Service Quality and

Customer Satisfaction

Service Quality
Quality is the totality of features or characteristics of
a product or service that bears its ability to satisfy
stated or implied needs of customers.
Quality is related to costs, profitability, customer
satisfaction, customer retention, behavioral intention
and positive word of mouth.
Quality is one of the most influential factors in the
consumers purchase decision process.
Service Quality is a comparison of customers
expectations with customers perceptions about a
service, which can affect their future purchasing
behavior.
Service Quality is an attitude of customers formed
by a long-term, overall evaluation of a firms
performance.
2

How Is Service Quality

Perceived?

When service organizations understand how

services are evaluated by consumers in
terms of quality, it is possible to design
strategies to manage these evaluations and
influence them in a desired direction.
Alfrecht and Zemke identified four factors
that influence the perceived service quality:
Care and concern
Spontaneity
Problem solving
Recovery
3

How Is Service Quality Perceived?

Word of
mouth

Service Quality
Dimensions
1. Reliability
2. Responsiveness
3. Assurance
4. Empathy
5. Tangibles

Personal
needs

Expected
service

Perceived
service

Past
experience

External
Communication

Service Quality Assessment

1. Expectations exceeded
ES<PS (Quality surprise)
2. Expectations met
ES=PS (Satisfactory quality)
3. Expectations not met
ES>PS (Unacceptable quality)

Factors Forming Customers Expectations

1.Market communication: Direct and

indirect channels
2.Image: The image of a service firm at the
corporate level as well as the local level.
3.Word-of-mouth
communication:
Advice and information support from
others.
4.Customer needs: the need intensity of
consumers.
5.Customers past experiences
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Measures of Service Quality

Customer-defined standards and measures of service
quality can be grouped into two broad categories:
1. Soft measures
2. Hard measures
. Soft measures refer to the standards and measures
that cannot easily be observed and must be collected
by talking to customers, employees or others.
. Soft standards provide direction, guidance and
feedback to employees on ways to achieve customer
satisfaction and can be quantified by measuring
customer perceptions and beliefs.
Example:
SERVQUAL
Surveys, service feedback cards, mystery shopping,
focus group discussions, service reviews,
customer
6
advisory panels, employee surveys and panels.

Measures of Service Quality

Hard measures refer to the standards and measures that
can be counted, timed or measured through audits.
Hard measures typically refers to operational processes or
outcomes and include such data as uptime, service
response times, failure rates, and delivery costs.
Example:
How many telephone calls were abandoned while the customer
was on hold?
How many minutes customers had to wait in line at a particular
stage in the service delivery?
The time require to complete a specific task
The temperature of a particular food item
How many trains arrived late?
How many bags were lost?
how many patients made a complete recovery following a
specific type of operation?
How many orders were filled correctly?
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Scope of Service Quality

Quality from five perspectives:
1.Content: Are standard procedures being
followed?
2.Process: Is the sequence of events in the
service process appropriate?
3.Structure: Are the physical facilities and
organizational design adequate for the service?
4.Outcome: What change in the status has the
service effected? Is the consumer satisfied?
5.Impact: What is the long-range effect of the
service on the consumer?
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Dimensions of Service Quality

Gronroos (1983) has identified two dimensions
of service quality in relation to quality
perception by customers:
Technical quality:
Technical quality refers to the result of the service and/or
the question, what has been provided?
Technical quality refers to the relatively quantifiable
aspects of the service that consumers experience during
their interaction with a service firm.

Functional quality:
Functional quality refers to the way the service has been
delivered and relates to the question, how has the
service been provided?
The way service processes are handled in a service
encounter is called functional quality.
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Determinants of Service Quality

Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1988). SERVQUAL: A Multiple-Item Scale
for Measuring Consumer Perceptions of Service Quality. Journal of Retailing, 64(1), 12-40.

Tangibles
Tangibles: appearance of physical facilities,
equipment, personnel, and written materials.
1.

Equipment is modern-looking.

2.

The physical facilities are visually appealing.

3.

Employees are neat appearing.

4.

Materials associated with the service (such as

pamphlets or statements) are visually appealing.

Reliability
Reliability: ability to perform the promised service
dependably and accurately.
1.

Promises are kept.

2.

Problems are solved sincerely.

3.

Service is performed right the first time.

4.

Time commitments are honored.

5.

Error-free records.

Responsiveness
Responsiveness: willingness to help customers and
provide prompt service.
1.

Employees will tell customers exactly when services

will be performed.

2.

Employees will give prompt service to customers.

3.

Employees will always be willing to help customers.

4.

Employees will never be too busy to respond to

customers requests.

Assurance
Assurance: employees knowledge and courtesy and their
ability to inspire trust and confidence.
1.

The Behavior of employees will instill confidence in

customers.

2.

Customers will feel safe in their transactions.

3.

Employees
customers.

4.

Employees will have

customers questions.

will

be

consistently

the

courteous

knowledge

to

with

answer

Empathy
Empathy: caring, individualized attention given to
customers.
1.

Company will give customers individual attention.

2.

Company will have employees who give customers

personal attention.

3.

The employees will understand the specific needs of

their customers.

4.

Company will have the customers best interest at heart.

5.

The operating hours is convenient to its customers.

The Gap Model of Service Quality

Parasuraman, A., Zeithaml, V.A., and Berry, L.L.
(1985), identify five major gaps that organizations
should measure, manage and minimize to meet
customers expectations of the customer experience,
in their article A Conceptual Model of Service
Quality and Its Implications for Future Research,
Journal of Marketing, vol. 49, pp. 41-50,
The model clearly determines two different types of
gaps. The customer gap (Gap 5) and the provider
gaps (Gap 1 to 4).
Gap 5 = f (Gap 1, Gap 2, Gap 3, Gap 4)
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The Gap Model

17

The Gap Model

Gap 5 (Customer Gap): The Gap between
customer expectations and perceptions.
The central focus of the gaps model is the
customer gap. Firms will want to close the gapbetween what is expected and what is received-to
satisfy their customers and build long-term
relationships with them. To close this allimportant customer gap, the model suggests that
four other gaps-the provider gaps-need to be
closed.
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The Gap Model

Gap 1 (Management Perception Gap): The Gap between
Consumer Expectation and Management Perception. Not
knowing what customers expect.
Gap 2 (Quality Specification Gap):The Gap between
Management
Perception
and
Service
Quality
Specification. Not selecting the right service designs and
standards.
Gap 3 (Service Delivery Gap): The Gap between Service
Quality Specification and Service Delivery. Not delivering
to service standards.
Gap 4 (Market Communication Gap): The Gap between
Service Delivery and External Communications. Not
matching performance to promises.
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Key Factors Leading to Provider

Gap 1
Customer Expectations

Gap
1

Company Perceptions of Customer Expectations

20

Key Factors Leading to Provider

Gap 2
Company Perceptions of Customer Expectations

Gap
2

Customer-Driven Service Designs and Standards

21

Key Factors Leading to Provider

Gap 3
Customer-Driven Service Designs and Standards

Gap
3

Service Delivery

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Key Factors Leading to Provider

Gap 4
Service Delivery

Gap
4

External Communications to Customers

23

Key Factors Leading to the Customer

Gap

Gap
5

Customer
Expectations

Customer
Perceptions

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Five Myths and Truths of Service Quality

Evert Gummesson (1991), Truths and Myths in Service Quality, International
Journal of Service Industry Management, 2(3): 7-16.

Myth 1: Service quality is difficult to assess

because services are intangible. Goods quality
is easy to assess because goods are tangible.
Truth: service quality is different from goods quality, but
there is no evidence that it is more difficult to assess.
Service quality has not been approached systematically
enough. It has lived in the shadow of goods quality
management system. The degree of controllability is
different for services due to co-production with
customers, limited control over certain elements of
service delivery process, design of final form of service
on the spot and intrafunctional dependency.
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Five Myths and Truths of Service Quality

Myth 2: Better quality costs more and causes

prices to go up. It is more or less a linear
relationship between cost and quality.
Truth: Quality is free, the slogan of Philip
Crosby, has become famous for reversing
this myth. The truth is that there is no
general relationship. Sometimes high
quality leads to higher costs; higher costs
leads to lower quality; costs may go up
and quality may remain the same and
costs may go up and quality may go down.
Anything may happen in services in
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different occasions and in different

Five Myths and Truths of Service Quality

Myth 3: Variability of service quality is a

major
problem
because
of
the
customers role and customer-perceived
quality and satisfaction.
Truth: Along with service delivery
process, the service design and the
ability to manage quality internally
with the support of operations
management and statistical quality
control
influence
service
quality.
Service quality must be managed
27

Five Myths and Truths of Service Quality

Myth 4: Market research, training programs, quality
circles, measurement techniques, improved service
design, incentive schemes to employees, and a host
of strategies such as continuous improvements and
zero defects will guarantee improved service quality.
Truth: All these are to some extent superficial, if
the commitment by management and staff is not
genuine and does not come from heart. As
services evolve in interaction with customers,
empathy, compassion, emotions, involvement,
sense of humor, tacit knowledge and intuition- all
dimensions of the love factor become essential, in
the decisive contributions to service quality.
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Five Myths and Truths of Service Quality

Myth 5: Improved service quality leads

to improved quality perceptions by
consumers.
Truth: Not necessarily always. You
can improve customer-perceived
quality,
without
changing
the
service, by putting the expectations
on
the
right
level.
Raising
expectations too much may create
dissatisfied customers.
29

Philosophies Relating to Service Quality

1. Quality must be perceived by customers

2. Quality must be reflected in every company
activity
3. Quality requires total employee commitment
4. Quality can always be improved
5. Quality does not cost more
6. Quality improvement sometimes requires
quantum leaps
7. Everyone contributes to customer-perceived
quality
8. Quality should be monitored by the
employees
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Zero Defects versus Zero Defections

Zero defects: A model used in manufacturing
that strives for no defects in goods produced. It
is
the
target
quality
standards
for
manufacturing firms. There should not be any
defects in performance, and the goal should be
to achieve 100% perfection.
Zero defections: A model used by service
providers that strives for no customer
defections to competitors. In the case of
services, customers are sold promises first. If
the service firm does not fulfill the promises
made to the customers, they will leave the
company.
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Service Excellence
Service excellence means offering superior quality performance
consistently and often beyond the bench-marking performances.
It requires well-defined organizational processes, policies,
procedures and quality-oriented service culture.
Ford, Heaton & Brown (2001) provide the following guidelines to
achieve service excellence:
1. Base decisions on what the customers want and expect.
2. Think and act in terms of the entire customer experience.
3. Continuously improve all parts of the customer experience.
4. Hire and reward people who can effectively build relationships with
customers.
5. Train employees on how to cope with emotional labor costs.
6. Create and sustain a strong service culture.
7. Avoid failing your customers twice.
8. Empower customers to co-produce their own experience.
9. Get managers to lead from the front, not the top.
10.Treat all customers as if they were guests.
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Research Approaches on Service Quality

The following are some of the research approaches
through which service firms can have useful information
on general or specific issues related to service quality:
1. Regular customer surveys
2. Use of consumer panel
3. Transactional analysis
4. Perception surveys
5. Mystery shopping
6. Analysis of complaints
7. Employees research
8. Post-transaction surveys
9. Focus group interviews
10.Similar industry studies
11.Intermediary research
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Service Quality Spells Profits

Defensive
Marketing

Service
Quality

Costs

Margins

Volume of
Purchases
Price
Premium

Customer
Retention

Profits

Word of
Mouth

Market
Share

Sales

Offensive
Marketing

Reputation
Price
Premium

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Productivity in a Service Context

Productivity measures the amount of output produced relative
to the amount of inputs used. Hence, improvements in
productivity require an increase in the ratio of outputs to inputs.
Intangible nature of many service elements makes it hard to
measure the productivity of service firms, especially for
information based services
Measuring Productivity:

Quantitative measures of productivity: Here

management is trying to improve the numbers of
output or finished products or services. Example:
counting the number of customers served per unit of
time.
Qualitative
measures
of
productivity:
Here
management is trying to improve the quality of output
or finished products or services. This technique give
stress on efficiency but neglect effectiveness.
35

Levels of Productivity

Level of productivity means the units of

analysis used to calculate or define
productivity. For example;
Aggregate productivity is the total level
of productivity achieved by a country.
Industry productivity is the total
productivity achieved by all the firms in a
particular industry.
Company productivity is the level of
productivity achieved by an individual
company.
Unit
productivity
refers
to
the
36
productivity achieved by a unit or

Types of Productivity
1. Total factor productivity is an overall indicator of
how well an organization uses all its resources, such as
labor, capital, materials and energy, to create all its
products and services.
Outputs
Productivity = ---------Inputs
2. Partial productivity relates the value of all output to
the value of major categories of input (Like- Labor),
using the ratio,
Total output
Productivity = --------------Partial input
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Types of Productivity
Outputs
Labor Productivity = -------------Direct labor
Example:
Comparison between productivity of one of GP
customer care center and City Cell customer care
center:
Productivity (GP)
=125/15=8.33 [here,
125=customer, 15=employee]
Productivity (City Cell) =100/8 =12.5 [here,
100=customer, 8=employee]

38

Importance of Productivity
From company point of view:
1. Efficiency measure of a employee
2. More benefit for the organization
3. Meet consumer competitive priorities
4. Less waste
From customer or societal point of view:
5. Lower price for product or services
6. Quality product
7. Economic growth
8. Higher standard of living
39

Factors Influencing Productivity

1. Coordination
with
all
of
the
departments in an organization
2. Proper implementation of various
statistical tools
3. Managerial
and
non-managerial
efficiency
4. Workers skill and attitudes
5. Technology
6. Operation system
40

Improving Productivity
Productivity can be improved following two ways:
1. by improving operations
2. by increasing employee involvement
Operations can be improved by;
Spending more on Research & Development (R&D): One way
that firms can improve operations is by spending more on
R&D. R&D spending helps identify new products, new uses
for existing products and new methods for making products.
Each of these research activities contributes to productivity.
Reassessing & Revamping transformation facilities: Another
way firms can boost productivity through operations is by
reassessing (to judge again the quality or value of
something) and revamping (to give something a new form or
structure) their transformation facilities.
41

Improving Productivity
Employee involvement can be improved by;
Participation in decision making: Participation can
enhance quality. It can also boost productivity.
Cross training: Increasing the flexibility of an
organizations workforce by training employees to
perform several different jobs. Such as cross
training allows the firm to function with fewer
workers because workers can be transferred easily
to areas where they are most needed.
Rewards: Rewards are essential to making
employee involvement work. Firms must reward
people for learning new skill and using them
proficiently.
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Strategies for Improving Productivity

Company-driven approaches:
1. Careful control of costs at every step in the process.
2. Efforts to reduce wasteful use of materials or labor.
3. Matching productive capacity to average levels of demand.
4. Replacing workers by automated machines.
5. Providing employees with equipment and databases that
enable them to work faster and/or to a higher level of
quality.
6. Teaching employees how to work more productively.
7. Broadening the array of tasks that a service worker can
perform.
. Customer-driven approaches:
1. Changing the timing of customer demand.
2. Involve customers more in production.
3. Ask customer to use third parties.
43

Total Quality Management (TQM)

TQM is continuous, customer-centered, employeedriven improvement.
TQM is a strategic commitment to improving quality by
combining statistical quality control methods with a
cultural
commitment
to
seeking
incremental
improvements that increase productivity and lower
costs.
TQM involves the organizations long-term commitment
to the continuous improvement of quality throughout
the organization, and with the active participation of all
members at all levels-to meet and exceed customers
expectations.
TQM is a real and meaningful effort by an organization
to change its whole approach to business and to make
quality a guiding factor in everything the organization
does.
44
TQM is defined as creating an organizational
culture

Principles of TQM
1. Do it right the first time:
Errors, if any, should be caught and
corrected at the source, i.e., where the
work is performed.
2. Be customer-centered:
Customer-centered means,
Anticipating the customers needs
Listening to the customer
Learning how to satisfy the customer,
and
Responding appropriately45 to the

Principles of TQM
3. Make continuous improvement a way of life:
The Japanese word for continuous improvement is
KAIZEN, which means improving the overall system by
constantly improving the little details. KAIZEN practitioners
view quality as an endless journey, not a final destination.
They are always experimenting, measuring, adjusting, and
improving. There are four general avenues for continuous
improvement;
i. Improved and more consistent product & service quality
ii. Faster cycle time (in cycle ranging from product
development to order processing to payroll processing)
iii. Greater flexibility (faster response to changing customer
demands and new technology)
iv. Lower costs and less waste (eliminating needless steps,
scrap, rework, and non-value adding activities)
46

Principles of TQM
4. Build teamwork and empowerment:
TQM is employee-driven. It empowers
employees at all level in order to top their
full
creativity,
motivation,
and
commitment.
Empowerment
means
making employees full partners in the
decision-making process and giving them
the necessary tools and rewards.

47

Elements of TQM
1. Strategic Commitment: The starting point for TQM is a
strategic commitment by top management. Such commitment
is important for several reasons. First, the organizational
culture must change to recognize that quality is not an ideal
but is instead an objective goal that must be pursued. Second,
a decision to pursue the goal of quality carries with it some
real costs-for expenditures such as new equipment and
facilities. Thus without a commitment from top management,
quality improvement will prove to be just a slogan.
2. Employee involvement: Employee involvement is another
critical ingredient in TQM. Almost all successful quality
enhancement programs involve making the person
responsible for doing the job responsible for making sure it is
done right. Work teams (are responsible for the daily work of
the organization; when empowered, they are self-managed
teams) are common vehicles for increasing employee
involvement.
48

Elements of TQM
3. Materials: Another important part of TQM
is improving the quality of the materials that
organization use.
4. Technology: New forms of technology are
also useful in TQM programs. Automation
and robots, for example, can often make
products with higher precision and better
consistency than can people. Investing in
higher-grade machines capable of doing jobs
more precisely and reliably often improves
quality.
5. Methods: Improved methods can improve
49
product and service quality. Methods
are

Tools & Techniques of TQM

1. Benchmarking: Benchmarking is the practice of
identifying, studying, and building upon the best practices
in ones industry or in the world. Benchmarking is the
process of learning how other firms do things in an
exceptionally high quality manner. There are two types of
Benchmarking; within industry, across industries.
2. Outsourcing: Another innovation for improving quality is
outsourcing. Outsourcing is the process of subcontracting
services and operations to other firms that can do them
cheaper and/or better. If a business performs each and
every one of its own administrative and business service
sand operations, it is almost certain to be doing at least
some of them in an inefficient and/or low quality manner. If
those areas can be identified and outsourced, the firm will
save money and realize a higher quality service or
operation.
50

Tools & Techniques of TQM

3. Speed: A third popular TQM technique is speed.
Speed is the time, needed by the organization to get
something accomplished, and it can be emphasized in
any area, including developing, making, and
distributing products or services.
Guidelines for increasing the speed of operations;
Minimize the number of approvals needed to do
something
Use work teams as a basis for organization
Develop and adhere to a schedule
Integrate speed into the organizations culture
Dont ignore distribution
Start from scratch
51

Tools & Techniques of TQM

4. ISO 9000: ISO 9000 refers to a set of quality standards
created by the International organization for standardization.
Five such standards, numbered 9000 to 9001, cover areas
such as product testing, employee training, record keeping,
supplier relations, and repair policies and procedures. Firms
that want to meet these standards apply for certification and
are audited by a firm chosen by the organizations domestic
affiliate. These auditors review every aspect of the firms
business operations in relation to the standards.
5. Statistical Quality Control: Statistical Quality Control is
primarily concerned with managing quality. It is a set of
specific statistical techniques that can be used to monitor
quality; includes acceptance sampling and in-process
sampling. Also there are another tools & techniques: Flow
Chart, Cause-and-Effect Analysis, Pareto Analysis, Control
Chart, Histogram, Scatter Diagram, Run Chart.
52

Customer Satisfaction
Customer Satisfaction is a measure of
how products and services supplied by a
company meet or surpass customer
expectation.
Customer Satisfaction is a comparison
of customers expectations versus
perception of experience.

53

Factors Influencing Customer Satisfaction

1.
2.
3.
4.
5.
6.
7.

Service features
Service quality
Credit for service success or failure
Perceptions of equity or fairness
Other consumers, family members, and coworkers
Price
Personal factors
a) The customers mood or emotional state
b) Situational factors
54

Customer Perceptions of Quality and Customer Satisfaction

55

THE END

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