply inquiring a smaller sample. Aczel and Sounderpandian ,2002,, state that a sur·ey consisting oí more than 30 respondents is considered a large sample. Beíore conducting the sur·ey, we had determined to ha·e a íixed number oí respondents in each ser·ice industry. It was agreed upon that 40 was an adequate number and thus we sampled 240 questionnaires. \e íound it diííicult to appreciate how many respondents that would be reluctant to answer but we ·alued 240 answers to be enough íor our statistical analysis. Because we wanted to make comparisons between industries, we sought to ha·e íixed number oí respondents in each class. 3.4 Non Response Non-response occurs when a sampled element does not respond to the request oí participating in a sur·ey ,Gro·es, Dillman, Lltinge & Little, 2002,. 1his is one oí the potential errors, which can occur when conducting a sur·ey and can lead to less reliable result ií the non-response percentage is too large. Because our sur·ey was conducted in a stressíul en·ironment, some approached respondents declined to participate, mainly because oí time restraints. lowe·er, we decided not to calculate the number oí people neglecting to take part in the sur·ey. Persons neglecting to take part in the sur·ey did probably not hold ·iews signiíicantly diííerent írom those that decided to take part. 1his because gender as well as age is oí less importance. Instead, the population is all people that ha·e used a ser·ice írom one oí our selected ser·ice industries. Moreo·er, e·en ií they did hold signiíicantly diííerent ·iews, we had no opportunity to sur·ey the people neglecting to respond aíterwards. 1he main reason íor declining answering was not due to lack oí interest but lack oí time and at the Swedish employment agency some did not ha·e any pre·ious experience with their ser·ices. Methodology 26 3.5 Data handling \hen analysing collected data, our aim was to íind ií a relationship exists between tangibility and loyalty. 1hus, we could only ha·e one ·alue oí each ·ariable. 1angibility already consisted oí one ·alue while loyalty was decided using se·eral questions. 1hereíore, we had to calculate a single ·alue írom the questions relating to loyalty. It was decided that neither mode ,the most írequently occurred ·alue, nor median ,the middle ·alue in the data, was adequate íor our data analysis. Mode gi·es no indication oí central tendency and median is the middle ·alue, which can be misleading depending on how the other ·alues in the series are ,Swiít, 2001,. 1o calculate the a·erage ·alue, mean is írequently employed and we considered that the mean would gi·e us the most adequate ·alue when adding the loyalty questions. In addition, Reichheld ,Bain & Company, 2005,, McDougall and Snetsinger ,1990, used mean in their data analysis. A sample mean was calculated as an unbiased estimator oí the population mean, ,. lowe·er, due to the number oí means employed ,240,, we decided not to calculate spread around each oí these mean ·alues. Because oí this decision, some statistical errors may be included in the mean calculation. Ne·ertheless, we do not consider this to aííect our results substantially since the range was only between 1 and 10. Aíter calculating the mean ·alue oí loyalty, we had one ·alue oí tangibility and loyalty íor each respondent. Graphically, we wanted to see ií there were any patterns in the data and decided to employ scatter plots. 1his is a sketch oí data on to ·ariables, which íacilitates ·isualising trends and patterns in data ,Aczel & Sounderpandian, 2002,. Scatter plots are suggested to be most suitable when data occurs in pairs and we wanted to plot the pairs as co-ordinates on a graph. By displaying our data in a scatter plot graph, we could easier decide ií the two ·ariables appeared to be correlated ,Swiít, 2001,. Sample correlation is measuring the strength oí a relationship between two ·ariables and lies in between -1 and -1. A correlation coeííicient oí -1 indicates a straight line with a positi·e slope while -1 shows a negati·e line where all data are exactly on the line ,Swiít, 2001,. 1he closer the correlation coeííicient ·alue is to any oí these extremes, the stronger positi·ely or negati·ely correlated they are. It is assumed that both ·ariables are random and normally distributed ,Aczel & Sounderpandian, 2002,. 1he sample correlation coeííicient is denoted by r, which is an estimate oí p, also reíerred to as the Pearson product-moment correlation coeííicient ,Aczel & Sounderpandian, 2002,. In addition to this, correlation can also be done on data, which is not normally distributed. Spearman rank correlation coeííicient can be employed when data is not normally distributed and data pairs are in íorms oí ranks írom smallest to largest. It is similar to Pearson`s correlation coeííicient but adjusted íor ranked data. Gi·en these explanations, we íound it most appropriate to apply Pearson`s correlation to our data since we did not rank our data and assumed normal distribution. 1o íind out ií the calculated correlation ·ariable was signiíicant or not, we had to choose what le·el oí signiíicance to utilize. Signiíicance le·el is used in statistical hypothesising to decide ií ·alues are statistically signiíicant or not. 1he signiíicance le·el is denoted by - and to reject the null hypothesis, l 0, the ¡-·alue has to íall below - ,Aczel & Sounderpandian, 2002,. 1he hypotheses are stated as íollow: l 0 : r ÷ 0 l A : r ~ 0 Ií we accept l 0 , no correlation exists and ·ice ·ersa, ií rejected, we can conclude that the ·ariables are correlated. Methodology 2¯ 1he ¡-·alue is a sort oí credibility rating` oí the null hypothesis. A ·alue oí i.e. 32 ° implies that there is roughly a chance oí 32 ° that l 0 is true. Ií we set - to 5 °, l 0 will be rejected when the ¡-·alue is below 5 ° and we can conclude that the correlation ·alue is signiíicant. In our data analysis, we will employ a signiíicance le·el oí 5 ° and thus we can be 95 ° coníident that l 0 is íalse beíore we reject it. A signiíicance le·el oí 5 ° is according to Aczel and Sounderpandian ,2002, one oí the standard ·alues. Neither intangibility nor loyalty can be said to depend on the other, which is why a regression analysis was seen as unsuitable. lowe·er, by calculating Pearson correlation, we could see ií a linear relationship existed without the intention oí deciding which ·ariable is dependent or independent. 3.6 Validity and Reliability Validity reíers to whether íindings really are about what they appear to be about ,Saunders et al., 2003,. In addition, it explains to what extent the estimators oí the population are a true ·alue or not and how good the precision is in what we are supposed to measure. 1he quality oí ·alidity depends on how the sample, data collection, data analysing was done and to what extent errors are included or not ,Christensen et al., 2001,. Robson ,cited in Saunders et al., 2003, lists some threats to ·alidity including ambiguity about causal relationship, maturation, testing and history. Ií, íor example, research is done aíter a big change has occurred in an organisation this history may iníluence ·alidity. Ambiguity concerning relationship reíers to when relationships are in·estigated between two ·ariables and it is diííicult to decide ií either oí them causes the other. Maturation in·ol·es participants in a study dropping out during a longer in·estigation and testing can reduce ·alidity ií the respondent acts diííerently because oí being tested. \e can diííer between external and internal ·alidity. 1he external ·alidity oí research íindings reíers to the ability to generalise data across the target population. Internal ·alidity is to what extent a research instrument measure what it is supposed to measure ,Cooper & Schindler, 2001, Collis & lussey, 2003,. In this research, when we are employing a quantitati·e method, we are also interested in testing statistical ·alidity ,\elman & Kruger, 2001,. \e want to know ií the relationship between loyalty and intangibility is statistically ·alid. 1his is done by examining the le·el oí signiíicance, discussed in 3.4. Reliability is concerned with the íindings oí the research ,Collis & lussey, 2003,. It can be e·aluated by answering the íollowing questions: \ill the measures gi·e the same result ií redone· \ill others studying the same subject reach the same results· Is there transparency in how sense was made írom raw data· ,Saunders et al., 2003,. Ií a study is claimed to ha·e high reliability, replication oí the study should generate same results. 1hreats against reaching high-quality reliability are íor instance participant error, participant bias, obser·er error and obser·er bias. Participant error can exist ií it matters rbev people are asked to íill in the questionnaire. Biases oí participants can arise ií participants íeel that somebody want them to answer in a certain way íor example ií sur·eying in a authoritarian oííice where the respondents answer in a way they think their boss would ha·e liked them to answer. Obser·er error and bias exist ií many diííerent people are conducting inter·iews and thus biases can rise since diííerent people will interpret answers diííerently ,Saunders et al., 2003,. Validity and reliability are connected concepts since íor a research to be ·alid, the reliability also has to be oí íirst-rate ,Christensen et al., 2001,. lowe·er, a study can ha·e high Methodology 28 reliability and simultaneously low ·alidity ,Collis & lussey, 2003,. \hen e·aluating reliability and ·alidity, it is essential to consider potential errors and systematically identiíy them and estimate how they aííect ·alidity and reliability ,Christensen et al., 2001,. 3.7 Criticism against used method \hen critically e·aluating ií our results are ·alid and reliable, we examine ií sampling, data collection and data analysing was correctly done without the existent oí any biases, which would aííect our results. A larger sample would ha·e made generalisations more ·alid, howe·er, as mentioned earlier, time restrictions made it uníeasible. In turn, we did not speciíy rbicb ser·ice in each ser·ice industry that each respondent reíerred to when íilling in the questionnaire. 1hus, we cannot make generalisations to diííerent ser·ices within the in·estigated ser·ice sectors, which aííect external ·alidity. lowe·er, this was not the purpose oí this thesis and thus not regarded to be a problem in this speciíic case. Ií a replication will lead to the same results or not is dependent on which ser·ice the respondents were considering when íilling in the questionnaire. lence, the reliability oí our results is slightly questionable because oí participant error. Ií respondents are asked to participate at another time, when they ha·e experienced another ser·ice within the sector, their results may be diííerent. 1he íact that all, except íor the Swedish employment agency, questionnaires were conducted at the same place during diííerent times is belie·ed to raise the possibility oí getting a representati·e sample oí the population. One íactor that might ha·e aííected the ·alidity oí our results is the stressíul en·ironment where the data collection was conducted. Some respondents appeared to be stressed and ga·e less thought when íilling in the questionnaire. Another íactor, which might ha·e iníluenced ·alidity, could be that the respondents were asked to recall their last experience írom the in·estigated ser·ice pro·ider. lence, they were more íamiliar with the ser·ice than they would ha·e been ií not pre·ious experience was required. Our reason íor this method is that it íacilitated íor the respondents to íill in the questionnaire. Ií scenarios oí speciíic ser·ices were to be used instead, it is assumable that the respondents would ha·e reíerred to their last experience anyway. 1he reason íor including six ser·ice industries was to get a wider picture. \e could also ha·e chosen to look only at one industry but we decided that it was more interesting to include se·eral in order to íind diííerences between them. Gi·en the purpose oí this thesis, to in·estigate ií there exist a relationship between ser·ices` intangibility and customer loyalty, the quantitati·e method was most suitable since it enabled us to achie·e results that could to some extent be applied to the whole population. Ií instead employing a qualitati·e method, we would ha·e been pro·ided with deeper insight in people`s mind concerning this subject but we would only ha·e had the possibility to sur·ey a íew respondents. 1hereíore, we belie·e that gi·en our purpose, we applied the most appropriate method e·en ií ·alidity as well as reliability could ha·e been enhanced by speciíy what ser·ice the respondents reíerred to. lowe·er, our intention was to get an o·erall ·iew in the attempt to generate new theory within this area. lrom this, elaborations can be done by períorming the same study in another way. Lmpirical lindings and Analysis 29 4 Empirical Findings and Analysis 1bi. cba¡ter ¡re.evt. tbe re.vtt aerirea frov tbe .vrre,. ít at.o covvect. tbe tbeoreticat fraveror/ ¡re.evtea iv tbe .ecova cba¡ter ritb tbe ev¡iricat fivaivg. to forv av avat,.i.. 1be retatiov.bi¡ betreev tavgibitit, ava to,att, ritt be eratvatea ava ivre.tigatea. 4.1 Method of Analysis Beíore presenting and analysing the results deri·ed írom the empirical íindings, the method íor analysing is discussed. Lmpirical íindings will be linked to the theoretical íramework. lowe·er, to make the analysis more graspable and clear, some assumptions are made based on common knowledge. 1his is done because relating complex concepts such as tangibility and loyalty to practical examples will íacilitate reading this chapter. 1he choice oí including such assumptions in the analysis instead oí in the íinal discussion is made because the analysis will be more interesting to take part oí. In the analysis, ser·ices are not separated into the classiíications mentioned in section 2.1.1. 1his is because the sur·ey reíers to all ser·ices pro·ided and not to any speciíic ser·ice. lence, core ser·ices, íacilitating ser·ices and supporting ser·ices mentioned by Gronroos ,2000, are grouped together. Moreo·er, con·enience, shopping, preíerence and specialty ser·ices are not diííered in between. As mentioned in the method chapter, this was not in line with the purpose oí this thesis. 1he ser·ice industries were distinguished based on the core ser·ice pro·ided. lowe·er, it is signiíicant to be aware oí that the respondents could be reíerring to diííerent kinds oí ser·ices when asked to recall the pre·iously experienced ser·ice. 1o deepen the analysis part and to detect similarities between ser·ice industries, we also decided to include comparisons between the selected ser·ice industries. By separately analysing tangibility and loyalty within restaurants, hairdressers, tra·el agencies, dentistries, banks and the Swedish employment agency, the chapter will be more structured. Lmpirical lindings and Analysis 30 4.2 Restaurants Intangibility rate 6 5 4 3 2 1 0 L o y a l t y 10 8 6 4 2 ligure 4-1 Restaurants` loyalty and intangibility rate. Lxamining the results írom restaurants, the Pearson indicator is -0.394 2 , which pro·es a negati·e correlation between loyalty and intangibility ratio. lurther, the signiíicant ·alue íor restaurants is 0.012 2 , which is well below the signiíicant le·el oí 0.05. 1his íigure indicates that the relationship between loyalty and intangibility ratio is signiíicant. 1he negati·e relationship is ·iable when considering the downward sloping line in the graph displayed abo·e ,see íigure 4-1,. Negati·e correlation means that ií loyalty towards a restaurant increases, intangibility oí the ser·ice will decrease and ·ice ·ersa. In other words, ií a restaurant`s ser·ices become more tangible, the loyalty ratio is expected to increase. lowe·er, important to consider is that the Pearson correlation coeííicient implies that neither loyalty nor intangibility is dependent on the other. 4.2.1 Tangibility 1he mean tangibility ratio oí restaurants is 1.9. Using the tangibility continuum, this íigure indicates that restaurants` ser·ices are more tangible than intangible ,McDougall & Snetsinger, 1990,. 1hus, in a scale ranging írom 1 to 5, where 5 is purely intangible and 1 purely tangible, these kinds oí ser·ices are more towards the tangible side. Restaurants are considered experience goods, hence, they ha·e more experience qualities than search or credence qualities ,McDougall & Snetsinger, 1990,. 1he íigure 1.9 indicates that respondents are in between ha·ing a clear picture oí the ser·ice and being able to picture the ser·ice immediately. 1he more search qualities a ser·ice consists oí, the easier it is to 2 See Appendix 3 Lmpirical lindings and Analysis 31 assess ,Rushton & Carson, 1989,. Based on this notion, it could be that a restaurant`s customers íind it easy to e·aluate the ser·ice pro·ided since tangibles enhance customers` pre-purchase assessment ,McDougall & Snetsinger, 1990,. 1he degree oí tangibility also aííects ser·ice quality ,Santos, 2002,. 1hus, quality could be argued as being highly percei·ed in this ser·ice industry. 1he rather low degree oí intangibility could indicate that customers know what to expect írom the ser·ice on beíorehand. 1his assumption can be drawn írom the notion that the more tangible a ser·ice is, the easier can a customer e·aluate the ser·ice beíore and aíter consumption ,McDougall & Snetsinger, 1990, Rushton & Carson, 1989,. lence, restaurants ha·e succeeded in making intangibility oí their ser·ices more tangible ,Reddy et al., 1993,. 1here are diííerent kinds oí tangibility íeatures that theorists mean that one should take into consideration. McDougall and Snetsinger ,1990, mean that it is important to make a distinction between tangibles and tangibility. In the questionnaire, respondents were asked how well the ser·ice pro·ided a clear and concrete image, this is according to McDougall and Snetsinger ,1990,, reíerring to both the physical and mental component oí the ser·ice. In turn, this means that when picturing a ser·ice recei·ed írom pre·ious experience with a restaurant, physical e·idence oí the ser·ice as well as the mental picture oí the ser·ice was taken into consideration. Moreo·er, the tangibility rate oí 1.9 captures both tangibility oí surroundings and tangible result oí the ser·ice, since tangibility is iníluenced by tangibles ,Rushton & Carson, 1989,. lence, when measuring tangibility oí ser·ices, taste oí the íood being ser·ed, milieu and location oí the restaurant and many more íeatures could ha·e iníluenced e·aluation oí ser·ice`s tangibility. 1his notion coheres with Gustaísson et al.`s ,2003, claim that satisíaction is the customer`s o·erall e·aluation oí the consumption experience. 4.2.2 Loyalty Getting expectations oí the ser·ice íulíilled pro·e that ser·ices` percei·ed quality is oí satisíaction. lowe·er, this depends on what expectations a customer had beíore consuming the ser·ice and what the customer is comparing it to. lence, it is important to be aware oí that e·aluation oí the pre·ious experienced ser·ice is depending on what preíerences and experiences customers had on beíorehand ,Gronroos, 2000,. Satisíaction is closely connected to quality ,Gronroos, 2000,. Mean satisíaction oí restaurants` ser·ices is ¯.6. 1his number is deri·ed írom question 4, which asks how satisíied the respondent was with the ser·ice. In turn, satisíaction is related to the degree oí loyalty ,Gustaísson et al., 2003,. 1hereíore, the mean oí satisíaction could imply that the restaurants` customers are rather loyal. lowe·er, when looking at the answer to question 1, which asks how great the probability oí continuing buying the ser·ice írom the same organisation, the mean is 6.8. 1his lower íigure supports Gronroos`s ,2000, claim that it is only customers that gi·e satisíaction top scores, who are truly loyal. lence, it is not suííicient simply to analyse the mean oí satisíaction, one must also consider the top scores. Six respondents oí 40 gi·e satisíaction a ten, which means that, ií accepting Gronroos`s statement, 15 ° oí the respondents are truly loyal. A possible reason íor the two diííerent íigures could be that íactors are limiting the customer to a speciíic ser·ice or restaurant by which the respondent is not íully satisíied with ,Soderlund, 2003,. lor example, ií expecting high quality oí certain dish but is not recei·ing what is expected, the customer might be dissatisíied but may continue being a customer ií the restaurant is the only pro·ider oí that speciíic dish. 1his coheres with the result deri·ed írom question number 1 that asks about the probability oí continuing buying the ser·ice írom the pre·ious ·isited Lmpirical lindings and Analysis 32 restaurant. 13 out oí 40, 32.5 ° mean that it is highly likely and ga·e a top score to the likelihood. 1here are many aspects to take into consideration when e·aluating the relationship between tangibility and loyalty. As mentioned abo·e, not only are there many tangibility íeatures that could aííect percei·ed quality oí ser·ices, there are also diííerent perspecti·es oí loyalty that needs to be reílected upon. Despite many iníluencing íactors, the graph displayed in íigure 4-1 points to the íact that as tangible íeatures oí restaurants` ser·ices increase, loyalty increases and ·ice ·ersa. 1his support and linkage theories oí íor example Gronroos ,2000,, that is relating tangibility to quality and theories oí leskett et al. ,1994, that relate quality satisíaction with loyalty. It can be concluded, aíter re·iewing the results deri·ed írom restaurants` ser·ices, that loyalty and tangibility are signiíicantly negati·ely correlated. lence, attempting to get more loyal customers, restaurants could íocus on making ser·ices more tangible. 1he high tangibility rate might imply that customers íind it easy to e·aluate the ser·ice beíore and aíter consumption, since they íind it easy to picture the ser·ice. Since the probability oí continue buying ser·ices is graded lower than satisíaction, there are íew customers, which are íound truly loyal. 1his might indicate that e·en though tangibility and loyalty are negati·ely correlated, there are other íactors than íeatures oí tangibility that are iníluencing a customer`s choice oí restaurant. Lmpirical lindings and Analysis 33 4.3 Hairdressers Intangibility rate 6 5 4 3 2 1 0 L o y a l t y 12 10 8 6 4 2 0 ligure 4-2 lairdressers` loyalty and intangibility rate. 1he scatter plot deri·ed írom sur·eying hairdressers` intangibility and customer loyalty shows a downward slope in the íigure abo·e ,see íigure 4-2,. lence, a negati·e relationship between loyalty and intangibility rate can be assumed. 1he graph`s appearance is supported by a Pearson correlation coeííicient oí -0.246 3 . lowe·er, because the ·alue 0.126 3 is rising abo·e the signiíicant le·el oí 0.05, correlation between the two íactors is insigniíicant. lence, there is no ·alid correlation between loyalty and intangibility rate in this ser·ice industry. 4.3.1 Tangibility Mean tangibility ratio íor hairdressers is 1.¯. Placing this íigure in the tangibility continuum indicates that ser·ices pro·ided by hairdressers are more tangible than intangible ,McDougall & Snetsinger, 1990,. As mentioned abo·e, respondents oí the questionnaire are not restricted to any speciíic íeatures oí tangibility when rating ser·ices` percei·ed tangibility. Despite diííerent perspecti·es oí tangibility, a rate oí 1.¯ pro·es that the respondents had a clear image oí the physical or mental components ,McDougall & Snetsinger, 1990,. One reason íor in·alid correlation could be that the tangibility íeature oí a ser·ice does not iníluence loyalty to a hairdresser since hairdressers pro·ide the same core ser·ice. 1his also support Gronroos` ,2000, claim that technical quality oí a ser·ice ,what a customer recei·es, is oíten similar within the same industry and is thereíore hard to compete with. lence, key to success is not only being dependent on tangibility oí the ser·ice as Reddy et al. ,1993, point out. 1he same goes the other way around, íor example, 3 See Appendix 3 Lmpirical lindings and Analysis 34 increasing loyalty does not necessarily make a hairdresser`s ser·ices more tangible. Santos ,2002, íound that degree oí intangibility,tangibility does ha·e a signiíicant eííect on customer`s quality perception. It could be that that quality is percei·ed as high because oí a low degree oí ser·ice intangibility. Moreo·er, theorists ,i.e. McDougall & Snetsinger, 1990, Rushton & Carson, 1989, claim that the more tangible a ser·ice is, the easier it is to e·aluate the ser·ice beíore and aíter its consumption. lence, expectations and experiences oí a ser·ice are iníluenced by a ser·ice`s tangibility. 1he rather low intangibility that hairdressers` ser·ices recei·e could thereíore mean that customers íind it easy to know on beíorehand what they are buying. 4.3.2 Loyalty 1he insigniíicant correlation might also indicate that satisíaction or loyalty oí the ser·ice is not high enough. According to Gronroos ,2000,, a customer percei·e bad quality ií expectations oí a ser·ice are not being met. lence, ií satisíaction oí a ser·ice is low, customers easily swap ser·ice pro·ider and loyalty decreases. 1he insigniíicant correlation between tangibility and loyalty might indicate that tangibility is not iníluencing ser·ice e·aluation. \et, this does not reject the claim that satisíaction oí the ser·ice is related to loyalty, as the ser·ice proíit chain indicates ,leskett et al., 1994,. Ií accepting Gronroos`s ,2000, theory concerning apostles, only the ones who are most satisíied will stay loyal. 1he mean satisíaction oí hairdressers` ser·ices is 8.1. lowe·er, considering Gronroos`s ,2000, notion, this relati·ely high íigure does not pro·e high loyalty. 12 oí 40 respondents did howe·er gi·e their o·erall satisíaction oí the hairdressers` ser·ices top score. 1hus, hairdressers ha·e indeed some loyal customers, but this is not correlated to tangibility ratio according to the Pearson`s correlation coeííicient. Since satisíaction is linked to ser·ice quality and since quality is linked with tangibility, it could imply that quality is not e·aluated with reíerence to the tangibility oí hairdressers` ser·ice ,Gronroos, 2000, Santos, 2002,. 1his is questioning Santo`s ,2002, assumption that the more tangible components a ser·ice has, the more do tangibles contribute to ser·ice quality. It can be concluded, summing up the results deri·ed írom hairdressers, that the relationship between tangibility and loyalty is insigniíicant. lence, it is not ·alid to claim that there exists a correlation between the two ·ariables. 1his result indicates that loyalty might not iníluence tangibility. A reason íor that could be that customers are able to picture a hairdresser`s ser·ices but since most hairdressers pro·ide the same kind oí core ser·ice, tangibility is not iníluencing loyalty. Another reason íor the insigniíicant result could be that respondents do not relate satisíaction to a ser·ice`s tangibility. lence, other íactors than tangibility might iníluence loyalty. In turn, it could be that quality, which is closely intertwined with tangibility, is not e·aluated upon when ranking satisíaction. Lmpirical lindings and Analysis 35 4.4 Travel Agencies Intangibility rate 6 5 4 3 2 1 0 L o y a l t y 12 10 8 6 4 2 ligure 4-3 1ra·el agencies` loyalty and intangibility rate. 1he signiíicant ·alue oí 0.026 4 is below the signiíicant le·el in Pearson correlation test, which in turn indicates that the relationship between loyalty and intangibility rate is signiíicant. 1he Pearson correlation coeííicient is -0.352 4 , which points to an increase in loyalty will decrease the intangibility rate and ·ice ·ersa. 1he downward sloping line in the graph abo·e ,see íigure 4-3, íurther displays the negati·e relationship between the two ·ariables. As mentioned beíore, it is important when interpreting the result deri·ed írom Pearson`s correlation test not to claim that one ·ariable is dependent on the other. lence, it is not ·alid to claim that any causality exists between the ·ariables. 4.4.1 Tangibility 1he mean tangibility ratio oí the ser·ices pro·ided by the tra·el agencies is 1.¯. Placing this íigure in the tangibility continuum pro·es that the ser·ices are tangible dominant ,McDougall & Snetsinger, 1990,. In turn, this means that customers oí tra·el agencies are able to picture the ser·ice they recei·ed, which coheres with McDougall`s and Snetsinger`s ,1990, deíinition oí ser·ice tangibility. lurthermore, it might be ·alid to state that tra·el agencies ha·e succeeded in making their ser·ices` intangibles tangible. 1ra·el agencies are considered, according to theory, to ha·e more experience qualities than search and credence ,McDougall & Snetsinger, 1990,. lowe·er, when placing tra·el agencies in the tangibility continuum they seem to contain more search qualities than experience. Since theory presented by Rushton and Carson ,1989, indicates that tra·el agencies should be high in credence qualities, it has an unexpected placement in the 4 See Appendix 3 Lmpirical lindings and Analysis 36 tangibility continuum. 1his could be explained by the questionnaires` íormulation. It is reíerring to the pre·ious experienced ser·ice recei·ed írom the tra·el agencies, which in turn could lead respondents to think about the pre·ious taken tra·el. lence, emotional íactors and experiences oí tra·elling might then ha·e iníluenced the ser·ice e·aluation. lor instance, ií the destination or weather oí the speciíic journey did not íulíil expectations, the ser·ice pro·ider might suííer írom low satisíaction results e·en though the actual ser·ice was percei·ed as good. lowe·er, in this speciíic case, ií the ser·ice had been marketed accurately customers might not ha·e had such high expectations and would then rank satisíaction higher. 1his reasoning coheres with Gronroos ,2000, notion that ser·ice pro·iders jeopardize ser·ice quality, ií building up too high expectations that cannot be íulíilled. 4.4.2 Loyalty 1aking into consideration the notion that a ser·ice`s tangibles are a direct presentation oí ser·ice quality would mean that the rather high tangible scores make tra·el agencies` ser·ices oí satisíactory quality ,Santos, 2002,. In turn, since tangibility and loyalty are signiíicantly correlated, it is ·alid to accept Gronroos`s ,2000, notion that satisíaction is closely linked with quality. In addition, leskett et al.`s ,1994, belieí that satisíaction oíten leads to loyalty is in this case adequate. According to Gronroos ,2000,, there are other quality aspects to take into consideration as well. le states that ser·ice quality is indi·idually e·aluated and that each customer experience ser·ices uniquely. In turn, customers` presumptions about diííerent kinds oí ser·ices are iníluencing judgment oí whether or not the experienced ser·ice quality is percei·ed as good ,Gronroos, 2000, Zeithaml et al., 1988,. lunctional quality as well as technical is also iníluencing experienced quality oí ser·ices. In the questionnaire, the reíerral to the pre·ious experience with a tra·el agency`s ser·ices will capture both oí these aspects. lence, technical and íunctional quality oí the ser·ice, are to be reílected in the questionnaire`s subsequent questions. Deri·ed írom the questionnaire, o·erall satisíaction ratio oí tra·el agencies ser·ices is ¯.9 and 10 oí 40 respondents ga·e satisíaction top scores. 1his means that, ií accepting Gronroos`s ,2000, and Soderlund`s belieí that it is only customers who gi·e top scores that are truly loyal, 25° oí tra·el agencies` customers are to be considered as truly loyal. Being loyal means, that customer will continue buying the ser·ice írom the same ser·ice pro·ider ,Oli·er, 1999,. 1he result deri·ed írom question 1, which concerned the probability oí continuing buying ser·ices írom the same ser·ice pro·ider, pro·es that this loyalty deíinition is acceptable in the case oí tra·el agencies. 1his is an important question to enlighten since loyalty is concerned with a relationship o·er time ,Oli·er, 1999,. 1he mean probability was ¯.3, which is not íar írom the result oí o·erall satisíaction. 1o conclude, the results deri·ed írom the tra·el agency industry pro·e that there is a signiíicant relationship between loyalty and tangibility. lence, there exists a ·alid negati·e correlation, which means that an increase in one ·ariable will lead to a decrease in the other. In turn, this means that ií a ser·ice becomes more tangible, loyalty will increase and ·ice ·ersa. Moreo·er, what íurther point to this relationship is the similar rating oí o·erall satisíaction and probability to continue buying the ser·ice. 1his since loyalty indicate that a customer is returning to the same ser·ice pro·ider and since satisíaction indicate that tra·el agencies ha·e succeeded to narrow the gap between ser·ice expectations and experience. Lmpirical lindings and Analysis 3¯ 4.5 Dentistry Intangibility rate 6 5 4 3 2 1 0 L o y a l t y 10 9 8 7 6 5 4 3 ligure 4-4 Dentists` loyalty and intangibility rate. Results írom sur·eying ser·ices related to dentists show that a relationship between loyalty and intangibility exists ,see íigure 4-4,. Pearson correlation gi·es a negati·e ·alue oí -0.32 5 , which means that as intangibility decrease, loyalty increases. 1he relationship can also be re·ersed, higher loyalty leads to lower rate oí intangibility. 1he le·el oí signiíicance is 0.044 5 , which imply that the negati·e relationship is signiíicant. lence, it is arguable that in the dentistry industry, there exist a negati·e relationship between loyalty and intangibility. 4.5.1 Tangibility Mean le·el oí tangibility íor the respondents in this group is 1.8, which implies that most respondents would agree with the statement that they ha·e a clear image oí this ser·ice. lowe·er, it is not clear ií this created image is positi·e or negati·e, in turn this means that both could be related to the ser·ice. Ne·ertheless, in the case oí this ser·ice industry, a possible negati·e picture will not disappear by changing to another ser·ice pro·ider, since the core ser·ice and the technical quality is similar ,Gronroos, 2000,. According to theorists, dentistry is considered high on credence qualities, meaning that the ser·ice consists mainly oí intangible íeatures that cannot be e·aluated beíore the purchase ,e.g. Moorthia, 2002, Rushton & Carson, 1989, Zeithaml, 1991,. 1hereíore, it was expected that the intangibility rate would be higher than 1.8. Locating this íigure in the tangibility continuum indicate that the ser·ices pro·ided by dentists ha·e more tangible than intangible íeatures. lowe·er, the degree oí tangibility depends on what ser·ice is 5 See Appendix 3 Lmpirical lindings and Analysis 38 conducted at the dentist. Most people ha·e experienced a regular examination while it can be assumed that a more complex ser·ice may be percei·ed as intangible ií the respondents ha·e not been in contact with it. It has been stated that ser·ice pro·iders can beneíit írom making their ser·ices more tangible ,Reddy et al., 1993,. It is argued that this would íacilitate e·aluation íor the consumer before the purchase is done and thus expected ser·ice quality would increase. Depending on what ser·ice we consider, the amount oí pre·ious experience can diííer. Some are íirst experienced at young age while others are not encountered until later in liíe ,i.e. bank ser·ices,. Dentistry could be an example oí a ser·ice used írom early age, which thus could make it easier to e·aluate since many persons ha·e experienced it during a longer time. 1angibility consists oí both a physical and a mental component where the physical part is the e·idence oí the ser·ice ,McDougall & Snetsinger, 1990,. 1angibles in this discussed example are impro·ed teeth but can also be the dentist`s surgery and how the consumer percei·es the ser·ice. Rushton and Carson ,1989, reíer to these kinds oí tangibles as surrogate íeatures, since it is not a tangible that is deri·ed írom ser·ice períormance but rather a complement to the actual ser·ice. lowe·er, íor the o·erall experience, it is equally important to ha·e physical surroundings that adds to the o·erall ser·ice quality. 1hus, to make dentistry more tangible, íocusing on enhancing the en·ironment is also oí importance. 4.5.2 Loyalty 1he mean loyalty ·alue íor dentistry was ¯.¯ out oí 10. 1hus, it can be concluded that loyalty in this ser·ice industry is rather high. As pre·iously highlighted, loyalty is oíten interlinked with satisíaction meaning that ií a consumer oí a ser·ice is satisíied, the degree oí loyalty should in general be higher. In question 4, the respondents were asked how satisíied they were with this particular ser·ice, which led to a mean oí 8.2. 1hus, satisíaction was higher than o·erall loyalty. Satisíaction is also interlinked with ser·ice quality ,Gronroos, 2000,. Ií satisíaction is high, it is assumable that the experienced quality also is considered high. Despite the high scores on satisíaction, Gronroos ,2000, argues that it is only customers who gi·e satisíaction the highest score, who will be íully loyal. lence, e·en ií a consumer scores high on the scale, it is not ·alid to claim that they are completely loyal to that ser·ice pro·ider. leskett et al. ,1994, state that customers ranking satisíaction highest are six times more likely to repurchase the ser·ice than those scoring lower on the scale. 1hereíore, ser·ice pro·iders must stri·e towards recei·ing high satisíaction scores. In our sur·ey, 42.5 ° ranked the highest score on the satisíaction question. Customers with a bad ser·ice quality experience are reíerred to as terrorists since they tend to speak badly about their experience ,Gronroos, 2000, leskett et al., 1994,. 1o a·oid this bad word-oí-mouth, satisíaction must be raised íor dentists that get low on satisíaction. 1o do this, it has been suggested that both employee management as well as customer orientation has to be impro·ed since both these aííect satisíaction ,Gustaísson et al., 2003,. 1he importance oí being ser·ice minded is equally important as períorming a high quality ser·ice. \ithin dentistry, many respondents expressed that they always went to the same dentist and had done so íor se·eral years. 1hus, it might be harder íor ser·ice pro·iders in this industry to attract new customers since many oí them are already attached to a speciíic dentist and might be reluctant to change. Lmpirical lindings and Analysis 39 Summing up, it is to be concluded that a signiíicant relationship between ser·ice tangibility and customer loyalty was íound. 1he main part oí the respondents rating loyalty high, also rated the ser·ice to be low on the intangibility scale. lence, by making the ser·ice more tangible, loyalty is expected to increase. Possible reasons íor high le·els oí loyalty and tangibility is that most people ha·e a long experience írom these types oí ser·ices and that many ha·e used the same ser·ice pro·ider íor many years. Lmpirical lindings and Analysis 40 4.6 Banks Intangibility rate 6 5 4 3 2 1 0 L o y a l t y 12 10 8 6 4 2 0 ligure 4-5 Banks` loyalty and intangibility rate. Results írom sur·eying bank customers show a ·ery small negati·e correlation between intangibility and loyalty oí -0.024 6 ,see íigure 4-5,. lowe·er, the le·el oí signiíicance is 0.883 6 , which implies that our results are insigniíicant. 1hereíore, it cannot be argued that a relationship exists in this ser·ice industry. 1he scatter plot displays a wide spread oí answers and a wide spread oí loyalty. 4.6.1 Tangibility Mean le·el oí tangibility is 1.8, which thus mean that the respondent`s picture oí the ser·ice is more tangible than intangible. 1his is not in line with theory suggesting that íinancial ser·ices consists mainly oí credence qualities and should thus be rated high on intangibility ,Moorthia, 2002,. Contact with íinancial ser·ices might diííer between the respondents. Since they were asked to think about the ta.t ·isit to a bank and not a speciíic ser·ice, this might ha·e aííected the result. Ií instead sur·eying a speciíic bank ser·ice, the results might ha·e looked diííerently. Ií going to the bank íor simple transactions, such as money transactions or depositions, a lower degree oí intangibility could be a result than ií other ser·ices were used. lowe·er, this was not in line with the purpose oí this thesis and thus not íurther examined into. 1angibles are deíined as being the physical e·idence oí the ser·ice and aííect tangibility ,McDougall & Snetsinger, 1990,. In the case oí banking, tangibles could íor example include employees, en·ironment and money. lowe·er, when banks are directing their 6 See Appendix 3 Lmpirical lindings and Analysis 41 customers towards using internet íor some ser·ices pre·iously conducted in bank oííices, contact with the bank is decreasing which may lead to higher degrees oí intangibility in the íuture when tangibles are not experienced in the same way as beíore. 1hus, e·en bank ser·ices such as transactions and depositions may be intangible in the íuture when períormed at home and not in bank oííices. 1hus, íuture lack oí tangibles might iníluence customer examination and e·aluation oí ser·ice quality. In turn, this may aííect customer loyalty in the íuture ,leskett et al., 1994, Santos, 2002,. Customers will ha·e less contact with tangibles and may thereíore e·aluate banks on other criteria than today. 4.6.2 Loyalty Mean ·alue oí loyalty was calculated to 6.8, which is a relati·ely low ·alue oí loyalty. \hen questioning how satisíied the respondents were, the mean was ¯.¯. As mentioned in the theoretical íramework, loyalty is hard to deíine and people can oíten reíer to diííerent things when talking about loyalty. Soderlund ,2003, states that loyalty can be both oí a physical and oí a mental nature. In the physical world, indi·idual`s beha·iour is highlighted while their attitudes and intentions are íocused on when talking about the mental world. 1hus, the beha·iour oí bank customers might diííer with their attitudes. Customers may be loyal in their beha·iour towards the bank but disloyal when examining their attitudes towards the same bank. 1his could be a case oí when customers are engaged in íalse loyalty` ,Soderlund, 2003,. 1hey may continue employing the same bank without being completely loyal in the mental world. lowe·er, since changing ser·ice pro·ider in this industry can be assumed more complex than in other, dissatisíied customers are less prone to change despite engaging in íalse loyalty. Customers might íind it hard to spot diííerences between banks. Banks oííer ser·ices that are more or less the same and all try to maintain a high quality en·ironment where ser·ices are deli·ered. 1his coheres with Gronroos`s ,2000, notion that a ser·ice organisation íind it hard to compete with íunctional quality. Butscher ,1998, suggested that loyalty must be built through real relationships based on emotions and trust by oííering high-percei·ed ·alue. In the banking industries, where many ser·ices are now conducted through the internet, building and maintaining loyalty in the way Butscher ,1998, suggestions might be less íeasible in the íuture. 1o keep customers loyal, simply using the internet as a tool íor increasing loyalty will be diííicult. Gronroos ,2000, argues that only respondents gi·ing the highest mark will stay completely loyal to the ser·ice pro·ider. Based on this statement, 32.5 ° oí the respondents are íully loyal to their bank. lowe·er, íew will probably change bank due to the complexity in·ol·ed. Still, banks ha·e to work continuously with attempting to attract new customers and trying to increase loyalty and satisíaction with the existing ones. 1he ser·ice-proíit chain displays the importance oí increasing loyalty since it aííects re·enue growth ,leskett et al., 1994,. It is claimed that satisíaction leads to loyalty and thus higher proíits. In the banking industry, it is perhaps easier to maintain customers since many people use the same bank through their liíe than trying to increase loyalty with the existing customers. lence, eííort has to be put on customers, who are about to choose bank íor the íirst time. lowe·er, it might be assume that people írom the same íamily generally use the same bank, which renders diííiculties when trying to attract new customers. As a result, increasing market share in this industry can be considered harder compared to other ser·ice industries. Lmpirical lindings and Analysis 42 1o conclude, our results írom the banking industry did not point towards any relationship between intangibility and loyalty. 1he answers were largely spread and respondents ha·ing a clear picture oí the ser·ice diííered in loyalty. 1hus, it cannot be concluded that a lower degree oí intangibility would necessary lead to higher degree oí loyalty. 1his may be because people in this ser·ice industry are less likely to change pro·ider in spite oí dissatisíaction with the bank. Lmpirical lindings and Analysis 43 4.7 The Swedish Employment Agency Intangibility rate 6 5 4 3 2 1 0 L o y a l t y 12 10 8 6 4 2 ligure 4-6 1he Swedish Lmployment agency`s loyalty and intangibility rate. 1he last ser·ice pro·ider diííers írom the others in that it is a public authority with state íunding. 1hus, the proíit moti·e existing in the other industries is not present here. In addition, they are less in·ol·ed in competition with other ser·ice pro·iders. lowe·er, arising job agencies on the Swedish market ha·e gi·en the Swedish employment agency some competition. Still, ií people become unemployed, they ha·e to notiíy the Swedish employment agency in order to get access to unemployment compensation. Despite these diííerences with the other in·estigated ser·ice industries, it is interesting to sur·ey people using these kinds oí ser·ices to see ií it diííers and ií a relationship can be íound between tangibility and loyalty. 1he results show that correlation is slightly negati·e with a ·alue oí -0.024 ¯ . 1he le·el oí signiíicance is howe·er ·ery high, 0.883 ¯ implying that the negati·e correlation is not ·alid and thus it cannot be decided ií a relationship exists between tangibility and loyalty. Answers are spread and both people with a clear picture as well as unclear picture oí the ser·ice ha·e rated both high and low on loyalty ,see íigure 4-6,. 4.7.1 Tangibility Mean le·el oí tangibility is 2.3, which shows that the respondents in this category ha·e a less clear picture oí the ser·ice pro·ided by the Swedish employment agency. Lxactly what ser·ice the respondents used was not in·estigated. 1hus, depending on what ser·ice the jobseeker used when answering our sur·ey probably also iníluenced the answers. ¯ See Appendix 3 Lmpirical lindings and Analysis 44 It was not known on beíorehand whether the Swedish employment agency consisted oí mainly experience or credence qualities when trying to place it on the tangibility continuum ,Moorthia, 2002,. L·aluating the results, it can be concluded that it is probably somewhat more intangible and consist oí mainly credence qualities since many respondents e·aluated the ser·ice to be less clear. Perhaps this is a result oí ambiguity in·ol·ed in the ser·ice. Is it the potential pro·ided job that is the ser·ice or is it education, help or compensation that is the core ser·ice· On the one hand, ií considering the main ser·ice to be pro·ision oí a job, then intangibility would probably be higher since the picture oí this will be ·ery unclear beíore employment has started. On the other hand, ií the ser·ice before employment starts is considered the core ser·ice, it is probably more clearly percei·ed. 1angibility oí the ser·ice will be higher in this case compared with the íirst mentioned ·iew because it consists oí more physical e·idence ,McDougall & Snetsinger, 1990,. Santos ,2002, has suggested that ií a ser·ice is more tangible, percei·ed ·alue will be higher. 1hus, in this case percei·ed quality should be low. lowe·er, this may also be hard to claim due to the speciíic íeatures oí this ser·ice pro·ider. 1he undesired aspect oí this ser·ice can lead to lower percei·ed quality than in other industries. It may also be linked with the characteristics oí ser·ices being inseparable, perishable, intangible and heterogenic ,Gronroos, 1998,. Because oí these characteristics, each person percei·es ser·ices diííerently and thus, perception oí quality will diííer. De·eloped theory concerning ser·ice marketing and problems deri·ing írom the intangibility aspect has been de·eloped with proíit-making organisations in mind ,leskett et al., 1994,. 1hereíore, the suggestion to make a ser·ice more tangible in order to increase proíits is less applicable on the Swedish employment agency. Since they are not dependent on proíits íor sur·i·al, they might be less prone to de·elop strategies to make the ser·ice more tangible. Moreo·er, beíore customers ha·e been pro·ided with a job, it can be harder to e·aluate the results írom the ser·ice pro·ided by the Swedish employment agency. Asking people now employed how they percei·ed the ser·ice would probably ha·e led to a lower mean oí tangibility since they can easier e·aluate the results. 4.7.2 Loyalty Loyalty will also be diííerent compared with other ser·ice pro·iders since customers do not ha·e the choice in the same way as with other ser·ices. Lately, there are more job pro·iders on the Swedish employment market than beíore. \et, all unemployed people are more or less obliged to ha·e some contact with the Swedish employment agency, ií requesting unemployment compensation. 1he mean ·alue oí loyalty was calculated to be 6.1, which can be argued to be quite low. Considering that the number oí ser·ice pro·iders in this industry is íew, the loyalty ·alue would ha·e been expected to be higher. Maybe it is a result oí the ser·ice in·ol·ed being sensiti·e and unwanted. Most likely, people are not satisíied with being unemployed, which automatically lead to gi·ing the Swedish employment agency low ratings in the sur·ey. People are loyal when they repurchase the same brand without any consideration oí buying another ,Oli·er, 1999,. lowe·er, in the case oí the employment industry, adapting this deíinition is not íeasible since there are not many brands to choose írom and the ser·ice is not purchased in the same way as other ser·ices. Jobseekers will remain loyal as long as they are unemployed and thereaíter be completely disloyal, reíerred to as terrorists by Gronroos ,2000,. Lmpirical lindings and Analysis 45 Loyalty has been connected with satisíaction and is stri·ed aíter due to its aííect on proíitability ,Gronroos, 2000, leskett et al., 1994,. 1hese are also more applicable to proíit-making industries. 1he Swedish employment agency will not try to increase loyalty because they want to increase proíits. Instead, they ha·e the re·erse wish, ií people become employed and thus less loyal, their goal has been íulíilled. lence, it can be argued that job seekers at the Swedish employment agency are engaged in íalse loyalty ,Soderlund, 2003,. It has been argued that loyalty is strongly interlinked with satisíaction ,Gronroos, 2000,. lowe·er, e·en ií customers are completely satisíied with a ser·ice, they may change pro·ider. Con·ersely, dissatisíied customers do not necessarily change ser·ice pro·ider ,Soderlund, 2003,. Applying this on the Swedish employment agency, customers might be dissatisíied but continue using their ser·ices. lowe·er, this beha·iour can take place in proíit-making organisations as well but may be more common when pro·iders are íew. Re·iewing the results írom the Swedish employment agency, there is no relationship to be íound between the le·el oí intangibility and loyalty. 1hus, attempting to make this ser·ice more tangible would probably not increase loyalty. It is likely that the results are aííected by the ambiguity in·ol·ed in job seeking. People using this ser·ice ha·e not yet experienced the result in íorm oí being employed, consequently, the ser·ice is percei·ed to be intangible. Loyalty is also ·iewed diííerently since the wish írom the ser·ice pro·ider is that people should become less loyal. Ií so, their primary goal has been reached, to decrease unemployment in Sweden. Lmpirical lindings and Analysis 46 4.8 Overall Service Analysis 4.8.1 Loyalty and Intangibility Graph Loyalty-Intangibility graph 5 5,5 6 6,5 7 7,5 8 1,5 1,6 1,7 1,8 1,9 2 2,1 2,2 2,3 2,4 Intangibility L o y a l t y Employment agency Restaurants Banks Dentistries Travel agencies Hairdressers ligure 4-¯ Loyalty and Intangibility Graph. 1o enable comparison between the in·estigated ser·ice pro·iders, we calculated a mean ·alue írom intangibility and loyalty in order to get one point íor each industry. By displaying the ·alues in a diagram ,see íigure 4-¯,, it can be disco·ered whether diííerences exist. lowe·er, the relationship between loyalty and intangibility is not shown here. Loyal customers ha·e been deíined as those who repurchase the same brand consistently without considering other brands ,Oli·er, 1999,. According to Gronroos ,2000,, it can only be argued that customers gi·ing loyalty top scores will be completely loyal. In the sur·ey, loyalty ·alue ranges in between 6.1 to ¯.¯. 1he Swedish employment agency got the lowest loyalty result while dentistry recei·ed the highest. lairdressers got the second highest rate oí ¯.2. Banks, tra·el agencies and restaurants got close rates and the diííerences cannot be claimed to be ·ery large. As argued, customer loyalty leads to higher proíitability, which most ser·ice pro·iders stri·e aíter ,leskett et al., 1994, Soderlund, 2003,. Ií loyalty is not in íocus, Reichheld ,199¯, argues that companies will experience a struggle to uphold growth. 1he Swedish employment agency lacks the goal oí increasing proíitability compared to the other ser·ice pro·iders. lowe·er, what is interesting is that the national dental health ser·ice also lacks the monetary goal. Since the respondents were not asked ií they were ·isiting a pri·ate dentistry or not, it cannot be decided to what extent the goal oí proíitability is present or not. It can be argued that banks, hairdressers, tra·el agencies and restaurants always are dri·en by proíitability and the results shows that they also recei·ed about the same loyalty ·alues. Lmpirical lindings and Analysis 4¯ Low loyalty ·alue recei·ed by the Swedish employment agency might be explained by the strong connection between ser·ice quality, satisíaction and loyalty ,Gronroos, 2000,. It is howe·er not necessary that ser·ice quality must be high as long as it surpasses expectations írom the customer ,Gronroos, 2000,. Customers at the Swedish employment agency may percei·e quality as low and thus satisíaction will decrease as well. Ne·ertheless, ií expectations were low írom the start and surpassed, satisíaction will be higher than expected. Satisíaction might not occur until aíter the goal oí employment has been achie·ed. 1hus, to ask people aíter they ha·e been employed would probably ha·e lead to higher loyalty results. Ser·ice intangibility is one characteristics leading to problems when marketing and assessing ser·ices. Marketing through employing similar strategies as with tangible product marketing is not íeasible and instead Rust et al. ,1996, propose three P`s, people, physical e·idence and process. Personal interactions and the surroundings were interactions take place are important when marketing ser·ices. In this thesis, the respondents were asked to consider the last time they made use oí a speciíic intangible ser·ice. Intangibility,tangibility ratings ·aried between 1.¯ and 2.3, which all are more towards tangibility than intangibility. 1his could be a result oí the ser·ice already being experienced and thus people ha·ing a clearer picture oí people, physical e·idence and processes. Ser·ices experienced at the hairdresser and the tra·el agency was percei·ed as most tangible while the Swedish employment agency got the highest ·alue oí 2.3. Bank and dentistry got a mean oí 1.8 and restaurant 1.9 that can be claimed to be ·ery close to hairdressers and tra·el agencies. McDougall and Snetsinger ,1990, argue that tangibility has both a physical and a mental component. Applying this on the Swedish employment agency, the physical and mental picture oí a potential job might be blurred and not as clear as with the other ser·ices. 1he ser·ice also diííers írom the others in that it is not purchased but used as means to reach something. Looking at the other extreme oí hairdresser and tra·el agency, people`s picture oí the ser·ice is clearer when they think about the last journey or haircut purchased. Summing up the results recei·ed when calculating a mean oí both loyalty and intangibility,tangibility on all in·estigated ser·ice pro·iders, small diííerences were íound. All the pro·iders, which ha·e proíitability goal, are grouped together and only small diííerences exist. 1he only pro·ider with results that diííers is the Swedish employment agency ,see íigure 4-¯,. 1he reason íor this can be that the ser·ice pro·ided is ·aguer than the others are since the respondents had not yet experienced the result as within the other industries. Ií asking people that had recei·ed a job through using the Swedish employment agency`s ser·ices, the results might ha·e diííered. Lmpirical lindings and Analysis 48 4.8.2 Tangibility Continuum ligure 4-8 1angibility Continuum. Intangibility is the ser·ice characteristic that has been most extensi·ely brought up to discussion by theorists ,e.g. larte & Dale, 1995, Johns, 1999, McDougall & Snetsinger, 1990, Rushton & Carson, 1989, Santos, 2002,. It is also argued that ser·ices should not be seen as a homogenous group and that the intangibility íeature does not clearly separate ser·ices írom products ,Johns, 1999, Le·itt, 1981, McDougall & Snetsinger, 1990, Santos, 2002,. Deri·ed írom these discussions, it is interesting to elaborate íurther with the analysis and to place the selected ser·ice industries along the tangibility continuum in order to detect any possible similarities or diííerences ,see íigure 4-8,. 1here are indications that the more search qualities a ser·ice has, the more tangible the ser·ice is ,larte & Dale, 1995, Rushton & Carson, 1989, Zeithaml, 1991,. 1he same goes the other way around, the more credence qualities a ser·ice has, the more intangible it is. lurthermore, intangibility íorces ser·ice marketing to part írom traditional marketing and to de·elop new marketing practises, which are more in line with ser·ices distinct characteristics ,Gronroos, 2000,. Since a ser·ice-oriented organisation should stri·e towards tangibilize ser·ices through marketing, it could be claimed that the ser·ice industries in·estigated ha·e succeeded with their marketing approach ,Reddy et al., 1993,. According to Rushton and Carson ,1989,, ser·ices pro·ided by restaurants, tra·el agencies, and hairdressers, are considered high in experience qualities while dentists and banks are high in credence qualities ,Rushton & Carson, 1989,. lence, it was expected that the chosen ser·ice industries would be located more in the middle and upper halí oí the tangibility continuum. lowe·er, neither did the study pro·ide such results nor did it separate experience dominant írom credence dominant ser·ices. Restaurants were in íact ranked more intangible than both banks and dentists, which do not support Rushton`s and Carson`s ,1989, grading. 1his means that the respondents íound it in general relati·ely easy to picture the ser·ice. In turn, there are indications that hairdressers, tra·el agencies, banks, dentists and restaurants in general possess ser·ice attributes that can be e·aluated beíore the actual purchase ,Zeithaml, 1991,. \hen it comes to the Swedish employment agency, there were no such expectations. lowe·er, due to its ser·ices nature ,íor example that it pro·ides ad·ices íor job seeking, there were indications that ií not being more credence dominated it would be more experience dominated. Such belieís cannot be accepted when considering the low intangibility rate. 2 , 3 L m p l o y m e n t A g e n c y 1 2 3 4 5 1 , 9 R e s t a u r a n t s 1 , ¯ l a i r d r e s s e r s , 1 r a · e l A g e n c i e s 1 , 8 B a n k s , D e n t i s t s Lmpirical lindings and Analysis 49 \hen e·aluating a ser·ice degree oí tangibility the respondents could ha·e considered many aspects. Due to the questionnaire`s design, it is neither possible to draw any conclusions írom what kind oí tangibility each ser·ice industry is generating nor what kind oí ser·ice that each respondents is reílecting upon. lowe·er, since tangibility is a concept that does take into consideration the tangibles` iníluence on tangibility and its physical and mental components, it is still interesting to compare the diííerent ser·ice industries tangibility ratings ,McDougall & Snetsinger, 1990, Rushton & Carson, 1989,. Conclusions and linal Discussion 50 5 Conclusions and Final Discussion 1bi. fivat cba¡ter ritt ¡re.evt covctv.iov. aerirea frov tbe avat,.i.. . fivat ai.cv..iov ritt ai.¡ta, tbovgbt. covcervivg tbe .tva, vaae. 1bere ritt at.o be .vgge.tiov. of area. for fvrtber re.earcb. 5.1 Conclusions 1he purpose oí this thesis was to in·estigate ií there is a relationship between ser·ices` tangibility and customer loyalty. In order to examine such matters, graphs that ·isibly display any possible relationships, ha·e been presented and so ha·e results írom Pearson`s correlation test. Due to the ·ariety oí results deri·ed írom diííerent ser·ice industries, it cannot be concluded that there is a relationship between ser·ices` tangibility and customer loyalty in the ser·ice industry as a whole. lowe·er, when analysing diííerent ser·ices industries separately, three ha·e a signiíicant relationship between the two ·ariables and three ha·e not. \hen re·iewing results írom the six chosen ser·ice industries, it can be concluded that there are diííerences in Pearson correlation coeííicients` signiíicant le·els between loyalty and tangibility. lence, it is necessary to look at each ser·ice industry separately and not as a homogenous group. \hile the Swedish employment agency, banks and hairdressers had an insigniíicant relationship between loyalty and tangibility, the dentists, tra·el agencies and restaurants had a signiíicant relationship between the two ·ariables. 1he íirst group`s signiíicant ·alues range írom 0.012 to 0.044 while the second group has ·alues that range írom 0.0126 to 0.883, íigures which are well abo·e the chosen signiíicant ·alue oí 0.05. 1he signiíicant correlations are all negati·e. Restaurants had a correlation oí -0.394, hairdressers -0.246 and dentists -0.320. Being íully correlated would show ·alues oí -1 or - 1, hence, e·en though correlated, the íigures indicate that loyalty and tangibility are not íully correlated. lowe·er, negati·e correlation coeííicients denote that a decrease in ser·ice intangibility will increase loyalty and ·ice ·ersa. In other words, ií ser·ice pro·iders within these industries attempt to increase ser·ices` tangibility, loyalty will increase. 1hereíore, by iníluencing customers` ability to picture ser·ices, dentists, tra·el agencies and restaurants will be able to aííect their customer loyalty. \hen it comes to the insigniíicant correlation ·alues oí the Swedish employment agency, banks and hairdressers, there are graphical tendencies towards this negati·e relationship. 1he correlation coeííicients ranges írom - 0.024 to -0.246, which coníirms that e·en though ·ery small correlations they are negati·e. lowe·er, in these cases, it is not ·alid to claim that attempting to make ser·ices more tangible would increase loyalty. 1hus, it cannot be concluded that a lower degree oí intangibility would necessary lead to higher degree oí loyalty and ·ice ·ersa. 5.2 Final Discussion \hen períorming a study that has primarily íocused on customer loyalty and ser·ice tangibility, it has been noticed that customers ha·e diííiculties in both deíining loyalty and tangibility. As a result, measuring these ·ariables based on customers` perception might aííect the results deri·ed írom the questionnaire. In turn, it is important to be aware that emotions and attitudes could be captured inaccurately. Moreo·er, there might be customers who consider themsel·es as being loyal, e·en though not loyal as theorists deíine. 1he same goes íor the other way around, customers might not see themsel·es as loyal, but their actions indicate the opposite. Conclusions and linal Discussion 51 \hen presenting our results írom the sur·ey, we decided not to look at the age spread oí the respondents. It was not in line with our purpose and thus excluded. lowe·er, because oí this, the age spread in each ser·ice industry is not known. Ií a larger sur·ey was to be conducted, this aspect could also ha·e been included to íind possible diííerences between age groups. Some results deri·ed írom the empirical íindings may be questionable. It was íound that people are more loyal to their hairdresser than their bank, which may not be the case in reality. 1his can be a result oí asking the respondents to consider their ta.t experience with a bank. 1hus, the bank reíerred to when íilling in the questionnaire may not be the bank they usually ·isit. Ií customers belie·e that tangibility and loyalty are hard to deíine, so might marketers. As mentioned only brieíly in the thesis, a study períormed by Rushton and Carson ,1989, pro·ed that practitioners in the ser·ice-marketing íield do see a diííerence between their task and that oí marketing managers dealing with goods. lowe·er, being able to separate intangible beneíits and intangible íeatures was diííicult. Common sense was oíten being used. It might be that, reílecting on such íindings, the theoretical world is not yet íully linked to reality. lurther, to implement diííerent kinds oí tangibility strategies, there is a need íor theorists to communicate what tangibility and intangibility are and rb, marketers should íocus on marketing their ser·ices in a more tangible way. In addition, to deepen knowledge oí how to market ser·ices as more tangible is an area íor íurther in·estigation. In the íuture, ií ser·ice tangibility has been eííecti·ely communicated to practitioners, loyalty might be measured only based on how customers percei·e pro·ided ser·ices. 1heir expectations as well as experiences based on tangibility could help marketers to direct and impro·e marketing methods. In addition, assuming that customers are aware oí the word tangibility, measuring loyalty through rather simple tangibility questions could cut costs írom more expensi·e and extensi·e loyalty programmes. 1hus, íocusing on tangibility could sa·e money but it could also íacilitate the actual measuring oí loyalty. 5.3 Suggestions for further studies Our study has measured the relationship between loyalty and tangibility within diííerent ser·ice industries. \e detected some similarities and diííerence, which would be more interesting to in·estigate íurther. lor example, the reasons íor why all in·estigated ser·ice industries ended up within a narrow tangibility range írom 1.¯ to 2.3. 1his is interesting because the ser·ice industries chosen are considered to ha·e more experience and credence qualities than search qualities. lence, when marketing ser·ices pro·ided by these industries, it is argued that these characteristics should be taken into consideration. lowe·er, as these ser·ices actually seem to ha·e more search qualities, could it then be more appropriate to use traditional marketing than ser·ice marketing· Because it is diííicult to íind pure ser·ices or pure products, could it be that customers ha·e changed and do not belie·e that there is a diííerence· Ií so, would it be appropriate to create a new marketing approach that íocuses on ser·ice and product mixtures instead oí either ser·ices or products· It could also be interesting to períorm similar tests between diííerent ser·ice pro·iders within the same ser·ice industry. Ií measuring loyalty and tangibility in one speciíic industry, comparisons oí how ser·ice pro·iders market the same core ser·ice could be íurther in·estigated in. In addition, competition theories could be introduced to the Conclusions and linal Discussion 52 discussion. It might also be interesting to link loyalty and ser·ice tangibility to diííerent kinds oí ser·ices pro·ided írom the same organisation. Identiíying a ser·ice pro·ider`s customers could deepen the discussion concerning the customer loyalty and ser·ice tangibility relationship. 1o examine what preíerences, experiences and expectations a customer has oí a speciíic ser·ice might help marketers to íind more suitable segments but also to be able to customize tangibilization strategies to diííerent customer groups. New trends within íor example banks and tra·el agencies aííect a ser·ice`s tangibility. lor example, banking acti·ities are carried out more on the internet than beíore. In turn, tangibles, physical surrounding and other íactors that iníluence ser·ice tangibility are no longer able to íunction as marketing tools. lence, ií ser·ices can be considered as becoming more intangible as new technologies are entering the market and taking o·er the physical meeting between a ser·ice pro·ider and a customer, it is important íor marketers to approach new strategies íor attracting and retaining customers. It might be that the loyalty concept needs to be re-e·aluated. List oí reíerences 53 6 List of references Aczel, A.D., & Sounderpandian, J. ,2002,. Cov¡tete ßv.ive.. ´tati.tic.. New \ork: McGraw- lill,Irwin. Al·esson, M., & Deetz, S. ,2000,. Doivg Criticat Mavagevevt Re.earcb. London: Sage. Andersson, B.L. ,1995,. ´ov vav fragar far vav .rar. Kristianstad: Kristianstads Boktryckeri. Backham, J. ,1998,. Ra¡¡orter ocb v¡¡.at.er. Lund: Studentlitteratur. Bain & Company ,2005,. ío,att, rvte.!. 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Kön O Man Alder O 18 - 32 O K·inna O 33 - 4¯ O 48 - 64 O 65 - 80 Iragorna ska besvaras utifran Lr senaste erfarenhet hos en bank. Hur kon- kret eller abstrakt anser ni att tjänsten var? Kryssa för det alternativ som stämmer bäst överens. Hur väl stämmer följande fragor in pa er syn av företaget? Ringa in det alter- nativ som stämmer bäst överens. J. Hur stor är sannolikheten att ni kommer att fortsätta köpa denna tjänst hos detta företag? Inte troligt 1 2 3 4 5 6 ¯ 8 9 10 1roligt 2. Om ni skulle välja ett liknande företag för första gangen, hur troligt är det att ni skulle ha valt detta företag? Inte troligt 1 2 3 4 5 6 ¯ 8 9 10 1roligt 3. Hur troligt är det att ni kommer att rekommendera andra att köpa tjänsten hos detta företag? Konkret Abstrakt O Jag har en ·äldigt tydlig bild a· denna tjänst. O Ln íoreställning a· denna tjänst kommer direkt íramíor mig. O Denna tjänst är lätt att se och rora. O Jag anser att detta inte är en typ a· tjänst som är lätt att íoreställa. O Detta är en s·ar tjänst att íoreställa sig. Appendices 58 Inte troligt 1 2 3 4 5 6 ¯ 8 9 10 1roligt 4. Hur nöjd är ni med tjänsten? Inte nojd 1 2 3 4 5 6 ¯ 8 9 10 Mycket nojd I vilken grad överensstämmer ni med följande pastaende? Ringa in det alter- nativ som stämmer bäst överens. S. Iöretaget bryr sig om att bygga upp en stark relation med mig. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med 6. Iöretaget kommunicerar öppet och ärligt. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med 7. Iöretaget är engagerat i att skapa ömsesidiga fördelar (dvs. missbrukar inte sina kundrelationer). laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med 8. Jag litar pa detta företags ledare och anställda. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med 9. Kundlojalitet är värdefullt för detta företag och lönar sig för mig som kund. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med J0. Jag anser att företaget är värd min kundlojalitet. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med JJ. Över aren sa har min kundlojalitet ökat för detta företag. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med J2. Det är enkelt att vara kund pa detta företag. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med J3. Iöretaget är ett bra föredöme för denna bransch. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med J4. Iöretaget har bra personal. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med JS. Iöretaget kommer med innovativa lösningar. laller inte med 1 2 3 4 5 6 ¯ 8 9 10 laller med 1ack för er medverkan! Appendices 59 Appendix 2 Survey – English version A survey concerning customer loyalty relating to services. Gender O Male Age O 18 - 32 O lemale O 33 - 4¯ O 48 - 64 O 65 - 80 1he questions should be answered with reference to your last experience at a bank. 1o what extent did you perceive the service as being tangible or intangible? Mark with a cross the alternative, which best coheres with your view. How well do your view of this company coheres with these questions? Mark the alternative, which best coheres with your view. J. How likely are you to continue buying services from this company? Not likely 1 2 3 4 5 6 ¯ 8 9 10 Likely 2. If you were selecting a similar vendor for the first time, how likely is it that you would choose this company again? Not likely 1 2 3 4 5 6 ¯ 8 9 10 Likely 3. Overall, how likely are you to provide enthusiastic referrals to this company? Not likely 1 2 3 4 5 6 ¯ 8 9 10 Likely 4. Overall, how satisfied are you with the service from this company? 1angible Intangible O I ha·e a ·ery clear picture oí this item. O 1he image comes to my mind right away. O 1his item is ·ery tangible. O 1his is not the sort oí item that is easy to picture. O 1his is a diííicult item to think about. Appendices 60 Not satisíied 1 2 3 4 5 6 ¯ 8 9 10 Very satisíied Please rate your level of agreement with the following statements. S. Company really cares about building a relationship with me. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree 6. Company communicates openly and honestly. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree 7. Company is committed to win/win solutions (does not take advantage of its partners or customers). Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree 8. I trust Company's leaders and personnel to behave with fairness and integrity. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree 9. Customer loyalty is appropriately valued and rewarded at Company. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree J0. I believe Company deserves my loyalty. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree JJ. Over the past year, my loyalty to Company has grown stronger. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree J2. Company makes it easy for me to do business with them. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree J3. Company sets the standard for excellence in its industry. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree J4. Company attracts and retains outstanding people (employees, partners, etc.). Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree JS. Company creates innovative solutions that make my life easier. Do not agree 1 2 3 4 5 6 ¯ 8 9 10 Agree 1hank you for participating! Appendices 61 Appendix 3 Correlation Outputs Restaurants Correlations 1,000 -,394* , ,012 40 40 -,394* 1,000 ,012 , 40 40 Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Intangibility rate Loyalty Intangibility rate Loyalty Correlation is significant at the 0.05 level (2-tailed). *. Hairdresser Correlations 1,000 -,246 , ,126 40 40 -,246 1,000 ,126 , 40 40 Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Intangibility rate Loyalty Intangibility rate Loyalty 1ravel Agencies Correlations 1,000 -,352* , ,026 40 40 -,352* 1,000 ,026 , 40 40 Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Intangibility rate Loyalty Intangibility rate Loyalty Correlation is significant at the 0.05 level (2-tailed). *. Appendices 62 Dentistry Correlations 1,000 -,320* , ,044 40 40 -,320* 1,000 ,044 , 40 40 Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Intangibility rate Loyalty Intangibility rate Loyalty Correlation is significant at the 0.05 level (2-tailed). *. Bank Correlations 1,000 -,053 , ,746 40 40 -,053 1,000 ,746 , 40 40 Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Intangibility rate Loyalty Intangibility rate Loyalty 1he Swedish Lmployment agency Correlations 1,000 -,024 , ,883 40 40 -,024 1,000 ,883 , 40 40 Pearson Correlation Sig. (2-tailed) N Pearson Correlation Sig. (2-tailed) N Intangibility rate Loyalty Intangibility rate Loyalty