QUALITY OF SERVICE ENCOUNTER CONSUMER EXPECTATIONS PERCEIVED

QUALITY OF SERVICE ENCOUNTER, CONSUMER EXPECTATIONS, PERCEIVED VALUE AND LOYALTY OF HOTEL GUESTS IN KENYA BY WANJIKU NG’A 1

Background • Service encounter is the basis for a customer's evaluation of the service provider. When companies provide a service encounter that suits consumers, they generate a positive experiential value and lasting customer relationships which leads to customer satisfaction (Wong & Tsai, 2010). • Service encounters directly impact customer satisfaction and also shape longer-term factors like intention to return, likelihood of communicating positively about the service and customer loyalty. 2

• Researchers such as Czepiel(1990) believe that the quality of the interaction between customers and service providers during the service encounter is important because it is at this level where customers judge the services provided to them. • Management of all encounters between an organization and its customers is therefore crucial in the development of quality services. 3

Customer Expectations Knowing what the customer expects is the first and possibly most critical step in delivering good quality service. Consumers of services have expectations about what they will receive from the delivery system and these are beliefs about future events which, when compared with the perceived actual service delivered, are presumed to influence satisfaction and assessments of overall service quality (Lovelock & Wirtz, 2007). 4

Perceived Value • Perceived value is consistently shown as a strong predictor of loyalty (Cronin et al. , 2000). It is argued that high value is one primary motivation for customer patronage. • Singh and Sirdeshmukh (2000) argue that consumers indicate behavioral intentions toward service providers as long as the relational exchanges provide superior value. • Customer value regulates behavioral intentions of loyalty toward the service provider as long as such relational exchanges provide superior value. 5

Loyalty • Jacoby and Chestnut (1978)emphasize the importance of brand loyalty and state that “The success of a brand on the long term is not based on the number of consumers that buy it once, but on the number of consumers who become regular buyers of the brand. ” • It is also believed that it is much more expensive to acquire a new customer than to retain an existing customer; and customers appear to be more profitable the longer they stay with a company. • Loyal customers are more likely to create new business by providing positive references to friends or colleagues. 6

The Hotel Industry in Kenya • The hotel industry is one of the fastest growing sectors of the global economies. Its significant contribution is seen to be on an upward trend, as evidenced even here in Kenya where international hotel chains are opening branches to reap the market rewards from this competitive industry (Kangongo, Musiega, & Manyasi, 2013). Customer satisfaction in the hotel industry is the highest priority for owners and managers competing with hundreds of others • This is because personal services are at the top of the travelers list of the most important things when considering a hotel to stay in. 7

• As Kenya focuses on being industrialized by 2030, research foresees the hotel industry as one of the sectors that will contribute greatly to the industrialization (Schultz & Omweri, 2012). • Meetings Incentives Conferencing Exhibitions(M. I. C. E) tourism sector in Kenya is expanding and the hospitality industry in general with new players coming into the market. The globalization of business has increased the needs for the MICE industry. • Construction of hotel properties is on the rise in Kenya and is projected to increase the total number of available rooms from 17, 500 currently to 19, 400 by 2018, according to a report by Price water house Coopers. 8

Research Problem • Service quality is considered to be an overall judgment of quality, and the quality of individual service encounters should contribute towards this judgment, a view endorsed by Jayawardhena, Souchon, Farrell, & Glanville (2007). • Thus, service encounter quality requires a holistic approach that focuses on the interaction between various variables such as customer expectations, perceived value and brand loyalty. This integrated view has not been studied and constitutes a major weakness in studies in service marketing. 9

• Most organisations do not offer service quality that meets customers’ needs, resulting in customer gaps and management dilemma. • Limited empirical literature is available on the use of performance based models in hotels in Kenya. • This study has operationalised the Gap model dimensions and seeks to test these variables as antecedents of loyalty. 10

• The hotel industry is one of the fastest growing sectors of the global economies. Its significant contribution is seen to be on an upward trend, as evidenced even here in Kenya where international hotel chains are opening branches to reap the market rewards from this competitive industry. • It is important to test the service encounter quality dimensions in this industry as it has been tested in other service firms. 11

Research Objectives The broad objective of this proposed study is to: Determine the influence of service encounter quality, customer expectations and perceived value on loyalty among hotel guests. The specific objectives of the study are to: • Determine the extent to which service encounter influences customer loyalty of luxury hotel guests in Kenya • Assess the extent to which customer’s expectations influence the relationship between service encounter and loyalty. • Examine the effect of perceived value on the relationship between service encounter and customer loyalty. • Determine the joint effect of service encounter, customer expectations and perceived value on loyalty of luxury hotel guests in Kenya 12

Literature Review • The study is based on the consumer behavior theory. The three major theories are; the expectancydisconfirmation theory (EDT), balance theory, and service encounter needs theory. • The expectancy disconfirmation theory emphasizes that expectations and perceived performance lead to post purchase satisfaction. It also argues that brand loyalty is a function of customer satisfaction, which allows for comparison of expectations prior to consumption and actual experience. 13

• Guests purchase goods and services with prepurchase expectations about anticipated performance. Once the product or service has been purchased and used, outcomes are compared against expectations. When outcome matches expectations, confirmation occurs. 14

Relationship between SEQ, CE, PV & Loyalty • Loyalty has been focused on as an important marketing strategy component in recent years because of the benefits involving existing customers. • Service encounter quality is the most crucial issue which most of the service organizations must pay attention to in order to enhance loyalty (Dick and Basu, 1994). Hotel customers tend to be loyal to specific services due to some service attributes such as processes, therefore, if customers are not satisfied with service quality of specific service, they’ll switch to others. This means that it is important to identify the customers’ expectations and their perceptions of value. 15

Conceptual Model 16

Conceptual Hypotheses • • In this study, hypotheses will be tested to establish the relationship between service encounter quality and brand loyalty of firms. H 1 Service encounter quality has a significant effect on brand loyalty H 2 Customer expectations have a significant mediating effect on the relationship between service encounter quality and brand loyalty. H 3 Perceived value has a significant mediating effect on the relationship between service encounter quality and brand loyalty. H 4 Service encounter quality, customer expectations and customer perceptions have significant joint influence on brand loyalty. 17

Research Methodology Research philosophy This study is guided by the positivist approach because it is based on existing body of knowledge; the researcher has reviewed literature from previous related studies, a conceptual framework has been developed and hypotheses has been formulated which will be tested using statistical techniques leading to their acceptance or rejection. The positivist approach adopts a clear quantitative approach to investigating phenomena (Cooper & Schindler, 2006). 18

Research Design • A descriptive cross-sectional design will be used for this study. The cross-sectional study is conducted once to pick out the parameters of a phenomenon at a specific point in time. • A descriptive cross-sectional survey affords the opportunity to capture a population’s characteristics and test hypotheses quantitatively and qualitatively. • The design also provides an opportunity to capture population characteristics and test hypotheses. 19

Population of the study • The population for this study will be guests at star rated hotels in Nairobi that are recognized by the Department of Tourism. • The unit of analysis in this study will be resident guests in the 5 and the 4 star rated hotels in Nairobi. • These group of customers give more weight to symbolic benefits of service quality and also the effect of branding here is more noticeable than in low rated hotels. 20

Sampling • The study will adopt a stratified random sampling procedure. From the selected target population, the guests will be stratified into 21 hotels and a proportionate sampling procedure employed to ensure that the number of samples drawn is relative to the size of each stratum. 21

Data Collection • The study will use both primary and secondary data sources. Primary data will be collected using questionnaires which consist of five sections; general information, service encounter quality, customer expectations, perceived value and brand loyalty. • The Secondary data will be obtained from the Ministry of Tourism, survey from Kenya Association of Hotels and Caterers (KAHC), the internet, journal papers and other industry publications. 22

Reliability and Validity Tests • Reliability tests for this study will be administered through Cronbachs’ alpha coefficient which is based on the average correlation between variables within each factor. Cronbach’s alpha reliability coefficient ranges from 0 to 1 where the closer it is to 1, the greater the consistency of the items in the scale. • Validity is the characteristic of measurement concerned with the extent to which a test measures what the researcher actually wishes to measure and that differences found with a measurement tool reflect true differences among participants drawn from a population. 23

Data Analysis • Descriptive statistics comprising of mode, median, mean scores, standard deviation, cross tabulation and frequency distribution will be used to summarize the characteristics of the respondents. • Inferential statistics will be used to establish the nature and magnitude of the relationship between the variables and to test the hypothesized relationships, inferential statistics will be used. Simple linear regression analysis will be used to determine the influence of service encounter quality on brand loyalty (H 1). 24