FACULITY OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

MEASURING CUSTOMER SATISFACTION IN ETHIOPIA ELECTRIC UTILITY AT ADDIS

ABABA EAST DISTRICT

A RESEARCH PROPOSAL SUBMITTED TO DEPARTMENT OF

MANAGEMENT FOR A PARTIAL FULFILLMENT OF BACHELOR OF ART DEGREE (B.A) IN
MANAGEMENT

By Gezahegn Tebikew
Advisor Mr. Yonas Abrha (MBA)

June; 2021
ADDIS ABABA; ETHIOPIA

.
 Table of content
Contents
Acknowledgement
Abstract
 Chapter One
1. Introduction
1.1. Back ground of the study (services offered by the EEU)

Statement of the problem

Research questions (mandatory)
Objective of the study
General objective
Specific objective
Hypothesis of the study
Statement of Hypothesis Formats
Null and Alternate Hypothesis
Statistical tools to be used in Hypothesis Testing
Scope of the Study
Delimitation of the study
Significance of the Study
Limitation of the study
Organization of the paper/study
Definition of terms and concepts
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Related theories
Conceptual review
Review of Empirical Studies
Conceptual Framework
CHAPTER THREE
Methodology
The study setting
Study design
Population of the study
Sample selection techniques(sampling technique)
Determination of sampling size
Distribution, Collection of the Questionnaire and interview question
Types of data (mandatory)
Source of data (primary data source and secondary data source)
Methods of data collection
Methods of data analysis and presentation
Reliability and validity test (reliability test and validity test) (may mandatory)
Ethical consideration
Reference
Appendix

Abstract
The survival of any organization in a highly competitive environment depends on its ability to provide the best
service quality to its existing customers as the quality of service it delivers. The performance of Ethiopian
Electric Utility (EEU) in providing quality service is not in a position to meet the expectation of service users.
The complaints on the quality of service and response from the users for lack of the services were indicative of
poor service delivery performance in the company.
Therefore, the major purpose of the study is assessing quality of service delivery and customer satisfaction of
EEU in East Addis Ababa District (EAAD) by measuring customer satisfaction of the Ethiopian Electric
Utility in both the power (electric) supply and the service in Ethiopia electric utility in Addis Ababa East
district. Also the research focuses on how the Ethiopia electric utility avoid its weakness by the analysis of
gathering primary and secondary data via a means of the stratified and simple random sampling techniques and
how to build reliability, trust responsiveness for customer satisfaction.
The five dimensions of SERVPERF were used to measure the quality of service offered by EEU service
centers.
This study tries to identify the major areas of problem in relation to service delivery and reveals the factors that
make customers become dissatisfied due to the electric, supply, tariffs, billing methods, servicing, and come up
with its solutions. The major problems in the technical services provided by Ethiopian electric utility are;
handling disputed bills and the long time needed for fixing electricity failure, spending a prolonged time for
post paid billing to pay a service charge, and power supply connection. The customers’ also very poor
satisfaction to prior intimidation of power cut, especially those who perform their day to day activity relates to
the electric power, so that the respondents think that the overall performance of Ethiopian Electric Utility
Company provides a poor service. Therefore, the EEU should come up with appropriate service delivery
standard forms to satisfy customers and to lead competitiveness in business running process.
Since customers may be residential, commercial, and industries, then the residential customers are relatively
most satisfied group followed by the commercial then the industrial.
Therefore, the Utility should come up with an appropriate service delivery standards, proper complaint handling
mechanisms, relevant training for its employees, and strengthening decision making power of employees.
Decision makers also have to exert maximum effort in quality improvement programs so that the Utility ensures
customers satisfaction.
Key Words: Customer Satisfaction, Service Quality, SERVPERF.

Acknowledgement
First and above all, I praise God, the almighty for providing me this opportunity and granting me the capability
to proceed successfully. I would like to thank my advisors, Dr…………………….and Mr…………..for their
valuable guidance in the preparation of this study. I would like to express my special thanks and sincere
gratitude to Ato…………….., Director of East Addis Ababa district for his extraordinary help and for all
hisexceptional stands to help in accepting me as taking time to attend my education.
My deepest gratitude goes to my friends especially to Ato……………. and colleagues for their full engagement
in the distribution and collection of questionnaires and of course to all survey respondents for their willingness
and participation in the survey. Finally, I would like to thank my family and friends for their encouragement
and support not only during this study but throughout my life.
Background of the study
Improving Service quality and customer satisfaction has been the major concern of organizations in any industry for
many years. In the period of globalization and continues technological advancements, maintaining customer
satisfaction is not an option, it is a must to survive the strong competition. An organization that consistently satisfies
its customers, enjoy higher retention levels and greater profitability due to increase in customer loyalty (Wicks
&Roethlein 2009). The payoff resulted from satisfying customers with improving service quality and other
marketing activities is also extensively studied and proven to be true through different marketing researches.
Although many scholars and researchers attempts to explain and measure customer satisfaction, there still does not
appear to be a consensus regarding its definition (Giese & Cote 2000). Customer satisfaction is an experience based
assessment made by the customer of how far his own expectations about the individual characteristics or the overall
functionality of the services obtained from the provider have been fulfilled (Bruhn 2003). According to Gyasi and
Azumah (2009) satisfaction is the process of customer overall subjective evaluation of the product/service quality
against his/her expectation or desires over a time period. Customer satisfaction can also be defined as a customer ’s
overall evaluation of the performance of an offering to date. This overall satisfaction has a strong positive effect on
customer loyalty intentions across a wide range of product and service categories (Gustafsson, Johns, &Roos 2005).
There are many factors which determine customer satisfaction level of a specific organization. Service quality in
addition to other elements such as product quality, price and others, determine customer satisfaction (Wilson et al.
2008). Many otherliteratures and studies also supports that service quality has an effect on the level of customer
satisfaction. Rust and Oliver (1994) stated that quality is one dimension on which satisfaction is based. According to
Shemwell, Yavas and Bilgin (1998), in today’s world of intense competition, the key to sustainable competitive
advantage lies in delivering high quality service that will in turn result in satisfied customers. When considering the
service sector, service quality has been proven to be the best determinant of customer satisfaction. There is also
much evidence in the literature to the fact that customer satisfaction is principally driven by service quality of a firm
from the perspective of its customers Bitner, Boom and Mohr (1994) and Anderson, Fornell and Lehmann (1994)
also point out the relationship between customer satisfaction and service quality by stating that improved service
quality will result in a satisfied customer.
Service quality is the delivery of excellent or superior service relative to customer expectations (Zeithaml and Bitner
1996). Service quality is recognized as a multi-dimensional construct. Many researchers try to identify different
dimensions that construct quality of service. Among those the SERVQUAL model constructed by Parasuraman
(1988) is most popular. It features five dimensions: tangibles, reliability, responsiveness, empathy and assurance.
The tangibles dimension is related to the physical environment aspect of the service provider, the reliability
dimension relates to the service outcome aspect and the remaining responsiveness, empathy and assurance represents
aspects of interaction quality between the service provider and the customer. SERVPERF model was later extracted
from SERVQUAL by Cronin and Taylor in 1992 by focusing only the perception aspect of customers.
Electricity sales have been growing at the fastest pace ever with 13.5% growth in the past five years. This rapid
growth in demand started in the year 2000 and get faster in the latter years. It is to be noted that this unprecedented
growth was also accompanied by frequent and substantial power cuts. This means unconstrained demand growth
would be even faster, probably close to 20 percent per year (Ethio Resource Group, 2009). Besides fastest demand
for electricity, the study undertaken by Japanese Embassy in Ethiopia (2009) shows that enhancement of the energy
sector is a must in order to maintain the economic growth and become a middle-income country in 20-30 years
through industrialization, considering the difficult macro-economic situation.
3 Since the Utility‟s service delivery process to satisfy the needs of its customers will lay a foundation for industrial
led economy, strengthening the energy supply and scaling up quality has prominent role in bringing economic
growth and macro-economic stability. Excellent service can be energizing because it requires the building of an
organizational culture in which people are challenged to perform to their potential and are recognized and
rewarded when they do (Berry et.al., 1994). In contrast to this, several organizations do not give emphasis to
excel such competence. This in turn will lead to poor service delivery and less profit. Satisfaction is not an easy
feeling since the customers are always in question to meet their limitless needs. Recently, Customer satisfaction
is the daily issues of many people and institutions in Ethiopia.
The reason is that it is being widely used on the progress for economic, business and social activities. Customers are
the main actors in these activities. According to Ethio Resource Group (2009) study, Electricity is a critical
economic infrastructure. If not delivered where and when needed, serious damage ensues for the economy.
Considerable potential output has been lost due to power cuts in the past few years. Potential losses from power
disruption will increase in the future as the economy grows and the relative contributions of the industry and service
sectors increase in the economy. Power supply must increase as rapidly as demand to avoid such losses and to
ensure sustained growth. This is the rationale upon which the government is accelerating its investment in expanding
the power system. The Government of Ethiopia has planned for rapid development of Ethiopia as part of its Growth
Transformation Program and has chosen the Utility sector as one of the focus areas for improvement of service
delivery to customers.
Purpose ‐ The purpose of this paper is to assess the relationship between service quality, customer satisfaction and customer loyalty
among industrial customers of the public electricity utility organisation in Malawi using correlation and regression
analyses. Design/methodology/approach ‐ A cross-sectional survey was used with a sample of 92 respondents drawn from a
population of 286 industrial customers of the public electricity utility in the Southern Region of Malawi. Data were collected using a
pre-tested questionnaire based on SERVQUAL and multi-item scales to measure customer satisfaction and loyalty. Findings ‐ The
findings suggest that the service quality is poor irrespective of demographic characteristics of the industrial customers. Furthermore,
the findings show that the public electricity utility industrial customers are dissatisfied with the service offered and are disloyal to the
public electricity utility. However, the level of loyalty is moderated by level of consumption. Large consumers are less disloyal than
small consumers. Finally, the findings suggest that there is a strong relationship between service quality, customer satisfaction and
customer loyalty among the public electricity utility's industrial customers and that the relationship between service quality and
customer loyalty is partially mediated by customer satisfaction. Research limitations/implications ‐ The study focused on functional
quality offered by the public electricity utility to its industrial customers within Southern Region of Malawi limiting its
generalisability. Additionally, it used the original SERVQUAL scale and some items may not be relevant to electricity utility
organisation. Practical implications ‐ The paper has a significant diagnostic value in the sense that it identifies areas where the public
electricity utility must direct its resources in order to satisfy its industrial customers.  Originality/value ‐ The paper extends the
examination of the relationship between service quality, customer satisfaction and customer loyalty into public sectors of a
predominantly associative culture in developing countries. Specifically, it extends the research into electricity utility organisations that
operates in a monopolistic market.
The existing annual electricity production capacity of the Ethiopian Electric Utility (EEU) is about 2178 MW and
the number of customers is about 2.26 million. Even if the number of customers has increased by more than 20%
annually, Ethiopian Electric Utility (EEU) cannot meet the need for electric power (EEPCo, 2011/12).
In Electric sector, even though, there are tangible physical product associated to provide service such as customer
premise equipment and cable, pole and meter, the major product is intangible in nature and the production and
consumption of the final product take place simultaneously (Rajasekhara& Poultry 2010). The whole service
provision and consumption process requires an end customer satisfaction assessment, the quality of service provided
at service centres and customers‟satisfaction level onthe service they get at the service centre should get enough
study attention. interaction between the service providing company and the consumer. And the interaction starts
from the point customers approach to the company in order to get services for the first time. Ethiopian electric
Utility service centre acts as retail outlets to the company and customers make their first contact to the company
through service centres located in all locations across the country. Majority of service quality and customer
satisfaction studies conducted in electric industry focused on the service quality and customer satisfaction levels.
Studies conducted on Ethiopian electric Utility service quality and customer satisfaction level also aimed at the
service performance of the company and the related customer satisfaction level. However, like the service
performance and customer satisfaction assessment, the quality of service provided at service centres and
customers‟satisfaction level on the service they get at the service centre should get enough study attention.

Definition of Key Terms

Commercial Customers: are customers who consume power supply for commercial purpose
and their power consumption varies according to their needs requirements
Domestic Customers: are customers who consume the power supply for domestic purpose (for
house lighting only)
Industry Customers: are customers who use power for industry purpose
Prepaid meter: is a kind of new style meter which adopt micro-electronics techniques and it
manage electricity fee by computer, which use smart card as media purchased electricity. In the
same time the electronic watt-hour meter realize using electric power after prepaying in
advanced.
Postpaid meter: is a normal devise in which EEU installs at customers’ house in order to
measure how much energy they consumed in hourly basis
Transformer: is an electrical device by means of which high voltage electrical power is
converted into low voltage suitable for consumers
Transmission Line means the system consisting of all high pressure cables and overhead lines
(not being an essential part of the distribution system of a EEU) transmitting electricity from a
generating station to another generating station or a sub-station, together with any step-up and
step-down transformers, switch-gear and other works necessary to and used for the control of
such cables or overhead lines, and such buildings or part thereof as may be required to
accommodate such transformers, switchgear and other works and the operating staff thereof. It
shall include any substation and line including 132 KV level and above.
Power factor means the ratio of watts to Volt-amperes, or the ratio of KWh to KVAh; as
applicable, for the duration for which it is to be determined.
Premises means the area/portion of the building/shed/field etc., for which, the electric
connection has been applied for or sanctioned for a singleconsumer.
Meter means an equipment used for measuring electrical quantities like energy in KWh, and or
KVAh maximum demand in KW and or KVA, reactive energy in KVAR hours etc. including
accessories like Current Transformers (CT) and Potential Transformers (PT) where used in
conjunction with such meter and any enclosure used for housing or fixing such meter or its
accessories and any devices like switches or fuses used for protection and testing purposes. It
will include any seal or sealing arrangement provided by EEU for avoiding unauthorized use of
electricity. This shall also include prepayment meters.
Distribution System means the system of wires and associated facilities between the delivery
point on the transmission lines or the generating station connection and the point of connection
to the installation of the consumers;
Consumer means any person who is supplied with electricity for his own use by EEU, and
includes a person whose supply has been disconnected for the time being; by the Government or
by any other person engaged in the business of supplying electricity to the public under the CSPP
or any other law for the time being in force and includes any person whose premises are for the
time being connected for the purpose of receiving electricity with the works of EEU, as the case
may be.
Conductor means any wire, cable, bar, tube; rail or plate used for conducting electrical energy
and so arranged as to be electrically connected to a system.
Breakdown means an occurrence on account of failure of equipment of the electric energy
supply system including electrical line that results in disruption of supply.
Billing Cycle or Billing Period means the period for which electricity bills shall be prepared for
different categories of consumers byEEU.
System Average Interruption Frequency Index is defined to be the average number of outages
for the system over a specified timeperiod.
Customer Average Interruption Duration Index is defined to be the average duration of a
single outage event.
System Average Interruption Duration Index is defined to be the average outage duration
forthe system over a specified time period. Also, the indexes are mathematically related as
follows: SAIDI= (SAIFI) × (CAIDI).

Chapter One –Introduction

Back Ground of theStudy

Ethiopia has registered impressive GDP growth in recent years, ranging between 6% and 12%
per year depending on the data source. Ethiopia ranks as sub Saharan Africa's second most
populous country, with over 90 million people. Investments in renewable energy resources and
hydro power in particular have been key drivers of economic growth in recent years. The total

1
installed electricity power (http://www.usaid.gov/powerafrica). Projection suggests that total
generation 2014 equal to 2145 Mw. Demand for power will grow by 30% per year. In 2012/2013
hydro power comprised 90% of the electricity supplied in Ethiopia.
(http://www.usaid.gov/powerafrica).

The flourishing electricity intensive industries, commercial buildings ,businesses, and the
widespread utilization of in efficient electrical appliances ,coupled with the inefficiency of the
electricity utility services, not only created a huge gap between electricity demand and supply,
but also negatively affected the reliability of supply of electricity to the country. "The actual
supply of electricity is not more than 60% to 70% of the total demand." Engineer Azeb CEO at
EEP said after a press briefing held at intercontinental hotel on June 11 2015. (Addis Fortune, 15
June 2015).AlemayehuTegenu, Minister of Water, Irrigation and Energy said that "the demand
for energy is growing at 25% to 32% annually in the country. Actual supply for the whole
country amounted to 2300MW in GTP I." (Addis Fortune, 15 June2015)

The Ethiopian Energy Agency noted that 20% of energy produced in Ethiopia is believed to be
wasted. This is equivalent to 400 mega watt power almost equivalent to the electricity generated
by the country‘s Gilgel Gibe II hydro electric dam. So the energy produced becomes a loss. This
creates power supply shortage. The power produced not used efficiently. (Addis Fortune, 15 June
2015).

2
Power sector Status
□Generation capacity in the grid – 2,268 MW
□Hydro – 1,978 MW
□Wind – 171 MW
□Geothermal –7.3 MW
□Diesel – 112 MW
□HV transmission line length > 12,000 km
□MV & LV distribution line length – 157,000 km
□Customers ~ 2.1 million
□Access to electricity grid to Rural Towns and Villages –54%
Source: Mekuria Lemma Strategy & Investment Head Ethiopian Electric Power (2014).

The World Bank awarded Ethiopia last place in Africa, with power utilization of 45 KWH per
person in 2009, the year before GTP I was launched, as compared to South Africa, which ranks
first with 4,532KWH.The bank gave a slightly higher rating of 51.96 KWH for 2011. Total
power consumption in Ethiopia in 2014 was, according to the World Bank, 4,645,000,000kwh,
compared to 6,515,000,000 kwh in Kenya and 6,715,000,000kwh in Sudan. (Addis Fortune news
paper, 2015).

Ethiopian Electric Utility (EEU)

The Ethiopian Electric Utility came into existence on The Regulation may be cited as the
"Ethiopian Electric Utility Establishment Council of Ministers Regulation No. 303/2013".The
Ethiopian Electric Utility (hereinafter the "Enterprise") is established as a public enterprise. The
Enterprise shall be governed by the Public Enterprises Proclamation No. 25/1992. The Ministry
of Water, Irrigation and Energy shall be the supervising authority of the Enterprise. The Enterprise
shall have its head office in Addis Ababa and may have branch offices elsewhere as may be
necessary. The Ethiopian Electric Utility came into existence on The Regulation may be cited as
the "Ethiopian Electric Utility Establishment Council of Ministers Regulation No.
303/2013".The Ethiopian Electric Utility (hereinafter the "Enterprise") is established as a public
enterprise. The Enterprise shall be governed by the Public Enterprises Proclamation No.
25/1992. The Ministry of Water, Irrigation and Energy shall be the supervising authority ofthe
 Enterprise. The Enterprise shall have its head office in Addis Ababa and may have branch offices
elsewhere as may be necessary.
Purpose
The purposes for which the Enterprise is established are:
(1) To construct and maintain electric distribution networks; to contract out the distribution
networks construction to contractors asrequired;
(2) To administer electric distribution networks, to purchase bulk electric power and sell electric
energy to customers;
(3) To initiate electric tariff amendments and, upon approval, to implementsame;
(4) In line with directives and policy guidelines issued by the Ministry of Finance and Economic
Development, to sell and pledge bonds and to negotiate and sign loan agreements with local and
international financial sources;
(5) To undertake any other related activities necessary for the attainment of itspurposes.
Capital
The authorized capital of the Enterprise is Birr 64,715,822,693.20 (Sixty Four Billion Seven
Hundred Fifteen Million Eight Hundred Twenty Two Thousand Six Hundred Ninety Three Birr
and Twenty Cents) of which Birr 16,178,955,673.30 (Sixteen Billion One Hundred Seventy
Eight Million Nine Hundred Fifty Five Thousand Six Hundred Seventy Three Birr and Thirty
Cents) is paid up in cash and in kind.(Ethiopian Electric Utility Establishment Council of
Ministers Regulation No. 303/2013".( Federal Negarit Gazette _No.5 December 27 th 2013 Page
7126-7128)
The electricity delivered to your home or business is typically generated in large centralized
power plants as illustrated in the figure below. Power then travels over long distances via high
voltage transmission lines, which are interconnected in a grid or network configuration .From the
transmission system, power travel to distribution substations. From these substations, distribution
lines, operating at lower voltage levels, disperse the power throughout cities and neighborhoods.
For safety reasons, each distribution lines are protected by circuit breaker in the substation. The
power then travels from the distribution line through a service transformer located in close
proximity to your home or business. Electricity enters the facility either through over head or
underground service entrance conductors (wires) which connect to the meter.EEU reads this
meter on a monthly basis and reports the information gathered to the billing department and the
respective department sold the bill. (CenterPointEnergy.com)

Customer service is one of the most important tools that help an organization to achieve a high
level of profitability and long term success. Since under this context of EEU, that's very
important for them to be able to provide a high and improve its existing service that being
provided to its customers. It is important to note that EEU must continually improve its services
because people's expectations and needs keep on changing. However, EEU has been subject of a
lot of criticism from the public in the quality of services they provide to them. Since an important
analysis needs to be made about the customer expectations and perceptions regarding to the
services that EEU areproviding.

One important aspect of EEU operations is its dealing with customers in order to
achieve their satisfaction through determining their needs and establishing the operation
system that deliver such needs. Quality in a service organization is a measure of the extent to
which a delivered service meets the customer’s expectations. It is determined by the customer‘s
perception and not by the perceptions of the providers of the service. It is therefore, very
important to determines customer needs and wants and, then design the service to meet these
requirements. Measuring customer satisfaction is an important element in the Total Quality
Management (TQM) concept.TQM includes elements that constitute its interrelated
systems of operations where customer focus is an important element of TQM (customer
satisfaction being the fuel that drives organizations is one of the philosophy of TQM). In general
customer focus in the TQM approach has two sides; assessing customer demands and
achieving customer satisfaction. In ISO 9001: 2008 model, inputs of the model require
that organizations have to investigate the needs of the customers and design the operation
system that would fulfill such needs. In addition, outputs of the ISO 9001 model require
achieving customer satisfaction. Hence, measuring customer satisfaction of EEU can lead to
better assessment of its operations and better continuous improvement of the company. In
achieving that, this current study will attempt to evaluate EEU services at North Addis Ababa
Region in all the 23 customer service centers and regionoffice.
 Statement of the Problem
Electricity power supply for domestic and industrial sector took a vital role in economic
development. Electricity services are recognized as the live blood to the nation and its
development. Further, it provides the power or energy to other industries to do their functions
properly and perfectly. If there is a problem in terms of power supply, whole economy is in
question mark. Due to that, government should focalize electricity services as prominent and
fundamental one.

In Ethiopia the general public complaining about the Electric service provided by Ethiopian
Electric Utility through different means. Among the problem the customer complaining frequent
power disruption, and days and weeks long black out, wastage of product and time in the
manufacturing sector. Power cuts and fluctuation result in economic, health, and security hazard.
There is big customer complaint in the new connection, failure fixing, billing, reliability of
power, and customer service delivery.

Different past studies shows that the company service delivery is not meet customer satisfaction.
ZerituFikre’s (2010) study shows that there was poor service quality and poor performance in
service process like new connection, complaint handling and recovery of service failure
procedure. So the corporation failed to meet such requirements in order to provide a reliable
service to its customers. AmanAbdie, (2011) effect of service delivery and quality on customer
satisfaction study service delivery process and service quality in Ethiopian Electric Power
Corporation are below the expectation of customers.

To give better service the Ethiopian government unbundled the former Ethiopian Electric
Corporation in to two separate entities, that is Ethiopian Electric power (EEP) and Ethiopian
Electric Utility (EEU) through Council of Ministers Regulation No. 302/2013 and NO. 303/2013
(EEP Regulation and EEU regulation), respectively, enacted on December 27, 2013.

To get new management capacity and to improve the customer service delivery the government
provides the management of Ethiopian Electric Utility to foreign company (A consortium of
three Indian companies under the management of power grid corporation of India-PGCI-whichis
responsible for operations, distribution, and sales services).The company won the contract for 21
million USD.

This study tries to measure the quality of customer service delivery and customer satisfaction of
EEU in the different operational unit of the utility retail and wire businesses, by focusing its
study on North Addis Ababa region 23 customer service centers which include both urban and
rural customers (both urban and rural customers classified as Domestic or residential,
Commercial and Industrial customers).This research paper tries to evaluate EEU’s service in the
eyes of customer after the Indian management overtake the management and assess the level of
customer satisfaction during the management time of Indians management contract which ends
August 2015.This research study Measuring customer satisfaction of EEU after the foreign
management run the company. Measuring customer satisfaction can lead to better assessment of
its operations and better continuous improvement of the company.
Research Questions

 How customers Perceive the EEU and its services?

 What is the level of customer satisfaction in EEU?
 What are the overall customer satisfaction regarding the general performance ofEEU?
 What are organizational factors that affect customers’ satisfaction?
 What kinds of measurement should be taken to improve or boost the satisfaction level of
customers?

Objectives of theStudy

 The general objective of this research is to measure customer satisfaction of EEU

services.
 The Specific objectives:-
 The first objective of the study is to measure the level of satisfaction of customers
regarding four technical service areas that is electricity tariffs, billing methods,
failure fixing and power supply connection.

 The second objective is to measure customer satisfaction of the quality of

EEUcustomer service operations.

 Third, this current study will attempt to assess the overall satisfaction of
customers regarding the general performance of EEU.( To know how
customers generally perceive the EEU service.)

 Fifth, to identify organizational factors those affects customers’satisfaction.

 Finally, the study will investigate if there is any differences in the level of
satisfaction between electricity users due to their type of subscriptions;
residential, commercial or industrial clients.
 Research Hypothesis
Based upon the literature review, the research hypothesis will be defined and predicted the
relationship between two variables of the study which are as follows:

Hypothesis 1
H1: There is statistically significant difference in customer satisfaction level in the EEU tariff
services among Residential, Commercial, and Industrial customers.

Hypothesis 2
H1: There is statistically significant difference in customer satisfaction level in the EEU billing
services among Residential, Commercial, and Industrial customers.

Hypothesis 3
H1: There is statistically significant difference in customer satisfaction level in the EEU failure
fixing among Residential, Commercial, and Industrial customers.

Hypothesis 4
H1: There is statistically significant difference in customer satisfaction level in the EEU new
connection service among Residential, Commercial, and Industrial customers..

Hypothesis 5
H1: There is statistically significant difference in customer satisfaction level in the EEU
customer service among Residential, Commercial, and Industrialcustomers.

Hypothesis 6
H1: There is no statistically significant difference in the general performance of EEU among
Residential, Commercial, and Industrial customers.
Significance of theStudy

Customer satisfaction plays significant role in the achievement of organizational objectives.

Preliminary analysis of customers’ needs help the organization in designing strategic planning.
The study having analyzed the theoretical perspectives, and after processing the feedbacks from
the various categories, will devise ways to improve service quality and increases customer
satisfaction in the company. Moreover, the study is believed to have the following importance:-
 It will enable EEU officials know customers view of their service deliveryquality
 EEU and Government will get feedback about its customers’ satisfaction level
and help to take the necessary actions.
 Ethiopia is recognized as an emerging country in terms of industrial development
and also economic growth has been increasing trend since the last decade. Due to
that, power supply in terms of electricity is the fundamental and denoted as the
back bone to the economy and its development. Therefore, this research gives
fruit full suggestion to the policy makers and researchers regarding to the service
quality and the level of customer satisfaction in the Ethiopian electricutility.
 This kind of customer satisfaction survey and evaluation conducted by researchers
help the company to assess the problemareas.

Scope of theStudy

This study delimited to North Addis Ababa Region Retail and Wire businesses. The study
assesses 23 customer services centers (Districts) in urban and rural areas using the descriptive
research design. The study not covered the entire 15 regional Wire and Retail businesses of EEU.
The study not covered Generation, Transmission and substation in detail, but it focuses on
Distribution and sales sectors of electricity services. The data collected with the use of
questionnaire, and document techniques.
 Limitation of theStudy
Customers’ service delivery covers all aspects of an organization performance. However,
due to budget and other related resource constraints this study is limited its scope to
measuring customer satisfaction particularly by taking the Ethiopian Electric Utility (EEU)
North Addis Ababa Region customer service centers. Furthermore, since the sample is only
Addis Ababa and some rural areas particularly North Addis Ababa Region customer
service centers are not large enough to represent the entire organization nationwide.
Therefore, the finding of this study should be considered as showing the circumstance of
customer satisfaction level and service quality in EEU. Another study with a large sample
size may be required in the further to arrive at reliable conclusion about Ethiopian Electric
utility customer satisfactionlevel.

Outline of Research Project

This research consists of five chapters. Chapter one is the general introduction ,and this one
presents the back ground ,the statement of the problem ,the objective of the study ,research
hypothesis ,the significance of the study ,scope and limitation of the study ,and the outline
the research project .
Chapter two, literature review which is critical analysis of what other researchers have said
on the subject and where the research project fit in ,the research gaps to be clearly
identified.
Chapter three, explanation of why the data are collected, what data collected, from where
data collected, and how to collected data analyzed.
Chapter four presents data analysis, results and discussion of findings. Analysis of results,
this chapter described the research findings their analysis and look an attempt of
interpreting the main findings of the study based on the stated objectives.
Chapter five presents the summary of the major findings, conclusion and recommendations
is given in this chapter.

Thischapterstartsbyintroducingthemainthemeoftheresearchworkservicequality, customer
satisfaction. Back ground information, problem statement, researchquestions, objective of
the study, operational definitions, significance and delimitationofthe studyare discussed in
this chapter.

Backgroundofthestudy

Improving Service quality and customer satisfaction has been the major concern

1
oforganizationsinanyindustryfor manyyears.Intheperiodof globalizationandcontinues
technological advancements, maintaining customer satisfaction is not
anoption,itisamusttosurvivethestrongcompetition.Anorganizationthatconsistentlysatisfiesits
customers,enjoyhigherretentionlevelsandgreaterprofitabilityduetoincreaseincustomerloyalt
y(Wicks&Roethlein2009).Thepayoff resulted from satisfying customers with improving
service quality and othermarketing activities is also extensively studied and proven to be
true through differentmarketingresearches.

Although many scholars and researchers attempts to explain and measure

customersatisfaction, therestilldoesnotappeartobe aconsensus regarding itsdefinition(Giese
& Cote 2000). Customer satisfaction is an experience based assessment
madebythecustomerofhowfarhisownexpectationsabouttheindividualcharacteristicsor the
overall functionality of the services obtained from the provider have beenfulfilled (Bruhn
2003). According to Gyasi and Azumah (2009) satisfaction is
theprocessofcustomeroverallsubjectiveevaluationoftheproduct/servicequalityagainst his/her
expectation or desires over a time period. Customer satisfaction canalso be defined as a
customer’s overall evaluation of the performance of an offeringto date. This overall
satisfaction has a strong positive effect on customer loyaltyintentions across a wide range
of product and service categories (Gustafsson, Johns, &Roos 2005)

There are many factors which determine customer satisfaction level of a

specificorganization. Service quality in addition to other elements such as product
quality,priceandothers,determinecustomersatisfaction(Wilsonetal.2008).Manyother

2
literatures and studies also supports that service quality has an effect on the level
ofcustomer satisfaction. Rust and Oliver (1994) stated that quality is one dimension
onwhich satisfaction is based. According to Shemwell, Yavas and Bilgin (1998),
intoday’s world of intense competition, the key to sustainable competitive advantagelies
in delivering high quality service that will in turn result in satisfied customers.When
considering the service sector, service quality has been proven to be the bestdeterminant of
customer satisfaction. There is also much evidence in the literature tothe fact that customer
satisfaction is principally driven by service quality of a firmfrom the perspective of its
customers Bitner, Boom and Mohr (1994) and
Anderson,FornellandLehmann(1994)alsopointouttherelationshipbetweencustomersatisfacti
on and service quality by stating that improved service quality will result in
asatisfiedcustomer.

Service quality is the delivery of excellent or superior service relative to

customerexpectations (Zeithaml and Bitner 1996). Service quality is recognized as a multi-
dimensionalconstruct.Manyresearcherstrytoidentifydifferentdimensionsthatconstruct
quality of service. Among those the SERVQUAL model constructed byParasuraman
(1988) is most popular. It features five dimensions: tangibles, reliability,responsiveness,
empathy and assurance. The tangibles dimension is related to
thephysicalenvironmentaspectoftheserviceprovider,thereliabilitydimensionrelatestotheservi
ceoutcomeaspectandtheremainingresponsiveness,empathyandassurance represents aspects
of interaction quality between the service provider andthecustomer.SERVPERFmodelwas
later extracted from SERVQUAL by CroninandTaylorin1992 by focusing only the
perceptionaspect ofcustomers.

Electricity sales have been growing at the fastest pace ever with 13.5% growth in thepast
five years. This rapid growth in demand started in the year 2000 and get faster inthe latter
years. It is to be noted that this unprecedented growth was also accompaniedby frequent
and substantial power cuts. This means unconstrained demand growthwould be even faster,
probably close to 20 percent per year (Ethio Resource
Group,2009).Besidesfastestdemandforelectricity,thestudyundertakenbyJapaneseEmbassy
in Ethiopia (2009) shows that enhancement of the energy sector is a must inorder to
maintain the economic growth and become a middle-income country in 20-
30yearsthroughindustrialization,consideringthedifficultmacro-economic situation.
 Since the Utility‟s service delivery process to satisfy the needs of its customers
willlay a foundation for industrial led economy, strengthening the energy supply
andscaling up quality has prominent role in bringing economic growth and macro-
economicstability.Excellentservicecanbeenergizingbecauseitrequiresthebuildingofano
rganizational culture in which people are challenged to perform to their potential and
arerecognizedandrewardedwhentheydo(Berryet.al.,1994).Incontrasttothis,severalorga
nizations do not give emphasis to excel such competence. This in turn will lead to
poorservice delivery and less profit. Satisfaction is not an easy feeling since the
customers arealways in question to meet their limitless needs. Recently, Customer
satisfaction is the dailyissuesofmany peopleandinstitutions inEthiopia.

The reason is that it is being widely used on the progress for economic, business andsocial
activities. Customers are the main actors in these activities. According to EthioResource
Group (2009) study, Electricity is a critical economic infrastructure. If
notdeliveredwhereandwhenneeded,seriousdamageensuesfortheeconomy.Considerable
potential output has been lost due to power cuts in the past few years.Potential losses from
power disruption will increase in the future as the economygrows and the relative
contributions of the industry and service sectors increase in theeconomy. Power supply
must increase as rapidly as demand to avoid such losses
andtoensuresustainedgrowth.Thisistherationaleuponwhichthegovernmentisacceleratingits
investment in expanding the power system.

The Government of Ethiopia has planned for rapid development of Ethiopia as part ofits
Growth Transformation Program and has chosen the Utility sector as one of thefocusareas
for improvement of service deliverytocustomers.

The existing annual electricity production capacity of the Ethiopian Electric Utility(EEU)
is about 2178 MW and the number of customers is about 2.26 million. Even ifthe number
of customers has increased by more than 20% annually, Ethiopian ElectricUtility(EEU)
cannot meetthe needfor electricpower (EEPCo, 2011/12).

InElectricsector,eventhough,therearetangiblephysicalproductassociatedtoprovide service
such as customer premise equipment and cable, pole and meter,themajor product is
intangible in nature and the production and consumption of the finalproduct take place
simultaneously (Rajasekhara& Poultry 2010). The whole serviceprovision and
consumption process requires an end customer satisfaction
assessment,thequalityofserviceprovidedatservicecentresandcustomers‟satisfactionlevelon
the service they get at the service centre should get enough study attention.
interactionbetween the service providing company and the consumer. And the interaction
startsfrom the point customers approach to the company in order to get services for the
firsttime. Ethiopian electric Utility service centre acts as retail outlets to the company
andcustomers make their first contact to the company through service centres located
inalllocationsacrossthe country.

Majority of service quality and customer satisfaction studies conducted in

electricindustryfocusedontheservicequalityandcustomersatisfactionlevels.Studiesconducted
on Ethiopian electric Utility service quality and customer satisfaction
levelalsoaimedattheserviceperformanceofthecompanyandtherelatedcustomersatisfactionlev
el.

However,liketheserviceperformanceandcustomersatisfactionassessment,thequality of
service provided at service centres and customers‟ satisfaction level on theservicethey get
atthe servicecentreshould getenough study attention.

StatementoftheProblem
Ethiopian Electric Utility‟s points of sales (service centre) serve as a service outlet
forthecompanyandcustomersfirstcontactpointtogetrequiredservicesfrom thecompany. The
number of customers using points of sales increased significantly afterthe company
introduced prepaid and post paid electric service and different typesservices. Besides sales
activity, support of services and quick response of services areprovided at the service
centre in addition to other tasks. Service centres also serve asinformation centre to
customers in addition to the company‟s expanding call centreservice.
The interactions or encounters between sales representatives in point of sales
andcustomers are the major component of service quality and customer satisfaction.
AsDiane and Eduardo (2006) stated, while many factors are important in improvingservice
quality, customer perception of the quality of service is strongly influenced bythe social
interactions they experience with employees. The behaviours of
frontlineserviceemployeesarecriticaltocustomerevaluationoftheserviceencounter(Hartline,
Maxham& McKee, 2000). As Amy (2004) stated the contact employeeplays an important
role in the delivery of service quality as well as the formation
ofcustomersatisfaction.Inthiscasesalesrepresentativesandotheremployeesin
Ethiopian Electric Utility service centres have an important role in delivering
qualityserviceandguarantyingcustomer satisfaction.
Despite efforts undertaken by the company to improve the service quality of its
pointsofsales,therearestillcustomercomplaintsregardingthesalesskillofsalesrepresentatives,f
requentinterruptionofelectric,thewaycustomercomplaintishandled, design & comfort of
waiting areas and the inconvenient location of point ofsales.(Ethio-ResourceGroup (2009)
study)
This study is primarily observed by the fact that the empirical documentation in thearea of
customer satisfaction and service quality regarding the country‟s sole Electricservice
provider, EEU, is highly focused on the service performance and
customersatisfactionlevel.

This study mainly focuses on Ethiopian Electric Utility‟s service centre

performanceandlevel ofcustomers‟satisfactionwith the provided services

ResearchQuestions
Based on the identified research problem, the research questions are formulated
asfollowsand the studytryto provideanswers for thefollowing major questions:

What is the level of service quality in Ethiopian Electric Utility points

ofsales?

Whatis thelevelofcustomersatisfaction inEthiopianElectricUtilitypointofsales?

Istherearelationshipbetweenservicequalitydimensionsandcustomersatisfa
ctioninEthiopianElectric Utility points of sales?
ObjectiveoftheStudy

Themainobjectiveofthisstudyistoinvestigatetheeffectofservicequalitydimensionsoncustome
r satisfactioninEthiopianElectricUtilityservice centres.
Specificobjectivesof thisstudyare:

To assess the quality of service provided in Ethiopian Electric Utility point

ofsales(service centre).

To assess the overall customer satisfaction level with the services provided
inEthiopianElectric Utilitypoint of sales(servicecentre).

To investigate if there is a relationship between service quality dimensions

andcustomersatisfactioninpoints of salesservices(service centre) .
 DefinitionofTerms
Table1.1 Definition ofterms

Term Definition

CustomerS Satisfaction is the consumer‟s fulfilment response. It is a

atisfaction judgmentthat a product or service feature, or the product of service
itself,provided (or is providing) a pleasurable level of consumption-
relatedfulfilment, including levels of under- or over-fulfilment.
(Oliver,1997).
ServiceQuality Service quality is the discrepancy betweenconsumers‟perceptions of
servicesofferedbyaparticularfirmandtheirexpectationsaboutfirmsofferi
ngsuch services. (Parasuraman, 1985)
Servicecentre A service centre is an instance of face-to-face interaction between
aserverwho is„officiallyposted‟in some servicearea,
thatinteractingbeing oriented to the satisfaction of the customer‟s
presumed
desireforsomeserviceandtheserver‟sobligationtoprovidethatservice
(Merritt,1977).
Pointof sales Pointofsales(servicecentre )is aplace wheresales (services)are
(servicecentre) given.
SERVPERF SERVPERFisaservicequality modelwhichmeasuresservicequality
byusing theperceptionsofcustomers.
Tangibility EEU service centreoverall appearance, employees‟
appearance,completenessandmodernityoffacilities&equipmentsint
he shop
Reliability Abilityof theEEUservice centreand its salesrepresentatives and
otheremployeestoperformthepromisedserviceaccuratelyanddepe
ndably
Responsiveness Thewillingnessof salesrepresentativesand otheremployees inthe
EEUservicecentreto provideprompt serviceandhelp customers.
Assurance The knowledge and courtesy of sales representatives and
otheremployeesin theEEUservicecentre andtheirabilitytoconveytrust
andconfidenceoncustomers
Empathy Theability of the EEUservicecentreandits salesrepresentatives and
otheremployeestoprovideacarryingandindividualizedattentiontocusto
mersand understand customers need

ScopeoftheStudy
The purpose of this study is limited to assess the level of customer satisfaction
andqualityofservicesprovidedinEthiopianelectricUtilitypointofsalesfromtheviewof
customers, who visited Ethiopian Electric Utility points of sales (service
centre)aroundAddis Ababa to get different services.
Geographically, the study is limited to Ethiopian Electric Utility customers who
usesthecompany‟spoints of sales(servicecentres)located in thecapitalcity,AddisAbaba
because it is very difficult to cover the whole country in terms of time andbudgetconstraint.
Itisalso limited toget enoughliteratureinthe areaofElectricity.
When compared to the long aged electric service history of Ethiopian electric
Utility(PreviouslyEthiopianElectricCorporation),morenumberofstudiesshouldhavebeen
conducted up to now in relation to service quality and customer satisfaction withthe
Electricservices.

SignificanceoftheStudy

The study findings will be relevant input to the management of Ethiopian ElectricUtility in
identifying the existing strength or weakness of service quality delivery andlevel of customers
satisfaction experienced by customers during their visit to thecompany‟s points ofsales(service
centre).

In addition to the above, this study contributes to existing theories by confirming oradding
value to the relationships that are involved in customer satisfaction,
servicequalityandSERVQUALdimensions.Itprovidesresultsthatcouldbeusefultomanagers in
business organizations for strategic planning. Additionally it will help asreferencefor
Researchers whowant to studyon customer satisfaction.

OrganizationoftheStudy

The introduction part of the study is chapter one. Back ground information,
problemstatement,researchquestions,objectiveofthestudy,operationaldefinitions,significanceand
delimitation ofthe study are discussedin this chapter.
In the next chapter, chapter two, existing literatures related to service quality andcustomer
satisfaction is assessed. EEU‟s brief background information with existingstudies related to
service quality and customer satisfaction which focused on
thecompanyispresentedandtheoreticalframeworkontherelationshipbetweencustomersatisfaction
and service quality developed.
The third chapter explains the methodology of the research. The research design
andresearchmethodsexplainedinthis chapterstartingfrom how thedatacollectioninstrumentis
prepared to howthe collected data is analyzed.
The following chapter, chapter four, discusses the empirical findings and analysis ofthe study
with interpretations. And the last chapter, chapter five, present conclusionbasedon
theanalysisresult andrecommendations provided bythe researcher.

1. Introduction
Background ofStudy
12
As Gant (1979) pointed out, the principal reason for the emergence of the public enterprise
sector in a country is the government’s decision to intervene directly and actively in the economy in
order to achieve the objective of its development plan. Most frequently, decision on the creation of
public enterprises is based on the analysis and findings that show the institutional needs for
development, which the government believes the private sector, will not meet, at least by itself. In other
words, the rationale for setting up public enterprises is that they are better instruments for
promoting developmentalgoals.
Some countries, notably socialist countries, visualize a new role of the state as an agent for change, for
social transformation and economic development. Hence, they believed that the economic functions of
production and distribution should substantially be managed in the public sector. In contrast, other
countries prefer to remain away from engaging, or are reluctant to engage, in any direct economic
activity unless they are compelled to do so by some temporary weaknesses or shortcomings envisaged
in the private sector, (Mathur, 1999:8). The justifications for state intervention in industrial and
commercial activities and the use of public enterprises as a model of planned development strategy
could be summarized asfollows:
I. The inability or unwillingness of the private enterprise to be involved in the production of
certain goods and services that are not rewarding in view of financial profitability, but
whichareconsideredsociallydesirableinviewofthestate.
II. Strong need of the government to intervene in those sectors that have decisive influence on
the structure of the economy and are considered to be basic and strategic to national
development. In view of the fact that there is a need to guide economic development in the light
of national priorities, the private sector alone should not be allowed to venture in sectors that are
found to be crucial tooverall development.
III. The pressure of international competition in the home or external market that would
inevitably yield negative consequences like closure of infant private industries,
monopolistic trends by big companies and the resultant prices escalation uponconsumers.

Generally speaking, therefore, public enterprises exist primarily to represent the government’s
interventionist objectives in the economy because of the aforementioned reasons. They exist as
distinctive institutions with the management capacity to conduct business activities effectively and
efficiently.

13
The survival of any business organization depends on the satisfaction of its stakeholders. Customers
being the major and critical ones among those stakeholders, they are the sources of profits for a
profit making organizations and the primary reason for being in operation for any non- profit making
organizations. Thus, customers are considered as the backbone of any organization, (Robert-Phelps,
2003).

However, often organizations fail to know the importance of their customer. As a policy some
organizations give high value to their customers as valuable assets while doing their jobs. There is no
doubt, thus, organizations should have an optimal marketing strategy which helps them to serve and
maintain existing and new customers.

In any organization, especially in service rendering firms, the key component of their function is
providing quality services to their customers. Today’s top level service providers are people
oriented by using their employees and customers. Customer satisfaction happens when a company
focuses on quality services. Customer satisfaction produces real rewards for the company in the
form of customer loyalty and corporate image, while lack of customer satisfaction produces real
liabilities that business can ill afford to ignore. Customers go back to business again and again
because they know its quality; they are also aware that they depend on the people there, and they
will get consistent service, which indicates they are satisfied with the activities of the
organization, (Denton, 1998, p.8 andp.14-15).

The issue of service quality is becoming a global concern that demands continuous reform to fit the
turbulent environment and changing customer needs. Public sector in most in our country lack
appropriate customer service policies, the institutional capacity and resources to cope with customer
servicechallenges.

Customers, subsequently judge service quality as the extent to which perceived service quality
matches with the initial expectation. There are three levels of expectations that can be defined as
service quality. The first one is the desired level of service, which reflects what the customer
wants. The second one is adequate service level, that is, the standard customers are willing to
accept. The third one is the predicted service level, which means the expectation that customers
believe to actually occur mostlikely, (Palmer, 1995 p. 155).

Furthermore, the quality level that is needed by customers to be satisfied has to do with every
aspect of services providers starting from the time customers arrive at the gets of the organizations.
One of therequiredqualitiesis,knowingtheconditionsunderwhichcustomersare.Oncetheyarein:
  the customers may be in line
 they may be in certain office waiting for concernedofficial
 still others may be annoyed for one or the otherreasons.

These efforts could identify customers’ problems and give solutions to them. Customers’ satisfaction
depends on the extent to which customer’s expectations about the product or services are fulfilled.
Customers’ expectations are not static, but keep changing.
Therefore, organizations need to monitor customers’ expectations on a continuous basis and to be
innovative in order to respond meaningfully to changes about the customers’ expectation, (Kotler,
1989:203).

In the past few decades, there has been a growing emphasis on the need for public
organizations to see the public (citizens) as customers and the trend in public sector management is
changing that customers increasingly used to describe the users of service delivered by government
bodies although it is traditionally associated with the private sector, (World Bank,1989).
These customers have rights and responsibility towards effective service delivery. In this regard, the
Ethiopian government has recognized the need for appropriate service delivery policy to encourage
public service organizations improve their services by applying various civil service reform
programs to attain user satisfaction. However, regardless of the service delivery reform being
introduced in the country, poor customer service delivery remains the feature of most public
enterprises. As far as Ethiopian Electric U t i l i t y (EEU) is concerned, the prevalence and impact of
poor service Qualityis explained by the organization management of EEU, (handbook, 2014; 44).

National overviews
Ethiopia is a country located in the horn of Africa. It has a land area of about 1.1 million
squarekilometers and an estimated population of 74 million. Over 83 percent of the
country’spopulation has still been classified as rural [census, 2007]. The economy of the country has
been predominantly agricultural. This sector accounts for approximately 44 percent of thetotal GDP,
while the service and the industrial sector accounts for 45 and 11 percentrespectively.

Currently, the country is following an agricultural lead industrialization strategy, and is achieving
encouraging results. The economy has been growing at a rate of more than 10 percent for the last six
yearsconsecutivelyandalargenumberofdevelopmentprojectsareunderway.
The National energy policy of the country emphasizes the need for equitable
development of the energy sector in parallel with other social and economic
developments. Specific policylinesincludetheattainmentofself-
sufficiencythroughthedevelopmentofindigenousresources
 with minimum environmental impact and equitable distribution of electricity in all regions. The policy
envisages the development of hydro, geothermal, natural gas, coal, wind and solar energy resources
based on their techno- economic viability, social and environmentalacceptability.
The country is well endowed with hydro power potential. According to the current estimates, this
potential goes beyond 45,000 MW. The power sector by and large is operated by the Ethiopian
Electric Power (EEP) & Ethiopian Electric utility (EEU). It is responsible for the generation,
transmission, distribution and sales of electricitynationwide.

Establishment

Electric power was introduced to Ethiopia in the late 19th century, during the regime of Minilik. He
got constructed the first hydro power plant on Akaki river in the year 1912 in order to supply power
to the small factories that had been established in Addis Ababa. Consequently, the power supply that
had been limited to small factories and the place was extended to public places and major roads in
the vicinity of the place. In the year 1948, an organization that had been vested with the power to
administer the enemy property was evolved to an organization called Shewa Electric Power. The new
organization Shewa although with limited capacity, managed to increase the power supply not
only in Shewa, but also other administrative regions. In lights of its functions, its name was changed
to “Ethiopian Electric Light and Power” in the year 1955. Soon after, its establishment, the
supervision and management of the organization was vested in the Board of Director appointed by
government. After eight months of its’ establishment, the Ethiopian Electric Light and Power was
transformed to the “Ethiopian Electric Light and Power Authority” (charter of the Ethiopian
Electric Light and Power). The newly established authority was conferred with the powers and
duties of the previous one. In light of the socio economic development of the country, the authority
continued to increase the scope of its operation in order to accommodate new changes. After being
in operation for about 50 years in this manner, major changes in the objectives and structural
setup of the organization took place relative to the changes in the socio economic conditions
of the country. In this regard, one of the major changes in the economic sector was
transformation of the centralized command economy to the free market driven economy in the year
1987. In order to accommodate the new changes in the environment, the Ethiopian Electric Light
and Power Authority was transformed to the Ethiopian Electric Power Corporation by recognizing
its functions on the basis of the principles of commercialization anddecentralization.
Accordingly, the Ethiopian Electric power Corporation as public enterprise was established for
indefinite duration by regulation No 18/1997, under the Public Enterprise Act of 1992, (50 th Golden
jubilee, pp33-34).
 EEU’S Vision,
Mission and Goal
Vision
Energizing Ethiopia's sustainable growth and enabling it to be power hub of Africa.

Mission
To provide adequate and quality electricity generation, transmission, distribution and sales service,
through continuous improvement of utility management practices responsive to the socio-
economic developmentand environmental protection need of the public.

Goals
The Corporation has put six strategic corporate goals; each goal is accompanied by specific
objective.
Goal 1: To bring institutional change by implementing the capacity building program.

Goal 2: To increase the generation capacity to ensure adequate and reliable power supply by
implementing the generationprogram.

Goal 3: To have reliable transmission network to transmit the power produced from power
plants to consumer by implementing the power transmissionprogram.

Goal 4: To ensure quality and reliable power distribution to consumers by implementing the power
distribution program.

Goal 5: To increase the electricity supplycoverage and access by implementing the customer
service program and the Universal Electricity AccessProgram.

Goal 6: To enhance the financial capacity of the corporation by executing all scheduled projects
within specified budget and time.

EEU has defined its long term strategies so as to support the endeavors of the Federal Government of
Ethiopia in promoting social and economic progress in all parts of the country. These strategies are
generally focused on:

 fast development of the country’s hydropowerresources

 increasing the current low level electricity access within short period oftime
 expanding EEU’s market to neighboring countries and beyond that through active
participation in regional and bilateral power tradeinitiatives.
 intensifying electric usage within already electrifiedtowns

 improving EEU’s service delivery capabilities through implementingreforms.

EEU & EEP currently operates two power supply systems, namely the main Inter-Connected System
(ICS) and the Self-Contained System (SCS). The main ICS, which serves the major towns and
industrial centers, has a total installed capacity of 1559.3 MW. This installed capacity is contributed
by hydropower installations having a total installed capacity of 1390.6 MW and thermal stations of
about 168.7 MW. The thermal stations are stand-by Diesel stations at different places in the country
(22.2 MW), in Kaliti (11.2 MW), in Awash Town (28 MW), in Dire Dawa (40 MW), in Adama (30
MW) and (30 MW) in Bishefetu, which are required to mitigate the power shortage during dry periods
when the generations from hydro plants is at its minimum. The Aluto-Langano geothermal
station has an installed capacity of 7.3 MW, which is, at present, non- operational due to low
pressure of the thermalfuels.

The SCS supplies isolated load centers, which are far from the ICS, mostly using Diesel as a source of
generation. Currently, this system has an aggregate installed capacity of about 20.01 MW, of which
13.86 MW are being generated from Diesel stations. The rest 6.15 MW are being generated from
small hydro power plants located at Sor, Yadot and Dembi.

EEU currently provides electricity to a total of about 1,830,052 customers in approximately

3367 towns and villages in Ethiopia, which is only a small proportion of the country from the total of
about 75.8 million inhabitants. According to current figures only about 32 percent of the population is
estimated to have access to electricity and the per capita energy consumption is 43.53 kWh, which
is one of the lowest in the world. Out of the total number of customers 95 percent are within the
ICS, while the remaining 5 percent are within the SCS. On the other hand around 10224 male and
2068 female employees are working in the Corporation [EEU,2014]
After having undergone structural changes, the centralized Addis Ababa Region which has formerly
responsible for power distribution for the capital is now divided into four regions namely: East, West,
South and North Addis Ababa regions. The Southern Addis Ababa Region has the greatest number of
customers than other regions. Presently, this region is expanding widely and rapidly, adding more and
more customers. The Southern Addis Ababa has eight customer service centers within its tertiary.
Each service center distributes power, collects bill from electricity sales, maintains power
breakdowns, relocates activities, improves power capacity of meter and connects new customers
within itsterritory.

From the above mentioned customer service centers, service center number 8 (Akakikality) has the
highest number of customers and rapidly expanding area within the region than the others. In
addition to this, service center 8 was selected for Business Process Reengineering (BPR) pilot
testproject
 in August 1999 E.C which indicates that employees who are selected from different areas and
well trained personnel were more aware about customer handling procedure than others who
implement BPR since April 2001 E.C. For the above stated reasons this customer service center is
selected for thestudy.

Statement of theproblem

Many authors agree that service quality leads to customer satisfaction. Although; high quality doesn’t
always results in high customer satisfaction, quality judgment is just one of the many aspects of
determining customer satisfaction about services. Chase and Bowen cited by Tjosvold, D. (1993)
identified some major determinants of service quality which are mentioned in the following
paragraph. preparing to serve customers, coordination between back and front offices,
reliability and consistency of service, effective use of technology, appropriate degree of
standardization in serving customers, appeal and functionality of facilities, logic and
consistency of business hours, handling of non routine demands and emergencies, provision of
customer privacy, rationality and fairness of customer queuing, availability of materials, orientation
of new customers, collection and use of customer feedback, and selection and trainingemployees.

Using these service dimensions, any organization can use to rate themselves. Roberts-Phelps.G (2003)
identifies two customer service satisfaction models. The first model shows that the only time that
customers contact an organization is when they have a problem with something they have
purchased. The second element of any customer service satisfaction model is that each and every
single customer has to feel in some way “special”. Here the user (customer) determines quality
service with his perception ofsatisfaction.
Nowadays, public sectors play a major role as service rendering firms. One of the major factors that
play vital role in the day to day activity of the people is electric power service. Unless this
sector is organized and managed in proper way in order to give quality service effectively, it
has its own negative impact on future success of the corporation, living condition of the people,
as well as the development of the nation. Service quality has to be looked from organization’s
decentralization philosophy. Sometimes customers are dissatisfied, if the service person dealing with
customer lacks discretion to facilitate the service delivery. Locations of service centers are also
important in providing efficient service to customers. The further the service centers from
customers, the more is customer dissatisfaction that arise from inconvenient time and place.
EEU has outlined a strategic plan to correct weaknesses and incompetence faced in its system in
delivering reliable abundant and quality power supply. Among various areas of its strategic plans that
are to be attempted with in short, medium and long term customer service reform has been apriority.
EEU strategic plan leads to operational plan of the customer service center. Implementation of this
plan requires performance measurements to enable decision makers evaluate whether those
actions are predetermined objectives or not. Thus, performance management is a strategic and
integrated approach to focus on how each employee can contribute to the overall success by the
corporation.
From management perspective, how the service is delivered efficiently and effectively, and
whether the organization systematically improves its quality system with a view to determining the
objectives (the desired quality level) that can beachieved and will be assessed.
EEU as a service provider faces various problems especially with rendering quality service bya
well designed delivery system for its customers that favor customer’s satisfaction. Hence, the
researcher tries to study issues related to the followingresearch questions:
ResearchQuestions

1. What is quality of service delivery in theCorporation?

2. What is the impact of the current service delivery system on customersatisfaction?
3. What is the standard (benchmark) of service quality in the Corporation that guides the
quality of service delivery processeffectively?
4. What are the main challenges facing to EEU regarding service quality and customersatisfaction?
5. What suggestions can be made to improve the currentsituation?

Objective ofstudy
The main purpose of this study is to assess quality of service delivery and customer satisfaction of
EEU. In addition to the main objective, the studytries to meet the following specific objectives:
 To assess management’ performance to increase service quality on continuousbasis,
 To assess whether the current service provided by the Corporation satisfies customers ornot.
 To assess the overall quality of service rendered byEEU
 To assess the main challenges facingEEU.
 To propose possible solutions that may help the Corporation in improving its quality service
delivery that will enable to achieve customersatisfaction.
 Definition ofTerms

Commercial Customers: are customers who consume power supply for commercial purpose and
their power consumption varies according to their needs requirements

Domestic Customers: are customers who consume the power supply for domestic purpose (for
house lighting only)

Industry Customers: are customers who use power for industry purpose

Prepaid meter: is a kind of new style meter which adopt micro-electronics techniques and it
manage electricity fee by computer, which use smart card as media purchased electricity. In the
same time the electronic watt-hour meter realize using electric power after prepaying in advanced.

Postpaid meter: is a normal devise in which EEU installs at customers’ house in order to measure
how much energy they consumed in hourly basis
Transformer: is an electrical device by means of which high voltage electrical power is converted
into low voltage suitable for consumers

Significance of theStudy
Nowadays public enterprises change their traditional attitude and see customers as a key
component for their survival. Customer satisfaction plays significant role in the achievement
of organizational objectives. Preliminary analysis of customers’ needs help the organization in
designing strategic planning. The study having analyzed the theoretical perspectives, and after
processing the feedbacks from the various categories, will devise ways to improve service quality and
increases customer satisfaction in the region. Moreover, the study is believed to have the following
importance:
 ItwillenablesEEUofficialsknowcustomersviewoftheirservicedeliveryquality
 EEU will get feedback about its customers’ satisfaction level and help to take the
necessaryactions
 It will help those interested in this area to have an insight on theoretical
understanding of the issue underdiscussion.
Scope ofStudy
The population of this study is Ethiopian Electric Utility Southern Addis Ababa Region Service
Centers, while the unit of analysis focuses on quality of service delivery and customer
satisfaction of SAAR c ustomer Service Center 8 (AkakiKality ) related to the service delivery and
customer satisfaction.
 Limitations of theStudy
Customers’ service delivery covers all aspects of an organization performance. However, due to budget
and time constraints this study is limited its scope to the assessment of customer service delivery and
customer satisfaction particularly by taking the Ethiopian Electric Utility (EEU) southern Addis Ababa
Region customer service center Eight. Furthermore, since the sample is only Addis Ababa
particularly Southern Region customer service center is not large enough to represent the entire
organization nationw ide. Therefore, the finding of this study should be considered as showing the
circumstance of customer service quality in EEU. Another study with a large sample size may be
required in the further to arrive at reliable conclusion about Ethiopian Electric Utility quality of customer
service deliverysystem.

Organization of thestudy
The research thesis has five chapters. The first chapter deals with research preliminaries including
background, statement of the problem, objectives, scope of study and outline of the paper. In the second
chapter, conceptual frame work of the study and review of related literature will be presented in a
detailed manner. In the third chapter, research design and methodology will be presented. In the fourth
chapter facts and figures obtained from both primary and secondary sources are presented,
discussed and analyzed. Based on the Forth chapter, conclusions and possible
recommendations will be made in the fifth c h a p t e r . The thesis also consists of other formal
sections like Bibliography, Appendices,etc

CHAPTER TWO

Literature Review
Total Quality Management(TQM)
To differentiate American quality management systems from Japanese quality management
systems and to integrate the theories and writings of the major American quality experts, theterm
total quality management (TQM) was coined. As cited by Lawrence (1993) TQM is a sort of
umbrella term, used to describe various American quality management systems operating in both
the public and private sectors.

In his literature, TQM has been defined as "the application of quantitative methods and human
resources to improve the material and services supplied to an organization, all the processes
within an organization, and the degree to which the needs of the customer are met now and in the
future"(Mossard, 1991,as cited in Lawrence, 1993). The reference to both quantitative methods
and human resources in this definition is reflective of TQM's attempt to integrate the analytical
perspective of scientific management with the human relation school’s focus on organizations,
groups, and employees (kronenberg&Loeffler, as cited in Lawrence, 1993).In other word,
Lawrence (1993) added that TQM is an attempt to blend the analytical and working smarter
aspects of scientific management with the organizational, group, and employees focus of the
human relation school.

Customer Defined Quality.

One of the areas of general agreement between the big four quality experts (Deming, Juran
Crosby and Fegenbaum) is that customers determine the relative importance of various quality
dimensions. For example, Fegenbaum, 1983 (as cited in Lawrence, 1993) states that quality
means products and services that "meet the expectation of customers." Crosby, 1983 (as cited in
Lawrence, 1993) define quality as "conformance to requirements." Since customers determine
what the requirements are, according to Crosby, this is just another way of saying that customers
define quality.Juran 1989 (as cited in Lawrence, 1993) states that quality is "fitness for use."As
the customer determines whether a product or service is fit for use, this again is simply another
way of saying that customers define quality.

Deming does not really define quality, but a definition can be inferred from his writings: the
reduction of variation. Since variation is the cause of quality problems, the less variation – the
higher the quality. Deming is unique in his view that quality is not defined solely by the
customer. He maintains this posture because he believes that customers do not know all the
various ways a product or service can be improved .Despite Deming's caveat, Lawrence stated in
his book TQM takes the position that quality is primarily, if not exclusively, defined by
customers. Richardson (1997) added that there is one fundamental principle of TQM; it is that
quality is what the customer defines it as, not what the organization defines it to be. According to
whitely (as cited in Richardson, 1997) the customer driven company moving from talk to action,
“companies that deliver what their customers want differ from others in diverse but
understandable ways. Perhaps most fundamentally, they provide high quality not according to
definitions they have developed on thereon but rather as the customer defines it."
 Quality Gurus (Experts of quality or coaches ofquality)
The four quality gurus opposes old concept of be reactive, designed to correct quality problems
after they occur. They support new concept of proactive, designed to build quality into the
product and process design.

Lawrence (1993) noted in his book to fully understand the TQM movement, we need to look at
the five notable Quality gurus who have shaped the evolution of TQM. Their philosophies
andteachings have contributed to our knowledge and understanding of quality today. According
to Richardson (1993) Philip B Crosby, Joseph M.Juran, and W.Edwards Deming are crusaders
for the Holy Grail of TQM. Lawrence (1993) called them as the patriarch of TQM.

W. Edwards Deming
According to Lawrence (1993) W. Edwards Deming is often referred to as the “father of quality
control.” He was a statistics professor at New York University in the 1940s. After World War II
he assisted many Japanese companies in improving quality. The Japanese regarded him so highly
that in 1951 they established the Deming Prize, an annual award given to firms that demonstrate
outstanding quality. It was almost 30 years later that American businesses began adopting
Deming’s philosophy. A number of elements of Deming’s philosophy depart from
traditionalnotions of quality. The first is the role management should play in a company’s quality
improvement effort. Historically, poor quality was blamed on workers on their lack of
productivity, laziness, or carelessness. However, Deming pointed out that only 15 percent of
quality problems are actually due to worker error. The remaining 85 percent are caused by
processes and systems, including poor management. Deming said that it is up to management to
correct system problems and create an environment that promotes quality and enables workers to
achieve their full potential. He believed that managers should drive out any fear employees have
of identifying quality problems, and that numerical quotas should be eliminated. Proper methods
should be taught, and detecting and eliminating poor quality should be everyone’s responsibility.
According to Richardson (1997) In Deming’s classic Out of Crisis ,he was exteremely critical of
management and stated that it is responsible for most quality problems.His famous fourteen
points and seven deadly diseases focus on management as being even more important than
statsticaltools.According to Lawrence (1993) Deming outlined his philosophy on quality in his
famous “14 Points.” These points are principles that help guide companies in achieving quality
 improvement. The principles are founded on the idea that upper management must develop a
commitment to quality and provide a system to support this commitment that involves all employ
ees and suppliers. Deming stressed that quality improvements cannot happen without
organizational change that comes from upper management.
Joseph M. Juran
According to Richardson (1997) After W. Edwards Deming, Dr.JosephJuran is considered to
have had the greatest impact on quality management. Juran originally worked in the quality
program at Western Electric. He became better known in 1951, after the publication of his book
Quality Control Handbook.In 1954 he went to Japan to work with manufacturers and teach
classes on quality. Though his philosophy is similar to Deming’s, there are some differences.
Whereas Deming stressed the need for an organizational “transformation,” Juran believes that
implementing quality initiatives should not require such a dramatic change and that quality
management should be embedded in the organization.

Richarson (1997) cited in his book ,Juran recognizes that specified requirements may be what
managements wants but adds the needs of customers. Quality is not just afunction of inspection
and control but a part of all mangement functions in an organization.

According to Lawrence (1993) One of Juran’s significant contributions is his focus on the
definition of quality and the cost of quality. Juran is credited with defining quality as fitness for
use rather than simply conformance to specifications. When Juran , defining quality as fitness for
use takes into account customer intentions for use of the product, instead of only focusing on
technical specifications. Richardson (1997) noted that Juran favors the concept of quality circles
because they improve communications between management and labour.
According to Lawrence (1993) Juran is well known for originating the idea of the quality trilogy:
quality planning, quality control, and quality improvement. The first part of the trilogy, quality
planning, is necessary so that companies identify their customers, product requirements, and
overriding business goals. Processes should be set up to ensure that the quality standards can be
met. The second part of the trilogy, quality control, stresses the regular use of statistical control
methods to ensure that quality standards are met and to identify variations from the standards.
The third part of the quality trilogy is quality improvement. According to Juran, quality
improvements should be continuous as well as breakthrough.
Armand V. Feigenbaum
Another quality leader according to Lawrence (1993) is Armand V. Feigenbaum, who introduced
the concept of total quality control. Feigenbaum took a total system approach to quality. He
promoted the idea of a work environment where quality developments are integrated throughout
the entire organization, where management and employees have a total commitment to improve
quality, and people learn from each other’s successes. From Feigenbaum we learn about the
"cost of Quality" and why it is cheaper in the long run to build quality in to products and services
than to correct errors later.

Phillip B. Crosby
According to Lawrence (1993) Crosby is concerned with the tools of TQM. Deming is
frequently described as the TQM philosopher; Crosby is often described as a TQMtechnician.
He developed the phrase “Do it right the first time” and the notion of zero defects, arguing that
no amount of defects should be considered acceptable. He scorned the idea that a small number
of defects are a normal part of the operating process because systems and workers are imperfect.
Instead, he stressed the idea of prevention.
To promote his concepts, Crosby wrote a book titled Quality Is Free, which was published in
1979. He became famous for coining the phrase “quality is free” and for pointing out the many
costs of quality, which include not only the costs of wasted labor, equipment time, scrap, rework,
and lost sales, but also organizational costs that are hard to quantify. Like Deming and Juran,
Crosby stressed the role of management in the quality improvement effort and the use of
statistical control tools in measuring and monitoring quality.

KaoruIshikawa
According to Richardson (1997) Dr. Ishikawa edited JUSE’S hand book, Quality control for
foremen, which is a guide for establishing and maintain quality circles or he was a proponent of
implementation of quality circles, which are small teams of employees that volunteer to, solves
quality problems.
Kaoru Ishikawa is best known for the development of quality tools called cause-and-effect
diagrams, also called fishbone or Ishikawa diagrams. These diagrams are used for quality
problem solving. He was the first quality guru to emphasize the importance of the “internal
customer,” the next person in the production process. He was also one of the first to stress the
importance of total company quality control, rather than just focusing on products and services.
 Dr. Ishikawa believed that everyone in the company needed to be united with a shared vision and
a common goal. He stressed that quality initiatives should be pursued at every level of the
organization and that all employees should be involved.

Common Ground among the Big Four TQMExperts

According to Lawrence (1993) Deming, Crosby, Juran, and Feigenbaum disagree with eachother
frequently with considerable vigor over exactly what TQM means as a philosophy of
management. Despite their areas of disagreement, however, several key areas of general
agreement do exist. These areas of common ground also provide useful insights into TQM as a
philosophy of management.
He also added that Six key elements of general agreement were identified that appear to be
central to an understanding of TQM as a philosophy of management. These six key elements (see
Table 2.1) are (a) quality as a primary organization goal, (b) quality being determined by an
organization's customers, (c) customer satisfaction being the fuel that drives organizations, (d)
the study and reduction of variation in processes, (e) change being continuous and accomplished
by teams and teams work, and (f) top management commitment to promoting a culture of
quality, employee empowerment, and a long- term perspective In addition contractor
involvement in TQM program in the organization is another major issue in TQMprogram.

Table 2.1 Key Elements of TQM as a philosophy of Management

1. Quality Is a primary organizational goal.
2. Customers Determine what quality is.
3. Customer Satisfaction Drives the organization.
4. Variation In processes must be understood and reduced.
5. Change Is continuous and is accomplished by teams and
teamwork.
6. Top management To promoting a culture of quality, employee
empowerment,
commitment
and a long- term perspective.
Source: Lawrence, 1993
Comparison of Traditional Management philosophy and TQMphilosophy
Lawrence (1993) pointed out in his book there is difference in traditional American management
philosophy and TQM in substance and style.

Table 2.2 compares principles derived from traditional American management philosophy with
TQM philosophical principles. Some of the major principles of traditional American
managementphilosophyare(a)profitandbottomlineconsiderationsastheprimarydriving forces, (b) a
preference for competition over cooperation, (c) the belief that change occurs in quantum’s , and
(d) a penchant for what the Japanese call "cowboy management" (Imai,1986 as cited in
Lawrence, 1993),or entrepreneurial champions who battle bureaucracies to bring about
innovations and change (peters & Waterman,1982 as cited in Lawrence 1993).Finally, the slogan
that may best characterize traditional American management philosophy is, "If it is not broke ,
don’t fix it."Underlying this slogan is the belief that when an organization is running smoothly,
managers and employees can simply sit back and rest on their laurels.
TABLE 2.2 comparison of Traditional American Management Principles with TQM
Management Principles
Traditional American Management Total Quality Management (TQM)
principles

1 The organization has multiple Competing Quality is the primary organizational goal.
goals.

2 Financial concerns drive the organization. Customer satisfaction drives the organization

3 Management and professionals determine what Customers Determine what quality is.
quality is.
4 The focus is on the status quo- "If it The focus is on continuous improvement-"unattended tend
Is not broke, don't fix it." to rundown."
5 Change is abrupt and is accomplished by Change is continuous and is accomplished by team work
champions battling the bureaucracy.

6 Employees and departments compete with each Employees and departments cooperate with each other.
other.
7 Decisions are based on "gut feelings." It is Decisions are based on data and analysis. It is better to do
better to dosomething than to donothing. nothing than to do the wrong thing.
8 Employee training is considered a luxury and a Employee training is considered essential and an
cost investment.

9 Organizational communication is primarily top- Organizational communication is Top-down, down up, and
down. sideways

10 Contractors are encouraged to compete with Long-term relationships are developed with contractors who
each Other on the basis of price. deliver quality products and services.

Adapted from Lawrence, 1993

The Philosophy of TQM
What characterizes TQM is the focus on identifying root causes of quality problems and
correcting them at the source, as opposed to inspecting the product after it has been made. Not
only does TQM encompass the entire organization, but it stresses that quality is customer driven.
TQM attempts to embed quality in every aspect of the organization. It is concerned with
technical aspects of quality as well as the involvement of people in quality, such as customers,
company employees, and suppliers. Here we look at the specific concepts that make up the
philosophy ofTQM.

 Customer Focus
The first, and overriding, feature of TQM is the company’s focus on its customers. Quality is
defined as meeting or exceeding customer expectations. The goal is to first identify and then
meet customer needs. TQM recognizes that a perfectly produced product has little value if it is
not what the customer wants. Therefore, we can say that quality is customer driven. However, it
is not always easy to determine what the customer wants, because tastes and preferences change.
Also, customer expectations often vary from one customer to the next. Lawrence (1993).The
customer who complain, have problems, or are not satisfied with a process .product or service is
the most important customers. These customers are helping point the way for continuous
improvement. Richardson(1997).

 Continuous Quality Improvement

According to Richardson, in step five of Deming points, management is obligated to continually
look for ways to improve quality. Another basic tenets of TQM as a philosophy of management
is the notion of continuous quality improvement through team work.

Traditional American management theory tends to view change as being radical in nature and
occurring in quantum leaps. Change comes about as a result of "breakthrough" created by the
application of new technologies (Carr &Littman, 1990 as cited in Lawrence 1993) or by
"champions" who engage the bureaucracy in individual combat to promote their ideas (Peters
&Waterman, 1982 as cited in Lawrence in 1993).Change in TQM is constant and, consequently,

tends to be incremental in nature. Change in TQM tends to be slow and plodding, but in the end
successful.

Traditionally, change for American managers involves large magnitudes, such as major
organizational restructuring. The Japanese, on the other hand, believe that the best and most
 lasting changes come from gradual improvements. To use an analogy, they believe that it is
better to take frequent small doses of medicine than to take one large dose. Continuous
improvement, called kaizen by the Japanese, and requires that the company continually strive to
be better through learning and problem solving. Because we can never achieve perfection, we
mustalwaysevaluateourperformanceandtakemeasurestoimproveit.AccordingtoBruceand
M. Suzanne Brocka it is easier, and more effective, to lift 50 pounds 10 times, than to move 500
pounds all at once .Continuous improvement is similar; small improvements done continuously
arrive at the same point as a major innovation. Unlike innovation, which can require great
resources, and no small amount of serendipity, continuous improvement is easier to manage and
utilizes every one talents. Japanese companies have used this idea for some time, and call this
approach Kaizen. This idea fits hand in hand with team building approaches such as quality
circles and brain storming, can be inexpensively managed. Richardson (1997) cited in his book
Deming recommended using a never ending, circular management process adapted from the
work of Shewart. This cyclic process, sometimes called the Deming wheel or cycle or chain
reaction. Now let’s look at the Deming cycle that can help companies with continuous
improvement: the plan – do – study – act (PDSA)cycle.

The Plan – Do – Study – Act Cycle

The plan – do – study – act (PDSA) cycle describes the activities a company needs to perform in
order to incorporate continuous improvement in its operation. This cycle, is also referred to as
theShewhart cycle or the Deming wheel. The circular nature of this cycle shows that continuous
improvement is a never-ending process. Let’s look at the specific steps in thecycle.

Plan: - The first step in the PDSA cycle is to plan. Managers must evaluate the current
process and make plans based on any problems they find. They need to document all
currentprocedures,collectdata,andidentifyproblems.Thisinformationshouldthenbe studied
and used to develop a plan for improvement as well as specific measures to evaluate
performance.
 Do: - The next step in the cycle is implementing the plan (do). During the implementation
process managers should document all changes made and collect data forevaluation.
 Study: - The third step is to study the data collected in the previous phase. The data are
evaluated to see whether the plan is achieving the goals established in the planphase.
 Act: - The last phase of the cycle is to act on the basis of the results of the first three
 phases. The best way to accomplish this is to communicate the results to other members
in the company and then implement the new procedure if it has been successful. Note that
this is a cycle; the next step is to plan again. After we have acted, we need to continue
evaluating the process, planning, and repeating the cycleagain.
According to Richardson (1997) some people have considered "continuous improvement “as
being equivalent to TQM. Others make distinctions between total continuous improvement
(TCI), continuous process improvement (CPI), and, TQM. This would imply that only TCI
would create an environment where everyone is continuously involved in the elimination of
waste and in reduction of variation, where as CPI might imply that quality gains are made by
improving each process.
He added that the objective of continuous improvement is to improve processes in order to ,in
turn ,continuously improve customer satisfaction .It also implies a continuous focus on finding or
measuring key quality factors and correcting (taking action to reduce ) sources of variability in
quality and management.

 Employee Empowerment
According to Richardson (1997) in the industrial society, bosses would do the work. Today; we
must accept the view that every person at every level of the organizations knows something that
can improve the way things get done. In empowerment authority is delegated so decision can be
quickly implemented .communication is essentially in participative management. Information
must be widely distributed for use by each worker. To be effective “managers must drive out
fear”. Most employees do not speak up because of fear of repercussions and mistrust of
management. In TQM, managers are still in charge, but they develop a genuine partnership with
the work force. Team based, worker empowered paradigm that heightens productivity by
viewing workers as a fertile sources of creativity, not extension of robotic machines. Brocka,
(1992).
If an organizational culture is to be transformed in to one based on the values and norms of
TQM, top management must also be committed to employee empowerment. Employee
empowerment can be thought of as any effort designed to move power, information, knowledge,
and rewards down ward in the organization (Business week, 1992, as cited in Lawrence, 1993).
The premise on which employee empowerment rests is a belief in the creative energies of the
people who really understand an organization's systems and majorprocesses.
Several of Deming's 14 points are designed to empower employees AS a general rules, Deming
recommends removing all barriers that rob employees of pride and ownership in their work. He
also specifically advocates a vigorous program of employee training and self-improvement. An
interesting caveat concerning employee training is that evaluation of TQM programs suggest that
employees must be provided with detailed training and instruction in how to do their jobs better
from a TQM perspective ,because most employees believe they are already doing the best job
possible (Koons,1991,as cited in Lawrence 1993).

 Process Management
The purpose of TQM is to optimize the value added steps and minimize the cost –added steps.
Richardson (1997).According to TQM a quality product comes from a quality process. This
means that quality should be built into the process. Quality at the source is the belief that it is far
better to uncover the source of quality problems and correct it than to discard defective items
after production. If the source of the problem is not corrected, the problem will continue. The old
concept focused on inspecting goods after they were produced or after a particular stage of
production. If an inspection revealed defects, the defective products were either discarded or sent
back for reworking. All this cost the company money, and these costs were passed on to the
customer. The new concept of quality focuses on identifying quality problems at the source or
the process and correcting them. Lawrence (1993).

 Team work
A team is two or more workers who serve as a unit often with little or no supervision, to carry
out organizational functions. In TQM, flexible work teams and information network within and
among organizations become the basic units of production. Major gains in quality and
productivity most often result from groups of people who pool their skills and knowledge to
tackle complex, chronic problems Richardson (1997).
He also noted that companies have organized around team-based organizations for two basic
reasons for two basic reasons: first to empowering teams allow employees to contribute more to
the business and to improve quality; secondly team work increases productivity
According to Richardson (1997) teams were allowed to determine for themselves how to
bestaccomplish the job. Teams were trained to perform production tasks from housekeeping and
minor tool repair to quality improvement.

 Managing Supplier Quality

TQM extends the concept of quality to a company’s suppliers. Traditionally, companies tended
to have numerous suppliers that engaged in competitive price bidding. When materials arrived,
an inspection was performed to check their quality. TQM views this practice as contributing to
poor quality and wasted time and cost. The philosophy of TQM extends the concept of quality to
suppliers and ensures that they engage in the same quality practices. If suppliers meet preset
quality standards, materials do not have to be inspected upon arrival Lawrence(1993).

 Understanding and ControllingVariation

According to Lawrence (1993) one of the key elements of TQM as a philosophy of management
is its focus on understanding and controlling variation. Variation can be defined as any deviation
from the standard.TQM is concerned with the study, comprehension, prediction, and control of
variation in systems and processes.

Variation is the natural enemy of quality. Quality suffers when too much variation is present in
the processes used to produce products and provide services. The point has been made several
times that reliability may well be the single most important quality dimension to customers.
Reliability means that the quality of products and services is consistently the same over time.

Variation in processes setup a causal chain that affects reliability which in turn affects quality.
The key to ensuring reliability and maintaining quality in any organization lies in controlling the
variation in processes Lawrence (1993).

In the language of TQM, variation is said to have two primary causes, common and special (Carr
&Littman, 1990, Gitlow et al., 1989, provost & Norman, 1990, as cited in Lawrence).common
causes of variation are small random sources that are always present in any process or system;
special causes of variation are non-random and are caused by sources outside the system or
process.
 Quality Awards and Standards
The Malcolm Baldridge AwardCriteria
Table 2.3 presents the Baldridge award criteria and scoring system. The criteria have widely
differing values. Each major category is assigned a score that serves to identify its relative
weight, or importance, compared to the other categories.
Four major categories dominate the Baldridge Award scoring system. In order of importance,
they are (a) customer focus and satisfaction, (b) quality and quality and operational results,
(c)human resource development and management, and (d) management of process quality. In
order to win the Baldridge Award, nominees must score well in each of these four categories.
Table 2.3 Baldridge Award Categories and Point values
No. Criteria Points
1 Leadership 100
2 Information and Analysis 70
3 Strategic Quality planning 60
4 Human Resource Development and Utilization 150
5 Management of Process Quality 140
6 Quality and Operational Results 180
7 Customer Focus and Satisfaction 300
Total point 1000

Source: Malcolm Baldrige National Quality Award-1992 Award Criteria (1992). Washington,
DC: U. S Department of Commerce and the National Institute of Standards and Technology.

Customer Focus in the TQM and ISO 9000Model

Quality has different but interrelated meanings such as fitness for use, conformity to
specifications and free of defects. However, it has been agreed that quality is simply meeting
customer needs and demands. Oakland (1996) emphasizes the concept of meeting customers’
requirements in his definition of quality. Total Quality Management is defined by Oakland
(1989) as being an approach to improve the effectiveness and flexibility of business participating
by all departments, employees and levels of the organization. Pfau (1989) agrees on the concept
of the participation of all levels and functions of the organization towards the
improvement of the quality of goods and services. However, there is no agreement on the
 elements that constitute TQM; it depends on the nature, culture and circumstances of
business. Nevertheless, it can be claimed that all TQM models such as the quality
management systems and the quality awards include customer focus as being a major
element of the models. ISO 9001: 2008 includes customer focus as an important pillar of
the quality system (Clause 5.2). Figure 2 shows that customer requirements are the
inputs and customer satisfaction is the output of the quality system. From that model we
may conclude that measuring customer satisfaction is a major requirement of ISO 9001.
In Clause 5.2 of ISO 9001:2008 (2008), it remands that top management has to be sure that
customer requirements are met for the aim of the improvement of customersatisfaction.
Figure 2: ISO 9001: 2008 Continual Improvement of the Quality Management
Source: ISO 9001: 2008 (2008) Quality Management Systems – Requirements, International Organization
for Standardization (ISO), Genève, Switzerland, Page VI.

Figure2. Demonstrates that the process approach model and the quality system start and
finishes with the customer. In the first instance there is the customer requirement on the left
hand side of the diagram, on the right hand side there is the degree of customer satisfaction
with the product or service that has been provided as a result of a number of inputs.
Customer satisfaction is measurable against the initial requirements and specifications.
Perhaps the most important feature of the model is the need to obtain information about
customer satisfaction, this feeds back into the monitoring and evaluation phase, which are
in turn is a measure of overall performance. The loop into management responsibility is
there to show that management has an important role to review customer feedback to
ensure that the appropriate policies, objectives and strategies are in place, along with the
necessary resources, to meet the quality challenges.

QualityImprovement
Quality improvement is another part of quality management that is focused on increasing
the ability to fulfill quality requirements (Clause 3.2.12 of ISO 9000:2005). It is not
concerned with correcting errors but concerned with doing things better to improve system
efficiency and effectiveness (bsigroup.com).
ISO offers the PDCA cycle as a useful tool for continual improvement. The methodology
applies to both high-level strategic processes and to simple operationalactivities.
 ISO 9001:2008 Quality Management Systems Requirements
A management system is simply the way an organization manages its processes, people
and other resources so that its products or services meet their objectives and customer
requirements. This standard specifies requirements of a QMS where the organization needs
to demonstrate its ability to provide products that fulfill customer needs and applicable
regulatory requirements and aims to enhance customer satisfaction through the effective
application of the system. Clauses 4 through 8 contain the required elements of the QMS.
The structure of ISO 9001:2008 is as follows. bsigroup.com (2013).

STRUCTURE OF ISO9001:2008
Clause 5 — Management
responsibility; Clause 6 — Resource
management; Clause 7 — Product
realization; and
Clause 8 — Measurement, analysis and improvement
Plan – management responsibility
Top level management must be committed to the development and involved in the
implementation of your quality management system. And this part of ISO 9001 provides
you with a powerful planning tool.
These individual requirements take managers through the following activity:
Customer focus
Find out what the customer’scurrent and future needs and expectations. This can be
achieved through feedback surveys or talking to some keycustomers.

Quality Policy
Use the information gathered from the customer to write a quality policy that is relevant
and applicable to your organization.
Objectives
Establish measurable objectives for the organization to help you achieve the aims of the
quality policy.
Plan the system
Allocate responsibilities and establish effective processes to achieve your objectives.
Review the system
Review the operation of your system at regular intervals and improve where necessary.
Ensure all appropriate resources areprovided.
P la n – resource management
The resource management part of the standard makes sure that you review and provide the
resources needed to implement and improve the system.
Resources are looked at in three ways: people, infrastructure and work
environment People
• Decide the competencies and skills needed within the organization.
• Then look at the people you have and identify gaps in existing competencies.
• Fill those gaps by providing training and coaching or encourage self-learning.
• Then go on to see how effective the actions taken have been in helping you achieve the
necessary competence for the business.
• Through this technique you always know whether the training you provide is actually
adding value to the organization and contributing to results.
Infrastructure
This involves the facilities and equipment you need to perform effectively. Start by
determining and providing what is needed and ensure that you review this regularly.
Work Environment
Here you look at the conditions under which work is performed and ensure that this is
appropriate for meeting customers’ requirements. Again, you will need to ensure that this is
reviewed regularly.

Do – Product or service realization

You now have the commitment and direction from management and the necessary
resources to do the job.
ISO 9001 goes on to give you a set of requirements for managing the work you do. Start
with planning and plan the journey from the point where the customer asks for something,
right through to delivery (and beyond if necessary).
Typically this involves defining the processes for:
• Sales
• Design and development
• Purchasing
• Production / operational / service activities
• Delivery
 Don’t worry if some of the topics here do not relate to you. Remember ISO 9001 is
designed to be used by all types of organizations. You simply concentrate on the areas
relevant to you.
Make sure at each stage that people understand their role and are competent to carry out
tasks in line with business policies and procedures.

Check and Act – measurement, analysis and improvement

Once you have delivered to your customers, don’t stop! Go on to find out whether they are
satisfied. Take other measurements of the system’s performance, analyses these and
identify the areas for improvement. Again, the standard provides you with a set of
requirements for achieving this using tried and tested techniques.
Customer satisfaction
This really involves the monitoring of customer perception. It does not mean that you have
to send questionnaires to your customers. There are many different ways of monitoring
perception. You can use methods relevant to your business.
Internal audit
Conduct reviews of your system to make sure that things are going to plan.
Monitoring and measurement of products and processes

Individual processes drive the system and it is important that they are operating effectively
and efficiently. Products should be also measured and monitored to ensure that you are
meeting the customer’s requirements.
Control of non-conforming products
If something goes wrong, procedures should be in place to ensure the problem is controlled
and dealt with appropriately.
Analysis of data
Using the standard effectively will produce data on how effective your systems are. Use the
data to find improvements.
Continual improvement
One of the key objectives of the standard is to make sure that your organization improves.
Using the results of the analysis will help you to determine where those improvements can
be made.

Service
A service is an act or performance offeredby one party to another. Although the process
may be tied to a physical product, the performance is essentially intangible and does not
normally result in ownership of any of the factors of production. Services are economic
activities that create value and provide benefits for customers at specific times and
places, as a result of bringing about a desired change in or on behalf of the recipient
of the service (Lovelock and Wright, 2002).Services are deeds, processes, and
performances (Zeithaml and Bitner, 2000). Services are described as objects of
transaction offered by firms and institutions that generally offer services or that consider
themselves service organizations (Steve and Kim, 1995).
Researchers studying service organizations point out that service possess certain
characteristics that set them distinctly apart from products (e.g. Murdick, Render,
&Russell, 1990).
According to Robin (1989) service has four characteristics. These are:
a) Intangibility:-services are intangible i.e. they do not have physical substance.
Consumers cannot touch, see, smell, or taste services before purchasing them. This poses
difficulties for the services marketer because target customers may be reluctant to buy what
they cannot physically examine.
b) Heterogeneity:-services are heterogeneous i.e. they are not standardized .The nature
of offering of any one seller may differ from one time period to another .Further, two or
more employees of one firm may provide service that are quite different from each other.
c) Inseparability:-marketers and services they provide are always inseparable that is they
are continually at the sample place at the same time. Service cannot exist unless the
marketer is present.
d) Perishability:-Service tends to have very short life spans. Tangible goods can be
produced and then placed in inventory, so that they are available when and where
customers want them. Service, however, cannot be stored.

According to Lawrence, 1993 analysis of these service characteristics might well lead one
to conclude that TQM is perhaps even more applicable to service organizations, than it is to
manufacturing organization. For example, TQM focuses on customers, but so do service
organization. For many human service organizations, customers are actually apart of the
service delivery process.TQM also focuses on variation and process control, but so do
service organizations, Because service organizations non standard out puts, quality control
is necessarily process control. In the human services, no two clients who complete a service
plan (an output) are ever likely to be exactly alike. Thus service organizations deal with
non standard out puts, thereby requiring that service quality control became essentially
process control. It is exactly these essential characteristics of service organization that
make them such good candidates for TQM programs.

ServiceQuality
Service quality is the ability of the organization to meet or exceed customer expectations.
Customer expectation may be defined as the “desires and wants of consumers” that is what
they feel a service provider should offer rather than would offer (Parasuraman, Zeithaml
and berry, 1988). Service quality has been defined as being the difference between
customer perceptions of quality and the delivery of the service to customers (Gronroos,
1984 and Parasuramanet al.1988).Oliver (1993) reports that service quality is a casual
antecedent of customer satisfaction, due to the fact that service quality is viewed at
transactional level and satisfaction is viewed to be anattitude.

Customer Expectations and Perceptions of Service

Customer Expectations
Customer expectations are pretrial beliefs a consumer has about the performance of a
service that are used as the standard or references against which service performance is
judge (Kenneth and David, 2003). Customer expectations may be described as the
desires or wants of the Consumer. The crux is that customer expectations are what the
customer expects from the organization and its range of product or services, that is what
customers feel the organization should offer them. These expectations are, in most
instances, different from what the customer gets in real life situations from the
organization. What is important here is to focus on the customer perceptions, rather than on
the reality of the performance (Brink and Berndt,2005).

2.2.2.2 Customer Perceptions

A consumer perception is defined as the process by which an individual selects, organizes,
and interprets stimuli in to a meaningful and coherent picture of the world. A stimulus is
any unit of input to any of the sense. Examples of stimuli (i.e., sensory input) include
products, packages, brand names, advertisements, and commercials (Leon and Leslie,
1997). Perceptions are defined in various ways; Strydom, Jooste and Cant (2000), define
customer perception as the process of receiving, organizing and assigning meaning to
information or stimuli detected by the customer’s five senses and opine that it gives
meaning to the world that surrounds the customer. Perceptions are also described as the
end result of a number of observations by the customer. Customers perceive services in
terms of quality of services provided and the satisfaction level attained.

CustomerSatisfaction
Customer satisfaction is the individuals’ perception of the performance of the product or
service in relation to his or her expectations (Leon and Leslie, 2007). Satisfaction is the
customers’ evaluation of a product or service in terms of whether that product or service
has met their needs and expectations. Failure to meet needs and expectations is assumed
to result in dissatisfaction with the product or service (Zeithaml and Bitner, 2000).
According to Kottler and Keller (2006), Customer satisfaction is a person’s feeling of
pleasure or disappointment resulting from comparing a product’s perceived performance
(or outcome) in relation to his or her expectations .If the performance falls short of
expectations, the customer is dissatisfied .If the performance matches the expectations,
the customer is satisfied. If the performance exceeds expectations, the customer is highly
satisfied or delighted.
Customer satisfaction is defined as an evaluation between what was received and
what was expected (Oliver, 1977, 1981; Olson and Dover, 1979). Parker and Mathew
(2001) treat customer satisfaction as having two approaches; process and outcome of a
consumption experience. Jones and Sasser (1995) consider achieving customer satisfaction
as being the main goal for service organizations. Moreover, increasing customer
satisfaction helps
organizationsgainingmarketshare,maximizingprofitsandreducingcosts(Heskettetal.,

1997; Reichheld, 1996). On that regard, William and Bertsch (1992) emphasize that
achievement of a strong customer satisfaction is related to understanding customer needs
and expectations. Additionally, Zeithaml (1988) finds out that customers who perceive
that they receive value for money are more satisfied than customers who do not perceive
they receive value for money.

The Relationship between service Quality and Customer

Satisfaction According to Brink & Berndt (2005), customers perceive services in
terms of the quality of service provided and the satisfaction level attained. These
 two concepts, service quality and customer satisfaction, are the focus of attention of
organizations because they want to measure them. The reason for the focus on
quality of service and customer satisfaction is the belief that organizations can
differentiate themselves by means of providing better service quality and overall
customer satisfaction.

The Benefits of Customer SatisfactionManagement

Although every successful organization wants to provide a service that satisfies
customers, this is not the only goal. Organizations can’t lose sight of other basic business
goals such as achieving a competitive advantage or making a profit. Customer satisfaction
provides many benefits for a firm, and higher levels of customer satisfaction lead to greater
customer loyalty. In the long run, it is more profitable to keep good customers than to
constantly attract and develop new customers to replace the ones who leave. Highly
satisfied customers spread positive word- of-mouth and, in effect, become a walking,
talking advertisement for a firm, which lowers the cost of attracting new customers
(Lovelock & Wright, 2002).
High levels of customer satisfaction are an insurance policy against something going
wrong. Long-term customers tend to be more forgiving in these situations, because an
occasional bad experience will be offset by previous positive ones, and satisfied customers
are less susceptible to competitors' offerings. It's no wonder that many companies place so
much emphasis on customer satisfaction, given its positive relationship to customer
retention, market share, and profits (Lovelock and Wright, 2002).

Customer SatisfactionMeasurement
Gauging the level of customer’s satisfaction and its determinants is critical for every
company. Marketers can use such data to retain customers, sell more products and
service, improving the quality and value of their offerings, and operate more effectively
and efficiently. Customer Satisfaction measurement includes qualitative and quantitative
measures, as well as a variety of contacts methods with the customers. Customer
satisfaction surveys measure how satisfied the customers are with relevant attributes of the
product or service, and relative importance of these attributes (using attribute scale)
.Generally, these survey use 5–point semantic differential scales ranging from “very
dissatisfied” to “very satisfied”. Research shows that customers who indicate they are very
satisfied (typically a score of 5 on the satisfaction scale) are much more profitable and
loyal than customers who indicate that they are satisfied (a score of 4).Therefore,
companies that merely strive to have “satisfied” customers are making a crucial error.
Some marketers maintain that customers’ satisfaction or dissatisfaction is a function of
difference between what they had expected to get from the product or service
purchased and their perceptions of what they received. A group of researchers developed
a scale that measures the performance of service received against two expectations
levels: adequate service and desired service. This approach is more sophisticated than
standard customer satisfaction surveys and more likely to yield results that can be
used to develop corrective measures for products and services that fail short of customers’
expectations ( Leon and lesile ,2007)

Expectation DisconfirmationModel
The Expectations Disconfirmation Model has been the dominant model in satisfaction
research. The model has consumers using pre-consumption expectations in a comparison
with post consumption experiences of a product/service to form an attitude of satisfaction
or dissatisfaction toward the product/service. In this model, expectations originate from
beliefs about the level of performance that a product/service will provide. This is the
predictive meaning of the expectations concept (Willard, 2000).
Everyone enters into a purchase with certain expectations above what the product or
servicewilldowhenitisused,andsatisfactionisthehoped-foroutcome.Satisfactionis

defined here as a post-consumption evaluation that a chosen alternative at least meets or

exceeds expectations. Richard Oliver spearheaded research on this subject with his
expectancy disconfirmation model. Briefly, this theory postulates that satisfaction or
dissatisfaction is the outcome of a comparison of pre-purchase expectations against actual
outcomes, and it has been consistently validated in empirical research (Kenneth and David,
2003). The expectation disconfirmation model is one the main models researchers use for
measuring satisfaction. In this model, customers compare their pre-consumption
experiences with post-consumption experiences of service or product. This model has been
the principal model in satisfaction research. In order to form attitude towards
satisfaction or dissatisfaction consumers compare their experiences of the
product/service. In Expectation Disconfirmation model, expectations come from beliefs
of consumers about the level of performance that a service willprovide.
Expectation is what consumers expect to receive from product or service which is usually
ideal situation for the consumer. However, satisfaction is defined as a customer’s
perception of a single service experience, whereas quality is the accumulation of the
satisfaction for many customers over many service experiences. Furthermore, service is
equal to the perception of a single service as received and measured against the
expected service received. The difference between the “perceptions” and “expectations”
of a customer result in a level of Satisfaction or dissatisfaction (Hill, 1992,).This differen
between “perceptions” and “expectations” essentially forms what is commonly referred to
as gapmodel. The gap model contains a minimum of two or sometimes three
key concepts Satisfaction and quality serviceare often treated together as
functions of a customer’sperceptions and expectations. The
gap model can be defined as a two component equation of Q= P–E. “Q” would be
“satisfaction” and “quality”; “P” stands for “perceptions” and finally “E” stands
for“expectations”.
Sometimes customers do not care about a service or do not have any expectations towards
a service or product. However, when perceptions (P) are equal to expectations (E), service
quality (Q) is satisfactory. If perceptions are lower than expectations, a customer’s rating
becomes negative and service quality becomes unsatisfactory (Cottle, 1990,). In order to
increase customer satisfaction you either raise customer perceptions, lower their
expectations,orboth.Sinceanexpectationisnothingmorethanananticipationofreceiving

something favorable or acceptable, it is essential for any service company to develop

realistic expectations among their customers. But “expectations and perceptions are
factors that are hard to control” (Davidow and Uttal, 1989).

Research Frame Work

Since the main objective of the study is the measurement of customer satisfaction on the
six dimensions of Electricity Service by the use of ISO 9001: 2008 Model .Thus the frame
work of this study is given below:
 Figure 3: Research Frame Work
Source: The researcher own generated

This chapter talks about the detailed theoretical concepts that the researchers believethey
provide a good back ground to carry out the research work. existing
literaturesrelatedtoservicequalityandcustomersatisfactionisassessed.EEU‟sbriefbackground
information with existing studies related to service quality and customersatisfaction which
focused on the company is presented and theoretical frame work ontherelationship between
customersatisfactionand service qualitydeveloped.

RelatedTheories
As a management philosophy, Theory of constraints (TOC),as described by
Hollye(2007),states that the use of the principles underlying the problem solving
paradigmleadtosignificantlyincreasedcustomerservicequalitywithrespecttoallfivedimension
sofcustomerservicequality.Byusingtheprinciplesunderlyingthisparadigm,problemsencounte
redasaresultofincorporatingnewtechnologyorproblems with the assessment of proposed
changes to the service system can beminimized or eliminated, leading to improved
customer service quality. The use of theprinciples underlying the logistics paradigm was
found to have a significant effect
oneachofthedimensionswiththeexceptionoftangibles.Underthelogisticsparadigm,a system‐
wide view must be taken. Having this broad perspective leads to
bettercustomerservicequality.Theprinciplesunderlyingtheglobalperformancemeasurementp
aradigmwerenot found toaffect customer servicequality.

Theothertheoryrelatedtoqualityserviceisgenerictheoryofservicequality.According to
Sengeet, al. (1993), the generic theory of service quality and capacityhas been elaborated
in a systems dynamic model. The service quality/capacity modelstimulates a service centre
where customers enter the system and after a waiting-time,are served by the centre‟s
employees. Service capacity i.e., service personnel, years
ofexperience,skillandmotivationisrequiredtoprovidethatservice;thedesiredamount of
capacity is determined by the desired level of quality, and the
desiredthroughputoftheservicecentre.Ifaparticularrequestisnotsatisfiedtothecustomer‟sstand
ard,itcomesbackintotheservicebacklogandhastobereprocessed as rework.
The other important theory in relation to the issue is disconfirmation theory, whichargues
that „satisfaction is related to the size and direction of the
disconfirmationexperiencethatoccursasaresultofcomparingserviceperformanceagainstexpec
tations‟. Ekinciet, al., (2004) clarify that it is a judgment that a product
orservicefeature,ortheproductorserviceitself,providedapleasurablelevelofconsumption-
relatedfulfilment, includinglevels ofunder-orover-fulfilment.

ConceptualReview

CustomerServiceandServiceConcept
According to Berkowitz et,al. (1994), service is defined as an intangible items that
anorganizationprovidestocustomers.Ontheotherhand,Stantonet,al.
(1991),statesthatmostproductofferingsareamixoftangiblegoodsandintangibleservices,locate
donaspectrumrangingfrompuregoodstopureservices.However,servicesare identifiable,
intangible activities that are the main object of a transaction designedto provide want –
satisfaction to customers. Others like Singh (2002) look service asany activity undertaken
for the express purpose of aiding customers. While this is arathervague statement, it
excludes many activities.

In this era of globalization, the concern for services should be seen at upper hand.Since
customers are the major focus of every business activity, organizations
mustexertmaximumefforttoenhancetheserviceprovision.Atthesametime,organizationsneedt
olooktheservicesettingstrategically.Ontheotherhand,customerserviceisthesetofactivitiesanor
ganizationusestowinandretaincustomers‟ satisfaction. It can be provided before, during, or
after the sale of theproduct or service and viewed strategically as it is the decisive factor
for long termsurvivalandprofitabilityof the firm.

Besterfieldet, al (2004) described elements of customer service as: (i) Organization

-identify each market sector, write down requirements, communicate
requirements,organizeprocesses,andorganizephysicalspace.(ii)Customercare –
meetcustomer‟sexpectations, get the customer‟s point of view, deliver what is promised,
make thecustomerfeelvalued,respondtoallcomplaints,over-
respondtothecustomer,provideacleanandcomfortablecustomerreceptionarea.
(iii)Communication–optimize the trade off between time and personal attention, minimize
the number ofcontactpoints,provide pleasant,knowledgeable,andenthusiasticemployees,
and
write documents in customer friendly language. (iv) Front-line people – hire peoplewho
like people, challenge them to develop better methods, give them the authority tosolve
problems, serve them as internal customers, be sure they are adequately trained,recognized
and rewarded for their performance. (v) Leadership–lead by example,listen to the front-line
people, strive for continuous process improvement. In order
tofulfiltheneedsandwantsofcustomers,gettinginformationabouttheseserviceelementsaresigni
ficant.

AttributesofService
Kumar‟s(2008)descriptionofservicesattributesiscomprehensiveanddescribedas:
Servicesaretypicallyintangible.

Theproductionandconsumptionofmanyservicesaresimultaneous.
Theservicemaynot be separablefromthe personor the seller.
Thecustomermaybeinvolvedintheserviceperformance.

The service process including staff at the customer interface becomes

integraltoservice quality.

Variability exists in services depending upon inputs and resources; quality

canbeaffectedandresultedinlackofstandardizationsotheuseofqualityindicatorsan
d standardsin theconventional sense is difficult.

Manypurchasescannotbestoredtomeetfluctuationsindemand.

ServiceQuality
Qualityiscriticaltocorporatesuccessasitplaysavitalroleinimprovingorganizationalproductivit
y

Jan Van (2009) defined quality as „the totality of inherent characteristics of a

productorservicethatbearonitsabilitytoincreasethedemandforthatproductorserviceata fixed
price‟ and can best be measured by capturing customer perceptions of theperformance of
those characteristics. Service quality is an outgrowth of the
totalqualitymanagement(TQM)movementofthe1980sandsuffersfromthatmovement‟s focus
on the provider rather than the value derived by customers
(Klauset,al.,2012).Whencomparedtoproductquality,servicequalityisdifficulttomeasure,defin
e,controlandcommunicate(Stanton,1991).Healsoaddedthatassumingsimilartimesandlocatio
ns,qualityofserviceistheonlyfactorthat
differentiatesthedifferentofferings.Inviewofmeetingcustomerrequirements,Oakland (2009)
states that it has wide implications and may include availability,delivery, reliability,
maintainability, and cost effectiveness, are among many otherfeatures.

Customer service and delivering quality service is the major issue determining
thecompetitive edge of organizations. Lack of or failure to meet quality will lead
anorganization to lose all or some of its customers. A great emphasis is needed for aservice
to retain all its qualities that customers need. Quality in a service business hasbecome a
measure of the extent to which the service provided meets the customer‟sexpectations. In
the modern highly competitive business world, the key to sustainablecompetitive
advantage lies in delivering high quality service that will intern, lead tosatisfied customers.
Customer satisfaction is considered a pre requisite of customerretention and loyalty, and
can help to boost profitability, market share and return oninvestment

AccordingtoGronroos(1994)citedinAnglovaet,al.(2011)therearethreedimensions of service
quality stated as: 1. Technical Quality, which involves what
thecustomerisreceivingfromtheservicedelivery.Thiscanbemeasuredbytheconsumer in a
rather objective manner. 2. Functional Quality, which involves themanner in which the
service is delivered. This concerns the psychological interactionbetween the buyer and the
seller perceived in a very subjective way, and wouldinclude elements such as: Attitudes
and behaviour of employees; Approachability ofservice personnel; Accessibility of service;
Appearance and personality of
personnel;Relationshipbetweenemployees,andInterrelationshipsbetweenemployeesandcust
omers.
3. Corporate Image dimension of quality is the result how consumers perceive thefirm, and
it is expected to be built up mainly by the technical and functional quality ofitsservices,and
will eventually affectservice perceptions.

CustomerSatisfaction
Severalresearchersemphasizedtheimportanceofcustomerserviceasakeyfororganizational
success. Arshiet, al. (2013) propound that the most productive
outputofanorganizationisproductionofcustomersatisfaction.Therealvalueliesindeliveringcus
tomersatisfactionwhichprecedescustomerretentionandprofits.
Although most organizations understand the importance of this stakeholder, few areable to
commit themselves to achieving customer satisfaction. For them
customerserviceisanattitude and not a department or competency.

A customer-led company recognizes that its only true assets are satisfied
customers.Without satisfied customers the balance sheet‟s assets are merely scrap. The
notion ofcustomers as assets is not a philosophical point, but a hard, economic one.
Companiescanactuallymeasurethelifetimevalueofcustomersandestimatethepotentialrevenue
s they will generate. The results can be staggering and should open the eyes ofmanagement
to the profitimplications of beingcustomer led(Doyle,2002).

Organizations that understand what customers really want and provide a product
orservicetomeettheserequirementscangaincompetitiveadvantageandprofit.Generallyspeakin
g,iforganizationsimprovetheircommunicationwiththeircustomersandcommitthemselvestode
liveringcustomerserviceanddevelopnecessary competencies for it, they would be able to
deliver the desired level ofcustomersatisfactionand meet organizational goals.

ServiceQualityandCustomerSatisfaction
Issuesofservicequalityandcustomersatisfactionlieattheheartofservicesmarketingandmanage
ment.Bothareseenasdesirableoutputsofanyservicestrategy.

Baron et, al. (2003) also discuss that in measuring perceived service quality the levelof
comparison (that is, expectation) is what a consumer should expect, whereas inmeasures of
satisfaction the appropriate comparison is what a consumer would expect.On the other
hand, Parasuramanet,al. (1988) maintain that customer satisfaction isdistinct from service
quality. Satisfaction is thought to result from the comparisonbetween predicted service and
perceived service, whereas service quality refers to thecomparisonbetween desired
serviceand perceived service.

Customersatisfactionordissatisfactionistheoutcomeofprovidingvaluethatmeetsordoesn‟tmee
tthecustomer‟sneedinthatsituation.Servicequalitymustbemeasured as antecedent to both
customer value and satisfaction, measure the valueperceived by customers during usage,
and measure the satisfaction or dissatisfactionthatis therealized end state(Oakland,2006).
Saxena(2002)alsoaddedthatcustomersatisfactionisafunctionofcustomerexpectation from the
firm and the actual performance by the firm. Expectations
shapeacustomer‟sperceptionoftheproduct/firm‟sperformance.Thus,

Customersatisfaction=Actualperformancebythe firm -Customersexpectations

MethodsofMeasuringServiceQuality
Service companies spend substantial time and resources on measuring and
managingcustomer satisfaction, customer loyalty and service quality. They should identify
andregularlymeasurecriticalelementsofcustomerserviceagainstperformancestandards.
Differences between standards and performance should form the basis
formodifyingcustomerservice.Gilmore(2002)discussesthatMeasurementsneedtotakeaccount
ofdifferenttypesofconceptsandcustomers.Indeed,differentmeasurementcriteriaarerequiredfo
rdifferentconceptssuchasservicequality,customer satisfaction, customer perceptions,
expectations and loyalty. Assessment ofthese concepts will also entail the use of different
measuring scales, and scope ofopinions, attitudes and behaviour. The following are two of
the methods used tomeasureservice qualityin this study.

GapModel
By support of the concept, Kotler et, al (2009) dictate the five gaps
influencingservicequality as;
Gap1:Consumerexpectations–managementperceptions ofconsumerexpectations.

Gap 2: Management perceptions of consumer expectations–service

qualityspecificationsactually set.
Gap3:Servicequalityspecifications–actualservicedelivery.

Gap4:Actualservicedelivery –externalcommunicationabouttheservice.

Gap5:Gaps1-
4togethercontributetoconsumers‟expectationsandperceptionsofactualservice.

Servqual
Ascompetitionbecomesmoreintenseandenvironmentalfactorsbecomemorehostile, the
concern for service quality grows. If service quality is to become thecornerstone of
marketing strategy, the marketer must have the means to measure
it.AccordingtoRamasawamyet,al.(2002)theSERVIQUALmodelprovidesareliable
methodology for measuring customer satisfaction in a service situation. It seeks tomeasure
perceived service quality on the basis of five parameters. Kotler et,al.
(2006)alsoagreewiththeideaandsuggestthefollowingSERVQUALattributesinmeasuringperc
eived service quality.

Tangibles:theappearanceoffirm‟sphysicalfacilities,equipment,personnelandco
mmunication material.

Reliability:thefirm‟sabilitytoprovidetheservicedependablyandaccurately.

Responsiveness:thefirm‟swillingnesstohelpcustomersanditsabilitytoprovid
eprompt service.

Assurance:theemployees‟knowledge,competence,courtesyandabilitytoinspir
econfidence in customers.

Empathy:theindividualattentionthefirmprovidestoitscustomers,includingaccess,
communicationand caring.
Gilmore(2003)alsoaddedthatSERVQUALisbasedonmeasuringcustomersatisfaction in
terms of the relationship between expectations (E) and outcomes (O).
Iftheoutcome(O)matchesexpectations(E),thenthecustomerissatisfied.Ifexpectations (E)
exceed the outcome (O), then customer dissatisfaction is indicated. Ifthe outcome (O)
exceeds expectations (E), then customer „delight‟ may be the result.Other writers like
Mudieet,al. (2006) propound that awards and certification aregranted to companies who
meet certain criteria in respect of standards. Additionally,there are programs such as Total
Quality Management (TQM) which companies canadopt. In contrast to external monitoring
and the development of universal standards,SERVQUAL is a technique that purports to
measure the customer‟s view of quality atthelevel of a specificservice organization.

SERVPERFModel:

Cronin and Taylor (1992)investigated the conceptualization and measurement

ofservicequalityanditsrelationshipwithconsumersatisfactionandpurchaseintentions. The
SERVPERF model was carved out of SERVQUAL model, which
wasoriginallydevelopedbyParasuraman,ZeithamlandBerryin1985.Itmeasuresservicequality
by using the perceptions of customers.
Cronin and Taylor (1992) compared computed difference scores with perception
toconclude that perceptions only are better predictor of service quality and
thereforeexpectationsshould notbe includedas suggestedby SERVQUAL.

The SERVPERF scale is found to be superior not only as the efficient scale but alsomore
efficient in reducing the number of items to be measured by 50% (Hartline
&Ferrell1996;BabakusandBoller,1992;BoltonandDrew,1991citedinMesay2012).
According to Cronin and Taylor (1992), their performance based SERVPERFscale is a
better method of measuring service quality. They claim that this
scale‟sreliabilityrangesbetween0.884and0.964,dependingontheindustrytype,andexhibitsbot
h convergent and discriminate validity(Mesay 2012).

StudiesrelatedtoEEUservices’qualityandcustomersatisfaction

BackgroundofEthiopianElectricUtility
Electric Power was introduced to Ethiopian in the late 19th Century, during the regimeof
Minilik. The first generator was said given to Minilik around the Year 1898 to lightthe
palace.

However, the effort of the government to extend the power supply to the public
washindered by the Italian invasion of Ethiopia in the years 1936.During this
temporaryoccupation,theItaliancompanycalledConeilovertookthegenerationanddistribution
ofelectricpower.Thecompanyinstalledgeneratorsatdifferentplacesandextended the
powersupply tothe then major towns.

After the Italians were driven out from Ethiopia in the year 1941, an organizationcalled
Enemy property Administration was established and took over along withotheractivities
the generation and distributionofpower to the public.

Intheyear1948,anorganizationthathadbeenvestedwiththepowertoadministerthe enemy
property was evolved to an organization called ShewaElectric Power. Thenew
organization Shewa although with limited capacity, managed to increase thepower supply
not only in Shewa but also other administrative regions.In light of itsfunction, its name was
changed to "Ethiopian Electric light and Power" in the
year1955.Soonafteritsestablishment,thesupervisionandmanagementoftheorganizationwas
vestedinthe BoardofDirectors appointed bythe government.
After eight months of its establishment, the Ethiopian Electric light and Power
wastransformed to the " Ethiopian Electric Light and Power Authority” (Charter of
theEthiopian Electric Light and Power).The newly established Authority was
conferredwiththe powers and dutiesof the previous Ethiopian ElectricLight and Power.

In light of the socio economic development of the country the authority continued
toincrease the scope of its operation in order to accommodate new changes.After beingin
operation for about 50 years in this manner, major changes in the objective andstructural
set up of the organization took place relative to the changes in the socio-economic
condition of the country.In this regard, one of the major changes in theeconomic sector was
the transformation of the centralized command economy to thefreemarket driven economy
in the year 1987.

In order to accommodate the new changes in the environment, the Ethiopian

ElectriclightandPowerAuthoritywastransformedtotheEthiopianElectricPowerCorporationby
reorganizingitsfunctionsonthebasisoftheprinciplesofcommercializationand decentralization.

Accordingly,theEthiopianElectricPowerCorporationaspublicenterprisewasestablished for
indefinite duration by regulation No. 18/1997, and conferred with thepowersandduties of
theprevious Ethiopian Electric Light andPower Authority.

Currently,TheGovernmentofEthiopiahasplannedforrapiddevelopmentofEthiopia as part of
its Growth Transformation Program and has chosen the powersector as one of the focus
areas for improvement. In 2014, in order to improve
theoperationsandservicesoftheelectricitycompany,theEthiopianElectricPowerCorporation(E
EPCo)wassplitintotwoindependententities,EthiopianElectricPower (EEP) and Ethiopian
Electric Utility (EEU).The scope of work of EEP iscurrently the planning and construction
of new Power plants and transmission
whiletheoperationofelectricservicetocustomersisunderEEUscope.EventuallycompleteGener
ation and Transmissionscope willbe underEEP. Going forward,EEUwill beonly responsible
fordistributionofelectricity and customerservice.

EEU isleadbyBoardofDirectorsatthetopandnextCEOandseniormanagers
,middle managersfinally lower level managers. Currently EEU has 12575
employeesAspartofEthiopia‟slong-termgoaltobecomeamiddleincomecountryby2025,
increasedurbanizationandindustrialdevelopmentsaredrasticallyupliftingthedemand for
energy. Currently there is a demand of 5427 MW Requested Demand ofelectricitywaiting
for connection.

The Government of Ethiopia has planned for rapid development of Ethiopia as part ofits
Growth Transformation Program and has chosen the Utility sector as one of thefocusareas
for improvementofservice deliveryto customers.

Empirical Studies related to EEU services’ quality

andcustomersatisfaction
AnumberofstudiesrelatedtoservicequalityandcustomersatisfactionwithEthiopian electric
Utility and the previous Ethiopian Electric Corporation (EEPCo)serviceswere conductedby
different researchers.

An Assessment of Industrial Customers‟ Satisfaction at Ethiopian Electric

PowerCorporation: A Case of South Addis Ababa Region (TemamAfdel (MBA) 1,
MesfinLemma(PhD) 2 Vol.5 No. 2 December 2013

The study has the objective of assessing industrial customers‟ satisfaction on

servicequality using SERVQUAL model. It also addresses the problems of quality
gapsthrough the survey done at EEPCo, South Addis Ababa Region Industrial
customers.The study was conducted using a descriptive survey method where the
respondentswereindustrial customers and frontline managers.

The study shows performance of EEPCo in providing quality service to its

industrialcustomers is not in a situation to meet their expectations. In all dimensions of
theSERVQUAL;tangibles,reliability,responsiveness,empathy,andassurance,it‟sfoundthatth
ereisanegativegapbetweenserviceexpectationsandserviceperceptions.

Despite the fact that quality service provision and ensuring customer satisfaction is akey
issue for all categories of customers, looking the problems faced by industrialcustomers is
indispensable. As the important contributor of the revenue, they shouldbe given special
consideration. However, continuous power interruption, low level ofresponsiveness,unable
toperform thepromisedservicedependablyand
accuratelyandthelikeissuesaretheproblemsraisedbyindustrialcustomersofEthiopianElectricP
owerCorporation.Tothisend,itisimportanttoassessindustrialcustomers‟
satisfaction on service quality so that EEPCo knows the seriousness of the problemandgive
remedial solutions.

thestudyundertakenbyJapaneseEmbassyinEthiopia(2009)showsthatenhancement of the
energy sector is a must in order to maintain the economic growthandbecomeamiddle-
incomecountryin20-30yearsthroughindustrialization,considering the difficult macro-
economic situation. Since the Corporation‟s servicedelivery process to satisfy the needs of
its industrial customers will lay a foundationfor industrial led economy, strengthening the
energy supply and scaling up quality hasprominent role in bringing economic growth and
macro-economic stability. Excellentservice can be energizing because it requires the
building of an organizational culturein which people are challenged to perform to their
potential and are recognized andrewarded when they do (Berry et.al., 1994). In contrast to
this, several organizationsdo not give emphasis to excel such competence. This in turn will
lead to poor servicedelivery and less profit. Satisfaction is not an easy feeling since the
customers arealways in question to meet their limitless needs. Recently, Customer
satisfaction is thedaily issues of many people and institutions in Ethiopia. The reason is
that it is beingwidely used on the progress for economic, business and social activities.
Customersarethe main actors in these activities.

According to Ethio Resource Group (2009) study, Electricity is a critical

economicinfrastructure. If not delivered where and when needed, serious damage ensues
for theeconomy.Considerablepotentialoutputhasbeenlostduetopowercutsinthepastfew years.
Potential losses from power disruption will increase in the future as theeconomy grows and
the relative contributions of the industry and service sectorsincrease in the economy.
Power supply must increase as rapidly as demand to avoidsuch losses and to ensure
sustained growth. This is the rationale upon which thegovernmentis acceleratingits
investmentin expanding thepower system.
AccordingtoEthiopianElectricPowerCorporation(EEPCo)annualbulletinof2011/2012,
concerning quality of supply, the service quality in the electrified areas
isnotsatisfactory.Thisisduetopoordesign,lackofcareandnegligenceduringimplementation,
and lack of scheduled maintenance. This resulted in
inappropriateconductorsizeinthedistributionsystem,poorqualityofconstruction,lackofmainte
nance,transformeroverloading,phaseimbalance,extendedoutagetimesunder
faulty condition, high system losses and poor safety situation has also time and
again,affectedtechnicians aswell as the general public.
The existing annual electricity production capacity of the Ethiopian Electric PowerCorporation
(EEPCo) is about 2178 MW and the number of customers is about 2.26million. Even if the
number of customers has increased by more than 20% annually,Ethiopian Electric Power
Corporation (EEPCo) cannot meet the need for electricpower(EEPCo, 2011/12).

Conceptual fran work

Fig2.1Conceptualframeworkofthestudy(WangandShieh,2006)

The conceptual framework (Figure 2.1) elucidates the underlying process, which isapplied to
guide this study. As discussed above, the SERVQUALmodel
issuitableformeasuringservicequalityandcustomersatisfactionusingtheservicequalitydimensions.
Inordertoknowtheperceivedservicequality,customers‟serviceperception and expectation will be
measured using service quality dimensions. Andfinally,the perceived
servicequalityindicateslevelof customer satisfaction.

Thegeneralideafromthepastliteratureisthatthereisarelationshipbetweencustomers‟satisfactionan
dservicequality;alsothatservicequalitycouldbeevaluated with the use of five service quality
dimensions and the most useable is theSERVQUALscale.

Review of RelatedLiteratures
The review of literature of this thesis is organized under the following major headings: over view of
public sector management reform and new public management, definition of service, characteristics of
service, quality and customer service, measuring service quality, service quality management,
appropriate customer handling system for quality service, customer satisfaction and review of related
work.

ServiceConcept
Definition ofService
According to Murdick (1990; 4), “service can be defined as economic activities that produce time,
place, form, or psychological utilities”. Many service firms have become successful by identifying a
previously unrecognized or unsatisfied customer wants. Stanton stated (1994;537) “ services are
identifiable, intangible activities that are the main object of a transaction designed to provide want
satisfaction to customers”. Stanton also stated (1994;33) that the travel, hospitals, finance,
entertainment, health care communications, utilities and professional services fields are
prime examples. Recognizing the importance of marketing, many of these industries and
organizations within them are now adding marketing-related personnel. According to Kotler (1996;
659) “services are growing ever faster in the world economy, marketing up a quarter of the value of
all international trade”. A service is an act or performance that one partly can offer to another that is
essentially intangible and doesn’t result in the ownership of any thing. Its production may or may
not be tied to a physical product. (Kotler, 1998; 428)Ac
The Service Process
Some processes will be highly visible to the customers, such as check in while others may be at
least in part invisible to the customer such as computerized booking and reservations, cooking and
cleaning at the hotel. Some processes were process customers such as the transfer coaches; some
processes information such as reservations systems and some processes will process materials such as
catering services. A service process links together activities that are required to deliver a service
(product) which together in an appropriate sequence create the service. Some tasks and activities may
be located in the back office away from customers while other tasks or activities takes place in the
presence of the customer, either in the organization’s front office or in customer’s home for example.
Together these processes created the service experience and result isthe service outcomes.

Characteristics ofservices
According to Kottler (1996: p 660-663) service have four major characteristics.
A. Intangibility
The literature highlights intangibility as one of the key characteristics of services. Regan (1963)
introduced the idea of services being activities, benefits or satisfactions which are offered for sale,
or are provided in connection with the sale of goods. Services are intangible unlike physical
products, they cannot be seen, tasted, felt heard or smelled before theyare bought.

B. Inseparability
Services are typically produced and consumed simultaneously. This is not true of physical
goods that are manufactured, put into inventory, distributed through multiple resellers and
consumed still later. For instance, the cashier in the bank is an inseparable part of the service offering.
The client also participates to some extent in the service, and affects the out come of the service. Both
the producer and the client affect the service outcome.
C. Variability
Services are highly variable, since they depend on who provides them and when and where they are
provided. Service buyers are aware of this high variability and frequently talk to other before
selecting a service provider. Service firms can take the following several steps to help manage
service variability.
 The first step is providing employee incentives that emphasizequality.
 The second step is standardizing the services performance process throughout the
organization. This is helped by preparing a service blue print which depicts the
 services events and process in a flow chart, with the objective of recognizing
potential service failpoints.
 The third step is monitoring customer satisfaction through suggestion and
complaint systems, customer surveys and comparison shopping so that poor
service can be deducted andcorrected.

D. Perish ability
The fourth characteristic of services highlighted in the literature is perish ability. In general,
services cannot be stored and carried forward to a future time period. Services are item
-dependent and item- important which make them very perishable. Hartman and Lindgren claim that
the issue of perish ability is primarily the concern of the service producer and that the
consumer only becomesawareoftheissuewhenthereis
insufficientsupplyandtheyhavetowaitfortheservice.
 Classification ofservice
According to Palmer (1995:p42-51) service can be classified into the following ten points.
1. Marketable Vs UnmarketableService
The first classification distinguishes between services that are freely traded and those considered
by the social and economic environment of the time to be more appropriately distributed by non
market based machines. For the latter groups, many government services are provided for the
public benefit but no attempt is made to changeusers of the service.
2. Producers Vs ConsumersService
Consumer services are provided for individuals who use up the service for their own enjoyment or
benefit. On the other hand, producer services are those provided to a business in order that the
business can produce something else of economicbenefit.
3. Status of the Service in the productoffering
Service can be classified according to the role of the services in that total quality offering. Three
principal roles can beidentified:
 A pure service exists when there is little, if any, evidence of tangiblegoods
 A second group of services exist in order to add value to a tangibleproduct
 A third group of services may add value to a product more fundamentally by
making it available in the firstphase.

4. Tangible Vs Intangible Services

The level of tangibility present in a service offer derives from four principal sources.

 Tangiblegoodsthatareincludedintheserviceofferandconsumedbythecustomers
 The physical environment in which the service production/ consumption process takesplace
 Equipment used in the service productionprocess
 Tangible evidence of serviceperformance

5. Extent of CustomerInvolvement
Some service can be provided only with the complete involvement of customers whereas others
require them to do little more than initiate the service process.

6. Degree ofVariability
Two dimensions of variability can be used to classify service:
 The extent to which production standards vary from a norm, in terms both of
outcomes and of productionprocess
  The extent to which a service can be deliberately varied to meet the specific needs of
individualcustomer

7. Pattern of ServiceDelivery
Whether the service is supplied on continuous basis or supplied casually or within an ongoing
relation between buyer andseller.
8. Pattern ofDemand
Service can be classified according to the temporal pattern of demand they face very few services face
a constant pattern through time.

9. People Based Vs Equipment BasedServices

Some services involve labor-incentive production methods. At the other extreme there are services
which involve equipments.
10. Significance of the Service to the Purchaser
Some services are purchased frequently, are of low value, are consumed very rapidly by the recipient
andarelikelytobepurchasedonimpulsewithverylittlepre-purchasedactivity.
ServiceEncounter
Encounters between customers and employees are critical components of service quality. This is
especially true for services characterized by a high degree of person-to-person interaction and by the
absence of an exchange of tangible goods. The client comes away from service interaction with
feelings of satisfaction or frustration. For contact personnel, encounters may be gratifying
experiences or painful event. Service encounter is an interpersonal relationship between the firm’s
employees and customers, a moment of truth satisfying or dissatisfying the customer, the moment of
interaction between the firm and the customer interaction with the service business (Shostack,
1985, cited in Eugence,2002). Some service encounters are very brief and consists of just a few
discrete delivery steps. However, other may extend over a long time frame and involve multiple steps.
Therefore, the service encounter often begins with submitting applications requesting service
and placing an order. Contact may take personal exchange between customers and service employees
or impersonal interaction with machine orcomputer.
It is difficult to improve service quality and productivity without full understanding of customer’s
involvement in a given service environment. Speeding up and weeding out unnecessary steps to avoid
wasted time and effort are often important ways of a firm to improve perceiving value of its service.
This study defines the service encounter as the entire exchange between customer and service provider
from the initial contact through conclusion of theexchange.
The most difficult service encounter to specify and control is clearly that between two people, the
customer and a customer facing employee. Many of the influence on the success or otherwise
of the service encounter are directly related to the style of management and the extent to which the
service operation has a robustdeign.
Servicerecovery
Service providers are frequently exhorted to strive toward a ‘Zero defects’ service; the ability to “get
it right first time” is thought to offer significant benefits to organizations in terms of both customers
evaluations and costs of delivery ( CChaefer and Ennew,2005). In practice, it is often difficult to
imagine how inherent heterogeneity in service provision and limitations on the extent to which a
provider can control the range of different interactions with customers. If service failure cannot be
wholly eliminated, and then understanding the process of service recovery and the way in which
customers respond can be considerable value in managing organizationalperformance.

Service recovery involves what a service provider does in response to service failures. Lovelock and
Wirtz (2001) defined service recovery as an umbrella for systematic effort by a firm to correct a
problem following service failure and return customer good will. Zemke and Bell (1990) describe
service recovery as a process for organization after a service or product has failed to live up to
expectations.

In their discrepancy paradigm, Zenithal et al (1993) define service recovery as service employee’s
performance resulting from a customer’s perception of initial service delivery falling below the
customers’ perception. This argument is based on the premises that customer satisfaction ensures
customers’ loyally; repeat sales and positive word-of- mouth communication. Effective service
recovery, on the other hand leads enhanced perception of the quality of products and services already
bought, enhanced perception of the firms’ competence and favorable image in terms of perceived
quality and value (Blodgett 1997). The outcome of service recovery is defined as the tangible and
result delivered to an initially dissatisfied customer [i.e. what isdelivered].

The process of service recovery refers to the manner in which a service provider handless a service
problem during the course of service rectory (i.e. how it was delivered). The explanation above
suggested that the importance of firms of ensuring that of something goes wrong, then there is
mechanism in place to recordit.

Stages of Service RecoveryMaturity

According to Great Brook service recovery in an organization progresses through a series of stages.
Stage 1, Moribund -This stage is when there is no complaint handling mechanisms within the
organization. Angry customers are ignored and an organization totally declines in service recovery
practices.
Stage 2: Reactive – In this stage customer complaints are heard and a response is made. But it's a
disorganized process with no defined goals for the response and no one owning this business process.
Stage 3: Active Listening- At this stage, the response to issues voiced by customers is structured.
Specific people have the responsibility to respond to complaints and guidelines are in place
for the response. However, it is stillreactive.

Stage 4. Solicitous- The critical change from Stage 3 to 4 is the move from reactive to proactive
solicitation of customers with issues. The reason this is so important is that most customers don't
bother to complain. They just move on to other suppliersofproducts. The solicitous role
is accomplished by encouraging customer to voice their complaints. Event surveys (also known as
transactional or transaction-driven survey) are a commonly used technique to get issues voiced. The
survey design must be such that more than just high level measurement of customer satisfaction is
captured. The design must allow for action to be taken. The desire for anonymity complicates the
task. Stage 5: Infused- The pinnacle of service recovery practices is achieved when the complaint
identification merges with business process improvement programs to support root cause
identification and resolution. The owners of business processes that cause customer issues are
notified of the occurrences to prompt reexamination of the processdesign.

In essence, we see two levels of feedback loops. First, feedback from the customer to the organization;
Second, feedback from the customer-facing groups to its business partners within the organization.
While company culture is clearly critical to implementing this level of feedback management, certain
technologies can infuse this information sharing into businesspractice.

Outcomes of ServiceRecovery
The customer complaint behavior and service quality literature suggest that the outcomes of service
recovery are to improve customer satisfaction and improved service quality perception leading to
positive behavior intention such as repeat purchases and loyalty, to maintain the business relationship
with the customer. They also constitute the primary objective of service recovery but it is
important that maintaining customer loyalty should not be seen in isolation. It should be rooted in
the firm’s overall strategy of delivering superior service and creating customer value. From an
economic point of view, long term customer loyalty is very important. Loyalty and the resultant
repeat purchases, impact on the bottom line (Rechheld, 1993). The result of it all is market share
gains, improved revenue,
lowermarketingcosttoattracttonewcustomersanlowerservicedeliverycostpercustomer.
Core Elements of ServiceManagement
Service Strategy
Service Strategy provides advice and guidance on designing, developing and
implementing service management – both as an operational capability within an organization but also
howto
 use that capability as a strategic asset. It tries to ensure that consideration is given as to why a
particular activity is to be performed - before an organization begins to think about how it will be
performed.
Service Design
The Service Design stage of the lifecycle starts with a set of new or changed business
requirements and ends with the development of a solution designed to meet the documented
needs of the business. This developed solution, together with its Service Transition Pack, is then
passed to Service Transition to build, test and deploy the new or changed service and on completion of
these activities control is transferred to theService
Service Transition
The Service Transition stage of the lifecycle provides guidance on ensuring that the introduction,
deployment, transfers and decommissioning of new or changed services is consistently well managed.
Service Transition ensures that the transition processes are streamlined, effective and efficient so
that the risks relating to the service in transition are minimized. The Service Transition stage of the
lifecycle receives input from the Service Design stage and provides output to the Service Operation
and Continual Service Improvement stages of the service lifecycle Operationstage.
Service Operation
Service operation is responsible for all aspects of managing the day-to-day operation of services,
ensuring that processes and activities are operated (and continue to be operated) on a ‘business as
usual’ basis. Its key purpose is to coordinate and perform the processes and activities that support the
delivery ofthe services at the levels defined in the relevant Service Level Agreements. The scope of
Service Operation covers the services, the service management processes, the underpinning
technology used to deliver those services - and the people used to manage all of theseaspects.
Continual Service Improvement
The Continual Service Improvement is not a lifecycle stage, but a wrapper used throughout the
whole service lifecycle. It has inputs and outputs for all lifecycle stages. It focuses on the overall
health of Service Management within the organizationhttp://www.foxit.net/pages/solutions/
Quality of CustomerService
Quality is a measure of how closely a product confirms to customers needs, wants and expectation.
It is a degree to which a product conforms to customer expectation and specification. Customers
service quality expectation is formed by their past experience, word of mouth, service firm
advertising and personnel needs. They compare the perceived service with expected service. If the
perceived service fall below the expected service customers lose interest in the provider and if the
perceived service meets or exceeds the expectation they are opt to use the provider again.Service
 quality is a focused evaluation that reflects the customer’s perception of elements of service such as
interaction quality, physical environment quality and outcome quality. These elements are in turn
evaluated based on specific quality dimensions. (Zeithmoal.M2003;86)
Customer Expectation of ServiceQuality
Expectations are reference points against which service delivery is compared only at beginning. The
level of expectation can vary widely depending on the reference point the customer hold. Customer
expectations embrace several elements including desired service,adequate

service, predicated services and a zone of tolerance that falls between the desired and adequate
service levels.(Lovelock and Wirtz,2004;61)

A. desired and Adequate Service Levels- The type of service customers hope to receive is termed
desired service. It is a “Wished-for” level; a combination of what customers believe can and should
be delivered in the context of their personal needs. However, most customers are realistic and
understand that companies can’t always deliver the desired level of service; hence, they also have a
threshold level of expectations, termed adequate service, which defined as the minimum level of service
customers; hence, they also have a threshold level of expectations, termed adequate service, which
defined as the minimum level of service customers will accept without beingdissatisfied.

B. PredicatedServiceLevel-Thelevelofservicethatcustomersanticipatereceivingis
known as predicted service which is directly affected how they define “adequate service” on that
occasion. If good service is predicated, the adequate level will be higher than if poorer service is
predicted. Customers’ predications of service may be situationspecific.
C. Zone of Tolerance- The inherent nature of service makes consistent service delivery difficult across
employees in the same company and even bythe same service employee from one day to another. The
extent to which customers are willing to accept this variation is called the zone of tolerance. A
performance that falls below the adequate service level will cause frustration and dissatisfaction, where
as one that exceeds the desired service level will both place and surprise customers. Another way of
looking at the zone of tolerance is to think of it as the range of service with in which customers do not
pay explicit attention to service performance. When service falls outside this range, customers will react
either positively ornegatively.

Customer Perceived Service Quality

Customers’ expectations and experience of service can vary of a single organization. The customer
perception is their reality. Customer isabout perception. Perceptions are consumer judgment
about the actual service performance by a company. Perceived value is the customer’s overall
assessment of the organization service based on the complete experience of the servicedelivery
process and they are subjective. As services are intangible, customers search for evidence of
service in very interaction they have with a service firm. The evidences of service as experienced by
the customers are: people, process and physical evidence. (Venugopal and Raghu,2001:262)
People – Who may be the contact employees, other customers or the customer himself who
participate in the service delivery process? The dimensions of reliability, assurance and empathy and
responsiveness are all reflected in the approach ability, efficiency and communicative skills of the
front lineemployees.

Process- The operational flow of the activities the steps involved in the process reflects the reliability
and the promptness of theservice.

Physical evidence- The tangible aspect of service dimensions will be reflected in the physical
evidence.Itincludestheservicesescape,broacher,theequipmentandanyothertangibleaspect.
Measuring ServiceQuality
Performing according to the desired level is critical to the entire organization. Monitoring,
controlling and improving the quality, the service delivery issue is essential to the firms’ market
orientation.
When evaluating service quality, consumer examines five dimensions; tangibles, reliability,
responsiveness, assurance and empathy.
Tangibles- Physical evidence of the service; physical facilities, tools and equipments; appearance of
providers; appearance of other customers in the service facility are the tangibles

Reliability - Consistency of performance and dependability; performs service right at the first time;
honors its promises; keeps accurate records, corrects billing, and performs services at the designated
times are the parameters ofreliability.

Responsiveness - It is the willingness of the firm’s staff to help customers and to provide them with
prompt service. Readinesses to provide the service; timeliness; setting up appointments promptly are
the symptoms of responsiveness.

Assurance- Knowledge, competence and courtesy of employees; trust and confidence; required
skills and knowledge; politeness, respectfulness, considerate, friendliness; trustworthiness,
believability, honesty are signs ofassurance.

Empathy- Caring; individualized attention, approachability, easiness of contact; effort in

understanding the customers’ needs are signs of empathy.

For each dimension, the SERVQUAL scale provides a score for customer expectations (E) and a
score for customer perceptions (P) of service quality. The differences between the two scores on each
 dimension are called gap scores. The key tooptimizing service quality is to maximize these gap scores
and the associated gap equation (Q = P – E).

As shown in Figure 1 above, perceived service quality is the result of the consumer’s comparison of
expected service with perceived service. The gap between producer’s specifications and customers’
expectations for the service level may lead to dissatisfaction even when the producer meets the exact
design specifications.

Service Quality Management

A service firm may win by delivering consistently higher quality service than competitors and
exceeding advertising customer’s expectations. These expectations are formed by their past
experience, word of mouth and. After receiving the service, customers compare the perceived
service with the expected service. If the perceived service falls below the expected service,
customers lose interest in the provider. If the perceived service meets or exceeds their
expectations, they are apt to use the provider again. (Kottler, 1998;438)
Appropriate Customer Handling System for QualityService

In service delivery, one of the major reasons for organization’s viewpoint is the essence of sound
service delivery processes. So how is this possible? Delivering appropriate customer service
requires desired empowerment of employees, proper management of instruction with customers,
assessing service to fit or exceed customer needs and providing customer centeredservice.

CustomerSatisfaction
 Definition of CustomerSatisfaction
The definition of customer satisfaction has been widely debated as organizations increasingly
attempt to measure it. Customer satisfaction can be experienced in a variety of situations and
connected to both goods and services. It is a highly personal assessment that is greatly affected by
customer expectations. Satisfaction also is based on the customer’s experience of both contacts with
the organization (the “moment of truth” as it is called in business literature) and personal outcomes.
Some researchers define satisfied customer within the private sector as “one who receives
significant added value” to his/her bottom line a definition that may apply just as well to public
services(Smith,2007)

Customer satisfaction is the outcome feltby buyers who have experienced a company’s performance
that has fulfilled expectation. Customers are satisfied when their expectations are exceeded.
Satisfied customers remain loyal longer, but more or less price sensitive and talk favorably about the
company.

Customer satisfaction is the customer’s fulfillment response. It is judgment that a product or service
featureortheproductorserviceitselfprovidesapleasurablelevelofconsumptionrelated
 fulfillment (Kottler, 1998; 59). Satisfaction is customer’s evaluation of a product or service in terms of
whether that product or service has met their needs expectations. Failure to meet needs and
expectationisassumedtoresultinsatisfactionwiththeproductorservice.
Customer satisfaction is a highly personal assessment that is greatly influenced by individual
expectations. Some definitions are based on the observation that customer satisfaction or
dissatisfaction results from either the confirmation or disconfirmation of individual expectations
regarding a service or product. To avoid difficulties stemming from the kaleidoscope of customer
expectations and differences, some experts urge companies to “concentrate on a goal that’s more
closely linked to customer equity.” Instead of asking whether customers are satisfied, they
encourage companies to determine how customers hold them accountable.( Kottler, 1998)

In the public sector, the definition of customer satisfaction is often linked to both the personal
interaction with the service provider and the outcomes experienced by serviceusers.
Importance of CustomerSatisfaction
Customer satisfaction measures how well a company's products orservices meet or exceed
customer expectations. These expectations often reflect many aspects of the company's business
activities including the actual product, service, company, and how the company operates in the global
environment. Customer satisfaction measures are an overall psychological evaluation that is based
on thecustomer'slifetimeofproductandserviceexperience(Smith, 2007)
Effective marketing focuses on two activities: retaining existing customers and adding new
customers. Customer satisfaction measures are critical to any product or service company because
customer satisfaction is a strong predictor of customer retention, customer loyalty and product
repurchase.
Determinants of CustomerSatisfactions
Customer satisfaction is influenced by specific product or service features, perception of quality,
customer’s emotional responses, their attributions and their perception.
Product Service Features- Customers satisfaction with a product or service is influenced by
customer evaluation of product or servicefeature.
Customer Emotion- Customer’s emotion can also affect their perception of satisfaction with products
and services. These emotions can be stable pre existingemotion.
Attribution of Service Success or Failure- Attribution influence perception of satisfaction
when they have been surprised by an outcome, (the service is either much better or much worse
than expected), customers tend to look for the reasons their assessments of the reasons can
influence theirsatisfaction.
 Perception of Equity or Fairness- Customer satisfaction is also influenced by perception of
equity and fairness customers ask the service. Have I been treated fairly compared with other
customers? Did other customers get better treatment, better prices or better quality service and the
like? Notions of fairness are central to customer’s perception of satisfaction with products and
services.(Valarie.Aetal.2003;87)

Organizations take different approaches to identifying customer service standards and they vary in
detail. Robert-Phelps uses “SPECIAL” as a model to satisfycustomers.

Speed
Personalit
y

Exceed expectations
Competence and
courtesy Information

Attitude
Long-term relationship

Speed and time

These two are very important factors to many customers to measure a company’s ability and
performance to satisfy their needs. Thus an organization whatever service it provides has to
accomplish as fast aspossible.

Personal Interaction with Customer

Things like how well remembering a customer’s name, a tone of voice and remembering the case of
the customer change the satisfaction of the customer. An organization should identify every
opportunity that it possibly can to make the customer feel unique. An organization has to train
employees based on how to answer telephone and how to deal with customers face-to-face, to treat
every single customer as, not theironly customer, but their most important customer.

Expectations
The ability to manage expectations well and then systematically and consistently exceed them is the
hallmark of a successful organization. There are three scenarios of satisfaction based on customer
expectation.
  A Delighted Happy Customer –This is situation when actual service is greater than
expected or experienced service. This kind of customer will come back and tell his friends
about his experience and will become an advocate for your service. An organization tries
and finds something extra and the way that attracts this kind of feeling.
 A Satisfied Customer- This is the situation when actual service is equal to their
experience. It is not any better significantly, neither is it any worse- they are
satisfied. However, this does not seem to enter the customer’s memory for any long
period oftime.
 A Dissatisfied Customer- This is the case when actual service is less than
expected/ experienced service. As well known, many organizations today struggle to
win customers by tellingthose things they think in their services by using brochures
and presentations. This over promising has poor experience and poor customer
satisfaction built into it. So always make sure that youand your organization deliver
more than youpromise.
Courtesy and Competence
The two gohand in hand. Courtesy means customers seem to be happier be determined by whatever
it is being served with as a customer. Competence means whoever services the customer with in the
organization has to do things and do them well. It means doing what you can do to the best that you
can do it. Competence and courtesy serve as licenses to keep customers forlife.

Information and Keeping Customer Informed

As well known, the world today is a much more complicated with a mass of information created by
technology, social changes and education patterns. So, one of the simplest ways to keep customers
feeling special and make them feel important to organization is to keep them informed about any
service provided for them. Whatever it is that even if their expectation that is going to be broken or
damagedthenletthemknowassoonasyouknow.

Attitude and Customer Liaison

Attitude is not always easy to understand. In this context it is defined as a positive and helpful
attitude. A good customer service experience is on where the customer service person imagined if
nothing else, that they enjoy their job and they like doing what they do and they are pleased to see the
customer. Employees in service rendering organization have to see every single customer as most
importantcustomer.
Long term Relationships
This is the last element of making customer feel special. A customer will feel special if
organization willactuallyreward,recognizeandencouragetheirloyaltyateverycontactwithacustomer.
If an organization implements ideas based around the above seven elements (SPECIAL) and
makes them a constant focus of attention, it becomes more customerfocused.
2.4.4. Satisfaction Measurement
According to Smith Satisfaction measures involve three psychological elements for evaluation
of the product or service experience: cognitive (thinking/evaluation), affective (emotional-feeling/like-
dislike) and behavioral (current/futureactions).
Customer satisfaction usually leads to customer loyalty and product repurchase. But measuring
satisfaction is not the same as measuring loyalty.
As shown in Figure 2 below customer satisfaction is influenced by perceived quality of products and
service attributes, features and benefits, and is moderated by customer expectations regarding the
product orservice.
 The Features of Customer – OrientedOrganizations
In many areas, customer satisfaction ultimately boils down to the customer’s contact with frontline
staff. Capable, empowered frontline staff put customer-focused mission statements, standards
and culture into practice (Center for the Study of Social Policy (CSSP); 2007). Research
consistently shows that the way employees are treated by their management has a direct impact
on the way those employees treat the businesses’ customers (Zemke and Schaaf, 1989, pp 87).
Treat your employees as you want them to treat your customers. If organizations treat their
employees correctly, they’ll treat the customer’s right. And if the customers are treated right, they’ll
come back to getservices.
Customer Service Standards andAccountability
A core component of a customer-focused organization is a clear set of customer service performance
standards that is systematically reinforced. Standards of customer service identify and communicate
what constitutes satisfactory performance for all employees and customers. They provide uniform
measures for all staff and promote consistently strong customer service. According to Mary
Malone as cited in CSSP, 2007, a patient satisfaction consultant to the hospital industry, “Behavioral
change requires standards, not suggestions.” Once those are in place, an organization can develop
consistency by clearly communicating what is expected and, based upon those expectations, reinforce
positive behaviors and hold employees accountable for sub-standard servicedelivery.

According to Center for the Study of Social Policy to satisfy customers staffs need tools including
thorough training, flexibility and empowerment to solve problems and satisfy customers. To
know that the organization values them, Frontline staffs also need recognition and rewards for strong
performance.

A. Orientation andTraining
Customer service leaders place heavy emphasis on instilling a customer-first culture throughout
their organizations by training new employees and reinforcing a customer focus with current
employees.

Successful service organizations make a clear commitment to training the employees who interact
with the public, whether they provide service by telephone or in-person. Their training programs
include formal classroom instruction that focuses on job skills and attitudes and the expectations of
management, as well as on-the-job training that allows staff to learn about the organization and the
work from interaction between coworkers (Schneider and Bowen, 1995, as cited on CSSP,
2007,PP18).
B. Empowering Employees to SatisfyCustomers
Orientation and training of staff are common ways of focusing employees on customer service.
Employee empowerment giving employees the flexibility to satisfy customers is less widely practiced.
However, studies show that it can lead to improved customer service and increased customer
satisfaction and that it is energizing and highly motivating foremployees.

Customer-oriented organizations also empower and motivate employees byinvolving them in

essential organizational processes. When everyone participates in developing organizational plans
and strategies for improvement, it adds more ideas, increases employee attention, and
contributes to a culture of employee empowerment. The organizations have to involve all
levels of employees in the organization’s strategic planning process. After senior leaders
identify specific company objectives, they communicate those objectives to staff at “lower
levels” of the organization. The employees on those levels identify the actions and deeds that if done
will collectively meet the objectives (CSSP, 2007, p20).

C. Recognizing and Rewarding EmployeePerformance

A common practice among successful service organizations is constant recognition, reward and
praise for employees who provide outstanding customer service. This can take many forms; it
does not always need to be expensive to be effective. Moreover, each month employees who go
“above and beyond” are praised in front of coworkers and managers and given certificates and gifts
from the caring baskets CSSP,2007).
Review of Relatedwork
There are many research works done related with this study. However the researcher tries to see three
of them which are more related to the topic. The titles with their objectives and major findings are
discussed below to have an insight about thesestudies.
The first work is MBA thesis done by AmanAbadi (July, 2008) with title of “Effects of service
delivery process and service quality on customer satisfaction: a case study of EEPCO, North
Western region, Bahir Dar town customer service centers”. The main purpose of the study is to
examine the effect of service delivery process and service quality on satisfaction of customers of
EEPCO with the following specific objectives: To examine the effect of service delivery process
and service quality on customer satisfaction and to understand real situation on how EEPCO handle its
customers.

Based on these objectives he found that the service provided by the Corporation has improved
during the last three years. However, the majority of the respondents dissatisfied with the
service delivery procedure available in the Corporation. Moreover, service failure and
recoveryprocedure is rated as poor both by employees as well as by thecustomers.
The second work is done by Eskinder, (July 2007) entitled as “The effect of public sector service
quality on customer satisfaction: the case study of Ethiopian Telecommunication Corporation
(ETC)”. His main objective is to examine and give a clear picture of the improved customer
service .He put specific objectives in the followingmanner:
 To demonstrate the actual importance and effect of quality service on customer
satisfaction in ETC
 To assess and understand real situation on how ETC handles itscustomers.

With these objectives he found similar things what Aman found. The service providedby the
corporation has improved a little in the past one year. However, there is
dissatisfaction due to physical infrastructures problems, inability to handle customer complaints
in service situation and poor quality of internetservice.

The third work taken as relatively similar work is done by Bruk (July 2007) MPA thesis with title
“Service Delivery and Customer Satisfaction in Selected Hospitals: case of Black Lion,
DagmawiMenilik and BetheZatha Hospital”. The main objective of the study isto identify the
problem of service delivery and examine the level of customer satisfaction with the
followingspecifics:
 To assess the availability of facilityenvironment
 To assess the attitude of employees towards theirclients
 To measure the level of satisfaction with the prevailing service deliverysystem
With these objectives in mind the study found that the majority of customers are not satisfied
with almost all of the service delivery system of all the organizationsunder study.

The final work taken was entitled as “Customer Satisfaction in Land Delivery Service by Urban
Local Government: a case study of Bishoftu Town Administration” MPA thesis by
Mohammedhussen Mama (2008). The main objective of the study is to evaluate customer’s
satisfaction in land delivery service and to identify the factors affecting it with specific
objectives of to examine the emphasis given by administration to satisfy its customers and
to measure the level of satisfaction of customers with land deliveryservice.
Based on these the study indicates that the institution failed to have mechanisms of serving
customers in a way they will be pleasant. There are many problems related to customer
service with in the institution. These are unhappiness of the employees, absence of proper
information dissemination and the policy did not include participation of customers. Over all
customers are not satisfied with theservice.

Similarly this study tries to assess the stated objectives based on theoretical knowledge and
give more emphasis on q u a l i t y service delivery, customer satisfaction, achievements and
challenges of theorganizationwithinthefiveyearsbasedonthetargetsthatCorporationset.

Chapter Three

3. Research Methodology
According to, Uma and Roger (2012), the population is the entire group of people, events,
or things that the researcher desires to investigate. In this study all the consumers who
consume the electricity power in North Addis Ababa region are taken as the target
population. They are approximately 201,931 according to the region marketing and sales
office. A sample of 400 users out of total population was selected according to the table for
determining sample size from a given population (Krejcie& Morgan, 1970) at 95% of
confidence level. The rules of thumb proposed by Roscoe (1975) suggest that sample size
larger than 30 and less than 500 are appropriate for most research. Hence, the sample size
determined for this research is consistent with the above criteria. The data were collected
for three months. The researcher personally distributed the questionnaire using simple
random sampling technique to the users and confirmed their willingness to respond the
same. As a result, a total of four hundred questionnaires (400)were given to the respondents
and three hundred seventy were retrieved (370) with the response rate of 92.5 percent,
which is sufficient for the survey.

Survey method performs as a significant way of gathering information (Fei, 2006). A

research design should be well designed, in away to facilitate the collection of relevant
evidence and information for the research, efficiently (Kothari, 1990: Sivathaasan,
Murugathas, &Chandrasekar, 2014). In this study, survey method is a questionnaire, which
has a set of questions to which the respondents record their answers. This was developed
based on the previous review of literature. The questionnaire consists of two sections as
part A & part B. In part A, question relates to demographic and organizational profile such
as gender, age, marital status, education, types of subscription and meter type were asked
from the respondents. Then, variables are grouped into categories and measured on
nominal scale by assigning code numbers to the objects. Likewise, in part B, customer
satisfaction of electric services on twenty two statements or items were measured. All
items are measured on interval scale and respondents are requested to indicate their degree
 of agreement or disagreement on a 5- point scale, ranging from poor (1) to very high(5).

A pilot study of 30 respondents was conducted before the actual survey and this assisted to
make necessary correction in the questionnaire. The primary and secondary data were
collected for the purpose of carrying out the research. Primary data refers to the
information that was developed or gathered by the researchers specifically for the research
project at hand (Burns et al., 2006).In this study, primary data were collected through a self
–administered questionnaire and Interview questions. Secondary data were collected from
books, journals, magazines, research reports, websites, Customer complaint applications,
and customer service procedure. The data collected was then analyzed by using a statistical
package for social science (version 20).Various statistical methods were employed to
analyze the data such as descriptive and inferential analyses. Further, reliability test, test of
sampling adequacy wasperformed.
Sampling Techniques
The target populations in this research paper were Residential Customers, Commercial
Customers, and Industrial Customers of Ethiopian electric utility North Addis Ababa
Region. This implies that the populations under the study were not homogeneous. Hence, a
stratified sampling technique was used for this research paper. The populations were
stratified based on their subscription or customer type. After stratification as Residential
Customers, Commercial Customers, and Industrial Customers, the questionnaires were
administered to each customer type through simple random sampling technique in whom
every single element in the population has a known and equal chance of being selected as a
subject. Stratified sampling was selected because of the nature of population as the
populations were in different consumption and tariff level, so that it was assumed that they
perceive organization’s customer service in differentway.
Population of the Study
The population of the study was from the 23 districts (customer service centers) of
residential, commercial and industrial customers in the region office of north Addis Ababa
region. The districts are customer service One ,Two Three, Four, Five, Six, Seven
(Cancho), Eight (Burayu), Holeta, Mugar, Addis Alem, Ginchi, Ambo, Hormat, Gudar,
Gedo, Ijaji, Bako, Wayu, Fincha, Kachisae, Geldu, Shambu.

Table: 3.1 Number of subscribed customers

 North Addis Ababa Region Marketing and Sales Number of Prepaid and Post Paid Customers
No. Customer Tariff(Post Paid) Pre Paid Total
Service 10 11 12 13 20 30 41 42 10 20
Centers
1 1 16618 50 12 188 3197 444 3 20512
2 2 15371 32 3 305 1370 33 3111 360 20585
3 3 12266 35 2 151 1305 71 3909 364 18103
4 4 11725 28 0 162 1106 68 2676 160 15925
5 5 12034 22 1 166 1527 62 7863 618 22293
6 6 9213 5 0 80 1741 64 22 3600 1000 15,725
7 Chancho 4530 0 2 8 635 10 199 1 5385
8 Burayu 8977 16 18 115 720 451 8526 1750 20573
9 Ambo 7467 11 4 67 942 26 182 6 8705
10 Addis Alem 2280 9 0 35 152 4 63 2543
11 Ginchi 5125 1 3 3 681 12 201 6026
12 Baco 5264 0 0 0 343 26 178 5811
13 Mugar 5262 0 4 4 406 7 229 3 5915
14 Kachisea 1831 0 1 0 236 7 89 2165
15 Hormat 85 0 0 0 12 8 8 113
16 Gudar 3991 2 1 1 195 12 101 4303
17 Holeta 5811 1 2 20 766 10 150 6760
18 Gedo 3316 1 4 13 284 10 195 1 3824
19 Fincha 5410 37 100 44 334 8 171 6104
20 Ijaji 1852 0 1 1 299 4 82 2239
21 Wayu 1404 0 1 0 129 3 104 1641
22 Shambu 4696 0 7 19 771 8 54 44 5599
23 Geldu 870 1 171 41 1083
Total 145398 250 167 1382 17322 211 3198 66 29685 4252 201931
Source: North Addis Ababa Region Marketing and Sales Office

Determination of the SampleSize

It is very expensive in terms of money and time to collect data from the population, so that
theresearcher has to determine sample which is representative for the total population.
Yamane (1967) provides a simplified formula to calculate sample sizes of finite population,
which is used to determine the sample size for this study paper. A 95% confidence level
was assumed for this formula to determine the sample size, at e=0.05. The sample size is
determined by the following formula.

Where n is the required sample size, N is the population size and e is the level of precision.
Applying the above formula,

n= 201,931
1+201931(0.05)2

= 399.20 approximately 400 samples. Hence the sample size for this research was 400
customers of Ethiopian Electric Utility.

Distribution, Collection of the Questionnaire and interview question.

Copies of the questionnaires were distributed to collect necessary information from
respondents. The researcher used one structured questionnaire for all residential customers,
commercial customers, and industrial customers and presented personally and through
district managers to the respondents to gather the data. The respondents have a number of
alternative options with structural questionnaire from which they must choose the one that
most closely approximates their view. The value of the study and the instructions were
explained to the subjects. Respondents were requested to complete the questionnaires
which were collected personally by the researcher and by district managers and employee
of EEU from individual respondents which ensured a high return rate.

The questionnaires were distributed to the customers of EEU North Addis Ababa Region.
It took about 4 months to distribute and collect the questionnaire from the respondents. The
status of the questionnaires was followed via phone and by physical visiting and a pre-test.
The researcher collected the questionnaire from few respondents and make sure whether it
was correctly filled or not by the respondents. Clarity of wordings in view of respondents’
level of understanding was checked on the pre-test to avoid misunderstanding of the
questions. Interview also conducted for the region wire and retail business head and 20
districtmanagers.
 3.5 Data Processing and Analysis
SPSS version 20 computer soft ware program was used. First the responses of the
participants were coded in Excel spreadsheet and then exported to SPSS to analyze the
findings. After exporting to SPSS, the raw data concerning the respondents’ demographic
and organizational variables were depicted using different tables. After the respondents
profile was presented, the customer satisfaction variables were processed using descriptive
statics and inferential statics such as correlation, analysis of variance (ANOVA). The
descriptive statics parts of the variables were analyzed using means, standard deviation,
and percentage whereas hypotheses of the study were tested using analysis of variance
(ANOVA). ANOVA test were used to test the significant mean differences between/
among respondents’ views on service quality variables (the dimensions) and their customer
service satisfaction level.

This chapter focuses describing the different methods applied in the research to gatherdata
and the type of data used to carry out the research. The strategy and design of theresearchis
also under discussion.

RESEARCHDESIGN
Since the major purpose of this study is to evaluate EEU customers‟ satisfaction onservice
quality, a descriptive method of research design was used to achieve theresearchobjective

A combination of descriptive and explanatory research method designs are used in

thestudy.Thestudyisdescriptiveinthatitseekstodescribeindetailthestateofcustomer
satisfaction and service quality in EEU points of sales, thus giving an
indepthunderstandingoftherealityofcustomersatisfactionwithservicequalityinEEU service
centres. On the other hand to identify the relationship between servicequality dimension
and customer satisfaction in addition to the effect of service qualitydimensionson customer
satisfaction,causalresearch designis applied.

Toaccomplishthestudyobjectiveandtoanswerthestatedresearchquestions,descriptiveandinfer
entialstatisticsareapplied.Descriptivestatisticssuchasfrequency, percentage, mean and
standard deviation are used to assess service qualityand measure customer satisfaction
level in EEU points of sales. Inferential statisticssuch as correlation is applied to identify
the relationship between service qualitydimensionsand customer satisfaction.

SourceData
Data sources used in this research are both primary and secondary. Primary data iscollected
from service centre customers found in Addis Ababa region. The sources ofsecondary
Information are collected from published and unpublished materials
likenewsletters,manuals,magazines, andannual reports.

In order to answer raised research questions, both Primary and secondary data
sourcesareused in this study. The primary data collection method is done using the use
ofstructuredquestionnaire.
 SamplingTechniquesand procedures
The primary data is collected through administrating questionnaire. A
probabilisticsampling method with a two staged cluster sampling technique was followed
to getresponse from the study participants.From the4 Addis Ababa Regional
offices(Eastern Addis Ababa, Western Addis Ababa ,Northern Addis Ababa and
SouthernAddis Ababa region ). fiveservice centreswere selected for the survey randomly
fromeach region using lottery method. Then from the total 20 service centres, 20
possiblerespondents were reached randomly by the researcher and collaborators when
theyvisit the selected 20 service centres to get different services during office hours from
8am up to 12 am in the morning. Respondents were requested to fill the
questionnaireontheir way out fromthe selected20 service centres.

SampleSizeDetermination
The target population of the study was EEU services users who visited EEU
servicecentresto get all services provided atservice centres foundin Addis Ababa.
The method of sample size determination was taken from Morgan table for
infinitepopulation. sample sizes of 400 respondents are selected, 100 from each 4
AddisAbaba regional offices (Eastern Addis Ababa, Western Addis Ababa ,Northern
AddisAbaba and Southern Addis Ababa region ). Pathak (2013) recommended that
forinfinitepopulation, a sample size of385 can beassumed.

MethodsofDataCollection
Before the full scale survey, a sample of 20 respondents were selected .The majorobjective
of the pilot taste is to check if it is possible to get the desired result using theprepared
questionnaire and to identify and eliminate potential problems
associatedwithquestioncontentandwording.Basedonfeedbackreceivedfromthetestresponden
tsfewmodificationsismadeinordertomakeitmoreclearandunderstandabletothe full scale
survey respondents.

During the full scale survey the questionnaire is administered to the target
populationthrough personal contact by the researcher and collaborators, who participate in
thedata collection. Out of the total 400 distributed questionnaires 340 were
collectedback,this makes theresponse rate 85%.
 ValidityandReliabilityofInstruments
In order to answer raised research questions, both Primary and secondary data sourcesare
used in this study. The primary data collection method is done using the use
ofstructuredquestionnaire.

Thequestionnairehasdividedintofourparts.Thefirstparthassevenquestionsandis prepared to
gather basic demographic information of respondents, their visit reasonand
habittoEEUpoints of sales.

In the second part respondents are asked to state their level of agreement towards
thetwenty two statements constructed to show items of service quality dimensions on afive
point liker scale. Only performance perceptions of customers are measured
whichmeanstheresearchermainlyusestheSERVPERFversionoftheoriginalSERVQUALscale
s.

The 22 items are distributed among the five dimensions of service quality as
follows;fouritemsareputunderthetangibilitydimension,fiveitemsarerelatedtothereliability
dimension, four items correspond to responsiveness dimension, four itemsdistributed to
assurance dimension and finally the remaining five items are part of theempathydimension.

The third and the final part has one question which requested customers to rate thelevel of
their satisfaction, on a five point liker scale, during their visit to EEU servicecentre.
Thequestionnaireisprepared inEnglishlanguage andAmhariclanguage.
Totest the survey by conducting using 20 respondents to check the validity
andreliabilityofthequestionnaire.Thequestionnaireisselfadministered.Selfadministeredquest
ionnaires are a usefulway of collecting data.
In addition to primary data sources, secondaryinformation sources like past
studiesarecollected in order to obtain some reliable literature and empirical findings that
canbe applied in order to have a better understanding of customer satisfaction and
servicequalityandSERVPERFmodel.
 ReliabilityTest
Cronbach‟salphaisusedinthisstudytoassesstheinternalconsistencyoftheresearchinstrument,
whichisdevelopedquestionnaire.Cronbach'sα(alpha)isacoefficient of reliability used to
measure the internal consistency of a test or scale; itresulted as a number between 0 and 1.
As the result approaches to 1 the more is
theinternalconsistencyoftheitems,whichmeansalltheitemsmeasurethesamevariable.
The result of the coefficient alpha for this study‟s instrument was found to be morethan
0.81 (table 4.1), as indication of acceptability of the scale for further
analysissinceallthefiveitemsofservicesqualitydimensions(Tangibility,Reliability,Responsiv
eness,AssuranceandEmpathy)measurethesamevariable,whichisservice quality. Besides the
overall reliability test, the items under each of the
fiveservicequalitydimensionsarealsotestedtocheckiftheymeasurethesamedimension or not.
All dimensions consistency test result was greater than 0.85
exceptfortangibilitywhichwas0..81.Allreliability measuresclearlyexceed
theusualrecommendation of alpha = 0.70 for establishing internal consistency of the
scale(Cronbach, 1951). Since the results are acceptable further analysis is conducted
(Forthefull reliability test result see Appendix).

table3.1 ReliabilityStatistics
NoofItems Cronbach'sAlpha
Tangibility 4 0.81
Reliability 5 0.85
Responsiveness 4 0.90
Assurance 4 0.90
Empathy 5 0.90
Source:SurveyResult(2016)
MethodsofDataAnalysis
The collected survey data are analyzed using statistical package for social
sciences(SPSS)version20applicationprogram.Eachresearchquestionswereansweredaccordin
gly and outputs of the analysis are presented in tables and charts and theirimplicationare
explained.

Simple descriptive statistics like frequencies and percentage are applied to discuss
thegeneraldemographicsand points of salesvisit habit of respondents.
The descriptive statistics isalso appliedtoassessservice quality in EEU pointsofsales and the
level of customer satisfaction with the services provided in the servicecentres. Comparison of
Mean scores of each service quality dimension is conducted toidentify at which service quality
dimension EEU points of sales are performing wellandat whichin anunfavourablecondition
basedon theperception ofrespondents.

Cross tabulation and ANOVA were conducted to see if there is a relationship betweenthe types
of service delivered at points of sales and level of customer satisfaction.
Andtodiscoverifthereisarelationbetweeneachitemofthefiveservicequalitydimensions and
customer satisfaction, correlation analysis is performed. Similarly therelation between the
overall five service quality dimensions and customer satisfactionarediscovered using
correlation analysis.

EthicalConsiderations

All information gotten from the respondents were treated with confidentiality
withoutdisclosure of the respondents‟ identity. Moreover, no information was modified
orchanged, hence information gotten was presented as collected and all the
literaturescollectedforthe purposeof this study wereappreciated inthe reference list.

3. Research Design andMethodology

Method of Datacollection

The research methods that were used in this study are both quantitative and qualitative. Both primary
and secondary data source were used to collect the required information. Purposive sampling
technique were used to select the specific service centers for the study; convenience sampling
to set sample size and stratified sampling were used to distribute questionnaires. Beside, structured
questioners and interviews were used to obtain the required data from employees and officials
respectively.
The research method involves primarily qualitative approach and the specific method here
adopted is descriptive type of research. It describes the issue conducted through structured
questionnaires. Since the intention of the study is to describe the present situation of quality of
customer service delivery and the satisfaction on it, each descriptive factor represent the situation
 under each respondent categories that are clustered into customers, employees and respectiveofficials.
Tools of DataCollection
Questionnaires, interviews and archives documents are used to gather the primary data concerning
quality of service delivery and customer satisfaction on Southern Addis Ababa Region ( SAAR).
More specifically, structured questionnaires were distributed randomly to the customers
selected by stratified sampling technique. Structured questionnaires and interviews are also used for
gathering information from employees and officials’respectively.

Sampling Techniques and Sample

size A). StudyArea
The population of this study consists of all customers of EEU in Southern Addis Ababa Region. The
selection of this region is based on convenience and other factors including:
 Widely expanding area in manydirections
 Larger number ofcustomers

Further, S AAR has around 120,000 numbers of customers within its territory. It is difficult to
select a sample from all customers in the region. There is the need to narrow down the focus of data
collection and one of the region’s eight customer service centers, customer service center number 8 ,
(Akakikakality) which has the highest number of customers consisting around wasselected.

Table 3.1 Summaries of samples

Postpaid meter users

Prepaid meter users
Customers in
Weekly
tariff category Weekly average
Sample (10%) average Sample (10%)
customers
customers
Domestic 1030 103 360 36

Commercial 340 34 110 11

Industry 20 2 - -

Total 1390 139 470 47

 Data Analysis Method
First the pilot test on the questionnaire instrument was made on 30 customers to check its reliability
and validity. The researcher used ServeQual model and different factors of comparison to measure the
customers’ attitude towards the quality of service delivery of the corporation. The method of data
analysis is mainly descriptive type and the analysis had been handled in away that each issue
included in the study is addressed. Both qualitative and quantitative descriptions were applied. Data
entry and analysis of the sample were made by the researcher with the help of statistical tools. The
study used frequency tables, charts, figures, and percentages for both primary and secondary data and
properly interpreting them, findings are summarized. Based on the major findings, conclusions were
drawn and recommendations forwarded in order to better satisfy customerneeds.
Presently EEU has eight service centers in SAAR and each service centers provide similar services to
its customers. Data collected from the center basically include both prepaid and postpaid meter users
(customers) and further clustered into domestic, commercial and industrial based on tariffgroup.
B). Target Population

Target population consists of all customers within the selected service center and the key informants
such as SAAR Marketing and Sales Chief Officer, Marketing and Sales Monitoring Officers,
Service Center Manager and front lineemployees.

C). Sampling Procedure

Currently, SAAR service center 8 has around 23,000 customers which include both prepaid and
postpaid meter services users. Post-paid meter users pay bill in monthly scheduled manner, while pre-
paid meter users buy electricity when they want to buy without any schedule. In addition, in line of
carrying out a sampling program on a large scale in terms of practicability and economic
feasibility, it is better to set up a modest program in which a special sampling is selected and defined
(Sewagegne, 2007 as cited by MohammedHussen, 2008 p.11) .In line with this explanation, the
researcher tries to set up samples that represent most of the customers of selected service center which
can becontacted.

Therefore, weekly average customers visiting the CSC were the study population for this research.
Based on the information from customer service center on average around 1390 and 470 postpaid meter
users and prepaid meter users visit CSC’s for different purposes within the week period of time
respectively. Customers will also clustered into domestic, commercial and industry customers based
on tariff structure. 10 percent of the study population will be taken as the sample of this study. As a
result, 10 percent of (1390 and 470) are 139 and 47 respectively. Therefore, the total number of
samples for customers is 186. These figures w i l l further clustered into domestic, commercial and
industry customers, which will be illustrated in the following Table 1.1. Hence, the researcher
will use the proportional stratified random sampling technique for thestudy.

In addition, structured questionnaires will be randomly distributed to 19 frontline employees.

This is 50 percent of 38 employees who have direct contact with customers in the service center. And
interviews will be conducted with two officials of the SAAR namely marketing and sales chief
officer and marketing and sales monitoringofficer
 Based on these, total numbers of twenty one key respondents from the Corporation will be selected in
order to get relevant information. These different sources of the data w i l l b e triangulated to cross
check itsreliability.

What is Customer?
Customer is an individual, group of individuals or an organization who receive or may receive goods,
services, products or ideas from another individual or a company in return of value which can be
money or anything of equivalent value. Customer forms the backbone of business. Usually more is
the number of customers, more is the business thriving and vice versa. Business need customers to
buy their products. A customer may not buying your product right away now but may buy it in future
but still remains part of your target customer group.
A customer is a person or company that receives, consumes or buys a product or service and can
choose between different goods and suppliers. The main goal of all commercial enterprises is to
attract customers or clients, and make them purchase what they have on sale. They also try to
encourage them to keep coming back. At the core of marketing is having a good understanding of
what the customer needs and values.

We often refer to customers who have a relationship with the supplier as clients. Also, people who
hire the services of a professional are clients, not customers. For example, a lawyer has clients.

When a customer buys something, the seller immediately focuses on the next one. However, with a
client, the aim is to cultivate the relationship.

In many cases, the client-supplier relationship becomes similar to a partnership. This does not tend to
happen with customers.

Types of customer

Customers can be of various types depending upon their ability to buy products or services. The
following 8 terms explain the type of customer

1. Potential Customer
Kind of person who is very likely to buy the product or service offered by the business. e.g. a
customer looking for an apartment in a particular area becomes a potential customer for the local
realtors who would have a flat which will suit the requirements of the customer. The customer might
end up buying the apartment. Potential customers can present an opportunity for the business to
sellers and after qualification can convert into a quote stage and eventually result in an order or a
sale.
2. Loyal Customers
Those who are loyal to one business and repeat the purchases irrespective of minor changes in
parameters like price, quantity etc.
e.g. a customer who buys the same airline's ticket irrespective of price.
3. New Customer
The customers who have used the product or service for the first time from a particular organization.
Such customers can be switching from a competitor brand or may be new entrant into the market. 
e.g. a person buying car for the first time after a salary raise. From the perspective of the
organization, a new organization would acquire new customers from the market either by launching a
new product category altogether or launching a competitive product offering in the market.
To attract new customer, we have to do

1. Identify your ideal client.

2. Discover where your customers live.
3. Know your business inside and out.
4. Position yourself as the answer.
5. Try direct response marketing.
6. Build partnerships.
7. Follow-up.

4. Discount Customer
Those who only buy or use the offering because it was on discount or offered a cashback. These
people are more likely to switch brands easily if prices reduce unlike loyal customers. e.g. A customer
who takes a different flight based in the discounts offered though the preferred airline brand was
different based on past travels.

5. Former Customers
Those who were once buyer of one business and became buyers of a new business because of
some reason. These people would still be potential customers as they have already tried the product
or service once.
e.g. A person who used to buy a specific beverage switched to a more healthier option offered by a
competitor.
6. Internal Customer
One who is connected to your organization and is internal to your organization. These for example
are your shareholders, employees & other stakeholders.
7. External Customer
An external buyer is a buyer of your services and products but external to your organization. An
example of your external consumer could be people buying your products in the marketplace.
8. Intermediate Customer
Those who purchases the goods for re-sale e.g. retailers. The customers are part of a longer supply
or value chain.
Customer categories
There are many different types of customers:

B2C
B2C stands for Business-to-Customer. For example, when I buy a coffee at a stall at the train station,
it is a B2C event.

B2B
The term stands for Business-to-Business. For example, when the coffee stand owner buys
coffee from a supplier; both of them are businesses.

C2B
C2B stands for Customer-to-Business. For example, when I sell my gold ring to a pawnbroker or
jewelry store.
C2C
C2C stands for Customer-to-Customer. For example, when I want to sell my car privately to another
person. eBay is a huge C2C and B2C marketplace.

Importance of Customer
A customer is the foundation for any business. A business cannot exist without a buyer base. A buyer
will pay for the offerings made by business and keep it going. It is very important for a business to
manage the customer really well as the same person can become loyal and repeat translating into
more business. These happy buyers would advocate and refer your business to other potential buyer
bringing in more business. In short, a business cannot operate without business hence customer is of
paramount importance to any business.
Customer vs Consumer
A consumer is the person who actually consumes the products or services, whereas the customer is
simply the purchaser & need not be the consumer. The intermediate buyers are never consumers as
they buy for re-sale. The purchaser of industrial goods & services is called industrial customers or
business to business customers.
Customer Service and Support
Customer Service is an important aspect of modern day business. Once a person buys a product or
uses a service, the scope of customer service starts immediately. A buyer may face some defect or
may need further information to use the offering. For example, a new SIM card user after installation
of card may not be able to place calls so there has t be a way to connect to SIM card provider for
help. If the customer service support solves the issue, the buyer is happy and values the business
but if there is no way to contact the business it can lead to loss of consumer and issues in future.

This article has been researched & authored by the Business Concepts Team. It has been reviewed
& published by the MBA Skool Team. The content on MBA Skool has been created for educational &
academic purpose only.

WHAT IS SATSIFACTION?
It is a fulfilment of one's wishes, expectations, or needs, or the pleasure derived from this.the payment of
a debt or fulfilment of an obligation or claim.
Satisfaction is a pleasant feeling that you get when you receive something you wanted, or when you
have done something you wanted to do (Cambridge Dictionary).

Customer satisfaction may be best understood in terms of customer experience. Customer

experience (or CX) is the total sum of a customer’s perceptions, interactions and thoughts about
your business. If the customer has a generally positive experience, they can be considered

satisfied.Customer satisfaction is a concept that sounds simple: how

satisfied customers are with your business. But it’s quite a bit more
complex than that in reality. This is because there are so many facets of
your business that contribute to the overall customer experience, and
customer expectations vary as well. 
WHAT IS CUSTOMER SATISFACTION?
Customer satisfaction (often abbreviated as CSAT) is a term frequently used in marketing. It is a
measure of how products and services supplied by a company meet or surpass customer expectation.
Customer satisfaction is defined as "the number of customers, or percentage of total customers, whose
reported experience with a firm, its products, or its services (ratings) exceeds
specified satisfaction goals."[1] Customers play an important role and are essential in keeping a product or
service relevant; it is, therefore, in the best interest of the business to ensure customer satisfaction and

build customer loyalty.Customer satisfaction indicates the fulfillment that customers

derive from doing business with a firm. In other words, it’s how happy the
customers are with their transaction and overall experience with the
company.Customer satisfaction is typically defined as the feeling that a person
experiences when an offering meets his or her expectations. When an offering meets the
customer’s expectations, the customer is satisfied.

Customer satisfaction is defined as a measurement that determines how happy customers are with a company’s
products, services, and capabilities. Customer satisfaction information, including surveys and ratings, can help a
company determine how to best improve or changes its products and services.

An organization’s main focus must be to satisfy its customers. This applies to industrial firms, retail and wholesale
businesses, government bodies, service companies, nonprofit organizations, and every subgroup within an
organization.

Model of Customer Satisfaction

 There are two important questions to ask when establishing customer satisfaction:

1. Who are the customers?

2. What does it take to satisfy them?

WHO ARE THE CUSTOMERS?

Customers include anyone the organization supplies with products or services. The table below illustrates some
supplier-customer relationships.
Note: that many organizations are both customers and suppliers.

Customer Satisfaction Process Improvement

Complaint Management Strategies

When buyers want to complain about products or companies, they have many ways to do so. They can
complain to the companies they’re upset with, tell their friends, or broadcast their concerns on the Internet.
People who use every Internet site possible to bash a company are called verbal terrorists. The term was coined
by Paul Greenberg, a marketing analyst who authored the wildly popular book CRM at the Speed of Light.

Should companies worry about verbal terrorists? Perhaps so. A recent study indicates that customer satisfaction
scores could be less important to a firm’s success or failure than the number of complaints its gets (Lou &
Homburg, 2008). To measure the tradeoff between the two, customer satisfaction guru Fred Reicheld devised
 something called the net promoter score. The net promoter score is the number of recommenders an offering
has minus the number of complainers (Reicheld, 2006). The more positive the score, the better the company’s
performance. According to another recent study, a company with fewer complaints is also more likely to have
better financial performance.

Studies also show that if a company can resolve a customer’s complaint well, then the customer’s attitude
toward the company is improved, possibly even beyond the level of his or her original satisfaction. Some
experts have argued, perhaps jokingly, that if this is the case, a good strategy might be to make customers mad
and then do a good job of resolving their problems. Practically speaking, though, the best practice is to perform
at or beyond customer expectations so fewer complaints will be received in the first place.

Customers will complain, though, no matter how hard firms try to meet or exceed their expectations.
Sometimes, the complaint is in the form of a suggestion and simply reflects an opportunity to improve the
experience. In other instances, the complaint represents a service or product failure.

When a complaint is made, the process for responding to it is as important as the outcome. And consumers
judge companies as much for whether their response processes seem fair as whether they got what they wanted.
For that reason, some companies create customer service departments with specially trained personnel who can
react to complaints. Other companies invest heavily in preparing all customer-facing personnel to respond to
complaints. Still other companies outsource their customer service. When the service is technical, marketers
sometimes outsource the resolution of complaints to companies that specialize in providing technical service.
Computer help lines are an example. Technical-support companies often service the computer help lines of
multiple manufacturers. A company that outsources its service nonetheless has to make sure that customer
complaints are handled as diligently as possible. Otherwise, customers will be left with a poor impression.

Handling the Complaint Process

A good customer complaint handling process involves the steps listed below. Note that one step
is to acknowledge the customer’s feelings. A customer who is angry or upset due to a failure
does not want to be patronized or have his or her problems taken lightly. The situation is
important to the customer and should be important to the person listening and responding to the
complaint.

 Listen carefully to the complaint

 Acknowledge the customer’s feelings
 Determine the root cause of the problem
 Offer a solution
 Gain agreement on the solution and communicate the process of resolution
 Follow up, if appropriate
 Record the complaint and resolution
 Note that the complaint-resolution process involves communicating that process and gaining
agreement on a solution, even if the customer sometimes might not like the outcome. He or she
still needs to know what to expect.

Finally, the complaint process includes recording the complaint. We stated earlier that a firm’s
best strategy is to perform at or beyond the customer’s expectations so as to minimize the
number of complaints it receives in the first place. Analyzing your company’s complaints can
help you identify weak points in a service process or design flaws in a product, as well as
potential miscommunications that are raising customer’ expectations unreasonably. To conduct
this analysis, however, you need a complete record of the complaints made.

A complaint record should reflect the main reason an offering failed. Typically, the failure can
be attributed to one (or more) of the following four gaps (Levy &Weitz, 2009):

1. The communication gap. Overstating the offering’s performance level, thereby creating

unrealistic expectations on the part of customers.
2. The knowledge gap. Not understanding the customer’s expectations or needs, which then
leads a company to create a product that disappoints the customer.
3. The standards gap. Setting performance standards that are too low despite what is known
about the customers’ requirements.
4. The delivery gap. Failing to meet the performance standards established for an offering.

You can attribute the complaints your company receives to one of the four gaps and then use
the information to figure out what must be done to fix the problem, assuming you have one. If
the problem is overstating the performance, then perhaps your firm’s marketing promotions
materials should be reviewed. If it appears that the offering is simply not meeting the needs of
your customers, then more work should be done to identify exactly what they are. If your firm
is aware of the needs of its customers but there is a gap between their requirements and the
standards set for your firm’s performance, then standards should be reviewed. Finally, your
company’s processes should be examined to ensure that standards are being met.

How to measure customer satisfaction

Customer satisfaction (CSAT) is an important customer experience metric to understand
how your customers feel about your products or services. Connecting with your customers
is the only real way to measure customer satisfaction.

Customer survey
One of the most common methods of measuring customer satisfaction is through
surveys.  Respondents record their feedback via multiple-choice questions, rating
questions, open-ended questions, etc.  Customer satisfaction measurement tools can help
you gather real-time insights through online surveys and deliver excellent experiences.

Customer survey,to get accurate feedback and actionable items for customer satisfaction, survey your
customers soon after the utilization of the service. There are different ways by which an organization can
conduct customer surveys:

 In-app surveys
 Online surveys
 In-store surveys
 Feedback forms
 Offline surveys over the phone or SMS.

By integrating a contact center technology with a feedback tool, organizations can record surveys that ask
customers to rate their services. Remember that your customers are very busy, and most of them hesitate
to fill in surveys as it takes their precious time. To counter this, your surveys should be crisp and specific.

Measure Customer Satisfaction Score

The Customer satisfaction score measures the short-term happiness of your customers. The scale
typically ranges from highly unsatisfied to highly satisfied:

 Highly unsatisfied
 Unsatisfied
 Neutral
 Satisfied
 Highly satisfied

The above scale asks the customers to rate the service received from 1–5, where 1 represents customers
who are highly unsatisfied and 5 represents customers who are highly satisfied. Some businesses
increase the scale to 7 or even 10 to record more accurate results from their customers. Once the score is
collected from the desired number of customers, the average number received is the CSAT score you can
relate to. A higher CSAT score means higher customer satisfaction. But it has a limitation, as it only
measures the recent transaction with the business. To measure the wider relationship let's drill down
further.

You can measure CSAT score from the responses to below question,

“How would you rate your overall satisfaction with the [product/service]?”

The options typically range from one end of the satisfaction level to the polar opposite.
  Very unsatisfied
 Unsatisfied
 Neutral
 Satisfied
 Very satisfied
The higher the number of responses for ‘Satisfied’ and ‘Very satisfied’, the higher the
score. It implies that the customers are happy with the products and services. They are
likely to stay loyal and lead to stable business growth.

To measure customers’ satisfaction, we have to follow these steps

1. Net Promoter Score

2. Live Chat Transcripts

3. Social Media Mentions

4. Marketing Emails

5. Short Message Service (SMS)

6. Churn Rate

7. Follow-Up Surveys

1. Net Promoter Score

Net Promoter Score ®, or NPS, is a popular customer satisfaction survey used to gather
quantitative and qualitative customer data. We'll talk a lot more about this type of
survey later in this post, but you'll need to adopt some form of customer feedback
software if you want to use it with the tips shared in the next section.
Imagine a situation where your customers are satisfied with your offerings but are not ready to
recommend your business to friends. Such a situation arises when they are not sure of your longevity to
keep them happy. To measure results and track customer loyalty, Net Promoter Score (NPS) was
introduced. NPS measures the probability of a customer referring your business to someone. Thus it does
not measure the short-term happiness as the customer is bound to think about the service provided to
them over a time period and refer to a friend only in case of consistency. Thus, a simple question under
NPS would look like:
Will you recommend us to your friends?

 0–6 (Not a chance) - detractors

 7–8 (Maybe)
 9–10 (Very Likely) - promoters

To calculate NPS, just subtract the percentage of detractors from the percentage of promoters.
A high percentage means that your customers have developed a sense of loyalty towards your brand and
are ready to take you places, but a low percentage would mean that your customers believe you lack
consistency to keep them happy.

The Net Promoter Score (NPS) measures how likely it is that a customer will act as a brand
ambassador and promote the products/services/company. The NPS places customers into
three categories – promoters, passives, or detractors.

 Promoters are customers who are enthusiastic about the products/services and are
likely to recommend them to friends and family.
 Passives are those who are satisfied with the products/services but are unlikely to
recommend them to friends or family members. Passives do not have strong brand
loyalty and can easily be converted by competitors.
 Detractors are customers who are unsatisfied with the products/services and may
damage the company’s brand image and growth through bad word-of-mouth.

2. Live Chat Transcripts

Live chat transcripts offer similar benefits to surveys or Net Promoter Scores. However,
instead of asking customers to participate, all you have to do is analyze previous chats
recorded by your live chat software. Customers will typically offer plenty of direct and
indirect feedback within these conversations and this information is valuable for
measuring user satisfaction. 
Image Source

And, that's not just feedback for your product, either. If you encourage reps to ask for
feedback directly within the chat, you can find out if users are enjoying other aspects of
your business as well  — like your website, customer services, and sales team. 
3. Social Media

Social media mentions represent how your customers perceive your brand's marketing
content. Whenever you release a new campaign, your followers have an immediate
channel to upload public feedback. These comments are unique because they're focused
on your brand's messaging, which is tough to ask about during a follow-up survey or live
chat transcript. 

You can also leverage social media as a feedback collection tool. If you post a poll on
Twitter or Instagram, you can record that to measure customer satisfaction. The benefit of
this channel is that it's free to use and gives you direct access to your customer base. 

4. Marketing Emails

Email is an excellent channel for engagement and feedback collection. The subscribers to
your newsletter have demonstrated a clear interest in your brand and you can easily add a
link to one of your surveys in a weekly newsletter. Or, you can embed the survey directly
into the email, similar to how HubSpot's Service Blog newsletter works.

 
5. Short Message Service (SMS)

SMS, or texting, is another efficient option for gathering feedback. It's relatively cheap to
send messages in bulk and it allows to you put a survey in the palm of your customers'
hands. And, if you're looking for a free alternative, you can use a popular messaging app

like Facebook or WhatsApp.

Image Source

6. Churn Rate

There will always be a percentage of your customer base that'll leave your company
without leaving a review or providing feedback. So, how do you count these customers
toward your customer satisfaction analysis?

Take a look at your churn rate. This is the percentage of customers that leave your
business over time. If you compare your total unique survey responses against the
number of customers that left your business, you'll have an idea of how many people left
without leaving feedback. It's safe to say that these customers were probably unsatisfied
with their experience, too. 
 7. Follow-Up Surveys

As we mentioned earlier, surveys are a great tool for measuring customer satisfaction.
Follow-up surveys are particularly effective because they capture the customer's
immediate reaction to the brand interaction. You'll know exactly how the customer is
feeling right after a long sales call or after a tricky support case. 

There are a few types of follow-up surveys that you can use to gauge customer sentiment.
We'll cover those in the next section when we review how to calculate customer
satisfaction. 

1. Define Your Goals.

2. Outline a Plan. 

3. Choose a Type of Customer Satisfaction Survey.

4. Customize Your Survey's Layout and Questions.

5. Determine Your Survey's Trigger.

6. Select Your Survey Medium.

7. Analyze Your Survey Data.

8. Make Adjustments and Repeat.

1. Define Your Goals. 

When embarking on any sort of campaign, it's helpful to take a step back and ask, "Why
are we doing this?"

In business, one must weigh the value of information -- the customer satisfaction data --
against the cost of collecting it -- the survey process. To be honest, if you won't change
anything after collecting your customer satisfaction data, you're better off not collecting it
at all. It's going to take time and effort, so you need to put it to use.

Depending on your business or organizational capabilities, there's a lot you can do with
this information. It's important to have a goal in mind so you can get the most out your
 customer data. Every business faces disappointed or upset customers, but not every
company has a solution.

With that in mind, the specific solution isn't necessarily the important part here. The
important part is stepping back and saying, "If we see that a segment of our customers is
unsatisfied, what will we do about it?"

2. Outline Your Plan. 

Once your goals are defined, you need an actionable plan to achieve them. Prior to
collecting your customer data, your team should outline the actions you'll take after
feedback is gathered and analyzed. Some examples you can execute are:

 Improve key UX bottlenecks that contribute to poor customer experience.

 Expedite customer support interactions with the most frustrated customers.

 Operationalize proactive support like a knowledge base and customer education.

 Test different live chat scripts and support strategies.
You can also plan actions based on your segment of highly satisfied customers.
Methodologies like NPS® segment your customers into promoters, passives, and
detractors for a few reasons. First, NPS provides you with an aggregate NPS score, thus
providing a health check and a longitudinal metric to track and improve over time.
Second, it gives you the possibility of segmenting customers based on attitudinal metrics
like satisfaction. You can offer your promoters special perks or encourage them to spread
the word about your business; they're the most probable people to act as your "external
sales force" -- in other words, your willing and excited customer advocates.
3. Choose a Type of Customer Satisfaction Survey.

Once you've sat down and discussed your plans with key stakeholders, you need to
design your survey. The first step you should take is determining the type of metrics you'll
use to measure customer satisfaction. 

What types of metrics measure customer satisfaction?

You can choose among a few different options for customer satisfaction surveys. There's
no unanimous agreement on which one is best. A few popular methods are:
 Customer Satisfaction Score (CSAT)
 Customer Effort Score (CES)
 Net Promoter Score® (NPS)

These are all "one-question" methods that vastly simplify the process of collecting
customer insights. While you may not think the survey methodology matters much, how
you ask the question measures different variables.

1. Customer Satisfaction Score (CSAT)

Customer Satisfaction Rating, or Customer Satisfaction Score (CSAT) measures on average, how
satisfied or unsatisfied customers are with your product, services, or customer success program.
Usually asked on a scale of 1-3, 1-5, or 1-7, your customer satisfaction score can be calculated by
adding up the sum of all scores and dividing the sum by the number of respondents.

Customer Satisfaction Score (CSAT) is the most commonly used satisfaction method. You
ask your customers to rate their satisfaction on a linear scale. Your survey scale can be 1 –
3, 1 – 5, or 1 – 10, and there's no universal agreement on which scale is best to use.
CSAT is a metric used to immediately evaluate a customer's specific experience. Here's
how Vipin Thomas, Global Lead of Customer Success at Freshdesk, put it:

"CSAT is a transactional metric that's based on what's happening now to a user's

satisfaction with a product or service. We try and get a CSAT score within 15 minutes of
an interaction.

It's super helpful to improvise on the resolution, mode of delivery, channel, etc. It's ONE of
the important metrics to evaluate the performance of the support desk. In fact, we
publish ours publicly as well."
2. Customer Effort Score (CES)

Customer Effort Score (CES) is very similar, but instead of asking how satisfied the
customer was, you ask them to gauge the ease of their experience.

You're still measuring satisfaction, but this way you're gauging user effort -- the
assumption being that the easier a task is the better the experience. As it turns out,
making an experience a low-effort one is one of the greatest ways to reduce frustration and
disloyalty.

A CES survey may look something like this:

3. Net Promoter Score (NPS)

NPS asks the question, "How likely is it that you would recommend this company to a
friend or colleague?"

This measures customer satisfaction but also customer loyalty. In doing so, you can come
up with an aggregate score, but you can also segment your responses into three
categories: detractors, passives, and promoters.

You calculate your Net Promoter Score by subtracting the percentage of detractors from
the percentage of promoters.

NPS is often used as a more general indicator of customer loyalty and brand devotion.
Here's how Thomas explains it:

"NPS is consumed by various different teams to drive retention, sales, product

improvements & advocacy.

Some important things to consider would be the channel it's delivered on -- email, in-
product, phone -- the frequency of delivery, and the target audience within the customer
base".
4. Customize Your Survey's Layout and Questions. 

The above three styles are commonly used, but those aren't your only options for
customer satisfaction surveys. Depending on your goals you can also send longer email
surveys that include things like demographic questions. Really, you can customize it to
your desires -- just remember that shorter surveys tend to have better completion rates.
Most importantly, don't ask questions if you won't do anything with the information. This
not only wastes your time, but your customers' time as well. And, studies show
that 66% of adults believe that the most important thing a company can do is value their
time. 
You can use more than one methodology -- since they all measure something different. In
fact, Vipin Thomas explains how you can combine multiple scores for a greater picture of
customer satisfaction:

"We take CSAT and NPS very seriously, both independently and in conjunction, since a
single measure alone won't show the true picture of why customers are detractors or
promoters (NPS) or why you have a lesser than expected CSAT.

CSAT, in conjunction with NPS, helps with a very targeted approach and often is a more
accurate indicator to spot an advocate or someone at risk of churn.

For example, a customer that has had three continuous, negative CSAT scores and is
also a detractor on NPS would be an immediate at-risk customer. A customer with positive
CSAT and a promoter on NPS are potentially the best source of advocacy and candidates
to cross-sell or upsell since they already have seen the value in their interactions with the
process and product."
Additionally, I recommend always appending a qualitative, open-ended question,
regardless of the survey you use. Without an open-ended question, you risk limiting your
insight into "why" the dissatisfaction may be occurring. Qualitative user feedback can give
you tons of ideas when it comes to implementing solutions.
Here's how Luke Harris, Customer Success Director at Wayin, puts it:

"Qualitative data is the nirvana many of us are searching for, because it provides us with
the most human version of customer satisfaction with the added benefit of scale and
replicability.

To be able to unbiasedly, capture and track qualitative data helps - especially a scaling
business - to quickly ascertain where it should focus, both in terms of product support and
development.

5. Determine Your Survey's Trigger.

This step is all about who you're sending the survey to and when you're sending it.

If you go back to your goals outline, this shouldn't be too hard to determine, at least
strategically. People tend to forget this step, but it's crucial as it affects the quality and
utility of your data.
 Tactically, you can trigger a survey pretty much anywhere, at any time, and to anyone.
But, doing it strategically, matters specifically when and where it's triggered.

Good examples of event data that can be used to fire a survey are:

 Time since signup

 Key actions taken in your app -- for instance, Qualaroo asks right after you receive your
10th survey response
 Complete user onboarding

Surveying too often will result in low response rates, so we recommend a customer
satisfaction (NPS) survey seven days after signup, 30 days after the first survey and every
90 days during the customer lifecycle.

Additionally, different business questions require different survey triggers. You also need
to take into account longitudinal data -- how customers' satisfaction scores change over
time. Here's how Nils Vinje, VP of Customer Success at Rainforest QA, put it:

"The best time to trigger/send a customer satisfaction survey is after a meaningful part of
the customer lifecycle is completed. "

Best Practices For Survey Triggering

With all the options for triggering, though, let's start with some best practices:

 The closer the survey is to the experience, the better.

 People forget how they felt the longer you wait.

 Who you survey changes what insights you get. If you survey website visitors about their
satisfaction, the respondents are anonymous and may be a customer or they may not. This will
bring you different data than sending an email to recent customers.

 You should survey your customers more than once to see how things change longitudinally.
Especially if you operate a SaaS company or a subscription service, regular NPS surveys can help
you analyze trends both at the aggregate and individual level.

 Survey people after a key moment of their customer journey.

 If a respondent gives you a high score, think about adding a follow-up ask. For instance,
Tinder asks you to rate their app in the app store if you give them a high score.

6. Select Your Survey Medium. 

In general, there are three primary methods by which you can send customer satisfaction
surveys:

 In-App or On-Site Surveys

 Post-Service or Post-Purchase Surveys

 Long Email Surveys

Each of these may require a different software or tool. For instance, Usabilla or HotJar
specialize in triggered in-app surveys. But if you're sending post-purchase surveys, you
may need something that offers a web interface, like Typeform. Email surveys can usually
be performed with any survey tool, like SurveyMonkey or Google Forms.

Matt Hogan, Head of Customer Success at Intricately, also emphasizes the need to
collect continuous and real-time feedback, regardless of major feature launches or
company-based events:

"I recommend surveying in-app and on a rolling basis. This will keep the constant
feedback loop going. The technology available makes it easy to manage this."

7. Analyze Your Survey Data.

Once you've collected your data, make sure it doesn't just sit there dormant and unused.
You've got all this customer insight, and it's just waiting to be uncovered!

Depending on the survey's format, this could be a simple process or one that requires a
Ph.D. in statistics and survey design.

As I mentioned before, calculating Net Promoter Score (NPS) is straightforward. You just

subtract the percentage of detractors from the percentage of promoters.
 8. Make Adjustments and Repeat.

Back to my first point: Now that you have these insights, what are you going to do about
it?

Ultimately, this is a personal decision that will reflect your own findings and capabilities.
You may find that a whole segment is dissatisfied because of a particular experience. In
that case, you may need to further investigate why that experience is causing
dissatisfaction and make changes to improve upon it. You may find that you have a small
percentage of super fans.

Now that you can identify these people, perhaps you can work with your marketing and
customer success teams to plan advocacy programs.

The possibilities are endless, but it all starts with accurately measuring customer
satisfaction. But asking for scores is only a part of it -- make sure you're creating
conditions for customers to leave you high scores, too. Check out the HubSpot Customer
Code and these tips from other companies for more ideas.

1. Make Pricing Open and Honest.

2. Onboard New Customers With Educational Content and Training. 

3. Offer 24/7 Customer Support Across a Variety of Channels.

4. Build Digital and In-Person Communities. 

5. Host In-Person and Digital Networking Events.

6. Make It Easy to Change or Cancel Contracts/Subscriptions.

7. Create Customer Loyalty Programs or Rewards.

8. Ask for Customer Feedback on a Consistent Basis.

9. Build Channels for Marketing, Sales, Customer Service, and Product Teams to Collaborate.
1. Make Pricing Open and Honest. 

Price is a crucial component of any customer experience. How much a customer pays for
your product or service will dictate the level of satisfaction they expect to receive from
your business. If you charge for an experience that you can't provide, customers won't be
satisfied with your company and will start to look elsewhere. 

2. Onboard New Customers With Educational Content and Training.

Some products are easier to learn than others, and some customers are faster learners
than others. Customers shouldn't be dissuaded to use your product because they don't
know how to operate it. Instead, you should teach new customers how to use your product
and how to get the most value out of it. Having an effective customer onboarding process
will ensure new users won't get frustrated with roadblocks early on and will continue to
work with your product until they're comfortable with its features. 
3. Offer 24/7 Customer Support Across a Variety of Channels.

When customers do get stuck, it's important for them to have a way to contact you for
help. Offering 24/7 support provides peace of mind to the customer because they know
they can reach you whenever they're in trouble. 

That being said, manning the phones all day and night can get expensive for a customer
support team. So, the best way to optimize efficiency is to adopt multiple service channels
and create an omnichannel experience. For example, you can assign bots to reply to live
chat messages when your team is out of the office. And, reps can use help desk
software to reply to customers from their mobile devices or via social media if they don't
have access to their work computers. 
4. Build Digital and In-Person Communities. 

Communities, whether they're in-person or held on an online forum, are excellent for
networking and educating customers. Customers can communicate with each other and
learn how to best use your product, and your team can record feedback from these
conversations that will help you improve products and services over time. Plus, these
groups are typically formed by your most loyal users, so a forum provides you with a
channel to engage a high-value audience with exclusive content or promotions. 
5. Host In-Person and Digital Networking Events.

Networking events, like professional training sessions and educational webinars, are
another way to gain favor with your customers. However, instead of discussing topics that
are focused on your products or company, expand your sessions to include broader
conversations that are relevant to your customers' needs and goals. This will increase
audience participation because you're trying to provide more value to the customer
experience, rather than capitalizing on a conversion opportunity. 
6. Make It Easy to Change or Cancel Contracts/Subscriptions. 

In customer service, we often talk about earning your customer's trust. But, as soon as a
customer signs up for a product, businesses make it nearly impossible to cancel a
subscription or contract. Customers feel tricked by the business and now they're trapped
in a bad deal that's taking too long to get out of. 

To avoid this feeling of entrapment, your cancellation process should be clear and
concise. While that may seem counterintuitive, your goal as a business is to help
customers succeed. If they're not accomplishing their goals., then your product or service
may not be the right fit for them. Forcing your brand on a customer will only cause further
damage to the relationship and can even result in a negative review of your company. 

7. Create Customer Loyalty Programs. 

For the customers who love interacting with your brand, there are still opportunities to add
more value to their experience. Customer loyalty programs accomplish just that by
providing loyal users with incentives for frequent engagement, repeat purchases, and
customer advocacy. These programs keep your most valuable customers happy as you
continue to reward them for long-term loyalty. 
8. Ask for Customer Feedback on a Consistent Basis.

Customers will provide your team with feedback whether you ask for it or not, but
proactively seeking out their opinions shows that you're invested in improving their
experience. Rather than waiting for customers to reach out with complaints or
suggestions, provides channels where they can submit these ideas independently. This
could be as simple as adding a form to your website or creating a forum page dedicated to
customer ideas.
9. Build Channels for Marketing, Sales, Customer Service, and Product Teams to Collaborate.

The information that your customer service department gathers isn't just valuable to that
specific team. It's useful to your entire business and should be shared with all
departments throughout your organization. 

However, to do this you'll need a sufficient internal communication system that enables
teams to easily access and exchange information. Typically, most businesses use a
messaging platform, like Slack, along with an internal knowledge base. These tools break
down data silos while simultaneously protecting your private customer data.   
To learn more, make sure you're avoiding these customer satisfaction survey mistakes.
Net Promoter, Net Promoter System, Net Promoter Score, NPS and the NPS-related emoticons are
registered trademarks of Bain & Company, Inc., Fred Reichheld and Satmetrix Systems, Inc.

How to improve customer satisfaction

If you’re using a range of metrics to track and monitor customer satisfaction, you’re already well on your
way to making improvements. Understanding your current status on customer satisfaction means you
can:

 Zero in on problem areas

High-quality VOC (Voice of the Customer) feedback gives you a clear roadmap to where problems
are most likely to arise within your customer experience. This is where you can make the biggest
gains by investigating and improving matters.
 Close the loop with unhappy customers
A dissatisfied customer can become an ardent promoter given the right kind of communication and
action. Use the visibility your customer experience program provides and make contact with
unhappy customers wherever and whenever they voice their concerns. By listening and setting the
issue right, you have the potential to create a positive bond in place of a disappointing memory.
 Identify the key drivers of satisfaction
Plenty of factors go into making up customer satisfaction, but they’re not all created equal. Using a
tool like QualtricsPredictiQ, you can identify which elements matter most in creating customer
satisfaction, and weigh your investment and improvements accordingly.
 Focus on employee experience
Your employees are in direct contact with customers and have a huge influence on whether
customer experiences are positive or not. There’s a proven link between customer experience and
employee experience that bears this out. So if customer satisfaction is the goal, it absolutely
makes sense to improve employee experiences and nurture a customer-centric culture within your
teams.
Theoretical Literature Review of measuring customer satisfaction in electric
utility
What is service?

A service is a transaction in which no physical goods are transferred from the seller to the buyer.
The benefits of such a service are held to be demonstrated by the buyer's willingness to make the
exchange. Public services are those that society as a whole pays for. A service is the action of doing
something for someone or something. It is largely intangible (i.e., not material). A product is tangible (i.e., material) since

you can touch it and own it.

A service tends to be an experience that is consumed at the point where it is purchased, and cannot be owned since is

quickly perishes. A person could go to a cafe one day and have excellent service, and then return the next day and have a

poor experience.

A service is an activity which has some element of intangibility associated with it, which involves some interaction with

customer or with property in their possession, and does not result in a transfer of ownership.

Service is described in the Oxford English Dictionary as “the action of serving, helping, or benefiting; conduct tending to the

welfare or advantage of another; condition or employment of a public servant; friendly or professional assistance.” According

to Kotler and Armstrong, “A service is an activity or benefit that one party can offer to another that is essentially intangible

and does not result in the ownership of anything. Its production may or may not be tied to a physical product.”

Explanation – Services are Intangible products such as accounting, banking, cleaning, consultancy, education, insurance,

expertise, medical treatment, or transportation. Services deal with processes rather than with thing are experienced rather

than consumed.

According to Quinn, Gagnon, ‘Services are actually all those economic activities in which the primary output is neither a

product nor a construction’.

According to Kotle, ‘Any activity or benefit that one party can offer to another that is essentially intangible and does not

result in the ownership of anything.’

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According to Gronroos, ‘A service is an activity or series of activities of more or less intangible nature that normally, but not

necessarily, take place in interactions between the customer and service employees and/or systems of the service provider,

which are provided as solutions to customer problems.’

“Services are activities, benefits or satisfactions, which are offered for sale or are provided in connection with the sale of

goods” – American Marketing Association

“Services refer to social efforts, which include government to fight five great evils- wants, disease, ignorance, squalor and

illness in the society”. – Sir William Bieveridge

“A service is any activity or benefit that one party can offer to another which is essential intangible and does not result is the

ownership of anything. Its production may or may not be tied to a physical product”. – Philip Kotler

“The service is an activity that has an element of intangibility associated with it and involves the service provider’s

interaction either with the customer or with the property belonging to the customer. The service does not involve the transfer

of ownership of the output”. -Adrian Payne

“Services are actually all those economic activities in which the primary output is neither a product nor a construction.” –

Quinn, Gagnon

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“A service is and activity or series of activities of more or less intangible nature that normally, but not necessarily, take place

in interactions between the customer and service employees and/or systems of the service provider, which are provided as

solutions to customer problems.” – Gronroos

“Services include all those economic activities that are intangible and imply interaction to be realized between a service

provider and the consumer.” – Van Looy et al

“Services are economic activities that create value and provide benefits to customers at specific times and places as a result of

bringing about a desired change in or on behalf of the recipient of services.” – Lovelock

“Services are separately identifiable, intangible activities which provide satisfaction when marketed to consumers and/or

industrial users and which are not necessarily tied to the sale of a product or service.” – William J Stanton

What is Service – The Concept 

In common parlance, the term can’t be only personal services like auto repairing, haircutting, services of dentists, legal

consultants and so on. The marketing experts view the problem in a bit different way. They feel that the contents of services

are much more-wider. There is no doubt in it that a number of experts have attempted to define the services but no single

definition has been accepted universally. It is quite natural that as and when we attempt to clarify the perception, a number

of comments crop up.

According to US Government’s Standard Industrial Classification, “Establishments primarily providing a wide variety of

services for individuals, business and government establishments and other organisations, hotels and other lodging places,

establishments providing personal services, repair and amusement services, educational institutions, membership

organisations and other miscellaneous services are included.”

What is Service – Top 5 Characteristics: Intangibility, Inseparability, Perishability, Heterogeneity

and Ownership

The distinct characteristics of services are discussed below:

1. Intangibility – Services are intangible in nature. They are not physical objects, so they cannot be seen, touched, felt or

tasted before purchase. Unlike products, customers have to rely on references, reputation and facilities provided by the

service provider to know about the quality of service.

2. Inseparability – Services cannot be separated from the service suppliers. Services are produced and consumed at the same

time. Therefore, the service providers have to be careful about the quality of services, as the customer presence is essential in

service. For instance, to use the services of a doctor, hairdresser, hotel or an airline, the customer must be physically present

to receive the services.

3. Perishability – Services are highly perishable, if not consumed simultaneously, result in a loss. The unused service cannot

be stored for future use. For instance, if a person is not able to board his flight or go for a movie, he cannot ask for the refund

of the amount he has already paid. Similarly, vacant seat in a flight, an unoccupied room in a hotel represent an economic

loss.

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4. Heterogeneity – Services cannot be uniformly sold to all the customers. It is difficult to standardise the services. Similarly,

different service providers render services differently.

5. Ownership – Ownership is not transferred in the name of the buyer/user. He will only have the access to services. A

service is purchased for the benefit that is provided. For instance, a consumer can use a hotel room; he does not become the

owner of a hotel. Ownership remains unaffected in the process of rendering the services.

There are major differences between the goods and services based on the above features. Goods are tangible objects, which

are to be manufactured, transported, stored, promoted and sold to the customers.

What is Service – Nature (With Examples)

The service marketers are required to pay special attention to analyse the existence of numerous features of services which

are consistently studied in the form of its nature.

Precisely the nature of services are stated here:

1. Intangibility:

i. Services cannot be seen, felt, tested, touched and clearly visible and apparently tangible and material existence,

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ii. Services are to a large extent abstract and intangible by its nature,

iii. A service is made and delivered on spot and hence it cannot be measured as early as tangible products,

iv. They are more focused on benefits, values and customized applicability and use brand name etc.,

v. It is difficult to judge and evaluate the performance quality and values in advance.
Suitable Examples:

a. Counseling services,

b. Accounting services,

c. Financial services,

d. Banking and Insurance services,

e. Data processing,

f. Legal services,

g. Voice telephone,

h. Retail banking,

i. Advertising / PR,

j. Health club,

k. Hospital services,

l. Tours and Travel services,

m. Hotel and Restaurant services,

n. Broadcasting / Cable

o. Office cleaning,

p. Plumbing services,

2. Inseparability:

i. Services cannot be separated from the person or concern who provide them,

ii. Service providers possesses a particular knowledge, skills, efficiency, competencies, training and equipment etc.

iii. Services are typically produced and consumed at the same time with customers participation in the process,
iv. Service providers may use needful equipments, tangible products, physical infrastructure and different materials to be

required in service performance,

v. It is a key quality of services which renders it impossible to diverse the supply or production of the service from its

consumption. Simultaneously the Production and consumption involves with each other which characterise most services,

vi. The identification and existence of service providers are based on their service performance,

vii. Customers must be present during the production of many services. Customers must have the intimate contact with the

production process and service providers.

Suitable Examples:

a. Singer

b. Teacher

c. Doctor

d. Plumber

e. Electrician

f. Beauticians

g. Technicians

h. Health cares,

i. Driving Services

j. Airplane trips

3. Perishability:

i. Services are liable to perish and that will not long last,

ii. Service capacity cannot be stored and carried forward for sale to a future time period,

iii. Services are time dependent which makes them very perishable,
iv. There is no provision of stockpiled as inventories of services,

v. Services have zero inventory. Once sold they stand sold and cannot be returned,

vi. If the services are not fully utilized, that represents a loss. On the other hand most of the services may face a fluctuating

demand. This issue is primarily concern of the service providers. Customers only become aware of the issue when there is

insufficient supply and they have to wait for the services,

vii. Each unique features of services leads to specific problem for service marketers and it is required to formulate specific

strategies for dealing with them,

viii. There is a need to coordinate the demand and supply of services.

Suitable Examples:

a. A car mechanic who has no car to repair today, in future his services will not be stored whenever car will be available for

repairs.

b. There is a peak demand of certain train routes which are always more heavily booked than others. On the other hand at

the time of low demand of booking, the service capacity may suffer the losses. As such services cannot be stored.

c. If the hotel rooms are not occupied, airline seats are not purchased and telephone line capacity are not used, it cannot be

reclaimed.

d. Repairs and Maintenance,

e. Office cleaning services,

f. Laundry and cleaning.

4. Heterogeneity:

i. There are certain difficulties to make standardization and uniformity of the quality of services so that the services are non-

standards and highly variable,

ii. It describes the uniqueness of service offering. They are generated, rendered and consumed at one time,

iii. Services have the nature of diverse character and diverse elements,

iv. Service performance from the same service provider or individual may also differ. The services denotes certain results in

variation from one service to another or variation in the same service from day to day or from customer to customer. It focus

on those service which is unique and cannot be exactly repeated even by the same service provider. It is not possible to make
service experience identical and uniform. Service performances is delivered by different people and their performance vary

from day to day,

v. It can be introduced as a benefit and point of differentiation.

Suitable Examples:

a. A doctor who pays attention to a patient today may lose his services by next day.

b. All the restaurants offers different services.

5. Ownership:

i. The services are treated as special kind of product,

ii. The services are purchased by customers because they provide certain intangible benefits and satisfaction,

iii. If a customer buy a product he become its owner, but in case of services, he may pay for its use but he will never own it,

iv. In respect of the payment of services, the customers may pay in the form of charges, rent and commission etc. and get the

benefits and satisfaction,

v. The customers do not gain the ownership or title on the services.

Suitable Examples:

a. Rented goods services – Customer may have the temporary right to use a physical goods that they prefer not to own. (i.e.

boats and costumes etc.)

b. Hired Labour to perform the work i.e. cleaning the house,

c. Expertise services (i.e. Car repairs and Electricians)

d. Rented space and place (i.e. area of premises may be rented for social and other occasions, to reserve the table in

restaurants, to book the seat in an aircraft),

e. Usage of system and network (Customers may use the specified system in cyber cafe and telecommunication with different

charges)
What is Service – Importance of Service Marketing

The concept and ideology of service marketing is much needful in overall marketing scenario. It is a platform on which a

marketer can be able to make an amicable and worthwhile environment to develop better interaction with customers.

As such, the significance or importance of service marketing are stated here:

1. Upgraded Knowledge:

Within phenomenon of marketing, the services may create and develop new and emerging learning aspects to manage and

coordinate different business activities. Also services are involved to generate new and knowledgeable aspects to conduct

and perform different marketing area.

2. Attention on Customers Welfare:

The overall ideologies of service are based on customers’ orientation as well as their welfare. Every task and approaches

concerning of service marketing aims to develop the customers’ welfare. Also the customer’s welfare is the main driving

quotes to inspire the promotional task of services.

3. Specialisation:

Every viewpoints and task of service performance are basically required to make the bases of specialization. In modern

business the services are required to formulate new techniques of specialization. On the other hand, the service marketing

can be able to promote new skills, knowledge, learning attitudes and multifarious competencies within marketing area.

4. Novel Ideologies:

Through new avenues and composition, service marketing are based on new and innovative technologies. At the same time,

the applications and composition of different services also contributes novel ideologies, viewpoints, concept, approaches and

thoughts in present state of society.

5. Promote Sales Campaign:

Service marketing can establish and promote most appropriate platform for sales campaign. It is the foremost and suitable

segment towards implementation of sales campaign programmes in overall marketing phenomenon.

6. Integration between Business and Society:

Service marketing contributes a balancing form and develops an integration between ‘profit motives’ and ‘service motives’. It

provide more merchandising opportunities towards business and on the other for the society at large.

7. Better Utilization of Money:

Service marketing contributes different and appropriate attributes and benefits to customers. They are liking to get much

satisfaction at the moment of buying process of product and services. By virtue of it, they feel that their money as well as

purchasing power are being utilized in most proper way. Better and most acceptable services are being helpful in this

context.

8. Credit Facilities:
Somehow, the service marketers also provide the credit facilities to their customers at the moment of service delivery. As

such the beneficial customers might be able to buy the products with proper services to utilize their limited income and

resources to make better standard of living and manage a certain level of social status.

9. More Customization:

Service marketing emphasize on every beneficial aspects of customers aims to give much response to them. More attention

have been given towards the needs and requirements of customers and their family. Every aspect of service marketing is

based on the customer’s orientation.

10. Increase in Standard of Living:

The different composition and varieties of services are providing multiple ways and means to make more comfortable and

efficient standard of living of customers. They also contribute to develop new avenues to make a happy, healthy and

prospective life.

11. Better Customer’s Relationship:

The modern concepts of marketing emphasize on the customers relationship patterns. By means of services, the marketers

can focus on the study of the customers perception and attitudes and try to develop their proper acquisition. As such, the

concept and framework of services may create and develop overall customers satisfaction to achieve better relationship with

customers.

12. Locational Benefits:

The service marketing provides and stimulates different target oriented services. By means of locational aspects, the

customers might be able to get their benefits according to their service performances, behavioural, service and cultural

profiles.

13. Analysis of Consumers Attitudes and Behaviour:

An attitude is a cognitive element with a feeling and tendency to react positively or negatively in regard to an object. The

marketers may find out customers attitudes by means of their knowledge, exposures, belief, experience, social status and

mass medias. Study of attitudes may be helpful towards plan of product and service design, parameters personal services

and analysis of different behaviour of customers.

14. To Promote Motivational Approaches:

There are different motivational approaches which aim to design more appropriate service performance. The approaches are

ego-defensive, self-images, value expressive, brand images, cognitiveness, assurance and learning and knowledge etc. These

approaches highlights to promote most suitable and applicable ways to perform excellent services.

15. To Promote Demands of the Products:

Within purview of services phenomenon, there are certain causes to be applicable to increase the demand of the product.

The demand of the product may be raised due to upgradation of services to coordinate the consistency of service and to

perform the allied services etc. The upgraded level of products’ demand may increase more trade, business, industry and

economic viabilities.

16. Value Additions:

The service marketers may develop a platform for value additions. It may develop a most appropriate and concurrent

platform to create and develop different attributes and beneficial aspects in products and services. The practical basement of

value additions denotes the role of mix variables to develop some areas in market offers.

17. Helpful in Buying Decisions:

The platform of service marketing is very essential to provide some directions and counseling to customers at their buying

process. The service providers may contribute rational, beneficial, economical and useful suggestion to customers at the time

of their buying decisions.

18. Optimum Utilization of Resources:

Different service organization particularly of personal care services, tourism services, hotel services and public services

contribute to the growth of economy. Such services utilize the natural resources in society for future generation.

19. Capital Formation:

There are tremendous indications that services will grow more rapidly in the near future. Economic, social and political

factors may stimulate an expansion of the service sector. Investments and job generations are far greater in the service sector

compared to manufacturing to promote the capital formation.

20. Employment Generation:

The components of the service sector are wide and varied. Within methods and process of service marketing, there are wide

possibilities to generate new employment scenario. Most of the persons with the capacity as traders, salesman, dealers,

technicians, professionals and different service providers are getting their employment in wide range of service performance

and its allied activities. Thus, the organized and systematic development of the service sector would create enormous

employment opportunities.

21. Quality Consciousness:

The overall scenario of service marketing is based on the concept of quality awareness. Most and applicable methods for

quality upgradation are needful not only in product development but in service performance also. Quality consciousness

provide upgraded level of customers’ satisfaction.

22. Cross Cultural Advantages:

Probably the services are based on different social customs, traditions, languages, castes, colours, relationship, assumptions

as well as cultural aspects. By means of service performance, there are some advantages and attributes to develop integrated

and mutually of cross cultural environment in our country.

23. Use of Environment Friendly Technology:

Now a days, almost all services are found to be technology driven. Developed countries are making full use of latest

technology while rendering services. Technologies used by service generating organizations such as banks, insurance

companies, tourism, hotels, communication and education services are not detrimental in any way to the environment.

What is Service – Classification based on End-User, Tangibility, People-Based, Expertise and Profit

Orientation

There are a number of ways of classifying service activity, and there is inevitably some degree of overlap between the

methods available.

Some of the methods of classification which are commonly used are as follows:

(i) End-User:

Services can be classified into the following categories:

(a) Consumer – leisure, hairdressing, personal finance, package holidays.

(b) Business to business – advertising agencies, printing, accountancy, consultancy.

(c) Industrial – plant maintenance and repair, work wear and hygiene, installation, project management.

(ii) Service Tangibility:

The degree of tangibility of a service can be used to classify services:

(a) Highly tangible – car rental, vending machines, telecommunications.

(b) Service linked to, tangible goods – domestic appliance repair, car service.

(c) Highly intangible – psychotherapy, consultancy, legal services.

(iii) People-Based Services:

Services can be broker, down into labour-intensive (people-based) and equipment-based services.

This can also be represented by the degree of contact:

(a) People-based services – high contact, education, dental care, restaurants, medical services.

(b) Equipment-based-low contact automatic car wash, launderette, vending machine, cinema.

(iv) Expertise:

The expertise and skills of the service provider can be broken down into the following categories:

(a) Professional – medical services, legal services, accountancy, tutoring.

(b) Non-professional – babysitting, caretaking, casual labour.

(v) Profit Orientation:

The overall business orientation is a recognised means of classification:

(a) Not-for-profit – The Scouts Association, charities, public sector leisure facilities.

(b) Commercial – banks, airlines, tour operators, hotel and catering services.

What is Service – Approaches towards Service Upgradation Laid down by Different Organisations

Within business scenario, there are different service organisations as directly or indirectly contributing in it. Here, it is

needful to draw a worthwhile attention to make some perspective ways and means as well as suggestive approaches to

achieve a certain level of service performance and upgradation as laid down by different organisations.

These are summarised here:

1. Business Services:

i. More emphasis on customisation,

ii. More attention on service motives,

iii. Consciousness towards social responsibilities.

2. Personal Services:

i. Knowledge, skills and competencies,

ii. Commitments and responsiveness,

iii. Develop quality consciousness.

3. Professional Services:

i. Self-management and work spirit,

ii. Code of conduct,

iii. Social values and ethics.

4. Distribution Services:

i. Mutual and integrated relationship,

ii. Locational facilities,

iii. Reciprocal and accountable relationship.

5. Counselling Services:

i. Fair and justified consultation,

ii. Avoid and restrict fraud and misconduct,

iii. Develop more appropriate and justified viewpoints with cooperative attitudes.

6. Communication Services:

i. Fair, justified and appropriate encoding and decoding communication,

ii. Informal communications,

iii. More emphasis on motivational communication.

7. Financial Services:

i. Integrity and commitments,

ii. Transparency and Accountabilities,

iii. Customer’s financial protection and safety.

8. Banking and Insurance Services:

i. Trust, faith and belongingness,

ii. Customer care, prompt services and appropriate complaint handling system,

iii. Well behavior and intellectual capacity of employees and agents.

9. Advertising Services:

i. Social awareness,

ii. Ethical conducts (Fair and Justified Practices),

iii. More emphasis on customers’ orientation.

10. Public Services:

i. Social responsibility and maturity,

ii. Involvement of multifarious groups,

iii. Environmental awareness.

11. Medical Services:

i. Fair and justified behaviour,

ii. Moral and ethical norms,

iii. Human aspects and behaviour.

12. Tourism Services:

i. Protection of socio-cultural values,

ii. Methods to create and develop ecological balance,

iii. Proper conservation and utilisation of natural resources.

13. Transport Services:

i. Promote services and time savings,

ii. Safety of product and services,

iii. Locational facilities.

14. Entertainment Services:

i. Social and cultural awareness,

ii. Well mannerism and ethical norms,

iii. Disciplined attitudes.

15. Postal Services:

i. Prompt and regular services,

ii. More emphasis on public interest,

iii. Effective customer’s interaction.

16. Legal Services:

i. Fair and justified services,

ii. More emphasis on constitutional provisions,

iii. Trust, reliable and cooperative attitudes.

The Service Process

1. Meaning of Service Process 2. Characteristics of Service Process 3. Steps for Managing Service Processes 4. Elements

5. Planning a Service Process 6. Phases 7. Service Blueprinting 8. Challenges in Designing the Service Process.

Service Process: Meaning, Characteristics, Steps, Elements, Phases, Challenges

and Other Details
Service Process – Meaning

When manufacturing goods, the process involved takes place in the factory’s premises, keeping the customers at bay. The

customer rarely comes in contact with the manufacturing process, as those processes that lie with the factory premises, lie in

the sole domain of operations.

Interaction of the customers with the system should be a part of the service creation and hence this makes the customer be a

part of the service process. The service failures often are the result of inadequately and inappropriately designed service

processes.

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Services which depend on customer contact or customers are the recipient of service actions, the customer side of the

process can be mapped by identifying service delivery process. A chart that draws and lists the various contact points when

the system and the customer come in contact to create a value is known as a flow chart.

Service production and consumption are inseparable, and therefore the customer acts as a co-producer of many services. The

service delivery is the outcome of the service process. The process constitutes the service itself. The service characteristics of

inseparability and participation often make the customer, interact and become a part of the process.

Despite such importance of the service process, sometimes service organisations pay very little systematic attention to this

aspect of business. As a result, service processes evolve on their own with internal bias or no focus at all. Therefore, it is not

surprising that many service organisations are not adequately equipped to serve the customer well and such processes limit

the efficiency of the operations.

It is a process to deliver requested service to the end user. Let us take an example of a company which is known for its service

processes – DTDC begin its operations in the year 1990 and since then, year by year they have achieved various milestones

based on their service quality.

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This company thrives on its quick service and the reason it is able to do so is its confidence in its processes. To top it, the

demand of these services is such that they have to deliver optimally without a loss in quality or in quantity. Thus, the process

of a service company in delivering its product is of utmost importance.

Quality of a service is defined by the way it is been processed thus detailing the service process becomes very important for

all service provider. Service processes intensely interact with the customer. Production processes differ from service

processes. The customer only perceives the output of a production process he selects it and pays for it.

Process is an element of the extended marketing-mix of services marketing. A process outlines the procedures and methods

to be followed to produce and deliver a service. It also determines the extent of customer involvement and participation

required in service creation and delivery. Therefore, process explains a series of activities, their sequence and the role to be

played by the service provider, the intermediaries and the customer. It plays an important role in determining the quality of

service design, production and delivery.

It is not possible to differentiate production from delivery in services as they are inseparable in nature. Therefore, process

includes all the activities related to production as well as delivery of the service. Further, processes need complete dedication

and commitment of the service personnel in order to be completed successfully.

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Companies, not only in the manufacturing sector, but in the service sector as well, gain competitive advantage over other

players with improved processes. A well-designed and well-executed process increases operational efficiency, offers

convenience to customers, reduces the cost of offering services, and improves the efficiency of service delivery. Effectively, it

helps in achieving the goal of customer satisfaction.

Service Process – 5 Main Characteristics

1. Divergence:

Often, service providers adapt their services to match customer needs, as a single service might not cater to all. The degree,

to which a service provider can vary services, deviating from the standard service, is known as divergence. Divergence

provides an opportunity for the service provider to customise services for his customers, and serve them better. For example,

many tourism companies customise their holiday packages according to customer needs.

2. Complexity:

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The process of creating and delivering a service involves many activities. While some activities might be quite simple, others

can be quite complex. The complexity of a process should take into consideration the contribution of the different activities

to service quality.

The activities that contribute to service quality in an interaction between a banker and a customer may include the

friendliness shown by the banker, his knowledge about the products, the speed at which the service is offered to the
customer, etc. At the same time, the number of activities in the production and delivery of a service increase with the

increase in divergence, i.e., complexity increases with divergence.

3. Service Location:

The nature of the service being offered largely determines the service location. Services can be delivered at the service

provider’s location, at the customer’s location, at a neutral location or virtually, depending on their nature. For example,

customers can either visit a hotel to have dinner or they can order home delivery.

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In the former case, the service location is the hotel, and in the latter, the customer’s home is the service location. A tourist

operator offers his services at the tourist spot, which is a neutral location. A banker offers his services virtually when he

provides internet-banking facilities to customers. Therefore, service location depends on the alternatives available to the

service provider and the customer.

4. Customer Participation and Interaction:

Service processes should be designed depending on the extent of interaction with the customer and his participation in

service production and delivery. The level of customer interaction and participation differs from service-to-service. For

example, the level of interaction between a banker and a customer is negligible in mobile banking transactions while the

level of customer participation is high in deciding and ordering a menu for a wedding.

It can also differ from channel-to-channel for the same service. The perceived quality of a service is enhanced if a customer

has prior knowledge of the service process. For example, a customer who has an idea about the check-in process at an airport

will be more comfortable and can appreciate the improvements made by the airline in the process, when compared to a

customer who has no knowledge of the check-in process.

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5. The Service Itself:

Services can be either process-based or technology-based. Process-based services involve many activities that a customer has

to go through before obtaining the service. For example, a student aspiring to join an IIM (Indian Institute of Management)

course or any other business institution has to fill-up an application form, take the entrance test and appear for an interview,

group discussion, etc., before gaining admission. Process-based services involve many people, with high levels of interaction

between them.

The service provider has an opportunity to improve the quality of service at every step and in each interaction. On the other

hand, equipment or technology-based services require very little inter-personal communication between a service provider

and his customer.

For example, internet banking, offered by many banks like ICICI, HDFC, GTB, etc., has almost eliminated the need for

personal interaction between a service provider and his customer. Through technology-based services are efficient and

convenient for customers, service providers lose an opportunity to enhance the quality of service through personal
interaction. Further, any problem in the teleological systems of the service provider affects the quality of service production

and delivery too.

Service Process – Steps for Managing Service Processes: 7 Step Process

Services are experiences from the customer’s point of view. Services are processes that have to be designed and managed to

create the desired customer experience from the organisation’s viewpoint. Hence processes become the plan of the services.

Processes describe the method and sequence in which the service operating systems work and specify how they link together

to create the value proposition promised to customers.

Customers are an integral part of the operation, and the process becomes their experience, in high contact services. If the

process has been designed up to the customer’s standards, this will frustrate the customers as the process are often slow and

of poor quality.

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If the process is not designed properly, it affects the frontline employees also in doing their jobs well, which then results in

poor productivity, with an increase in the risk of service failures.

While designing and managing a service process, keep in mind the following steps:

Step # 1. Flowcharting:

Flowcharting, a technique for displaying the nature and sequence of the different steps involved in delivering a service to

customers, offers an easy way to understand the totality of the customer’s service experience. We can gain valuable insights

into the nature of an existing service by flowcharting the sequence of encounters customers have with a service organisation.

Recognising that a value proposition may embrace all or part of the whole cluster of benefits a firm offers to its target

market, service marketers need to create a coherent offering in which each element is compatible with the others and all are

mutually reinforcing.

Step # 2. Service Blueprinting:

It is important for an organisation to gain a holistic view of how the elements of the service relate to each other, when the

service production processes are complex and involve multiple service encounters.

Blueprinting’ according to Shostack, is a graphical approach, designed to overcome problems that occur where a new service

is launched without adequate identification of the necessary support functions.

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The three main elements in a customer’s blueprint are:

i. All of the principal functions required to make and distribute a service are identified, along with the responsible company

unit or personnel.

ii. Timing and sequencing relationships among the functions are depicted graphically.

iii. For each function, acceptable tolerances are identified in terms of the variation from standard that can be tolerated

without adversely affecting customer’s perception of quality.

Step # 3. Identify Failure Points:

A good blueprint will bring out the key elements in service delivery, highlighting risks which can go wrong. The most serious

fail points are those that will result in failure to access or enjoy the core product, from the customer’s view point.

They involve:

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i. The reservation (could the customer get through by phone? Was a table available at the desired time and date? Was the

reservation recorded accurately?)

ii. Seating (was a table available when promised?).

There is also the possibility of delays between specific actions, requiring the customers to wait, since service delivery takes

place over time. Too much waiting can irritate customers. Failures often lead directly to delays, reflecting orders that were

never passed on, or time spent correcting mistakes.

Step # 4. Failure Proofing:

Once the points that seem negative have been identified then a careful analysis for the reasons for failure need to be

evaluated in service processes. The analysis done often points outs the prospect for “failure proofing” certain activities in

order to reduce or even eliminate the risk of errors. Poka-Yoke technique is widely used in fail-safe service processes.

Step # 5. Setting Service Targets:

Service managers can learn the nature of customer expectations at each step in the process, through both formal research

and on-the-job experience. The expectations of customer’s vary from the desired level to the threshold level of merely

adequate service.

At each step service providers should design standards to satisfy and make the customers happy else they will have to modify

the customer’s expectations. These standards might include time parameters, the script for a technically correct

performance, and prescriptions for appropriate style and demeanor.

Step # 6. Service Process Redesign:

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The processes that have been out dated, get a fresh lease of life but this does not mean that in the first place the processes

were poorly designed. Rather, changes in technology, customer needs, added service features, and new offerings may have

made existing processes crack and creak. Instead of getting rid of outdated services and replacing them with a new

innovations, redesigning of existing services should be considered.

These are the following types of service redesign:

i. Eliminating Non-Value Adding Steps:

With the goal of focusing on the benefit- producing part of the service encounter, some activities at the front-end and back-

end processes of services can be streamlined. By trying to eliminate non-value-adding steps, service redesign streamlines

these tasks. The outcomes are typically increased productivity and customer satisfaction.

ii. Physical Service:

Physical re-design involves changing the customer’s experience through the tangibles associated with the service or the

physical surroundings of the service. Midway Express Airlines has changed the entire airline flight experience primarily

through re-designing the interior of its airplanes. Leather seats, two-by-two seating, China plates, and cloth napkins are all

ways of creating a new experience through tangibles and services cape re-design.

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iii. Pre-Service:

This type of re-design involves streamlining or improving the activation of the service, focusing on the front-end processes.

An example can be express check-in at a hotel or car rental, pre-admission processes at a hospital and pre-payment of tolls

on highways. Making the front-end of the service more efficient can dramatically change the customer experience during

actual service delivery.

iv. Direct Service:

Direct service means bringing the service to the customer rather than asking the customer to come to the provider. This

might mean delivering the service to the customer in his or her home or workplace.

Restaurant food and dry cleaning delivery to the office, pet grooming in the home, auto repair in one’s driveway, and

computer distance education and training services are examples of firms bringing services directly to their customers rather

than customers travelling to the service provider.

v. Self-Service:

Moving the customer into a production mode rather than a passive, receiving mode is another approach to redesign. Re-

designing the service process in this way increases benefits for the customer in terms of personal control, accessibility, and

timing. Prime examples of self-service occur when companies offer their services via the Internet, as in the case of Internet

banking.

vi. Bundled Service:

Grouping, or bundling, multiple services together is another way to re-design current offerings. The benefit to customers is

in receiving greater value, combined with convenience, than they might have received by hiring each service independently.

Step # 7. Managing Customers Effectively:

Managing customers effectively as partial employees is another way to enhance customer performance in service processes

and to reduce customer-induced service failures.

The following steps need to be followed:

i. Recruitment and Selection:

For a human resource management to be effective, the first plan is to start with recruitment and selection. The same

approach should hold true for “partial employees”. So if co-production requires specific skills, firms should target their

marketing efforts to recruit new customers who have the competency to perform the necessary tasks.

ii. Job Analysis:

A “job analysis” of the customer’s roles in the business needs to be in place, which should be compared against the roles that

the firm wants them to play. Find out if the customers are capable enough to have the skills needed to perform.
iii. Education and Training:

Once the job has been analysed, the next step would be education and training, especially if the job analysis identified

significant misalignment of customers’ role perceptions. If the customers are expected to work more, then the information

which be needed by them to perform better would be greater.

This type of training and education can be given to them in different ways. Automated machines often contain user-friendly

operating instructions. Many websites include a Frequently Asked Questions (FAQ) section. Advertising for new services

often contains significant educational content, and brochures and posted instructions are two widely used approaches.

iv. Motivate:

Motivation is an essential part for managing customers effectively. They must be motivated by rewarding them for

performing well.

v. Appraise:

Appraisals should be done at regular intervals. If the performance is unsatisfactory, then make sure to improve the

customer’s knowledge by giving him proper training.

vi. Ending:

When a relationship is not working out, ending it remains an option of last resort. Physicians have a legal and ethical duty to

help their patients, but the relationship will succeed only if it is mutually cooperative. Having to terminate customer

relationships may indicate problems in the recruitment process that needs to be addressed.

Service Process – Elements

The service process is a part of the extended 3 Ps of services. They are an addition to the existing or traditional 4 Ps of

services. The traditional Ps are important in defining and understanding services, however, they are not sufficient for the

same. Hence, for a comprehensive understanding of services, the additional 3 Ps – People, Process and Physical Evidence

are introduced and studied.

We shall study each element of this extended marketing mix in detail. Process is referred to the procedures, mechanisms and

flow of activities by which the service is delivered or the service delivery and operating systems. For example, the process of

travelling with a budget airline, is very different from that with a full- fledged premium airline. The process of dining at an

up-scale restaurant is different from eating at a local restaurant.

Services are performances or actions done for or with the customers, that is the reason, they typically involve a sequence of

steps and activities. The combination of these steps constitute a service process which is evaluated by the customers.

Furthermore, in a service situation customers are likely to have to queue before they can be served and the service delivery

itself is likely to take a certain length of waiting time.

For example, at a customer service counter of your local telephone service provider, there is a queue of customers waiting for

their turn to register their inquiry, complaint or grievance. A doctor’s office has patients waiting for their turn in the ‘waiting

room’. There are numerous such examples where, the customers have to wait for the service to be delivered, how fast,

effective and efficient is this waiting period is a task for any marketer.
It helps if marketers ensure that customers understand the process of acquiring a service and the acceptable delivery times.

Creating and managing effective service processes are essential tasks for service firms. This is the reason behind customer

care department of various companies give a 24 hours’ time window (or more depending on the efficiency of the service

provider) to address the customer complaint or to visit the customer personally to provide necessary corrective service.

Managing the process factor is essential due to the perishability of services which means that services cannot be inventoried,

stored for reuse or returned. We have studied this under capacity constraints and demand variation. As services are

performances that cannot be stored, it is a challenge for service businesses to manage situations of over or under demand.

Another distinctive characteristics of the service process that provide evidence to the customer is the standardized or

customized approach based on customer’s needs and expectations. Since services are created as they are consumed, and

because the customer is always involved in the process, there are more opportunities for customizing the service to meet the

needs of the customers.

The first concerns the extent to which the characteristics of the service and its delivery system lend themselves to the scope

of customization; the second relates to the extent of flexibility the contact employees or front line staff are able to exercise in

meeting the needs of the customers.

Service Process – Important Decisions to be Taken by a Service Provider in Planning a Service

Process

A service provider has to take many decisions regarding the use of technology, people, materials and equipment in serving

clientele. Most of these decisions are taken while planning the service process, which is in turn determined by the type of

service offered and customer requirements.

Let us now discuss the important decisions to be taken by a service provider in planning a service process:

1. Layout Design:

Layout involves decisions regarding both production process and front/office layout. An ideal design uses the space available

to the maximum extent, minimizing the movement of goods/people, and increasing customers’ convenience. Finally, it

should be pleasant and encouraging for the service employees as well as the customers.

For example, the layout at an airport should place the luggage weighing equipment, ticketing counters, check-in counters,

security check equipment, passenger and visitor lounges, and coffee shop in such a way that it increases the productivity of

airport personnel by reducing the time and efforts involved, and also offers convenience to customers.

2. Organisational Structure:

Decisions under organisational structure determine the extent to which processes need to be standardised. They also

determine whether an informal or formal organisational structure is to be adopted, whether decision-making is to be

centralised or decentralised and how the organisation is to be structured.

Service Process – 4 Important Phases

A product is manufactured away from a customers and the time lag between manufacturing and consumption is more. But

most of the service is processed just few steps away from customers. Other peculiarity of service processes is that throughout

the process there are interactions between service provider and customers.

There may be duties of the customer that are critical for success or failure of the service process. For example, it may be

necessary that the customer provides some information to allow the further proceeding of the process. It is important to

emphasize that a service process must describe the interaction between customer and service provider.

Another vital factor is that the services offered can be divided into two stages namely:

1. Front stage

2. Back stage

Those activities of the service providers and that of the customers which are visible are referred to as front stage. On the

other hand, those activities which cannot be seen are referred to as back stage.

Yet another key property in services is that the processes will have to signify the transfer of resources and related

information from customer to the service provider and the compensation vice versa. Furthermore, service processes are

often cross- organizational. The top-management service providers, who are responsible for providing the service to the

customer coordinates several of sub-processes.

The definition of the lifecycle for service processes is based on the lifecycle which contains the design phase, the deployment

phase, the operation and the evaluation phase.

1. Design Phase:

Today’s customers are very demanding not only in terms of better quality services but also how fast they are served. If a

company does not want to lose the customers base they have to design their service process is in such a way that service is

delivered fast and with quality. Service quality is very important for service providers to build customer loyalty and to

achieve competitive edge.

The design phase help to formalize the interaction between the customer and service provider it helps to define the contacts

and the information exchanged in this contacts. For example a person entering in a restaurant who are the people who will

have first-hand interaction with customers is it the door keeper, the manager who will guide customers to here table or the

waiter who will give the menu card or is it directly the manager who will take the order.
Service process is divided into two stages, namely, front stage and back stage to have appropriate execution of interactions.

For example, in a restaurant front stage activities are welcoming the customers, taking order from the customers, serving

food to the customers, collecting plates after customers are done and in the end bringing the bill whereas, back stage

activities are taking order from waiter with regard to what customer has ordered, cooking, decorating the food, preparing the

bill and payment work.

Both front stages and back stage are so much interlinked that companies should clearly define the roles and regulations of

each and every individual.

The process of design phase is not only concerned with interaction of customer with the service provider, it is also about

designing the interaction that the service provider has with suppliers. Many service providers use suppliers to provide sub-

services for example many companies are buying space is social networking sites to increase their sales so the contract with

these suppliers have to be taken into account as well so that they also are accountable for better service delivery.

Estimating the demand of a service is very tough as they are manufactured the moment they are consumed. Therefore, to

assure the customers about the reliability of the service provider, certification and documentation of the service to be

provided is an important means.

Such a certificate is based on the compliance with rules and structures assuring an adequate service quality as per

requirement. An example for such a surrogate is the certification of ISO 20000 compliance, which is an essential benefit for

a service provider.

2. Deployment Phase:

The planning which has been defined in the design phase is verified by the deploying the process. The interactions between

the client and the supplier will have to be identified in order to avoid clashes and problems between them during the process.

There are many parallel activities which happen in interacting with an employee such as other customers trying to interact

with other service providers outside noise etc. Particular attention should be paid to synchronize the deployment process in

order to avoid such disturbances.

The certification of the designed process requires a sealing of the process during deployment. Once the certification is

obtained, changes of any kind cannot be performed as this may result in losing the certificate. To fulfill the service level

requirements concerning readiness and dependability, appropriate resources and substitute systems have to be allocated and

prepared.
3. Operation Phase:

During the operation of the service process, it is essential to record a number of facts and figures to prove to the customer

that the level agreements relating to the service process have been met.

To begin with, the availability and dependability of the services will have to be recorded. This log will also include the time

required for repair and other broken services. In case the service providers have experienced failure in the past, caution will

have to be taken to prevent such failure from reoccurring.

Interaction between the client and customer will have to be logged which serves as a proof of whether the customer’s

requests has been catered to, the time taken to provide the service and other such information. The same applies for the

handing over and restitution of resources at the end of the service process; the customer’s resources have to be returned to

the customer.

This process will have to done by using specified techniques guaranteeing that formal requirements such as receipts,

protocols etc. are used and a suitable documentation is generated which proves the restitution of the resources.

As the broken services cannot be replaced from the available stock, the service providers of broken services will have to

suggest a remedy wherever possible to ensure the customers are not affected by the same. In order to achieve this, suitable

backup and retrieval procedures will have to be made available.

Suppose there is a failure during the service process, the agreements entered into by the parties will play a vital role which

safeguards the interest of the customers at first. There may be different service level agreements for different customers

defining much shorter recovery times for one customer. Thus, this customer should be supported first.

The challenge here is the tracking of the process status, because the process is cross-organizational. Several service process

certificates such as ISO/IEC 20000 require that quality control and upgrading mechanisms are stimulated throughout the

operation phase to allow a future estimation and enhancement of the process.

4. Evaluation Phase:

The evaluation phase is also prejudiced by the exceptional features of service processes and services. The service providers

will have to be in a position to prove to the customers that the service level agreements have been fulfilled and satisfied all

the provisions stated in the agreement.

Besides this, the details about failures, if any, will be used for recognizing actions for improvement in the service process.

Therefore, the availability and reliability achieved and the failures occurred have to be compared with the service level

agreement, mal-formed interactions shall be traced and violations of the handover and restitution protocols shall be

exposed.
Service Process – Elements of Blueprinting

A service blueprint depicts the entire service process on a map and shows the various stages of customer interaction with the

service provider, and provides minute details of the service delivery processes, the tangible evidence of the service, and the

people involved in carrying it out. Blueprinting helps in breaking up the service delivery process into a series of logical steps.

Blueprinting can be used in either designing or redesigning service products. Let us now discuss the various elements of

blueprinting.

Elements of Blueprinting:

These elements are discussed by Zeithaml and Bitner in “Services Marketing”. The complexity of the service determines the

type of symbols used and the number of lines in the blueprint. However, the rules in sketching the blueprint are not rigid.

The following are the various elements of a blueprint:

1. Customer Role:

This element involves all the steps a customer goes through in selecting a particular service, purchasing it, consuming that

service, and finally rating it. For example, a customer visits a restaurant depending on the type of food he wants to eat and

his financial position, he interacts with the service personnel in the restaurant and orders the food, he consumes the food,

pays the bill, offers a tip, and finally he evaluates the whole experience.

2. Onstage and Backstage Employee Actions:

Onstage employee action can be any activity performed by the service employees that can be seen by the service personnel.

Onstage employees’ action may include the manner in which a waiter takes the order, the way he serves, etc., which can be

seen by the customer. On the other hand, backstage employees’ actions include those activities performed by the service

personnel, which are necessary to support the onstage service personnel. Backstage employees are involved in preparing the

food for the customers, arranging them, billing the service, etc.

3. Support Processes:

A service blueprint maps all the support services, activities, or processes that help the service personnel in producing and

delivering the services. For example, a hotel may provide training for its service personnel (both onstage and backstage) on

the aspects of service creation and delivery. This training is a support process.

4. Technology:

A service provider needs to look into different aspects of the available technology and the extent to which it needs to be

upgraded for delivering the desired services at the expected quality. For example, banks that are planning to introduce

internet banking should analyse the available technologies, and upgrade their systems to offer services through the internet.

5. Conversion Process:

A service provider is required to choose a method of converting inputs into the desired output from the pool of alternatives

available. For example, a bank can communicate with its customers through direct mail, facsimile, telephone, courier,

internet, mobile phone, etc. The choice should be based on the organisation’s ability to bear the costs involved, customer
preferences, the service quality level offered by each alternative, user friendliness of each alternative and the speed at which

it delivers the services.

6. Equipment:

A service provider should opt for equipment that is compatible with the other systems in the process. He should also analyse

the extent to which it is useful in the process, compare its operating costs with the resultant benefits, assess the knowledge

required by the operators to work with the equipment and finally, estimate its maintenance costs. This will help in choosing

the right equipment for the process.

7. Flow of Process:

Process flow determines the flow of work from one stage to another to produce the final output. It involves the logical

arrangement of service personnel and equipment to perform the operations according to the process. For example,

McDonalds has a well-laid process flow with service personnel operating the equipment to deliver the standard services on

time. Generally, companies use flow charts to develop the process flow.

8. Service Personnel:

Service personnel play an important role in production and delivery of services. In fact, they provide a competitive advantage

to the service provider. A service provider should therefore be careful to hire the right people in terms of qualification and

skills. He should then give them the right jobs to do, train and develop them continuously, and motivate them to deliver the

best quality service.

9. Service Location:

As services are intangible in nature, customers attach importance to the service location. They perceive it as an evidence of

the quality of service offered Therefore, service providers should choose a location that is easily accessible to customers, has

a good infrastructure and the right atmosphere. For example, foreign banks and private banks in India today look entirely

different from the old nationalised banks.

Service Process – 4 Major Challenges in Designing the Service Process

Since the services are intangible, there is a difficulty in describing them and it becomes a challenging task for the service

originators.

Lynn Shostack, author of a Marketing Management column for ‘The American Banker’ identified four risks inherent in

describing services-

1. Over Simplification:

Shostack writes, “To say that ‘portfolio management’ means ‘buying and selling stocks’ is like describing the space shuttle as

‘something that flies.'” Many a times, the key points in the service process remains unnoticed or is overlooked in the

designing phase, which will be identified only when the customers on a later date when they criticize about the process.

2. Incompleteness:
Customers can provide a clear picture of the services with which they have direct contact and are familiar to such service.

Hence, the service designers will have to program the functioning services in such a way that they can be altered without

much difficulty to accommodate the customers.

3. Subjectivity:

People are influenced by their personal experiences and they can relate the same to services, irrespective of whether they are

connected to such experiences or not. For instance, if you had a tough day at work, even your favorite food eaten the same

day will not leave you contented.

4. Biased Interpretation:

When the users of services describe the services to the others, a prejudice is formed and in addition to that, it creates bias in

the minds of the listeners with the use of words and their interpretation of the use of the words. For example, the perspective

of a person for the terms “well-mannered and receptive” may be different from what another perceives it to be.
Chx of service
Some of the important characteristics of services are as follows: 1. Perishability 2. Fluctuating Demand 3. Intangibility 4.
Inseparability 5. Heterogeneity 6. Pricing of Services 7. Service quality is not statistically measurable.

1. Perishability:
Service is highly perishable and time element has great significance in service marketing.

ADVERTISEMENTS:

Service if not used in time is lost forever. Service cannot stored.

2. Fluctuating Demand:
Service demand has high degree of fluctuations. The changes in demand can be seasonal or by weeks, days or even hours.
Most of the services have peak demand in peak hours, normal demand and low demand on off-period time.

3. Intangibility:
Unlike product, service cannot be touched or sensed, tested or felt before they are availed. A service is an abstract
phenomenon.

4. Inseparability:
Personal service cannot be separated from the individual and some personalised services are created and consumed
simultaneously.

ADVERTISEMENTS:

For example hair cut is not possible without the presence of an individual. A doctor can only treat when his patient is
present.
5. Heterogeneity:
The features of service by a provider cannot be uniform or standardised. A Doctor can charge much higher fee to a rich client
and take much low from a poor patient.

6. Pricing of Services:
Pricing decision about services are influenced by perishability, fluctuation in demand and inseparability. Quality of a service
cannot be carefully standardised. Pricing of services is dependent on demand and competition where variable pricing may be
used.

7. Service quality is not statistically measurable:

It is defined in form of reliability, responsiveness, empathy and assurance all of which are in control of employee’s direction
interacting with customers. For service, customers satisfaction and delight are very important. Employees directly
interacting with customers are to be very special and important. People include internal marketing, external marketing and
interactive marketing.

What is quality?
Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy given needs. ( American Society for  Quality) Quality,
an inherent or distinguishing characteristic, a degree or grade of excellence. ( American Heritage  Dictionary, 1996). It is the standard of something as measured
against other things of a similar kind; the degree of excellence of something.

SERVICE QUALITY
Service quality (SQ), in its contemporary conceptualisation, is a comparison of perceived expectations (E) of a service with perceived performance (P), giving rise to the
equation SQ=P-E.[1] This conceptualistion of service quality has its origins in the expectancy-disconfirmation paradigm. [2]

A business with high service quality will meet or exceed customer expectations whilst remaining economically competitive.[3] Evidence from empirical studies suggests that
improved service quality increases profitability and long term economic competitiveness. Improvements to service quality may be achieved by improving operational processes;
identifying problems quickly and systematically; establishing valid and reliable service performance measures and measuring customer satisfaction and other performance
outcomes. From the viewpoint of business administration, service quality is an achievement in customer service.[5] It reflects at each service encounter. Customers form service
expectations from past experiences, word of mouth and marketing communications. [6] In general, customers compare perceived service with expected service, and if the former
falls short of the latter the customers are disappointed.

The five dimensions of service quality measured by the

SERVQUAL Instrument
The SERVQUAL Instrument measures the five dimensions of Service Quality. These five dimensions are: tangibility, reliability, responsiveness, assurance and
empathy.

Tangibility
Since services are tangible, customers derive their perception of service quality by comparing the tangible associated with these services provided. It is the
appearance of the physical facilities, equipment, personnel and communication materials. In this survey, on the questionnaire designed, the customers respond to
the questions about the physical layout and the facilities that FFR offers to its customers.

Reliability
It is the ability to perform the promised service dependably and accurately. Reliability means that the company delivers on its promises-promises about
delivery,sevice provision, problem resolutions and pricing. Customers want to do business with companies that keep their promises, particularly their promises
about the service outcomes and core service attributes. All companies need to be aware of customer expectation of reliability. Firms that do not provide the core
service that customers think they are buying fail their customers in the most direct way.

Responsiveness
It is the willingness to help customers and provide prompt service. This dimension emphasizes attentiveness and promptness in dealing with customer’s requests,
questions, complaints and problems. Responsiveness is communicated to customers by length of time they have to wait for assistance, answers to questions or
attention to problems. Responsiveness also captures the notion of flexibility and ability to customize the service to customer needs.
Assurance
It means to inspire trust and confidence. Assurance is defined as employees’ knowledge of courtesy and the ability of the firm and its employees to inspire trust
and confidence. This dimension is likely to be particularly important for the services that the customers perceives as involving high rising and/or about which they
feel uncertain about the ability to evaluate. Trust and confidence may be embodied in the person who links the customer to the company, for example, the
marketing department. Thus, employees are aware of the importance to create trust and confidence from the customers to gain competitive advantage and for
customers’ loyalty.

Empathy
It means to provide caring individualized attention the firm provide its customers. In some countries, it is essential to provide individual attention to show to the
customer that the company does best to satisfy his needs. Empathy is an additional plus that the trust and confidence of the customers and at the same time
increase the loyalty. In this competitive world, the customer’s requirements are rising day after day and it is the companies’ duties to their maximum to meet the
demands of customers, else customers who do not receive individual attention will search elsewhere.

MODEL OF SERVICE QUALITY GAPS

There are five major gaps in the service quality concept, which are shown in Figure 1. The model is from Parasuraman et al (1985). For this survey, we are only
studying the gap between the customer expectation and customer perception of service quality at the FFR. The starting premise for the model is that “perceived
service quality (or satisfaction with service) is a function of the difference between expected service levels and delivered (perceived) service. The following diagram
which summarises how perceived service can diverge from expected service, constitutes the essence of the possible contributing factors of the following gaps
listed.

The challenge to the organization is to isolate which variables are influencing service quality perception negatively and how to eliminate them. Of key importance
to the organization is Gap 1. Gap 5 relates to the overall perception the client-base has of the unit’s ability (for this survey, the FFR’S unit ability) to deliver on
service commitments made
Parasuraman et al. (1985) developed an instrument to measure service quality generally known as SERVQUAL. The disconfirmation paradigm is the basis
of the SERVQUAL model, which views service quality as the gap between the expected level of service and the customer perceptions of the level
received.

SERVQUAL OR GAP MODEL

CONSUMER

PAST EXPERIENCE

PERSONAL NEEDS

WORD OF MOUTH

EXPECTED SERVICE

PERCEIVED SERVICE

SERVICE DELIVERY (PRE &POST CONTACTS )

EXTERNAL COMMUNICATION TO CUSTOMERS

GAP 1

GAP3
 GAP 4

GAP 5

TRANSLATION OF PERCEPTION INTO SERVICE QUALITY SPECIMENS

GAP2

MANAGEMENT PERCEPTION OF CUSTOMERS EXPEDCTETIONS

PROVIDER

It can be said that the origin of SERVQUAL Model is derived from the study of Parasuraman, ZeithamI, and Berry in 1985 based on expectation – perception gap
model. In 1985 work, Parasuraman, ZeithamI, and Berry illustrated that consumers’ quality perceptions are influenced by a series of four distinct gaps occurring in
organizations. These gaps on the service provider’s side, which can impede delivery of services that consumers perceive to be of high quality, are:

The 5 Gaps of Service Quality are

1. Knowledge Gap
2. Policy Gap
3. Communication Gap
4. Delivery Gap
5. Customer Gap

Gap 1: Knowledge Gap

The knowledge gap refers to the difference between the company’s perception of what the customer expects from the industry and the exact expectation of the
customers. This gap can grow if management doesn’t focus on the customer’s expectations thoroughly.GAP 1: Gap between consumer expectation and
management perception: arises when the management or service provider does not correctly perceive what the customers wants or needs. Gap between consumer
expectation and management perception: This gap arises when the management or service provider does not correctly perceive what the
customer wants or needs. For instance – hotel administrators may think guests want better food or in-house restaurant facilities, but guests
may be more concerned with the responsiveness of the staff or the cleanliness of their rooms.

The knowledge gap is the difference between the customer’s expectations of the service and the company’s provision of that service.
 
Essentially, this gap arises because management doesn’t know exactly what customers expect. There are a number of reasons this could
happen, including:
 Lack of management and customer interaction.
 Lack of communication between service employees and management.

 Insufficient market research.

 Insufficient relationship focus.

 Failure to listen to customer complaints.

There are many reasons that can increase the knowledge gap, for example:

 Not focusing on what customers expect.

 Lack of upward communication.
 Insufficient market analysis.
 Less focus on relationships.
 Failure to understand customer complaints.
 Lack of interaction between management and customer.

Example of the Knowledge Gap

The user of Netflix wants to see the upcoming movie trailers on the website. So, Netflix would suffer this gap if it did not provide the upcoming movie list.
 Gap 2: Policy Gap

The policy gap is the difference between management perceptions of the customer needs and the translation of those perceptions into service delivery policies and
standards. This gap occurs because of the dissimilarity of what the customer wants and what the management provides for the customers.

Gap between management perception and service quality specification: this is when the management or service provider might correctly perceive what the

Gap between management perception and service

customer wants, but may not set a performance standard.

quality specification: This is when the management or service provider might

correctly perceive what the customer wants, but may not set a performance
standard. An example here would be that hospital administrators may tell the
nurse to respond to a request ‘fast', but may not specify ‘how fast'.
There are a number of reasons why this gap can occur:
 Lack of customer service standards.

 Poorly defined service levels.

 Failure to regularly update service level standards.

There are many reasons that can grow the policy gap, for instance:

 First of all, Insufficient commitment to service quality

 Additionally, Lack of task standardization
 Moreover, Lack of goal setting
 Further, Shortness of customer service standards.
 Also, Inadequately described service levels.
 Finally, Failure to continually update service level standards.

Example of the Policy Gap

Netflix will suffer from the policy gap if it uploads the upcoming movie trailers after releasing the movie. People want to watch the movie trailer before releasing the
movie.

Gap 3: Delivery Gap

The delivery gap is the dissimilarity between the standard of the service delivery policies of the company and the actual delivery of the service. This problem may
occur because of the communication gap, poor technology, and inappropriate supervisory on productions in the industry. Gap between service quality specification
and service delivery: may arise pertaining to the service personnel. This could arise due to there being poor training, incapability or unwillingness to meet the set
service standard. Gap between service quality specification and service delivery: This gap may arise in situations pertaining to the service
personnel. It could happen due to poor training, incapability or unwillingness to meet the set service standard. An example would be when a
doctor's office has very specific standards of hygiene communicated but the hired staff may have been poorly trained on the need to follow
these strict protocols.

This gap can occur for a number of reasons:

 Deficiencies in human resources policies.

 Failure to match supply to demand.

 Employee lack of knowledge of the product.

 Lack of cohesive teamwork to deliver the product or service.

This gap occurs because of many reasons in the industry, for example;
 Firstly, Lack of teamwork to deliver service or product
 Secondly, the lack of knowledge of the employee about the product or service
 Thirdly, Insufficient human resources.
 In addition, the Service performance gap.
 Further, the Role ambiguity and role conflict – unsure of what your remit is and how it fits with others.
 Moreover, the Poor employee or technology fit – the wrong person or system for the job.
 Also, the Inappropriate supervisory control or lack of perceived control – too much or too little control.

Example of Delivery Gap

Netflix may experience this gap if it uploads the lower video quality movie.

Gap 4: Communication Gap

The communication gap refers to is the gap between what the company advertises about the products and what exactly the customer gets delivered. It occurs when
the company cannot provide services or products according to the commitment.  It is a very important dimension because it may lead to customer
disappointment.gap between service delivery and external communication: consumer expectations are highly influenced by statements made by company
representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of service delivery. ap between service
delivery and external communication: Consumer expectations are highly influenced by statements made by company representatives and
advertisements. The gap arises when these assumed expectations are not fulfilled at the time of delivery of the service. For example – a
hospital printed on its brochure may have clean and furnished rooms but in reality, it may be poorly maintained – in this case the patient's
expectations are not met.

Again. there are a number of reasons why this can happen:

 Overpromising.

 Viewing external communications as separate to what’s going on internally.

 Insufficient communications between the operations and advertising teams.

This communication gap occurs because of many reasons in the industry including;

 Over-commitment.
 Lack of integration between communication and production department.
 Inadequate communications between the advertising teams and the operations department.

Example of Communication Gap

Netflix may suffer this gap if it is unable to telecast the HD video that promised to offer.

Gap 5: Customer Gap

The customer gap is the difference between customer perceptions of the experience and customer expectations of the service.  Many organizations are not
conscious of this gap; therefore, they are losing a big number of customers overnight. Gap between expected service and experienced service: this gap arises when
the consumer misinterprets the service quality. Gap between expected service and experienced service: This gap arises when the consumer
misinterprets the service quality. The physician may keep visiting the patient to show and ensure care, but the patient may interpret this as
an indication that something is really wrong.

Gap1: Difference between consumer expectations and management perceptions of consumer expectations.

Gap2: Difference between management perceptions of consumer expectations and service quality specifications.
 Gap3: Difference between service quality specifications and the service actually delivered.

Gap4: Difference between service delivery and what is communicated about the service to consumers.

Gap5: Difference between service expectation and perceived service quality

Using the Model to Address Gaps

When using the Gap Model of Service Quality, then once you have identified a gap you can use one of the following actions to reduce the
gap.
Gap 1: The Knowledge Gap
Close this gap by learning what customers expect. Options to consider include:
 Using customer research.
 Increasing interactions between management and customers.

 Increasing interactions between management and service staff.

 Act on other customer insights you receive once validated.

Gap 2: The Policy Gap

Close this gap by creating the right service quality standards. Options to consider include:
 Ensure a good proportion of senior management remuneration is aligned to service quality.
 Set, communicate and reinforce quality standards.

 Set measurable service quality goals.

 Train managers to be service quality leaders.

 Update policies regularly.
 Reward staff for the achievement of quality goals.

Gap 3: The Delivery Gap

Close this gap by ensuring that performance meets set standards. Options to consider include:
 Train employees.
 Empower employees.

 Provide the right technology, tools, and equipment.

 Focus on internal marketing.

 Take steps to retain high-performing employees.
Gap 4: The Communication Gap
Close this gap by ensuring the product or service delivered matches and promises made. Options to consider include:
 Getting employee input to your advertising campaigns.
 Use reality advertising by using real customers, real reviews, and real employees etc.

 Ensure advertising campaigns are signed off by the operations team.

 Manage customer expectations realistically.
Gap 5: The Customer Gap

This gap can only be closed by closing the other four gaps in the model. Once this is done then customer expectations and
customer perceptions should align.

Summary
The Gap Model of Service Quality is a framework which can help us to understand common customer satisfaction issues. Within the model
there are five common gaps which can occur:
 The Knowledge Gap

 The Policy Gap

 The Delivery Gap

 The Communication Gap

 The Customer Gap

To use the model, companies should measure each gap and take steps to reduce them where necessary.

According to Parasuraman, ZeithamI, and Berry (1985), perceived service quality is defined in the model as the difference between consumer expectations and
perceptions, which in turn depends on the size and direction of the four gaps associated with the delivery of service quality on the marketer’s side.

In addition, Brown and Bond (1995) stated that the conceptual of service quality also called the expectation – perception gap model is one of the best received and
most heuristically valuable contributions to the services literature. The model identifies the keys discrepancies or gaps relating to managerial perceptions of service
quality, and tasks associated with service delivery to customers. The Gap 1, Gap 2, Gap 3 and Gap 4 are identified as functions of the way in which service is
delivered, whereas Gap 5 pertains to the customer and as such is considered to be the true measure of service quality (Shahin A., 2006).

The five dimensions of service quality

Reliability

Reliability shows the ability to provide services accurately, on time, and credibly (Parasuman, Zeithaml and Berry, 1985). This requires consistency in the
implementation of services and respects commitments as well as keeps promises to customers. Ability to perform the promised service dependably and accurately.
Reliability is an important dimension of the Servqual model that confirms the capacity to provide services exactly, on time, and credibly (Parasuman, Zeithaml, and
Berry, 1985). Consistency is a very important factor here to provide service or product to the customers on time with error-free conditions. You have to respect the
commitment to give your service on time accurately as you promised to them.

Responsiveness

This criterion measures the ability to solve the problem fast, deal with customers’ complaint effectively and the willing to help customers as well as meet the
customers’ requirements (Parasuman, 1988). In other words, responsiveness is the feedback from banks to what customers want. Willingness to help customers and
provide prompt service. Responsiveness refers to the eagerness to assist customers with respect and provide quick service to satisfy (Yang Peterson & Cai, 2003).
This dimension focuses on the two important factors including willingness and promptness. So, you have to ensure that the customer is getting their service within
a short time without any delay and make the customers feel that you are very interested to help them. Responsiveness will be defined by the length of time when
customers wait for the answer or solution. In short, responsiveness is to solve the customer problem as soon as possible by providing expecting information or
replacing products.

Example of the responsiveness dimension: trying to keep no customer in waiting serial and replace the product within a short time before finishing the
promised period.

Tangibles

Tangibles are the images of the facilities, equipment, machines, attitude of staffs, materials, manuals, and information systems of the bank (Parasuman, Zeithaml
and Berry, 1985). In others words, the tangibles refer to the effect of physical facility, equipment, personnel and communication materials on customer
(Sureshchandar, Rajendran and Kamalanabhan, 2001). The atmosphere also called servicescapes influences directly both employees and customers in physiological,
psychological, sociological, cognitive and emotional ways (Sureshchandar, 2001). Appearance of physical facilities, equipment, personnel, and communication materials.
Tangibles represent the physical facilities, the appearance of the employees, equipment, machines, and the information system of the organization (Parasuman,
Zeithaml, and Berry, 1985). It focuses on facilitating materials and physical facilities.
 Assurance

This element creates credibility and trust for customers, which is considered through professional services, excellent technical knowledge, attitude courtesy, and
good communication skills, so that customers can believe in the quality of firm’s services.( Knowledge and courtesy of employees and their ability to convey trust and
confidence). Assurance means creating trust and credibility for the customers. It will be ensured based on the employee’s technical knowledge, effective
communication skills, courtesy, credibility, competency, and also professionalism. Therefore, these skills will help the organization to gain customer trust and
credibility.

The assurance dimension is a combination of a few factors, for example;

 Competence – having the requisite skills and knowledge.

 Courtesy – politeness, respect, consideration, and friendliness of contact staff.
 Credibility – trustworthiness, believability, and honesty of the staff.
 Security – freedom from danger, risk, or doubt.

Sympathy

Sympathy is the caring, consideration, and the best preparation for customers, so that they can feel as ‘guests’ of the firm and are always welcome at any times,
anywhere. Human factors are the core of this success and the more caring the bank gives to customers, the more customer understanding increases.( Caring,
individualized attention the firm provides its customers). Empathy means focusing on the customers attentively to ensure caring and distinguishing service to them
(Yang Peterson & Cai, 2003). It is an essential attitude in some countries in the world to serve every customer individually. It is also a great process to satisfy
customers psychologically and increase confidence, trust, and loyalty. The company might lose its customers due to the lack of empathy inside the employees
therefore they need to ensure empathy.

Initially, the introducers of the Servqual model proposed ten dimensions of service quality that are as follows:

1. Reliability
2. Responsiveness
3. Competence
4. Access
5. Courtesy
6. Communication
7. Credibility
8. Security
9. Knowing the Customer
10.  Also, Tangibles, the five are the best and common one

#1 Just Do It
RELIABILITY: Do what you say you’re going to do when you said you were going to do it.
Customers want to count on their providers. They value that reliability. Don’t providers yearn to find out what customers value? This is it.It’s three times more important to be
reliable than have shiny new equipment or flashy uniforms.

Doesn’t mean you can have ragged uniforms and only be reliable. Service providers have to do both. But providers first and best efforts are better spent making service reliable.

Whether it’s periodics on schedule, on-site response within Service Level Agreements (SLAs), or Work Orders completed on time.

#2 Do It Now
RESPONSIVENESS: Respond quickly, promptly, rapidly, immediately, instantly.
Waiting a day to return a call or email doesn’t make it. Even if customers are chronically slow in getting back to providers, responsiveness is more than 1/5th of their service
quality assessment.

Service providers benefit by establishing internal SLAs for things like returning phone calls, emails and responding on-site. Whether it’s 30 minutes, 4 hours, or 24 hours, it’s
important customers feel providers are responsive to their requests. Not just emergencies, but everyday responses too.

REPORTING RESPONSIVENESS
Call centers typically track caller wait times. Service providers can track response times. And their attainment of SLAs or other Key Performance Indicators (KPIs) of
responsiveness. This is great performance data to present to customers in Departmental Performance Reviews.

#3 Know What You’re Doing

ASSURANCE: Service providers are expected to be the experts of the service they’re delivering. It’s a given.
SERVQUAL research showed it’s important to communicate that expertise to customers. If a service provider is highly skilled, but customers don’t see that, their confidence in
that provider will be lower. And their assessment of that provider’s service quality will be lower.

RAISE CUSTOMER AWARENESS OF YOUR COMPETENCIES

Service providers must communicate their expertise and competencies – before they do the work. This can be done in many ways that are repeatedly seen by customers, such as:

 Display industry certifications on patches, badges or buttons worn by employees

 Include certification logos on emails, letters & reports
 Put certifications into posters, newsletters & handouts
By communicating competencies, providers can help manage customer expectations. And influence their service quality assessment in advance.

#4 Care about Customers as much as the

Service
EMPATHY: Services can be performed completely to specifications. Yet customers may not feel provider employees care about them during delivery. And this hurts customers’
assessments of providers’ service quality.
For example, a day porter efficiently cleans up a spill in a lobby. However, during the clean up doesn’t smile, make eye contact, or ask the customer if there is anything else they
could do for them. In this hypothetical the provider’s service was performed fully. But the customer didn’t feel the provider employee cared. And it’s not necessarily the employees
fault. They may not know how they’re being judged. They may be overwhelmed, inadequately trained, or disinterested.

SERVICE DELIVERY MATTERS

Providers’ service delivery can be as important as how it was done. Provider employees should be trained how to interact with customers and their end-users. Even a brief session
during initial orientation helps. Anything to help them understand their impact on customers’ assessment of service quality.

#5 Look Sharp
TANGIBLES: Even though this is the least important dimension, appearance matters. Just not as much as the other dimensions.
Service providers will still want to make certain their employees appearance, uniforms, equipment, and work areas on-site (closets, service offices, etc.) look good. The danger is
for providers to make everything look sharp, and then fall short on RELIABILITY or RESPONSIVENESS.

At the End of the Day

Customers’ assessments include expectations and perceptions across all five SERVQUAL dimensions. Service providers need to work on all five, but emphasize them in order of
importance. If sacrifices must be made, use these dimensions as a guide for which ones to rework.

Also, providers can use SERVQUAL dimensions in determining specific customer and site needs. By asking questions around these dimensions, providers can learn how they play
out at a particular location/bid opportunity. 

2.2.3 Applications of SERVQUAL Model

There is no doubt that a firm wants to survive in a competitive environment, they have to ensure about the quality of products and services they are supplying to
the market. Some firms provide only services therefore the quality of services is an important issue for all of these firms. Competing goods firms such as
department stores, supermarket may sell a wide range of products and quality of services is a primary means of competitive differentiation. Firms that supply only
services like telecommunication companies, airlines etc. have a little to offer if their quality is not good (Berry, 1986).

It can be said that SERVQUAL is multiple – item scale with good reliability and validity that help firms to have better understanding evaluation the services
expectations and perception of customer and improve the services as well. Parasuraman et al. (1988) claimed that ‘SERVQUAL provides a basic skeleton through its
expectations/ perceptions format encompassing statements for each of the five service quality dimensions. The skeleton, when necessary, can be adapted or
supplemented to fit the characteristics or specific research needs of a particular organization’.

SERVQUAL shows its best valuation when it is used to track service quality trends as well as in combination with other forms of service quality measurement.
Moreover, SERVQUAL is used to evaluate the firm’s quality according to the five services dimensions by averaging the difference scores on items making up the
dimensions (Parasuraman et al.,1985). Similarly, an overall measure of service quality in the form of an average score across all five dimensions. Determining the
relative importance of the five dimensions affecting customers’ overall quality perception is one potential application of SERVQUAL. Another application of
SERVQUAL is used in categorizing a firm’s customers into several perceived – quality segments on the basis of their individual SERVQUAL scores (Parasuraman et
al.,1988).

2.3 Theories and concepts of SERVQUAL Model

2.3.1 Definition
2.3.1.1 Service quality
Service quality is a concept that has aroused considerable interest and debate in the research literature because of the difficulties in both defining it and measuring
it with no overall consensus emerging on either (Wisniewski, 2001). Besides, there are many different definitions of what is meant by service quality. The most
common definition used to define service quality is the extent to which a service meets customers’ needs or expectations (Lewis and Mitchell, 1990; Dotchin and
Oakland, 1994; Asubonteng et al ., 1996; Wisniewski and Donnelly, 1996). Service quality can also be defined as the difference between customer expectations of
service and perceived service. If expectations are greater than performance, then perceived quality is less than satisfactory and the result is customer dissatisfaction
(Parasuraman et al ., 1985; Lewis and Mitchell, 1990).

2.3.1.2 Customer Satisfaction

There are several definitions of customer satisfactions that come from the different point of views of researchers on customer satisfaction. For example, in opinion
of Oliver (1981) ‘Satisfaction is a psychological state resulting when the emotion surrounding disconfirmed expectations is coupled with the consumer’s prior
feelings about the consumption experience’. While Kotler (2000) defined satisfaction as: ‘a person’s feelings of pleasure or disappointment resulting from
comparing a product’s perceived performance (or outcome) in relation to his or her expectations’. Hoyer and MacInnis (2001) said that satisfaction can be
associated with feelings of acceptance, happiness, relief, excitement, and delight. While Hansemark and Albinsson (2004) stated ‘satisfaction is an overall customer
attitude towards a service provider, or an emotional reaction to the difference between what customers anticipate and what they receive, regarding the fulfillment
of some need, goal or desire’.

2.3.2 Service Quality

Realizing the growing importance of services quality to compete on the service dimensions of the augmented product, several scholars have examined the
problems of measuring and managing service quality (Baumann, Burton, Elliott and Kehr, 2007; Bitner, Booms and Tetreault, 1990; Boulding, Kalra, Staelin and
Zeithaml, 1993; Gilbert and Veloutsou, 2006; Parasuraman, Berry and Zeithaml, 1985, 1988, 1990, 1991, 1993; Robledo, 2001). However, service quality is more
difficult to measure than goods quality (Gronroos, 1982) due to the intangibility of services. For this reason, firms actually find it more difficult to understand how
customers perceive services and evaluate service quality (Zeithaml, 1981).

According to Lewis and Booms (1983) service quality is a measure of how well the service level delivered matches customer expectations. Delivering quality service
means conforming to customer expectations on a consistent basis. Parasuraman et al. (1985, 1988) also shared the opinion with Lewis and Booms (1983) by the
statement: ‘Service quality perceptions result from a comparison of consumer expectations with actual service performance’. To demonstrate the above statement,
Parasuraman et al (1985, 1988) proposed the SERVQUAL scale for measuring the service quality. Cronin et al. (1992) summarized four different measurement
models for service quality these are SERVQUAL, SERVPERF, Weighted SERVQUAL, and Weighted SEVPERF. However, SERVPERF was regarded as the best of four
models. Furthermore, Martilla et al. (1977) conducted the Importance – Performance Analysis which was considered as another measurement for service quality.

2.3.3 Customer Satisfaction

Customer satisfaction is generally considered among the most important long term objectives of firms. The marketing concept suggests that a satisfied customer
will be more likely to repurchase products or use the services again than those are dissatisfied (Al – Wugayan et al., 2007). Al – Wugayan et al, (2007) also
concluded that it is generally accepted that satisfaction is a psychological state that results from consumer experiences after consumption. Additionally, the basic
conceptualizations focus on either or both of two aspects: the customers’ initial expectations in relation to product attributes and the customers’ perceptions of the
product performance in relation to these expectations.

There are many different factors influencing customer satisfaction these are friendly employees, courteous employees, knowledgeable employees, helpful
employees, accuracy of billing, billing timeliness, competitive pricing, service quality, good value, billing clarity and quick services (Hokanson, 1995).
In order to gain the customer satisfaction, first of all firms have to understand and satisfy their customer needs and wants (La Barbera and Mazursky, 1983).
According to Kotler (2000) customers’ needs illustrate the felt deprivation of a customer. Meanwhile customers’ wants refer to the form taken by human needs as
they are shaped by culture and individual personality.

Singh, H. (2006) indicated that customer satisfaction affect positively and directly to an organization’s profitability. Hoyer and MacInnis (2001) claimed that satisfied
customers form the foundation of any successful business as customer satisfaction leads to repeat purchase, brand loyalty, and positive word of mouth. To some
extents, the consequences of a lack of customer satisfaction need to be taken into account. According to Hoyer and MacInnis (2001), dissatisfied consumers can
decide to discontinue purchasing the good or service; complain to the company or to a third party and perhaps return the item, or engage in negative word – of –
mouth communication. From summarizing a numerous previous researches about satisfied customer and dissatisfied ones, La Barbera and Mazursky (1983) made a
conclusion that ‘satisfaction influences repurchase intentions whereas dissatisfaction has been seen as a primary reason for customer defection or discontinuation
of purchase’.

Moreover, customer satisfaction affects positively and directly customer loyalty as well as customer retention. According to Sivadas and Baker-Prewitt (2000), there
is an increasing recognition that the ultimate objective of customer satisfaction measurement should be customer loyalty. It can be denied that high customer
satisfaction will result in increased loyalty for the firm and that customers will be less prone to overtures from competition (Fornell, 1992). Anton (1996) also shared
his opinion with statement: ‘satisfaction is positively associated with repurchase intentions, likelihood of recommending a product or service, loyalty and
profitability’. Clearly, customer loyalty brings customer retention to repurchase or use the products and services the firms supply. In addition, long-term customer
retention in competitive markets requires the business to go beyond mere basic satisfaction and to look for ways of establishing ties of loyalty that will help ward
off competitor attack (Clare, 2001).

2.3.4 Relationship between Service Quality and

Customer Satisfaction
Customer satisfaction is often defined as the customers’ post-purchase comparison between pre-purchase expectation and performance received (Oliver, 1980;
Zeithaml et al., 1993). The relationship between service quality and customer satisfaction has been discussed in numerous previous papers during the past decade.

First of all, many researchers present that service quality has positive related relationship with customer satisfaction. In other words, service quality influence
customer satisfaction and vice versa customer satisfaction influence quality (Jun and Cai, 2010). There is no doubt that in the world’s today intensive competition,
once a business wants to survive, they have to improve the service quality that helps them to achieve a different advantage over their rivalries. Service quality,
therefore has become one of the critical factors for satisfying and retaining valued customers in every industries and banking is not an exception. Many scholars
indicate that high service quality results in customer satisfaction and loyalty with the product or service. A satisfied customer will have the willingness to
recommend someone else, reduction in complaints and the bank can achieve the customer retention. Furthermore, a satisfied customer is likely to be a loyal
customer who will give repeating business to the firm (Heskett et al., 1997). More importantly, according to Bedi (2010), the cost of retaining existing customer by
improving the quality of product and services is perceived to be significantly lower than the cost of achieving the new customers.

On the other hand, when regarding the relationship between service quality and customer satisfaction in some industries as banking, some scholars point out that
service quality is not related to customer satisfaction under certain circumstances. For example, through numerous studies, Parasuraman et al. (1985) indicated that
even though customers were satisfied with a particular service, they did not think that it was of high quality. Another scholar also agrees with this idea, Storbacka et
al. (1994, pp. 24) stated that: ‘A customer could, therefore, respond on a questionnaire that a particular bank is of high quality, even if this did not mean this
customer was satisfied with using the bank. Its interest rates on loans may be too high or it might not fit the customer’s preferences for some other reason’.

9 Practical Methods for Measuring Service Quality

We like to measure stuff. How long we can hold our breath, our weight before and after a workout, the IQ of our kids...
Through measurement we can compare, aim, and improve. But some things are less straightforward to measure. Like
service quality.

But measuring service quality is absolutely crucial. Although it's not the same as customer satisfaction — which has its own methods — there’s
a strong and positive correlation between the two .

Here are 9 practical techniques and metrics for measuring your service quality.
 1

SERVQUAL
This is the most common method for measuring the subjective elements of service quality. Through a survey, you ask your customers to rate the
delivered service compared to their expectations.

Its questions cover what SERVQUAL claims are the 5 elements of service quality : RATER.

 Reliability - the ability to deliver the promised service in a consistent and accurate manner.

 Assurance - the knowledge level and politeness of the employees and to what extend they create trust and confidence.

 Tangibles - the appearance; of e.g. the building, website, equipment and employees.

 Empathy - to what extend the employees care and give individual attention.

 Responsiveness - how willing the employees are to offer a speedy service.

You can find an example of a SERVQUAL questionnaire here .

Mystery Shopping
This is a popular technique used for retail stores, hotels, and restaurants, but works for any other service as well. It consists of hiring an
"undercover customer" to test your service quality – or putting on a fake moustache and going yourself, of course.

The 8 Core Principles of Good Customer Service

Performance in any field is guided by a few core principles. Here are the ones governing the quality of customer service.

First principle thinking

The undercover agent then assesses the service based on a number of criteria, for example those provided by SERVQUAL. This offers more
insights than simply observing how your employees work. Which will probably be outstanding — as long as their boss is around.

Post Service Rating

This is the practice of asking customers to rate the service right after it’s been delivered.

With Userlike’s live chat , for example, you can set the chat window to change into a service rating view once it closes. The customers make their
rating, perhaps share some explanatory feedback, and close the chat.

Something similar is done with ticket systems like Help Scout , where you can rate the service response from your email inbox.

It’s also done in phone support. The service rep asks whether you’re satisfied with her service delivery, or you’re asked to stay on the line to
complete an automatic survey. The latter version is so annoying, though, that it kind of destroys the entire service experience.

Different scales can be used for the post service rating. Many make use of a number rating from 1 – 10. There’s possible ambiguity here, though,
because cultures differ in how they rate their experiences .
People from individualistic cultures, for example, tend to choose the extreme sides of the scale much more often than those from collectivistic
cultures. In line with stereotypes, Americans are more likely to rate a service as “amazing” or "terrible," while the Japanese will hardly ever go
beyond “fine” or "not so good." It's important to be aware of when you have an international audience.

Simpler scales are more robust to cultural differences and more suited for capturing service quality. Customers don’t generally make a
sophisticated estimation of service quality.

“Was it a 7 or an 8...? Well... I did get my answer quickly... On the other hand, the service agent did sound a bit hurried…” No. They think the
service was “Fine,” “Great!” or “Crap!”

That’s why at Userlike we make use of a 5-star system in our live chat rating, why Help Scout makes use of three options (great – okay – not
good), and the US government makes use of four smileys (angry – disappointed – fine – great). Easy does it.

Follow-Up Survey
With this method you ask your customers to rate your service quality through an email survey – for example via Google Forms . It has a couple
advantages over the post-service rating.

For one, it gives your customer the time and space for more detailed responses. You can send a SERVQUAL type of survey, with multiple
questions instead of one. That’d be terribly annoying in a post-service rating.

It also provides a more holistic overview of your service. Instead of a case-by-case assessment, the follow-up survey measures your customers’
overall opinion of your service.

It’s also a useful technique if you didn’t have the post service rating in place yet and want a quick overview of the state of your service quality.

But there are plenty of downsides as well. Such as the fact that the average inbox already looks more like a jungle than a French garden.
Nobody’s waiting for more emails – especially those that demand your time.

With a follow-up survey, the service experience will also be less fresh. Your customers might have forgotten about it entirely, or they could
confuse it with another experience.

And last but not least: To send an email survey, you must first know their emails.

Example of a follow-up survey.

In-App Survey
With an in-app survey, the questions are asked while the visitor is on the website or in the app, instead of after the service or via email. It can be
one simple question – e.g. "how would you rate our service" – or it could be a couple of questions.

Convenience and relevance are the main advantages. SurveyMonkey offers some great tools for implementing something like this on your
website. Also check out hotjar's guide on website feedback .
 6

Customer Effort Score (CES)

This metric was proposed in an influential Harvard Business Review article. In it, they argue that while many companies aim to "delight" the
customer – to exceed service expectations – it’s more likely for a customer to punish companies for bad service than it is for them
to reward companies for good service .

While the costs of exceeding service expectations are high, they show that the payoffs are marginal. Instead of delighting our customers, so the
authors argue, we should make it as easy as possible for them to have their problems solved. That’s what they found had the biggest positive
impact on the customer experience , and what they propose measuring.

Looking for better customer relationships?

Test Userlike for free and chat with your customers on your website, Facebook Messenger, and Telegram.

Read more
Don’t ask: “How satisfied are you with this service?” – its answer could be distorted by many factors, such as politeness. Ask: “How much effort
did it take you to have your questioned answered?”

The lower the score, the better. CEB found that 96% of the customers with a high effort score were less loyal in the future, compared to only 9%
of those with low effort scores.

Social Media Monitoring

This method has been gaining momentum with the rise of social media. For many people, social media serve as an outlet. A place where they can
unleash their frustrations and be heard.

And because of that, they are the perfect place to hear the unfiltered opinions of your customers – if you have the right tools. Facebook and
Twitter are obvious choices, but also review platforms like TripAdvisor or Yelp can be very relevant. Buffer suggests to ask your social media
followers for feedback on your service quality.

Two great tools to track who’s talking about you are Mention and Google Alerts .

Documentation Analysis
With this qualitative approach you read or listen to your respectively written or recorded service records. You’ll definitely want to go through the
documentation of low-rated service deliveries, but it can also be interesting to read through the documentation of service agents that always rank
high. What are they doing better than the rest?

The hurdle with the method isn’t in the analysis, but in the documentation. For live chat and email support it’s rather easy, but for phone support
it requires an annoying voice at the start of the call: “This call could be recorded for quality measurement.”
 9

Objective Service Metrics

These stats deliver the objective, quantitative analysis of your service. These metrics aren’t enough to judge the quality of your service by
themselves, but they play a crucial role in showing you the areas you should improve in.

 Volume per channel. This tracks the amount of inquiries per channel. When combined with other metrics, like those covering
efficiency or customer satisfaction, it allows you to decide which channels to promote or cut down.

 First response time. This metric tracks how quickly a customer receives a response on her inquiry. This doesn’t mean their issue are
solved, but it’s the first sign of life – notifying them that they’ve been heard.

 Response time. This is the total average of time between responses. So let’s say your email ticket was resolved with 4 responses, with
respective response times of 10, 20, 5, and 7 minutes. Your response time is 10.5 minutes. Concerning reply times , most people reaching out via
email expect a response within 24 hours; for social channels it’s 60 minutes. Phone and live chat require an immediate response, under two minutes.

 First contact resolution ratio. Divide the number of issues that's resolved through a single response by the number that required
more responses. Forrester research showed that first contact resolutions are an important customer satisfaction factor for 73% of customers.

 Replies per ticket. This shows how many replies your service team needs on average to close a ticket. It’s a measure of efficiency and
customer effort.

 Backlog Inflow/Outflow. This is the number of cases submitted compared to the number of cases closed. A growing number
indicates that you’ll have to expand your service team.

 Customer Success Ratio. A good service doesn’t mean your customers always finds what they want. But keeping track of the number
that found what they looked for versus those that didn’t, can show whether your customers have the right ideas about your offerings.

 "Handovers" per issue. This tracks how many different service reps are involved per issue. Especially in phone support, where
repeating the issue is necessary, customers hate handovers. HBR identified it as one of the four most common service complaints.

 Things Gone Wrong. The number of complaints/failures per customer inquiry. It helps you identify products, departments or service
agents that need some "fixing."

 Instant Service/Queueing Ratio. Nobody likes to wait. Instant service is the best service. This metric keeps track of the ratio of
customers that were served instantly versus those that had to wait. The higher the ratio, the better your service.

 Average Queueing Waiting Time. The average time that queued customers have to wait to be served.

 Queueing Hang-ups. How many customers quit the queueing process. These count as a lost service opportunity.

 Problem Resolution Time. The average time before an issue is resolved.

 Minutes Spent Per Call. This can give you insight on who are your most efficient operators.

 Find more service metrics here .

Some of these measures are also financial metrics, such as the minutes spent per call and number of handovers. You can use them to calculate
your service costs per service contact. Winning the award for the world’s best service won’t get you anywhere if the costs eat up your profits.

Some service tools keep track of these sort of metrics automatically, like Talkdesk for phone and Userlike for live chat support. If you make use
of communication tools that aren’t dedicated to service, tracking them will be a bit more work.

One word of caution for all above mentioned methods and metrics: beware of averages, they will deceive you . If your dentist delivers a great
service 90% of the time, but has a habit of binge drinking and pulling out the wrong teeth the rest of the time, you won’t stick around long.

A more realistic image shapes up if you keep track of the outliers and standard deviation as well. Measure your service, aim for a high average,
and improve by diminishing the outliers.
What is the SERVQUAL Model?
The Service Quality Model or SERVQUAL Model was developed and implemented by the American marketing gurus Valarie Zeithaml, A.
Parasuraman and Leonard Berry in 1988. It is a method to capture and measure the service quality experienced by customers.
Initially, emphasis was on the development of quality systems in the field product quality. Over time, it became more and more important to
improve the quality of related services. Improved service quality could give organisations a competitive edge. In addition, service in general
became more important, and as a result, the SERVQUAL Model had a serious impact in the eighties. Back then, measuring service was abstract
and not easily quantifiable.

The SERVQUAL Model is primarily a qualitative analysis. If a satisfaction survey mainly depends on the transactions between supplier and
buyer, the observed quality is measured through generic, environmental factors.

SERVQUAL Model: shortcomings

This framework can be used to expose shortcomings in the service and address them. In that sense, it is a so-called ‘GAP Analysis‘. It compares
the expected service quality and the service quality that has actually been experienced.
This experience is measured based on the customers perceptions. It is an external analysis of customer needs in relation to the quality of the
service they experienced.

Because of that, the focus is always on customer needs and not on the measuring system or the organisation’s perception; the way they would
like to see themselves.

Furthermore, when determining the customer needs, the gap between customer expectations and the actual service they experience, needs to
be taken into account.

Expectancy pattern
Central to the SERVQUAL Model is the expectancy pattern of the service quality; the difference between expectations and perception. It there is
a difference in quality, that is shown in the difference (the gap) between what was expected and what was actually experienced.
 The SERVQUAL Model enables organisations to learn which factors play a role how the customer’s expectancy pattern is formed. That way, the
organisation can improve itself and take this expectancy pattern into account beforehand.

SERVQUAL Model: 10 dimensions

The first studies according to the SERVQUAL Model, were carried out exclusively for the services of a telecommunications, a banking and a
maintenance company. The previously mentioned researched surveyed consumers and their perceptions of the experienced service quality of
these three organisations.

From the original questionnaire of almost 100 items, 25 finally remained that were considered important by the consumers regarding customer
service. In the end, this resulted in the following ten dimensions that still play an important role in the SERVQUAL Model:

1. Reliability
2. Responsiveness
3. Competence
4. Access
5. Courtesy
6. Communication
7. Credibility
8. Security
9. Knowing the customer
10. Tangibles
The reliability depends on to what extent the service is accurate and honest. Responsiveness is about promptly and adequately responding to
customer questions or complaints.

Competence relates to the expertise an organisation has and the access determines if a customer can quickly and efficiently contact the right
department.

Courtesy is the trying to be polite to customers and communication is about clear, honest and prompt information for clients. Credibility is
about to what extent the organisation’s message is believable and reliable.

Security is meant to add trust to the service and proper access for the consumer. Knowing the customer includes a personal approach and
responding well to customers’ needs and wishes. The tangibles are tangible information; that what is visible to the customers in the form of for
instance the visibility of staff (work clothes / uniform), the decoration and cleanliness of an office building and all other facilities.

A smaller version of the SERVQUAL Model is the RATER model.

Where the SERVQUAL Model works with 10 dimensions to measure the quality of service, the RATER model works with 5 dimensions.
SERVQUAL Model: 5 gaps
Both the communication between the customer and the service-providing organisation, as well as the organisation’s internal communication,
are of vital importance for the level of quality of the service. It is good when organisations know the expectancy pattern of their customers.

Therefore, the SERVQUAL Model identifies five gaps that can arise between the customer’s needs and the service that a company offers.

1. Knowledge gap

A gap arises when an organisation’s knowledge of customer expectations is lacking, preventing them from approaching consumers in the right
way.

2. Standards gap

The organisation has already formed its own idea about what the customer expects from their service. If this idea is wrong from the start and
does not correspond to what customers actually expect, there is a significant risk that the organisation will translate it wrongly into a quality
policy and corresponding rules.

3. Delivery gap

A gap can also occur when the organisation offers service that is different from what the consumer had expected. This also involves an
incorrect implementation. For instance, in the way employees carry out policy.

4. Communications gap

Sometimes, the external (marketing) communication that the organisation sends out, can create the wrong expectations among customers. It
also happens that the organisation communicates and promises things that are not in line with what they can actually deliver.
 5. Satisfaction gap

Dissatisfaction results from a (significant) difference between the service a customer expects and the service they actually experience.
Eventually, this will lead to the biggest gap in the experience of quality.

It’s Your Turn

What do you think? What is your experience with the SERVQUAL Model? Do you recognize the practical explanation or do you have more
additions? What are your success factors for good quality management?

Share your experience and knowledge in the comments box below.

If you liked this article, then please subscribe to our Free Newsletter for the latest posts on models and methods.

More information

1. Parasuraman, A., Zeithaml, V. A., & Berry, L. L. (1985). A conceptual model of service quality and its implications for future research. the Journal
of Marketing, 41-50.
2. Saleh, F., & Ryan, C. (1991). Analysing service quality in the hospitality industry using the SERVQUAL model. Service Industries Journal, 11(3),
324-345.
3. Zeithaml, V. A., Berry, L. L., & Parasuraman, A. (1996). The behavioral consequences of service quality. the Journal of Marketing, 31-46.
How to cite this articl

SERVQUAL is a multi-dimensional research instrument designed to capture consumer expectations and perceptions of a service along five dimensions that are believed to
represent service quality. SERVQUAL is built on the expectancy-disconfirmation paradigm, which, in simple terms, means that service quality is understood as the extent to
which consumers' pre-consumption expectations of quality are confirmed or disconfirmed by their actual perceptions of the service experience. When the SERVQUAL
questionnaire was first published in 1985 by a team of academic researchers,  A. Parasuraman, Valarie Zeithaml and Leonard L. Berry to measure quality in the service sector,
[1]
 it represented a breakthrough in the measurement methods used for service quality research. The diagnostic value of the instrument is supported by the  model of service
quality which forms the conceptual framework for the development of the scale (i.e. instrument or questionnaire). The instrument has been widely applied in a variety of contexts
and cultural settings and found to be relatively robust. It has become the dominant measurement scale in the area of service quality. In spite of the long-standing interest in
SERVQUAL and its myriad of context-specific applications, it has attracted some criticism from researchers.

SERVQUAL is a multidimensional research instrument designed to measure service quality by capturing respondents’ expectations and perceptions along five dimensions of
service quality.[2] The questionnaire consists of matched pairs of items - 22 expectation items and 22 perceptions items - organised into five dimensions which are believed to
align with the consumer's mental map of service quality dimensions. Both the expectations component and the perceptions component of the questionnaire consist a total of 22
items, comprising 4 items to capture tangibles, 5 items to capture reliability, 4 items for responsiveness, 4 items for assurance and 5 items to capture empathy. [3] The
questionnaire may be administered as a paper survey, web survey or in a face-to-face interview. Known studies have published high scores for validity and reliability from small
to large size sample sizes. In practice, it is customary to add additional items such as the respondent's demographics, prior experience with the brand or category and
behavioural intentions (intention to revisit/ repurchase, loyalty intentions and propensity to give word-of-mouth referrals). Thus, the final questionnaire may consist of 60+ items
though the 22 questions are the same. The face to face interview version may take one hour, per respondent, to administer but not the print or web survey forms.

Summary of SERVQUAL items [4]

Dimension No. of Items in Questionnaire Definition

Reliability 5 The ability to perform the promised service dependably and accurately

Assurance 4 The knowledge and courtesy of employees and their ability to convey trust and confidence

Tangibles 4 The appearance of physical facilities, equipment, personnel and communication materials

Empathy 5 The provision of caring, individualized attention to customer

Responsiveness 4 The willingness to help customers and to provide prompt service

The instrument which was developed over a five-year period; was tested, pre-tested and refined before appearing in its final form. The instrument's developers, Parasuraman,
Ziethaml and Berry, claim that it is a highly reliable and valid instrument. [5] Certainly, it has been widely used and adapted in service quality research for numerous industries and
various geographic regions. In application, many researchers are forced to make minor modifications to the instrument as necessary for context-specific applications. Some
researchers label their revised instruments with innovative titles such as LibQUAL+ (libraries), EDUQUAL (educational context),[6] HEALTHQUAL (hospital context) [7] and
ARTSQUAL (art museum). [8]

Examples of matched pairs of items in the SERVQUAL questionnaire [9]

Dimension Sample expectations item Sample perceptions item

When excellent telephone companies promise to do something by a certain time,

Reliability XYZ company provides its services at the promised time
they do so

The behaviour of employees in the XYZ bank instils confidence in

Assurance The behaviour of employees in excellent banks will instill confidence in customers
you.

Tangibles Excellent telephone companies will have modern looking equipment XYZ company has modern looking equipment

Empathy Excellent banks will have operating hours convenient to customers XYZ bank has convenient operating hours

Employees of excellent telephone companies will never be too busy to help a

Responsiveness XYZ employees are never too busy to help you
customer

The SERVQUAL questionnaire has been described as "the most popular standardized questionnaire to measure service quality." [10]  It is widely used by service firms, most often
in conjunction with other measures of service quality and customer satisfaction. The SERVQUAL instrument was developed as part of a broader conceptualization of how
customers understand service quality. This conceptualization is known as the model of service quality or more popularly as the gaps model.

The model of service quality[edit]

The model of service quality, popularly known as the gaps model was developed by a group of American authors, A. Parasuraman, Valarie A. Zeithaml and Len Berry, in a
systematic research program carried out between 1983 and 1988. The model identifies the principal dimensions (or components) of service quality; proposes a scale for
measuring service quality (SERVQUAL) and suggests possible causes of service quality problems. The model's developers originally identified ten dimensions of service
quality, but after testing and retesting, some of the dimensions were found to be autocorrelated and the total number of dimensions was reduced to five, namely - reliability,
assurance, tangibles, empathy and responsiveness. These five dimensions are thought to represent the dimensions of service quality across a range of industries and settings.
[11]
 Among students of marketing, the mnemonic, RATER, an acronym formed from the first letter of each of the five dimensions is often used as an aid to recall.

A simplified model of service quality

Businesses use the SERVQUAL instrument (i.e. questionnaire) to measure potential service quality problems and the model of service quality to help diagnose possible causes
of the problem. The model of service quality is built on the expectancy-confirmation paradigm which suggests that consumers perceive quality in terms of their perceptions of
how well a given service delivery meets their expectations of that delivery. [12]  Thus, service quality can be conceptualized as a simple equation:

SQ = P- E

where;
SQ is service quality
P is the individual's perceptions of given service delivery
E is the individual's expectations of a given service delivery

When customer expectations are greater than their perceptions of received delivery, service quality is deemed low. When perceptions exceed
expectations then service quality is high. The model of service quality identifies five gaps that may cause customers to experience poor service
quality. In this model, gap 1 is the service quality gap and is the only gap that can be directly measured. In other words, the SERVQUAL instrument
was specifically designed to capture gap 1. In contrast, Gaps 2-5 cannot be measured, but have diagnostic value.
 Summary of Gaps with Diagnostic Indications [13]

Gap Brief description Probable Causes

Gap 1  Insufficient marketing research

Difference between the target market's expected service and  Inadequate upward communications
management's perceptions of the target market's expected service
 Too many layers of management
The Knowledge Gap

 Lack of management commitment

to service quality
Gap 2 Difference between management's perceptions of customer  Employee perceptions of
expectations and the translation into service procedures and infeasibility
The standards Gap
specifications
 Inadequate goal setting
 Inadequate task standardisation

 Technical breakdowns or
malfunctions
Gap 3  Role conflict/ ambiguity
Difference between service quality specifications and the service  Lack of perceived control
The Delivery Gap actually delivered
 Poor employee-job fit
 Poor technology- fit
 Poor supervision or training

 Lack of horizontal communications

 Poor communication with
Gap 4 advertising agency
 Inadequate communications
The Difference between service delivery intentions and what is
between sales and operations
Communications communicated to the customer
Gap  Differences in policies and
procedures across branches or divisions
of an entity
 Propensity to overpromise

Development of the instrument and model[edit]

The development of the model of service quality involved a systematic research undertaking which began in 1983, and after various refinements,
resulted in the publication of the SERVQUAL instrument in 1988. [14] The model's developers began with an exhaustive literature search in order to
identify items that were believed to impact on perceived service quality. This initial search identified some 100 items which were used in the first
rounds of consumer testing. Preliminary data analysis, using a data reduction technique known as factor analysis (also known as principal
components analysis) revealed that these items loaded onto ten dimensions (or components) of service quality. The initial ten dimensions that were
believed to represent service quality were:

1. Competence is the possession of the required skills and knowledge to perform the service. For example, there may be competence
in the knowledge and skill of contact personnel, knowledge and skill of operational support personnel and research capabilities of the
organization.
2. Courtesy is the consideration for the customer's property and a clean and neat appearance of contact personnel, manifesting as
politeness, respect, and friendliness.
3. Credibility includes factors such as trustworthiness, belief and honesty. It involves having the customer's best interests at prime
position. It may be influenced by company name, company reputation and the personal characteristics of the contact personnel.
4. Security enables the customer to feel free from danger, risk or doubt including physical safety, financial security and confidentiality.
5. Access is approachability and ease of contact. For example, convenient office operation hours and locations.
6. Communication means both informing customers in a language they are able to understand and also listening to customers. A
company may need to adjust its language for the varying needs of its customers. Information might include for example, explanation
of the service and its cost, the relationship between services and costs and assurances as to the way any problems are effectively
managed.
7. Knowing the customer means making an effort to understand the customer's individual needs, providing individualized attention,
recognizing the customer when they arrive and so on. This in turn helps to delight the customers by rising above their expectations.
8. Tangibles are the physical evidence of the service, for instance, the appearance of the physical facilities, tools and equipment used
to provide the service; the appearance of personnel and communication materials and the presence of other customers in the service
facility.
9. Reliability is the ability to perform the promised service in a dependable and accurate manner. The service is performed correctly on
the first occasion, the accounting is correct, records are up to date and schedules are kept.
10. Responsiveness is the readiness and willingness of employees to help customers by providing prompt timely services, for example,
mailing a transaction slip immediately or setting up appointments quickly.

Further testing suggested that some of the ten preliminary dimensions of service quality were closely related or autocorrelated. Thus the ten initial
dimensions were reduced and the labels amended to accurately reflect the revised dimensions. By the early 1990s, the authors had refined the
model to five factors which in testing, appear to be relatively stable and robust.

1. Reliability: the ability to perform the promised service dependably and accurately

2. Assurance: the knowledge and courtesy of employees and their ability to convey trust and confidence
3. Tangibles: the appearance of physical facilities, equipment, personnel and communication materials
4. Empathy: the provision of caring, individualized attention to customers
 5. Responsiveness: the willingness to help customers and to provide prompt service

These are the five dimensions of service quality that form the basis of the individual items in the SERVQUAL research instrument (questionnaire).
The acronym RATER, is often used to help students of marketing remember the five dimensions of quality explicitly mentioned in the research
instrument. It is these five dimensions that are believed to represent the consumer's mental checklist of service quality.

Nyeck, Morales, Ladhari, and Pons (2002) stated the SERVQUAL measuring tool “appears to remain the most complete attempt to conceptualize
and measure service quality” (p. 101). The SERVQUAL measuring tool has been used by many researchers across a wide range of service
industries and contexts, such as healthcare, banking, financial services, and education (Nyeck, Morales, Ladhari, & Pons, 2002).

Criticisms of SERVQUAL and the model of service quality[edit]

Although the SERVQUAL instrument has been widely applied in a variety of industry and cross-cultural contexts, there are many criticisms of the
approach. Francis Buttle published one of the most comprehensive criticisms of the model of service quality and the associated SERVQUAL
instrument in 1996 in which both operational and theoretical concerns were identified. [15] Some of the more important criticisms include:

Face validity: The model of service quality has its roots in the expectancy-disconfimation paradigm that informs customer satisfaction. [16] A number of researchers
have argued that the research instrument actually captures satisfaction rather than service quality.[17] Other researchers have questioned the validity of
conceptualising service quality as a gap. [18]
Construct validity: The model's developers tested and retested the SERVQUAL scale for reliability and validity. However, at the same time, the model's developers
recommended that applied use of the instrument should modify or adapt them for specific contexts. Any attempt to adapt or modify the scale will have implications
for the validity of items with implications for the validity of the dimensions of reliability, assurance, tangibles, empathy and responsiveness. [19]
Ambiguity of expectations construct: SERVQUAL is designed to be administered after respondents have experienced a service. They are therefore asked
to recall their pre-experience expectations. However, recall is not always accurate, raising concerns about whether the research design accurately captures true
pre-consumption expectations. In addition, studies show that expectations actually change over time. Consumers are continually modifying their expectations as
they gain experience with a product category or brand. [20] In light of these insights, concerns have been raised about whether the act of experiencing the service
might colour respondents' expectations.
Operational definition of the expectations construct: The way that expectations has been operationalised also represents a concern for theorists investigating the
validity of the gaps model. The literature identifies different types of expectations. [21] Of these, there is an argument that only forecast expectations are true
expectations. Yet, the SERVQUAL instrument appears to elicit ideal expectations.[22] Note the wording in the questionnaire in the preceding figure which grounds
respondents in their expectations of what excellent companies will do. Subtle use of words can elicit different types of expectations. Capturing true expectations is
important because it has implications for service quality scores. When researchers elicit ideal expectations, overall service quality scores are likely to be lower,
making it much more difficult for marketers to deliver on those expectations. [23]
Questionnaire length: The matched pairs design of the questionnaire (total of 22 expectation items plus 22 perception items= 44 total items) makes for a very long
questionnaire. If researchers add demographic and other behavioural items such as prior experience with product or category and the standard battery of
demographics including: age, gender, occupation, educational attainment etc. then the average questionnaire will have around 60 items. In practical terms, this
means that the questionnaire would take more than one hour per respondent to administer in a face-to-face interview. Lengthy questionnaires are known to
induce respondent fatigue which may have potential implications for data reliability. In addition, lengthy questionnaires add to the time and cost involved in data
collection and data analysis. Coding, collation and interpretation of data is very time consuming and in the case of lengthy questionnaires administered across
large samples, the findings cannot be used to address urgent quality-related problems. In some cases, it may be necessary to carry out 'quick and dirty' research
while waiting for the findings of studies with superior research design.
Administration of the questionnaire: Some analysts have pointed out that the SERVPERF instrument, developed by Cronin and Taylor, [24][25]  and which reduced the
number of questionnaire items by half (22 perceptions items only), achieves results that correlate well with SERVQUAL, with no reduction in diagnostic power,
improved data accuracy through reductions in respondent boredom and fatigue and savings in the form of reduced administration costs.
Dimensional instability: A number of studies have reported that the five dimensions of service quality implicit in the model (reliability, assurance, tangibles, empathy
and responsiveness) do not hold up when the research is replicated in different countries, different industries, in different market segments or even at different time
periods. [26][27]  Some studies report that the SERVQUAL items do not always load onto the same factors. In some empirical research, the items load onto fewer
dimensions, while other studies report that the items load onto more than five dimensions of quality. In statistical terms, the robustness of the factor loadings is
known as a model's dimensional stability. Across a wide range of empirical studies, the factors implicit in the SERVQUAL instrument have been shown to be
unstable. [28] Problems associated with the stability of the factor loadings may be attributed, at least in part, to the requirement that each new SERVQUAL
investigation needed to make context-sensitive modifications to the instrument in order to accommodate the unique aspects of the focal service setting or problem.
However, it has also been hypothesised that the dimensions of service quality represented by the SERVQUAL research instrument fail to capture the true
dimensionality of the service quality construct and that there may not be a universal set of service quality dimensions that are relevant across all service industries.
[29]

In spite of these criticisms, the SERVQUAL instrument, or any one of its variants (i.e. modified
forms), dominates current research into service quality. [30]  In a review of more than 40 articles
that made use of SERVQUAL, a team of researchers found that “few researchers concern
themselves with the validation of the measuring tool”.[31]  SERVQUAL is not only the subject of
academic papers, but it is also widely used by industry practitioners.

Sampling technique
a population is the entire collection of people or things you are interested in;
-a census is a measurement of all the units in the population;
-a population parameter is a number that results from measuring all the units
in the population;
-a sampling frame is the specific data from which the sample is drawn, e.g., a
telephone book;
-a unit of analysis is the type of object of interest, e.g., arsons, fire
departments, firefighters;
 -a sample is a subset of some of the units in the population;
-a statistic is a number that results from measuring all the units in the sample;
-statistics derived from samples are used to estimate population parameters.
In my research I select simple random sampling, especially stratified simple random
sampling. The concept of "randomness" implies that every item being considered has an equal
chance of being selected as part of the sample.

Simple Random Sampling: A simple random sample (SRS) of size n is produced by

a scheme which ensures that each subgroup of the population of size n has an equal
probability of being chosen as the sample.

Stratified Random Sampling: Divide the population into "strata". There can be any
number of these. Then choose a simple random sample from each stratum. Combine
those into the overall sample. That is a stratified random sample. (Example: Church A
has 600 women and 400 women as members. One way to get a stratified random
sample of size 30 is to take a SRS of 18 women from the 600 women and another SRS
of 12 men from the 400 men.)
Simple random sampling is a type of probability sampling in which the researcher randomly selects a subset of participants from a population. Each member of
the population has an equal chance of being selected. Data is then collected from as large a percentage as possible of this random subset. A simple random
sample is a randomly selected subset of a population. In this sampling method, each member of the population has an exactly equal chance of being selected.

This method is the most straightforward of all the probability sampling methods, since it only involves a single random selection and requires little advance
knowledge about the population. Because it uses randomization, any research performed on this sample should have high internal and external validity.

When to use simple random sampling

Simple random sampling is used to make statistical inferences about a population. It helps ensure high internal validity: randomization is the best method to
reduce the impact of potential confounding variables.

In addition, with a large enough sample size, a simple random sample has high external validity: it represents the characteristics of the larger population.

However, simple random sampling can be challenging to implement in practice. To use this method, there are some prerequisites:

 You have a complete list of every member of the population.

 You can contact or access each member of the population if they are selected.
 You have the time and resources to collect data from the necessary sample size.

Simple random sampling works best if you have a lot of time and resources to conduct your study, or if you are studying a limited population that can easily be
sampled.

In some cases, it might be more appropriate to use a different type of probability sampling:

 Systematic sampling involves choosing your sample based on a regular interval, rather than a fully random selection. It can also be used when you
don’t have a complete list of the population.
 Stratified sampling is appropriate when you want to ensure that specific characteristics are proportionally represented in the sample. You split your
population into strata (for example, divided by gender or race), and then randomly select from each of these subgroups.
 Cluster sampling is appropriate when you are unable to sample from the entire population. You divide the sample into clusters that approximately
reflect the whole population, and then choose your sample from a random selection of these clusters.

How to perform simple random sampling

There are 4 key steps to select a simple random sample.
Step 1: Define the population
Start by deciding on the population that you want to study.

It’s important to ensure that you have access to every individual member of the population, so that you can collect data from all those who are selected for the
sample.

Example: PopulationIn the American Community Survey, the population is all 128 million
households who live in the United States (including households made up of citizens and non-
citizens alike).

Step 2: Decide on the sample size

Next, you need to decide how large your sample size will be. Although larger samples provide more statistical certainty, they also cost more and require far more
work.

There are several potential ways to decide upon the size of your sample, but one of the simplest involves using a formula with your desired confidence interval and
confidence level, estimated size of the population you are working with, and the standard deviation of whatever you want to measure in your population.

The most common confidence interval and levels used are 0.05 and 0.95, respectively. Since you may not know the standard deviation of the population you are
studying, you should choose a number high enough to account for a variety of possibilities (such as 0.5).

You can then use a sample size calculator to estimate the necessary sample size.

Example: Sample sizeThe ACS follows 3.5 million households each year. This is a small fraction
of the overall population of 128 million households, but it is a large enough sample size to gather
detailed data on all geographical regions and demographic groups in the United States, including
those usually underrepresented in surveys.

Step 3: Randomly select your sample

This can be done in one of two ways: the lottery or random number method.

In the lottery method, you choose the sample at random by “drawing from a hat” or by using a computer program that will simulate the same action.

In the random number method, you assign every individual a number. By using a random number generator or random number tables, you then randomly pick a
subset of the population. You can also use the random number function (RAND) in Microsoft Excel to generate random numbers.

Example: Random selectionThe Census Bureau randomly selects addresses of 295,000

households monthly (or 3.5 million per year). Each address has approximately a 1-in-480 chance
of being selected.

Step 4: Collect data from your sample

Finally, you should collect data from your sample.

To ensure the validity of your findings, you need to make sure every individual selected actually participates in your study. If some drop out or do not participate for
reasons associated with the question that you’re studying, this could bias your findings.

For example, if young participants are systematically less likely to participate in your study, your findings might not be valid due to the underrepresentation of this
group.

Simple random sampling formula

Consider a hospital has 1000 staff members, and they need to allocate a night shift to 100
members. All their names will be put in a bucket to be randomly selected. Since each person has
an equal chance of being selected, and since we know the population size (N) and sample size
(n), the calculation can be as follows:

P = 1- N-1/N.N-2/N-1….N-n/N-(n-1)

Cancelling=1-N-n/N

=n/N

 =100/1000

=10%

Stratified sampling is appropriate when you want to ensure that specific characteristics are
proportionally represented in the sample. You split your population into strata (for example,
divided by gender or race), and then randomly select from each of these subgroups. In stratified
sampling, researchers divide subjects into subgroups called strata based on characteristics that
they share (e.g., race, gender, educational attainment, etc). Once divided, each subgroup is
randomly sampled using another probability sampling method. Stratified random sampling is a
type of probability sampling using which a research organization can branch off the
entire population into multiple non-overlapping, homogeneous groups (strata) and randomly
choose final members from the various strata for research which reduces cost and improves
efficiency. Members in each of these groups should be distinct so that every member of all
groups get equal opportunity to be selected using simple probability. This sampling method is
also called “random quota sampling”.

Stratified sampling may be Proportionate Stratified Random Sampling or Disproportionate

Stratified Random Sampling (i.e Proportionate Stratified Random Sampling has constant
sampling fraction through whereas Disproportionate Stratified Random sampling each stratum
has variable/different sampling fraction).
In a proportionate stratified sample, the population of sampling units is divided into sub-groups,
or strata, and the sample is selected separately in each stratum. For the sampling to be
proportionate, the sampling fraction (or interval) must be identical in each stratum.

Proportionate better than disproportionate because it allocation is used for two reasons:
to reduce standard error for survey estimates, and to ensure that sample sizes for strata are of
their expected size, so chosen in my study.

In a disproportionate stratified sample, the population of sampling units is divided into sub-
groups, or strata, and a sample selected separately per stratum. Crucially, the sampling fraction is
not the same within all strata: some strata are over-sampled relative to others.

In a proportionate Stratified Random Sampling Formula: nh = ( Nh / N ) * n

nh= Sample size for hth stratum (a strata sample size or proportionate stratified random sample)

Nh= Population size for hth stratum (a simple random sampling from the total population)

N = Size of entire population (all population)

n = Size of entire sample (size of each strata group entire ,i.e it may no. of age range strata
group entire, sex/gender strata group entire, and the like)

Example: if the researcher wanted a sample of 50,000 graduates using age range, the
proportionate stratified random sample will be obtained using this formula: (sample
size/population size) x stratum size. The table below assumes a population size of 180,000
MBA graduates per year.
From this in the age of 24-28, the strata entire /group sample size (n) is 90,000, a simple random
sample size (Nh) is 50,000 which is given (randomly selected from the total population), and the
Nh
total population (N) is 180,000, so the strata sample size (nh) = ∗n
N

Nh 50000
Strata sample size (nh) = ∗n ata sample size (nh) = ∗90000 = 25000. This means that
N 180000
out of 180000 total populations 90000 were grouped under the age between 24-28 with a 25000
stratified sample size from the total simple random sample size of 50000.

Again from this in the age of 29-33, the strata entire /group sample size (n) is 60,000, a simple
random sample size (Nh) is 50,000 which is given (randomly selected from the total population),
Nh
and the total population (N) is 180,000, so the strata sample size (nh) = ∗n
N

Nh 50000
Strata sample size (nh) = ∗n ata sample size (nh) = ∗60000 = 8,333. This means that
N 180000
out of 180000 total populations 60000 were grouped under the age between 29-33 with a 8,333
stratified sample size from the total a simple random sample size of 50000 and so on

How an appropriate random sample size calculated from the total population?

Answer, this can be done in one of two ways: the lottery method or random number method.

LOTTERY METHOD
In the lottery method, you choose the sample at random by “drawing from a hat” or by using a
computer program that will simulate the same action. A researcher randomly picks numbers,
with each number corresponding to a subject or item, in order to create the sample. To create
a sample this way, the researcher must ensure that the numbers are well mixed before selecting
the sample population. Under this method units are selected on the basis of random draws.
Firstly each member or element of the population is assigned a unique number. In the next step
these numbers are written on separate cards which are physically similar in shape, size, color etc.
Then they are placed in a basket and thoroughly mixed. In the last step the slips are taken out
randomly without looking at them. The number of slips drawn is equal to the sample size
required.

With a lottery method, each member of the population is assigned a number, after which
numbers are selected at random. ... Because individuals who make up the subset of the larger
group are chosen at random, each individual in the large population set has the same probability
of being selected. The lottery method of creating a simple random sample is exactly what it
sounds like. A researcher randomly picks numbers, with each number corresponding to a subject
or item, in order to create the sample. To create a sample this way, the researcher must ensure
that the numbers are well mixed before selecting the sample population.

Lottery method suffers from few drawbacks. The process of writing N number of slips is
cumbersome and shuffling a large number of slips, where population size is very large, is
difficult. Also human bias may enter while choosing the slips. Hence the other alternative i.e.
random numbers can be used. A lottery method cannot be used when the population is infinite.

RANDOM NUMBER METHOD

In the random number method, you assign every individual a number. By using a random
number generator or random number tables, you then randomly pick a subset of the population.
You can also use the random number function (RAND) in Microsoft Excel to generate random
numbers.

By using a random number table, all members in the population will have an equal and
independent chance of being selected for the sample group. ... A random number table is a
series of digits (0 to 9) arranged randomly in rows and columns, as demonstrated in the
small sample shown below. A random number table is a series of digits (0 to 9) arranged
randomly in rows and columns, as demonstrated in the small sample.

Unlike lottery method, random number method, can be used when the population is infinite

These are commonly found at the back of textbooks on the topics of statistics or research methods. Most random number tables will have as many as
10,000 random numbers. These will be composed of integers between zero and nine and arranged in groups of five. These tables are carefully created to
ensure that each number is equally probable, so using it is a way to produce a random sample required for valid research outcomes.

To create a simple random sample using a random number table just follow these steps.

1. Number each member of the population 1 to N.

2. Determine the population size and sample size.
3. Select a starting point on the random number table. (The best way to do this is to close your eyes and point randomly onto the page.
Whichever number your finger is touching is the number you start with.)
4. Choose a direction in which to read (up to down, left to right, or right to left).
5. Select the first n numbers (however many numbers are in your sample) whose last X digits are between 0 and N. For instance, if N is a 3
digit number, then X would be 3. Put another way, if your population contained 350 people, you would use numbers from the table whose
last 3 digits were between 0 and 350. If the number on the table was 23957, you would not use it because the last 3 digits (957) is greater
than 350. You would skip this number and move to the next one. If the number is 84301, you would use it and you would select the person
in the population who is assigned the number 301.
6. Continue this way through the table until you have selected your entire sample, whatever your n is. The numbers you selected then
correspond to the numbers assigned to the members of your population, and those selected become your sample.

Using a Computer
In practice, the lottery method of selecting a random sample can be quite burdensome if done by hand. Typically, the population being studied is large
and choosing a random sample by hand would be very time-consuming. Instead, there are several computer programs that can assign numbers and
select n random numbers quickly and easily. Many can be found online for free.
Sampling With Replacement
Sampling with replacement is a method of random sampling in which members or items of the population can be chosen more than once for inclusion
in the sample. Let’s say we have 100 names each written on a piece of paper. All of those pieces of paper are put into a bowl and mixed up. The
researcher picks a name from the bowl, records the information to include that person in the sample, then puts the name back in the bowl, mixes up the
names, and selects another piece of paper. The person that was just sampled has the same chance of being selected again. This is known as sampling
with replacement.
Sampling Without Replacement

Sampling without replacement is a method of random sampling in which members or items of the population can only be selected one time for
inclusion in the sample. Using the same example above, let’s say we put the 100 pieces of paper in a bowl, mix them up, and randomly select one name
to include in the sample. This time, however, we record the information to include that person in the sample and then set that piece of paper aside
rather than putting it back into the bowl. Here, each element of the population can only be selected one time.

In general, a simple random sample is a randomly selected subset of a population. In this

sampling method, each member of the population has an exactly equal chance of being selected.

This method is the most straightforward of all the probability sampling methods, since it only

involves a single random selection and requires little advance knowledge about the population.

Because it uses randomization, any research performed on this sample should have

high internal and external validity.
If you have 4 strata with 500, 1000, 1500, 2000 respective sizes and the research organization
selects ½ as sampling fraction. A researcher has to then select 250, 500, 750, 1000 members
from the respective stratum.

When to use stratified sampling

To use stratified sampling, you need to be able to divide your population into mutually exclusive and exhaustive subgroups. That means every member of the
population can be clearly classified into exactly one subgroup.

Stratified sampling is the best choice among the probability sampling methods when you believe that subgroups will have different mean values for the variable(s)
you’re studying. It has several potential advantages:

 Ensuring the diversity of your sample

A stratified sample includes subjects from every subgroup, ensuring that it reflects the diversity of your population. It is theoretically possible (albeit unlikely) that
this would not happen when using other sampling methods such as simple random sampling .

 Ensuring similar variance

If you want the data collected from each subgroup to have a similar level of variance, you need a similar sample size for each subgroup.

With other methods of sampling, you might end up with a low sample size for certain subgroups because they’re less common in the overall population.

 Lowering the overall variance in the population

Although your overall population can be quite heterogeneous, it may be more homogenous within certain subgroups.

For example, if you are studying how a new schooling program affects the test scores of children, both their original scores and any change in scores will most
likely be highly correlated with family income. The scores are likely to be grouped by family income category.

In this case, stratified sampling allows for more precise measures of the variables you wish to study, with lower variance within each subgroup and therefore for
the population as a whole.

 Allowing for a variety of data collection methods

Sometimes you may need to use different methods to collect data from different subgroups.

For example, in order to lower the cost and difficulty of your study, you may want to sample urban subjects by going door-to-door, but rural subjects using mail.

Research exampleYou are interested in how having a doctoral degree affects the wage gap
between men and women among graduates of a certain university.
Because only a small proportion of this university’s graduates have obtained a doctoral degree,
using a simple random sample would likely give you a sample size too small to properly
compare the differences between men and women with a doctoral degree versus those without
one.

Therefore, you decide to use a stratified sample, relying on a list provided by the university of all
its graduates within the last ten years.

Step 1: Define your population and subgroups

Like other methods of probability sampling, you should begin by clearly defining the population from which your sample will be taken.
Choosing characteristics for stratification
You must also choose the characteristic that you will use to divide your groups. This choice is very important: since each member of the population can only be
placed in only one subgroup, the classification of each subject to each subgroup should be clear and obvious.

Stratifying by multiple characteristics

You can choose to stratify by multiple different characteristics at once, so long as you can clearly match every subject to exactly one subgroup. In this case, to get
the total number of subgroups, you multiply the numbers of strata for each characteristic.

For instance, if you were stratifying by both race and gender, using four groups for the former and two for the latter, you would have 2 x 4 = 8 groups in total.

ExampleYour population is all graduates of the university within the last ten years. You will
stratify by both gender and degree received.

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Step 2: Separate the population into strata

Next, collect a list of every member of the population, and assign each member to a stratum.

You must ensure that each stratum is mutually exclusive (there is no overlap between them), but that together, they contain the entire population.

ExampleYou compile a list of every graduate’s name, gender, and the degree that they obtained.
Using this list, you stratify on two characteristics: gender, with two strata (male and female), and
degree, with three strata (bachelor’s, master’s, and doctorate).
Combining these characteristics, you have six groups in total. Each graduate must be assigned to
exactly one group.
Characteristic Strata Groups

Gender  Female 1. Male bachelor’s graduates,

 Male 2. Female bachelor’s graduates,
3. Male master’s graduates,
4. Female master’s graduates,
5. Male doctoral graduates,
Degree  Bachelor’s
6. Female doctoral graduates.
 Master’s
 Doctorate

Step 3: Decide on the sample size for each stratum

First, you need to decide whether you want your sample to be proportionate or disproportionate.

Proportionate versus disproportionate sampling

In proportionate sampling, the sample size of each stratum is equal to the subgroup’s proportion in the population as a whole.

Subgroups that are less represented in the greater population (for example, rural populations, which make up a lower portion of the population in most countries)
will also be less represented in the sample.
 In disproportionate sampling, the sample sizes of each strata are disproportionate to their representation in the population as a whole.

You might choose this method if you wish to study a particularly underrepresented subgroup whose sample size would otherwise be too low to allow you to draw
any statistical conclusions.

Sample size
Next, you can decide on your total sample size. This should be large enough to ensure you can draw statistical conclusions about each subgroup.

If you know your desired margin of error and confidence level as well as estimated size and standard deviation of the population you are working with, you can use
a sample size calculator to estimate the necessary numbers.

ExampleBecause you need to ensure your sample size of doctoral graduates is large enough, you
decide to use disproportionate sampling.
Even though doctoral students make up a small proportion of the overall student population, your
sample is about ⅓ bachelor’s graduates, ⅓ master’s graduates, and ⅓ doctoral graduates.

Step 4: Randomly sample from each stratum

Finally, you should use another probability sampling method, such as simple random or systematic sampling, to sample from within each stratum.

If properly done, the randomization inherent in such methods will allow you to obtain a sample that is representative of that particular subgroup.

Advantages of simple random sampling

1. It is a fair method of sampling, and if applied appropriately, it helps to reduce any bias involved compared to any other sampling
method involved.
2. Since it involves a large sample frame, it is usually easy to pick a smaller sample size from the existing larger population.
3. The person conducting the research doesn’t need to have prior knowledge of the data he/ she is collecting. One can ask a
question to gather the researcher need not be a subject expert.
4. This sampling method is a fundamental method of collecting the data. You don’t need any technical knowledge. You only require
essential listening and recording skills.
5. Since the population size is vast in this type of sampling method, there is no restriction on the sample size that the researcher
needs to create. From a larger population, you can get a small sample quite quickly.
6. The data collected through this sampling method is well informed; more the samples better is the quality of the data.
7. . One of the great advantages of simple random sampling method is that it needs only a minimum knowledge
of the study group of population in advance.

8. 2. It is free from errors in classification.

9. 3. This is suitable for data analysis which includes the use of inferential statistics.
10. 4. Simple random sampling is representative of the population

11. 5. It is totally free from bias and prejudice

12. 6. The method is simple to use.

13. 7. It is very easy to assess the sampling error in this method.

Disadvantages of Simple random sampling

Simple random sampling suffers from the following demerits:

1. This method carries larger errors from the same sample size than that are found in stratified sampling.

2. In simple random sampling, the selection of sample becomes impossible if the units or items are widely dispersed.

3. One of the major disadvantages of simple random sampling method is that it cannot be employed where the units of
the population are heterogeneous in nature.
4. This method lacks the use of available knowledge concerning the population.

5. Sometimes, it is difficult to have a completely cataloged universe.

6. It may be impossible to contact the cases which are very widely dispersed.
SAMPLING THEQNIQUE
Who is Slovin and where and how did the Slovin's Formula for determining the sample size for a
survey research originated?
The Slovin's Formula is quite popularly use in my country for determining the sample size for a
survey research, especially in undergraduate thesis in education and social sciences, may be
because it is easy to use and the computation is based almost solely on the population size. The

N
Slovin's Formula is given as follows: n =
1+ Ne 2
n = N/(1+Ne2), where n is the sample size, N is the population size and e is the margin of error to
be decided by the researcher (i.e e error of tolerance). You may be happy with a confidence level
of 95 percent (giving a margin error of 0.05), or you may require a tighter accuracy of a 98
percent confidence level (a margin of error of 0.02). 
N
What is the formula of n= ?
1+ Ne 2