Ashford Week 2 Assignment

BUS 642

Instructor Kurt Diesch

July 6, 2015

Abstract

Service quality improvement has been a critical issue to most business settings, rendering them to provide poor services. They focus on spending a lot of money on ill- conceived services and undermining the best methods to offer their customers with quality services. Excellent service is an important approach because customer’s loyalty and satisfaction is improved. Customers view value as the as the profit acquired from the trouble encountered such as unfriendly employees, high prices, services which are not attractive and locations that are not convenient to them. With excellent services, profit maximization of the company is improved and customer’s burdens on non-price issues are minimized. Prior researches have concentrated on how services can be measured and nature of customer’s expectations without considering the service quality improvement factor (Loshin, 2011).

This research will help to identify and quantify the relationship between service quality and profits. The profit resulting from improved quality can be determined if the expenditure on the service quality can be ascertained. Quality would need to be described by the customer, whereby it should conform to his or her specification. Most company’s view quality as conformance to organization specifications and this research will help to solve this problem by identifying the best methods of delivering quality service. This research will help to address the questions on how to respond to customers and taking care of them to provide the best quality of service (Hernon, 2011). In short, the research paper will examine the service quality –profit link with different measures of service quality being examined by the customers for feedback. The information will be used to determine the best measure for quality and what the profit driver is.

Introduction

Service quality is defined as the difference between customer competence and expectation compared with other dimensions used to measure quality. There are several measures that can be used to evaluate the quality of service by the customer. These are service accessibility, courtesy, reliability, security, competence, credibility, tangibles, responsiveness, communication and understanding of the customer needs. Zeithaml, Parasuraman, and Berry proposed a service quality scale (SERVQUAL), a generic instrument that has 5 areas of service that have a high correlation. Tangibles, responsiveness, empathy, reliability and assurance have been used (Zeithaml & Bitner, 2003)

The model has been used widely to measure customer satisfaction and customer preference. In the model the levels of performance of service quality has been conditioned from the expectation of the customers. When the performance of the model is low this shows that the quality of the service did not meet the customer expectation and therefore considered low quality. When the performance is ranked highly around the quality of service met the expectation (Hernon & Whitman, 2000; Randheer, AL-Motawa, & Prince, 2011).

As a diagnostic tool, the SERVQUAL model measures perceived customer satisfaction and customer service. Tangible is a description of the physical ability of the service provider (address). Empathy is the degree to which the customers’ needs are felt and articulated. Assurance often communicates trust to most customers when they interact with the service. The ability of the service provider to keep their promises makes for reliability. When the service provider is ready to assist the customer with whatever he needs this is described as responsiveness. Service quality research has revealed that there exists a service quality gap where the customers’ needs are met and exceeded.

Experiences with different service providers as well as change in the expectation can shape levels of expectations. The importance of the gap is to direct any service provider to meet the customers’ expectations (Randheer et al., 2011).

Mathematically the service gap is denoted by; Service quality SQ = Customer perception (P) – customer expectation (E). Customer perception describes the perceived level of service delivery while customer expectation describes the service expected to be offered by a service provider. The more the service gap the better the profit if the service manages to perform and exceed the expectations of the customer. The gap affects the profits negatively when the service quality is negative. This indicates poor customer satisfaction. The goal of any service provider should be to increase customer satisfaction. Service quality management is based on the management of the above named gap. Service quality is the gap and it represents customer satisfaction (Randheer et al., 2011).

Background Research and Research Question

As described above, poor service quality lowers customers’ satisfaction. As a result, businesses have placed more value on customer satisfaction. The main reason for this is that a satisfied customer is a loyal customer and that results in repeat business. Sometimes the customer may not be able to buy again but they can act as a referral to those who want to buy. However, it is not enough to just increase customer satisfaction. Of importance is the quantification of customer satisfaction such that they can relate this to customer loyalty and finally profit. Businesses must develop levels of customer satisfaction and service quality where they can achieve their profit goals (Zeithaml & Bitner, 2003).

According to research, Xerox was satisfied with customers who gave reviewed them with a four (on a five point scale with one being low and five being high).

Between 1990 and 1993, Xerox polled 480000 customers every year with regards to service quality, customer satisfaction and the product. The goal of Xerox was to come up with customers who scored the company at 4 and above. However they noticed that very satisfied customers who gave the company a 5 would probably be loyal to the company. In fact customers who gave Xerox a five were likely to purchase the products six times more than the customer who gave them a four (Zeithaml & Bitner, 2003).

That both customers are satisfied is not in dispute but the level of satisfaction has turned one customer to very loyal customer than the other. In the case of Xerox, they were able to answer the question of how to quantify service quality with regards to profit. For them, it was six times. In the end the company's goal was to achieve 100 percent 5s in customer polls because this would make their profits soar. Similarly it is imperative that every business s able to identify the relationship between the profit and the customer quality. The next step is to quantify this relationship and hence take service quality improvement measures (Hernon & Whitman, 2000; Randheer et al., 2011).

Hypotheses

In the case of Xerox and every other organization that offers services, high service quality leads to customer retention and loyalty. The personal feeling of disappointment or pleasure resulting from a customer’s evaluation of services rendered with regard to their expectations is referred to as customer satisfaction. Customer retention leads to repeat business and retained market share which is good for business. However, high service quality is a prerequisite of customer satisfaction and customer retention (Zeithaml & Bitner, 2003).

It is easy to conceptualize customer satisfaction into referrals through word of mouth and repeat purchases.

If the customer satisfaction is transaction specific, it refers to the customer’s evaluation based on a specific transaction. If customer satisfaction is cumulative, then it refers to the customer’s evaluation of all transactions to date (Zeithaml & Bitner, 2003).

Using SERVQUAL model, five service quality dimensions of (assurance, empathy, tangibility, responsiveness and reliability) will be examined for significant differences. The customer’s perception (performance) of service in any particular service company will be analyzed with regards to their expectations using the different dimensions. Each service quality dimension will be measured for their impact on customer perception of the service rendered by the service organization. The research framework will therefore take the following form:

Reliability

Service quality Tangibility customer satisfaction profit

Empathy

Responsiveness

Assurance

The six hypotheses are: 1)Reliably has an impact on customer satisfaction; 2) Tangibility has an impact on customer satisfaction; 3) Empathy has an impact on customer satisfaction; 4) Responsiveness has an impact on customer satisfaction; 5) Assurance has an impact on customer satisfaction; and 6) Customer satisfaction has an impact on profit (Randheer AL-Motawa & Prince, 2011).

References

Hernon, P., & Whitman, J. R. (2000). Delivering Satisfaction and Service Quality: A Customer-Based Approach for Libraries. Chicago: American Library Association.

Loshin, D. (2011). The Practitioner's Guide to Data Quality Improvement. Burlington, MA: Morgan Kaufmann.

Randheer, A., AL-Motawa, A., & Prince, V.J. (2011). Measuring Commuters’ Perception on Service Quality Using SERVQUAL in Public Transportation. International Journal of Marketing Studies, Vol. 3(1) pp 1-14.

Zeithaml, V.A.& Bitner, M.J. (2003) Service Marketing: Integrating Customer Focus across the Firm. New York, NY: McGraw-Hill. 2003