Customer Satisfaction Measurement in the Restaurant Industry in Mexico:

a PLS-PM Approach

School of Business and EconomicsUniversidad Panamericana Guadalajara, Mexico

Omar Rojas (PhD, La Trobe)orojas@up.edu.mx

November 2015

Outline• Problem context• Survey• Results• PLS-PM• Other marketing applications

Problem context

Abstract• We present an application of the European Customer Satisfaction

Index to the Mexican Restaurant Industry. We model the Index using Partial Least Squares Path Modeling. We will present the literature review that supports the construction of the manifest variables that serve as a proxy for the latent variables of the model. We also give an economic background on the importance of the Restaurant industry in Mexico, in particular in Guadalajara´s Metropolitan Area. We aim to contribute to the literature with a better understanding of customer satisfaction, which is measured through loyalty.

Measurement of quality in Mexico• Measurement of quality in services and products entered the realm of

academics and industry in Mexico in the late 90s. To date, the Mexican consumer has become more demanding, having had contact with robust systems of excellence, including global franchises. Even the government is beginning to feel the demands of taxpayers who ask for accountability and transparency in regards to their taxes.

From quality to satisfaction• In the early 70s, quality gurus emphasized the fact that quality is free,

and that it was enough to produce quality goods or offer quality services in order to increase sales.• However, the 80s saw a different trend. Firms opted to keep their

customers satisfied, as this was cheaper than implementing costly campaigns to find new customers. As a consequence, measures of satisfaction were required to clarify a firm’s areas of opportunity.

Satisfaction and loyalty• Currently, companies have taken a step forward to include, not only

satisfaction, but loyalty (or confidence) as well. The key to success lies in focusing on customer satisfaction and, in turn, satisfaction is linked to loyalty (in the form of repeated purchases or referral to potential clients).

Internal and external satisfaction• The model of satisfaction begins with the construction of internal quality of the

good or service. This is because, internally, employees adopt company objectives as their own and transmit them indirectly to their customers. Internal quality includes not only care in the product or service offered, but employee satisfaction, as well. • Internal quality includes consumer experience: attributes, benefits obtained from

the service or product, costs, and company image held by the customers. At the same time, satisfied customers tend to remain loyal to the brand, or to have confidence in the service. Loyalty includes the predisposition towards repeat purchases and referral to friends. Hence, customer satisfaction correlates to sales through brand loyalty.• External satisfaction, meanwhile, has several repercussions. The most important of

these are increased sales and financial success of the company.

Satisfaction -> sales• Increased customer satisfaction leads to more

sales. This is not a spurious correlation; rather, the explanation lies in the fact that, the more satisfied the customer is, the more loyal he or she will be. Loyalty thus leads to product repurchase.

• This paper, therefore, will focus on the importance of having a quantitative model or method, which allows us to measure satisfaction in an objective manner in the specific context of the restaurant sector. This measure can be useful to restauranteurs as a practical tool for decision-making.

UKCSI

How to measure satisfaction• Satisfaction cannot be measured solely by answering the question:

How satisfied is my customer with the goods or service. Thus, we will begin with a model which analyzes variables such as perceived quality, customer expectations, image, perceived value, the relationship among these factors, and the effects they can produce: complaints or referrals.

First studies in customer satisfaction• Engel, Kouat, & Blackwell (1968, p.512-15) and Howard & Sheth (1969. P 145-

50) established that satisfaction is directly related to product expectations. • This point of view was based, in large part, on laboratory studies carried out by

Cardozo (1965). • Later research by Anderson (1973), Cohen & Goldberg (1970), Olshavsky &

Miller (1972), Olson (1976), Woodside (1972) and Oliver (1977), confirmed that satisfaction is a more complex issue than had previously been understood.• Bishop (1984), Doyle (1984), Jacoby & Olson (1985), Sawyer & Dickson (1984),

and Schlechter (1984), dealt with the relationship between price and quality and their fundamental power in determining production selection and purchases.

First customer satisfaction index• The first country to develop a customer satisfaction index was Sweden

in 1989. The Customer Satisfaction Barometer (CSB) offered an annual measure of customer satisfaction in over 30 industries and 100 firms. The new index was intended to be a complement to productivity measures and to examine the quota of market participation. The model proposes that satisfaction will be lower in industries with a homogenous supply and a heterogeneous demand (Fornell, 1992).

ACSI

• In 1994 in the United States, the American Customer Satisfaction Index (ACSI) was implemented by researchers at the University of Michigan, in conjunction with the American Society for Quality in Milwaukee, Wisconsin, and the CFI Group in Ann Arbor, Michigan. The index was developed to provide information about quality satisfaction for both products and services available to consumers. This index was based on the Swedish model (Fornell, 1996).

Customer satisfaction in Mexico• In Mexico, there is no way to measure customer satisfaction and

loyalty in a uniform manner or to track these indicators against international standards on global index reports. The problem is that there is no Mexican satisfaction index that includes a model considering measurement errors and standardized with a unique methodology, to compare satisfaction and establish benchmarking per sector.

Model of customer satisfaction• Satisfaction is a subjective perception; thus, it should be measured using

models that include measurement error, analysis of variables, and the relationships between these, in a quantitative manner.• This study was carried out based on the model of the European Customer

Satisfaction Index (ECSI), which allowed us to carry out a multivariable analysis of the restaurant industry in the Mexican state of Jalisco, to obtain correlations among construct variables, using structural equations, in particular using the Partial Least Squares Path Modeling (PLS-PM) approach. By means of multivariable analysis, we intend to eliminate subjectivity in quality measurements. A measurable objective instrument will allow for correct decision making by restauranteurs.

Our Customer Satisfaction Index

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SATISFACTION

EXPECTATIONS

PERCEIVED QUALITY

PERCEIVED VALUE

COMPLAINTS

LOYALTY

Table 1. Literature review about satisfaction factors

Reference Image Expectations

Perceived Value

Perceived Quality

Satisfaction Loyalty Complain

s

(Fornell C. J., 1996) x x x x x x

(Raquel Sánchez Fernándeza, 2013) x x x x(Mohammad Hossein Askariazad, 2013) x x x x x x x(Prybutok, 2009) x x x x(Demirel, 2013) x x x x x x x(Odette Lobato-Calleros, 2013) x x x x x

(Andreassen & Lindestad, 1997) x x

(Bayol, 2000) x x(Ball, Coelho, & Machas, 2003) x x x x x x x(LeBlanc & & Nguyen, 1996) x x

(O’Loughlin & & Coenders, 2002) x x

(Parasuraman, Zeithaml, & & Berry, 1988) x x x

(Lam, Shankar, Erramilli, & & Murthy, 2004) x x

(Mathwick, Malhotra, & Rigdon, 2001) x x x

(Overby & Lee, 2006) x x

(Ryu, Han, & Soocheong, 2010) x x

(Yang & Lee, 2010) x x

(Babin, Lee,, Kim, & Griffin, 2005) x x

(Jones, Reynolds, & Arnold, 2006) x x

(Chiu, Hsieh, Li, & Lee, 2005) x x

(Stoel, Wickliffe, & Lee, 2004) x x

(Johns & Howard, 1998) x x x

(Cronin & Taylor, 1992) x x x

(Olorunniwo, Hsu, & Udo, 2006) x x x

(Kivela, Inbakaran, & Reece, 1999) x x x x

(Kara, Kaynak, & Kucukemiroglu, 1995) x x x

(Kim & Kim, 2004) x x x

(Boulding, Kalra, Staelin, & Zeithaml, 1993) x x x x

(Keillor, Hult, & Kandemir, 2004) x x x x

(Andreassen & Lindestad, 1998) x x x

(Martensen, Kristensen, & Grønholdt, 2000) x x x

(Johnson, Gustafsson, Andressen, Lervik, & Cha, 2001) x x x

(Anderson & Fornell, 2000) x x x

(Chan, y otros, 2003) x x x x x

(Fornell C. , 1992) x x x

(Ball, Simões Coelho, & Machás, 2004) x x x x x xLee, Y. and N. Hing (1995) x x x x

LITERATURE REVIEW ABOUT

SATISFACTION FACTORS

Restaurant industry• World income from the food and beverage industry is four times

greater than that of the hotel industry (Montecinos 2002). • On the other hand, Espejel (2000) states that, with over 6 billion

people on the planet, there is a demand for 18 billion meals daily• The restaurant industry has evolved globally, to become a

fundamental part of a country’s economy, and of the daily life of the consumers as well. This highlights what Lessard (2004) points out: restaurant meals account for 46% of the family budget in the United States, but only 9.8% in Mexico.

Restaurant industry in Mexico• Implementing the customer satisfaction index model will be carried

out in the restaurant sector, since it generates direct employment for over 1,300,000 families in the Mexico, with around 3,250,000 indirect jobs. • These numbers place the industry as the second largest employer at

the national level. In the country, there are over 400,000 fixed and non-fixed location restaurants, accounting for 1.4% of the GDP and 13% of the tourism-based GDP.

Restaurant industry in Guadalajara• Jalisco occupies the third place at the national level in number of

fixed-location restaurants, with a total of 24,875 establishments, out of the 347,199 countrywide; that is 7.16% of the total.• Guadalajara is the second most import metropolitan area of the

country in regards to the sector, with 14,631 establishments (economic units) 4.2% of the country’s total, with 65,785 occupied employees, 5% of the total.

Full-service restaurants• This study will be carried out in full-service restaurants, defined as

economic units devoted mainly to the preparation of foods and beverages for immediate consumption, offering full service to the customers, including taking orders, serving the foods and beverages ordered, and presenting the bill for payment after consumption. This includes full-service restaurants devoted principally to serving non-alcoholic beverages (coffee, tea, chocolate) for immediate consumption together with baked goods, and full-service restaurants, devoted to preparing and serving coffee for immediate consumption, together with the roasting and grinding of coffee beans (INEGI, 2014).

Survey

Perceived quality

Food presentation Drink varietyFood freshness Drink portionsFood degree of cooking Drink qualityFood taste Waiter brought what askedFood temperature Waiters helped with the order decisionFood variety Waiters offered specialsDish portions Waiters were kindCondiments and complements Waiters were well informedVariety of desserts The bill was rightFood quality Service qualityFood temperature

Perceived value

Waiting time for the foodWaiting time fo the billFood pricesDrink pricesPrice was right

ImageMusic Comfortness of chairsLighting Parkingambiance Kids areaDesign Restaurant prestigeRoom temperature Employee apearance Distance between tables Cleanliness of restaurantLocation of assigned table Cleanliness of restrooms

Expectations

Food quality was rightDrink quality was rightService quality was rightAmbiance was right

Complaints

Easyness to express a complainManager was availableThe waiter acknowledge the faultThe personnel replied kindlyAny compensation received

Satisfaction

The experience was pleasantRestaurant choice was right

Loyalty

Would you come backWould you speak nice abut itWould you recommend it

Results

PLS-PM

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Based on: PLS Path Modeling with R by Gaston Sanchez

Other PLS-PM applications

Thanks for your attention