Effects of service quality and salesperson
- 1. Forster 285 Vision 17(4) 285–292 © 2013 MDI SAGE Publications Los Angeles, London, New Delhi, Singapore, Washington DC DOI: 10.1177/0972262913505370 http://vision.sagepub.com Introduction Relationship marketing has come to exist as an alternate to building and retaining customer loyalty. Traditional marketing models with a focus on capturing market share are found wanting in building a stronger customer fran- chisee. Brand management dominated the strategic land- scape for some period of time and posited about delivering differential value to customers. But of late, a lot of focus is on using relationship marketing strategies to retain cus- tomers and increase their life time value. A good customer relationship management programme helps in building consumer loyalty, increases life time value of customers and brings greater accountability to marketing spend. Literature Survey A good customer relationship management programme in services demands higher quality of service delivery (Leonard and Sassar, 1982; Parasuraman et al., 1985). Service quality model (Parasuraman et al., 1985) brings a classical gap analysis between customer’s expectations and company perception of customer expectations. This model highlights four important gaps namely differences between consumer expectations and management percep- tions of consumer expectations, management perceptions of consumer expectations and service quality specifica- tions, service quality specifications and the service quality delivered and service delivered and what is communicated about the service to the consumers. Zeithaml (1988) conducted qualitative research to explore the factors that affect the magnitude and direction of each of the above gaps. In both the above studies, service quality is treated as a dependent variable. In this study, the author proposes service quality to be an independent variable which plays a role in influencing consumer’s perception about service representative characteristics, relationship commitment and trust. Personal characteristics of customer service repre- sentatives also influence the relationship commitment and trust for service firms. By characteristics, we do not mean the typical socio-demographic characteristics of the service representatives. Two characteristics namely expertise and power are taken as constructs in this study. Customers Article Effects of Service Quality and Salesperson Characteristics on Consumer Trust and Relationship Commitment: An Empirical Study on Insurance Buyers in India Tapan K. Panda Abstract This research article explores the effect of service quality and salesperson characteristics on consumer trust and relationship commitment among life insurance buyers in India. Earlier research on service quality has revealed five key dimensions that influence levels of consumer satisfaction. This article explores how ‘service quality’ as an independent variable influences consumer’s trust and relationship commitment. Earlier studies have explored organizational shared values on consumer trust and relationship commitment but no study in Indian context reveals how salesperson characteristics affect consumer trust and commitment. In this article the author has conceptualized two models (a) linking service quality with consumer trust and relationship commitment and (b) service quality with salesperson characteristics, consumer trust and commitment to study mediating and direct effects of independent variables on the dependent variables in the context of term life insurance policies in Indian market by applying structural equation modelling. The study identifies the strength and direction of these relationships and has a significant bearing in developing future relationship marketing programmes for insurance marketing companies in India. Key Words Service Quality, Salesperson Characteristics, Consumer Trust, Relationship Commitment, Structural Equation Modelling, AMOS.
- 2. 286 An Empirical Study on Insurance Buyers in India Vision, 17, 4 (2013): 285–292 tend to trust a service representative more when he shows expertise on the matter of purchase. Trust based on service representatives expertise focuses on expectancy held by a person that the person’s word or written statement can be relied on (Lindskold, 1978). Though a capability process, a salesperson’s expertise build’s a consumer’s trust by increasing its confidence that a salesperson can deliver on his promise. Customers view sales people with higher levels of perceived expert power as more trustworthy (Busch and Wilson, 1976). Perceived expertise of an insur- ance salesperson is a significant predictor of customer trust (Crosby et al., 1990). The second construct is ‘power’. A salesperson’s power is defined as the customer’s belief that the salesperson is capable of providing the promised outcome that matches to the promise of the salesperson. Power can help in increasing trust by means of capability process (Swan and Nolan, 1985). Trust has assumed a central role in relationship marketing literature (Dwyer et al., 1987, Morgan and Hunt, 1994). The concept of trust revolves around trust on the organization and trust on the salesperson. However they are treated as two different constructs in trust literature. A long term relationship with an organization can be in trouble if a lower or no trust worthy salesperson is involved in transaction. Similarly higher trust worthy sales people may preserve customer commitment during difficult times which may appear against the customer’s best interest in a shorter period of time (Kelley and Kerwin, 1992; Schiller, 1992). Trust is defined as the perceived credibility and benevolence of a target of trust (Ganeshan, 1994; Kumar, Scheer and Steenkamp, 1995). The first dimension of trust is an objective credibility of the organization including people who represent them. The second dimension of benevolence is the extent to which one member is genuinely interested in the other member’s welfare and is motivated for a symbiotic gain. Presence of relationship commitment and trust is central to the idea of successful relationship marketing (Morgan and Hunt, 1994). Though level of power and ability to influence the other partner’s decision making can force a relationship building process, but it is not long term in nature. Commitment and trust are key because they encourage marketers to work at preserving relation- ship investments by cooperating with exchange partner; resist attractive short term alternatives in favour of the expected long term benefits of staying with existing partners and view potentially high risk actions as being prudent because of the belief that their partners will not act opportunistically (Morgan and Hunt, 1994). Commitment to the relationship is defined as an enduring desire to maintain a valued relationship (Moorman et al., 1992). So a relationship exists when the relationship is important to both the partners and it demands both parties to put concerted effort to maintain and protect this relationship for future and long term benefit. There is hardly any study that makes one understand the inter relationships between service quality, personal characteristics of the salesperson, relationship commitment and trust in Indian context. The detail literature survey could not find out any study that assesses the interplay of these factors in the context of insurance selling in India. Objectives and Importance of the Study The objective of this study is to understand and empirically examine how consumer’s perception of service quality impacts trust and how consumer’s trust impacts relationship commitment in insurance industry. The study also aims to find out how personal characteristics play a role in the above relationships. Indian insurance industry has woken up to free market competition in recent past. The dominant player in this segment is Life Insurance Corporation of India (LIC) which holds almost 90 per cent of the market share in life insurances. However many banks and other financial institutions have tied up with multi-national players and have created joint ventures like PnbMetlife, Bajaj Alianz, Birla Sunlife and others. Insurance being a high involvement, long term and non-tangible product in the market place relies heavily on quality sales force who tries to establish trust and commitment among customers. Since insurance buying is a long term engagement and switching cost is very high, trust and commitment are important factors in shaping the direction and intensity of relationship. This study will develop a strong grounding in understanding insurance selling business and help in strategizing future success of new generation insurance marketers in India. Research Design Based on the literature survey, the researcher postulates a theoretical model. Data collected from market survey are used to validate the model through application of structural equation modelling technique. The findings of this study will throw new light into the inter-relationship among these constructs and suggest any new relationship in Indian context. The researcher then develops an extended model based over the results of the first level of analysis. The first model studies the causal effect of service quality on trust and in turn the effect of trust on relationship commitment. The second model adds on the personal characteristics of the salesperson as a mediating variable. These models are tested over a large sample of buyers of insurance products (see models in Figures 1 and 2). Corresponding to each of the models developed for the study, a list of hypotheses is generated for testing them in the subsequent stages of research.
- 3. Tapan K. Panda 287 Vision, 17, 4 (2013): 285–292 Figure 1. Source: Author’s research. Figure 2. Source: Author’s research. Hypotheses for Model-1 Ha1: Service quality positively affects relationship commitment Ha2: Service quality positively affects consumer trust Ha3: Consumer trust positively affects relationship commitment Hypotheses for Model-2 Hb1: Service quality positively affects the personal characteristics of salesperson Hb2: Salesperson characteristics positively affect rela- tionship commitment Hb3: Salesperson characteristics positively affect con- sumer trust Hb4: Consumer trust positively affects relationship commitment As there are no previous studies available in India on the above proposed models for testing their appli- cations in insurance business, the key constructs selected for measurement are service quality, consumer trust, salesperson characteristics and relationship commitment. The researcher has adopted definition and measurement of service quality from the seminal work of service quality dimensions (Parasuraman et al., 1985) by taking all the five dimensions namely reliability, tangibility, assurance, empathy and responsiveness. Reliability is the insurance company’s ability to fulfil the promise for delivering assured quality of service; tangibility is the financial performance and dividend history of the insurance company as well as outward appearance of the sales person; assurance is the professional knowledge possessed and courtesy exhibited by salesperson during customer contacts and is judged by the consumer’s comfort level in the sales promise; empathy measures the degree to which the customer feels that salesperson really cares about the customers; finally responsiveness is the salesperson’s ability to provide quicker and accurate service. The component of trust reflects consumer’s perception of the salesperson’s trustworthiness and integrity. The salesperson’s characteristic is measured by using a scale based on salesperson’s expertise, power, likeability, similarity, frequency of contact with customers, social interaction with salesperson, length of relationship with sales people and trust of salesperson (Doney and Cannon, 1997). This scale is modified to suit to requirements of a business to consumer situation as the original scale was developed for organizational buying situation. Relation- ship commitment is represented as consumer’s perceived importance of maintaining quality transactional relation- ships with the company (Jih et al., 2007). The questionnaire involves items obtained from litera- ture survey and made relevant to the context of this research. The instrument was tested for validity and relia- bility. The final version of the instrument had 15 questions on service quality, 31 items on personal characteristics and 3 each on consumer trust and relationship commitment. At the first phase of the study service quality dimensions were reduced to 5 from the 15 items and personal characteristics were reduced from 31 to 8 items by applying factor analy- sis. The reliability of data is measured by the Cronbach’s alpha. Validity of the instrument is tested by correlation analysis and a second stage Confirmatory Factor Analysis (CFA). The theoretical models proposed for this study are tested by using AMOS. The final questionnaire was administered over 750 respondents and 663 samples were eligible for analysis after data editing for completeness, consistency and illegibility (see Tables 1 and 2). The next important task is to measure the research constructs for their reliability, convergent and discriminant validity. This is essentially done to test the adequacy of the instrument for explaining the causation. The two phase confirmatory factor analysis is used for testing construct
- 4. 288 An Empirical Study on Insurance Buyers in India Vision, 17, 4 (2013): 285–292 Table 2. Measure and Key Summary Statistics of Salesperson Characteristics Construct Question Item Scale Mean Standard Deviation Scale Reliability (Cronbach’s alpha) Salesperson Expertise The salesperson is very knowledgeable 5.76 1.11 0.89 The salesperson knows his insurance product This salesperson has no knowledge on products Salesperson power The salesperson has power to get his offer through his organization 4.35 1.23 0.769 The salesperson is one of the most best in the company The salesperson has clout inside his organization Salesperson likeability The salesperson is friendly 4.27 1.27 0.93 The salesperson is always nice to customers This salesperson is someone we would like to meet us very often Salesperson similarity This salesperson shares similar interest like us 4.78 1.04 0.91 The salesperson has values similar to us The salesperson is very similar to people in our family Frequent Contact with Customers The salesperson frequently visits our place 4.65 1.39 0.89 The salesperson takes lots of time in learning about needs The sales people takes lots of time in understanding our family members Table 1. Service Quality Measurement, Construct Reliability, Convergent and Discriminant Validity Constructs Question Items Confirmatory Factor Analysis Reliability Cronbach’s alpha Stage-1 Stage-2 SSC t-value SSC t-value Reliability We received satisfactory sales service at first visit 0.738 B 0.869 8.965 0.789The company reliably provides customer service 0.754 12.28 The company fulfills the promises that it makes to its customers 0.699 13.98 Tangibility The brochures and leaflets are good and factual in nature 0.698 10.98 B 0.776Companies printed material and online displays are easily comprehended 0.781 B The sales representative is well dressed and presentable 0.654 11.87 Assurance The behaviour of sales people are trustworthy towards customers 0.651 B The transactions are secured as per customer’s understanding 0.766 13.28 The sales people answer customer questions in a professional manner 0.687 14.76 0.796 9.655 0.698 Empathy The salespeople show genuine concern for customer’s investments 0.876 B 0.839 9.673 0.873The salesperson is able to satisfy specific customer needs 0.775 15.91 The salesperson shows empathy explicitly towards customers 0.665 14.65 Responsiveness The salesperson is always willing to assist customers 0.668 15.78 0.788 8.878 0.679Sales people provide desired services immediately 0.631 B The customer’s queries and redemption requests are responded quickly 0.629 14.45 Source: Author’s own. Notes: SSC: Standardized Structural Coefficient, B = Factor Loading Fixed (Table 2 continued)
- 5. Tapan K. Panda 289 Vision, 17, 4 (2013): 285–292 Construct Question Item Scale Mean Standard Deviation Scale Reliability (Cronbach’s alpha) Extent of Social Interaction with salesperson The salesperson meets away from the workplace 2.49 1.09 Not applicable(A)The salesperson talks about sports, family and matters of personal interest The salesperson meets over breakfast and launch The salesperson invites to attend entertainment events The salesperson arranges meetings and get together primarily to have fun The salesperson talks about common interests besides work The salesperson is a part of get together with other family members Length of Relationship with salesperson How long is the relationship with the salesman 5.67 4.54 Not applicable(B) Trust of Salesperson This salesperson has been frank in dealing with us 5.97 1.20 0.91 The salesperson doesn’t make any false claims We don’t think this salesperson is completely open in dealing with us The salesperson is only concerned about his interest The salesperson is not genuinely concerned about our interest My family members don’t trust this salesperson This salesperson is not trust worthy Source: Author’s own. Note: (A) and (B) Formative scales, coefficient alpha is not appropriate for assessing reliability. and discriminant validity. For dimensions of service quality, the result produced values of GFI (0.929), AGFI (0.912), NFI (0.908), NNFI (0.955), CFI (0.967) and RMSEA (0.611). The measures GFI, AGFI, NFI and NNFI are above 0.90 and CFI 0.95 and RMSEA 0.0.08. The t-values also need to be significant. So the service quality data collection portion shows acceptable validity and reliability. The salesperson characteristics measures had GFI (0.91), AGFI (0.907), NFI (0.943), NNFI (0.916), CFI (0.931) and RMSEA (0.439) with t-values being signifi- cant. These results also show that data collected on salesperson characteristics has acceptable validity and reliability. It is also important to assess the discriminant and convergent validity of the overall theoretical model proposed for the study consisting of service quality, sales- person characteristics, consumer trust and relationship commitment. The factor loadings of all dimensions are greater than 0.75. The variances explained are above 60 per cent. These results suggest acceptable convergent validity of the measures (see Table 3). The discriminant validity of the constructs can be judged in terms of variance of each constructs and the correlations between the constructs and if the variance is (Table 3 continued) Table 3. Reliability and Convergent Validity Measurement of Constructs Constructs Measurement Items Factor Loadings Cronbach’s Alpha Variance Service Quality Reliability 0.829 0.799 67.87 Tangibility 0.754 Assurance 0.787 Empathy 0.854 Responsiveness 0.799 Salesperson Characteristics Salesperson Expertise 0.766 0.724 78.56 Salesperson power 0.761 Salesperson likeability 0.778 Salesperson similarity 0.751 Frequent Contact with Customers 0.769 Extent of Social Interaction with salesperson 0.754 Length of Relationship with salesperson 0.731 Trust of Salesperson 0.777 (Table 2 continued)
- 6. 290 An Empirical Study on Insurance Buyers in India Vision, 17, 4 (2013): 285–292 Constructs Measurement Items Factor Loadings Cronbach’s Alpha Variance Trust I trust that the company will provide correct information 0.845 0.764 68.95I trust that if there is an error the company will apologize and correct mistakes 0.787 I trust that the company will keep its promise and deliver the benefits 0.711 Relationship Commitment I will continue to buy all my insurance products in future from the same company 0.789 0.775 66.67 The insurance products of this company is worth purchasing in future also 0.823 The company is like a life partner for me as it is taking care my long term needs 0.788 Source: Author’s own. (Table 3 continued) higher than the correlation, the discriminant validity can be accepted. The pre-processing analysis of the constructs not only helps in explaining the adequacy of the constructs in measuring the validity and reliability of the constructs but also helps in evaluation of the proposed model by applying structural equation modelling tools (see Table 4). As a proposition service quality is assumed as an independent variable and is used to measure its impact on consumer trust and relationship commitment. The results of SEM output is shown in Table 5 below which explains the strength of variable relationships in model-1. Service quality is found to be significantly impacting consumer trust (t-value = 12.766, SSC = 0.780, p 0.01). Consumer trust has a significant impact on relationship commitment (t-value = 6.786, SSC = 0.731, p 0.01). It is also found that there is no support for direct effect of service quality on relationship commitment (t-value = 1.301, SSC = 0.109, p 0.01). So service quality impacts relationship commit- teemen through consumer trust. So consumer trust is a mediating factor between service quality and relationship commitment. So Ha1 is rejected and Ha2 and Ha3 hypoth- eses are accepted (see Table 5). The second model is used to test the relationship between service quality, consumer trust, salesperson characteristics and relationship commitment. In this model we bring in salesperson characteristics as a mediating variable and that leads to formation of four key hypotheses (see Table 6). Table 4. Measurement of Discriminant Validity Service Quality Salesperson Characteristics Consumer Trust Relationship Commitment Service Quality 0.564 Salesperson Characteristics 0.176 0.679 Consumer Trust 0.257 0.117 0.613 Relationship Commitment 0.299 0.343 0.221 0.621 Source: Author’s own. Table 5. Results of Model-1 Causal Path Hypotheses Theoretical Model Standardized Structure Coefficient t-value Service Quality → Relationship Commitment Ha1 0.109 1.301 Service Quality → Trust Ha2 0.798 12.776* Trust → Relationship Commitment Ha3 0.731 6.786* Fitness Index Fitness Criteria Fitness Values Fitness Result GFI 0.9 0.915 Good AGFI 0.9 0.964 Good NFI 0.9 0.945 Good CFI 0.95 0.977 Good RMSEA 0.08 0.048 Good Chi square/d.f. 3 1.854 Good Source: Author’s own. Note: * p 0.01.
- 7. Tapan K. Panda 291 Vision, 17, 4 (2013): 285–292 From the analysis of Table 6 it is evident that service quality positively impacts salesperson characteristics (standardized structured score = 0.781, t-value = 10.68, p 0.01). However the direct effect of salesperson characteristics is not supported by the standardized structured scores (SSC = 0.136, t-value = 1.598, p 0.01). Salesperson characteristics has a direct impact on the consumer trust (standardized structured score = 0.873, t-value = 11.54, p 0.01) and consumer trust has a direct impact on relationship commitment (standardized structured score = 0.891, t-value = 10.32, p 0.01). So we can conclude that salesperson characteristics do not have a direct impact on relationship commitment but has mediating effect through consumer trust on relationship commitment. Hence other than hypotheses (Hb2), rest other hypotheses are accepted. Since all the hypotheses are proposed affirmatively, as a principle, all expected signs are treated positively for the hypotheses. Summary and Conclusions Relationship marketing literature has ample evidence on service quality and its impact in building consumer loyalty and trust. But such a relationship does not always lead into commitment. Quality of service comes from two sources viz: company sources through its policies and procedures aswellasindividualsourceslikesalespersoncharacteristics. Some sales people are very good in managing their relationship with customers. Insurance per say as a business is long term in nature and has a high switching cost barrier. Once a customer purchases an insurance product, it is hardly a possibility for the customer to come out of a life term policy. However in cases of unit linked plan (linking performance to capital markets, popularly known as ULIPs in India), the customer can change within the service offering (by changing the debt: equity structure of the product) or switch to another insurance seller. The focus of our research is on term plans where customer is expected to run the policy for a longer period of time and also expect good services from the salesperson. Alternatively, if the salesperson can keep a good relationship with customers, it creates an opportunity for cross selling through referrals among other members of family and friends in general. This research helps in developing a theoretical model in establishing relationship between service quality, sales- person characteristics, consumer’s trust and relation- ship commitment. In most of the earlier research studies, service quality is taken as a dependent variable whereas application of structural equation modelling tools like AMOS helps us to treat this as an independent variable and its impact on consumer trust and relationship commit- ment is measured. The results show that service quality has a positive impact on consumer trust and salesperson characteristics and mediating effect on relationship commitment. Salesperson characteristic has no direct effect on rela- tionship commitment but has a direct effect on consumer trust. These findings in Indian context corroborate earlier work done by Morgan and Hunt (1994) and Doney and Cannon (1997). Further research can be conducted by using more explanatory variables which will help in deeper understanding of consumer trust and relationship commit- ment and their inter-linkage to other variables. These studies will help in developing relationship marketing strategies for insurance industry in India References Busch, Paul., Wilson, David T. (1976). An experimental analysis of a salesman’s expert and referent bases of social power in the buyer seller dyad, Journal of Marketing Research, 13(February), 3−11. Table 6. Results of Model-2 Causal Path Hypotheses Theoretical Model Standardized Structure Coefficient t-value Service Quality → Salesperson Characteristics Hb1 0.781 10.68* Salesperson Characteristics → Relationship Commitment Hb2 0.136 1.598* Salesperson Characteristics → Consumer Trust Hb3 0.873 11.54* Consumer Trust → Relationship Commitment Hb4 0.891 10.32* Fitness Index Fitness Criteria Fitness Values Fitness Result GFI 0.9 0.926 Good AGFI 0.9 0.917 Good NFI 0.9 0.939 Good CFI 0.95 0.928 Good RMSEA 0.08 0.063 Good Chi square/d.f. 3 1.976 Good Source: Author’s own. Note: * p 0.01.
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