SERVICE QUALITY AND CUSTOMER SATISFACTION:

THE PUBLIC SECTOR PERSPECTIVE

Mohamad Niza Md Nor*

Shaiful Annuar bin Khalid*
Mohd Fazly Mohd Razali*
Mohammad Ismail*
Nor Aimah Ramli*

Abstract

The purpose of this research paper is to examine service quality as a

determinant of customer satisfaction among a group of customer toward a
public sector organization in Malaysia. This study is cross-sectional and
descriptive in nature. Service quality consists of service product, service
delivery and service environment. Questionnaires were administered to a
total of 331 customers of the agency. The hypotheses were tested using
multiple regression. The findings indicate that service product is significantly
and positively related to customer satisfaction. However, service delivery
and service environment were not significant predictors of satisfaction.
Implications and recommendations are discussed.

Field of Research: Public Sector, Customer Satisfaction, Service Quality.

*Mohamad Niza Md Nor Faculty of Business and Management, Universiti Teknologi MARA, Perlis.
Email: mohdniza@perlis.uitm.edu.my
*Mohd Fazly Mohd Razali Faculty of Business and Management, Universiti Teknologi MARA,
Perlis. Email: mohdfazly@perlis.uitm.edu.my
*Shaiful Annuar bin Khalid Faculty of Business and Management, Universiti Teknologi MARA,
Perlis. Email: shaiful@perlis.uitm.edu.my
*Mohammad Ismail Faculty of Business and Management, Universiti Teknologi MARA, Perlis.
Email: mohammadismail@perlis.uitm.edu.my
*Nor Aimah Ramli. Email: aimahramli@yahoo.com

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1. Introduction

Both public and private organizations exist to serve their customers. The service
quality particularly in the public sector has become ever more important in
improving customer satisfaction. Organizations, especially in the public sector
agree that customer service is one of the most vital factors that contribute
establishment of reputation and credibility among the public. The public complaint
of long queues, poor service delivery and insufficient physical facilities may affect
the image and level of service quality in the public sector. However, it is not easy
to measure service quality because of its unique characteristics which are
intangibility, perishability and heterogeneity. Service product, service delivery and
service environment are the main concern in service quality for any organization.
Rust and Oliver (1994) recommended a three-component model affecting service
quality. They were service product (technical quality), service delivery (functional
quality) and service environment. Even though, Rust and Oliver (1994) have not
tested their conceptualization, support had been gained for similar models in retail
banking and health care samples (Mc Alexander, Kaldenberg and Koenig, 1994).
According to the related literature, service quality that customers received must be
reliable, responsive and emphatic involving service product, service delivery and
service environment. Thus, the purpose of this study is to examine the extent to
which service product, service delivery and service environment influence
customer satisfaction among customers of public service agency.

2. Review of Literature

2.1 Service Quality

Service quality has been documented as one of the key driving forces for business
sustainability and is crucial for firms’ accomplishment (Rust and Oliver, 1994).
Hence, research on service quality has been carried out worldwide. Earlier
studies have focused on service quality construct by Parasuraman et al. (1985,
1988, and 1994). The development of the original 22-item SERVQUAL instrument
signifies one of the most extensively used operational of service quality. It has
provided researchers with the possibility of measuring the performance-
expectations gaps composed of five determinants namely, reliability,
responsiveness, empathy, assurance and tangibility. Not many researchers have
attempted to investigate the three-component model as proposed by Rust and
Oliver (1994). This model consists of three dimensions, which are labeled as
service product, service delivery and service environment. Service product refers
to the technical quality of the service, whereas service delivery refers to the
functional quality of the service. On the other hand, service environment includes
the internal and external environments.

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Rust and Oliver (1994) have not tested their conceptualization but support has
been found for related models in retail banking (Mc Dougalll and Levesque 1994)
and health care samples (Mc Alexander, Kaldenberg and Koenig 1994).
Furthermore, Kotler and Amstrong (2008) stated that “a service firm’s ability to
hang onto its customers depends on how consistently it delivers value to them”.
Satisfaction is a person’s feeling of the pleasure or disappointment arising from
comparing products perceived performance in relation to expectation. The
connection between customer satisfaction and future intentions has been
identified. Customer satisfaction is believed to be associated with fruitful customer
behavior from the firm’s point of view. A number of empirical studies did indicate a
link between service quality and satisfaction (e.g., Fornell, 1992; Taylor and Baker,
1994).

2.2 Service Product

Service product is the service as it is designed to be delivered. Service product

often entails specific features. The main managerial decision in the service product
is identification of relevant feature or specifications to offer. For instance, a term
insurance policy with an associated payoff and yearly premium is a service
product. The service product also involves service specifications and targets.
Designing the service product is some what different conceptually from designing
the core physical product (Rust and Oliver, 1994). Rust and Oliver (1994) found
that many individuals did not take any action despite their dissatisfaction towards
the service product, because they did not want to be perceived negatively. With
strong ties, however, one may be more likely to express one’s true thoughts, as
strong ties are less likely to change their perception of a person they are close to
as a result of a negative consumption experience. Employee who completes the
service delivery is part of service product. Customers consume such service
product and finally assess the service quality and consuming values. Sometimes,
customers are even participants of service production.

In such circumstance, there is no chance that employees can correct service

failures without customers’ awareness. The characteristics of service product are
intangibility, inseparability, heterogeneity and perishable (Zeithaml and Bitner,
2000). The production management jobs of service industry are much different
and difficult for managing than manufacturing industry. Besides, bad service
product can cause service failures, bad service quality and low customer
satisfaction. Therefore, the concept of service management must also include the
component of employee's quality consciousness (Deng and Pei, 2009).

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2.3 Service Delivery

The service delivery proces can be likened to the role performances or scripts.
Consumers are thought to possess expected sequences of events and provide
role expectations with most service encounters. Research into service
performances shows that violations of these expectations or the nature of the
expectation itself can facilitate or impede critical post encounter behaviors such as
repatronage and complaining (Rust and Oliver, 1994). The management needs to
study carefully the service delivery process to monitor the satisfaction of
customers. Mohr and Bitner (1995) stated that the performances of service
delivery of front-line employee dramatically affect service quality and customer
satisfaction (Mohr and Bitner, 1995). Many researchers emphasized the importance
of customer-contact employees in creating and providing good service quality
(Bitner et al. 1990; Hartline and Ferrell, 1996). Ahearne et al. (2007) indicated that
salesperson’s service behaviours are important in building trust and customer
satisfaction. Therefore, when the manager tries to make endeavor of service
quality and customer satisfaction improvement, employees' quality consciousness
definitely is the critical management topic in present human resource management
and service management.

2.4 Service Environment

The service environment includes numerous dimensions that can be classified into
two main themes and they are internal environment and external environment.
Literature on the internal environment primarily focuses on organizational culture
and the overriding philosophy brought to service provision by management. The
external theme focuses primarily in the physical ambience of service setting.
Fisk, Brown and Bitner (2000) stated that, correct workplace conditions are
important factors for health and performance and are profitable and beneficial in
every way. Meanwhile, Rust and Oliver (1994) stated that, improving workplace
conditions and health standards would assure employees’ performance. To create
a physical infrastructure to satisfy internal and external customers and to obtain
higher workplace performance and profit will have a direct impact on an
organization’s success and on the wealth of the community.

Store atmosphere meant the styles and appearance of physical environment for
service giving and the part experienced by customers on the occasion of service
transferring (Bitner, 1992). The atmosphere, smell and music expressed by the
physical environment would affect customers' perception and behaviours. The
overall atmosphere filled with inspiring delight affected customers to stay longer in
stores. It could enhance the willingness for customers' to interact and to
communicate with service providers and business performance of stores could be
improved (Donavan and Rossiter, 1982; Donavan, Rossiter, Marcoolynn and
Nesdale, 1994). Thus, when customers implemented touch with service providers,
the service providers' service quality to customers included manual attitude and

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behaviors. Also, the atmosphere of service environment would affect customers'
perception of service performance. We propose the following hypotheses about
Store Atmosphere (Kuo and Tsai, 2009).

3. Theoretical Framework

Based on the above review of literature, the following model and hypotheses were
proposed to be tested in this study. Three independent variables were identified,
that is, service product, service delivery and service environment. These variables
were hypothesized to influence customer satisfaction.

SERVICE PRODUCT

SERVICE DELIVERY CUSTOMER

SATISFACTION
PROMOTIONS
SERVICE ENVIRONMENT

PROMOTIONS
Independent Variables Dependent Variable

H1 Service product is related positively with customer satisfaction.

H2 Service delivery is related positively with customer satisfaction.
H3 Service environment is related positively with customer satisfaction.

4. Methodology

Due to the constraint in obtaining necessary information about the population

elements, this study utilized convenience sampling technique. It was carried out
from January 2009 to February 2009. According to the information gathered from
the department, only about 55 percent of total customer is the customer that dealt
with counter services. With an average of 4500 customers per month, 55 percent
of the population represent about 2475 customers per month. By referring to the
table that was simplified by Krejcie and Morgan (1970) the sample size of this
research would be 331. The researcher distributed 600 questionnaires to
customers who were obtaining various services at various counters at the public
agency. The researchers managed to collect 249 usable questionnaires which
represented 43 percent response rate. Established measurement was used to
measure the study variables. The researcher used close-ended questions and the
five-point Likert scale. The five-point Likert scale requires the respondents to

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respond to a series of statements (Saunders, Lewis and Thornhill, 2000). The
questionnaires were divided into four sections. Section A contained items tapping
the customer satisfaction. Section B covered several questions about the service
product, service delivery and service environment. The last section contained
questions on demographic factors.

5. Discussion and Findings

Data gathered through this analysis was analyzed after it had been collected from
all respondents and illustrated in the form of tables and bar charts. There were
only 249 sets of questionnaires that were answered by the respondents, who were
customers of a particular public department. Data analysis was important for the
researcher to develop the reliability rest, frequency distribution, Pearson
Correlation, descriptive analysis and regression analysis. As Table 1 indicates,
alphas for all variables are more than .70 which indicates suitability of the
construct (Nunnally, 1978). In terms of occupational sector, Table 2 indicates that
personal business represented the biggest percentage of 62.7 percent followed
by company representatives 15.35 percent, agent 10 percent, own business 9.2
percent and others 2.4 percent.

Table 1: Summary of Reliability Analysis

Variable No. of Cronbach’s Alpha

Items

Customer Satisfaction 5 .737

Service Product 4 .874

Service Delivery 5 .871

Service Environment 5 .816

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 Table 2: Type of Respondents Occupational Sector

Occupational Sector Frequency Percentage

Company representatives 38 15.3

Own business 23 9.2

Personal Business 156 62.7

Agent 25 10.0

Others 6 2.4

Table 3: Means and standard deviation

--------------------------------------------------------------------------------------------------------
Variables Minimum Maximum Mean SD
---------------------------------------------------------------------------------------------------------
Customer satisfaction 1.00 5.00 3.37 .72
Service product 1.00 5.00 3.47 .83
Service delivery 1.00 5.00 3.42 .81
Service environment 1.00 5.00 3.69 .74
---------------------------------------------------------------------------------------------------------
Table 3 shows the means and standard deviations for the 4 study variables.
Overall, all the variable means are above the mid-point of 3. The means ranged
from 3.69 for service environment to 3.37 for customer satisfaction.

Table : 4 Intercorrelation
----------------------------------------------------------------------------------------------------------
Variables 1 2 3 4
----------------------------------------------------------------------------------------------------------
Customer satisfaction - .30** .24** .20**

Service product - - .80** .71**

Service delivery - - - .81**

Service environment - - - -
----------------------------------------------------------------------------------------------------------
** p<.01; *p<.05

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The result of the correlation analysis presented in Table 4 shows that customer
satisfaction is related significantly with service product (r=.30, p<.01), service
delivery (r=.24, p<.01) and service environment (r=.20, p <.01). The result of
correlation analysis provided initial support to the study hypotheses.

Table 5: Multiple Regression

Independent Variable Beta Sig.

Service Product .31 .00

Service Delivery .03 .79

Service Environment .05 .66

Adjusted R Square .08

R Square .09

Based on the result of the regression presented in Table 5, of the three

independent variables, only service product (β=.31; p<.01) was related
significantly and positively with customer satisfaction. Service delivery ((β=.03;
n.s.) and service environment (β=.05; n.s.) were not significantly related with
customer satisfaction. Hence, only H1 was supported.

6. Conclusion

This study was conducted to analyze service quality and customer satisfaction
involving one of the public department offices. The findings show that only service
product is a significant predictor of customer satisfaction. This study expanded the
service encounter literature by offering evidence in the context of public sector.
Customers' satisfaction will be enhanced if they perceive that there is a favourable
service product. Relationship quality has a significant influence on behavioural
intentions. That means customers' satisfaction and trust established will enhance
word-of-mouth and repeated patronage. Service delivery and service environment
were not significant predictors of satisfaction. Therefore, in order to attain and
maintain high level of customer satisfaction towards their services, the
organization should focuses more on service product. The development of a new

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service product should be made according to a customer’s specific needs. A
regular survey should be given to the customers through the department websites,
brochures or others. By conducting regular surveys, the result can be used by the
department to come up with a new excellent product such as quality of printing or
documentation for delighting their customers. The department should encourage
their employees to give personal attention to all customers. This is to ensure
equal service is emphasized at the department; thus making the department
among the favourable government services in Malaysia. In order to enhance
friendly cooperation between customer service counter staff and customers, full
commitment and cooperation among department staff is the most important
element. Customers nowadays are concerned with the way they are being
appreciated by the person they are dealing with. The findings that service delivery
and service environment have no effect on satisfaction should be taken with
precaution. The small size and non-probability sampling used may result in non-
significant relationship. Future research need to reconfirm these findings. We
believed that service delivery and service environment remained important in
determining satisfaction. Satisfied customers may not remain satisfied forever. A
major concern with the service delivery is the courtesy of employees towards the
customers. It is important that the staff know the right way to treat customers.
Employees who do not perform well in customers contact task should be
reassigned and retrained. The existence of physical facilities provided by the
department should be maintained and improved. In longer term, it is important to
retain good customers and draw new customers. Highly satisfied customers
spread positive words of mouth and become an effective walking, talking
advertisement for the organization that lower the cost of attracting new customers.
Delivering high quality service and maintaining customer satisfaction may lead the
organization towards accomplishing the mission and vision of the organization.
Therefore, the study about the changing trend on public service sector must be
continuously monitored in order to keep abreast with the needs of society.

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