“Over the years service researchers have suggested that consumers judge the quality of services based on their perceptions of the technical outcome provided, the process by which that outcome was delivered, and the quality of the physical surroundings where the service is delivered”
Figure 2 shows the ‘Customer Perceptions of Quality and Customer Satisfaction model (Zeithaml and Bitner, 2003)
Figure 2
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Reliability, Responsiveness, Assurance, Empathy and Tangibles are factors which make up how the customer perceives the interaction quality. Zeithaml and Bitner (p.93, 2003) go on to define these five dimensions:
Reliablility: ability to perform the promised service dependably and accurately
Responsiveness: willingness to help customers and provide prompt service
Assurance: employees’ knowledge and courtesy and their ability to inspire trust and confidence.
Empathy: caring, individualized attention given to customers
Tangibles: appearance of physical facilities, equipment, personnel and written materials
The Interactions Qualities are the qualities that the organization attempts to serve the customer with, such response times and the ability to communicate clearly with the customer. Any combination of the five factors above contribute to how the customer perceives the service quality he or she receives during the interaction between them and the organization. The Physical Surroundings that the customer is aware of is another quality that contributes to service quality. This can be as simple as a comfortable chair for the customer to sit on whilst he or she is dealing with the organization – the perception of a customer’s surroundings can influence a customer’s overall perception of service quality. An example of this would be Nike Town where the whole where the customer is encouraged to fully engage in the shopping experience as it becomes a ‘day out’ – offering customers to perceive excellent quality service. The Outcome Qualities are what gets the customer’s attention and what the customer wants to get out of the interaction with the organization. For example, if a customer wanted a jacket to be dry-cleaned the clean jacket would be the outcome quality. Again, the five factors listed above make up an overall perception for the customer on the outcome quality.
Parasuraman, et al (1985) describe how understanding customer expectations through market research and open communication with employees contributes to the five service quality dimensions. If an organization can gain information about the market it can more effectively create superior service dimensions for the customer by identifying what the customer wants and how these wants fit into the market as a whole. Open communication with employees also allows the organization to gain first hand data on customer responses as employees often received on-the-spot feedback from customers. Parasuraman, et al (1985) also describes how management commitment to service and employee performance impact on how the service dimensions are perceived.
Zeithaml & Bitner (1996) describe the ‘zone of tolerance’ and the two levels of service expectation, see figure 3.
Figure 3
The zone of tolerance lies between a perceived adequate level of service and the desired level of service. Due to the nature of services variation can often arise from serving one customer to another. One customer may even experience different levels of service, or a lack or consistency, from one transaction to another. The zone of tolerance allows for an amount of variation where the customer still finds the service to be acceptable – if the perceived level of service drops below the acceptable level the customer will become frustrated and dissatisfied.
“The zone of tolerance can increase or decrease for individual customers depending on factors including competition, price or importance of specific service attributes” (Lovelock et al, p.127, 1999)
For example, if a customer was given a complimentary holiday from a travel company they are likely to have a larger zone of tolerance than if they had paid full price. The level of service they receive may drop to below what they would usually accept but because the holiday was free they may not be dissatisfied.
Just three years later Burrell and Gale (1987) show us the PIMS Principle (figure 4) and the relationship between Relative Quality and Relative Market share. This is a useful model to understand as it brings in the Return on Investment (ROI) which most models do not include.
The equations are: High Market Share + High Quality = High ROI
Low Market Share + Low Quality = Low ROI
We must remember that service quality is rarely described as a cheap or short-term implemented part of business. Berry et al makes it clear that service quality is long term if it is to work.
“There are no ways to change the attitudes, habits, knowledge, and skills of human beings quickly.”
Service quality can add a valued differentiator to the products offered where goods in today’s environment are largely undifferentiated. However, this will inevitably have an instant effect on bottom line success in that it will costing will increase.
3. Customer Satisfaction
We can define customer satisfaction:
“Satisfaction is the consumer’s fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provides a pleasurable level of consumption-related fulfillment. Zeithaml and Bitner (2003) quote R. L. Oliver.
Satisfaction happens when the customer perceives the product or service to at least meet their expectations. The customer may experience fulfillment, contentment, pleasure, delight or relief. If the customer’s needs or wants are not met he or she will become dissatisfied.
Zeithaml and Bitner (2003) go on to compare customer satisfaction:
“Although they have certain things in common, satisfaction is generally viewed as a broader concept, whereas service quality assessment focuses specifically on dimensions of service. Based on this view, perceived service quality is a component of customer satisfaction.”
We can see how the ‘Customer Perceptions of Quality Customer Satisfaction’ model (Zeithaml and Bitner, 2003) is completed in figure 5.
Figure 5
We can see that price is introduced as a contributing factor to customer satisfaction, whereas as price does not contribute to service quality. Most importantly, we can see that situational and personal factors influence customer satisfaction. These factors are beyond the control of the organization and are part of individual customers and what they bring with them to the market place.
“Customer’s emotions can also affect their perceptions of satisfaction…”,
“Positive emotions such as happiness, pleasure, elation and a sense of warm-heartednesss enhanced customers’ satisfaction…” (Zeithaml & Bitner, 2003)
Zeithaml are offering the notion of emotional transactions with the service delivery and if organizations factor this into the delivery it is likely to enduce a positive outcome of customer satisfaction, hence customer satisfaction is in itself an emotional state. This is important to marketers, as a customer with already positive emotions is likely to respond to the service quality with an already positive outlook when dealing with the supplier. Negative emotions will, however, have the opposite affect.
“…negative emotions such as sadness, sorrow, regret and anger led to diminished customer satisfaction.” (Zeithaml & Bitner, 2003)
Cronin & Taylor (1992) describes the results from their study on Service Quality that they link to satisfaction and the relationship - the results are as follows:
- a performance-based measure of service quality may be an improved means of measuring the service quality construct,
- service quality is an antecedent of consumer satisfaction,
- consumer satisfaction has a significant effect on purchase intentions,
- service quality has less effect on purchase intentions than does consumer satisfaction.
4. Defections Management
Realising and effectively managing how and why customers decide to leave, or defect, from your company can have a positive impact on bottom line success.
“Companies can boost profits by almost 100% by retaining just 5% more of their customers.” (Reichheld & Sasser, p.105, 1990)
Reichheld & Sasser (1990) explain the cost of losing a customer in relation to the initial spend made by companies to gain the customer in the first place. An example of a credit card is used to demonstrate how attracting one customer can cost as much as $50 – but this outlay is not recouped until year two. They explain that operating costs decrease the longer the customer stays with the company, and revenues increase year on year as the customer becomes more confident in using the service. Costs are likely to decrease as a more confident customer is expected to spend less time asking questions and more time making use of the service i.e. spending. Defections Management can also result in increased profits from referrals and price premiums.
5. Repeat Purchasing and Retention
Customer repurchase intention is influenced by seven important factors – service quality, equity and value, customer satisfaction, past loyalty, expected switching cost and brand preference. (Hellier et al, 2003) Past loyalty to the product is likely to influence the customer making another purchase simply due to the loyalty the customer feels towards the business. If a customer has been loyal in the past it may feel perfectly natural to carry on with a system that has worked in the past. Large organizations, for example, will often order supplies such as stationary from the same supplier because they have systems in place to make those orders due to past loyalties with the supplier. The expected switching cost can be a major contributing factor to repurchases in industries where joining fees or ‘get-out’ clauses exist.
Jones & Sasser (1995) compare satisfaction with retention at Rank Xerox in the early 1990s (Figure 6).
High levels of retention are not met until the customer is very satisfied. Just not dissatisfying the customer or even satisfying the customer is not enough to gain 50% or higher levels of retention.
Rust et al (1995), however, say that scores of 5 will result in 97%, a score of 3’s and 4’s will result in 95% retention. We can see from this that satisfaction to retention varies from one organization to another, as well as from industry to industry. Figure 7 (Jones & Sasser, 1995) displays how this relationship changes dependant on industry.
A service such a telephone service provider (or most utility providers) often serve their customers because there is none or very little alternatives available. Contracts and notice to leave also result in customers staying with their service provider because it is more convenient, even if they are not especially satisfied. A motorcar supplier is shown to have the opposite affect as there is much choice in the market and customers are free to purchase how and when they like. Technological advances may also influence if and when a customer defects from one company to another, as they may desire new technology from a competitor. Robert Weisman, Boston Globe (2004) supports this notion:
“Some customers may feel trapped – they’ll continue doing business with their vendors because they have to, not because they want to.”
We can also explore the notion that loyal customers have a direct postive affect on bottom line business success. Much literature on loyal agrees that loyal customers will be more familiar with a company’s transactional processes and therefore should find it cheaper to serve them (Reinartz et al, 2002)
Reinartz et al (2002 ) do not agree fully that loyal customers have a direct positive affect on profits:
“Specifically, we discover little or no evidence to suggest that customers who purchase steadily from a company over time are necessarily cheaper to serve, less price sensitive, or particularly effective in bringing in new business.”
6. Conclusion
6.1 Service quality on satisfaction and profits
Zeithaml and Bitner (2003) agree that while service quality contributes to customer satisfaction it must be combined with product quality and price. Price is an important factor in certain industries where service quality is not perceived by the customer as a highly important part of the total package being offered by the supplier. In high volume low price selling markets the customer is often enticed into the transaction by low prices and remains a profitable customer because he perceives the value to be good, even if the service quality is relatively poor. The zone of tolerance explained by Zeithaml & Bitner (1996) shows that as long as the service is not below an adequate level the customer will not be dissatisfied. Price will only play such an important part in some sectors, whilst most customers will find service quality to be important in satisfying their needs. As far an impacting on bottom line success is concerned, again this will depend on the individual organization and its targets, whether they be long-term or short-term. As Berry et al (1988) explains, it is not a quick process and the whole organization must be involved in improving service quality. This kind of investment is unlikely to suit organizations with very short-term goals which are looking at capturing profits in a short space of time as implementation costs are unlikely to warrant the end results.
6.2 Satisfaction on repurchase and profits
It is clear that customer retention, when retaining the right customers will result in increased profits, as costs decrease. I do not believe that there is conclusive evidence to agree that profits will inevitably increase because highly loyal customers become less price sensitive. Whilst being loyal they are still aware of the service quality and price and the process which contributes to satisfaction still exists, its just that their loyalty to the supplier becomes a contributing factor. The retention – satisfaction relationship is also dependant on industry and organizational structure. As Jones & Sasser (1995) display the varied relationships from motor cars to telephone services – the more of a necessity the service is the less satisfaction sensitive the customer is. Service is quality and customer satisfaction will be far less important to a utility service provider if there is not alternative as the customer has no choice but to remain as a customer. So, as far as bottom line measures, service quality and satisfaction would not be important as the customer’s evaluation of the purchase would have little influence on future purchases. In today’s environment, however, this monopolistic type of organization is almost non-existent as all organizations have a competitor of one type or another who can supplier the customer.
6.3 Final Summary
The notion of service quality and customer satisfaction being important when a customer is evaluating a purchase if a ‘fact’ for the vast majority of organizations. Service quality may not be the most important factor, consciously or subconsciously, but it will often play an important contributing factor when the customer is evaluating whether or not to repurchase. As we have seen, satisfaction does depend on the industry the supplier is operating in and the available options in that industry, however, there is still substantial literature that supports the idea that customer satisfaction has a direct impact on customer retention, making it important. Service quality and satisfaction has an impact on bottom line business success but will not always be important in contributing to bottom line success – sue to individual emotional states it can be very difficult to create high levels of service quality and satisfaction and attaining a good return on the initial investment.
References
Berry L, Parasuraman A, Zeithaml A (1988) The Service-Quality Puzzle Business Horizons. September – October 1988
Gronroos C (1984) A Service Quality Model and its Marketing Implications. European Journal of Marketing. Vol 4 pp. 36-44.
Zeithaml V and Bitner M (2003). Services Marketing : Integrating Customer Focus Across The Firm. London: McGraw-Hill
Zeithaml V and Bitner M (1996). Services Marketing, New York: McGraw-Hill
Parasuraman A, Zeithaml V, Berry L (1985) A conceptual model of service quality and its implications for future research, Journal of Marketing, Vol.49
Burrell D and Gale T (1987) The PIMS principles : linking strategy to performance, London: Collier Macmillan
Reichheld & Sasser (1990) Zero defections : quality comes to services, Harvard Business review, Sept/Oct 1990
Hellier P, Geursen G, Carr R, Rickard J (2003) Customer repurchase intention: A general structural equation model, European Journal of Marketing, Vol. 37 No. 11
Jones T, Sasser W (1995) Why satisfied customers defect. Harvard Business Review, November-December, pp. 88-99.
Rust R, Zahorick A, Keiningham T (1995) Return on Quality (ROQ): Making Service Quality Financially Accountable. Journal of Marketing, 59 (April)
Cronin, J, Taylor, S, 1992, Measuring service quality: a re-examination and extension, Journal of Marketing, Vol. 56
Weisman R: Boston Globe, (2004). “Satisfied customers aren’t always loyal” Available at: www.americanqualitymall.com/artman/publish/.html [Accessed 01/12/04]
Bibliography
Lovelock C, Vandermerwe S, Lewis B (1999) Services Marketing : A European Perspective. London:Prentice Hall Europe
Gummesson E (1991) Truths and Myths in Service Quality, International Journal of Science Industry Management Vol 2 No. 3. University Press.
Zeithaml V, Berry L, Parasuraman A. (1996) The behaviour consequences of servive quality, Journal of Marketing, Vol 60
Caruana A (2002) Service Loyalty – The effects of service quality and the mediating role of customer satisfaction, European journal of marketing, vol. 36, no. 7/8.
Sivadas E, Baker-Prewitt L (2000) An examination of the relationship between service quality, customer satisfaction, and store loyalty, International journal of retail and distribution management, vol. 28, no. 2.
Woolf B: The Wise Marketer (2002) “What is loyalty?” Available at: www.thewisemarkeeter.com/features/read.asp?id=13 [Accessed 01/12/04]
