Perceived quality, customer satisfaction, and customer loyalty: The case of Lexus in Taiwan

The purpose of this study is to examine overall customer satisfaction associated with Toyota's Lexus automobiles in Taiwan by applying Fornell et al.'s (1996) customer satisfaction index (CSI) model. By analysing a set of 320 Taiwanese Lexus owners of more than 7 months, the study uses the structural equation model with LISREL software to show that the perceived quality has a direct effect on overall customer satisfaction, and has an indirect effect on customer complaint-levels and customer loyalty. That is, customer expectations have a direct impact on customer perceived quality; therefore, such expectations have an indirect effect on overall levels of customer satisfaction. Not surprisingly, overall customer satisfaction negatively influences customer complaints and positively influences customer loyalty. Importantly, the study also finds that customer complaints do not have negative impact on customer loyalty. Additionally, the study demonstrates that the CSI model should be modified in the case of Lexus' Taiwanese customers: because the notion of 'perceived value ' is not present in the existing model, further exploration is required. Finally, the study finds that firms should do their utmost to improve perceived quality, as doing so seems to represent the most effective way of increasing levels of customer satisfaction.