Service quality and customer satisfaction in business to business the case of ready mix concrete industry vietnam

The results indicate that all determinants of B2B Service Quality including Potential quality, Hard process quality, Soft process quality, Output quality and Buyer-supplier relationship

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

Le Thi Binh Phuong

SERVICE QUALITY AND CUSTOMER

Table of Contents

ACKNOWLEDGEMENT 3

ABSTRACT 4

LIST OF TABLES 5

LIST OF FIGURES 6

Chapter 1 7

INTRODUCTION 7

1.1 Ready-Mix Concrete industry in Vietnam 7

1.2 Service Quality and Customer Satisfaction in B2B context 9

1.3 Research Objectives 11

1.4 Scope of the research 12

1.5 Expected contributions of research 12

1.6 Organization of thesis 13

Chapter 2 14

LITERATURE REVIEW AND HYPOTHESES 14

2.1 Literature review 14

2.1.1 Service experience 14

2.1.2 Service Quality 16

2.1.3 Customer Satisfaction 27

2.2 Research Model and Hypotheses 31

Chapter 3 36

RESEARCH METHOD 36

3.1 Quantitative research: Pre-test 36

3.2 Quantitative research: Main survey 37

3.2.1 Measurement scales 37

3.2.2 Sampling 40

3.2.3 Data analysis 42

Chapter 4 46

DATA ANALYSIS AND RESULTS 46

4.1 Data statistical analysis 46

4.2 Identifying and addressing outliers 47

4.3 Cronbach’s Alpha coefficient of reliability test 48

4.4 Exploratory Factor Analysis (EFA) result 48

4.5 Research Model test 50

4.5.1 Multiple regression 51

4.5.2 Chow test for moderating effect 56

Chapter 5 60

DISCUSSION AND CONCLUSIONS 60

5.1 Discussion of research results 60

5.2 Contribution and managerial implications for the research 63

5.2.1 Contribution for the research 63

5.2.2 Managerial implications of the research 64

5.3 Limitations and directions for further research 64

5.4 Conclusions 66

REFERENCES 67

APPENDIX 73

ACKNOWLEDGEMENT

Foremost, I would like to express my sincere gratitude to my supervisor Dr Vo Thi Ngoc Thuy for her continuous support, for her patience, motivation, enthusiasm, and immense knowledge Her guidance helped me over the time of research and writing this master thesis

Besides my supervisor, I would like to thank the ISB Research Committee: Prof Nguyen Dinh Tho, Prof Nguyen Dong Phong, Prof Nguyen Thi Mai Trang, Prof Nguyen Thi Nguyet Que and Prof Tran Ha Minh Quan, for their encouragement and insightful comments

My sincere thanks also go to all of respondents, without whom, this research would have been impossible

Le Thi Binh Phuong

February 2014

ABSTRACT

This study empirically examines the different impacts of B2B Service Quality’s determinants on Customer Satisfaction in Vietnam Ready-Mix Concrete industry and explores the moderating role of Ready-Mix Concrete Company Type variable on these relationships Whereby, it provides a comparison of these impacts extent between two types of Ready-Mix Concrete Company, local company and foreign company Chow test was used to test these impacts, utilizing a sample of 122 industrial customers of three Ready-Mix Concrete Companies

The results indicate that all determinants of B2B Service Quality including Potential quality, Hard process quality, Soft process quality, Output quality and Buyer-supplier relationship quality play important role in explaining Overall Customer Satisfaction toward Ready-Mix Concrete service Furthermore, the results also support that Read-Mix Concrete Company type moderates the relationship between each determinant of B2B Service Quality and Overall Customer Satisfaction Accordingly, that degree of Overall Customer Satisfaction for Foreign Company is higher than Local Company is appropriate with the current situation in Vietnam Ready-Mix Concrete service Indeed, it is a meaningful implication for manager in contributing into cost leadership strategy in case he has to make decision on selecting best solution for service quality improvement with limited budget

The research findings also engage with some limitations in the strength of measurement scale, the sampling method as well as the fitness between the research

model and data which results in the valuable directions for further researches in future

LIST OF TABLES

Table 2.1 - B2B Service quality determinants over the time 20

Table 4.1 - Descriptive statistics of multiple regression 51

Table 4.2 – Inter-correlations 52

Table 4.3 - Model Summary 53

Table 4.4 - ANOVA 53

Table 4.5 - Coefficients 54

Table 4.6 - Group Statistics 56

Table 4.7 - Summary table for Chow test 59

LIST OF FIGURES

Figure 1.1 - B2B Service quality determinants over the time 8 Figure 2.1 - Measurement dimensions in SERVQUAL and INDSERV 21 Figure 2.2 - The conceptual framework and its dimensions displayed in middle

column 26

Chapter 1 INTRODUCTION 1.1 Ready-Mix Concrete industry in Vietnam

In this era of intense competition and difficult economic environment, all industries in Vietnam have faced many challenges It is no doubt that construction area in generally and Ready-Mix Concrete industry in specifically is in the same situation In today’s global marketplace, the key to sustainable competitive advantage lies in delivering service with high quality that will in turn result in customer satisfaction (Shemwell et al., 1998)

Concrete is a mixture of three basic ingredients: sand, gravel (crushed stone) and Ready-Mix Concrete, as well as chemical compounds known as admixtures Combining this mixture with water causes the Ready-Mix Concrete to undergo an exothermic chemical reaction called hydration, turning Ready-Mix Concrete into a hard paste that binds the sand and gravel together Moreover, ready-mix concrete is concrete mixed with water at a plant and transported directly to a construction site Ready-Mix is a perishable product that needs to be delivered within an hour and a half before it becomes too stiff to be workable (Alan, 2010)

Figure 1.1: Ready-Mix Concrete Supply Chain

Source: Insights (2013) – an internal newspaper in Holcim Vietnam

Ready Mixed Concrete is also referred as the customized concrete products for commercial purpose The Ready-mix Concrete Company offer different concrete according to user's mix design or industrial standard

Associate with the growth of Ready-Mix Concrete companies in Vietnam in quantity and quality, customers have more choices for their experiencing services Although almost these companies aim to serve the construction industry better, to offer high quality products, comprehensive solutions and services to many projects from individual houses to large projects (Insights, 2013), customers complaints are unavoidable At every turn, customers are assessing how the company performance as

an insurance provider matches their expectations To be able to compete better in the market, most of Ready-Mix Concrete companies are trying to observe customers satisfaction level and then improve their service quality

1.2 Service Quality and Customer Satisfaction in B2B context

In recent years, substantial research has examined the level of quality (and its dimensions) in the performance of a service Ekinci (2003) indicates that the evaluation of service quality leads to customer satisfaction Rust and Oliver (1994) define satisfaction as the “customer fulfillment response,” which is an evaluation as well as an emotion-based response to a service Research has found empirical support for the relationship between perceived service quality and business performance (Athanassopoulos et al., 2001; Caruana et al., 1995), probably reflecting the difficulty

to imitate (e.g Hiseand Gabel, 1995)

Consequently, a validated instrument to measure the customer’s perceptions about the service being delivered is crucial, especially since there is evidence which show that the customer’s evaluation of service quality and the resulting satisfaction/dissatisfaction is connected to repurchase, loyalty, and willingness to maintain a long-term relationship with the provider (Iacobucci et al., 1994; Athanassopoulos et al., 2001) Responding to this need, researchers have devised and examined various instruments to measure perceived service quality However, most of the research has focused on measuring service quality in the end consumers and particularly using the SERVQUAL scale as developed and subsequently modified by Parasuramanet al (1991) or some variation In the other hand, dimensions of business-to-business customer service differ to individual service (Gregory.L, 2010) Evidence has shown that SERVQUAL appears to perform less admirably than B2B contexts (Babakus and Boller, 1992; Durvasula et al., 1999) Accordingly, researchers have made some recent attempts to investigate and develop alternative B2B specific scales

At the present, the most important contribution to this area has been the INDSERV scale proposed and developed by Gounaris (Gounaris, 2005a, b, c; Gounaris and Venetis, 2002) Gounaris proposed that B2B service quality should be composed of, at least, four dimensions: potential quality, hard process quality, soft process quality and output quality

In 2008, Van der Valk et al added one more dimension to the existing conceptualization originated from Gronroos (1984): buyer-supplier relationship This dimension has a more long-term and dynamic character and supported empirically by Kamping (2009) When evaluating service providers in B2B context generally and in Ready Mix Concrete industry specifically, companies should not only look at the object of exchange, but also at the overall relationship While service quality is

“basically static”, relationship quality is dynamic in the sense that it represents how quality develops over time Consequently, service quality is short-term oriented and relationship quality is long-term oriented Relationship quality is very highly significant in Ready Mix Concrete industry Therefore, the fifth dimension will be brought into this study as a determinant affecting customer satisfaction and tested in the context of Ready-Mix Concrete industry in Vietnam

According to Zeithmal and Bitner (2003), “satisfaction is the consumer fulfillment response It is a judgment that a product or service feature, or the product

or service itself, provides a pleasurable level of consumption-related fulfillment” (p 86) It has been suggested that satisfaction is a broader concept than service quality It includes both cognitive and affective evaluations, while service quality evaluations are mainly a cognitive procedure (Tian-Cole and Crompton, 2003; Oliver, 1997) A

number of studies in the services marketing literature have reported that these two constructs are strongly related (e.g., Caruana, 2002; Spreng and Chiou, 2002; Alexandris et al., 2001; Spreng and McKoy, 1996; Cronin and Taylor, 1992; Woodside et al., 1989)

Given aforementioned situation, this paper is an attempt to put forth the role of five dimensions of B2B service quality in affecting customer satisfaction in the context of Ready-Mix Concrete industry in Vietnam with the different type of Ready-Mix Concrete companies: local and foreign The reason why for making distinction is that there is a clear difference between local and foreign company in the same play station about many aspects such as investment capital, supply chain, staff capability, training program, etc In Vietnam, the foreign Ready-Mix Concrete Company takes many advantages over local company

This empirical study employs the dimensions of B2B service quality through INDSERV scale to explain the customer satisfaction All concepts will be explained and analyzed more specifically in literature review section

(2) To examine the moderating effects of Ready-Mix Concrete Company Type: the impact degrees of each determinant of B2B service quality (potential

quality, hard process quality, soft process quality, output quality and buyer – supplier relationship quality) on customer satisfaction are distinct depending on local or foreign company

1.4 Scope of the research

The empirical setting in this research is the Ready-Mix Concrete companies in the context of Ho Chi Minh City, Vietnam Particularly, data collected from industrial customers of three Ready-Mix Concrete companies in Ho Chi Minh City and put into analysis and comparison

1.5 Expected contributions of research

According to the theoretical perspective, this study contributes to the application of the INDSERV model into the context of Ready-Mix Concrete industry

in Vietnam It is a meaningful outcome for the researchers in this specific B2B service industry since it turns the successful investigation of combining four dimensions of INDSERV scale with additional fifth dimension: buyer – supplier relationship quality

Regarding to the managerial implications, this finding will help Ready-Mix Concrete companies understand obviously about the components of their service quality affecting satisfaction of their customers whereby they can improve their performance for increasing the level of customer satisfaction In addition, the comparison between foreign and local Ready-Mix Concrete companies aims to provide specific determinants to fit with each context In era of global recession, all companies plan efforts towards effective and efficient investment on improving service quality The expected results of this study would have contributed into Cost

Leadership strategy of the company in selecting his own best solution (i.e which determinant should be exploited with the limited budget, etc.)

1.6 Organization of thesis

This research is constructed in five parts The first is the introduction of the study The second is the literatures review and hypotheses Following is the research method The next part is the data analysis and results Discussion and conclusion comprise the final section of this research

Chapter 2 LITERATURE REVIEW AND HYPOTHESES

Chapter 2 reviews and discusses about the theories of service quality, customer satisfaction and the relationships between these two concepts in B2B context, especially in the Ready-Mix Concrete service industry Accordingly, the existing researches employed various approaches to measure service quality Among them, SERVQUAL are the popular instruments applied in many B2C service fields but considered at best mixed in B2B context Therefore, this research approaches four dimension of INDSERV- the most fundamental and comprehensive scale applied in B2B context so far - together with the fifth dimension referring to the dynamics of long-term quality formation in ongoing customer relationships, namely, Potential quality, Hard quality, Soft quality, Output quality and Buyer-supplier relationship quality to measure the construct Ready-Mix Concrete service quality In addition, basing on practical situation of Ready-Mix Concrete service industry in Vietnam, this chapter points out the moderating effect of company types on the relationship of each determinant of B2B service quality and customer satisfaction Following these arguments, a research model is set up with six hypotheses

2.1 Literature review

2.1.1 Service experience

The concept of “service experience” has been described as the core of the service offering and service design (Zomerdijk and Voss, 2010); as such, it is a key concept in the emerging paradigm of service-dominant logic (S-D logic), which regards the service experience as the basis of all business (Lusch and Vargo, 2006;

Schembri, 2006; Vargo and Lusch, 2008) Holbrook and Hirschman’s (1982) pioneering article on the service experience characterized the concept in experiential and phenomenological terms, which was in accordance with the authors’ view of consumption as: “ primarily subjective state of consciousness with a variety of symbolic meanings, hedonic responses, and aesthetic criteria” Twenty years later, Carù and Cova (2003) observed that the concept of service experience has subsequently been characterized, often somewhat loosely, in a wide variety of ways – although most authors continued to restrict the use of the term to specific kinds of service experience, such as hedonic consumption Although there is widespread contemporary agreement on the importance of the concept of service experience in marketing, it is apparent that there are divergent views on how it should be characterized Indeed, no systematic review of the literature on the concept of service experience was published until Anu Helkkula (2011) seeks to fill this gap in the literature by undertaking a systematic review and analysis of how the concept of service experience has been characterized in the contemporary service marketing literature The findings from this study has indicated that there are three characterizations of the concept of service experience including phenomenological service experience (which relates to the value discussion in service-dominant logic and interpretative consumer research), process-based service experience (which relates to understanding service as a sequential process), and outcome-based service experience (which relates to understanding service experience as one element in models of service linking a number of variables or attributes to various outcomes)

However, in the B2B context, this study supports the viewpoint of Meyer and Schwager published in 2007 They suggested that customers’ service experience is the internal and subjective response customers have to any direct or indirect contact with

a company Direct contact generally occurs in the course of purchase, use, and service and is usually initiated by the customer Indirect contact most often involves unplanned encounters with representations of a company’s products, services, or brands and takes the form of word-of mouth recommendations or criticism, advertising, news reports, reviews, and so forth

Despite scarce empirical evidence, scholars seem to be in agreement of a conceptual distinction between customers’ service experience and customer satisfaction According to Schmitt (2003), satisfaction can be described as an outcome-oriented attitude that occurs when customers evaluates the performance of a product according to their expectations of it In contrast, an experience is characterized as process-oriented, including value beyond the functional, product-driven determinants of satisfaction Meyer and Schwager (2007) suggest that customer satisfaction is the culmination of a series of customer experiences, where degree of satisfaction is the net result of good experiences minus bad experiences

2.1.2 Service Quality

Definition of Service Quality

Service quality in the management and marketing literature is the extent to which customers' perceptions of service meet and/or exceed their expectations for example as defined by Zeithaml et al (1996) Parasuraman defines service quality as

“the differences between customer expectations and perceptions of service”

(Parasuraman, 1991) They argued that measuring service quality as the difference between perceived and expected service was a valid way and could make management

to identify gaps to what they offer as services Zeithaml and Bitner (2003) defined perceived service quality as a global judgment or attitude relating to the superiority of

a service It is widely accepted today that service quality is a multi-dimensional concept This conceptual definition is valid in both the B2C and B2B context and the measurement of the service quality concept is mostly based on its dimensions or determinants (Parasuraman, Zeithaml and Berry, 1988)

B2C & B2B context: SERVQUAL model and INDSERV model

The empirical research has showed that the dimensions of service quality perceived by an industrial firm or by an individual customer may not totally overlap each other (Kong and Mayo, 1993) There has been a variety of service quality models

in the literature One of the most widely used models is the SERVQUAL, which was developed by Parasuraman, Zeithaml, and Berry, (1988) Based on focus group interviews with customers and in-depth interviews with executives in consumer sectors like retail banking and product repair and maintenance, Parasuraman, Zeithaml and Berry (1985) defined ten dimensions of service quality: tangibles, reliability, responsiveness, competence, access, courtesy, communication, credibility, security and understanding the customer Subsequent research (Parasuraman, Zeithaml and Berry, 1988) revealed only five dimensions Tangibles, reliability and responsiveness remain the same, while assurance and empathy encompass the other seven dimensions

In the past, it has been assumed that the service quality dimensions found in consumer settings could be applied to business markets as well However, in a B2B environment other determinants may play a role in perceived service quality than the ones found in a B2C context B2B service relationships are of a longer-term and greater-intensity nature For instance, services purchased from organizations (B2B) are provided by qualified professionals whose expertise and skills are key elements of the quality of service provided They interact closely with managers from the buying organization and on a very frequent basis (Hausman, 2003) In addition, B2B services are far more complex and require the management of a larger number of parameters to ensure their flawless provision and outcome (Lovelock, 1996) Jackson and Cooper (1988), also stress this increased demand for specialization, which in a way is a consequence of the increased customization that is required when serving organizational buyers As a result, selecting, evaluating and deciding on the continuation of the relationship with a B2B service provider is not a routine task (Jackson et al., 1995), even for established providers What organizations actually purchase is frequently a customer-specific and quite-unique solution to a specific problem (Patterson, 1995)

Therefore, researchers have frequently questioned and revised the dimensionality of SERVQUAL, with variegated numbers and identities of factors emerging in different studies One of the pioneers in this area is Gronros (1984) who suggested that two types of perceived service quality are of concern for industrial customers: Technical quality and Functional quality The former was conceived as

encompassing the core operation-related aspects of the service while the latter as comprising the interaction between individuals from the two organizations

Following Gronros (1984) original conceptualization, Morgan (1991) proposed two different but quite similar dimensions: Process elements, i.e how the service is delivered with regard to the interaction between the staff from the two companies (customer and provider) and Outcome elements, i.e what the customer actually received from the provider Another dimension, that of integrative quality, is proposed

by Edwardson et al (1990) referring to the provider’s ability to ensure that all the systems that are required to deliver the service are actually coordinated well enough to

sub-do so

Later work by Szmigin (1993) furthered the dimension of output quality, which relates with eventually delivering the service outcome that the customer expects This dimension is different from hard quality because a service company may well manage

to put all the required sub-systems to work in a coordinated fashion and still the result of the serving endeavor will be less than what the customer expected Given this difficulty to relate outcome quality to the efforts and success of the provider, Halinen (1994) suggests that output quality ought to be broken down in two distinct dimensions: “Immediate outcome” and “Final outcome quality” With regard to the former, it relates to the success of the provider to provide the customer with a solution

end-to its problem while, the latter describes the effects that the service offered created for the customer, after it has been implemented

Furthermore, less service quality measurement methods on B2B services quality are found in literature: of the 30 articles discussed by Ladhari (2008), only 5

focused on a B2B environment (where the buyer is a professional instead of a consumer), while there are no empirically tested other methods available that are applicable for all services Generally, we can distinguish two streams of research: the SERVQUAL based measures, of which INDSERV (Gounaris, 2005) is an example, and the conceptualization of Grönroos (1984)

Results of applying SERVQUAL in a B2B context were at best mixed (Gounaris, 2005), which was reason for Gounaris to develop a new conceptualization

of service quality Extending the dimensions suggested by Szmigin (1993) and Bochove (1994), Gounaris proposed that B2B service quality should be composed of,

at least, four dimensions: Potential quality, Hard process quality, Soft process quality and Output quality

In summary, it is considered that the INDSERV scale developed by Gounaris (Gounaris, 2005a, b, c; Gounaris and Venetis, 2002) is the most fundamental and comprehensive scale applied in B2B context up to now Table 1.1 summarizes the findings in the literature to understand various determinants of basic service quality

Table 2.1 – B2B Service quality determinants over the time

Figure 2.1: Measurement dimensions in SERVQUAL and INDSERV

Analyzing Gounaris model and findings, and looking at the adaptations he actually made to the SERVQUAL measure, it can be concluded as following

(1) Four dimensions of SERVQUAL (Empathy, Assurance, Reliability and Responsiveness) load together as one factor, suggesting that they are in fact aspects of the same dimension Looking at what these dimensions actually measure, one can say

Tangibility

Assurance

Reliability

Responsiven ess

Empathy

SERVQUAL B2C

Output Quality

Soft Process Quality

Hard Process Quality

Potential Quality

INDSERV B2B

that these dimensions measure almost the same as what (hard and soft) process quality measures;

(2) The Tangibles dimension is not present in the INDSERV measure However, the Potential Quality dimension resembles a “professional version” of the Tangibles dimension Potential quality in the B2C SERVQUAL measure is based on “visually appealing buildings” and “neat employees”; in the B2B INDSERV measure it is based

on amongst others skilled personnel, network and facilities Both are elements that the customer perceives and can associate with (potential) quality of the supplier;

(3) The INDSERV measure has one dimension that we do not find in the SERVQUAL: Output Quality (effects that the solution offered created for the client after it has been implemented (Gounaris, 2005) In Gounaris’ method this dimension has the following items: the supplied service reaches its objectives, the service has a notable effect, the service contributes to our image/sales, the service is creative in terms of its offering, and the service is consistent with our strategy

Four dimensions of Service Quality in INDSERV model:

Potential quality: Bochove (1994) suggested that a critical dimension of

perceived service quality is that of Potential quality, which relates to the search attributes that customers use in order to evaluate the provider’s ability to perform the service before the relation has actually begun This is in line with the findings of Patterson (1995), who reports that industrial customers have significant difficulty to assess the provider’s ability to perform the requested service Gounaris and Venetis (2002) provide empirical evidence of how this specific dimension influences the overall evaluation of the service offered by the provider

Hard process quality: based on the work of Szmigin (1993), hard quality

pertains to what is being performed during the service process This notion similar to Gronrøos’ (1984) “technical quality” conceived as encompassing the core operation-related aspects of the service such as scheduled kept, budget stayed in, need understood, etc

Soft process quality: soft quality pertains to how the service is performed

during the service process according to Szmigin (1993), on the other hand pertains to the front-line personnel and the interaction between two managers and/or employees from the two companies such as understanding customer’s needs and personality match (Morgan, 1991), self-disclosure (Hausman, 2003) and so on This notion similar to Gronrøos’ (1984) “functional quality” defined as comprising the interaction between individuals from the two organizations

Output quality: referring to the client’s evaluation of the end-results of the hard

and soft parameters or the effects that the solution offered created for the client after it has been implemented (i.e whether the supplier contributed to customer’s image or creative in term of its offering) This dimension is different from hard quality because

a service company may well manage to put all the required sub-systems to work in a coordinated fashion and still the end-result of the serving endeavor will be less than

what the customer expected

In 2008, Van der Valk et al took Grönroos’ (1984) functional-technical conceptualization as a basis for service quality They preferred Grönroos’ conceptualization over Parasuraman’s, because it is broader than SERVQUAL Since many authors (Axelsson and Wynstra, 2002; Van Weele, 2008) have argued that the

relationship between the buyer and the supplier has become important in addition to price, quality and delivery This development suggests that when evaluating service providers, especially in B2B context, companies should not only look at the object of exchange, but also at the overall relationship In addition, Grönroos (2000, as cited in Van der Valk et al., 2008) made a clear distinction between quality at the level of the service and quality at the level of the relationship He claims that buyer-supplier relationship quality refers to “the dynamics of long-term quality formation in ongoing customer relationships” While service quality is “basically static”, relationship quality is dynamic in the sense that it represents how quality develops over time Consequently, service quality is short-term oriented and relationship quality is long-term oriented

Van der Valk et al (2008) added a third dimension to the existing conceptualization: buyer-supplier relationship, beside functional and technical dimension This three-dimension conceptualization however has no measurable items

to measure service quality, and its usefulness has not been supported by empirical evidence

Based on the findings from Van der Valk et al (2008), H.P Kamping (2009) from Eindhoven University of Technology applied successfully this conceptualization

in his empirical Master Thesis in developing a method to define and measure service quality from buying company’s perspective (i.e Nestle) The dimensions that are used

in the conceptual framework with four as follows:

Service Output Quality: Quality associated with the outcome/result of the

service encounter

Service Process Quality: Quality associated with the processes of service

delivery and consumption

Buyer-Supplier Relationship Quality: Refers to the dynamics of long-term

quality formation in ongoing customer relationships

Supplier Capabilities: Refers to potential quality of a service supplier

Given aforementioned analysis, this study therefore includes relationship quality in the conceptualization of quality in business-to-business service context In the context of B2B, this dimension is totally significant and suitable for empirically applying

Figure 2.2: The conceptual framework and its dimensions displayed in

Soft Process Quality

Hard Process Quality

Potential Quality

INDSERV B2B

Service Output Quality

Supplier Relationship Quality

Buyer-Service Process Quality

Van der Valk

et al

Gronroos (1984)

Technical Quality

Functional Quality

Output Quality

Supplier Relationship Quality

Buyer-Conceptual Framework

Potential Quality

Soft Process Quality

Hard Process Quality

2.1.3 Customer Satisfaction

Definition of Customer Satisfaction

Many researchers (Oliver, 1993; Brady and Robertson, 2001; Lovelock, Patterson and Walker, 2001) conceptualize customer satisfaction as individual’s feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations Generally, there are two general conceptualizations of satisfaction, namely, transaction-specific satisfaction and cumulative satisfaction (Boulding et al., 1993; Jones and Suh, 2000;

Yi and La, 2004) Transaction-specific satisfaction is a customer’s evaluation of his or her experience and reactions to a particular service encounter (Cronin and Taylor, 1992; Boshoff and Gray, 2004), and cumulative satisfaction refers to the customer’s overall evaluation of the consumption experience to date (Johnson, Anderson and Fornell, 1995)

Three dimensions of Customer Satisfaction

According to Giese and Cote (2000), consumer satisfaction has been typically conceptualized as either an emotional (e.g., Cadotte, Woodruff, and Jenkins 1987; Westbrook and Reilly 1983) or cognitive response (e.g., Bolton and Drew 1991; Howard and Sheth 1969; Tse and Wilton 1988) For example, Westbrook and Reilly (1983, p 256) refer to satisfaction as "an emotional response," while Howard and Sheth (1969, p 145) refer to it as "a buyer’s cognitive state" Furthermore, there are several conceptual and operational definitions indicating that the response maybe comprised of both cognitive and affective dimensions (e.g., Churchill and Surprenant 1982; Swan, Trawick, and Carroll 1980; Westbrook 1980) More recent satisfaction

definitions concede an emotional response (Halstead, Hartman, and Schmidt 1994; Mano and Oliver 1993; Oliver 1997; Oliver 1992; Spreng, MacKenzie, and Olshavsky 1996) In some cases, operational definitions may even include a conative dimension, such as repeat purchase intention (e.g., Westbrook and Oliver 1991) Other definitions provide no suggestion about the specific type of response and simply say "an evaluative response" (Day 1984, p 496) or "summary psychological state" (Oliver

1981, p 27) or "an overall post-purchase evaluation" (Fornell 1992, p 11) As noted

by these examples, there is little agreement about the type of satisfaction response, although more current definitions employ an emotional bent Based on given analysis, the three main dimensions of customer satisfaction which is used in this study include

cognitive, affective and conative

Cognitive response is an evaluative process in which the perceptions of (or

beliefs about) an object, action, or condition are compared to one’s values (or needs, wants, desires) as defined by Westbrook and Reilly, 1983 It means that customers compare the service performance with their expectations Another definition of cognitive judgment was also supposed by Swan, Trawick and Carroll (1980) “the product/service has performed relatively well or poorly or that the product/service was suitable or unsuitable for its use/purpose”

Affective response is an emotional response to the experiences provided by

and associated with particular products or services purchased (Westbrook and Reilly, 1983) or a transaction-specific affective response resulted from the customer’s comparison of service performance to some pre-purchase standard (Halstead, Hartman

and Schmidt, 1994) Moreover, an emotional response is triggered by a cognitive evaluative process

Conative response such as repeat purchase intention (Westbrook and Oliver,

1991) Cognitive and conative components tend to be more strongly related to antecedents and consequences of the satisfaction determination (Giese and Cote, 2000)

At the other hand, customer satisfaction is perceived as being a key driver of long‐term relationships between suppliers and buyers, as it is positively related to customer loyalty and customer profitability (Helgesen, 2007) The possible dimensions that one can use in measuring customer satisfaction such as: product quality, service quality, pricing, complaints or problems, trust in firm’s employees, firm positioning in customers’ minds Since product quality and price are certain and relatively easier to be measured and compared, competing in product quality and pricing are usually not the main issue in the competition Service quality is somewhat more abstract than the other two, because it involves customers’ experience toward the company’s service level Thus measuring service quality might provide challenge for the company

In research and practice field, customer satisfaction is still an abstract and rather ambiguous concept (Corneliu et al., 2010) A review of the existing literature indicates a wide variance in the definitions of satisfaction Without a uniform definition of satisfaction, researchers are unable to select an appropriate definition for

a given context; develop valid measures of satisfaction; and/or compare and interpret empirical results (Giese and Cote, 2000) As concluded by the literature review and

validated by the group and personal interview data, Giese and Cote (2000) defined consumer satisfaction as following:

A summary affective response of varying intensity The exact type of affective

response and the level of intensity likely to be experienced must be explicitly defined

by a researcher depending on the context of interest

With a time-specific point of determination and limited duration The

researcher should select the point of determination most relevant for the research questions and identify the likely duration of the summary response It is reasonable to expect that consumers may consciously determine their satisfaction response when asked by a researcher; therefore, timing is most critical to ascertain the most accurate, well-formed response

Directed toward focal aspects of product acquisition and/or consumption The

researcher should identify the focus of interest based on the managerial or research question they face This may include a broad or narrow range of acquisition or consumption activities/issue

2.2 Research Model and Hypotheses

Research Model

Hypotheses

H1: Potential quality has significant effect on overall customer satisfaction H2: Hard process quality has significant effect on overall customer satisfaction H3: Soft process quality has significant effect on overall customer satisfaction H4: Output quality has significant effect on overall customer satisfaction

H5: Buyer – supplier relationship quality has significant effect on overall

customer satisfaction

H6: Read-mix concrete company type moderates the relationship between each

determinant of B2B service quality (Potential quality, Hard process quality, Soft

process quality, Output quality, and Buyer – supplier relationship quality) and overall customer satisfaction

In details, hypothesis 1 to hypothesis 5 developed is to explore the different impacts of B2B service quality’s determinants including Potential quality, Hard process quality, Soft process quality, Output quality, and Buyer-supplier relationship quality on customer satisfaction in Vietnam Ready-Mix Concrete industry

Quality is a relatively global value judgment (Zeithaml, 1988) “Satisfaction” and “quality” are often used interchangeably, but even though the two appear to be highly similar, they are two different constructs (Iacobucci et al., 1995) There is a definite distinction between customer satisfaction and service quality as well as the causal direction of their relationship (Parasuraman et al., 1994) A review of the emerging literature suggests that there appears to be relative consensus among marketing researchers that service quality and customer satisfaction are separate constructs which is unique and share a close relationship (Cronin and Taylor, 1992; Oliver, 1993) Most researchers in the services field have maintained that these constructs are distinct (Bitner, 1990; Carman, 1990; Boulding et al., 1993; Spreng and Mackoy, 1996)

Since customer satisfaction has been considered to be based on the customer’s experience on a particular service encounter, (Cronin and Taylor, 1992) it is in line with the fact that service quality is a determinant of customer satisfaction, because service quality comes from outcome of the services from service providers in organizations Regarding the relationship between customer satisfaction and service quality, Oliver (1993) first suggested that service quality would be antecedent to

customer satisfaction regardless of whether these constructs were cumulative or transaction-specific Some researchers have found empirical supports for the view of the point mentioned above (Anderson and Sullivan, 1993; Fornell et al 1996; Spreng and Macky 1996); where customer satisfaction came as a result of service quality This study follows the majority of recent researches regarding to the service quality as

an antecedent to satisfaction

Potential quality, which relates to the search attributes that customers use in

order to evaluate the provider’s ability to perform the service before the relation has actually begun

Hard process quality, what is being performed during the service process This

notion similar to Gronrøos’ (1984) “technical quality” conceived as encompassing the core operation-related aspects of the service such as scheduled kept, budget stayed in, need understood, etc

Soft process quality, how the service is performed during the service process

according to Szmigin (1993), on the other hand pertains to the front-line personnel and the interaction between two managers and/or employees from the two companies such

as understanding customer’s needs and personality match (Morgan, 1991), disclosure (Hausman, 2003) and so on This notion similar to Gronrøos’ (1984)

self-“functional quality” defined as comprising the interaction between individuals from the two organizations

Output quality refers to the client’s evaluation of the end-results of the hard and

soft parameters or the effects that the solution offered created for the client after it has been implemented (i.e whether the supplier contributed to customer’s image or

creative in term of its offering) This dimension is different from hard quality because

a service company may well manage to put all the required sub-systems to work in a coordinated fashion and still the end-result of the serving endeavor will be less than

what the customer expected

Buyer-supplier relationship quality refers to the dynamics of long-term quality

formation in ongoing customer relationships

Based on aforementioned argument, the following hypotheses will be tested

H1: Potential quality has significant effect on overall customer satisfaction H2: Hard process quality has significant effect on overall customer satisfaction H3: Soft process quality has significant effect on overall customer satisfaction H4: Output quality has significant effect on overall customer satisfaction

H5: Buyer-supplier relationship quality has significant effect on overall

customer satisfaction

Furthermore, as can be studied from the practical situation of Vietnam Mix Concrete industry, the sixth hypothesis is proposed to examine the moderating effects of Ready-Mix Concrete Company Type According to the internal magazine of Holcim Vietnam issued in 2012, the amount of ready-mixed concrete is rising and more cement enterprises are extended their business to concrete, there is more competition in the concrete industry Advanced techniques and enterprise management are becoming more and more important The appearance of Foreign Ready-Mix Company has brought to the customers a full effective package of Ready-Mix Concrete Supply Chain (from placing order to after service) Whereas, local Ready-Mix Company still try to improve their Supply Chain in order to match the

Ready-higher customer satisfaction level, especially the aspects related to customer service and value added solution (Insight, 2012) In this situation, the foreign Ready-Mix Concrete Company takes many advantages over local company such as investment capital, standardized supply chain, high-skilled staffs, training program, etc With the above advantages, the foreign Ready-Mix Companies have attracted and maintained a large amount of industrial customers, particularly the international customers These customers follow the high quality of service and require the best comprehensive solution

In the South of Vietnam, the market demand of Ready- Mix Concrete is around

5 million m3 per year (Insight, 2012) and expectedly 10 million m3 in 2016 In Ho Chi Minh market, there are 20 main players with 7 foreign companies including: Holcim (Switzerland), Lafarge (France), RDC (Japan), Soam Vina (Korea), Sino Pacific (China), Fico Pan-U (Singapore), SCG (Thailand) The aforementioned discussions give foundation to propose that Ready-Mix Concrete type plays considerable effect on the relationship between service quality and customer

satisfaction It should be examined the Hypothesis 6: “The impact degrees of each

determinant of B2B service quality (Potential quality, Hard process quality, Soft process quality and Output quality, Buyer-supplier relationship quality) on Overall Customer Satisfaction are distinct depending on local or foreign company”

Chapter 3 RESEARCH METHOD

The literature review, model and hypotheses in chapter 2 are considered as basement for this chapter presenting about the method and research design used in the current study to explore the relationships among service quality and customer satisfaction toward Ready-Mix Concrete service in Ho Chi Minh city, Vietnam The research procedure was implemented through quantitative research with two steps: pre-test and main survey Regarding to survey sampling, the data is collected by convenience sampling method from industrial customers (i.e project managers or project supervisors of construction companies) of three Ready-Mix Concrete companies The sample size is 126 respondents Chapter 3 also mentions about the procedure to analyze the data collected Accordingly, the process includes test of internal consistency reliability, exploratory factor analysis (EFA), multiple regression test and chow test by SPSS software

3.1 Quantitative research: Pre-test

In pre-test, the purpose is to test measurement scales for identifying whether any item is not suitable / not significant in the Ready-Mix Concrete industry context based

on the standpoint of customers INDSERV scales have been applied successfully in many empirical fields around the world Therefore, a small sample was used for this pre-test consisting of about 20 industrial customers (10 customers of local company and 10 customers of foreign company) The technique employed was face-to-face interview, the respondents were the top managers of construction companies Based

on these responses, list of items were modified before being employed for main survey in quantitative research

3.2 Quantitative research: Main survey

3.2.1 Measurement scales

Measurement scale for B2B service quality in Ready-Mix Concrete industry will be adapted from Gounaris (2005) with 22 items and modified through pre-test The additional dimension Buyer – Supplier Relationship Quality will be adapted from Kamping (2009) with 8 items and interpreted into Ready-Mix Concrete industry

Satisfaction was measured using 3 items adapted from different existing scales The items used were: (1) “How satisfied are you with Ready-Mix Concrete service of this company?” (very dissatisfied-very satisfied) (adapted from Oliver and Bearden, 1983) (2) “Compared to your expectations for the Ready-Mix Concrete service, how

do you actually rate the service of this company?” (much worse-much better) (adapted from Oliver, 1980a) (3) “Compared to your expectations for the Ready-Mix Concrete service, how do you actually rate the service of this company?” (no chance-certain) (adapted from Oliver and Swan, 1989)

Instead of the existing 5 or 7-point scale, 11 point likert scale was used because

it is more coherent with the Vietnamese culture

Dimension Criteria Description

Concrete Company

service

interesting portfolio of (other) services

of service delivery and consumption

followed up

agreed period

of service delivery and consumption

effectively dealt with

problem

customer

of the service encounter

reach objectives

The service has a notable effect on a certain parameter (e.g market share, brand

recognition)

customer’s image

4 Is creative in terms of its offering The service delivered is creative offering

customer’s strategy

Buyer – Supplier relationship quality

Refers to the dynamics of long-term quality formation in ongoing customer relationships

improvement at the customer

customer demands

from the market to the customer

The contact persons at the company are friendly, helpful, approachable, "on the same level"

The industrial customer and the company have an effective mix of organization cultures and management philosophies