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Objectives of service quality

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  • 1. OBJECTIVES OF SERVICE QUALITYThe subject of service quality has aroused considerable recent interest among business peopleand academics. Of course, buyers have always been concerned with quality, but the increasingcompetitive market for many services has led consumers to become more selective in theservices they choose. Conceptualizing the quality for services is more complex than for goods.Because of the absence of tangible manifestations, measuring service quality can be difficult butthere are possible research approaches. Comprehensive models of service quality and therelimitations can be studied. Understanding just what dimensions of quality are of importance tocustomers is not always easy in their evaluation process. It is not sufficient for companies to setquality standards in accordance with misguided assumptions of customers‘ expectations. Afurther problem in defining service quality lies in the importance which customers often attach tothe quality if the service provider is distinct from its service offers – the two cannot be separatedas readily as in the case of goods. Finally, issues relating to the setting of quality standards andimplementation of quality management should be studied.INTRODUCTION TO SERVICE QUALITYQuality improvement and adherence to accepted norms of quality are central to the modernconcept of marketing of services. The quality of service delivery results in customer satisfactionand their retention as it reinforces the perception that the value of the service received is greaterthat the price paid for it. Some important concepts are:Modern quality concepts result in better profitability, which is the main goal of all the business.Quality control has much to do with changing the frame of min d and psychology of the serviceprovider and particularly the front-end and back-end employees actually providing the services.We need to know how this fundamental change in attitude can be brought about.Traditionally, most service providers have felt that they know all there is to know about thecustomers and their requirements. This smug or self-satisfied approach needs to be changed.Development of feedback systems is very essential part of the quality improvement. How thiscan be used to develop better quality standards is an issue of immense importanceGoal setting and adherence to the goals are both essential to ensure continuous improvementin the quality standards.CUSTOMER RETENTION THROUGH QUALITY IMPROVEMENTThe focus of the modern marketers has shifted away from a one-time sale to making repeatedsales to the same customer. Increasing attention is being paid to medium and long termperspectives, rather than just the short-term perspective. This has been a major revolution inthinking in the field of marketing. Customer retention usually pays dividends by way of:Lifetime value of the customer. If the customer remains loyal to the company, naturally, therepeated purchases represent a cumulative value which is quite substantial compared to anysingle transaction.Reduced costs. It costs much more to acquire a new customer than to retain an old customer.Therefore, the focus of marketing has shifted away from the goal of mere customer acquisitionto customer retention in order to substantially reduce marketing costs.Benefit from wider opportunities to market more products and services to customers who arealready loyal to you. The key differentiator between customer retention is customer satisfaction.Satisfaction results when the customer feels that the value of a service received by him issubstantially higher than the price he paid for acquiring the service. Customer satisfaction canbe largely attributed to the quality of the service or product. Thus, delivery of high quality service
  • 2. is crucial to the high service value perception. When the major marketing goal of a company iscustomer retention, the quality of service delivery is, undeniably, the key differentiator.LINK BETWEEN SERVICE QUALITY AND PRODUCTIVITYThe approach towards quality has changed quite drastically during the past few years.Previously people thought in terms of quality control. Quality is defined as the ability of theservice provider to satisfy customer needs. Customer perception, service quality, andprofitability are interdependent values. The idea of control was that the manufacturer decided tofind the reasonable number of defects that a customer would accept without demur. The goal ofthe exercise was to restrict the number of defects in order to be called a high-quality producer.This approach was based on two assumptions:Other producers under similar marketing conditions would adhere to similar norms of non-compliance or transgression of quality. Thus the issue of competition driving up the quality wasnot taken seriously. Live and let live was the motto that most large producers adhere to. Thelack of serious quality improvement translates into savings in production costs as elaborateeffort for improvement was not done.Almost every customer assumed that the service or product received by them will not be perfectin every respect. Customers took it for granted that luck was involved in receiving high-qualitygoods and services. Thus, people would avoid cars assembled on Fridays or Mondays. It wasassumed that during the pre-weekend phase, when the employees where focused on the forthcoming weekend, and the post-weekend phase , when the employees were physically andmentally tired from their weekend exploits, they paid less attention to work. It was thus assumedthat on Fridays and Mondays, nobody would stop the assembly line for just a bolt not fitted atthe appropriate place. People preferred cars which were driven from the factory to the dealer‘spremises rather than carried by trucks to the delivery points. Customers believed that inherentdefects were bound to be uncovered during this pre-delivery phase, and, therefore they wouldbe duly identified and rectified before customer delivery.The total service quality management [TSQM] emphasizes different policies. Statements suchas the following demonstrate the approach:Quality is free. It is the non-quality that costs money. Non-quality means that everything is notdone right from the beginning.About 35% of the company‘s costs are due to faults and their corrections.Quality enhancement usually improves profitability by 5 to 10%. This is a sizable jump in theoverall profitability. To get a similar increase in profitability with quality improvement, thecompany will need to increase the turnover by 20 to 25%, which is quite a sizable task.The costs of the quality improvement are roughly divided into two groups: cost of conformanceand cost of non-conformance.Cost of ConformanceThis includes costs incurred to adhere or stick to the existing established standards or norms.This is the maintenance and improvement of the quality.• Preventive costs: these include staff training cost and costs of the robust design or robustnessbuilt into the service.• Cost of Control: to continuously maintain the high quality, it is necessary to carry out surveysand obtain feedback from the customers to ensure that the delivery is as per the planned levelof service and quality standards.Cost of non-conformanceThe non-conformance to the established standards results in additional cost of customer
  • 3. dissatisfaction, complaints and warranty claims. The costs are for replacement, correction orcompensation of the faulty delivery of services or goods.DEFINING SERVICE QUALITYQuality is an extremely difficult concept to define in a few words. At its most basic, quality hasbeen defined as conforming to requirements .This implies that organizations must establishrequirements and specifications; once established, the quality goal of the various function of anorganization is to comply strictly with these specifications. Many analyses of service qualityhave attempted to distinguish between objective measures of quality and measures which arebased on the more subjective perceptions of customers.A development of this idea by Gronroos identified ‗technical‘ and ‗functional‘ quality as being thetwo principle components of quality. Technical quality refers to the relatively quantifiable aspectsof a service which consumers receive in their interactions with a service firm. Because it caneasily be measured by both customer and supplier, it forms an important basis for judgingservice quality. Examples of technical quality include the waiting time at a supermarket checkoutand the reliability of train services. This, however, is not the only element that makes upperceived service quality. Because services involve direct consumer-producer interaction,consumers are also influenced by how the technical quality is delivered to them. This is whatGronroos describes as functional quality and cannot be measured as objectively as theelements of technical quality. In the case of the queue at a supermarket checkout, functionalquality is influenced by such factors as the environment in which queuing takes place andconsumers perceptions of the manner in which queues are handled by the supermarket‘s staff.Gronroos also sees an important role for a service firm‘s corporate image in defining customers‘perception of quality, with corporate image being based on both technical and functional quality.Service quality is a highly abstract construct, in contrast to goods where technical aspects ofquality predominate. Many conceptualizations of service quality therefore begin by addressingthe abstract expectations that consumers hold in respect of quality. Consumers subsequentlyjudge service quality as the extent to which perceived service delivery matches up to theseinitial expectations. In this way, a service which is perceived as being of mediocre standard maybe considered of high quality when compared against low expectations, but of low quality whenassessed against high expectations. Analysis of service quality is complicated by the fact thatproduction and consumption of a service generally occur simultaneously, with the process ofservice production often being just as important as the service outcomes. Gronroos pointed outthat a buyer of manufactured goods only encounters the traditional marketing mix variables of amanufacturer, i.e. the product, its price, its distribution and how these are communicated to himor her. Usually production process are unseen by consumers and therefore cannot be used as abasis for quality assessment. By contrast, service inseparability results in the productionprocess being an important basis for assessing quality.A further problem in understanding and managing service quality flows from the intangibility,variability and inseparability of most services which results in a series of unique buyer-sellerexchanges with no two services being provided in exactly the same way. It has been noted thatintangibility and perceived risk ness affects expectations, and in one study of a long-distancephone service, a bookstore and a pizza shop service, it was concluded that intangibility hadsome role in service quality expectations. Managing customers‘ expectations can be facilitatedby means of managing the risks a consumer perceives when buying a particular service.SERVICE QUALITY DIMENSIONSService quality is a perception of the customer. Customers, however, form opinions aboutservice quality not just from a single reference but from a host of contributing factors. Service
  • 4. marketers need to understand all the dimensions used by customers to evaluate service quality.David Garvin in the article ‗Competing on the Eight Dimensions of Quality‘ identified thefollowing eight dimensions of quality applicable to both goods and services. These include:Performance, Features, Reliability, Conformance, Durability, Serviceability, Aesthetics,Perceived quality or prestigeIn a further refinement of their earlier factor identification, Parasuram, Zeithmal and Berry haveidentified the following five dimensions of service quality as crucial. These are:a. ReliabilityThis dimension is shown to have the highest influence on the customer perception of quality. Itis the ability to perform the promised service dependably and accurately. Sahara Airlines, anupcoming domestic air carrier within India, has been striving to protect itself as a reliable airline.It hopes to differentiate itself from other airlines Indian Airlines. To p[protect this reliability,Sahara Airways has a scheme of full refund plus a coupon of Rs3,000 to every passenger ondelay of flights by more than 59 minutes.When service delivery fails the first time, a service provider may get a second chance to providethe same service in the phase called ‗Recovery‘. The expectations of the customer are usuallyhigher during the recovery phase than before because of the initial failure. Thus, the serviceprovider is likely to come under greater scrutiny, thereby increasing the possibility of customerdissatisfaction. The reliability dimension, which ensures timely delivery time after time, helps theservice provider to meet the customer expectations fully at the lowest level of serviceexpectation.b. ResponsivenessIt is the willingness of the service firm‘s staff to help customers and to provide them with promptservice. The customers may have queries, special requests, complaints, etc. In fact, eachcustomer may have problems of his or her own. While the front-end employee may have beentrained or equipped to deliver standardized services, the customers want them to go beyond thislimit. It is the willingness to help the customer or willingness to go that extra distance that isresponsiveness.Example: A customer calls room service to find out if they would pack a Jain lunch. It is not thehotel‘s normal policy to cook such specialty and customized meals. However, the customerbeing very religious minded would be very pleased if the hotel could pack it for him to carry andeat. This may impose some strain on the kitchen. However, the hotel may be rewarded in twodifferent ways if it agreed to provide the meal. The customer would be very pleased with theservice and is very likely to recommend the hotel to his friends and acquaintances. In addition,the hotel could charge extra commensurate with the extra efforts. He is unlikely to mind payingmore.The second aspect of responsiveness is speedy response to a customer request. Whenresponse is delayed customers usually loses interest. Many sales representatives respond onthe phone, ‗I will call you back‘. The call is never returned. The customer draws his or her ownconclusion about the quality of service he is likely to receive in the future.c. AssuranceIt defined as the ability of the company to inspire trust and confidence in the service delivery. Itrefers to knowledge and courtesy of the service firm‘s employees and their ability to inspire trustand confidence in the customer toward the company. This dimension is considered vital forservices that involve high risk as customers may not be able to evaluate all the uncertaintiesinvolved in the process by them.Example: Medical services requiring complex uncommon procedures, sales / purchase offinancial securities, investment issues, legal affairs, etc. demand this service quality dimension.
  • 5. There are property developers/builders who provide a list of previous buyers of flats orapartments to potential buyers. The evaluation of construction services is beyond technicalcapabilities of most buyers. However, the prospective customers are free to call the previouscustomers. When prospective customers hear from them about the company and its satisfactorydelivery, they feel assured and develop a more positive attitude towards the company.d. EmpathyIt refers to the caring, individualized attention the service firm provides each customer. Whenservice provider puts himself in the shoes of the customers, he may see the customer‘sviewpoint better. When customers feel t5hat the provider is making his best effort to see theirviewpoint, it may be good enough for most.Example: a lady customer with a young child arrives slightly late at the check-in counter andrequests the agent for a seat along the aisle and near the toilet. Even if all such seats havealready been taken up, the agent and the airline may make even effort to request anotherpassenger to exchange seats and meet the customer demand. The lady passenger would bedelighted if her request could be honored despite the last minute checking in, and even if shedoes not get such a seat, she would be grateful for their effort.e. TangiblesIt refers to physical facilities, equipment, and appearance of a service firm‘s employees. The jobof the tangible and physical evidence of a service is multifunctional. When a patient in thewaiting room of a clinic sees the doctor‘s certificate, he becomes aware of the quality of servicehe is about to receive. If a dental clinic provides patients with clean rubber footwear and freshlylaundered bibs or coats before the actual service, the patients and their accompanying relativesor friends will be impressed. A dentist dressed in a spotless white coat is likely to impress, themeven further. Tangibles provide the customer proof of the quality of service.MEASURING SERVICE QUALITYWhen evaluating service quality, consumers examine five dimensions: tangibles, reliability,responsiveness, assurance and empathy.Using SERVQUAL to Measure Service QualityThe SERVQUAL instrument was based on the premise that service quality is the differencebetween customers‘ expectations and their evaluation of the service they received. The first partof the questionnaire asks customers to indicate the level of service they would expect from afirm in a particular industry. The second part of the questionnaire asks customers to evaluatethe service performed by a specific service firm. Gap Theory is the method for calculatingservice quality that involves subtracting a customer‘s perceived level of service received fromwhat was expected.SERVQUAL uses 21 questions to measure the five dimensions of tangibles, reliability,responsiveness, assurance and empathy. Through SERVQUAL, firms can measure customers‘evaluations of their service performance. For example, if customers consistently give firm lowscores for one dimension, such as reliability, then the firm‘s management can take steps toimprove that particular dimension of their service offering.Problems with SERVQUALAlthough SERVQUAL is an excellent instrument for measuring service quality, managers mustbe aware of potential problems with the instrument, as well as with the gap theory methodologyon which it is based. An understanding of these problems may prevent service companies frommisinterpreting the results and developing inappropriate marketing plans.The SERVQUAL instrument has three potential problems. First, SERVQUAL measures
  • 6. customers‘ expectations of the ideal firm in a particular service industry. This may or may not berelevant to the capabilities of a particular service firm or the set of service firms available to aconsumer. For example, consumers may indicate that physicians should provide their servicesat the time they promised. Seldom do patients see the doctor at the scheduled time. No onelikes waiting after their appointment time, yet, because of excess demand, patients will continueto wait.The second problem with SERVQUAL is its generic nature. Since its not industry specific, itdoes not measure variables that may be important for a particular industry. For example, in theairline business, on-time arrival is a very important dimension to travelers, but SERVQUAL doesnot measure travelers‘ perceptions of this variable.The third problem with problem with SERVQUAL deals with the gap theory methodology usedfor measuring the level of service quality. Measuring consumer expectations after a service hasbeen provided will bias consumers‘ responses. If customers had a positive experience atBlockbuster, they will tend to report lower scores for their expectations, so there is a measurablegap between what they expected and the actual service they received.Correct Use of Gap TheoryManagers can use the gap theory methodology for measuring service quality performance ifprecautions are taken to reduce the problems just discussed. If SERVQUAL is used, theinstrument should be modified to apply to the specific industry for which it is being used.Additional variables should be added that are relevant and important to customers. Wheninterpreting the results, managers must remember that respondents are comparing their firmwith the ideal firm in the industry. To prevent biases from interfering with the gap scores,consumer expectations should be measured prior to the service and service perceptions afterthe service. Because consumers are affected by advertising and word-of-mouthcommunications, the time between measuring expectations and measuring the quality of servicereceived should be relatively close.Service Quality - A Key to Success in the Services Sector"Service with a smile", "You can count on XXXX for prompt delivery", "With ABC mobile phonesyou can reach anyone, anywhere, anytime", "ZZZ Airlines - we fly you everywhere" -these aresome punch lines of ad campaigns that are currently splashed across media - print, televisionand hoardings. How many of us can honestly claim to have experienced this service -consistently, day after day, purchase after purchase, transaction after transaction?Yet, this is the age of the service sector, an era for excelling in quality of service provided. Theservice sector is growing in spread and depth to encompass all transactions involving buyingand selling - be it in the tangible or intangible form. The examples below underscore how theservice sector has transgressed all boundaries.Companies across the country and the world are seeking to outsource many of their costcenters - the resultant surge in service providers like security services, indoor plants anddecorative, cleaning and housekeeping and even secretarial services is phenomenal.Dual-income, nuclear households are getting to be the norm in urban India. In cities like
  • 7. Mumbai, families are experiencing a burning new need - more time. Overstressed with work andtravel, they find it impossible to grapple with routine everyday tasks. This has given rise tohitherto unconventional new services. Housewives now make a cool sum with selling idli / dosabatter and homemade food. Telephonic orders and home delivery are now passed with grocersand vegetable vendors. Supermarkets sell packaged vegetables, which are chopped andcleaned - waiting to be cooked. The makeover is apparent even in traditional services likeretailing and banking. These service providers have added peripheral services to reducetransaction time and improve service delivery.Turn to product marketing - tangible products like television sets, air conditioners, microwaveovens and refrigerators, pagers and mobile phone sets and even cars are being sold on thepromise of after sales service. Buyers are not just conscious of the necessity of services afterthe purchase has been made - they demand it.Having tasted the joys of greater and enhanced services in all walks of life, urban Indians areclamoring for more. They now want an improvement in the quality of service offered. Servicequality therefore is the latest buzzword - in corporate boardrooms, the local banias siestaconversation with his neighbors and in the kings lair - the urban household.How then is the service provider to go about the difficult task of analyzing his businessoperations for chinks in delivery of quality service? What tool would indicate to him that he hasmisunderstood his customer? Where would he seek a consultant for rectifying this fatal error?The Gaps model of service quality looks into the gaps in service quality. It is a ready reckonedto service providers to analyze their existing service delivery system and rectify matters beforethe company has lost the attention of the customer.THE GAPS MODEL OF SERVICE QUALITYThe Customer Gap: The difference between customer perceptions and expectationsCustomer perceptions are subjective assessment of actual service experience customerperceptions and customer expectations play an important role in service marketing. Customerexpectations are the standards if or reference e point of performance against which serviceexperiences are compared, and often formulated in terms of what a customer believes should orwill happen. For example, when you visit a fast-food restaurant you expect a certain level ofservice, one that is considerably different from the level you would expect in an expensiverestaurant.The sources of customer expectations consist of marketer –controlled factors as well as factorsthat the marketer has a limited ability to affect (innate personal needs, word-of-mouthcommunications, competitive offerings). In a perfect world, expectations and perceptions wouldbe identical: customers would perceive that they receive what they thought they would andshould. In practice these concepts are often, even usually, separated by some distance.Broadly, it is the goal of service marketing to bridge this distance. The assumptions appears tobe that services , if not identical to goods, are at least similar enough in the consumers mindthat that they are chosen and evaluated in the same manner.The gaps model is useful as it allows management to make an analytical assessment of thecause of poor service quality. If the first gaps are great, the task of bridging the subsequentgaps becomes greater, and indeed it could be said that in such circumstances quality servicecan only be achieved by good luck rather than good management.GAPs model of service quality
  • 8. Gap 1: Not knowing what Customers ExpectNot knowing what customers expect is one of the root causes of not delivering to the customerexpectations gap 1 is the difference between customer expectations of the service andcompany understanding of those expectations. Examples abound - foreign banks were right inthinking that customer expectation in terms of ambience was not being met. So they brought insome good ambience and more presentable executives and thought they had bridged the gap.But what they did not understand was that the customer was taking note of the lack of ambiencebecause there was a wait when he was twiddling his thumbs and looking around for a place tosit. In other words, he was really complaining about the lack of speed and ease of operations.Result: Fancy ambience and higher cost attached to the same slow and indifferent service -albeit by better looking personnel in better surrounds. Private sector banks understood theproblem a mite better - but they too slipped up as business grew. They lost out on sustainabilityof the service promise.Example: A contractor using an electrical subcontractor for the first time may expect thesubcontractor to use a certain grade of wire conduit in all of their construction sites theysubcontractor, however, may think the contractor wants to use the lowest grade to keep the costdown. Unless the contractor clearly delineates his expectations, he will probably be dissatisfiedbecause the subcontractor did not do what was expected.The reverse may also occur. Management can provide a service they think customers expectwithout conforming customer expectations. Although on the surface this sounds good becausecustomer expectations will probably be exceeded, there are two dangers. First, if customerexpectations are consistently exceeded, in time, these expectations will rise to meet the servicebeing provided. Example: If customers do not expect their cars to be vacuumed and cleanedinside when the oil is changed at Quik Lube, then at first they will be pleased with this extratouch. But the next time they use Quik Lube, their expectations increase and after a few times ofreceiving this special touch, it will become a permanent part of their expectations. Failure tovacuum and clean the interior of the car will then result in a negative gap since the vacuumingand the cleaning of the interior becomes something customers expected. The second danger isthat the firm may be spending money on providing services that the customers do not expect orperhaps even care about, thus yielding a negative impact on profit.Causes of Gap One:• No direct interactions with customers. When people with the authority and responsibility forsetting priorities do not fully understand customers‘ service expectations, they may trigger achain of bad decisions and suboptimal resources allocations that result in perceptions of poorservice quality. One example of displaced priorities stemming from an inaccurate understandingof customers‘ expectations is spending far too much money on buildings and appearance of acompany‘s‘ physical facilities when customers may be much more concerned with howconvenient, conventional and functional the facilities are. Another example is illustrated by themanagement of Sears in the early 1990s, when the company failed to understand that thecustomers had changed there desires and modes of shopping. The company kept its traditionalcatalogue store long after customers had decided to take their business elsewhere. In the mid-1990s, Sears management rediscovered its customers, now defined primarily as women, andbegan once again to be profitable and satisfying to customers. The service providers seethemselves as indifferent or superior to customers. This typically happens in government-runservices such as railways or postal departments where they would not want to know whatcustomer desires.• Unwillingness to ask customers about expectations. Service providers may think that theyknow what is best for their customers. This is the patronizing attitude towards the customers. Intoday‘s changing organizations, the authority to make adjustments in service delivery isdelegated to empowered teams and front line people. For example, when AT&T asked its long-
  • 9. distance operators to improve their service to customers, the team identified key customersegments and conducted its own customer research to determine expectations. Gap one wasclosed without involving management as it is traditionally defined.• Unprepared ness to address the expectations. The service provider may be aware of theShortfalls but may be unprepared to address the issue in the mistaken belief that the customersmay be tolerant or that the lapse is unlikely to loss of customer patronage. Another trend relatedto Gap One involves current company strategies to retain customers and strengthenrelationships with them. The term relationship marketing is used to describe this approach,which emphasizes strengthening the bonds with existing customers. When customers havestrong relationships with their customers, gap 1 is less likely to occur.• Lack of market segmentation to understand the needs are such segment. Marketsegmentation is the grouping of customers sharing similar requirements, expectations anddemographic or psychographic profiles. Segmentation is usually done to understand the needsof customers more elaborately or distinctly. While segmentation has been used by marketers fordecades, it may be more critical today than any other time. Customers are no longer satisfied byhomogenous products and services for the mass market; now, more than ever before, theyseeking and buying services that fit their unique configuration of needs. If the needs are notprecisely understood due to lack of segmentation, quality perception is likely to be poor.Strategies for Reducing Gap One:Service firms have four strategies available to them to reduce the size of gap one. Thesestrategies are: communicating with the customers, conducting marketing research, encouragingupward communication in the organization, and decreasing the number of layers ofmanagement. By talking to customers, management will learn what buyers expect in terms ofservice quality and how they feel about the service they received. Contact and communicationbetween customers and management is common in small business because the owner is oftenthe service operator.Buyer may not always be honest in their communication with management of service firm. Toensure open, honest communication, service firm can use marketing research, which can eitherbe performed by third parties or, in case of large cooperation, by the marketing department. Tobe effective, the marketing research much focus on service quality issues and consumerexpectations of the service.For firms where management is separated from the customer contact personnel, upwardcommunication is vital in reducing the size of Gap One. Service contact personnel must beencouraged to communicate with management in an open, non threatening environment. To beeffective, upward communication must be requested by top management. Ideas forimprovement should not only be sought from service contact personnel, but employees shouldbe rewarded for productive ideas.As the layers of management increase, the chances of management having a correctunderstanding of what customer want in terms of service quality became more difficult. Manyservice firms, therefore, are seeking means to reduce the number of management layers.For much small business, service quality is the major issue in the selection of theirtelecommunications provider. According to Tony Parella, executive vice-president of Allegiancetelecom of Dallas, ―People buy from us because they don‘t necessarily feel appreciated byregional Bell carrier.‖ The goal of Allegiance management is to provide customers withpersonalized service. To ensure management hears about customer concerns and to ensureAllegiance communicate effectively to customers, Allegiance has instituted a customer Bill ofRights and place a customer service manager in each branch. These actions have been a majorstep for Allegiance in reducing the size of Gap One and ensuring a high level of customersatisfaction.Formal and informal methods to capture information about customer expectations can be
  • 10. developed through market research. Techniques involving a variety of traditional researchapproaches must be used to stay close to the customer, among them customer visits, surveyresearch, complaint systems, and customer panels. More innovative techniques such as qualityfunction deployment, structured brainstorming, and service quality gap analysis are oftenneeded.Many marketers are achieving success with niche marketing – targeting segments of customersand developing services and strategies that fit their needs better than other companies‘offerings. Other marketers are embracing the concept of mass customization – creating servicesfor a large group of customers that can be customized or appear to be customized throughtechnological innovations.Technology affords companies the ability to acquire and integrate vast quantities of data oncustomers that can be used to build relationships. Frequent flyer travel programs conducted byairlines, car rental companies, and hotels are among the most familiar programs of this type.Relationship marketing is distinct from transactional marketing, the term used to describe themore conventional emphasis on acquiring new customer rather than on retaining them. Whencompanies focus too much on attracting new customers, they may fail to understand thechanging needs and expectations of their current customers.Gap Two: Not Selecting the Right Service Designs StandardsAccurate perceptions of customers‘ expectations are necessary, but not sufficient, for deliveringsuperior quality service. Another prerequisite is the presence of service designs andperformance standards that reflect those accurate perceptions. A recurring theme in servicecompanies is the difficulty executives, managers, and other policy-setters experience intranslating their understanding of customers‘ expectations into service quality specifications.Gap 2 is the difference between the company understanding of customer expectations anddevelopment of customer driven service designs and standards. Customer driven standards aredifferent from the conventional performance standards the most services company establish inthat they are based on pivotal customer requirements that are visible to and are measured bycustomers. They are operation standards set to correspond to customer expectations andpriorities rather than to company concerns such as productivity or efficiency.Example: In the billing division in debit cards, companies charge a hefty interest rate onoutstanding amounts. They however fail to check with the department that handles inflow ofpayments and updating of outstanding amounts. Often, a cheque is sent in on the due date anda statement with the finance charge sent out on the same date. The customer is hopping madas he has paid up on due date, the debit card company claims that interest starts ticking on duedate. Everyone has a valid reason, but the situation is a mess.In many of these cases, one observes a reluctance to tackle the problem head-on and a lack ofcommitment to providing quality service. While customer-contact personnel are key to providingquality service, leadership plays a pivotal role in ensuring that quality standards are in place andadhered to.Causes of Gap Two:• Absence of customer-driven standards of service quality. The standards for qualityimprovement or planning should be clearly those which are desired by the customers ratherthan those set by only the service provider. Thus, the involvement of the end user/ customer inthe goal setting process is crucial to its success.• Absence of formal quality control goals. It is not enough to say that quantification is notpossible and, therefore, formal goals cannot be set for services delivery. Even subjectiveassessment may be vital in setting the standards.• Vague or undefined service design. The service design may have been running traditionally fora number of years without any alterations, or it may have been borrowed form some other
  • 11. concept. Defining the service would go a long way towards determining the standards ofcustomer satisfaction. Poor service design may also be a result of failure to connect servicedesign to service positioning.• Resource constraints. A service firm may understand and even want to deliver servicesdesired by the customers but is unable to because of resource constraints. Example, a local airconditioner dealer knows that customers want quick repairs.However, demand for both services in springs and early summer will exceed the firm‘s capacityto provide the service. The no of technician available to repair AC is limited and the number ofhours they can work is limited. Because of personnel constraints these services cannot meetcustomer expectations for quick service during the peak demand time.• Market Conditions. The most competitive market condition impacting this gap is known ascompetitive parity, a situation where competitors produce almost identical quality goods andservices. To prevent a competitor from capturing additional market share, companies oftenmatch a competitors offering. In some cases, firms translate customer expectations intomatching competitive offerings rather than meeting the wants of their customers. If this is donethere will be a gap between what firms know customer expect and service pacifications, or whatthe firm actually provides. For example, an airline may know that passengers want more legroom in the airplane but they do not translate this in service specification. They do not put theseats further apart since other airlines are not doing it and to do so would reduce the potentialpassengers load.A second market condition affecting gap two is monopoly markets such as cable televisionservices, utilities, and basic telephone services. Each operates with a virtual monopoly with nocompetitors. These firms may understand certain needs and expectations of their patrons butmay not translate them to service specifications unless required to do so by a governmentagency supervising them. Their rationale for permitting this situation may be that the cost ofmeeting customer expectations is higher than the additional revenues that could be generated ifthe change were made.• Management Indifference. Management may talk about providing high quality service, but inactual practice they may offer only the minimum level of service that will suffice. The goal is notto provide customer satisfaction but to avoid customer dissatisfaction. In the short run, thisphilosophy may succeed and may even generate greater revenues because more customerscan be served. But in the long run, customers will switch to competitors who provide betterservice. Management complacency is a problem in many corporate owned service facilitiesbecause of the pressure to generate short term profits.• Inadequate service leadership:o Perception of infeasibilityo Inadequate management commitment.Strategies for Reducing Gap Two:To reduce the size of gap two, service firms must have the commitment of top management.Many mission statements have references to the firm being committed to providing customerswith high level of service quality. However, in actual practice, firm often emphasis on costreduction, gross sales, and net profit rather than a high level of quality. There are two reasonsfor the discrepancy between mission statements and actual practice. First is the difficulty ofmeasuring service and the ease of measuring costs, sales and profit. Second the current rewardsystem is often based on non-service criteria. Most managers are promoted and rewarded forgenerating greater sales, increasing net profits, reducing costs, not for enhancing servicequality.If service firms are going to get serious about providing high quality service, they must start witha commitment by management. Not only must management be committed to providing a highlevel of service, they must also set an example for their employees. Managers who talk service
  • 12. but fail to deliver an example of good service are not committed.Reduction of this gap requires setting service quality goals. These goals must be set with thecustomer, the service contact provider and management in mind. Customer contact employeesmust understand management‘s perspective and the need to generate a profit. In exchange,management must understand what is possible and what is not in terms of operations. Servicecontact personnel can provide their supervisors with valuable input into the best process forachieving service quality goals.To be effective, the goals must be customer oriented. The service quality standards must bewhat customers want and desire. Including in the goal setting process is advantageous to bothmanagement and service contact personnel.Task standardization will also reduce the size of gap two. Standardization can be achievedthrough hard technology (substituting machines or computers for people) or soft technology(improving work methods). Both methods are designed to standardize the operation and providea uniform delivery of the service to customers, reducing the gap between managementperception of consumer expectations, and the translation of those expectations into servicequality specifications.Example: Hard technology can be used to completely replace the human provider as in case ofATMs or it could be used to improve the consistency of service, as in the case of the diagnosticcomputer used by auto mechanics and the automatic scrubbing machines used by cleaning theservice.Example: The standardized employee training procedure used by McDonald‘s, the prepackagedtours offered by many travel agencies, and the buffet used by pizza Hut. By standardizing thetraining McDonald‘s strives to ensure that all employees use the same procedure in preparingfood for their customers. No matter where one buys a McDonalds hamburger, it will look andtaste the same. The same concept applies to prepackaged tours offered by travel agencies anda lunch buffet offered by Pizza Hut.Closing gap two by demonstrating strong leadership commitment and by setting by settingcustomers‘ performance standards—has a powerful positive impact on closing the customergap. Leadership plays a pivotal role in providing service excellence.Strategic measurement systems are also necessary to close this gap. While companymeasurement has historically been the bailiwick of finance and accounting, managementstrategies now call for the addition of key marketing indicators in the overall measurementprogram. To achieve competitive superiority in an era when satisfying a customer is a priority,companies need measurement systems that incorporate and align measures of customerperceptions and satisfaction with pivotal operational and performance indicators. Sam Walton ofWal-Mart is hailed as a service leader worldwide. His service philosophy to spur on his peopleand organization is as follows:• Realize that customer service is the key.• Design for comfort and convenience.• Provide one-stop shopping.• Customize• Invert the organizational chart so that the customer is on the top and the management is at thebottom.• Empower the sales staff.• Provide servant leadership - Wal-Marts managers are servants to the needs of theiremployees and customers.• Recognize that the customer is always right.While Sam Waltons philosophy may appear simplistic, it was his adherence to these veryprinciples that led to the soaring growth of Wal-Mart in the 1990s, when others were retrenchingand cutting down on costs.
  • 13. Gap Three: Not Delivering to Service StandardsGap 3 is the discrepancy between developments of customer driven service standards andactual service performance by company employees. Even when guidelines exist for performingservices well and treating customers correctly, high quality service performance is not acertainty. Standards must be backed by appropriate resources (people, systems, technology)and also must be supported to be effective —that is, employees must be measured andcompensated on the basis of performance along those standards. Thus, even when standardsaccurately reflect customers‘ expectations, if the company fails to provide support for them—if itdoes not facilitate, encourage, and require their achievement—standards do no good. When thelevel of service delivery performance falls short of the standards, it falls short of what customersexpect as well. Narrowing Gap 3, by ensuring that all the resources needed to achieve thestandards are in place reduce the gap.Another problem associated with the bridging of provider gap 3 is that of dealing withfranchisees, agents, retailers and brokers. Because quality in service occurs at the moment oftruth i.e. at the point of interaction between the service provider and the customer, control overthe service encounter by the company is crucial, yet it is rarely possible.When one NIIT franchisee falls short of set educational standards, it reflects on the company asa whole. When food at one outlet of Birdys , McDonalds or Croissants etc is below qualitystandards, the image of the entire chain is tarnished. For this, the firm needs to developsystems to either control or motivate these intermediaries to meet company goals.Primary causes of this gap are variable and inseparable nature of services. Because mostservices are performed by people, the quality of service is highly dependent upon well theservice provider performs his or her job. If the service contact personnel provide services asspecified, customers are usually satisfied and their expectations are met, if employees do notprovide the service as specified in the service specifications, customer expectations will not bemet and customers will be dissatisfied.Cause of Gap Three:• Deficiencies in human resources policies.o Ineffective Recruitment: The front-end employees involved in services delivery require certainqualities that enable them to relate to and deal with customers. They require training to achievethis.o Role ambiguity and role conflict: these include employees who do not clearly understand therole they are to play in the company, employees who feel in conflict between customers andcompany management, the wrong employees.o Poor employee-technology job fito Inappropriate evaluation and compensation systemso Lack of empowerment, perceived control, and teamwork.These factors all relate to the company‘s human resource function, involving internal practicessuch as recruitment, training, feedback, job design, motivation, and organizational structure.• Failure to match supply and demand: when demand for a particular service exceeds thesupply capacity, the general tendency is to shorten the process of the service delivery to speedup the process. Usually, in this case the quality of the service delivered deteriorates.o Failure to smooth peaks and valleys of demando Inappropriate customer mixo Over reliance on price to smooth demand• Customers not fulfilling roles: The customer is as much involved in the process of services
  • 14. delivery as the service provider. Therefore, training the customer to receive the service to derivemaximum benefit is essentials.o Customers lacking knowledge of their roles and responsibilities.o Customers negatively impacting each other• Lack of training to the franchisee‘s staff: Whenever service is provided by a franchisee in lieuof the service provider, the front-end employees of the franchisee require elaborate training tobe able to cope with the customer demands in a standardized and pre-determined manner.Most service companies face and even more formidable task: attaining service excellence andconsistency in the presence of intermediaries who represent them, interact with their customers,and yet are not under their direct control. Among the intermediaries that play a central role inservice delivery are retailers, franchisees and dealers.Strategies for Reducing Gap ThreeA common characteristic of successful service companies is teamwork. A feeling of teamwork iscreated when employees see other employees and management as key members of the team.The lowest-level employee must feel that management; from their immediate supervisor to theCEO of the company, cares about them and that they are a critical part of the firm‘s success.There must be a spirit of cooperation, not competition, among employees. All of this is achievedwhen every employee is involved in the company and committed to providing a high level ofservice to customers, to the company, and to other employees. For instance, Southwest Airlinesis often cited as a service provider with excellent teamwork.If employees are to provide the services according to the job specifications, there must be a fitbetween employee skills and job requirements. Firms must hire individuals who have the abilityto perform the job. Once hired, management must be sure each employee has to do the tasksaccording the company‘s procedures.Because of technology, many service firms are using machines, tools, and computers to assistservice workers in their job. To perform their job according to company standards, serviceemployees must have the proper equipment. The equipment needs to be in good condition andthe employees must have the knowledge and training to properly use the technology to enhancethe quality of their work.To diagnose problems with newer automobiles, computerized diagnostic equipment is essential.The quality of diagnosis is dependent upon the quality and condition of the equipment and theability of the service technician to operate it. In cleaning carpets in homes and offices, theoperator of the equipment can perform a good job only if the shampoo machine is runningproperly and he or she has the ability to operate it.An important factor in reducing gap 3 is the concept of perceived employee control. Whenemployees are allowed some flexibility and control in the service process, morale is enhanced,and there is a grater desire to perform the service properly. Flexibility and control also allowservice employees to modify the process to meet the particular needs and desires of customers.In addition, by having control of the service encounter, the outcome of the service will becomemore predictable.The supervisory control system will have an impact on the size of gap 3. If service employeesare encouraged and rewarded for meeting job specifications, the likelihood of employees doingthe job according to the specifications increases. However, supervisors often tell employees tofollow the correct job specifications but reward or punish employees on other criteria, which iscalled role conflict. For example, employees may be evaluated by their supervisors on suchcriteria as a balanced cash register for a bank teller, the number of automobiles repaired by amechanic, and the amount of time spent cleaning a particular office by a janitor. When thisoccurs, employees will shortcut the specifications to improve whatever criteria are used by theirsupervisors in their evaluations, often neglecting other service specifications.Role conflict is inherent in many service contact positions. How this role conflict is handled will
  • 15. have an impact on how closely the service delivered matches the service specified. The primaryconflict faced by service contact personnel is between expectations of customers andexpectation of management. This conflict is increased when employees are not given flexibilityto meet the needs of customers, when employees have little control over how the service is tobe performed, the amount of paper work necessary to carry out the service, and the number ofother employees a service provider must contact or use in the process of performing theservice.To reduce role conflict, management should allow service contact personnel adequate flexibilityto meet customer needs. Employees need to have some control over the service encounterbecause the greater the control, the less role conflict experienced. Control and flexibility meanservice employees will not have to go to other employees and managers with questions and forpermission to modify the service to meet a customers‘ unique request. It is responsibility of themanagement to reduce the amount of conflict faced by their service employees. Not only doesreducing role conflict aid service employers in meeting the needs of customers but it willincrease job satisfaction, job morale and length of employment.Role ambiguity refers to employees‘ lack of information or understanding of their job and jobrequirements. As role ambiguity increases job satisfaction decreases. It also becomes difficultfor employees to perform the necessary job specifications if they lack an understanding of whatthese specifications are.Management often mistakenly assumes employees understand their job when, in fact, servicecontact personnel do not have clear understanding of goals and expectations. Although theyhave been told what to do, they may not have been told how the service is to be performed. Toreduce role ambiguity, service firms must do the following: Provide frequent and clear downward communication from management on what is expectedand how the service is to be performed.§§ Provide employees with constructive feedback to help them understand how the service is tobe performed and what management expects. Provide employees with product and service knowledge so they can§ perform their jobs better. Train and retrain employees in the proper method of performing the§ service.§ Train service contact personnel o communicate effectively with customers, with supervisors,and with other employees.Gap Four: Mismatch Between Promises and Performance.Gap Four is the difference between the service delivered to customers and the externalcommunications made about the service. Promises are made to consumers by a firm‘sadvertising, sales promotions, and sales staff. These promises may be explicitly stated or theymay be implied. If the firm does not provide the service that is promised, there is a gap betweenwhat customers expect and the service received.As consumer expectations for a service increase, the profitability of patronizing the firm will alsoincrease. To increase patronage, firms are tempted to make promises that may be difficult oreven impossible to deliver. Communication through these channels tends to raise customerexpectations and set certain standards to assess the service in the minds of customers. Anydiscrepancy between promised and actual service tends to broaden the customer gap. A recentadvertisement by a leading Pizza chain promised one free pizza with a specified order. Oncalling in for the offer, one found that the small print indicated that this offer was valid only at thecounter and not on home delivery orders. Would the outlet have received so many calls if theyhad indicated this in bold type? While on the subject of pizzas, one wonders if Dominosmanages to keep its promise of delivering anywhere in 30 minutes - especially in Mumbai traffic.If not, they must be making heavy losses on free pizzas.
  • 16. Causes of Gap Four• Ineffective management of customer expectationo Failure to manage customer expectations through all forms of communication: In additionunduly elevating expectations through exaggerated claims, there are other, less obvious ways inwhich external communications influence customers‘ service quality assessments. Customersare not always aware of everything done behind the scenes to serve them well. One bankexecutive indicated that customers were unaware of the bank‘s behind-the-counter, on-line tellerterminals, which would translate into visible effects on customer service. By neglecting to informcustomers of such behind-the-scenes efforts, the bank was foregoing an opportunity tofavorably influence service perceptions.o Failure to educate customers adequately: In the anxiety to strike a deal or market the service,sales personnel promise more than what they can ever deliver. Such communication can beeither formal or informal. Usually, customers set the service expectations according to suchdelivery and price quotations.• Overpromisingo Overpromising in advertising: During the marketing phase, the sales force may go beyond theoriginal script to strike the deal.o Overpromising in personnel selling: While customers may be lost to competition due tounderpromising, they may be lost due to overpromising as well.o Overpromising through physical evidence cues• Inadequate horizontal communicationso Insufficient communication between sales and operations: If during the personal selling phasea commitment was made to strike the deal, it is essential to convey this message to the otherpeople in the organization, especially the production team, failing which, they may not be able tokeep up with this additional conceded demando Insufficient communication between advertising and operationso Differences in policies and procedures across branches or units• Pricing of services.In packaged goods many customers posses enough price knowledge before purchase to beable to judge whether a price is fair or in line with competition. With services customers oftenhave no internal reference point for prices before purchase and consumption. Pricing strategiessuch as discounting, ―everyday prices‖ and couponing obviously need to be different in servicesin cases where the customers have no sense of the price to start with! Techniques fordeveloping prices for services are more complicated than those for pricing of tangible goods.Strategies for Reducing Gap FourTo reduce the size of Gap Four, service firms must address two issues: horizontalcommunications and propensity to over promise. Service contact personnel should have input inthe firm‘s advertising and promotional to ensure that messages conveyed to the prospectivecustomers can be operationally performed. The reverse is also true; service personnel shouldbe informed prior to an advertising or promotional campaign. In service organizations with fieldsales representatives, there must be communication between the salespeople and thepersonnel performing the service. Salespeople will often make promises to prospectivecustomers to gain contacts. If promises are made, the operations department needs to beaware of it so they can ensure the promises will be delivered.The tendency to over promise increases with pressure to achieve greater profits or to meetcompetitive claims. In both cases, severe damage to the firm‘s image can occur since it isunlikely the firm can perform the service as promised.Customers‘ service perceptions may also be enhanced if the company educates them to be
  • 17. better users of the service. Service companies frequently fail to capitalize on opportunities toimprove customers‘ perceptions. As on bank executive observed, ―We don‘t teach ourcustomers how to use us well and why we do the things we do.‖ Effectively coordinating actualservice delivery with external communications therefore narrows provider gap 4 and favorablyaffects the customer gap as well.Another function that must be involved in communication is human resources. For employees todeliver excellent customer service, firms must serve the employees through training, motivation,compensation and recognition to have a power full impact on the quality of service theemployees deliver.External communications—whether from advertising, pricing or the tangibles associated with theservice – can create a larger customer gap by raising expectations about service delivery. Inaddition to improving service delivery, companies must also manage all communications tocustomers so that inflated promises do not lead to higher expectations.Case: Taj Mahal―Archetypal Drives‖ of a customer who Visits Taj Mahal: The study was of the visitors includingspouse, family, and group of friends or relatives. The primary drives of the tourist to this placeare the beauty of the place and historical significance. The facilities sought in the vicinity of theTaj Mahal and basic amenities like safe drinking water , clean toilets, small grocers, cafeteriasand milk. The sample interviewed was of the opinion that the Taj Mahal bedecked in moonlightwas a picture of delight, and should not be missed. However, for those who could not make it onthat crucial night of the month, similar creations could be made through a light and sound show.On the full moon night some cultural events could also be planned and offered. Since the maincharm in visiting the city of Agra was the Taj Mahal, the tourists were keen on knowing thetimings and approach to the spot and any rules that govern visiting this wonder of the world.External Communication Content on Taj Mahal: The information provided on the governmentwebsites on Taj Mahal is not indicative of the facilities sought by the tourists. On fundamentalinformation, the prevailing basic amenities in the vicinity of Taj Mahal are not listed, once inAgra how to reach Taj Mahal is not known. The visiting hours and weekly offs, if any are notnotified. Also people traveling with families must be provided with information on basicamenities in and around the Taj Mahal.For the bespoke customer, the historical significance, this is a selling point for Taj Mahal Is notadequately flaunted. There is neither imagery nor mystic incorporated in the communicationcontent. Taj Mahal bedecked in moonlight, a much sought after experience is also notadequately represented. Though there is a mention of the Taj‘s beauty on a full moon night butthere is no mention of when the full moon is expected in the next few months. Tourist could beprovided with calendar data of full moon nights along with associated special events. Therecould be plans for special shows on full moon night to make experience more memorable.There is no mention of any light and sound show on any day. Taj Mahal is one of the wonders ofthe world, hence providing conservation guidelines for tourists in the communication content isan expectation.
  • 18. Consumer perception of technical and functional quality modelQUALITY AND SATISFACTIONA review of the literature will reveal that the terms ‗quality‘ and ‗satisfaction‘ are quite often usedinterchangeably. While both concepts are related and appear to be merging, there are still gapsin the understanding of the two constructs, their relationship to each other and their antecedentsand consequences. A distinction has often been made between the two constructs. According toCronin and Taylor ‗this distinction is important to both managers and researches alike, becauseservice providers need to know whether their objective should be to have consumers who aresatisfied with their performance or to deliver the maximum level of perceived service quality.‘Oliver takes the view that satisfaction is ‗the emotional reaction following a disconfirmationexperience‘. Getty and Thompson defined satisfaction as a ‗summary psychological stateexperienced by the consumer when confirmed or disconfirmed expectations exist with respect toa specific service transaction or experience‘. Rust and Oliver suggested that customersatisfaction or dissatisfaction - a ‗cognitive or affective reaction‘ – emerges as a response to asingle or prolonged set of service encounters. Satisfaction is a ‗post consumption‘ experiencewhich compares perceived quality with expected quality, where as service quality refers to aglobal evaluation of a firm‘s service delivery system. Perceived quality, on the other hand, maybe viewed as a global attitudinal judgment associated with the superiority of the serviceexperience over time.Not surprisingly there has been considerable debate concerning the nature of the relationshipbetween the constructs of satisfaction and quality. While the majority of research suggests thatservice quality is a vital antecedent to customer satisfaction there is now strong evidence tosuggest that satisfaction must be a vital antecedent of service quality. Regardless of which viewis taken, the relationship between satisfaction and service quality is strong when examined fromeither direction. Satisfaction affects assessments of service quality and assessment of servicequality affects satisfaction. In turn both are vital in helping buyers develop their future purchaseintention.So, conclusion is that the key difference between the two constructs is that quality relates tomanagerial delivery of the service, while satisfaction reflects customers‘ experiences with thatservice. They argued that quality improvements that are not based on customer needs will notlead to improved customer satisfaction.THE SERVICE-PROFIT CHAINThe increased emphasis on customer satisfaction begs the question whether improvements incustomer satisfaction lead to improvements in the economic performance of firms. Heavyexpenditures and importance attached to customer satisfaction measurement suggest that the
  • 19. link between customer satisfaction and economic performance is presumed by companies.Increasing levels of research is going into understanding the nature of the service-profit chain.There is considerable support for a link between improvements in service quality andimprovements in service quality and improvements in financial performance. Grant reports thatthe American Customer Satisfaction Index studies found a positive correlation betweencustomer satisfaction and stock market returns. Much of the literature has sort to establish a linkbetween satisfaction and loyalty. Dick and Basu, in a conceptual paper on loyalty viewedsatisfaction as an antecedent of relative attitude because, without satisfaction, consumers willnot hold a favorable attitude towards a brand as compared to other alternatives available andwill therefore not be predisposed to repurchase. .Much of the research into the outcomes of the satisfaction has measured behavioral intentions,for example, the likelihood of recommending a service or repurchasing it. However, in the lightof increasing levels of competition in most services markets, behavioral intention based onloyalty generated through good service can easily be broken. This decline has been attributed toa number of factors including greater choice and information available to customers, the‗commoditization‘ of several services, and increased levels of competition.Against this, some researchers have pointed out that much of the evidence to support a linkbetween quality and financial performance is anecdotal in nature and refuted by analysis ofcorporate performance. It is suggested that there is wide spread evidence of managers‘frustration with the inability of quality improvement to improve organizational performance.Developments in information technology are offering new insights into the link between qualityand financial performance. Large multiple outlet service organization are increasingly able toexperiment with elements of service quality in test sights and to judge economic performanceover time. A fast-food restaurant, For example, may implement a new staff payment system ortraining program in a number of ―experimental‖ sites and will be able to identify changes inperformance relative to other ‗control‘ branches. Some service providers have disaggregatedtheir information even further by linking service quality questionnaires to features of the servicewhich a respondent actually received. In this way, individual employees or groups of employeescan be linked to measure of quality. While information technology is opening up newpossibilities for correlating data about inputs and perceived outcomes, the problem of analyzingcross-sectional data remains. It is very difficult within a research framework to isolate all of thecontributors to customers‘ perceptions of quality except those which the researcher is interestedin.The Service Profit-chainSETTING QUALITY STANDARDSA precise specification of service standards serves a valuable function in communicatingstandard of quality which consumers can expect to receive. It also serves to communicate thestandards which are expected of employees. While the general manner in which an organizationgoes about promoting itself may give a general impression as to what level of quality it seeks todeliver, more specific standards can be stated in a number of ways which are considered below.At its most basic, an organization can rely on its terms of business as a basis for determiningthe level of service to be delivered to customers. These generally act to protect customersagainst excessively poor service rather than being used to proactively promote high standardsof excellence. The booking conditions of tour operators, for example, make very few promisesabout service quality, other than offers of compensation if delays exceed a specified standard orif accommodation arrangements are changed at short notice.Generally worded customer charters go beyond the minimum levels of business terms bystating in a general manner the standards of performance which the organization aims to
  • 20. achieve in its dealings with customers. In this way, banks publish characters which specify ingeneral terms the manner in which accounts will be conducted and complaints handled.Specific guarantees of service performance are sometimes offered, especially in respect ofservice outcomes. As an example parcel delivery companies often guarantee to deliver a parcelwithin a specified time and agree to pay compensation if they fall below this standard. Many ofthe public utilities now offer compensation payments if certain specified services are notdelivered correctly, increasingly, service organizations set their service guarantees withreference to benchmarks established by best-practice companies within their sectors, or incompletely different sector. Many highly specific targets are therefore restricted to internal usewhere their function is to motivate and control staff rather than to provide guarantees to potentialcustomers. While the major banks give their branch managers targets for such quality standardsas queuing time for counter staff and availability of working ATM machines, it does notguarantee a specified level of service to its customers.Many services companies belong to a trade or professional association and incorporate theassociation‘s code of conduct into their own service offering. Codes of conduct adopted bymembers of professional associations as diverse as car repairers, undertakers and solicitorsspecify minimum standards below which service provision should not fall. The code of conductprovides both a reassurance to potential customers and a statement to employees about theminimum standards which are expected of them.Contrary to popular belief, a company operating to ISO 9002 does not guarantee a high level ofquality for its service. Instead, ISO accreditation is granted to organizations who can show thatthey have in place management systems for ensuring a consistent standard of quality- whetherthis itself is high or low is largely a subjective judgment. Although this standard was initiallyadopted by manufacturing industries, it has subsequently found significant use among servicecompanies, including education, leisure centers and building contractors. Increasingly, industrialpurchasers of services are seeking the reassurance that its suppliers are ISO registered.In the case of some public sector services which operate in a monopolistic environment, qualitystandards are sometimes imposed from outside. In the case of privately owned utilities, therelevant regulating authority has the power to set the specific targets.DELIVERY OF HIGH-QUALITY SERVICEDEVELOPMENT OF A QUALITY CULTUREOrganizations, like human beings, develop a unique personality, shaped by interpersonalrelations, the quality of the management and the influence of the leadership upon theemployees, the system in place, and the quality of the employees. High-quality service designand delivery is not just the function of the front end employees but of all the members of theorganization. The factors that could play a crucial role in the quality of service delivery aremany. A few important factors are discussed below.HUMAN FACTORSIt basically includes employee recruitment and selection, training, rewards and motivation. ‗Ishall not deliver substandard service nor shall I let anybody else deliver substandard service‘ isthe type of motto to be adopted. For example, some quality conscious automobile companieshave given the right of halting the assembly line to any concerned employee who may havenoticed inadequate or defective components fitted on a vehicle. This quality consciousness iscrucial to long term quality maintenance. In addition, customer feedback on quality issues has tobe an important component of employee evaluation.SYSTEMS SUPPORTIt is not employees but also system which tends to produce defects. Thus, organizations have toput systems in place that ensure high quality services delivery. For example, the computerized
  • 21. system in the bank has to ensure accurate and timely delivery of the customer bills andstatements.ORGANIZATIONAL FACTORSOrganizations with very high number of levels within the structure tend to have very poorinteraction between the front-end employees and the higher echelons within the organization.The reporting structure and close interaction between the supervisors and the front-end servicedelivery employees is very important. A receptionist being a front-end employee may be seenas the key person for the customer interaction. However if the receptionist is not authorized toask the housekeeping unit to improve upon the service when a customer has complained aboutit, it may demotivate the employee, and, in future, the receptionist may not report problems withthe housekeeping unit.FEEDBACKOrganizations need to encourage feedback from every employee including the front-endemployees as a part of the quality monitoring system. Employees have to be told that thisfeedback is crucial for the organizational success.1] QUALITY CIRCLESQuality circles are groups of non-supervisors and work leaders in a single company departmentwho volunteer to conduct group activities in order to improve the effectiveness of the work intheir respective departments. Fishbone or Ishikawa diagrams prepared by Ishikawa help totrace quality complaints to the responsible production process that is the root cause of theproblem. The role of individual employees is very crucial to quality control of services as well asgoods production. This is more so in the case of services where the service is usually deliveredin person by one of the employees.The diagram below is a root cause diagram that enables you to pinpoint the causes contributingto the delayed departure. In addition, the frequency of each failure can be measured so that thereasons for poor quality service can be understood and both short and long-term measures canbe instituted to tackle the situation.2] TOTAL QUALITY MANAGEMENTTQM is defined as management of the entire organization so that there is continuousimprovement in all dimensions of process, products, and services that are important to thecustomer. The key aspects of the focus as follows:• Quality Standards must be customer driven. Every service firm should have both company-defined and customer-defined standards of quality. The customer-defined standards areclassified as soft and hard standards.• External and internal customers both need to be addressed. The receptionist could notperform the best service for the customer without the cooperation from others, including thehousekeeping department. Thus, services to internal customers also have to be given the samedegree of importance as those for external customers.• Every employee is a quality inspector and is empowered. Each and every employee can stopthe assembly line. Thus, each employee is treated as a quality inspector and is empowered totake appropriate corrective action.• Continuous measurement and improvement. It has been the belief of a number oforganizations that the quality improvement needs to be done on a large scale to be effective.Contrary to this, it has been seen that while it helps to have a major review of the quality of
  • 22. Japanese goods and services owes much to the continuous measurement and improvement,even on a small scale. Thus, small tinkering towards quality improvement also contributessignificantly to overall quality improvement due to the cumulative effect.• Commitment to quality improvement from the top management. Organizational culture is verycrucial to the quality improvement process. In particular, the contribution of top managementand their commitment is also crucial as employees usually emulate the attitudes of the topmanagement. When the top management is committed to quality improvement, the employeesfeel confident that they would enjoy the support of top management even when they have tomake some hard unpalatable decisions leading to short term loses.The factors that cause the failure of TQM are as follows:• More rhetoric than real commitment to the development of quality culture. Many times we seequality statements or organizational objectives displayed prominently at work place.Surprisingly, most of them are for the visitors or the customers rather than the operatingemployees! Thus, they are decorative rather than operative in nature. This does not bring aboutthe desired changes in the products or services, nor does it bring about an attitudinal change.• More focus on cost saving than on long-term generation of value for the customers. Some ofthe quality control initiatives require capital funds or increases in the variable cost. In the shortrun, they may sound like unnecessary costs and therefore not desirable. However, in the longterm, quality improvement would bring about customer satisfaction through greater valuedelivery and customer loyalty. These costs will eventually transform themselves into financialgains.• Lack of quality initiatives, support, or follow-through actions. The lack of commitment alsocould mean no further initiatives or follow up actions. Employees may tend to think that if theimmediate crisis is adverted, there is less compulsion to follow up on the efforts made.3] HARD MEASURES OF SERVICE QUALITYA standard represented by a number gives a concrete idea about the goal and the gap betweenthe performance and the goal. Thus, this is an ideal way of giving feedback to relevant partiesabout the performance. To understand this hard measure we use the example of the number ofbuses leaving a bus terminal. In the Ishikawa or fishbone diagram, we went into the possiblereasons for the delay. Let us assume that the acceptable standard for the service delivery is amaximum delay of 10 minutes in bus departure from the announced timetable. We coulddevelop a daily measure of how many buses left within this 0-10 minute‘s interval. We could usepercentage of buses that left within 0-10 minutes delay as a measures of overall timelinessquality. The timeliness index would be the percentage of buses leaving on time.Visually, both the operating and supervisory personnel could judge the recent trend, the long-term trend, and whether the performance is satisfactory or not. If a series of such hardmeasures could be developed, the task of quality control would be greatly simplified.4] PREVENTION OF CUSTOMER DEFECTIONIf the quality of the services extended by the organization is perceived by the customers to be ofhigh quality, the customer is likely to remain loyal to the service provider. The perceived level ofservice, above which this level of satisfaction is achieved, is called ‗adequate level of service‘.It has been noted that the switching to another source of service usually does not occursuddenly. The customers start to use the service of the current provider less frequently beforecompletely switching over to another provider. Thus, usually, there is some warning when thecorrection could be made and the trend reversed. We need to make use of the tools ofcomputerization and data mining for this purpose.For example, a frequent flyer program administered by airlines can be used effectively. Fromthe past data, the company knows about the average number of flights undertaken by anexecutive on quarterly basis. Should there be a significant drop in the number of flights flown on
  • 23. this airline during two successive quarters, it may be worth acting upon a line may be droppedto the person enquiring about his health and the reasons for the lack of flying, or evenrequesting a feedback about the airline performance.The techniques of data mining and data manipulation can be used effectively to bring out suchinstances to the attention of the management to plan suitable action. A stitch in time could thussave nine. While a number of managers would agree on the value of customer loyalty, they arenot prepared to invest resources to ensure continued patronage. This total commitment to thecustomer loyalty would ensure long-run success.5] ROLE OF AUTOMATION IN SERVICE QUALITY DELIVERYThe factors contributing to poor quality of service include:• Employees as a source of variation in services delivery• Customers as a source of variation in services delivery• Due to intangible nature of services and inability to describe them, good communication withthe customers may be difficult to achieve.In view of these factors, automation can be a way of delivering high quality services. Theadvantages of automation are:• The role of a service-providing person is greatly reduced or even totally eliminated, therebyreducing one source of services variation. Thus, when the bank passbook entries are madedirectly from a computer through a printer, the role of the person keeping the ledger is greatlyreduced. This ensures accuracy of the work.• Due to moods, emotions and variations in behavior, customers tend to perceive identicalservice delivery at different points to be different. Even the moodiest of the customers, however,can see the consistency in automated delivery.• As automation usually means a limited number of alternatives available on a menu, thecustomer is unable to ask for an impossible service alternative, thereby avoiding the risk offailure.• Automation always provides consistent and standard delivery. While the service may or maynot delight the customer, it would meet the adequate level of service expectation quite easily.Reliability is one of the most important quality dimensions.• Usually the cost of automated delivery is considerably less than that of service delivery by anemployee or representative. A case in point is the ATM. The average cost of cash receipt orpayment transaction by a cashier or teller is Rs 3 to 5 per transaction. A similar ATM transactioncosts Rs 0.25. thus, a considerable saving in operating cost can accrue to the service providerdue to automation.• Automation can produce data about various customer transactions. It can be used as a sourceof information about consumer behavior, special interest, etc. This can be used to makecustomized offerings to high net-worth customers for mutual benefits.6] ROLE OF QUALITY AWARDS AND CERTIFICATIONAn offshoot of the commerce department of the United States Government cal -led ‗NationalInstitute of Standards and Technology‘ offers awards each year in three categories-manufacturing, service and small business-for quality achievements. The award, named after aUS commerce Secretary, was instituted in 1987 to promote excellence in order to meet theJapanese economic threat successfully.Companies have to nominated themselves and make detailed submissions about their qualitypractices and performance. Selected companies are visited by the examiners for a detailed lookat the operations. Thus, two-third points are awarded for direct measurement of quality andcontribution of quality processes. The chosen criteria are good yardsticks for quality. Theyrepresent the entire quality delivery process of services.If a company receives such a highly prestigious award, it can be used as a vital tool for
  • 24. marketing the products or services produced by such a firm. The award focuses onmanagement systems and processes, and even the companies who are not successful inwinning the award benefit enormously by just participating in the award process. The awardwakes up a number of companies and participant managers to the need for TQM. Theimportance of quality in the global competition is brought before the participants and they get ablueprint for action that works.7] ROLE OF SEGMENTATION IN SERVICE QUALITYIMPROVEMENTSegmentation is one of the key techniques used in the current marketing to understand thecustomer needs better and then offer products or services that more particularly meets theecustomer needs. In the case of products, the need for segmentation is obviated to some extentby an elaborate range of products that can be offered simultaneously. Thus, a large number ofalternatives exist for customers to choose from. In the case of services, the number ofalternative services that can be designed to achieve the same end purpose is limited. Forexample, if the tourist company normally offers tours to Far East or European Countries, thenumber of service alternatives is limited to first class or economy class.If the customer is provided with unsuitable service not needed or required by a set of customers,their perception of service quality received is considerably lower. The service provider can adopta number of measures to combat this situation.Specialization in a particular area of service.While there are any number of both public and private hospitals in India, a very largepercentage of them offer extensive services in almost all the areas of medical care. Byspecialization in one area, however, a hospital can develop expertise, reduce costs, and buildup a quality reputation which can be unmatched. In Canada, Dr Shouldice, a pioneer in thetechnique for surgical correction of hernia (a condition usually brought about by the weakeningof the stomach wall), and his colleagues run a number of hospitals which surgically treat onlyhernia. Unlike in the case of other hospitals, the surgery is mostly performed under localanesthesia, with the patient walking in and out of the operating theatre with the help of thesurgeon. The previously operated patients in their post-operative stay in the hospital providemoral and spiritual support to the newly admitted patients, which lead to reduced anxiety andfaster recovery.Adoption of modularization.Instead of offering completely different or distinct services, the company may design add-onmodules and offer them to customers by way of greater variety. Thus, a tour and travelcompany may offer an add-on package for children below 3 or between 3 and 12 years of age.The company may offer an additional stay package at attractive prices, single room supplementfor a price, etc. these modules will effectively meet the demands of the greater segments of thecustomers more precisely.Various modules can be combined to produce distinctive services that appeal to variouscustomers. For example, in Kulu Manali, a large number of hiking alternatives are available to atourist. Thus, the tourist can decide on an uphill and/or downhill walk. The tourism departmentoffers a choice of walk trail for 2 hours, 4 hours, or 6 hours. One can choose either a bus,funicular railway, chair car, ski lift, or even a post office bus to reach the starting point and thenchoose the trail of the selected duration. Even the return arrangement is similarly made byflexible mode of transport. As a result, tourists return to the area frequently and choose themodular package best suited to their pockets and levels of energy.RESEARCHING SERVICE QUALITY
  • 25. The development of reliable, easy-to-easy measures of service quality represents a key aspectof consumer behavior and services marketing research. Indeed, an integral part of anyorganization‘s attempt to still a ‗quality culture‘ is a commitment to a process of ‗continuousimprovement‘. To support this a systematic approach to quality measurement is needed. This isespecially true of ‗pure‘ services organizations, as unlike their counterparts in the manufacturingsector they have fewer objective measures of quality by which to judge their production.Ramaswamy identified three different three different sets of measures that a company must beconcerned with:• Service performance measures that are primarily internally focused and evaluate the currentperformance of the service and ensure that it is continuing to reliably meet the designspecifications.• Customer measures, on the other hand, which are both internally and externally focused,aimed at assessing the impact of the service performance on customers.• Financial measures, which are indicators of the financial health of the organization.Naturally the correlation between financial and customers will determine the revenue generatingpotential of the service, while the relationship between service performance measures andcustomer measures will give some indication as to how the service is performing in customers‘eyes. In turn, this will have a direct bearing on a company‘s financial performance and overallmarket share.1] Regular customer surveysThe incidence of surveys into the level of satisfaction that customers have experienced fromservice providers is increasing throughout the service sector. The increasing range of competingservices available and customers‘ growing awareness of the fact that they are in receipt of aservice for which they pay a price – whether directly or through taxation – has led them toexpect to be consulted and to express an opinion about the level of satisfaction provided.Today, members of the public are in constant receipt of literature from a wide range of serviceproviders asking for comments on the quality of service that they have received. It is probablytrue to sat that most large service providers in both private and public sectors have jumped onthis quality bandwagon, although it is often questionable whether the most appropriate methodsare employed to gather the information. Typical application include filling in a questionnaire onthe plane after a holiday or being asked by the local council to fill in a card headed Customerservice enquiry. Such surveys usually ask recipients to relate any complaints that they mayhave about the services provided and any comments/suggestions for improving them. Theassumption that most people make is that data from such surveys will be used to take correctiveaction where expectations are not reached.2] Customer panelsThese can provide a continuous source of information on customer expectations. Groups ofcustomers, who are generally frequent user, are brought together by a company on a regularbasis to study their opinions about the quality of service provided. On other occasions, they maybe employed to monitor the introduction of a new or revised service – for example a panel couldbe brought together by a building society following the experimental introduction of a newbranch design format.The use of continuous panels can offer organizations a means of anticipating problems and mayact as an early warning system for emerging issues of importance. Retailers have been involvedin the operation of continuous panels contribute to monitor their level of service provision as wellas letting panels contribute to new product development research. User groups also have animportant part to play in many of the UK‘s recently privatized industries such as gas, water,electricity and telecommunication. However, the validity of this research method is quitedependent on how well the panel represents consumers as a whole. There has been a
  • 26. suggestion that the number of people prepared to become members of panels is not rising asquickly as firms‘ appetite for information. The result has been the emergence of ‗professional‘panel members who may not be representative of service users as a whole.3] Transaction analysisAn increasingly popular method of evaluative research involves tracking the satisfaction ofindividuals with particular transactions that they have recently been involved in. This type ofresearch enables management to judge correct performance, particularly customers‘satisfaction with the contact personnel with whom they have interacted, as well as their overallsatisfaction for the service.The research effort normally involves a mail-out questionnaire survey to individual customersimmediately after a transaction has been completed. For example, the Automobile Associationsurveys customers who have recently been served by its breakdown service and many buildingsocieties invite customers who have just used their mortgage services to express their views onthe service received via a structured questionnaire. An additional benefit of this research is itscapability to associate service quality performance with individual contact personnel and link itto reward system.4] Perception surveysThese investigations use a combination of qualitative and quantitative research methods. Manyprofessional services organization have employed such studies in order to develop futuremarket strategies. Their aim is to achieve a better understanding of how customers view anorganization. In other words, to help the firm itself as clients see it. The initial qualitative stagesof a study involve researchers in identifying the attitudes of clients towards the firm as well ashow the firm is perceived by the community at large. Group discussions and/or in depthinterviews are the vehicles used for assessing the perceptions of people at this stage. In thequantitative phase of the survey , clients are asked to judge the company‘s performance using abattery of attitude statements. Perception studies of ten include an analysis of the perceptions ofa firm‘s employees.5] Mystery customersThe use of ‗mystery customer‘ is a method of auditing the standard of service provision,particularly the staff involvement in such provision. A major difficulty in measuring service qualityis overcoming the non-conforming of staff with performance guidelines. This so called service-performance gap is the result of employees being unable and/or unwilling to perform the serviceat the desired level. An important function of mystery customer surveys is therefore to monitorthe extent to which specified quality standards are actually being met by staff.This method of researching actual service provision involves the use of trained assessors whovisit service organizations and report back their observations. Audits tend to be tailored to thespecific needs of a company and focus on an issue that it wishes to evaluate. The format of theenquiry is determined jointly by the client and research organization.The constructive nature of this research technique has to be stressed, as the mystery customercan quite easily be mistaken by staff as an undercover agent spying on them on behalf of themanagement. In particular, if the techniques are applied correctly, they can allow managementto know what is really happening at the sharp end of their business. To be effective mysteryshopping surveys need to be undertaken independently, should be objective and must beconsistent. The training of assessors is critical to the effective use of this research method andshould include, for example, training in observation techniques which allows them to distinguishbetween a greeting and an acknowledgement.6] Analysis of complaints.
  • 27. Dissatisfaction of customers is most clearly voiced through the complaints that they make aboutservice provision. For many companies, this may be sole method of keeping in touch withcustomers. Complaints can be made directly to the provider or perhaps indirectly through anintermediary or a watch dog body. Complaints by customers, referring to instances of what theyconsider poor-quality service may, if treated constructively, provide a rich source of data onwhich to base policies for improving service quality. However, customer complaints are at bestan inadequate source of information. Most customers don‘t both to complain, remain dissatisfiedand tell others about their dissatisfaction. Others simply change to another supplier and do notoffer potentially valuable information to the service provider about what factors where wrongwhich cause them to leave.In truly market - oriented organizations, complaints analysis can form a useful pointer to wherethe process of service delivery is breaking down. As part of an overall programme for keeping intouch with customers, the analysis of complaints can have an important role to play. Thecontinuous tracking of complaints is a relatively inexpensive source of data which enables acompany to review the major concerns of customers on an ongoing basis and hope fullyrectifies any evident problems. In addition the receipt of complaints by the firm enable staff toenter into direct into direct contact with customers and provides an opportunity to interact withthem over their matters of concern. As well as eliciting customers‘ views on these issues inparticular, complainants can also contribute views about customer service in general. Manycompanies have gone to great lengths to make it easy for customers to complain, for exampleby creating free phone telephone lines and making comment cards readily available.7] Employee researchResearch undertaken among employees can enable their views about the way that services areprovided and their perceptions of how they are received by customers to be taken into account.Data gathered from staff training seminars and development exercises, feedback from Qualitycircles, job appraisal and performance evaluation reports, etc. can all provide valuableinformation for planning quality service provision. One way in which formal feedback from staffcan be built into a systematic research program is the operation of a staff suggestion scheme.The proposals which staff may make about how services could be provided more efficientlyand/or effectively certainly do have an important role to play in moving service quality.Research into employees‘ needs can also identification of policies which improve theirmotivation to deliver a high quality f service. Many of the techniques employed to elicit the viewsof employees as internal customers are in principle the same as those used in studies ofexternal customers. Interviews and focus may be used in the collection of qualitative data onemployee needs, wants, motivations and attitudes towards working conditions, benefits andpolicies.In the respect of obtaining involvement and participation, involving employees in the researchprocess and its findings, for example by using them to gather data, showing them videotapes ofgroup discussions and interviews with customers and circulating them with the findings ofresearch reports, can do a lot for improving their understanding of service quality issuesthroughout their organization. There are many barriers to the flow of information fromemployees to managers, especially in organization where there is no culture of listening to staff.Where there are clearly identified, and for acting on the result, a shared commitment toimproving quality can greatly improve customers‘ perception.8] Benchmarking studiesThe nature of customers‘ quality expectations in other similar service industries can be usefulsource of information for managers. It is often apparent that customer needs may be similarbetween different industries, even though the service product on offer is ostensibly quitedifferent. Many common dimensions cut across the boundaries of industries and apply to
  • 28. services in general – for example courteous and competent staff, a pleasant environment, andhelpfulness, to name but a few. It can therefore be beneficial to investigate the nature of serviceprovision in closely related services areas, and draw upon the findings of any research that hasbeen made available. In particular, it is worth while investigating what is known in those servicessector that have a good track record of analyzing and responding to customers‘ needs andidentifying whether it is applicable to an industry that has only recently adopted a customer-ledapproach. For example, it is possible to learn a lot about certain aspects of hospital service fromwhat hotel and catering establishments have been researching and practicing for someconsiderable time. Continuing with this theme, many services organizations that have beenoperating outside the private market place for many years can benefit from an understanding ofthe operations of their counterparts in other countries that have openly marketed their services Iin a freely competitive market. In this way, managers within the UK National Health Service maylearn a lot about customer care by examining health services in the USA.The term benchmarking is frequently used to describe the process by which companies setstandards for themselves, based on a study a best practice elsewhere. Best practice could bedefined in terms of firms within the same sector, or completely different sectors which sharesimilar processes.Benchmarking can be undertaken at a number of levels, based on what is compared and whatthe comparison is being made against:• Performance benchmarking This is essentially based on outcome measures.• Process benchmarking For example, the efficiency and effectiveness of customer handlingprocedures.• Strategic benchmarking For example, comparing the integrity of a company‘s strategic planwith best practice in the industry.• Internal benchmarking This involves comparing internal processes and structures.• Competitive benchmarking This may be with respect to market share, selling price etc.• Functional benchmarking Sometimes the task will be compare the performance of acompany‘s functions with best practice.Benchmarking involves a five-step continuous process: plan the study; from the benchmarkingteam; identify potential benchmarking partners; collect and analyze the information; and adaptand improve. While benchmarking produces a standard against which improvements arecontinuous and benchmarks can go out of date very quickly.9] Intermediary researchService intermediaries often perform a valuable function in the process of service delivery,performing their role in quite a different manner to goods intermediaries. Research intointermediaries focuses on two principle concerns:• Firstly, where intermediaries form an important part of a service delivery process, the qualityperceived by a customer is to a large extent determined by the performance of intermediaries.In this way, the perceived quality of an airline may be tarnished if its ticket agents are perceivedas being slow or unhelpful to customers. Research through such techniques as mysterycustomer surveys can be used to monitor the standard of quality delivered by intermediaries.• Secondly, intermediaries as co-producers of a service are further down the channel ofdistribution and hence closer to customers. They are therefore in a position to provide valuablefeedback to the service principal about consumers‘ expectations and perceptions. As well asconducting structured research investigations of intermediaries, many services principals find itpossible to learn more abut the needs and expectations of their final customers during theprocess of providing intermediary support services such as training.McDonalds – A Story of Service Recovery
  • 29. Background Note:The McDonald brothers, Richard and Maurice opened a drive-in restaurant in San Bernardino,California, in 1937. By the late 1990s, after years of declining earnings and poor customerratings, McDonald‘s Corp., the largest fast food chain in the world, seemed to have lost its claimto providing the ‗Great American Meal‘. The company, which was once the favorite destinationof fast food lovers around the world, had been receiving low ratings on quality and customersatisfaction since the early 1990s. However, under the leadership of Jim Cantalupo, who wasmade CEO in early 2003, and Charlie Bell, the President, McDonald‘s managed a relativelyquick turnaround. Under the turnaround plan, McDonald‘s introduced substantial system-widechanges that overhauled the company‘s products, operations and marketing. The new planeliminated the negative elements in the system, while retaining and building on the positiveaspects.No Longer the ‗Great American Meal‘:Through the decades, McDonald had promoted itself as the provider of the ‗Great AmericanMeal‘. However, by the1990s, it was clear that the company has lost its claim to that title.Changing customer eating habits, increased competition and complacence on the part of thecompany and its franchises, were the main reasons for the difficulties experienced by it. The1990s saw an increasing interest in healthy living and physical fitness in the US. People realizedthat regular consumption of fast food could play havoc with their health by increasing theirintake of Cholesterol and fat, and lead to a spate of problems related to obesity and heartdisease. Instead of fast food, which comprised mainly of burgers, fries and soda, peopleswitched to sandwiches and salads, which were perceived as healthier foods. Consequently,company‘s like Subway and Panera Bread, which offered sandwiches and salads in a casualdinning atmosphere, began to take over the customer base of fast food chains like McDonalds.These restaurants created a new subcategory in the industry and were called ‗fast casualoutlets‘. In an attempt to recover their lost customers, McDonald Start including healthier itemslike salad and sand witches in their menu. For instance, McDonald introduced the McLeanDeluxe Burger in the early 1990s a 91% fat free patty, as a substitute for the Big Mac. However,people hated its taste and McDonalds was forced to phase out the product a couple of yearsafter it was launched. Mc Donald also attempted to shift to low fat frying oil in2002, but it wasnot able to give the trademark McDonalds taste, and customers rejected the change.Considering peoples perception of fast food, it did not take long for the industry to become thetarget of lawsuits filed by people who blamed the fast food industry for their obesity. Activistspublished statistics showing that McDonald‘s food had a high proportion of unhealthy fats, andreports also made public the unhygienic careless way in which the food was being prepared.Although none of the lawsuits filed against the company were successful, analysts said that theygenerated a large amount of bad publicity. Despite the protests and the accusations against theindustry, analysts noted that customer behavior in the fast food industry was paradoxical.People realized that junk food was unhealthy and criticized companies for serving it, but whenhealthier alternatives were made available, customers did not like them.Apart from increasing public aversion to fast food, increased competition also harmedMcDonald‘s adversely. McDonald‘s had to face competition not only from fast food chains likeBurger King, Wendy‘s and Pizza Hut, but also from chains like Subway, Cosi and Panera Bread,which dealt in salads and sandwiches. McDonald focused on building more stores, consumerswere demanding better food and more variety. Acc. To a survey conducted by Business week,consumers who ate fast food at least once a month rated both Wendy‘s and burger king betterthan McDonald‘s, as far as the quality of food was concerned.McDonald‘s‘ continuous expansion and failing franchisee relations had an adverse effect onservice and quality, which had been its USP for many years. In 1990s, McDonald‘s stoppedgrading its franchisee‘s by mystery shoppers on parameters such as cleanliness, speed and
  • 30. service. In 1992 McDonald‘s introduced ‗made for you‘ kitchens to counter custom-made foodsystems at Wendy‘s and Burger King, but it extended the time required to serve instead ofspeeding it up. Research also found that slow service and rude professional employees weremajor sources of customer‘s complaints. Acc. to a survey, Wendy‘s took 127 seconds to serveits customers while V took 163 seconds. Besides, McDonald‘s products had become stale andthe company had failed to come out with successful product launches since the early 1980s.Although it attempted in the 1990s, to introduce 40 food items but most of them failed to appealto customers.The Golden Arches Rise Again:After McDonald‘s announced its first quarterly loss in38 years in 2003, the board realized thatbig changes were required in the company‘s strategy and direction. The board oustedGreenberg and installed Cantalupo as the CEO. Soon after taking over, Cantalupo prepared the‗plan to win‘, which outlined McDonald‘s strategy for the next three years. The plan streamlinedthe company‘s operations and aimed to create a McDonald‘s that was more geared to the newconditions in the fast food industry. The cornerstone of the turnaround plan was theimprovement of comparable sales, which could be increased by improving the quality of serviceand operations in existing restaurants, instead of funneling capital spending into new openings.Towards this end, the company made several improvements designed to help the restaurantsfunction more efficiently. For instant, it reduced the number of shelf-keeping units by 84, whichreduced inventory, and designed new menu boards that would include more pictures to makeordering easy. It also introduced new automated drink dispensers, French fry bins, and ahydraulic vegetable-oil-delivery system that would save time in the kitchen.The menu was simplified and included a greater number of healthy options, while doing awaywith slow moving products. For instance, instead of selling separately a Double Cheeseburgermeal, a Quarter Pounder meals, and a Two-Cheeseburger meal, McDonald‘s planned to sellonly the Quarter Pounder. The number of items in a Value Meal was also pared down from 13to 8.In a move to offer a healthier menu McDonald‘s Increased its focused on salads andsandwiches. In 2003, it introduced entrée-sized salads, along with items like McGriddlesbreakfast sandwiches, white-meat chicken nuggets and chicken nuggets and chicken strips,which were reasonably successful. It also began offering fruit with Happy meals.In early 2004, McDonald‘s began phasing out its ‗super size‘ portions of fries and soft drinks. Italso launched the Adult Happy meal, which was a meal designed for grown-ups that included asalad, bottled water, a pedometer and a booklet of walking tips. Soon after introducing thisconcept, comparable store sales increased 10.5%.Some McDonald‘s outlets were also diversifying into coffee. Some Australian franchisees weretesting a concept called McCafe in over 500 outlets in Australia.McDonald‘s was also on a drive to improve quality of service and maintenance standards in itsrestaurants. In 2003, Cantalupo reinstalled the grading system by ‗mystery shoppers‘ to identify,improve, or eliminate underperforming restaurants and to check whether the franchisees weremaintaining the expected high standards of hygiene and cleanliness. Under the turnaround plan,the company decided that each restaurant would be visited by mystery shoppers- anonymousvisitors paid to observe restaurants- at least 16 times a year.In 2004, the company introduced the ‗travel path‘ which required that a staff member, in arestaurant, had to walk around at regular intervals during the day. to ensure that everything wasin order.Surveys conducted by the company in the early 2000s revealed that Ronald McDonalds wasone of the best recognized icons in the US, ranking just behind Santa Claus. McDonald‘s beganto showing signs of turning around by early 2004. Number of satisfied customers increased bymore than 2 million over 2003-2004.
  • 31. Fast Food restaurant – Factor AnalysisFast Food Restaurant Attributes Critical Factors Influencing Service QualityIndividual attention paid to you, when in group(0.663)Staff‘s acknowledgment on entering the outlet (0.655)Providing reliable information—menu ingredients, nutritional value, offers, etc.(0.683)Response to suggestions/feedback/complaints(0.628)Staff‘s knowledge in answering(0.621)Accommodation of requests (0.594)Assistance for seating (0.591)Service provision in time (0.570)Effective utilization of personal details – for mailers, feedback, offers, etc. (0.542)Recreational or special facilities – play area for children, indoor games, etc. (0.508)Personalized service and customer delightMaintenance of Hygiene/ Cleanliness (0.715)Correct provision of ordered items (0.688)Accuracy in billing (0.665)Provision of items mentioned in the menu card (0.646)Quality of preparation : Ordered items (0.635)Convenience of outlet hours (0.631)Image of the fast Food chain (0.571)Courtesy shown by staff (0.555)Service design and deliveryFast Food Restaurant Attribute Ratings
  • 32. Fast Food Attributes Dimension RankThe Fast Food outlet‘s commitment to quality, hygiene and ethicsEMPATHY IThe knowledge and courtesy of the staff and their ability to convey trust and confidenceASSURANCE IIThe willingness of the fast food outlet to help its CustomersRESPONSIVENESS IIIThe appearance of the outlet, its physical facilities, personnel and communication materialsTANGIBILITY IVThe ability of the fast food outlet to perform the promised service dependably and accuratelyRELIABILITY VGaps in Fast Food ServiceResearch Questions: This study proposes to investigate the relationship between the perceivedand expected service quality among consumers of fast food services.Research Methodology: Sample population was 100 individual. Avoiding all the drawbacks ofthe SERVQUAL method and taking necessary precautions I have used the gap theorymethodology for measuring service quality performance of McDonalds, Pizza Hut & Dosa Plaza.I have applied the SERVQUAL instrument to the fast food industry. I have formulated it as perthe particular industry and its relevancy to customers.I made my respondents to compare McDonalds, Pizza Hut & Dosa Plaza with the ideal firm inthe fast food industry. In order to prevent biases, I measured the customer expectations prior tothe service and customers perception after the service delivery. I have considered the fact thatcustomers are affected by advertising and word-of-mouth communications, and thus the timebetween measuring expectations and perceptions have been kept very less.Results and data analysis:The service quality evaluations for each of the components of service quality for McDonalds,Pizza Hut & Dosa Plaza are:Dimension McDonalds Pizza Hut Dosa PlazaTangibles -1.09 -1.05 -1.8Reliability -1.6 -1.2 -0.931Responsiveness -1.72 -1.4 -1.86Assurance -0.9 -0.936 -0.5Empathy -2.45 -2.5 -1.584The above table shows, that the fast food industry received strong ratings on the empathydimensions, particularly caring and individualized attention and low ratings on the Assurancedimensions. This study used a seven point‘s scale range from ―strongly agree‖ (7) to ―stronglydisagree‖ (1), to assess all five dimensions of service.Table I suggests that Dosa Plaza is the highest performing fast food restaurant and holds anadvantage over others in the area of perceived reliability, assurance and empathy dimensions.Whereas Pizza Hut is good at responsiveness and tangible dimensions.Responses were computed by subtracting the expectation response from the perceptionresponse. Each aspect of the quality of service showed differences with respect to the size ofgap score. The bigger the gap is, the more important the dimensions from the customer‘s point
  • 33. of view, which would be ranked in the following, order: Empathy, Responsiveness, Tangibles,Reliability and Assurance.None of the service quality dimensions had a positive SERVQUAL score, suggesting that theFast food restaurants considered for this study did not meet or exceed consumer‘sexpectations.Conclusion:Findings from this study provide initial direction in determining the optimum service qualityattributes to focus on in promoting fast food services. No positive scores were found. Thelargest discrepancy was found along the ―empathy‖ dimension. This indicates that the samplepopulation appears not to be getting what they expect from their fast food service experience asfar as individual attention is concerned.If the industry persists in measuring and monitoring the perceptual aspects of fast food servicequality, the complementary aspects of basic outcome must be tracked as well to ensure anappropriate and satisfactory customer experience.Managerial Implications:These results have several managerial implications, in that they support the findings of previousresearch which indicates that customer contact employees play an important role in affectingcustomer perception of service quality. In general, it is important for managers to identify therelevant intrinsic and extrinsic cues used by consumers in order to communicate the relevantquality signals to them. The implication of this research is to design a service delivery systemthat promotes positive ―moments of truth‖. Moreover, using service quality assessment likeSERVQUAL can ensure that fail points in customer encounters are reduced, leading to apositive experience and strong customer referrals.Additionally, managers should make key performers aware of their role and provide them withadequate training in order to offer a consistently high standard of service delivery. We saw lowcustomer ratings on the empathy dimension of service quality in our research. Due to thedominant role played by the employees in the fast food industry, management should makesure that there are always sufficient staffing levels to cope with peaks and troughs in demand. Indoing so, they will optimize service delivery and provide consistent service at all times.Finally, it is important that the service quality be assessed on a regular basis. The firstassessment provides a baseline for comparison with future assessments. This comparison isessential for gauging the effectiveness of service quality improvement efforts and identificationof service quality trends as they emerge. The frequency of reassessments will vary with theindividual firm‘s situation.ConclusionThe ―Service Quality Top Ten‖ LessonsThe Key lessons which I learned after the whole study and the developments of the last 10-15years are as follows:Service delivery is a process, it is as subject to the disciplines of analysis and process control asany manufacturing process. Customer value is ―built in‖ to service design, and it is possible toevaluate service design systematically using tools such as service blueprinting, Gap model ofservice delivery, service profit chain, return on quality analysis.―The times are changing‖, as Bob Dylan wrote gives a conclusion that the old road for financialsuccess for business was to seek profit growth through market share and through costeconomies. Times have changed, and the new order identifies that both cost reduction and
  • 34. revenue increases through retention and satisfaction, or seeking market share and customerloyalty.Everything includes service, and most things are predominantly services.Think globally, act locally. Larger organizations need to recognize that in delivering customervalue, homogenous an enterprise following a single, perspective customer value formuladoesn‘t work optimally.Quality isn‘t free. Investments in service quality improvements must be made with the an eye onNet Present Value (NPV) or Return on Investment (ROI) as other investments, and with thesame discipline in identifying anticipated benefits, and measurement of outcomes.Quality doesn‘t always lead to profits; ―For an individual firm, higher service quality is not anunconditional guarantee of profitability‖. Blind faith in quality initiatives is often a cover on theorganization‘s failure.Do it with numbers. Clearly there is an emerging science to developing quality service, andincreasing customer value. There are many tried and true methods for measuring customersatisfaction.One size doesn‘t fit all. The ultimate goal of the customer value models is company profitability– but service delivery systems aren‘t designed as one size to fit all. The consequence may bean active plan to lose some customers.Understanding customers‘ needs – even when you know different customers have differentneeds, recognize that each customer‘s needs may vary dependent on situational factors.And, lastly, when in doubt – ask. The best way to understand what customers‘ value is to askthem. The Gap model of service delivery is useful approach to ask customers what they value,and explore with staff and management as to how to deliver it.Improving service quality is certainly not a simple, straight forward exercise. Service quality canbe improved if the following areas are given due attention:• Identifying primary quality determinants,• Managing customer expectations,• Managing evidence,• Educating customers about the service• Developing a quality culture,• Automating quality,• Following up the service quality information system,• Employing benchmarking wherever possible and• Keeping track of internal costs, external costs and quality maintenance costs.