Keywords

1 Background of the Study

Customer loyalty is a customer’s preference for and continued purchases from a specific company over an extended period (Ozkan & Tekeli, 2022; Abdur Rehman et al., 2021; Irfan et al., 2018; Hadi et al., 2019). It is integral to customer behavior because recurring business and favorable word-of-mouth recommendations can enhance business revenue and profitability (Al-Maghrabi, 2017). However, companies’ services may have low value for customers, which ultimately affects their loyalty. Therefore, companies need to modify their assumption that service quality (SQ) always leads to customer loyalty. In their study, Irfan et al. (2016) highlighted the important role of customer satisfaction in the relationship between SQ and customer loyalty. They strongly suggested that companies needed to prioritize customer satisfaction over customer loyalty. As a result, the relationship among customer satisfaction, customer loyalty, and SQ has been widely studied in the literature (Shahzad et al., 2021; Ozkan & Tekeli, 2022; Khan et al., 2020). Most of the studies, though, have been conducted in a non-Saudi Arabian context. Some studies have been published in Saudi Arabia (Ahmed et al., 2022), but they represented the banking sector. However, there needs to be more literature examining this relationship from retail customers’ perspectives in Saudi Arabia (Khan et al., 2020). Recent developments in Saudi Arabia’s retail market, including online retail, have heightened the need for more research on SQ, customer satisfaction, and loyalty. According to a recent report by GlobalData, the size of the retail market in Saudi Arabia is expected to grow by 4% during 2021–2026 (GlobalData, 2022). Therefore, the purpose of this study was to identify the attitude of retail customers towards SQ, customer satisfaction, and customer loyalty and to examine the effect of SQ on customer loyalty via customer satisfaction in the retail sector of Saudi Arabia.

Findings of this study contribute to a better understanding of customer loyalty, SQ, and customer satisfaction from customers’ demographic perspectives. Understanding this aspect is crucial because it will enable firms in Saudi Arabia to enhance SQ and customer satisfaction, ultimately leading to improved customer retention. Retail organizations in Saudi Arabia may use these findings to understand better how they can enhance customer loyalty and develop tactics to increase the quality of services provided to their customers. Additionally, this study’s findings permit an in-depth investigation of each dimension of SQ as such, contributing to excellent customer service in Saudi Arabia and a deeper understanding of each aspect.

Theoretical background of the study has discussed in next section, this is followed by literature on variables, methodology, data analysis and results. The study findings are discussed in Sect. 4 with limitations, future research directions and implications.

2 Literature Review

2.1 Theoretical Background

Reciprocity theory guided the hypothesized relationships. This theory states that customers are more likely to favor their service provider if that company provides quality services to them (Zulkifli & Yazid, 2020; Mustapha, 2020).

2.2 Service Quality with Dimensions

The service quality (SERVQUAL) model is an industry-standard measure of SQ characteristics. Devised by Paraskevas and Zeithaml in 2000 as a framework for measuring and evaluating SQ, its principles have since been widely accepted and utilized across numerous research studies. The five dimensions comprising its paradigm are dependability, responsiveness, assurance, empathy and tangibility (see Fig. 1).

Fig. 1.
figure 1

SERVQUAL Model and its Key Dimensions. Note. (Kobiruzzaman, 2020).

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Reliability refers to a service provider’s ability to consistently provide services at the required standard (Wu et al., 2020). Responsiveness encompasses a provider’s reactions to requests for prompt and beneficial service. Assurance is the ability to instill trust in clients. In contrast, empathy encompasses individual consideration and comprehension extended by service providers to clients. Finally, tangibles include tools or supplies required to provide the service and the physical design of service environments.

2.3 Service Quality and Customer Loyalty

Numerous studies have explored the relationship between SQ and customer loyalty, and their findings showed a clear positive correlation. Researchers have agreed that clients who received higher levels of SQ showed lower propensities to switch providers while being more loyal to one provider over time. Study results have revealed that clients who received higher levels of SQ also were more likely to be pleased with what they received, leading them to remain loyal customers of the provider. Paraskevas and Zeithaml (2000) discovered that two SQ characteristics, reliability and responsiveness, had a direct positive influence on customer satisfaction. Al-Maghrabi (2017) found a similar correlation and discovered that customer SQ had an immediate and beneficial effect on customer loyalty. Paraskevas et al. (2017) indicated that SQ enormously affected customer loyalty in hotel businesses. In the present study, reliability was found to have the greatest influence on customer service, followed by responsiveness, tangibles, and empathy. Verma et al. (2019) and Al-Maghrabi (2017) explored the relationship between providing exceptional customer service and high-quality retail services in Saudi Arabia. Their findings demonstrated a positive correlation between quality of service and customer loyalty, with empathy having the most decisive influence on the customer’s experience, followed by dependability, responsiveness, assurance, and tangibles of quality service delivery.

2.4 Service Quality and Customer Satisfaction

Additionally, numerous studies have explored the relationship between providing high-quality service and customer satisfaction. For example, Choudhury and Gunasekaran (2017) investigated the correlation between SQ and customer satisfaction in retail banking markets. According to their findings, SQ had a dramatic influence on customer satisfaction; specifically, responsiveness, assurance, empathy, and tangibles were among the key aspects of SQ that had the greatest influence on customer satisfaction, followed by reliability as an aspect of SQ. Moreover, Javalgi et al. (2017) and Shah and Hadi (2019) investigated the relationship between customer satisfaction and the quality of healthcare service provided in healthcare industries. Their results showed a clear link between SQ and customer satisfaction levels. Empathy strongly influenced customers’ satisfaction levels, followed by reliability, responsiveness, assurance, and tangibles.

Likewise, Al-Maghrabi (2017) found that empathy was the factor that most directly impacted customer satisfaction. Research by Wong-On-Wing and Merrilees (2007), Irfan et al. (2016), Hadi et al. (2019), Zhang et al. (2017), Zhang et al. (2019), and Zhong and Moon (2020) also discovered a positive relationship between quality of service provided and customer satisfaction reported by customers. According to Paraskevas and Bouziotas’s (2018) findings, customer satisfaction with fast-food restaurants was positively influenced by characteristics such as meal quality, menu variety, pricing, and packaging design.

2.5 Customer Satisfaction and Customer Loyalty

Paraskevas et al. (2019) concluded that high customer satisfaction levels were a predictor of client loyalty within the banking industry. Hadi et al. (2019) and Irfan et al. (2016) also discovered that customer satisfaction accurately predicted consumer loyalty in the telecom sector in Pakistan. Undoubtedly, customer satisfaction and devotion to a brand are interlinked, no matter the form the relationship takes. Companies that offer customer service should prioritize providing high-quality assistance while ensuring that clients are satisfied with what was provided to them.

The link among providing high-quality service, keeping customers happy, and building customer loyalty can be complex and multifaceted, yet businesses should not focus solely on customer satisfaction; understanding all essential viewpoints will allow organizations to formulate more successful strategies to build customer service and retain customers and will provide them with a competitive advantage in doing so.

Based on the above discussion, the following hypotheses were developed:

H1: A positive and significant relationship exists between SQ and customer satisfaction.

H2: The relationship between SQ and customer satisfaction is explained by customer satisfaction.

Fig. 2.
figure 2

Theoretical Framework for This Research. Note. (Mahmoud et al., 2018).

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3 Methodology

This research employed a positivist research philosophy and quantitative data-analysis techniques. Based on the reciprocity framework, the conceptual model as shown in Fig. 2 was developed. The convenience sampling technique was used in this study, and data were collected at one point in time. To prevent biases, we chose initial volunteers from their own networks who were educated and aware of the value of customer loyalty, among other variables. This research used SPSS software for data analysis, and confirmatory factor analysis and mediation analysis were done through SmartPLS. The questionnaire was distributed to 200 participants in Saudi Arabia, of which we received 155 responses. Five responses were removed after the quality check process. Therefore, the final sample size was 150.

3.1 Analysis and Results

There was slightly higher male participation in the sample, with 59% of respondents who were male. Higher participation of males is common in Saudi Arabia, but female participation has increased generally. So, this sample can be considered an ideal population representation. More than 50% of the participants were between the ages of 25 and 54, making up the largest age group. However, those between 25 and 34 years old comprised the large segment in this sample, which is also the largest age segment in Saudi Arabia. Further, many respondents had earned a bachelor’s (33.8%) or a master’s degree (26.5%). When interpreting the research findings, it is crucial to consider the demographic parameters’ potential impact on respondents’ SQ, satisfaction, and loyalty ratings.

3.2 Mean Values of Service Quality, Customer Satisfaction, and Customer Loyalty

The average SQ scores were relatively low, at 2.88 on the tangibility scale and 4.04 on the responsiveness scale. There was some dispersion in the importance weights, as indicated by the extensive range of standard deviations. When broken down, the indicator with the highest mean rating was responsiveness (4.04), demonstrating that Saudi Arabian consumers placed a premium on a company that could swiftly address their concerns. The lowest average rating was for tangibility (2.88), suggesting that customers cared less about the outward appearance of stores and other commercial structures. Customers placed a moderate value on reliability, as indicated by the mean reliability rating of 3.79.

Average levels of customer satisfaction were rather high, spanning a range from a low of 3.78 on the satisfaction scale to a high of 4.29. Likewise, mean scores for customer loyalty were rather high, as well, spanning from 3.7 for cognitive loyalty to 4.11 for frequency of usage The standard deviations, though, were small, suggesting that the judgements of importance were more consistent than the SQ indices.

For main variables, no differences in the mean scores for males and females were found for SQ, customer satisfaction, or customer loyalty. Similarly, no differences in the mean scores were found for different age categories (18–30, 31–45, 46–60, and 61 +). With respect to level of education, no differences existed for customer satisfaction, service quality, or customer loyalty.

3.3 Confirmatory Factor Analysis (CFA)

Table 1 below shows the confirmatory factor analysis (CFA) results of the present study.

Table 1. CFA Results
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According to the CFA results, all four indicators of SQ (tangibility, reliability, responsiveness, and assurance) showed strong factor loadings and were dependable measures of the underlying SQ. The alpha and composite reliability (CR) scores were high, which indicated strong internal consistency and reliability. The average variance extracted (AVE) scores were also above 0.5, which indicated strong convergent validity. Furthermore, the square root of AVE for each construct was greater than the correlation between that construct and other constructs in the model, demonstrating discriminant validity.

Based on CFA results, all three indicators (customer attitude, satisfaction, and customer loyalty) were reliable customer satisfaction measures. Alpha and CR scores were high, indicating strong internal consistency and reliability. In contrast, AVE scores exceeded 0.5 to signal strong convergent validity and discriminant validity, as evidenced by the square root of AVE values greater than correlation coefficients between each construct in the model.

The results demonstrated strong consistency and reliability, with AVE scores above 0.5 indicating strong convergent validity. In addition, analysis revealed discriminant validity as evidenced by the fact that the square root of AVE for each construct was higher than its correlation with other constructs in the model.

In sum, the results of CFA demonstrated that measures used in this research to assess SQ, customer satisfaction, and loyalty were both reliable and valid. High alpha/CR scores showed the measures were consistent and reliable while AVE scores above 0.5 suggested the measures may have been convergent. Furthermore, each construct measured an individual concept, thus demonstrating discriminant validity. This finding suggests these measures may be useful for future analyses of customer quality in Saudi Arabia (Table 2).

Table 2. Results of Mediation Analysis
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Direct Effect with Mediator

A path coefficient (also referred to as the standardized coefficient or beta coefficient) of 0.45 represented the strength and direction of the relationship between IV and DV when including the mediator in the analysis. This indicated that for every 1-unit increase in IV, there was a 0.45-unit increase in DV, controlling for the mediator. A standard error estimate of 0.06 provided an idea of its uncertainty. P value refers to the probability of observing the observed t value (or more extreme value) under the null hypothesis that there was no relationship between IV and DV when including the mediator. A p value <.001 indicated strong evidence against this hypothesis, suggesting significant relationships between IV and DV may exist when including the mediator.

Indirect Effect

SQ - CS - CL: This pathway depicted an indirect route by which IV (SQ) influenced DV (CL) through the mediator CS. A path coefficient of 0.25 denoted the strength and direction of the relationship between SQ and CL via the mediator CS; a 1-unit increase in SQ resulted in a 0.25-unit increase in CL through its operation through mediators such as CS; its standard error was estimated at 0.08-unit increases in this path coefficient.

Total Effect

The total effect refers to the overall relationship between IV and DV regardless of mediation. A path coefficient of 0.70 represented this total effect of SQ on CL. Taking into account all paths involved, every 1-unit increase in SQ led to a 0.70-unit increase in CL.

The mediation proportion measured how much of the effect of IV on DV could be explained by indirect mechanisms through mediators such as the CS variable. Here, the proportion mediated was 35.7%, indicating that approximately 35.76% of SQ’s effects were mediated through this intermediary variable. Therefore, both hypotheses (H1 and H2) presented in the chapter were accepted.

4 Discussion of Findings

A multi-group investigation revealed that elderly consumers tended to be more loyal. In contrast, women were more attuned to specific SQ characteristics such as responsiveness and empathy than were other consumer groups. These findings imply that Saudi Arabian retailers must create segment-specific strategies to meet the needs and expectations of various demographic groups. Additionally, customers with higher incomes and educational levels had higher expectations for service providers and tended to place more value on SQ than did other groups, as was identified in many existing studies (Thaichon & Quach, 2015; Zhu et al., 2018). As a result, Saudi Arabian retailers should invest into training and development initiatives to raise the level of customer-service proficiency of their retail workforces.

The findings of this research provided insight into the role that SQ plays in influencing customer satisfaction and loyalty in the Saudi Arabian retail industry. Our results showed that delivering high-quality service was a critical factor in raising customer satisfaction and loyalty, which is consistent with other studies from other nations, including, UAE (Khraim, 2011), Malaysia (Perez-Moron et al., 2022; Irfan et al., 2016), Pakistan (Hadi et al., 2019), the United Kingdom (Nguyen et al., 2018) Saudi Arabia (Al-Mudaifer et al., 2019; Alqahtani & Alqahtani, 2018; Ali & Alhaddad, 2017; Mahfooz, 2014; Sanjuq, 2014), and Jordan (Alsmadi, 2019).

Our findings further imply that, with a significant direct influence and an extra indirect effect, customer satisfaction partially mediates the association between SQ and customer loyalty. These results suggest that Saudi Arabian retailers should prioritize high-quality service to boost consumer satisfaction and loyalty. To further increase customer loyalty, retailers should concentrate on putting these methods into practice. These results confirm earlier research that customer satisfaction bridges customer loyalty and service excellence (Huang et al., 2019; Orel & Kara, 2014).

4.1 Conclusions and Recommendations

According to our findings, the two most crucial aspects of SQ and customer satisfaction in Saudi Arabia were service reliability and responsiveness. Our research, moreover, suggests how Saudi Arabian businesses might better serve their customers. First and foremost, companies should work to increase customer satisfaction by boosting the dependability and responsiveness of their services. Second, it is essential to set up communication channels, training programs, and review mechanisms. Finally, businesses should invest resources into boosting SQ to better assist customers and, in turn, win their loyalty. As a result of our research, we now better understand the variables in the Saudi Arabian market that affect SQ, customer satisfaction, and the quality of the interactions between businesses and their clients. Our results indicated that customer satisfaction and loyalty depended heavily on SQ. Thus, retailers should create segment-specific strategies to meet the needs and expectations of various demographic groups. Overall, Saudi Arabian retailers can strengthen their positions in the market and raise customer satisfaction and loyalty by concentrating on these areas.

4.2 Potential Implications

First, our study indicated that SQ affected customer satisfaction, so we argue that it is crucial for businesses to prioritize SQ improvements that boost customer satisfaction. Second, we concluded that the quality of customer service benefitted customer satisfaction and customer loyalty. This finding suggests that companies should prioritize first-rate customer service to boost their standing with their clientele.

4.3 Future Research Direction

This research was based on customer perspectives. Therefore, future studies could include the perspectives of service providers. Also, future studies should interview service providers to understand their current practices, challenges, and opportunities. Finally, interviews with customers could help to understand their needs and expectations.

4.4 Limitations

Despite this study’s valuable findings, several limitations must be considered. For one, the sample size was small, and the information was only gathered from one Saudi Arabian city. The findings may also be limited in their applicability to other industries due to the research’s focus on Saudi Arabian retail customers. Third, the participants provided all the information in the research, which could lead to bias or inaccurate results. We did not apply other sophisticated statistical techniques, which were beyond the study program’s scope. Finally, this research did not investigate extraneous factors such as cultural or societal norms’ influence on the constructs’ correlations.