A Causal Model of Customer Loyalty in Professional Service Firms: An Empirical Study

In general, business organizations make considerable use of professional services. However, it has received less attention in the context of professional business services than of other consumer services. The purpose of this study is to examine a proposed causal model of customer loyalty in professional service firms and seeks to test the model with a sample of listed and OTC companies in Taiwan. The results indicate that the SERVQUAL instrument with five-dimension provides good measurement of service quality for professional accounting business. To create behaviorally loyal customers, movement along service quality[arrow right]customer satisfaction[arrow right]loyalty is necessary. In addition, our findings provide substantial support for the hypothesized model. Managerial implications from this study are also provided. Introduction Most people would agree that the value of loyalty is as a proxy for actual customer retention and subsequent profitability (Johnson, Gustafsson, Andreassen, Lervik, and Cha, 2001). Considerable evidence suggests that customers of service providers, especially business services, tend to remain with the same provider if customers are continually satisfied (Davidow and Uttal, 1989; Woodside, Wilson, and Milner, 1992). Thus, the issue of customer satisfaction has become extremely important for the success of any business in this dynamic and intensive competition environment. If not recognized and responded to customers' needs rapidly and effectively, a firm may result in increased pressure of work, lost revenue opportunities, and ultimately, in increased levels of customer dissatisfaction (Gurau and Ranchhod, 2002). Therefore, a firm must constantly ask itself, "what do clients want from us? " and "how do we improve what clients actually perceive? " Business organizations make considerable use of professional services. However, it has received less attention in the context of professional business services than of other consumer services in general. The purpose of this study is to examine a proposed causal model of customer loyalty in professional service firms and seeks to test the model with a sample of listed and OTC companies in Taiwan. This article is structured as follows. First, a conceptual framework is presented with hypotheses. Second, research methodology along with collection procedures and measurement of the constructs are introduced. Third, the results of the empirical study are discussed. Finally, we conclude by noting the managerial implications of the study's findings and provide directions for future research. Conceptual Model and Hypotheses Our conceptual model is demonstrated and tested as Figure 1, which is amended from Johnson et al. (2001). This model begins with SERVQUAL measurement scale, consisting of five-dimensional structure (responsiveness, assurance, empathy, tangibles, and reliability), to assess service quality. Then, we develop a set of hypotheses surrounding major variables (such as price, firm image, service quality, customer satisfaction, and customer loyalty). Furthermore, the effect of these variables is examined. Service Quality By definition, service quality construct is the difference between expected service and perceived service (Parasuraman, Zeithaml and Berry, 1985). Service providers must realize that the key to service quality is consistently meeting or exceeding consumer expectations (Bojanic, 1991). Consumers' perceptions of service quality depend on the size and direction of the gap between expected service and perceived service (Parasuraman et al., 1985). Service quality is more difficult for the consumer to evaluate than product quality because of the lack of tangible evidence associated with service. This is especially true for professional services because they tend to be very peoplebased. Since the appearance of Parasuraman et al.'s (1985, 1988) research, which developed their scale to measure service quality (SERVQUAL), numerous researchers have attempted to empirically replicate the instrument's five-dimensional structure consisting of responsiveness, assurance, empathy, tangibles, and reliability. …