SOCIAL BEHAVIOR AND PERSONALITY, 2011, 39(9), 1183-1192 Society for Personality Research http://dx.doi.org/10.2224/sbp.2011.39.9.

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DECISION-MAKING FRAMEWORK OF CUSTOMER PERCEPTION OF VALUE IN TAIWANESE SPA HOTELS

IUAN-YUAN LU National Sun Yat-Sen University, Kaohsiung, Taiwan, ROC JERRY YUWEN SHIU Tajen University, Pingtung, Taiwan, ROC
In this study we examined the framework linking antecedents of perceived value and willingness to buy in the Taiwanese spa hotel industry. We developed 6 hypotheses to identify the factors that are evaluated by customers. Hierarchical multiple regression analysis of data collected from hotels in 4 major spa regions in Taiwan revealed that the source of multicollinearity among the antecedents resulted in perceived value, which was positively associated with willingness to buy, being assigned varying levels of importance. The results also confirmed the 2 distinct and different effects of perceived price to perceived value and perceived quality in the service domain. Our findings could be used for comparative studies of value perception in other service industries and cultural settings. Keywords: consumer behavior, perceived value, spa hotel, decision-making framework.

In a survey by the Directorate General of Budget, Accounting, and Statistics of Taiwan it was reported that the most desirable Taiwanese lifestyle involves maintaining good health (59%), enjoying family time (26.7%), and being wealthy (26%) (cited in Chang, Hsiao, & Wu, 2003, p. 55). Based on the increasing number of people traveling for health purposes, it appeared that hot spring

Iuan-Yuan Lu, Institute of Business Management, National Sun Yat-Sen University, Kaohsiung, Taiwan, ROC; Jerry Yuwen Shiu, Department of Marketing and Distribution Management, Tajen University, Pingtung, Taiwan, ROC. Appreciation is due to reviewers including: Cheng-Jui Tseng, Asia University, Taiwan, ROC, Email: exeterwasabi@gmail.com; Guo-Ciang Wu, National Pingtung Institute of Commerce, Taiwan, ROC, Email: gcwu@npic.edu.tw Please address correspondence and reprint requests to: Jerry Yuwen Shiu, Department of Marketing and Distribution Management, Tajen University, No. 20, Wei-Shin Road, Shin-Ell Tsun, Yan-Pu Hsiang, Pingtung 907, Taiwan, ROC. Email: yshiu@mail.tajen.edu.tw

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tourism would develop as a result of supply and demand (Lee & King, 2008). According to a survey conducted by the Taiwan Ministry of Economic Affairs in 2003, the percentage of Taiwanese people visiting hot springs soared from 2% in early 1999 to 23% in late 2002, with the latter equating to four million visits annually (cited in Lee & King, 2008, p. 342). This makes hot spring spas one of the fastest growing tourism markets in Taiwan.
Perceived quality

Perceived price

Perceived value for money

Willingness to buy

Perceived risk Figure 1. Conceptual model of perceived value.

Previous researchers have indicated that the creation of outstanding consumer value was necessary for spa hotels to achieve sustainable financial and market success (Bolton & Drew, 1991; Parasuraman, Berry, & Zeithaml, 1991; Parasuraman, Zeithaml, & Berry, 1998; Zeithaml, Berry, & Parasuraman, 1996) and that outstanding consumer value is becoming a priority for managers because of the increasingly intense competition of todays customer-centered market (Bolton & Drew, 1991; Hu, Kandampully, & Juwaheer, 2009; McDougall & Levesque, 2000; Ravald & Gronroos, 1996; Zeithaml, 1988). In the past decade, companies and academics have become aware of the business benefits of creating value for customers. However, as yet little empirical research has been conducted on how customers perceptions of value differ, and what variables may explain such differences (Ruiz, Castro, & Armario, 2007). In a previous explorative study conducted by Lu and Shiu (2009), a conceptual model of perceived value (as illustrated in Figure 1) was developed in order to assess the factors customers evaluated while making purchasing decisions. We used analysis of the correlation to evaluate the relationships between the constructs, and the economical deduction in order to construct the conceptual model. Our findings in the previous study have important implications for understanding how the recent downsizing of Taiwans economy has made attitudes to leisure service consumption more conservative as a result of the slightly significant relationship between perceived value and willingness to buy. Even in the light of our prior findings, how practitioners can provide superior customer value requires further research. Accordingly, in the current study we used hierarchical multiple regression analysis (HMR) to analyze data from hotels in four major spa

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regions in Taiwan. We examined the decision-making framework that links the antecedents of customers perceptions of value and their willingness to buy in the Taiwanese spa hotel industry in order to understand customers value perceptions and willingness to pay for spa services. LITERATURE REVIEW PERCEIVED VALUE Value is perceived and defined by customers (Bettman, Luce, & Payne, 1998; Vandermerwe, 2003) in terms of a tradeoff between salient give and get components (Zeithaml, 1988). Customers attempt to maximize the overall or net valence that results from both the negative and positive attributes of an action (Paul & Lawrence, 1975), including taking potential future benefits and sacrifices into account (Spence, Engel, & Blackwell, 1970). In other words, the antecedents of perceived value were traditionally limited to the basic functions of perceived quality and perceived monetary price during the last two decades of that twentieth century (Sweeney, Soutar, & Johnson, 1999). Empirical models of the antecedents of perceived value have been limited to benefits and sacrifices at the time of purchasing. However, when consumers make a purchasing decision they assess immediate situational factors, such as price and service, as well as the longer-term implications of product ownership. The inclusion of perceived risk in a value model may help to explain how perceived value is evaluated (Sweeney et al., 1999). According to Stone and Grnhaugs (1993) conceptualization, we define perceived risk as the subjective expectation of a loss. While a number of risk dimensions have been suggested, only two are included: namely, financial and performance. Proponents of appraisal theory spell out the antecedents and consequences of distinct affective responses in that it is the cognitive appraisal of an event (for example, perceived price), rather than the event itself (for example, a price increase), that will trigger an emotional reaction (for example, perceived value or net valence), which will lead to changes in behavior (for example, higher or lower purchase intent) (Anderson & Srinivasan, 2003; Chen & Dubinsky, 2003; Lawson & Bhagat, 2002; Pura, 2005). Perceived value was regarded as being antecedent to a persons willingness to buy and also as being an outcome of perceived product quality and perceived sacrifice (Monroe, 1990). The following hypotheses were, therefore, developed: H1: The greater the perceived risk, the lower the perceived value will be. H2: The greater the perceived quality, the greater perceived value will be. H3: The greater the perceived relative price, the lower the perceived value will be. H4: The greater the perceived value of money, the greater the willingness to buy will be.

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FACTORS THAT REDUCE PERCEIVED RISK In addition to their impact upon perceived value, quality offerings may also reduce perceived risk (Sweeney et al., 1999). Many risk reduction models have been suggested, including word of mouth, warranties, brand image, a price-quality association, and salesperson assurance (Hawes & Lumpkin, 1986). The use of service as a risk reduction strategy in purchasing high risk products has been recognized, that is, how the service is delivered (functional service quality) and what is received from the service (technical service quality) may reduce risk (Gronroos, 1984, 1990). If a customer views a service interaction favorably this may reduce risk perceptions, which suggests that: H5: The greater the perceived quality, the lower the perceived performance/ financial risk will be. FACTORS THAT INCREASE PERCEIVED QUALITY Dodds, Monroe, and Grewal (1991) found that price had a negative effect on a products value for money and peoples willingness to buy durable goods, but a positive effect on perceived product quality. In other words, perceived price has a dual effect. Price is a financial sacrifice and contributes negatively to value. However, perceived price also influences perceptions of quality and has a positive influence on value (Monroe, 1990). While this latter relationship has been widely discussed by researchers, the relationship cannot be generalized across all product types (Zeithaml, 1988). For instance, when Rao and Monroe (1989) conducted a meta-analysis they concluded that the phenomenon was only supported for moderately priced, frequently purchased goods, rather than higher priced, infrequently purchased goods. This led us to form the following hypothesis: H6: The greater the perceived price, the greater the perceived quality will be. METHOD DATA COLLECTION AND MEASUREMENT As in our previous study, data collection occurred in two stages. In the first stage, a draft questionnaire was developed and pretested to improve the validity of the scales. The coefficient alphas of all the dimensions in the pretested questionnaire were over .6, indicating that they had acceptable internal consistency and reliability (Nunnally, 1970). In the second stage, a survey was conducted and the empirical data were collected from customers at different spa hotels in northern, eastern, southern, and central regions of Taiwan. Staff at hotels were instructed to ask a random selection of customers to complete a structured questionnaire using 5-point Likert-type scales ranging from 1 (strongly disagree) to 5 (strongly agree). Our aim was to use the questionnaire to assess customers

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overall agreement regarding perceived quality, perceived price, perceived risk, perceived value, and their willingness to pay for the spa service at a hotel, rather than their experience at any particular hotel. In the survey, there were some negatively reversed items to verify that all of the questions were answered properly. Finally, 200 valid samples (95% of those surveyed), were successfully collected in 2006 and included in the subsequent data analysis. RESULTS The results of reliability analysis indicated that the Cronbachs coefficient alpha of the multi-item measures ranged between .75 and .91, which strongly suggested the acceptability of all measurements in terms of internal consistency. Moreover, the results of principal component analysis indicated that all five constructs had an eigenvalue greater than 1. Furthermore, the cumulative percentage of total variance explained in the conceptual model by perceived value was 71.24%. Table 1 shows the mean values, standard deviations, and correlations for all the variables measured. The result of reliability analysis revealed that the item-to-total coefficients of 27 of a total of 30 questionnaire items were greater than .5, and correlation coefficients as illustrated in Table 1 ranged between .01 and .41, with the directions matching the findings of previous researchers. Therefore, the measure was considered to be acceptable with regard to convergent and discriminant validity, allowing the research to proceed to the model testing phase.
TABLE 1 MEANS, STANDARD DEVIATIONS, AND CORRELATIONS Variables Perceived quality Perceived price Perceived risk Perceived value Willingness to buy M 4.03 3.94 2.02 3.79 3.88 SD 0.40 0.47 0.68 0.54 0.53 1 .41** -.37*** .35*** .34*** 2 3 4

-.31*** -.01*** .29

-.06*** -.02***

.15*

Notes: N = 200. p < .10, * p < .05, ** p < .01, *** p < .001. Two-tailed tests.

In this study, HMR was used to determine how much additional variance was explained by the independent variables after controls. We tested the hypotheses with HMR analysis, entering ordinal demographic variables as controls at step 1, independent variables at step 2, and interactions, if any, at step 3, and tracing changes in the multiple squared correlation coefficients (R2) from step to step. The results of HMR analysis for the main effects are illustrated in Table 2. Model 4c in Table 2 shows that the regression coefficient of perceived quality was positive and significant for perceived value ( = .36, p < .001), indicating

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TABLE 2 RESULTS OF THE HMR ANALYSIS FOR MAIN EFFECTS Quality Model 2a .37*** .16* -.21 .21* .02* -.14 .05 -.10 -.08 .26*** -.14 .37*** .01 .32*** -.12 .20* .17** -.16 .21* .03 -.27** -.01 -.03 -.16 .25** -.20* .38*** .03 .32*** -.12 -.27*** .32*** .09 .24** -.13 -.16 .37*** .01 .30*** -.11 Model 2b Model 3a Model 3b Model 4a Model 4b Model 4c Model 4d Risk Value Model 4e -.20* .38*** .03 .31*** -.11 Model 4f -.26** .31*** .09 .25*** -.15

Variables

Willingness

Model 1a

Model 1b

.55*** .14* -.06 -.07 .17*

.23*** .37*** -.37*** .12 .10 5.40*** .24 .22 10.22*** .12 .10 .07 4.20*** .22 .25 .27 .19 .23 .24 8.87*** 13.12*** 11.79*** .12 .02 -.14* .36*** .36 .34 18.36*** .11 -.08 .26 .24 11.20*** .01 -.05 .27 .24 10.15*** .02 -.12

DECISION-MAKING FRAMEWORK OF VALUE PERCEPTION

Control Age .52*** Education .23*** Revenue -.05 Consumption amount .01 Consumption times .14 Main effects Value Price Quality Risk R2 .28 Adj. R2 .26 F 15.53*** R2

.33 .31 15.53*** .05

-.01 .37** .06 .37 .34 13.78*** .12

Notes: N = 200. Standardized coefficients are reported. p < .10; * p < .05, ** p < .01, *** p < .001. Two-tailed tests.

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that consumers perceived quality positively contributed to their value perception (H2). The regression coefficient for perceived price in model 4b was negative and significant ( = -.14, p < .05), indicating that the greater the perceived price was, the lower the perceived value was (H3). Although the Pearson correlation between perceived risk and perceived value was negative and highly significant (r = -.06, p < .001), as shown in Table 1, the regression coefficient for perceived risk in model 4d was not statistically significant, indicating that perceived risk did not contribute to consumers value perception (H1). The multicollinearity among the antecedents of perceived value might have been the source of this lack of significance. The same multicollinearity among the antecedents of perceived value might have resulted in the decreasing priority of perceived quality, perceived price, and perceived risk when comparing model 4e and 4f, where the data indicated that perceived quality was the only factor that contributed to perceived value in model 4f. The data also indicated that perceived price was the only factor that mattered when perceived quality was excluded in model 4e. Model 1b shows that the regression coefficient of perceived value was positive and significant for willingness to buy ( = .23, p < .001), indicating that consumers perceived value positively contributed to their willingness to buy (H4). The regression coefficient of perceived price in model 2b was positive and significant for perceived quality ( = .37, p < .001), indicating that the greater the perceived price, the greater the perceived quality (H6). In model 3b, the regression coefficient of perceived quality was negative and significant for perceived risk ( = -.37, p < .001), indicating that the perceived quality negatively contributed to perceived risk (H5). Models 2b and 3b provided evidence for the source of multicollinearity among the antecedents of perceived value. DISCUSSION In this study we have clarified the relationships in the conceptual model of perceived value and have reached several conclusions. First, the perceived quality and price of the antecedents separately contributed to value perception, which was positively associated with willingness to buy. This indicated that the higher the perceived quality and the lower the perceived price, the greater would be the perceived value and willingness to buy. In other words, customers considered perceived quality and perceived price, the immediate situational factors of benefits and sacrifices as separate and distinct factors when purchasing spa services, that will trigger an emotional reaction (e.g., perceived value or net valence), which will lead to changes in behavior. Second, the results also indicated that perceived value in the service domain was mainly dependent upon quality, followed by price and then risk, since there is multicollinearity among the antecedents of perceived value. Third, the evidence

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that supported hypotheses 3 and 6 verified the dual effect of perceived price on perceived value and perceived quality in the service domain. Our findings allow us to make some pertinent recommendations for managers of spa services. In todays world, under intense competition in the spa hotel industry, management and marketing staff should focus on increasing customer value by improving the customers overall perceptions of product and service quality, which will reduce perceptions of risk and lower sensitivity to price. Therefore, service providers should continuously improve both service quality and perceived value by setting standards that ensure service quality. LIMITATIONS AND FUTURE RESEARCH In this study we developed a conceptual model, taking into account perceived quality, perceived relative price, and perceived performance/financial risk as antecedents of perceived value for money, which in turn affect consumers willingness to buy. However, this preliminary attempt had a number of limitations: First, the scales for measuring perceived value and willingness to buy require further development and refinement to increase the number of items used for individual behavior intentions. Second, we focused on the relationships among service-related factors in the spa hotel industry. Given the great diversity of service industries, these findings need to be tested in other service industries. Similarly, they could be confirmed by further evidence from other countries, given the diversity of values and cultures among different countries and domains. However, these limitations also provide directions for future research. Further research will also be needed to assess the link, or mechanism, between perceived value and willingness to buy, as well as the mediating influences of perceived value, risk, and quality in the conceptual model. In addition, the content of the antecedent of perceived value remains tenuous in spite of the limited empirical evidence currently available. Therefore, researchers should investigate constructs such as satisfaction, loyalty (Hu et al., 2009) and relational benefits (Bitner, Gwinner, & Gremler, 1998). In addition, as Ruiz et al. (2007) suggested, researchers should attempt to explain market heterogeneity in customers perceptions of value. REFERENCES
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