Recap

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Recap Week 2
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Classifying services

• The degree of tangibility/intangibility - Are
  there some tangible aspects of the service? To
  what extent?
• Who or what is the direct recipient of service
  processes- Are the services directed to the
  customers themselves or to objects belonging to
  them?
• The place of service delivery- Do the customers
  go to the service or the service to the customer?

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Classifying services

• Customisation versus standardisation -Should all
  customers receive the same service or should it
  be more flexible?
• Relationship with customers Is the relationship
  formal or informal?
• Discrete versus continuous services Does the
  relationship occur on a single occasion or
  continuous over a period of time?
• High contact versus low contact- How much of the
  service is tangible or intangible?

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Service encounters

• Three levels of customer contact
• High contact
• Medium contact
• Low contact

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Consumer behaviour and services
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Sources of key difference

• Intangibility
• Heterogeneity
• Simultaneous production and consumption
• Search properties
• Search qualities
• Experience qualities
• Credence qualities

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Key differences

• Information search
• Greater use of personal services
• Perceived risk
• Financial risk
• Performance risk
• Physical risk
• Social risk
• Psychological risk
• Time risk
• Evaluation of service alternatives
• Smaller evoked set
• Substitutability by self

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Key differences in consumer behaviour

• Purchase
• Simultaneous purchase and consumption, or
  services may be purchased ahead of delivery
• Risk and risk reducing strategies
• Consumer experience
• Dominates the evaluation process
• Post purchase evaluation
• Word of mouth communication
• Attribution of satisfaction
• Brand loyalty
• Cultural differences

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Service Quality

• Week 3

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Learning objectives

• After this week you should be able to
• define service quality
• distinguish between service quality and
  satisfaction
• understand the importance of service quality to
  the management of services
• describe various models of service quality
• be aware of current issues regarding service
  quality.

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Service quality

• Elusive
• An abstract concept, similar in nature to an
  attitude, as it represents a general, overall
  appraisal of a product or service
• Service quality can be defined as a consumers
  judgement or perception of an entitys overall
  excellence or superiority, often as a result of
  comparing expectations with perceived performance

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Intangibility and quality

• Quality of physical goods can be assessed before
  purchase
• Services cant be sampled before purchase
  increasing risk
• Marketers must develop strategiesaimed at
  tangibilising the intangible, standardising
  production and consumption (as much as
  possible),and reducing the perceived risk and
  cognitive dissonance often associated with the
  purchase of services.

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Inseparability and quality

• Quality depends on the interaction between
  service provider and consumer
• Consumers often rely on this interpersonal
  process to assess service quality

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Variability and quality

• Customers, service personnel and environmental
  influences may result in variability
• Variability makes it difficult to apply quality
  standards

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Service quality

• Insulating customers
• Creating competitive advantage
• Encouraging repeat purchase
• Promoting loyalty
• Enhancing positive word of mouth
• Lowering the marketing costs due to higher
  loyalty
• Facilitating a positive service outcome

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The evolution ofservice quality

• Disconfirmation of expectations
• The Nordic model
• The SERVQUAL/Gaps model
• The three component model
• Integrating perspectives

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Disconfirmation of expectations (Oliver 1980)
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The Nordic model (Gronroos 1990)

• Represents the service experience on the basis of
  functional and technical elements
• Technical quality refers to what the customer
  receives from the service
• Functional quality refers to service delivery
• Model emphasises companies must be careful what
  they promise

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The Gaps model (Zeithaml, Parasuraman Berry
1990)
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The Gaps
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The Gaps (cont.)
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The Gaps (cont.)
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The Gaps (cont.)
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The SERVQUAL dimensions Perceived Service
Quality

• Reliability (dependability, accurate performance)
• Assurance (competence, courtesy, credibility
  security)
• Tangibles (appearance of physical elements)
• Empathy (easy access, good communications
  customer understanding)
• Responsiveness (promptness helpfulness)
• (Parasuraman, Zeithaml Berry 1988)

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SERVQUAL
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SERVQUAL (cont.)
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The three-component model Rust Oliver (1994)
Source Rust Oliver, 1994. p. 11
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Hierarchical model
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Current issues in service quality

• Causality
• Does satisfaction lead to quality or does quality
  lead to satisfaction
• What is the relationship between service quality,
  customer satisfaction behavioural intent?

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Current issues (cont.)

• Should researchers use performance only measures
  or expectation perception when assessing
  service quality?

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Model Advantages Disadvantages
Disconfirmation of expectations Takes into consideration expectations as well as actual perceptions The use of expectations in measuring service quality has currently come under a lot of criticism in the literature
Nordic model (Gronroos) Focuses on the service outcome and process, that is, what the customer receives from the service and how the service is delivered Does not explicitly consider the impact of the physical environment of the service setting on service quality perceptions. Uses the disconfirmation of expectations model as a basis
Servqual/Gaps Identifies a number of areas important to service quality assessment. Has been widely used in the literature and in practice Uses gap scores as derived from the disconfirmation of expectations model. Does not have an outcome orientation does not measure service outcome perceptions
Three-component model Extends Gronroos model to include the physical environment. Has received increasing support in the literature Some three-component models are still based on disconfirmation. Not well tested in the literature.
Integrated model Looks at service quality in a new light. Provides a more sensitive analysis by looking at the different tiers of service quality dimensions Has not been well tested in the literature as it is a new model. Needs more research to test its usefulness
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Satisfaction

• Lecture Week 3

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Learning objectives

• After this week you should be able to
• explain what customer satisfaction/dissatisfactio
  n (CSD) is and what factors lead to CSD
• understand delight
• measure customer CSD

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Satisfaction

• The customers fulfilment response
• A judgement that a service or service provider
  provided a level of fulfilment including under
  or over fulfilment
• Involves both cognitive (thinking) and affect
  (emotion and feeling) elements

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Satisfaction service quality (Oliver 1993)

• Satisfaction is experience dependent
• Quality evaluations are largely cognitive
  evaluations of satisfaction are cognitive
  emotive
• Satisfaction has a shorter term temporal focus

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Satisfaction formation

• Satisfaction is related to the variation between
  a customers pre-purchase expectations and
  perceptions of service performance (D of E
  paradigm)

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Other influences

• Attitudes towards the brand
• Attributions
• Causal attribution (who is to blame?)
• Control attribution (could the firm control the
  event?)
• Stability attribution (is it a one-off event?)
• Equity theory (perceived fairness)
• Perceived value (quality/price trade-off)

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Disconfirmation of expectations (Oliver 1980)
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Satisfaction consequences McColl-Kennedy (2003)
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Satisfaction consequences (cont.) McColl-Kennedy
(2003)
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Satisfaction in services

• Satisfaction is based on expectations
• Dissatisfied customer will change suppliers
• Merely satisfied customers may also change
  suppliers
• A challenge is to delight customers

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Link between satisfaction loyalty
profitability

• Satisfaction is linked to loyalty and influences
  retention of customers
• Satisfied customers increase purchasing where
  purchasing is discretionary
• Satisfied customers are more likely to note
  company communications
• Satisfied customers also tolerate lower price
  elasticity

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ASCI and Annual Percentage Growthin SP 500
Earnings
Source C. Fornell Customer Satisfaction and
Corporate Earnings, commentary appearing on ACSI
website, May 1, 2001, http//www.bus.umich.edu/res
earch/nqre/Q1-01c.html.
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Relationship between Customer Satisfaction and
Loyalty in Competitive Industries
Source James L. Heskett, W. Earl Sasser, Jr.,
and Leonard A. Schlesinger, The Service Profit
Chain, (New York, NY The Free Press, 1997), p.
83.
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Customer delight

• Expectations exceeded to a surprising degree
• Can make it more difficult to please the customer
  in the future
• Creates dissatisfaction in competing firms

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Does delight pay?

• Delight is useful if
• Satisfaction influences behaviour
• Future profits receive significant weight
• The firm is able to capitalise on competitors
  dissatisfied customers (e.g. Bendigo Bank)
• Best results if it is not easily imitated

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Measuring satisfaction

• Expectations play a key role in CSD
• Expectations offer standards against which
  experiences are evaluated
• Ideal to measure pre- and post- consumption

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Measurement process

1. initial work to determine consumers service
   expectations (eg focus groups/interviews)
2. measurement of expectations pre-consumption (eg.
   questionnaire)
3. subsequent post-consumption measurement of
   performance
4. disconfirmation and satisfaction perceptions.

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Summary

• Companies want satisfied customers
• Customer satisfaction involves both cognitive and
  affective elements and represents a judgement
  that a service provider provided a level of
  fulfilment
• There are a range of drivers of satisfaction

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Summary (cont.)

• Satisfaction is based on expectations
• Customer delight creates dissatisfaction among
  the customers of competitor firms
• Delight strategies should be difficult to imitate
• Satisfaction can should be measured