Modeling the Role of Service Quality, Customer Satisfaction and Customer Loyalty in Building Service Brand Equity

Modeling the Role of Service Quality, Customer Satisfaction and Customer Loyalty in Building Service Brand Equity

Hashim Zameer (College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing, China), Ying Wang (College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing, China), Humaira Yasmeen (College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing, China) and Waqas Ahmed (Nanjing University of Aeronautics and Astronautics, Nanjing, China)
Copyright: © 2019 |Pages: 18
DOI: 10.4018/IJABIM.2019040103

Abstract

This study comprehends a framework for measuring strength of service brands in service industry of Pakistan using three fundamental pillars in building service brand equity i.e. service quality, customer satisfaction and customer loyalty. The results validated through the structural equation modeling (SEM) indicates the significance of customer loyalty that is contingent to satisfied customers. Moreover, in the context of service sector organizations, customer satisfaction is highly dependent on service quality. The mediation testing further indicates that customer satisfaction mediates and strengthens the relationship between service quality and customer loyalty, while, the latter fully mediates the relationship between customer satisfaction and service brand equity. Based upon the findings, this study develops a pyramid of building service brand equity. Finally, theoretical and managerial implications have been discussed.
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1. Introduction

Service sector provides a strong backing for economic growth and plays a vital role in the development of societies (Chesbrough & Spohrer, 2006). Today, service sector is the fastest growing sector around the globe and it contributes more to global output as compare to any other sector (Diao, McMillan, & Rodrik, 2017). The main reason for the extensive growth in this sector is the increasing trend in urbanization and more demand of consumer services. However, the competition among service providers is becoming cut throat and intensifying with the passage of time especially in developing countries like Pakistan (Arshad, Iqbal, & Shahbaz, 2018). This intense competition has brought into consideration the importance of branding for service sector organizations. The role of branding is vital in building customer trust (Iglesias, Markovic, Singh, & Sierra, 2017), it provides value for customers (Keller, 2016) and it also provides a base for differentiation among service providers. Moreover, these factors play a critical role in creating more value for the company, this value creation is called building brand equity.

Traditionally service organizations put emphasis on their core dimensions of service quality to improve customer satisfaction and brand equity. But, in today’s competitive business environment brand has become one of the most powerful intangible assets for service organizations. The role of brand to develop its brand understanding and minimizing the perceived risk is inevitable that can further impulse purchase intentions in the customer’s mind. However, service sector organizations with branding focus can generate better performance in long term (Zhang & He, 2014). In addition, service quality works as a spearhead for service sector organizations and these organizations can gain and sustain competitive advantage over their rivals and at the same time satisfies their customers with better service quality (Prakash, Somasundaram, & Krishnamoorthy, 2016). Satisfied customers can become loyal customers (Schirmer, Ringle, Gudergan, & Feistel, 2016), and these loyal customers increase customer base for the company. But, the dynamic nature of service organizations and intense competition among service providers has created many dynamic challenges for the managers. In recent times, managers of service organizations are facing the multitier challenges of responding with changing customers’ needs while ensuring consistency in the brand image.

In academic research, the concept brand equity has been studied in two different perspectives: information economics and cognitive psychology. The perspective of information economics indicate that strong brands can work as a signal of quality while the other perspective highlight that brand equity belongs to consumer perceptions. Most of the previous studies used these perspectives separately and focused on commodity brands. However, the study of (Wang, Hsu, & Fang, 2009) indicates that the brand equity of service a firm is different from other firms and customers’ evaluations are different in both types of organizations. Therefore, it is required to measure and conceptualize service brand equity differently. A wealth of academic research exists on brand equity and service quality in the context of commodity brands, but research that examines the role of service quality, customer satisfaction and customer loyalty toward building service brand equity is scant. Thus, the purpose of this study is to bridge this research gap and extend the body of literature by providing a knowledge base to practitioners. With providing strong understanding about building service brand equity, this study also highlights managerial implications for service sector organizations operating in Pakistan.

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