The Impact of Service Quality on Consumer Loyalty

A Study of “All Needs Supermarket, Takoradi.”

by Dr. David Ackah (Author) Makafui R. Agboyi (Author)

Research Paper (postgraduate) 2013 32 Pages

Economics - International Economic Relations




1.1 Background to the Study
1.2 Statement of the Problem
1.3 Purpose of the Study
1.4 Objectives of the Study
1.5 Research Questions
1.6 Importance of the Study
1.7 Scope of the Study
1.8 Organization of the Study

2.1 Introduction
2.2 Service Quality
2.2.1 Store Image
2.3 Customer Satisfaction
2.4 Customer’s Loyalty
2.4.1 Inter-Relationship among Service Quality, Customer Satisfaction and Customer Loyalty
2.5 Conclusion

3.1 Introduction
3.2 Research Design
3.3 Area of Study
3.4 Population
3.5 Sample Size
3.6 Sampling Technique
3.7 Instrumentation
3.8 Mode of Data Collection
3.9 Method of Data Analysis and Presentation of Results
3.10 Ethical Considerations

4.1. Introduction
4.2 Background of the Respondents
4.3 Reliability of Quality Service
4.3.1 Timely Provision of Service
4.3.2 Dependability
4.3.3 Staff’s Provision of Knowledgeable Information
4.3.4 Consistency in the Delivery of Service
4.4 Responsiveness of Staff
4.4.1 Informing Users of Services
4.4.2 Approachability of Staff
4.4.3 Quick Response
4.4.4 The Supermarket never keeps Customers waiting
4.5 Assurance of Staff
4.5.1 Knowledge to Answer Questions
4.5.2 Ability to Solve Customers’ Problems
4.5.3 Conduciveness of the Supermarket
4.5.4 Courtesy and politeness of staff
4.6 Staff Empathy
4.6.1 Personal Attention
4.6.3 Convenient Opening Hours
4.6.4 Information on All Services Available
4.6.5 Reliance on Knowledge to Meet My Needs
4.7 Tangibles of the Supermarket
4.7.1 Physical Facilities of the Supermarket
4.7.2 Extent of Physical Layout of Equipment
4.7.3 Environmental Conditions
4.7.4 Appearance of Staff
4.8 User Satisfaction
4.9 Customer Loyalty
4.9.1 Proud of Being a Customer
4. 9.2 Desire to Continue as Customers
4.9.3 Recommending the Shop to Others
4.9.4 Possibility of Purchase
4.9.5 Possibility of waiting

5.1 Introduction
5.2 Summary of the Findings
5.2.1 Dimensions of Service Quality
5.2.2 Overall Satisfaction
5.3 Conclusion
5.4 Recommendation
5.4.1 Tailor-Made Service
5.4.2 Implementation of Total Quality Management (TQM) Program
5.4.3 Training of Staff
5.4.4 Environmental Development



The study explores the relationship between service quality and customer satisfaction on customer loyalty with regards to services provided by All Needs Supermarket, located in Takoradi.

To achieve the objective of the study, quantitative method was used for the statistical analysis and convenience sampling for selecting customers. The researcher used the self-administered questionnaire as a method for collecting data from the sample consists of 101customers randomly selected from the population frame.

The results show that both service quality and customer satisfaction significantly affect the level of customer loyalty of the customers of All needs supermarket, Takoradi. It was therefore, recommended that staff of All needs supermarket should pay special attention to their service quality and the factors that drive customer satisfaction.


1.1 Background to the Study

“Business marketers have much to gain from retention marketing. Business customers tend to be fewer and more valuable, meaning as an organization you cannot afford to lose even one customer. But how do you keep your customers active and buying from you” (Stephens, 2010). Basically, customers according to Levitt, 1986 are assets that need to be acquired before they can be managed for profit. Unless you acquire these important assets survival of the organization is meaningless. That is the more reason why efforts are geared towards retaining the consumers of an organization. During the past two decades or so, regulatory, structural and technological factors have significantly changed the business environment throughout the world (Angur et al., 1999). In a milieu which becomes increasingly competitive, service quality as a critical measure of organizational performance continues to compel the attention of service providers for example, banking institutions, and remains at the forefront of services marketing literature and practice (Lasser et al., 2000; Yavas and Yasin, 2001). The interest is largely driven by the realization that higher service quality results in customer’s satisfaction and customer loyalty, greater willingness to recommend to someone else, reduction in complaints and improved customer retention rates (Danaher, 1997; Magi and Julander, 1996; Levesque and McDongall, 1996).

Customers’ behavior in this modern information age is very essential for the acquisition of products of an organization and also the retention of the consumers in the market. Most importantly, organizations go out of business when they lose consumers (customers). Forbes (2011) identifies that given the continued emergence of disruptive marketing technologies, how can companies stay abreast, much less ahead, of how consumers will interact with their brands? In other words, marketers today need to view the customer as being more contemporary , but are caught in hindsight by focusing on what worked in the past, not what is working in the present or will work in the future. According to Singh (2006) customer satisfaction, (which comes from receiving quality service) is very important because, many researchers have shown that customer satisfaction has a positive impact on an organization’s profitability. As a result, the consequences of delivering quality service to customers must be of great concern to every organization.

There is also a positive correlation between service quality, customer satisfaction and customer loyalty. Therefore, service quality, customer satisfaction and customer loyalty are all very important for the success of every organization of which “All needs supermarket” is no exception. All needs supermarket is the largest and the most comprehensive retail shop in Takoradi, Western Region of Ghana dealing in almost every type of merchandised. All needs supermarket, the biggest supermarket in the western Region of Ghana, a name synonymous with quality, convenience and sound business ethnics has come a long way to becoming a leading name to reckon with in good market for quality goods and services in the heart of Takoradi - Ghana.

As the leading ultramodern supermarket located in the heart of the twin-city, All Needs offer variety of local and exotic products for its cherished customers. No wonder All Needs Supermarket has become a household name in the Western part of Ghana and beyond.

Notwithstanding the keen competition, all needs supermarket has been able to keep their heads above the competition due to their outstanding pedigree of excellence in providing customer-oriented services and still willing to improve on quality service which they think could lead to customer loyalty. Organizations must improve the quality of their services in order to survive. The study explores the impact of service quality on customer loyalty and examines how user surveys have been employed in a number of previously published literature (Cullen 2001) using All Needs Supermarket, as a case.

Service oriented organizations including supermarkets, have identified the customer as the most critical voice in assessing service quality. For the assessment to be effectively carried out in All Needs supermarket, it is imperative to investigate users’ perspectives on service quality. On the basis of the above considerations, a compelling case was made for the research to examine the impact of service quality on customer loyalty in All Needs Supermarket, given the fact that no studies had been conducted to provide insight into the effect of service quality on customer loyalty for customers.

1.2 Statement of the Problem

All needs supermarket faces the challenge of attracting and sustaining the interest of its customers to its services. Users (customers) have to be satisfied with the supermarket’s physical environment (tangibles), with the interaction of staff (responsiveness) and the ability of the staff to provide services (reliable) needed by them (customers). Furthermore, users (customers) are affected significantly when staff of the supermarket fails to solve their (customers) needs and problems (Assurance). The mentioned challenges appear to affect the quality of service delivery, consequently affecting the loyalty of customers.

In addition to the above problems, All Needs supermarket environment appears to hinder effective shopping. Thus, customers who wish to engage in further explanation with staff seem not to have the opportunity to do so, thereby creating dissatisfaction of customers. For example, the lighting system and air conditioning seem to be inadequate.

The All needs supermarket staff lack computer skills and are unable to help customers search for information from the system. Due to inadequate staffing, it is difficult to attend to all customers who may visit the supermarket on one – on – one basis. The customer population is so large that it is almost impossible for the staff to give personal attention to each and every customer.

Reichheld and Teal (1996) identified that “creating value for customers builds loyalty and intends build growth, profit and more value”. When an organization implements quality and loyalty practices through its customer service policies, it gains a level of loyalty from the customer that drives and increases the ability to maximize revenue.

There is therefore the need to assess the quality of services at All Needs supermarket so that problems that users face can be addressed and also, to help improve the customer loyalty of All Needs supermarket.

1.3 Purpose of the Study

The purpose of the study is to assess the quality of service and its impact on customer loyalty at All Needs supermarket from the customers’ perspective and to make recommendations for improvement of service quality.

1.4 Objectives of the Study

The study sought to achieve the following specific objectives:

1.4.1 Assess the level of service quality at the All Needs supermarket.

1.4.2 Determine the effects of service quality on customer loyalty.

1.4.3 Make recommendations based on the findings of the study that will help address the

challenges identified by the customers.

1.5 Research Questions

1. What is the level of service quality at All Needs supermarket?

2. What are the impacts of service quality on the loyalty customers of All Needs Supermarket?

3. What factors account for quality of service in retail businesses?

4. How can quality service at All Needs supermarket be improved?

1.6 Importance of the Study

The study would suggest ways to improve service quality and user satisfaction among the customers of All Needs supermarket. The management of All Needs supermarket will be in a better position to identify the shortcomings of the services rendered to the community. Secondly, it will help in the identification of what users perceive and expect from All Needs supermarket to enable them have better access to needed services in the fastest possible time The significance of this study is to provide a reference guide to the retailing (supermarket) industry and the general public, contributing to the existing knowledge about supermarket (retailing) services available in the Ghanaian market. In addition, management will benefit from the outcome of this research, as it would educate management on what could be done to enhance the quality of services and make them effective and efficient towards customers.

Finally, the study would come out with recommendations which when adopted and implemented would help fashion out policies to address the deficiencies and pitfalls in the service delivery which consequently translates to customer loyalty.

1.7 Scope of the Study

The study covered the two main branches of All Needs supermarket, all located at Takoradi in the Western Region of Ghana. The researcher focused on the entire customers of All Needs supermarket who access and use the supermarket. The areas of service quality covered in the study were the SERVQUAL dimensions, namely tangibles, reliability, responsiveness, assurance and empathy in relation to the service encounters and expectations of the customers of All Needs supermarket.

1.8 Organization of the Study

The study was structured into five (5) chapters: Chapter one comprised of the introduction which covered the background of the study, statement of the problem, purpose of the study, objectives, and importance of the study, scope of the study, and organization of the study. Chapter Two focused on literature review. Chapter Three looked at the methodology adopted for the study. This dealt with the research design, selection of cases, selection of subjects which consisted of population, sample size and sampling technique, instrumentation, data analysis and presentation of results and ethical consideration and problems encountered and limitations. Chapter Four comprised the data analysis and discussion of the findings of the study. Chapter Five consisted of the summary, conclusions and recommendations drawn from the findings of the study.


2.1 Introduction

According to Creswell (2009), literature review provides a framework for establishing the importance of the study as well as a benchmark for comparing results with other findings. This chapter reviewed the ideas and argument made by scholars and authors on service quality and the customer loyalty.

2.2 Service Quality

Quality has been defined as fitness for use, or the extent to which a product successfully serves the purposes of consumers (Beverly et al., 2002). Customer service is one of the organizational processes which companies perform considering the growing competition and for attracting entrepreneurial opportunities for increasing profitability and better access to the market and increasing the customer satisfaction and loyalty level (Calif, 1987). According to Goofin and Price (1996) customer service has importance because it ends in increasing product quality, gaining competitive advantage, gaining profitable opportunities, and as a result increasing sales and income. According to Newby and McManus (2000) excellent quality of customer services is based upon not just the knowledge and skills of the individual but also upon the way that the organization as a whole, from top management downwards, pull in the same direction and presents a clear, positive message to customers.

Service quality was defined by Zeithaml (1988) as “the judgment of customers about the overall superiority of a product or service.” Gronroos (1988) posited that perceived quality is considered good when the experienced quality meets the expected quality from the brand. The literature considers perceived service quality as a “core/primary” aspect across customer-based brand equity landmark frameworks (Farquhar, 1989; Keller, 1993; Aaker, 1996; Dyson et al., 1996). It provides customers with a reason to purchase and enhances customer value by equipping the brand with differentiation and prominent positioning among competitor’s brands.

Service quality is considered a multi-attribute construct-the product of the comparison between the customers’ expectations and their perceptions of the company’s actions (Parasuraman et al., 1998; Gronroos, 1994). Perceived service quality has been defined as the consumer’s global attitude or judgment of the overall excellence or superiority of the service. Perceived service quality results from comparisons by consumers of expectations with their perceptions of service delivered by suppliers (Lewis et al., 1994). Customers expectation are beliefs about a service that serve as standards against which service performance is judged (Zeithaml et al., 1993); what customers think a service provider should offer rather than what might be on offer (Parasuraman et al., 1988). Expectations are formed from a variety of sources such as the customer’s personal needs and wishes (Edvardsson et al., 1994).

The SERVQUAL instrument proposed by Parasuraman et al. (1988) posits the computed disconfirmation approach whereby the difference between a customer’s expectation and the actual performance is calculated. This approach has been criticized by several authors for a number of weaknesses. The alternative approach namely SERVPERF, is that measurement of the customer’s perception of the performance of a service which provides adequate assessment for service quality (Bebko, 2000). The increasing support on the measurement of service quality by performance-only measurement (SERVPERF) is witnessed (Cronin et al., 2000).

Several researchers have suggested that the search for universal conceptualization of the service quality construct may be futile (Levist, 1981; Lovetock, 1983). The service quality construct is either industry or context specific (Babakus and Boller, 1992). The measurement of the service quality construct is multidimensional. In its original structure, service quality consists of five dimensions (Parasuraman et al., 1988).

These are:

i. the tangibility aspects of the service
ii. the reliability of the service provider
iii. the assurance provided by the service provider
iv. the responsiveness of the service provider; and
v. the service provider’s empathy with customers

For instance, the included variables to measure the service quality of commercial banks ranges from seventeen to fifty seven variables (Elango and Gudep, 2006; Sharma and Sharma, 2007). However, in the present study, the included service quality variables are as named above.

The perception of customers about quality was predicted to be linked with their loyalty with brand because favorable perception about the brand quality leads to more and more brand loyal customers. That’s why Bolton and Drew (1991) suggested “service quality has significant effects on customer loyalty”. In general, perceived service quality seems to be positively related to customers’ likelihood of remaining a loyal customers and their attitudes toward the service provider i.e. brand loyalty (Anton, Camarero, & Carrero, 2007; Bell, Auh & Smalley, 2005; Aydin & Ozer, 2005). Among others, Jones et al. (2002) found a significant relationship between perceived quality and customer loyalty.

2.2.1 Store Image

Martineau (1958) was the first person who applied image idea in the retail sales domain, and he called the force which can affect the customer’s decision-making as “store personality or image”. He also gave the definition with store personality or image that “the customer defined the store approach not only functional qualities, but also effect by aura of psychological attributes influence”.

Dichter (1985) stressed that image certainly was not referred to the individual characteristic or the quality, but the store overall image in the customer heart. Berman and Evans (1995) defined the store image as the functional and emotional mix. For example, Heijden and Verhagen (2004) in order to develop an appropriate measure for online store image, they relied on the relatively established literature on “traditional” store image, which is defined as the “personality” the store presents to the public or “a complex of meanings and relationships serving to characterize the store to the populace” (Hirschman et. al., 1978).

Furthermore, ‘personality” may be “the complex of a consumer’s perceptions of a store on functional attributes and emotional attributes”(Houston and Nevin, 1981). Consumers perceive store or supermarket on a number of dimension, usually called components or attribute, which collectively make store image, so store image is closely related to the multi-attribute model. Lindquist (1974) defines store images as a “structure of some sort that is tying together the dimensions that are at work” and conceptualizes store images as nine key attribute denominations: merchandise, service, clientele, physical facilities, convenience, promotion, store ambience, institutional factors, and post-transaction satisfaction.

Dickson and Albaum (1977) refined both instrumentations for retail store image and ultimately arrive at the following dimensions: prices, products, store layout and facilities, service and personnel, promotion and “others.” An instrument containing 29 items (also semantic differentials) was developed and analyzed on reliability and validity. In predicting retail trade, Nevin and Houston (1980) have generated three dimensional images of the retail stores with fourteen variables: assortment, facilities, and market posture. These attributes were organized by the customer, and embodied in their consciousness system to help them on how to decide the store policy and operation expectation.

Chen (2006) discussed the relationship between online store image and purchasing intention, divided store image into six dimensions: web skill ability, popularity, product value, convenience, security and after-sale service. Synthesize above literature, we used three dimensions: popularity, product value and convenience to measure online store image.

2.3 Customer Satisfaction

Several studies seem to conclude that satisfaction is an affective construct rather than a cognitive construct (Oliver, 1997). Cronin et al., (2000) assessed service satisfaction using items that include interest, enjoyment, surprise, anger, wise choice, and doing the right thing. Rust and Oliver (1994) defined satisfaction as the “customer’s fulfillment response” which is an evaluation as well as an emotion-based response to a service. In the present study, the more popular Westbrook and Oliver’s (1991) four emotion-laden items have been used. Customer satisfaction has been defined in various ways, but the conceptualization, which appears to have achieved the widest acceptance, is that satisfaction is a post-choice evaluative judgment of a specific transaction (Bastos and Gallego, 2008). Customer satisfaction is the result of a customer’s perception of the value received in a transaction or relationship – where value equals perceived service quality relative to price and customer acquisition costs (Hallowell, 1996).



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impact service quality consumer loyalty study needs supermarket takoradi



Title: The Impact of Service Quality on Consumer Loyalty