Determinants of customer satisfaction case study sun wah tower master project in business administration

2.5.2 American Customer Satisfaction Index ACSI 15 2.7.3 Service quality measurement – SERQUAL 23 2.9 Suggested research model and form hypothesis 31 CHAPTER 3 – RESEARCH DESIGN... LIST

MBAVB

DO THI THANH VAN

DETERMINANTS OF CUSTOMER SATISFACTION

Case study: Sun Wah Tower

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME)

Advisor: Dr NGUYEN VAN PHUC

Ho Chi Minh City

(2010)

I would like to commit that I have prepared and conducted this research, 

“Determinants  of  Customer  Satisfaction  –  Case  Study:  Sun  Wah  Tower”, as the final project of MBAVB program

Ho Chi Minh City, February 18, 2011

DO THI THANH VAN

The undersigned would like to acknowledge the great patience, understanding and assistance of several people who made this project possible

A special thanks is extended to Dr Nguyen Van Phuc for his valuable guidance, challenging comments and continuous encouragement throughout the study I would also like to thank Professor Michele Allete of Solvay University in Belgium, Dr Tran Anh Tuan, the program coordinator, all of Professors and the two coordinators: Mr Serge Bywalski and Ms Bui Phan Bao Tran for their hard work and commitment to the program

I would like to acknowledge Mr Lo Kwok Luen, General Director, Mr Ryan Lower, Property Manager, and all colleagues of Sun Wah Management team for their commitment and support me to carry out the research, create advantageous conditions for me to study and complete this project

Finally, I’d like to mention the support and encouragement of my family, whose patient love enabled me to complete this work

Ho Chi Minh City, February 18, 2011

DO THI THANH VAN

First of all I would like to show my appreciation to our Ms Thanh Van for bringing the idea to conduct a research about service quality to investigate Customer Satisfaction of tenants in Sun Wah Building to my attention

The research presents the knowledge about service quality, customer satisfaction and what determinants of service quality impact customer satisfaction Through this research we have discovered what our tenants’ expectations put on us and have notified what we need to improve to meet the demands of our tenants in the building That inspires all of our staffs to try their best to make Sun Wah Tower the best service provider in the office building market

This research is served as an asset of Sun Wah Management Office for further study about customer satisfaction Again, we appreciate her hard work, her practical recommendations and we sincerely thank her for this work

Ho Chi Minh City, February 18, 2011

RYAN LOWER Property Manager Sun Wah Tower

The project is to find out determinants of customer satisfaction in the case of Sun Wah tower Customer satisfaction is very important in office building industry given the fact that there is strong competition in this industry in Ho Chi Minh City now It plays a vital role in sales that ultimately determines profitability of firms The aim of the project is to answer the question what are determinants of customer satisfaction in this industry

The strengths of the project are as follows: 

­ It is well organised. 

­ Literature review is comprehensive It reviews theories on customer satisfaction and service quality Based on this, it proposes the model for quatitative analysis The model has five explanatory variables: Tangibles, Reliability, Responsiveness, Assurance, Empathy The hypotheses are that all these variables have positive influence on customer satisfaction This model is quite standard in this field. 

­ The methodology includes descriptive statistics and regression. 

­ Sample size is large enough for regression. 

­ The main contribution is the results of the regression model The findings indicate that there are three independent variables which are statistically significant These findings are sound R-squared (0.69) is quite good However, there are two variables which are not significant

The weaknesses of the project are as follows: 

­ Literature review is quite standard There is no elaborate theory on office building. 

­ There is lack of review of previous empirical studies. 

­ Chapter 4 depends too much on CB Richards Ellis It is not well connected

to the whole project. 

­ The results of the regression model have two insignificant independent variables. 

­ Recommendations at the end of the project should be more elaborate

In general, the thesis is well written although there are some limitations as the student admitted at the end of the thesis

Based on the above performance, I recommend the thesis for acceptance

of public defense. 

DETERMINANTS OF CUSTOMER SATISFACTION

Case study: Sun Wah Tower TABLE OF CONTENTS

CHAPTER 2 – LITERATURE REVIEW

2.4.1 Customer perceived value (CPV) 12

2.5.1 Kano model of Customer Satisfaction 13

2.5.2 American Customer Satisfaction Index (ACSI) 15

2.7.3 Service quality measurement – SERQUAL 23

2.9 Suggested research model and form hypothesis 31

CHAPTER 3 – RESEARCH DESIGN

4.5 Demand 45

CHAPTER 5 – ANALYSIS AND RESULT

5.1 Characteristics of research samples 50

Appendix 6: Terminology and definitions 76 Appendix 7 : Criteria for Classifying Office Building 77

ABBREVIATIONS

psm: Per square meter

q-o-q: Quarter on quarter

y-o-y: Year on year

NFA: Net floor area

GFA: Gross floor area

CBD: Central business district

CPV: Customer perceived value

SERVQUAL: Service quality

CCTV: Close Circuit Television

LIST OF CHARTS

LIST OF FIGURES

Figure 2.5.1 Kano model of customer satisfaction 15 Figure 2.5.2 American Customer Satisfaction Index (ACSI) 16 Figure 2.6 Customer Satisfaction Diagram 18 Figure 2.7.2 GAP model of service quality 23 Figure: 2.8.1 Relationship between Perception and Performance 31

Figure 4.5 Major Leasing Transactions, Q 3 2010 46

LIST OF TABLES

Table 2.7.3.2 Determinants of quality in SERVQUAL 25 Table 3.2.1 Dimensions measuring building services 37 Table 3.2.2 Variables of Customer Satisfaction 38 Table 5.2.1 Descriptive statistics result of service quality measurement 51 Table 5.2.2 Variables for customer satisfaction 51

ABSTRACT

The benefits of good customer satisfaction on business as well as the costs

of poor customer satisfaction have been clearly demonstrated in the research literature The SERVQUAL (Parasuraman, Zeithaaml, & Berry, 1985) is based

on the premise that quality can be defined by the differences between the customer and the organization on the perceptions, expectations, and actual delivery of service These gaps provide information that can be used to identify the relative strengths and weaknesses of the processes and components of service In turn, the business is able to implement adjustments in service delivery that directly improve customer satisfaction and profit

The purpose of this study was to develop a customer satisfaction survey in Sun Wah Tower to identify and examine the key factors that influence customer satisfaction A modified version of SERVQUAL was emailed to 108 tenants &

142 tenants’ employees There were 200 samples collected qualified for used The results show three major findings Firstly, “assurance” has a strong significant effect on customer satisfaction, second is “tangible” and the other is

“responsiveness” This information gives the landlord the clear understanding of not only what is important to their service, but also the requirements of customers The results provide the landlord the precious information for service improvement to meet customer demands The study concludes with recommendations for the organization

CHAPTER 1 - INTRODUCTION

1.1 Problem statement

An expected imbalance of supply and demand in the next three years is due to new office space coming on stream Average rents across all grades are decreasing and have not yet bottomed out Grade A rents experienced a further decline as new landlords lowered their rents to attract tenants to their buildings and existing buildings lowered their rents in-line with the new buildings in order

to retain their existing tenants

The Ho Chi Minh City office market is facing the crucial problems for the first time since the establishment in 1994 Firstly the Ho Chi Minh City office market is facing oversupply and while many felt this is a good thing as rentals are reduced in-line with other Asian markets on the developer side it is considered a negative as newly built buildings carry huge bank loan debt and thus need to cannibalize tenants from the existing office buildings and attract them to lease that their new building The new building attracts the tenant to lease by offering numerous incentives such as generous rent free period or a rental holiday which means the tenant does not pay agreed upon rent during a certain period, free car and motorbike parking, flexible lease terms such as an early exit clause and accepting a bank guarantee letter in lieu of deposit and of course a lower than market rental rate

The new landlord or building has no choice as they must find tenants to occupy their building in order to begin a revenue stream in order to pay off bank loans and begin normal operations With only a few tenants the operational costs are huge and thus the new landlord needs to find tenants as soon as possible to

maintain cash-flow and be recognized as a new or reputable quality building in the local market

Secondly, problems arose with strata title tenants when prime landlords faced internal competition when strata title owners offered their space at rates much lower than standard building rates Strata title can be an easy way for a new developer to see immediate return on investment but this can also be viewed as short-term thinking as once a floor is sold the new owner may not want to pay the “Service Charge” for provision of Landlord services such as air conditioning, lighting, cleaning of common areas and security as one problem the Landlord will face The other problem is once sold the new owner can lease for less than what the building owner is currently leasing at and thus you essentially have the same product but with two (02) different prices

My report research will firstly, concentrate on the review the quality of customer service to understand customer’s positive or negative feeling about the

value of using business service in the building Secondly, my research will give

the recommendation for solutions to improve the service for the goal or mission

to retain existing tenants and try to attract new tenants which as mentioned earlier are becoming increasingly more difficult to landlords

In this research, the SERVQUAL approach is applied to measure customer satisfaction about the service provided by Sun Wah building The results of the survey will be used to adjust the quality of service to meet the

expectation of the tenants

1.2 Introduction of Sun Wah Tower

The Sun Wah Tower is designed and supervised by Los Angeles Architects Archeon International and built to International Standards by Japan's

best contractor- the Shimizu Corporation, located on an island site in the heart of

Ho Chi Minh City's central business district

Sun Wah Tower is prosperously situated to provide the ultimate business address, attracting into the vicinity representation from almost every global financial and capital market member, as well as a host of the world's finest

hotels

1.2.1 The Developers/Owners

Founded in 1965 with head office in Hong Kong, Sun Wah Group is a diversified multinational corporation that specializes in the production and international distribution of frozen seafood and food products, property development and financial services business

The Marubeni Corporation is one of Japan's leading general trading and investment conglomerates With almost 200 offices world-wide the group's experience in handling global development projects has made it one of the most

widely respected in this field

1.2.2 The Architects

The EaWes Corporation was founded in 1988 in Los Angeles and quickly established a reputation for providing award winning design Since that time, a variety of projects have benefited from EaWes' unique policy of active

involvement in their projects from start to finish

1.2.3 The Contractor

The largest contractor in the world, Shimizu Corporation has consistently played a pioneering role in the development of construction technology With careful planning and a commitment to creating an enriching human environment,

Shimizu has made a major contribution to shaping our world throughout almost

two centuries of handling construction projects

1.2.4 Location

Sun Wah Tower is conveniently located on Nguyen Hue Boulevard located in District One, the very heart of the city It is here that the central government offices are found, many 5 star hotels and the offices of almost every major name in global banking and finance

It is within this prosperous environment that Sun Wah Tower provides the ultimate business address for commercial enterprises in Ho Chi Minh City

Within easy reach of all major hotels and a majority of the city's tourist attractions, Sun Wah Tower is just 20 minutes away from the Tan Son Nhat

The staffs selected for interviews are Office Managers, Administration officers, tenants’ employees who are directly using services in the building

1.5 Methodology

Desk research:

Collect data as internal data base and from internet, specialized

magazines & press, involved books and previous related research

Survey research:

Qualitative research: This step is researching by in-depth interviews with customers in order to discover, adjust and supplement service quality dimensions and other involved factors The result of this research is analyzed for designing the questionnaire which is used for official study

Quantitative research: This step is researching by questionnaire in which the results are for analyzing level of customer satisfaction through SPSS

software version 16.0

1.6 Organization of the project

Main contents of this project include 6 chapters:

Chapter 1 : Introduction This chapter gives an overview of the

research, the purpose, the way to conduct the research; The general information

of Sun Wah Building where the research is carried out; The scope and

methodology of the study

Chapter 2 : Literature review This chapter includes definition of

service and products, theoretical background in terms of service quality and customer satisfaction This chapter also presents the GAP model of service quality, Kano model & ASCI models of customer satisfaction from which the study model is proposed

Chapter 3 : Research design The aim of this chapter is to introduce the

research methodology, which includes the research design, the preliminary

research result, the variable adjustment and research sample

Chapter 4 : HCMC Office Market overview This chapter gives an

overview of Hochiminh City office building market in Quarter 3 of year 2010 The supply, rents, vacancy, demand and outlook about the market are mentioned

in this chapter

Chapter 5 : Analysis of research data and results This chapter gives the

results of Descriptive statistics of service quality measurement, Reliability analysis, and Regression analysis The three findings impact customer

satisfactions in Sun Wah Tower are Assurance, Tangible and Responsiveness

Chapter 6 : Conclusion and recommendation This chapter contains a

summary of the findings, and gives some recommendations

CHAPTER 2 - LITERATURE REVIEW

2.1 Service and products:

Services have some clear characteristics which makes them special These differences are described as “intangibility”, “inseparability”, heterogeneity”, perishability” (Hoffman and Bateson, 1997:22-24) The box

below gives an overview of them (Zeithaml et al., 1992: 50)

“Intangability”:

“A distinguishing characteristic of

services that makes them unable to be

touched or sensed in the same manner

as physical goods.”

1 Services cannot be stored

2 Cannot protect services through patents

3 Cannot readily display or communicate services

4 Prices are difficult to set

“Inseparability”:

“A distinguishing characteristic of

services that reflects the

interconnection among the service

provider, the customer involved in

receiving the service, and other

customers sharing the service

experience.”

1 Consumer involved in production

2 Others consumers involved in production

3 Centralized mass production of

services difficult

“Heterogeneity”:

“A distinguishing characteristic of

services that reflects the variation in

consistency from one service

transaction to the next”

1 Standardization and quality

control difficult to achieve

“Perishability”:

“A distinguishing characteristic of

services in that they cannot be saved,

their unused capacity cannot be

reserved, and they cannot be

inventoried”

1 Services cannot be inventoried

Table 2.1 Characteristics of Service

Dealing with these specific characteristics will influence the search for

defining which components of service quality determine satisfaction

2.2 Understanding Customer Satisfaction

Understanding and measuring satisfaction is a central concern In order to get a better view on satisfaction, we describe some key elements in this part The model has underpinned the satisfaction approach is the disconfirmation theory, which suggests that customer satisfaction with a service is related to the size of the disconfirmation experience; where disconfirmation is related to the person’s initial expectation If experience of the service greatly exceeds the expectations clients had of the service, then satisfaction will be high, and vice versa In the service quality literature, perceptions of service delivery are measured separately from customer expectations, and the gap between the two,

P (Perceptions) – E (Expectations), provides a measure of service quality and determines the level of satisfaction. 

Figure 2.2  Service Quality Gap

2.3 Customer’s expectations

Expectations have a central role in influencing satisfaction with services, and these in turn are determined by a very wide range of factors

Customer’s expectations are the needs, wants, and preconceived ideas of

a customer about a product or service Customer expectation will be influenced

by a customer's perception of the product or service and can be created by previous experience, advertising, hearsay, awareness of competitors, and brand image The level of customer service is also a factor, and a customer might expect to encounter efficiency, helpfulness, reliability, confidence in the staff, and a personal interest in his or her patronage If customer expectations are met, customer satisfaction is increasing

Recognition of factors, which influence customer’s expectation, will help the service supplier applying appropriate procedures to modify customer’s expectations and to provide customers with service proportion to thereof Given the central importance of expectations, it is importance to understand how they are formed (Quality Accounts Commission, 1999) The basic key factors most commonly seen to influence expectations are described as:

· Personal needs: any customer or user of a service will have what they

regard as a set of key personal needs that they expect the service to express These will vary from service to service and from customer to customer A clear understanding of these needs is necessary to design an appropriate service

· Previous experience: many will have had service encounters before Their

previous experience will in part influence their future expectations of the service This can include their past experience of the service in question, but also of other services

· Word of mouth communications: expectations will be shaped by

communications from sources other than the service provider itself This can include family, friends and colleagues, but more widely the media and other organizations, such as audit agencies

· Explicit service communications: statements from staff or from leaflets or

other publicity material can have direct impact on expectations

· Implicit service communication: This includes factors such as the physical

appearance of buildings E.g renovation may lead the customer to expect other service aspects to be of higher quality

Figure2.3: Antecedents of expectations

The impact of brand image or service (covered by word of mouth communications above) on expectations is seen as central in a number of building service sector studies This would seem to be a particularly important concern for building service, for two keys reasons Firstly, it is argued that in the

absence of detailed information about competitor services or alternatives the importance of image is increased This is likely to make this factor a central aspect of views of many services, given the generally more constrained choice

and limited benchmarks available to customers

2.4 Customer satisfaction

Philip Kotler (2003) conceptualize customer satisfaction as an individual’s feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations With

Yi (1990), customer satisfaction is a collective outcome of perception, evaluation and psycho logical reaction to the consumption experience with a product or service

The studiers reckon that enterprises will create much more competitive advantages if their customers are always strongly satisfied because customers stay with the company longer; their loyalty level to brand is increased; they demonstrate less price sensitivity; marketing and promotion costs are saved remarkably (a highly satisfied customer costs less to serve than a new customer); they are willing to pay more for the product or service; company’s image has been improved and they recommend company's services to others (Fornell, 1992)

Besides, effective marketing focuses on two activities: retaining existing customers and adding new customers Customer satisfaction measures are critical to any product or service company because customer satisfaction is a strong predictor of customer retention, customer loyalty and product/service repurchase/continuous choose

2.4.1 Customer perceived value (CPV)

According to Philip Kotler (2003), Customer perceived value (CPV) is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived alternatives Total customer value

is the perceived monetary value of the bundle of economic, functional, and psychological benefits customers expect from a given market offering Total customer cost is the bundle of costs customers expect to incur in evaluating, obtaining using, and disposing of the given market offering

Customers are value-maximizers They form an expectation of value and act on it Buyers will buy from the firm that they perceive to offer he highest customer-delivered value, defined as the difference between total customer

value and total customer cost

2.4.2 Total customer satisfaction

Philip Kotler (2003) stated whether the buyer is satisfied after purchase depends on the performance in relation to the buyer‘s expectation In general satisfaction is a person’s feeling of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectations If the performance falls short of expectations, the customer is dissatisfied If the performance matches the expectations, the customer is satisfied If the performance exceeds the expectations, the customer is highly satisfied or delighted

A buyer’s satisfaction is a function of the product perceived performance and the buyer’s expectations Recognizing that high satisfaction leads to high customer loyalty, many companies today are aiming for Total customer satisfaction For such companies, customer satisfaction is both a goal and a marketing tool

Satisfaction = Perception - Expectation

2.5 Customer Satisfaction Models

2.5.1 Kano model of customer satisfaction

The Kano Model of Customer Satisfaction classifies product attributes based on how they are perceived by customers and their effect on customer satisfaction These classifications are useful for guiding design decisions in that they indicate when good is good enough, and when more is better

Project activities in which the Kano Model is useful: Identifying customer needs, determining functional requirements, concept development and analyzing competitive product

Other tools that are also useful in conjunction with the Kano Model: Eliciting Customer Input; Prioritization Matrices; Quality Function Deployment; Value Analysis

The Kano Model of Customer Satisfaction distinguishes six categories of quality attributes, from which the first three actually influence customer satisfaction:

· Basic factors (Dissatisfier Must have.) – The minimum requirements which will cause dissatisfaction if they are not fulfilled but do not cause customer satisfaction if they are fulfilled (or are exceeded) The customer regards these as prerequisites and takes these for granted Basic factors establish a market entry “threshold”

· Excitement factors (Satisfiers Attractive.) – The factors that increase customer satisfaction if delivered but do not cause dissatisfaction if they are not delivered These factors surprise the customer and generate

“delight” Using these factors, a company can really distinguish itself from its competitors in a positive way

· Performance factors The factors that cause satisfaction if the performance

is high and they cause dissatisfaction if the performance is low Here, the attribute performance-overall satisfaction is linear and symmetric Typically these factors are directly connected to customers’ explicit needs and desires and a company should try to be competitive here

The additional three attributes which Kano mentions are:

· Indifferent attributes The customer does not care about this feature

· Questionable attributes It is unclear whether this attribute is expected by the customer

· Reverse attributes The reverse of this product feature was expected by the customer

Application of the Kano Model Analysis:

A relatively simple approach to applying the Kano Model Analysis is to ask customers two simple questions for each attribute:

· Rate your satisfaction if the product has this attribute?; and

· Rate your satisfaction if the product did not have this attribute?

Customers should be asked to answer with one of the following responses:

Customer Satisfaction Model

Prof N Kano

(Adapted from Kano, 1984)

Figure 2.5.1 Kano Model of Customer Satisfaction

2.5.2 American Customer Satisfaction Index (ACSI)

The American Customer Satisfaction Index uses customer interviews as input to a multi-equation econometric model developed at the University of Michigan’s Ross School of Business The ACSI Model is cause-and-effect model with indices for drivers of satisfaction on the left side (customer expectations, perceived quality, and perceived value), satisfaction (ACSI) in the center, and outcomes of satisfaction on the right side (customer complaint and customer loyalty, including customer retention and price tolerance)

These indexes (shown in the diagram below) are multivariable components measured by several questions that are weighted within the model

The questions assess customer evaluations of the determinants of each index Indexes are reported on a 0 to 100 scale The survey and modeling methodology quantified the strength of the effect of the index on the left to the one to which the arrow points on the right These arrows represent “impacts.” The ACSI model is self-weighting to maximize the explanation of customer satisfaction (ACSI) on customer loyalty Looking at the indexes and impacts, users can determine which drivers of satisfaction, if improved, would have the most effect

on customer loyalty

Figure 2.5.2 American Customer Satisfaction Index (ACSI)

· Customer Expectations: Customer expectations is a measure of the customer’s anticipation of the quality of a company’s products or services Expectations represent both prior consumption experience, which includes some non-experiential information like advertising and word-of-mouth, and a forecast of the company’s ability to deliver quality in the future

· Perceived Quality: Perceived quality is a measure of the customer’s evaluation via recent consumption experience of the quality of a

company’s products or services Quality is measured in terms of both customization, which is the degree to which a product or service meets the customer’s individual needs, and reliability, which is the frequency with which things go wrong with the product or service

· Perceived Value: Perceived value is a measure of quality relative to price paid Although price (value of money) is often very important to the customer’s first purchase, it usually has a somewhat smaller impact on satisfaction or repeat purchases

· Customer Complaint: Customer complaints are measured as a percentage

of respondents who indicate they have complained to a company directly about a product or service within a specific time frame Satisfaction has a negative relationship with customer complaints, as the more satisfied the customers, the less likely they are to complain

· Customer Loyalty: Customer loyalty is a combination of the customer’s professed likelihood to repurchase from the same supplier in the future, and the likelihood to purchase a company’s products or services at various price points (price tolerance) Customer loyalty is the critical component

of the model as it stands as proxy for profitability

2.6 Customer Satisfaction Diagram:

Customer satisfaction is influenced by a complex interplay of factors Customer expectation can pose a major challenge, simply because expectations shift constantly, and they shift easily: they grow, they shrink, and they change shape, they change direction How satisfied (or dissatisfied) the company’s customers are is determined by these expectations and the company’s performance in meeting them

Customer expectations are influenced by the perceived quality of service that they received, the quality of product, if applicable, and the value they received for the price they pay The image of a company also influences customer expectations

The diagram below demonstrates the links between the various elements that drive customer satisfaction

Figure 2.6 Customer Satisfaction Diagram 2.7 Service quality

2.7.1 Service quality definition

Service quality is always a hot topic because of its close connection to factors of production costs, enterprise benefits, customer satisfaction and customer loyalty Besides, service quality is an important tool to create competitive advantages that every enterprise desires to have

As per Gronroos (1984), service quality is the quality customer experience through the service he/she receives While with Parasuraman et al (1985),

service quality can be identified through gap measurement between expectation

and perception of customer about the service

2.7.2 GAP model of service quality

The concept of measuring the difference between expectations and perceptions is very useful for accessing levels of service quality This information on service quality can help manager diagnose where performance improvement can best targeted

To enhance knowledge of service quality and encourage investigation of the key issues, Parasuraman, Zeithaml, and Berry (1985) developed the Service Quality Gap Model The authors regard a gap representing a significant hurdle in achieving a satisfactory level of quality The overriding attractiveness of this model is that it should encourage us to consider service quality in more than definition terms Rather, it looks to the workings of a service organization for explanation of the “how” and “why” of service quality delivery

The model’s key features are:

· The identification of key attributes of service quality from a management and consumer perspective

· Highlighting the gaps between consumers and service providers with particular reference to perception and expectations

· Understanding the implications for service management of closing the gaps

A set of key discrepancies of gaps exist regarding executive perceptions

of service quality and the tasks associated with service delivery to consumers These gaps can be major hurdles in attempting to deliver a service which consumers would perceive as being of high quality

The following is a brief account of the gaps:

Gap 1 – The difference between customer expectations and management

perceptions of customer expectations

Many service organizations simply do not understand what customers expect and what really matters to them It is important for an organization to being clearly aware of what is exactly that the customer expect Failure to do so can lead to poor perceptions of satisfaction with service quality This is a cornerstone of effective business – Knowing One’s Customer (Dutka, 1993) This gap can only be bridged through customer research and, more particularly,

knowledge from front-line employees

Gap 2 –The difference between management perceptions of customer

expectations and service quality expectations

Even where customer expectations are understood, management experiences difficulty in translating that understanding into service quality specification This exists because:

· Management may believe that customer expectations are unreasonable or unrealistic

· Management may believe that the degree of variability inherent in service defies standardization Ironically, reduction of variability has become a key motivator for the standardization of services

· There is an absence of wholehearted management commitment to service quality In the face of short term financial deadlines many service companies are reluctant to pursue customer satisfaction or quality efforts

To reach customer satisfaction, the intended service must meet the expected service The more exact these are the more likely that the organization

is measuring the important qualities of service anticipated by its customers The customer must determine the standards of service delivery for satisfaction to be

positive (Shostack, 1990; Takeuchi & Quelch, 1990)

Gap 3 – The difference between actual service quality specifications and the

service actually delivered

This is referred to as the service performance gap Even when formal standards of specifications for maintaining service quality are in existence, the delivery of a quality service is by no means certain This is cause by poor, in adequately deployed resources in term of people, system and technology The implications for the human resource or personnel management function should

be obvious

An organization must be closely and carefully monitoring the provision of

service Failure to do so will lead to lower customer satisfaction (Gitomer, 1998)

Gap 4 – The difference between service delivery and what is communicated to

customers

The consistency between organization assurances of service delivery and actual service delivery is the issue of this gap Advertising and other forms of communication by a service organization can affect consumer expectations The danger is that promises made are not kept Many service organizations use the brochure or prospectus for communicating with potential customers It should be

a statement of what the customer will receive, not an attractive set of promises that cannot be delivered

Failure to deliver as promised can lead to customer dissatisfaction, not only with the service but the agency as well This is identified as a significant

reason for customer defection (Reichheld & Sasser, 1990)

Gap 5 – The difference between customer expectations and perceptions.

This gap represents the key challenge To ensure good quality the provider must meet or exceed customer expectations Perceived service quality

is the result of the consumer’s comparison of expected service with perceived service delivery Failure to do so can lead customer dissatisfaction – outrage in extreme- while meeting or exceeding these can lead to satisfaction- or delight in extreme (Keiningham & Vavra, 2001) Obviously, happy customers help and angry customers harm business

The model is appealing both in its simplicity and intuitive logic Customer expectations of service that are closely matched with perceived actual services will be satisfied customers If expectations exceed actual services, the client is dissatisfied (or worse) Conversely, if the actual services surpass expectations, the customer is very satisfied

Figure 2.7.2: GAP Model of Service Quality

2.7.3 Service quality measurement – SERVQUAL

2.7.3.1 Dimensions and determinants of service quality and satisfaction

As with the models for measuring satisfaction and identifying priorities outlined above, there are also a number of different constructions of the service

We start with the factors that inform the SERVQUAL approach, before looking

at refinements and alternative approaches

SERVQUAL is a survey tool that calculates “gap scores” to measure the difference between expectations and perceptions for different aspects of a service affect the quality Elements of the SERVQUAL approach still appear in a

large number of customer satisfaction studies and when properly applied, can

provide some useful insights

2.7.3.2 Determinants of quality in SERVQUAL

Service quality literature usually attempts to categorize the factors that influence attitudes towards the service at a number of different levels At the highest level this involves a small number of service quality dimensions These can be disaggregated into a larger set of service quality factors or determinants, which are then developed into questions for measuring through a structured questionnaire

In the original concept of the SERVQUAL instrument, 10 determinants

of service quality were described (Accounts Commission, 1999)

Keeping customers informed in a

language they understand; listening to

customers

Plain language pamphlets and brochures; communication material tailored to the needs of individual groups (ethnic minorities, visually impaired etc); suggestions and

complaint systems

Competence

Having the skills and knowledge to

provide the service

All staff knowing, and being able to do

their job

Courtesy

Politeness, respect, consideration,

friendliness of staff at all levels

Staff having politely and pleasantly

Credibility

Trustworthiness, reputation and image

The reputation of the service in the wider community; staff generating a

feeling of trust with customers

Reliability

Providing consistent, accurate and

Standards defined in local service charters, accuracy of records; accuracy

dependable service; delivering the

service that was promised

of community charge bills; doing jobs right first time; keeping promises and

deadlines

Responsiveness

Being willing and ready to provide

service when needed

Resolving problems quickly; providing

The physicals aspects of the service

such as equipment, facilities, staff

appearance

Up to date equipment and facilities;

staff uniforms

Understanding the customer

Knowing individual customer needs;

recognizing the repeat customer

Tailoring services where practical to meet individual needs

Table 2.7.3.2 Determinants of quality in SERVQUAL After extensive research these ten were refined to five; following further

analysis showed that some were very closely related The five determinants are:

Tangibles The physical facilities and equipment available, the

appearance of staff, how easy it is to understand communication materials…

Reliability Performing the promised service dependably and

accurately Responsiveness Helping customers and providing a prompt service Assurance Inspiring trust and confidence

Empathy Providing a caring and individual service to customers

The five dimensions are translated into 22 questions that measure both perceptions and expectations (Zeithaml et al., 1990: 175-186)

1 X has modern-looking equipment

2 X’s physical facilities are visually appealing