Final Research Work.docx

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A THESIS

Submitted to the Superior University, Lahore

As partial fulfillment of the Requirements

For

The Degree of

Bachelors of Business Administration

Submitted by:

Supervised by:



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“An integrated model for the effect of perceived product,

perceived service quality, and perceived price fairness on

consumer satisfaction and customer loyalty: Evidence from

Fast Food industry of Pakistan”



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Declaration of Originality

I pronounce that this thesis is my own work and I properly give the citation of the quotations of

authors and researchers.

I also pronounce that I have given the complete end references of the data which I have taken

from internet source to complete my research work and I know the fact that plagiarism can

influence my research work and even due to this my research work can be rejected.

Signed…………………………………………

Date…………………………………………….

Name of Supervisor………………………………



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ACKNOWLEGEMENTS

I would like to thank the following persons without whose guidance this dissertation could not

have been completed.

First of all I would like to express my sincere appreciation and gratitude to my supervisor

Khansa Irem for her guidance and insight throughout in making my dissertation and especially,

her invaluable suggestions and comments that really guided my research and also helped me to

structure my dissertation.

Secondly, I am also very indebted to my best friends, my father and mother for their continuous

support. I owe a lot of their unconditional love and understanding. Well, their suggestions

allowed me to think in many different ways. Most importantly, they continually helped me

improve my confidence. There were certain times, when I used to say that I just did not think I

could go on with my studies, but they always knew just what to say to get me back in the race.

They really very special entities of my life…. What a journey! I will never stop admiring them.



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DEDICATION

“I dedicated this research work to my parents, teachers, and friends who guide, assist and prayed

for me throughout my study life”.



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Abstract

The objective of the present study was to find the different factors affecting customer loyalty in

the context of fast food industry of Lahore, Pakistan. Macdonald’s, KFC, and Fri Chicks were

selected to complete the study. The data was collec ted from the 150 customers of Macdonald’s,

KFC, and Fri Chicks using self administered questionnaires. The response rate was 100%. SPSS

16.0 was used for the analysis of the data. Statistical analysis included histograms, scatter Plots,

correlation, t-test and regression analysis to analyze the data.

The study finds that all variables of the study are significantly and positively correlated with

each other. The results of regression analysis shows that perceived product quality, perceived

service quality, perceived price fairness has significant and positive correlation with the

customer satisfaction and customer loyalty. The results also show that customer satisfaction has

positive correlation with the customer loyalty. Finally the regression analysis shows that

perceived product quality, perceived service quality, perceived price fairness has significant and

positive linkage with the customer loyalty and customer satisfaction has positive and significant

relationship with the customer loyalty. After that the benefits and limitation of the study are

discussed. End list of references is also provided.

Keywords: Perceived product quality, Perceived service quality, Perceived price fairness,

Customer satisfaction, Customer loyalty, fast food industry, Lahore, Pakistan etc.



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Table of Contents

Declaration of Originality.................................................................................. I

Acknowledgement............................................................................................... II

Dedication............................................................................................................ III

Abstract.....…………................................................................................…… IV

Chapter 1: Introduction………………………………………………………. 7

1.0 Introduction………………………………………………………. 7

1.1 Purpose statement ……………………………………………….. 9

1.2 O bjectives ………………………………………………………... 9

1.3 Significance ……………………………………………………… 10

1.4 R esearch questions ………………………………………………. 11

Chapter 2: Literature Review……………………………………………...…. 13

2.0 Theoretical Model ……..………………………………………… 35

Chapter 3: Data/ Methodology.......................................................................... 40

4.0 Tools of data collection ………………………………………….. 40

4.1 Sampling technique and sample ……………………………….… 41

4.2 Measure ………………………………………………………….. 42



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4.3 Data analysis …………………………………………………….. 43

Chapter 5: Analysis………….....…..…..…………………………………...…. 45

5.0 Data screening..………………………………………………….. 45

5.2 R esults …………………………………………………………… 45

5.2.1 Descriptive summary ……………………………………… 46

5.2.2 Histogram..…………………………………………………. 47

5.2.3 Scatter plot ………………………………………………… 51

5.2.4 Correlation ………………………………………………… 55

5.2.5 Regression …………………………………………………. 57

Chapter 6: Discussion/ conclusion..…..…………………………………...….. 60

6.0 Discussion ……………………………………………………….. 60

6.1 Conclusion ………………………………………………………. 63

References ………………………………………………………………….….. 64



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CHAPTER No. 1

INTRODUCTION

1.0 Introduction

Fast food industry has become of great important in the recent years in Pakistan. Fast food is the

term given to food that can be prepared and served very quickly. While any meal with low

preparation time can be considered to be fast food, typically the term refers to food sold in a

restaurant or store with low quality preparation and served to the customer in a packaged form

for take-out/take-away. The term "fast food" was recognized in a dictionary by Merriam –

Webster in 1951.Franchise operations which are part of restaurant chains have standardized food

stuffs shipped to each restaurant from central locations for example like KFC, McDonald, Pizza

Hut, and Burger King and so on. The capital requirements involved in opening up a fast food

restaurant are relatively low. Smaller, individually-owned fast food restaurants are becoming

much more common throughout the world. After getting much response in the world, the fast

food industry is also grooming in Pakistan. There are many fast food chains in Pakistan such as

Macdonald, KFC, Hardees, Pizza Hut, and Subway. There are also local fast food companies in

Pakistan such as Fri Chicks etc. which are attracting huge number of customers. Thousands of

people visit fast food hotels daily. This growth has not only been fuelled by consumer

demand, but also through the expansion of the supply base. Fast-food menus have been limited

in breadth and depth of product mix, as the market has matured. Numbers of chains are able to

offer a new experience to their existing customers and possibly appeal to a new customer base.

By seeing the tremendous response of customers towards the fast food industry, this study is an

attempt to find what factors of fast food industry creates the loyalty among customers. In other



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words this study finds the reasons due to which customers visit the fast food store again and

again. There are many previous studies which find the factors of customer loyalty such as the

study of Ti Bei and Chiao (2001) found that perceived service quality, perceived product quality,

perceived price fairness, and customer satisfaction creates the customer loyalty. The studies of

Cronin, Bradly, and Hult, (2000); Lee, (1998); Mcdougall, and Levesque, (2000), Sumaedil,

Bakti, and Metasari (2011) find the impact of perceived service quality, perceived price, and

customer satisfaction on customer loyalty. Keeping in view the empirical evidences of previous

studies this study is an attempt to find the indirect impact of perceived service quality, perceived

product quality, perceived price fairness, through customer satisfaction on the customer loyalty

in the fast food industry of Pakistan.

1.1 Purpose Statement

In the ever growing market for fast food industry it becomes very crucial for the fast food

companies to achieve customer loyalty by satisfying its customers. Previous researches pointed

out that various factors serve as the determinants of customer loyalty mediating by the customer

satisfaction. So based on the precious researches the current study purposes to develop the

questionnaires on factors of loyalty to check their relationship with satisfaction and loyalty in the

context of fast food industry of Pakistan. In the present study service quality, perceived product

quality, perceived price fairness are used as independent variables of the study while customer

satisfaction is mediating variable and customer loyalty is the dependent variable of the study.



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1.2 Research Objectives

To examine the impact of perceived product quality on the customer satisfaction in the

context of fast food industry of Pakistan.

To examine the impact of perceived service quality on the customer satisfaction in the

context of fast food industry of Pakistan.

To examine the impact of perceived price fairness on the customer satisfaction in the context

of fast food industry of Pakistan.

To examine the impact of customer satisfaction on the customer loyalty in the context of fast

food industry of Pakistan.

To examine the impact of customer satisfaction on the customer loyalty in the context of fast

food industry of Pakistan.

To examine the impact of perceived product quality on the customer loyalty in the context of

fast food industry of Pakistan.

To examine the impact of perceived service quality on the customer loyalty in the context of


To examine the impact of perceived price fairness on the customer loyalty in the context of




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1.3 Significance of the study

The present study finds out the different factors affecting customer loyalty in the fast food

industry of Pakistan. the study also determine the impact of customer satisfaction on

customer loyalty in the context of fast food industry of Pakistan

The current study enhances the knowledge on achieving customer loyalty by maintain certain

factors. It means it contribute to the body of knowledge on the relationship among perceived

product quality, perceived service quality, perceived price fairness, and customer loyalty.

This study also enhances the knowledge on the mediating effect of customer satisfaction in

such relationship. Since most of the research on this topic was done in the context of

developed countries so this research is an attempt to find such linkage in the developing

countries context like Pakistan.

The present study also provide the help to the marketing managers of the fast food companies

to maintain the factors which involve in creating the customer loyalty through satisfying the

customers.

Lastly, the current study is significant in a way that it provides the theoretical understanding

of the association among perceived service quality, perceived product quality, perceived

price fairness, customer satisfaction and customer loyalty in the context of Pakistan.

1.4 Research question and Hypothesis

1.4.1 Main research question

What are the factors which contribute to the creation of customer loyalty in the fast food

industry of Pakistan?



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1.4.2 Hypothesis

H1: A relationship exists between perceived product quality and customer satisfaction.

H2: A relationship exists between perceived service quality and customer satisfaction.

H3: A relationship exists between perceived price fairness and customer satisfaction.

H4: A relationship exists between customer satisfaction and customer loyalty.

H5: A relationship exists between perceived product quality and customer loyalty.

H6: A relationship exists between perceived service quality and customer loyalty.

H7: A relationship exists between perceived price fairness and customer loyalty.



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CHAPTER No. 2

LITERATURE REVIEW

Relationship between Perceived Product Quality and Customer Satisfaction

A research study was conducted by the Tsiotsou (2005) to find out the linkage among perceived

product quality, satisfaction, and purchase intensions. The purpose of the study was to determine

the influential effects of perceive product quality and satisfaction on the consumers purchase

intensions. The study also proposed to check the effect of involvement and value on the purchase

intensions of buyers. The data of the study was collected by conducting questionnaire survey

from the consumers of sports shoes. The population of the study was the students out of which

197 were selected to response the questionnaire. The collected data was then analyzed by using

SPSS. The results of the study showed that perceived product quality influence the customer

satisfaction which in then affects the purchase intensions of buyers. Moreover the study found

that customer satisfaction strongly and directly influences the purchase intension. Lastly the

study revealed that involvement has strong but indirect impact o the purchase intensions of the

buyers.

Another research work was done by the Abdullah et al, Rozario (2009) to determine the effect of

service quality and product quality on the satisfaction of customers in the context of Malaysian

hotel industry. The purpose of the study was to identify the determinants of customer

satisfaction. The independent variables of the study were service quality, and food quality. The

term customer satisfaction was used as the dependent variable of the study. The data of the study

was collected by using questionnaire survey from 149 customers of hotels of Kuala Lumpur,

Malaysia. SPSS method was used to analyze the collected data. The results of the study showed



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that service quality positively and strongly effect the customer satisfaction as the significance

value of their relationship was (r=0.544, p=0.000). The results also showed that food quality

strongly and negatively affect the customer satisfaction as the significance value of their

relationship was (r=-0.268, p=0.001).

A research study was also conducted by the Andaleeb and Conway (2006) to verify the factors

affecting customer satisfaction in the context of restaurant industry of USA. The objective of the

research work was to determine that what factors contribute to satisfy the customer in the service

industry mainly in restaurant industry. The data of the research was collected by using structure

questionnaires from the restaurant users selected from telephone book by using random sampling

technique. Qualitative interviews were also conducted to collect the data from the respondents

selected by using judgment sampling. The collected data was then analyzed by using factor

analysis and multiple regression analysis. The results of the study revealed that responsiveness

was the most influential factor of customer satisfaction. Food quality and price also found to

have significant influence on customer satisfaction. Lastly it was found that physical design and

appearance of the restaurant does not affect the satisfaction of the customers.

A research work was conducted by the Tsiotsou (2005) to check the impact of perceived product

quality on satisfaction, involvement, and purchase intensions of the customers in Greek

university perspective. The study considered various quality determinants to check their relation

with the product involvement, overall satisfaction and purchase intentions. The data of the

research work was collected by conducting questionnaire survey. 204 students of the university

were selected to collect the data. After the analysis of collected data the study revealed that

perceived quality strongly affect the customer satisfaction while have moderate relation with the

product involvement and purchase intensions.



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Relationship between Perceive Service Quality and Customer Satisfaction

Abedniya, Zaeim, and Hakimi (2011) conducted the study to check the impact of Customers’

Perceived Service Quality on customer Satisfaction in the Islamic banking perspective of

Malaysia. Customer satisfaction was used as the dependent variable of the study which depends

on the perceived service quality (Independent variable). The study used a cross-sectional

research design which is a study based on accumulated data analysis to provide insights to

answering our research questions. This design of research was used to conduct our study in all

Islamic banks in Kuala Lumpur, the capital of Malaysia. The questionnaire was filled by 102

respondents. The collected data was then analyzed by using SPSS 15. Factor analysis,

Correlation, and regression analysis were applied to the collected data to analyze the findings of

the study. The results of the study showed that perceived service quality positively and strongly

affect the customer satisfaction.

Lee and Yoo (2000) conducted the study to identify the factors of perceived service quality and

to check their linkage with the customer satisfaction. Determinants of service quality like

tangibles, and responsiveness were taken as the independent variable. Customer satisfaction was

taken as the dependent variable of the study. The research was done in the people based and

equipment based industries context. After the analysis of the collected data the results of the

study showed that tangibles appeared to be a more important factor in the facility/equipment-

based industries, whereas responsiveness is a more important factor in the people-based

industries.

Kuo, Wub, and Deng (N.D.) conducted the study to check the relationship among service

quality, perceive value, customer satisfaction, and post purchase intension in the context of

Taiwan. The main objective of the study was to develop a tool to asses’ service quality of mobile



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value-added services and have a further discussion of the relationships among service quality,

perceived value, customer satisfaction, and post-purchase intention. The data of the study was

collected from college and graduate students of fifteen major universities in Taiwan. The

collected data was then analyzed by using SEM and regression analysis. The study revealed that

service quality strongly affects the customer satisfaction and perceived value. The study also

revealed that perceived value has positive and significant relation with the satisfaction and

purchase intension. Further the study revealed that customer satisfaction has direct and strong

linkage with the purchase intensions. Lastly, the study revealed that service quality has strong

but indirect relationship with the purchase intensions.

A research work was conducted by the Chaipakdee, and Wetprasit (N.D.) to determine the

linkage among service quality, customer satisfaction, perceived value, and behavioral intentions

in the context of Thailand. The main objective of the study was to identify the perceptions of

customers about service quality provided by sea-kayaking operations based in Phuket and Phang-

Nga Province. Another objective of the study was to determine the influential affect of service

quality on satisfaction, value, and behavioral intensions. The data of the study was collected by

using self administrated questionnaire survey. The collected data was then analyzed by using

regression analysis. The findings of the study suggested that all the determinants of service

quality were significantly and positively linked with the satisfaction. The results also suggested

that the price variable was the most important contributor to tourist satisfaction, whereas

“company provides service quality worth the money paid” was the most important contributor to

behavioral intention.

Wei (2010) conducted a study to find the factors affecting customer satisfaction in the banking

sector of New Zealand. The purpose of the study was to determine the determinants of perceived



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service quality and its relationship with the customer satisfaction, corporate image, and perceived

value in the banking sector. The dimensions of service quality were taken as the independent

variables of the study. Corporate image and perceived value were taken as the moderating

variables and customer satisfaction was the dependent variable of the study. The data of the

study was collected from the customers of local commercial banks of New Zealand. The sample

of the study was selected by using convenience sampling technique. The collected data was then

analyzed by using SPSS. The findings of the study showed that service quality has most

significant and strong relationship with customer satisfaction as compared to the perceived value

and corporate image. Further the study also provided the evidence of mediating effect of value

and image in the relationship between service quality and satisfaction.

Clemes, Gan, Kao, and Choong (2008) conducted the empirical study to analyze customer

satisfaction in the context of international air travel industry. The objective of the research was to

find the factors which affect customer satisfaction and behaviors in the air travel industry.

Another objective of the study was to determine the most important and least important

dimensions of service quality. Timeliness, assurance, convenience, helpfulness, comfort, meals,

and safety and security were taken as the dimensions of service quality which was the

independent variable of the study. The data of the study was collected from the sample of 428

passengers of international air travel. After the analysis of the study the findings of the study

showed that all the dimensions of service quality positively affect the customer satisfaction.

Moreover the study showed that safety and security was considered as the most important

dimension of service quality.



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Relationship between Perceived Price Fairness and Customer satisfaction

Bei, and Chiao (2001) conducted the study to check the impact of the perceived service quality,

perceived product quality and perceived price fairness on the customer satisfaction and customer

loyalty in the automobile industry. The purpose of the study was to balance service quality, and

product quality into an integrated model. Another objective of the study was to determine the

impact of perceived product quality, perceived service quality, and perceived price fairness on

customer loyalty through customer satisfaction. A questionnaire method was used to collect the

data on the variables of data from the respondents of the study. A survey of 495 customers of

three automobile companies (Mitsubishi, Nissan, and Toyota) was conducted. The collected then

analyzed through SPSS. The results of the study revealed that 1). Service quality has positive

relationship with the satisfaction as the significance value was 0.01 and value of t= 3.09. 2).

Service quality has positive relationship with the Loyalty as the value of t = 2.63, P < 0.001. 3).

Product quality has positive relationship with the satisfaction as the significance value was 0.01

and value of t= 5.65. 4). Product quality has positive relationship with the Loyalty as the value of

t = 4.42, P < 0.001. 5). Perceived price fairness has positive relationship with the satisfaction as

the significance value was 0.01 and value of t= 7.91.6). Perceived price fairness has positive

relationship with the Loyalty as the value of t = 9.23, P < 0.001. 7). Satisfaction has positive

relationship with the Loyalty as the value of F = 227.857 and the significance level were 0.001.

Sumaedil, Bakti, and Metasari (2011) conducted the study to check the impact of perceive

service quality and perceived price on the satisfaction of students in the context of Indonesia.

Perceived service quality and perceived price were the independent variables of the study while

the satisfaction was used as the dependent variable of the study. The research study was

quantitative in nature which used survey method for data collection. The data of the study was



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collected from the sample size of 155 students of two Indonesia public universities. The data of

the study was analyzed by using regression analysis. The results of the study showed that the

perceived service quality and perceived price strongly and positively affect the student’s

satisfaction as the F statistic value of their relationship was 52.884 and the significance value of

the relationship was 0.000.

A research work was conducted by the Dai (2010) to determine the mediating effect of customer

loyalty in the relationship among perceived price fairness, customer satisfaction, and behavioral

intensions. The objective of the study was to verify the relationship of price fairness with

customer satisfaction and behavioral intension. The study also proposed to verify the mediating

effect of customer loyalty. Perceived price fairness was the independent variable of the study.

Loyalty was the mediating variable of the study while customer satisfaction and behavioral

intensions were used as the dependent variable of the study. The data of the study was collected

from the students of Auburn University and Sam Houston State University. The sample of the

study was selected by using convenience sampling technique. SEM was used to analyze the

findings of the study. The study revealed that customer loyalty plays a mediating role in the

relationship of perceived price fairness and satisfaction. The study also revealed that perceived

price fairness has strong and positive relationship with the satisfaction. Moreover the study found

that perceived price fairness also influence the repurchase intensions of buyers.

Herrmann, Xia, Monroe, and Huber (2007) conducted the study to check the impact of the

perceived price fairness on customer satisfaction in German automobile industry context. The

objective of the study was to clarify the linkage between perceived price fairness and satisfaction

empirically. Further, it seeks to examine specific factors that influence fairness perceptions

including price perception and consumer vulnerability. Perceived price fairness was the



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independent variable of the study while satisfaction was the dependent variable of the study. The

data of the study was collected by the sample of 246 car users in German. The results of the

study revealed that the perceptions about price strongly and positively affect the satisfaction. The

study also revealed that consumers vulnerability negatively influence the perceived price

fairness.

Hanif, Hafeez, and Riaz (2010) completed a research study with a purpose to determine the

factors of customer satisfaction. The study was done in the telecom sector of Pakistan. Price

fairness and customer services were the independent variable of the study while customer

satisfaction was the dependent variable of the study. Users of Telenor, Mobilink, and Ufone were

selected as the population of the study. The data of the study was collected by conducting

questionnaire survey from the sample of the study. The collected data was then analyzed by

using correlation and regression analysis. The findings of the study confirmed that price fairness

and customer services strongly and positively influence the customer satisfaction. The results of

correlation analysis showed that price fairness and customer satisfaction were strongly correlated

with each other as the value of their relation was 0.51. Similarly the value of correlation between

satisfaction and customer services was 0.50 which indicated the strong correlation between these

variables. The results of the regression analysis showed that price fairness and customer services

have linkage with the satisfaction as the values of their coefficients were 0.507 and 0.447.

Ahmat, Radzi, Zahari, Muhammad, Aziz, and Ahmad (2011) conducted the research study to

find the determinants of price fairness which affect consumer response behaviors in the hotel

industry of Malaysia. Four variables were analyzed in this study which was a) treatment

experience, b) price knowledge, c) price expectation, and d) price information to check their

relationship with the response behaviors of the tourists of Langkawi Island, Malaysia. The data



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of the study was collected by using self administered questionnaire survey from the tourists stay

at four and five star resort restaurants in Langkawi Island, Malaysia. A total of 330

questionnaires were distributed among the respondents having 100% response rate. The collected

data was then analyzed by using SPSS16. The results of the study treatment experience (β =

.150, p < 0.05), price expectation (β = .078, p > 0.05) has direct and positive relationship with the

response behaviors of the customers. The study also confirmed that price information (β = -.050,

p > 0.05), and price knowledge (β = -.220, p < 0.05) has negative relationship with the response

behavior.

Relationship between Customer Satisfaction and Customer Loyalty

Yang, and Peterson (2004) conducted the study to check the role of switching costs in the

relationship among perceive value, satisfaction and loyalty. The study proposed to find the

mediating effect of switching cost in the relationship among perceived value, satisfaction, and

loyalty. The study took consumer value and perceives satisfaction as independent variables. The

switching cost was the mediating variable of the study. The dependent variable of the study was

loyalty. The data was collected through web based online survey from the users of online users.

The data of the study was collected by using questionnaires. The collected data was then

analyzed by using statistical package for social sciences. After the analysis of data the study

revealed that perceived value and satisfaction are the strong predictors of customer loyalty. The

study also revealed that switching cost strong mediates the relation of satisfaction, value, and

loyalty.

Hallowell (1996) conducted the empirical study to investigate the relationship among the

satisfaction of customers, customer loyalty, and profitability. The purpose of the research was to



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determine the factors which contribute to the profitability of the firm. The study used customer

satisfaction as independent variable, customer loyalty as mediating variable and profitability as

dependent variable. The study was quantitative in nature which used questionnaires for the

collection of the data from the sample of the study. The data was then analyzed by using SPSS.

The study revealed that customer satisfaction, and customer loyalty positively and strongly

affects the profitability of the firm. The results of the study were consistent with the findings of

Heskett et al., and Storbacka et al., (1994).

A research study was conducted by the Mohsan, Nawaz, Khan, Shaukat, Aslam, (2011) to check

the relationship among customer satisfaction, loyalty and intensions to switch in the context of

banking industry of Pakistan. The purpose of the research was to determine the linkage among

customer satisfaction, customer loyalty and intentions to switch. Customer satisfaction was taken

as the independent variable. Customer loyalty and intensions to switch were taken as the

dependent variables which depend on customer satisfaction. The data of the research was

collected by using questionnaire survey. The data of the research was collected from the sample

size of 120 customers of banks of Pakistan. The analysis of the data was done by using Microsoft

Excel and SPSS 16. The results of the study confirmed that customer satisfaction has positive

and significant relationship with the customer loyalty as the significance value of their

relationship was (0.001). The study also suggested that customer satisfaction has negative

relationship with the intensions to switch as the significance value indicated which was (-0.003).

Chumpitaz, and Swaen (2003) conducted the study to check the mediating effect of customer

satisfaction in the relationship between service quality and brand loyalty in the context of airline

company. The independent variable of the study was Service quality which was measured by



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(Check-in boarding, Service on board, Food service, and Aircraft comfort). Customer

satisfaction was taken as the mediating variable while the dependent variable of the study was

Brand Loyalty. The data of the study was gathered by using questionnaires. The data was

collected from the sample of 4006 clients of an airline company. The collected data was then

analyzed by the LISREL. The study revealed that service quality creates the customer

satisfaction among customers. The study also revealed that customer satisfaction strongly

influences the purchase intensions. Lastly, the study revealed that customer satisfaction mediates

the relationship between service quality and brand loyalty.

Yeung (N.D.) conducted the study to check the relationships among service quality, image,

customer satisfaction and loyalty in a Hong Kong franchised bus company. The purpose of the

study was to investigate how service quality, image, satisfaction and loyalty are related to gain

insight on the decreasing market share problem based on data collected from passengers of a

franchised bus company in Hong Kong in 2004. Service quality was taken as the independent

variable of the study. Corporate image and Satisfaction were taken as the mediating variables

while customer loyalty was taken as the dependent variable. The target population of the study

was purely KMB passengers. Stratified sampling was employed to select the bus routes within

each type of stratum: urban Kowloon, New Territories, and cross-harbour. Passengers over 16

years old waiting at the bus stops or stations to ride the selected bus routes and had ridden a

KMB bus in the previous month were invited for interview. A total of 855 passengers were

randomly selected to complete the questionnaire; only 636 samples were valid and included in

the analysis. Successful response rate was 74.4%. Structural equation modeling (SEM) technique

was employed to analyze the collected data. The results of the study showed that, 1). Service

quality affects satisfaction and image directly, 2). Image affects overall satisfaction and loyalty



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directly, and 3). Overall satisfaction affects loyalty directly. The study also resulted that service

quality does not affects loyalty directly. Service quality has only indirect effect on loyalty

through image and overall satisfaction.

Hu, Cheng, Chiu, and Hong (2011) conducted the study to check the relationship among quality

attributes, customer satisfaction, and customer in the context of medical service industry of

Taiwan. The objective of the study was to investigate the impact of service quality attributes on

customer satisfaction and customer loyalty by using Kano’s integrated model and the Customer

Satisfaction Index Model. The independent variables of the study were customer expectation and

perceive quality. The mediating variables of the perceive value and customer satisfaction.

Complaint behavior and customer loyalty were taken as the dependent variables in the study.

The data for analysis was collected by using questionnaire survey which was sent to 1,100 clients

of 15 hospitals of Taiwan. The sample size of the study was 1100 clients which were selected by

using convenience sampling technique. Out of 1100 questionnaires, the total of 923 was used for

analysis showing the response rate of 89.3 percent. The study revealed that customer satisfaction

was influenced by the one-dimensional and attractive attributes, and negatively affected by

customer complaints. Surprisingly, the must-be attributes could not predict customer satisfaction,

which suggests that competitive convergence played a role within the Taiwan context. As well,

customer loyalty proved to be independent of customer satisfaction and customer complaints.

Bloemer, Ruyter, and Peeters (1998) conducted the study to determine the factors affecting

customer loyalty in the banking sector of Netherland. The objective of the study was to clarify

the factors which strongly affect the customer loyalty. The study took image, service quality, and

customer satisfaction as the strong predictors of customer loyalty. Image was taken as the

independent variable of the study. Perceive quality and satisfaction was taken as the mediating



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variable while loyalty was taken as the dependent variable of the study. The data of the study

was collected by interviewing 2500 customer of Netherland’s major banks. The sample of the

study was taken from the bank’s customer database. The sample size of the study was selected

by using random sampling technique.

The results of the study revealed that image has strong and positive linkage with the perceived

service quality (r = 0.59). The study also resulted that image has strong and positive linkage with

the customer satisfaction (r = 0.44), and customer loyalty (r = 0.53). Furthermore, the study

revealed that perceived service quality has significant and positive linkage with satisfaction (r =

0.55), and loyalty (r = 0.66). The study also revealed that customer satisfaction has strong

relationship with the customer loyalty (r = 0.59). The study also revealed that perceived service

quality and customer satisfaction has positive and significant relationship with the customer

loyalty as the values of their relationship were (beta = 0.38 and beta = 0.42) respectively.

Relationship between Perceived Product Quality and Customer Loyalty

Yee (2008) conducted the study to check the relationship between customer’s perceived quality

and business loyalty in B2B organizations context. The purpose of the study was to check the

influential effect of perceived quality on customer loyalty in the context of wooden product

manufacturers of Malaysia. Perceived quality (service and product quality) was the independent

variable of the study while loyalty was selected as the dependent variable of the study. Customer

satisfaction was the mediating variable of the study. The data of the study was collected by using

questionnaires. The questionnaires were filled by 36 respondents which were used for analysis.

After the analysis of the data the study revealed that perceived service quality and perceived



27

product quality significantly affect the customer satisfaction. The study also revealed that

customer satisfaction significantly influences the customer loyalty and relationship quality.

Chang and Fong (2010) conducted the study to verify the relationship among Green product

quality, green corporate image, green customer satisfaction, and green customer loyalty. The

purpose of the study was to explore the relationships among green product quality, green

corporate image, green customer satisfaction, and green customer loyalty. The study used the

green product quality and green corporate image as independent variables while study employed

green customer satisfaction and green customer loyalty as the dependent variables. The data of

the study was collected by using questionnaire survey. The authenticity of the questionnaires was

ensured by mailing it to 10 scholars and experts for refine purpose. The data of the study was

collected from the users of green products. The questionnaires were filled by 600 respondents

out of which just 196 were used for the analysis purpose showing the response rate of 32.67

percent. AMOS was used to run the confirmatory factor analysis. The study revealed that green

product quality strongly and positively affects the green customer satisfaction and green

customer loyalty. The study also revealed that green corporate image has positive and

significant relationship with the green customer satisfaction and loyalty. Further the study

revealed that green customer satisfaction has strong and positive relationship with the green

customer loyalty.

Jahangir, Parvez, Bhattacharjee, Ahamed (2009) conducted the study to check the linkage among

brand affect, brand quality, and customer’s brand extension attitude mediating by the customer

loyalty. The research intended to propose a conceptual framework that will investigated the

effects of brand affect and brand quality on customers’ brand extension attitude mediated

through customer loyalty. Brand trust, brand affect, and brand quality was taken as the



28

independent variable while mediating variable of the study was customer loyalty. Consumer

brand extension attitude was taken as the dependent variable of the study. Structured

Questionnaire survey was used to collect the data of the study from the sample size of 100

customer of fruit juice. All 100 questionnaires were returned which were used for analysis

purpose having response rate of 100 percent. The collected data was then analyzed by using

Pearson correlation and regression analysis. The results of the correlation analysis revealed that

brand quality and brand affect strongly influence the brand loyalty as the values showed (r = .45,

p < .01; r = .40, p < .01 respectively). The results also revealed that brand extension attitude has

strong and significant relation with the brand affect (r = .33, p < .01), brand quality (r = .27, p <

.01), and brand loyalty (r = .58, p < .01). The results of the regression analysis revealed that

brand affect and quality has strong and positive linkage with the brand loyalty as confirmed by

the values (β = 0.342, p < .01; β = 0.414, p < .001 respectively). Lastly, the results of regression

analysis revealed that customer loyalty has significant and positive linkage with the brand

extension attitude as the value suggested (β = 0.552, p < .001).

Relationship between Perceived Service Quality and Customer Loyalty

Kiran, and Diljit (2011) conducted the research work on Antecedents of customer loyalty in the

context of academic library setting. In this study service quality was taken as independent

variable. Service value and customer satisfaction was taken as the mediating variables while

customer loyalty was taken as the dependent variable. The target population of the study were

consisted of postgraduate students and teaching staff at four research intensive universities in

Malaysia. The sample of the study was selected on the basis of convenience sampling as it was

difficult to obtain the contact of all postgraduates. Data was collected by assistants over two



29

months, April 2009-May 2009. A total of 2000 questionnaires were distributed and the return

rate was 22% (441), of which 231 cases were used for analysis after data cleaning and

eliminating non web-based library service users. Structural equation modeling (SEM) was used

to analyze the collected data. The results of the study showed that perceived service quality has a

positive effect on customer satisfaction (β= 0.54, p<.01) and service value (β= 0.82, p<.01).

However, the relationship between perceived service quality and customer loyalty was negative

and not statistically significant (β= -0.11). Although service quality does not have a significant

direct effect on customer loyalty, it has an indirect positive effect on customer loyalty (.91).

Customer Value too does not have a significant direct effect on Customer Loyalty, but is has an

indirect positive effect on customer loyalty via customer satisfaction (.35). The total effect of

service quality on customer loyalty is (.80). The results also indicated that customer satisfaction

mediated the relationship between service quality and customer loyalty.

Al-Rousan, Ramzi, and Mohamed (2010) conducted the study to check the relationship between

customer loyalty and service quality loyalty in the context of five star hotels in Jordan. The

purpose of the research was to empirically investigate the dimensions of service quality and its

impact on customer loyalty in hotel industry of Jordan. The dimensions of service quality

(empathy, reliability, responsiveness and tangibility) were taken as the independent variables of

the study while customer loyalty was the dependent variable of the study. The data of the study

was collected by using self administered questionnaire from the sample size of 322 customers of

three branches of Marriott hotel in Jordan. The data of the study was analysis by using SPSS 16.

The study revealed that dimensions of service quality such as empathy, reliability,

responsiveness and tangibility have strong and positive relationship with the customer loyalty.



30

The study also revealed that tangibility was found be most strong influential factor of customer

loyalty.

Ismail, Haron, Ibrahim, and Isa (2006) conducted the study to check that what factors could lead

to the customer loyalty in the audit firms of Malaysia. The purpose of the study was to find the

factors which could possibly be the reason of customer loyalty. The dimensions of service

quality (reliability, assurance, tangibility, empathy and responsiveness), and customer

satisfaction were taken as the antecedents of customer loyalty. 500 questionnaires were sent to

the respondents out of which 115 questionnaires were returned showing the response rate of

23%. The study revealed that out of all dimensions of service quality, tangible has strong and

positive relationship with customer loyalty as other did not find to be the strong predictors of the

loyalty. The study also revealed that empathy has the weakest relation with the loyalty. Lastly

the study revealed that satisfaction does play the mediating role in the relationship between

reliability and loyalty.

Rauyruen, Miller, and Barrett (n.d.) conducted a research study on quality and loyalty

relationship. The objective of the study was to check the linkage between relationship quality

and loyalty in Australian courier service industry context. Trust, commitment, satisfaction and

service quality were used as the dimensions of relationship quality which was the independent

variable of the study. Customer loyalty was selected as the dependent variable of the study. The

data of the study was collected by using two approaches i.e. online survey and mail survey. The

data of the study was collected from 306 respondents. A two step approach (Anderson and

Gerbing 1988) was selected for measurement model and structural model. The study revealed

that all the dimensions of relationship quality (trust, commitment, satisfaction and service

quality) significantly and positively influence the customer loyalty. The study also revealed that



31

customer satisfaction strongly influences the purchase intensions through loyalty. Lastly the

study revealed that service quality has significant relationship with the purchase intension and

attitudinal loyalty.

Relationship between Perceived Price Fairness and Customer Loyalty

Ailawadi, Luan, Neslin, and Taylor (2011) conducted the study to check the relationship of CSR

with perceived price fairness and customer loyalty in the context of United State of America. The

purpose of the study was to check the direct and indirect of CSR on the loyalty. The study also

proposed to check the mediating effect of perceived price fairness in linkage between CSR and

loyalty. CSR was the independent variable of the study while loyalty was selected as the

dependent variable of the study. The mediating variable of the study was perceived price

fairness. The data of the study was collected by conducting self administered questionnaire. The

study revealed that two dimensions of CSR have significant effect on the loyalty. The study also

revealed that CSR doesn’t have direct impact on the loyalty as perceived price fairness mediate

the relationship between CSR and loyalty.

Dai (2010) conducted the study to determine the mediating effect of customer loyalty in the

relationship among perceived price fairness, customer satisfaction, and behavioral intensions.

The objective of the study was to verify the relationship of price fairness with customer

satisfaction and behavioral intension. The study also proposed to verify the mediating effect of

customer loyalty. Perceived price fairness was the independent variable of the study. Loyalty

was the mediating variable of the study while customer satisfaction and behavioral intensions

were used as the dependent variable of the study. The data of the study was collected from the

students of Auburn University and Sam Houston State University. The sample of the study was

selected by using convenience sampling technique. SEM was used to analyze the findings of the



32

study. The study revealed that customer loyalty plays a mediating role in the relationship of

perceived price fairness and satisfaction. The study also revealed that perceived price fairness

has strong and positive relationship with the satisfaction. Moreover the study found that

perceived price fairness also influence the repurchase intensions of buyers.

Mendez, Parraga, Kara, and Urrutia (2009) conducted the study to verify the factors affecting

student’s loyalty in the context of Latin American higher education. The purpose of the study

was to find the factors which strongly affect the student’s loyalty among perceived service

quality, perceived price, satisfaction, trust, and commitment. Factors of loyalty (perceived

service quality, perceived price, satisfaction, trust, and commitment) were the independent

variables of the study while loyalty was selected as the dependent variable of the study. The data

o the study was collected from the freshman, sophomore, junior, and senior students attending

classes at multiple sections of a public Chilean university in two years, 2002 and 2004. A

combined 752 questionnaires were sent to the students out of which all were used for analysis

showing response rate of 100%. After the analysis the study revealed that among all the factors

of loyalty, commitment has significant and direct relationship with the student’s loyalty. The

study also revealed that all other factors have strong but indirect relationship with the loyalty.



33

2.1 Theoretical Model

The conceptual framework of the present study is based on the model of research conducted

by Ti Bei and Chiao (2001) in the context of Taiwan’s automobile maintenance industry. The

study of Ti Bei and Chiao (2001) found that perceived service quality has indirect effect on

the loyalty of customer through customer satisfaction while perceived product quality and

perceived price fairness has direct and indirect (through satisfaction) linkage with the

customer loyalty.

Perceived

Product Quality

Perceived

Service Quality

Perceived Price

Fairness

Customer

Satisfaction

Customer

Loyalty



34

CHAPTER No. 3

DATA & METHODOLOGY

3.1 Introduction

The purpose of this chapter is to discuss and explain the research methodology to be used in the

collection of data and after collection, analyzing the data to check and test the research model of

proposed study that is the factors affecting customer loyalty in the fast food industry of Pakistan.

Data collection technique and method, population, sampling techniques, validity and reliability

of data, and data analysis technique is to be discussed in this chapter.

3.2 Research Paradigm

Three types of research paradigms are exist in research. First one is the positivism in which

quantitative research approach is used. In positivism hypothesis are made based on existing

theory which was then verified through empirical evidences. In positivism the data is collected

through questionnaires. The collected data is analyzed through statistical packages for social

sciences.

The second paradigm is interpretivism which is a qualitative research approach. In interpretivism

a new theory is generated. The data is collected through observations and interviews are used to

collect the data. The collected data is analyzed through images and words in interpretivism

approach.

The third approach is pragmatism approach in which both (quantitative and qualitative)

approaches are used to collect and analyzed the data.



35

So the present study uses the positivism research approach because present study employs the

quantitative research method to verify the existing theory of Ti Bei and Chiao (2001). Another

reason for selecting positivism is that the present collects the data through questionnaires and

analyze it through statistical package for social sciences 16.0.

3.3 Sample and Sampling Technique

3.3.1 Population

The population of the study was the customers of fast food restaurants like Macdonald, KFC, and

Fri Chicks situated in Lahore.

3.3.2 Sample size

In order to collect the data a sample size of 150 customers of fast food restaurants in Lahore were

selected.

3.3.3 Sampling Technique

The present employs the convenient sampling technique in which the researcher collect data from the

sources which is most conveniently available to the researcher.

3.4 Tool of data Collection

The data of the study is collected by using questionnaires developed with the help of existing

literature. A questionnaire survey is conducted in the 3 fast food restaurants i.e. Macdonalds,

KFC, and Fri Chicks to collect the data.

The close ended questionnaires for the collection of the data are developed by using 5 point likert

scale from “strongly agree” to “strongly disagree” on all the variables of the study with the help

of existing literature on these variables.



36

Questionnaires Interviews

Questionnaires are very cost effective Interviews are costly

Questionnaires are less intrusive Respondents hesitate to give generalised

answer

Questionnaires reduce bias Interviews increases biasness

Questionnaires are easy to analyze Interviews take time to analyze

3.5 Measures

In order to measure the variables of the present study filled questionnaires were used. The data

was collected from the participants through survey using five point likert scales only and ask few

questions from participants. The each variable was measured by asking some question by using 5

point likert scale.

Perceived product qual ity

The variable perceived product quality was measured by using 5 point likert scale ranging from 1

for strongly disagree to 5 for strongly agree.

Perceived service quali ty

The variable perceived service quality was measured by using 5 point likert scale ranging from 1


Perceived price fair ness

The variable perceived price fairness was measured by using 5 point likert scale ranging from 1


Customer satisfaction



37

The variable customer satisfaction was measured by using 5 point likert scale ranging from 1 for

strongly disagree to 5 for strongly agree.

Customer loyalty

The variable customer loyalty was measured by using 5 point likert scale ranging from 1 for

strongly disagree to 5 for strongly agree.

3.6 Reliability and Validity

3.6.1 Reliabi l ity

The reliability of the questionnaires was censured by applying Cronbach Alpha, reliability test

through SPSS software. The value of Cronbach Alpha confirms the reliability of the data.

As the values of all the variables are above .70, so the data is said to be reliable which measure

the concept of the construct accurately

3.6.2 Validity

The validity of the data was censured by using face validity. Face validity is the validity where

measure apparently reflects the content of the concept in the question. In face validity the

authenticity of the questions were ensured by asking some experts in the field of research about

questions.

SR# Variable Items Cronbachalpha

1 Perceived quality 5 .711

2 Perceived service quality 5 .787

3 Perceived price fairness 4 .749

4 Customer satisfaction 5 .738

5 Customer Loyalty 4 .801



38

3.7 Data Analysis

The collected data of the study is analyzed by using SPSS 16.0 software. The data is analyzed by

using descriptive statistics, correlation, and regression analysis.

3.7.1 Descriptive Statistics

The purpose of applying descriptive statistics is to find the frequency of the data. Descriptive

statistics is also helpful to find the minimum and maximum range of the data.

3.7.2 H istograms

Histograms are applied to check the graphical representation of all the variables with the curve to

check the normality of the response rate. The bell curved shapes of the data in histogram verify

that the data is normally distributed.

3.7.3 Scatter Plots

Scatter plots were applied to the data to check the relationship between variables. It also

confirms that whether the relationship between two variables is linear or non linear. Scatter plots

are also applied to check the assumption of Pearson correlation.

3.7.4 Corr elation

Correlation is used to check the mutual relationship among variables. For checking the

relationship we will make two hypotheses: null (H0) and alternative (H1). We interpret the

findings on the acceptance or rejection of the hypothesis. We used correlation matrix to check

the mutual relationship of different variables

3.7.5 Regression Analysis

Regression analysis is a statistic technique used to investigate the relationships between a

dependent variable and one or more independent variables. Regression analysis is used to check

the strength of relationship among variables. In regression analysis t-test is used to find the level



39

of significance and r-square test is used. R-square test tells that how much dependent variable is

affected by the independent variable. At the last the present study employed the f-test to check

the overall relationship of the independent variable with dependent variable. The regression

equation will take the foolowing form:

Customer loyalty = a + b PPQ + c PSQ + d PPF + e

In the above equation customer loyalty is the dependent variable, PPQ, PSQ, and PPF are the

independent variables, and e is the random error term. The b, c and d are the regression

coefficients.



40

CHAPTER No. 4

ANALYSIS & RESULTS

4.1 Descriptive statistics

Table 1

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Perceived Product quality 150 1.40 3.80 2.3627 .59816

Perceived service quality 150 1.00 4.20 2.3320 .65491

Perceived price fairness 150 1.00 3.75 2.5067 .70708

Customer satisfaction 150 1.00 4.40 2.3480 .70489

Customer loyalty 150 1.00 4.25 2.2950 .74132

Valid N (list wise) 150

Table 1 presents the descriptive statistics that show the overall picture of all the five variables.

There were scales of 5 responses that lead to the options (strongly disagree, disagree, neutral,

agree, and strongly agree). Number of observations of each variable is 150. In the above table the

mean values and the values of standard deviation of all the 4 variables have been shown. Mean

value provides the idea about the central tendency of the values of a variable. For example if we

observe the above output to assess the average response rate or the respondent then we come to

know the mean of different variables like perceived quality (mean:2.36), perceived service

quality (mean:2.33), perceived price fairness (mean:2.50), customer satisfaction(mean: 2.34) and

customer loyalty (mean: 2.29). If we observe then for the first five variables (perceived quality,

perceived service quality, perceived price fairness, customer satisfaction and customer loyalty)



41

the average response rate of responded is lie within the option 2-3 (2 is for disagree and 3 is for

neutral). The minimum option that is ticked by responded is 1 and the maximum option that is

ticked by responded is 4.40.

Standard deviation gives the idea about the dispersion of the values of a variable from its mean

value. So, if we observe then in the response rate for the variable of perceived quality is value of

standard deviation is (S.D.598) which is the lowest value as compare to other variable values.

Which shows that most of the respondent answers were same for the variable of perceived

quality and have consistency in their response rate but if we observe then for customer loyalty

the value of standard deviation is (S.D .74) which is quite high as compare to other variables

which clearly shows that the response regarding perceived price fairness of mostly respondents

were not the same and they don’t have consistency in their answers.



42

4.2 Histograms

This shows the graphical representation of all the variables with the curve to check the normality

of the response rate. Let’s discuss the result of each variable’s histogram one by one

4.2.1 Perceived Product Qual ity

Strongly Disagree = 1

Disagree = 2

Neutral = 3

Agree = 4

Strongly Agree = 5

The above histograms is of perceived product quality in which the response rate of respondents

lies in the option 2 - 3 (2 for disagree and 3 is for neutral). Similarly small numbers of

respondents were marked very low and very high options. The bars in the histogram from a



43

distribution (pattern or curve) that is similar to the normal, bell shaped curve. Thus, frequency

distribution of the perceived product quality is normal.

4.2.2 Perceived Service Quali ty


Disagree = 2

Neutral = 3

Agree = 4

Strongly Agree = 5

The second histogram is of perceived service quality which shows the response rate of

respondents which are lies in the option 2 - 3 (2 for disagree and 3 is for neutral). Similarly small

numbers of respondents were marked very low and very high options. The bars in the histogram



44

from a distribution (pattern or curve) that is similar to the normal, bell shaped curve. Thus,

frequency distribution of the perceive service quality is normal.

4.2.3 Perceived Price Fair ness


Disagree = 2

Neutral = 3

Agree = 4

Strongly Agree = 5

The above histogram is of perceived price fairness in which the response rate of respondents lies

in the option 2 - 3 (2 for disagree and 3 is for neutral). Similarly small numbers of respondents

were marked very low and very high options. The bars in the histogram from a distribution



45

(pattern or curve) that is similar to the normal, bell shaped curve. Thus, frequency distribution of

the perceive price fairness is normal.

4.2.4 Customer Satisfaction


Disagree = 2

Neutral = 3

Agree = 4

Strongly Agree = 5

The above histogram is of customer satisfaction in which the response rate of respondents lies in

the option 2 - 3 (2 for disagree and 3 is for neutral). Similarly small numbers of respondents were

marked very low and very high options. The bars in the histogram from a distribution (pattern or



46

curve) that is similar to the normal, bell shaped curve. Thus, frequency distribution of the

customer satisfaction is normal.

4.2.5 Customer Loyalty


Disagree = 2

Neutral = 3

Agree = 4

Strongly Agree = 5

The above histogram is of customer loyalty in which the response rate of respondents lies in the

option 2 - 3 (2 for disagree and 3 is for neutral). Similarly small numbers of respondents were

marked very low and very high options. The bars in the histogram from a distribution (pattern or



47

curve) that is similar to the normal, bell shaped curve. Thus, frequency distribution of the

customer loyalty is normal.

4.3 Scatter Plots

4.3.1 Perceive Product Quali ty and Customer satisfaction

To check the assumption of Pearson correlation for this purpose scatter plot applied the result

shows both variable have linear relationship because the difference between R 2 quadratic and R

2

linear of perceived product quality and customer satisfaction value is less than 0.05 which shows

that the relationship between perceived product quality and customer satisfaction is linear.



48

4.3.2 perceived service qual i ty and customer satisfaction



2

linear of perceived service quality and customer satisfaction value is less than 0.05 which shows

that the relationship between perceived service quality and customer satisfaction is linear.



49

4.3.3 Perceive Price fairness and customer satisfaction



2

linear of perceived price fairness and customer satisfaction value is less than 0.05 which shows

that the relationship between perceived price fairness and customer satisfaction is linear.



50

4.3.4 Perceived service qual i ty and perceived price fair ness



2

linear of perceived service quality and perceived price fairness value is less than 0.05 which

shows that the relationship between perceived service quality and perceived price fairness is

linear.



51

4.3.5 Perceived product qual ity and perceived service qual ity


shows both variable have linear relationship because the difference between R 2

quadratic and R 2

linear of perceived product quality and perceived service quality value is less than 0.05 which

shows that the relationship between perceived product quality and perceived service quality is

linear



52

4.3.6 Perceived product qual ity and perceived pri ce fair ness



2

linear of perceived product quality and perceived price fairness value is greater than 0.05 which

shows that the relationship between perceived product quality and perceived price fairness is not

linear



53

4.3.7 Customer satisfaction and customer loyalty


shows both variable have linear relationship because the difference between R

2

quadratic and R

2

linear of customer satisfaction and customer loyalty value is less than 0.05 which shows that the

relationship between customer satisfaction and customer loyalty is linear



54

4.4 Correlation

Correlation is used to check the mutual relationship among variables. For checking the

relationship we will make two hypotheses: null (H0) and alternative (H1). We interpret the

findings on the acceptance or rejection of the hypothesis. We used correlation matrix to check

the mutual relationship of different variables. The hypothesis which we developed are given

below

Hypothesis 1

H1: There is relationship between customer satisfaction and perceived quality

H0: There is no relationship between customer satisfaction and perceived quality

Hypothesis 2

H1: There is relationship customer satisfaction and perceived service quality

H0: There is no relationship between customer satisfaction and perceived service quality

Hypothesis 3

H1: There is relationship between customer satisfaction and perceived price fairness

H0: There is no relationship between customer satisfaction and perceived price fairness

Hypothesis 4

H1: There is relationship between perceived quality and perceived service quality

H0: There is no relationship between perceived quality and perceived service quality

Hypothesis 5

H1: There is relationship between perceived service quality and perceived price fairness.

H0: There is no relationship between perceived service quality and perceived price fairness.



55

Hypothesis 6

H1: There is relationship between perceived quality and perceived price fairness

H0: There is no relationship between perceived quality and perceived price fairness

Hypothesis 7

H1: There is relationship between customer satisfaction and customer loyalty

H0: There is no relationship between customer satisfaction and customer loyalty



56

4.4.1 Pearson corr elation

Correlations

Perceivedquality

Perceivedservice quality

Perceived pricefairness

Customersatisfaction

Customerloyalty

Perceived quality Pearson Correlation .225** .710

** .787

*

Sig. (2-tailed) .006 .000 .000

N 150 150 150

Perceived service quality Pearson Correlation .463** .921

** .530

*

Sig. (2-tailed) .000 .000 .000

N 150 150 150

Perceived price fairness Pearson Correlation .225** .463

** 1 .405

** .179

Sig. (2-tailed) .006 .000 .000 .029

N 150 150 150 150 150

Customer satisfaction Pearson Correlation .710** .921

** .405

** 1 .479

*

Sig. (2-tailed) .000 .000 .000 .000

N 150 150 150 150 150

Customer loyalty Pearson Correlation .787** .530

** .179

* .479

** 1

Sig. (2-tailed) .000 .000 .029 .000

N 150 150 150 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).



57

Table 1 represents the table of correlations. Where all variables – perceived quality, perceived

service quality and perceived price fairness – are positively correlated to perceived customer

satisfaction (r= .710, p = .000 , r=.921 , p= .000 and r=.405, p=.000 respectively).. The

magnitudes of the above discussed two correlations are greater than 0.70 in the absolute terms,

which shows the strong correlations between the said pairs of the variables but the correlation of

perceived price fairness is lesser than 0.70 in absolute terms, which shows the moderate

correlation between perceived price fairness and customer satisfaction. If we see the mutual

relationship of perceived quality and perceived price fairness (r= .225, p = .006) then there is

positive relationship exist between both variables and the value of r= .225 which shows that both

variables are weak related to each other and the variables – perceived price fairness and

perceived service quality, perceived price fairness and customer satisfaction – are positive

correlated (r=.463 , p = .000, and r= .405, p= .000, respectively) but both correlation were lesser

than 0.70 which shows that both have moderate impact. Customer loyalty has a significant

relationship between perceived price fairness, perceived service quality, perceived price fairness

and customer satisfaction. All the above correlations are statistically significant at less than five

percent level of significant. In the case of these correlations the null hypothesis that were stated

above of no correlation are rejected as the P-values are lesser than 0.05.



58

4.4.2 Spearman correlation

Correlations

Perceived quality

Perceived price

fairness

Spearman's rho Perceived quality Correlation Coefficient 1.000 .217**

Sig. (2-tailed) . .008

N 150 150

Perceived price fairness Correlation Coefficient .217** 1.000

Sig. (2-tailed) .008 .

N 150 150

**. Correlation is significant at the 0.01 level (2-tailed).

Spearman correlation was applied if we see the mutual relationship of perceived product quality

and perceived price fairness (r = .217, p = .008) then there is positive relationship exist between

both variables and the value of r = .217 which shows that both variables are strongly related to

each other



59

4.5 Regression

4.5.1 Perceived Pri ce fairness and customer L oyalty

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .179a .032 .025 .73185

a. Predictors: (Constant), perceivedpricefairness

The value of the coefficient of determination (R2) is .032. This shows that the correlation

between the observed values perceived price fairness the value of the customer loyalty is 3.2%

percent. The value of the adjusted coefficients of determination (adj. R2) is affected. The value

of the adjusted coefficient of determination (adj. R2) is .025 which shows that 2.5% variations in

customer loyalty.

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) 1.825 .221 8.268 .000

perceivedpricefairness .187 .085 .179 2.209 .029

a. Dependent Variable: customerloylaty

The coefficient table presents the results of the regression analysis. The objective of the

regression in this study is to find such an equation that could be used to find the impact of

perceived price fairness on customer loyalty. The specified regression equation takes the

following form:



60

Customer loyalty = C + b perceived price fairness

Customer loyalty = 1.825 +.187 perceived price fairness

The results show that the independent variables significantly affect the customer loyalty. Null

hypothesis in perceived price fairness test is set as the simple regression coefficients are less than

0.05. This test shows that the coefficients of the predictor are statistically significant at less than

five percent level of significance.

4.5.2 Perceived service qual ity and customer Loyalty

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .530a .281 .276 .63063

a. Predictors: (Constant), perceivedservicequality

The value of the coefficient of determination (R2) is .28. This shows that the correlation between

the observed values perceived service quality the value of the customer loyalty is 28% percent.

The value of the adjusted coefficients of determination (adj. R2) is affected. The value of the

adjusted coefficient of determination (adj. R2) is .27 which shows that 27% variations in

customer loyalty.

Coefficientsa

Model


Standardized

Coefficients


1 (Constant) .895 .191 4.686 .000

perceivedservicequality .600 .079 .530 7.609 .000




61



perceived service quality on customer loyalty. The specified regression equation takes the

following form:

Customer Loyalty = C + b perceived service quality

Customer Loyalty = .895 + .600 perceived service quality


hypothesis in perceived service quality test is set as the simple regression coefficients are less

than 0.05. This test shows that the coefficients of the predictor are statistically significant at less

than five percent level of significance.

4.5.3 Perceived product quali ty and customer satisfaction

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .787a .619 .617 .45884

a. Predictors: (Constant), perceivedquality


the observed values perceived quality, the value of the customer loyalty is 61% percent. The

value of the adjusted coefficients of determination (adj. R2) is affected. The value of the adjusted

coefficient of determination (adj. R2) is .61 which shows that 61% variations in customer

loyalty.



62

Coefficientsa

Model


Standardized

Coefficients


1 (Constant) -.010 .153 -.063 .950

perceivedquality .975 .063 .787 15.522 .000




perceived quality on customer loyalty. The specified regression equation takes the following

form:

Customer loyalty = C + b perceived product quality

Customer loyalty = - .010+.975 perceived product quality

The results show that the independent variables significantly but affect the customer loyalty. Null

hypothesis in perceived quality test is set as the simple regression coefficients are less than 0.05.

This test shows that the coefficients of the predictor are statistically significant at less than five

percent level of significance.

4.5.4 Customer satisfaction and customer loyalty

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .479a .230 .224 .65291

a. Predictors: (Constant), customer satisfaction



63


the observed values customer satisfaction the value of the customer loyalty is 23% percent. The

value of the adjusted coefficients of determination (adj. R2) is affected. The value of the adjusted

coefficient of determination (adj. R2) is .22 which shows that 22% variations in customer

loyalty.

Coefficientsa

Model


Standardized

Coefficients


1 (Constant) 1.112 .186 5.979 .000

customer satisfaction .504 .076 .479 6.640 .000

a. Dependent Variable: customer loyalty



perceived quality on customer satisfaction. The specified regression equation takes the

following form:

Customer loyalty = C + b Customer satisfaction

Customer loyalty = 1.112+ .504 Customer satisfaction


hypothesis in customer satisfaction test is set as the simple regression coefficients are less than

0.05. This test shows that the coefficients of the predictor are statistically significant at less than

five percent level of significance.



64

CHAPTER No. 5

DISACUSSION & CONCLUSION

5.1 Discussion

The present study is carried out to identify the factors affecting the customer loyalty in the

context of the fast food industry of Pakistan. For this purpose the present study uses quantitative

research method to check the proposed model in the context of Pakistan and the present study

uses the customers of fast food industry as the population of the study. The customers of

Macdonald’s, KFC, and Fri Chicks, Lahore are taken as the sample of the study. The sample size

of the study is 150 customers of Macdonald’s, KFC, and Fri Chicks, Lahore, Pakistan. The study

selects the perceived product quality, perceived service quality, perceived price fairness, and

customer satisfaction as the factors affecting customer loyalty by concerning the past literature

on these variables.

The literature review of the present study has reported the theoretical evidence from past studies

which confirmed the perceived product quality, perceived service quality, perceived price

fairness, and customer satisfaction as the factors of customer loyalty. The study also finds the

mediating effect of customer satisfaction in the linkage among perceived product quality,

perceived service quality, perceived price fairness, and customer loyalty.

The present study selects the customer loyalty as the dependent variable of the study which

depends on the perceived product quality, perceived service quality, perceived price fairness.

The present study takes customer satisfaction as the mediating variable of the study. Many

studies have been done to check this relationship but in Pakistan, specifically, in fast food

industry this association still has a gap which is filled by the present study. So the present study



65

is an attempt to enhance the literature on customer loyalty and its different factors in the context

of fast food industry of Pakistan.

In the present study the descriptive statistics uses to find the maximum and minimum range of

data and also to find the mean and standard deviation of data through frequency tables as well as

histogram to check normal distribution curve. To check the acceptance or rejection of hypothesis

and check the relationship between variables the present study used inferential analysis. In

inferential analysis the present study tested the relationship among perceived product quality,

perceived service quality, perceived price fairness, customer satisfaction, and customer loyalty.

After observing the descriptive statistics, histograms, scatter plot matrix, and the correlations, the

regression has been used for further analysis.

The empirical evidences shows that perceived product quality, perceived service quality,

perceived price fairness has significant correlation with the customer satisfaction (sig. = .000, p =

.710; sig. = .000, p = .921; and sig. = .000, p = .405 respectively) and Perceived product quality,

perceived service quality, perceived price fairness has significant and positive correlation with

the customer loyalty (sig. = .000, p = .787; sig. = .000, p = .530; and sig. = .000, p = .179

respectively). The study also finds that customer satisfaction has strong correlation with the

customer loyalty (sig. = .000, p = .479). The results of regression analysis shows that perceived

product quality, perceived service quality, perceived price fairness has significant and positive

relationship with the customer loyalty (sig. = .000, b = .787; sig. = .000, b = .530; and sig. =

.029, b = .179 respectively). The results also show that customer satisfaction has positive

relationship with the customer loyalty (sig. = .000, b = .504).

Thus this study is an attempt to find the different factors of customer loyalty mediated by

customer satisfaction in the fast food industry of Pakistan. Since Pakistan is a developing country



66

and the topic of research has little evidence from developing countries so this study helps to

enhances the evidences from the developing countries context.

The present study helps decision makers related to fast food industry in Pakistan to influence the

loyalty of the customer so that they choose their products again and again. The other benefit of

the present study is that it also determines the impact of customer satisfaction on the loyalty of

the customers.

Despite of the many benefits of the study, there are several limitations of the study. First, the

study is only limited to the fast food industry of Pakistan because it collects data only from the

customers of fast food industry, thus the results may not be valid to the other organizations.

Secondly, this study is limited because it only checks the impact of only three variables on

customer loyalty as there could be some other factors which can be taken such as the Trust, Hotel

Environment, and Customer Experience etc. This study is also limited to the customer loyalty

which can be further enhanced to check the profitability of the industry. Lastly, the results of the

study could not be valid to service sector as the present study was carried out in the context of

manufacturing sector of the Pakistan.

5.2 Conclusion

The study concludes that perceived product quality, perceived service quality, perceived price fairness,

and customer satisfaction has strong effect on customer loyalty. Therefore the managers of fast

food industry should emphasis on product quality, service quality, and price to make the customer

satisfied due to which they will b able to gain the attention of the customer again and again. It

means if customers are satisfied then they will visit the restaurant again and again. Thus it is

clear form the study that managers of the fast food industry has to focus on their product quality



67

and they have to maximize their concern on the improvement on the service quality if they want

satisfied and loyal customers. The managers should also consider the price as the important

factor which can influence the satisfaction and loyalty of customers. Most importantly the

managers have to pay most of their intension on the quality of their products which strongly

affect the loyalty of the customers according to the evidence of the present study. So quality of

the products should be the first and foremost concern of the managers of fast food industry if

they want to attain and retain their customers.



68

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72

APPENDIX

QUESTIONNAIRE

“An integrated model for the effect of perceived product, perceived service quality, and

perceived pr ice fair ness on consumer satisfaction and customer loyalty: Evidence from

Fast Food industry of Pakistan”

Dear Sir / Madam;

I am the student of superior university and I am going to conduct a survey for the purpose of

evaluation the data from your side on the topic of ““An integrated model for the effect of

perceived product, perceived service quality, and perceived price fairness on consumer

satisfaction and customer loyalty: Evidence from Fast Food industry of Pakistan””. So for this

purpose I need your help. Please give me actual response. I promise you that the information will

be only use for the purpose of research and also we will be kept confidential and it will be only

use for the purpose of study.

Name: __________________________

Age: ___________________________

Gender: Male Female

Which fast food restaurant you visit?

Macdonald KFC Fri Chicks



73

Question SA

5

A

4

N

3

DA

2

SDA

1

Perceived quality

1 I always prefer good quality food

2 I always eat food which is good for my health

3 I prefer to go which provide healthy food for me

4 Fast food industry of Pakistan provide quality of food for

me

5 Fast food industry of Pakistan provide Halal food for me

Perceived service quality

8 I always go to those restaurants which order taking time

minimum

9 I always go to those restaurants which provide clean

environment

10 I always go to those restaurants where I feel comfortable

atmosphere

11 My preference to go those restaurants where employees are

comparative

12 I use to go those restaurants where employee’s behavior is

good

Perceived price fairness

13 I think reasonable price of food in restaurants

14 I think amount against the products are fair

15 I think restaurants provide good meal in promotional prices

16 In my opinion price doesn’t matter against good quality of

food

Customer satisfaction

17 If quality of food is healthy than I am satisfied



18 if the order taking time is minimum then I am satisfied

19 I am satisfied if the behavior of employee is good

20 I am satisfied when price of food is reasonable

21 I am satisfied if the restaurants provide halal food

Customer Loyalty

22 Quality of services creates the loyalty through providing

the best customer services

23 Restaurants creates loyalty through providing good taste

24 Restaurants creates loyalty by providing the fast services

25 Restaurants creates loyalty through providing halal food

in their service

Thank You!

Final Research Work.docx

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Transcript of Final Research Work.docx