Customer satisfaction and loyalty after service failure and recovery a study in restaurant industry in ho chi minh city of vietnam

List of Tables Table 2-1 : Definition of justice elements and representative researchs…………...……..9 Table 3-1: Summary of measurement scale………...………18 Table 3-2 : Summary of coding variab

CUSTOMER SATISFACTION AND LOYALTY AFTER

SERVICE FAILURE AND RECOVERY

A study in restaurant industry in Ho Chi Minh City of Vietnam

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

In International Business

by Pham Thi Thuy

MBA03031 International University - Vietnam National University HCMC

August 2013

CUSTOMER SATISFACTION AND LOYALTY AFTER

SERVICE FAILURE AND RECOVERY

A study in restaurant industry in Ho Chi Minh City of Vietnam

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

In International Business

by

Ms Pham Thi Thuy ID: MBA03031 International University - Vietnam National University HCMC

August 2013 Under the guidance and approval of the committee, and approved by all its members, this thesis has been accepted in partial fulfillment of the requirements for the degree Approved:

ACKNOWLEDGEMENT

To complete this thesis, I have been benefited from the great deal of help from many people I would like to take this opportunity to sincerely thank them for all what they have done for me

Fist of all, I would like to express my gratitude to my advisor, Associate Professor Le Nguyen Hau, who has given me guidance, advice, feedback and supervision during the course of my research Only thank to his help my research was developed, executed and completed

I also do not forget to thank the data collection team who have assisted me in collecting data in such a limited time

Finally, I would like to thank you my family and friends for the continuous support and encouragement given to me

I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Hochiminh City

CHAPTER 1 - INTRODUCTION 1

1.1 Research background 1

1.2 Problem statement 2

1.3 Research objectives 3

1.4 Contribution of the research 3

1.5 Research structure 4

CHAPTER 2 – THEORY FRAMEWORK AND HYPOTHESES 5

2.1 Theory framework 5

2.1.1 Service failure and recovery attributes 5

2.1.2 Equity theory 7

2.1.3 Justice theory and three justice dimensions 7

2.1.4 Justice evaluation 10

2.1.5 Justice dimensions and customer satisfaction 10

2.1.6 Customer satisfaction and loyalty 11

2.1.7 Social Status Orientation and Customer Satisfaction 11

2.2 Research model and hypotheses 12

CHAPTER 3- RESEARCH METHOD 14

3.1 Research design 14

3.2 Research process 15

3.3 Data collection 15

3.4 Data analysis 20

3.4.1 Coding data 20

3.4.2 Descriptive statistics 21

3.4.3 Reliability test (Cronbach’s Alpha) 21

3.4.4 Validity test 22

3.4.5 Regression analysis 22

3.4.6 Test effect of moderating variables 23

3.4.7 One-way Anova 23

CHAPTER 4 – RESEARCH RESULTS 24

4.1 Response rate 24

4.2 Demographic profile 24

4.3 Descriptive statistics 27

4.3.1 Distributive justice attribute 28

4.3.2 Procedural justice attribute 28

4.3.3 Interactional justice attribute 29

4.3.4 Customer satisfaction 30

4.3.5 Customer loyalty 30

4.3.6 Modern Status Orientation (MSO) 31

4.4 Result of reliability test 31

4.4.1 Cronbach’s alpha of three justice variables 31

4.4.2 Cronbach’s anpha of customer satisfaction 33

4.4.3 Cronbach’s alpha of customer loyalty 34

4.4.4 Cronbach’s alpha of moderating variable- modern status orientation 34

4.5 Result of validity test 35

4.5.1 Exploratory Factor Analysis (EFA) of independent variables 35

4.5.2 EFA of dependent variable – customer satisfaction 38

4.5.3 EFA of dependent variable – customer loyalty 39

4.5.4 EFA of morderating variable- modern status orientation 41

4.5.5 Rename factors 42

4.5.6 Restate model 44

The models and hypothesis were restated as followings: 44

4.6 Regression analysis and hypothesis testing 44

4.6.1 Correlation testing 44

4.6.2 Regression analysis 45

4.6.3 Hypothesis testing 47

4.6.4 Test effect of moderating variables 48

4.6.5 Analysis of Variance (ANOVA) 52

CHAPTER 5 – DISCUSSION AND IMPLICATIONS 53

5.1 Effect of outcome justice evaluation on customer satisfaction 53

5.2 Effect of interactional justice on customer satisfaction 54

5.3 Satisfaction and loyalty 55

CHAPTER 6- CONCLUSION AND RECOMMENDATION 57

6.1 Conclusion 57

6.2 Recommendation 58

6.3 Limitation and suggestion 59

REFERENCE 61

APENDIX 64

Apendix 1: Survey Questionnaire (Vietnamese version) 64

Apendix 2: Survey Questionnaire (English version) 69

Apendix 3: Data coding 73

List of Tables

Table 2-1 : Definition of justice elements and representative researchs………… …… 9

Table 3-1: Summary of measurement scale……… ………18

Table 3-2 : Summary of coding variables……… 21

Table 4-1: Summary of demographic profile……….25

Table 4-2: Summary of demographic profile (continued 1)……… 27

Table 4-3: Summary of demographic profile (continued 2 )……… 28

Table 4-4 : Summary of descriptive statistics of distributive justice……….29

Table 4-5 : Summary of descriptive statistics of procedural justice……… 29

Table 4-6 : Summary of descriptive statistics of interactional justice……… 30

Table 4-7 : Summary of descriptive statistics of customer satisfaction………31

Table 4-8 : Summary of descriptive statistics of customer loyalty………31

Table 4-9 : Summary of descriptive statistics of modern status orientation……… 32

Table 4-10 : Reliability coefficient of distributive justice measurement scale………… 33

Table 4-11: Reliability coefficient of procedural justice measurement scale………33

Table 4-12: Reliability coefficient of interactional justice measurement scale………….34

Table 4-13 : Reliability coefficient of customer satisfaction measurement scale… … 35

Table 4-14: Reliability coefficient of customer loyalty measurement scale……… 35

Table 4-15 : Reliability coefficient of modern status orientation measurement scale 36

Table 4-16: KMO and Bartlett's Test independent variable)……… ……….36

Table 4-17: Total Variance Explained (independent variables)… ……….37

Table 4-18: Rotated component matrix (independent variables)……… 38

Table 4-19: KMO and Bartlett's Test (Customer satisfaction)……… ……… 39

Table 4-20: Total variance explained (Customer satisfaction)……… 39

Table 4-21: Component matrix……… 40

Table 4-22: KMO and Bartlett's Test (Customer loyalty)……… ……… 40

Table 4-23: Total variance explained (Customer loyalty)……….41

Table 4-24: Component matrix (Customer loyalty)……… 41

Table 4-25: KMO and Bartlett's Test (Modern status orientation)………42

Table 4-26: Total variance explained (Modern status orientation)……… 42

Table 4-27: Component matrix (Modern status orientation)……….42

Table 4-28: Summary of renamed factors after EFA……… 44

Table 4-29: Pearson correlations……… ………46

Table 4-30: Model summary……… 46

Table 4-31: Regression – coefficient of dependent variables………47

Table 4-32: Model summary……… 47

Table 4-33: Regression – coefficient of dependent variables………48

Table 4-34: Summary result of hypotheses test……… 48

Table 4-35: Summary of regression analyses (by modern status orientation)………… 49

Table 4-36: Summary of regression analyses (by Gender)………50

Table 4-37: Summary of regression analyses (by Age)……….50

Table 4-38: Summary of regression analyses (by Service failure type)……… 51

Table 4-39: Summary of regression analyses (by Frequency) ……… 52

Table 4-40: Summary of regression analyses (by Income)……… …………52

Table 4-41: Test of Homogeneity of Variance……… 53

Table 4-42: Result of ANOVA test……… 53

This research was conducted to examine the evaluation of customers towards result of service recovery of organizations In this paper the three justice dimensions was employed to explain the customer satisfaction after service failure and recovery in restaurant setting in Ho Chi Minh City fo Vietnam

Convenient sampling method was used to collect data by means of a survey SPSS software version 20 was used to analyse collected data set The measurement scales were adopted and adjusted from previous research Exploratory Factor Analysis was applied to refine measurement scale and reduce factors Research model and hypotheses were tested using regression analysis

The result of data analysis provided empirical evidence that justice evaluation has positive effect on customer satisfaction after service failure and recovery The result also confirmed that customer satisfaction and their loyalty had strong correlation Implications for the organizations in restaurant industry is that in order to better satisfy customers and retain their loyalty besides improving product qualtity, service quality and price service providers should understand the perception of justice evaluation and have effective strategy to recover service failure when it occurs

Keywords: service failure, service recovery, customer satisfaction, loyalty

CHAPTER 1 – INTRODUCTION

1.1 Research background

Challenge facing most of organizations now is how to develop and implement strategies aim at satisfying customers, who always have higher demand on better service quality, and retaining their loyalty Organizations are nowadays copping with high level of competitiveness due to current trend of economic globalization and integration of countries around the world (Yeung 2006) In a competitive market service providers, especially those organizations in the industries that have higher service failure rate such as restaurant, are required to always maintain good quality product and high service level

Many companies consider investment in complaint handling as a way to increase their overall service quality as well as increase customer commitment and build up customer loyalty However they are not sure how to resolve service failure effectively and how to measure customer satisfaction after service recovery (Tax, Brown and Chandrashekaran 1998)

The opinion that companies can increase profit by nearly 100 percent by retaining just

5 percent more of their customers (Reichheld and Sasser 1990) makes service failure and recovery has even more important to organizations, and service failure then becomes one of key factor that directly affect customer switching behavior (Roos 1999)

In their reasearch Fisk, Brown, and Bitner (1993) also argued that due to nature of service it is not possible for companies to provide 100% error-free services Therefore putting effots in resolving customer complaints effectively play an important role in winning back customer trust and their commitment Consequently, the way how to manage service failure recovery and to know consumer responses to the recovery process are increasingly seen as factors that may separate the more successful organizations from the others

While organizations could be aware of the impact that organization responses to service failure had on customers’ intention of repurchase and their loyalty, they were less sure which aspect of the service failure recovery effort were driving customer satisfaction and their loyalty more than the others

1.2 Problem statement

In recent years the restaurant industry in Vietnam especially in Ho Chi Minh City has been developing quickly and people tend to eat out in restaurants more often than to cook at home This trend makes the restaurant business more attractive to investors but since Vietnam was opening to globalization to catch up with fast development of the world customers started to require up-to-international standard services The competition in restaurant industry in Vietnam therefore getting tense than ever before when customers now have more choices than they had in the past In order to meet higher expectation and demand from customers it is vital for organizations to continuously improve their competitive advantage through their best service quality The some restaurants, especially big and foreign brands, in Ho Chi Minh City are always rated superior than other local restaurants in term of service quality and complaint handling This could be easily seen in the multinational fastfood restaurant chains where service quality is high and standardized These restaurants make the customer complaint procedure easy and flexible to their customers and they also take initiative to recover service failure This is going to be a big challenge for small and medium local restaurants who would like to compete to gain market share or at least

to retain their existing customers

In addition, not so many Vietnamese customer have habbit to lodge in the complaint, when service failure occur they choose to ignore because either complaint processes too complicated or customers do not think that service providers is going to fix the problems for them Even though some restaurants are very proactive by sending out the satisfaction survey questionaires, customers are still not familiar or not interested

in giving restaurants the feedback Such channels as email, hotline, facebook, website are also not really effective ways for restaurants to get to know the customer evaluation towards their service quality and their service recovery performance Therefore how to understand current state of how (at what level) customers rate their service failure recovery result for them to take necessary corrective and preventive actions becomes essential for all restaurants

Restaurant is a high interaction or “high contact service” industry which is associated with its high service failure rate as nature of the industry The bad impact of service failure could be huge because unsatisfied customers who experienced service failure

may not go back the restaurant again, they may also talk unconstructive about the restaurant to others and start to look for other restaurants as replacement Therefore besides trying to offer the diners the best service in the first place it is more important for organizations in this industry to enhance customer satisfaction and increase loyalty after service failures to increase market share and profit at the end

1.3 Research objectives

The main purpose of this thesis is to investigate the evaluation of customers toward service recovery performance of the organizations The study also examined the impact of customer evaluation on future relationship which is reflected through the loyalty level customers have to organizations after service encounter in the case of restaurant industry in Ho Chi Minh City of Vietnam The specific objectives of this research therefore are as followings :

- To identify the relative importance of individual justice attributes in explaining the customer satisfaction after service failure and recovery

- To recommend alternatives to effectively recover service failure to improve customer satisfaction and customer loyalty

The main questions that this research focuses to explore are :

1 Currently how do customers evaluate the service failure recovery of

restaurants in Ho Chi Minh City ?

2 How does the customer satisfaction after service failure and recovery impact the loyalty level of customers with restaurants in Ho Chi Minh City ?

1.4 Contribution of the research

The measurement scale and collected data analysis gives management in restaurant industry an idea of how customers evaluate their service recovery performance base

on perception of different justices

The findings of this research helps organizations in retaurant industry understand the effect of justice evaluation of customer on their satisfaction after revice failure and recovery The study also recommends alternatives to improve customer satisfaction and loyalty after service failure and recovery

1.5 Research structure

This research comprises 6 chapters namely Introduction, Theory Framework and Hypotheses, Research Method, Research Results, Discussion and Implication, Conclusion and Recommendation

Chapter 1 (Introduction) introduced the research background, define research

problem and research objectives to confirm the necessity for this research

Chapter 2 (Theory framework and hypotheses) presented theoretical background for

researched problem; the related theories and previous researches that were used to support data analysis, support the interpretation and discussion of research findings later

Chaper 3 (Reseach method) presented the source of information, data collection and

data analysis method as well as the plan for data analysis

Chapter 4 (Research results) analyzed the collected data and inteprete the research result

Chapter 5 (Discussion and implication) discussed the implications of the research

results presented in previous chapter in the light of the literature review

Chapter 6 (Conclusion and recommendation) proposed some conclusions and as a

result of finding and significance of study, researcher recommended some solution to solve the problem mentioned

CHAPTER 2 – THEORY FRAMEWORK AND HYPOTHESES 2.1 Theory framework

2.1.1 Service failure and recovery attributes

According to Polaris Marketing Research, a service failure is defined as a service

performance that fails to meet a customer expectations Service failures could be devided into two main types, which are outcome and processs failure and being mentioned in many service marketing literatures (Bitner, Booms, and Tetreault 1990; Keaveney 1995; Mohr and Bitner 1995) The outcome aspect of service failure involves what customers actually receive from the service, whereas the process dimension is more about how customers receive the service or how the service is delivered to customers (Gronroos 1988, Parasuraman, Zeithaml, and Berry 1985) In other words, in an outcome failure, organization fail to fulfill basic service need or fail

to perform core service while for process failure, the delivery of core service is deficient in some way

Service recovery refers to actions an organization takes in response to service failure

(Gronroos 1988) When a service failure occurs, service providers try to fix the problem by compensating for the losses that service failures caused to their customers

or taking necessary actions to prevent the service failure happen again in future The service failure recovery performance of organization could be in following forms:

Compenstion: Social exchange theory emphasizes role of distributive justice because

it relates to the allocation of costs and benefits in achieving equitable exchange relationships (Deutsch 1975, 1985) In term of service recovery, distributive justice perceptions involve the allocation of compensation (in form of discount, refunds, coupons and others) by the organization in response to the inequity that service failure caused Walster, Berscheid, and Walster (1973) have shown that compensation is a strategy for restoring equity in an exchange relationship when one party has been harmed by the other Tax, Brown, and Chandrashekara (1998) use content analysis of qualitative evaluation of service complaint experiences to show that compensation is the most important recovery dimension associated with customers’ perceptions of distributive justice Therefore it was suggested that higher level of compensation should result in higher distributive justice evaluation

Response speed: The issues of timing, responsiveness and customer waiting have

been addressed in the complaint and service encounter literatures ( Bitner, Booms, and Tetreault 1990; Clemmer and Scheneider 1993, 1996; Kelly, Hoffman, and Davis 1993; Maister 1985; Parasuraman, Zeithaml, and Berry 1985) A quick recovery response to service failure will enhance customer evaluations (Clark, Kaminski, and Rink 1992; Heskett, and Sasser 1990) Specially the speed with which problems and complaints are handled has been identified as an important dimension of procedural justice (Blodget, Hill and Tax Chandrashekaran 1998) Therefore the longer it takes service firms to recover the service failure, the lower customer evaluate their procedural justice

Apology: In social exchange and equity theories, an apology is viewed as a valuable

reward in an exchange relationship (Walster, Berscheid, and Walster 1973) An apology from a service provider could be viewed as the politeness, courtesy, concern, effort and empathy to customers who have experienced a service failure An apology can help to enhances customer evaluation (Hart, Heskett, and Sasser 1990) An apology also show quality of interpersonal treatment and communication during service recovery process and has been associated with customers’ perception of interactional justice (Blodgett, Hill, and Tax 1997)

Recovery Initiation: Service recovery consists of broader course of activities than

complaint handling because it includes situations where service failure occurs but no complaint is recorded An absence of complaint in service failure is because customers sometimes are unable or not willing to complain or in some cases the complaint is not necessary because it has been recognized and acknowledged by the service provider Studies showed that 70% to 95% of dissatisfied customers do not bother to complain and several researchers have suggested that proactive service recovery effort will enhance customers evaluation of the service provider ( Berry 1995; Johnston 1995; Kelley, Hoffman, and David 1993) Therefore it is good for organizations to always initiate their service recovery effort rather than to wait until customer lodge an official complaint then organization reactively resolve it When organization initiate a recovery, customer perception of interactional justice should be enhanced, because customers likely to view a proactive effort as an act of courtesy, an implication of honesty and a show of empathic understanding and respect

The service marketing literatures also provides information that different type of failure causes different categories of loss to customers therefore service failure type is expected to impact on customer satisfaction judgements toward service recovery Therefore, it is expected that three types of service failures, namely staff attitude, staff skill and service procedure have moderating effect on relationship between justice evaluation and customer satisfaction

2.1.2 Equity theory

Equity theory has been applied in customer satisfaction research very early The equity is about fairness, rightness, or deservedness judgement that we make in reference to what others receive (Oliver 1997, p.194) This theory suggests that in an exchange if customers feel inequitily treated and their input to exchange is not tally with output of the exchange, then there will be not a satisfaction (Goodwin and Ross

1992, Oliver 1997) This theory also suggests that customers are concerned not only with the perceived fairness of the outcome they receive, but also with the perceived fairness of the process used to deliver the outcome (Conlon and Murray 1996) These two concerns were being referred to as distributive and procedural justice, respectively Some studies also separate out the inter-personal aspect of the procedural justice, referred to as interactional justice, which emphasized the manner

in which the process is executed and information is communicated to the customer by the service provider (Seiders and Berry 1998)

The equity theory was found very powerful in explaining recovery satisfaction (Smith

et al.1999; Tax et al.1998) Assuming that customers often perceive an inequity following a service failure, they then need a justice and they are more likely to engage

in equity evaluation (Hoffman and Kelly 2000) It is also argued that because consumers confront a specific service scenarios, the equity, which is based on the comparison between self and others, is more obvious in service rather than product failure situations (Goodwin and Ross 1989; Seiders and Berry 1998)

2.1.3 Justice theory and three justice dimensions

An allocation decision has been defined by Bies and Moag (1986) as “ a sequence of events in which a procedure generates a process of interaction and decision making through which an outcome is allocated to someone This is clarified by Austin (1979,p.24) that “Justice pertains not merely to outcome distribution but also to how

the distribution arrived at and the manner by which it is implemented” Therefore, justice involves not only the outcome but also the procedure of making the decisions lead to the outcome

A three dimensional view of the concept includes :

(a) Distributive justice: dealing with decision outcomes It is evaluated by one of the

three decision rules; equality, equity or need (Deutsch 1975)

(b) Procedural justice: dealing with decision making procedure Procedural justice is

concerned with the fairness of the procedures used in making decision (Folger and Greenberg 1985) It is the extent to which procedures used to determine a distribution

of outcomes (Goodwin and Ross 1990) as it was believed that the way decisions are reached is just as important as the decision itself

(c) Interactional justice: dealing with interpersonal behavior in enactment of

procedures and delivery of outcomes It relates to the interpersonal communications in the decision making process It emphasizes the style with which a decision is implemented The presence of a policy or rule does not mean that the policy is fairly applied Therefore a distinction must be made between a policy and a guideline and how the policy is implemented (Vermunt, Van der Kloot, and Van der Meer 1993) Interactional justice also conveys a common courtesy, politeness, respect, empathy and willingness to listen

The justice theory explains how people judge and response to an outcome, procedure and manner to implement procedure base on their perception of justice

Table 2-1 : Definition of justice elements and representative researchs

(Source : Journal of Markeing Vol.62 April 1998, P 63)

Equal outcomes regardless

of contribution to an exchange

requirements regardless of contributions

Satisfaction, repurchase intention, word of mouth

Satisfaction, social harmony

Satisfaction

Goodwin and Ross (1992), Oliver and Desarbo (1988), Oliver and Swan (1989) Greenberg(1990) Deutsch(1985) Deutsch (1985)

Extend to which a person is free to accept or reject a decision outcomes

Ease of engaging a process Perceived amount of time

procedure Adaptability of procedures

circumstances

Satisfaction, commitment

Satisfaction

Satisfaction Anger, uncertainty, Satisfaction, service quality

Market orientation, satisfaction

Goodwin and Ross(1992), Kanfer et al.(1987), Lind and Tyler (1988)

Brett (1986), Heide and John(1992) Bitner, Booms, and Tetreault (1990)

Bowen and Lawler(1995) Fisk and Coney (1982) Maister (1985)

Taylor (1994) Bitner, Booms, and Tetreault (1990) Narver and Slater (1990)

Amount of positive energy

Complaint evaluation, repurchase intention, satisfaction

Anger, satisfaction, trust

Service quality, satisfaction

Bies and Shapiro(1987) Bitner, Booms, and Tetreault (1990) Goodwin and Ross(1989)

Blodgett, Hill and Tax(1997), Clemmer (1988), Goodwin and Ross(1989)

Folkes (1984), Mohr and Bitner (1995)

Parasuraman, Zeithaml, and Berry (1988)

2.1.4 Justice evaluation

Service failure and recovery can be seen as an exchange relationship in which customers experience a loss due to service failure and the organizations attempt to provide a gain, in the form of recovery effort to compensate for the customer’s loss (Homans 1961; Walster, Berscheid and Walster 1973; Watster and Berscheid 1978) Service failure and recovery can be considered mixed exchanges with both utilitarian and symbolic dimensions Utilitarian exchange envolves economic resources such as money, goods or time, whereas symbolic exchange involves psychological or social resources, such as status, esteem, or empathy (Bagozzi 1975)

Service failures can result in loss of economic or social resouces for customers Hence organizations may attempt to recover it by offering customers in form of compensation, response speed, apology or initiation Customer then will evaluate the service failure and recovery by comparing the amount of resource lost and gained during the exchange

2.1.5 Justice dimensions and customer satisfaction

Customers evaluate service failure recovery performance in terms of the outcome or benefits they receive as a result of service failure encounter, the procedures organization used to arrive at the outcomes as well as the nature of the interpersonal treatment and communication during the process (Clemmer and Schneider 1996) Social exchange theorists have also identified three dimensions of perceived justice

(distributive justice, procedural justice, interactional justice) that influence how

people evaluate the exchanges

Service failure and recovery is viewed as a series of actions in which a service failure generates a procedure that will create economic and social interaction between customer and service provider Therefore it is predicted that customer satisfaction with service failure recovery will be influenced by customer perception of all three dimensions of justice

H1: There is a positive relationship between distributive justice and customer

satisfaction with service failure recovery

H2: There is a positive relationship between procedural justice and customer

satisfaction with service failure recovery

H3: There is a positive relationship between interactional justice and customer

satisfaction with service failure recovery

2.1.6 Customer satisfaction and loyalty

Service failure recovery satisfaction refers to the degree to which the customer perceives the company’s service failure recovery performance as meeting or exceeding his or her expections (e.g., Gilly and Gerb 1982; McCollough, Berry, and Yadaw 2000) Overall customer satisfaction after the service encounter refers to the degree to which the customer perceives the company’s general performance in a business relationship as meeting or exceeding his or her expectation (eg., Anderson and Sullivan 1993) This type of satisfaction is cumulative in nature, whereas service recovery satisfaction reflects a form of transaction-specific satisfaction (e.g., Bolton and Drew 1991)

Customer loyalty refers to a strong favourable attitude towards a particular brand and also lead to repeat purchase of the same brand (Day, 1969) Customer loyalty after the service failure recovery refers to the degree to which a customer has continued relationship with a company after the service failure recovery and the degree to which

he or she intends to do so in the future

H4: There is a positive impact of overall customer satisfaction after service

failure recovery on customer loyalty

2.1.7 Social Status Orientation and Customer Satisfaction

In their study Zeithaml and Bitner (2000) concluded that customer satisfaction is influenced not only by product, service quality and price but also by situation factors and personal factors Hoyer and MacInnis (2001) also shared the same idea that satisfaction can be associated with feelings, happiness, relief, excitement, and delight Wilson et al (2008) found the same result that satisfaction generally is broader than Price, Service and Product, these broader components that affect satisfaction are situation and personal (Wilson et al., 2008)

In their paper about status orientation and customer choice of foreign products Tambyah, Nguyen, and Jung (2009) developed and tested a consumer status orientation scale in Vietnam The status orientation was defined as a construct focusing on consumer belief that obtaining status symbols could help them have their

social standing The two sub-constructs of status orientation were proposed by these authors are TSO and MSO TSO stands for Traditional Status Orientation which refers to consumers’ orientation toward traditional status symbols while MSO is Modern Status Orientation which is more about modern status symbols

The research found that high MSO consumers are particular demographic in Vietnam who are younger and more educated The study result explained why those individuals may be strongly influenced by mordern values Further, high MSO consumers more receptive to new things and have more chances at international experience, thus they’re more likely to influenced by modern style The findings of the study also confirmed that high MSO consumers tend to choose foreign products while those with low MSO will buy domestic products

In addition, low social status oritentation consumers could easily enjoy their happy life without placing importance on material value As suggested by the findings from Tambyah, Nguyen and Jung (2009) low MSO consumers consider the care for benefit

of the others than themselves, the importance of living a simple and clean life, regardless of wealth Thefore being rich does not convey high status or display their position in life

From above discussed points, it is predicted that customers with different level of social status orientation may access service recovery performance of organization not

in the same way, the Modern Status Orientation was then suggested to have moderating impact on relationship between justice evaluation and customer satisfaction after service failure recovery Hence the hypothesis was formed as followings:

H5: Modern Status Orientation has moderating effect on relationship between

justice evaluation and customer satisfaciton

2.2 Research model and hypotheses

The research model is presented in Figure 1 below This model consists of three constructs which are justice dimension, customer satisfaction and customer loyalty The justice dimension has a three sub-justice dimensions namely distributive justice, procedure justice and interactional justice

Figure 2-1: Research model

H1: There is a positive relationship between distributive justice and customer

satisfaction after service failure and recovery

H2: There is a positive relationship between procedural justice and customer

satisfaction after service failure and recovery

H3: There is a positive relationship between interactional justice and customer

satisfaction after service failure and recovery

H4: There is a positive impact of overall customer satisfaction after service failure

and recovery on customer loyalty

H5: Modern Status Orientation has moderating effect on relationship between

justice evaluation and customer satisfaction

Satisfaction after service failure and recovery

Customer loyalty

Status Orientation

CHAPTER 3- RESEARCH METHOD 3.1 Research design

Research design is known as a plan of how research study to be carried out, it gives a description of methods to be used Main function of a research design is to ensure that data in accordance with the stated problem is collected accurately and economically In other word, research design is a framework for the research study which guides data collection and data analysis process The research design, depending upon the needs of researcher may be very detail or it can just provide information required for planning the research project

Research design consist of the aim, the selection of appropriate methodology that best suit research literature (White,2005) The research design and research objective then serve as a guidance to researcher on how to collect and analyse data effectively (Churchill, 1979)

This study was conducted using mixed method which includes quantitative, qualitative methods Quantitative is the main method and supported by qualitative menthod Survey questionaires was constructed using qualitative and quantitative methods while the finding of the research was drawn from quantitative data analysis result

The mixed methods was used to draw from the strengths and minimize the weaknesses of the quantitative and qualitative research approaches (Johnson & Onwuegbuzie, 2004)

The secondary data is used to get better insight on the research topic, to establish platform for theoretical framework constituting the bases of this research, and to design the sample frame and questionnaire for retrieving primary data

According to Biggam (2008), primary data is the information that the researcher finds out by him/herself regarding a specific topic The main advantage with this type of data collection is that it is collected with the research’s purpose in mind This means that the information resulting from it is more consistent with the research questions and purpose

Define managerial problem,

reasearch objectives and scope

Review literatures

Indentify data needs, data

sources and data collection

method

Plan for data analysis

Analyse data and interprete the

Conduct field survey

Present research model

Sample

The study was conducted in restaurant service setting in Ho Chi Minh City Restaurant is high interaction or “high contact service” industry which has its important role of emotion A restaurant does not only simply sell foods but it also sells the hospitalily, which mean the nature and result of restaurant service are both tangible and intangible Restaurant also presents a service for which failure is common In short, restaurant industry has mixed characteristics of all service industries and could be the best representative or the best studied subject of service quality and evaluation of service recovery performance

Restaurant is also the industry which is frequently studied by both manager and academic researchers who are interested in customer satisfaction and service recovery (e.g., Boulding, et al.1993)

The surveyed sample composed of real consumers who had recently (in three months back) patronized a restaurant The survey was administered to different customer groups consisting of students, office staffs, house duties, others…those may have different attribute importance weight, this made them the most appropriate for this study

To ensure that the respondents had prior experience with the service provider being evaluated, they were asked to answer structured questions to remind and refresh them about a restaurant which they visited and experienced service failure in the past 3 months Having customers recalled actual service failure and recovey reduced response bias

The sample size for this finding could be five times compared with number of variables (N) analyzed as recommended sample size by Hair et al (1998) The N of this study is 31

Data collection method

Data was collected using individually completed questionnaires Students were hired

to deliver and collect back pencil-and-paper questionnaires to respondants at different locations The data collection team was also trained how to give face-to-face

explainations about the research’s objective and instruction on how to complete the questionnaire

The questionnaires was also distributed and return via email Data was obtained from customers in Ho Chi Minh City of Vietnam

Pilot testing

Pilot testing involves conducting a preliminary test of data collection tools and procedures to identify and eliminate problems, allowing researcher to make corrective changes or adjustments before actually collecting data from the target population Pilot testing is the last step in constructing questionnaire process Pilot testing gives researcher an opportunity to make necessary revisions to data collection procedures to ensure that appropriate questions are being asked, the right data will be collected, and the data collection methods will work The validity and reliability of questionnaire survey will be examined by pilot respondants

The scales and questions of this study were originally developed in English and then stranslated into Vietnamese After completing the process of checking and revising, the Vietnamese questionnaire version was pretested in a small convienience sample for final check Necessary changes were made for the purpose of accuracy and clarity before collecting data According to Frink (1995) the minimum of selection for pilot questionnaire is 10 respondants, researcher delivered draft questionnaire to 10 people and used their feedback to adjust and eliminate question After pilot test, there are 35 questions left and some questions are adjusted and reworded to make questionnaire understandable and easier to answer

Questionaire design

A comprehensive questionnaire was developed after the thorough literature review The questionnaire consists of 4 parts, those are:

Part 1: General information

Part 2: About customer evaluation of service failure recovery performance

Part 3: About social status orientation of the informant

Part 4: Demographic information

The questionnaire inquired respondants to evaluate their dinning experieces and statement about themselves by using 5 point Linkert Scale Each scale item was attached at numerical 1 having verbal statement “strongly disagree” and the numerical

5 with verbal statement “strongly agree” Questionaire also consist of demographic questions in order to obtain demographic profile of the respondants

The survey began with repondants reading introduction, explaination of the objective

of this study Questionaires begin by asking subjects a series of general structured questions to remind respondants about a service failure and recovery in a restaurant happened lately which they they remembered the most Next customers will be asked

to answer series of structured questions to reflex their evaluation toward the service encounter, and their overall satisfaction as well as their loyalty

Measurement scale: Scales of this study were adapted and modified from previous

researchs of service encounters, justices evaluation, customer satisfaction and loyalty The summary on measurement scales is presented as in below table:

Table 3-1: summary of measurement scales

Distributive Jutice

1 The outcome I received was fair

2 The compensation I received was appropriate

3 I get what I deserved

4 The outcome I received was right

5 In resolving my problem the restaurant gave me what I needed

Adapted and adjusted from Oliver and Swan (1989) and Tax (1993)

Procedural Justice

1 The length of time taken to resolve my problem was longer than

necessary

2 The restaurant quickly reacted to my problem

3 The restaurant showed flexibility in dealing with my problem

4 I felt I could easily complain the service failure to this restaurant

5 The service recovery procedure of restaurant shows the care to

individual customer

6 The restaurant handled my complaint in thoughtful manner

7 Overall, I felt the restaurant’s service failure recovery procedure

Adapted and adjusted from Tax (1993)

was fair

Interactional Justice

1 The employees were appropriately concerned about my problem

2 The employees put the proper effort into resolving my problem

3 The employees communication with me were appropriate

4 The employees gave me the courtersy I was due

5 The employees proactively fixed my problem

6 The employees paid due attention when I talked about the service

failure

7 The employees explained the causes led to service failure

Adapted and adjusted from Tax (1993)

Customer satisfaction after the service failure recovery

1 Overall, after the service failure recovery, I was very

satisfied with this restaurant

2 Overall, so far, I had positive experiences with this

restaurant

3 This restaurant service is better than others

4 Overall, purchase of service from this restaurant was a

good decision

Adapted and adjusted from Bitner and Hubber (1994); Tax, Brown, and Chandrashekaran (1998)

Customer Loyalty

1 If I want to go to restaurant I will choose this restaurant

2 I will recommend this restaurant to others who seek my

advice

3 It’s very likely that I will go to this restaurant again

4 I intend to remain loyal to this restaurant in future

Adapted and adjusted from

Cheng et al.(2008),

Gilly and Gelb

(1982)

Measurement of Status Orientation was adapted from Tambyah, Nguyen and Jung

2009 The measurement scales of MSO (Modern Status Orientation) is as followings:

1 Striving to become a rich man would be one of the most important goals in life

2 I admire people who have abilities to earn high incomes

3 I admire people who have a wide relationship network, especially with important people

4 It would be worth considerable effort to obtain luxury products and services

3.4 Data analysis

After collecting the respondent from questionnaires delivered, the first check for completeness was done, items in questionnaire was then coded and input on the data file using SPSS 20 software for analysis later Descriptive statistic was initially conducted to give an overview of the sample Then explore factor analysis was also applied to refine the measurement scales Next, linear regression analysis was used to test the hypothesis Finally, we run the T-test and ANOVA test to examine the diferent level of satisfaction and loyalty between object groups in each demographic group

3.4.1 Coding data

Once the questionnaires had been completed, the responses in each question were then coded These scores were captured in a Microsoft Excel spreadsheet for statistical analysis with respect to Demographic, Justice, Satisfaction and Loyalty variables

In the first section of general information about the participants, there are 4 items were coded, namely, (1) Frequency of dinning out in a restaurant in the last 3 months, (2) Type of restaurant, (3) Type of service failure, (4) Complaint was made to In section related to demographic, there are five items: gender, age, occupation, monthly income and marital status The responses in the two remaining sections used 5-point Likert scale from Strongly Disagree to Strongly Agree

The details of subscales were coded as shown in below table:

Table 3-2 : Summary of coding variables

VARIABLES

Satisfaction SATISF20, SATISF21, SATISF22,

SATISF23 (Dependent

Factors)

LOYALT27 Status

Orientation

(Moderating

Factors)

MSO (Modern Status

Orientation)

MODERN28, MODERN29, MODERN30,

MODERN31

3.4.2 Descriptive statistics

Descriptive statistics are often used to describe the basic features of the data in a study They gives summaries about the sample and the measures Together with simple graphics analysis, they form the basis of virtually every quantitative analysis of data The purpose of applying this technique is to summarize both variability and the centre

of data by using mean and standard deviation

3.4.3 Reliability test (Cronbach’s Alpha)

In this research Cronbach’s Alpha coefficients were computed to evaluate the reliability of the studied factors

Cronbach’s Alpha is the most commonly used and accepted means to measure the reliability (internal consistency) of measurement scale (Hair, 1995) Internal consistency describes the extent to which all the items measure the same thing and hence it is connected to the inner-relatedness of the items within the test (Tavakol et al., 2011) In accessing a multi-item scale, internal consistency reliability assessement

is the first necessary step to avoid additional dimensions produced after factor analysis due to gabage items

Value of Cronbach’s Alpha ranges from 0 to 1 According Hair et al.(1998) any item that have Cronbach’s Alpha of less than 0.6 will be eliminated Reliabilities within 0.7 ranges are considered acceptable and those coefficients over 0.8 are considered good 3.4.4 Validity test

Exploratory Factor Analysis (EFA) is used to examine relationship between variables and evaluate validity of constructs EFA is a commonly applied statistical technique which is used for data reduction and summarization In EFA, we can apply Kaisaer-Meyer-Olkin (KMO) to test the correlation matrix of the variables The KMO index ranges from 0 to 1, with 0.50 considered suitable for factor analysis All elements on the diagonal of the matrix should be greater than 0.5 if the sample is adequate (Field, 2000) By performing exploratory factor analysis, researcher can also decide the number of factors to extract in the model if they wish to According to Kaiser, factor which has eigenvalue <1 will be eliminated in model An important part in exploratory factor analysis is interpreting factor matrixes This research will use Principal Component Analysis (PCA) with Varimax rotation to produce multiple group factors Factor loadings which indicate correlations between the variables and the factors are required to have greater than 0.5 value

Pearson correlation coefficient (r) was conducted The sign of the Pearson correlation coefficient indicates the direction of the relationship and varies between -1 and +1 The nearer the value of r is to zero, the weaker the relationship, and the closer to unity

(- or +), the stronger the relationship A coefficient of above 0.8 indicates a strong relationship, a coefficient of between 0.5 and 0.8 indicates a moderate relationship, and a coefficient below 0.5 indicates a weak relationship (Devore & Peck, 1993) The statistical significance (p-value) of the results represents a decreasing index of the reliability of a result If p-value is less than 0.05, we will reject the null hypothesis

We then conclude that there is a statistical significant and positive/negative relationship between the studied variables If the p-value is greater than 0.05, we then fail to reject the null hypothesis and come to conclusion that there is no statistical significant and relationship between the variables (Sekaran, 2000)

3.4.6 Test effect of moderating variables

According to Baron & Kenny (1986) a moderator is a qualitative (e.g., sex, race, class) or quantitative (e.g., level of reward) variable that affects the direction or strength of the relation between an independent or predictor variable and a dependent

or criterion variable Specifically within a correlational analysis framework, a moderator is a third variable that affects the zero-order correlation between two other variables In this study the moderating variables (1) type of service failure, (2) type of restaurant where customers experienced the service failure, (3) demographic and (4) status orientation will be considered

In this research to examine the impact of moderating variables on trength of relation between customer satisfaction and justices evaluation the sample were devided into sub-groups of sample according to a preset criterias The multi regression analyses were then conducted for each single sub-group, results then were compared and interpreted

CHAPTER 4 – RESEARCH RESULTS 4.1 Response rate

Total 421 questionaires was collected After checking for completeness and screening

to sort out the valid questionaires, there are only 298 out of 421 returned questionares was usable for the study 133 questionaires was eliminated because the informants completed the survey at either question 1, question 3 or question 7 of the part I-General Informaiton where they answered that (1) they did not go to restaurant in last

3 months, (2) they did not experienced any service failure in last 3 months or did not feel irrirated with the service failure, (3) the restaurant did not take any action to fix the problem (service failure) for them This result make the usable response rate of the survey is approximately 71%

4.2 Demographic profile

Demographic characteristics of respondents is presented in the summary tables below:

Table 4-1: Summary of demographic profile

Dong

Other information about participants and their dinning experience was also described 49% of the customers in the survey informed that they went to restaurant about one to three times in last 3 months, 25% and 26% ate at restaurants for 4 to 6 times and more than 6 times respectively The restaurant where customers experienced service failure the most is “Quan an gia dinh” and the least service failure were reported in coffee shop and other places Staff attitude turned to be the most popular service failure which account for 55% compare to 29% of procedure and around 16% of staff skill The summary shows that more than 50% of customers complained to the manager when service failure occured and around 36% of them directly informed their problem to the restaurant staffs instead

Table 4-2: Summary of demographic profile (continued 1)

Frequency of going to restaurant in the last 3 months

go to restaurant with relatives and family while 158 cases reported that customers go

with their friends and colleague According to the summary going to restaurant alone

is not a choice of customers, only 5.7%

As for service failure type, staffs attitude is the most popular service failure and 69.5% surveyed customers reported this failure type Another two types of service failure were also recorded but lesser cases were counted compare to that of sfaff attitude, the number is 93 cases and 117 cases for staff skill and procedure respectively

Table 4-3: Summary of demographic profile (continued 2 )

Cases Col Response % (1) Go to restaurant with whom

(2) Service failure type

Service failure type - staff's attitude 207 69.5%

The means value shows an estimation of the center of a distribution, in this study means value can be interpreted as average ranking score of the customers when they access service recovery performance of the restaurant

Standard deviation presents the dispersion level of customer ranking score around the mean value The lesser dispersive the data, the more valuable it is

4.3.1 Distributive justice attribute

Table 4-4 : Summary of descriptive statistics of distributive justice

Mean Std Deviation

The table illustrates that on average customers evaluate distributive recovery performance pretty good, more than 3 score out of 5 score band The difference of means score of variables is not much but the compensation of the restaurant were rated higher as it has the highest mean value of 3.36

The highest Std Deviation of the fairness of outcome means that customers evaluate the fairness of outcome much differently between the lowest and the highest rating 4.3.2 Procedural justice attribute

Table 4-5 : Summary of descriptive statistics of procedural justice

Mean Std Deviation PROCED06 Problem resolving time was reasonable 2.94 1.043

PROCED08 Flexible in dealing with problem 3.24 927