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3. Literature Review
Over the past decades, many marketing researchers have proposed numerous empirical studies which explain what motivates customer satisfaction. There are many factors can help organization to increase customer satisfaction, however, this review will only focus on four major variables which are presented at Taiwan Customer Satisfaction Index (TCSI); these variables are brand image, customer expectations, perceived quality and perceived value.
After these antecedents, customer satisfaction and customer loyalty will be presented.
3.1. Brand Image
In the service marketing literatures, brand image has been defined as an important factor in the overall evaluation of the service and company (Grönroos 1984; Gummesson and Grönroos 1988; Bitner 1991; Andreassen and Lindestad 1997); the construct of brand image was first introduced in the Norwegian Customer Satisfaction Barometer (NCSB) model (Andreassen &
Lindestad, 1998a; Andreassen & Lindestad, 1998b). Keller (1993) stated that brand image is the perceptions of an organization reflected in the associations held in consumer memory; and Assael (1998) proposed that brand images are developed when customers have experienced the quality of products or services companies provide, or based on friends’ opinions.
Brand image is an important component of customer satisfaction model (Martensen et al., 2000); and some market researches proved that brand image has a direct effect on value (e.g., Kristensen et al., 1999; Martensen et al., 2000). According to Porter and Claycomb (1997), a positive brand image can encourage customers to re-purchase from the companies; and other researchers Lee et al (2005) proposed the similar theory that brand image has a strong impact on customers’ buying behaviors. Ahmend (1991) found out that a strong and clear brand
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image can increase consumer confidence and convince consumers to purchase, and Simon (2011) claimed that the stronger the brand’s position is in the consumers’ mind, the more essential source of differentiation it becomes, and this is a fundamental competitive advantage.
In addition, Martenson (2007) stated that customers to a favorable brand image might affect perception of store brand.
For smartphone users, Knapman (2012) believes consumers are strongly influenced by brand when it comes to choosing Smartphone; because consumers usually go for a brand which they are familiar with, it can be a brand has high exposure and widely recognized among the target audiences, it can be a brand has special features than other competitors, or it can be a brand is well-known for its competitive pricing.
3.2. Customer Expectation
Globalization has changed today’s business environment; the market competitions has become intensively and increasingly from both domestic and foreign smartphone producers which result in higher expectations from the customers. Customers’ expectation is what the customers wish to receive from the service; understanding and accommodating customers’
high expectation requires constant progress in service quality from smartphone producers to attract their customers to stay loyal.
Marketing researchers Zeithaml et al. (2006) proposed customer expectations are beliefs about a service delivery that serve as standard against which performance is done; customer expectation is the results of prior experience with the company’s products (Türkyilmaz et al 2007), it involves many factors and complex considerations, including their own pre-purchase beliefs, previous experience with other companies, and learning from advertisement,
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customers’ psychological condition at the time of service delivery, customer background and values, the images of the purchased product, and other people’s opinions. Different customers have different expectation about the same product; and the different expectations can be influenced by pre-purchase beliefs, individual needs, customers’ own experiences, word of mouth communications and other personal attitudes.
Customers’ expectations are important driver in the service quality formation process; and consumers’ expectations have been an important topic of study in many other fields such as economic psychology (Oliver, 1997), consumer economics (Muth, 1961; Lovell, 1986), retailing (Swan and Trawick, 1980), pricing (Della and Monroe, 1974), and satisfaction (Fornell et al, 1996). The fulfillment of a consumer’s expectation is a key factor in the consumer’s satisfaction, and may indirectly influence the consumer’s intention to repurchase from the same seller (Kim, Ferrin and Rao, 2003).
Lin and Wu (2011) found out that customers who are not satisfied with the received services would not be expected to have long run relationships with the company. For developing customer satisfaction, reliability in the providing of services and commitment to service relationships a company must attempt to increase customers’ future expectations.
Organizations that listen and exceed customers’ expectations will succeed and maximize sales and market share; ultimately, it will be rewarded with customer loyalty and profitability.
To stay competitive in the smartphone industry, producers must constantly strive to improve their products and quality to meet with customers’ expectations. Researchers (Hines, Silvi and Bartolini, 2002) suggested that companies should integrate customer expectations into their supply chain designs. In other words, management should be able to understand how their
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customers perceive them and whether their performance meets these expectations (Hill, Brierley and MacDougall, 2003).
3.3. Customer Perceived Quality
In recent years, perceived quality has been the subject of considerable interest by both practitioners and researchers, mainly in services marketing (Cronin and Taylor, 1992;
Parasuraman, Zeithaml and Berry 1996). Marketing researchers Aaker (1991) and Zeithaml (1988) proposed that perceived quality is not the actual quality of the brands or products;
rather, it is the consumers’ judgment about an entity’s or a service’s overall excellence or superiority; and perception of brand quality is determined by individual customers (Cole, Robert and Flynn, 2009).
Aaker (1991) pointed out that perceived quality has direct impacts on the consumers’
purchase decision and brand loyalty, specifically when a consumer is not able to research the specific product in depth. High estimation of perceived quality does not only justify to the consumers a premium price for the brand, but it can also be used for brand extension, as the high quality the brand is known for in one market can be extended to a different marketplace.
Nowadays, the concept of perceived product quality has become an important marketing tool for companies to differentiate themselves from competitors; more and more academic scholars and marketing practitioner have already emphasized the importance of perceived product quality because it is the consumers’ perception of overall components of products and good perceived product quality may result in customers’ satisfactions. According to Zeithaml (1988), the perceived quality is (1) different from objective or actual quality, (2) a higher level abstraction rather that a specific attribute of a product, (3) a global assessment that in some
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cases resembles attitude, and (4) a judgment usually made within a consumer’s evoked set.
Perceived quality can affect a willingness to buy; and the price that customers will pay (Cole, Robert and Flynn, 2009). Some researchers stated the concept of perceived product quality not only affects the purchase intention of the consumer but also affects the market share, brand profitability, brand power, and brand equity (Garvin, 1984; Jacobson and Aaker, 1987;
Aaker and Jacobson, 1994; Stobart, 1994). Chaudhuri (2002) claimed the perceived quality may lead to consumer satisfaction, which is determined by perceived performance and expectation. To understand the customers’ perception about the quality of their service, companies must measure customers’ satisfaction with their products and services; and deliver quality service is considered an essential strategy for success and survival in today's competitive environment (Zeithaml, and Berry 1985; Dawkins and Reichheld 1990;
Parasuraman, Reichheld and Sasser 1990; Zeithaml, Parasuraman, and Berry 1990).
3.4. Perceived Value
One of the most cited definitions of perceived value is presented by Zeithaml (1988); he defined perceived value as “the consumer’s overall assessment of the utility of a product based on what is received and what is given”; the concept of perceived value has gained its importance in the recent year because perceived value not only effects on consumer purchasing behavior but also provide important strategic marketing plans for the success of companies.
More and more industrial marketing researchers had studied perceived value because it is the essential result of marketing activities (Metcalf, Frear and Krishman, 1992; Anderson, Jain and Chintagunta, 1993; Parasuraman, 1997; Ravald and Grönross, 1996; Lapierre, 2000;
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Walter, Ritter and Germünden, 2001; Ulaga and Chacour, 2001, Eggert and Ulaga, 2002; Flint, Woodruff and Gardial, 2002; Ulaga and Eggert, 2003; Woodall, 2003; Anderson and Narus, 2004; Leonidou, 2004; Lindgreen and Wynstra, 2005; Ulaga and Eggert, 2006; Eggert, Ulaga and Schultz, 2006). Researchers (Dodds, Monroe, and Grewal, 1991; Cronin, Brady, Brand, Hightower, and Shemwell, 1997; Grewal, Monroe, and Krishnan, 1998; Cronin, Brady, &
Hulf, 2000; Oh, 2003) argued that perceived value is the price paid which related to the level of product quality; and it is identified as a construct configured by two major approaches; one is benefits received (economic, social and relationship) and the other is sacrifices made (price, time, effort, risk and convenience) by the customers.
Recently, a new approach based on the conception of perceived value as a multidimensional construct is supported by some marketing researchers (De Ruyter, Wetzels, Lemmink, and Mattson, 1997; Woodruff, 1997; DeRuyter, Wetzels, and Bloemer, 1998; Sinha and DeSarbo, 1998; Rust, Zeithaml, and Lemmon, 2000; Sweeney and Soutar, 2001); this new approach enables us to overcome some issues from the traditional approach to perceived value, particularly its excessive concentration on economic utility. Also, this new approach echoes the new theoretical developments in the area of consumer behavior, referring to the role played by feelings in buying and consumption habits.
Holbrook (1994) stated that customer value is the fundamental basis for all marketing activity;
perceived value is a major tool to help the service provider to gain a better competitive position in the market (Naumann 1995; Woodruff 1997; Parasuraman 1997; Stahl, Barnes, Gardial, Parr and Woodruff 1999; Huber, Herrmann and Morgan 2001); and Fonell et al.
(1996) pointed out that as the impact of value increased relation to quality, price is a more important determinant of satisfaction. To sum up, customer perceived value is an important
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factor used to predict customers’ behavioral intentions and preferences; and perceived value is considered to be a source of gaining competitive advantages.
3.5. Customer Satisfaction
In the past decades, many countries had already developed their national indicators for examining consumers’ satisfaction such as The Swedish Customer Satisfaction Barometer (SCSB) in 1989, the American Customer Satisfaction Index (ACSI) in 1994, the Norwegian Customer Satisfaction Barometer (NCSB) in 1996, the Swiss Customer Satisfaction Index (SWICS) in 1998, the ECSI in 2000; and later the KCSI, CCSI, TCSI, etc. These national indicators allow companies to understand customers’ evaluations and satisfactions about the quality of the products and services they supply. Customer satisfaction plays an important role and is often discussed in marketing literatures; customer satisfaction is crucial for all business organizations in today’s competitive business environment, because it can have a positive impact on customer’s retention, loyalty and intention to repurchase. Customer satisfaction is defined as an evaluation of the perceived discrepancy between prior expectations and the actual performance of the product (Tse and Wilton, 1988, Oliver 1999); satisfaction can also be described as a fulfillment response of service and an attitude change as a result of the consumption.
In previous studies, marketing researchers Anderson, Fornell and Mazvancheryl (2004) stated that it is costly to generate satisfied and loyal customers but that would prove profitable in a long run for a firm. The similar study was done by Eshghi, Haughton and Topi (2007); and they found out that satisfied customers can help the brands to build long and profitable relationships with their customers. In addition, some marketing scholars proved that satisfied customers are more likely to remain their loyalty by committing to an organization which
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eventually leads to profits (Reichheld and Sasser, 1990; Heskett, Jones, Loveman, Saaser and Schlesinger, 1994; Heskett, Sasser and Schlesiner, 1997).
According to Deng et al. (2009), the ability of a service provider to create high degree of satisfaction is crucial for product differentiation and developing strong relationship with customers. Customers’ satisfaction with products and services of a company is considered as most important factor leading toward competitiveness and success (Hennig-Thurau and Klee, 1997). Kotler & Keller (2006) proposed that customer satisfaction does not only prevent customers from complaining, but more importantly it meets and even exceeds customers’
expectation. In addition, many empirical studies have shown that customer satisfaction helps companies to increase future revenues (Bolton, 1998; Fornell, 1992), reduces future transactions costs (Reichheld and Sasser, 1990) and decreases price elasticity (Anderson,1996). Therefore, it is important for organizations to understand the key factors drive customers’ satisfaction and increase the customer loyalty of company product or service.
Oliver (1997) stated customer satisfaction can be described as a judgment that a product or service provides pleasurable consumption; therefore, smartphone producers shall measure customers’ satisfaction with their products and services if they would like to understand the customers’ perception about the quality of their products and service. Another great motivation for smartphone producers to focus on customers’ satisfaction is that higher customer satisfaction can lead to a stronger competitive position resulting in higher market share and profit (Fornell, 1992). In this study, customer satisfaction is defined as “the process of customer overall subjective evaluation of smartphone products and service delivered by smartphone producers against his/her expectation or desires over a time period”.
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3.6. Customer Loyalty
Customer loyalty is defined as a behavioral measure; it is customers’ willingness to maintain their relations with a particular organization, service or product. (Kim and Yoon, 2004). In the consumer marketing community, customer loyalty has been considered as an important goal for companies (Reichheld and Schefter, 2000). Service organizations strive to maintain a superior quality of service in an effort to gain customer loyalty (Parasuraman, Zeithaml and Berry, 1996) because customer loyalty is one of the key drivers of customer retention process which will help a company sustains its long-term success. Therefore, building and maintaining customer loyalty has been an important marketing theory and practice because the competitive advantages can be offered to the companies (Gommans et al., 2001).
Today, companies are seeking solutions to increase customer loyalty of their organization because loyal customers make more purchase than non-loyal customers and they tend to have higher customer retention (Reichheld and Sasser, 1990). In addition to higher customer retention and higher spending, Zeithmal (2000) argued that loyal customers are more likely to help organizations to gain new customers by strong word-of-mouth and business referral.
Aaker (1997) also pointed out that loyal customers can help companies to have higher market share and reduce the operating cost; and loyal customers are less price sensitive which brings more sales for the company compared to non-loyal customers because loyal customers are willing to purchase frequently, try different products or services, and bring new customers to the companies (Reichheld and Sasser, 1990).
In 1990, Reichheld and Sasser found that a 5% increase in customer retention increases a firm's profits at a range between 25% and 85%; and Raphel and Raphel (1995) pointed out that the cost of creating a new customer is 5-9 times greater than the cost of maintaining an
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old customer. The similar study was examined by Frederick (2001) and he proved that the longer customers stay in relationship with the company, the more value the company generates; the customer profitability rate over the life of a retained customer tends to increase annually by up to 20 %. Researchers Gupta et al. (2004) claimed that a 1% improvement in the customer retention rate improves firm value by 5%.
Many other researchers had emphasized the benefits of customer retention (Bendapudi and Berry, 1997; Johnson et al., 2001; Libai et al., 2002; Johnson and Selnes, 2004); and Ehigie (2006) proposed that excellence in service quality is a key to achieve customer loyalty, which is the primary goal of business organizations, due to the advantages of customer retention.
Berger and Nasr (1998) stated that the period of time a relationship maintained is one of fundamental factors determining the value that the customers provide to the firm. To reach customer retention, companies should manage satisfaction and consequences of customer loyalty (Naranyandas, 1998). Therefore, the most important task and challenge for all the smartphone producers now is customer retention and loyalty.
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