SERVICE QUALITY AND CUSTOMER RETENTION
Parasuraman et al. (1988) suggests that service quality is a complex and elusive concept. He explains that it involves the comparison between what a customer expects and what they actually receive. Service quality, he argues, can only be measured from the customer’s perspective, with quality being the service’s ability to meet customer expectations. The customer’s ability to assess service based on these expectations significantly influences their satisfaction or dissatisfaction. Clear and easy judgment of service quality from the customer’s viewpoint thus plays a key role in determining their satisfaction.
However, Wilson (2018) points out that the definition of quality, as based on customer expectations, has been criticized by some scholars, as expectations are seen as predictive measures that may not have occurred yet. Parasuraman et al. (1994) argue that understanding customer expectations helps service providers identify weak areas in their service delivery process, allowing them to make improvements (Venetis & Ghauri, 2004). Some scholars suggest that if service quality is defined as the ability to differentiate, then performance measurement should be designed to create a suitable scale for evaluating service quality. Thus, customer perceptions of quality are central, and organizations must focus on satisfying these perceptions (Purandare, 2019). Service quality is also crucial for customer retention; exceeding expectations can boost customer loyalty and provide a competitive advantage.
Service quality is often judged by customers based on their past experiences or similar services they’ve encountered. According to Datta, Fraser, and Lebcir (2018), customer retention is closely linked to customer loyalty, as loyal customers tend to make repeat purchases. Retaining customers is often more cost-effective and beneficial to an organization than acquiring new ones, especially in competitive industries (Omondi & Odock, 2019). Satisfied customers can positively influence a company’s reputation by bringing in more customers, whereas dissatisfied customers can drive others away (Satti, Babar, & Ahmad, 2019).
The SERVQUAL theory, selected for this study, emphasizes that service quality should be measured through customer perceptions. Silalahi, Ritonga, and Batubara (2019) explain that customers evaluate service quality by comparing their expectations with the actual service they receive. Although this theory is widely praised, it faces criticisms regarding the difficulty of determining and measuring customer expectations. Jones, Bryon, and Huang (2019) argue that customer expectations change frequently, making it challenging for companies to consistently meet them. However, upward communication and customer engagement can help address this issue. Asagba and Coker (2019) also highlight the challenges of translating customer expectations into service design and standards, but they stress that companies committed to service quality can overcome these challenges. Maladi, Nirwanto, and Firdiansjah (2019) note that exaggerated advertising can set unrealistic customer expectations, leading to disappointment, but suggest that honest marketing can mitigate this issue.
Despite its criticisms, the SERVQUAL theory remains valuable for measuring service quality, and this study will use it as a foundation.
Reliability, according to Hadi, Aslam, and Gulzar (2019), reflects a service provider’s ability to deliver services consistently and on time. Customers need to perceive the service as reliable in order to remain loyal. Reliable service not only means timely delivery but also effective and efficient service. Customers’ continued engagement with a service provider depends on the firm’s ability to consistently meet their needs. Outsourcing experts in communication to handle customer queries efficiently can further enhance reliability and build trust (Rashid & Rokade, 2019).
Timely responses to customer needs are crucial for building a strong reputation and fostering customer loyalty. A positive reputation enhances customer retention, whereas negative experiences can lead to dissatisfaction and loss of business. Providing timely feedback and addressing customer complaints builds trust and encourages repeat business, solidifying customer loyalty.
Westerlund, Leila, and Schmidt (2019) emphasize the importance of service assurance for customer retention. Customers need to feel confident that they will consistently receive quality service. Companies that ensure reliable and accessible service can retain loyal customers for the long term (Boadu & Achiaa, 2019). In a competitive market, service assurance is key to maintaining customer loyalty and trust (Wilson, 2018).
Responsiveness, as described by Rashid and Rokade (2019), is the ability of a service provider to deliver timely, efficient, and effective service. Jones, Bryon, and Huang (2019) agree that responsiveness influences customer satisfaction and retention. Service providers that quickly and effectively address customer needs foster trust and confidence, making customers more likely to remain loyal.
Customer satisfaction, as noted by Kebede Desta (2019), has been a focus for companies over the past few decades. Satisfied customers are more likely to become loyal and continue purchasing from the same company. Customer satisfaction is a key factor in encouraging repeat purchases and generating customer loyalty. Rashid and Rokade (2019) further suggest that satisfied customers are more likely to recommend a service to others, which can drive loyalty and create brand advocates. However, even satisfied customers may not always remain loyal, highlighting the need for companies to understand and nurture customer loyalty in addition to satisfaction.
