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The retail environment today is changing more rapidly than ever
before (Dabholkar, 1996). It is characterized by intensifying competition from
both domestic and foreign companies, a spate of mergers and acquisitions, and
more sophisticated and demanding customers who have great expectations related
to their consumption experiences (Sellers, 1990; Smith, 1989). Existing
research indicates that consumers satisfied with service quality are most
likely to remain loyal (Wong and Sohal, 2003). Service quality is perceived as
a tool to increase value for the consumer; as a means of positioning in a
competitive environment (Mehta, Lalwani and Han, 2000). By satisfying customers
through high quality service, business firms not only retain their current
customers, but also increase their market share (Finn and Lamb, 1991). Many
studies on service quality relied on service quality construct and scale by
Parasuraman et al. (1988). However, this application to the retail industry may
not be appropriate for service quality in retailing industry seems to be
different from other services (Kaul, 2005; Dabholka et al, 1996). In retail
setting, especially retail stores where there is a mix of product and service,
retailers are likely to have impact on service quality more than on product
quality (Dabholkar et al., 1996). As retailers can create such effects, service
quality plays a significant strategic role in creating quality perceptions.
Service quality
Service quality is a critical component of customer perceptions
about the service. Customers perceive services in terms of its quality and how
satisfied they are overall with their experiences (Zeithaml, 2000). As thus,
service quality is defined as customers’ perception of how well a service meets
or exceeds their expectations (Czepiel, 1990). In the retail context,
perceptions of service encounters accumulate over time and a customer’s
relationship with an organization are a continuation of exchanges or
interactions both past and present” (Czepiel, 1990). When customers evaluate
retail service, they compare their perceptions of the service they receive with
their expectations. Customers are satisfied when the perceived service meets or
exceeds their expectations. They’re dissatisfied when they feel the service
falls below their expectations (Levy and Weitz, 2005).
Service quality is consumers’ comparisons between service
expectations and service performance (Parasuraman et al. (1985). In
other words, service quality is “the degree and direction of discrepancy
between consumer’s perceptions and expectations in terms of different but
relatively important dimensions of the service quality, which can affect their
future purchasing behaviour”. Service quality with reference to a product or
service as “the consumer’s evaluative judgement about an entity’s overall
excellence or superiority in providing desired benefits” (Arnauld et al.
2002). Service quality is perceived as a tool for increasing value for the
consumer; as a means of positioning in a competitive environment (Mehta,
Lalwani and Han, 2000) and for ensuring consumer satisfaction (Sivadas and
Baker-Prewitt, 2000), retention, and patronage (Yavas, Bilgin and Shemwell,
1997).
As a gap or difference between customer ‘expectations’ and
‘perceptions’, service quality is viewed as lying along a continuum ranging
from ‘ideal quality’ to ‘totally unacceptable quality,’ with some points along
the continuum representing satisfactory quality. When perceived or experienced
service is less than expected service, it implies less than satisfactory
service quality. But, when perceived service is less than expected service, the
obvious inference is that service quality is more than satisfactory
Parasuraman, et al 1988). Service quality is one of the most influencing
factors in a consumer’s purchase decision process. According to Buzell and Gale
(1987) empirical research clearly shows the positive relationship between
service quality and organisational performance. Using a large database with
thousands of strategic business units, research shows that the most critical
factor affecting a business unit’s performance is the service quality of its
products and services as perceived by the market relative to the perception
about its competitors.
From the previous definitions of service quality it is apparent
that they include the perception and expectations of services. Perception of
service is the customer’s opinion of the service or product (Foster, 2004) or
the general judgment of a service which is affected by many factors such as the
education level, background and others (O‘Neill & Palmer, 2003). Perception
could be a one time or single perception of the company, such as an experience
buying a product at a specific time, or an overall perception of the company
based on many experiences with the organisation. The perception of service
quality is not constant which means that it changes for many reasons such as
time, culture, consumer taste and promotional activities of the company
(Zeithaml, Bitner & Gremler, 2009).
SERVICE QUALITY MODELS
Most of the service quality models suggest a multidimensional
conceptualisation of service quality that leads to the measurement of service
quality from a consumer‘s perspective (Akinci, Atilgan-Inan & Aksoy, 2010;
Martinez & Martinez, 2010). There is a need to have a clear understanding
of the service quality models because they help managers to identify quality
problems which leads them to plan programmes to improve the quality which in
turn will lead to better performance (Ahmad et al., 2009; Seth, Deshmukh
& Vrat, 2005). Two major schools of thought dominate the literature; the
American school and the Nordic school (Caro & Garcia, 2007; Karatepe, Yavas
& Babakus, 2005) and researchers generally adapt one of the two schools
(Ahmad et al., 2009).
Nordic School
The main contributor to the Nordic school service quality model is
Gronroos’. This model is not as widely known as the American school (Kang &
James, 2004; Woodall, 2001). As discussed earlier, Gronroos’ service quality
model consists of three dimensions:
1. Technical quality
2. Functional quality
3. Image (Gronroos, 2007)
According to Gronroos, the customer can measure the outcome of
service in an objective manner while, the functional quality of the service
encounter is concerned with the interaction between the provider and recipient
of a service and is often perceived in a subjective manner (Ghobadian et
al., 1993). Moreover the corporate image will influence the perception of
the customer towards the image of the service provider.
Lehtinen and Lehtinen (1991) also proposed three dimensions of
service quality, which is another service quality model of the Nordic school
(Athanassopoulos, 2000).
Following are the dimensions of service quality according to
Lehtinen and Lehtinen (1991):
1. Physical quality
2. Corporate quality
3. Interactive quality
Physical quality is the quality that results from the physical
element of the service. It includes the physical products (goods) that are
consumed during the service process and this is usually evaluated in an
objective manner, and physical support which aids the production of the
service. The interactive quality is the interaction with the employees or any
other elements of the service provider. This also includes interactions that
customers have with each other. Finally, the corporate quality is the history
of the organisation and the image people form about the organisation. The
corporate quality takes time to evolve whereas the physical quality might
improve faster depending on the improvements made by the organisation (Lehtinen
& Lehtinen, 1991).
The North American School
The North American School is more widely known than the Nordic
school, and it is based on Parasuraman, Zeithaml & Berry (1988) gap model
(Prayag, 2007; O’Neill & Palmer, 2003). The American school, also known as
the disconfirmation model, was developed in 1985 then later modified in 1988,
1991 and 1994 (Akbaba, 2006). The gap model is about giving managers the tools
to improve service quality. In the GAP model, five gaps are identified, taking
into consideration the possible discrepancies between the elements of the
service management process.
Gap 1: Difference
between consumer expectations and management perceptions of consumer
expectations.
Gap 2: Difference
between management perceptions of consumer expectations and service quality
specifications.
Gap 3: difference
between service quality specifications and the service actually delivered.
Gap 4: difference
between service delivery and what is communicated about the service to the
consumer.
Gap 5: difference
between consumer expectations and perceptions.
The Hierarchical Model
Brady & Cronin (2001) acknowledge that the American school and
the Nordic school are the most adopted conceptualisation of service quality by
researchers. They integrated the Nordic school model and the North American
model into a new hierarchical model; they adapted the view of Rust & Oliver
(1994) that perceived service quality depends on three dimensions; the customer
employee interaction, the service environment and outcome. Brady & Cronin
(2001) also adapted the view of Dabholkar, Thorpe & Rentz (1996) that service
quality is a multidimensional and multilevel construct. Therefore, the model by
Brady & Cronin (2001) integrates the conceptualisation of service quality
by suggesting a service quality model with three dimensions. The three
dimensions are:
1. Interaction quality
2. Physical environment quality
3. Outcome quality
Each of these dimensions consists of three sub-dimensions and the
aggregate evaluation of the sub-dimensions forms the perception of that
dimension. The combined perception of these dimensions leads to the overall
service quality perception. The Brady & Cronin (2001) model is presented
below.
BRADY AND CRONIN HIERARCHICAL MODEL
Further, Martinez & Martinez (2010) classifies the service
quality models into three main models to help conceptualise service quality:
The multidimensional reflective model: This model is a multidimensional and a multi-level (hierarchal)
model. This means that variation in the service quality construct causes
variation in the dimensions and the variations in the dimensions causes
variations in the sub dimensions. An example of this type is the retail service
quality scale by Dabholkar, Thorpe & Rentz (1996).
Multidimensional formative models: These models are multidimensional models and they assume that variations
in the dimensions cause variations in the service quality construct which is
opposite to the reflective model. This model conceptualizes service quality as
shaped by its dimension; this is different to the multidimensional reflective
model which conceptualizes service quality as defined by its dimensions.
Examples of this type of model are the SERVQUAL, SERVPERF and the Nordic model.
The Multidimensional formative-reflective models: This model is a combination of the formative and reflective models.
This model is similar to the formative model, it conceptualizes service quality
as formed by its dimensions and it is similar to the reflective model in that
the dimensions are reflected by its sub-dimensions. An example of this type of
model is Brady and Cronin hierarchical model.
SERVICE QUALITY MEASUREMENT
Service quality is defined as ‘a global judgment or attitude,
relating to the overall superiority of the service’ (Parasuraman, Zeithaml and
Berry, 1988, p16). The measurement of service quality becomes vital for the
industry to attain competitive advantage. Service quality knowledge There are many retail service quality
models. The main service quality models are SERVQUAL and GAP model by
Parasuraman et al. (1988), SERVPERF by Cronin and Taylor (1992), Retail Service
Quality Model by Dabholkar et al. (1996).
SERVQUAL and Gap Model: In 1980s, in the attempt to define service quality and develop a model
of service quality, Parasuraman et al. conducted an exploratory investigation.
The results showed that regardless of the type of service, consumers used
basically the similar criteria in evaluating service quality (Parasuraman et
al., 1985). They labeled those 10 criteria “service quality determinants”.
Since then, service quality was defined through 10 dimensions: access,
communication, competence, courtesy, credibility, reliability, responsiveness,
security, tangibles and understanding/knowing the customer. Later, they were
simplified into five dimensions including tangibles, reliability, responsiveness,
assurance and empathy. This model indicates that consumer perceptions of
quality are influenced by five gaps occurring in the internal process of
service delivery. The basic premise is that service quality can be defined by
the difference between expected service and perceived service (Parasuraman et
al, 1985). The first four are those on the service provider side of service.
Gap 5 is related to the customer side of service. These gaps are (1) the
difference between what customers expected and what management perceived
customer expected; (2) the difference between management’s perceptions of
customer expectations and the translation of those perceptions into service quality
specifications; (3) the difference between actual service quality
specifications and the delivery of those specifications to customer service
actually delivered; (4) the difference between the services delivered to
customers and the external communications about the service; and (5) the
difference between customer expectations and perceptions. Although SERVQUAL has
been applied in the study of different types of service industries, there are certain
limitations and criticisms. Some of the widespread concerns are the 5 dimension
configuration of the scale, the appropriateness of operationalizing service
quality as the expectations-performances gap score, and the scale’s applicability
to a retail setting (Bakakus and Boller, 1992; Finn and Lamb, 1991; Reeves and
Bednar 1994).
SERVPERF: With
an argument that Parasurman et al.’s gap theory of service quality was
supported by little empirical or theoretical evidence, Cronin and Taylor (1992)
developed a "performance-based" service quality measurement scale
called SERVPERF. The major difference between these two scales is that SERVQUAL
operationalises service quality by comparing the perceptions of the service
received with expectations, while SERVPERF maintains only the perceptions of
service quality. The SERVPERF scale consists of 22 perception items excluding
any consideration of expectations. The superiority of SERVPERF over SERVQUAL
has been demonstrated in numerous studies including those by Avkiran (1999),
Lee et al. (2000) and Brady et al. (2002). However, the continued
use of and reference to SERVQUAL in marketing literature suggest that
“consensus has not yet been reached relative to the superiority of
performance-only measures of service quality” (Brady et al. 2002, p.
18).
Retail Service Quality Scale (RSQS): Similar to and originating from the SERVPERF, the RSQS is a
performance based measure of service quality but specific to the retail
context. To contextually fit the retail industry, Dabholkar et al.
(1996) developed Retail Service Quality Model (RSQS). Based on SERVPERF, RSQS includes
28-item scale, of which 17 items are from SERVPERF and 11 items are developed
by qualitative research. It composes of 5 dimensions, namely (1) Physical
aspects – Retail store appearance and store layout; (2) Reliability – Retailers
keep their promises and do the right things; (3) Personal interaction – Retail
store personnel are courteous, helpful, and inspire confidence in customers;
(4) Problem solving – Retail store personnel are capable to handle returns and
exchanges, customers’ problems and complaints; and (5) Policy – Retail store’s policy on merchandise quality, parking,
operation hours, and credit cards. Retail Service Quality Scale (RSQS)
developed in the U.S. for applicability to Indian retail. This scale has been
found appropriate in a variety of settings – across different countries such as
South Africa and Singapore and across a variety of store types such as
supermarkets, department stores and hyper stores. The RSQS model is also
applicable to Indian scenario (Subhashini Kaul, 2005).
Customer Loyalty
Customer loyalty is defined as repeated purchasing and referring a
company to other customers (Heskett et al., 1997), generating positive
and measurable financial results (Duffy, 2003). Pearson (1996) has defined
customer loyalty as the mind-set of the customers who hold favourable attitudes
toward a company, commit to repurchase the company’s product/service, and
recommend the product/service to others. In other words, customer loyalty is
the degree to which a customer exhibit repeat purchasing behaviour from a
service provider possesses a positive attitudinal disposition toward the
provider, and considers using only this provider when a need for this service
exists.
Loyalty is developed over a period of time from a consistent record
of meeting, and sometimes even exceeding customer expectations (Teich, 1997).
Improvements in retention and increase in the share of the company are the
obvious economic benefits of customer loyalty. Customer loyalty is an
indispensable performance measurement tool for profit as well as non-profit
organisations to sustain competitive advantage (Kotler, 1998) and to enhance
business/service performance measures. Therefore, loyalty is essential for the organisation
because it is cheaper to retain its old customers than to find new customers;
in addition to this customer retention is linked to the company’s profit.
Customer loyalty (or the absence of it) is exhibited both through customer
behaviour and also through attitude.
The customer loyalty as “the market place currency of the
twenty-first century” suggested by Singh and Sirdeshmukh (2000). Customer
loyalty is concerned with the likelihood of customer returning, making business
referrals, providing strong word-of-mouth references and publicity (Bowen and
Shoemaker, 1998). Loyal customers are less likely to switch to a competitor due
to price inducement, and these customers make more purchases compared to less
loyal customers (Baldinger and Rubinson, 1996). However, customers who are
retained may not always be satisfied and satisfied customers may not always be
retained. Customers may be loyal due to high switching barriers or the lack of
real alternatives, customers may also be loyal because they are satisfied, thus
wanting to continue with the relationship.
People become loyal customers in stages, according to Griffin
(1995) and Vavra (1995). In the first stage, the prospective customer
becomes a suspect, who may be anyone that might buy the product or service. In
the second stage, a prospect must have a need for the product or
service. In the third stage, the customer is a disqualified prospect as
the company has discovered that the customer does not need the product or does
not have the ability to buy the product. First-time customers are those who
have bought once and repeat customers have bought twice or more. A client
purchases regularly and retailer has on-going relationship with this customer.
The customer as advocate is the last stage. An advocate purchases regularly as a
client, but additionally encourages others to buy from the company. An inactive
customer has bought from the company, but has not purchased from the company
for a period that is longer than the normal purchase cycle (Griffin, 1995).
Jacoby and
Chestnut (1978) have explored the psychological meaning of loyalty in an effort
to distinguish it from behavioral (i.e., repeat purchase) definitions. Their
analysis concludes that consistent purchasing as an indicator of loyalty could
be invalid because of happenstance buying or a preference for convenience and
that inconsistent purchasing could mask loyalty if consumers were multi-brand
loyal. More specifically, all three decision making phases must point to a
focal brand preference if true brand loyalty exists. Thus, (1) the brand
attribute ratings (beliefs) must be preferable to competitive offerings, (2)
this “information” must coincide with an affective preference (attitude) for
the brand, and (3) the consumer must have a higher intention (conation) to buy
the brand compared with that for alternatives.
In marketing literature, the word loyalty is used in at least three
different senses:
a) As transactional retention: Customers or employees are retained to act repeatedly in favour of
the company’s interests in exchange for something attractive. This, for
example, is what happens when newspapers include collectible items so that
buyers will not cease to purchase the same newspaper, or when businesses or commercial
chains offer certain advantages to customers who make repeat purchases in the
same establishment or chain. Managers and employees are also retained by the
firm by means of economic compensation or other personal or family perks.
b) As sentimental attraction: This is present when someone more or less habitually chooses a
certain product or brand because he likes it, or because it inspires a feeling
of confidence: the man, for instance, who always buys the same newspaper because
he enjoys it, has grown accustomed to it, or because its editorial line appeals
to him. This kind of “loyalty” is also generated when one works for a company
that he finds comfortable, or trustworthy. This feeling may arise in very
different ways. One of these is “falling in love” with a business when one
notices how it takes a genuine interest in intelligently meeting a customer’s
or employee’s needs. This leads a person to believe that he can place his trust
in it.
c) As willingness to commit oneself: This is the case when a person understands that he ought to
dedicate his activity perseveringly to a person, cause, or institution that he
considers valuable and to which he has made some sort of commitment. In
contrast to transactional retention, which corresponds to an instrumental,
calculating, self-interested rationality, loyalty understood as willingness to
commit is based on a deliberately created bond that obliges the person to
maintain this commitment. Such loyalty is considered intrinsically valuable.
This understanding of loyalty is also distinct from a mere sentimental
attraction or reflexive habit, which occurs without reflection or responsible
decision. Every company makes effort to transform its first time customer into
a life time buyer. Below are the reasons:
·
Sales
go up because the customer is buying more from XYZ
·
Strengthen
XYZ’s position in the marketplace when customers are buying from XYZ instead of
its competitors
·
Marketing
costs go down when XYZ don’t have to spend money to attract a repeat customer,
since XYZ already have him. In addition, as a satisfied customer he tells his friends
thereby decreasing XYZ’s need to advertise.
·
XYZ
is insulated from price competition because a loyal customer is less likely to
be lured away by a discount of a few rupees.
·
Finally,
a happy customer is likely to sample XYZ other product lines thus helping XYZ
in achieving a larger share of customer.
Today’s companies must manage a strange paradox: in the race to win
market share and its promise of profit, a company risks (and often loses) the
highest margin customers and in doing so worsens profitability rather than
improving it. A company interested in building a solid, loyal customer base
uses an approach different from that of a company interested in simply building
market share. Loyalty building requires the company to emphasize the value of
its products or services and to show that it is interested in building a
relationship with the customer. The company recognizes that its business is to
build a stable customer base rather than make a single sale.
