service quality gap model (term paper)

8/3/2019 Service Quality Gap Model (Term Paper)

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CHHATRAPATI SAHU JI MAHARAJ UNIVERSITY

KANPUR

(FINANCIAL SERVICE MARKETING)

TERM PAPER

ON

SERVICE QUALITY-GAP MODEL AND QUALITY DIMENSIONS

SUBMITTED TO: SUBMITTED BY:

ARPNA KATIYAR MBA(F&C)-3rdSEM.

VIKAS GAUR

SACHIN VERMA

ARCHANA VERMA

AKHIL KAUSHAL

SAURABH PANDEY



Lifetime value of the customer if the customer remains loyal to the company, naturally, the repeatedpurchases represents a cumulative value which is quite substantial compared to any single 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 acquisition tocustomer retention in order to substantially reduce marketing costs.Benefit from wider opportunities to market more products and services to customers who are already

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 is substantiallyhigher than the price he paid for acquiring the service.

Customer satisfaction can be largely attributed to the quality of the service or product. Thus, delivery ofhigh quality service is crucial to the high service value perception. When the major marketing goal of acompany is customer retention, the quality of service delivery is, undeniably, the key differentiator.

LINK BETWEEN SERVICE QUALITY AND PRODUCTIVITY

The approach towards quality has changed quite drastically during the past few years. Previouslypeople thought in terms of quality control. Quality is defined as the ability of the service provider tosatisfy customer needs. Customer perception, service quality, and profitability are interdependentvalues. The idea of control was that the manufacturer decided to find the reasonable number of defectsthat a customer would accept without demur. The goal of the exercise was to restrict the number ofdefects 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-complianceor transgression of quality. Thus the issue of competition driving up the quality was not taken seriously.Live and let live was the motto that most large producers adhere to. The lack of serious qualityimprovement translates into savings in production costs as elaborate effort for improvement was not

done.

Almost every customer assumed that the service or product received by them will not be perfect inevery respect. Customers took it for granted that luck was involved in receiving high-quality goods andservices. Thus, people would avoid cars assembled on Fridays or Mondays. It was assumed that duringthe pre-weekend phase, when the employees where focused on the forth coming weekend, and thepost-weekend phase , when the employees were physically and mentally tired from their weekendexploits, they paid less attention to work. It was thus assumed that on Fridays and Mondays, nobodywould stop the assembly line for just a bolt not fitted at the appropriate place. People preferred carswhich were driven from the factory to the dealer‘s premises rather than carried by trucks to the deliverypoints.Customers believed that inherent defects were bound to be uncovered during this pre-delivery phase,and, therefore they would be duly identified and rectified before customer delivery.

The total service quality management [TSQM] emphasizes different policies.Statements such as the following demonstrate the approach:

Quality is free. It is the non-quality that costs money. Non-quality means that everything is not doneright 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 the overallprofitability. To get a similar increase in profitability with quality improvement, the company will need toincrease 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 conformance and costof non-conformance.

Cost of Conformance:This includes costs incurred to adhere or stick to the existing established standards or norms. This isthe maintenance and improvement of the quality.• Preventive costs: these include staff training cost and costs of the robust design or robustness builtinto the service.• Cost of Control: to continuously maintain the high quality, it is necessary to carry out surveys andobtain feedback from the customers to ensure that the delivery is as per the planned level of serviceand quality standards.

Cost of non-conformance:The non-conformance to the established standards results in additional cost of customer

dissatisfaction, complaints and warranty claims. The costs are for replacement, correction orcompensation of the faulty delivery of services or goods.

DEFINING SERVICE QUALITY

Quality is an extremely difficult concept to define in a few words. At its most basic, quality has beendefined as conforming to requirements .This implies that organizations must establish requirements andspecifications; once established, the quality goal of the various function of an organization is to complystrictly with these specifications. Many analyses of service quality have attempted to distinguish

between objective measures of quality and measures which are based on the more subjectiveperceptions of customers.

A development of this idea by Gronroos identified ‗technical‘ and ‗functional‘ quality as being the twoprinciple components of quality. Technical quality refers to the relatively quantifiable aspects of aservice which consumers receive in their interactions with a service firm. Because it can easily bemeasured by both customer and supplier, it forms an important basis for judging service quality.Examples of technical quality include the waiting time at a supermarket checkout and the reliability oftrain services. This, however, is not the only element that makes up perceived service quality. Becauseservices involve direct consumer producer interaction, consumers are also influenced by how thetechnical quality is delivered to them. This is what Gronroos describes as functional quality and cannotbe measured as objectively as the elements of technical quality. In the case of the queue at asupermarket checkout, functional quality is influenced by such factors as the environment in whichqueuing takes place and consumers perceptions of the manner in which queues are handled by thesupermarket‘s staff. Gronroos also sees an important role for a service firm‘s corporate image indefining customers‘ perception of quality, with corporate image being based on both technical andfunctional quality.Service quality is a highly abstract construct, in contrast to goods where technical aspects of qualitypredominate. Many conceptualizations of service quality therefore begin by addressing the abstractexpectations that consumers hold in respect of quality. Consumers subsequently judge service qualityas the extent to which perceived service delivery matches up to these initial expectations. In this way, a



service which is perceived as being of mediocre standard may be considered of high quality whencompared against low expectations, but of low quality when assessed against high expectations.Analysis of service quality is complicated by the fact that production and consumption of a servicegenerally occur simultaneously, with the process of service production often being just as important asthe service outcomes.

Gronroos pointed out that a buyer of manufactured goods only encounters the traditional marketing mixvariables of a manufacturer, i.e. the product, its price, its distribution and how these are communicatedto him or 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 production process beingan important basis for assessing quality.

A further problem in understanding and managing service quality flows from the intangibility, variabilityand inseparability of most services which results in a series of unique buyer-seller exchanges with notwo services being provided in exactly the same way. It has been noted that intangibility and perceivedrisk ness affects expectations, and in one study of a long-distance phone service, a bookstore and apizza shop service, it was concluded that intangibility had some role in service quality expectations.Managing customers‘ expectations can be facilitated by means of managing the risks a consumer

perceives when buying a particular service.

SERVICE QUALITY DIMENSIONS

Service quality is a perception of the customer. Customers, however, form opinions about servicequality not just from a single reference but from a host of contributing factors. Service marketers needto understand all the dimensions used by customers to evaluate service quality.David Garvin in the article ‗Competing on the Eight Dimensions of Quality‘ identified the following eightdimensions of quality applicable to both goods and services.These include: Performance, Features, Reliability, Conformance, Durability, Serviceability, Aesthetics,

Perceived quality or prestige.

In a further refinement of their earlier factor identification, Parasuram, Zeithmal andBerry has identified the following five dimensions of service quality as crucial.These are:

A. Reliability :

This dimension is shown to have the highest influence on the customer perception of quality. It is theability to perform the promised service dependably and accurately. Sahara Airlines, an upcomingdomestic air carrier within India, has been striving to protect itself as a reliable airline. It hopes todifferentiate 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 on delay of flights by more than 59minutes.When service delivery fails the first time, a service provider may get a second chance to provide thesame service in the phase called ‗Recovery‘. The expectations of the customer are usually higherduring the recovery phase than before because of the initial failure. Thus, the service provider is likelyto come under greater scrutiny, thereby increasing the possibility of customer dissatisfaction. Thereliability dimension, which ensures timely delivery time after time, helps the service provider to meetthe customer expectations fully at the lowest level of service expectation.



B. Responsiveness :

It 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, each customermay have problems of his or her own. While the front-end employee may have been trained or

equipped to deliver standardized services, the customers want them to go beyond this limit. It is thewillingness to help the customer or willingness to go that extra distance that is responsiveness.Example: A customer calls room service to find out if they would pack a Jain lunch. It is not the hotel‘snormal policy to cook such specialty and customized meals.However, the customer being very religious minded would be very pleased if the hotel could pack it forhim to carry and eat. This may impose some strain on the kitchen. However, the hotel may be rewardedin two different 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 hotelcould charge extra commensurate with the extra efforts. He is unlikely to mind paying more.The second aspect of responsiveness is speedy response to a customer request.When response 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 own

conclusion about the quality of service he is likely to receive in the future.

C. Assurance :

It defined as the ability of the company to inspire trust and confidence in the service delivery. It refers toknowledge and courtesy of the service firm‘s employees and their ability to inspire trust and confidencein the customer toward the company. This dimension is considered vital for services that involve highrisk as customers may not be able to evaluate all the uncertainties involved in the process by them.Example: Medical services requiring complex uncommon procedures, sales / purchase of financialsecurities, investment issues, legal affairs, etc. demand this service quality dimension.There are property developers/builders who provide a list of previous buyers of flats or apartments topotential buyers. The evaluation of construction services is beyond technical capabilities of most

buyers. However, the prospective customers are free to call the previous customers. When prospectivecustomers hear from them about the company and its satisfactory delivery, they feel assured anddevelop a more positive attitude towards the company.

D. Empathy :

It refers to the caring, individualized attention the service firm provides each customer. When serviceprovider puts himself in the shoes of the customers, he may see the customer‘s viewpoint better. Whencustomers feel t5hat the provider is making his best effort to see their viewpoint, it may be good enoughfor most.Example: a lady customer with a young child arrives slightly late at the check-in counter and requeststhe agent for a seat along the aisle and near the toilet. Even if all such seats have already been taken

up, the agent and the airline may make even effort to request another passenger to exchange seatsand meet the customer demand. The lady passenger would be delighted if her request could behonored despite the last minute checking in, and even if she does not get such a seat, she would begrateful for their effort.



E. Tangibles :

It refers to physical facilities, equipment, and appearance of a service firm‘s employees. The job of thetangible and physical evidence of a service is multifunctional. When a patient in the waiting room of aclinic sees the doctor‘s certificate, he becomes aware of the quality of service he is about to receive. If

a dental clinic provides patients with clean rubber footwear and freshly laundered bibs or coats beforethe actual service, the patients and their accompanying relatives or friends will be impressed. A dentistdressed in a spotless white coat is likely to impress, them even further. Tangibles provide the customerproof of the quality of service.

MEASURING SERVICE QUALITY

When evaluating service quality, consumers examine five dimensions: tangibles, reliability,responsiveness, assurance and empathy.

Using SERVQUAL to Measure Service Quality

The SERVQUAL instrument was based on the premise that service quality is the difference betweencustomers‘ expectations and their evaluation of the service they received. The first part of thequestionnaire asks customers to indicate the level of service they would expect from a firm in aparticular industry. The second part of the questionnaire asks customers to evaluate the serviceperformed by a specific service firm. Gap Theory is the method for calculating service quality thatinvolves subtracting a customer‘s perceived level of service received from what 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 low scores for one dimension, such as reliability, thenthe firm‘s management can take steps to improve that particular dimension of their service offering.

Problems with SERVQUAL

Although SERVQUAL is an excellent instrument for measuring service quality, managers must beaware of potential problems with the instrument, as well as with the gap theory methodology on which itis based. An understanding of these problems may prevent service companies from misinterpreting theresults and developing inappropriate marketing plans.The SERVQUAL instrument has three potential problems.

First, SERVQUAL measures customers‘ expectations of the ideal firm in a particular service industry.This may or may not be relevant to the capabilities of a particular service firm or the set of service firmsavailable to a consumer. For example, consumers may indicate that physicians should provide theirservices at 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 continue to wait.

The second problem with SERVQUAL is its generic nature. Since its not industry specific, it does notmeasure variables that may be important for a particular industry. For example, in the airline business,



on-time arrival is a very important dimension to travelers, but SERVQUAL does not me asure travelers‘perceptions of this variable.

The third problem with problem with SERVQUAL deals with the gap theory methodology used formeasuring the level of service quality. Measuring consumer expectations after a service has beenprovided will bias consumers‘ responses. If customers had a positive experience at Blockbuster, they

will tend to report lower scores for their expectations, so there is a measurable gap between what theyexpected and the actual service they received.

CORRECT USE OF GAP THEORY

Managers can use the gap theory methodology for measuring service quality performance ifprecautions are taken to reduce the problems just discussed. If SERVQUAL is used; the instrumentshould be modified to apply to the specific industry for which it is being used. Additional variablesshould be added that are relevant and important to customers. When interpreting the results, managersmust remember that respondents are comparing their firm with the ideal firm in the industry. To preventbiases from interfering with the gap scores, consumer expectations should be measured prior to theservice and service perceptions after the service. Because consumers are affected by advertising andword-of-mouth communications, the time between measuring expectations and measuring the quality ofservice received 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 phones youcan reach anyone, anywhere, anytime", "ZZZ Airlines - we fly you everywhere" -these are some punchlines of ad campaigns that are currently splashed across media - print, television and hoardings. Howmany of us can honestly claim to have experienced this service - consistently, day after day, purchaseafter purchase, transaction after transaction?Yet, this is the age of the service sector, an era for excelling in quality of service provided. The servicesector is growing in spread and depth to encompass all transactions involving buying and selling - be itin the tangible or intangible form.

The examples below underscore how the service sector has transgressed all boundaries.Companies across the country and the world are seeking to outsource many of their cost centers - theresultant surge in service providers like security services, indoor plants and decorative, cleaning andhousekeeping and even secretarial services is phenomenal.Dual-income, nuclear households are getting to be the norm in urban India. In cities like Mumbai,families are experiencing a burning new need - more time.Overstressed with work and travel, they find it impossible to grapple with routine everyday tasks. This

has given rise to hitherto unconventional new services.Housewives now make a cool sum with selling idli / dosa batter and homemade food. Telephonicorders and home delivery are now passed with grocers and vegetable vendors. Supermarkets sellpackaged vegetables, which are chopped and cleaned - waiting to be cooked. The makeover isapparent even in traditional services like retailing and banking. These service providers have addedperipheral services to reduce transaction time and improve service delivery.Turn to product marketing - tangible products like television sets, air conditioners, microwave ovensand refrigerators, pagers and mobile phone sets and even cars are being sold on the promise of after



sales service. Buyers are not just conscious of the necessity of services after the purchase has beenmade - they demand it.Having tasted the joys of greater and enhanced services in all walks of life, urban Indians are clamoringfor more. They now want an improvement in the quality of service offered. Service quality therefore isthe latest buzzword - in corporate boardrooms, the local bania's siesta conversation with his neighborsand in the king's lair - the urban household.

How then is the service provider to go about the difficult task of analyzing his business operations forchinks in delivery of quality service? What tool would indicate to him that he has misunderstood hiscustomer? 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 reckoned toservice providers to analyze their existing service delivery system and rectify matters before thecompany has lost the attention of the customer.

THE GAPS MODEL OF SERVICE QUALITY

The Customer Gap: The difference between customer perceptions and expectationsCustomer perceptions are subjective assessment of actual service experience customer perceptionsand customer expectations play an important role in service marketing. Customer expectations are thestandards if or reference e point of performance against which service experiences are compared, andoften formulated in terms of what a customer believes should or will happen. For example, when youvisit a fast-food restaurant you expect a certain level of service, one that is considerably different fromthe level you would expect in an expensive restaurant.

The sources of customer expectations consist of marketer –controlled factors as well as factors that themarketer has a limited ability to affect (innate personal needs, word-of-mouth communications,competitive offerings). In a perfect world, expectations and perceptions would be identical: customerswould perceive that they receive what they thought they would and should. In practice these conceptsare often, even usually, separated by some distance. Broadly, it is the goal of service marketing tobridge this distance. The assumptions appears to be that services , if not identical to goods, are at leastsimilar enough in the consumers mind that 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 the cause ofpoor service quality. If the first gaps are great, the task of bridging the subsequent gaps becomesgreater, and indeed it could be said that in such circumstances quality service can only be achieved bygood luck rather than good management.



GAPs model of service quality

Fig. 1: The Integrated Gaps Model of Service Quality (Parasuraman, Zeithaml, Berry 1985)

Gap 1: Not knowing what Customers Expect

Not 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 and companyunderstanding of those expectations. Examples abound - foreign banks were right in thinking thatcustomer expectation in terms of ambience was not being met. So they brought in some goodambience and more presentable executives and thought they had bridged the gap. But what they didnot understand was that the customer was taking note of the lack of ambience because there was await when he was twiddling his thumbs and looking around for a place to sit. In other words, he wasreally 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 bettersurrounds.Private sector banks understood the problem a mite better - but they too slipped up as business grew.They lost out on sustainability of the service promise.Example: A contractor using an electrical subcontractor for the first time may expect the subcontractorto use a certain grade of wire conduit in all of their construction sites they subcontractor, however, may

think the contractor wants to use the lowest grade to keep the cost down. Unless the contractor clearlydelineates his expectations, he will probably be dissatisfied because the subcontractor did not do whatwas expected.

The reverse may also occur. Management can provide a service they think customers expect withoutconforming customer expectations. Although on the surface this sounds good because customerexpectations will probably be exceeded, there are two dangers. First, if customer expectations areconsistently exceeded, in time, these expectations will rise to meet the service being provided.Example: If customers do not expect their cars to be vacuumed and cleaned inside when the oil ischanged at Quik Lube, then at first they will be pleased with this extra touch. But the next time they useQuik Lube, their expectations increase and after a few times of receiving this special touch, it willbecome a permanent part of their expectations. Failure to vacuum and clean the interior of the car will

then result in a negative gap since the vacuuming and the cleaning of the interior becomes somethingcustomers expected. The second danger is that the firm may be spending money on providing servicesthat the customers do not expect or perhaps 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 for settingpriorities do not fully understand customers‘ service expectations, they may trigger a chain of baddecisions and suboptimal resources allocations that result in perceptions of poor service quality. Oneexample of displaced priorities stemming from an inaccurate understanding of customers‘ expectationsis spending far too much money on buildings and appearance of a company‘s‘ physical facilities whencustomers may be much more concerned with how convenient, conventional and functional thefacilities are. Another example is illustrated by the management of Sears in the early 1990s, when thecompany failed to understand that the customers had changed their desires and modes of shopping.The company kept its traditional catalogue store long after customers had decided to take theirbusiness elsewhere. In the mid-1990s, Sears‘s management rediscovered its customers, now definedprimarily as women, and began once again to be profitable and satisfying to customers. The serviceproviders see themselves as indifferent or superior to customers. This typically happens in government-run services such as railways or postal departments where they would not want to know what customerdesires.• Unwillingness to ask customers about expectations. Service providers may think that they know what

is best for their customers. This is the patronizing attitude towards the customers . In today‘s changingorganizations, the authority to make adjustments in service delivery is delegated to empowered teamsand front line people. For example, when AT&T asked its long-distance operators to improve theirservice to customers, the team identified key customer segments and conducted its own customerresearch to determine expectations. Gap one was closed without involving management as it istraditionally defined.• Unprepared ness to address the expectations. The service provider may be aware of the Shortfallsbut may be unprepared to address the issue in the mistaken belief that the customers may be tolerant



or that the lapse is unlikely to loss of customer patronage. Another trend related to Gap One involvescurrent company strategies to retain customers and strengthen relationships with them. The termrelationship marketing is used to describe this approach, which emphasizes strengthening the bondswith existing customers. When customers have strong relationships with their customers, gap 1 is lesslikely to occur.• Lack of market segmentation to understand the needs are such segment. Market segmentation is the

grouping of customers sharing similar requirements, expectations and demographic or psychographicprofiles. Segmentation is usually done to understand the needs of customers more elaborately ordistinctly. While segmentation has been used by marketers for decades, it may be more critical todaythan any other time. Customers are no longer satisfied by homogenous products and services for themass market; now, more than ever before, they seeking and buying services that fit their uniqueconfiguration of needs. If the needs are not precisely understood due to lack of segmentation, qualityperception 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. These strategies are:communicating with the customers, conducting marketing research, encouraging upwardcommunication in the organization, and decreasing the number of layers of management. By talking tocustomers, management will learn what buyers expect in terms of service quality and how they feelabout the service they received. Contact and communication between customers and management iscommon in small business because the owner is often the service operator.Buyer may not always be honest in their communication with management of service firm. To ensureopen, honest communication, service firm can use marketing research, which can either be performedby third parties or, in case of large cooperation, by the marketing department. To be effective, themarketing research much focus on service quality issues and consumer expectations 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 be encouragedto communicate with management in an open, non-threatening environment. To be effective, upwardcommunication must be requested by top management. Ideas for improvement should not only besought from service contact personnel, but employees should be rewarded for productive ideas.As the layers of management increase, the chances of management having a correct understanding ofwhat customer want in terms of service quality became more difficult. Many service firms, therefore, areseeking means to reduce the number of management layers.For much small business, service quality is the major issue in the selection of their telecommunicationsprovider. According to Tony Parella, executive vice-president of Allegiance telecom of Dallas, ―Peoplebuy from us because they don‘t necessarily feel appreciated by regional Bell carrier.‖ The goal ofAllegiance management is to provide customers with personalized service. To ensure managementhears about customer concerns and to ensure Allegiance communicate effectively to customers,Allegiance has instituted a customer Bill of Rights and place a customer service manager in each

branch. These actions have been a major step for Allegiance in reducing the size of Gap One andensuring a high level of customer satisfaction.Formal and informal methods to capture information about customer expectations can be developedthrough market research. Techniques involving a variety of traditional research approaches must beused to stay close to the customer, among them customer visits, survey research, complaint systems,and customer panels.More innovative techniques such as quality function deployment, structured brainstorming, and servicequality gap analysis are often needed.



Many marketers are achieving success with niche marketing – targeting segments of customers anddeveloping services and strategies that fit their needs better than other companies‘ offerings. Other marketers are embracing the concept of mass customization – creating services for a large group ofcustomers that can be customized or appear to be customized through technological innovations.Technology affords companies the ability to acquire and integrate vast quantities of data on customersthat can be used to build relationships. Frequent flyer travel programs conducted by airlines, car rental

companies, and hotels are among the most familiar programs of this type. Relationship marketing isdistinct from transactional marketing, the term used to describe the more conventional emphasis onacquiring new customer rather than on retaining them. When companies focus too much on attractingnew customers, they may fail to understand the changing needs and expectations of their currentcustomers.

Gap Two: Not Selecting the Right Service Designs Standards

Accurate perceptions of customers‘ expectations are necessary, but not sufficient, for deliveringsuperior quality service. Another prerequisite is the presence of service designs and performancestandards that reflect those accurate perceptions.A recurring theme in service companies is the difficulty executives, managers, and other policy-settersexperience in translating their understanding of customers‘ expectations into service qualityspecifications.Gap 2 is the difference between the company understanding of customer expectations anddevelopment of customer driven service designs and standards.Customer driven standards are different from the conventional performance standards the mostservices company establish in that they are based on pivotal customer requirements that are visible toand are measured by customers. They are operation standards set to correspond to customerexpectations and priorities rather than to company concerns such as productivity or efficiency.Example: In the billing division in debit cards, companies charge a hefty interest rate on outstandingamounts. They however fail to check with the department that handles inflow of payments and updatingof outstanding amounts. Often, a cheque is sent in on the due date and a statement with the financecharge sent out on the same date. The customer is hopping mad as he has paid up on due date, thedebit card company claims that interest starts ticking on due date. Everyone has a valid reason, but thesituation 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 providing qualityservice, leadership plays a pivotal role in ensuring that quality standards are in place and adhered to.

Causes of Gap Two:

• Absence of customer -driven standards of service quality. The standards for quality improvement orplanning should be clearly those which are desired by the customers rather than those set by only theservice provider. Thus, the involvement of the end user/ customer in the goal setting process is crucialto its success.• Absence of formal quality control goals. It is not enough to say that quantification is not possible and,therefore, formal goals cannot be set for services delivery. Even subjective assessment may be vital insetting the standards.



• Vague or undefined service design. The service design may have been running traditionally for anumber of years without any alterations, or it may have been borrowed from some other concept.Defining the service would go a long way towards determining the standards of customer satisfaction.Poor service design may also be a result of failure to connect service design to service positioning.• Resource constraints. A service firm may understand and even want to deliver services desired by thecustomers but is unable to because of resource constraints.

Example, a local air conditioner dealer knows that customers want quick repairs. However, demand forboth services in springs and early summer will exceed the firm‘s capacity to provide the service. The noof technician available to repair AC is limited and the number of hours they can work is limited.Because of personnel constraints these services cannot meet customer expectations for quick serviceduring the peak demand time.• Market Conditions. The most competitive market condition impacting this gap is known as competitiveparity, a situation where competitors produce almost identical quality goods and services. To prevent acompetitor from capturing additional market share, companies often match a competitors offering. Insome cases, firms translate customer expectations into matching competitive offerings rather thanmeeting the wants of their customers. If this is done there will be a gap between what firms knowcustomer expect and service pacifications, or what the firm actually provides. For example, an airlinemay know that passengers want more leg room in the airplane but they do not translate this in service

specification.They do not put the seats further apart since other airlines are not doing it and to do so would reducethe potential passengers load.A second market condition affecting gap two is monopoly markets such as cable television services,utilities, and basic telephone services. Each operates with a virtual monopoly with no competitors.These firms may understand certain needs and expectations of their patrons but may not translatethem to service specifications unless required to do so by a government agency supervising them.Their rationale for permitting this situation may be that the cost of meeting customer expectations ishigher than the additional revenues that could be generated if the change were made.• Management Indifference. Management may talk about providing high quality service, but in actualpractice they may offer only the minimum level of service that will suffice. The goal is not to providecustomer satisfaction but to avoid customer dissatisfaction. In the short run, this philosophy may

succeed and may even generate greater revenues because more customers can be served. But in thelong run, customers will switch to competitors who provide better service. Management complacency isa problem in many corporate owned service facilities because of the pressure to generate short termprofits.• Inadequate service leadership:Perception of infeasibilityInadequate 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 customers with high levelof service quality. However, in actual practice, firm often emphasis on cost reduction, gross sales, andnet profit rather than a high level of quality. There are two reasons for the discrepancy between missionstatements and actual practice. First is the difficulty of measuring service and the ease of measuringcosts, sales and profit. Second the current reward system is often based on non-service criteria. Mostmanagers are promoted and rewarded for generating greater sales, increasing net profits, reducingcosts, not for enhancing service quality.



If service firms are going to get serious about providing high quality service, they must start with acommitment by management. Not only must management be committed to providing a high level ofservice, they must also set an example for their employees. Managers who talk service but fail todeliver an example of good service are not committed.Reduction of this gap requires setting service quality goals. These goals must be set with the customer,the service contact provider and management in mind.

Customer contact employees must understand management‘s perspective and the need to generate aprofit. In exchange, management must understand what is possible and what is not in terms ofoperations. Service contact personnel can provide their supervisors with valuable input into the bestprocess for achieving service quality goals.To be effective, the goals must be customer oriented. The service quality standards must be whatcustomers want and desire. Including in the goal setting process is advantageous to both managementand service contact personnel.Task standardization will also reduce the size of gap two. Standardization can be achieved throughhard technology (substituting machines or computers for people) or soft technology (improving workmethods). Both methods are designed to standardize the operation and provide a uniform delivery ofthe service to customers, reducing the gap between management perception of consumerexpectations, and the translation of those expectations into service quality specifications.

Example: Hard technology can be used to completely replace the human provider as in case of ATMsor it could be used to improve the consistency of service, as in the case of the diagnostic computerused by auto mechanics and the automatic scrubbing machines used by cleaning the service.Example: The standardized employee training procedure used by McDonald‘s, the prepackaged toursoffered by many travel agencies, and the buffet used by pizza Hut. By standardizing the trainingMcDonald‘s strives to ensure that all employees use the same procedure in preparing food for theircustomers. No matter where one buys a McDonalds hamburger, it will look and taste the same. Thesame concept applies to prepackaged tours offered by travel agencies and a lunch buffet offered byPizza Hut.

Closing gap two by demonstrating strong leadership commitment and by setting by setting customers‘performance standards—has a powerful positive impact on closing the customer gap. Leadership plays

a pivotal role in providing service excellence.Strategic measurement systems are also necessary to close this gap. While company measurementhas historically been the bailiwick of finance and accounting, management strategies now call for theaddition of key marketing indicators in the overall measurement program. To achieve competitivesuperiority in an era when satisfying a customer is a priority, companies need measurement systemsthat incorporate and align measures of customer perceptions and satisfaction with pivotal operationaland performance indicators. Sam Walton ofWal-Mart is hailed as a service leader worldwide. His service philosophy to spur on his people andorganization 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-Mart's managers are servants to the needs of their employees andcustomers.• Recognize that the customer is always right.



While Sam Walton's philosophy may appear simplistic, it was his adherence to these very principlesthat led to the soaring growth of Wal-Mart in the 1990's, when others were retrenching and cuttingdown on costs.

Gap Three: Not Delivering to Service Standards

Gap 3 is the discrepancy between developments of customer driven service standards and actualservice performance by company employees. Even when guidelines exist for performing services welland treating customers correctly, high quality service performance is not a certainty. Standards must bebacked by appropriate resources (people, systems, technology) and also must be supported to beeffective —that is, employees must be measured and compensated on the basis of performance alongthose standards. Thus, even when standards accurately reflect customers‘ expectations, if thecompany fails to provide support for them—if it does not facilitate, encourage, and require theirachievement—standards do no good. When the level of service delivery performance falls short of thestandards, it falls short of what customers expect as well. Narrowing Gap 3, by ensuring that all theresources needed to achieve the standards are in place reduce the gap.Another problem associated with the bridging of provider gap 3 is that of dealing with franchisees,agents, retailers and brokers. Because quality in service occurs at the moment of truth i.e. at the pointof interaction between the service provider and the customer, control over the service encounter by thecompany is crucial, yet it is rarely possible.When one NIIT franchisee falls short of set educational standards, it reflects on the company as awhole. When food at one outlet of Birdy‘s, McDonald's or Croissants etc. is below quality standards, theimage of the entire chain is tarnished. For this, the firm needs to develop systems to either control ormotivate these intermediaries to meet company goals.Primary causes of this gap are variable and inseparable nature of services. Because most services areperformed by people, the quality of service is highly dependent upon well the service provider performshis or her job. If the service contact personnel provide services as specified, customers are usuallysatisfied and their expectations are met, if employees do not provide the service as specified in theservice specifications, customer expectations will not be met and customers will be dissatisfied.

Cause of Gap Three:

• Deficiencies in human resources policies.

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.

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 and

company management, the wrong employees. Poor employee-technology job fit

Inappropriate evaluation and compensation systems

Lack of empowerment, perceived control, and teamwork.These factors all relate to the company‘s human resource function, involving internal practices such asrecruitment, training, feedback, job design, motivation, and organizational structure.

• Failure to match supply and demand: when demand for a particular service exceeds the supplycapacity, the general tendency is to shorten the process of the service delivery to speed up theprocess. Usually, in this case the quality of the service delivered deteriorates.



Failure to smooth peaks and valleys of demand

Inappropriate customer mix

Over reliance on price to smooth demand• Customers not fulfilling roles: The customer is as much involved in the process of services

delivery as the service provider. Therefore, training the customer to receive the service to derivemaximum benefit is essentials.

Customers lacking knowledge of their roles and responsibilities.

Customers negatively impacting each other• Lack of training to the franchisee‘s staff: Whenever service is provided by a franchisee in lieu of

the service provider, the front-end employees of the franchisee require elaborate training to beable to cope with the customer demands in a standardized and pre-determined manner. Mostservice 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 Three

A 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. Thelowest-level employee must feel that management; from their immediate supervisor to the CEO of thecompany, cares about them and that they are a critical part of the firm‘s success. There must be a spiritof cooperation, not competition, among employees. All of this is achieved when every employee isinvolved in the company and committed to providing a high level of service to customers, to thecompany, and to other employees. For instance,Southwest Airlines is often cited as a service provider with excellent teamwork. If employees are toprovide the services according to the job specifications, there must be a fit between employee skills and

job requirements. Firms must hire individuals who have the ability to perform the job. Once hired,management must be sure each employee has to do the tasks according the company‘s procedures.Because of technology, many service firms are using machines, tools, and computers to assist serviceworkers in their job. To perform their job according to company standards, service employees musthave the proper equipment. The equipment needs to be in good condition and the employees musthave the knowledge and training to properly use the technology to enhance the quality of their work.To diagnose problems with newer automobiles, computerized diagnostic equipment is essential. Thequality of diagnosis is dependent upon the quality and condition of the equipment and the ability of theservice technician to operate it. In cleaning carpets in homes and offices, the operator of the equipmentcan perform a good job only if the shampoo machine is running properly and he or she has the ability tooperate it.

An important factor in reducing gap 3 is the concept of perceived employee control. When employeesare allowed some flexibility and control in the service process, morale is enhanced, and there is agrater desire to perform the service properly.Flexibility and control also allow service employees to modify the process to meet the particular needsand desires of customers. In addition, by having control of the service encounter, the outcome of theservice will become more predictable.The supervisory control system will have an impact on the size of gap 3. If service employees areencouraged and rewarded for meeting job specifications, the likelihood of employees doing the jobaccording to the specifications increases.



However, supervisors often tell employees to follow the correct job specifications but reward or punishemployees on other criteria, which is called role conflict. For example, employees may be evaluated bytheir supervisors on such criteria as a balanced cash register for a bank teller, the number ofautomobiles repaired by a mechanic, and the amount of time spent cleaning a particular office by a

janitor.When this occurs, employees will shortcut the specifications to improve whatever criteria are used by

their supervisors in their evaluations, often neglecting other service specifications.Role conflict is inherent in many service contact positions. How this role conflict is handled will have animpact on how closely the service delivered matches the service specified. The primary conflict facedby service contact personnel is between expectations of customers and expectation of management.This conflict is increased when employees are not given flexibility to meet the needs of customers,when employees have little control over how the service is to be performed, the amount of paper worknecessary to carry out the service, and the number of other employees a service provider must contactor use in the process of performing the service.To reduce role conflict, management should allow service contact personnel adequate flexibility to meetcustomer needs. Employees need to have some control over the service encounter because thegreater the control, the less role conflict experienced. Control and flexibility mean service employeeswill not have to go to other employees and managers with questions and for permission to modify the

service to meet a customers‘ unique request. It is r esponsibility of the management to reduce theamount of conflict faced by their service employees. Not only does reducing role conflict aid serviceemployers in meeting the needs of customers but it will increase job satisfaction, job morale and lengthof employment.Role ambiguity refers to employees‘ lack of infor mation or understanding of their job and jobrequirements. As role ambiguity increases job satisfaction decreases. It also becomes difficult foremployees to perform the necessary job specifications if they lack an understanding of what thesespecifications are.Management often mistakenly assumes employees understand their job when, in fact, service contactpersonnel do not have clear understanding of goals and expectations. Although they have been toldwhat to do, they may not have been told how the service is to be performed. To reduce role ambiguity,service firms must do the following:

Provide frequent and clear downward communication from management on what is expected and howthe service is to be performed.

• Provide employees with constructive feedback to help them understand how the service is to beperformed and what management expects

• Provide employees with product and service knowledge so they can perform in their jobs better.• Train and retrain employees in the proper method of performing the service Train service

contact personnel• 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‘s advertising,sales promotions, and sales staff. These promises may be explicitly stated or they may be implied. Ifthe firm does not provide the service that is promised, there is a gap between what customers expectand 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 or even



impossible to deliver. Communication through these channels tends to raise customer expectations andset certain standards to assess the service in the minds of customers. Any discrepancy betweenpromised and actual service tends to broaden the customer gap. A recent advertisement by a leadingPizza chain promised one free pizza with a specified order. On calling in for the offer, one found thatthe small print indicated that this offer was valid only at the counter and not on home delivery orders.Would the outlet have received so many calls if they had indicated this in bold type? While on the

subject of pizzas, one wonders if Domino's manages to keep its promise of delivering anywhere in 30minutes - especially in Mumbai traffic. If not, they must be making heavy losses on free pizzas.

Causes of Gap Four

• Ineffective management of customer expectation

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.

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.

• Overpromising

Overpromising in advertising: During the marketing phase, the sales force may go beyond theoriginal script to strike the deal.

Overpromising in personnel selling: While customers may be lost to competition due to underpromising, they may be lost due to overpromising as well.

Overpromising through physical evidence cues• Inadequate horizontal communications

Insufficient communication between sales and operations: If during the personal selling phase acommitment 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 demand

Insufficient communication between advertising and operations

Differences in policies and procedures across branches or units• Pricing of services.

In packaged goods many customers possess enough price knowledge before purchase to be able to

judge whether a price is fair or in line with competition. With services customers often have no internalreference point for prices before purchase and consumption. Pricing strategies such as discounting,―everyday prices‖ and couponing obviously need to be different in services in cases where thecustomers have no sense of the price to start with! Techniques for developing prices for services aremore complicated than those for pricing of tangible goods.



Strategies for Reducing Gap Four

To reduce the size of Gap Four, service firms must address two issues: horizontal communications andpropensity to over promise. Service contact personnel should have input in the firm‘s advertising andpromotional to ensure that messages conveyed to the prospective customers can be operationally

performed. The reverse is also true; service personnel should be informed prior to an advertising orpromotional campaign. In service organizations with field sales representatives, there must becommunication between the salespeople and the personnel performing the service. Salespeople willoften make promises to prospective customers to gain contacts. If promises are made, the operationsdepartment needs to be aware 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 meet competitiveclaims. In both cases, severe damage to the firm‘s image can occur since it is unlikely the firm canperform the service as promised.Customers‘ service perceptions may also be enhanced if the company educates them to be betterusers of the service. Service companies frequently fail to capitalize on opportunities to improvecustomers‘ perceptions. As on bank executive observed, ―We don‘t teach our customers how to use uswell and why we do the things we do.‖ Effectively coordinating actual service delivery with external

communications therefore narrows provider gap 4 and favorably affects the customer gap as well.Another function that must be involved in communication is human resources. For employees to deliverexcellent customer service, firms must serve the employees through training, motivation, compensationand recognition to have a power full impact on the quality of service the employees 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. In addition toimproving service delivery, companies must also manage all communications to customers so thatinflated 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 including spouse,family, and group of friends or relatives. The primary drives of the tourist to this place are the beauty ofthe place and historical significance. The facilities sought in the vicinity of the Taj Mahal and basicamenities like safe drinking water, clean toilets, small grocers, cafeterias and milk. The sampleinterviewed was of the opinion that the Taj Mahal bedecked in moonlight was a picture of delight, andshould not be missed. However, for those who could not make it on that crucial night of the month,similar creations could be made through a light and sound show. On the full moon night some culturalevents could also be planned and offered. Since the main charm in visiting the city of Agra was the TajMahal, the tourists were keen on knowing the timings and approach to the spot and any rules thatgovern visiting this wonder of the world.External Communication Content on Taj Mahal: The information provided on the government websiteson Taj Mahal is not indicative of the facilities sought by the tourists. On fundamental information, theprevailing basic amenities in the vicinity of Taj Mahal are not listed, once in Agra how to reach TajMahal is not known. The visiting hours and weekly offs, if any are not notified. Also people travelingwith families must be provided with information on basic amenities in and around the Taj Mahal.For the bespoke customer, the historical significance, this is a selling point for TajMahal Is not adequately flaunted. There is neither imagery nor mystic incorporated in thecommunication content. 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 but there isno mention of when the full moon is expected in the next few months. Tourist could be provided withcalendar data of full moon nights along with associated special events. There could be plans for specialshows 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 of the world, hence providing conservationguidelines for tourists in the communication content is an expectation.

Consumer Perception of Technical and Functional

Quality Model

QUALITY 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 gaps in theunderstanding of the two constructs, their relationship to each other and their antecedents andconsequences. A distinction has often been made between the two constructs. According to Cronin andTaylor ‗this distinction is important to both managers and researches alike, because service providers

need to know whether their objective should be to have consumers who are satisfied with theirperformance or to deliver the maximum level of perceived service quality.‘ Oliver takes the view that satisfaction is ‗the emotional reaction following a disconfirmation experience‘.Getty and Thompson defined satisfaction as a ‗Summary psychological state experienced by theconsumer when confirmed or disconfirmed expectations exist with respect to a specific servicetransaction or experience‘. Rust and Oliver suggested that customer satisfaction or dissatisfaction - a‗cognitive or affective reaction‘ – emerges as a response to a single or prolonged set of serviceencounters.Satisfaction is a ‗post consumption‘ experience which compares perceived quality with expectedquality, whereas service quality refers to a global evaluation of a firm‘s service delivery system.Perceived quality, on the other hand, may be viewed as a global attitudinal judgment associated withthe superiority of the service experience over time.

Not surprisingly there has been considerable debate concerning the nature of the relationship betweenthe constructs of satisfaction and quality. While the majority of research suggests that service quality isa vital antecedent to customer satisfaction there is now strong evidence to suggest that satisfactionmust be a vital antecedent of service quality. Regardless of which view is taken, the relationshipbetween satisfaction and service quality is strong when examined from either direction.Satisfaction affects assessments of service quality and assessment of service quality affectssatisfaction. In turn both are vital in helping buyers develop their future purchase intention.So, conclusion is that the key difference between the two constructs is that quality relates to managerialdelivery of the service, while satisfaction reflects customers‘ experiences with that service. They arguedthat quality improvements that are not based on customer needs will not lead to improved customersatisfaction.

THE SERVICE-PROFIT CHAIN

The increased emphasis on customer satisfaction begs the question whether improvements incustomer satisfaction lead to improvements in the economic performance of firms. Heavy expendituresand importance attached to customer satisfaction measurement suggest that the link between customersatisfaction and economic performance is presumed by companies. Increasing levels of research isgoing into understanding the nature of the service-profit chain.



There is considerable support for a link between improvements in service quality and improvements inservice quality and improvements in financial performance.Grant reports that the American Customer Satisfaction Index studies found a positive correlationbetween customer satisfaction and stock market returns. Much of the literature has sort to establish alink between satisfaction and loyalty. Dick and Basu, in a conceptual paper on loyalty viewedsatisfaction as an antecedent of relative attitude because, without satisfaction, consumers will not hold

a favorable attitude towards a brand as compared to other alternatives available and will therefore notbe predisposed to repurchase. .Much of the research into the outcomes of the satisfaction has measured behavioral intentions, forexample, the likelihood of recommending a service or repurchasing it. However, in the light ofincreasing levels of competition in most services markets, behavioral intention based on loyaltygenerated through good service can easily be broken. This decline has been attributed to a number offactors including greater choice and information available to customers, the ‗commoditization‘ of severalservices, and increased levels of competition.Against this, some researchers have pointed out that much of the evidence to support a link betweenquality and financial performance is anecdotal in nature and refuted by analysis of corporateperformance. It is suggested that there is wide spread evidence of managers‘ frustration with theinability of quality improvement to improve organizational performance.

Developments in information technology are offering new insights into the link between quality andfinancial performance. Large multiple outlet service organization are increasingly able to experimentwith elements of service quality in test sights and to judge economic performance over time. A fast-foodrestaurant, For example, may implement a new staff payment system or training program in a numberof ―experimental‖ sites and will be able to identify changes in performance relative to other ‗control‘branches. Some service providers have disaggregated their information even further by linking servicequality questionnaires to features of the service which a respondent actually received. In this way,individual employees or groups of employees can be linked to measure of quality. While informationtechnology is opening up new possibilities for correlating data about inputs and perceived outcomes,the problem of analyzing cross-sectional data remains. It is very difficult within a research framework toisolate all of the contributors to customers‘ perceptions of quality except those which the researcher isinterested in The Service Profit-chain.

SETTING QUALITY STANDARDS

A precise specification of service standards serves a valuable function in communicating standard ofquality which consumers can expect to receive. It also serves to communicate the standards which areexpected of employees. While the general manner in which an organization goes about promoting itselfmay give a general impression as to what level of quality it seeks to deliver, more specific standardscan 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 determining the levelof service to be delivered to customers. These generally act to protect customers against excessivelypoor service rather than being used to proactively promote high standards of excellence. The booking

conditions of tour operators, for example, make very few promises about service quality, other thanoffers of compensation if delays exceed a specified standard or if accommodation arrangements arechanged at short notice.Generally worded customer charters go beyond the minimum levels of business terms by stating in ageneral manner the standards of performance which the organization aims to achieve in its dealingswith customers. In this way, banks publish characters which specify in general terms the manner inwhich accounts will be conducted and complaints handled.



Specific guarantees of service performance are sometimes offered, especially in respect of serviceoutcomes. As an example parcel delivery companies often guarantee to deliver a parcel within aspecified time and agree to pay compensation if they fall below this standard. Many of the public utilitiesnow offer compensation payments if certain specified services are not delivered correctly, increasingly,service organizations set their service guarantees with reference to benchmarks established by best-practice companies within their sectors, or in completely different sector. Many highly specific targets

are therefore restricted to internal use where their function is to motivate and control staff rather than toprovide guarantees to potential customers. While the major banks give their branch managers targetsfor such quality standards as queuing time for counter staff and availability of working ATM machines, itdoes not guarantee 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 by members ofprofessional associations as diverse as car repairers, undertakers and solicitors specify minimumstandards below which service provision should not fall. The code of conduct provides both areassurance to potential customers and a statement to employees about the minimum standards whichare expected of them.Contrary to popular belief, a company operating to ISO 9002 does not guarantee a high level of qualityfor its service. Instead, ISO accreditation is granted to organizations who can show that they have in

place management systems for ensuring a consistent standard of quality- whether this itself is high orlow is largely a subjective judgment. Although this standard was initially adopted by manufacturingindustries, it has subsequently found significant use among service companies, including education,leisure centers and building contractors.Increasingly, industrial purchasers of services are seeking the reassurance that its suppliers are ISOregistered.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, the relevantregulating authority has the power to set the specific targets.

DELIVERY OF HIGH-QUALITY SERVICE

DEVELOPMENT OF A QUALITY CULTURE

Organizations, like human beings, develop a unique personality, shaped by interpersonal relations, thequality of the management and the influence of the leadership upon the employees, the system inplace, and the quality of the employees. High-quality service design and delivery is not just the functionof the front end employees but of all the members of the organization. The factors that could play acrucial role in the quality of service delivery are many. A few important factors are discussed below.

HUMAN FACTORS

It basically includes employee recruitment and selection, training, rewards and motivation. ‗I shall notdeliver substandard service nor shall I let anybody else deliver substandard service‘ is the type of mottoto be adopted. For example, some quality conscious automobile companies have given the right ofhalting the assembly line to any concerned employee who may have noticed inadequate or defectivecomponents fitted on a vehicle. This quality consciousness is crucial to long term quality maintenance.In addition, customer feedback on quality issues has to be an important component of employeeevaluation.



SYSTEMS SUPPORT

It is not employees but also system which tends to produce defects. Thus, organizations have to putsystems in place that ensure high quality services delivery. For example, the computerized system inthe bank has to ensure accurate and timely delivery of the customer bills and statements.

ORGANIZATIONAL FACTORS

Organizations with very high number of levels within the structure tend to have very poor interactionbetween the front-end employees and the higher echelons within the organization. The reportingstructure and close interaction between the supervisors and the front-end service delivery employees isvery important. A receptionist being a front-end employee may be seen as the key person for thecustomer interaction. However if the receptionist is not authorized to ask the housekeeping unit toimprove upon the service when a customer has complained about it, it may demotivate the employee,and, in future, the receptionist may not report problems with the housekeeping unit.

FEEDBACK

Organizations need to encourage feedback from every employee including the front-end employees asa part of the quality monitoring system. Employees have to be told that this feedback is crucial for theorganizational success.

1] QUALITY CIRCLES

Quality circles are groups of non-supervisors and work leaders in a single company department whovolunteer to conduct group activities in order to improve the effectiveness of the work in their respectivedepartments. Fishbone or Ishikawa diagrams prepared by Ishikawa help to trace quality complaints tothe responsible production process that is the root cause of the problem. The role of individualemployees is very crucial to quality control of services as well as goods production. This is more so inthe case of services where the service is usually delivered in person by one of the employees.The diagram below is a root cause diagram that enables you to pinpoint the causes contributing to thedelayed departure. In addition, the frequency of each failure can be measured so that the reasons forpoor quality service can be understood and both short and long-term measures can be instituted totackle the situation.

2] TOTAL QUALITY MANAGEMENT

TQM is defined as management of the entire organization so that there is continuous improvement inall dimensions of process, products, and services that are important to the customer. The key aspectsof the focus as follows:• Quality Standards must be customer driven. Ever y service firm should have both company-definedand customer-defined standards of quality. The customer-defined standards are classified as soft andhard standards.• External and internal customers both need to be addressed. The receptionist could not perform thebest service for the customer without the cooperation from others, including the housekeeping



department. Thus, services to internal customers also have to be given the same degree of importanceas those for external customers.• Every employee is a quality inspector and is empowered. Each and every employee can stop theassembly line. Thus, each employee is treated as a quality inspector and is empowered to takeappropriate corrective action.• Continuous measurement and improvement. It has been the belief of a number of organizations that

the quality improvement needs to be done on a large scale to be effective. Contrary to this, it has beenseen that while it helps to have a major review of the quality of Japanese goods and services owesmuch to the continuous measurement and improvement, even on a small scale. Thus, small tinkeringtowards quality improvement also contributes significantly to overall quality improvement due to thecumulative effect.• Commitment to quality improvement from the top management. Organizational culture is very crucialto the quality improvement process. In particular, the contribution of top management and theircommitment is also crucial as employees usually emulate the attitudes of the top management. Whenthe top management is committed to quality improvement, the employees feel confident that they wouldenjoy the support of top management even when they have to make some hard unpalatable decisionsleading 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 see qualitystatements or organizational objectives displayed prominently at work place. Surprisingly, most of themare for the visitors or the customers rather than the operating employees! Thus, they are decorativerather than operative in nature. This does not bring about the desired changes in the products orservices, nor does it bring about an attitudinal change.• More focus on cost saving than on long-term generation of value for the customers. Some of thequality control initiatives require capital funds or increases in the variable cost. In the short run, theymay sound like unnecessary costs and therefore not desirable. However, in the long term, qualityimprovement would bring about customer satisfaction through greater value delivery and customerloyalty. These costs will eventually transform themselves into financial gains.

• Lack of quality initiatives, support, or follow-through actions. The lack of commitment also could meanno further initiatives or follow up actions. Employees may tend to think that if the immediate crisis isadverted, there is less compulsion to follow up on the efforts made.

3] HARD MEASURES OF SERVICE QUALITY

A standard represented by a number gives a concrete idea about the goal and the gap between theperformance and the goal. Thus, this is an ideal way of giving feedback to relevant parties about theperformance. To understand this hard measure we use the example of the number of buses leaving a

bus terminal. In the Ishikawa or fishbone diagram, we went into the possible reasons for the delay. Letus assume that the acceptable standard for the service delivery is a maximum delay of 10 minutes inbus departure from the announced timetable. We could develop a daily measure of how many busesleft within this 0-10 minute‘s interval. We could use percentage of buses that left within 0-10 minutesdelay as a measures of overall timeliness quality. The timeliness index would be the percentage ofbuses leaving on time. Visually, both the operating and supervisory personnel could judge the recenttrend, 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 DEFECTION

If the quality of the services extended by the organization is perceived by the customers to be of highquality, the customer is likely to remain loyal to the service provider. The perceived level of service,

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 occur suddenly. Thecustomers start to use the service of the current provider less frequently before completely switchingover to another provider. Thus, usually, there is some warning when the correction could be made andthe trend reversed. We need to make use of the tools of computerization and data mining for thispurpose.For example, a frequent flyer program administered by airlines can be used effectively. From the pastdata, the company knows about the average number of flights undertaken by an executive on quarterlybasis. Should there be a significant drop in the number of flights flown on this airline during twosuccessive quarters, it may be worth acting upon a line may be dropped to the person enquiring abouthis health and the reasons for the lack of flying, or even requesting a feedback about the airlineperformance.

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 thus savenine. While a number of managers would agree on the value of customer loyalty, they are not preparedto invest resources to ensure continued patronage. This total commitment to the customer loyalty wouldensure long-run success.

5] ROLE OF AUTOMATION IN SERVICE QUALITY DELIVERY

The 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 with thecustomers may be difficult to achieve.In view of these factors, automation can be a way of delivering high quality services. The advantages ofautomation are:• The role of a service-providing person is greatly reduced or even totally eliminated, thereby reducingone source of services variation. Thus, when the bank passbook entries are made directly from acomputer through a printer, the role of the person keeping the ledger is greatly reduced. This ensuresaccuracy of the work.• Due to moods, emotions and variations in behav ior, customers tend to perceive identical servicedelivery at different points to be different. Even the moodiest of the customers, however, can see theconsistency in automated delivery.

• As automation usually means a limited number of alternatives available on a menu, the customer isunable to ask for an impossible service alternative, thereby avoiding the risk of failure.• Automation always provides consistent and standard delivery. While the service may or may notdelight the customer, it would meet the adequate level of service expectation quite easily. Reliability isone 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 or paymenttransaction by a cashier or teller is Rs 3 to 5 per transaction. A similar ATM transaction costs Rs 0.25.thus, a considerable saving in operating cost can accrue to the service provider due to automation.



• Automation can produce data about various customer transactions. It can be used as a source ofinformation about consumer behavior, special interest, etc. This can be used to make customizedofferings to high net-worth customers for mutual benefits.

6] ROLE OF QUALITY AWARDS AND CERTIFICATION

An offshoot of the commerce department of the United States Government cal –led ‗National Institute ofStandards and Technology‘ offers awards each year in three categories- manufacturing, service andsmall business-for quality achievements.The award, named after a US commerce Secretary, was instituted in 1987 to promote excellence inorder to meet the Japanese economic threat successfully. Companies have to nominated themselvesand make detailed submissions about their quality practices and performance. Selected companies arevisited by the examiners for a detailed look at the operations. Thus, two-third points are awarded fordirect measurement of quality and contribution of quality processes. The chosen criteria are goodyardsticks for quality. They represent 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 marketing theproducts or services produced by such a firm. The award focuses on management systems andprocesses, and even the companies who are not successful in winning the award benefit enormouslyby just participating in the award process. The award wakes up a number of companies and participantmanagers to the need for TQM. The importance of quality in the global competition is brought beforethe participants and they get a blueprint for action that works.

7] ROLE OF SEGMENTATION IN SERVICE QUALITY IMPROVEMENT

Segmentation is one of the key techniques used in the current marketing to understand the customer

needs better and then offer products or services that more particularly meets thee customer needs. Inthe case of products, the need for segmentation is obviated to some extent by an elaborate range ofproducts that can be offered simultaneously. Thus, a large number of alternatives exist for customers tochoose from. In the case of services, the number of alternative services that can be designed toachieve the same end purpose is limited. For example, if the tourist company normally offers tours toFar East or European Countries, the number of service alternatives is limited to first class or economyclass.If the customer is provided with unsuitable service not needed or required by a set of customers, theirperception of service quality received is considerably lower. The service provider can adopt a numberof 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 large percentage ofthem offer extensive services in almost all the areas of medical care. By specialization in one area,however, a hospital can develop expertise, reduce costs, and build up a quality reputation which can beunmatched. In Canada, Dr Shouldice, a pioneer in the technique for surgical correction of hernia (acondition usually brought about by the weakening of the stomach wall), and his colleagues run anumber of hospitals which surgically treat only hernia. Unlike in the case of other hospitals, the surgery



is mostly performed under local anesthesia, with the patient walking in and out of the operating theatrewith the help of the surgeon. The previously operated patients in their post-operative stay in the hospitalprovide moral 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-on modulesand offer them to customers by way of greater variety. Thus, a tour and travel company may offer anadd-on package for children below 3 or between 3 and 12 years of age. The company may offer anadditional stay package at attractive prices, single room supplement for a price, etc. these modules willeffectively meet the demands of the greater segments of the customers more precisely.Various modules can be combined to produce distinctive services that appeal to various customers. Forexample, in Kulu Manali, a large number of hiking alternatives are available to a tourist. Thus, thetourist can decide on an uphill and/or downhill walk. The tourism department offers a choice of walk trailfor 2 hours, 4 hours, or 6 hours. One can choose either a bus, funicular railway, chair car, ski lift, oreven a post office bus to reach the starting point and then choose the trail of the selected duration.Even the return arrangement is similarly made by flexible mode of transport. As a result, tourists return

to the area frequently and choose the modular package best suited to their pockets and levels ofenergy.

RESEARCHING SERVICE QUALITY

The development of reliable, easy-to-easy measures of service quality represents a key aspect ofconsumer behavior and services marketing research. Indeed, an integral part of any organization‘sattempt to still a ‗quality culture‘ is a commitment to a process of ‗continuous improvement‘. To support

this systematic approach to quality measurement is needed. This is especially true of ‗pure‘ servicesorganizations, as unlike their counterparts in the manufacturing sector they have fewer objectivemeasures of quality by which to judge their production. Ramaswamy identified three different threedifferent sets of measures that a company must be concerned 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 design specifications.• Customer measures, on the other hand, which are both internally and externally focused, aimed atassessing 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 and customermeasures will give some indication as to how the service is performing in customers‘ eyes. In turn, thiswill have a direct bearing on a company‘s financial performance and overall market share.



1] Regular customer surveys

The incidence of surveys into the level of satisfaction that customers have experienced from serviceproviders is increasing throughout the service sector. The increasing range of competing services

available and customers‘ growing awareness of the fact that they are in receipt of a service for whichthey pay a price – Whether directly or through taxation – has led them to expect to be consulted and to express anopinion about the level of satisfaction provided. Today, members of the public are in constant receipt ofliterature from a wide range of service providers asking for comments on the quality of service that theyhave received. It is probably true to sat that most large service providers in both private and publicsectors have jumped on this quality bandwagon, although it is often questionable whether the mostappropriate methods are employed to gather the information.Typical application include filling in a questionnaire on the plane after a holiday or being asked by thelocal council to fill in a card headed Customer service enquiry.Such surveys usually ask recipients to relate any complaints that they may have about the servicesprovided and any comments/suggestions for improving them.

The assumption that most people make is that data from such surveys will be used to take correctiveaction where expectations are not reached.

2] Customer panels

These can provide a continuous source of information on customer expectations. Groups of customers,who are generally frequent user, are brought together by a company on a regular basis to study theiropinions about the quality of service provided. On other occasions, they may be employed to monitorthe introduction of a new or revised service – for example a panel could be brought together by abuilding society following the experimental introduction of a new branch design format.

The use of continuous panels can offer organizations a means of anticipating problems and may act asan early warning system for emerging issues of importance. Retailers have been involved in theoperation of continuous panels contribute to monitor their level of service provision as well as lettingpanels contribute to new product development research. User groups also have an important part toplay in many of the UK‘s recently privatized industries such as gas, water, electricity andtelecommunication. However, the validity of this research method is quite dependent on how well thepanel represents consumers as a whole.There has been a suggestion that the number of people prepared to become members of panels is notrising as quickly 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 analysis

An increasingly popular method of evaluative research involves tracking the satisfaction of individualswith particular transactions that they have recently been involved in. This type of research enablesmanagement to judge correct performance, particularly customers‘ satisfaction with the contactpersonnel with whom they have interacted, as well as their overall satisfaction 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 Association surveyscustomers who have recently been served by its breakdown service and many building societies invitecustomers who have just used their mortgage services to express their views on the service receivedvia a structured questionnaire. An additional benefit of this research is its capability to associate servicequality performance with individual contact personnel and link it to reward system.

4] Perception surveys

These investigations use a combination of qualitative and quantitative research methods. Manyprofessional services organization have employed such studies in order to develop future marketstrategies. Their aim is to achieve a better understanding of how customers view an organization. Inother words, to help the firm itself as clients see it. The initial qualitative stages of a study involveresearchers in identifying the attitudes of clients towards the firm as well as how the firm is perceived bythe community at large. Group discussions and/or in depth interviews are the vehicles used forassessing the perceptions of people at this stage. In the quantitative phase of the survey, clients areasked to judge the company‘s performance using a battery of attitude statements. Perception studies often include an analysis of the perceptions of a firm‘s employees.

5] Mystery customers

The use of ‗mystery customer‘ is a method of auditing the standard of service provision, particularly thestaff involvement in such provision. A major difficulty in measuring service quality is overcoming thenon-conforming of staff with performance guidelines. This so called service-performance gap is theresult of employees being unable and/or unwilling to perform the service at the desired level. An

important function of mystery customer surveys is therefore to monitor the extent to which specifiedquality standards are actually being met by staff.This method of researching actual service provision involves the use of trained assessors who visitservice organizations and report back their observations. Audits tend to be tailored to the specific needsof a company and focus on an issue that it wishes to evaluate. The format of the enquiry is determined

jointly by the client and research organization.

The constructive nature of this research technique has to be stressed, as the mystery customer canquite easily be mistaken by staff as an undercover agent spying on them on behalf of the management.In particular, if the techniques are applied correctly, they can allow management to know what is reallyhappening at the sharp end of their business. To be effective mystery shopping surveys need to beundertaken independently, should be objective and must be consistent. The training of assessors is

critical to the effective use of this research method and should include, for example, training inobservation techniques which allows them to distinguish between a greeting and an acknowledgement.

6] Analysis of complaints

Dissatisfaction of customers is most clearly voiced through the complaints that they make about serviceprovision. For many companies, this may be sole method of keeping in touch with customers.



Complaints can be made directly to the provider or perhaps indirectly through an intermediary or awatch dog body. Complaints by customers, referring to instances of what they consider poor-qualityservice may, if treated constructively, provide a rich source of data on which to base policies forimproving service quality. However, customer complaints are at best an inadequate source ofinformation. Most customers don‘t both to complain, remain dissatisfied and tell others about theirdissatisfaction. Others simply change to another supplier and do not offer potentially valuable

information to the service provider about what factors where wrong which cause them to leave.In truly market - oriented organizations, complaints analysis can form a useful pointer to where theprocess of service delivery is breaking down. As part of an overall programme for keeping in touch withcustomers, the analysis of complaints can have an important role to play. The continuous tracking ofcomplaints is a relatively inexpensive source of data which enables a company to review the majorconcerns of customers on an ongoing basis and hope fully rectifies any evident problems. In additionthe receipt of complaints by the firm enables staff to enter into direct into direct contact with customersand provides an opportunity to interact with them over their matters of concern. As well as elicitingcustomers‘ views on these issues in particular, complainants can also contribute views about customerservice in general. Many companies have gone to great lengths to make it easy for customers tocomplain, for example by creating free phone telephone lines and making comment cards readilyavailable.

7] Employee research

Research 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. Datagathered from staff training seminars and development exercises, feedback from Quality circles, jobappraisal and performance evaluation reports, etc. can all provide valuable information for planningquality service provision. One way in which formal feedback from staff can be built into a systematicresearch program is the operation of a staff suggestion scheme. The proposals which staff may makeabout how services could be provided more efficiently and/or effectively certainly do have an importantrole to play in moving service quality.Research into employees‘ needs can also identification of policies which improve their motivation todeliver a high quality service. Many of the techniques employed to elicit the views of employees asinternal customers are in principle the same as those used in studies of external customers. Interviewsand focus may be used in the collection of qualitative data on employee needs, wants, motivations andattitudes towards working conditions, benefits and policies.In the respect of obtaining involvement and participation, involving employees in the research processand its findings, for example by using them to gather data, showing them videotapes of groupdiscussions and interviews with customers and circulating them with the findings of research reports,can do a lot for improving their understanding of service quality issues throughout their organization.There are many barriers to the flow of information from employees to managers, especially inorganization where there is no culture of listening to staff. Where there are clearly identified, and for

acting on the result, a shared commitment to improving quality can greatly improve customers‘perception.



8] Benchmarking studies

The nature of customers‘ quality expectations in other similar service industries can be useful source ofinformation for managers. It is often apparent that customer needs may be similar between different

industries, even though the service product on offer is ostensibly quite different. Many commondimensions cut across the boundaries of industries and apply to services in general – for examplecourteous and competent staff, a pleasant environment, and helpfulness, to name but a few. It cantherefore be beneficial to investigate the nature of service provision in closely related services areas,and draw upon the findings of any research that has been made available. In particular, it is worth whileinvestigating what is known in those services sector that have a good track record of analyzing andresponding to customers‘ needs and identifying whether it is applicable to an industry that has onlyrecently adopted a customer-led approach. For example, it is possible to learn a lot about certainaspects of hospital service from what hotel and catering establishments have been researching andpracticing for some considerable time.Continuing with this theme, many services organizations that have been operating outside the privatemarket place for many years can benefit from an understanding of the operations of their counterparts

in other countries that have openly marketed their services I in a freely competitive market. In this way,managers within the UK National Health Service may learn a lot about customer care by examininghealth services in the USA.The term benchmarking is frequently used to describe the process by which companies set standardsfor themselves, based on a study a best practice elsewhere. Best practice could be defined in terms offirms within the same sector, or completely different sectors which share similar processes.Benchmarking can be undertaken at a number of levels, based on what is compared and what thecomparison 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 plan with bestpractice 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 wil l be compare the performance of a company‘sfunctions with best practice.Benchmarking involves a five-step continuous process: plan the study; from the benchmarking team;identify potential benchmarking partners; collect and analyze the information; and adapt and improve.While benchmarking produces a standard against which improvements are continuous andbenchmarks can go out of date very quickly.

9] Intermediary research

Service intermediaries often perform a valuable function in the process of service delivery, performingtheir role in quite a different manner to goods intermediaries.

Research into intermediaries 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 perceived as being slowor unhelpful to customers. Research through such techniques as mystery customer surveys can beused to monitor the standard of quality delivered by intermediaries.

• Secondly, intermediaries as co-producers of a service are further down the channel of distribution andhence closer to customers. They are therefore in a position to provide valuable feedback to the service

principal about consumers‘ expectations and perceptions. As well as conducting structured researchinvestigations of intermediaries, many services principals find it possible to learn more about the needsand expectations of their final customers during the process of providing intermediary support servicessuch as training.

McDonalds – A Story of Service Recovery

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 customer ratings,McDonald‘s Corp., the largest fast food chain in the world, seemed to have lost its claim to providingthe ‗Great American Meal‘. The company, which was once the favorite destination of fast food loversaround the world, had been receiving low ratings on quality and customer satisfaction since the early1990s. However, under the leadership of Jim Cantalupo, who was made CEO in early 2003, andCharlie Bell, the President, McDonald‘s managed a relatively quick turnaround. Under the turnaroundplan, McDonald‘s introduced substantial system wide changes that overhauled the company‘s products,operations and marketing. The new plan eliminated the negative elements in the system, whileretaining and building on the positive aspects.No Longer the ‗Great American Meal‘: Through the decades, McDonald had promoted itself as the provider of the ‗Great American Meal‘.

However, by the1990s, it was clear that the company has lost its claim to that title. Changing customereating habits, increased competition and complacence on the part of the company and its franchises,were the main reasons for the difficulties experienced by it. The 1990s saw an increasing interest inhealthy living and physical fitness in the US. People realized that regular consumption of fast food couldplay havoc with their health by increasing their intake of Cholesterol and fat, and lead to a spate ofproblems related to obesity and heart disease. Instead of fast food, which comprised mainly of burgers,fries and soda, people switched to sandwiches and salads, which were perceived as healthier foods.Consequently, company‘s like Subway and Panera Bread, which offered sandwiches and salads in acasual dining 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 casual outlets‘. In anattempt to recover their lost customers, McDonald Start including healthier items likes salad and sandwitches in their menu.

For instance, McDonald introduced the McLean Deluxe Burger in the early 1990s a 91% fat free patty,as a substitute for the Big Mac. However, people hated its taste andMcDonalds was forced to phase out the product a couple of years after it was launched. Mc Donaldalso attempted to shift to low fat frying oil in2002, but it was not able to give the trademark McDonaldstaste, and customers rejected the change.Considering people‘s perception of fast food, it did not take long for the industry to become the target oflawsuits filed by people who blamed the fast food industry for their obesity. Activists published statisticsshowing that McDonald‘s food had a high proportion of unhealthy fats, and reports also made public theunhygienic careless way in which the food was being prepared. Although none of the lawsuits filed



against the company were successful, analysts said that they generated a large amount of badpublicity. Despite the protests and the accusations against the industry, analysts noted that customerbehavior in the fast food industry was paradoxical. People realized that junk food was unhealthy andcriticized companies for serving it, but when healthier alternatives were made available, customers didnot like them.Apart from increasing public aversion to fast food, increased competition also harmed McDonald‘s

adversely. McDonald‘s had to face competition not only from fast food chains like Burger King, Wendy‘sand Pizza Hut, but also from chains like Subway, Cosi and Panera Bread, which dealt in salads andsandwiches. McDonald focused on building more stores, consumers were demanding better food andmore variety. Acc. To a survey conducted by Business week, consumers who ate fast food at leastonce a month rated both Wendy‘s and burger king better than McDonald‘s, as far as the quality of foodwas concerned.McDonald‘s‘ continuous expansion and failing franchisee relations had an adverse effect on serviceand quality, which had been its USP for many years. In 1990s, McDonald‘s stopped grading itsfranchisee‘s by mystery shoppers on parameters such as cleanliness, speed and service. In 1992McDonald‘s introduced ‗made for you‘ kitchens to counter custom-made food systems at Wendy‘s andBurger King, but it extended the time required to serve instead of speeding it up. Research also foundthat slow service and rude professional employees were major sources of customer‘s complaints. Acc.

to a survey, Wendy‘s took 127 seconds to serve its customers while V took 163 seconds. Besides,McDonald‘s products had become stale and the company had failed to come out with successfulproduct launches since the early 1980s. Although it attempted in the 1990s, to introduce 40 food itemsbut most of them failed to appeal to customers.

The Golden Arches Rise Again:

After McDonald‘s announced its first quarterly loss in38 years in 2003, the board realized that bigchanges were required in the company‘s strategy and direction. The board ousted Greenberg and installed Cantalupo as the CEO. Soon after taking over, Cantalupoprepared the ‗plan to win‘, which outlined McDonald‘s strategy for the next three years. The planstreamlined the company‘s operations and aimed to create a McDonald‘s that was more geared to the

new conditions in the fast food industry. The cornerstone of the turnaround plan was the improvementof comparable sales, which could be increased by improving the quality of service and operations inexisting restaurants, instead of funneling capital spending into new openings. Towards this end, thecompany made several improvements designed to help the restaurants function more efficiently. Forinstant, it reduced the number of shelf-keeping units by 84, which reduced inventory, and designed newmenu boards that would include more pictures to make ordering easy. It also introduced newautomated drink dispensers, French fry bins, and a hydraulic vegetable-oil-delivery system that wouldsave time in the kitchen.The menu was simplified and included a greater number of healthy options, while doing away with slowmoving products. For instance, instead of selling separately a Double Cheeseburger meal, a QuarterPounder meals, and a Two-Cheeseburger meal, McDonald‘s planned to sell only the Quarter Pounder.The number of items in a Value Meal was also pared down from 13 to 8.

In a move to offer a healthier menu McDonald‘s Incr eased its focused on salads and sandwiches. In2003, it introduced entrée-sized salads, along with items like Mc-Griddles breakfast sandwiches, white-meat chicken nuggets and chicken nuggets and chicken strips, which were reasonably successful. Italso began offering fruit with Happy meals.In early 2004, McDonald‘s began phasing out its ‗super-size‘ portions of fries and soft drinks. It alsolaunched the Adult Happy meal, which was a meal designed for grown-ups that included a salad,bottled water, a pedometer and a booklet of walking tips. Soon after introducing this concept,comparable store sales increased 10.5%. Some McDonald‘s outlets were also diversifying into coffee.Some Australian franchisees were testing 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, thecompany decided that each restaurant would be visited by mystery shoppers- anonymous visitors paidto observe restaurants- at least 16 times a year.

In 2004, the company introduced the ‗travel path‘ which required that a staff member, in a restaurant,had to walk around at regular intervals during the day to ensure that everything was in order.Surveys conducted by the company in the early 2000s revealed that Ronald McDonalds was one of thebest recognized icons in the US, ranking just behind Santa Claus. McDonald‘s began to showing signsof turning around by early 2004. Number of satisfied customers increased by more than 2 million over2003-2004.

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 DELIVERY

Fast Food Restaurant Attribute RatingsFast Food Attributes Dimension Rank

The Fast Food outlet‘s commitment to quality, hygiene and ethics

EMPATHY IThe knowledge and courtesy of the staff and their ability to convey trust and confidence

ASSURANCE IIThe willingness of the fast food outlet to help its Customers

RESPONSIVENESS IIIThe appearance of the outlet, its physical facilities, personnel and communication materials

TANGIBILITY IV

The ability of the fast food outlet to perform the promised service dependably and accurately

RELIABILITY V

Gaps in Fast Food Service

Research Questions: This study proposes to investigate the relationship between the perceived andexpected service quality among consumers of fast food services.Research Methodology: Sample population was 100 individual. Avoiding all the drawbacks of theSERVQUAL method and taking necessary precautions I have used the gap theory methodology for

measuring service quality performance of McDonalds, Pizza Hut & Dosa Plaza. I have applied theSERVQUAL instrument to the fast food industry. I have formulated it as per the particular industry andits relevancy to customers.I made my respondents to compare McDonalds, Pizza Hut & Dosa Plaza with the ideal firm in the fastfood industry. In order to prevent biases, I measured the customer expectations prior to the service andcustomers perception after the service delivery. I have considered the fact that customers are affectedby advertising and word-of-mouth communications, and thus the time between measuring expectationsand 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 -1.584

The above table shows, that the fast food industry received strong ratings on the empathy dimensions,particularly caring and individualized attention and low ratings on the Assurance dimensions. This study



used a seven point‘s scale range from ―strongly agree‖ (7) to ―strongly disagree‖ (1), to assess all fivedimensions of service.Table I suggests that Dosa Plaza is the highest performing fast food restaurant and holds an advantageover others in the area of perceived reliability, assurance and empathy dimensions Whereas Pizza Hutis good at responsiveness and tangible dimensions.Responses were computed by subtracting the expectation response from the perception response.

Each aspect of the quality of service showed differences with respect to the size of gap score. Thebigger the gap is, the more important the dimensions from the customer‘s point of view, which would beranked in the following, order: Empathy, Responsiveness, Tangibles, Reliability and Assurance.None of the service quality dimensions had a positive SERVQUAL score, suggesting that the Fast foodrestaurants considered for this study did not meet or exceed consumer‘s expectations.



CONCLUSION:

Findings from this study provide initial direction in determining the optimum service quality attributes tofocus on in promoting fast food services. No positive scores were found. The largest discrepancy was

found along the ―empathy‖ dimension. This indicates that the sample population appears not to begetting what they expect from their fast food service experience as far as individual attention isconcerned.If the industry persists in measuring and monitoring the perceptual aspects of fast food service quality,the complementary aspects of basic outcome must be tracked as well to ensure an appropriate andsatisfactory 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 affecting customerperception of service quality. In general, it is important for managers to identify the relevant intrinsic andextrinsic cues used by consumers in order to communicate the relevant quality signals to them. The

implication of this research is to design a service delivery system that promotes positive ―moments of truth‖. Moreover, using service quality assessment like SERVQUAL can ensure that fail points in customer encounters are reduced, leading to a positiveexperience and strong customer referrals.Additionally, managers should make key performers aware of their role and provide them with adequatetraining in order to offer a consistently high standard of service delivery. We saw low customer ratingson the empathy dimension of service quality in our research. Due to the dominant role played by theemployees in the fast food industry, management should make sure that there are always sufficientstaffing levels to cope with peaks and troughs in demand. In doing so, they will optimize servicedelivery and provide consistent service at all times.Finally, it is important that the service quality be assessed on a regular basis. The first assessmentprovides a baseline for comparison with future assessments. This comparison is essential for gauging

the effectiveness of service quality improvement efforts and identification of service quality trends asthey emerge. The frequency of reassessments will vary with the individual firm‘s situation.

ConclusionThe ―Service Quality Top Ten‖ LessonsThe Key lessons which I learned after the whole study and the developments of the last 10-15 yearsare as follows:Service delivery is a process, it is as subject to the disciplines of analysis and process control as anymanufacturing process. Customer value is ―built in‖ to service design, and it is possible to evaluateservice design systematically using tools such as service blueprinting, Gap model of service delivery,service profit chain, return on quality analysis.―The times are changing‖, as Bob Dylan wrote gives a conclusion that the old road for financial success

for business was to seek profit growth through market share and through cost economies. Times havechanged, and the new order identifies that both cost reduction and revenue increases through retentionand satisfaction, or seeking market share and customer loyalty. Everything includes service, and mostthings are predominantly services.Think globally, act locally. Larger organizations need to recognize that in delivering customer value,homogenous an enterprise following a single, perspective customer value formula doesn‘t workoptimally.



Quality isn‘t free. Investments in service quality improvements must be made with the an eye on NetPresent Value (NPV) or Return on Investment (ROI) as other investments, and with the same disciplinein 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, and increasingcustomer value. There are many tried and true methods for measuring customer satisfaction.One size doesn‘t fit all. The ultimate goal of the customer value models is company profitability – butservice delivery systems aren‘t designed as one size to fit all. The consequence may be an active planto lose some customers.Understanding customers‘ needs – even when you know different customers have different needs,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 ask them.The Gap model of service delivery is useful approach to ask customers what they value, and explorewith staff and management as to how to deliver it.Improving service quality is certainly not a simple, straight forward exercise.Service quality can be 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.

service quality gap model (term paper)

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