The Importance of FLE Competencies in Service Industry

Service exchange was delivered or provided through frontline-employee (FLE) to consumer. During the transaction, FLEs likely convinced customer’s behavior and thinking by expert suggestion, more deeply, the satisfaction of customer’s needs and expectation could be promoted through the intangibility service.

FLE is a position which has to face customer, and the job could be in everywhere such as inside sales associates, delivery personal, call center personnel and personal interactions at the vanguard of service activities. So their behavior has strong dedication for influencing customers’ satisfaction and improving customer loyalty. Whereas, in dissimilar level contacting, the consumer’s demands and FLE competencies expected would not be same (Jackson Jr. & Sirianni, 2009; Pimpakorn & Patterson, 2010; Li, Yang,

& Wu, 2009).

After service got everyone attention, firms slowly started investing FLEs training and spent a money to keep eligible employee. This is especially important for financing service organization like banks, investment entities and insurance companies which are high-involving and built on trust between frontline employees and customers (Jackson Jr.

& Sirianni, 2009). As Nolan et al.,2012 indicated that finaical industry is a modern service which is a role of international bridge.

For this reason, the employee’s ability could be one of careers considered condition.

The condition for service employee involves skill inventories, which are mechanized listing of employee’s interests, talents and experience (Jackson Jr. & Sirianni, 2009). On the other hand, the skill of interaction between FLE and customer could be used in inter-organization which means that it would be the other valuable contribution in company.

As Cardy and Selvarajan (2006) emphasized that FLE competencies could be a competitive advantage because the core competency is a combination of resources and capabilities, it is difficult to imitate and difficult to substitute.

2.1.3 Definition of FLE Competence

As the above, service employees should have some special characteristic. In this study, some scholars’ definition of FLE competence was adopted.

Since 1980s, competence has been seen as a unique bundle of resources, and the characters of competence were included knowledge, skill, ability or characteristic associated with high performance demanding tasks, such as problem solving, analytical

thinking or leadership (Mirabile, 1997). In addition, the FLE competencies were not only involved the professional skills but also the emotional intelligence (EI) (Kidwell, Hardesty, Murtha, & Sheng, 2011). Besides, “the competence perspective has brought both significant theoretical extensions and important practical benefits to contemporary management thinking” said by Sanchez (2004, p. 514) and “competence is the ability to sustain the coordinated deployment of assets in ways that help a firm”.

Afterward, Winsted (2000 a, b) pointed out three dimensions which were specific behaviors of leading satisfied customers displayed by service personnel. The element of first dimension includes empathy, assurance, and responsiveness; the element of second dimension includes civility, adequate service, protection against dissatisfaction, and avoiding acts like being arrogant and getting annoyed with or ignoring customers; the element of final dimension includes congeniality, related to behaviors such as smiling and being cheerful and enthusiastic.

Rapidly, the conception of competence was tending to organization-oriented and characteristic-oriented which consisted of skills, capabilities, knowledge, learning, coordination, organization and relationship (Sanchez, 2004). In addition, the processes of competence have been building and leveraging to three hierarchies (Hasin, Seeluangsawat, & Shareef, 2001; Cardy & Selvarajan, 2006): Assets (including tangible or intangible which the firm can use in its processes of creating), Capabilities (which means repeatable patterns of action in the use of assets to create) and Skills (special forms of capability). Moreover, the definition of competence embodies five elements of diligence, information communication, inducements, empathy, and sportsmanship (Ahearne, Jelinek, & Jones, 2007), called Salesperson Service Behaviors (SSBs). Also Li,

et al. (2009) divided the competence into three elements by combining different views with the concept of service industry from various researchers: knowledge and technical skills, social skills and service attitude.

In recently research, the service competencies of FLEs in the service industry were defined as they carried out their respective tasks in an attempt to meet customers’ needs, and thus resulting in overall job performance (Wu & Hsiung, 2012). As the Table 2 shows, the service competencies of FLEs included two dimensions: relation-oriented competencies and task-oriented competencies. Relation-oriented competencies were defined as the interactive communication and social skills required in the service industry for the FLEs to carry out their tasks, such as meeting customer needs, thus impacting overall job performance. Task-oriented competencies were defined as the professional knowledge and analytical skills required in the service industry for FLEs to carry out their tasks as related to meeting the needs of the customer, thus impacting overall job performance. Therefore, in this study, element of the FLE competencies will tend to follow Wu and Hsiung (2012) study.

Table 2. Definition and description of two dimensional FLEs’ service competence

Two Dimensional FLEs’

Service Competency Definition Description

Relation-oriented

Source: Wu and Hsiung study (2012).

2.1.4 The Linking Between FLE and Customer Loyalty

FLE is very important in service sector because they can indirectly affect customer loyalty (Yee, Yeung, & Cheng, 2011). In the other way, “salespeople has unique opportunities to translate customers’ desired value back into their firms as well as understand and influence how the value that has been co-created can be fairly

appropriated in the form of revenue and other strategic benefits” said by Blocker et al.,(2012, p. 150). Therefore, it is necessary that customer service competencies for FLEs as they need to convey high value service and quality. Schlesinger and Heskett (1991) indicated that capable workers provided better service and their consumers were likely to be more satisfied with their performance, return often and even purchase more.

Likewise, Peterson and Lucas (2001) stated that the behaviors of front-line service employee have a positive association with customer-oriented behavior.

In business marketing, greater emphasis has been placed on creating customer value as a path for building a highly satisfied and loyal customer base, in addition, “loyalty reflects a buyer’s emotional or psychological commitment to a provider or other business entity. Behavioral loyalty captures a buyer’s intention to repurchase or to continue a business relationship” adopted by Blocker et al. (2012, p. 17).

As mentioned above, this study expects that FLEs with qualified service competencies can perform high service quality and meet consumer needs while coping with their issues. Based on all of the above, the following hypotheses were proposed:

H1a: FLE relation-oriented competencies are positively associated with customer loyalty.

H1b: FLE task-oriented competencies are positively associated with customer loyalty.

2.2 Relationship Quality

2.3.1. Definition of Relationship Quality

Previously, the buy-seller relationship was basic on satisfying consumer demands; but

nowadays, keeping customers can be more power strategy than getting a new customer because it is normally less expensive to make a satisfied existing customer buy more compared to what it costs to get a new customer (Gronroos, 1995; Reichheld, 1993;

Reichheld et al., 2000). And the new element of relationship involved the buyer’s trust in the salesperson, seller’s ethical orientation, and the seller’s expertise (Bejou, Wray, &

Ingram, 1996); meanwhile, the customer satisfaction leaped in an essential station. Then researchers started call that kind of situation as relationship quality (Crosby, Evans, &

Cowles, 1990; Berry, 1995)

Relationship quality could create long-term service sales relationships by continuing interaction of in fact that seller could on go to understand customer’s needs and to spread new business. Likewise, Dorsch et al. (1998) considered that the relationship quality is a higher-order construct. Also relationship quality provides knowledge of understanding the customer’s requirement and needs (Berry, 1995).

More specifically, there are many dimension of relationship quality, including trust, commitment, satisfaction, communication, affective conflict, selling orientation, opportunism, selling orientation, economic benefits, customization benefits, mutual goals, closeness, ethical profile, and equity (Roberts, Varki, & Brodie, 2003; Athanasopoulou, 2009; Bejou, Wray, & Ingram, 1996).

However, with a view to Crosby et al. (1990, p. 76) “relationship quality contributes to a lasting bond by offering assurance that the salesperson will continue to meet the customer's expectations (satisfaction), and not knowingly distort information or otherwise subvert the customer's interests (trust)”. Undeniable, consumers will tend to

their favor store then dissatisfied store because of emotion influenced (Dorsch, Swanson,

& Kelley, 1998)

Thus, although existing literatures have different opinions about which dimensions make up relationship quality, this study is tending to see relationship quality as two dimension construct consisting of customer satisfaction and trust (Berry, 1995; Crosby, Evans, & Cowles, 1990).

2.3.2. The Related Relationship Quality Research

In effective relationship marketing, the benefit of customer–to–employee relationships is the key ingredients effecting customer satisfaction in a social exchange relationship (Berry, 1995; Dwyer, Schurr, & Oh, 1987), and customers always customer always expects to getting more and more from salesperson. Especially in a pure service company, product and service are inseparable (Fournier, Dobscha, & Mick, 1998; Sheth &

Parvatiyar, 1995)

Relationship quality will depend on the salesperson’s attractiveness and competence (Crosby, Evans, & Cowles, 1990; Sheth & Parvatiyar, 1995). Kim and Cha (2002) stated that the relationship quality is not only positively correlated with customer orientation, relational orientation and service providers’ attributes, but is also directly influencing shares of purchases and relationship continuity. Therefore, service provider should be equipped with expertise, experience and professional appearance to enhance customers’ trust and satisfaction. .

Bejou et al. (1996) study found that relationship quality has a significant effect on

future salesperson-customer interactions; expertise has a significant effect on relationship quality, and future sales opportunities would be greater due to the quality of relationship established between a customer and a salesperson.

However, even firms understood that building relationship quality is a worth strategy, but considered of other variable, maximum firms could not invest in building relationship in any condition (Adjei & Clark, 2010). The strategy may not be beneficial without identifying conditions under which relationship marketing is efficient.

Therefore, it was expected that FLE service competencies will increase the relationship quality, which in turn will increase the customer loyalty, and evidence the value of FLE in practical. Thus, hypotheses were proposed as follows:

H2a: FLE relation-oriented competencies are positively associated with trust relationship quality.

H2b: FLE task-oriented competencies are positively associated with trust relationship quality.

H2c: FLE relation-oriented competencies are positively associated with satisfaction relationship quality.

H2d: FLE task-oriented competencies are positively associated with satisfaction relationship quality.

2.3 Customer Loyalty

Obviously, the cases of in fact that loyal customer repurchase product in same brand occurs in everywhere. They rarely consider other brands and barely seek more

brand-related information (Newman & Werber, 1973). And the loyalty has been cogitated that psychological influenced behavioral repetitive purchase (Jacoby & Chestnut, 1978).

Jones (1997) indicated the three aspects definition in customer loyalty, such as retention, business repetition and referral. Also, Oliver (1997) mentioned that loyalty is frequently desired to repurchase or re-patronize product/service, thus, repetitive same-brand or same same-brand-set purchasing.

However, researchers tended to advocate their own argument and separated customer loyalty into different measuring approaches, such as attitudinal measurement, behavioral measurement and composite measurements (Vesel & Zabkar, 2009; Chaudhuri

& Holbrook, 2001; Zeithaml V. A., 2000; Dick & Basu, 1994; Oh, 1995). On the attitudinal side, customer loyalty has not only been explained by several psychological researchers as a specific desire to have frequent relationship with service provider, besides, it can be used to understand the cognitive features of purchasing motivation and future action (Czepiel & Gilmore, 1987). On the behavioral side, loyalty has also been defined by some behavioral researchers as repetitive patronage, which means that customers repurchase same product or service when they have similar needing (Vesel &

Zabkar, 2009; Bowen & Chen, 2001; Neal, 1999). Moreover, many researches used both attitudinal and behavioral perspectives to be the commonly-used-identifying measures which mean composite measurement (Day, 1969; Yang & Peterson, 2004; Oliver, 1999;

Vesel & Zabkar, 2009; Bowen & Chen, 2001; Kumar & Shah, 2004; Koo, 2003; Bodet, 2008; Kim, Park, & Jeong, 2004). Thus, this study was tending to use the composite measurement to measure customer loyalty.

Furthered, customer loyalty has two meanings: long-term and short-term loyalty.

Long-term loyalty supporters do not change their own favorite service provider easily, while short-term loyalty supporters will change their mind frequently (Liu, Guo, & Lee, 2011; Jones & Sasser, 1995). Yau et al. (2000) stated that loyalty program’s purpose is to foster long-term relationships with customers so as to enhance repurchase (Krishnamurthi

& Raj, 1991).

Based on the above, this study adopted the concept that customer loyalty is both of attitudinal and behavioral perspective and long-term relationship.

2.2.1. The Linking Between Customer Loyalty and Relationship Quality

For relationship durable, buy-seller has to build up in trust and satisfaction situation (Bejou, Wray, & Ingram, 1996). And the customer loyalty would be effect on consumer expected which was scale by participation (Peterson, 1995). Certainly, customer satisfaction is liked with attitudinal loyalty and repurchasing behavior, which means that satisfied customers tend to have a higher usage level of a service than those who are not satisfied (Bodet, 2008).

Therefore, enhancing customer loyalty should through raising customer satisfaction (Yang & Peterson, 2004), besides, they are interaction relationship because of included psychological and social relationship that manifest itself as care, trust, intimacy and communication (Kim, Park, & Jeong, 2004). In addition, the relationship between relationship quality (i.e., satisfaction and trust) and behavioral loyalty is positive (Adjei &

Clark, 2010; Wulf, Odekerken-Schroder, & Lacobucci, 2001). Likewise, researchers found out that the satisfaction and trust in relationship quality are significant because

customers trust the service provider, so they have direct relation (Dorsch, Swanson, &

Kelley, 1998; Liu, Guo, & Lee, 2011; Rauyruen & Miller, 2007; Deng, Lu, Wei, &

Zhang, 2010).

Based on all of the above, the following hypotheses were proposed:

H3a: Trust relationship quality is positively associated with customer loyalty.

H3b: Satisfaction relationship quality is positively associated with customer loyalty.

Based on literature review above, this study proposed a model integrating FLE competencies, relationship quality, and customer loyalty. The proposed model is presented in Figure 2 showing the effect of FLE competencies on relationship quality which in turn influences customer loyalty.

Figure 2. The framework

3. Methodology

The evaluation measurements used were designed on the basis of the literature review and through group discussion with heads of the organization. The measures used in this study come from well-established instruments in different fields. Scale items for assessing key constructs, such as FLE competencies, relationship quality and customer loyalty were adapted from prior studies’ validated measures. Two types of control variables were used in this study. The first type was usage—usage experience and the second type was demographic such as personal information including age, education and gender.

3.1. Measure of the Constructs

The study separated three dimensions when evaluating the process of consumer behavior:

1) FLEs competencies which used service competency scale measurement 2) customer loyalty which used customer loyalty scale measurement 3) relationship which used customer loyalty measurement.

The service competency scale: This scale developed by Wu and Hsiung (2012) was used to measure the required competencies of FLEs in the service industry as they carried out their respective tasks in an attempt to meet customers’ needs, and thus resulting in overall job performance. This scale includes two dimensions: relation-oriented competencies (4 items) and task-oriented competencies (4 items) as shown in Appendix I.

Each item was rated using a 5-point Likert-type scale with anchors of 1: strongly disagree and 5: strongly agree.

Customer loyalty scale: It was used to measure customer loyalty to a customer’s feeling of attachment to the service shop. It is based on a 7-point Likert scale with 1:

strongly disagree and 7: strongly agree (Zeithaml, Berry, & Parasuraman, 1996).

The relationship quality scale: This scale was used to measure the health and future wellbeing of long-term service sales relationships. It features a 7-point Likert scale with 1: strongly disagree and 7: strongly agree (Crosby, Evans, & Cowles, 1990).

The total items in this study are 26 including 8 for FLE competencies, 5 for customer loyalty, and 13 for relationship quality (4 for trust and 9 for satisfaction);

besides, author united the measure scale by the 5-point Likert scale which is 1: strongly disagree to 5: strongly agree.

3.2. Instrument

In the recent years, researchers tended to use the evolution of structural equation modeling (SEM) methods to statistical development in the area of social sciences. So, the research model has been tested using partial least squares (PLS) path modeling, also referred to as PLS-SEM. The main character of PLS is its primary objective the minimization of error (or, equivalently, the maximization of variance explained) in all dependent constructs and that objective can be determined by examining the R² values for the dependent constructs in any particular PLS model accomplished. In addition, there are three advantages of using PLS: (1) assessing the reliability and validity of measures;

(2) determining the appropriate nature of the relationships between measures and constructs; and (3) interpreting path coefficients, determining model adequacy, and selecting a final model from the available set of alternatives (Hulland, 1999).

3.3. Sampling and Respondent Profit

Convenience sampling (called reliance on available subjects) method was used in this study in Taiwan. There were two reason of selected insurance industry as sample. Frist, insurance industry is one of most effective modern services activities (Nolan, Park, &

Estrada, 2012). Second, insurance industry is under the high-involving and customized service type (Cronin & Taylor, 1992).

The FLE competencies in the insurance industry refer to cashier and insurance salesmen who need professional service and emotional service (Wu & Hsiung, 2012). In addition, one of the primary functions performed by life insurance FLE is service customization, and customer is usually recurring interaction with same FLE. Moreover, insurance is a modern service industry (Nolan et al.,2012) and insurance company tends to train their saleperson with high communication skill and relaitonship builded.

Therefore, this research used insurance industry as an example for high customer involvement service industry. Participants who had experience of contacted with insurance agents in Taiwan in past three months (including brought insurance or intending to buy insurance).

4. Data Analysis and Results

4.1. Data Collection

A self-administrated questionnaire was designed to test the effect of that FLE competencies influencing customer loyalty and involving relationship quality as an indirect. The questionnaires were first checked by pilot test. A total of 350 questionnaires

were distributed and 255 questionnaires were returned, including 47.1% male and 51.4%

female. The adequacy of this sample size for the analysis was discussed. And the missing value includes 1.6% for gender, as the Table 3 shows. The average age of respondent is over 30 year-old, 63.5% respondents are over 30 year-old which closes with the conception of Crosby et al. (1990) that participators who were over 24 year-old have more consumption power and higher demand for insurance.

Table 3. Demography of respondents

Demography of respondents Frequency Percentage

Gender

Male 120 47.1

Female 131 51.4

Total 251 98.4

Missing System 4 1.6

Total 255 100

Age

under 30 year-old (including) 93 36.5

31-40 year-old 65 25.5

41-50 year-old 52 20.4

51-60 year-old 30 11.8

over 61 year-old (including) 15 5.9

Total 255 100

Education

Junior high school degree or

lower 13 5.1

High school degree 72 28.2

College degree 51 20.0

Undergraduate degree 87 34.1

Graduate degree or higher 31 12.2

Total 254 99.6

Missing System 1 4

Total 255 100

4.2. Statistical Analysis

Convergent Validity and Reliability Analysis: To assess construct reliability, composite reliability (which can be interpreted similarly to Cronbach’s alpha) and average variance extracted (AVE) scores were adopted as the internal consistency indicators here. The composite reliability coefficients of each construct were between 0.76 and 0.90 which exceeded the recommended level of 0.7 (Wertz, Linn, & J¨oreskog, 1974), and the AVE for each measure should exceed 0.5 (Hair et al., 1995). As Table 4 shows, all composite reliability coefficients in this study were above 0.8 and all AVE in this study were above 0.5. As mentioned above, the reliability of each variable was dependable. In addition, the result of compared the square root of the AVE score for each construct to its correlations with the other latent constructs (Chin, 1998) to ensure that the square root of AVE

Convergent Validity and Reliability Analysis: To assess construct reliability, composite reliability (which can be interpreted similarly to Cronbach’s alpha) and average variance extracted (AVE) scores were adopted as the internal consistency indicators here. The composite reliability coefficients of each construct were between 0.76 and 0.90 which exceeded the recommended level of 0.7 (Wertz, Linn, & J¨oreskog, 1974), and the AVE for each measure should exceed 0.5 (Hair et al., 1995). As Table 4 shows, all composite reliability coefficients in this study were above 0.8 and all AVE in this study were above 0.5. As mentioned above, the reliability of each variable was dependable. In addition, the result of compared the square root of the AVE score for each construct to its correlations with the other latent constructs (Chin, 1998) to ensure that the square root of AVE