Journal of Hospitality Marketing & Management

ISSN: 1936-8623 (Print) 1936-8631 (Online) Journal homepage: http://www.tandfonline.com/loi/whmm20

Service Orientation, Service Quality, Customer

Satisfaction, and Customer Loyalty: Testing a
Structural Model

Hyun Jeong Kim

To cite this article: Hyun Jeong Kim (2011) Service Orientation, Service Quality, Customer
Satisfaction, and Customer Loyalty: Testing a Structural Model, Journal of Hospitality Marketing &
Management, 20:6, 619-637, DOI: 10.1080/19368623.2011.577698

To link to this article: http://dx.doi.org/10.1080/19368623.2011.577698

Published online: 30 Jun 2011.

Submit your article to this journal

Article views: 3332

View related articles

Citing articles: 42 View citing articles

Full Terms & Conditions of access and use can be found at

http://www.tandfonline.com/action/journalInformation?journalCode=whmm20

Download by: [FU Berlin] Date: 30 April 2017, At: 13:00

Journal of Hospitality Marketing & Management, 20:619–637, 2011
Copyright © Taylor & Francis Group, LLC
ISSN: 1936-8623 print/1936-8631 online
DOI: 10.1080/19368623.2011.577698

Service Orientation, Service Quality, Customer

Satisfaction, and Customer Loyalty: Testing a
Structural Model

HYUN JEONG KIM

School of Hospitality Business Management, Washington State University,
Pullman, Washington, USA

The objective of this study is to develop and validate a conceptual

model that incorporates the relationships among service orienta-
tion, service quality, customer satisfaction, and customer loyalty.
Data were collected from a chain of casual dining restaurants
located in Seoul, Korea. Frontline employees completed a ques-
tionnaire measuring service orientation while customers completed
a questionnaire measuring perceived service quality, satisfaction,
and loyalty. The questionnaires from customers then were paired
with the questionnaires from employees who had attended to the
customers. The proposed model indicated that customers’ percep-
tions of service quality fully mediate the effect of employees’ service
orientation on customer satisfaction and that customer satisfac-
tion fully mediates the relationship between customers’ perceptions
of service quality and customers’ decision to remain loyal.

KEYWORDS Service orientation, perceived service quality,

customer satisfaction, loyalty

INTRODUCTION

The restaurant industry in Korea has expanded dramatically. In 13 years

(1991–2004), the number of restaurants rose from 298,196 to 600,233; this
is an average annual growth rate of 7.5% (Statistics Korea, 2006). One of
the major forces behind this significant growth is the introduction of many

Address correspondence to Hyun Jeong Kim, PhD, School of Hospitality Business

Management, 471 Todd Hall, Washington State University, Pullman, WA 99164, USA. E-mail:
Jennykim@wsu.edu

619
620 H. J. Kim

chain restaurants from other countries, particularly from the United States.
For example, quick-service restaurants like McDonald’s, Wendy’s, and Pizza
Hut appeared in Korea in the mid- and late-1980s while mega casual-dining
chains such as T.G.I. Friday’s, Bennigan’s, Outback Steakhouse, and Chili’s
penetrated the Korean market in the 1990s (Park, 2009). Korean operators
also became sophisticated, developing their own chains or specialty restau-
rants to draw diners away from foreign-brand chain restaurants (Park, 2009).
Taken together, these phenomena have intensified the competition in the
restaurant industry.
As the market became saturated and the global economic recession,
which started in the late 2000s, dragged on, the Korean restaurant indus-
try ceased to enjoy its traditional influx of customers. Within the hospitality
industry, the competition has led many organizations to look for profitable
ways of differentiating themselves. One such strategy is the delivery of high
service quality (Zemke & Algright, 1985; Stevens, Knutson, & Patton, 1995).
High service quality increases customer satisfaction and produces measur-
able long-term benefits in market share and profitability (Anderson, Fornell,
& Lehmann, 1994). From the managerial point of view, the ultimate goal is
to attract and maintain customers. Hospitality operations have learned that
attracting new clients takes four to five times as much money as maintaining
existing ones (Bowen & Basch, 1994); therefore, customer retention is a key
to survival in the hospitality industry.
Numerous studies have indicated that customer satisfaction, service
quality perceptions, and customers’ decision to remain loyal or switch ser-
vice providers are significantly affected by the customer-oriented attitude
or behaviors of contact employees. (Bitner, 1990; Crosby & Stephens, 1987;
Ekiz, 2009; Schneider, Parkington, & Buxton, 1980; Surprenant & Soloman,
1987). However, empirical research to find the relationships among these
constructs is limited. The objective of this study is to develop and validate a
conceptual model that integrates the relationships among service orientation,
service quality, customer satisfaction, and customer loyalty in the context of
casual dining restaurants in Korea.

HYPOTHESES AND RESEARCH MODEL

Service Orientation
Service orientation has been viewed as a blend of certain dimensions of
personality (Cran, 1994; Herley, 1998; Hogan, Hogan, & Busch, 1984).
Hogan et al. (1984) defined service orientation as a “disposition to
be helpful, thoughtful, considerate, and cooperative” (p. 167). Other
researchers have emphasized the impact of situational and environmen-
tal variables on service-oriented behaviors (Soloman, Surprenant, Czepiel,
& Gutman, 1985). Donavan (1999) defined service orientation as an
 Service Orientation, Service Quality, Satisfaction and Loyalty 621

interaction between individual employee’s personality traits and the service

environment.
The first researchers to assess service orientation in the restaurant indus-
try were Dienhart, Gregoire, and Downey (1991). Groves (1992) expanded
Dienhart et al.’s (1991) nine-item service orientation scale to 34. Both the
original and expanded versions comprised three constructs: customer focus,
organizational support, and service under pressure. The researchers argued
that the first view (service orientation as an innate personality trait) is
embedded in the customer focus construct, while the second view (service
orientation focusing on situational or environmental elements) is embedded
in organizational support and service under pressure. This study followed
Dienhart et al.’s (1999) integrative approach and defined service orientation
as a function of individual traits and environmental or situational factors.

Service Quality
In the early 1980s, the manufacturing industry implemented total quality
management (TQM) and similar approaches. As service did not resemble
physical goods due to its intangibility, heterogeneity, and inseparability of
production and consumption, it was difficult to define and measure the
concept of service quality (Parasuraman, Zeithaml, & Berry, 1985). Unlike
quality concepts from the manufacturing sector, service quality experts in the
service industry developed a unique service quality concept using consumer
behavior models.
With the emphasis on the voice of the customer, service quality was
defined as the difference between customer expectations of service and the
perceptions of the actual service received (Parasuraman, Zeithaml, & Berry,
1988). This popular concept resulted in the creation of the SERVQUAL instru-
ment (Parasuraman et al., 1988). Originally, SERVQUAL was proposed as a
generic measure that could be applied to any service. However, Carman
(1990) indicated that SERVQUAL must be customized to the service in ques-
tion. In the hospitality industry, a modified version of SERVQUAL, DINESERV
was developed to measure service quality in restaurants (Stevens et al.,
1995).
Researchers have disagreed about the best way to operationalize the
SERVQUAL instrument (Cronin & Taylor, 1992; Parasuraman, Berry, &
Zeithaml, 1993). Cronin and Taylor (1992) demonstrated that the perceptions
battery alone explains more variances in the structural model. However,
Parasuraman et al. (1993) argued that the decision depends on the objec-
tive of the study; difference scores are useful for the purpose of diagnosing
service shortfalls, whereas perception ratings alone are useful when explain-
ing the variance in some dependent variables. Because the objective of this
study is to investigate the interrelationships (or causal relationships) among
the four constructs (service orientation, service quality, customer satisfaction,
622 H. J. Kim

and customer loyalty) in the structural model, it is deemed appropriate to

utilize the perceptions score of service quality rather than the gap score
(difference between expectations and perceptions of service performance).

Customer Satisfaction and Loyalty

This study adopted Oliver’s (1981) concept of customer satisfaction. Oliver
(1981) defined customer satisfaction as the “summary psychological state
resulting when the emotion surrounding confirmed or disconfirmed expec-
tation is coupled with the consumer’s prior feelings about the consumption
experience” (p. 27). The term disconfirmation in this context relates to
the fulfillment of expectation, and may be positive (where product perfor-
mance exceeds expectations), negative (where product performance falls
below expectations), or zero (where performance equals expectations).
More specifically, an individual’s expectations are (a) confirmed when a
product performs as expected, (b) negatively disconfirmed when the prod-
uct performs more poorly than expected, and (c) positively disconfirmed
when the product performs better than expected. This paradigm, known
as confirmation/disconfirmation, leads to an emotional reaction called
satisfaction or dissatisfaction.
Customer loyalty is defined as “the feeling of attachment to or affec-
tion for a company’s people, products or services” (T. O. Jones & Sasser,
1995, p. 94). Marketing researchers have long favored behavioral scales to
assess customer loyalty in the belief that the share of purchase ultimately
represents the level of loyalty. Although customer loyalty and repeat pur-
chase behaviors are closely associated, there is criticism of the exclusive
use of behavioral scales as a loyalty measure (Jacoby, Chestnut, & Fisher
1978). For example, behavioral loyalty can be influenced by a variety of cir-
cumstantial constraints such as accessibility of services or products (Dick &
Basu, 1994). In this situation, behavioral scales are likely to fail to distinguish
spurious loyalty from true loyalty. As an alternative, attitudinal scales high-
lighting trust or emotional attachment have been proposed (Baloglu, 2002).
Ponnavolu (2000) argued that both behavioral and attitudinal measures are
necessary to appreciate the full picture of customer loyalty because they
are two integral dimensions of loyalty. This study utilized the concept of
customer loyalty that bears both behavioral and attitudinal aspects.

Relationships Among Service Orientation, Perceived Service Quality,

and Customer Satisfaction
The relationship between service orientation and perceived service quality
was first suggested by Schneider et al. (1980). In a study of 23 banks, they
discovered that the climate for service in a bank was correlated to customers’
 Service Orientation, Service Quality, Satisfaction and Loyalty 623

attitudes about service quality. Furthermore, there was a strong correlation

between employees’ perceptions of service orientation and customers’ per-
ceptions of overall service quality. Additional studies found a substantial
correlation between employees’ service attitudes and customers’ perceptions
of service quality (Schneider & Bowen, 1985). C. Jones and DeCotiis (1986)
stated “service quality in a hotel or restaurant depends absolutely on the
ability of an operation’s employees to deal graciously with guests in all sit-
uations” (p. 68). Similarly, other hospitality scholars asserted that hospitality
business organizations should have employees who make customers feel
special, have a positive attitude, and work well under pressure, thereby pro-
viding excellent customer service (Kim, McCahon, & Miller, 2003; Marsh,
1994). Therefore, the first hypothesis of the proposed model is as follows:

H1: A high degree of service orientation for the contact employee has
a positive and significant effect on the customer’s perception of
service quality.

Research has shown the possibility of a direct link between customer

satisfaction and the contact employee’s service orientation. Westbrook (1981)
identified the eight factors that could influence customer satisfaction in a
retail setting (store salespeople, store environment, merchandising policies,
store service orientation, product, clientele, value/price relationship, and
special sales). Factor scores of these eight components then were used as
predictor variables for multiple regression analysis. The results indicated
that satisfaction with store salespeople (encompassing the four variables
of helpfulness, friendliness, politeness, and number of salespeople) had the
most influence on customer satisfaction. Other scholars have reported similar
findings that customer satisfaction depends directly on particular behaviors
of contact employees (Bitner, 1990; Donavan & Hocutt, 2001; Surprenant &
Soloman, 1987). These conclusions suggest the following hypothesis:

H2: A high degree of service orientation by the contact employee has a

positive and significant effect on customer satisfaction.

Relationships Among Service Quality, Customer Satisfaction, and

Customer Loyalty
Literature has suggested contradictory views of whether customer satisfac-
tion or service quality directly affects customer loyalty (Bitner, 1990; Cronin
& Taylor, 1992). This conceptual conflict has resulted from a definition of
service quality; “a form of attitude, which is related but not equivalent to
customer satisfaction, and results from a comparison of expectations with
perceptions of performance” (Parasurman et al., 1988, p. 15). Bitner (1990)
624 H. J. Kim

supported this definition and proposed that satisfaction derived from indi-
vidual transactions (Oliver, 1981), leads to a more general construct, service
quality (or attitude), which in turn leads to customer loyalty. Cronin and
Taylor (1992) hypothesized that service quality mediates customer satis-
faction and future purchase intentions; that is, customer satisfaction is an
antecedent of service quality. However, the empirical result in this non-
recursive LISREL model suggested that service quality is an antecedent of
customer satisfaction. Accordingly, the relationship between service quality
and customer satisfaction is hypothesized as follows:

H3: Favorably perceived service quality has a positive and significant

effect on customer satisfaction.

Although Cronin and Taylor (1992) demonstrated that customer satis-

faction has a more significant effect on customer loyalty than service quality,
it seems feasible that both factors could influence customer loyalty signifi-
cantly. In fact, when Heung, Mok, and Kwan (1996) examined the degree
of hotel brand loyalty in the free independent travelers market for the Hong
Kong hotel industry, their results revealed that the quality of hotel services
is critical for hotel brand loyalty. Placing equal weights on the findings by
Cronin and Taylor (1992) and Heung, Mok, and Kwan (1996), the following
two hypotheses are proposed:

H4: Favorably perceived service quality exerts a positive and significant

effect on customer loyalty.

H5: Customer satisfaction exerts a positive and significant effect on

customer loyalty.

After the earlier proposed paths (H1 through H5) were put together,
two mediating relationships became apparent: service quality as a
mediator between service orientation and customer satisfaction (Service
Orientation → Perceived Service Quality → Customer Satisfaction); and cus-
tomer satisfaction as a mediator between service quality and customer loyalty
(Perceived Service Quality → Customer Satisfaction → Customer Loyalty).
Therefore, the following additional hypotheses are put forward:

H6: Perceived service quality mediates the effect of contact employees’

service orientation on customer satisfaction.

H7: Customer satisfaction mediates the effect of service quality on

customer loyalty.

Figure 1 depicts a full model with hypothesized relationships.

 Service Orientation, Service Quality, Satisfaction and Loyalty 625

Employee Differences: Customer Outcomes:

Service Quality

Service Customer
Orientation Loyalty

Customer
Satisfaction

FIGURE 1 Proposed model.

METHOD
Sample and Procedure
Data were collected from one chain of casual dining restaurants located
in Seoul, Korea. A total of seven restaurants in the chain participated in
this study. Frontline employees who made frequent face-to-face contacts
with diners (i.e., waitpersons and bartenders) were invited to this study. A
total of 169 usable questionnaires assessing service orientation were gath-
ered from contact employees, while 508 usable questionnaires measuring
service quality, customer satisfaction, and customer loyalty were gathered
from diners. Questionnaires for customers were distributed by participating
employees during the lunch (noon to 3:00 p.m.) and dinner (5:00 p.m. to
8:00 p.m.) periods. The employees were instructed to solicit male and female
customers of various age groups at the time of the survey distribution and
to recruit a minimum of three customers. Customer participants completed
the questionnaire after receiving service from the employee who attended
to them.
The researcher coded employee surveys numerically and assigned one
specific number to each contact employee. Customer questionnaires were
coded with the same number assigned to the particular server or bar-
tender so that the researcher could match employee questionnaires with
customer evaluations. Customers placed the completed questionnaire in an
envelope, sealed it, and handed it to the employee. The employee kept
customers’ questionnaires, along with their own questionnaire, in a large
envelope until all questionnaires in the unit had been completed. Then, all
the questionnaires were collected and handed to the researcher. As a token
626 H. J. Kim

of appreciation, a cash incentive (equivalent to US$200) was offered to each

unit to be used for employee socials.

Survey Instrument
To assess employee service orientation, Groves’ (1992) scale was selected.
Groves’ (1992) scale, which originated in the United States, was subject to
factor analysis in order to assess its validity in Korean culture (Kim et al.,
2003). The factor analysis by Kim et al. (2003) indicated that four factors
(customer focus, prior customer relationship, service under pressure, and
organizational support) were more appropriate for Groves’ (1992) measure
and several items were eliminated because of low factor loadings. Therefore,
the shortened version with four factors (after the elimination of low-factor-
loading items) was used to assess contact employees’ service orientation
in this study. The sample items for the four factors are: “I will go out of
my way to provide good service to customers” (Customer Focus); “People
I have served before ask for me” (Prior Customer Relationship); “Our ser-
vice procedures make it easy for me to give excellent customer service”
(Organizational Support); and “Sometimes I forget to smile when the restau-
rant is really busy” (Service Under Pressure). The four factors each yielded a
coefficient alpha of >.70, with an overall coefficient alpha of .78. All of the
statements were rated on a 5-point scale ranging from 1 (strongly disagree)
to 5 (strongly agree).
To evaluate service quality of the participating restaurants, the per-
ceptions battery of DINESERV was utilized. DINESERV consists of 29 items
with five service quality dimensions (tangibles, assurance, reliability, respon-
siveness, and empathy), which originated from the SERVQUAL measure of
Parasuraman et al. (1988). Five dimensions of DINESERV were not con-
firmed using the customer data of this study. Previous studies have also
reported inconsistent outcomes on the five-factor structure of SERVQUAL
(Carman, 1990; Babakus & Boller, 1992). The results of this study suggested
the existence of three subdimensions in tangibles and indistinguishability
between the responsiveness and assurance dimensions. The first tangibles
dimension focused on appearance of physical facilities and staff; the second
pertained to menu of the restaurant; and the third emphasized comfort and
cleanliness of facilities. Consequently, six factors (Tangibles I, Tangibles II,
Tangibles III, Reliability, Combination of Responsiveness and Assurance, and
Empathy) were used for this study. The alpha values for the six constructs
of DINESERV ranged from .78 to .93, with an overall coefficient alpha of .96.
All DINESERV items used a 7-point scale ranging from 1 (strongly disagree)
to 7 (strongly agree).
Customer satisfaction was assessed with two items (α = .76). The first
item assessed the “summary psychological state” derived from a consumer’s
dining experience. The item was stated as “Overall, I am satisfied with this
 Service Orientation, Service Quality, Satisfaction and Loyalty 627

restaurant” and rated using a seven-point scale from 1 (strongly disagree) to

7 (strongly agree). The second item was a modification of the Circles Scales
(Andrews & Withey, 1976); it has a rectangular shape with a 7-point graphic
rating. The first rectangle containing all minuses represents the worst dining
experience; the seventh rectangle containing all plusses represents the most
pleasant. Customer loyalty was also measured with two items (α = .83).
The first item pertained to behavioral loyalty (“I would come back to this
restaurant to dine”) and the second item related to attitudinal loyalty (“I feel
attached to this restaurant”). Both items were rated on a seven-point scale
ranging from 1 (strongly disagree) to 7 (strongly agree).

Data Analysis
Prior to data analysis, the questionnaires from customers, collected by each
employee, were averaged and then paired with the questionnaire from the
employee who attended to the customers. Hypotheses were tested using a
structural equation modeling (SEM) method with LISREL 8.71 (Joreskog &
Sorbom, 2004). Input for the LISREL 8.71 program consisted of a 14 × 14
covariance matrix. Four latent variables and 14 indicators were constructed
for the model (see Figure 2). The four latent variables included service ori-
entation, service quality, customer satisfaction, and customer loyalty. The 14
indicators included: (a) four from employee service orientation (Customer

T1 T2 T3 R R/A E

0.58 0.67 0.81 0.85 0.84

0.60

CF Service Quality
0.47
0.29* 0.08
0.52
PCR 0.90 RI
Service 0.73** Customer
0.61
OS Orientation Loyalty
0.78
0.49
0.08 0.84**
Customer EA
SUP
Satisfaction

0.75 0.89

S1 S2

FIGURE 2 Service orientation–customer loyalty model.

Note. Dotted lines indicate insignificant relationships. For Service Quality, T1 through T3 =
tangibles; R = reliability; R/A = responsiveness/assurance; and E = empathy. For Service
Orientation, CF = customer focus; PCR = prior customer relationship; OS = organizational
support; and SUP = service under pressure. For Customer Satisfaction, S1 = satisfaction 1
and S2 = satisfaction 2. For Customer Loyalty, RI = revisit intention and EA = emotional
attachment.
∗
p < .05. ∗∗ p < .00.
628 H. J. Kim

Focus, Prior Customer Relationship, Organizational Support, and Service

Under Pressure); (b) six from service quality (Tangibles I, Tangibles II,
Tangibles III, Reliability, Combination of Responsiveness and Assurance,
and Empathy); (c) two from customer satisfaction (two satisfaction items);
and (d) two from customer loyalty (Future Buying Intentions and Emotional
Attachment). The value of each indicator (subfactor) for the two constructs
(Service Quality and Service Orientation) was a composite score obtained
by averaging all variables in its respective subdimension; the indicators for
the two remaining constructs (Customer Satisfaction and Customer Loyalty)
used raw scores.
The paths connecting latent variables and their respective indicators
are called the measurement model, and the paths connecting the sets of
latent variables are called the structural model. As recommended by SEM
researchers (Hair, Anderson, Tatham, & Black, 1998; Joreskog, 1993), two
steps were used to test the proposed model. The first step involved con-
firmatory factor analysis to assess the validity of the measurement model.
The second step involved the generation of a structural model that tests the
research hypotheses.
To evaluate fits of both the measurement and structural model, several
fit indices were used including the chi-square statistic; the goodness-of-fit
index (GFI: a measure of the correspondence of the actual covariance matrix
with that predicted from the proposed model); the adjusted GFI index (AGFI:
a GFI index adjusted for sample size); the standardized root mean square
residual (standardized RMSR: average standardized residual value derived
from the fitting of the covariance matrix for the proposed model); and the
normed fit index (NFI: a measure that provides the incremental improvement
of the fit of the proposed model from a baseline model). After the evaluation
of the fit indices, the parameter estimates with their associated significance
levels using t values (parameter estimate or standard error) were reported
for the proposed model.

RESULTS
Model Fit
The overall chi-square for the measurement model was 107.12 with 71
df and a p value less than .0057. When the chi-square is not significant
(p > .05), the model fit is appropriate; that is, there is no significant differ-
ence between the actual matrix and the predicted matrix (Loehlin, 1992).
The small p value of the model indicated a significant difference between
the actual matrix and the predicted matrix. The chi-square statistic is known
to be very sensitive to sample size and the number of parameters estimated;
thus, using the normed chi-square (χ 2/df ) is appropriate (Hair et al., 1998;
Wheaton, Muthen, Alvin, & Summers, 1977). The normed chi-square had
a value of 1.51 (107.12/71) for the measurement model. This falls well
 Service Orientation, Service Quality, Satisfaction and Loyalty 629

TABLE 1 Goodness-of-Fit Indices for Measurement and Structural Models

Std.
Model χ2 df χ 2/df GFI AGFI NFI RMSR

Measurement model 107.12 71 1.51 .93 .88 .91 .052

Structural model 108.51 72 1.50 .93 .88 .91 .050
Note. GFI = goodness-of-fit index; AGFI = adjusted goodness-of-fit index; NFI = normed fit index; Std.
RMSR = standardized root mean square residual.

within the recommended levels of 1.0 to 2.0 (Hair et al., 1998), indicat-
ing that the model fit is acceptable. In addition to the normed chi-square,
other fit indices (GFI = .93; AGFI = .88; NFI = .91) fell around the desired
level of .90, revealing that the model is representative of the observed data
(Bentler & Bonett, 1980; Hair et al., 1998). Lastly, the standardized RMSR
(.05) suggested that the magnitude of the differences between the actual
and predicted covariance matrices are relatively small (Brown & Chdeck,
1993).
The overall chi-square for the structural model was 108.51 with 72 df
(p < .0055). Table 1 shows no significant difference between the structural
model and the measurement model (chi-square difference = 1.4, df = 1).
Because the measurement model allows all latent constructs to covary freely,
a comparison of the conceptual model to the measurement model is one
indication of adequate model fit. A lack of significant difference between
the two models implied that the data supported the theory. Other fit values
for the structural model were almost identical to those of the measurement
model (Normed chi-square = 1.51; GFI = .93; AGFI = .88; NFI = .91;
standardized RMSR = .05), satisfying the acceptable fit criteria mentioned
earlier.
Another method of evaluating the model fit is to examine the mod-
ification indices (chi-square reduction computed for each nonestimated
relationship). The modification indices suggested that the proposed model
fit could be improved by freeing additional correlations among measure-
ment errors. However, because those relationships could not be justified
theoretically, no changes were made to the model (Joreskog, 1993).

Parameter Estimates
The significance of the parameter estimates was judged using t values. The
critical t values are 1.96 for the 0.05 significance level and 2.58 for the 0.01
significance level. Table 2 presents the summary statistics of the measure-
ment model with LISREL estimates (factor loadings) and Table 3 presents
the path coefficients for the structural portion of the proposed model. An
examination of Table 2 reveals that each relationship between the latent
variables and their respective indicators are large, and all are statistically
significant (t > 2.58, p < .01). All latent variables displayed acceptable
630 H. J. Kim

TABLE 2 Summary Statistics and Measurement Model

Average
Factor Composite variance
Variables M SD loadings t value α reliability extracted

Service Orientation .78 77 .51

Customer focus 4.65 .33 .67 —
Prior customer 3.92 .92 .52 3.03∗
relationship
Organizational 4.34 .47 .61 3.20∗
support
Service under 1.81 .77 .49 3.27∗
pressurea
Service Quality .96 .96 .87
Tangible I 5.37 .79 .60 —
Tangible II 5.16 .87 .58 6.05∗
Tangible III 5.87 .66 .67 7.28∗
Reliability 6.14 .57 .81 8.10∗
Responsiveness & 5.89 .60 .85 8.25∗
assurance
empathy 5.60 .80 .84 8.19∗
Customer .76 .75 .82
Satisfaction
Satisfaction I 4.72 .61 .75 —
Satisfaction II 5.83 .76 .89 10.27∗
Customer Loyalty .83 .85 .84
Future buying 6.08 .77 .90 —
intensions
Emotional 5.61 .90 .78 11.56∗
attachment
Note. Factor loading values are based upon a completely standardized solution. Dashes indicate t values
were not computed as the parameters fixed to 1.00 during estimation.
a
Mean of the service under pressure variable is reverse coded.
∗
p < .01.

TABLE 3 Standardized Path Coefficients for Structural Equation Model

LISREL
Proposed model relations estimate t value Indirect effect t value

Service Orientation → .29 2.35∗ .21 (Satisfaction) 2.01∗

Perceived Service Quality
(γ 11 )
Service Orientation → .08 1.01
Satisfaction (γ 21 )
Perceived Service Quality → .73 5.87∗∗ .61 (Customer Loyalty) 4.93∗∗
Satisfaction (β 21 )
Perceived Service Quality → −.07 −0.09
Customer Loyalty (β 31 )
Satisfaction → Customer .84 7.42∗∗
Loyalty (β 32 )
∗ ∗∗
p < .05. p < .01.
 Service Orientation, Service Quality, Satisfaction and Loyalty 631

composite construct reliability ranging from .77 to .96. Average variance

extracted ranged from .51 to .87, all above the standard of .50 recommended
by Fornell and Larcker (1981), suggesting adequate convergent validity.
In Table 3, the standardized path coefficient between service orienta-
tion and service quality supported the first hypothesis (H1); a high degree
of service orientation for the contact employee significantly affected the cus-
tomer’s perception of service quality (γ 11 = .29, t = 2.05, p < .05). On
the other hand, the second hypothesis (H2) regarding the causal relation-
ship between service orientation and customer satisfaction was rejected. The
third hypothesis (H3) stating the positive relationship between perceived
service quality and satisfaction was supported; the perceived service quality
significantly influenced customer satisfaction (β 21 = .73, t = 5.87, p < .01),
confirming the previous empirical result (Cronin & Taylor, 1992) that service
quality is an antecedent of customer satisfaction.
The sixth hypothesis (H6) regarding the mediating role of service qual-
ity between service orientation and customer satisfaction was supported;
service orientation showed a significant indirect effect on customer satis-
faction via service quality (γ 11 × β 21 = .21, t = 2.50, p > .05). In other
words, contact employees’ high degree of service orientation was conveyed
via their service performance, which in turn led to high levels of customer
satisfaction. Further, the insignificant direct path from service orientation to
customer satisfaction suggested that service quality plays a role as a full
(rather than a partial) mediator between employee service orientation and
diners’ satisfaction in the restaurant setting (for the distinction between full
and partial mediators, see Baron & Kenny, 1986).
The fourth (H4) and fifth (H5) hypotheses focused on the effect of
service quality on customer loyalty and the effect of customer satisfaction
on customer loyalty, respectively. H4 was rejected, as service quality did
not have a significant, direct effect on customer loyalty. H5 was supported;
the result suggested that customer satisfaction has a significant influence on
customer loyalty (β 32 = .84, t = 7.42, p < .01). The last hypothesis (H7)
regarding customer satisfaction as a mediator between service quality and
customer loyalty was supported as there was a significant indirect effect on
customer loyalty via customer satisfaction (β 21× β 32 = .61, t = 4.93, p < .01).
Similar to H6, no significant path from service quality to customer loyalty
suggested the possibility of customer satisfaction as a full mediator between
perceived service quality and customer loyalty.

DISCUSSION AND MANAGERIAL IMPLICATIONS

This study contributes to the existing body of literature by its unique research
design. Previous studies that argue the positive associations between
frontline employees’ service orientation and customer outcome variables
632 H. J. Kim

such as satisfaction often gathered the ratings of all study variables from cus-
tomers (e.g., see Donavan & Hocutt, 2001; Brady & Cronin, 2001). However,
the present study depends on two data sources: Service oriented behav-
iors were reported by frontline employees themselves (i.e., servers and
bartenders) and dining customers provided their perceptions of service qual-
ity, satisfaction, and loyalty to the service company. This research design
reduces the impact of common method variance (i.e., single source) and
therefore the results are more likely to present reliable, true effects of ser-
vice orientation (predictor) on customer perceptions of a service company
(outcomes).
This study supports the prevalent theory or common belief that
customer-oriented companies benefit at multiple levels. Specifically, it shows
that frontline employees (i.e., servers and bartenders) with a high degree of
service orientation influence restaurant diners’ perceptions of service qual-
ity and ultimately lead to diners’ satisfaction and loyalty. It sends a crucial
message to restaurateurs as to how important it is to have customer-oriented
staff members. This study adopted the approach of service orientation as a
function of innate traits and situational or environmental factors. Following
this approach, restaurant operators should come up with a proper person-
ality trait profile and hire people that fit that profile. Some recent studies in
the hospitality field have pointed out the fundamental role of the individual
employee’s personality traits in work engagement and burnout (Kim, Shin,
& Swanger, 2009; Kim, Shin, & Umbreit, 2007). Despite such recruitment
efforts to select the applicants with suitable personality traits, companies
may find that employees, who are hired, have different levels of customer
focus. This situation indicates the significance of the other variable in the
service orientation equation—a situational or environmental factor. Practical
and useful environmental or situational factors to enhance employee service
orientation may include: offering ongoing training and rewarding good per-
formance of employees. The benefits of rewards and proper training in the
hospitality industry have been well documented (Kim, Tavitiyaman, & Kim,
2009).
Another key issue addressed in this study is the relationships among
service quality, customer satisfaction, and customer loyalty. The results con-
firmed that customers’ decisions to remain loyal depend directly on their
satisfaction (Cronin & Taylor, 1992) and found that customers’ perceptions
of service quality have an indirect influence on customer loyalty via customer
satisfaction (Perceived Service Quality → Customer Satisfaction → Customer
Loyalty). Rust and Oliver (1994) explained the relationship between service
quality and customer satisfaction best. They suggested that quality is one
of the many potential service dimensions that are factored into customer
satisfaction. Similarly, Westbrook (1981) indicated that satisfaction comes
from multiple sources, and a higher level of satisfaction with certain sources
might compensate for lower levels of satisfaction with others. Rust and
 Service Orientation, Service Quality, Satisfaction and Loyalty 633

Oliver’s (1994) and Westbrook’s (1981) arguments, in a sense, justify the

current finding (service quality as an antecedent of customer satisfaction)
and help support the mediating effect of customer satisfaction: Perceived
Service Quality → Customer Satisfaction → Customer Loyalty.
In addition, Rust and Oliver’s (1994) and Westbrook’s (1981) arguments
imply that it may be wise to conduct a further investigation on how vital
it really is to provide a high level of service to customers in different din-
ing segments. For instance, high levels of service quality may be the most
significant predictor of customer satisfaction in fine dining restaurants, but
price or promotion may be more essential for customers at quick-service
restaurants. This kind of detailed information is more likely to be use-
ful for practitioners than the simple managerial implication that service
quality has a positive effect on customer satisfaction. Restaurant operators
should also note that satisfaction results from both current and past expe-
riences (Oliver, 1981). Customers are becoming more demanding as they
acquire a greater range of dining experiences and have more choices in
all food service segments. The operators who can ensure that their cus-
tomers are always satisfied are more likely to enjoy repeat business from
their customers.

Limitations and Future Research

First, although this study reduced the common method variance to some
extent by relying on two data sources (employees and customers), interre-
lationships among service quality, satisfaction, and loyalty are still subject to
common rater bias since these constructs are all assessed by customers. The
much stronger relationships are shown among customer outcome variables
(service quality to satisfaction and satisfaction to loyalty) than the path from
employee service orientation to service quality. Perhaps this may reflect the
common rater bias and therefore the relationships among service quality,
satisfaction, and loyalty should be attenuated and interpreted with some
caution.
Next, each participating employee was paired with a rather small num-
ber of customers. Although there is no concrete criterion about how many
customer responses are appropriate, the aggregated responses from three or
four customers may not be sufficient to make an objective, accurate judg-
ment about the quality of service provided by the individual employee. The
overall sample size of this research (n = 169) is also quite small although
it falls into the acceptable range (100–200; Hair et al., 1998) to employ the
SEM method. These circumstances could contribute to resulting in weaker
associations (than expected) between service orientation and service qual-
ity. This study shows, although significant at the 0.05 level, the path from
service orientation to service quality was not significant at the conservative
0.01 level.
634 H. J. Kim

Third, Groves’ (1992) instrument used for this study is designed for the
restaurant business and the population of this study comprises employees in
casual dining restaurants in Korea. Therefore, generalization of this study’s
findings to other service industries (e.g., airlines, travel agencies, hotels) and
other cultures is limited. To validate the result of this study in different hos-
pitality or service segments, it is necessary to choose a service-orientation
measure that may be applicable to a broad spectrum of service jobs to assess
frontline employees’ service orientation. One exemplary measure is the
service-orientation scale recently developed by Donavan et al. (2004). Their
scale items are created using diverse service settings (e.g., travel agency,
financial services, food service) and the measure includes the four service
orientation components (pamper, read, deliver, and personal relationship).
Finally, the proposed model in this study is rather simple because it
investigates the impact of service orientation as a whole on customer satis-
faction and service quality. In the future, it is feasible to build more complex
service orientation models. For example, it would be interesting to see the
influence of service orientation on customer outcomes such as perceived
service quality, customer satisfaction, and revisit intention after splitting ser-
vice orientation into innate personality traits and environmental variables. In
this scenario, researchers could compare the two distinctive service orien-
tation components (personality vs. environmental factor) and assess which
component is more influential on customer outcome variables. The results
of these kinds of models may assist industry practitioners in terms of how
to prioritize the use of their financial resources in the human resource areas
(e.g., recruitment vs. service training).

REFERENCES

Anderson, E. W., Fornell, C., & Lehmann, D. R. (1994). Customer satisfaction, market
share and profitability: Findings from Sweden. Journal of Marketing, 58(3),
53–66.
Andrews, F. M., & Withey, S. B. (1976). Social indicators of well being. New York,
NY: Plenum Press.
Babakus, E., & Boller, G. W. (1992). An empirical assessment of the SERVQUAL
scale. Journal of Business Research, 24, 253–268.
Baloglu, S. (2002). Dimensions of customer loyalty. Cornell Hotel and Restaurant
Administration Quarterly, 43(1), 47–59.
Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinc-
tion in social psychological research: Conceptual, strategic, and statistical
considerations. Journal of Personality and Social Psychology, 51, 1173–1182.
Bentler, P. M., & Bonett, D. G. (1980). Significant tests and goodness of fit in the
analysis of covariance structures. Psychological Bulletin, 88, 588–606.
Bitner, M. J. (1990). Evaluating service encounters: The effects of physical surround-
ing and employee responses. Journal of Marketing, 54(2), 69–82.
 Service Orientation, Service Quality, Satisfaction and Loyalty 635

Bowen, J. T., & Basch, A. J. (1994). Managing customer-created uncertainty.

Hospitality and Tourism Educator, 6(1), 19–24.
Brady, M. K., & Cronin, J. J. (2001). Customer orientation: Effects on customer service
perceptions and outcome behaviors. Journal of Service Research, 3, 241–251.
Brown, M. W., & Chdeck, R. (1993). Alternative ways of assessing model fit. In
K. A. Bollen & J. S. Long (Eds.), Testing structural equation models
(pp.136–162). Newbury Park, CA: Sage.
Carman, J. M. (1990) Consumer perceptions of service quality: An assessment of the
SERVQUAL dimensions. Journal of Retailing, 66(1), 33–55.
Cran, D. J. (1994) Towards validation of the service orientation construct. The Service
Industries Journal, 14(1), 34–44.
Cronin, J. J., & Taylor, S. A. (1992). Measuring service quality: A reexamination and
extension. Journal of Marketing, 56(3), 55–68.
Crosby, L. A., & Stephens N. J. (1987). Effects of relationship marketing on satisfac-
tion, retention and prices in the life insurance industry. Journal of Marketing
Research, 24, 404–411.
Dick, A. S., & Basu, K. (1994). Customer loyalty: Toward an integrated conceptual
framework. Journal of the Academy of Marketing Science, 22(2), 99–113.
Dienhart, J. R., Gregoire, M. B., & Downey, R. G. (1991). Service orientation of
restaurant employees. Hospitality Research Journal, 14, 421–429.
Donavan, D. T. (1999). Antecedents and consequences of the contact employee’s
service orientation: From personality traits to service behaviors (Unpublished
doctoral dissertation). Oklahoma State University, Stillwater, OK.
Donavan, D. T., Brown, T. J., & Mowen, J. C. (2004). Internal benefits of service-
worker customer orientation: Job satisfaction, commitment, and organizational
citizenship behaviors. Journal of Marketing, 68(1), 128–146.
Donavan, D. T., & Hocutt, M. A. (2001). Customer evaluation of service employ-
ees’ customer orientation: Extension and application. Journal of Quality
Management, 6, 293–306.
Ekiz, E. H. (2009). Factors influencing organizational responses to guest complaints:
Cases of Hong Kong and Northern Cyprus. Journal of Hospitality Marketing
and Management, 18, 539–573.
Fornell, C., & Larcker, D. F. (1981). Evaluating structure equation models with
unobservable variables and measurement error. Journal of Marketing Research,
18(1), 39–50.
Groves, J. (1992). Perceived service orientation of restaurant employees
(Unpublished doctoral dissertation). Kansas State University, Manhattan, KS.
Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. (1998). Multivariate data
analysis with readings (5th ed.). Upper Saddle River, NJ: Prentice Hall.
Herley, R. F. (1998). Customer service behavior in retail settings: A study of the effect
of service provider personality. Journal of the Academy of Marketing Science,
26, 115–127.
Heung, V. C., Mok, C., & Kwan, A. (1996). Brand loyalty in hotels: An exploratory
study of overseas visitors to Hong Kong. Australian Journal of Hospitality
Management, 3(1), 1–11.
Hogan, J., Hogan, R., & Busch, C. M. (1984). How to measure service orientation.
Journal of Applied Psychology, 69(1), 167–173.
636 H. J. Kim

Jacoby, J., Chestnut, R. W., & Fisher, W. A. (1978). A behavioral process approach
to information acquisition in nondurable purchasing. Journal of Marketing
Research17, 532–543.
Jones, C., & DeCotiis, T. A. (1986). Video-assisted selection of hospitality employees.
The Cornell Hotel and Restaurant Administration Quarterly, 27(2), 68–73.
Jones, T. O., & Sasser, W. E. (1995). Why satisfied customers defect. Harvard
Business Review, 73(6), 88–99.
Joreskog, K. G. (1993). Testing structural equation models. In K. A. Bollen & J. S.
Long (Eds.), Testing structural equation models (pp. 294–316). Newbury Park,
CA: Sage.
Joreskog, K. G., & Sorbom, D. (2004). LISREL 8.71: User’s reference guide. Chicago,
IL: Scientific Software.
Kim, H. J., McCahon, C., & Miller, J. (2003). Service orientation for contact employ-
ees in Korean casual-dining restaurants. International Journal of Hospitality
Management, 22, 67–83.
Kim, H. J., Shin, K., & Swanger, N. (2009). Burnout and engagement: A comparative
analysis using the big five personality dimensions. International Journal of
Hospitality Management, 28(1), 96–104.
Kim, H. J., Shin, K., & Umbreit, T. (2007). Hotel job burnout: The role of personality
characteristics. International Journal of Hospitality Management, 26, 423–434.
Kim, H. J., Tavitiyaman, P., & Kim, W.G. (2009). The effect of hotel management
commitment to service on employee service behaviors. Journal of Hospitality
and Tourism Research, 33, 369–390.
Loehlin, J. C. (1992). Latent variable models: An introduction to factor, path, and
structural analysis (2nd ed.). Hillside, NJ: Lawrence Erlbaum.
Marsh, P. (1994). Customer retention: A strategy for travel agents. Journal of
Vacation Marketing, 1(1), 75–80.
Oliver, R. L. (1981). Measurement and evaluation of satisfaction processes in retail
settings. Journal of Retailing, 57(3), 25–48.
Parasuraman, A., Berry, L. L., & Zeithaml, V. A. (1993). Research note: More on
improving service quality measurement. Journal of Retailing, 69(1), 140–147.
Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). A conceptual model of
service quality and its implications for future research. Journal of Marketing,
49(4), 41–50.
Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1988). SERVQUAL: A multi-
item scale for measuring consumer perceptions of service quality. Journal of
Retailing, 64(1), 12–37.
Park, K. Y. (2009). Foodservice operations and management in the age of global
competition. Seoul, Korea: Daewang.
Ponnavolu, K. (2000). Customer loyalty in interactive media: An exploration of
its antecedents and consequences (Unpublished doctoral dissertation). Drexel
University, Philadelphia, PA.
Rust, R. T., & Oliver, R. L (1994). Service quality: New directions in theory and
practice. London, England: Sage.
Schneider, B., & Bowen, D. E. (1985). Employee and customer perceptions of ser-
vice in banks: Replication and extension. Journal of Applied Psychology, 70,
423–433.
 Service Orientation, Service Quality, Satisfaction and Loyalty 637

Schneider, B., Parkington, J. J., & Buxton, V. M. (1980). Employee and customer
perceptions of service in banks. Administrative Science Quarterly, 25, 252–267.
Solomon, M., Surprenant, C., Czepiel, J. A., & Gutman, E. (1985). A role theory per-
spective on dyadic interactions: The service encounter. Journal of Marketing,
49(1), 99–111.
Statistics Korea. (2006). Report on the census of service industry. Seoul, Korea:
Author.
Stevens, P., Knutson, B., & Patton, M. (1995). DINESERV: A tool for measuring
service quality in restaurant. The Cornell Hotel and Restaurant Administration
Quarterly, 36(2), 56–60.
Surprenant, C. F., & Solomon, M. R. (1987). Predictability and personalization in the
service encounter. Journal of Marketing, 51(2), 73–80.
Westbrook, R. A. (1981). Sources of customer satisfaction with retail outlets. Journal
of Retailing, 57(3), 68–85.
Wheaton, B., Muthen, B., Alvin, D. F., & Summers, G. F. (1977). Assessing reliability
and stability in panel models. In D. R. Herse (Ed.), Sociological methodology
(pp. 84–136). San Francisco, CA: Jossey-Bass.
Zemke, R., & Algright, C. (1985). Service America. Homewood, IL: Dow Jones-Irwin.