Refinement of the Customer Satisfaction Index for Mobile Phone Service in

China

Thomas S.C. Sun
1
, Xia Han
2
1
College of Professional and Continuing Education, The Hong Kong Polytechnic University, Kowloon,
Hong Kong (sptsun@speed-polyu.edu.hk)
2
Ministry of Industry and Information Technology of the Peoples Republic of China, China

ABSTRACT
This study proposed and tested a refined customer satisfaction index (CSI) for the mobile phone service industry in
China. Data were collected from 1,440 randomly selected mobile phone subscribers through telephone interviewers
using customer lists of the two primary mobile phone service companies. Results showed the validity of adding the
perceived equity construct to the CSI model. Corporate image was found to have a direct positive impact on customer
loyalty; and customer satisfaction was influenced by corporate image, perceived value, and perceived equity. This study
contributed to the continued refinement of CSI and derived practical implications for mobile phone service providers.
Keywords: customer satisfaction index, equity, mobile phone, China

1. INTRODUCTION

The numerous studies on customer satisfaction can be
categorized into two groups, those investigating the
determinants of satisfaction and those examining the
consequences of satisfaction. Determinants of
satisfaction include customers expectation of products
or services (Bosque & Martin, 2008; Ofir & Simonson,
2007; Oliver, 1993; Zeithaml, Berry, & Parasuraman,
1993), the performance of products or services
(Hamilton & Thompson, 2007; He & Song, 2009; Musa,
Pallister, & Robson, 2005), brand or company image
(Martenson, 2007; Silva & Alwi, 2008), and customers
perceived equity (Hellier, Geursen, Carr, & Richard,
2003; Hutchinson, Lai, & Wang, 2009). Consequences
of satisfaction include complaint behavior (Lam & Tang,
2003; Tsiros & Mittal, 2000; Zeithaml, Berry, &
Parasuraman, 1996) and customer loyalty (Fuller &
Matzler, 2008; Gallarza & Saura, 2006; Kim, 2008;
Loureiro & Gonzalez, 2008).

Various countries have developed their customer
satisfaction index based on multiple major industries,
starting from Sweden in 1989, followed by Germany in
1992, USA in 1994, New Zealand in 1995, South Korea
in 1998, Norway and the European Union in 1999, and
others. Figures 1-3 show the constructs included in the
Swedish Customer Satisfaction Barometer, American
Customer Satisfaction Index, and European Customer
Satisfaction Index. Although the structure of the models
varies, they all include determinants and consequences
of customer satisfaction.

The purpose of this study was to refine a customer
satisfaction index for the mobile phone service industry
in China. In 2009, the telecommunication services
reached 2,568 billion RMB and mobile phone users
reached 747 million (Ministry of Industry and
Information Technology, 2009). The number of mobile
phone service subscribers is growing at a faster rate than
that of fixed line phone subscribers, and the number of
mobile phone users has surpassed that of fixed line
phone users.

Source: Fornell (1992)

Figure 1. Swedish Customer Satisfaction Barometer



Source: Fornell, Johnson, Anderson, Cha, and Bryant (1996)

Figure 2. American Customer Satisfaction Index

The importance of the telecommunication industry in
China can be evidenced in its rapid growth. Between
1998 and 2005, the industry had an average annual
growth rate of 18%, twice the growth rate of the
countrys GDP. In 2005, the telecommunication industry
Perceived
Quality
Customer
Expecta-
tions
Customer
Satisfac-
tion
Customer
Complaints
Perceived
Value
Perceived
Performance
Customer
Expectation
Customer
Loyalty
Customer
Satisfaction
Customer
Complaints
Customer
Loyalty
978-1-4244-6487-6/10/$26.00 2010 IEEE

contributed to 2.72% of the GDP (Guangxi News
Network, 2009). However, in the past three years, the
growth of the telecommunication industry has slowed
down, having an annual growth rate lower than the GDP
growth and the gap between the two growth rates are
widening. In 2007, the telecommunication industry
growth rate was 11.2% and the GDP growth rate was
11.9%. However, the rates were 7.0% and 9.0% in 2008,
and 4% and 8.5% in 2009, respectively (China News
Network, 2009).


Source: Grigoroudis and Siskos (2004)

Figure 3. European Customer Satisfaction Index

Due to the rapid development of communication
technology, increased standard of living, and the
Central Governments policy that introduced more
competition in the telecommunication service industry,
customers expectations of mobile phone service
providers have increased. The slower growth rate also
signifies more intense competition between service
providers. Thus, an understanding of users expectation,
perception of service quality, and satisfaction will
facilitate service providers strategy formation to
enhance their competitiveness.

The development of a Telecommunication Customer
Satisfaction Index (TCSI) in China was commissioned
by the Ministry of Industry and Information
Technology in 2001 with six constructs (Figure 4),
perceived quality, expected quality, perceived value,
customer satisfaction, customer complaints, and
customer loyalty (Tang & Cao, 2003); and
subsequently revised in 2002 with the addition of the
corporate image construct (Mao, 2009). Regardless of
the evidence from numerous studies that perceived
equity is positively related to customer satisfaction
(Hellier et al., 2003; Hutchinson et al., 2009),
perceived value (Hutchinson et al., 2009; Musa et al.,
2005), and perceived quality (Berry, Parasuraman, &
Zeithaml, 1994; Hutchinson et al., 2009), the construct
is absent from the TCSI. This study adopted the
definition from Hellier et al. (2003) that perceived
equity is customers overall perception of being treated
honestly, fairly, and justly during the purchase and use
of services as well as the complaint and service
recovery processes. The theoretical framework of the
study is presented in Figure 4.

2. METHODOLOGY

A questionnaire was developed to collect data on the
constructs included in the model. The ACSI
measurement was used as the base for questionnaire
development. The measurement items for the
constructs were adopted from previous studies:
perceived equity (Hellier et al., 2003), perceived
quality, expected quality, perceived value, customer
satisfaction (Fornell at al., 1996), corporate image
(Andreassen & Lindestad, 1998), customer complaint
(Anderson & Fornell, 2000; Fornell & Wernerfelt,
1988), and customer loyalty (Grigoroudis & Siskos,
2004; Geroptt, Rams, & Schindler, 2001). Several
adjustments were made based on unique characteristics
of the telecommunication industry in China.

All measurement items, except customer complaint and
price tolerance under the customer loyalty construct,
used a 10-point scale. Customer complaint was
measured with three items using either a yes or no
answer. Price tolerance level was measured as a
percentage in price increase.

Telephone interviews were used as the data collection
method due to the advantages of speed of feedback,
low cost, and wide coverage. A tiered random sampling
method was used to draw a representative sample from
mobile phone users in China. User lists of the two
Customer
Expectations
Perceived Quality of
Service/Software
Perceived
Value
Perceived Quality of
Product/Hardware
Customer
Satisfaction
Customer
Loyalty
Image

major mobile phone service providers in China, China
Mobile and China Unicom, were used as sampling
frames. Of the 31 provinces, prefectures, and
municipalities covered by each of the companies, 12
were randomly selected for each company. From each
of the provinces and prefectures selected, two cities
were randomly drawn. The target sample size from
each city was 30 (thus 60 per province and prefecture)
and from each municipality was 60.







Figure 4. Theoretical framework based on Telecommunication Customer Satisfaction Index

CATI system was used for the telephone interviews,
with 30 stations. Interviewers were professional call
center employees. A training session was provided to
those employees specifically for this project. Mock
interviews were conducted prior to the actual data
collection. The interviews were completed in a
two-week period on weekday evenings and weekend
day time. Mobile phone subscribers registered fixed
line numbers were dialed due to the potential concern of
costs to participants (some subscribers are charged by
usage). A total of 6,842 telephone numbers were used,
with a success rate of 21% (1,440/6,842). Of the
unsuccessful numbers, 7% refused to participate, 45%
did not answer the phone, 19% cannot be reached (e.g.,
wrong number), and others included unqualified
respondents, bad connection, and language barriers.

3. RESULTS

With data in 10-point scale, percentage, and 0-1, data
were standardized first before further analysis. SPSS
and AMOS were used as the analysis software. Before
testing the proposed model fit, constructs were
examined to establish their reliability and validity.

Cronbachs alpha was calculated for each construct to
assess internal consistency. Construct reliability values
of .7 or higher indicate good reliability, and between .6
and .7 are acceptable (Hair, Black, Babin, Anderson, &
Tatham, 2006). Results showed that other than customer
complaints (=0.35), all constructs showed good or
acceptable reliability: perceived equity (=0.80),
perceived quality (=0.62), expected quality (=0.78),
corporate image (=0.76), perceived value (=0.78),
customer satisfaction (=0.81), and loyalty (=0.74).

According to Campbell and Fiske (1959), there are two
main components of construct validity: convergent and
discriminant validity. Convergent validity can be
assessed in several ways. The minimum is for each
indicators estimated pattern coefficient on its posited
underlying factor to be significant (Anderson & Gerbing,
1988). Hair et al. (2006) suggested that standardized
factor loading should be at least .5 and ideally .7 or
higher. Factor analyses using the principal component
method and varimax rotation were applied to each
construct. Of all the constructs included in the study,
standardized factor loadings were all above .7, except
one item under customer complaint having a loading of
0.66. Another indicator of convergent validity is
construct reliability (Hair et al., 2006). The above
reported construct reliabilities indicated good or
acceptable values. Therefore, the convergent validity
was established.

Validity of latent factors can be examined by checking
their correlation matrix. Normally, low correlations
among latent constructs are preferred to provide
evidence of discriminant validity. Johnson, Gustaffasson,
Andreassen, Lervik, and Cha (2001) also suggested
exploring whether each construct shares more variance
with its indicators than it does with other constructs in
the model. This is examined by looking at the
percentage of measurement variable loadings that
exceed the construct correlations. For this study, the
Perceived
Quality
Expected
Quality
Perceived
Value
Corporate
Image
Customer
Loyalty
Customer
Satisfaction
Customer
Complaint
Telecommunication Customer
Satisfaction Index

Source: Mao (2009)
Perceived
Equity

percentage was 26%, which shows acceptable
discriminant validity.

The overall measurement model including all latent
constructs was tested using a confirmatory factor
analysis. The results of the test are presented in Table 1.
All fit indices (RMR=0.124, GFI=0.927, AGFI=0.907,
CFI=0.930, RMSEA=0.056) showed a well-fitting
model, which could be used as a baseline to test the
theoretical relations among constructs.

Table 1. Overall measurement model (n=1,440)

Construct Item Std. Factor
Loading
S.E. C.R.
Perceived
Equity
Being treated honestly 0.707 0.039 25.248
Being treated justly (compared to what should one receives) 0.834 0.040 29.390
Being treated fairly (compared to other customers) 0.735
Perceived
Quality
Overall quality 0.558 0.040 18.315
Reliability 0.546 0.054 17.976
Meeting personal needs 0.638
Expected
Quality
Overall quality 0.584 0.039 19.625
Reliability 0.687 0.045 22.587
Meeting personal needs 0.660
Corporate
Image
Overall perception of image 0.744 0.026 29.700
Contribution to society 0.620 0.035 23.903
Overall liking 0.806
Perceived
Value
Appropriateness of pricing 0.771 0.032 28.594
Quality based on price paid 0.655 0.029 24.151
Price based on quality received 0.802
Customer
Satisfaction
Overall satisfaction 0.828
Gap between needed and actual service 0.725 0.033 29.973
Gap between desired and actual service 0.742 0.033 30.867
Customer
Complaint
Formal complaint 0.325
Negative word-of-mouth 0.821 0.051 6.532
Switching intention 0.274 0.101 6.923
Customer
Loyalty
Repeat purchase intention 0.640 0.066 20.521
Trust in company 0.790 0.046 24.052
Forgiving service failure 0.640
*all p<.001

The proposed structure model was tested next and
results are shown in Figure 5. Corporate image was
found to be the strongest determinant of customer
loyalty, although customer satisfaction also contributes
significantly to loyalty. This supports the allocation of
marketing dollars on corporate image building
activities. However, corporate image also positively
influence customers expectation of quality. Thus, a
strong corporate image would create higher customer
expectation, which raises the bar that the firm has to
reach. Fortunately, higher expectation also leads to
higher quality perception (Oliver, 1993) and
subsequently better equity perception (Hellier et al.,
2003). All these lead to customer satisfaction because
customer satisfaction was influenced by corporate
image, perceived value, and perceived equity. The
findings regarding positive relationship between
perceived value and satisfaction as well as negative
relationship between customer complaint and customer
satisfaction were supported by previous research.

4. CONCLUSION

This study contributed to the continued refinement of
customer satisfaction index by adding the perceived
equity construct. Empirical findings of the study
supported the inclusion of equity in the model and
showed that perceived equity has a direct impact on
customer satisfaction.

This research also revealed several practical
implications for mobile phone service providers.
During sales and service recovery processes, customers
should be treated honestly, justly, and fairly due to their
direct impact on customer satisfaction. The importance
of corporate image demonstrated that mobile phone
service companies should simultaneously work on their
internal service quality management and their external
public relations and image building to increase
customer satisfaction and eventually customer loyalty.

Future research could further improve the reliability
and validity of the measurement model by looking at
the measurement item design. Longitudinal study
designs will allow opportunities to validate the models
stability over time and to assess the causal relationships
among the constructs in more valid ways.







*p<05, **p<.01, ***p<.001

Figure 5. Structural relations

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