Impact of Service Quality on Brand Image: Empirical Evidence from Hotel Industry

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  Impact of Service Quality on Brand Image: Empirical Evidence
                      from Hotel Industry
                                Prof. Dr. Muhammad Ehsan Malik
  Dean, Faculty of Economics and Management Sciences/Director, Institute of Business Administration
      (IBA)/Director General, Gujranwala Campus, University of the Punjab, Lahore (Pakistan)

                                          Basharat Naeem
Lecturer at IBA, University of the Punjab, Lahore (Pakistan) & Ph.D. (Management Sciences) Scholar at
                   COMSATS Institute of Information Technology (CIIT), Pakistan

                                        Abdul Mohsin Nasir
             Student of MBA (Honors) at IBA, University of the Punjab, Lahore (Pakistan)




Abstract
Brand image is one of the key components that enable hotels to gain superior advantage over
their rivals. From last five years, there is huge proliferation of hotel brands across the globe
due to which hotel management faced difficulties to build a unique brand image in
consumers’ mind. So, the basic aim of this research endeavor was to find out what service
quality dimensions can promote brand image of four and five star hotels in Pakistan. Hotel
customers’ survey responses were analyzed by employing regression technique. It was
observed that empathy, responsiveness and reliability perceptions were instrumental in
nurturing hotel brand image. Interestingly, perceived assurance and tangibles did not
contribute anything significant in boosting brand image. Implications for practitioners and
suggestions of future researchers were presented, too.

Keywords: Service Quality, Brand Image, Hotel Industry, Pakistan
Introduction
In recent years, brand management and branding have established its importance strategically
for different companies (Post, 2008; Kapferer, 2008; Keller, 2008). Smith (2004) suggested
that in service industry “brand management requires brand managers to take a holistic view
of the brand that transcends the marketing and service function and makes it a rallying cry for
the firm”. Brand has also been described as “the impressions received by consumers resulting
in a distinctive position in their mind’s eye based on perceived emotional and functional
benefits” (Shoemaker, Lewis, Yesawich, 2007).

In service sector, hotel industry is considered as most representative example where hotel
brands played a crucial role in the success stories of the hotel (Berry, 2000). The hotel
industry of Pakistan faced numerous challenges recently. Recession is a global phenomenon
and Pakistan was no exception so the total growth in revenue sloped downwards to 45% and
the rest was done by the continuing poor security turmoil. Nevertheless, the economic
indicators for the hotel industry have been more than satisfactory over the year 2009-10, as
the average growth rate in hotel industry was 5 percent in hotel establishments and 3.5
percent in rooms during the last five years and the hotel industry showed a growth of 9.7
percent in hotels and 9.5 percent in rooms (Pakistan Hotel Association, 2010).



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Service quality defined by Gronroos (1984) as “the result of an evaluation process, which
helps consumer compare his expectations with his perception of the service received; in other
words, he places the perceived service and the expected service opposite one another.”
Javalgi et al., (2006) claimed that during the decision making process, customers have very
few cues while buying services while an established brand performed as crucial role in form
of risk reducer and purveyor which makes the decision making process more easier (Davis,
2007; Kayaman & Arasli, 2007). Forgacs (2003) argued that hotel industry is heavily used
branding strategies because of their success.

During last five years, there is huge hotel brands proliferation worldwide due to which
customers faced number of confusion in recognizing the brand (Kim et al. 2008; Gibson,
2003). Consumers perceive the same service quality in different ways. This difference in
perception is most likely influenced by corporate image. Companies can plan corporate brand
image before implementing marketing communications, and shape brand image through
various marketing strategies. That’s why Bailey and Ball (2006) suggested that “brand
management within the hotel industry can be improved through more effective brand
differentiation strategies” like their service quality, word-of-mouth communication,
advertising techniques etc. Brand managers in hotel industry faced bigger challenge of
differentiating themselves in a competitive market (O’Neill, Mattila & Xiao, 2006). Hence,
the basic aim of this research was to assess empirically the role of customers’ perceptions
regarding hotel service quality dimensions in building hotel brand image.

Literature Review
Brand image is a set of associations with the brand, revealing both association and image
represented perceptions of either objective or subjective reality (Aaker, 1991). Keller (1993)
clarifies the concept, defining it as “perceptions about a brand as reflected by the brand
association held in memory”. Brand image management is significant in deciding whether or
not the employee is connected with the organization by influencing the strength of an
individual’s identification, and the evolving trend of brand image is noted in strategic
importance (Dutton, Dukerich, & Harquail, 1994; Gray & Smeltzer, 1985). Keller, (2003)
treated the concept of brand image the reasoned or emotional perceptions of the customers
which they associate with a particular brand. Therefore, brand image is one of the key
components that enable hotel companies to gain a superior advantage among others. Some
scholars viewed brand image to be “directly related to the product category within which the
brand is marketed” (Martinez, Chernatony, 2004).

On the other hand, Martı´nez and de Chernatony (2004) found out that there was no agreeable
consensus in literature for the empirical measurement of brand image and the basic reason for
this is the multi-dimensionality of the concept. More or less same were the findings of Dobni
and Zinkhan (1990) who claimed that because of the confusing variety of work on defining
the concept of brand image, at first it may result to ambiguity in selecting the best scale for its
measurement. To exemplify its multi-dimensionality, brand image has also been taken as an
element of brand personality (Hosany, Ekinci, & Uysal, 2006) and there are examples in
which literature significantly relates it to customers’ self-concepts (Belk, 1988; Aaker, 1996;
de Chernatony & Dall’Olmo Riley, 1998; Solomon, 1999).

A very interesting study of Pitt, Opoku, Hultman, Abratt, and Spyropoulou (2007) maintained
the notion that even branding is itself is entirely the process of creating and building a brand
image. And according to them, ‘creating a brand image means’ an effort that “engages the
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hearts and minds of customers”. GrÖnroos (1984) emphasized the extreme importance of
brand image for service firms because when the customers use service, they see the firm and
its resources by their judgment of the interaction between them and their service providers.
His findings depicted that the customers formulate image as they see the components of the
firm and develop their perceptions. The definition by Kurtz and Clow (1998), “the overall or
global opinion customers have of a firm or organization” depicts threat customers show high
tendency of patronizing the firm if they develop high perceptions of its image.

Service serves as the most salient phenomenon that customers can experience and perceive.
Hence, quality of firm’s service mainly builds up the image of that particular brand.
Similarly, Nguyen and LeBlanc (1998) explained that overall brand image of the company is
formed by the combined perceptions of service quality as a result of frequent service
experiences. Many researchers (e.g. Gummesson and Grönroos, 1988) reported brand image
to be the key factor in the evaluation of overall service quality. Keller (1993) studied brand
image as a perception, held in consumer memory, of an organization which serves as a filter
to influence the perceptions related to operational aspects of the organization. In his study of
airline service, Ostrowski et al. (1993) argued, “positive experience over time (following
several good experiences) will ultimately lead to positive image”. Kim and Kim (2005)
observed that “brand image and service quality perceptions share too many features”. Aydin
and Ozer (2005) found that perceived service quality directly determines the perception of
brand image. Therefore the following proposed relationship may be expected:
Research Hypothesis: Perceive Service quality (regarding SERVQUAL dimensions namely
tangibles, assurance, reliability, empathy and responsiveness) will result into improve hotel
brand image in Pakistan.

Research Methods
Data was collected from the customers of 8 four/five star hotels living in different cities of
Pakistan during May and September, 2010. After multiple follow-ups, 250 questionnaires
were successfully retrieved and 190 were considered fit for statistical analysis. For testing the
hypothesised relationship, the main concepts measured in this study included SERVQUAL
dimensions namely tangibles, assurance, reliability, empathy, responsiveness and brand
image. Brand image was measured by using 14-items from the study of Kim and Kim (2005)
whereas perceived service quality was measured by 22-items scale developed by
Parasuraman et al., (1988). The 5-point Likert scale was employed. Stepwise regression
analysis was employed to test the research hypothesis.

Analysis and Interpretation
The demographic profile of four and five star hotel customers is given hereunder:
   ƒ Gender: male customers’ proportion was 78% and female represented only 22%.
   ƒ Profession: 30% were serving in private companies, 17% were students, 10% doctors
      while housewives 6% were from government sector

Table 1 reflects the descriptive statistics and inter-item correlation matrix of all independent
and dependent variables.




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Table 1: Descriptive Statistics and Inter-Correlation Matrix
         Mean          Std. Deviation          X1        X2                                         X3               X4              X5             X6
 X1       4.10               0.33             1.00
 X2            4.06                     0.423                     0.30*            1.00
 X3            3.88                      0.48                     0.54*           0.32*            1.00
 X4            3.98                      0.46                     0.56*           0.32*           0.58*             1.00
 X5            4.03                      0.43                     0.32*           0.47*           0.45*             0.32*           1.00
 X6         3.91                   0.49                  0.60*        0.33*         0.58*        0.61*          0.48*         1.00
X1 = Brand Image, X2 = tangibles, X3 = Reliability, X4 = Responsiveness, X5 = Assurance, X6 = Empathy, *Significant at 0.001 Level


Table # 2 depicts the results of stepwise regression procedure where all dimensions of service
quality proposed by Parasuraman et al., (1988) regressed on dependent variable (brand
image). The results indicated that about 45% variance (adjusted R2=0.45) was explained by
perceptions regarding “empathy”, “responsiveness” and “reliability”. The empathy alone
explained 37% variability (R2 change = .37) whereas responsiveness and reliability accounted
for only 6% (R2 change = .06) and 3% (R2 change = .03) variance in brand image
respectively. However perceptions on “tangibles” and “assurance” did not contribute in
building hotel brand image.
Table 2: Model Summary (Dependent Variable: Brand Image)
                                                                                               Change Statistics
                                                         Std. Error
                         R            Adjusted                                  R                                                             Durbin-
Model          R                                           of the                               F                               Sig. F
                       Square         R Square                                Square                         df1      df2                     Watson
                                                          Estimate                            Change                           Change
                                                                              Change
1            0.61           0.37              0.36                 0.26          0.37            83.87          1    146            .000
2            0.65           0.43              0.42                 0.25          0.06            15.48          1    145            .000
3            0.67           0.45              0.44                 0.25          0.03            06.80          1    144            .010             1.86
a. Predictors: (Constant), Empathy, b. Predictors: (Constant), Empathy, Responsiveness, c. Predictors: (Constant), Empathy, Responsiveness, Reliability


Table 3 shows ANOVA results in which predictive strength (F 3,144 = 39.59, p < .001) of the
model suggesting its appropriateness for explaining variance in brand image.

Table 3: ANOVA (Dependent Variable: Brand Image)
        Model            Sum of Squares          df                                            Mean Square                        F              Sig.
3    Regression                         7.15        3                                                     2.38                    39.59           .000c
     Residual                           8.66      144                                                     .060
     Total                             15.81      147
a. Predictors: (Constant), Empathy, b. Predictors: (Constant), Empathy, Responsiveness, c. Predictors: (Constant), Empathy, Responsiveness,
Reliability


Table 4 reflects that empathy (beta = 0.34, t = 4.08, p < 0.001) had stronger positive impact
on brand image than did responsiveness (b = 0.24, t = 2.87, p < 0.01) and reliability (beta =
0.21, t = 2.61, p < 0.01). Whereas, assurance and tangibles perceptions didn’t explain any
significant impact on brand image hence dropped from the empirical model.

This finding supports Andreassen and Lindestad’s (1998) contention that the perception of
service quality was an important factor in influencing image because services were difficult
to evaluate. In addition, this result supports Zeithaml’s (1988) proposition that service quality
was customers’ judgment about the overall excellence or superiority of a service or, in other
words, the image. The study results support Kayaman and Arasli’s (2007) findings that brand
image developed from all of customers’ service experiences. These results are partially in

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agreement with Kayaman and Arasli (2007) observations that reliability and empathy
perceptions have a developmental role in brand image.


Table 4: Coefficients (Dependent Variable: Brand Image)
                    Unstandardized Standardized                                                  Collinearity
                                                                         Correlations
                       Coefficients   Coefficients                                                Statistics
     Model                                            t      Sig.
                               Std.                                  Zero-
                       B                  Beta                               Partial    Part   Tolerance   VIF
                              Error                                  order
  (Constant)          1.99        .20               10.15    .000
  Empathy             0.23       0.06          0.34  4.08    .000     0.60     0.32     0.25        0.55   1.81
  Responsiveness      0.17       0.06          0.24  2.87    .005     0.56     0.23     0.18        0.56   1.80
  Reliability         0.14       0.06          0.21  2.61    .010     0.54     0.21     0.16        0.59   1.71

Conclusion & Recommendations
The main goal of current research was to ascertain the impact of perceptions on Parasuraman
proposed SERVQUAL dimensions on brand image of four and five stars hotels operating in
Pakistan. According to results, it can be concluded that only empathy, responsiveness and
reliability perceptions were drivers to building hotel brand image. Interestingly, perceived
assurance and tangibles did not contribute anything significant in nurturing brand image. So,
Hotels should build up brand image conception and strengthen brand consciousness; pay
attention to reliable factors and establish customer credit; regard reliability factors and
enhance employee accomplishment; tangibilize the intangible and create core advantage;
improve responsiveness factors and increase working efficiency; resort to empathy factors
and add additional value and extend brand awareness.

The current research endeavor also has several limitations. The study was conducted only on
four and five stars hotels of Pakistan so the researchers should take other categories of hotel
operating in Pakistan to conduct comparative analysis across diverse star classifications. To
have more confidence in cause-effect relationship between perceived service quality and
brand image, longitudinal research design should be considered in future investigations.
Triangulation regarding data information sources, data collection methods and analytical
techniques is advised to future researchers.




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