Effects of management commitment on service quality to increase customer satisfaction of domestic airlines in Indonesia.

Abstract

At present, the market conditions for Indonesia's domestic airlines is very competitive. The deregulation policies of the Indonesian government since 1990 have resulted in an oversupply in the domestic airline industry, which in turn induced even tighter competition. This paper studies the effects of management commitment to service quality on the customers' level of satisfaction.

The results showed that a majority of the customers were not satisfied with the service provided. The five dimensions of service quality positively affected the customers' level of satisfaction, and among those dimensions, assurance has the strongest effect on the level of customers' satisfaction. The customers' levels of satisfaction or dissatisfaction were not differentiated by price and personal variables, but rather by other variables, like 1) the customers perception of service quality, 2) the appropriation between the service quality and the external communication, and 3) the situational variable. The situational variable proved to be the differentiating variable in the level of satisfaction or dissatisfaction for business segment customers.

Keywords: Management commitment to service quality, Employees' job satisfaction, Customers' perception of service quality, Customers' satisfaction

Background of Issues on Domestic Airlines Service Quality

The service industry is a unique phenomenon in the national development of a country. Since the 1980s, the service industry has developed into an extremely important element in the development of many countries especially the developing and advanced countries. At present, the service industry has become the dominant element, ranging from 45 per cent of the total GNP of a country like Indonesia, to 80 per cent in a country like Singapore. The most important component is infrastructure, such as transportation and telecommunication.

Before the gradual deregulation in the airline service industry by the Indonesian government, all regular customers of commercial flights for the domestic market must use the Garuda Indonesia airline service. PT Garuda Indonesia, as a state-owned company and the first national airline in Indonesia, has dominated the existing demand of customers of commercial flight services.

Along with the demand for national economic developments, technological advancements, and other aspects of community life, as well as effects of globalisation, there had been changes in the business climate of commercial flight services in Indonesia. The changes in the business climate, characterised by the government deregulation in the air transport industry, had created the emergence of new competitors for the Garuda Indonesia Airways. Each of the new airlines would be competing in the existing market. The competition is indeed escalating. Some airline companies have used market gimmicks to draw customers, from offering special discounts and refunds. All these efforts are to provide better services to customers of domestic airline.

Certain customers' directed orientations in the context of modern marketing are highly relevant at present. These approaches are necessary due to the increasingly tight competition among companies, rapid technological advancements, and the growing global marketing activities. The key to keeping the customers is customer satisfaction. In service industries, customer satisfaction is always influenced by the quality of interactions between customers and the personnel involved in the contact services (Kotler, 1994). In the last decade, the movement towards quality had started to spread from the manufacturing sector to the service sector. The shift of focus to quality is basic for the service business to survive the competition, get acceptance from society, and be able to achieve its missions.

In principle, the two main things closely related to services are namely, expected quality and experienced or perceived quality. The first is the customers' expectations of service quality and the latter is the customers' perceptions of service quality. The customers will always assess the services they experienced by comparing them with whatever they expected or wished to receive.

Identifying the expectations of airline service users is one way to find out the customers' satisfaction or dissatisfaction. Empirical data of readers' complaints indicated that the domestic airline companies may be considered as not yet satisfying their customers (Pambagio, 1996). In marketing terminology, the conclusion was that the marketing activities of domestic airline companies were still not oriented to customers' needs. This was because the companies still considered the customers as objects, and not as subjects. Preliminary research findings carried out by Natalisa (1996) revealed some of the customers' expectations for improved domestic flight services. These included on time departure, safety, better service, cheaper airfares, easy booking, and more varied flight schedules.

Management commitment to service quality plays a very important role in satisfying the customers' needs and wishes. Most service providers believe that they already have commitments to service quality, however, their commitments are in general, based on the companies' own internal and technical perspectives. When, viewed from the customers' side, the service provider is found lacking. The service providers have to use their resources for other organisational objectives, such as sales, profits, or maintaining market shares. In other words, a service provider that does not set own initiatives to its internal service quality is not aware that enhancing service quality will result in better company performances.

Research Objectives

Based on the above-mentioned issues, the research objectives are the following:

1. Studying the effects of customers' perceptions on service quality to the customer satisfaction level.

2. Studying the effects of conformity between service quality and external communication on the customer satisfaction level.

3. Studying the variables for differentiating the levels of customers' satisfactions or dissatisfactions.

4. Studying whether the customers (from segments of business, holidays, or visiting friends and relatives) have differences in expressing their satisfactions or dissatisfactions.

5. Studying the effects of management commitment and level of employee's work/job satisfaction on the customers' perceptions about service quality and level of customers' satisfaction.

Research Concepts and Hypotheses

Research Concepts

According to the model of customers' satisfaction by Zeithaml and Bitner (1996b), quality service is the focus of assessments reflecting the customers' perceptions on the five specific dimensions of services, namely: 1) empathy, 2) reliability, 3) responsiveness, 4) tangibility, and 5) assurance. On the other hand, the concept of satisfaction is more inclusive than the concept of quality service. Customer satisfaction is influenced by five variables, namely: 1) service quality, 2) product quality, 3) price, 4) situation, and 5) personality.

In this research, we made several modifications to the Zeithaml and Bitner model (1996b). First, combining the variables of product quality and service quality into variable of service quality (in this research, the term used is "customers' perception of service quality", as the customers have already compared their expectations and the delivered service). Besides, combining the variables of product quality, service quality is also based on the nature of the airline service product itself, where it is difficult to differentiate product from service. Second, differentiating the variables of situation differentiated by delay in departure and non-delay. Third, differentiating the variables of customers' personality by:

a) segments of travel destination: business, holidays, and visiting friends,

b) age,

c) passenger class,

d) sex,

e) educational level,

f) occupation,

g) income per month, and

h) previous experiences in flying with the respective airline company.

The fourth modification is differentiating the variable of price, namely differentiating the customers by the amount they pay for their tickets, discounted, or non-discounted (normal price). The fifth modification is, adding the variable of conformity between service quality and external communication as the variable that influences the level of customer satisfaction.

Two variables will be analysed from the service provider side, namely, management commitment and employee's job satisfaction. Management commitment is whether the service provider (airline company) had already considered the customers' expectations. Employees' job satisfaction refers to measuring the personnel's satisfaction regarding the job as a whole: salary, acquired facilities, colleagues, superiors, and relationship with the customers.

Research Hypotheses

This research tests the following propositions:

1. The higher the customers' perception of service quality, the higher the level of customer satisfaction.

2. The higher the conformity between the service quality and external communications, the higher the level of customer satisfaction.

3. The level of customers' satisfaction or dissatisfaction is differentiable by variables of:

a) customers' perception of service quality,

b) price,

c) situation,

d) personality,

e) conformity between service quality and external communications.

4. a) Variable of situation (on-time departure) is the variable to differentiate the level of satisfaction or dissatisfaction of customers in the business segment.

b) Variable of price (discounts) is the variable differentiating the level of satisfaction or dissatisfaction of customers from the segments of tourism and family visits.

5. The higher the management commitment and level of employee's job satisfaction, the higher the customers' perception of service quality, and the higher the level of customer satisfaction.

Research Methodology Research Design and Implementation

The methodology used in this research is the survey method. As this research is to explain the causal relationship among the variables through hypothetical testing, this study is an explanatory research by nature.

Population

"Population" in this research refers to the services provided by domestic airline companies, in this case, it is focused on customers and employees of domestic airline companies, namely Bouraq Airlines, Garuda Indonesia, Mandala Airlines, Merpati Nusantara, and Sempati Air.

Samples and Sample Size

1) Samples of customers

The samples comprised customers from the four domestic airline companies (Bouraq, Garuda, Mandala, and Merpati). The respondents were passengers of the domestic airline companies who were waiting to board at the departure lounges at each terminal of the companies in Cengkareng Airport, Jakarta. The respondents were requested to fill in the questionnaire in accordance to their previous experiences (no longer than the past three months) of using the domestic airline company's services.

2) Samples of Service Providers

a) Sampling of decision-makers: Individuals representing the group of directors and managers (head office).

b) Sampling of frontliners: Individuals representing the personnel directly relating with the customers, namely cabin crew, reservation officers, personnel at ticketing, check-in counters, boarding gates (greeting service), delivery baggage staff, and lost and found personnel.

Data Analysis Technique

To decide on the statistical analysis method for use, a normality test was conducted. Results of statistical analyses using the Kolmogorof Smirnof Test indicated a value of p > 0.05 for all the variables of sample data. This means that the samples have normal distribution.

Based on results of the normality test, statistical analyses were carried out using parametric statistics. The statistical analyses used the Regression Analysis, Factor Analysis, Discriminant Analysis, and Path Analysis. Analysis of research data used the level of significance [alpha] = 0.05.

Research Results and Discussion

Effects of Customers' Perceptions of Service Quality on the Level of Customers' Satisfaction

To test the effects of the variable of customers' perceptions of service quality on the variable of level of customers' satisfaction, we used the regression analysis.

Results of the regression analysis indicated that the customers' perceptions of service quality have significant effects on the level of customers' satisfaction (p < 0.05). In several marketing projects, the concept of service quality is often interchangeable with the concept of customer satisfaction. However, Zeithaml and Bitner (1996b) in their book Services Marketing stated that the concept of service quality is different from the concept of customer satisfaction. According to Zeithami and Bitner, service quality is only one of the variables determining customer satisfaction. Besides service quality, there are other variables affecting the level of customer satisfaction, namely: price, situation, and personal factors. The findings of this research support the theory of Zeithaml and Bitner. The low value of [R.sup.2] (53.2 per cent) for the two concepts often considered as interchangeable, indicated the effects of the other variables (besides service quality) on the level of customer satisfaction.

Effects of Customers' Perceptions of Service Quality on the Level of Customer Satisfaction, Measured by Servqual Dimensions

The measurement of the variable of customers' perceptions of service quality comprised of five Servqual dimensions, namely tangibility, reliability, responsiveness, assurance, and empathy.

Results of the regression analysis on the five Servqual dimensions on the level of customer satisfaction indicated that four out of the five Servqual dimensions have significant effects on the level of customer satisfaction (all have p < 0.05). The only dimension not significantly affecting the level of customer satisfaction is responsiveness.

Besides, the other conclusion drawn from the regression analysis results is the dominant effect of the dimension of assurance compared to effects of the other Servqual dimensions. The dimension of assurance measured the service security on the level of skills and knowledge needed to enable the provision of good services. Good services include courteousness, respect, attention, friendliness, professionalism, and honesty of the service provider to convince the customers to trust the offered services. The five items covered in this dimension are: flight safety, encouraging airline staff behaviours, airline company image, respect and friendliness shown by the airline staff, as well as the capability of the airline staff to answer questions. The dominance of the dimension of assurance over the other Servqual dimensions is shown by the largest regression coefficient of the assurance dimension compared to the regression coefficient of the other Servqual dimensions, namely 0.725.

Effects of Customers' Perceptions of Service Quality on the Customer Satisfaction Level by Airline Companies

Results of regression analysis indicated that the customers' perceptions of service quality on the four domestic airlines (Bouraq, Garuda, Merpati, and Mandala) have significant effects on the customer satisfaction level (all with p < 0.05). Worth noting is the result of regression analysis for Bouraq. Out of the four domestic airline companies, it turns out that the customers' perceptions of service quality of Bouraq have dominant effects on the level of customer satisfaction for Bouraq, compared to the three other domestic airlines. This is shown by the regression coefficient for Bouraq being largest compared to the regression coefficients of the three other airlines, namely 0.8.

Table 3 presents the mean and standard deviation of the customer satisfaction level by the respective airline companies. The Mandala Airline customers exhibited the highest level of customer satisfaction (83.13) compared to the three other airline companies (Bouraq, Garuda, and Merpati). Besides, the standard deviation of the satisfaction level of Mandala customers is also showing the smallest figure (10.84).

Effects of Conformity between External Communication and Service Quality on the Customer Satisfaction Level

Table 4 presents the regression analysis results conducted on the variable of conformity between external communication and the service quality and of the variable of customer satisfaction level.

Results of the analysis indicate that the conformity between external communications and service quality has significant effects on the customer satisfaction level (p < 0.05). Up to the present time, marketing researchers have never conducted a research that tested the relationship between service quality and external communications on the customer satisfaction level. However, several researchers have mentioned the importance of fulfilling one's promises to the customers. Gronroos (1990) stated that the strong base for keeping good relationships with the customers is to fulfill the promises made by the company. For the company side, this relates to the three important activities in the company. They are, namely: 1) making realistic promises to customers, 2) fulfilling the promises while serving the customers, and 3) enabling the frontliners and serving system to fulfill these promises. Kotler (1994) had discussed the three marketing activities using terms of external marketing, interactive marketing, and inte rnal marketing.

Effects of Conformity between External Communications and Service Quality on the Customer Satisfaction Level by Airline Companies

Results indicated that conformity between service quality and external communications conducted by the four domestic airline companies (Bouraq, Garuda, Mandala, Merpati) have significant effects on the customers' level of satisfaction (all values of p <0.05). The effects of conformity between service quality and external communications on the customer satisfaction level were of highest priority on Garuda (8.451), followed by Merpati (8.151), Mandala (7.958), and finally Bouraq (7.311).

Differentiating Factors of the Customers' Satisfaction Level on the Whole

According to Zeithaml and Bitner (1996), there are four variables (personality, situation, price, and customers' perceptions of service quality) affecting customers' satisfaction. However, it turns out that, in general, the variables of price and personality are not the differentiating factors for the level of satisfaction and dissatisfaction of customers of domestic airlines.

On the other hand, the customers' perceptions on service quality and situation (on time departure) have proven to be the main factors differentiating the level of satisfaction or dissatisfaction of customers. Another finding which deviates from the concept proposed by Zeithaml and Bitner (1 996b) is that the fulfillment of airline company's promises turns out to be the differentiating factor for the customers' level of satisfaction or dissatisfaction. These promises, as contained in the promotional brochures and other forms of external communications, proved to have a great effect on the satisfaction level, expressed in a larger canonical discriminant coefficient of the variable of situation (0.529). Results of discriminant analysis on all the differentiating variables on customer satisfaction level, using the stepwise method, indicate significant effects with a p value of < 0.05.

Results of factor and discriminant analyses indicate that the variable of price turns out not as the differentiating variables for the customers' level of satisfaction or dissatisfaction. The customers' satisfaction or dissatisfaction may be due to three reasons. First, the Indonesian government implemented a ceiling price policy in deciding on the domestic air flight tariff, thus, the airfare for a certain route tends to be similar among the airlines. Second, of all the domestic passengers, 74 per cent of them were flying for official or business purposes, thus their fares were paid by companies. This fact had made price not a differentiating factor for the level of customers' satisfaction or dissatisfaction. Third, self-paying passengers were, in general, Indonesians with high income. In Indonesia, only about 2 per cent of the 205 million Indonesians could afford to fly. Around 195 million Indonesians have never experienced flying (Kompas, August 1998).

Factors Differentiating the Customers' Satisfaction Level by Segments

Furthermore, discriminant analysis was carried out to identify the factors differentiating the customer satisfaction levels by segments of customer flight destinations, namely business, vacation or tourism, and visiting friends and relatives. Results of analyses on the three segments of customer flight destination indicated similarities of factors differentiating the levels of customers' satisfaction or dissatisfaction on service quality and conformity between service quality and external communications (promotion). Out of the two factors, the customers' perceptions on service quality is the more dominant factor differentiating the level of customers' satisfaction compared to conformity between service quality and external communications on the segments of business and vacation. Meanwhile, the conformity between service quality and external communications was more dominant compared to the customers' perception on service quality on the segment of visiting friends and relatives. These findings are shown by the canonical discriminant function coefficient for the respective segments.

The discriminant analysis for customers of the business segment proved that the variable of situation (on time performance) is the factor differentiating the level of customers' satisfaction with a quite high level of significance (0.17). Besides, the data showed that the mean value of the satisfaction level of customers of the business segment experiencing no delays (80.18) is higher than the mean value of satisfaction level of customers of the same segment experiencing delays (75.25). Apart from that, the standard deviation of customers' satisfaction level of customers experiencing delays is showing a lower value (11.2) compared to the satisfaction level of customers not experiencing any delays. We may conclude that there is a difference in the level of customers' satisfaction when there is a delay.

Effects of Management Commitments, Frontliners 'Job Satisfaction, and Customers' Perception of Service Quality on the Customer Satisfaction Level

Based on results of path analysis shown in Figure 3, we conclude that management commitment has a direct negative effect (-0.361) on the customer satisfaction level. Besides, management commitments had positive indirect effects on customers' satisfaction through customers' perception of service quality (0.359). Of all the available paths, the path of customers' perception of service quality and customers' satisfaction had the greatest effects among the other path (1.021). Furthermore, after considering the direct effects of management commitments and frontliners' job satisfaction, the total indirect effect was greatest in the indirect path between management commitments and customers' perception of service quality. The total indirect effect on the level of customer satisfaction was --0.052. This total effect is greater than the total effect of the path between the frontliners' job satisfaction, customers' perception of service quality, on the level of customer satisfaction (namely --0.265).

Another conclusion drawn from the path analysis results is that the frontliners' job satisfaction had negative effects on the customers' perception of service quality and the customer satisfaction level. The customers' perception of service quality, which is the customers' evaluation on the airline's performances, is not reflected by the frontliners' job satisfaction. In other words, the customers give positive evaluations of the service quality and customer satisfaction as there is the effects of management commitments of the domestic airline company, and not because of the frontliners' job satisfaction. The research results indicate that most of the customers of domestic airline companies (64.8 per cent) were not satisfied with the services they received. The customers' dissatisfactions were due to the interactions taking place between the customers and the frontliners, and not because the customers felt that the company did not have commitments for service quality.

This finding contradicts the results of earlier researches. Schneider and Bowen (1985) and Gronroos (1993) concluded that "if managers treat their employees well, the employees will treat their customers well."

Theoretical Implications and Applications

The findings in this research indicate that management commitment on service quality have positive indirect effects on the customer satisfaction level, through customers' perception of service quality. Besides, the frontliners' job satisfaction turns out to have no positive effects on the customers' perception of service quality and level of customer satisfaction. In other words, the customers give positive evaluations on service quality and are satisfied due to the effects of management commitments to service quality, not the effects of the frontliners' job satisfaction. To increase customers' satisfaction, the management should continuously enhance their commitments on service quality, so that through the leadership mechanism, the decision-makers at the domestic airline companies could enhance their employees' job satisfaction. On the other side, the internal marketing activities (especially the training of frontliners) should be enhanced their effectiveness, as the evaluation on service quality will be det ermined by the interactions taking place between customers and the frontliners.

Management commitment is found to be highest at the Garuda Airways, whereas job satisfaction is felt to be greatest among the employees of Merpati Airlines. Nevertheless, however, customers of the domestic airline companies consider the best quality service was provided by Mandala Airlines, causing the highest satisfaction level of Mandala Airlines customers. We conclude that the corporate culture (in this research, the management commitment to service quality) is the factor determining the satisfaction level of customers of domestic airline companies.

Conclusions

This study concludes that:

1. The majority of customers of domestic airline companies (64.8 per cent) were not satisfied with the services they received. This was due to the domestic airline companies lacking customer orientations, their orientations were on products.

2. Customers' perception of service quality has positive effects on the level of customer satisfaction. Out of the five dimensions of service quality, the dimension of assurance has greatest effects on the level of customer satisfaction. Assurance of flight-safety, airline company image, professionalism of personnel, and friendliness of the frontliners, are the additional values influencing the level of customer satisfaction.

3. Fulfilling the company's promises (conformity between service quality and external communications) has significant effects on the level of customer satisfaction. Exaggerated promotional themes (not in conformity with the services provided) could lead to customers' dissatisfaction for the services provided by the domestic airline companies.

4. On the whole, the level of satisfaction or dissatisfaction of customers of domestic airline companies is not differentiated by the variables of price (discounts) and personality. However, the differentiating variables are the variables of a) customers' perception of service quality; b) conformity between service quality and promotion; and c) situation (on time performance). The price competition strategy adopted so far by some domestic airline companies proved to have no differentiating effects on the level of customers' satisfaction or dissatisfaction.

5. The variable of situation (on time performance) proved to be the differentiating variable for the level of satisfaction or dissatisfaction of customers of the business segment. The variable of price (discounts) did not prove to be the differentiating variable for the level of satisfaction or dissatisfaction of customers of the segments of tourism or holidays and visiting friends or relatives. On incidents of delays, the time of announcing the delay was the differentiating variable for the level of satisfaction or dissatisfaction of customers of the segment of visiting friends and relatives.

6. Management commitments to service quality have positive indirect effects on the level of customer satisfaction, through the customers' perception of service quality. On the contrary, the frontliners' job satisfaction did not prove to have positive effects on the customers' perception of service quality and customers' satisfaction.

The findings of this research proved that management commitments could enhance customers' satisfaction through improving customers' perception of service quality.

Recommendations

1. To enhance customers' satisfaction, the domestic airline companies should enhance the quality of the services they provide to the customers. Improvement of service quality should be conducted on the five Servqual dimensions, especially the dimensions of assurance and tangibility.

2. The domestic airline companies should better be more careful in making service promises through external communications (promotional activities). Exaggerated and less realistic promotional themes could influence customers' satisfaction.

3. Management commitment to service quality should be enhanced through the mechanism of leadership. The managers already on a high position of work dimension should better promote the people dimension. On the other hand, the managers already on a high position of people dimension should better promote the work dimension.

4. It is necessary for the company to promote internal marketing activities through training programmes, especially for customer-contact service employees, as the customers' evaluation on service quality will depend on the interactions taking place between customers and frontliners.

5. An integrative research, involving the service providers and users as respondents, should be conducted on other kinds of services as well. This is to test the relationships made as hypotheses in this research, especially the relationship between management commitments and employees' job satisfaction and its effects on the customers' perception of service quality and on the level of customer satisfaction.

6. Future research is necessary to study the internal aspects of service quality and management of customer-contact service employees or the frontliners. The topics worth considering are, among others, leadership and internal marketing strategies (training).

Table 1

Planned and Realised Sample Size of Customers by Airlines

No                                 Company  Average number of
                                             passengers/day

1                                  Bouraq           551
2                                  Garuda         3,637
3                                  Mandala        1,195
4                                  Merpati        1,938
5                                  Sempati          600

                                                  7,921
Less samples of Sempati customers

Number of samples used in data
analysis

No                                 Planned Sample  Obtained Number
                                        Size         of Samples

1                                        60              119
2                                       364              365
3                                       120              147
4                                       194              256
5                                        60               69

                                        798              956
Less samples of Sempati customers                         69

Number of samples used in data                           887
analysis

Note: The plan for sample size is at least 10 per cent of the average
number of passengers leaving Cengkareng Airport per day.

Table 2

Sample Size of Decision-makers by Companies

No  Company  Population      Obtained Samples
                                Number      Percentage

1         Bouraq        15        11           16.7
2         Garuda        28        18           27.3
3         Mandala       22        12           24.2
4         Merpati       26        21           31.8

           Total        91        66          100.0

Table 3

Mean and Standard Deviation of Satisfaction Level of Customers of
Domestic Airlines by Airline Companies, May 1998

No                                Company     Customer
                                            Satisfaction
                                                Level
                                            Mean

1                                 Bouraq    79.51
2                                 Garuda    77.62
3                                 Mandala   83.13
4                                 Merpati   75.29

Average scores of four companies            78.11



No                                      Customer
                                   Satisfaction Level
                                  Standard Deviation

1                                       13.48
2                                       12.16
3                                       10.84
4                                       11.41

Average scores of four companies        12.19

                                           (n = 887)

Table 4

Regression Analysis Results: Effects of Conformity between External
Communications and Service Quality on Customer Satisfaction Level for
all Four Airline Companies, May 1998

Equation             [R.sup.2]               t                  F
                                Constant  Regression Coef.

Y= 47.506 + 8.310 X    0.425      38.4          25.6        654.1



Equation                 P


Y= 47.506 + 8.310 X  0.001 (b)

                     (n = 887)

Legend: [R.sup.2] = Coefficient of determination

p = level of significance

b = significant

Y = Level of customer satisfaction

X = Conformity of external communications and service quality

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