Service Quality

and
Consumers of Services
Dr Declan P Bannon
Copyright © 2017
Hospitality – conferences, meetings, awards
ceremonies, travel, tourism, airports,
hotels, bars, restaurants, taxis, etc.
Banking, financial advisors and insurance.

Personal services
e.g. personal trainers, coaches, private tutors,
mentors, dietitians. hairdressing, gardening,
cleaning etc.
Professional services e.g. legal, accountancy, medical
etc.
Charities
Public services
Service
high service - low physical content

FMCG
high physical content - low service
 Characteristics of Service Markets
• Intangible
• Lack of ownership
• Perishability
• Heterogeneity
- each service experience is likely to be
different.
• Inseparability
– production and consumption are usually
together
 Services are about People
People
–Capability (ability, resources,
support and training).
–Availability (service levels and
motivation to provide the service).
–Effectiveness (perception/reality).
–Customer interaction/interface
 Physical evidence

– Facilities and environmental surroundings

– Infrastructure/Essential evidence
– Peripheral evidence (ambiance, style,
music, smell, feel, trappings of the
essence of the place e.g. compare an old
cathedral with a 5 star hotel).
– Premises/Equipment/Literature
– Support (e.g. I.T. and essential utilities).
 Processes
– Operating process that takes the
customer through from initial contact
to service experience and evaluation.
– Ordering/Database management/Queuing
systems
– Service delivery
– Standardisation, consistency and
reliability.
 What is Quality?

• The US Strategic Planning Institute in 1972

developed the concept of relative perceived
quality (RPQ), that is the perception of quality
as defined by customers, relative to the
offerings of competitors. In other words
quality is what a customer perceives it to be
and this is a dynamic and complex notion.
 Does Quality really matter?

• Regular studies have shown that RPQ

is strongly related to profitability.
• Is related to higher returns on
investment.
• Higher market share and the ability to
charge a higher price.
• Is not correlated with higher costs.
 Benefits of RPQ

Stronger customer loyalty leads to

more repeat business, less vulnerability to
price wars ability to command high price
without effecting market share and
improvement in market share.
 Perceived Service Quality
• The perceived service quality is a function of
the expectations and the experiences of a given
customer.
• Quality does not exist objectively but it is
perceived subjectively by every single customer.
• If the experienced service equals expectations, the
perceived service quality will be good
(Gronross,1984).
 Why do Change Programmes
Fail?

Most quality initiatives fail to deliver

usually due to a lack of customer focus
and a clear understanding of what the
customer really expects.
Most quality initiatives fail to deliver
Usually due to a lack of customer focus
and a clear understanding of what the
customer really expects.
 Value Creation

It is the value to the customer as the

customer perceives it that is real quality.

Quality cannot be viewed in hard facts

while it is soft usage which determines
satisfaction.
 Zonal Model of Service Quality
HIGH LEVEL SERVICE
High +VE CRITICAL INCIDENT

Tier 1 ABOVE LEVEL OF EXPECTED SERVICE

Perceived
Quality ACCEPTIBLITY OF SERVICE
QUALITY
Service
Tier 2: BELOW LEVEL OF ACCEPTABLESERVICE

Low UNAACEPTIBLE LEVEL OF SERVICE

-VE CRITICAL INCIDENT
 Priority Matrix – Targeted Service Change

Secondary Target Primary Target -

High – Long-Term Service Quality
Program Priority
Importance to
the Customer
Fourth Level Third Level Target
Low Target

Difficult Change Easy of Change

 Gaps Model of Service Quality

CUSTOMER Expected
Service

Customer
Gap
Perceived
Service

External
Service Delivery Communications
GAP 4 to Customers
GAP 1 GAP 3
Customer-Driven Service
Designs and Standards

GAP 2
Company Perceptions of
COMPANY Consumer Expectations
 Customer Expectation

Experience (perceived reality)

Word of mouth
– credibility & trustworthiness
Needs/want/desires/aspirations
Communication from the organisation
(Ziethaml & Berry, 1988).
Additional Expectation Factors

Price reflects expectation

Brand expectations
Context and expectations
Levels of customer expectations and
thresholder of acceptability
Sources: Bannon, 2017.
 Service Quality Gap Analysis

Gap 1
Consumer Expectation – Management Perception

Managers say they know what customers expect,

focus groups demonstrated that discrepancies
exist i.e. there are gaps in management
knowledge about customer groups.
 Gap 1
• Lack of a relational approach and research
• Insufficient segmentation
• Transactional rather than relational focus
• Too many layers of management
• Closeness to the customer
• First hand experience
• Inadequate service recovery
 Gap 1
• Inadequate or insufficient marketing research.
• Research not focused on different customer
groups and expectations e.g. Starbucks versus
Cong Kafe.
• Lack of communication
-between customer groups and management
that set service standards (do customers know what
they want or is it a faster horse scenario?)
-between frontline staff and management that
set service standards.
 RST Model (Bannon, 2017)

Internal Reflection for the Management Team

• Resources – do staff have the right resources
to do the job to the expected standards?
• Support – are staff effectively and efficiently
supported in the role both personally and
professionally?
• Training – have staff been given the right basic
training and what are your plans for staff
development and higher level skills?
 10 Steps to Better Service
Quality
• Supervision – are there adequate ears and
boots on the ground to support and
implement the expected service delivery.
• Monitoring – methodology, frequency,
variance analysis, adaption – adoption –
change.
• Feedback loops from customers and staff
• Ability and flexibility to manage damage
limitation.
• Reward and compensation schemes.
• Evaluation loops.
• Change and service improvement
plans are adequate.
• Are we benchmarking against the best in our
industry and other industries.
• Where and how is the innovation of service
quality going to come from?
• Communication of service quality standards
both internally in terms of staff goal
congruence and expectations of management;
and externally in managing customer
expectations. Source: Bannon, 2015.
 Gap 2
Management Perception
– Service Quality Specifications

Managers experience difficulties in attempting to

match or exceed customer expectations;
constraints within existing systems; costs;
management indifference; saying versus doing.
 Gap 2
Poor service design
Unsystematic service development process
Vague, undefined service designs
Failure to connect service design to
service positioning
Absence of customer designed standards
Inappropriate physical evidence
(Zeithamal &Bitner, 2000)
 Gap 3
Service Quality Specs – Service Delivery

i.e. staff do not deliver to the service

specifications.

Highlights the need to set targets for the

attainment of quality monitor attainments and
Improvements.
 Gap 3
Deficiencies in HR policy
Poor recruitment
Role ambiguity and role conflict
Personnel/technology gaps
Line management of staff
Wages/bonuses
Lack of empowerment
Teamwork
Control and evaluation
 Gap 3

Failure to match supply and demand

Staffing levels
Timing of staffing levels for peak demand
Over reliance on price to smooth demand

(Zeithamal &Bitner, 2000)

Problems with service intermediaries
Channel conflict over objectives and
performance
Channel conflict over costs and rewards
Control over quality and consistency
Tension between empowerment and control
(Zeithamal &Bitner, 2000)
Contract management
Legal obligations
Commitment to service and service culture
(Bannon, 2015)
 Gap 4
Delivery – External Communication Gap

Media advertising and other forms of

communication must reflect what you are
offering rather than building higher
expectations than your organisation can
deliver.
 Gap 4
Lack of integrated marketing communications.

Tendency to view each external communication

as separate opposed to integrated marketing
communication over all channels.

Lack of marketing expertise and Marketing planning.

 Gap 4
Ineffective management of customer expectations

Communication
Understanding customer expectation
Ability to lower expectations
Pre-empting customer disappointment
Adequate skill and scope to resolve and
compensate customers, conflict resolution.
Over promising - the ‘Fray Bentos Gap’
Source: Bannon, 1994.

• In advertising
• Personal selling
• Physical evidence clues
 Gap 4
• Inadequate horizontal communications
• Communications between sales and
operations management
• Communication between advertising and
operations management
• Standardising among branches and individual
members of staff.
 Gap 5
Expected Service – Perceived Service Gap

The key to ensuring good serve is meeting or

exceeding what the customer expects from the
service.

Real and perceived differentiation

 Service Proposition

Gap5 = f( Gap1+Gap2+Gap3+Gap4)

Focus Groups reveal that, regardless of the type of

service, consumers used basically similar criteria in
Evaluating service quality.
 Customer Gap:

Difference between expectations and perceptions:

Provider Gap 1:
not knowing what customers expects

Provider Gap 2:
not having the right service designs and
standards
Provider Gap 3:
not delivering to service standards

Provider Gap 4:
not matching performance to promise
 Ten facts of Customer Retention

‘Highly satisfied’ customers repurchase.

They are six times more likely to

repurchase than customers who rate
themselves just ‘satisfied’.

Highly satisfied customers tell others

about the company.
 Loyal customers are assets.

• A customer that generates a profit of

£1,000 for a supplier in its first year is
likely to generate a total profit of
£50,000 if retained as a satisfied
customer over ten years.
 Dissatisfied customers tell others.
On average they tell 14 others.

Losing a single customer represents the loss

of an asset with a lifetime value of say
£10,000, this might be only the tip of the
iceberg. The total value lost might be 14
times as great.
 Most dissatisfied customers don’t
complain.
While they tell their associates, only 4 per
cent bother to complain to the company.

For every complaint received, another 26 are

likely to have problems and 6 will be serious.
 Winning new customers is costly.

• It costs 3-5 times as much to find a new

customer as it is to retain an existing one.
• These are the costs of researching,
advertising, selling and negotiating with
new prospects.
Loyal customers are more profitable.

• They buy more of the company’s

products, take less of its time, are
less sensitive to price and bring in
new customers by WOM.
Satisfactory resolution of
complaints increase loyalty.

• When complaints are resolved

satisfactorily, these customers tend to be
more loyal than those who never
experience a problem.
Few customers defect due to poor
product performance.

• Only 14 per cent defect for this reason.

Two-thirds leave because they find
service people indifferent or
inaccessible.
 Increasing Customer Retention
• The average company loses 10 per cent of its
customers annually.
• Studies show that increasing retention by as
little as 5 per cent can increase a company’s
profits by 85 per cent (Doyle, 1992).
 Customer Satisfaction and
Loyalty
• Customer satisfaction and
customer loyalty are two different
concepts.
– A satisfied customer may not necessarily
be loyal but they are unlikely to bad
mouth you.
– A loyal customer may not be satisfied but
may not necessarily recommend you.
 Five Golden Rules of
Business Development

1. The Sales Orientation.

Getting in front of the targeted
prospect – Professionals can sell!
2. The Marketing Orientation.

Getting in front of the right potential

client with a need/want/desire for
your products and services – of no
value unless they have a need and
of course
money to make a purchase.
- Anyone can give away a Ferrari!
3. The Relationship Marketing
Orientation (RM).

Building a relationship of trust with

the right client with a need, so as
you become the preferred supplier!
 4. The Business Orientation
of RM.

Negotiating a long-term win-win

scenario – everyone is satisfied!

You get what you negotiate!

 5. Quality of service delivery
as perceived by the client and
RM.

Delivering to the client expectation

and maintaining the relationship.
Comments and techniques used
by you and your industry would
be appreciated.

-Thanks!
 Summary
Customer care is a core element to all
business and management training courses.

Customer satisfaction and retention is

central to developing and maintaining
business effectiveness and competitiveness.