Perceptions of Service - Zeithaml (Edited)

Chapter 4 Customer Perceptions of Service

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Customer PerceptionsHow customers perceive services, how they assess whether they have experienced quality service, and whether they are satisfied are the subjects of this chapter. Customers perceive services in terms of the quality of the service and how satisfied they are overall with their experiences. Companies today recognise that they can compete more effec-tively by distinguishing themselves with respect to service quality and improved customer satisfaction.

Satisfaction versus Service QualityPractitioners and writers in the popular press tend to use the terms satisfaction and quality interchangeably, but researchers have attempted to be more precise about the meanings and measurement of the two concepts, resulting in considerable debate.1 Consensus is that the two concepts are fundamentally different in terms of their underly-ing causes and outcomes.2 Although they have certain things in common, satisfaction is generally viewed as a broader concept, whereas service quality focuses specifically on dimensions of service. Based on this view, perceived service quality is a component of customer satisfaction. Figure 4.1 graphically illustrates the relationships between the two concepts.

As shown in Figure 4.1, service quality is a focused evaluation that reflects the customers perception of reliability, assurance, responsiveness, empathy and tangibles.3 Satisfaction, on the other hand, is more inclusive: it is influenced by perceptions of service quality, prod-uct quality and price as well as situational factors and personal factors. For example, service quality of a health club is judged on attributes such as whether equipment is available and in working order when needed, how responsive the staff are to customer needs, how skilled the trainers are and whether the facility is well maintained. Customer satisfaction with the health club is a broader concept that will certainly be influenced by perceptions of service quality but will also include perceptions of product quality (such as quality of products sold in the bar/restaurant), price of membership,4 personal factors such as the consumers emo-tional state, and even uncontrollable situational factors such as weather conditions and experiences driving to and from the health club.5

Well-articulated promises that set clear expectations are the key to customer satisfaction.

5. Sort out Service Recovery Everyone understands that things go wrong . . . The art is how you put it right. Having a manager on hand so that you can speak to someone who actually knows what they are talking about really does help.

Inevitably, services or products sometimes go wrong. Dealing with this promptly and effectively is paramount to maintaining a brands reputation.

6. Build a relationship With Brand X, you can never trace who youve spoken to and which country theyre in. Theres no relationship at all, its confusing.

Being put on hold for a lengthy period only to discover that the person you finally get through to knows nothing about your problem and wants to put you through to another department is the bugbear of many a consumer. The one-stop-shop concept where the left hand of a company knows what the right is doing is essential.

Source: Adapted from: Clark, N. (2010) The satisfaction manifesto: secret of good service, Marketing, 3 November, p. 29.

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Part 1 Foundations for Services Marketing

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Transaction versus Cumulative PerceptionsIn considering perceptions, it is also important to recognise that customers will have per-ceptions of single, transaction-specific encounters as well as overall perceptions of a com-pany based on all their experiences.6 For example, a bank customer will have a perception of how he or she was treated in a particular encounter with a bank employee at a branch and will form a perception of that particular transaction based on elements of the service expe-rienced during that specific transaction. That perception is at a very micro, transaction-specific level. That same bank customer will also have overall perceptions of the bank based on his or her encounters over a period of time. These experiences might include mul-tiple in-person encounters at the bank branch, online banking experiences and experiences using the banks ATMs across many different cities. At an even more general level, the cus-tomer may have perceptions of banking services or the whole banking industry as a result of all his or her experiences with banks and everything he or she knows about banking.

Research suggests that it is important to understand all these types of perceptions for different reasons and that the points of view are complementary rather than competing.7 Understanding perceptions at the transaction-specific level is critical for diagnosing ser-vice issues and making immediate changes. These isolated encounters are also the build-ing blocks for overall, cumulative experience evaluations, as you will learn later in this chapter. On the other hand, cumulative experience evaluations are likely to be better pre-dictors of overall loyalty to a company. That is, customer loyalty most often results from the customers assessment of all his experiences, not just from one single encounter.

Customer SatisfactionWhat is Customer Satisfaction?Everyone knows what satisfaction is, until asked to give a definition. Then, it seems, nobody knows.8 This quote from Richard L. Oliver, respected expert and long-time writer

Figure 4.1 Customer perceptions of quality and customer satisfaction

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Service quality

Situational factors

Customer satisfactionProduct

quality

Personal factorsPrice

Customer loyalty



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and researcher on the topic of customer satisfaction, expresses the challenge of defining this most basic of customer concepts. Building from previous definitions, Oliver offers his own formal definition (p. 13): Satisfaction is the consumers fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provides a pleasurable level of consumption-related fulfillment. In less technical terms, we interpret this definition to mean that satisfaction is the customers evaluation of a product or ser-vice in terms of whether that product or service has met the customers needs and expec-tations. Failure to meet needs and expectations is assumed to result in dissatisfaction with the product or service.

In addition to a sense of fulfilment in the knowledge that ones needs have been met, satisfaction can also be related to other types of feelings, depending on the particular context or type of service.9 For example, satisfaction can be viewed as contentment more of a passive response that consumers may associate with services they do not think a lot about or services that they receive routinely over time. Satisfaction may also be associated with feelings of pleasure for services that make the consumer feel good or are associated with a sense of happiness. For those services that really surprise the consumer in a positive way, satisfaction may mean delight. In some situations, where the removal of a negative leads to satisfaction, the consumer may associate a sense of relief with satis-faction. Finally, satisfaction may be associated with feelings of ambivalence when there is a mix of positive and negative experiences associated with the product or service.

Although consumer satisfaction tends to be measured at a particular point in time as if it were static, satisfaction is a dynamic, moving target that may evolve over time, influ-enced by a variety of factors.10 Particularly when product usage or the service experience takes place over time, satisfaction may be highly variable depending on which point in the usage or experience cycle one is focusing on. Similarly, in the case of very new services or a service not previously experienced, customer expectations may be barely forming at the point of initial purchase; these expectations will solidify as the process unfolds and the consumer begins to form his or her perceptions. Through the service cycle the consumer may have a variety of different experiences some good, some not good and each will ultimately impact satisfaction.

What Determines Customer Satisfaction?As shown in Figure 4.1, customer satisfaction is influenced by specific product or service features, perceptions of product and service quality, and price. In addition, personal fac-tors such as the customers mood or emotional state and situational factors such as family member opinions will also influence satisfaction.

Product and Service Features Customer satisfaction with a product or service is influenced significantly by the customers evaluation of product or service features.11 For a service such as a resort hotel, important features might include the pool area, access to golf facilities, restaurants, room comfort and privacy, helpfulness and courtesy of staff, room price, and so on. In conducting satisfaction studies, most firms will determine through some means (often focus groups) what the important features and attributes are for their service and then measure perceptions of those features as well as overall service satisfaction. Research has shown that customers of services will make trade-offs among different service features (for example, price level versus quality versus friendliness of personnel versus level of customisation), depending on the type of service being evalu-ated and the criticality of the service.12

Consumer Emotions Customers emotions can also affect their perceptions of satisfaction with products and services.13 These emotions can be stable, pre-existing emotions for example, mood state or life satisfaction. Think of times when you are at a very happy stage in your life (such as when you are on holiday), and your good, happy mood



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and positive frame of mind have influenced how you feel about the services you experi-ence. Alternatively, when you are in a bad mood, your negative feelings may carry over into how you respond to services, causing you to overreact or respond negatively to any little problem.

Specific emotions may also be induced by the consumption experience itself, influenc-ing a consumers satisfaction with the service. Research done in a white-water rafting con-text showed that the guides had a strong effect on their customers emotional responses to the trip and that those feelings (both positive and negative) were linked to overall trip satisfaction.14 Positive emotions such as happiness, pleasure, elation and a sense of warm-heartedness enhanced customers satisfaction with the rafting trip. In turn, nega-tive emotions such as sadness, sorrow, regret and anger led to diminished customer satis-faction. Overall, in the rafting context, positive emotions had a stronger effect than negative ones.

Similar effects of emotions on satisfaction were found in a Finnish study that looked at consumers satisfaction with a government labour bureau service.15 In that study negative emotions including anger, depression, guilt and humiliation had a strong effect on customers dissatisfaction ratings.

SERVICE SPOTLIGHT

Attributions for Service Success or Failure Attributions the perceived causes of events influence perceptions of satisfaction as well.16 When they have been surprised by an outcome (the service is either much better or much worse than expected), consumers tend to look for the reasons, and their assessments of the reasons can influence their sat-isfaction. For example, if a customer of a weight-loss organisation fails to lose weight as hoped for, he or she will likely search for the causes was it something he or she did, was the diet plan ineffective or did circumstances simply not allow him or her to follow the diet regime before determining his or her level of satisfaction or dissatisfaction with the weight-loss company.17 For many services, customers take at least partial responsibility for how things turn out.

Even when customers do not take responsibility for the outcome, customer satisfaction may be influenced by other kinds of attributions. For example, research done in a travel agency context found that customers were less dissatisfied with a pricing error made by the agent if they felt that the reason was outside the agents control or if they felt that it was a rare mistake, unlikely to occur again.18

Perceptions of Equity or Fairness Customer satisfaction is also influenced by percep-tions of equity and fairness.19 Customers ask themselves: have I been treated fairly com-pared with other customers? Did other customers get better treatment, better prices, or better quality service? Did I pay a fair price for the service? Was I treated well in exchange for what I paid and the effort I expended? Notions of fairness are central to customers perceptions of satisfaction with products and services, particularly in service recovery situations. As you will learn in Chapter 15, satisfaction with a service provider following a service failure is largely determined by perceptions of fair treatment.

Other Consumers, Family Members and Co-workers In addition to product and ser-vice features and ones own individual feelings and beliefs, consumer satisfaction is often influenced by other people.20 For example, satisfaction with a family holiday is a dynamic phenomenon, influenced by the reactions and expressions of individual family members



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over the duration of the holiday. Later, what family members express in terms of satisfac-tion or dissatisfaction with the holiday will be influenced by stories that are retold among the family and selective memories of the events. Similarly, the satisfaction of people on a white-water rafting adventure is certainly influenced by individual perceptions, but it is also influenced greatly by the experiences, behaviour and views of the other rafters. In a business setting, satisfaction with a new service or technology for example, a new cus-tomer relationship management software service will be influenced not only by indi-viduals personal experiences with the software itself, but also by what others say about it in the company, how others use it and feel about it, and how widely it is adopted in the organisation.

National Customer Satisfaction IndicesBecause of the importance of customer satisfaction to firms and overall quality of life, many countries have a national index that measures and tracks customer satisfaction at a macro level.21 Many public policy-makers believe that these measures could and should be used as tools for evaluating the health of the nations economy, along with traditional mea-sures of productivity and price. National customer satisfaction indices begin to get at the quality of economic output, whereas more traditional economic indicators tend to focus only on quantity. The first such measure was the Swedish Customer Satisfaction Barometer introduced in 1989.22 Throughout the 1990s similar indices were introduced in Germany (Deutsche Kundenbarometer, or DK, in 1992), the United States (American Customer Satisfaction Index, ACSI, in 1994), Norway (Norsk Kundebarometer, in 1996) and Switzerland (Swiss Index of Customer Satisfaction, SWICS, in 1998).23 These indices measure customer satisfaction over a wide range of different industries and organisa-tions including public sector organisations. They are intended to be complementary to productivity measures, with productivity reflecting the quantity of output and customer satisfaction measuring the customers view of quality of output. The research is carried out through interviews with hundreds of current customers. Each of the organisations involved receives a satisfaction score computed from its customers perceptions of qual-ity, value, satisfaction, expectations, complaints and future loyalty. A benchmark pan-European customer satisfaction survey was undertaken in 2005 covering 10 European countries (Estonia, Latvia, Lithuania, Denmark, Finland, Norway, Sweden, Greece, Portugal and Iceland) to examine differences in satisfaction across a number of service sectors.24

A multitude of ways to measure customer satisfaction, loyalty, and quality exists, and all are not equally useful. Some are too complex, others are too simple, and yet others measure the wrong things. Some are better for predicting outcomes such as growth and performance, while other types of satisfaction and quality measures are needed for diag-nosing underlying problems and making improvements.

One measurement approach, Net Promoter, was developed by loyalty expert Frederick Reichheld. 25 This was based on business case studies conducted by his firm. Net Promoter has gained tremendous popularity across industries in a very short time. The research pro-motes one customer loyalty question as the best for most industries in terms of predict-ing repeat customer purchases, growth, or referrals. The question is: How likely is it that you would recommend [company X] to a friend or colleague?

Using this question as a basis, many firms now use Reichhelds Net Promoter metric (the proportional difference between a firms promoters and detractors, based on this one question) to predict growth and loyalty. While the measure enjoys tremendous popularity, there is continuing controversy about its superiority as a predictor. Academic researcher Timothy Keiningham and colleagues26 have concluded that it is no better at predicting growth than other measures such as a Customer Satisfaction Index.

Although tools such as Net Promoter or customer satisfaction help firms to determine where they stand with their customers and to monitor trends, these global measures do not provide the detail that companies need to diagnose underlying causes or to make


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Service Encounters: The Building Blocks for Customer PerceptionsWe have just finished a discussion of customer perceptions, specifically customer satis-faction and service quality. Here we turn to what have been termed the building blocks for customer perceptions service encounters, or moments of truth. Service encounters are where promises are kept or broken and where the proverbial rubber meets the road sometimes called real-time marketing. It is from these service encounters that customers build their perceptions.

Service Encounters or Moments of TruthFrom the customers point of view, the most vivid impression of service occurs in the service encounter or moment of truth,37 when the customer interacts with the service firm. For example, among the service encounters that a hotel customer experiences are checking into the hotel, being taken to a room by a hotel porter, eating a restaurant meal, requesting a wake-up call and checking out. You could think of the linking of these moments of truth as a service encounter cascade (see Figure 4.2). It is in these encounters that customers receive a snapshot of the organisations service quality, and each encounter contributes to the cus-tomers overall satisfaction and willingness to do business with the organisation again. From the organisations point of view, each encounter thus presents an opportunity to prove its potential as a quality service provider and to increase customer loyalty.

Some services have few service encounters, and others have many. The Disney Corporation estimates that each of its amusement park customers experiences about 74 service encounters and that a negative experience in any one of them can lead to a nega-tive overall evaluation. Mistakes or problems that occur in the early levels of the service cascade may be particularly critical. Marriott Hotels learned this through their extensive customer research to determine what service elements contribute most to customer loy-alty. They found that four of the top five factors came into play in the first ten minutes of the guests stay.38

The Importance of EncountersAlthough early events in the encounter cascade are likely to be especially important, any encounter can potentially be critical in determining customer satisfaction and loyalty. If a customer is interacting with a firm for the first time, that initial encounter will create a first impression of the organisation. In these first encounter situations, the customer frequently has no other basis for judging the organisation, and the initial telephone contact

Figure 4.2 A service encounter cascade for a hotel visit

Check-in

Hotel porter takes customer to room

Restaurant meal

Wake-up call

Check-out



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or face-to-face experience with a representative of the firm can take on excessive impor-tance in the customers perceptions of quality. A customer calling for a repair service on a household appliance may well hang up and call a different company if he or she is treated rudely by a customer service representative, put on hold for a lengthy period or told that two weeks is the soonest someone can be sent out to make the repair. Even if the technical quality of the firms repair service is superior, the firm may not get the chance to demon-strate it if the initial telephone encounter drives the customer away.

Even when the customer has had multiple interactions with a firm, each individual encounter is important in creating a composite image of the firm in the customers memory. Many positive experiences add up to a composite image of high quality, whereas many negative interactions will have the opposite effect. On the other hand, a combination of positive and negative interactions will leave the customer feeling unsure of the firms quality, doubtful of its consistency in service delivery and vulnerable to the appeals of competitors. For example, a large corporate customer of a commercial catering company that provides food service in all its employee canteens and cafeterias could have a series of positive encounters with the account manager or salesperson who handles the account. These experiences could be followed by positive encounters with the operations staff who actually set up the food service facilities. However, even with these positive encounters, later negative experiences with the staff who serve the food or the accounting depart-ment that administers the billing procedures can result in a mixture of overall quality impressions. This variation in experiences could result in the corporate customer wonder-ing about the quality of the organisation and unsure of what to expect in the future. Each encounter with different people and departments representing the food service provider adds to or detracts from the potential for a continuing relationship.

Logic suggests that not all encounters are equally important in building relationships. For every organisation, certain encounters are probably key to customer satisfaction. For Marriott Hotels, as noted, the early encounters are most important. In a hospital context, a study of patients revealed that encounters with nursing staff were more important in predicting satisfaction than were encounters with catering or administrative staff.39

In addition to these key encounters, there are some momentous encounters that, like the proverbial one bad apple, simply ruin the rest and drive the customer away no matter how many or what type of encounters have occurred in the past. These momentous encoun-ters can occur in connection with very important events (such as the failure to deliver an essential piece of equipment before a critical deadline). Similarly, momentous positive encounters can sometimes bind a customer to an organisation for life.

Types of Service EncountersA service encounter occurs every time a customer interacts with the service organisation. There are three general types of service encounters: remote encounters, telephone encounters and face-to-face encounters.40 A customer may experience any of these types of encounters, or a combination of all three, in his or her relations with a service firm.

First, encounters can occur without any direct human contact (remote encounters), such as when a customer interacts with a bank through the ATM system, with a car park man-agement company through an automated ticketing machine, with a retailer through its Internet website or with a mail-order service through automated touch-tone telephone ordering. Remote encounters also occur when the firm sends its billing statements or communicates other types of information to customers by mail. Although there is no direct human contact in these remote encounters, each represents an opportunity for the firm to reinforce or establish quality perceptions in the customer. In remote encounters the tan-gible evidence of the service and the quality of the technical processes and systems become the primary bases for judging quality.

More and more services are being delivered through technology, particularly with the advent of Internet applications. Retail purchases, airline ticketing, repair and maintenance



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troubleshooting, and package and shipment tracking are just a few examples of services available via the Internet. All these types of service encounters can be considered remote encounters.

In many organisations (such as insurance companies, utilities and telecommunications), the most frequent type of encounter between an end customer and the firm occurs over the telephone (telephone encounters). Almost all firms (whether goods manufacturers or service businesses) rely on telephone encounters to some extent for customer service, general inquiry or order-taking functions. The judgement of quality in telephone encoun-ters is different from remote encounters, because there is greater potential variability in the interaction.41 Tone of voice, employee knowledge and effectiveness/efficiency in han-dling customer issues become important criteria for judging quality in these encounters.

A third type of encounter is the one that occurs between an employee and a customer in direct contact (face-to-face encounters). At Disney theme parks, face-to-face encounters occur between customers and ticket-takers, maintenance personnel, actors in Disney character costumes, ride personnel, food and beverage servers, and others. For a company such as Ericsson, in a business-to-business setting direct encounters occur between the business customer and salespeople, delivery personnel, maintenance representatives and professional consultants. Determining and understanding service quality issues in face-to-face contexts is the most complex of all. Both verbal and non-verbal behaviours are important determinants of quality, as are tangible cues such as employee dress and other symbols of service (equipment, informational brochures, physical setting). In face-to-face encounters the customer also plays a role in creating quality service for himself or herself through his or her own behaviour during the interaction.

Sources of Pleasure and Displeasure in Service EncountersBecause of the importance of service encounters in building perceptions, researchers have extensively analysed service encounters in many contexts to determine the sources of customers favourable and unfavourable impressions. The research uses the critical incident technique to get customers and employees to provide verbatim stories about satisfying and dissatisfying service encounters they have experienced.42 With this tech-nique, customers (either internal or external) are told, Think of a time when, as a customer, you had a particularly satisfying (or dissatisfying) interaction with ____________________, and are asked the following questions:

When did the incident happen? What specific circumstances led up to this situation? Exactly what did the employee (or firm member) say or do? What resulted that made you feel the interaction was satisfying (or dissatisfying)? What could or should have been done differently?

Sometimes contact employees are asked to put themselves in the shoes of a customer and answer the same questions: Put yourself in the shoes of customers of your firm. In other words, try to see your firm through your customers eyes. Now think of a recent time when a customer of your firm had a particularly satisfying/unsatisfying interaction with you or a fellow employee. The stories are then analysed to determine common themes of satisfaction/dissatisfaction underlying the events. On the basis of thousands of service encounter stories, four common themes service recovery (after failure), adaptability, spontaneity and coping have been identified as the sources of customer satisfaction/dissatisfaction in memorable service encounters.43 Each of the themes is discussed here, and sample stories of both satisfying and dissatisfying incidents for each theme are given in Table 4.2. The themes encompass service behaviours in encounters spanning a wide variety of industries.


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Recovery Employee Response to Service Delivery System Failures The first theme includes all incidents in which there has been a failure of the service delivery system and an employee is required to respond in some way to consumer complaints and disappoint-ments. The failure may be, for example, a hotel room that is not available, a flight that is delayed six hours, an incorrect item sent from a mail-order company or a critical error on an internal document. The content or form of the employees response is what causes the customer to remember the event either favourably or unfavourably.

Adaptability Employee Response to Customer Needs and Requests A second theme underlying satisfaction/dissatisfaction in service encounters is how adaptable the service delivery system is when the customer has special needs or requests that place demands on the process. In these cases, customers judge service encounter quality in terms of the flexibility of the employees and the system. Incidents categorised within this theme all contain an implicit or explicit request for customisation of the service to meet a need. Much of what customers see as special needs or requests may actually be rather routine from the employees point of view; what is important is that the customer perceives that something special is being done for him or her based on his or her own individual needs. External customers and internal customers alike are pleased when the service provider makes an effort to accommodate and adjust the system to meet their requirements. On the flip side, they are angered and frustrated by an unwillingness to try to accommodate and by promises that are never followed through. Contact employees also see their abilities to adapt the system as being a prominent source of customer sat-isfaction, and often they are equally frustrated by constraints that keep them from being flexible.

Spontaneity Unprompted and Unsolicited Employee Actions Even when there is no system failure and no special request or need, customers can still remember service encounters as being very satisfying or very dissatisfying. Employee spontaneity in deliv-ering memorably good or poor service is the third theme. Satisfying incidents in this group represent very pleasant surprises for the customer (special attention, being treated like royalty, receiving something nice but not requested), whereas dissatisfying incidents in this group represent negative and unacceptable employee behaviours (rudeness, stealing, discrimination, ignoring the customer).

Coping Employee Response to Problem Customers The incidents categorised in this group came to light when employees were asked to describe service encounter inci-dents in which customers were either very satisfied or dissatisfied. In addition to describ-ing incidents of the types outlined under the first three themes, employees described many incidents in which customers were the cause of their own dissatisfaction. Such cus-tomers were basically uncooperative that is, unwilling to cooperate with the service pro-vider, other customers, industry regulations and/or laws. In these cases nothing the employee could do would result in the customer feeling pleased about the encounter. The term coping is used to describe these incidents because coping is the behaviour generally required of employees to handle problem customer encounters. Rarely are such encoun-ters satisfying from the customers point of view.44 Also of interest is that customers themselves did not relate any problem customer incidents. That is, customers either do not see, or choose not to remember or retell, stories of the times when they themselves were unreasonable to the point of causing their own unsatisfactory service encounter.

Table 4.3 summarises the specific employee behaviours that cause satisfaction and dis-satisfaction in service encounters according to the four themes just presented: recovery, adaptability, spontaneity and coping. The left-hand side of the table suggests what employees do that results in positive encounters, whereas the right-hand side summarises negative behaviours within each theme.


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Perceptions of Service - Zeithaml (Edited)

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