CUSTOMER NEED KNOWLEDGE

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CUSTOMER NEED KNOWLEDGE

‘Examination of the Interaction Motivation’

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M.Sc. Thesis Anne Siegel: Customer Need Knowledge: Examination of the Interaction Motivation [1]

CUSTOMER NEED KNOWLEDGE

EXAMINATION OF THE INTERACTION MOTIVATION

Groningen, oktober 2012 By:

Siegel, A.E. (Anne), S1777602

Westersingel 43-B, 9718 CD Groningen s1777602@student.rug.nl, 06-23111883 M.Sc. Thesis Business Administration Specialization Marketing Management University of Groningen

Supervisors:

1st_{: Prof. dr. J.C. Hoekstra}

2nd_{: Dr. J.A. Voerman}

External Supervisors:

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Management Summary

In these times of economic crisis, companies need to distinguish themselves from their competitors. One way of doing that is by delivering excellent service quality. This research focuses specifically on perceived service quality by the customer as a result of the service encounter by looking at the perceived customer need knowledge and perceived customer orientation as important predictors of perceived service quality. The interaction motivation of the customer is included in the model as the main moderator. The interaction motivation is the main reason why the customer contacts the service organization, based on the customer’s prior cumulative state of satisfaction. Customers that have different interaction motivations have different needs and so, the frontline service employee needs to deal with them differently.

Furthermore, two important moderators have been included in the model: length of relationship and gender discrepancy. The goal is to provide insights into these concepts which could help companies and their frontline service employees provide better service to their customers in different client situations and so improve perceived service quality.

In the empirical research phase, a questionnaire was developed based on existing marketing research scales and distributed online. 224 respondents completed the questionnaire. The analysis shows that the interaction motivation has an important moderating effect between perceived customer need knowledge and perceived service quality. Furthermore, the perceived customer orientation has a positive effect on perceived customer need knowledge and the moderators length of relationship and gender discrepancy have been found to have no significant effect.

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1. Introduction and Problem Statement

1.1 Introduction

Service quality has been the subject of research for many years (Zeithaml, 2000). Competition is becoming more and more intense every day and the concern for service quality continues to grow (Asubonteng, McCleary & Swan, 1996). Companies need to distinguish themselves from their competitors.

One way of doing that is by delivering excellent service quality, in every way possible. It is the key for superior performance and business success (Parasuraman, Zeithaml & Berry, 1988). What Parasuraman et al. (1988) predicted several years ago continues to be true: ‘Delivering superior service quality appears to be a prerequisite for success, if not survival’.

This research focuses specifically on perceived service quality by the customer as a result of the service encounter. The service encounter is the moment of interaction between a customer and a firm, usually by a frontline service employee (Bitner, Booms & Tetrealt, 1990), regardless of the communication medium used (telephone, e-mail or face-to-face).

When a customer contacts the service organization, they usually act upon their recent feelings (Bowman & Narayandas, 2001). Bolton (1998) introduced the concept of interaction motivation. The interaction motivation is the main reason why the customer contacts the service organization, based on the customer’s prior cumulative state of satisfaction. Customers that have different interaction motivations have different needs in the service encounter. Therefore, frontline service employees need to deal with them differently to generate the same levels of perceived service quality.

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identify a given customer’s hierarchy (priorities’) of needs in accordance with the customer. Although the accuracy of frontline service employees’ perceptions of customer needs has been examined once in a systematic manner by Homburg et al. (2009), customer need knowledge has not yet been linked to perceived service quality.

Although this idea that knowing the needs and wants of your customers will bring your company further is an accepted thought in marketing literature (Hoekstra, Leeflang & Wittink, 1999), the concept and influence of customer need knowledge on perceived service quality has not been researched much.

But how to acquire customer need knowledge? One way of generating customer need knowledge is by implementing a customer orientation in the service encounter (Homburg et al. 2009). The customer orientation reflects a firm’s ability to interact with individual customers and take advantage of the information obtained from them through these interactions. Customer orientation is defined as the degree to which a frontline service employee satisfies the needs of customers, instead of making a ‘sale’ (Homburg et al. 2009). Frontline service employees who behave in a customer oriented way will acquire more accurate customer need knowledge (Gill & Swann, 2004; Homburg et al. 2009). The objective is to take advantage of this information and satisfy the customer, which will generate higher levels of customer outcomes in terms of customer satisfaction, willingness to pay (Homburg et al. 2009) and perceived service quality. Behaving in a customer oriented way is the cornerstone of marketing management and critical for business performance (Jaworski & Kohli, 1993).

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extent to which a customer orientation can lead to the generation of customer need knowledge, instead of as antecedents. Although frontline service employees might behave completely in a customer oriented way in the service encounter, this might not relate because of these moderating relational facets.

1.2 Problem Statement

This research focuses specifically on the service encounter between the frontline service employee and the customer. It examines the moderating influence of the interaction motivation on the relationship between perceived customer need knowledge and perceived service quality. Also, the link between the perceived customer orientation and perceived customer need knowledge is measured (Homburg et al. 2009) with the moderating concepts of length of relationship and gender discrepancy. All concepts are measured seen through the eyes of the customer; perceived service quality, perceived customer need knowledge and the perceived customer orientation.

The problem statements for this research is:

How are the customer orientation and customer need knowledge related to perceived service quality and how do length of relationship, gender discrepancy and the interaction motivation moderate/influence these relationships?

The following sub research questions are answered:

 To what extent does customer need knowledge influence perceived service quality?

 To what extent is this relationship moderated by the interaction motivation?

 To what extent does customer orientation influence customer need knowledge?

 How do length of relationship and gender discrepancy moderate the relationship between the customer orientation and customer need knowledge?

1.3 Academic Contribution

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different needs, the frontline service employees need to address these different service encounters differently (Erickson & Eckrich, 2001).

Besides that, most of marketing literature focuses solely on either very satisfied customers (customer delight; complimenting behavior) or very dissatisfied customers (complaining behavior). This research also acknowledges the concept of inquiries, where the customer does not feel very satisfied or unsatisfied, but asks a question in regard of neutral information where he/she does not have a distinct opinion. This research is one of the first to examine the concept of the interaction motivation and the influence it has on the service encounter and perceived service quality.

Homburg et al. (2009) examined the concept of customer need knowledge by measuring the difference between the perception of the service employees’ needs and that of the customer. For this research, a new reliable scale for customer need knowledge was developed that represents only the customer’s point of view (perceived customer need knowledge).

Finally, the relationships studied in this research have not yet been put together into one conceptual framework, based on the customer’s perception.

1.4 Managerial Relevance

Parasuraman et al. (1985) found that service quality is a key factor in cost reduction, market share and return on investment. Therefore, it is very important for firms to know how service quality is perceived by the customer and how it can be improved, especially in day-to-day operations like service encounters.

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Also, by knowing how length of relationship and gender discrepancy influence the relationship between customer orientation and customer need knowledge, firms can benefit from this by adjusting their service encounters with the findings from this research.

1.5 Structure

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2. Theoretical Framework

This chapter first examines the direct relationship between perceived customer need knowledge and perceived service quality with the moderating influence of the interaction motivation of the customer. Secondly, the direct relationship between the perceived customer orientation and perceived customer need knowledge and the influence of length of relationship and gender discrepancy between the frontline service employee and the customer are explained. The relationships between these constructs are illustrated in the conceptual framework (figure 2.1), which is the basis for this theoretical framework.

Figure 2.1 Conceptual Framework

2.1 Perceived Service Quality

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responsiveness, reliability, assurance and empathy. SERVQUAL looks at perceived service quality, the consumer’s judgment about the overall excellence of a service (Zeithaml, 1988). For this research, service quality is defined as the overall excellence of the service encounter, perceived through the eyes of the customer. The focus is on three aspects of the SERVQUAL instrument; responsiveness, reliability and assurance which together make up the overall perceived service quality aspect. These concepts measure the service process itself in a personalized way.

Nowadays, customers want their services more personalized (Kumar & Reinartz, 2006). In many cases, this means an offering that customizes the basic service adapted to the customer’s wants and needs (Suprenant & Solomon, 1987). Frontline service employees can make the moment of interaction more personal by taking more time for the interaction, offering personalized advice, making small talk or having a personal interest in the customer (Suprenant & Solomon, 1987). By looking at the determinants of service quality that Parasuraman et al. (1984) identified during early research, three components relate to the frontline service employee-customer interaction of the service; courtesy, communication and understanding. All these three can have an impact on the personalization of the service (Suprenant & Solomon, 1987) and the identification of a customer’s needs.

Most important for this research is the dimension of understanding (Parasuraman et al. (1984). It is defined by Parasuraman et al. (1984) as a learning experience about the customer’s needs and by doing so, providing them individual attention. Courtesy is more about the polite and friendly way to interact with the customer. And last, communication is about talking and interacting with the customer in a language that they can understand. By becoming aware of these three important concepts, frontline service employees can make a significant difference in their service encounters (Suprenant & Solomon, 1987). The understanding part relates most to customer need knowledge.

2.2 Customer Need Knowledge

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Customer need knowledge is defined here as the extent to which a frontline service employee can accurately identify a given customer’s needs (Homburg et al. 2009).

Every individual customer has a hierarchical set of customer needs. Each need has a

different priority which identifies the importance of the need for the customer. Griffin &

Hauser (1993) call this ‘range of need importance’ the voice of the customer. A need is an internal state of tension caused by disequilibrium from an ideal or desired state (Hoyer & Macinns, 2008). Another perception of needs is that a need is a deprivation in the way of something being lacking (Jackson & Marks, 1999). Needs are usually described in a customer’s own words. Because every customer has different needs and priorities, performance of the service encounter depends largely on how frontline service employees can assess these needs and the corresponding hierarchy of priorities (Homburg et al. 2009). A frontline service employee has generated customer need knowledge when he or she can accurately identify a given customer’s hierarchy (priorities’) of needs and act upon them in correspondence with the customer.

To create a more positive evaluation of service quality by the customer, frontline service employees must accurately identify a given customer’s needs and in dialogue, provide a customized outcome of the service encounter. When frontline service employees have more knowledge of customer’s needs, they can more accurately help the customer. If frontline service employees can accurately identify a customer’s needs and know how to respond to this customers will have more adequate service. If employees try to generate customer need knowledge in their interaction with customers, this results in confirming to customer’s needs, which in turn leads to positive perceived service quality and customer satisfaction (Homburg et al. 2009).

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This eventually leads to more positive perceived service quality, customer satisfaction and firm performance.

This leads to the following hypothesis:

H1: Perceived customer need knowledge positively influences perceived service quality.

2.3 Interaction Motivation

The interaction between the frontline service employee and the customer can be initiated by both (Bitner et al. 1990). Customer initiated contact can be an important source of information for firms, since the customer usually addresses a concern, problem or general question (Bowman & Narayandas, 2001). Customer initiated contact is influenced by customer characteristics (demographics, user style etc.) and context specific factors like type of contact (Bowman & Narayandas, 2001). Saxe & Weitz (1982) also raised the question whether the effects of customer oriented behavior are context dependent and found this to be true. For this research, we only look at the context specific factors, namely the interaction motivation to contact the organization.

Bowman & Narayandas (2001) categorized customer initiated contacts into complaints and inquiries. Where complaints are regarded as (prior to contact) dissatisfied customers, inquiries were made by customers who were more likely to have a neutral mind set (prior to contact); neither positive nor negative. Customers with inquiries will be primarily interested in information that will answer their question (Bowman & Narayandas, 2001). Bowman & Narayandas (2001) also found that customers who were dissatisfied and wanted to address a complaint more critically viewed the service process and the service outcome.

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complimenting behavior (Johnston, 1995). For this research, three different interaction motives are examined: complaints (negative service encounters), compliments (positive service encounters) and inquiries (neither positive nor negative service encounters; neutral) (Bowman & Narayandas, 2001; Oliver, Rust & Varki, 2002; Johnston, 1995).

The interaction motivation is defined here as the main reason why the customer contacts the service organization, based on the customer’s prior cumulative state of satisfaction (Bolton, 1998).

Complaining Behavior

As described before, complaining behavior is defined as a customer who communicates certain aspects about the service that generate a certain degree of dissatisfaction (Alvarez, Casielles & Martin, 2010). Parasuraman (2010) found that when a customer addresses a complaint, they pay more attention to how the frontline service employee handles and responds to the issue. Therefore, behaving in a customer oriented way is very important in this case. Negative service encounters which consider complaints can be seen as critical service encounters, because firm’s either lose or win the customer back. Parasuraman (2010) found that in less critical service encounters, customers do not pay so much attention to the frontline service employee. So it is stated that when a customer has positive or neutral feelings prior to contact, behaving in a customer oriented way is less important.

If a frontline service employee excels in behavior of generating customer need knowledge and solves the complaint accordingly, it could be that the customer is even more satisfied than before (Bitner et al. 1990). Also, when a frontline service employee is engaging in customer need knowledge behavior and does this right, this could give the customer feelings of participation in the service process (Evans & Zou, 2008). Results show that participating in the service recovery process actually increases customer satisfaction and perceived service quality (Evans & Zou, 2008).

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to satisfy the complaining customer again, a sense of fairness should be perceived. Some customers who complain seek fairness; firms should inform customers with information about the source of the failure/problem (Berry, Seiders & Grewal, 2002). Employees should reduce customer’s anxiety about the dissatisfaction. This way, customers can make sense of the issue and understand it more thoroughly (Berry et al. 2002). However, for some customers, the objective is to redress propensity, find a reason why (Chebat, Davidow & Codjovi, 2005) or service recovery (Kau & Loh, 2006). If a frontline service employee can accurately address what a customer is looking for when complaining with the corresponding priority of needs, this could lead to improved perceived service quality.

Complimenting Behavior

Complimenting customers are customers for which the prior performance of the service exceeded their expectations/standards (Rust & Oliver, 2000). They had a better experience or service than expected originally, and this makes them very satisfied (Day, 1984). Customers who compliment firms are likely to be highly brand-loyal and motivated (Erickson & Eckrich, 2001). They have invested time in contacting the organization to communicate unsolicited response in the form of a compliment.

Customers who compliment may feel a need for special acknowledgement. Because they took the time to give unsolicited feedback, they may search for the feeling of being heard (Erickson & Eckrich, 2001). Therefore, they may feel the need for procedural justice, acknowledgement for the time and effort they have given necessary to address the compliment. (Erickson & Eckrich, 2001). Sometimes, the customer wants interaction (Gummesson, 1997), in response to their profound compliment.

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Inquiries (Neutral Behavior)

Inquiries are being made by customers who are more likely to have a neutral mind set (prior to contact); neither positive nor negative (Bowman & Narayandas, 2001). Performance was what was expected in the past, so the customer will be indifferent (Day, 1984). Customers with a neutral state of mind will be primarily interested in information that will be provided during the service encounter (Bowman & Narayandas, 2001). To satisfy the customer, the frontline service employee should focus on the reliability and competence of the information (Berry, Wall & Carbone, 2006).

When a customer addresses an inquiry, the need can be easily identified and therefore, the frontline service employee does not have to put much effort into it. Therefore, lesser amounts of customer need knowledge are required to interact with the customer and have them perceive service quality.

All in all, this leads to the following hypothesis:

H2: The interaction motivation moderates the effect of perceived customer need knowledge on perceived service quality. The moderating effect is largest in case of complaining behavior (enhancing the direct relationship) and smallest in case of complimenting behavior.

2.4 Customer Orientation

Homburg, Müller & Klarmann (2010) defined two types of customer oriented behavior from frontline service employees. First, there is the functional customer orientation, defined as task-related behavior, aimed at helping the customer make satisfactory purchase decisions. Second, there is the relational customer orientation, which is defined as personal-related behavior, by establishing a relationship with the customer. For this research, a more relational view is taken by looking at personal-related behavior of a frontline service employee, the satisfaction of the needs of the customer.

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employee can make a potentially important difference by addressing a customer’s latent needs; needs that are important to customers but are difficult for them to articulate (Blocker, Flint, Myers & Slater, 2011). By proactively talking to the customer, frontline service employees can discover those latent needs and act upon them. This way, they can also delight customers with their customer oriented behavior (Oliver, Rust & Varki, 2002). The combination of both acting upon current expressed needs and latent needs creates more value for customers and is therefore an important predictor of customer need knowledge.

H3: The perceived customer orientation of a frontline service employee positively influences perceived customer need knowledge.

2.5 Length of Relationship

If customers have a long history with the firm, the firm can acquire information over a longer period of time and save this in a database. This increases the likelihood of an accurate identification of customer’s needs. Acquaintance with the target provider (the customer) provides the employee with a more representative idea of how the target behaves across different situations (Homburg et al. 2009). This provides the employee with more information, increasing the likelihood of a positive identification of someone’s hierarchy (priorities’) of needs. The longer this relationship, the higher the effect.

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H4: The length of the relationship between a firm and a customer positively enhances the effect of the perceived customer orientation on perceived customer need knowledge.

2.6 Gender Discrepancy

Gender discrepancy is the difference in gender between the frontline service employee and the customer (Homburg et al. 2009). When the gender is different, gender discrepancy occurs (female-male/male-female). Humans consider similar people holding desirable traits and preferences because of similarity and familiarity to one self (Homburg et al. 2009). Jackson & Alvarez (1992) found that a match between employee and customer in terms of demographic characteristics that improved store performance. Their results are based on the similarity attraction argument. Jackson & Alvaraz (1992) believe that a match in demographic characteristics (like gender, age, education) improves an employee’s understanding of the customer’s needs & preferences. Likewise, Coulter & Coulter (2002) found that perceived similarity between a customer and a frontline service employee builds upon trust. They found that similarity allows the customer to identify with the frontline service employee. It may also enhance communication between them.

Driver & Johnston (2001) also found that customers have different priorities in terms of what they regard as perceived service quality. Some customers prioritize hard and some prioritize soft quality aspects. Driver & Johnston (2001) found that this is also related to demographics. So when the frontline service employee and the customer have the same gender, this results in more significant perceived service quality because they perceive themselves as ‘more similar’.

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3. Research Design

This chapter describes the research design and research methods that are used in the empirical research phase. First, there is a short introduction of the researched company to provide some background. Data collection (3.2) and the measurement constructs (3.3) are explained. At last, the process of sampling (3.4) is described.

3.1 Researched Company: Randstad

The empirical research was carried out at Randstad. Randstad is a staffing company that provides HR/Recruitment services to their main business clients, called key accounts. This is done through search & selection (staffing), HR solutions and various in-house services. The research was done at Randstad Payroll Direct, which is a large administrative organization that provides payroll solutions for large key accounts in the Netherlands.

Randstad Payroll Direct is an organization with frontline service employees who provide first line service to customers calling/e-mailing or initiating contact any other way. Customers do not have their own personal frontline service employee. Every time they initiate contact, a different employee will help them. Randstad Payroll Direct is large and has many customer initiated contacts on a daily basis (>100).

3.2 Data Collection

Respondents are acquired using the customer database of Randstad Payroll Direct. The data is collected using a self-administered questionnaire. Online survey is used because this is the most convenient way for respondents (Malhotra, 2010). It saves respondents time, it is cheap and the results are easy to process. To send out the questionnaire, a program called Qualtrics was used. Qualtrics is a program that specializes in online questionnaires. When respondents completed the survey, they participated in a lottery with chances of winning cinema tickets, surf boards and key chains. The survey was distributed in Dutch.

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spoke (male/female). After this, respondents state their opinion about the given statements. At last, some demographic questions are asked.

The questions are primarily based on pre-existing scales from marketing literature. For the complete questionnaire, see appendix A.

3.3 Measurement Scales

For most of the constructs, established scales are used. The respondents are asked to rate their opinions based on a 7 point Likert scale, ranging from strongly disagree to strongly agree. Because one specific service provider is investigated, existing questions were slightly adapted to fit within the Randstad context. For an overview of the scales, see table 3.1, measurement scales.

Perceived Service Quality

Perceived service quality is measured by using an adapted and shortened version of the SERVQUAL scale. SERVQUAL is an instrument developed by Parasuraman et al. (1988), it measures five dimensions along which consumers perceive and evaluate service quality, namely: tangibles, responsiveness, reliability, assurance and empathy.

Tangibles are left out of the scale, because for this specific service provider, the physical environment will not be relevant. Customers will interact with frontline service employees by phone or e-mail. Also, empathy is left out of the scale because it is a very general concept and does not actually fit with the other SERVQUAL constructs that measure the service process itself.

To measure the construct of perceived service quality, the respondent is asked to rate his/her opinion based on a 7 point Likert scale, ranging from strongly disagree to strongly agree.

Perceived Customer Need Knowledge

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Statements focus on the identification of needs & wants, importance and success. The focus was the frontline service employee. Could he or she identify the customer’s needs & wants, assess importance and acquire success with this information? The new customer need knowledge scale has proven to be reliable.

Interaction Motivation

From the academic literature (Bowman & Narayandas, 2001; Parasuraman, 2010; Bitner et al. 1990 & Erickson & Eckrich, 2001), three concepts of interaction motivation were found: complaining behavior, complimenting behavior and neutral behavior (inquiries). To measure the construct of customer’s interaction motivation, respondents are asked to think about their last contact moment with Randstad Payroll Direct and what the main purpose for contacting the organization was.

Perceived Customer Orientation

Blocker et al. (2011) found that the customer’s perception of the customer orientation of the frontline service employee differs substantially from those of the frontline service employees and management itself. However, the customers view is more important than the other perceptions. The customer is the one who creates value and has in-depth insights into the firm’s resources and capabilities (Blocker et al. 2011).

Perceived customer orientation is measured by using the shortened version of the SOCO scale by Thomas, Souter & Ryan (2001). Originally, the SOCO scale was developed by Saxe & Weitz (1982) to measure the customer orientation of sales personnel. The scale was adapted for specific service situations by Thomas, Souter & Ryan (2001). The scale was adapted to reflect the customer’s point of view in service situations.

The constructs of perceived customer orientation are measured on a 7 point Likert scale, ranging from strongly disagree to strongly agree.

Lenght of Relationship

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Gender discrepancy

Gender difference between the frontline service employee and the customer is a binary scale with 1 being different female/female-male) and 0 being the same (male-male/female-female).

Constructs Sources

Perceived Service Quality Reliability

SQ1 The service employee showed a sincere interest in solving my problem

SQ2 The service employee performed the service right the first time Responsiveness

SQ3 The service employee gave prompt service

SQ4 The service employee was not too busy to respond to my request Assurance

SQ5 The service employee was consistently courteous SQ6 The service employee answered all of my questions

SERVQUAL scale of Parasuraman, Zeithaml & Berry, 1985;1988;

Adjusted by Teas, 1993; overall service quality scale

Not included: tangibles; empathy

CO1 The service employee had my best interest in mind CO2 The service employee found out what my needs were CO3 The service employee solved my problems

CO4 The service employee found the most suitable answer/solution to my problem

Original SOCO scale of Saxe & Weitz, 1982;

Adjusted by Thomas, Souter & Ryan, 2001.

Perceived Customer Need Knowledge

CNK1 The service employee knew exactly what I wanted

CNK2 The service employee knew what was important to me and what not

CNK3 The service employee understood my specific ‘needs’ CNK4 The service employee hits the nail on the head every time

Newly developed scale with adapted items of Parasuraman, Zeithaml & Berry, 1988;

Homburg et al. 2009

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Control Variables

Control variables are used to test if they may affect the outcomes. Age, gender (female; male) and education (lower; high school; MBO; HBO; WO) of the respondents are used to control for the conceptual model.

3.4 Sampling

The target population of this research is all customers engaged with Randstad Payroll Direct for one specific key account: KPN. The customer database of Randstad Payroll Direct KPN consists of 1686 customers. Each customer was invited to participate in the study by e-mail. 258 customers completed the survey.

3.5 Plan of Analysis

This section shortly explains the statistical tests that were used to analyze the gathered data.

3.5.1 Reliability Analysis

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Constructs CA Tolerance ViF

Perceived Service Quality Reliability

SQ1 The service employee showed a sincere interest in solving my problem

SQ2 The service employee performed the service right the first time

Responsiveness

SQ3 The service employee gave prompt service

SQ4 The service employee was not too busy to respond to my request

Assurance

SQ5 The service employee was consistently courteous SQ6 The service employee answered all of my questions

.857 .727

.714

.623

.426 2.347

CO1 The service employee had my best interest in mind CO2 The service employee found out what my needs were CO3 The service employee solved my problems

CO4 The service employee found the most suitable answer/solution to my problem

.907 .511 1.957

Customer Need Knowledge

CNK1 The service employee knew exactly what I wanted CNK2 The service employee knew what was important to me and what not

CNK3 The service employee understood my specific ‘needs’ *

CNK4 The service employee hits the nail on the head every time

.872 .345 2.898

Table 3.2 Reliability Analyses

*Item deleted after CA

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.714; .623). The 6 separate items were computed into one variable ‘Perceived Service Quality’. In one case, the ‘if item was deleted’ score leads to a higher Cronbach’s Alpha. This was the case with item CO3 ‘The service employee solved my problems’. After consideration, the item was left out. For each construct, the items were averaged.

3.5.2 Regression Analyses

To test if the hypotheses should be rejected or accepted, a regression analysis were performed. A regression analysis measures the relationship between two or more independent and dependent variables (Malhotra, 2010).

The hypotheses were tested through 4 models. To make it more comprehensible, the direct relationships were examined first and after this, the moderating variables were included. ( ) ( ) ( ) ( ) Where:

CNK = Customer Need Knowledge (perceived) CO = Customer Orientation (perceived) SQ = Service Quality (perceived)

IM = Interaction Motivation GD = Gender Discrepancy LR = Length of Relationship

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3.5.3 Multicollinearity

When performing a regression analysis, multicollinearity should be taken into account. Multicollinearity is present when there are very high intercorrelations among the independent variables (Malhotra, 2010). To check for multicollinearity, a Tolerance score and a Variance for Inflation test have been done. The Tolerance score should be > .1. The Variance for Inflation score should be <.10. This indicates a low degree of multicollinearity.

Multicollinearity is not present in this dataset, all factors were found to have a low Tolerance (>.1) and low Variance for Inflation (<10) score. The scores can be found in table 3.2.

3.5.4 Mediation (extra)

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4. Results

In this chapter, the results of the data analysis are described. Some descriptive statistics are outlined and after this, the results of the statistical tests are examined.

4.1 Descriptive Statistics

In total, 258 customers’ respondents completed the survey. 224 of those were useful due to respondent bias, or by not completing the questionnaire fully. The response rate is 13% (224/1686), which is satisfying enough for this particular research.

Gender

In total, 142 (63.5%) male respondents and 82 (35.5%) female respondents completed the questionnaire.

For measuring the gender discrepancy effect, there are 142 respondents in condition group 1 being different (1) (male-female/female-male) and 82 respondents in condition group 2 being the same (0) (male-male/female-female). The results are the same because at Randstad Payroll Direct, all frontline service employees are female.

Gender n = % Gender Discrepancy n = %

Male 142 63.5% 1: Different 142 63.5%

Female 82 36.5% 0: The Same 82 36.5%

Table 4.1 Gender Distribution Length of Relationship

The mean length of relationship was approximately 4 months. To make the moderating effect of length of relationship easier to calculate, 4 groups have been formed with approximately the same n of respondents.

Length n= %

Very Short Relationship <3 months 58 26%

Short Relationship 4– 6 months 62 27.5%

Medium Relationship 7– 14 months 51 23%

Very Long Relationship >14 months 53 23.5%

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Interaction Motivation

There were 85 respondents who contacted RPD because of complaints. Unfortunately, there were only 28 respondents in the condition group of complimenting behavior. The remaining 111 respondents contacted RPD because they wanted to ask a question or for some other general comment (inquiry).

Interaction Motivation n = %

Complimenting 28 12.5%

Neutral/Inquiry 111 49.5%

Complaining 85 38%

Table 4.3 Distribution Interaction Motivation Means and Standard Deviation

The following table shows the mean scores and standard deviations for the three concepts of perceived service quality, the customer orientation and customer need knowledge.

Mean SD

Perceived Service Quality 5.24 .76

Customer Orientation 4.82 .89

Customer Need Knowledge 4.67 1.22 Table 4.4 Means & Standard Deviations

4.2 Results

Here, the results of the statistical tests are examined. The relations between the dependent and independent variables are analyzed and the hypotheses accepted or rejected based on the results.

4.2.1 Customer Need Knowledge (Model 1 & 2)

To calculate if the customer orientation of a frontline service employee positively influences customer need knowledge, a lineair regression analysis was performed with (model 1) and without (model 2) length of relationship and gender discrepancy.

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Independent Variables Customer Need Knowledge

Model 1 (Main effect) Model 2 (Interactions)

Constant .312 .245 CO .937 *** .56 ** GD -.219 LR -.111 CO * GD .112 LR * CO -.240 R² .879 .643 F 8.192 7.143 Sig. (p-value) .000 *** .725

Table 4.5 Regression Customer Need Knowledge *= p<.10 **= p<.05 ***= p<.001

Table 4.5 shows that the overall regression of model 1 is statistically significant (sig. p = .000 < .05). The R-squared is .879, meaning that 87,9% of the variability of customer need knowledge is accounted for by the customer orientation of the frontline service employee. The Beta coefficient is .937. One ‘standard deviation’ in customer orientation leads to a .937 increase in customer need knowledge, meaning that this effect is positive. The proposed hypotheses ‘H3: The perceived customer orientation of a frontline service

employee positively influences perceived customer need knowledge’ can be accepted.

Model 2 incorporates the moderating variables gender discrepancy and length of relationship in the relationship. However, the overall regression of model 2 is not statistically significant (sig. p = .725 > .05). Also, the model shows that there are no significant effects on customer need knowledge, none of the β-values are significant.

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the perceived customer orientation on perceived customer need knowledge with 1 being different (female-male/male-female) and 0 being the same (female-female/male-male). By incorporating the interaction effect in model 2, the results (β = .112, sig. = .387) provide no support for gender discrepancy moderating the relationship between the customer orientation of a frontline service employee and customer need knowledge.

The proposed hypotheses ‘H4: The length of the relationship between a firm and a

customer positively enhances the effect of the perceived customer orientation on perceived customer need knowledge’ and; ‘H5: Gender discrepancy negatively mitigates the effect of the perceived customer orientation on perceived customer need knowledge’ are rejected.

If we check for any direct effects of gender on customer orientation (sig. p = .558) and customer need knowledge (sig. p = .745 > .05), the results are also not significant. The control variable gender does not influence the results. If we check for any direct effects of length of relationship on customer orientation (sig. p = .063 > .05), the results are also not significant. Length of relationship not have significant effects on customer need knowledge.

4.2.2 Perceived Service Quality (Model 3 and 4)

To calculate if the customer need knowledge of a frontline service employee positively influences perceived service quality, a lineair regression analysis was performed. After this, gender discrepancy and length of relationship have been incorporated in model 4. The results can be found in table 4.6.

Independent Variables Perceived Service Quality

Model 3 (Main effect) Model 4 (Interactions)

Constant .421 .119 CNK .261 *** .134 ** IR .456 ** CNK * IM .298 ** R² .789 .174 F 5.672 .5132 Sig. (p-value) .000 *** .013 **

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Table 4.6 shows that the overall regression of model 3 is statistically significant (sig. p = .000 < .05). The R-squared is .789, meaning that 78,9% of the variability of perceived service quality is accounted for by the customer need knowledge of a frontline service employee. The Beta coefficient is .261. One ‘standard deviation’ in customer need knowledge leads to a .261 increase in perceived service quality, meaning that this effect is positive. The proposed hypotheses ‘H1: Perceived customer need knowledge positively

influences perceived service quality’ can be accepted.

Table 4.6 also shows that when the moderating variable interaction motivation is incorporated in the model, the overall regression is still statistically significant (sig. p = .013 > .05). Also, there is a significant effect of the interaction motivation on perceived service quality as a moderating variable (β = .298, sig. = .002). The interaction motivation of a customer was hypothesized to moderate the effect of customer need knowledge on perceived service quality.

By incorporating the interaction effect in model 4, the results provide support for the interaction motivation moderating the relationship between customer need knowledge and perceived service quality. Part of the proposed hypotheses ‘H2: The interaction

motivation moderates the effect of perceived customer need knowledge on perceived service quality’ can be accepted.

The interaction motivation between the customer and the frontline service employee was hypothesized to moderate the effect of the perceived customer need knowledge on perceived service quality. The effect is largest in case of complaining behavior and smallest in case of complimenting behavior. Because the importance of the effects is measured, a variance analysis (ANOVA) has been performed secondly because there are more than 2k groups (complimenting, complaining and inquiries).

The ANOVA shows statistically significant results (sig. p = .003 < .05). This means that groups are different. Based on the results, the proposed hypotheses, ‘H2: The interaction

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(enhancing the direct relationship) and smallest in case of complimenting behavior’ can

therefor fully be accepted.

4.2.3 Mediation

To see if customer need knowledge (CNK) has a mediating effect between the customer orientation (CO) and service quality (SQ) (all perceived), a mediation analysis has been performed based on Baron & Kenny (1986). The regression analysis of CO  SQ and CO  CNK showed that both had a statistically significant sig. value (p) .000 < .05. The results can be found in table 4.7.

B R2 Sig. value

CO  SQ .629 *** .782 .000 ***

CO  CNK .937 *** .879 .000 ***

** .675 .044 ** Table 4.7 Mediation Effects *= p<.10 **= p<.05 ***= p<.001

Looking at the coefficients, the effect of CO on SQ (β = .629 sig. = .000) , CO on CNK (β = .937, sig. = .000) and the overall models are statistically significant (sig. p = 000 < .05). In the last equation, the mediation effect is tested (sig. p = .44 < .05) (β 1 = .231, sig. = .023, β 2 = .390, sig. = .011). This means that there is partial mediation.

The relationship between customer orientation and perceived service quality is partly explained by customer need knowledge, but there also still exists a direct relationship between customer orientation and perceived service quality when customer need knowledge is included as a predictor.

4.3 Discussion

In this part, the results are discussed and the proposed hypotheses are accepted or rejected based on the outcomes.

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need knowledge can also be an important predictor of the customer orientation of a frontline service employee.

Results showed that it does also works the other way around. If a frontline service employee generates more customer need knowledge, they will be better able to focus on the customer orientation and in turn, this influences perceived service quality. Both concepts have a predictive influence on each other. However, the effect of customer orientation on customer need knowledge has been found stronger, but the interacting effect should not be forgotten.

The results show that gender discrepancy did not have any significant moderating effect between the perceived customer orientation and perceived customer need knowledge. When gender discrepancy occurs, the effects between perceived customer orientation and perceived customer need knowledge are not different. This could be due to the fact that in this research, the service encounter between the customer and the frontline service employee is not based on physical contact. Rather, it is based on contact by telephone or e-mail. Because the customer and frontline service employee do not see each other, the service encounter could be perceived different and therefore, gender discrepancy did not occur.

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The direct effects on perceived service quality are significant for perceived customer need knowledge. By giving the customer personalized attention through identifying the needs and wants actually achieves more perceived service quality perceived by the customer.

The results show that the interaction motivation has a significant moderating effect between customer need knowledge and perceived service quality. It could be concluded that, for different interaction motivations (complimenting, complaining and inquiries; neutral behavior), the effect between perceived customer need knowledge and perceived service quality is different. It was hypothesized that when a frontline service employee excels in behavior of identifying a customer’s needs and solves the complaint accordingly, it could be that the customer is even more satisfied than before (Bitner et al. 1990). When a customer complains, employees should reduce customer’s anxiety about the dissatisfaction. By using customer need knowledge, an employee can accurately identify a complaining customers’ needs and reduce these. This is proven to be true.

When a customer addresses an inquiry, needs can be easily identified and therefore, the frontline service employee does not have to put much effort into it. Therefore, it was hypothesized that lesser amounts of customer need knowledge were required to interact with the customer to keep the same state of perceived service quality.

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5. Conclusion

This research focused specifically on the service encounter between the frontline service employee and the customer. It examined the moderating influence of the interaction motivation on the relationship between perceived customer need knowledge and perceived service quality. Also, the link between the perceived customer orientation and perceived customer need knowledge was measured (Homburg et al. 2009) with the moderating concepts of length of relationship and gender discrepancy. All concepts were measured seen through the eyes of the customer; perceived service quality, perceived customer need knowledge and the perceived customer orientation. To answer this, the following research question and sub research questions were formulated:

How are the customer orientation and customer need knowledge related to perceived service quality and how do length of relationship, gender discrepancy and the interaction motivation moderate/influence these relationships?

The following sub research questions are answered:

 To what extent does customer need knowledge influence perceived service quality?

 To what extent is this relationship moderated by the interaction motivation?

 To what extent does customer orientation influence customer need knowledge?

 How do length of relationship and gender discrepancy moderate the relationship between the customer orientation and customer need knowledge?

A theoretical framework based on literature was the basis for this research. Measurement items were constructed and after this, an online questionnaire was held to gather data about the research topic. This chapter tries to answer the research questions. Limitations and recommendations for further research follows.

5.1 Conclusion

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cumulative state of satisfaction (Bolton, 1998). For this research, three different interaction motives have been examined: complaints (negative service encounters), compliments (positive service encounters) and inquiries (neither positive nor negative service encounters; neutral) (Bowman & Narayandas, 2001; Oliver, Rust & Varki, 2002; Johnston, 1995).

The results showed that the interaction motivation has a significant moderating effect on the relationship between perceived customer need knowledge and perceived service quality. The effect was largest in case of complaining behavior. When it comes to complimenting behavior, the results were significant but negative instead of positive. This was not expected but can be due to the fact that complimenting customer already is very satisfied and they don’t need frontline service employees to make a lot of effort to find out what their needs are.

One of the sub research questions was to what extent the use of perceived customer need knowledge results in perceived service quality. A positive customer need knowledge outcome was defined as when the frontline service employee can accurately identify a given customer’s needs. If frontline service employees implement customer need knowledge in their interaction with customers, this results in confirming to a customer’s needs, which in turn leads to positive perceived service quality (Homburg et al. 2009). Results showed that the generation of customer need knowledge has a significant influence on perceived service quality. Meaning that, in order to create a more positive evaluation of perceived service quality, frontline service employees must accurately identify a given customer’s hierarchy (priorities’) of needs and use this to provide a customized outcome of the interaction. Also, when frontline service employees have more knowledge of the customer’s needs, they can more accurately help the customer which makes the customer more satisfied.

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addresses a question (inquiry/neutral state of behavior), customer need knowledge is helpful but to a lesser extent in the case of complaining behavior. Customers with a neutral state of mind will be primarily interested in information that will answer their question(s) (Bowman & Narayandas, 2001). Customer need knowledge is not always the answer here.

The second sub research question was about the perceived customer orientation. The customer orientation was defined as the degree to which a frontline service employee satisfies the needs of customers, instead of making a ‘sale’ (Homburg et al. 2009). This can be seen as an outcome of something, an end state. Results showed that the customer orientation has a significant influence on perceived customer need knowledge. If a frontline service employee takes a customer oriented view in the service encounter, they can generate more customer need knowledge, which ultimately results in overall perceived service quality for the customer.

The last sub research question was about the moderating influence of the length of relationship and gender discrepancy between the perceived customer orientation and perceived customer need knowledge. The length of relationship variable was based on the idea that if customers have a long history with the firm, the firm can acquire information over a longer time period and save this in a database. This increases the likelihood of an accurate identification of customer’s needs. The gender discrepancy effect was based on the research of Jackson & Alvaraz (1992) and Coulter & Coulter (2002). A match in similar demographic characteristics improves an employee’s understanding of the customer’s needs & preferences and perceived similarity between a customer and a frontline service employee builds upon trust.

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Concluding, three out of the five hypotheses have been accepted, the others are rejected. The essence of this research, the interaction motivation hypotheses can be accepted, meaning that this research accounts for something. This research was one of the first to examine the concept of the interaction motivation and the influence it has on the customer interaction contact moment and perceived service quality. The results found that this relationship is significant. Frontline service employees should address different customers in different ways. A complimenting customer does not need the whole package when it comes to generating customer need knowledge, but a complaining customer does. Frontline service employees should be trained in order to find out quickly why the customer is calling (to address a complaint, to compliment the firm or to ask a question/neutral behavior) and adjust service behavior accordingly. It this is done properly, overall perceived service quality rises.

Overview of the hypotheses

H1: Perceived customer need knowledge positively influences perceived service quality.

Accepted

H2: The interaction motivation moderates the effect of perceived customer need knowledge on perceived service quality. The moderating effect is largest in case of complaining behavior (enhancing the direct relationship) and smallest in case of complimenting behavior.

Accepted

H3: The perceived customer orientation of a frontline service employee positively influences perceived customer need knowledge.

Accepted

H4: The length of the relationship between a firm and a customer positively enhances the effect of the perceived customer orientation on perceived customer need knowledge.

Rejected

H5: Gender discrepancy negatively mitigates the effect of the perceived customer orientation on perceived customer need knowledge.

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5.2 Limitations & Recommendations

The results of this research have only been proven in at one company, in one specific business industry. Because the service encounters and frontline service employees are mostly alike for one company, it could be questioned if the results should be generalized. For the future, it would be interesting to look at different companies in different industries. Also, because all of the Randstad Payroll Direct frontline service employees were female, it could be questioned if the results remain when some of the frontline service employees would be male.

The quantities between the different groups of the interaction motivation were not normally distributed. There were a lot of people in the complaining group and very less in the complimenting group. It could be questioned if results based on these numbers can be generalizable.

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CUSTOMER NEED KNOWLEDGE

CUSTOMER NEED KNOWLEDGE

‘Examination of the Interaction Motivation’

CUSTOMER NEED KNOWLEDGE

Table of Contents

1. Introduction and Problem Statement

2. Theoretical Framework

3. Research Design

4. Results

5. Conclusion

5 References