CUSTOMER SATISFACTION IN AUTOMOBILE INDUSTRY Investigate the impacts of product quality, service quality and price on customer satisfaction.

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Acknowledgements

                                           Contents

Abstract.......................................................................................................         6

1.0         Chapter 1: Introduction...................................................................         7

1.1         A brief description of the topic............................................7

           1.2      Overview some previous studies……………………………7

           1.3      Research Aim…………………………………………………...8

           1.4      Research Objective…………………………………………….8

2.0     Chapter 2: Literature Review………………………………………….9

           2.1       Introduction……………………………………………………..9

           2.2       Customer Satisfaction………………………………………...9

           2.3       Product quality and Customer Satisfaction……………….10

           2.4       Service quality and Customer Satisfaction………………..15

           2.5        Price and Customer Satisfaction……………………………17

           2.6        Chapter Conclusion……………………………………………19

3.0     Chapter 3: Research Methodology…………………………………….20

           3.1         Introduction……………………………………………………. 20

           3.2         Research theory and approach……………………………..20

             3.2.1       Research theory……………………………………………..20

             3.2.2       Research philosophy approach…………………………..21

           3.3           Research Strategy and Design……………………............21

           3.4         Research Methods…………………………………………….22

                   3.4.1      Qualitative and Quantitative Method………………...22

                   3.4.2       Semi-structured Interview……………………………..24

           3.5          Alternative Method…………………………………………….25

           3.6          Data Analysis…………………………………………………..25

           3.7          Limitation……………………………………………………….26

                    3.7.1       Time……………………………………………………….26

                    3.7.2        Sample Technical and Size…………………………..26

                     3.7.3           Reliability and Validity………………………………27

            3.8           Ethical Issue…………………………………………………...28

            3.9           Chapter Conclusion…………………………………………..29

4.0   Chapter 4: Finding Analysis and Discussion…………………………...30

             4.1          Introduction…………………………………………………….30

             4.2          Customer Satisfaction in Managers/Customers ‘perspective

                            And Its Role……………………………………………………..30

             4.3           Product Quality …………………………………….………….33

             4.4           Service Quality..............................................................…...38

             4.5           Price………………………………………………………………43

             4.6          Chapter Conclusion…………………………………………….46

5.0     Chapter 5: Conclusion and Recommendation………………………….48

             5.1            Conclusion……………………………………………………..48

             5.2            Recommendation……………………………………………..48

References……………………………………………………………………………49

Appendices……………………………………………………………………………53

                     Appendix A…………………………………………………………….53

             Appendix B…………………………………………………………….55

             Appendix C…………………………………………………………….59

             Appendix D…………………………………………………………….60

ABSTRACT

CHAPTER 1        INTRODUCTION

1.1   A brief description of the topic

Automobile industry has been one of the most important for people all over the world since last century; car has a daily impact on hundred million people life nearly everywhere. With the huge numbers of customers, all cars brands seem to be having the same important mission is to satisfy their customers in order to increase their sales of products and their revenue as well as improve customers’ retention in competitive market. Therefore, customer satisfaction has been one of the core areas of interest in business marketing.

1.2    Overview some previous studies

Customer satisfaction can be defined as the fulfillment of customers ‘requirements or needs (Fournier and Mick, 1999). There are several approaches and models have been developed to evaluate customer satisfaction (E.g Oliver and De Sarbo, 1988; Oliver, 1981). Taylor and Baker (1994) suggested that there are strong evidences in marketing and management literature considering service quality and product quality as the keys determinant of customer’ purchase intention. Several researchers (Bitner 1990; Cronin and Taylor 1992) found that service quality and customer satisfaction plays a key role in formulating the purchase intention between customers (i.e Bitner 1990; Cronin and Taylor 1992). Whereas, another approaches focus on product quality and price as the important determinants of shopping behavior and also of product choice. (Zeithaml, 1988). Cronin, Brady and Hult (2000) noted that the studies in customer satisfaction and service quality have dominated the service-related literature. Parasuramal, Zeithaml, and Berry (1994) found that there are less consistent of the influences of product and perceived price in previous customer satisfaction studies. They also argued that price is the important factor on consumer satisfaction. There were fewer studies previously that examined the impact of all factors including service quality, product quality and price.

1.3 The aim of this research:

Examine the key factors influence customer satisfaction in Automobile Industry.

1.4 The objective of this research:

  1. Examine the effect of product quality on customer satisfaction in Automobile Industry.
  2. Examine the influences of service quality on customer satisfaction in Automobile Industry.
  3. Examine the effect of price on customer satisfaction In Automobile Industry.

This research is an effort to contribute to the understanding about customer satisfaction and the influences of service quality, product quality and price on it. It will be much clear in the case of automobile industry.

        

Chapter 2                       LITERATURE REVIEW

2.1 Introduction

There are many customer satisfaction theories in marketing research. This chapter will follow several previous studies which highlight the impact of product quality, service quality and price on customer satisfaction.

2.2 Customer Satisfaction

The concept of customer satisfaction has been attracted both academics and practitioners in such a long time with the fact that customers are the primary sources of most firm’s revenue. Erevelles and Leavit (1992) suggested that customer satisfaction has become an important concept for marketing scholars and significant goal to achieve for marketing practitioners. Yi (1990) defined customer satisfaction as an attitude like judgement following a purchase of good or service. His definition means that customer satisfaction is customer’s judgement about the product and service meets or do not meet customer expectation.

Kim, Lee and Yoo (2006) found that customer satisfaction could lead to customer loyalty and provide positive word-of-mouth which will increase new customers. In marketing concept, the fact that encourages customer satisfaction should be the heart of all marketing activities (Machleit & Mantel, 2001). Nevertheless, it is still unclear in marketing literature the differences between perceived service quality and customer satisfaction (Anderson & Fornell 1994). Therefore, Parasuraman et al. (1988) argued that “perceived service quality is a global judgment, or attitude, relating to the superiority of the service, whereas satisfaction is related to a specific transaction”. Oliver (1993) also mentioned satisfaction as specific transaction which means the outcome of the immediate post purchase judgment or affective reaction.

Furthermore, several scholars( i.e Machleit & Mantel, 2001; Westbrook, 1987 ) have highlighted the emotional nature of customer satisfaction. Oliver (1981) defined satisfaction as “a total psychological state when there is an existed discrepancy between the emerging emotion and expectation, and such an expectation is a consumer’s feeling anticipated and accumulated form his or her previous purchases”. In his definition, he mentioned that satisfaction is the emotional come from product or service experience and also from the disconfirmation of customer’s view about the performance of product or service and his or her expectations of performance. In addition, customer satisfaction has been developed more in economic-based approach. For example Anderson et al. (1994) viewed customer satisfaction as “overall evaluation based on the total purchase and consumption experience with a good or service over time”. There are more studies now that consider the overall evaluation of satisfaction concept which develops overall customer’s experience in business operation.

2.3    Product Quality and Customer Satisfaction

In most of customer satisfaction theory, product quality is always considered as very important factor that have the huge impacts on customer satisfaction. Product quality can be defined as “superiority or excellence of a product” ( Zeithaml (1991; Dawar 1999) Juran (1989) defined” quality as fitness for use with each product having multiple quality characteristics of two kinds: customer-design product features and freedom from deficiencies.”  On the other hand, Garvin (1987) stated that “quality means pleasing customers, not just protecting them from annoyances”. Garvin also provided a strategic approach contain eight-dimensions of quality for products which include: performance, features, reliability, conformity, durability, serviceability, aesthetics and perceived quality. Automobile industry perhaps is one of the most relevant examples for Garvin theory (See Figure 1).

Moreover, Garvin also developed a practical definition of quality for product (Figure 2); the process flow chart identifies the system of product quality dimensions and provides the definition of product quality from the view of customers. As it can be seen in the flow chart, Garvin emphasised that the dimensions of quality is the most important for customer satisfaction. He also differs from the view of quality process among customers and manufactures; it means customers may never see the quality process from the manufacture’s point of view. In his research, different degree of products should apply to different dimensions; it is not always the same application for them. Therefore, the manufactures should seek the information from their customers to secure the quality dimensions that apply to each product.

Additionally, in term of product quality, Quality function deployment is created to improve customer satisfaction in many industries. Quality function deployment (QFD) concept is an approach to design new product development (NPD) and it was first introduced in Japan in 1966 ( Akao, 1990). Akao defined the concept of customer satisfaction as ‘‘QFD provides specific methods for guaranteeing quality at each stage of the product development process, starting with design. In other words, it is a method for introducing quality right from design stage to satisfy the customer and to transform customer requirements into design objectives and key points that will be required to ensure quality at production stage’’. In addition, there are many definitions of QFD with different view, however, Maddux et al., 1991 found that they have similar objectives which to identify customers, discover what customers want and also provide a way to fulfill customer’s desires. Quality function deployment concept basic translates the desire of customer, it is, the voice of customers into product technical requirement and responds to their needs and wants (Akao 1990). QFD consists of two questions: “WHAT” refer to customer’s requirements and “HOW” refer how the requirements are fulfill satisfied (Hauser & Clausing, 1998).  QFD consists of three features which are facilitator (a cross-functional team), tool (a series of matrices), and goal (a customer satisfaction target). Brown (1991) suggested that QFD brings the benefits such as superior product design, improving potential of new innovation and low project and product costs which leading more satisfaction of customers about the products. Raynor (1994) demonstrated the power of QFD bases on an organization’s processes and how these processes operate to create customer satisfaction.

Kano (1984) and other researchers have developed very useful model that can help us gain clearly understanding of customer satisfaction. It is easier for the organization in term of product development to understand that higher product performance can lead to higher customer satisfaction. In his model, product features are divided into three different categories and each of these features affects customer satisfaction in different way. (See Fig 3)

  1. Must- be attributes: For example, when customer considers to buy a new car, an attribute may be “No Scratches”, Nevertheless, customer can be dissatisfied when a product they purchase does not meet their needs sufficiently.
  2. One-dimensional attributes: It happens in customer satisfaction and dissatisfaction when fulfilled or not fulfilled. Customers are more satisfied when these attributes become better.
  3. Attractive attributes: Customers are more satisfied with strong achievement of these attributes.

Kano model clearly provides the view of relationship between customer satisfaction and performance of a product. The relationship is different between must-be, one-dimensional and attractive attributes. Moreover, Kano model also contributes an approach for categorising customer attributes into different types.  Matzler et al.(1998) and Vasilash (1995) also have further discussed about Kano model. Based on Kano model, there are some direct implements on product development to satisfy customers. In the market, for example car market, customers can be difficult in making their decision when they purchase a new car because there are many similar products with similar features and models as well. Therefore, the firms may be unable to satisfy their customers by meeting their basic needs and wants; In order to achieve, they must exceed customer expectations. Products quality can retains their customers, moreover, customer requirements and customer satisfaction can be satisfied and exceed with such product quality.

Figure 1:

Figure 2:

Figure 3:

2.4    Service Quality and Customer Satisfaction

Service quality has been one of the most important issues for researches, practitioners, managers in service literature and marketing (Parasuraman et al., 2005). Gronross (1982, p37) defined service quality as “the outcome of an evaluation process where the consumer compares his expectations with the service he perceived he has perceived”. In other words, service quality is “the delivery of excellent or superior service relative to customer expectations” (Zeithaml and Bitner,1996, p. 117). Moreover, service quality refers to a customer’s subjective acknowledge to quality, and the most important characteristics of quality is to satisfy customer wants (Juran, 1989). Carman (1990) suggested that service quality is difficult task causing many debates in a long time about the intangible nature of service quality and the problems coming from both production and consumption of a service. However, most of researchers have agreed that service quality should be viewed at customer’s perspective in order to improve customer satisfaction.

Rust and Oliver (1994) argued that customer satisfaction has an evaluation as well as an emotion-based response to a service. This is mean that the customer’s belief on the probability of service leading to a positive feeling. Gronross (1982) noted two dimensions of service quality which is the technical aspect and the functional aspect, meaning what and how serviced is provided. The customers recognize what they receive as the outcome of process through the use of resources (e.g quality, technical), however, they often perceive how the process itself functions (e.g the functional, dimension). By understanding the nature of the dimensions of service quality, organizations may improve their service quality to meet customer expectation or to satisfy their customers. Furthermore, Lehtinen and Lehtinen (1982) developed broadly the concept of service quality which focus on physical quality, interactive quality and corporate. Physical quality concerns the tangible of service (i.e physical of product or physical support), while interactive quality means the interactive nature of services (the interaction between customer and the service organizational) and corporate quality involves the perception of customers about the image of the organization.

Oliver (1989) noted there are more than five different consumption models that encourage satisfaction. Different models are suitable with different affect description and different antecedents operate for different models. Parasuraman et al. (1985) measured 10 dimensions of service quality (SERVQUAL) (i.e reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer and tangibles). In later research, Parasuraman, Zeithaml, and Berry (1988) reduced from 10 to 5 dimensions such as tangible, reliability, responsiveness, assurance and empathy. Reliability widely concerns whether the outcome of service was as promised while other dimensions concern the process of service delivery. In their study, they suggested that customers increase expectation of performance through the service dimensions, observe performance and later form performance perceptions. SERVQUAL based on the notion of a gap between customers expect from service provider and their assessment of the actual performance of service that they received from service provider. They summarized that the methods use to measure service quality and customer satisfaction based on comparisons of expectation and performance. Additionally, because of the nature characteristics of service quality so lead to customer always require quality guarantees in order to reduce the uncertainty of customer service ( Kotler, 1994). Bitter (1990) asserted that good service quality often leads to satisfaction, on the other hand, customer satisfaction increased the value of service quality again.

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 Furthermore, Teas (1993) also argued that perceived service quality was the accumulation of customer satisfaction. Cronin and Taylor (1992) examined four service industries of fast food, banking, dry-cleaning, pest control to interpret the relationship between service quality and customer satisfaction and they found that service quality was an antecedent of customer satisfaction. Oliver (1993) addressed some distinctions among the meanings of quality and satisfaction. He suggested that satisfaction judgments may result from any dimension, quality related or not. Brady and Cronin (2001) summarized the various studies into one model called hierarchical service quality model (HSQM) which consists of three ...

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