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American International Journal of Social Science

Vol. 3 No. 2; March 2014

Relations between Service Quality and Customer Loyalty: An Empirical Investigation of Retail Chain Stores in Emerging Markets
Neringa Ivanauskienė
Doctor of Social Sciences
Vice-Dean for Academic Affairs
ISM University of Management and Economics
Arklių St. 18, Vilnius 01129, Lithuania
Justina Volungėnaitė
Master of Science
ISM University of Management and Economics
Arklių St. 18, Vilnius 01129, Lithuania

Abstract
The current study investigated the relationship between service quality and customer loyalty across three emerging countries. The quantitative research data was collected through a survey of current customers of the specific retail sector, the household retail chain in Lithuania, Latvia and Estonia. Data obtained from 370 survey questionnaires was analyzed using SPSS; the Principal Component Analysis and Linear Regression statistical methods were applied. The study findings indicate that the dimensions of retail service quality in a specific sector of the industry are different in emerging markets compared to those that are in the original measurement scale such as RSQS. The study revealed that the three dimensions of service quality, namely, personal interaction, policy and product quality have a positive impact on customer loyalty across household retail markets in the three researched countries.

Keywords: Service Quality, Loyalty, Retail, Emerging Markets.

Introduction
Literature analysis discloses that there are discussions on the dimensions of retail service quality. Retail service quality dimensions are different than those in any other service industries (Finn and Lamb, 1991). Researchers should evaluate whether RSQS measurement instrument developed by Dabholkar, Thorpe and Rentz (2001), is applicable in specific retail sector or different cultural environment (Thenmozhi and Dhanapal, 2010). Myriad studies are done in this regard including studies in Iceland (Eysteinsson and Bjorsdottir, 2012), South Africa (Boshoff and Terblanche, 1997), Singapore (Mehta, Lalwani and Han, 2000), India (Kaul, 2007; Ramakrishnan and Ravindran, 2012), Taiwan (Huang, 2009), and other retail markets. However, it can be stated that emerging markets like Lithuania, Latvia and Estonia are not researched intensively in this regard (according to Hoskinsson, Eden, Lau and Wright (2000) Post Soviet countries can be defined as emerging markets). Thus the research with an attempt to test the usefulness of RSQS in Lithuania, Latvia and Estonia reduces the gap in research and makes it possible to compare what impact each of the retail service quality dimensions make on customer loyalty. Thus the aim of this study is twofold: (1) to evaluate the applicability of RSQS instrument in Lithuania, Latvia and Estonia household retail sector and (2) to examine the relationship between retail service quality dimensions and customer loyalty. A quantitative survey of retail customers in Lithuania, Latvia and Estonia was executed, and data obtained from 370 survey questionnaires was analysed using Principal Component Analysis and Linear Regression method.

1. Theoretical Considerations and Hypotheses
1.1. Service Quality and Customer Loyalty
Service quality is defined as the difference between customers’ expectations and perceptions of service (Parasuraman, Zeithaml and Berry, 1988) and can often be seen as a way to build a competitive advantage. 113

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Service quality as a multi-dimensional construct commonly regarded as customer judgements about service supplier and customer interactions and service itself (Cronin and Taylor, 1992; Babbakus and Boller, 1992; Zeithaml et al., 1996).

According to Sargeant and West (2001), it is obvious that the perceptions of service quality and commitment are related to loyalty, but each of the aforementioned factors, may have a different impact on customer loyalty in a particular market. There are two kinds of reasons that can determine relationship breakdown between the customer and the organization - the natural causes (customer demand extinction) and artificial causes (inadequate product specifications, insufficient quality of service level) (Sargeant and West, 2001). It is obvious that in order to increase customer loyalty the organization must seek to eliminate both natural and artificial customer exit reasons.

Service quality analysis makes an impact on the development of the customer loyalty concept – service quality can be regarded as one of the most frequently analyzed customer loyalty determinants. Tangible and intangible constituents of service quality were important in evaluating either customer view of an organization or customer trust in an organization (Doney and Cannon, 1997; Garbarino and Johnson, 1999). It has been defined that service quality is very important for customer satisfaction, and by it service quality impacts customer loyalty (Cronin and Taylor, 1992; Oliver, 1999). It can be stated, that the limitation of service quality studies is the inconsistency in determining the link between service quality and customer loyalty. Some studies have found that service quality determines customer satisfaction and affects customer loyalty through satisfaction (Cronin and Taylor, 1992; Rust and Oliver, 1994). Other studies, in contrast, have justified the influence of customer satisfaction on the quality of service (Bolton and Drew, 1991).

Howat, Crilley, and McGrath (2008) attributed the approach of research into service quality to American and Nordic schools of thought. The approach of American school of thought to service quality is best revealed in SERVQUAL model developed by Parasuraman et al., (1985). In conceptualizing the basic service quality model the authors identified ten key determinants of service quality: access, communication, competence, courtesy, credibility, tangibility, reliability, responsiveness, security and understanding the customer. Later the authors grouped SERVQUAL dimensions into five and added assurance and empathy dimensions...

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Keywords

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