Examining the Relationship between Service Quality and Customer Loyalty in

Lebanese Restaurants

Dissertation

Submitted to Northcentral University

Graduate Faculty of the School of Business and Technology Management

in Partial Fulfillment of the

Requirements for the Degree of

DOCTOR OF PHILOSOPHY

by

JOSEPH E. SALEEBY

Prescott Valley, Arizona August 2008

UMI Number: 3321218

Copyright 2008 by Saleeby, Joseph E.

All rights reserved

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JOSEPH E. SALEEBY

ABSTRACT

Examining the Relationship Between Service Quality and Customer Loyalty in

Lebanese Restaurants

By

JOSEPH E. SALEEBY Northcentral University, August 2008

Restaurants in Lebanon, a country with an economy relying heavily on its tourism

sector, have flourished over the past decade. They are diverse, differentiated,

and have helped to create an industry which is highly competitive and boasts

high standards in quality and service. In this paper, the relationship between

quality of service and customer loyalty in the restaurant industry is investigated.

The customer’s perception of quality of service is studied based on the

SERVQUAL model. Customer loyalty is defined as a hybrid between behavioral

and attitudinal loyalty with a higher emphasis on the behavioral aspect of

customer loyalty (Ballinger and Rubinson 1996; Dick and Basu 1994). The

research survey covered 7 different restaurants in Lebanon and the correlation

between perceived quality of service and customer loyalty was calculated using

the Pearson r coefficient. The findings show a strong positive correlation (r

=0.671) between customer loyalty and service quality. Further analysis revealed

that the SERVQUAL components of Assurance and Responsiveness are more

highly correlated with customer loyalty than the other components.

iii

ACKNOWLEDGEMENTS

The writing of this dissertation has been one of the highest, and

distinguished academic achievements for me. I would like to take this great

opportunity to express my deepest gratitude to my coach and advisor Dr. Daljit

Singh, who gave me the needed guidance and freedom to express my own

thoughts and explore new ideas. Special thanks for Dr. Joseph DiRenzo and Dr.

Thomas Driver for commenting on my views and helping me understand and

enrich my ideas. I am also indebted to the rest of the members of the dissertation

committee at NCU, for their feedback and input. Also, without the support, and

patience of my wife and my family this study would not have been completed.

This Dissertation is dedicated to my wife Mireille, and my daughter

Rebecca, who inspired my efforts in all stages, despite all the difficulties that I

was facing.

iv

Table of Contents

Page

LIST OF TABLES ................................................................................................vii 

LIST OF FIGURES............................................................................................. viii 

CHAPTER 1: INTRODUCTION............................................................................ 1 Statement of the Problem................................................................................ 2 Background and Significance of the Problem.................................................. 3 Research Questions........................................................................................ 6 Brief Review of Related Literature................................................................... 7 Definition of Terms ........................................................................................ 10 Highlights and Limitations of Methodology.................................................... 11 Summary and Conclusions ........................................................................... 13 

CHAPTER 2: REVIEW OF LITERATURE .......................................................... 15 The Lebanese Restaurant Industry and its Problems ................................... 15 Customer Loyalty .......................................................................................... 17 Measuring Customer Loyalty......................................................................... 19 SERVQUAL and Service Quality................................................................... 20 Correlation between customer loyalty and service quality............................. 22 Summary....................................................................................................... 22 

CHAPTER 3: METHODOLOGY ......................................................................... 24 Overview ....................................................................................................... 24 Restatement of the Problem.......................................................................... 24 Statement of Research Questions/Hypotheses............................................. 25 Operational Definition of Variables................................................................ 27 Description of Materials and Instruments ...................................................... 28 Selection of Participants................................................................................ 29 Procedures.................................................................................................... 30 Discussion of Data Processing...................................................................... 31 Methodological Assumption, Limitations, and Delimitations .......................... 32 Ethical Assurances........................................................................................ 33 

CHAPTER 4: FINDINGS .................................................................................... 34 Overview ....................................................................................................... 34 Findings......................................................................................................... 35 Analysis and Evaluation of Findings.............................................................. 40 Hypotheses Testing ...................................................................................... 43 Summary....................................................................................................... 44 

CHAPTER 5: SUMMARY, C0NCLUSIONS, AND RECOMMENDATIONS ........ 45 Summary....................................................................................................... 45 

v

Conclusions................................................................................................... 46 Recommendations ........................................................................................ 47 

REFERENCES................................................................................................... 49 

APPENDIXES..................................................................................................... 52 

Appendix A Service Quality Questionnaire....................................................... 53 

Appendix B Customer Loyalty Test ..................... Error! Bookmark not defined. 

Appendix C: Overall Customer Loyalty Rating Calculation Form................. Error! Bookmark not defined. 

vi

LIST OF TABLES

Table 1: Definition of Variables........................................................................... 27 Table 2: Likert Scale........................................................................................... 28 Table 3: Description of Restaurans Surveyed .................................................... 29 Table 4: Respondants per Restaurant................................................................ 35 Table 5: Mean Rating SERVQUAL Commponents............................................. 36 Table 6: Mean rating of Customer Loyalty test ................................................... 37 Table 7: Correlations .......................................................................................... 39 Table 8: SERVQUAL Ratings from Highest to Lowest ....................................... 40 Table 9: Significan Results of Customer Acid Test............................................. 41 

vii

LIST OF FIGURES

Figure 1. Remodeled Service-Profit Chain (Heskett et al. 1994, Magnusson and Sundin, 2005) ..................................................................................................... 19 

viii

1

CHAPTER 1: INTRODUCTION

Lebanese restaurateurs are finding it difficult to accurately assess

customer loyalty and identify its drivers. According to the Ministry of Tourism,

Lebanon has more than 4000 restaurants that cater for more than 150,000

persons daily. As new restaurants are setup on a frequent basis, customers tend

to show shifting patterns, trends and even unpredictable behavior causing

restaurants to lose market share as others gain them (Majali, 2006). Diminishing

customer loyalty has caused some restaurants to report yearly revenue

decreases on an average of 20% and sometimes even up to 45 % (Majali, 2006).

Lebanon is a Middle Eastern country located on the eastern side of the

Mediterranean Sea. Tourism is one of the pillars of Lebanese economy

accounting for around 10% of the country’s GDP (Restovista), and its importance

has driven a growing and competitive market for the food & beverage industry

where professionalism, innovation, and a high quality of customer service are

minimum requirements for survival in this challenging business. After the 15-year

old civil war, an estimated investment of $1.23 billion (Restovista) has been

spent on reshuffling or setting up new restaurants in Lebanon which employ

around 80,000 employees and constitutes the largest private employment sector

in the country according to Restovista. The Lebanese business environment is

very entrepreneurial especially when it comes to the restaurant industry, and

investors and businessmen have readily ventured into new concepts and

restaurants despite the political turmoil plaguing the country since 2005. They

2

cater to the Lebanese people who are frequent restaurant goers and are very

critical of good service, especially the relatively well-to-do suburban class.

Consequently, and in today’s competitive environment, restaurants are in

a constant quest to achieve competitive advantage. They are thus eager to

identify the components of service that are most valued by customers.

Statement of the Problem

Restaurant owners are complaining about decreases in revenue caused

by decreasing customer loyalty in the highly competitive and dynamic Lebanese

restaurant market according to Majali (2006). As Lebanese restaurant owners

export and franchise into external markets, especially those in the gulf which

amount to around 80% of Lebanese franchises, they risk exporting the same

problems they are facing in the local market.

Today, competition is intensifying and the industry in Lebanon is in need

of accurate data and tools to help effectively and efficiently retain customers.

The purpose of this mixed correlational quantitative and qualitative

research was to analyze the impact of service quality on customer loyalty in the

context of Lebanese restaurants.

This was done by identifying and answering the following research

questions:

1. How should customer loyalty be defined in the restaurant industry?

2. What measurement tool for customer loyalty should be used to

conduct the research in the Lebanese restaurant industry?

3

3. How does the variation in overall service rating affect the customer

loyalty rating in Lebanese restaurants?

4. How does the variation in one of the service components impact the

level of customer loyalty in Lebanese restaurants?

The results of the proposed research offered insight on the correlation

between the services offered by restaurants of all types on the degree of

customer loyalty in the Lebanese market. Also, the service offering was

segmented into a set of components that were individually examined and their

impact on loyalty determined.

Furthermore and for the purpose of this research, the SERVQUAL

framework, a comprehensive analytical tool used to define, analyze, and

measure the service quality, was investigated. Then, the relevance of each

SERVQUAL determinant of service quality to the restaurant industry in general

and to the Lebanese restaurants in particular was also evaluated. Last but not

least, the proposed research may provide the industry with a valuable

measurement tool of customer loyalty.

Background and Significance of the Problem

Lebanon is a country renowned for its expertise in the services sector in

the Middle East. When it comes to tourism and the restaurant industry, the

Lebanese have a reputation for being successful restaurant entrepreneurs and

for pioneers in concepts and franchising in the region.

Literature review and personal interviews have shown that, restaurant

managers have recently complained about what they perceive as lack of

4

customer loyalty. In an interview with Mr. Azzam Dbeis, the manager of Chicken

Inc., a medium-sized chain of restaurants with outlets in every major city which

specialize in fried and roasted chicken, he helped in illustrating the problem by

stating the following:

The [Lebanese] customer in general is not very loyal. A floor manager of

one of our major outlets once told me that there was a customer who used

to come as frequently as five times a week to order the same meal, one

half roasted chicken with garlic paste on the side and baked potatoes.

Then, on his day off, he [the floor manager] happened to pass by one of

our main competitor’s branches, and saw our supposedly loyal customer

purchasing some chicken to take-out. And this happens often with our

customers. It is a very big problem. We cannot predict how our customers

will behave, and who is really loyal and who is not … we are not knowing

what makes our customer loyal to us and what doesn’t. (Azzam Dbeis,

personal communication, April 14, 2007)

Mr. Dbeis’s statement highlights several problems. Firstly, the problem of

customer loyalty which Mr. Dbeis complains about is not very well understood.

There is a need to clarify the meaning of customer loyalty in the context of

Lebanese restaurants. Second of all, there is no reliable framework or method to

quantitatively measure customer loyalty in Lebanese restaurants, or understand

what affects them. As little as 30% of restaurants in Lebanon rely on customer

feedback through comment cards in managing their operations and this figure is

virtually insignificant when it comes to small family owned restaurants (Majali,

5

2006). This low responsiveness to comment cards can be attributed to the lack of

faith in the effectiveness of feedback, and/or a lack sense of duty towards

restaurants which suggests a low attitudinal loyalty on the part of the patrons.

Furthermore, the recent political turmoil in the country since 2005 has had

a negative impact on the local restaurant industry. This in turn has pushed

restaurant owners to expand to the more stable regional markets such as Jordan,

Egypt, Kuwait, Saudi Arabia, and the U.A.E. Jean-Paul Ramy, a Lebanese

entrepreneur previously working in the clothing industry, has opened with his

partners a total of 22 restaurant outlets in the middle east in a period of just four

years with more to come for the year 2008 (“Food Franchising”, 2007). Another

large Lebanese franchiser, Zaatar w Zeit, has expanded regionally and includes

2 outlets in Jordan, 6 in the UAE, and 4 in Kuwait (Locate Zaatar w Zeit, 2007).

Due to the importance of the restaurant sector to the Lebanese economy,

as well as the potential revenues from the gulf markets, it has become a national

duty to help in researching, documenting, and analyzing the many problems of

the Lebanese restaurant industry in a professional and scholarly manner. A

research on how quality of service in restaurants affects customer loyalty will

contribute to the insufficient literature tackling the subject of restaurants in

Lebanon, and will help managers and restaurant owners both locally and

regionally in understanding and identifying problems associated with customer

loyalty and service in their many outlets, which will in turn help them in becoming

more competitive and more professional.

6

Research Questions

The problems identified are multifaceted. They involve qualitative

problems such as the appropriate definition of customer loyalty, as well as

quantitative questions regarding how loyal customers are and how they rate

quality of service in Lebanese restaurants. As stated before, the SERVQUAL

framework will be used to identify quality of service in restaurants. The problem

statement will be investigated by answering 5 comprehensive research questions

in a qualitative and quantitative manner as deemed appropriate by depending on

previous literature, statistics, questionnaires, and analysis of the acquired data.

The research questions are:

1. How should customer loyalty be defined in the restaurant industry?

There is a multitude of definitions for customer loyalty. In this sense, the

research proposed a suitable definition based on literature for customer loyalty in

the context of Lebanese restaurants. Both the behavioral and attitudinal

dimensions of the customer loyalty paradigm were investigated.

2. What measurement tool for customer loyalty should be used to

conduct the research in the Lebanese restaurant industry?

El Hakim (2003) suggested a method to measure customer satisfaction in

the airline industry and particularly the Middle East Airlines as a case study,

However, El Hakim (2003) failed to mention customer loyalty or provide any

method to measure customer loyalty while considering local cultural preferences.

Majali (2003) studied the Lebanese Restaurant industry in particular but also

failed to provide a measurement method for customer loyalty. Shankar, Smith

7

and Rangaswamy (2000) studied the concept of loyalty in online and offline

environments and propose a measurement method.

3. How does the variation in overall service rating affect the customer

loyalty rating in Lebanese restaurants?

The quantitative correlation between the overall service quality (as

perceived by the customers) and customer loyalty in Lebanese restaurants was

investigated in the proposed research. The overall value attributed to customer

service rather than the specific components of customer service according to the

SERVQUAL model was used. A correlation was found between this variable and

the customer loyalty variable, as defined by the methods derived from answering

the above qualitative questions. An investigation into the basic correlation

between service quality and customer loyalty were conducted in the primary

stage of the proposed research

4. How does the variation in one of the service components impact the

level of customer loyalty in Lebanese restaurants?

Different components of service have different levels of impact on

customer loyalty and therefore should be given different degrees of importance

from the restaurant manager’s point of view. The answer to this question, a

principle point of investigation, helped in identifying the parts of the service that

have the strongest impact on customer loyalty and should hence be prioritized.

Brief Review of Related Literature

The literature covered includes broad topics regarding restaurants, service

quality and the SERVQUAL framework, and customer loyalty in general. The

8

objective of this part of the research is to synthesize an adequate definition of

customer loyalty customized to the local context of the Lebanese restaurants.

The literature research also focuses, to the extent possible, on papers tackling

the subject of Lebanese restaurants and customer loyalty in Lebanon.

Unfortunately, no research has been done regarding service quality in

restaurants in Lebanon, despite the size of the restaurant industry and the

importance of such research. In fact, very little research has been conducted

regarding any aspect of Lebanese restaurants over the past decade.

Local Research on Restaurants and Customer Loyalty

Majali (2006) focused on the importance of CRM in his research on

building customer relationships in small Lebanese restaurants and its effect on

restaurant sales. Although this research touches on Customer Loyalty, no

reference to importance of service in these restaurants is made. El-Hakim (2003)

related service quality to customer satisfaction in the Middle East Airlines with

suggestions for improving service quality. However, no direct correlation was

inferred between service quality and customer satisfaction let alone customer

loyalty.

Service Quality and Customer Loyalty

With regards to other markets, notably in the U.S and Europe, a number of

studies had been conducted regarding the affect of service quality on customer

loyalty. In a study conducted on 4 industries, Bloemer, De Ruyter, and Wetzels

(1999) concluded that service quality-customer loyalty at the individual dimension

varies according to industry. They also identified the most important factors of

9

customer loyalty; purchase intention, word of mouth, price sensitivity, and

complaining behavior. Fu and Parks (2001) researched the affect on customer

loyalty in restaurants amongst elderly who are usually more critical of the service

they are given. A similar study by Ostrowski, O'Brien and Gordon (1993) showed

that service quality was perceived as low in a study conducted on two

commercial airlines, and that subsequently, customer loyalty was low. Bell,

Seigyoung, and Smalley (2005) and Koutouvolas and Siomkos (2006) added the

dimension of switching costs to their studies and showed that increases in

switching costs diminished the dependence of customer loyalty on service

quality.

SERVQUAL and Service Quality

Bartlett & Han (2007), Bell Seigyoung & Smalley (2005), and El Hakim

(2003) all used SERVQUAL as a reliable tool for quantification and measurement

of service quality. The SERVQUAL instrument provides a standard which makes

any research customizable and applicable to other service related issues across

industries locally and globally.

Furthermore, analysis tools such as multiple regression analysis are also

commonly used in order to correlate elements of service quality to loyalty. As Fu

and Parks (2001) showed by using a multiple regression model, elements of

service quality are factored differently and given varying levels of importance

depending on the market studied, where for example, the elderly give more value

to the friendliness and importance given to the customer than other aspects of

service in restaurants such as the credibility projected by the restaurant server.

10

However, there is an apparent lack of prior research pertaining to the

whole restaurant industry and the effect of service quality on customer loyalty in

general and in the Lebanese context in particular. Therefore, such a study would

be more difficult in larger markets such as U.S or other markets since other

considerations should be taken into account and generalization of the result

would be less reliable. Of the literature reviewed, there is also an apparent lack

of research on customer loyalty in Lebanese restaurants, and of the affect of

service quality on it. Service quality has been studied, but much work is needed

in devising a reliable methodology to correlate service quality and customer

loyalty in restaurants, as well as the different aspects of service quality identified

in the SERVQUAL model. The proposed research will help to answer these

questions, clarify ambiguities, and hopefully provide a starting point for other

researchers to build on in order to contribute to the advancement of the

restaurant industry, a key sector of the Lebanese economy.

Definition of Terms

Customer loyalty. Although there is no universal definition of customer

loyalty, the existing literature provides various, yet convergent delineations of the

concept of loyalty in a service provider’s context. Still, the customer loyalty

concept is analyzed in the cited literature from two different perspectives:

Attitudinal loyalty and behavioral loyalty. For instance, Czepiel and Gilmore

(1987) defined attitudinal loyalty as a “specific attitude to continue in an

exchange relationship based on past experiences” (p. 91). The attitudinal

component of loyalty is thus linked to past experiences that forge perceptions

11

and attitudes towards a certain product, service, brand, or company. Behavioral

loyalty on the other hand is defined by Jacoby and Chestnut (1978) as “the

biased (i.e. non-random) behavioral response, expressed over time, by some

decision making unit, with respect to one store, out of a set of stores, which is a

function of psychological processes resulting in brand commitment” (p. 21).

SERVQUAL. Zeethaml, Parasuraman and Berry (1988), developed

SERVQUAL as a generic model to breakdown and qualify service in any

industry. They suggest that service quality can be assessed from five

dimensions: tangibles, reliability, responsiveness, assurances, and empathy.

This instrument utilizes a gap score analysis method which assesses the

difference between a user’s expectations of service and the actually perceived

service. However, research has shown that not all elements of the SERVQUAL

model are relevant or applicable in specific industries. One of the aims of the

proposed research is to highlight the relevant factors of the SERVQUAL model to

the restaurant industry and in particular, the Lebanese restaurant industry.

Highlights and Limitations of Methodology

In order to investigate the relationship between service and customer

loyalty, and examine how service quality in Lebanese restaurants, as perceived

by the customer, affects loyalty, a mixed qualitative and quantitative method

using correlation and multiple regression was used.

Research questions 1 and 2 constitute the qualitative part of the research

regarding the broad definition and measurement of customer loyalty which were

then customized to the context of Lebanese restaurants. This was done by a

12

careful and thorough understanding and analysis of related literature. To define

customer loyalty, there was a heavy reliance on the works of Czepiel and

Gilmore (1987) and Jacoby and Chestnut (1978) constituting the two broadly

accepted descriptions of customer loyalty as being considered as attitudinal or

behavioral respectively. Other research papers conducted regarding customer

loyalty in restaurants or similar related business such as casinos or hotels were

used in order to identify the best definition of customer loyalty in the required

context. (Hu, Jang, and McCain, 2005) performed a gap analysis of loyal

customers compared with switchers to evaluate service quality in casinos. They

adopted the behavioral definition of customer loyalty and considered loyal

customers as customer with repetitive behavior and recurring visits. After a

common definition of customer loyalty was adopted for the research at hand, a

method for measuring customer loyalty was determined. This was based on

previous research as well as various customer loyalty measurement methods

used in different cases and industries and a hybrid of the most appropriate ones

was used.

After determining the appropriate definition and method of determining

customer loyalty in Lebanese restaurants, a quantitative analysis was conducted

in order to answer the research questions 3 and 4. A survey was conducted on a

number of Lebanese restaurants in order to determine the loyalty of customers

and their assessment of the service quality in each restaurant. Then, a degree of

correlation was determined between Overall Customer Loyalty and Overall

Service Quality Rating based on the SERVQUAL model. A linear regression

13

analysis was conducted to determine the most important attributes of service

quality in Lebanese restaurants and their relative importance to Overall Service

Quality Rating. For example, Gupta and Chen (1995) used a least square

regression analysis to determine the importance of five factors of the

SERVQUAL model (tangibles, reliability, responsiveness, assurance, and

empathy) in the three types of service (pure service, mixed service, and quasi-

manufacturing service) of the Chase and Tansik model (Chase & Tansik, 1988).

In attempting to thoroughly and conclusively tackle the research questions

derived from the problem statement, there are limitations to be considered. The

first concern is the objectiveness and impartiality of the Lebanese customers in

answering the survey questionnaire. Both Majali (2006) and El-Hakim (2003)

identified a slight degree of lack of cooperation amongst Lebanese customers

and even managers and business owners when answering surveys. Although a

non-monetary incentive will be used (Singer, n.d), the data derived might not be

100 % accurate. Another limitation is the lack of existing literature on Lebanese

restaurants on which a comparison can be based in order to make a better

assessment on the correctness of the data and progress in the restaurant sector.

These limitations will be discussed further in Chapter III and methods to

overcome them will be suggested.

Summary and Conclusions

The aim of the proposed research was to provide the industry with a

valuable measurement tool for customer loyalty. Furthermore, such a research

may bring about awareness on the importance and effectiveness of quantitative

14

correlational, and qualitative research as tools for improvements in the whole

industry. Through the research, an increased awareness of the relevance and

effectiveness of the SERVQUAL model was created. This will hopefully drive

similar researches by local higher degree candidates on other aspects of the

restaurant business and hospitality industry to help improve this highly

dependent sector of the economy.

15

CHAPTER 2: REVIEW OF LITERATURE

The literature review for the research project began with previous

researches and sources introducing the problems of the restaurant industry in the

Lebanese market. It includes a selection of widely accepted papers as resources

for the broad topics of customer loyalty and the SERVQUAL model. In addition,

there are numerous other papers that discuss cases involving customer loyalty

and the SERVQUAL model related to the hospitality industry and in some cases

specific to the restaurant industry. Literature research also deals with

measurement of customer loyalty. Information is also obtained from research on

the specifics of customer loyalty in Lebanon. Unfortunately, no research has

been done regarding service quality in restaurants in Lebanon, despite the size

of the restaurant industry and the importance of such research. Finally, literature

where correlation and other methods were used to analyze and interpret data on

customer loyalty and service quality is reviewed. This covered the main

questions of our research in a thorough theoretical study with regards to the

qualitative questions of SERVQUAL, customer loyalty, and measurement.

The Lebanese Restaurant Industry and its Problems

Literature research has revealed that there are very little papers written on

the Lebanese restaurant industry. Majali (2006) has tackled the subject of

Lebanese restaurants and his work on the impact of developing customer

relationships in small family-owned (Majali, 2006) includes an introduction to the

Lebanese restaurant market and to the problems they face. Majali (2006)

focused on the importance of CRM in his research on building customer

16

relationships in small Lebanese restaurants and its effect on restaurant sales.

Although Majali touches on customer loyalty in his research, no reference to the

importance of service in these restaurants is made. Majali detected a 25 % to 40

% reported decrease in yearly revenues in surveyed restaurants which he

attributes to diminishing customer loyalty, or the failure of customers to show a

repetitive behavior in frequenting a given restaurant, and show a tendency to try

out new restaurants as they open. Majali conducted in-depth interviews with

restaurant managers and owners and surveyed 80 customers. Majali suggested

improving customer relationship management and in his conclusions noted that

42% of surveyed restaurants who enhanced their CRM, even in primitive

methods such as recording customer names and keeping basic information

regarding customer preferences, showed an improvement in sales over the one

year period when the study was conducted. Although this ratio might seem small,

it is important to keep in mind that the restaurants surveyed were generally small

family-owned businesses with traditional methods of management and who

would find it difficult to implement effective CRM. Although not explicitly

mentioned, customer loyalty in this research seems to take on two definitions.

Lebanese customers tend to show little behavioral loyalty as suggested by

Jacoby and Chestnut (1978) where Lebanese customers do not show any brand

commitment to given restaurants and although constantly frequenting a given

restaurant, they would readily become patrons of a new one for no apparent

reason (Majali, 2006).

17

Majali (2006) introduced some key problems in the industry; little customer

loyalty resulting in diminishing revenues, traditional and unprofessional methods

of management, volatile and frequently changing trends in the market, and lack

of sufficient data and reliable statistics. This sheds light on the status of the

Lebanese restaurant industry as well as the possible obstacles to overcome

while conducting a research survey and specific market characteristics to be

taken into consideration. The first topic to discuss of the restaurant industry in

Lebanon is customer loyalty. The following section reviews previous works on

customer loyalty in general as well as cases of customer loyalty in the restaurant

industry and service related industries.

Customer Loyalty

There are two widely accepted definitions of customer loyalty. Czepiel and

Gilmore (1987) defined attitudinal loyalty as a “specific attitude to continue in an

exchange relationship based on past experiences” (p. 91). On the other hand,

behavioral loyalty as defined by Jacoby and Chestnut (1978) is “the biased (i.e.

non-random) behavioral response, expressed over time, by some decision

making unit, with respect to one store, out of a set of stores, which is a function

of psychological processes resulting in brand commitment” (p. 21). Recent

research has attempted to explain customer loyalty as an integrated form of both

the attitudinal and behavioral dimensions of loyalty as two distinct but important

constructs (Ballinger and Rubinson 1996; Dick and Basu 1994). According to

Bennet (2002), loyalty is defined as the relationship between an individual's

attitudinal predisposition towards an object and the repeat patronage of that

18

object. It is thus apparent that recent definitions of customer loyalty are a hybrid

of both attitudinal and behavioral dimensions of loyalty.

In order to define customer loyalty in the context of restaurants, research

literature on the topic was reviewed. In a study relating service tangibility to

customer loyalty in several industries including restaurants, Magnusson and

Sundin (2005), who surveyed 240 respondents, considered Oliver’s (1999)

definition of loyalty; “a deeply held commitment to rebuy or repatronize a

preferred product/service consistently in the future, thereby causing repetitive

same-brand or same brand-set purchasing, despite situational influences and

marketing efforts having potential to cause switching behavior.” (Oliver, 1999,

p.2). Fu and Parks (2001) identified the relationship between service quality and

customer loyalty amongst the elderly in restaurants in the U.S. In their study, they

adopted an attitudinal definition of loyalty and considered loyal patrons as those

who have a positive attitude towards the restaurants they frequent, despite the

frequency of their visits to that specific restaurant. This would seem appropriate

for the demographic segment of elder people. For the purpose of this study, a

functional definition of customer loyalty should be taken, meaning that loyal

customers should be ones who, at the end of the day, drive higher sales and

improve revenues. This is illustrated by Heskett et al. (1994) service-profit chain

(see figure 1). This service-profit chain was conceptualized for the case of

service-oriented organizations and the importance of putting customers and

employees as a priority (Heskett et al. 1994). Therefore, customer loyalty should

be considered as an integration of attitudinal and behavioral loyalty but with

19

emphasis on behavior which is materialized by repetitive purchasing and

patronage of the restaurant.

With the establishment of a definition of customer loyalty, a method for

measuring loyalty should be defined. The following section reviews literature

dealing with the measurement of customer loyalty in restaurants and related

industries.

Figure 1. Remodeled Service-Profit Chain (Heskett et al. 1994, Magnusson and Sundin, 2005)

Measuring Customer Loyalty

In Loyalty Rules! Reichheld (2001) suggested a highly reliable and widely

employed method for measuring customer and employee loyalty knows as the

Loyalty Acid Test (Reichheld). The Customer Acid Test is used to measure

customer loyalty and emphasizes the behavioral dimension of customer loyalty

by asking questions such as “How likely are you to continue buying Company's

products and/or services from Company xYz?” and “How long have you been a

customer of Company xYz?” (SATMETRIX, n.d, p.1). This test will be used

throughout the survey; however it is important to point out other considerations

when dealing with measuring customer loyalty such as taking into account the

attitudinal dimension of customer loyalty. Bennet (2002) suggested the 3x3

matrix taken from Ballinger and Rubinson (1996) to take into account both

dimensions of loyalty. Bennet proposed this method because it is more accurate

to measure loyalty.“It appears to be commonly accepted amongst cognitive

20

researchers that attitude precedes behavior in the context of repurchasing a

product and is important because attitudes towards an object determine choice”

(p.11).

However, attitudinal loyalty is difficult to measure and since they cannot be

directly measured, then they are not appropriate in the context of research (Bass,

1974). Local research on the topic did not bring much insight. El Hakim (2003)

measured quality of service in the Middle East Airlines but did not provide any

method to measure customer loyalty. Majali (2006) mentioned customer loyalty in

his study on Lebanese restaurants, but he did not devise a method to measure it.

The literature reviewed so far covered the meaning of customer loyalty

and methods of measuring it. The second part of the problem deals with service

quality and the SERVQUAL model which will be discussed in the following

section.

SERVQUAL and Service Quality

Service quality is conceptualized as the comparison of service

expectations with actual performance perceptions (Zeithaml et al., 1990).

SERVQUAL (Zeethaml, Parasuraman and Berry, 1988) is a generic

multidimensional instrument based on the gap model between expectations and

perception that divides service quality into the following:

1. Tangibles

2. Reliability

3. Responsiveness

4. Assurance

21

5. Empathy

This model is widely used while conducting research on service quality

across the range of industries and it is common for researches to focus on a

relevant set of these dimensions and not all of them at the same time. For

example, Gupta and Chen (1995) conducted a study which identified the

relationship between five of the dimensions of SERVQUAL (tangibles, reliability,

responsiveness, assurance and empathy) and customer perceived service

quality using a linear regression model in different types of service industries.

Their results show that tangibles is perceived as most relevant in the surveyed

industries. The model has been used extensively in the hospitality industry,

seeing as it’s a service oriented industry (Bartlett and Han, 2007, Bell Seigyoung

& Smalley, 2005, Fu and Parks, 2001) and has been used in local research

papers such as the work of El-Hakim (2003) on service quality in the Middle East

Airlines company.

Despite its wide use, SERVQUAL cannot be used as an ultimate fail-proof

model to examine service quality without taking cultural considerations. It has

been criticized as being inappropriate in its applications particularly in the

marketing field (Myerscough, 2002). However, it can be used as a foundation to

conceptualize a model in different cultures (Bartlett and Han, 2007). As is the

case in our research, no model based on SERVQUAL has been customized for

the Lebanese industry, which creates an opportunity to fill a gap and identify the

most relevant dimensions of service quality as a result of this research, to be

used by scholars in the future.

22

Correlation between customer loyalty and service quality

Although no works have been conducted regarding the relationship

between customer loyalty and service quality in Lebanese restaurants, this issue

has been tackled in the restaurant industry and other service-oriented industries

in other markets such as Europe and the U.S. A study by Ostrowski, O'Brien and

Gordon (1993) on two commercial airlines showed that low service quality

resulted in low customer loyalty. Another example is Bloemer, De Ruyter, and

Wetzel’s’ (1999) work which linked customer loyalty in a to service quality based

on the SERVQUAL model in a multidimensional study across four industries;

entertainment, fast food, supermarket, and health care services. In this study, the

relationship between four dimensions of customer loyalty (word-of-mouth

communications, purchase intention, price sensitivity, and complaining behavior)

was analyzed with the overall service quality and the SERVQUAL dimensions

tangibles, empathy, reliability, responsiveness, and assurance.

Summary

The literature reviewed has clearly identified the lack and need of

conducting the proposed research for the Lebanese restaurant industry. Different

definitions of customer loyalty were discussed, and adopting the behavioral

definition of customer loyalty proves to be relevant to the problem at hand. A

proper reliable method for measuring loyalty was found. Furthermore, the

SERVQUAL model as a reliable foundation for studying the dimensions of

service quality was proven to be widely used and efficient for the given context. It

was also shown that the lack of literature using the SERVQUAL model in the

23

different sectors of the service-oriented Lebanese economy will make this work a

significant contribution which can be built upon for the improvement of services in

Lebanon. Finally, the importance of correlating service quality and customer

loyalty has become clear and the lack thereof in the Lebanese industry makes it

even more essential.

24

CHAPTER 3: METHODOLOGY

Overview

In this section, the steps and methods used in aim of answering the

research questions derived from the problem statement are explained. The

problem and research questions along with related hypotheses are restated.

Then, the research design is presented and explained. Following that, a

description of the variables are given and then the instruments used to acquire

the data along with a description of the restaurants, participants, owners and

managers included in the survey. The procedure taken to acquire the data and

the mathematical methods used to analyze it and withdraw conclusions is

explained. Finally, the limitations and possible shortcoming of the proposed

methodology are mentioned.

The survey was conducted with the highest level of objectivity and the

resulting data was analyzed in its rawest form.

Restatement of the Problem

Restaurants in Lebanon are suffering from diminishing revenues caused

by, amongst other reasons, behavior showing low customer loyalty. A significant

number of restaurant owners use traditional methods of management and there

is no documented research suggesting the relationship between customer loyalty

and quality of service, let alone providing solutions to the problem at hand.

Furthermore, Lebanese restaurants are actively expanding to the gulf amidst

increasing competition and risk exporting the problems they face to foreign

markets.

25

The aim of the proposed correlational quantitative and qualitative research

is to tackle the problem by analyzing the impact of service quality on customer

loyalty.

The four research questions derived from the problem statement as well

as the proposed hypothesis where applicable are discussed in next section.

Statement of Research Questions/Hypotheses

The research aims to answer the following questions:

1. How should customer loyalty be defined in the restaurant industry?

Through literature research, it was shown that the most recently adopted

definition of customer loyalty is an integrated multi-dimensional definition

incorporating both behavioral and attitudinal definitions of customer loyalty.

However, when it comes to service-oriented industries, the behavioral definition

is more appropriate from a practical sense seeing as it is more measurable

(Bennet 2002, Bass 1974). Results based on loyalty test conducted in this

research coupled with comparison to previous works proved that the using the

behavioral dimension of customer loyalty is accurate and effective in providing

reliable results in the research conducted. The attitudinal characteristics of

customer loyalty proved to be less relevant in the context of the restaurant

industry.

2. What measurement tool for customer loyalty should be used to

conduct the research in the Lebanese restaurant industry?

The measurement of customer loyalty is based on Reichheld (2001)

Loyalty Acid Test with emphasis on likeliness to return, satisfaction, likeliness to

26

purchase if substitutes exist, and other behavioral factors. The result of the test

was then summarized in one rating and used as a variable to answer the

remaining questions.

3. How does the variation in overall service rating affect the overall

customer loyalty rating in Lebanese restaurants?

This constitutes the central question of the research. A quantitative

relationship between overall customer loyalty and overall service quality was

investigated. Following are the null and the derived hypothesis.

H3o: The overall rating of service quality in Lebanese restaurants is not

correlated to the overall customer loyalty rating.

H3a: The overall rating of service quality in Lebanese restaurants is

positively correlated to the overall customer loyalty rating.

4. How does the variation in one of the SERVQUAL service component

variables impact the overall customer loyalty rating in Lebanese restaurants?

Further to investigating how the overall service quality rating affects the

overall customer loyalty rating, the effect of each of SERVQUAL’s separate

dimension of service on customer loyalty were analyzed to identify what factors

are more relevant and should be prioritized by restaurant owners and managers.

The hypothesis and its null are as follows:

H4o: The rating of any single or combination of the SERVQUAL service

components is not correlated to the overall customer loyalty rating.

H4a: The rating of any single or combination of the SERVQUAL service

components is positively correlated to the overall customer loyalty rating.

27

Operational Definition of Variables

In order to investigate the direct relationship between overall service

quality and overall customer loyalty constituting question 3 of the research, two

variables were defined:

Overall Customer Loyalty Rating. The dependent variable (Y), overall

customer loyalty, was derived from a simplified version of the loyalty acid test

taken by participants and is an average rating of loyalty on a scale of 10

reflecting the loyalty status of the respondent.

Overall Service Quality Rating. The Overall Service Quality Rating is an

independent variable (X). It is a rating specified by customers reflecting their

assessment of the overall quality of service in a given restaurant.

To investigate the individual relationship between the SERVQUAL

dimensions of service quality on the overall loyalty rating of the customer, the

following variables were defined (see Table 1).

Table 1

Definition of Variables

Variable Name Type Description

Y Overall Customer

Loyalty Rating

DV Average customer’s overall

loyalty

X Overall Service Quality

Rating

IV Rating specified by customer

reflecting overall service of a

given restaurant

X1 Tangibles V Elements that represent the

service physically

28

X2 Reliability V Ability to deliver promised

service accurately

X3 Responsiveness V Willingness to help customers

and provide prompt service

X4 Assurance V Ability to inspire trust and

confidence

X5 Empathy V How customers are treated

individually

Description of Materials and Instruments

The research was conducted using two questionnaires. The first

questionnaire (see Appendix A) deals with the perceived service quality and is

centered on the SERVQUAL criteria and using the five-point Likert-type

excellence model, where customers were asked to rate each criterion on a scale

consisting of 1 to 5 with 5 being Excellent and 1 being Poor as shown in Table 2.

Table 2

Likert Scale 1 2 3 4 5

Poor Fair Neutral Good Excellent

The customers were then asked to rate the overall customer service of the

restaurant which constitutes variable X as described in Table 1. This type of

questionnaire is commonly used for its simplicity and its responsiveness. Majali

29

(2006), El-Hakim (2003), and Fu and Parks (2001) all use this model in their

questionnaires.

The second questionnaire is the customer loyalty questionnaire based on

the Acid Loyalty Test (see Appendix B). This was given simultaneously with the

service quality questionnaire and was used to derive an overall customer loyalty

rating. Incentives were given prior to the questionnaire in order to instill a sense

of duty in the respondent to answer objectively.

In the proposed research the impact of variations in those factors on

customer loyalty were analyzed, but with caution not to fall into the “satisfaction

survey” (Reichheld, 1995, p.2) trap; the questionnaire did not include any

questions regarding general customer satisfaction focused specifically on

customer loyalty. In attempting to analyze and measure customer loyalty, many

researchers have fallen into Reichheld’s customer satisfaction trap. Loyalty could

be viewed as a consequence of satisfaction that results in an action (such as

repeated purchase) while satisfaction is a mere feeling that does not necessarily

lead to an action.

Selection of Participants

The survey was conducted on a variety of restaurants (see Table 3)

covering different income segments of the market based on average spending

per customer per restaurant. This gave a more comprehensive idea about the

whole market and the different customers.

Table 3

Description of restaurants surveyed

30

Restaurant Food Type Average dollar spending per customer

Roadster’s Diner American 12.00

ZWZ Lebanese Fast Food 8.00

Sultan Ibrahim Lebanese Mezzeh 30.00

La Parilla Argentinean

Steakhouse

50.00

Chopsticks Chinese 15.00

Sushi Bar Japanese 50.00

Chicken Inc. Fast Food 8.00

The sample population was a random set that was composed of 63

subjects and was conducted on a period of one week in order to cover the whole

weekly cycle of the restaurant which included all typical customers during the

week from families to couples to corporate customers. The survey did not

differentiate between gender and age group of customers in restaurants.

Procedures

In agreement with restaurant owners, the survey questionnaires were

distributed over a period of one week in all restaurants mentioned in Table 3.

Questionnaires were given to customers after they completed their meal and

before they ordered their bills. Each customer received two questionnaires; the

Customer Acid Test and the Service Quality Questionnaire. A dessert coupon

was usually given to each customer after completing the questionnaire as an

31

incentive. In some restaurants, such as Sultan Ibrahim, Turkish coffee was

offered instead of the dessert.

Discussion of Data Processing

After the questionnaires were completed, the data was collected and

analyzed with two sets of data resulting from the questionnaires. Each set of data

was separately entered for analysis using the SPSS 16.0 for Windows release

16.0.1 statistical software.

From the data collected, the Y (Overall Customer Loyalty Rating) variable

was calculated. The form for calculation is included in Appendix C. The variable

Y was calculated for each individual Customer Acid Test survey and a

subsequent set of Overall Customer Loyalty Rating results was obtained. In this

method of calculation, it is assumed that the ratings of the Customer Acid Test

questions are of equal importance and have an equal weight when calculating

the average.

Then, a correlation between Y (Overall Customer Loyalty Rating) and X

(Overall Service Quality Rating) was calculated and linear regression analysis

was used in order to verify the correlation. This was done by calculating the

correlation coefficient r based on the Pearson product-moment method. The

value of r should range between -1.0 and 1.0 and determines the extent and type

of correlation between the variables. A value close to the extremities indicates a

high correlation and indicates whether the correlation is negative or positive. A

close to zero value indicates no correlation and a value in between indicates the

existence of correlation to some moderate degree depending on the value.

32

The second set of data consisted of the different ratings for the five

variables of the SERVQUAL model (X1…5) was correlated with the Overall

Customer Loyalty Rating (Y) to derive a relationship between each individual

SERVQUAL service component and Overall Customer Loyalty in order to identify

the more important factors of service quality which affect customer loyalty.

Therefore, a set of correlation coefficients ri was be calculated between each

individual rating and the Overall Customer Loyalty Rating.

Methodological Assumption, Limitations, and Delimitations

In the study to be conducted, there are assumptions to be considered

which are relevant to the accuracy of the data collected. First and foremost, it

was assumed that the surveyed customers have thoroughly understood and

accurately answered questions regarding loyalty and their perceptions of

customer service in the surveyed restaurant. Lebanon is an Arabic speaking

country, and although most restaurant patrons are educated and have a basic

understanding of the English language, it was not guaranteed that they were able

to answer in full accuracy. Another assumption to be considered is that the

behavioral-attitudinal definition of customer loyalty applies to the case at hand.

Furthermore, it is assumed that all criteria of the Customer Acid Test have equal

weight when calculating the average to derive the Overall Customer Loyalty

Rating.

In order to address the problem of understanding the survey questions,

the surveys were as self-explanatory as possible. Furthermore, the surveyor

clarified all possible all ambiguities and difficulties in understanding the

33

questionnaires. However, there is a limit to how much can be explained, and to

the number of surveyed patrons who can be engaged on a one-to-one basis.

Another limitation is the type of participants of the survey. Although the survey

was conducted in a diverse set of restaurants and included participants with

different income levels and from different cultural backgrounds, it cannot be

accurately stated that the survey was able to constitute a microcosm of the whole

restaurant market in Lebanon, keeping in mind that the Lebanese population is in

itself ethnically and religiously diverse. It is important to note here that the

Lebanese population consists of no less than 18 registered religious groups and

subgroups with different cultural backgrounds.

Ethical Assurances

The survey was conducted from an objective perspective and the data

from the questionnaires was not affected by the surveyor in any way. This was

done by directly entering the participant’s answers in the questionnaires into the

SPSS 16 statistical software without recalculating or altering the data in any way.

Furthermore, all subjects have been assured their anonymity and their opinions

will stay confidential and will not be disclosed to restaurant managers. The

respondents answered the questionnaires at their own will and respondents who

wished not to participate were not pressured to do so. In turn, the restaurant

managers gave their consent to conduct such a survey.

34

CHAPTER 4: FINDINGS

Overview

The following chapter presents the findings of the conducted research. It

includes a summary of the data found in the questionnaires. Then, an analysis

and evaluation of the data will be given and it will be verified with the hypotheses.

The chapter will be concluded with a summary of the data, analysis, and results.

The research questions will be revisited in the next chapter and the final

conclusions of the research will be drawn.

The findings in this chapter deal with the quantitative part of the study in

which the correlation between quality of service and customer loyalty is

investigated at the broad level of overall perception of quality of service and

overall customer loyalty, and also at the more detailed level in which different

components of service based on the Servqual model are investigated. The

qualitative part of the research was done prior to conducting the survey and

answers research questions 1 and 2 established in Chapter I of this paper. They

are as follows:

1. How should customer loyalty be defined in the restaurant industry?

Literature review has shown that customer loyalty is being viewed as a

hybrid of two long established definitions of customer loyalty; attitudinal loyalty

defined by Czepiel and Gilmore (1987) and behavioral loyalty defined by Jacoby

and Chestnut (1978). In the restaurant industry, the behavioral aspect is more

significant in conducting research since it defines customer loyalty based on

repetitive behavior which itself is the driver of sales and revenue.

35

2. What measurement tool for customer loyalty should be used to

conduct the research in the Lebanese restaurant industry?

It was found that studying the behavioral aspects of customer loyalty give

a good indication of the effective loyalty of the customers. For that purpose, the

Customer Acid Test (Reichheld, 2001) was used as a tool for conducting the

survey on customer loyalty in Lebanese restaurants.

In the following section, a summary of the findings of both the Service

Quality questionnaire (see Appendix A) and the Customer Loyalty Test (see

Appendix B) based on Reichheld’s (2001) Customer Acid Test will be given. The

survey was conducted on 63 respondents in 7 different restaurants in Lebanon.

Findings

The survey was conducted in 7 different restaurants serving different

types of food and catering for patrons of different income levels. The respondents

per restaurant are shown in Table 4.

Table 4

Respondents per restaurant Restaurant Respondents Food Type Average dollar spending per customer

Roadster’s Diner 11 American 12.00

ZWZ 12 Lebanese

Fast Food

8.00

Sultan Ibrahim 7 Lebanese

Mezzeh

30.00

La Parilla 6 Argentinean

Steakhouse

50.00

36

Chopsticks 10 Chinese 15.00

Sushi Bar 8 Japanese 50.00

Chicken Inc. 9 Fast Food 8.00

TOTAL 63

The respondents were given two questionnaires. The first is the Service

Quality Questionnaire (see Appendix A) in which customers were asked to rate

the restaurant’s five SERVQUAL components on a scale from 1 to 5, with 5 being

the highest and 1 being the lowest. The second questionnaire (see Appendix B),

was the Customer Loyalty test comprised of 12 questions answered on a scale

from 0 to 10 with 10 being most likely and 0 being not likely at all.

The descriptive statistics of the Service Quality Questionnaire were

generated by the SPSS 16 software are given in Table 5.

Table 5

Mean rating of SERVQUAL components SERVQUAL Component

Mean Rating Standard Deviation

[X1] Tangibles 4.3175 0.7145

[X2] Reliability 4.3810 0.6072

[X3] Responsiveness 3.7143 0.7055

[X4] Assurance 3.5714 0.8370

[X5] Empathy 3.7143 0.8314

37

[X] Overall

Service Quality 3.9365 0.6189

The respondents simultaneously filled the Customer Loyalty Test

questionnaire composed of twelve questions. The descriptive statistics were

generated by the SPSS 16 software and are given in Table 6 below. The

dependant variable Overall Customer Loyalty(Y) was then calculated for each

survey by finding the average of the ratings of the 12 questions. The rating found

indicates the customer loyalty of each respondent.

Table 6

Mean rating of Customer Loyalty Test

Question Mean Rating

Standard Deviation

[Q1] How likely are you to continue buying the

Restaurant’s products and/or services from this

Restaurant?

7.5556 1.0592

[Q2] If you were selecting a similar Restaurant for the

first time, how likely is it that you would choose this

Restaurant again?

7.5397 1.3892

[Q3] Overall, how likely are you to provide enthusiastic

referrals for this Restaurant? 6.8889 1.2587

[Q4a] Restaurant really cares about building a

relationship with me 6.5238 1.0137

38

[Q4b] Restaurant communicates openly and honestly 6.8413 1.1806

[Q4c] I trust Restaurant’s leaders and personnel to

behave with fairness and integrity 6.3968 1.2769

[Q4d] Customer loyalty is appropriately valued and

rewarded at Restaurant 6.7302 1.0504

[Q4e] I believe Restaurant deserves my loyalty 7.1270 0.9918

[Q4f] Over the past year, my loyalty to Restaurant has

grown stronger 6.5873 1.3986

[Q4g] Restaurant values people and relationships

ahead of short-term profits 7.3651 1.4843

[Q4h] Restaurant sets the standard for excellence in its

industry 8.3986 0.9595

[Q4i] Restaurant attracts and retains outstanding

people (employees, partners, etc.) 7.6032 1.5610

[Y] Overall Customer Loyalty 7.1085 0.8457

The main inquiry of this essay is to find if a correlation exists between

quality of service and customer loyalty in Lebanese restaurants. This refers to

research question three. In order to test the hypothesis H3a and its null H3o, the

39

Pearson’s correlation factor R is calculated using the correlation function of the

SPSS 16 software between the dependant variable Overall Customer Loyalty (Y)

and the independent variable Overall Service Quality (X). The secondary inquiry

of this research is to find which of the SERVQUAL components is more relevant

to the restaurant industry. This was also done by calculating the correlation

between the ratings of the individual SERVQUAL components (independent

variables X1-5) and the dependant variable Overall Customer Loyalty (Y). The

Pearson R factors are given in the table below.

Table 7

Correlations Variables Correlation

[Y] Overall Customer Loyalty

[X] Overall Service Quality 0.671

[X1] Tangibles 0.512

[X2] Reliability 0.410

[X3] Responsiveness 0.643

[X4] Assurance 0.636

[X5] Empathy 0.616

40

Analysis and Evaluation of Findings

The tabulated data and statistics presented in the Findings section have

significant implications regarding the research questions and hypotheses. They

also reveal important data regarding quality of service and customer loyalty in

Lebanese restaurants. In this section, the data is evaluated and analyzed.

The Service Quality Questionnaire based on the five SERVQUAL

components (Zeethaml, Parasuraman and Berry, 1988) shows that there are

general trends in the perception of service quality in Lebanese restaurants. Table

8 shows the averages of the different ratings resulting from the questionnaire

from highest to lowest.

Table 8

SERVQUAL ratings from highest to lowest SERVQUAL Component

Mean Rating Standard Deviation

Reliability 4.3810 0.6072

Tangibles 4.3175 0.7145

Responsiveness 3.7143 0.7055

Empathy 3.7143 0.8314

Assurance 3.5714 0.8370

Table 8 shows that the Lebanese customers perceive Reliability as the

best component of service in Lebanese restaurants with Assurance having the

41

lowest rating. Lebanese restaurants are better at providing reliable service and

also score a high rating when it comes to tangibles. This apparent trend is

justifiable given that Lebanese restaurant managers tend to focus on providing

consistent reliable quality and give importance to image which is materialized in

high quality tableware and their dependence on branding and design (Majali,

2006). The average of the Overall Service Quality for the survey was 3.9365 (on

a scale from 1 to 5).

The most significant results of the Customer Acid Test are shown in Table

9.

Table 9

Significant results of Customer Acid Test

Question Mean Rating

Standard Deviation

[Q4a] Restaurant really cares about building a

relationship with me 6.5238 1.0137

[Q4c] I trust Restaurant’s leaders and personnel to

behave with fairness and integrity 6.3968 1.2768

[Q4d] Customer loyalty is appropriately valued and

rewarded at Restaurant 6.7302 1.0504

[Q4h] Restaurant sets the standard for excellence in its

industry 8.3968 0.9595

[Y] Overall Customer Loyalty 7.1085 0.8457

42

The average of the Overall Customer Loyalty rating, 7.1085 (on a scale

from 1 to 10), indicates a good level of customer loyalty. However, there is

potential for a higher rating. The more significant findings of the questionnaire are

the lower ratings given for some statements of the survey. Notably, the

restaurant is perceived as not caring to build a relationship with customers. Also,

customers do not highly trust the integrity and fairness of the restaurant staff and

also gave lower ratings for how much the restaurant values customer loyalty. By

contrast, most customers believe that the restaurant they visited sets the

standard for excellence in the industry, meaning that they regard it as better than

its competition. This is a good explanation for repetitive behavior on the part of

the customers although they do not on average believe that the respective

restaurants focus on building customer loyalty and integrity. This indicates that

customers might be loyal to restaurants not because of the restaurant’s efforts to

make them more loyal, but because the restaurant is the best there is amongst

its competitors. This coincides with the high ratings given by customers for

tangibles and reliability in the Quality Service Questionnaire and respectively

lower ratings given for empathy, assurance, and responsiveness.

The correlations shown in Table 7 are main indicators of the same

phenomenon. The testing of hypotheses H3a and H3o reveals a Pearson’s R

factor of 0.671 which shows that there is a positive correlation between Overall

Service Quality and Overall Customer Loyalty. In testing the hypotheses H4a and

H4o, it was shown that Responsiveness and Assurance are more positively

correlated with Overall Customer Loyalty (0.643 and 0.636 respectively) than

43

Empathy, Tangibles, and Reliability (0.616, 0.512, and 0.410 respectively). They

are therefore more relevant to improving customer loyalty. This supports the idea

that customer loyalty in Lebanese restaurants is driven by elements of service

that are concerned with the human interaction between customers and staff

rather than what the restaurant has to offer in terms of quality and image.

Hypotheses Testing

The statistical survey was designed to test the hypotheses H3 and H4 and

their nulls.

H3o: The overall rating of service quality in Lebanese restaurants is not

correlated to the overall customer loyalty rating.

H3a: The overall rating of service quality in Lebanese restaurants is

positively correlated to the overall customer loyalty rating.

H4o: The rating of any single or combination of the SERVQUAL service

components is not correlated to the overall customer loyalty rating.

H4a: The rating of any single or combination of the SERVQUAL service

components is positively correlated to the overall customer loyalty rating.

The correlation value of 0.671 (see Table 7) between Overall Service

Quality and Overall Customer Loyalty indicates that there is a positive correlation

between service quality and customer loyalty in Lebanese restaurants and thus

the null hypothesis H30 should be rejected. Similarly, the positive correlation

values between each of the five SERVQUAL components X1-5 and Overall

Customer Loyalty (see Table 7) also indicate that the null hypothesis H40 should

be rejected. Therefore both null hypotheses H30 and H40 are rejected.

44

Summary

The findings of the survey show that the quality of service in Lebanese

restaurants is perceived as being relatively high (3.9365) with Tangibles and

Reliability achieving higher ratings than Empathy, Assurance, and

Responsiveness. The Overall Customer Loyalty rating was 7.1085 which is

relatively good, but has a margin for improvement. These findings verify the

problem specified at the beginning of the research; that customers do not show

very high customer loyalty.

The data shows a strong positive relationship between Overall Service

Quality and Overall Customer Loyalty (correlation of 0.671) and shows that the

service components of Responsiveness and Assurance are the more important

factors affecting customer loyalty.

The most likely explanation to the problem resulting is that restaurant

managers are focusing more on quality and image, shown in the higher ratings

given to Tangibles and Reliability rather than on the human factor ( Empathy,

Assurance, and Responsiveness) which is the driver of customer loyalty

according to the results of the correlations.

45

CHAPTER 5: SUMMARY, C0NCLUSIONS, AND RECOMMENDATIONS

Summary

This paper deals with the relationship between quality of service and

customer loyalty in Lebanese restaurants. The problem of diminishing revenues

attributed to low customer loyalty with customers easily switching between

restaurants was identified. Since the restaurant industry is a service based

industry, it was important to identify to uncover a relationship, if any exists,

between quality of service and customer loyalty.

Through a survey of existing literature, the SERVQUAL multidimensional

model (Zeethaml, Parasuraman and Berry, 1988) based on five components of

service (Tangibles, Reliability, Responsiveness, Assurance, and Empathy) was

deemed appropriate in order to investigate the quality of service in the restaurant

industry. The same model was used for similar researches in the industry such

as those of Bartlett and Han (2007), Bell Seigyoung & Smalley (2005), and Fu

and Parks (2001). Customer loyalty was defined as a hybrid of the two widely

accepted definitions of customer loyalty; the behavioral definition (Czepiel and

Gilmore, 1987) and the attitudinal definition (Jacoby and Chestnut, 1978).

Furthermore, there was a lack of existing literature on Lebanese restaurants in

general and the works of Majali (2006) helped in identifying the problems of the

market.

The experiment was then designed to find the relationship being

investigated. A Service Quality Questionnaire based on the SERVQUAL model

and a Customer Loyalty Test based on Reichheld’s (2001) Loyalty Acid Test

46

were distributed for a survey covering 7 Lebanese restaurants. The resulting

variables of Overall Customer Loyalty rating and Overall Service Quality rating

were correlated and other correlational measures were done between the

separate components of the SERVQUAL model and the Overall Customer

Loyalty rating. The correlation was done using the Pearson method.

The findings showed a strong positive correlation between service quality

and customer loyalty and identified that the components of Responsiveness and

Assurance are more important factors with regards to Customer Loyalty. This

adds a contribution to the little existing literature on Lebanese restaurants, and

identifies that restaurant managers should give more importance to

Responsiveness and Assurance in order to increase the loyalty of their

customers.

Conclusions

Restaurant managers in Lebanon have problems in understanding and

identifying the drivers of customer loyalty. Low behavioral customer loyalty has

caused restaurants to repeatedly lose customers without having possible

solutions for the problem. Research on the relationship between customer loyalty

and quality of service will have a strong impact on how restaurant managers view

service and what components of it they should focus on.

Regarding the definition of customer loyalty in restaurants, literature

research has shown that customer loyalty in the restaurant industry is a hybrid of

attitudinal and behavioral loyalty with more emphasis on the behavioral aspect

which is concerned with repetitive buying and switching between restaurants

47

(Ballinger and Rubinson 1996; Dick and Basu 1994; Oliver 1999). This aspect is

more significant because it is what drives revenues in the high turnover

restaurant business.

Through literature research, a customer loyalty questionnaire (see

Appendix B) was designed based on Reichheld’s (2001) Customer Acid Test

since this type of questionnaire emphasizes the behavioral aspect of customer

loyalty. This questionnaire has proved efficient and useful.

The survey was conducted and the analysis of the findings has shown that

the service quality and customer loyalty are highly positively correlated.

Therefore, improving the quality of service in Lebanese restaurants should have

a noticeable impact on customer loyalty. Furthermore, the survey has shown that

the quality of service is perceived as high (3.965 on a scale of 1 to 5) in the

surveyed restaurants, and that customer loyalty is at an acceptable overall rating

of 7.1085 on a scale of 0 to 10. However, customer loyalty can still be increased.

The findings have also shown that customers perceive tangibles and reliability as

better than the other components of customer services.

A further study on the correlation between the different components of the

SERVQUAL model and customer loyalty has shown that responsiveness and

assurance have a higher impact on customer loyalty and should thus be the

focus of restaurant managers.

Recommendations

This study has given an important insight on how service quality affects

customer service in Lebanese restaurants. The findings have shown that

48

restaurant managers should focus on the human aspect of customer service

which has a stronger impact on customer loyalty. The findings have also shown

that customers are loyal to restaurants not due to the restaurants’ efforts on

improving their relationships with their customers, but more due to the position of

these restaurants with regards to their competitors on the market and their focus

on high quality and image. It is therefore recommended that restaurant managers

find ways to improve their relationships with their customers on a human level.

This opens possibilities on the different ways that can be achieved and

constitutes a good topic for further research into the matter.

49

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APPENDIXES

53

Appendix A

Service Quality Questionnaire

RESPONDENT # : ______________

Please rate the following service quality criteria by circling the most appropriate

number.

1 Tangibles: Rate the restaurant’s service

material (tableware, tablecloth, plates, cups).

Excellent Good Neutral Fair Poor

5 4 3 2 1

2 Reliability: Rate the restaurant’s ability to

provide service accurately and consistently.

Excellent Good Neutral Fair Poor

5 4 3 2 1

3 Responsiveness: Rate the restaurant’s ability

to help customers and provide prompt service.

Excellent Good Neutral Fair Poor

5 4 3 2 1

4 Assurance: Rate your confidence and trust in

the restaurant’s service.

Excellent Good Neutral Fair Poor

5 4 3 2 1

5 Empathy: Rate how you were treated by the

restaurant staff.

Excellent Good Neutral Fair Poor

5 4 3 2 1

6 Rate the restaurant’s overall quality of service. Excellent Good Neutral Fair Poor

5 4 3 2 1

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Appendix B

Customer Loyalty Test

RESPONDENT # : ______________

Please rate the following on a scale from 0 to 10 with 10 being ‘most likely,’ 0 ‘not

likely at all,’ and 5 indicating ‘neutral.’

1. How likely are you to continue buying the Restaurant’s products and/or

services from this Restaurant ? ________

2. If you were selecting a similar Restaurant for the first time, how likely is it

that you would choose this Restaurant again? ________

3. Overall, how likely are you to provide enthusiastic referrals for this

Restaurant? ________

4. Please rate your overall agreement with the following statements:

Attribute Agreement

a. Restaurant really cares about building a relationship with me

b. Restaurant communicates openly and honestly

c. I trust Restaurant’s leaders and personnel to behave with fairness and

integrity

d. Customer loyalty is appropriately valued and rewarded at Restaurant

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e. I believe Restaurant deserves my loyalty

f. Over the past year, my loyalty to Restaurant has grown stronger

g. Restaurant values people and relationships ahead of short-term

profits

h. Restaurant sets the standard for excellence in its industry

i. Restaurant attracts and retains outstanding people (employees,

partners, etc.)

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Appendix C:

Overall Customer Loyalty Rating Calculation Form

RESPONDENT # : ______________

Question

(Customer Acid Test)

Rating

1

2

3

4a

4b

4c

4d

4e

4f

4g

4h

4i

Average

Overall Customer Loyalty Rating:______________