Department of MBA

IMS Engineering College, Ghaziabad

Marketing of Services

UNIT 4

Service Performance & Service Quality

 Customer Satisfaction
• Customer satisfaction is the affable notion of the
customers if they perceive the service experience
to be in line with their expectation.
• If a service fulfills the needs and wants of the
customers, it results into customer satisfaction.
• The higher the fulfillment, the higher the
satisfaction will be
• One of the prime marketing objective should be
to maximize customer satisfaction.
 Factors influencing customer satisfaction

• Product and service features: service features are the

prime determinants of customer satisfaction
• Customer’s emotions: emotions are a state of mind and
depend upon the customer’s feelings at a point of time.
• Service success or failure: service success leads to
satisfaction while failure leads to dissatisfaction. E.g. a
service error.
• Perceptions of equity or fairness: if the customer feels
that he/she has been treated at par with other
customers, it leads to satisfaction.
 Service Quality
• Kasper et al (1999) defined service quality as
‘the extent to which the service, service
processes and the service organization can
satisfy the expectations of the user’
• Service quality is crucial for the success of any
service organization
• Service quality plays an important role in
adding value to the overall service experience.
 Perceived Service Quality
Experienced Service Quality
Perceived Service
Quality
Expected Service Quality

• Experienced Service quality: Services can also be

defined as an experience. Intangibility in service leads the
customer to perceive the quality of the service on the basis
of ‘experience’, which is the result of ‘technical quality’ &
‘functional quality’. Technical quality is related to ‘what’
customer receives on interacting with the firm while
functional quality is ‘process related dimension’, it is
related to ‘how’ the customer receives the service
 Perceived Service Quality
• Expected Service quality: this is related to the
customer expectations when they purchase any
service. Customer expectations may be based on
 Market Communication: advertisements,
promotions
 Image of the organization: skills, innovativeness
 Word of mouth: voluntary communication,
informal, influential
 Customer needs: e.g. customers who are in hurry
expect a prompt service.
 Dimensions of Service Quality
• Service quality is crucially determined by the
inconsistency between service expectations and
service perceptions of the customers (Gupta et al.
2005). According to Parasuraman et al. (1988),
service quality includes dimensions of:
 Reliability
 Assurance
 Tangibility
 Empathy
 Responsiveness
 Dimensions of Service Quality
 Reliability: ability to perform the service accurately,
in the same manner and on time. Reliability brings
confidence in the customers.
 Assurance: based on communication, trustworthiness,
capability of the service provider. It creates feeling of
credibility and honesty.
 Tangibility: includes appearance of the physical
facilities, equipments, personnel and communication
material. Through tangibility, service organizations
show differential advantages (how different they are)
 Dimensions of Service Quality
 Empathy: involves the provision of caring and
providing individualized attention to the customers. The
employees of the service organization must be
approachable and sensitive to the needs of the customers.
 Responsiveness: This includes the willingness to help
and provide timely service to the customers. Employees
should create a ‘memorable’ service experience for the
customers. If the customers are kept waiting for a long
time for the service, it will create negative image in their
minds about the service provider.
 Customer perception, service quality
& customer satisfaction
impacting service purchase decision
 Service failure
• Providing a ‘zero defect service’ should be the
objective of all the service providers but problems arise
when gaps are left in service delivery (Weun et al.
2004)
• By providing a service that is not able to satisfy its
customers, a business loses customers. It is a well
known fact that it costs a lot more to acquire a new
customer in comparison to retain an existing one
• Customer’s response from the service can be –
delighted, satisfied, dissatisfied or frustrated. However,
customer’s feedback and responses are important.
 Service failure - Reasons
• Service system failure – when the core service
itself fails, e.g. train getting cancelled.
• Failure in implicit or explicit customer requests:
when employees are not able to meet customer’s
individual needs e.g. food not cooked as per order
etc, seating smokers in non smoker’s section etc
• Unprompted or unsolicited employee actions:
rudeness, poor attitude, wrong order delivered,
order misplaced, incorrect billing,
Methods to collect customer’s feedback
• Feedback forms: company can ask the customers to fill
feedback forms
• Transactional surveys: these surveys are done at the
end of a transaction to gauge the level of customer
satisfaction. E.g ATM transaction
• Mystery shoppers: service providers send their
employees like normal customers to experience the
service and judge the skills of service personnel
• Unsolicited feedbacks: sometimes, customers give their
feedback without being asked for the same especially
when they are dissatisfied / frustrated from the service.
 Customer’s response
to service failures
• If a service failure occurs, a customer has two ways
to respond to it – either to complain to not to
complain to the service provider about the service
failure.
• If the customer complaints, it gives a chance to the
service provider to improve the situation.
• It is the customers who do not complain as they
nurture negative feelings and are the ones who are
never likely to return to the service provider for re
purchase of the service.
 Handling Service Complaints
Types of Complainers
• Zeithaml and Bitner (2000) identified four types of
complainers:
• Passives: this group is least likely to take any action.
They do not say anything to the service provider, are
less likely to spread a negative WOM and are unlikely to
approach a third party like the consumer forum. They
believe that complaining will not result into any action
• Voicers: This group actively complaints to the service
providers but will not spread negative WOM and also
will not approach a third party. They help service
providers to improve.
 Handling Service Complaints
Types of Complainers
• Irates: this group complaints to the service
provider, in addition to this, it also complaints to
relatives and friends about the failure. They switch
over to another service provider. However, they do
not approach a third party like the consumer forum.
• Activists: This group actively complaints to the
service providers, relatives, friends, they spread
negative word of mouth and also approach third
party for reimbursement of losses. They are highly
optimistic about outcomes of their actions.
 Service Recovery Management
• When customers complain, they expect the
service provider to take action. It is thus, up to
the service provider to have a recovery strategy
in place as described below:
 Listen to the customers
 Apologize to the customers
 Express concerns to the customers
 Assist the customers
 Compensate the customers
 Recovery Strategies
 Listen to the customers: The service provider must listen
carefully to what the customers have to say while they are
complaining. This will help the service provider to improve.
 Apologize to the customers: After listening, the service
provider can make immediate apology. Researches show that
many customers drop their idea to switch service provider as
soon as an apology is tendered.
 Express concerns to the customers: The service provider
after tendering apology can express concerns about the
service failure depending upon the magnitude of service
failure occurred.
 Recovery Strategies
 Assist the customers: this includes actions taken to
rectify the problem. This is the most effective recovery
strategy as it brings the customer back to the original
purpose of purchasing the service. E.g. reordering food
for the customer who complains about bad food.
 Compensate the customers: this includes monetary
payments to the customers for the inconvenience
experienced. It is a extreme remedy that is used when
the customer feels that assistance alone is not sufficient
to ease the problem. Compensation can be in form of
free food, discount coupons etc.
 Effectiveness of
Recovery strategies
• Good recovery strategies are important to build up ongoing
relationships with the customers who were unhappy about
company’s services.
• Service recovery can lead to value enhancement (La and
Kandampully, 2004). It leads to re-alignment of damage
control systems on the basis of learning from service
recoveries, so that the same mistake does not occur in future.
• Although service recovery is often regarded as a matter of
operational concern, if integrated with strategic and
conceptual issues, it can contribute to firm’s business
orientation.
 Service Guarantees
• Due to characteristics of service, customer cannot be sure
of quality of a service unless they experience it
themselves.
• As costs are involved and process cannot be reversed
(services are non-returnable), in order to generate a feeling
of trust and confidence, the service providers try to give
guarantees. To ensure that service delivery is going to
satisfy the customers.
• A service guarantee is a commitment (promise) to service
provider gives to the customer concerning all or part of the
service process and may also include a compensation for
the customer if the commitment is not honoured.
 Service Guarantees - Types
• Unconditional service guarantees – an unconditional
service guarantee guarantees 100% satisfaction
without any terms and conditions whatsoever. This
applies to the customer’s overall satisfaction.
• Conditional service guarantees – conditional
guarantee comes with terms and conditions. It is
given when the service provider wants to promote a
certain element of service offering. E.g. a telecom
provider may tell about conditions such as
downtime, billing errors, internet speed etc while
offering service level agreements to customers.
Designing the Service Guarantee
Preliminary Analysis

Internal Analysis:
External Analysis: - Process fit
- Industry standards
- Employee motivation
- Competition
- Pricing strategy
- Legal aspects
- Process to manage
- Uncontrollable factors
customer’s feedback

Service Quality signal – service guarantees help service

organizations to send signals about their service to customers.

Guarantee Design – adopt a customer oriented approach, design a

service standard & try to honour promises every time

Implementation and
Communication

Performance Analysis
 Role of CRM in managing service
quality
• Customer Relationship management is the strongest
and the most efficient approach in maintaining and
creating relationships with customers.
• Customer relationship management is not only pure
business but also ideate strong personal bonding within
people. Development of this type of bonding drives the
business to new levels of success.
• Once this personal and emotional linkage is built, it is
very easy for any organization to identify the actual
needs of customer and help them to serve them in a
better way.
 Role of CRM in managing service
quality
• A CRM system consists of a historical view and analysis of all the
acquired or to be acquired customers. This helps in reduced
searching and correlating customers and to foresee customer needs
effectively and increase business.
• CRM contains each and every bit of details of a customer, hence it is
very easy for track a customer accordingly and can be used to
determine which customer can be profitable and which not.
• In CRM system, customers are grouped according to different
aspects according to the type of business they do or according to
physical location and are allocated to different customer managers
often called as account managers. This helps in focusing and
concentrating on each and every customer separately.
• A CRM system is not only used to deal with the existing customers
but is also useful in acquiring new customers.
 The
Gap Model of service quality
• Developed by Zeithaml et al. (1985)
• This model is used to analyze quality issues and
to help managers understand the ways of
improving service quality.
• The model is divided into two parts – one relates
to the customers and the other relates to the
service providers
• The model talks about five gaps – gap1, gap 2,
gap 3, gap 4, and gap 5 in service offering.
 CRM & Service quality
• CRM results into higher customer satisfaction
and hence, higher perceived quality of service
 The
Gaps Model of service quality
 The
Gap Model of service quality
 GAP 1: occurs due to difference between customer
expectations and management’s perception of
customer expectations (inaccurate perception)
 GAP 2: Service quality specification gap between
company’s perception of customer expectations and
service design. This is also called the design gap.
 GAP 3: This is the service delivery gap. It occurs due
to difference in service delivery standards and actual
service delivery. It is caused due to lack of skills and
knowledge of the employees or customers not
fulfilling their role.
 The
Gap Model of service quality
• GAP 4: Occurs when the service delivered is not as per
the expectations created by the communication made
by the organization (in their advertisements etc). It is
caused to due over promising, execution problem etc.
This is called the marketing communication gap
• GAP 5: Occurs when the experienced service
(perceived service) is not as per the expectations of the
customer. It is called the perceived service quality gap
or the overall service gap. To close this gap, it is
necessary to remove all the four gaps previously
discussed.