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International Journal of Marketing Studies

Vol. 2, No. 2; November 2010

Impact of Service Orientation on Frontline Employee Service Performance and Consumer Response
Rong-Da Liang Department of Marketing and Logistics Management, National Penghu University No.300, Liuhe Rd., Magong City, Penghu County 88046, Taiwan, R.O.C Tel: 886-6-926-4115 Ext: 5522 E-mail: rdliang@npu.edu.tw

Hsing-Chau Tseng Graduate School of Business and Operations Management, Chang Jung Christian University 396, Chang Jung Rd., Sec.1, Kway Jen, Tainan 71101, Taiwan, R.O.C Tel: 886-6-278-5123 Ext: 2020 E-mail: hsingchau@mail.cjcu.edu.tw

Yun-Chen Lee (Corresponding author) Graduate School of Business and Operations Management, Chang Jung Christian University No. 396, Chang Jung Rd., Sec.1, Kway Jen, Tainan 71101, Taiwan, R.O.C Tel: 886-937-366-869 Abstract As product and price become less important, managers search for new ways to differentiate themselves in a buyer-seller relationship. Increasingly, businesses have to focus on service orientation to differentiate themselves from their competitors. As consumer loyalty depends primarily upon rendering quality service, the delivery process among business service orientation, frontline service employee performance and consumer response deserves more attention. This article explores some of the ways in which service orientation can be used as an appropriate alternative to the more traditional business methods. This study analyzes the dyadic data collected from 247 questionnaires distributed to consumers and employees across 17 branches of a financial service company. The results show that service orientation positively affects employee service performance but negatively affects consumer loyalty. Employee service performance positively influences consumer loyalty and indirectly positively influences word-of-mouth of consumers. Keywords: Service orientation, Service performance, Consumer loyalty, Word-of-mouth 1. Introduction Recent marketing literature has acknowledged the role of a company’s service orientation in achieving a sustainable competitive advantage. This service orientation, the relationship and strategy between the company and the customer, is arguably the most important area for a business to study. Over the last decade, it has become crucial for businesses to fundamentally understand and satisfy consumer needs in order to succeed in a highly competitive market environment (Keillor, Parker and Pettijohn, 1999). These new considerations, while extended in scope, clarify several points about service orientation. As a result, its antecedents and consequences have been widely studied (Homburg, Hoyer, and Fassnacht, 2002; Kelley, 1992; Lytle and Timmerman, 2006; Marinova, Ye and Singh, 2008). The impact of service orientation may be viewed as a roadblock that businesses must navigate in order to reduce negative effects generated from interaction with consumers. A vast majority of the attention paid to the consequences of service orientation has concentrated on its relationship with business performance (Homburg et al., 2002; Lytle, et al., 1998; Lytle, Lynn, and Bobek, 2000; Di Mascio, 2010). However, relatively little academic research has focused on the role of service orientation in influencing employees and customer response. Moreover, the research is scant in addressing other possible consequences, such as the effect of service orientation on the operational level of employees (Wu, Liang, Tung, and Cheng, 2008). These impacts of service orientation can be applied only after the basis limitation impacts have been applied but before the operational level of employees are tested. Thus, this study simultaneously examines the various consequences of service orientation. E-mail: yunchen222@gmail.com

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International Journal of Marketing Studies

Vol. 2, No. 2; November 2010

Recent developments have given heightened importance to employees as important channels to deliver service to customers that will reduce the negative impact. The Albrecht (1988) “service triangle” indicates the tripartite relationship among the service organization, the service provider, and the customers. In the meantime, service organizations have begun to consider the roles their employees should play in achieving a sustainable competitive advantage (Asif and Sargeant, 2000). If employees are part of a solid service culture and receive management support for delivering improved customer service, this has a positive impact and influences the structuring of how an organization pursues service orientation. One which favors excellent service quality can lead to employee behavior and attitudes which, in turn, creates higher value and a better result. In addition, the experience will lead to increased consumer loyalty and positive word-of-mouth. Assumptions that have been made for the purpose of our analysis include how a company’s service orientation affects employees’ service performance and eventually customer loyalty and word-of-mouth. This current research begins with the development of the hypotheses to be tested in the study with an objective dyadic sample applied. The methodology used in the study is then described, after which the empirical results are presented. The article concludes with a discussion of research and managerial implications. 2. Literature Review 2.1 Attraction-Selection-Attrition Model The Attraction-Selection-Attrition (ASA) Model (Schneider and Goldstein, 1995; Schneider and Bowen, 1995) provides the theoretical background for the general framework of our study. According to this theory, individuals have diverse attitudes in the same environment (e.g., organization). However, over time, people within an organization become more similar in their dispositions and, consequently, more homogenous in their attitudes (Schneider et al., 1995). This result arises because the individuals in an organization are affected by the same situational influences, and thus their attitudes should converge (Ryan, Schmit, and Johnson, 1996). According to Schneider et al. (1995), a positive and satisfactory organizational climate allows employees to serve consumers with excellent service and is responsive to organizational and consumer goals. Therefore, once an organization pursues premium service orientation, consumer loyalty should be related to employees’ service performance and to the homogeneity of the working environment. 2.2 Relationships among service orientation, employee service performance and consumer loyalty According to Hogan, Hogan, and Busch (1984), service orientation can be defined as “a set of attitudes and behaviors affecting the quality of interaction between an organization’s employees and its customers.” In other words, it is the disposition used when providing service to the consumers. Liao and Chuang (2004) found empirical support for a positive relationship between service orientation (e.g., service environment) and frontline employee service performance. Furthermore, Alge, Gresham, Heneman, Fox, and McMaster (2002) indicated that customer service oriented employees are a key factor of customer service. Service organizations that emphasize service culture or service orientation can enhance employees’ service behavior. In focusing on the service triangle, the idealistic state exists when there are positive relationships between the service organization-service provider, service organization-consumer, and service provider-consumer. It represents a balanced triad and the optimal state in which the consumer has no need cognitively to distort, reevaluate, or behaviorally withdraw from the situation. When an organization maintains positive relationships with both the provider and the consumer, several desirable outcomes are likely (Kotler, 2000). Employees will experience increased levels of motivation, satisfaction, and commitment and decreased levels of intent to withdraw from the organization (De Man, Gemmel, Vlerick, Rijk, and Dierckx, 2002). There will be a reduction in the gap between consumer expectations and actual service quality, and consumers will be more loyal and will have higher repurchase intentions, as compared to when positive relations do not exist among all three parties (Castro, Armario, and Del Río, 2005). As a result, market orientation theory (Castro et al., 2005, Day 1994; Jaworski and Kohli 1993; Slater and Narver 1994; Wright, Pearce, and Busbin, 1997) indicates that firms with superior service strategy or facilitation should have superior customer knowledge, excellent service performance and should be able to develop offerings that better satisfy the needs and wants of target customers. Marketing literature indicates that an employees’ service performance (e.g., good interpersonal skills; employees’ credibility) positively impacts customer satisfaction and loyalty (Alge et al., 2002; Hansen, Sandvik, and Selnes, 2003). Bowen and Schneider (1988) noted three defining characteristics of service: intangibility, simultaneous production and consumption, and customer co-production. Customer experience thus is an important factor. Extant research (e.g., Castro et al., 2005; Hwang and Chi, 2005) suggests there are certain components of the service delivery process for which the consumer holds the provider responsible. Specifically, the consumer expects the provider to be reliable, responsive, competent, courteous, credible, and understanding.
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ISSN 1918-719X E-ISSN 1918-7203

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International Journal of Marketing Studies

Vol. 2, No. 2; November 2010

Consumers further expect providers to exhibit appropriate demeanor, communicate effectively, and inspire confidence. Finally, the quality of the interaction between employee and consumer is critical in determining customer satisfaction and loyalty (Liao et al., 2004; Lytle et al., 2006). According to these arguments, the following hypotheses are proposed: H1. Service orientation has a positive effect on employee service performance H2. Service orientation has a positive effect on consumer loyalty H3. Employee service performance has a positive effect on consumer loyalty 2.3 Relationships between consumer loyalty and word of mouth According to Zeithaml, Berry, and Parasuraman (1996), loyal customers forge bonds with the company and behave differently from disloyal customers. In this assumption, we can expect customer loyalty to impact behavioral outcomes and, finally, the profitability of a company. Srinivasan, Anderson, and Ponnavolu (2002) indicated that customers with higher loyalty can enhance the opportunity to provide positive word-of-mouth or willingness to pay more. Dick, Basu (1994), Hagel, and Amstrong (1997) noted that loyal customers are more likely to promote a company with a positive perspective. Thus we may subsequently recognize that the loyalty of customers will positively relate to their word-of-mouth behavior. H4. Consumer loyalty is positively related to word of mouth 3. Research method In line with the literature review and the purpose of study, the conceptual framework of the study was configured as illustrated in Figure 1. 3.1 Measure In order to test the proposed hypotheses, an empirical study that is quantitative in nature was conducted. The analysis was based on dyadic data; that is, involving judgments by frontline employee and their consumers, an approach that rules out the risk of a common method bias. Most of the scales we used were developed on the basis of a review of the extant literature and interviews with practitioners. This study adopted a 5-point Likert scale for a questionnaire which comprised of questions already developed for other studies but modified to serve this study’s purposes. As a result, the questionnaire was pre-tested and further refined on the basis of comments from marketing managers and scholars during the pretest. The unit of analysis was an individual front service employee in a financial company and the consumer base for which this employee is responsible. The service orientation and frontline employee service performance was measured with five and seven items based on the work of Liao et al. (2004). Consumer loyalty and word-of-mouth was measured through items adapted from the work of Lichtenstein Lichtenstein, Drumwright, and Braig (2004). A complete list of items appears in Table 1. 3.2 Sample and data collection The financial service industry was selected for the first phase for two reasons: (1) customers desire higher quality service and employee response in a highly competitive environment (George and Bettenhausen, 1990; Keillor et al., 1999), and (2) customer management relationships (CRM) is the basis of overall strategy consideration for most financial service companies (Fitzgibbon and White, 2005). In the second phase, service oriented businesses were selected that met three criteria. First, financial holding companies with branch systems were chosen because the branch companies are located in different areas with different customer segmentations (such as Northern, Central and Southern Taiwan) with different influences of regional competition and internal administration, which facilitates effective measurement of the research topic. Second, companies with fully developed customer database systems were selected to facilitate investigation of customer-employee relationships. Third, companies whose managers agreed to assist in customer selection and questionnaire distribution were chosen (Hellier, Geursen, Carr and Rickard, 2003). A specific financial company was then chosen as the research subject. In the third phase, of 35 branches of a specific financial company, 17 branches were contacted with a random sampling method. Questionnaires of dyadic data from employees (such as A1) and consumers (such as B1) were distributed to the 17 branches which were then distributed to service personnel by branch managers. Service personnel were asked to randomly distribute consumer questionnaires to consumers on the same date the

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questionnaire forms arrived. After the completion of the questionnaire forms, branch managers returned the questionnaire forms back to the researchers. In total, 300 questionnaires were distributed to employees and another 300 were distributed to consumers of which 275 and 254 completed forms were collected, respectively. Additionally, 247 copies were counted as valid (a fully completed A1 and B1 form). 4. Results 4.1 Factor and reliability analysis This study analyzed the validity and reliability of all scales using exploratory factor analysis and Cronbach’s coefficient. The dimension value ranged from 0.67~0.87. Although the reliability of service orientation was only .67, the overall reliability for all scales exceeded the acceptable level of 0.7, as recommended by Nunnally (1978). The relationship between SO2 and SO5 and service orientation was below 0.5. After removing these two questions, reliability values of 0.78 were obtained. Regarding the analytical results of employee service performance, the ESP7 and dimension was less than 0.5. The item was removed and a reliability value of 0.87 was obtained. The resulting Cronbach values of consumer loyalty and word of mouth were 0.78, and 0.83, respectively. 4.2 Confirmatory factors analysis This study used two-stage confirmatory factors analysis to test whether all dimensions had sufficient convergent and discriminated validity. For convergent validity, the results of confirmatory factors analysis for all dimensions are listed in Table 2. All of the adequacy indicators were close to the ideal, and the t values for the factor loading of all measurement items reached the level of significance (p