Unit 5

UNIT 5: CUSTOMER SATISFACTION AND SERVICE QUALITY

Learning Outcomes

  • Upon completion of this unit, the students should be able to:

    • Discuss customer satisfaction and its benefits.

    • Explain the methods for measuring customer satisfaction.

    • Express the difference between Service Quality and E-Service Quality.

    • Explain the basic concept of SERVQUAL.

    • Explain Service Quality Gaps.

    • Discuss the factors that influence the size of each service quality gap.

The Importance of Customer Satisfaction

  • The importance of customer satisfaction cannot be overstated.

  • Without customers, the service firm has no reason to exist.

  • Every business needs to proactively define customer satisfaction.

    • Waiting for customers to complain to identify problems is naive.

    • Judging a firm's progress in customer satisfaction based on complaints alone is inadequate.

Technical Assistance Research Program (TARP)

  • The average business does not hear from 96% of its unhappy customers.

  • For every complaint received, 26 customers have the same problem.

  • The average person with a problem tells 9 or 10 people.

  • Satisfied customers tell an average of 5 people about the resolution of their complaints.

  • Complaining customers are more likely to do business with the company again:

    • 54-70% if resolved at all.

    • 95% if handled quickly.

Benefits of Customer Satisfaction

  • Generates positive word-of-mouth (WOM) from existing customers, often leading to new customers.

  • Companies with high customer satisfaction ratings can protect themselves from competitive pressures.

  • Customers are willing to pay more to a firm that meets their needs than to risk moving to a lower-priced competitor.

  • Firms focused on customer satisfaction generally provide better environments and experiences.

Measuring Customer Satisfaction

  1. Direct Measures: Customer satisfaction surveys.

    • Quantitative Methods:

      • The Scale of 100 Approach:

      • Customers rate the firm's performance on a scale of 100.

      • General rating; does not point out specific areas for improvement.

      • Example Question: "How satisfied are you with the services you received today?"

      • A score of 80 may not mean the same to all customers.

  2. Direct Measures Continued:

    • The ‘Very Dissatisfied/Very Satisfied Approach’:

      • Customers use a 5-point Likert Scale to express satisfaction.

      • Example Question: "How satisfied are you with the service you received today?"

  3. Indirect Measures:

    • Tracking and monitoring sales records, profits, and customer complaints.

  4. The Combined Approach:

    • Uses quantitative scores from the Likert Scale and qualitative feedback from customers indicating they were less than very satisfied.

    • Example Question: "If less than very satisfied, what could the firm have done better?"

Does Customer Satisfaction Translate into Customer Retention?

  • High satisfaction ratings do not guarantee that a firm will retain a customer indefinitely.

  • Research indicates that between 65-85% of customers who defect to competitors reported being satisfied or very satisfied (Harvard Business Review).

Criticism of Customer Satisfaction Research

  • Satisfaction research often focuses on current needs rather than future needs.

  • It tends to overlook registered complaints and feedback from employees.

Defining Service Quality

  • Customers’ perceptions of service quality result from comparing their expectations before the service with their actual service experiences.

  • Service quality is defined as the degree to which a service’s features conform to an organization’s specifications and requirements.

  • Quality encompasses the totality of features and characteristics of a service that influence its ability to satisfy stated or implied needs.

  • It can also be viewed as an attitude formed by the customer’s long-term evaluation of a firm’s overall performance.

Implications of Quality

  • Enhances company reputation and profitability.

  • Global implications: Quality is a concern across international boundaries.

  • Promotes continuous improvement.

  • Provides protection against lawsuits.

  • Encourages teamwork and employee empowerment.

  • Fosters a customer focus leading to customer retention.

SERVQUAL Model

  • Key Dimensions:

    • Reliability

    • Responsiveness

    • Empathy

    • Tangibles

    • Assurance

Measuring Service Quality Using SERVQUAL

  • Key Differences:

    • Satisfaction compares consumer perceptions with typical expectations, whereas service quality compares perceptions against ideal expectations from a high-quality service firm.

    • SERVQUAL serves as a diagnostic tool to identify strengths and weaknesses in service quality.

SERVQUAL Attributes

  • Reliability:

    • Service delivered as promised.

    • Dependability in addressing service problems.

    • Correct service performance on the first attempt.

    • Service delivered on time.

    • Maintaining error-free records.

  • Assurance:

    • Employees instill confidence in customers.

    • Creating a safe transactional environment.

    • Employees must have adequate knowledge to address customer inquiries.

    • Consistency in employee courtesy.

  • Empathy:

    • Individual attention provided to customers.

    • Employees' caring disposition towards customers.

    • Understanding customers' needs.

    • Keeping convenient business hours.

  • Tangibles:

    • Modern equipment and visually appealing facilities.

    • Professional appearance of employees.

    • Attractive materials associated with the service.

  • Responsiveness:

    • Keeping customers informed about service timings.

    • Prompt and willing assistance to customers.

E-QUAL Dimensions for Measuring Service Quality

  • Evaluating online businesses based on seven (7) quality dimensions:

    • Accessibility

    • Navigation

    • Design and Presentation

    • Content and Purpose

    • Responsiveness

    • Reputation and Security

    • Interactivity and Customization

Service Quality Gaps

  • Gap Analysis:

    • Comparison of actual performance with potential or desired performance levels.

    • Five types of gaps can occur throughout the design and delivery of service performance:

    • Gap 1: The Knowledge Gap

    • Gap 2: The Standards Gap

    • Gap 3: The Delivery Gap

    • Gap 4: The Communications Gap

    • Gap 5: The Service Gap

Gap 1: The Knowledge Gap

  • Defined as the difference between what customers expect and what management believes they want.

    • Example: Hotel managers may assume that comfort in rooms is paramount, overlooking customer preference for service.

  • Consequences of a Knowledge Gap:

    • Potential provision of unwanted services while neglecting desired ones.

Reasons for the Knowledge Gap

  • Inadequate marketing research orientation.

  • Lack of upward communication leading to managerial distance from frontline employees.

  • Insufficient focus on building customer relationships.

Solutions for Reducing the Knowledge Gap

  • Enhance marketing research procedures.

  • Implement an effective customer feedback system, including satisfaction research and complaints.

  • Increase direct interactions between managers and customers.

  • Encourage communication between frontline employees and management.

  • Act on customer insights and feedback.

Gap 2: The Standards/Policy Gap

  • Occurs when management’s understanding of customer expectations does not align with the service quality specifications set.

    • Example: A restaurant may know that customers expect a 20-minute service time but lack sufficient staffing to meet that expectation.

Reasons for the Standards Gap

  • Emphasis on cost reduction.

  • Inappropriate physical evidence.

  • Lack of a culture prioritizing service quality.

  • Poorly designed service processes.

  • Management refusal to implement necessary changes.

Solutions for Reducing the Standards Gap

  • Commitment from top management to service quality.

  • Openness to new service delivery methods.

  • Develop tiered service offerings aligned with customer expectations.

  • Regular performance measurement and feedback.

Gap 3: The Delivery Gap

  • Reflects the disparity between actual employee performance and the quality standards set by management.

    • Example: Employees may disregard training guidelines affecting service delivery.

Reasons for the Delivery Gap

  • Employee reluctance or unwillingness to perform services.

  • Lack of job-fit; insufficient training for the role.

  • Role ambiguity among contact employees.

  • Contact employees’ excessive workload.

Solutions for Reducing the Delivery Gap

  • Recruit the best employees and ensure suitable fit.

  • Invest in employee training and necessary technology.

  • Encourage teamwork among staff to enhance service delivery.

  • Retain strong employees through recognition and equitable reward systems.

Gap 4: The Communication Gap

  • The difference between promised service delivery through communications and actual service provided.

Reasons for the Communications Gap

  • Over-promising in competitive contexts.

  • Poor cross-location communication leading to misunderstandings of promotion.

  • Integration failure of marketing communications.

Solutions for Reducing the Communication Gap

  • Utilize 'reality' advertising reflecting real situations.

  • Solicit employee input regarding service delivery capabilities.

  • Establish internal marketing to align employee actions with service promises.

  • Ensure consistent service quality across multi-site operations and manage customers’ expectations carefully.

Gap 5: The Service Gap

  • Considered the most crucial gap, representing the distance between customer service expectations and perceptions.

    • Closing this gap requires addressing the four previous gaps first.

Review of Service Quality Gaps

  • Knowledge Gap: Management's misunderstanding of customer desires.

  • Standards Gap: Company’s inability to meet known customer expectations due to limitations.

  • Delivery Gap: Employees' inability or unwillingness to provide the promised service.

  • Communications Gap: Mismatch between advertising promises and actual service delivery.

E-service refers to the service quality experienced by customers while interacting with online businesses. It encompasses various dimensions crucial for providing a satisfactory online experience. The E-QUAL dimensions for measuring service quality include:

  • Accessibility: The ease with which customers can access the service online.

  • Navigation: The simplicity and intuitiveness of the website or service interface.

  • Design and Presentation: The aesthetic appeal and functional layout of the online platform.

  • Content and Purpose: The relevance and quality of the information provided to users.

  • Responsiveness: The ability to provide timely assistance and service updates to customers.

  • Reputation and Security: The trustworthiness of the service provider and the protection of user data.

  • Interactivity and Customization: The extent to which users can interact with the service and tailor it to their preferences.