SERVCE QUALTY - THEORETCAL OVERVEW Kaidas. M.G Financia services marketing: A study on marketing practices of banks in Keraa on service quaity dimensions Thesis. Department of Commerce and Management Studies, University of Caicut, 2007
Chapter V SERVCE QUALTY - THEORETCAL OVERVEW C3 Defmitions of Service quaity C3 Dimensions of Service quaity W Service quaity based on expectations and perceptions of service C3 Measurement of Service quaity
41. ntroduction Service sector has made an instrument of socia changes in our country. The forces of dereguation, gobaisation and advancing technoogy have greaty increased the competitive pressures in a the industries especiay in the banking industry. The ndian banking industry too is going through turbuent times. ndian banks are functioning increasingy under competitive pressures emanating from within the banking system, from nonbanking institutions as we as domestic and internationa capita markets. Thus in this area of increased competition, in order to prosper, it wi be imperative for the banks to deveop ong-term reationships with the customer by offering quaity service. Deveoping ong-term reations with customer or capturing customer ifetime vaue depends basicay on three dimensions. Product quaity Reationship quaity, and Service quaity
n this chapter an attempt is made to expain the above mentioned dimensions by giving a specia emphasis on the concept - service quaity. 4.2. Product quaity The 'product', here in banking services, means or incudes services provided by banks. Banks offers a variety of services or products to their customers. n a highy competitive market the quaity of product is important, because, it has a direct ink to the customer satisfaction. Customer satisfaction is mandatory for buiding a ong-term reationship with them. A product is said to be high quaity when it satisfied a particuar need of the customer effectivey and efficienty than its competitor can provide. The quaity of a product determines the features of product and expectations of targeted group of customers. f the product has the abiity to rise to the eve equa to the eve of expectation, that product can be caed a 'quaity product'. So, in order to improve or maintain quaity of product, whie designing a product or service, service providers need to take a hoistic view of the entire performance they want customers to experience. The design of service incuded three stages viz., design of core product, design of suppementary services and design of service procedures or features. The core product suppies the centra probem- soving benefits that customer seek from that product. The function of suppementary service is to faciitate core product's use and enhancing its vaue and appea. t aso pays a
roe in differentiating and positioning the core product. The third component deas with the procedures used to deiver both the core product and the suppementary services. Hence, in order to increase the quaity of product or service integration of the above mentioned three components at an optimum eve is needed. The eve wi be changed with the change in the nature of product, needs and wants of targeted customers etc. Aso, the targeted market shoud be homogeneous in nature, so that they can reduce the conficts between customers. Another way to increase service or product quaity is that, set or design standards with sufficient high to satisfy or even deight customers, on the basis of the customer expectations earnt through both forma research and on-the-job experiences. These standards may incude time parameters, the script for a technicay correct performance and prescriptions for appropriate stye and demeanor. 4.3. Reationship quaity The second dimension in the task of capturing customer ifetime vaue is the quaity in the reationship between customer and the service provider. The task of creating ong term customer reationship starts by identifying and targeting the right customers. Customers differ widey in terms of needs and the vaue they can contribute to a service provider. So matching customer to
the firm's capabiities is vita. Besides, they need to consider the competence of their personne, both persona stye and technica, in meeting the expectations of customers. Reationship marketing is another way to increase and maintain reationship quaity of a service provider. t means buiding and maintaining ong-term satisfying reations with both interna and externa customers. The interna customers are empoyees or other personas or units who took part a roe in deivery of products or services. The externa customers are peope who buy or use these products or services. According to Koter, Phiip et a. "Customer reationship management is the over a process of buiding and maintaining profitabe customer reationship by deivering superior customer vaue and satisfaction". t deas with a aspects of acquiring, keeping and growing customers. Deivering superior customer vaue and satisfaction can increase the reationship quaity. Customer vaue means perceived vaue or utiity customer expects from a product or service choice. The customer satisfaction is the extent to which a product's perceived performance matches a buyer's expectation. f the performance of the product fas short of expectations, the customer is dissatisfied. f performance exceeds expectations, the customer is highy satisfied or deighted. The service provider can increase the reationship quaity by buiding reationship eves depending on the nature of the target market. The different eves are.
9 Basic reationship - t is the one extreme point of reationship with customer. t is suitabe when the firm seek to deveop reationship with many ow- margin customer through advertisement or sae promotion activities. Fu reationship - t is another extreme point of reationship between service provider and customer. t can be practiced in those situations when there are a few customers and high margins. n other words it is the task of buiding reation with key customers to satisfy their requirements fuy. n between these two extremes, firms can practice any number of appropriate customer reationship eves such as, cub marketing programs, frequency marketing programs etc. 4.4. Service quaity The term 'Service Quaity7 is an association of two different words; 'service' and 'quaity7. Service means "any activity or benefit that one party can offer to another that is essentiay intangibe and does not resut in the ownership of anything."' Quaity has come to be recognized as a strategic too for attaining operationa efficiency and better performance of business.
'Service quaity' means the abiity of a service provider to satis@ customer in an efficient manner through which he can better the performance of business. n the service sector too 'quaity' is an important eement for the success of business. t is because of the reaization of its positive ink with profits, increased market share, customer satisfaction. Severa earier studies and authors pointed out that quaity concept in service is different from the concept prevaent in the goods sector. The reasons for such a treatment are inherent features of services ike intangibiity, inseparabiity from the provider, heterogeneous etc. Hence there is a distinct frame work for quaity expication and measurement. 4.5. Definitions of Service quaity The term 'Service quaity' is harder to define and judge. Number of authors tried to define it and give definitions in different point of views. Phiip Koter and Gary Armstrong defined the term 'service quaity' as "it is the abiity of a service firm to hang on to its customer^'.^ That is, in their opinion customer retention is the best measure of service quaity. Christian Gronroos suggested that the quaity of service as perceived by the customer has two dimensions - technica or outcome dimension and the function of process reated dimen~ion.~
A. Parasuraman, Vaarie A.Zeitham1 and L. Berry defined service quaity as "the deivery of exceent or superior service reative to customer expectation."' They conducted extensive research into service quaity and identified ten criteria in evauating service quaity. Later, they reduced it into five broad dimensions viz.,. Reiabiity 2. Responsiveness. 3. Assurance 4. Empathy 5. Tangibiity So, from the above discussions it is cear that the service quaity is a difficut concept to define in a singe definition. This concept seems to refer severa different areas, namey, quaity of the output, quaity of the process, quaity of the deivery system and quaity as a genera phiosophy of the organization. 4.6. Dimensions of service quaity The above definitions reveas one fact that, the concept 'service quaity' is not an independent term, means, its formation depends upon severa factors reated to service and service firms. These factors are grouped
into five broad dimensions such as, reiabiity, responsiveness, assurance, empathy and tangibiity. Each one is discussed be10w.~ 4.6.i. Reiabiity Reiabiity is defined as the abiity to perform the promised service dependaby and accuratey. n broad sense reiabiity means, service firms' promises about deivery, service provisions, probem resoutions and pricing. Customers ike to do business with those firms, who keep their promises. So it is an important eement in the service quaity perception by the customer and his oyaty. Hence the service firms need to be aware of customer expectation of reiabiity. n the case of banking services, the reiabiity dimension incudes - reguarity, attitude towards compaints, keep customers informed, consistency, procedures etc. 4.6.ii. Responsiveness Responsiveness is the wiingness to hep customers and to provide prompt service. This dimension focuses in the attitude and promptness in deaing with customer requests, questions, compaints and probems. t aso focuses on punctuaity, presence, professiona commitment etc., of the empoyees or staff. t can be cacuated on the ength of time customers wait for assistance, answers to questions etc. The conditions of responsiveness can be improved by continuousy view the process of service deivery and empoyees attitude towards requests of customers.
4.6.iii. Assurance The third dimension of service quaity is the Assurance dimension. t can be defined as empoyee's knowedge, courtesy and the abiity of the firm and its empoyees to inspire trust and confidence in their customers. This dimension is important in banking, insurance services because customers fee uncertain about their abiity to evauate outcome. n some situations ike insurance, stock broking services firms try to buid trust and oyaty between key contact persons ike insurance agents, brokers etc and individua customers. n banking services "persona banker" pays the roe of key contact person. This dimension focuses on job knowedge and ski, accuracy, courtesy etc of empoyees and security ensured by the firm. 4.6.i~. Empathy Another dimension of service quaity is the Empathy dimension. t is defined as the caring, individuaized attention provides to the customers by their banks or service firms. This dimension try to convey the meaning through personaized or individuaized services that customers are unique and specia to the firm. The focus of this dimension is on variety of services that satisfies different needs of customers, individuaized or personaized services etc. n this case the service providers need to know customers persona needs or wants and preferences.
4.6.v. Tangibiity The fifth dimension of service quaity is the Tangibiity which is defined as the appearance of physica faciities, equipments, communication materias and technoogy. A these provide enough hints to customers about the quaity of service of the firm. Aso, this dimension enhances the image of the firm. Hence tangibiity dimension is very important to firms and they need to invest heaviy in arranging physica faciities. 4.7. Service quaity based on expectations and perceptions of service. Service quaity or perceived service quaity can be judged by comparing customer expectations of service and their perceptions of service. 4.7.i. Customer expectation Customer expectations are beiefs about service deivery that is used as a base or bench mark against which the performance of the service is judged. Customers have different types of expectations about service. These expectations can be grouped into two as, desired service and adequate service. The desired service means the eve of service the customer hopes to receive or wishes to receive from a company. Adequate service is the eve of expectation when the customer recognizes that his hope to achieve desired service is not possibe. Hence adequate service stands ower to desired
service. The difference between these two is the zone of toerance of a customer, which is represented in figure 4.1. Figure 4.1 Expectation eve of customer. Desired service. Zone of Toerance.. Adequate service..... Source: Zeitham, Vaarie A. and Binter, Mary Jo (1996). Service marketing, Maaysia, MC Graw Hi -p, 80. The expectation of customer may infuence the factors ike, Persona needs of customer Externa communication of the service provider Persona and non persona statements made by others to the customer, that is, word of mouth. Past experience of customer.
4.7.ii. Customer perception Customer perceptions are judgments about the actua service performance or deivery by a company. This perceived vaue is the overa assessment of the organization by the customer and these are subjective. t is because the determinants of perception of service quaity wi be affected or fet differenty to each customers. The determinants or factors of customer perception are,. Service encounters - Service encounters occurs when the customer interacts with the service firm. When the customer has had mutipe interactions with a firm, each individua encounter is important in creating a composite image of the firm in the customer's memory. The positive experiences add up to a composite image of the high quaity and negative experience or interactions create ow quaity. There are three types of service encounters such as, remote encounters (eg. ATM system of banks), phone encounters and face-to-face encounters. 2. The evidence of service - Another factor that infuence customer perception of service quaity is the evidence of service. t is important because, services are intangibes and hence customers search for evidence of service in every interactions. The evidence as experienced by the customer are - peope, process and physica evidence. These eements are
present in every encounters and are important in managing the quaity of service. 3. Reputation or image - The reputation or image about service provider in the mind of customer infuence his service quaity perceptions. These images are buit up in the customer's mind through advertisement, pubic reations, word of mouth etc. 4. Price - The price of the service aso affects the perceptions of customers about the quaity. f the price is high customers expect high quaity and their perception wi be infuenced by this expectation. 5. Perceived vaue - The customers wi evauate the quaity of service on the basis of their perceived vaue. The vaue is the customer's overa assessment of the utiity of a product based on perceptions of what he received and what he gave. t is the reation between the benefits received and cost of service. 4.7. iii. Perceived Service Quaity Since the expectations and perceptions or experience of services are different to customers, their perceived quaity is aso different. Perceived vaue of service quaity is the difference between expectation of service and perception of service. The customers fee quaity surprise when their perception exceeds expectation and they fee un acceptabe quaity when
their perception of service not met their expectations. f their perception is just enough to met their expectation, it is the state of satisfactory quaity. The figure 4.2. given beow expains the reation between dimensions of service quaity and customer perception of service quaity. Figure 4.2. Reation of Service quaity dimensions to service quaity perception nfuencing expectation word of persona needs past mouth experience externa communication Dimensions of service quaity 1. Reiabiity H 2. Responsiveness 3. Assurance 4. Empathy Expected service 1. Quaity surprise W Perceived service Perceived service quaity 2. Satisfactory quaity 3. Unacceptabe quaity Source: Parasuramana, A. et a.1 (1985). "A conceptua mode of service quaity and its impications,for future research", Journa of Marketing, Vo-49, p.48.
4.8. Measurement of Service quaity n the case of tangibe goods, quaity can be assessed by examining the goods. Quaity contro can be used to check specifications and reject defective goods. But service quaity cannot be assessed in the same way as a tangibe product due to particuar feature of service such as, intangibiity, in separabiity etc. As in the case of goods, the service provider cannot undertake quaity check before the service is finay deivered to the customer. n order to assess the service quaity the customer judges the expected service quaity against the perceived quaity when they receive it. There are mainy two methods for measuring service quaity viz., Gap anaysis Service performance measures 4.8.i. Gap anaysis Gap anaysis mode of service quaity was deveoped by Parasuraman, A. et a. in the year 1985. The mode indicated that customer perception of quaity was infuenced by a series of five distinct gaps. They are mentioned beow. Gap - - Gap between customer expectation and Management perception.
The reasons for this gap are ack of adequate market research and ack of upward communication. This gap can be narrowed by adopting adequate research programs to know customer needs and to improve the communication system. t can be measured by using the SERVQUAL scae and comparing the scores obtained from the management and customers. Gap - 2 - Gap between Management perception and service quaity specification. This gap exists in service firms because of the ack of whoe hearted commitment of management to service quaity, inadequate service eadership etc. t can be cosed by standardizing service deivery process and setting proper organizationa goas. Gap - 3 - Gap between Service quaity specification and service deivery. The third gap originates from the discrepancies in the actua service deivery, that is, the service providers or empoyees do not perform at the eve expected by the management. t is because of the ineffective recruitment, ack of proper incentives and motivations etc. This gap can be eiminated by providing the empoyees with adequate support system, better human resource management system etc.
Gap - 4 - Gap between Service deivery and externa communication. The gap between service deivery and externa communication occurs due to exaggerated promise or ineffective communication to the customer, which raise customer expectations. This can be narrowed by efficient and effective communication system. Gap - 5 - Gap between expected quaity and perceived quaity. This gap exists because of the inequaity in the service expectation of customer and his service perception. This can be overcome by identifying, quantifying and monitoring customer expectations and perceptions through the effective use of marketing and marketing research toos. A pictoria presentation of these five gaps are depicted in figure 4.3.
Figure 4.3 Gap anaysis mode of service quaity Consumer Word of mouth Persona needs Past experience j Gap 5 Perceived service ----------------+---------------L------.--------------------------------..------- Marketer Service deivery (incuding pre and post contacts) 1..- Gap - - - - - 4 - - - Externa communications to consumer Gap 1 Transition of perceptions into service quaity specifications - - - - - - - - - consumer expectations Source: ibid, p44. -
4.8..ii. Service performance measures An aternative to using gap theory methodoogy for measuring service quaity is the service performance measures. The two types of performance measures can be used under this method. One is, Soft measures of service quaity and other one is, Hard measures of service quaity. These are expained beow. 4.8.ii.a. Soft measures of service quaity Soft measures are those that cannot easiy be observed and must be coected by taking to customers, empoyees or others. Under this method the banks can measure quaity in the foowing ways-. Customer satisfaction surveys - Under this method individua customers or corporate customer may be asked to rate their specific and overa impression of service deivery. For this a questionnaire or interview schedue can be used. Besides this, focus group interviews and other market research techniques can be utiized for this purpose. 2. nterna performance anaysis - n this method empoyee surveys are conducted to determine perception of the quaity of service deivered to customers on specific dimensions. Aso, feed back from quaity circes, performance evauation reports, customer retention eves etc., provide information to monitor quaity of services.
4.8.ii.b. Hard measures of service quaity This method incudes those characteristics and activities that can be counted, timed or measured through audits. Such measures may incude waiting time for the pass book to be updated by a bank, time taken to issue a demand draft, deay in cearing and crediting a cheque deposited by the customer etc. 4.9. Concusion n the increasing competitive market, especiay banking services market, the focus on service quaity is essentia to service firms for their surviva and success. The management of service quaity heps the management to maintain consistency in service deivery and to meet changing customer expectations more efficienty and effectivey. Aso, it provides some benefits to firms such as, service differentiation from competitors, better image, higher profitabiity, increased customer satisfaction, increase customer retention and oyaty, staff morae, productivity etc. Hence measurement of service quaity is an inevitabe task to the service firms, especiay banking service companies.
REFERENCES 1. Koter, Phiip and Armstrong, Gary (2006). Principes of marketing, New Dehi: Prentice Ha nc., p. 263 2. Venugopa, Vasanti and V.N., Raghu (2001). Services Marketing, Mumbai: Himaaya Pubishing House., p. 259 3. Zeitham Vaarie A. and Bitner, Mary Jo. (1996). Services marketing, Singapore: Mcgraw - Hi Companies, p. 1 17 4. bid., p. 1 18 5. Kurtz, David L. and Cow, Kanneth E. (2002). Services marketing, Singapore: John Wiey & sons Pvt. Ltd, p. 106