The impact of servicescape on customer behavioral intention a study of apartment leasing service in HCMC

Keywords Servicescape, substantive staging of servicescape, communicative staging of servicescape, customer behavioral intentions, leasing service, service experience evaluation... Recen

International School of Business

-

Phan Thi Tuyen

THE IMPACT OF SERVICESCAPE ON CUSTOMER BEHAVIORAL INTENTION: A STUDY OF APARTMENT LEASING SERVICE IN HCMC

MASTER OF BUSINESS (Honors)

Ho Chi Minh City – Year 2016

International School of Business

-

Phan Thi Tuyen

THE IMPACT OF SERVICESCAPE ON CUSTOMER BEHAVIORAL INTENTION: A STUDY OF APARTMENT LEASING SERVICE IN HCMC

ID: 22140062

MASTER OF BUSINESS (Honors)

SUPERVISOR: Dr PHAM NGOC THUY

Ho Chi Minh City – Year 2016

tremendous understanding when I couldn’t break through Her knowledge and

experience helped me set the course and made it possible for me to continue my research

I also would like to send many thanks to my family who motivate me a lot during research period, to my clients, my friends and colleagues who participated in the interview and survey for this research They also gave me useful thoughts and comments on my research Their contributions make my research possible

Abstract

This study examines the relationship between every aspect of servicescape, service experience evaluation, and customer behavioral intentions Based on data derived from 304 customers who have leased apartments in Ho Chi Minh City (HCMC), a link was found between both the substantive and communicative aspects of the

servicescape reliably predicted customers’ evaluations This research also found that a more favorable service experience evaluation positively related to behavioral

intentions Theoretical contributions of this research are elucidated Moreover,

managerial implications related to servicescape design, promotion strategies and service experience enhancement are discussed

Keywords

Servicescape, substantive staging of servicescape, communicative staging of

servicescape, customer behavioral intentions, leasing service, service experience evaluation

TABLE OF CONTENTS ACKNOWLEDGEMENT

ABSTRACT

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

1 Introduction 6

2 Literature review 9

2.1 Apartment Leasing Service in condominiums 9

2.2 Servicescape 9

2.2.1 Substantive Staging of Servicescape 11

2.2.2 Communicative Staging of Servicescape 13

2.3 Service experience evaluation 14

2.2 Behavioral intentions 16

3 Method 17

3.1 Procedure and sampling 17

3.2 Measurement scales 20

4 Data analysis and results 23

4.1 Measurement validation 23

4.2 Confirmatory Factor Analysis (CFA) 25

4.3 Hypotheses testing 30

4.4 Structural equation model (SEM) results 31

5 Discussions 33

5.1 Implications 34

5.2 Conclusion 35

5.3 Limitations and recommendations for future research 36

6 Support information 37

6.1 Result of pilot research 37

6.2 Questionnaire 40

REFERENCES

APPENDIX

LIST OF FIGURES

Figure 1: Conceptual model 17

Figure 2: CFA result 27

Figure 3: SEM result 32

LIST OF TABLES Table 1: Descriptive statistics of sample 20

Table 2: Measurement scales 22

Table 3: Comparison between CFA threshold values and CFA results 26

Table 4: Measurement scale validity and reliability testing result 29

Table 5: Means, standard deviations, and standardized CFA loadings of items 29

Table 6: Structural paths in the model 31

Table 7: Findings of pilot research 37

Table 8: The respondent’s nationality 40

Table 9: The name of condominiums 41

servicescape does not simply impact customer perceptions of service functions and service quality, but more subtly, also impacts on the meanings a customer draws from

a lot of intangible, contextual and symbolic elements of a service Servicescape or atmospherics have the means of providing the evidence that assists consumers in making subjective evaluations of service products (Hoffman & Turley, 2002)

Therefore, servicescape has a direct and an indirect effect on perceived service

quality, but different from service quality, servicescape has a high overall effect

Servicescape has well developed theory which have been successfully tested in many service contexts such as leisure service setting (Wakefield & Blodgett, 1996), hotel industry (Countryman & Jang, 2006), retail service (Hooper et al, 2013), theme park service (Dong & Siu, 2013), etc Moreover, numerous studies have highlighted various aspects of servicescape, such as color and light, background music, as well as odors (Reimer & Kuehn, 2005) In Vietnam, some master theses studied about the effect of servicescape to customer loyalty in restaurants or in coffee shop However, servicescape of apartment leasing service in condominiums has not been paid

adequate attention

Leasing service is a common service in condominiums or residential buildings requiring a large amount of capital of investors It is not a high risk investment but it can be a high return investment if the investors buy the right properties In the world, roundly 40% of population lives in rental housing (Malpezzi, as cited in Amenyah & Fletcher, 2013) In Ho Chi Minh City (HCMC), recently, a large number of

condominiums came into the market In 2015, the total supply was approximately 4,370 apartments from 83 projects, increasing 6% year-on-year (YoY) From 2016 to

2018, more than 67,000 units are expected to enter the market which providing around 2,200 apartments for leasing (Savills, Ho Chi Minh City Market Brief Q1 2016) With

a high gross domestic product (GDP) growth rate and being considered as the most dynamic city in Viet Nam, in 2015, Ho Chi Minh City attracted US$3 billion in

foreign direct investment (FDI), up 129% (YoY) Increasing FDI inflow has

positively affected the demand for leasing apartments The increasing of supply and demand is a phenomenon creating a dynamic leasing apartment market

Nevertheless, the rapid increasing in supply of leasing apartment service in the coming years pushes the competition among investors, developers more and more intense The lessees nowadays have strong bargaining position due to many choices of leasing apartments Furthermore, the requirements of the lessees to have a stable residence is more and more stringent They do not only require to have a nice interior decoration, high quality home appliances and furniture, etc which are provided inside the apartment, they also require to have a beautiful view, peaceful and clean area, good facilities, fresh air, or how people manage the condominium, how safe and security it is, etc which are related to the landscape of service or the physical and

mental environment Generally, location, surrounding development and scenic beauty are common determinants of the demand for condominium properties (Zarin &

Bujang, 1999) The lessees normally prefers leasing apartment in condominiums to other types of property due to the rental, convenience, safety, environment, location, etc The lessors who invest for leasing service normally look for long term lease contracts and premium rentals leading to profitable investments Accordingly, to meet those requirements and encourage lessees to continue using service, the developers as well as lessors need to build their properties with attractive servicescape to have more competitive advantages Servicescape is considered as future’s form of intense

competition in service environment (Ishaq, Bhutta, Hamayun, Danish & Hussain, 1995) Miles, Miles and Cannon (2012) state that servicescape is a part of competitive approach that should be promoted and emphasized For those reasons, this paper contributes to the literature on servicescape by examining the impact of Servicescape

on behavioral intentions of leasing service in HCMC To be more specific, this paper

2 Literature review

2.1 Overview of apartment leasing service in condominiums

A condominium is a building or a structure which has two or more stories consisting

of parcels, owned and/or used separately by individuals and remaining portion of the property being owned by the owners of individual unit in common (Gajanayake, as cited in Ariyawansa & Udayanthika, 2012) There are low-rise condominium with below five stories, medium-rise condominium with between six- to twelve-stories and high-rise condominium including cluster of buildings over thirteen stories or above (Ngai-ming Yip, Chin-oh & Tzu-ying Hung, 2007) The servicescape in

condominium refers to exterior attributes (such as building exterior, signage, parking, waiting areas, admission office, and landscape), interior attributes (such as design, layout, equipment and decoration), ambient conditions (such as the music and

temperature) and the people who work for providing the service (such as

administrators, receptionists, security guard, cleaners…) Over the years, researchers focused more on lessees’ satisfaction in specific settings Some studied property specific characteristics such as high-rise, multifamily, or owner-occupied and others focused on characteristics of neighborhood and environment, e.g schools, climate, or transportation (Brouwer, 2015) Brouwer (2015) also mentioned that the constructs of leasing service is quite different from other services, services in leasing apartment may be better expressed using variables related to maintenance and cleanliness

2.2 Servicescape

Although the term “servicescape” is probably the most popular term to refer to the influence of tangible and intangible cues on consumers, the other terms

“atmospherics”, “environmental psychology”, “store environments” and “physical environment” also describe the same concept (Hooper et al, 2013) Significance of servicescape depends on length of time customer spend for service and the purpose of service consumption (hedonic or utilitarian) (Wakefield & Blodgett, 1994) The physical environment may be an important determinant of customer satisfaction and subsequent behavior when services are consumed primarily for hedonic purposes The relationship between the environmental stimuli (servicescape) and customer

behavioral intentions was first established by the environmental psychologists

(Russell & Mehrabian, 1974) Kotler (1973) used the term “atmospherics” to test if the physical environment had an effect on human behavior Psychologists have

determined that the physical environment has an effect on human behavior and this branch of psychology has been known as environmental psychology

Kotler (1973) pointed out that the physical environment in which a product is purchased is an important part of the total consumption package In 1974, Mehrabian and Russell described environmental psychology as “the direct impact of physical stimuli on human emotions and the effect of physical stimuli on a variety of

behaviors, such as work performance or social interaction” In 1992, Bitner developed atmospherics further by creating a conceptual framework for service settings and began using the term servicescape to describe the physical environment in which services occur Bitner’s conceptual framework which is used in numerous researches

is comprised of the three environmental dimensions:

1 ambient conditions (i.e weather, temperature, air quality, noise, music, odors);

2 spatial layout and functionality (i.e the way in which equipment and

furnishings are arranged, and the ability of those items to facilitate

consumers' enjoyment); and

3 Signs, symbols and artefacts (i.e signage and decor used to communicate and enhance a certain image or mood, or to direct customers to desired destinations)

Arnould, Price and Tierney (1998) states a more comprehensive definition of servicescape According to Arnould et al., servicescape is like nested product of managerial strategies and customer inputs It was produced through substantive and communicative staging, and can have high or low level of substantive staging

combined with either high or low levels of communicative staging The substantive staging of servicescape refers to the physical creation of contrived environment which was stressed in most of previous related researches The communicative staging of servicescape refers to the ways in which environment is presented or interpreted This paper adopts the definition of Arnould et al (1998) which describes fairy well the servicescape at condominiums

2.2.1 Substantive staging of servicescape

Substantive staging refers to “the physical creation of contrived environments”

(Arnould et al., 1998) Some services require a simple servicescape with a few

elements and spaces such as self-service (only customer) or remote service (only employee), some others require complex servicescape and a lot spaces which interact both customers and employees such as interpersonal services (Bitner, 1992)

Apartment leasing service is one of interpersonal services because it takes place in condominiums with many floors, apartments, gardens, facilities and equipment, etc The substantive staging of servicescape is highlighted by Bitner in the research of service marketing becomes a popular theory of servicescape

The implications of previous research suggests that organizations need to be acutely aware of how they manage a wide range of internal design issues because they appear to affect the perceptions, emotional state and behavioral intentions of both employees and customers Over the years, the different studies have been conducted in different industries In 2002, Hoffman and Turley (2002) emphasize that both tangible elements (the building, carpeting, fixtures, and point of-purchase decorations) and intangible elements (colors, music, temperature, and scents) are essential in creating service experiences In 2006, Countryman and Jang has a study of hotel industry stating that servicescape has a significant relationship to customers’ impression of the hotel lobby Recently, in the context of them park, Dong and Siu (2013) confirm that visitors satisfy with the substantive staging of a servicescape positively relates their service experience evaluation Similarly, in the context of apartment leasing service, the servicescape influence customer experience with the same direction as customer using hotel service, theme park service, etc Therefore, hypothesis 1 is proposed:

H1: Substantive staging of a servicescape is positively related to service experience evaluation of customer using apartment leasing service

2.2.2 Communicative Staging of Servicescape

Communicative staging of the servicescape refers to how the service environment is presented and interpreted It involves the transmission both of meaning directly related

to service delivery and of meaning transcending the instrumental context (Arnould et al., 1998) Communicative staging of servicescape involves the transmission of

servicescape meaning and moves servicescape meaning from service provider to customer, between customers and potentially at least from customers to providers According to Arnould et al (1998), “Communicative staging is patterned through the who, what, how and when of communication” Service providers and customer

interactions are one of important ingredient of Communicative Staging and it is the primary source of competitive differentiation Bitner (1992) acknowledged though her focus was to conceptualize the manufactured and physical stimuli that constitute servicescape, both customers and employees are also affected by social and natural stimuli, which are also housed within servicescape (Rosenbaum & Massiah, 2011)

Communicative staging includes the personnel and cultural elements of a service setting When the customers enter a service, they sometimes read the signs, the announcement or ask the employees for help or explanations… The personnel aspects,

as service employees serve as the major channel for communication with customers, they play an important role in customers’ evaluations of service performance

(Gwinner, Gremler, & Bitner, 1998) Cultural elements are another major aspect of a servicescape’s communicative staging Indeed, they can be of critical importance in many types of service settings, especially for experiential services where customers are expected to interact comprehensively with the setting Cultural atmospherics are

then designed to influence customers’ psychological feelings toward the service encounter and thus shape their service experience evaluation (Dong & Siu, 2013)

In apartment leasing service, the communicative staging of servicescape is the interaction between the lessee and people working at condominium such as

receptionist, managing people, security people, etc The lessees will evaluate service through performance Both employee’s behavior (i.e being customer oriented and credible) and their image (i.e the competence and physical attractiveness) influence the lessees’ perceptions The physical attractiveness of the service personnel at the interface with customers can "greatly enhance the service experience" (Baker, as cited

in Harris & Ezeh, 2008) The significance of staff behavior as a product of market orientation is related to organizational culture (Harris & Ezeh, 2008)

In 2008, Harris and Ezeh (2008) state the greater customers' evaluation of staff behavior, staff image and staff physical attractiveness, the greater the intentions of customers to be loyal The research of theme park, Dong and Siu (2013) also prove that visitors satisfy with the communicative staging of a servicescape positively

relates their service experience evaluation Hence, the hypothesis 3 is proposed:

H2: Communicative staging of a servicescape is positively related to

service experience evaluation of customer using apartment leasing service

2.3 Service experience evaluation

Service experience has its roots in many disciplines including economics, psychology, social psychology, management and marketing (Philipp "Phil" Klaus, & Maklan, 2012) In 2014, Tu suggested that customer experience is important in building up

both customer satisfaction and longer-term "loyalty" Total service experience is defined as a unique cognition generated by the individual, based on a service

encounter, combining the factors (inputs) such as expectation, disconfirmation,

perceived service quality, during-consumption emotions, and post consumption

emotions Consistent with the experiential emphasis of the service-dominant logic (Berry, Wall & Carbone, 2006) point out that customers’ evaluation of a service rely

on both rational and emotional clues embedded in the total experience

Ferguson, Paulin and Bergeron (2010) emphasize emotional clues are described

as either mechanic coming from inanimate objects and the physical aspects of the intangible service, or humanic, coming from the behavior and appearance of service providers Mechanic clues could be described as originating in the servicescape and humanic clues from the interactions or relations with the service personnel

Organizations can manage the clues in a customer experience that evoke attitudes of commitment that builds loyalty (Berry & Carbone, 2007) Customers’ perceptions of the service experience is impacted by atmospherics of service Service setting design can strongly influence individual and social behavior within that setting in ways that constrain or support the service experience of customers and staff at a functional level and in symbolic ways What is interesting is that customers and indeed staff may not always be attentive to how the servicescape design impacts their sense of well-being (Nilsson & Ballantyne, 2014) Sandstrom, Edvardsson, Kristensson and Magnusson (2008) has pointed out a service experience is the sum total of the functional and emotional outcome dimensions of any kinds of service

In the current study, a customer’s service experience evaluation was the

individual’s unique cognitive and affective impressions about an experience based on their interactions with substantive as well as communicative elements of the

servicescape The evaluation was assumed to encompass their evaluation of the entire service process, the outcome (enjoyment or otherwise), and their positive or negative memories of aspects of the service experience In the research of Schembri (2006) states that service experience is a key determinant of consumers' service quality

evaluation Customer-perceived value in the service experience involves both

cognitive and emotional responses (Berry et al., 2006; Edvardsson, 2005; Ferguson et al., 2010) Customers will be most likely to cherish a favorable service experience for

an extended period of time if they feel that the experience has been exclusive, and pleasing In the health service context, the finding of Ferguson et al (2010) shows that all dimensions of the total service experience are associated with positive word-of-mouth intentions In the context of a UK university graduation ceremony, Koenig-Lewis and Palmer (2014) find the results post-experience positive emotions had a greater effect on behavioral intention than satisfaction From the above discussion, hypothesis 3 is proposed:

H3: Service experience evaluation is positively related to behavioral

intentions of customer using apartment leasing service

2.4 Behavioral intentions

Behavioral intentions are signals for the actual purchase, and hence, it is important that it is monitored (Zeithaml, Berry, & Parasuraman, 1996) Behavioral intentions

include purchase intention and willingness to pay for premium price, and this has critical effects on brand and organizational performance Particularly, Zeithaml et al (1996) suggested that favorable behavioral intentions are associated with a service provider’s ability to get customers to say positive things about service and recommend

it to other consumers, remain loyal to them, spend more with the company, and pay price premiums Therefore, Malhotra and McCort (2001) argue that generating a greater understanding of consumer behavioral responses continues to be a primary concern for marketing researchers

Figure 1: Conceptual model

3 Method

3.1 Procedure and sampling

This research was conducted in Ho Chi Minh City (HCMC), the economic center of Vietnam There are two phases of study in this research, a pilot study to modify the questionnaire and a main survey to collect data for testing the scales and the model Respondents were foreigners who has experienced in leasing apartments in HCMC Foreigners were chosen to investigate because most of foreigners living in Vietnam have used apartment leasing service and experienced this service The respondents

H3 H2

H1

Service Experience Evaluation

Behavioral Intentions

Substantive Staging of

Servicescape

Communicative Staging of

Servicescape

were interviewed about apartment leasing service at their latest apartment which they have leased

In the pilot study, individuals who have leased apartments was invited to attend in-depth interviews to obtain more insight about the constructs under investigation After that a quantitative study by conducting a survey with a sample of five lessees by face to face interviews to preliminarily test the measures before launching a main survey The pilot study was used to modify and refine the scale items by using of Cronbach’s alpha reliability and exploratory factor analysis (EFA)

In the main survey study, respondents were approached to answer the survey questions In order to test the above-proposed model, a national online survey was used to collect data for empirical testing by using convenient sampling We distributed the link through the survey website https://docs.google.com The online lessees were invited by receiving the invitation letter via e-mail to follow this link to the survey, which took approximately 10-15 minutes to finish The collected data from the main survey was used to validate the measures by confirmatory factor analysis (CFA) and

to test the structural model by structural equation model (SEM) Convenience

sampling was used for the main survey

According to Hair, Black, Babin, and Anderson (2010), a general rule, the sample size should be 100 or greater and the minimum sample should have a desired ratio of 5 observations per variable n>100 and n>=5k (k: number of variables) In this paper, we have 4 constructs: Substantive staging of servicescape (10 items),

communicate staging of servicescape (8 items), service experience evaluation (6

items), and behavioral intentions (5 items) Totally, there are 29 items so the necessary sample size will be 29 x 5 = 145 samples (Hair et al., 2010)

Regarding EFA, Comrey and Lee (2013) suggested a range of minimum

sample sizes, from 50 (very poor) to 1,000 (excellent) Gorsuch (1974) characterized sample sizes above 200 as large and below 50 as small From the above suggestion we decide to have at least 200 participants to make sure that the paper have adequate sample size In this research, we collected the data from 304 respondents which is sufficient for using both CFA and EFA

The sample comprised with 160 (52.6%) male respondents and 144 (47.4%) female respondents There were 87 (28.6%) lessees living alone, 175 (57.2%) lessees living with family, 37 (12.2%) lessees living with friends and 6 (2%) lessees having other cases Most of lessees (58.9%) have got married, 80 (26.3%) lessees were single, 21 (6.9%) lessees was separated, 24 (7.9%) lessees was divorced 45 (14.8%) lessees are Korean which is highest proportion in this research, 35 (11.5%) lessees are American Most of lessees in this research were business men (38.5%) The second rank was teacher (23.7%) There were 122 (40.1%) lessees stayed in the latest

apartment with 6 months – 12 months, 62 (20.4%) lessees stayed for less than 6

months, 47 (15.5%) lessees stayed for 12 months – 18 months, 43 (14.1%) lessees stayed for 18months – 24 months and 30 (9.9%) lessees stayed for more than 24 months

Table 1: Descriptive statistics of sample

performed to identify whether the measurement variables reliably reflected the

hypothesized latent variables Structural Equation Modeling (SEM) was used with latent variables via AMOS 22 was tested to determine the adequacy of the constructs

of the model and test the hypotheses

3.2 Measurement scales

Four constructs were examined for measurement: substantive staging of servicescape, communicative staging of servicescape, service experience evaluation and behavioral

intentions The multiple-item method was used and each item will be measured based

on a five-point Likert type scale (ranging from 1 = strongly disagree to 5 = strongly agree) More specifically, this study was adapted the measures used to operationalize the constructs embedding in proposed theoretical model from relevant previous

studies Substantive staging of servicescape was measured by ten items borrowed from Bitner (as cited in Dong and Siu, 2013) and modified based on the results of the qualitative pilot study Communicative staging of servicescape was measured by eight items borrowed from Arnounld et al., (1998) Service experience evaluation was

measured by six items borrowed from Tu (2004) The last is Behavioral intentions was

measured by five items borrowed from Zeithaml et al (1996) Totally there are 4 constructs with 29 items The result from qualitative study indicates that servicescape affects the lessee’s experience a lot For example, an interviewee shared his opinion about servicescape: “I cannot sleep well if in the area having noise I prefer living in the high floor apartment so that I will not hear the noise for traffic and others”

Another respondents said: “I would like to stay in the apartment where swimming pool and gym has It is necessary in my daily activities” One doctor from South Africa shared his opinion: “I like the apartment with nice view and large balcony so that I can enjoy the fresh air”

Based on the result of pilot study, the measurement scales for four constructs: substantive staging of servicescape, communicative staging of servicescape, service experience evaluation and behavioral intentions were modified to be appropriate with Vietnamese context The questionnaire was composed in English with three parts: general information, main questions, and demographic information

Table 2: Measurement scales

Variable Coding Measurement Scales Sources

Substantive

Stage of

Servicescape

SUBSTA01 The theme park has nice smell

Dong & Siu (2013)

in Bitner (1992)

SUBSTA02 The atmosphere is cheerful

SUBSTA03 The theme park has up-to-date facilities

SUBSTA04 The architecture is attractive

SUBSTA05 The signs used are helpful to me

SUBSTA06 The layout makes the facilities easy to use

SUBSTA07 The color scheme is attractive

SUBSTA08 The style of decoration is fashionable

SUBSTA09 The facilities are maintained well

SUBSTA10 In general, the physical environment pleases

Tierney (1998)

COMSTA12 The employees are polite

COMSTA13 The employees are friendly

COMSTA14 The employees give customers personal

attention

COMSTA15 The employees are passionate

COMSTA16 The employees are neat and gracefully dressed

COMSTA17 The symbols of theme park are lovely

COMSTA18 The park brings the local culture to visitors

Service

Experience

Evaluation

SEREXP19 How would you categorize your experience

with this hotel?

- Extremely negative memorable

- Not sure

SEREXP23 Would you say your money was well spent for

the whole experience?

- No

- Yes

- It was alright/ average

SEREXP24 How would this hotel experience influence

your future choice of hotel?

- I would definitely not come back to this hotel

- I would probably not choose this hotel again

- Not sure I am indifferent between this hotel and other hotels

- I would probably choose this hotel again

- I would most likely stay at the same hotel if I visit the area again

4 Data analysis and results

The results were analyzed following a two-step procedure First, we examined the psychometric properties (reliability, convergent validity, and discriminant validity) of the scales following methodological recommendations given by Churchill (1979) and Anderson and Gerbing (1988) And second, we tested the hypotheses of the

conceptual model by means of a structural equation system (SEM)

4.1 Measurement scale validation

Cronbach’s alpha is the most widely used method to measure the internal consistency

of reliability of test Cronbach’s alpha above 0.7 is considered reliable We tested Cronbach’s alpha for every construct Testing Cronbach’s alpha before using EFA to

eliminate the inappropriate items because these items can create the fake constructs when using EFA (Nguyen Dinh Tho & Nguyen Thi Mai Trang, 2008)

The conditions for appropriate item:

- Cronbach's Alpha > 0.6

- Corrected Item-Total Correlation > 0.3

At the first time of testing Cronbach’s alpha, there are 5 items were eliminated: SUBSTA03, SUBSTA06, SUBSTA10, COMSTA15, and SEREXE22 because these items have corrected item-total correlation less than 0.3 After eliminating the

inappropriate items, we tested Cronbach’s alpha the second time, the result showed 24 appropriate items with corrected item-total correlation greater than 0.3 The

Cronbach’s alpha of substantive staging of servicescape is 0.786 Cronbach’s alpha of communicative staging of servicescape is 0.824 Cronbach’s alpha of service

experience evalutaion is 0.862 Cronbach’s alpha of behavioral intentions is 0.853 All the constructs have the appropriate Cronbach’s alpha

Factor analysis is used to uncover the latent structure (dimensions) of a set of variables (Garson, 2006) It reduces attribute space from a larger number of variables

to a smaller number of factors Exploratory factor analysis (EFA) is applied in this section to test the model with KMO and Bartlett’s combined with Promax rotation which are highly recommended for structural equation modeling (SEM) KMO

(Kaiser -Meyer-Olkin) measure of sampling adequacy with KMO from 0.6 to 1 is a good factor analysis, and Bartlett’s test of Sphericity should be significant (Sig < 0.05) for factor analysis to be considered appropriate Moreover, Total Variance

Explained needs to be over 50% and Eigen-value of each factor must above 1 to be

accepted Items that having factor loading less than 0.5 and item that distributes in 2

or more components/factors with difference less than 0.3 will be eliminated (Kaiser,

as cited in Garson, 2006)

In the first rotated round, 24 items were grouped into 4 components with KMO

is 876 and Sig 000 Total variance explained is 56.306% The conditions to run EFA were matched However, SUBSTA08 and COMSTA18 have factor loading less than

0.5, they were eliminated In the second round, 22 items were grouped into 4

components with KMO slightly decreasing to 0.868 and Sig 000 All items have factor loading more than 0.5 Total Variance Explained is 58.167% EFA result was acceptable

4.2 Confirmatory Factor Analysis (CFA)

The measurement model with all four constructs was assessed using Confirmatory Factor Analysis (CFA) with AMOS 22 software The measurement model was

examined for instrument validation using CFA before the analysis of the structural model for testing associations hypothesized in the research model (Lin, 2007) In confirmatory factor analysis (CFA), a finding that indicators have high loadings on the predicted factors indicates convergent validity In the first testing, the item

SEREXP24 was eliminated to increase the GFI from 0.882 to 0.965 and decrease CMIN/df from 2.008 to 1.614 In the former case, the threshold value is 0.6, and in the latter it is recommendable to take a value of at least 0.5 (Bagozzi & Yi, 1988; Hair

et al., 2010) Convergent validity was assessed by verifying that the standardized lambda parameters were significant and above 0.5 (Gerbing & Anderson, 1988;

Steenkamp & van Trijp, 1991) The scales' discriminant validity was established by determining whether the square root measure of the AVE exceeded correlations

between the latent variables In order to create a model fit for the study, the table 3 shows the comparison the CFA result with the threshold value as bellows:

Table 3: Comparison between CFA threshold values and CFA results

Threshold (Hair et al., 2010) CFA result