Journal of Services Marketing

Strategies for Reducing Perceptions of Quality Risk in Services

L.W. Turley
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L.W. Turley, (1990),"Strategies for Reducing Perceptions of Quality Risk in Services", Journal of Services Marketing, Vol. 4
Iss 3 pp. 5 - 12
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 STRATEGIES FOR REDUCING PERCEP-
TIONS OF QUALITY RISK IN SERVICES
L.W. Turley
Downloaded by University of Liverpool At 03:13 22 July 2016 (PT)
This article explores the degree to which con-
sumers perceive various services as being quali-
ty-risk purchases. From the data, it appears that
this is a particular problem for most types of
services and is therefore an issue with which
service managers need to be concerned. This
article discusses a number of strategies which
can be used to reduce this perception.
The Quality-Risk Factor
During the 1980s A m e r i c a n c o n s u m e r s
became more preoccupied with quality and
showed an increasing willingness to pay high-
er prices for it. This shift by consumers caught
m a n y b u s i n e s s m a n a g e r s by s u r p r i s e .
American firms had grown comfortable with
the notion that price was the dimension that
was most important to consumers and was
therefore the principle point upon which to
compete. Foreign manufacturers, accustomed
to dealing with a more quality-conscious con-
sumer, garnered large market shares in a num-
ber of industries that had traditionally been
dominated by domestic firms (e.g., automotive,
machine tools, and consumer electronics).
The reactions to this consumer shift and the
increased competition have been fairly pre-
L. W. Turley is an Assistant Professor of Marketing at Western Kentucky University in Bowling Green, Kentucky. He
received a B.S. in Marketing, and an M.B.A. from Murray State University and D.B.A. from the University of Kentucky. In
addition to an ongoing research interest in consumer service decision making he has also been the recipient of several
college and university teaching awards.
Vol 4 No 3 Summer 1990
dictable. The popular business press has been
inundated by by books and articles on the
importance of quality and methods for achiev-
ing higher quality products and, more impor-
tant, higher perceptions of quality by con-
sumers. Most of what has been written, howev-
er, is oriented toward ensuring quality in the
manufacturing and product design process and
is virtually useless to the service manager.
Since services are generally recognized as
intangible and cannot usually be made in
advance, the quality approaches used in prod-
uct marketing cannot be transferred to the ser-
vice arena. Service quality perceptions arise
out of the service delivery process, that is, the
interaction of service providers with cus-
tomers, rather than from the production pro-
cess. 21 This key difference is a particular prob-
lem for firms that market both products and
ancillary services. 11 Such firms need to under-
stand how quality is judged in both products
and services.
Unfortunately, interest and research in ser-
vice quality seems to be running about 60
years behind interest in product quality. 1 1
However, a s m a l l e r but g r o w i n g body of
knowledge is beginning to emerge in regard to
service quality. Since foreign competition in
5
 THE JOURNAL OF SERVICES MARKETING
domestic service industries is beginning to
increase in areas such as hotels and banking,
the issue will become more relevant to service
marketers in the immediate future.
One emerging view argues that services are
harder for consumers to evaluate than products
and that service purchases are probably per-
ceived as riskier than product purchases. 2 0
Perceived risk is composed of a number of com-
ponents, 4 including financial risk, performance
risk, physical risk, psychological risk, social
risk, time loss risk,14 and quality risk.17 Since
researchers have recognized that services tend
to be less uniform than products, 1 quality risk
appears to be an issue that service managers
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need to bo aware of when setting strategies.
Quality risk has been defined as the poten-
tiality that a product or service will not meet a
consumer's m i n i m u m quality standards. 1 7
Recent interest in service quality seems to have
centered on identifying those factors which
influence perceptions of service quality. Two
different viewpoints about this process have
emerged. One argues that service quality per-
ceptions are caused by the tangible evidence,
reliability, responsiveness, assurance, and
empathy. 16 The other approach, largely devel-
oped by the "Nordic School," holds that ser-
vice quality is a result of six criteria: profes-
sionalism and skills, attitudes and behavior,
accessibility and flexibility, reliability and
trustworthiness, recovery reputation, and con-
trol. 10 Regardless of which theory one sub-
scribes to, an understanding of how consumers
evaluate quality is vitally important. It is, after
all, the consumer's perception of quality that
counts, not management's. 3 Service quality is
determined day-by-day in thousands of tempo-
rary relationships between service providers
and customers and is a major influence in the
formation of service loyalty.18
Service quality expectations can also be
used to segment some service m a r k e t s .
Research has shown that professional services
are better candidates for service quality seg-
mentation than are nonprofessional services,
since customer expectations about the latter
6
appear to be consistent regardless of demo-
graphic characteristics. 19 Expectations about
professional services, however, appear to vary
according to a number of demographic vari-
ables. For example, the most quality-conscious
segment is composed of females with relatively
high income and educations. Therefore, profes-
sional service managers can use service quality
as an approach to segment markets by aiming
high service quality offerings at this group.
First, this article will explore the degree to
which consumers perceive services as being
quality-risk purchases. Second, it will explore
a number of strategies that service managers
can use to reduce a consumer's perception of
quality risk.
The Study
A recent review of a mid-sized city tele-
phone book yielded 106 consumer-based ser-
vices. From this list, a panel of respondents
were asked to choose the services they were
most likely to use over the coming year; 18
emerged as being commonly used services.
These 18 services were then evaluated by a
sample of 64 respondents in a mid-sized West
Coast city. Respondents were members of two
civic groups, and information was gathered at
one of their regularly scheduled meetings. The
respondents were asked to indicate, for each
service that they use, their degree of agreement
with a statement that they had "noticed big dif-
ferences in the quality of the services available
to them." A five-point Likert scale was used
with 1 indicating strong agreement and 5 indi-
cating strong disagreement. A summary of the
results appears in Table 1. The response rate
column indicates the percentage of the sample
that responded to that question. It seems, from
this data that none of these services was per-
ceived as being low in quality risk. The least
quality-risky service, movie theaters, was at
the exact midpoint of the five-point scale. All
the other services in this study had a mean
score that fell on the higher quality-risk side of
the continuum.
 STRATEGIES FOR REDUCING PERCEPTIONS OF QUALITY RISK IN SERVICES

Table 1
Summary Table of Quality-Risk Responses

Variable Mean Stantard Coefficient Response

Deviation of Skewness Rate

Savings and 1.941 1.008 .1324 .80

Loans/Banks

Auto Repair 1.965 1.085 .1213 .89

Shops

Attorneys 1.973 1.078 .1363 .59

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Beauty Shops 2.060 1.321 .1671 .52

Insurance 2.207 1.133 .0641 .83

Agencies

Hospitals 2.212 .9604 -6.070 .52

Optometrists 2.234 1.026 7.240 .73

Health Clubs 2.235 .9701 8.811 .27

•
Barber Shops 2.235 1.046 8.321 .53

Physicians 2.288 1.060 .0567 .92

Airlines 2.346 1.170 4.700 .81

Investment 2.357 1.129 6.849 .44

Services

Dentists 2.400 1.123 7.855 .91

Carpet/Rug 2.422 1.033 1.276 .70

Cleaners

Photography 2.588 1.219 1.311 .80

Shops

Tanning Salons 2.714 1.204 5.981 .22

Dry Cleaners 2.929 1.109 -1.340 .88

Movie Theaters 3.000 1.166 4.584 .80

7
 THE JOURNAL OF SERVICES MARKETING
The highest quality-risk service was savings
and loans/banks, closely followed by auto
repair and attorneys. Since consumers consider
quality levels of these types of services to be
extremely nonstandardized, managers of such
services need to be particularly concerned with
quality-risk perceptions. However, since no ser-
vices were perceived as low quality-risk pur-
chases, this is an issue which any service busi-
ness manager ought to consider when setting
future strategies.
Managerial Implications and
Suggestions
The results of this study have some impor-
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tant i m p l i c a t i o n s for service managers. It
appears that consumers do perceive that differ-
ent service firms provide widely different lev-
els of quality. Service managers need to think
creatively about ways of reducing perceptions
of quality risk for their individual businesses.
The following are some approaches that service
managers can use to help reduce consumers
perceptions of quality risk.
1. Concentrate on duality
• A concentration on quality by the total
organization is necessary before any long-term
solution to the quality-risk problem can be
achieved. This means that everyone from the
CEO down needs to be aware that potential
first-time purchasers of a service may be looking
extremely hard for cues to quality.
• It is especially important that top man-
agers be concerned about improving quality
and that they not just pay lip service to it.
Many of the cues that customers use to evalu-
ate quality may not be controllable by cus-
tomer contact personnel. Examples are facility
location and policies regarding customer com-
plaints. If individual customer contact person-
nel are not supervised correctly, they may end
up discovering their own "solutions" to some
types of problems. The result is variation in
8
the way customers are treated, a situation that
may foster a wide variety of quality percep-
tions. Top management must be single-minded
about quality so that all customers are treated
alike and similar problems are handled consis-
tently. If the whole organization is not con-
cerned with a customer's perceptions of quali-
ty risk, then all the other strategies are less
likely to be successful.
2. If You Advertise, Talk About Quality
• In order to reduce perceptions of quality
risk, it is important that service firms provide
more than price and location information.
Testimonials may be particularLy effective
techniques for some firms. Consumers having
trouble evaluating services may be likely to
turn to reference group members for advice. 20
Testimonials, if they are believable, may be
readily acceptable by consumers because of
this predisposition for social information.
Consumers having trouble evaluat-
ing services may be likely to turn
to reference group members
for advice.
• Professional certifications, awards, achieve-
ments, and information about the experience of
the service providers are other cues that adver-
tising may provide about quality risk. Focusing
on service providers in the advertising of peo-
ple-based services may be effective since
research has shown that some customers may
eventually perceive the service provider as the
service. 2 AT&T and the Bell Operating
C o m p a n i e s have successfully used this
approach in their advertising campaigns to
reposition themselves since the court-mandated
breakup in 1984. Prior to the breakup, the
"phone company" had a pretty dismal reputa-
tion for customer service. Increased competition
has caused AT&T to make some basic changes
in the way it deals with the public, and it has
c o m m u n i c a t e d this change of p h i l o s o p h y
 STRATEGIES FOR REDUCING PERCEPTIONS OF QUALITY RISK IN SERVICES
through stark ads that feature actual AT&T
employees promising increased service and cus-
tomer satisfaction. By discussing quality and
focusing on the people who provide it, these
credible ads have helped reposition a former
underachiever into a high-quality alternative.22
3. Emphasize Employee Training
• Training is one of the most important yet
most under-researched areas of service market-
ing. Too many services hire young or inexperi-
enced workers on Monday and have them serv-
ing customers on Tuesday. Because many ser-
vices are primarily people based, training is
absolutely critical. Even though human vari-
ability cannot be "trained out" of people, poor
Downloaded by University of Liverpool At 03:13 22 July 2016 (PT)
public relations techniques can almost always
be i m p r o v e d . Contact p e r s o n n e l m u s t be
thought of as having a public relations compo-
nent in addition to a sales component. In some
service firms they not only sell the service but
also produce and deliver it. This additional
level of involvement is probably one of the fac-
tors that make consumers more loyal to ser-
vices then they are to products. 20 The interac-
tion between the customer and the service
provider is so important that several writers
have termed it "the moment of truth." 15
It is the consumer's perception
of quality that counts, not
management's.
• Top managers need to think about these
"moments of truth" and to decide how they
want customers to be approached and which
sales techniques they want customer contact
personnel to. use. Then they must train their
people on how to execute these approaches
before they ever come in contact with cus-
tomers. On-the-job training in services can be a
potential disaster. You may not get a second
"moment of truth" per customer so you have to
take advantage of the first one. Training is the
only way to make sure that the interactions
will be conducted in a manner that will lead to
repeat business.
• Since customers often come in contact
with employees other than primary customer
contact personnel, training of all personnel
s h o u l d be strongly c o n s i d e r e d . Firms as
diverse as SAS Airlines and Boston Edison
Company have used these "wall-to-wall" train-
ing programs with great success. 1 Although
expensive, this is probably the best approach
to training in service corporations.
4. Provide Incentives to Employees for
Excellent Service
• After employees have been trained, a good
strategy for reinforcing their newly sharpened
contact skills is to provide an incentive system
that rewards excellent service. Too often, com-
pany contact personnel hear only about prob-
lems or mishandled "moments of truth." This
type of supervision fosters negativism and can
demotivate some employees. In order to create
a positive experience for the customer, employ-
ees need to know that their accomplishments
will be recognized and rewarded.
• Delta and American Airlines are examples
of service firms that have integrated employee
recognition programs into their managerial
practices. Not coincidentally, these two com-
panies are generally recognized by polls and
airline rating services as airlines that provide
excellent service quality.22
5. Provide Incentives for Your Customers
to Tell Their Friends
• Recent research has shown that consumers
are more likely to contact their friends and
social contacts when evaluating services than
when evaluating products. This too is probably
an indication that consumers feel more risk
with services than with products. Since con-
sumers are talking about service purchases any-
way, managers need to think creatively about
ways of tapping into these conversations.
• One example of a strategy that capitalizes
on word-of-mouth is a health club running "two
for one" specials encouraging friends to join
together. Some health clubs have had programs
9
 THE JOURNAL OF SERVICES MARKETING
whereby members who bring in new customers
are given two free months toward a membership
renewal. Video shops have given free movies to
those who refer their friends. Many service
businesses could provide successful referrals.
Consumers do perceive that differ-
ent service firms provide widely
different levels of quality.
• Service providers should encourage satis-
fied customers to spread the word. In order to
ensure that customers do so, managers need to
provide incentives that will motivate them to
talk to their friends. The best salesperson one
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can possibly have is a satisfied customer.
• USAA is an insurance firm that does no
advertising and relies wholly on word-of-
mouth and customer r e c o m m e n d a t i o n s to
attract new business. The company can afford
to take this approach since it has been recog-
nized as having the second highest "satisfac-
tion i n d e x " in both h o m e o w n e r and auto
insurance, 22 USAA customers are more than
willing to recommend such a well-run and
efficient service to their friends.
6. Provide Guarantee Programs
Providing "satisfaction guaranteed" pro-
grams is one of the best ways a service firm can
reduce customers' perceptions of quality risk.
Although potentially expensive, this strategy
essentially makes a purchase risk-free for con-
sumers. Non-service retail stores have been
offering this type of program for years, but too
few service firms have a t t e m p t e d this
approach. In a marketplace where no other ser-
vice competitor is attempting this strategy, it
can be a significant differential advantage. A
service firm using this approach is saying with
confidence to a consumer, "We know you will
be satisfied or else we couldn't make this offer."
L. L. Bean and Lands End are both catalog
retailers that have successfully emphasized sat-
isfaction guarantee programs. 22 These strong
guarantee policies have reduced the quality
10
risk dimension in catalog purchasing by accept-
ing all returns no matter what the circum-
stances are. Since consumers cannot inspect
catalog items prior to purchase, these programs
are particularly appropriate for this industry.
• There are, of course, a few considerations
associated with this strategy. First, the service
manager needs to be sure that the firm really
does have an offering that consumers like and
are satisfied with. Before implementing this
program, the manager should track consumer
complaints for a period of time in order to fore-
cast the number of returns that may be encoun-
tered. It is important to "get it right" before
offering this program since expectations about
the service will be affected by the offer. In any
business but particularly a service business one
should never offer what cannot be delivered. 9
Second, this type of program needs proper
promotion. The program must be communi-
cated to customers so that they are aware of it
before it can become a good quality-risk-
reducing strategy. Since this program is by
nature aimed at new rather than existing cus-
tomers, advertising appears to be the most
logical promotion tool. Service businesses
that cannot afford to advertise may find it
harder to implement this strategy.
7. Use Sales Promotion Tools
The above discussion should not be inter-
preted as a suggestion that advertising is the
only promotional tool to be utilized. Sales pro-
motional approaches that adjust price can also
be very effective quality-risk-reducing mecha-
nisms. Price reduction coupons, rebates, bonus-
es (offering more service for the regular price),
and premiums (offering a free second service
when a first service is sold) are examples of
sales promotion techniques which service firms
may find helpful. Since some of these programs
decrease the price of their service, they may be
seen by customers as reducing the risk. These
approaches appear to be more widely used in
product marketing, so once again, they may
provide a unique differential advantage to an
aggressive service firm.
 STRATEGIES FOR REDUCING PERCEPTIONS OF QUALITY RISK IN SERVICES

There is, however, a possibility that reduc-
ing the price of service may decrease the con-
sumer's perception of quality. Recent research
has found the price/perceived quality relation-
s h i p to be e s p e c i a l l y strong in s e r v i c e s .
Therefore managers of service firms that are
a t t e m p t i n g to c o m m u n i c a t e high q u a l i t y
should be cautious about using price-oriented
sales promotion. Nonprice-oriented programs
such as games, bonuses, and point-of-purchase
displays should be used in these situations.
Summary
This article has provided evidence that con-
sumers feel quality-risk when evaluating ser-
Downloaded by University of Liverpool At 03:13 22 July 2016 (PT)
vices. Quality-risk has been defined as the
potentiality that a service or product will not
meet a customer's minimum quality standards.
Eighteen services were tested and none were
perceived as being low in quality-risk.
Because of this phenomenon, service man-
agers need to think about programs that reduce
quality-risk perceptions. We have suggested
seven strategies which may be used to combat
this problem. Creative service managers may,
of c o u r s e , be able to d e v e l o p a d d i t i o n a l
approaches. From a competitive point of view,
service firms that implement quality-risk-
reducing approaches should have an advantage
over firms that do not.

End Notes
1. Albrecht, Karl, At America's Service: How Corporations Can Revolutionize the Way They
Treat Their Customers, Homewood, IL: Dow Jones-Irwin, 1988.
2. Berry, Leonard L., "Service Marketing Is Different," Business, 30 (May-June 1980), 24-29.
3. Berry, Leonard L., A. Parasuraman, and Valarie A. Zeithaml, "The Service Quality Puzzle,"
Business Horizons," 31. no. 5 (1988), 35-43
4. Bettman, James R., "Perceived risk and Its Components: A Model and Empirical Test,"
Journal of Marketing Research, 10 (May 1973), 184-190.
5. Chase, Richard B., "Where Does the Customer Fit in a Service Operation?" Harvard Business
Review, 56 (November-December 1978), 137-142.
6. Enis, Ben M., and Kenneth J. Roering, "Services Marketing: Different Products, Similar
Strategy," in Marketing of Services, ed. James H. Donnelly and William R. George. Chicago:
American Marketing Association, 1981, pp. 1-4.
7. F r e i d e n , Jon B., and Ronald E. Goldsmith, " P r e p u r c h a s e Information Seeking for
Professional Services," The Journal of Services Marketing, 3, no. 1 (1989), 45-55.
8. George, William R., "The Retailing of Services: A Challenging Future," Journal of Retailing,
53 (Fall 1977), 85-98.
9. Gronröös, Christian, Strategic Management and Marketing in the Service Section.
Cambridge, MA: Marketing Science Institute, 1983.
10. Gronröös, Christian, "Service Quality: The Six Criteria ox Good Perceived Service Quality,"
Review of Business, 9 (Winter 1988), 10-13.
11. Gummesson, Evert, "Service Quality and Product Quality Combined," Review of Business, 9
(Winter 1988), 14-19.
12. Hugstad, Paul, James W. Taylor and Grady Bruce, "The Effects of Social Class and Perceived Risk
on Consumer Information Search," The Journal of Services Marketing, 1, no. 1 (1987), 47-52.

11
 THE JOURNAL OF SERVICES MARKETING

13. Jacoby, Jacob, and Loon Kaplan, "The Components of Perceived Risk," in Proceedings
of the Third Annual Conference of the Associaton for Consumer Research, ed. M.
Venkatesan. Chicago: Association for Consumer Research, pp. 382-393.
14. L o u d o n , David L., a n d Albert Delia Bitta, Consumer Behavior: Concepts and
Applications.3rd ed. New York: McGraw-Hill Book Company, 1988.
15. N o r m a n , R i c h a r d , Service Management: Strategy and Leadership in Service
Business. New York: John Wiley and Sons, 1984.
16. Parasuraman, A., Valarie A. Zeithamal, and Leonard L. Berry, "SERVQUAL: A Multi-
Item Scale for Measuring Consumer Perceptions of Quality," Journal of Retailing, 64
(Spring 1988), 12-37.
17. Peterson, Robert A., and William R. Wilson, "Perceived Risk and Price Reliance Schema
as Price-Perceived Quality Mediators," in Perceived Quality: How Consumers View
Stores and Merchandise, ed. J. Jacoby and J. C. Olson. Lexington, MA: Lexington Books,
1985, pp. 247-267.
Downloaded by University of Liverpool At 03:13 22 July 2016 (PT)

18. S h e r d e n , William A., " G a i n i n g the Service Quality A d v a n t a g e , " T h e Journal of

Business Strategy, 9 (March-April 1988), 45-48.
19. Webster, Cynthia, "Can C o n s u m e r s Be Segmented on the Basis of Their Service
Quality Expectations?" The Journal of Services Marketing, 3 (Spring 1989). 35-53.
20. Zeithaml, Valarie A., "How Consumer Evaluation Processes Differ Between Goods
a n d Services," in Marketing of Services, ed. James H. Donnelly a n d William R.
George. Chicago: American Marketing Association, 1981, pp. 186-190.
21. Zeithaml, Valarie A., Leonard L. Berry, and A. Parasuraman, "Communication and
Control Processes in the Delivery of Service Quality," journal of Marketing, 52 (April
1988), 35-48.
22. Zemke, Ron, and Dick Schaaf, The Service Edge: 101 Companies That Profit from
Customer Care. New York: New American Library, 1989.

12
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