Strategies for Service Quality

Strategies for Service Quality Literature Review Chapter One: An overview of Service Quality 1.0 Introduction Nowadays, service quality strategy is an important weapon used to gain a competitive advantage over competitors. This chapter starts by defining quality, services and service quality. Some essential elements such as the expectations of service, importance of service quality and its benefits are also being highlighted. It further stresses the need for handling customer complaints and underlines the role of service failure and recovery. 1.2 Meanings of Quality Quality is constantly evolving depending on its application techniques used. Quality is a term that is heard almost everywhere nowadays, from top management business to the small corner shop on the local street to the stall selling fruits in the market. Quality is perceived as a subjective term which means different things to different people in different situations. According to Joseph M. Juran (1988), quality is defined as â€Å"fitness for purpose†. Deming W. Edwards (1982), another quality guru, described quality as being â€Å"a predictable degree of uniformity and dependability at low cost and suited to the market†. However, â€Å"Delighting the customer by fully meeting their needs and expectations† is a more common definition of quality. Other definitions of quality are listed below: â€Å"Quality is a conformance to requirement† (Philip Crosby, 1979) â€Å"Quality is the customers opinion† (Armand V Feigenbaum, 2004) â€Å"Quality is the extent to which the customer or users believe the product or service surpasses their needs and expectations† (Gitlow et al. , 1989) The different definitions of â€Å"quality† given above are not stating the same thing. Thus, it is possible that one business concentrates on quality to meet a specified requirement, but this may not satisfy the customers expectations. Also, it is possible for a product to be of a degree of excellence but may not fit for purpose, that is, the definition underlined by Joseph Juran. Simply expressed, all gurus of quality dance around the definition of quality but none of these definitions stated above is a complete statement of what is meant by quality. 1.3 Importance of Quality The concept of quality is currently so widely used by organisations that it is no longer just an advantage to adopt it but a must for survival. Increased globalisation leads to increased competitive pressures. Therefore, businesses are forced to do their best to be more efficient, more up-to-date with the changing technologies and at the same time to be responsive to the markets. Dale (2003) stresses the importance of quality in that it increases productivity, followed by enhanced performance in the marketplace and improves overall business performance. According to Armand Feigenbaum (2004), quality is considered to be the single most important force resulting in organisational success and growth in both national and international markets. Competition nowadays is fiercer as existing competitors need to improve their offerings while new and low cost competitors emerge in the marketplace (Dale, 2003). Consequently, businesses are required to understand the great significance of quality and try to indulge in continuous and sustainable quality improvements in order to survive. Quality is a key aspect that plays a great role for both goods and services providing enterprises. More specifically, quality and its management have turned out to be progressively significant in pursuing business excellence, superior performance and market supremacy. But why quality in service? This is because organisations face challenges such as meeting customer requirements while remaining economically competitive. Services are labour intensive even today. There is not any substitute for high quality personal interaction between service employees and customers. Thus, quality practices need to be implemented by the service enterprises to identify problems quickly and systematically, establish valid and reliable service performance measures and measure customer satisfaction. 1.4 Services The new catch-all word â€Å"services† is making its rounds in the industry in the last decade. Indeed, the role of services in the world economy has increased considerably within the last ten years, particularly in developed nations. According to Jiang and Rosenbloom (2005), the shifting of the economy in industrialised countries from goods to services is considered to be one of the most essential long-term trends in the business world today. In fact, the service sector is one of the fastest growing sectors in the USA nowadays, accounting for over 75% of the increase in the GNP (Gross National Product) in the last decade. Regan (1963) brought in the idea of services being â€Å"activities, benefits or satisfactions which are offered for sale, or are provided in connection with the sale of goods†. As human beings, we consume services in our everyday life such as switching on the television, talking on mobile phones and using emails. Economies of the world are becoming more and more services based. Some activities such as banking, construction, tourism, accounting and hairdressing can be easily identified. Organisation goals can be achieved by knowing the needs and wants of target markets and thus delivering the appropriate and desired service better than competitors. According to Zeithaml et al. (1990), customers are considered to be the only judge of service. However, it is often difficult for customers to predict satisfaction and evaluate service prior to purchase and consumption and hence, they are more likely to look for information before purchasing services than goods This may be mostly due to the fact that services, in contrast to goods, are commonly said to derive from the four characteristics namely intangibility, heterogeneity, perishability and inseparability. However, some authors have argued that services are not fundamentally different from goods and have also reported that no pure goods or services exist in todays marketplace (McDougall et al. , 1990; cited by Stell et al. , 1996). This stream of thought puts forward that the service/good dichotomy is such that consumers can purchase either a good or service to fulfill their needs. For instance, when consumers need to have their documents copied, they may buy a personal copy machine (a good) or go to a copy center (a service). In these circumstances, services may compete directly with goods (Dholakia and Venkatraman, 1993). So, instead of identifying differences, marketing strategy should be based on the similarities between services and physical goods in relation to the characteristics of the total market offering. 1.4.1 Services in Retail Industry Organisations must be able to identify their most important customers and prospect and at the same time integrating customer insights and powerful analytics into retail decision-making. Thus, this can drive high performance throughout the business. Evidence suggests that services business customers tend to remain with the same service provider if they are continually and continuously satisfied (Hong and Goo, 2004). The building and maintenance of such relationships can attain better financial performance, customer trust, commitment and satisfaction (Hsieh et al, 2002). In order to achieve high performance in the retail industry, there are several attributes that retailers should strive towards to guarantee success and outperform their competitors. They have to excel in areas such as being customer focus, being continuously innovative, establishing a performance-oriented culture and improving the distribution channel. All these add a new dimension of competition. 1.5 Definition of Service Quality Service quality has drawn attention of researchers in recent decades (Zeithaml, 2000). Nevertheless, since there is not a universally accepted definition for service quality, many different meanings exist. For instance, Czepiel (1990) portrays service quality as customers perception of how well a service meets or exceeds their expectations whereas Bitner, Booms and Mohr (1994, p. 97) define service quality as â€Å"the consumers overall impression of the relative inferiority or superiority of the organisation and its services†. Zeithaml et al. (1996) depict service quality as â€Å"the delivery of excellent or superior service relative to customer expectations†. While other researchers (for example, Cronin and Taylor, 1994) view service quality as a form of attitude representing a long-run evaluation in general, Parasuraman, Zeithaml and Berry (1985, p. 48) define service quality as â€Å"a function of the differences between expectation and performance along the quality dimensions†. Indeed, this has appeared to be consistent with Roest and Pieters (1997) definition that service quality is a relativistic and cognitive discrepancy between experience-based norms and performances concerning service benefits. As for Gronroos (1983), service quality is viewed as the accomplishment of customers expectations whereas Parasuraman et al. (1985) define it as the gap between customers expectations, in terms of service, and their perception developed by the actual service experience. That is, service quality is an attitude that results from the comparison of expected service levels with perceived performance. Furthermore, Parasuraman et al. (1985) have reported that outstanding service is a profitable strategy as it results in more new customers, fewer lost customers, more business with existing customers, more insulation from price competition and fewer mistakes requiring the re-performance of services. Accordingly, by offering superior service quality, a firm is liable to become more profitable and at the same time to sustain a competitive edge in their served markets. Evidently, superior service quality is a strategic weapon aiming to attract more customers. Lassar et al. (2000) believe that service quality is a significant sign of customer satisfaction and thus delivering superior service quality is a strategy that eventually leads to success. 1.5.1 Service Quality in Retailing With the rapid development in the retail industry nowadays, understanding of retail service quality and identifying determinants of retail service quality has become strategic importance for retailers. By satisfying customers through high quality service, firms not only retain their current customers, but at the same time, their market share also increases. (Finn and Lamb, 1991; cited by Nguyen, 2007) According to numerous marking researchers (for example, Berry, 1986; Reichheld Sasser, 1990; Dabholkar et al., 1996; NcGoldrick, 2002), the offer and supply of high quality service is often perceived to be of fundamental importance in retailing. In the retail context, when customers evaluate retail service, they compare their perceptions of the service they receive with that of their expectations. Customers are seemed to be satisfied only when the perceived service meets or even exceeds their expectations. However, they are dissatisfied when they feel that the service falls below their expectations (Levy and Weitz, 2005). To date, Parasuraman et al. (1988) believe that many studies on service quality relied on service quality construct and scale. Nevertheless, Kaul (2005) and Dabholkar et al. (1996) argue that this application to the retail industry may not be appropriate for service quality in retailing industry as the latter seems to be different from other services. In retail setting, where there is a mix of product and service, retailers are prone to have impact on service quality more than on product quality (Dabholkar et al. , 1996). Hence, since retailers can create such effects, service quality plays a significant strategic role in creating quality perceptions. 1.6 Customer Expectations of Service According to Parasuraman et al (1993), understanding customer expectations is a must for delivering superior and value-added service. Customers have the tendency to compare their perceptions with that of expectations when judging a service. They are satisfied only when the service they have received is the same or exceeds what they expected. Lewis (1991) define expectations as the desires or wants of consumers and what they believe a product or service should offer, which are formed on the basis of previous experience with a company, its competitors and the marketing mix inputs. Thus, identifying what a customer expects is the prime step in delivering high quality of customer service. 1.6.1 Determinants of Customer Expectations of service Berry and Parasuraman (1993) have developed a complete model of customer expectations and have given their opinions through two levels namely desired and adequate expectations and the zone of tolerance in the middle which separates them (refer to Figure 1.3). This model shows the different factors that affect these three features. Desired service is that level of service which a customer expects to receive from a service firm. In fact, it is a blend of what the customer considers ‘can be and ‘should be. It is believed to result from six sources namely, enduring service intensifiers, personal needs, explicit service promises, implicit service promises, word-of-mouth and past experience. Conversely, adequate service level is related to which the customer finds acceptable. It is based on the customers appraisal of what the service ‘will be. It is influenced by five factors such as transitory service intensifiers, perceived service alternatives, customer self-perceived service role, situational factors and predicted service. Berry and Parasuraman (1993) describe a tolerance zone as â€Å"a range of service performance that a customer considers satisfactory†. This concept assumes that customers have expectations of a service attribute on the two given levels which have been discussed above. If the real experiences of a customer fall in the zone of tolerance, then the perceived quality is regarded as good. Understanding the different sources of customer expectations can therefore help managers to perceive correctly what their customers want and expect. They can then put emphasis on the services elements that they can control and deliver the services they have promised. Hence, this model can serve as a valuable diagnostic tool to boost up the overall level of perceived service quality (Kettinger and Lee, 2005).Yet, one of the perplexing issues confronting service businesses is how to measure quality service perceptions of existing and potential customers since many of these factors are uncontrollable and also expectations differ from customer to customer and, possibly, from one situation to the next for the same customer (Young et al. , 1994). Why is Service Quality Important? Across all service industries, service quality remains a critical issue as businesses strive to maintain a comparative advantage over their competitors in the marketplace (Kandampully et al., 1999). As a result, the environment of service organisations is more and more competitive. Ghobatian et al. (1994) point out that â€Å"customers are the lifeblood of any business† and â€Å"service quality can be the means to win and keep customers†. Actually, in todays aggressive environment, the pursuit of service quality is believed to be the most important strategic weapon in achieving a sustainable differential advantage within the global marketplace (Devlin et al., 2000). More importantly, it is conceded that companies that excel in high quality service as perceived by their customers, tend to be the most profitable ones. On the other hand, poor service has been classified as the prime cause for customers switching to competitors (Ghobatian et al., 1994). It is often observed that organisations providing a sophisticated level of service, try to go beyond just satisfying their customers. â€Å"They emphasise the need to ‘delight them by providing them more than what is required. They also now talk about winning customers† (Dale, 2003). The latter highlights some customer service facts and indicates why service quality is crucial for a firm. (See Appendix A) While focusing on the increased importance of service quality, it is also essential to assess the related benefits and costs. Lewis (1991) has underlined some benefits when adopting a quality service strategy such as customer satisfaction and customer retention, loyalty, expanded market share, enhanced firms reputation, improvement in employee morale, low staff turnover, increased productivity, less mistakes, lower costs, high revenues, increased financial performance, high revenues and positive word-of-mouth. On the other hand, Crosby (1979) has identified the costs of poor quality which are related due to lack of responsiveness to customers, low morale of employees, dissatisfied customers and unfavorable word-of-mouth communication. Hence, it is important for businesses to clearly anticipate that service quality is the basic prerequisite for continuous success. 1.7 Service Quality and Customer Satisfaction In a competitive business environment where organisations compete for customers, customer satisfaction is perceived as a key differentiator and increasingly has become a primary element of business strategy (Carl D. McDaniel, 2005). Customers are the foremost decision makers in any marketing effort. They opt for a service offering that adds value to them and optimises their satisfaction. Many researchers such as Brady and Robertson (2001) and Lovelock, Patterson and Walker (2001) conceptualise customer satisfaction as an individuals feeling of pleasure or disappointment resulting from judging against a products perceived performance with respect to his or her expectations. But, Westbrook and Oliver (1981) make use of the confirmation-disconfirmation theory to better explain the meaning of customer satisfaction. This paradigm states that customers assess their levels of satisfaction by comparing their actual experiences with that of their previous experiences, expectations, and perceptions of the products performance. Parasuraman et al. (1994) mention that customer satisfaction is a key consequence of service quality and thus, it can determine the long term success of a service organisation. In the same vein, Oliver (1980) points out that customer satisfaction is affected by customer expectation or anticipation prior to obtaining a service and can be approximated by the following equation: Customer Satisfaction = â‚ ¬Ã‚  Perception of Performance Expectations Based on the above equation, Parasuraman et al. (1994) devise that a service provider can boost up overall customer satisfaction by either improving customer perceptions of a service or by lowering their expectations of it. If a service firm fails to respect this equation, then, this may dissatisfy the customer at the time and, in turn, will result in his or her switching to alternative service firms (McCollough, Berry, and Yadav, 2000; Roos, 1999). Thus, this equation is a valuable tool and a clear reminder that both factors, perceptions and expectations of customer satisfaction need to be managed and controlled by the service provider. An analysis of the literature on the relationship between customer satisfaction and service quality has received a widely held view among researches. Caruana and Malta (2002) point out by mentioning that service quality is an important input to customer satisfaction. Zeithaml et al. (1996) share the same line of thought by suggesting that a customers relationship with a company is strengthened when that customer makes a positive appraisal about the companys service quality and is weakened when a customer makes negative assessments about the companys service quality. They argue that favourable assessment of service quality will result in favourable behavioral intentions like â€Å"praise for the company† and expressions of preference for the company over other companies. Thus, implying that there is a positive relationship between service quality and customer satisfaction. However, the relationship between customer satisfaction and service quality has been criticised for not being inter-related by many researches. For instance, Iacobucci et al. (1995) identify that the vast majority of articles attempting to scrutinise this inter-relationship have been of a non-empirical nature. Similarly, Anderson and Fornell (1994) point out that the literature is not very clear about the distinction between quality and satisfaction. Satisfaction is a â€Å"post consumption† experience which judges perceived quality against expected quality, whereas service quality refers to a global evaluation of an organisations service delivery system (Anderson and Fornell, 1994; Parasuraman et al., 1985). Hence, Dabholkar et al. (2000) suggest that it is recommended that customer satisfaction should be measured separately from service quality so as to understand how customers evaluate service performance. 1.8 Service Quality and Customer trust The trust that customers have in service organisations is an important concern for customer relationship managers. Existing research has accentuated the significance of trust and its implications for driving profitable and long-lasting customer relationships (Garbarino and Johnson, 1999; Morgan and Hunt, 1999). Practitioners and researchers have repeatedly emphasised the importance of service quality which enable firms to build stable and trusting relationships with customers (Grà ¶nroos, 1983; Rust, Moorman, and Dickson, 2002; Zeithaml, Berry, and Parasuraman, 1996). Recent evidence highlights that there exists a positive relationship between service quality and trust (Chiou and Droge, 2006; Sharma and Patterson, 1999). To reinforce this notion, a firm that consistently meets or exceeds the expectations of customers will cultivate more trusting relationships with its customers. The courteous, caring, and responsive employee behaviours that are characteristic of service quality will inspire confidence in customers, particularly in retail outlets and thus will introduce a sense of trust for the retail store in customers (Weisinger, 1998). These related factors of service quality eventually contribute to the development of trust, and trust starts to develop as the customers experience positive service interactions and obtain benefits from this personal interaction. Consequently, the higher the service quality, the stronger is customer trust in an organisation. 1.9 Service Quality and Customer Loyalty The main aim of leading service organisations is to maintain a superior quality of service in an effort to gain customer loyalty. Coupled with this, Zeithaml (1996) believes that a service firms long term success in a market is essentially determined by its ability to expand and maintain a large and loyal customer base. Buttle and Burton (2002) simply describe customer loyalty as â€Å"a customer who continues to buy is a loyal customer†. Boulding et al. (1993) find that there is a positive relationship between service quality and customer loyalty, that is, customers having the repurchase intentions and the willingness to recommend. Sharing the same line of thought, Zeithaml et al. (1990) also report a positive relationship, thereby, customers willingly pay a price premium and intend to remain loyal in case of a price increase. However, Johnson et al. (2001) point out that this positive relationship varies between products, industries, and situations. On the other hand, some researchers argue that it has remained unclear whether or not there is a direct relationship between service quality and loyalty. In the study done by Cronin and Taylor (1992), service quality did not appear to have a significant or positive effect on customer loyalty. Similarly, Bloemer et al. (1999) mention that this relationship has remained relatively underdeveloped. 1.10 Handling customer complaints The phenomenon of customer complaints is considered as an area of great significance for businesses, particularly where organisations are increasingly recognising the value of pursuing long-term relationships with customers. Tax and Brown (1998) identify that only 5-10% of customers who are dissatisfied actually complain. Hence, it is imperative for organisations to encourage their customers to voice their dissatisfaction by providing communication facilities such as customer service desks. However, Blancero and Johnson (2001) argue that customer complaints could result in negative reactions from employees, which may in turn reduce service quality. But complaints can have a positive impact as well. It is an excellent opportunity for an organisation when receiving complaints in order to restore customer confidence and to capitalise on this feedback for helping in organisational improvements (Johnston, 2001; Ramsey, 2003). When focusing on handling customer complaints, it should include adequacy or fairness of the outcome, access to the organisation contact points, friendliness, empathy, active feedback, and speed of response (Stauss, 2002). 1.11 Service Failure and Recovery The retail industry involves a high degree of interaction between employees and consumers and as a result, provides many opportunities for service failures to crop up. According to Michel (2001), service failures include those circumstances when a service fails to live up to the customers expectations. Some consequences of service failures are dissatisfaction, negative word-of-mouth (Mattila, 2001), decrease in customer confidence and a decline in employee morale and performance (Boshoff and Leong, 1998). When service failure occurs, then service providers have to take actions to recover which gives rise to service recovery. Miller et al. (2000) describe service recovery as the actions takes to problems, change negative attitudes of dissatisfied customers and to ultimately retain these customers. Examples of recovery efforts consist of price discounts, improved services, refunds, free products or services, apologies, and acknowledgment of the problem (Kelley et al. , 1993). 1.12 Summary of the Literature Review This chapter has provided a general idea on service quality. It has started by providing an overview of services and quality with emphasis in the retailing industry. In addition, customer expectations, customer trust, loyalty and customer satisfaction have also been discussed. Undoubtedly, in the service quality literature, service quality is proven to provide many benefits to organisations. Literature Review Chapter Two: Related Concepts of Service Quality 2.0 Introduction In this chapter, service quality and its related concepts have been explored. They are as follows: The dimensions of service quality including SERVQUAL, Gap analysis, the three dimensions of Lehtinen and Lehtinen and the Perceived service quality model. Besides, the difficulties in measuring service quality as well as a critical review of the concept of service quality have also been identified 2.1 Dimensions of Service Quality Service quality is not a singular but rather it is a multidimensional phenomenon (Ghobatian et al, 1993). Without doubt, the identification of the quality dimensions to measure is of fundamental necessity as customers base their views about service on these dimensions (Kunst and Lemmink, 1996). Various writers and researchers have suggested a number of dimensions of service quality. For instance, Lehtinen and Lehtinen (1982) identify three dimensions for service quality which are physical quality (tangible aspects of service), corporate quality (company image and reputation) and interactive quality (two-way flow between customers and personnel). They also argue that it is important to differentiate between the output quality of service and the quality associated with the process of service delivery. Indeed, service quality is being perceived as a multidimensional concept. Grà ¶nroos (1984) point out that service quality comprises of three global dimensions: The technical quality which refers to what is delivered or what the customer gets from the service. For example, for a retail store, technical quality may consist of the range of products offered and the availability of parking space. The functional quality, that is, the way in which the service is delivered or how it is delivered. For example, customers of a retail store will assess whether the salespersons are friendly or whether products are easily returnable. The corporate image has to do with how consumers perceive the firm and is built by mainly both technical and functional quality and to some extent other factors such as the traditional marketing activities (pricing, advertising). Unlike Grà ¶nroos (1984) who uses the global measure of service quality, Parasuraman et al. (1985) argue that the criteria used by consumers to evaluate service quality fits ten dimensions: reliability, responsiveness, competence, courtesy, communication, credibility, security, access, tangibles and understanding/knowing the customer. Later, after having carried out successive research, analysis and testing, Parasuraman et al. (1988) refine the dimensions into only five dimensions namely: Tangibles: the appearance of physical facilities, personnel, communication materials and condition of equipment. Reliability: the ability to perform the promised service on time dependably and accurately. Responsiveness: the willingness to help customers, to deal effectively with complaints and provide prompt service. Assurance: the employees knowledge and courtesy and their ability to convey trust and confidence. Empathy: The level of caring, individualised attention provided to the customers. 2.1.1 SERVQUAL Model Based on these five dimensions above, the SERVQUAL instrument has been developed. This particular instrument which is originally developed by A. Parasuraman, Valarie A. Zeithaml and L.L. Berry in 1988, measures service quality through customer opinions. They point out that SERVQUAL essentially comprises of two sections. The first section basically questions customers expectations, while the second part measures customers perceptions. The gap between the expected service and perceived service is measured using the SERVQUAL together with its five underlying dimensions of service quality (tangibles, reliability, responsiveness, assurance and empathy). The SERVQUAL incorporates 22 items in each of the two sections which are sub-items of the predefined five dimensions (refer to Appendix B). According to Zeithaml et al. (2006), SERVQUAL has been creatively used in multiple service contexts. Indeed, Parasuraman et al. (1988) suggest that the instrument is applicable across a wide variety of services. In the same line, Getz et al. (2001) put forward that SERVQUAL has been broadly used in a variety of service industries. They also point out that it is a helpful tool comprising of potential applications in assessing effectively consumers expectations and perceptions of service quality. Despite the fact that SERVQUAL is the most well known instrument for service quality, it has been criticised from several researchers. Cronin and Taylor (1992) claim that there are deficiencies in both the conceptualisation and operationalisation of service quality in the SERVQUAL model. Buttle (1996) criticises on the dimensionality of the SERVQUAL scale, especially to the number of dimensions and their stability from contexts to contexts. He also states that the dimensions are not universal. Following the same line of thought, Bahia and Nantel (2000) declare that this model emphas Strategies for Service Quality Strategies for Service Quality Literature Review Chapter One: An overview of Service Quality 1.0 Introduction Nowadays, service quality strategy is an important weapon used to gain a competitive advantage over competitors. This chapter starts by defining quality, services and service quality. Some essential elements such as the expectations of service, importance of service quality and its benefits are also being highlighted. It further stresses the need for handling customer complaints and underlines the role of service failure and recovery. 1.2 Meanings of Quality Quality is constantly evolving depending on its application techniques used. Quality is a term that is heard almost everywhere nowadays, from top management business to the small corner shop on the local street to the stall selling fruits in the market. Quality is perceived as a subjective term which means different things to different people in different situations. According to Joseph M. Juran (1988), quality is defined as â€Å"fitness for purpose†. Deming W. Edwards (1982), another quality guru, described quality as being â€Å"a predictable degree of uniformity and dependability at low cost and suited to the market†. However, â€Å"Delighting the customer by fully meeting their needs and expectations† is a more common definition of quality. Other definitions of quality are listed below: â€Å"Quality is a conformance to requirement† (Philip Crosby, 1979) â€Å"Quality is the customers opinion† (Armand V Feigenbaum, 2004) â€Å"Quality is the extent to which the customer or users believe the product or service surpasses their needs and expectations† (Gitlow et al. , 1989) The different definitions of â€Å"quality† given above are not stating the same thing. Thus, it is possible that one business concentrates on quality to meet a specified requirement, but this may not satisfy the customers expectations. Also, it is possible for a product to be of a degree of excellence but may not fit for purpose, that is, the definition underlined by Joseph Juran. Simply expressed, all gurus of quality dance around the definition of quality but none of these definitions stated above is a complete statement of what is meant by quality. 1.3 Importance of Quality The concept of quality is currently so widely used by organisations that it is no longer just an advantage to adopt it but a must for survival. Increased globalisation leads to increased competitive pressures. Therefore, businesses are forced to do their best to be more efficient, more up-to-date with the changing technologies and at the same time to be responsive to the markets. Dale (2003) stresses the importance of quality in that it increases productivity, followed by enhanced performance in the marketplace and improves overall business performance. According to Armand Feigenbaum (2004), quality is considered to be the single most important force resulting in organisational success and growth in both national and international markets. Competition nowadays is fiercer as existing competitors need to improve their offerings while new and low cost competitors emerge in the marketplace (Dale, 2003). Consequently, businesses are required to understand the great significance of quality and try to indulge in continuous and sustainable quality improvements in order to survive. Quality is a key aspect that plays a great role for both goods and services providing enterprises. More specifically, quality and its management have turned out to be progressively significant in pursuing business excellence, superior performance and market supremacy. But why quality in service? This is because organisations face challenges such as meeting customer requirements while remaining economically competitive. Services are labour intensive even today. There is not any substitute for high quality personal interaction between service employees and customers. Thus, quality practices need to be implemented by the service enterprises to identify problems quickly and systematically, establish valid and reliable service performance measures and measure customer satisfaction. 1.4 Services The new catch-all word â€Å"services† is making its rounds in the industry in the last decade. Indeed, the role of services in the world economy has increased considerably within the last ten years, particularly in developed nations. According to Jiang and Rosenbloom (2005), the shifting of the economy in industrialised countries from goods to services is considered to be one of the most essential long-term trends in the business world today. In fact, the service sector is one of the fastest growing sectors in the USA nowadays, accounting for over 75% of the increase in the GNP (Gross National Product) in the last decade. Regan (1963) brought in the idea of services being â€Å"activities, benefits or satisfactions which are offered for sale, or are provided in connection with the sale of goods†. As human beings, we consume services in our everyday life such as switching on the television, talking on mobile phones and using emails. Economies of the world are becoming more and more services based. Some activities such as banking, construction, tourism, accounting and hairdressing can be easily identified. Organisation goals can be achieved by knowing the needs and wants of target markets and thus delivering the appropriate and desired service better than competitors. According to Zeithaml et al. (1990), customers are considered to be the only judge of service. However, it is often difficult for customers to predict satisfaction and evaluate service prior to purchase and consumption and hence, they are more likely to look for information before purchasing services than goods This may be mostly due to the fact that services, in contrast to goods, are commonly said to derive from the four characteristics namely intangibility, heterogeneity, perishability and inseparability. However, some authors have argued that services are not fundamentally different from goods and have also reported that no pure goods or services exist in todays marketplace (McDougall et al. , 1990; cited by Stell et al. , 1996). This stream of thought puts forward that the service/good dichotomy is such that consumers can purchase either a good or service to fulfill their needs. For instance, when consumers need to have their documents copied, they may buy a personal copy machine (a good) or go to a copy center (a service). In these circumstances, services may compete directly with goods (Dholakia and Venkatraman, 1993). So, instead of identifying differences, marketing strategy should be based on the similarities between services and physical goods in relation to the characteristics of the total market offering. 1.4.1 Services in Retail Industry Organisations must be able to identify their most important customers and prospect and at the same time integrating customer insights and powerful analytics into retail decision-making. Thus, this can drive high performance throughout the business. Evidence suggests that services business customers tend to remain with the same service provider if they are continually and continuously satisfied (Hong and Goo, 2004). The building and maintenance of such relationships can attain better financial performance, customer trust, commitment and satisfaction (Hsieh et al, 2002). In order to achieve high performance in the retail industry, there are several attributes that retailers should strive towards to guarantee success and outperform their competitors. They have to excel in areas such as being customer focus, being continuously innovative, establishing a performance-oriented culture and improving the distribution channel. All these add a new dimension of competition. 1.5 Definition of Service Quality Service quality has drawn attention of researchers in recent decades (Zeithaml, 2000). Nevertheless, since there is not a universally accepted definition for service quality, many different meanings exist. For instance, Czepiel (1990) portrays service quality as customers perception of how well a service meets or exceeds their expectations whereas Bitner, Booms and Mohr (1994, p. 97) define service quality as â€Å"the consumers overall impression of the relative inferiority or superiority of the organisation and its services†. Zeithaml et al. (1996) depict service quality as â€Å"the delivery of excellent or superior service relative to customer expectations†. While other researchers (for example, Cronin and Taylor, 1994) view service quality as a form of attitude representing a long-run evaluation in general, Parasuraman, Zeithaml and Berry (1985, p. 48) define service quality as â€Å"a function of the differences between expectation and performance along the quality dimensions†. Indeed, this has appeared to be consistent with Roest and Pieters (1997) definition that service quality is a relativistic and cognitive discrepancy between experience-based norms and performances concerning service benefits. As for Gronroos (1983), service quality is viewed as the accomplishment of customers expectations whereas Parasuraman et al. (1985) define it as the gap between customers expectations, in terms of service, and their perception developed by the actual service experience. That is, service quality is an attitude that results from the comparison of expected service levels with perceived performance. Furthermore, Parasuraman et al. (1985) have reported that outstanding service is a profitable strategy as it results in more new customers, fewer lost customers, more business with existing customers, more insulation from price competition and fewer mistakes requiring the re-performance of services. Accordingly, by offering superior service quality, a firm is liable to become more profitable and at the same time to sustain a competitive edge in their served markets. Evidently, superior service quality is a strategic weapon aiming to attract more customers. Lassar et al. (2000) believe that service quality is a significant sign of customer satisfaction and thus delivering superior service quality is a strategy that eventually leads to success. 1.5.1 Service Quality in Retailing With the rapid development in the retail industry nowadays, understanding of retail service quality and identifying determinants of retail service quality has become strategic importance for retailers. By satisfying customers through high quality service, firms not only retain their current customers, but at the same time, their market share also increases. (Finn and Lamb, 1991; cited by Nguyen, 2007) According to numerous marking researchers (for example, Berry, 1986; Reichheld Sasser, 1990; Dabholkar et al., 1996; NcGoldrick, 2002), the offer and supply of high quality service is often perceived to be of fundamental importance in retailing. In the retail context, when customers evaluate retail service, they compare their perceptions of the service they receive with that of their expectations. Customers are seemed to be satisfied only when the perceived service meets or even exceeds their expectations. However, they are dissatisfied when they feel that the service falls below their expectations (Levy and Weitz, 2005). To date, Parasuraman et al. (1988) believe that many studies on service quality relied on service quality construct and scale. Nevertheless, Kaul (2005) and Dabholkar et al. (1996) argue that this application to the retail industry may not be appropriate for service quality in retailing industry as the latter seems to be different from other services. In retail setting, where there is a mix of product and service, retailers are prone to have impact on service quality more than on product quality (Dabholkar et al. , 1996). Hence, since retailers can create such effects, service quality plays a significant strategic role in creating quality perceptions. 1.6 Customer Expectations of Service According to Parasuraman et al (1993), understanding customer expectations is a must for delivering superior and value-added service. Customers have the tendency to compare their perceptions with that of expectations when judging a service. They are satisfied only when the service they have received is the same or exceeds what they expected. Lewis (1991) define expectations as the desires or wants of consumers and what they believe a product or service should offer, which are formed on the basis of previous experience with a company, its competitors and the marketing mix inputs. Thus, identifying what a customer expects is the prime step in delivering high quality of customer service. 1.6.1 Determinants of Customer Expectations of service Berry and Parasuraman (1993) have developed a complete model of customer expectations and have given their opinions through two levels namely desired and adequate expectations and the zone of tolerance in the middle which separates them (refer to Figure 1.3). This model shows the different factors that affect these three features. Desired service is that level of service which a customer expects to receive from a service firm. In fact, it is a blend of what the customer considers ‘can be and ‘should be. It is believed to result from six sources namely, enduring service intensifiers, personal needs, explicit service promises, implicit service promises, word-of-mouth and past experience. Conversely, adequate service level is related to which the customer finds acceptable. It is based on the customers appraisal of what the service ‘will be. It is influenced by five factors such as transitory service intensifiers, perceived service alternatives, customer self-perceived service role, situational factors and predicted service. Berry and Parasuraman (1993) describe a tolerance zone as â€Å"a range of service performance that a customer considers satisfactory†. This concept assumes that customers have expectations of a service attribute on the two given levels which have been discussed above. If the real experiences of a customer fall in the zone of tolerance, then the perceived quality is regarded as good. Understanding the different sources of customer expectations can therefore help managers to perceive correctly what their customers want and expect. They can then put emphasis on the services elements that they can control and deliver the services they have promised. Hence, this model can serve as a valuable diagnostic tool to boost up the overall level of perceived service quality (Kettinger and Lee, 2005).Yet, one of the perplexing issues confronting service businesses is how to measure quality service perceptions of existing and potential customers since many of these factors are uncontrollable and also expectations differ from customer to customer and, possibly, from one situation to the next for the same customer (Young et al. , 1994). Why is Service Quality Important? Across all service industries, service quality remains a critical issue as businesses strive to maintain a comparative advantage over their competitors in the marketplace (Kandampully et al., 1999). As a result, the environment of service organisations is more and more competitive. Ghobatian et al. (1994) point out that â€Å"customers are the lifeblood of any business† and â€Å"service quality can be the means to win and keep customers†. Actually, in todays aggressive environment, the pursuit of service quality is believed to be the most important strategic weapon in achieving a sustainable differential advantage within the global marketplace (Devlin et al., 2000). More importantly, it is conceded that companies that excel in high quality service as perceived by their customers, tend to be the most profitable ones. On the other hand, poor service has been classified as the prime cause for customers switching to competitors (Ghobatian et al., 1994). It is often observed that organisations providing a sophisticated level of service, try to go beyond just satisfying their customers. â€Å"They emphasise the need to ‘delight them by providing them more than what is required. They also now talk about winning customers† (Dale, 2003). The latter highlights some customer service facts and indicates why service quality is crucial for a firm. (See Appendix A) While focusing on the increased importance of service quality, it is also essential to assess the related benefits and costs. Lewis (1991) has underlined some benefits when adopting a quality service strategy such as customer satisfaction and customer retention, loyalty, expanded market share, enhanced firms reputation, improvement in employee morale, low staff turnover, increased productivity, less mistakes, lower costs, high revenues, increased financial performance, high revenues and positive word-of-mouth. On the other hand, Crosby (1979) has identified the costs of poor quality which are related due to lack of responsiveness to customers, low morale of employees, dissatisfied customers and unfavorable word-of-mouth communication. Hence, it is important for businesses to clearly anticipate that service quality is the basic prerequisite for continuous success. 1.7 Service Quality and Customer Satisfaction In a competitive business environment where organisations compete for customers, customer satisfaction is perceived as a key differentiator and increasingly has become a primary element of business strategy (Carl D. McDaniel, 2005). Customers are the foremost decision makers in any marketing effort. They opt for a service offering that adds value to them and optimises their satisfaction. Many researchers such as Brady and Robertson (2001) and Lovelock, Patterson and Walker (2001) conceptualise customer satisfaction as an individuals feeling of pleasure or disappointment resulting from judging against a products perceived performance with respect to his or her expectations. But, Westbrook and Oliver (1981) make use of the confirmation-disconfirmation theory to better explain the meaning of customer satisfaction. This paradigm states that customers assess their levels of satisfaction by comparing their actual experiences with that of their previous experiences, expectations, and perceptions of the products performance. Parasuraman et al. (1994) mention that customer satisfaction is a key consequence of service quality and thus, it can determine the long term success of a service organisation. In the same vein, Oliver (1980) points out that customer satisfaction is affected by customer expectation or anticipation prior to obtaining a service and can be approximated by the following equation: Customer Satisfaction = â‚ ¬Ã‚  Perception of Performance Expectations Based on the above equation, Parasuraman et al. (1994) devise that a service provider can boost up overall customer satisfaction by either improving customer perceptions of a service or by lowering their expectations of it. If a service firm fails to respect this equation, then, this may dissatisfy the customer at the time and, in turn, will result in his or her switching to alternative service firms (McCollough, Berry, and Yadav, 2000; Roos, 1999). Thus, this equation is a valuable tool and a clear reminder that both factors, perceptions and expectations of customer satisfaction need to be managed and controlled by the service provider. An analysis of the literature on the relationship between customer satisfaction and service quality has received a widely held view among researches. Caruana and Malta (2002) point out by mentioning that service quality is an important input to customer satisfaction. Zeithaml et al. (1996) share the same line of thought by suggesting that a customers relationship with a company is strengthened when that customer makes a positive appraisal about the companys service quality and is weakened when a customer makes negative assessments about the companys service quality. They argue that favourable assessment of service quality will result in favourable behavioral intentions like â€Å"praise for the company† and expressions of preference for the company over other companies. Thus, implying that there is a positive relationship between service quality and customer satisfaction. However, the relationship between customer satisfaction and service quality has been criticised for not being inter-related by many researches. For instance, Iacobucci et al. (1995) identify that the vast majority of articles attempting to scrutinise this inter-relationship have been of a non-empirical nature. Similarly, Anderson and Fornell (1994) point out that the literature is not very clear about the distinction between quality and satisfaction. Satisfaction is a â€Å"post consumption† experience which judges perceived quality against expected quality, whereas service quality refers to a global evaluation of an organisations service delivery system (Anderson and Fornell, 1994; Parasuraman et al., 1985). Hence, Dabholkar et al. (2000) suggest that it is recommended that customer satisfaction should be measured separately from service quality so as to understand how customers evaluate service performance. 1.8 Service Quality and Customer trust The trust that customers have in service organisations is an important concern for customer relationship managers. Existing research has accentuated the significance of trust and its implications for driving profitable and long-lasting customer relationships (Garbarino and Johnson, 1999; Morgan and Hunt, 1999). Practitioners and researchers have repeatedly emphasised the importance of service quality which enable firms to build stable and trusting relationships with customers (Grà ¶nroos, 1983; Rust, Moorman, and Dickson, 2002; Zeithaml, Berry, and Parasuraman, 1996). Recent evidence highlights that there exists a positive relationship between service quality and trust (Chiou and Droge, 2006; Sharma and Patterson, 1999). To reinforce this notion, a firm that consistently meets or exceeds the expectations of customers will cultivate more trusting relationships with its customers. The courteous, caring, and responsive employee behaviours that are characteristic of service quality will inspire confidence in customers, particularly in retail outlets and thus will introduce a sense of trust for the retail store in customers (Weisinger, 1998). These related factors of service quality eventually contribute to the development of trust, and trust starts to develop as the customers experience positive service interactions and obtain benefits from this personal interaction. Consequently, the higher the service quality, the stronger is customer trust in an organisation. 1.9 Service Quality and Customer Loyalty The main aim of leading service organisations is to maintain a superior quality of service in an effort to gain customer loyalty. Coupled with this, Zeithaml (1996) believes that a service firms long term success in a market is essentially determined by its ability to expand and maintain a large and loyal customer base. Buttle and Burton (2002) simply describe customer loyalty as â€Å"a customer who continues to buy is a loyal customer†. Boulding et al. (1993) find that there is a positive relationship between service quality and customer loyalty, that is, customers having the repurchase intentions and the willingness to recommend. Sharing the same line of thought, Zeithaml et al. (1990) also report a positive relationship, thereby, customers willingly pay a price premium and intend to remain loyal in case of a price increase. However, Johnson et al. (2001) point out that this positive relationship varies between products, industries, and situations. On the other hand, some researchers argue that it has remained unclear whether or not there is a direct relationship between service quality and loyalty. In the study done by Cronin and Taylor (1992), service quality did not appear to have a significant or positive effect on customer loyalty. Similarly, Bloemer et al. (1999) mention that this relationship has remained relatively underdeveloped. 1.10 Handling customer complaints The phenomenon of customer complaints is considered as an area of great significance for businesses, particularly where organisations are increasingly recognising the value of pursuing long-term relationships with customers. Tax and Brown (1998) identify that only 5-10% of customers who are dissatisfied actually complain. Hence, it is imperative for organisations to encourage their customers to voice their dissatisfaction by providing communication facilities such as customer service desks. However, Blancero and Johnson (2001) argue that customer complaints could result in negative reactions from employees, which may in turn reduce service quality. But complaints can have a positive impact as well. It is an excellent opportunity for an organisation when receiving complaints in order to restore customer confidence and to capitalise on this feedback for helping in organisational improvements (Johnston, 2001; Ramsey, 2003). When focusing on handling customer complaints, it should include adequacy or fairness of the outcome, access to the organisation contact points, friendliness, empathy, active feedback, and speed of response (Stauss, 2002). 1.11 Service Failure and Recovery The retail industry involves a high degree of interaction between employees and consumers and as a result, provides many opportunities for service failures to crop up. According to Michel (2001), service failures include those circumstances when a service fails to live up to the customers expectations. Some consequences of service failures are dissatisfaction, negative word-of-mouth (Mattila, 2001), decrease in customer confidence and a decline in employee morale and performance (Boshoff and Leong, 1998). When service failure occurs, then service providers have to take actions to recover which gives rise to service recovery. Miller et al. (2000) describe service recovery as the actions takes to problems, change negative attitudes of dissatisfied customers and to ultimately retain these customers. Examples of recovery efforts consist of price discounts, improved services, refunds, free products or services, apologies, and acknowledgment of the problem (Kelley et al. , 1993). 1.12 Summary of the Literature Review This chapter has provided a general idea on service quality. It has started by providing an overview of services and quality with emphasis in the retailing industry. In addition, customer expectations, customer trust, loyalty and customer satisfaction have also been discussed. Undoubtedly, in the service quality literature, service quality is proven to provide many benefits to organisations. Literature Review Chapter Two: Related Concepts of Service Quality 2.0 Introduction In this chapter, service quality and its related concepts have been explored. They are as follows: The dimensions of service quality including SERVQUAL, Gap analysis, the three dimensions of Lehtinen and Lehtinen and the Perceived service quality model. Besides, the difficulties in measuring service quality as well as a critical review of the concept of service quality have also been identified 2.1 Dimensions of Service Quality Service quality is not a singular but rather it is a multidimensional phenomenon (Ghobatian et al, 1993). Without doubt, the identification of the quality dimensions to measure is of fundamental necessity as customers base their views about service on these dimensions (Kunst and Lemmink, 1996). Various writers and researchers have suggested a number of dimensions of service quality. For instance, Lehtinen and Lehtinen (1982) identify three dimensions for service quality which are physical quality (tangible aspects of service), corporate quality (company image and reputation) and interactive quality (two-way flow between customers and personnel). They also argue that it is important to differentiate between the output quality of service and the quality associated with the process of service delivery. Indeed, service quality is being perceived as a multidimensional concept. Grà ¶nroos (1984) point out that service quality comprises of three global dimensions: The technical quality which refers to what is delivered or what the customer gets from the service. For example, for a retail store, technical quality may consist of the range of products offered and the availability of parking space. The functional quality, that is, the way in which the service is delivered or how it is delivered. For example, customers of a retail store will assess whether the salespersons are friendly or whether products are easily returnable. The corporate image has to do with how consumers perceive the firm and is built by mainly both technical and functional quality and to some extent other factors such as the traditional marketing activities (pricing, advertising). Unlike Grà ¶nroos (1984) who uses the global measure of service quality, Parasuraman et al. (1985) argue that the criteria used by consumers to evaluate service quality fits ten dimensions: reliability, responsiveness, competence, courtesy, communication, credibility, security, access, tangibles and understanding/knowing the customer. Later, after having carried out successive research, analysis and testing, Parasuraman et al. (1988) refine the dimensions into only five dimensions namely: Tangibles: the appearance of physical facilities, personnel, communication materials and condition of equipment. Reliability: the ability to perform the promised service on time dependably and accurately. Responsiveness: the willingness to help customers, to deal effectively with complaints and provide prompt service. Assurance: the employees knowledge and courtesy and their ability to convey trust and confidence. Empathy: The level of caring, individualised attention provided to the customers. 2.1.1 SERVQUAL Model Based on these five dimensions above, the SERVQUAL instrument has been developed. This particular instrument which is originally developed by A. Parasuraman, Valarie A. Zeithaml and L.L. Berry in 1988, measures service quality through customer opinions. They point out that SERVQUAL essentially comprises of two sections. The first section basically questions customers expectations, while the second part measures customers perceptions. The gap between the expected service and perceived service is measured using the SERVQUAL together with its five underlying dimensions of service quality (tangibles, reliability, responsiveness, assurance and empathy). The SERVQUAL incorporates 22 items in each of the two sections which are sub-items of the predefined five dimensions (refer to Appendix B). According to Zeithaml et al. (2006), SERVQUAL has been creatively used in multiple service contexts. Indeed, Parasuraman et al. (1988) suggest that the instrument is applicable across a wide variety of services. In the same line, Getz et al. (2001) put forward that SERVQUAL has been broadly used in a variety of service industries. They also point out that it is a helpful tool comprising of potential applications in assessing effectively consumers expectations and perceptions of service quality. Despite the fact that SERVQUAL is the most well known instrument for service quality, it has been criticised from several researchers. Cronin and Taylor (1992) claim that there are deficiencies in both the conceptualisation and operationalisation of service quality in the SERVQUAL model. Buttle (1996) criticises on the dimensionality of the SERVQUAL scale, especially to the number of dimensions and their stability from contexts to contexts. He also states that the dimensions are not universal. Following the same line of thought, Bahia and Nantel (2000) declare that this model emphas