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Journal of Marketing Management

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Customer Satisfaction, Service Quality and Perceived

Value: An Integrative Model
Jackie L.M. Tam
Version of record first published: 01 Feb 2010.
To cite this article: Jackie L.M. Tam (2004): Customer Satisfaction, Service Quality and Perceived Value: An Integrative
Model, Journal of Marketing Management, 20:7-8, 897-917
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Journal of Marketing Management, 2004, 20, 897-917
Customer Satisfaction, Service Quality

Jackie L. M. Tam1 and Perceived Value:
An Integrative Model
The present study examines the relationships among
customer satisfaction, service quality and perceived value.
These variables are increasingly recognised as being
sources of competitive advantage. However, little
empirical research has been conducted to examine these
variables simultaneously and their relationships with
post-purchase behaviour. The present study was therefore
The Hong Kong designed to develop an understanding of the relationships
Polytechnic University among these variables and their influence on post-
purchase behaviour. An integrative model was developed
and tested using data collected from customers in the
Downloaded by [McGill University Library] at 08:39 26 November 2012
restaurant industry. The results reveal that customer

satisfaction and perceived value significantly influence
post-purchase behaviour. Implications of the findings and
areas for future research are discussed.
Keywords: customer satisfaction, service quality, perceived value
Introduction
In highly competitive markets, firms are increasingly concerned with

customers post-purchase behaviour. It is recognised that merely satisfying
customers is not sufficient to secure customer loyalty (Jones and Sasser 1995).
Studies have shown that satisfied customers also express a tendency to
switch to competitors (Mittal and Lasser 1998). In the past decade, quality
has been recognised as a strategic tool to strengthen a firms competitive
position and improve its profitability (Reicheld and Sasser 1990). However,
as customers become more demanding, competition further intensifies, and
economic and industrials growth slows down, quality might not be an
adequate source of a competitive advantage. Woodruff (1997) believes that
customer value is the next underlying source for competitive advantage.
Consistent with this view, Weinstein and Johnson (1999) consider that
customer value is the strategic driver that differentiates a firms offering in
the crowded marketplace.
1Correspondence: Jackie L. M. Tam, Department of Management and Marketing, The

Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong, Email:
msjackie@polyu.edu.hk, Telephone: (852) 27667951
ISSN1472-1376/2004/7-8/00897 + 20 8.00/0 Westburn Publishers Ltd.
898 Jackie L. M. Tam
Customer satisfaction, quality and perceived value are three prominent

marketing constructs, and their relationships with post-purchase behaviour
have drawn considerable interest and attention from practitioners and
academics (Sweeney et al. 1997; Bloemer et al. 1999; Brady and Robertson
1999; McDougall and Levesque 2000; Cronin et al. 2000). Parasuraman and
Grewal (2000) suggest that quality enhances perceived value, which in turn,
contributes to customer loyalty. This quality-value-loyalty model accords
with Heskett et al.s (1997) service-profit chain which places perceived value
at the centre of the chain linking employee satisfaction, loyalty, productivity
and output quality with customer satisfaction, loyalty and profitability.
Heskett et al. (1997) define perceived value as the ratio of process quality
and results delivered to customers relative to the price and the other costs
incurred in acquiring the service. According to the chain model, satisfied and
loyal employees create output quality, which contributes to perceived value,
and in turn directly influences customer satisfaction and loyalty, which in
turn drive profit performance and growth. There is some empirical support
for some of the links in the service-profit chain model (Loveman 1998;
Silvestro and Cross 2000; Bernhardt et al. 2000). However, most studies have
neglected the contribution of customer perceived costs to perceived value.
Ravald and Grnroos (1996) consider that studies have not explicitly
included customers perceived costs may be a shortcoming as this variable
plays a significant role in determining satisfaction. In order to design
effective strategies to enhance customer satisfaction and loyalty, it is
imperative to understand the role of quality and costs in customer value
assessment and their relationships with satisfaction and post-purchase
behaviour. Thus, the present study extends the prior research by integrating
quality, perceived costs, perceived value, customer satisfaction and post-
purchase behaviour into a coherent model and by empirically assessing the
interrelationships among them.
The organisation of this article is as follows. A review of the literature is
presented in order to provide a conceptual basis for the study and to develop
a conceptual model that integrates customer satisfaction, quality, perceived
costs, perceived value and post-purchase behaviour. The research
methodology adopted to assess the model is then described, followed by a
discussion of the results. Finally, the implications of the findings are
discussed and the article concludes with some suggestions for further
research.
Literature Review
Defining Customer Satisfaction

The concept of customer satisfaction has drawn the interest of academics
and practitioners for more than three decades in the light of the fact that
Customer Satisfaction, Service Quality and Perceived Value 899
customers are the primary source of most firms revenue. Customer

satisfaction is a necessary precondition for customer loyalty, which is in turn
a key driver of profit growth and performance (Reichheld 1993; Heskett et al.
1997). Churchill and Surprenant (1982) define customer satisfaction as an
outcome of purchase and use resulting from the buyers comparison of the
rewards and costs of the purchase in relation to the anticipated
consequences. It has also been viewed as an emotional state that occurs in
response to the evaluation of a service (Westbrook 1981). The former
conceptualisation recognises that satisfaction is determined by a cognitive
process of comparing what customers receive (rewards) against what they
give up to acquire the service (costs) whereas the latter views satisfaction as
an emotional feeling resulting from an evaluative process. Consistent with
this view, customer satisfaction is defined as an emotional response, that
results from a cognitive process of evaluating the service received against the
costs of obtaining the service (Woodruff et al. 1991; Rust and Oliver 1994).
Defining Perceived Service Quality

The actual quality of service is difficult to define and measure (Gavin
1983; Parasuraman et al. 1988; Brown and Swartz 1989). However,
researchers have reached a consensus that service quality should be defined
and measured from the customers perspective. The most widely accepted
definition of perceived service quality is that it represents the discrepancy
between customers expectations and their perceptions of the service
performance (Lewis and Booms 1983; Grnroos 1984; Parasuraman et al.
1988).
There has been a debate regarding the inclusion of expectations in the
measurement of service quality (Teas 1993, 1994; Cronin and Taylor 1994;
Parasuraman et al. 1994). While Cronin and Taylor (1994) claimed that the
perceived performance measure possesses a high predictive ability,
Parasuraman et al. (1994) assert that the expectation measures can assist
management in identifying those areas which require immediate attention.
However, Parasuraman et al. (1994) concur that if the primary purpose of
measuring perceived service quality is to explain the variance on some
dependent construct, then a performance-based measure is appropriate.
There is a growing acceptance among researchers that service quality can be
tied to perceptions of service performance (Grnroos 1993; Dabholkar 1993).
Defining Perceived Value

The importance of perceived value in relation to purchase intentions was
documented in the early literature (Zeithaml 1988) but it is only in recent
years that the concept of perceived value has received increasing attention
(Cronin et al. 1997; Patterson and Spreng 1997; McDougall and Levesque
2000; Varki and Colgate 2001). The definitions of perceived value generally
involve a trade-off between what customers receive and what they give up to
acquire the service (Zeithaml 1988; Monroe 1991). Lovelock (2001) suggests
that perceived value can be enhanced by either adding benefits to the service
or by reducing the outlays associated with the purchase and use of the
service.
Price is often used as the key measure to represent what customers have
to sacrifice to obtain the service. However, it is noted that non-monetary
costs such as time, physical and psychic effort are also considered as the
outlays to obtain the service (Lovelock 2001). The importance of the types of
outlays may vary across individual consumers and usage situations, and in
accordance with the nature of the service. In this study, perceived sacrifice
includes monetary and time costs whereas perceived value is a result of
customers evaluation of the service received against their perceptions of the
costs of obtaining the service.
Hypothesis Development
Relationship between Perceived Service Quality and Customer Satisfaction

The nature of the relationship between perceived service quality and
customer satisfaction is an intriguing issue. Some researchers have suggested
that perceived service quality is an antecedent of customer satisfaction
(Anderson and Sullivan 1993; Ravald and Grnroos 1996; de Ruyter et al.
1997). Others have adhered to the view that customer satisfaction precedes
perceived service quality (Parasuraman et al. 1988; Bolton and Drew 1991;
Patterson and Johnson 1993). Teas (1993) explained that the confusion as to
the causal relationship between satisfaction and perceived service quality is
due to the lack of consensus on the definition and operationalisations of the
two constructs. He pointed out that perceived service quality has been
viewed as a global judgement in most service quality research, in contrast to
the transaction-specific focus of most customer satisfaction research. It is
clear that the confusion on the causal relationship is attributed to the
different perspectives held by the researchers. Perceived service quality can
be viewed at the level of both the transactional perspective and the global
perspective (Teas 1993; Oliver 1993; Parasuraman et al. 1994). At the
transaction level, perceived transaction-specific quality will influence
customer satisfaction, and at the global level, the overall perception of a
firms service quality is based on customers cumulative transaction-specific
satisfaction with the service.
The present study is interested in the relationships between perceived
service quality, customer satisfaction and perceived value from an encounter
perspective rather than from a global perspective. Due to the inseparability
of the production and consumption of most services, the encounter provides
an opportunity for a firm to capture customer future purchases. During the

consumption of the service, consumers are able to determine the quality of
the service and their satisfaction level (Grnroos 2000). It is hypothesised that
in a service consumption, if consumers perceive that a service they receive is
of high quality, then satisfaction results. On the other hand, if consumers
perceive that a service received is of low quality, then dissatisfaction results.
Thus, the first hypothesis:
H1: Perceived service quality will have a positive effect on customer

satisfaction.
Relationships between Perceived Value with Perceived Service Quality and

Perceived Sacrifice
Perceived value is an important concept, as it is believed to have an
influence on customer satisfaction (Heskett et al. 1997), and behavioural
intentions (Cronin et al. 1997). Thus, marketers attempt to influence customer

satisfaction and ultimately post-purchase behaviour may be accomplished in
part, by influencing customers perceptions of value. Ravald and Grnroos
(1996) suggest that perceived value of a service can be heightened by either
delivering better service or reducing customer perceptions of the costs
associated with using the service. They assert that adding value to the service
at a competitive price is a potent source of competitive advantage.
Customers perceive higher value in the service when they perceive the
quality of service as greatly exceeding the costs they have sacrificed to obtain
the service. There is some empirical evidence to support the view that quality
is positively related to perceived value and perceived sacrifice is negatively
related to perceived value (Brady and Robertson 1999; Teas and Agarwal
2000). It is hypothesised that the more customers perceive they have
received, the higher the perceived value, whereas the more costs customers
perceive themselves to have sacrificed in acquiring the service, the lower the
perceived value. This leads to the following hypotheses:
H2: Perceived service quality will have a positive effect on perceived

value.
H3: Perceived monetary costs will have a negative effect on perceived
value.
H4: Perceived time costs will have a negative effect on perceived value.
While the literature documents a positive relationship between quality and

price, studies have shown that the role of price as a cue to quality is
diminished in the presence of consumer familiarity or other available cues
such as brand name (Johnson and Kellaris 1988; Dodds et al. 1991). In this
study, consumers determine the quality of a service following a consumption

experience. It is suggested that their evaluation of the quality of the service is
driven by their perceptions rather than by price, thus price and quality are
considered as two independent constructs. There has been limited research
on the relationship between price and customer satisfaction, and the
relationship between price and post-purchase behaviour. Varki and Colgate
(2001) found that these relationships exist in a New Zealand sample but not
in a U.S. sample. Although price is one of the major factors that influences
the consumer purchase decision, it is hypothesized that value is a stronger
determinant of post-purchase behaviour, and that price exerts an influence
on post-purchase behaviour via perceived value.
Relationships between Perceived Value with Customer Satisfaction and

Post-purchase Behaviour
Perceived value is posited to be a determinant of customer satisfaction.
The more the customers perceive the quality of service exceeds the costs of
obtaining the service, the higher their perceptions of the value of the service,
which in turn results in greater satisfaction. Studies have shown that
perceived value exhibits a strong and significant impact on customer
satisfaction, which in turn affects repurchase intentions (Patterson and
Spreng 1997; Eggert and Ulega 2002). The direct linkage between perceived
value and post-purchase behaviour is less clear. While perceived value was
found to be a primary factor influencing purchase intentions (Cronin et al.
1997; Sweeney et al. 1997; Brady and Robertson 1999), others have provided
evidence to suggest that the effect of perceived value on repurchase
intentions was completely mediated via customer satisfaction (Patterson and
Spreng 1997). In accordance with the previous research, it is hypothesised
that perceived value will directly influence both customer satisfaction and
post-purchase behaviour and indirectly influence post-purchase behaviour
via customer satisfaction. This leads to the following hypotheses:
H5: Perceived value will have a positive effect on customer satisfaction

H6: Perceived value will have a positive effect on post-purchase behaviour
H7: Perceived value will have an indirect positive effect on post-purchase
behaviour via customer satisfaction
Relationship between Customer Satisfaction with Post-purchase Behaviour

Studies have shown a strong positive relationship between customer
satisfaction and repurchase intentions (McDougall and Levesque 2000;
Caruana 2002; Olsen 2002). However, some researchers have suggested that
mere satisfaction is not enough to keep customers loyal in highly competitive
markets (Jones and Sasser 1995). The relationship between customer
satisfaction and loyalty may vary according to the degree of competition in

the market. Customers who are satisfied with the service will also switch
suppliers if they see that there is a better alternative elsewhere. On the other
hand, where there is no other choice, customers will continue purchasing
from the same supplier even though they are dissatisfied with the service.
Recent research has examined the relationship between customer
satisfaction and financial performance. Bernhardt et al. (2000) revealed that
restaurants with increased customer satisfaction mean scores achieved higher
percentage increases in average monthly profits than those restaurants with
stable or reduced customer satisfaction mean scores. Anderson, Fornell and
Lehmann (1994) found that, contrary to the general belief, there was a trade-
off between customer satisfaction and market share. Since their data were
cross-sectional, they explained that in the short-run, market share might be
gained by seeking customers with preferences falling outside the target
market. However, in the long run, they expected customer satisfaction and
market share to be positively related. In summary, customer satisfaction is an

important determinant of post-purchase behaviour, which in turn is expected
to affect the firms future profitability. From the preceding discussion, it is
posited that the more satisfied customers feel with the service they receive,
the more likely it is that they will repurchase the service and recommend it to
other people. Thus, the eighth hypothesis is:
H8: Satisfaction will have a positive effect on post-purchase behaviour
Perceived Service H1
Quality
Customer
Satisfaction H8
H2
Post-Purchase
Perceived H5 Behaviour
Monetary Costs
H3
Perceived H6
Value
Perceived Time Costs

H4
Figure 1. Depicts an Integrative Model of the Relationships to be Assessed

Research Context
The study was conducted among Chinese consumers in Hong Kong in the
Peoples Republic of China. Family/popular chains of restaurants which
offer table service and extensive menus were chosen for the study. The
restaurant industry was chosen because restaurants offer both tangible and
intangible elements, as most product offerings combine tangible and
intangible elements. Further, competition is fierce in the restaurant industry.
Diners have many choices, and if they find that the service provided is not
satisfactory, they can easily find other providers at minimal or no additional
cost. Thus, the present study is able to clearly depict the relationships among
customer satisfaction, perceived service quality, and perceived value with
post-purchase behaviour in a highly competitive market.
Research Methodology
Research Instrument
The questionnaire included items intended to measure perceived service
quality, customer satisfaction, perceived sacrifice, perceived value and
intended post-purchase behaviour. The perceived service quality scale was
adapted from Teas (1993) quality scale. Customers were asked to indicate
their perceptions of the overall quality of the service received on three
semantic differential scales items with bipolar adjectives addressing high
quality, industry standards and best to worst respectively. Customer
satisfaction was measured using three semantic differential scales with
bipolar adjectives addressing satisfaction, pleasant, enjoyment and one face
scale. These scales were utilised to capture both the cognitive and the
emotional nature of this construct (Hausknecht 1990). Two aspects of post-
purchase behaviour were particularly important; future repurchases and
recommendation to others. Three items were used to measure future
purchase intentions and two items were used to measure recommendation
intentions. Perceived monetary costs were measured using three items and
perceived time required in obtaining the service was measured by two items.
Perceived value was measured by asking customers to evaluate the overall
service in the light of price paid and time spent. The questionnaire was
pre-tested with twenty consumers prior to the field survey. The purpose of
this pre-test was to identify any ambiguous wording, and to discover
whether respondents had any difficulties in answering the questions. The
appendix contains a list of items used.
Data Collection
Data were collected by means of a consumer survey. The fieldworker
selected customers prior to entering the chosen restaurants at about ten
minutes interval.
Table 1. Demographic Characteristics of the Respondents
Demographics Number Percentages

Sex
Male 78 37.3
Female 131 62.7
Age
18 25 50 23.9
26 30 41 19.6
31 35 46 22.0
36 40 29 13.9
41 45 21 10.0
46 50 22 10.5
Marital Status
Single 100 48.1
Married 106 51.1
Divorced 2 1.0
Education Attainment
Primary or below 27 13.0
Secondary 93 44.7
Post-secondary 25 12.0
Tertiary or above 63 30.3
Occupation
Professional / Executive 40 19.2
White Collar 76 36.5
Student 22 10.6
Entrepreneurs / Self-employed 7 3.4
Managerial 9 4.3
Blue Collar 14 6.7
Housewife 26 12.5
Unemployed 5 2.4
Others 9 4.3
Personal Monthly Income
$5,000 or below 51 24.5
$5,001 - $10,000 44 21.2
$10,001 - $15,000 49 23.6
$15,001 - $20,000 23 11.1
$20,001 - $25,000 14 6.7
$25,001 - $30,000 13 6.3
$30,001 or above 14 6.7
The customers were informed about the purpose of the research, and were
invited to take part in the study. If the customers agreed to take part, they
were given the questionnaire with a return envelope, and a covering letter
requesting them to complete and return the questionnaire within a week. A
gift was used to stimulate customer participation. It was estimated that
roughly one out four customers approached agreed to take part in the study.
Analysis and Results

Two hundred and fifty five agreed to participate in the study, but only
two hundred and seventeen respondents returned the questionnaire. Among
those returned questionnaires, eight were incomplete and were discarded.
The number of responses used for the analysis was 209. The resultant sample
consisted of 37.3 percent males, and 62.7 percent females. Of these 43.5
percent were aged 18 30, and 44.7 percent had attained a secondary
education. The median personal income was between $10,001 and $15,000.
Table 1 presents the demographic profile of the respondents.
LISREL 8.14 was used to assess the hypotheses as it had the ability to
estimate the multiple and interrelated relationship whilst accounting for the
measurement errors in the estimation process (Hair et al. 1998). The
measurement items identified in the Appendix were specified as the
indicators of the respective constructs except post-purchase behaviour. In
order to maintain parsimony in the number of indicators in the model, two
indices were formed by averaging the three items measuring future purchase
intentions and the two items measuring recommendation intentions
respectively, and they represented the indicators of the post-purchase
behaviour (Hair et al. 1998).
Table 2. Results of Confirmatory Factor Analysis
Items Standardised Loadings Squared (r2) Multiple Correlations

Monetary Costs
1,1 0.80 0.64
2,1 0.78 0.61
3,1 0.71 0.50
Time Costs
4,2 0.83 0.68
5,2 0.76 0.58
Perceived Service Quality
6,3 0.82 0.76
7,3 0.79 0.74
8,3 0.86 0.82
Perceived Value
9,4
10,4 0.70 0.49
Customer Satisfaction 0.77 0.59
11,5
12,5 0.92 0.85
13,5 0.90 0.81
14,5 0.85 0.72
Post-purchase Behaviour 0.76 0.58
15,6
16,6 0.93 0.86
0.85 0.72
The confirmatory factor analysis results suggested a reasonably good fit with
2 statistic = 155.29 (88 degrees of freedom), GFI = 0.91, NFI = 0.94, and
RMSR = 0.057. Although the 2 statistic was significant, the GFI, NFI and
RMSR values were acceptable (Bentler and Bonett 1980; Sharma 1996,
Kelloway 1998). It is documented in the literature that the 2 statistic is
sensitive to sample size. For large sample sizes, even small differences in the
sample covariance matrix are statistically significant, although the
differences may not be practically meaningful (Sharma 1996). The t-statistics
showed that the factor loadings were highly significant (all were greater than
1.96), thus providing evidence of convergent validity (Anderson and Gerbing
1988). The squared multiple correlations were all met the 0.50 threshold
suggested by Fornell and Larcker (1981) with the exception of the value item
measuring the overall service with respect to the monetary costs (r2 = 0.49).
The Cronbach alpha values for the scales ranged from 0.71 to 0.92. As a rule
of thumb, the Cronbach alpha value should be at least 0.70 for a scale to
demonstrate internal consistency (Nunnally 1978). Table 2 presents the

results of the confirmatory factor analysis.
The structural model included six constructs, of which three were
exogenous and three were endogenous. Table 3 presents the covariance
results and correlation coefficients among the constructs. The overall fit of
the model was reasonable and the r2 for the structural equations ranged from
0.59 to 0.79. The Chi-square statistic was 164.53 (p=0.00) with 93 degrees of
freedom, GFI = 0.91, NFI = 0.93 and RMSR 0.06. Table 4 shows the parameter
estimates of the structural equations.
Table 3. Covariances and Correlations Among the Constructs
(I) (II) (III) (IV) (V) (VI)

Monetary Costs (I) 0.62 0.49 0.19 -0.13 0.10 -0.05
Time Costs (II) 0.45 1.37 -0.02 -0.29 -0.08 -0.21
Perceived Service Quality (III) 0.12 -0.02 0.67 0.70 0.81 0.71
Perceived Value (IV) -0.08 -0.26 0.43 0.56 0.68 0.85
Customer Satisfaction (V) 0.08 -0.09 0.67 0.52 1.04 0.76
Post-purchase Behaviour (VI) -0.04 -0.26 0.61 0.68 0.81 1.11

(above diagonal = correlation matrix; diagonal = variance; below diagonal = covariance
matrix)
Table 4. Parameters Estimates of the Structural Model
Dependent Variables
Independent
Variables Perceived Value Customer Satisfaction Post-Purchase Behaviour
Monetary Costs -0.16*

(-0.17)
Time Costs -0.12*
(-0.19)
Perceived Service 0.67* 0.82*
Quality (0.73) (0.66)
Perceived Value 0.29* 0.88*
(0.21) (0.63)
Customer 0.34*
Satisfaction (0.33)
r2 0.59 0.68 0.79

(* significant at 5 % level, standardised parameter estimates in parentheses)
All the path coefficients were significantly different from zero with
respective t-values greater than 1.96 and their signs were in the hypothesised
direction. Perceived service quality was found to display a positive effect on
customer satisfaction (=0.66, p<0.05), and perceived value (=0.73, p<0.05).
As customers perceptions of the quality of the service increase, they feel
more satisfied with the service and perceive higher value in the service.
Thus, hypotheses one and two were supported. Monetary and time costs
were found to display a negative effect on perceived value, the path
coefficients were (= -0.17, p<0.05) and (= -0.19, p<0.05) respectively. These
results suggest that both monetary and time costs play a significant role in
customers assessments of the value of the service. Accordingly, hypotheses
three and four were supported. Perceived value was shown to have a
positive effect on customer satisfaction (=0.21, p<0.05) and intended post-
purchase behaviour (=0.63, p<0.05). Thus, hypotheses five and six were also
supported. It is interesting to note that perceived value has a stronger impact
on intended post-purchase behaviour than on customer satisfaction. As
customers perceive that the value of the service increases, they feel more
satisfied with the service and their tendency to repurchase and recommend
the service to others becomes higher.
Studies have found that the effect of perceived value on repurchase
intentions is completely mediated by customer satisfaction (Patterson and
Spreng 1997). In order to examine whether the effect of perceived value on
behavioural intentions would indeed be completely mediated by customer
satisfaction, an alternative model was proposed with the parameter of the
structural path between perceived value and intended post-purchase
behaviour constrained to zero. A Chi-square difference test was performed to
assess the overall fit of the theoretical model and the alternative model.
Steiger et al. (1985) stated that the difference between Chi-square statistics for
the nested models is itself asymptotically distributed as Chi-square, with
degrees of freedom equal to the difference in the degrees of freedom for the
two models. The results of the Chi-square difference test showed that the
theoretical model provided a better overall fit to the data than the alternative
model, the Chi-square difference was 48 with one degree of freedom
(p<0.05). Thus, the notion that perceived value has both a direct and an
indirect effect through customer satisfaction on behavioural intentions is
supported by the data. Hence, hypothesis seven was supported. Consistent
with the results of previous research, customer satisfaction displayed a
significant influence on intended post-purchase behaviour (=0.33, p<0.05).
As customers feel more satisfied with the service, they will be more likely to
repurchase and encourage others to use by word of mouth. Accordingly,
hypothesis eight was supported.
Further analyses were conducted to examine the relationships between

monetary costs and quality, monetary costs and customer satisfaction, and
monetary costs and intended post-purchase behaviour. Each path was
evaluated in turn to determine whether monetary costs had any direct
influence on quality, customer satisfaction and intended post-purchase
behaviour respectively. The results showed no significant improvement in
model fit, suggesting that customers perceptions of quality were not affected
by monetary costs, and the effect of monetary costs on customer satisfaction
and intended post-purchase behaviour were mediated through perceived
value.
Discussion and Conclusions
Although customer satisfaction has been used as a means of achieving the

business goals of most firms, the assumption that satisfied customers will
make repeated purchases and tell others about their satisfying experiences
may no longer hold in highly competitive markets. The present study shows
that perceived value has relatively speaking, a greater influence on post-
purchase behaviour than customer satisfaction as is evidenced by the
standardised path coefficients of 0.63 for perceived value and of 0.33 for
customer satisfaction shown in Table 4. Moreover, the results of this study
reveal that adding the path between perceived value and post-purchase
behaviour has improved the overall fit of the model. This suggests that
integrating perceived value with customer satisfaction and perceived service
quality in a single model can better explain and predict post-purchase
behaviour.
Although increasing customers perceptions of service quality can result
in high customer satisfaction and perceived value, the effect of perceived
service quality on perceived value might be offset by high perceived

sacrifice. There are instances in which customers may feel satisfied with a
service, but their perceptions of its value are low due to the high costs
incurred in obtaining it. When they learn that another supplier is offering a
better value service, their likelihood to switch is high.
Price may play several roles in the customer purchase decision process.
Prior to a purchase, customers may use price as an indicator of quality, and
set expectations in regard to the service they are likely to receive (Zeithaml
and Bitner 2003). Following the consumption of the service, price is one of
the costs perceived by customers, and contributes to value assessment of the
service (Lovelock 2001). The present study provides evidence of the
contribution of price to customer assessment of a service value. As predicted,
the relationship between quality and price was found to be weak. This may
suggest that customers perceptions of quality are not driven by price
perceptions in post-purchase evaluations. However, the relationship between
quality and price should be not underestimated in an initial purchase. Since

services lack tangible cues for customers to assess their quality prior to
consumption, price might have an effect on customers perceptions of the
quality of a service to be provided in pre-purchase evaluations. Thus, firms
need to be very careful about attempting to make the service offered more
appealing by lowering prices. They need to convince customers that a
reduction in price is accompanied by a reduction in the quality of service.
The promotional message should emphasise the benefits of the service
relative to the costs and educate customers to recognise its value. In line with
this view, Berry and Yadav (1996) suggest that service firms should capture
and communicate value to customers in their pricing strategy.
In order to stimulate customer repeated purchase behaviour, firms should
design strategies to enhance customer perceptions of the value of a service.
First, it is important to identify the aspects of a service which customers
value most, and then make efforts in these areas to influence customer
perceptions of value. When customers are confronted with more than one
supplier, it is likely that they will compare the alternatives. Firms should
educate and convey clearly that the service they are offering is better than
that of their competitors, or that they are providing supplementary services
at no extra cost to customers. Alternatively, firms can aim to reduce customer
perceptions of the costs associated with using their services compared to
those of using their competitors services (Ravald and Grnroos 1996).
The literature documents that customer perceptions of costs include
monetary as well as non-monetary considerations. Whilst this study reveals
that monetary and time costs are the significant determinants of perceived
value, the significance of such perceived sacrifices may vary among
customers as well as with type of service. It is important for firms to
determine the components that constitute value for their target customers. In
summary, to succeed in the competitive marketplace, it is not necessary for a
firm to offer the highest quality service or the lowest price. Perceived value
can offer greater competitive leverage as it not only contributes to customer
satisfaction, but also encourages repeated purchases.
Limitations and Suggestions for Future Research
The present study exhibits some limitations that should be noted. Firstly,
female consumers were more willing to participate in the study and thus
were slightly over-represented in the sample. Secondly, the study was
conducted in the context of the restaurant industry; hence generalisations of
the findings beyond the restaurant industry and the study population should
be made with caution. Furthermore, other intangible costs such as physical
and psychic costs were not examined in this study. These costs are highly
relevant in services that are complex and professional such as medical

services and investment services. It would therefore be worthwhile in future
studies to examine how these costs affect the purchase decisions of customers
and their subsequent post-purchase evaluations.
Acknowledgements
The author thanks the two anonymous reviewers for their comments and
invaluable suggestions.
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Appendix: List of the Items
Perceived Sacrifice
Based on this service encounter, please rate on the following scales, the time you
perceive to have spent waiting to be served.
(7-point semantic differential scale; little time / a long time; lower than I expected /
higher than I expected)
Please rate on the following scales, the price you perceive to have paid for the service
received at this encounter (including food, service, and environment)?
(7-point semantic differential scale; cheap / expensive; reasonable / unreasonable;
lower than I expected / higher than I expected)
Perceived service Quality

Please rate on the following scales, the overall quality of the service you received at
this encounter (including food, service, and environment).
(7-point semantic differential scale; one of the worst / one of the best; low quality /
high quality; lower than the standard of this industry / higher than the standard of
this industry)
Perceived Value
(7-point semantic differential scale, not worthwhile at all / very worthwhile)
Based on the service you received (including food, service, environment), how did
you perceive the price you paid?
Based on the service you received (including food, service, and environment), how
did you perceive the time you spent waiting to be served?
Customer Satisfaction
How did you feel about the overall service experience (including food, service,
environment) at the recent encounter?
(7-point semantic differential scale; very unpleasant / very pleasant; very dissatisfied
/ very satisfied; I did not enjoy it at all / I enjoyed it very much)
Please mark on one of the seven faces below the position, which most reflects your
feelings towards this overall service experience.
Post-purchase Behaviour
(1=definitely will not / 7=definitely will)
I will consume at this restaurant more frequently
I will recommend the restaurant to others
I would consider this restaurant as my first choice if I had to choose again
I will say favourable things about the restaurant to others
I will be a loyal customer of this restaurant
About the Author
Jackie L. M. Tam (PhD) is an assistant professor in the Department of

Management and Marketing of The Hong Kong Polytechnic University. Her
research work has been published in the International Marketing Review,
Psychology and Marketing, and The Journal of Services Marketing. Dr. Tams
research interests include services marketing, marketing research, and
consumer behaviour.

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This article was downloaded by: [McGill University Library]

On: 26 November 2012, At: 08:39

Journal of Marketing Management

Customer Satisfaction, Service Quality and Perceived

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Customer Satisfaction, Service Quality

restaurant industry. The results reveal that customer

Keywords: customer satisfaction, service quality, perceived value

In highly competitive markets, firms are increasingly concerned with

1Correspondence: Jackie L. M. Tam, Department of Management and Marketing, The

Customer satisfaction, quality and perceived value are three prominent

Defining Customer Satisfaction

customers are the primary source of most firms revenue. Customer

Defining Perceived Service Quality

Defining Perceived Value

Relationship between Perceived Service Quality and Customer Satisfaction

an opportunity for a firm to capture customer future purchases. During the

H1: Perceived service quality will have a positive effect on customer

Relationships between Perceived Value with Perceived Service Quality and

intentions (Cronin et al. 1997). Thus, marketers attempt to influence customer

H2: Perceived service quality will have a positive effect on perceived

While the literature documents a positive relationship between quality and

study, consumers determine the quality of a service following a consumption

Relationships between Perceived Value with Customer Satisfaction and

H5: Perceived value will have a positive effect on customer satisfaction

Relationship between Customer Satisfaction with Post-purchase Behaviour

satisfaction and loyalty may vary according to the degree of competition in

market share to be positively related. In summary, customer satisfaction is an

H8: Satisfaction will have a positive effect on post-purchase behaviour

Perceived Time Costs

Figure 1. Depicts an Integrative Model of the Relationships to be Assessed

Table 1. Demographic Characteristics of the Respondents

Demographics Number Percentages

Analysis and Results

Table 2. Results of Confirmatory Factor Analysis

Items Standardised Loadings Squared (r2) Multiple Correlations

demonstrate internal consistency (Nunnally 1978). Table 2 presents the

Table 3. Covariances and Correlations Among the Constructs

(I) (II) (III) (IV) (V) (VI)

Time Costs (II) 0.45 1.37 -0.02 -0.29 -0.08 -0.21

Perceived Value (IV) -0.08 -0.26 0.43 0.56 0.68 0.85

Customer Satisfaction (V) 0.08 -0.09 0.67 0.52 1.04 0.76

Post-purchase Behaviour (VI) -0.04 -0.26 0.61 0.68 0.81 1.11

Table 4. Parameters Estimates of the Structural Model

Monetary Costs -0.16*

r2 0.59 0.68 0.79

(* significant at 5 % level, standardised parameter estimates in parentheses)

Further analyses were conducted to examine the relationships between

Discussion and Conclusions

Although customer satisfaction has been used as a means of achieving the

service quality on perceived value might be offset by high perceived

quality and price should be not underestimated in an initial purchase. Since

Limitations and Suggestions for Future Research

relevant in services that are complex and professional such as medical

Anderson, E., Fornell, C., and Lehmann, D. (1994), Customer Satisfaction,

Berry, L. and Yadav, M. (1996), Capture and Communicate Value in the

36, No. 7/8, pp.811-828

Grnroos, C. (1984), A Service Quality Model and its Marketing

Mittal, B. and Lasser, W. (1998), Why Do Customers Switch? The Dynamics of

Item Scale for Measuring Consumer Perceptions of Service Quality, Journal

Economic and Psychology, Vol. 18, pp.387-406