CHAPTER 4
SERVICE AND RELATIONSHIP QUALITY

“An acceptable outcome is a prerequisite for good perceived quality and a satisfied customer, but an excellent service process creates customer satisfaction and a distinct and sustainable competitive edge.”

INTRODUCTION

Based on the discussion of the characteristics of service and service consumption, and on the customer management approach to marketing in the previous chapters, this chapter explains how the quality of service is perceived in service encounters as well as in ongoing relationships. The perceived service quality model is presented as a basic model of the perception of total service quality. The characteristics and determinants of good service quality, such as the seven criteria of good perceived service quality, are then discussed, followed by a description of instruments for measuring perceived service quality. Attribute-based approaches, such as the SERVQUAL instrument, are presented as well as the critical incident approach. In the latter part of the chapter, dynamic approaches to understanding service quality in a relationship context are described. After having read the chapter, the reader should understand the nature of perceived service quality and the determinants or criteria of service quality as well as know how to measure perceived service quality. The reader should also understand how perceived service quality develops into relationship quality in a long-term relationship context.

RESEARCH INTO SERVICE QUALITY

Chapter 2 illustrated the complexity of service and most service activities. Consequently, the quality of service is complex, too. The quality of goods is traditionally related to the technical specifications of the goods, although, even in a goods context, a firm using an image strategy, for example, tries to add to the quality of their goods component by creating imaginative extra value for their customers using, for example, fashion, status or lifestyle aspects.

Service as a process and a series of activities, where production and consumption cannot be totally separated, and where the customer often actively participates in the production process, is bound to be perceived as extremely complex. In order to develop service management and marketing models, it is important to understand what customers are really looking for and what they evaluate.

When the service provider understands how service is perceived and evaluated by the users, it will be possible to identify ways of managing these evaluations and influencing them in a desired direction. The relationship between the service concept, the service offered to customers and customer benefits has to be clarified.

Grönroos introduced a service-oriented approach to quality in 1982 (in English) with the concept of perceived service quality and the model of total perceived service quality.¹ This approach is based on research into consumer behaviour and the effects of expectations concerning goods performance on post-consumption evaluations. The perceived service quality approach with its disconfirmation construct (that is, it measures how well experiences of the service process and its outcome meet expectations) still forms the foundation of most ongoing service quality research.²

The original perceived quality model was developed as a conceptual guideline to help managers and researchers understand what constitutes service in the minds of customers. Goods have physical features which can be perceived and evaluated. Service does not exist before it is consumed. When a customer asks for service the service production process can begin. Eventually it ends and the customer is left with an outcome. Features of service emerge during the simultaneous service production and consumption processes. In the model that was developed the term ‘quality’ was used. In the same way as a marketer of physical goods needs to know how customers perceive the quality of product features, the service marketer has to assess how customers perceive the quality of the ‘service features’ implied by the perceived service quality framework. The perceived service quality model was introduced as a conceptual framework that describes how customers perceive the ‘features’ of service. Originally there was no intention to develop quality measurement models based on a service quality model. Once it is known how customers perceive the quality of the ‘service features’, normal customer satisfaction studies can be conducted to find out how satisfied customers are with a certain service. Customer satisfaction measurement models are also based on the disconfirmation construct and fit service well. However, research into service quality took another avenue, and parallel models for the assessment of service quality were developed.

In addition to research into service quality, there is also an existing quality management establishment with roots that go a long way back in the twentieth century. During the 1990s this took the form of total quality management. However, this quality movement is overwhelmingly devoted to issues related to goods quality. Because of the characteristics of service, much of the goods-related quality know-how is not directly applicable in service organizations.

Of course, on the other hand, much of this is useful for service, too. This should not be forgotten, although this chapter concentrates on what is unique to quality and quality management in service contexts.

QUALITY IS WHAT CUSTOMERS PERCEIVE

Quality has to be defined and how customers perceive quality understood before decisions about quality development can be made. Otherwise quality decisions only become paying lip service to service quality improvement. In service quality literature it is noted that the quality of a particular product or service is whatever the customer perceives it to be.

If quality is defined too narrowly, quality programmes become too narrow in scope. For example, the technical specification of a service, or a product, is frequently considered the only or the most important feature of the perceived quality. The more technology-oriented the firm is, the bigger this risk tends to be. In reality, customers perceive that quality is a much broader concept and moreover, features other than technical ones frequently dominate the quality experience. One has to define quality in the same way customers do, otherwise the wrong actions may be taken and money and time may be poorly invested. It should always be remembered that what counts is quality as it is perceived by customers.

QUALITY DIMENSIONS: WHAT AND HOW

Service is a more or less subjectively experienced process where production and consumption activities take place simultaneously. Interactions, including a series of moments of truth between the customer and the service provider, occur. What happens in these interactions, so-called buyer–seller interactions or service encounters, will obviously have a critical impact on the perceived service.

Basically, the quality of a service as it is perceived by customers has two dimensions: a technical outcome-related dimension and a functional process-related dimension. The hotel guest will be provided with a room and a bed to sleep in, the consumer of a restaurant’s service will get a meal, the airline passenger will be transported from one place to another, the client of a business consultant may receive a new organization scheme, a factory may have its goods transported from its warehouse to a customer, the bank customer may be granted a loan, the servicing of a machine may be taken care of by the manufacturer, a claim by an unsatisfied customer may be settled by a retail store, and so on. All of these outcomes of service processes are obviously part of the quality experience.

What customers receive in their interactions with a firm is clearly important to them and their quality evaluation. Internally though, this is often thought of as the quality of the service. However, this is not the whole truth. It is merely one quality dimension, called the technical quality of the outcome of the service production process. In service management literature the term ‘outcome quality’ has also been used for this dimension. It is what the customer is left with, when the service production process and its buyer–seller interactions are over. Frequently, but by no means always, this dimension can be measured relatively objectively by customers, because of its characteristic as a technical solution to a problem.

However, as there are a number of interactions between the service provider and the customer, including various series of moments of truth, the technical quality dimension will not count for the total quality that the customer perceives he has received. The customer will obviously also be influenced by the way in which the technical quality – the outcome or end result of the process – is transferred to him. The accessibility of an ATM, a website, a restaurant or a business consultant, the appearance and behaviour of waiters, bank clerks, travel agency representatives, bus drivers, cabin attendants, repairmen and service and maintenance technicians, and how these service employees perform their tasks, what they say and how they do it, also influence the customer’s view of the service.

Furthermore, in the case of self-service, the more customers accept and understand self-service activities or co-production routines, the better they will, probably, regard the service. Also, other customers simultaneously consuming the same or similar service may influence the way in which a given customer will perceive a service. Other customers may cause long queues, or disturb the customer; on the other hand, they may have a positive impact on the atmosphere of the buyer–seller interactions in these service encounters.

FIGURE 4.1

Two service quality dimensions.

In summary, the customer is also influenced by how he receives the service and how he experiences the simultaneous production and consumption process (the service encounter). This is another quality dimension, which is related to how the moments of truth of the service encounters are taken care of and how the service provider functions. Therefore, this is called the functional quality of the process. In the literature this dimension is also labelled ‘process quality’. Hence, as illustrated in Figure 4.1, we have two basic quality dimensions, namely, WHAT the customer receives and HOW the customer receives it; the technical result or outcome of the process (technical quality) and the functional dimension of the process (functional quality).³ It is easy to see that the functional quality dimension cannot be evaluated as objectively as the technical dimension; frequently, it is perceived very subjectively.

Moreover, unlike goods consumption, in most cases the customers knows which organization produces the service. Company and/or local image is therefore of utmost importance to most services. It can affect the perception of quality in various ways. If the provider is good in the minds of the customers, that is, if it has a favourable image, minor mistakes will probably be forgiven. If mistakes often occur, the image will be damaged. If the image is negative, the impact of any mistake will often be considerably greater than it otherwise would be. As far as the quality perception is concerned, image can be viewed as a filter.

The two quality dimensions, that is, what and how, are not only valid for service activities. The technical solution for a customer – provided by, for example, a machine or another good – is part of the overall technical quality perceived by this customer. But attempts to tailor the machine according to the specific demands of a customer are an additional value of a functional nature and therefore part of the overall functional quality which this customer experiences.

It should be observed that hidden services, such as invoicing and complaints handling, have a quality impact on customers as well. For example, if a claim is settled with satisfactory results for the customer, the outcome of the claims handling process has good technical quality. However, the total customer influence of the claims handling process also depends on how the process flows. For instance, if it was complicated and time-consuming to get results, the functional quality of the claims handling process has been low and total perceived quality lower than it otherwise would have been.

ADDITIONAL DIMENSIONS

Quality dimensions other than the two basic ones (what and how) have been suggested in the literature. Rust and Oliver discussed the need for explicitly recognizing the physical environment of the service encounter as a third dimension.⁴ Thus, the where of the service quality perception would be added to the what and how.⁵ In the perceived service quality model the service processes include the environment of the process, and thus the functional quality perception is influenced by elements of the physical environment. Therefore, the where aspect is part of the how dimension, which is logical because the perception of the process is clearly dependent on the context of that process. For example, shabby decor influences the perception of the service process in a restaurant. However, as a way of increasing the clarity of the model, if needed a distinction between ‘how’ and ‘where’ could very well be made. Hence, a third basic dimension (not counting image) would be introduced into the model. This dimension could, for example, be labelled servicescape quality, using the term ‘servicescape’⁶ introduced by Bitner to describe various elements of the physical environment of the service encounter.

The economic consequence is another aspect of perceived service quality that Holmlund has suggested in a business-to-business context.⁷ Economic quality would denote the perceived economic consequences of a certain solution. It is not directly a question of price or other kinds of sacrifice for a customer, but rather the perception of, for example, possible economic sacrifice caused by a solution. In some situations, not only in industrial markets, it may very well be justified to take this aspect of perceived service quality into account.

QUALITY AND THE COMPETITIVE EDGE

Quality is often considered to be one of the keys to success. In service contexts, quality is often the foundation of creating a competitive advantage, but which quality dimension (what or how) is the vital part of excellent total quality? If this question is not answered correctly, the wrong actions may be taken, and the company would lose its chance to achieve a stronger competitive position.

Too often technical quality considerations are thought of as the paramount quality issues. A technical quality strategy is successful if a firm succeeds in achieving a desired technical outcome that the competition cannot match. Today, this is rarely the case; there are a number of firms that can produce approximately the same technical quality. Creating a technical advantage is difficult because, in many industries, competitors can introduce similar solutions relatively quickly. In service, creating a technical advantage seems to be even more difficult than in manufacturing. For example, in financial service or insurance competitors often launch a similar service in a technical sense in response to competition within weeks or even days. Even when an excellent solution is achieved, the firm may be unsuccessful, if excellent technical quality is counteracted or nullified by badly managed or handled service encounters; that is, by an unsatisfactory functional quality of the process.

Implementing a service strategy is a viable option for most firms, service firms and manufacturers of physical goods alike. This means, in principle, that improving the service process and service encounters becomes the basis for quality programmes. Developing the functional quality dimension may add substantial value for the customers and thus create the necessary competitive edge. To state this in a more simplified way, you can beat the competition if you provide your customers with more and better service where functional quality is emphasized. Of course, this does not mean that technical quality issues are not important, and that technical quality should not be developed as well.

The technical quality of the outcome of a service process is normally a prerequisite for good perceived quality. It has to be at an acceptable level. The definition of an acceptable level depends on the strategy of a firm and the needs and expectations of its customers. However, once the outcome is good enough, this becomes transparent. Good technical quality alone does not mean that customers perceive that the service quality is good. If customers are to consider total service quality good, functional quality has to be good as well. In a situation where a number of firms are competing with similar outcomes or technical quality, the functional quality impact of the service process counts. In that situation, firms compete with their service processes and the functional quality impact created by them. However, if technical quality fails, total perceived quality fails as well.

In conclusion, the technical quality has to be good enough, as defined by the firm’s strategy and its customers’ needs and expectations, but a service provider competes with functional quality, that is, with how its service process is experienced by its customers.

THE PERCEIVED SERVICE QUALITY

In previous sections we discussed the two basic quality dimensions – the what and the how. We also noted that quality is to a large extent perceived subjectively. However, the quality perception process is more complicated. It is not just the experiences of the quality dimensions that determine whether quality is perceived as good, neutral or bad.

Figure 4.2 illustrates how quality experiences are connected to traditional marketing activities resulting in a perceived service quality. Good perceived quality is obtained when the experienced quality meets the expectations of the customer; that is, the expected quality. If expectations are unrealistic, the total perceived quality will be low, even if the experienced quality measured in an objective way is good. As shown in Figure 4.2, the expected quality is a function of a number of factors, namely marketing communication, word of mouth and discussions in social media, company/local image, price, customer needs and values. Marketing communication includes, for example, advertising, direct mail, sales promotion, websites, Internet communication and sales campaigns, which are under the direct control of the firm. Image, social media and word of mouth, as well as public relations, are only indirectly controlled by the firm. Image also includes a customer’s prior experiences. External impact on these factors may also occur, but they are basically a function of the previous performance of the firm, supported by, for example, advertising. Finally, the needs of the customer as well as the values of the customer that determine his choice also have an impact on his expectations.

A service quality programme may be unsuccessful, or even lead to deteriorated perceived quality, if the firm simultaneously runs advertising campaigns that promise too much or are inadequate in some other respect. The level of total perceived quality is not determined simply by the level of technical and functional quality dimensions, but rather by the gap between the expected and experienced quality (the disconfirmation notion). Consequently, every quality programme should involve not only those involved in operations, but also those responsible for external marketing and market communication.

Image plays a central role in customer perception of service quality, and is as important to a service firm as to any other organization. Hence, it is imperative that image be managed in a proper manner. The issues of how image develops and what causes image problems are not always very well understood. Therefore these issues will be dealt with at length in Chapter 11 on managing brand relationships and image.

FIGURE 4.2

Total perceived quality.

MANAGING EXPECTATIONS TO SECURE THE QUALITY PERCEPTION

As the perceived service quality model shows, customer expectations have a decisive impact on customers’ quality perceptions. If a service provider overpromises, it raises customers’ expectations too high and, consequently, customers will perceive that they get low quality. The level of quality may very well still be high, objectively measured, but as customer expectations were not in balance with experiences, the perceived quality is nevertheless low. Many quality development processes are destroyed by too much promise of improved service, too early. The marketer has to be very careful when designing external marketing campaigns and activities, so that he avoids making promises that cannot be kept. Indeed, it may be wiser to try to keep promises on a lower level than actual customer experiences. In that way customers will at least not be dissatisfied with the quality they perceive. At the same time it allows the service provider to offer its customers unexpected surprises, which much more effectively create loyalty and repurchases than simply satisfactorily perceived quality. We shall return to this issue in the next chapter.

In conclusion, from a marketing point of view it is better to underpromise in order to be sure that the organization can fulfil the promise that has been given. It is even better to underpromise and overdeliver.

THE MOMENTS OF TRUTH AND QUALITY

As noted in this chapter, the situations in which the customer meets and interacts with the service provider’s resources and processes are critical to the quality experience. In these interactions most or all of the technical quality of the outcome is transferred to the customer, but often even more importantly, these buyer–seller interactions or service encounters determine the level of the functional quality. In service management such situations are often called moments of truth, to use a term that was introduced into the service management literature by Richard Normann.⁸

The ‘moments of truth’ concept literally means that this is the time and place when and where the service provider has the opportunity to demonstrate to the customer the quality of its service. It is a true moment of opportunity. In the next moment the opportunity will be lost. The customer will have gone, and so will the moment of opportunity. If a quality problem has occurred, it is too late to take corrective action. In order to do so, a new moment of truth has to be created. The service provider can, for example, actively contact the customer to correct a mistake or to at least explain why things went wrong. This is, of course, much more troublesome and probably less effective than a well-managed moment of truth.

In reality, the customer will experience a whole series of moments of truth when patronizing a service organization. When using the service of an airline the passenger goes through a number of such moments, beginning with arrival at the airport and ending with baggage claim and transportation away from the airport.

The service process must always be planned and executed so that no badly handled moments of truth take place. If such situations go unmanaged there is an evident risk that unexpected quality problems may occur.

THE EFFECT OF EMOTIONS AND MOOD

Emotions that customers feel when consuming a service have not been included in the perceived service quality model, or in models for measuring satisfaction with service quality. However, it is quite obvious that felt emotions, such as anger and depression, guilt or happiness, delight and hopefulness, somehow affect the pure cognitive perception of service processes. Some services, such as theatre or an ice hockey game, should arouse emotions, but emotions also form either a filter mediating experiences of the service process, or are variables that influence the experiences alongside cognitively perceived quality elements.

Managers should always bear in mind the potential effects of emotions on perceived service quality. There have been some minor studies of the effects of emotions on satisfaction with service quality. One such study indicated that negative emotions may have a stronger effect on satisfaction with quality than positive emotions.⁹ However, no conclusive guidance for management has yet been found.

Mood is a related concept, which may also have a decisive effect on how the quality of a service is perceived. Previous research on consumer behaviour has shown that customers’ mood – positive or negative – has an effect on their evaluations and behavioural responses to, among other things, service encounters.¹⁰ As with emotions, research into the effects of mood on how service quality is perceived is very scarce. However, based on existing research, it seems that mood may only have a limited impact on how customers perceive service encounters.¹¹

MEASURING SERVICE QUALITY

Customers’ perception of the quality of service features must, of course, be assessed. The natural way of doing it would be to measure customers’ satisfaction with the quality they have perceived, as was originally intended with the perceived service quality model. However, a major part of service quality research has been geared towards the development of instruments for measuring service quality directly. In the literature, two types of measurement instruments have been discussed and used.

1. Attribute-based measurement instruments: measurement models based on attributes describing the features of a service.

2. Qualitative measurement instruments: for example, measurement models based on the assessment of critical incidents.

Attribute-based models are the most widely used measurement instruments in academic research as well as in business practice. The most well-known instrument is the SERVQUAL instrument. According to this measurement approach a number of attributes that describe the features of a service are defined, and after that respondents are asked to rate the service on these attributes.

Qualitative measurement approaches are used to a much lesser extent. Here respondents are asked to describe their perception of the service or the service encounters. The critical incident method is the most often used qualitative method. In a subsequent section this method will be described.

ATTRIBUTE-BASED MODELS: SERVICE QUALITY DETERMINANTS AND THE SERVQUAL INSTRUMENT

How service quality can be measured using attribute-based models has been studied extensively. In the mid-1980s. Berry and his colleague began to study service quality determinants and how customers evaluate the quality of service based on the perceived service quality concept.¹² In Figure 4.3 the results of their initial study, the 10 service quality determinants, are summarized.

The 10 determinants were found to characterize customers’ perception of the service. One of the determinants, competence, is clearly related to the technical quality of the outcome, and another, credibility, is closely connected to the image aspect of perceived quality. However, it is interesting to observe that the rest of the determinants are more or less related to the process dimension of perceived quality. The importance of the functional quality dimension is very much stressed by these findings.

As a result of a later study the 10 determinants of service quality were decreased to the following five:¹³

1. Tangibles. This determinant is related to the appeal of facilities, equipment and material used by a service firm as well as to the appearance of service employees.

2. Reliability. This means that the service firm provides its customers with accurate service the first time without making any mistakes and delivers what it has promised to do by the time that has been agreed upon.

3. Responsiveness. This means that the employees of a service firm are willing to help customers and respond to their requests as well as to inform customers when service will be provided, and then give prompt service.

4. Assurance. This means that employees’ behaviour will give customers confidence in the firm and that the firm makes customers feel safe. It also means that the employees are always courteous and have the necessary knowledge to respond to customers’ questions.

5. Empathy. This means that the firm understands customers’ problems and performs in their best interests as well as giving customers individual personal attention and having convenient operating hours.

SERVQUAL is an instrument for measuring how customers perceive the quality of a service. This instrument is based on the five determinants above and on a comparison between customers’ expectations of how the service should be performed and their experiences of how the service is rendered (disconfirmation or confirmation of expectations). Usually 22 attributes are used to describe the five determinants and respondents are asked to state (on a seven-point scale from ‘Strongly Disagree’ to ‘Strongly Agree’) what they expected from the service and how they perceived the service. Based on the discrepancies between expectations and experiences over the 22 attributes, an overall quality score can be calculated. The more this score shows that experiences are below expectation, the lower the perceived quality.¹⁴ However, more important than calculating the overall score may be the scores on the individual attribute scales.

FIGURE 4.3

Determinants of perceived service quality.
Source: Parasuraman, A., Zeithaml, V.A. & Berry, L.L., A conceptual model of service quality and its implications for future research. Journal of Marketing, 49(Fall); 1985: p. 47. Reproduced by permission of the American Marketing Association.

There has been some controversy regarding the use of the SERVQUAL instrument. In many studies the determinants have been reported to be stable over various types of service, but in other studies the set of five standard determinants has not been found. Moreover, sometimes in a factor analysis one set of determinants emerges for expectations and another set for experiences. In addition, the 22 attributes used in the original instrument do not always accurately describe all aspects of a given service.¹⁵

The SERVQUAL scale should be applied carefully, and the determinants and attributes of the instrument should always be reassessed in any situation, before the instrument is used. The services, as well as markets and cultural environments, are different. It may be necessary to add new aspects of the service to be studied to the original set of determinants and attributes, and sometimes to exclude some from the measurement instrument used. From a managerial point of view, when trying to understand what constitutes a given service, the five determinants, and also the original 10 determinants, give a valuable starting point for the development of an understanding of what aspects characterize the service that is provided. However, when using a SERVQUAL-type approach to measuring perceived service quality one should always carefully customize the set of determinants and attributes used to the specific situation at hand.

PROBLEMS WITH EXPECTATIONS/EXPERIENCES MEASUREMENTS AND COMPARISONS

There has been a considerable amount of debate regarding what kind of expectations the real experiences of a given service should be compared with. In the original SERVQUAL instrument, customers were asked what they expected from the service they had consumed, so the expectations and experiences measurements related to the same service. Later the measurement method was changed so that customers were asked what they expected from an excellent or ideal service in the same category as the one they had consumed. The original perceived service quality model from which the expectations/experiences comparison originates in service quality contexts was developed to help managers and researchers understand how customers perceive features of a given service. Hence, the expectations concept in that model is quite clearly related to the same service that is also experienced. Following the original model, the expectations should be measured as the expectations of the service that is consumed.

However, independent of what one wants to know about a given service, different kinds of expectations could be measured. If one wants to assess how good a given service is considered to be compared with the best in its category, expectations of the best-in-the-category service or an ideal service should be measured. On the other hand, if one wants to find out how customers perceive the quality of a given service, both expectations and experiences regarding this particular service should be measured.

There is another problem with measurement instruments that are based on comparisons between expectations and experiences over a number of attributes. This is because there are certain validity problems related to the measurement of expectations. These problems can be summarized in the following three points:¹⁶

1. If expectations are measured after the service experience or at the same time as the experiences occur, which for practical reasons they often are, then what is measured is not really expectation but something that has been biased by experience.

2. It does not necessarily make sense to measure expectations prior to the service experience either, because the expectations that customers have beforehand are perhaps not the expectations with which they will compare their experiences. The customer’s experiences of the service process may change his expectations, and altered expectations are ones with which the experiences should be compared to determine the actual quality perception of a customer.

3. Measuring expectations is not a sound way of proceeding in any case, because experiences are perceptions of reality, and inherent in these perceptions are prior expectations. Consequently, if first, one way or the other, expectations are measured and then experiences are measured, then the expectations are measured twice.

When measuring perceived service quality, the problems described above are not easy to solve. Theoretically, a comparison of experiences and expectations still makes sense, because expectations clearly influence the perception of quality. Managers need to observe the management of expectations when developing quality programmes. However, in practice we may have to find alternative ways of measuring perceived quality.

In her study on the restaurant industry, Liljander¹⁷ compared a number of different standards to relate experiences to, expectations being one of them. Her conclusion was that making no comparisons at all seems to be a good approach to measuring perceived service quality. This means that by measuring experiences only over a set of appropriate attributes, one can get a good approximation of the perceived quality. In a North American study, based on similar arguments as Liljander’s, a measurement instrument called SERVPERF (service performance only) was suggested.¹⁸ Indeed, measuring customers’ experiences only may be the best and most valid way of assessing perceived service quality. Thus, the researcher develops a set of attributes that describes the service as conclusively as possible and only measures how customers experience the service on scales that measure these attributes. This way of measuring perceived service quality is also much easier to administer and the data is easier to analyse.

STUDYING CRITICAL INCIDENTS: A QUALITATIVE APPROACH TO MEASURING SERVICE QUALITY

An alternative to attribute-based methods to study how customers perceive the quality of a given service is the critical incident method. This method has been used a great deal in various studies in the service field.¹⁹

The methodological approach is to ask respondents, in this case customers with experiences of a given service, to think of situations where the service, or any part of the service process including the outcome of that process, clearly deviated from the norm, either in a favourable or unfavourable way. These are critical incidents. Then the respondent is asked to describe, in as much detail as possible, what happened and what made him consider the incident critical. Finally, the researcher analyses the descriptions of the critical incidents and the reasons for them in order to find out what kind of quality problems exist and why these problems occur. Favourable quality perceptions and the reasons for them are also categorized in the same fashion.

A study using critical incidents gives the marketer rich material indicating problem areas and strengths as well as what should be developed in order for the firm to improve the perceived quality of its service. One may find out, for example, that a lack of resources, problems with the technical skills of service employees or negative attitudes towards customers are frequently occurring reasons for negative critical incidents, causing low service quality perception. If needed, the marketer can use these findings as a basis for further research on actions necessary to improve service quality. Frequently the findings from a critical incident study give direct indications about what actions need to be taken.

PERCEIVED SERVICE QUALITY VERSUS CUSTOMER SATISFACTION

Customer satisfaction with a physical product is often measured using an instrument where a given physical product is described by a set of attributes that reflect key product features. A comparison of experiences with prior expectations is also often made. Probably because the development of measurement models for perceived service quality included similar elements to models for measuring satisfaction with goods features, the question whether there is a difference between service quality and customer satisfaction has been debated in the literature. Furthermore, if there is a difference, the question whether quality is perceived first and then satisfaction, or satisfaction with a service comes first and then leads to a quality perception has also been discussed. This discussion has been extensive and even heated at times; however, it is quite unnecessary.

The perceived service quality model is intended to offer a conceptual framework for understanding the features of a service, including its outcome, process and image dimensions. It is not a measurement model. Instead it should give the researcher and marketer a basis for developing a service offering with a certain quality. In the same way as a customer first perceives the quality of the features of a physical product, and only then, perhaps taking into account price and other sacrifice-related issues, finds out whether or not he is satisfied with the product, a person consuming a service first perceives the quality of the dimensions of the service, and only then, again perhaps considering other issues as well, is either satisfied or not with the quality of that service.

A logical analysis clearly shows that a perception of service quality comes first, followed by a perception of satisfaction or dissatisfaction with this quality.

A SUMMARY: THE SEVEN CRITERIA OF GOOD PERCEIVED SERVICE QUALITY

There has been a range of studies of service quality conducted in many countries. From them various lists of attributes or factors of good quality can be collated. Such lists are useful as starting points for managers who want to develop an appropriate list of attributes or features that describe a given service. However, in order to make such lists of determinants or factors of good service quality useful for managerial purposes, they have to be short, yet still provide a comprehensive list of aspects of good quality. Figure 4.4 provides such a list. These seven criteria of good perceived service quality are an integration of available studies and conceptual work. Some of these studies have been discussed in this chapter. One of the seven, professionalism and skills, is outcome-related and thus a technical quality dimension. Another criterion, reputation and credibility, is image-related, thus fulfilling a filtering function. However, four other criteria, attitudes and behaviour, accessibility and flexibility, reliability and trustworthiness and service recovery, are clearly process-related and thus represent the functional quality dimension. Finally, following the conceptual work by Bitner et al.,²⁰ the impact of the servicescape is introduced as a seventh criterion. This is clearly a process-related, functional quality criterion.

FIGURE 4.4

The seven criteria of good perceived service quality.

These seven criteria of good perceived service quality can be viewed as guidelines based on a solid body of empirical and conceptual research as well as on practical experience. Therefore, they should be useful as managerial principles. Of course, the list is not exhaustive. In various industries and for various customers certain criteria are more important than others. And of course, there may in specific situations be other determinants of good quality that are not covered by these criteria.

The role of price in a quality context is not very clear. Normally, however, the price of a service can be viewed in relation to the quality expectations of customers or to their previously perceived service quality. If the price of a service is considered too high, customers will not buy. Price also has an impact on expectations. But in some situations price seems to be a quality criterion. A higher price level may equal a better quality in the minds of customers, especially when the service is highly intangible. In many cases professional service is an example of such service.

RELATIONSHIP QUALITY: A DYNAMIC APPROACH TO PERCEIVED QUALITY

The perceived service quality model is basically static, although the image factor adds dynamism to it. Most service quality models and instruments are static. As service is a process and inherently relational, clearly customers’ quality perceptions develop and undergo change over time as the relationship continues. Even if there is only one single service encounter, this encounter is a process that includes a series of moments of truth and the customer’s quality perception develops in a dynamic fashion throughout this interaction process. The need for dynamic models to further develop the understanding of how service quality is perceived by customers was expressed at the beginning of the 1990s.²¹ Driven by service quality research, an interest in relationship quality emerged.²² Relationship quality can be described as the dynamics of long-term quality formation in ongoing customer relationships. In the last part of this chapter models that describe how long-term quality perceptions can be understood and analysed are described.²³

From the customer’s point of view, relationship quality is their continuously developing quality perception over time. However, as a relationship includes at least two parties, the supplier or service provider and the customer, a quality perception is really developing on both sides. The supplier or service provider forms an impression of the quality of the customer and, especially in business relationships, there may be ongoing reciprocal business developing over time with continuous quality perceptions by both parties related to the two-way exchanges of goods, service activities, information or other items of value.

A RELATIONSHIP FRAMEWORK FOR THE ANALYSIS OF RELATIONSHIP QUALITY

In any commercial relationship between two parties, interaction is the key concept. Interactions are the basic phenomena in quality and customers’ value creation.²⁴ The perception of relationship quality occurs in ongoing interactions, which may be either continuous, such as in security and cleaning services, or discrete, such as in bank service or goods transportation. Maria Holmlund has developed a framework for understanding and analysing ongoing interactions.²⁵ Such interactions may be very different depending on the type of marketing situation involved. Some contacts are between people, some between customers and machines and systems, and some between systems of the supplier and customer, respectively. In every case interactions are involved. The framework is equally valid for describing and analysing relationships in consumer markets and in business-to-business markets.

The framework consists of a continuous flow of acts, episodes and sequences, which form the relationships.²⁶ Figure 4.5 illustrates this relationship framework.

Acts are the smallest unit of analysis in the interaction process. Examples of acts could include phone calls, factory visits, service calls and hotel registration. These are moments of truth. Acts may be related to any kind of interaction elements, physical goods, services, information, financial aspects or social contacts.

Interrelated acts form a minor part of a relationship. These are called episodes (or service encounters to use a concept frequently used in the service management literature) and examples of these include paying bills from a home computer or visiting a bank office to withdraw money, a negotiation, a shipment of goods, or dinner at a hotel restaurant during a stay at that hotel. Every episode includes a series of acts, and consequently a series of moments of truth. For example, a shipment may include such acts as the placement of an order by telephone, assembling and packing the products, transporting the products, unpacking them, making a complaint, and sending and paying an invoice.

FIGURE 4.5

A relationship framework: interaction levels in a relationship.
Source: Holmlund, M., Perceived Quality in Business Relationships. Helsinki: Hanken Swedish School of Economics, Finland/CERS, 1997, p. 96. Reproduced by permission.

Interrelated episodes form the next level of analysis in the interaction process, a sequence. Sequences can be defined in terms of a time period, a product offering, a campaign or a project, or a combination of these. The analysis of a sequence may contain all kinds of interactions related to a particular project, which may take up to a year or even longer. As an example, in a hotel context, a sequence comprises everything that takes place during one stay at a particular hotel, including episodes such as accommodation, eating in the hotel restaurant and using the hotel’s gym or pool. Sequences may naturally overlap, so that episodes belonging to one sequence may also be part of another sequence.

The final and most aggregated level of analysis is the relationship. Several sequences form a relationship. Sequences may follow each other directly, may overlap or may follow after longer or shorter intervals depending, for example, on the type of business or on whether the service is of a continuous or discrete nature. This way of dividing the interaction process into several layers on different levels of aggregation gives the marketer a detailed enough instrument to be used in the analysis of interactions between a supplier or service provider and his customers. All different types of elements in the interaction process – goods and service outcomes, service processes, information, social contacts, financial activities, etc. – can be identified and put into their correct perspective in the formation of a relationship over time.

PERCEIVED QUALITY IN A RELATIONSHIP FRAMEWORK

The more or less static models of perceived service quality describe how quality is perceived at the episode (or service encounter) level, and the measurement instruments that have been developed measure perceived quality on that level. From a dynamic perspective, quality is perceived at every level of the relationship framework, thus accumulating to an overall perception of quality at any given point of time. The quality perception at a certain time reflects on the perception of quality in, for example, single acts and episodes, for example by continuously forming and reforming the customer’s image of the service provider. Thus, single acts such as visiting a movie theatre’s website, buying tickets for a certain movie and finally paying for the tickets over the Internet form the episode (or service encounter) of buying cinema tickets. The customer forms a perception of the quality of an act, and this perception, or image, is reflected in the expectations of and perceptions of the next act. Some of these quality perceptions may be good, others neutral or poor. Together these quality perceptions form the perception of the quality of the buying-cinema-ticket-over-the-Internet episode.

Act-level, or first-level, quality perception reflects upon the episode-level, or second-level, quality perception. However, the dynamics of relationship quality formation then make upper-level quality perceptions (in this case the perceived quality of the Internet ticket purchase) reflect back on the perception of lower-level acts of following episodes. The quality perception of the purchase episode forms customer expectations and the image of the firm, and these influence the perception of following lower-level acts; in this case, the act of picking up tickets at the ticket counter of the movie theatre, the comfort of the seat and visibility of the screen from the seat, and the movie experience itself, which together form a second episode. The perceptions of these visit-the-cinema-related acts accumulate into the perceived quality of this whole second episode as a second, second-level quality perception. According to the relationship quality dynamics, the quality experiences of continuous episodes, some good, some neutral or poor, accumulate into an overall third-level quality perception of the whole sequence of going to the movie theatre on a particular evening, including buying the tickets over the Internet and going to the movie theatre to see the movie. This third-level quality perception then reflects back on continuing lower-level perceptions of episodes and acts in the relationship between a given customer and this particular movie theatre in the future.

Finally, the quality perceptions of sequences of episodes accumulate into a fourth-level quality perception; that is, into relationship quality. This quality perception in turn, following the logic of relationship quality dynamics, reflects back on how quality is perceived in the future on lower levels.

The dynamics of relationship quality are illustrated schematically in Figure 4.6. The arrows indicate how perceptions of quality reflect up onto higher levels and then back again in the form of image and expectations. For the sake of clarity, the figure does not show all influences. The grade of shading of the boxes depicting acts, episodes, sequences and the relationship illustrate whether the quality is perceived as good, neutral, or poor. For the sake of simplicity, only a three-grade scale is used here to show the level of the quality perception. As the figure shows, the level of quality may vary and this influences the formation of the quality perception on higher levels. In practical quality management it is of course important to build as much consistency and continuously good quality perceptions as possible into the process, because unfavourable quality experiences always have a negative effect, which in turn will reflect on future quality perceptions.

FIGURE 4.6

Inherent dynamics in the formation of quality in a relationship.
Source: Adapted from Holmlund, M., Perceived Quality in Business Relationships. Helsinki: Hanken Swedish School of Economics, Finland/CERS, p. 160. Reproduced by permission.

The strength of this relationship framework, with its four levels of analysis, is that it enables the supplier or service provider to study in detail the development of a relationship with a customer and also makes it possible to understand and analyse how the development of a series of customer contacts adds to an overall relationship quality. It clarifies the multi-faceted dynamics involved in customers’ perceptions of quality. An analysis of the relationship demonstrates the multitude of acts and episodes (service encounters) that contribute to the long-term formation of quality and makes managers more aware of the range of customer contacts that have to be managed from a quality perspective. It shows which acts or episodes are relationship-breaking and which are less critical for the continuation of the relationship. It does not, however, go into the detailed aspects of the dynamics in long-term quality formation. The next section deals with this issue.

THE LILJANDER–STRANDVIK MODEL OF RELATIONSHIP QUALITY

The Liljander–Strandvik model of relationship quality includes four important aspects:²⁷

1. It makes a distinction between episode-level quality (the perceived quality of a service encounter) and relationship-level quality.

2. It incorporates satisfaction and customer perceived value in a quality framework.

3. It enables an extension of the traditional limited disconfirmation notion used in static models of perceived service quality to include a range of comparison standards.

4. It includes customer behaviour variables.

The model is illustrated in Figure 4.7. Concepts used in the model are described in Table 4.1. The lower part of the Liljander–Strandvik model is related to the perception of service quality in a single service encounter (episode-level quality). Episode performance – that is, the service experienced in one service encounter – can be compared with any comparison standard, not only predictive expectations as is traditionally the case in service quality models (see Table 4.1), or it can be compared with no comparison standards, depending on what seems to generate the most valid result. By comparing the episode quality that emerges with the customer’s perceived sacrifice (such as price, queuing time, lost earnings opportunities and standstill costs), the customer forms his (or the organization’s) perception of the value for him (or the organization) provided by the episode. This in turn leads to satisfaction (or dissatisfaction) with the service. The zone of tolerance is an accepted variation in performance levels.

The satisfaction with a given service encounter (episode) influences the future behaviour of the customer. The customer’s behaviour is dependent on his feelings of loyalty and commitment to the firm. However, there are also other factors that have an impact on behaviour. These are bonds that exist between the customer and the service provider. Some bonds, such as legal, economic, technological, geographical and time-related bonds, often constitute barriers to exiting from the relationship. Other bonds, such as knowledge-related, social, cultural, ideological and psychological bonds, may glue the customer to the service provider in a positive fashion. The 10 different types of bonds are described in some detail in Table 4.2.

FIGURE 4.7

The Liljander-Strandvik relationship quality model.
Source: Adapted from Liljander, V. & Strandvik, T., The nature of relationships in services. In Advances in Services Marketing and Management, Vol. 4. Greenwich: CT: The JAI Press, copyright © 1995, p. 143 with permission from Elsevier.

TABLE 4.1

The Liljander–Strandvik model of relationship quality.

Concept	Episode level	Relationship level
Comparison standard	All comparison standards suggested in the literature (e.g. predictive expectations, brand norm, adequate, product norm, best brand norm, excellent service, ideal, competitor).	All comparison standards suggested in the literature except predictive expectations.
Disconfirmation	Direct or inferred disconfirmation of any comparison standard.	Direct or inferred disconfirmation of any comparison standard except predictive expectations.
Performance	Perceived performance of one particular episode.	Perceived performance across all episodes in the relationship.
Zone of tolerance	The accepted variation in performance levels. A plateau in the quality function.	The accepted accumulation variation in the performance within the relationship.
Quality	Customers’ cognitive evaluation of the service of one episode compared with some explicit or implicit comparison standard.	Customers’ cognitive evaluation of the service across episodes compared with some explicit or implicit comparison standard.
Sacrifice	Perceived sacrifices (price, etc.) connected to the service episode compared with some explicit or implicit comparison standard.	Perceived sacrifices (price, etc.) across all service episodes in the relationship compared with some explicit or implicit comparison standard.
Value	Episode quality compared with episode sacrifice.	Relationship quality compared with relationship sacrifice.
Satisfaction	Customers’ cognitive and affective evaluation based on the personal experience of one service episode.	Customers’ cognitive and affective evaluation based on the personal experience across all service episodes within the relationship.
Image	The holistic perception of a service provider that filters performance evaluations and can in itself constitute a comparison standard. It is also the attitudinal component of commitment in a relationship. All types of bonds can affect the image positively or negatively. Image itself is more likely to affect and strengthen the psychological bonds.
Commitment	Commitment is defined as the parties’ intentions to act and their attitude towards interacting with each other. High relationship value will positively affect commitment.
Behaviour	Purchase behaviour and communication behaviour (word of mouth, complaints). Loyalty, which is based also on positive commitment by the customer, indicates a stronger relationship than if it is based on mere repetitive purchase behaviour. The behaviour is also affected by the bonds between the customer and the service provider. By using the same service provider the bonds may be strengthened.
Bonds	Exit barriers that tie the customer to the service provider and maintain the relationship. These are legal, economic, technological, geographical, time-related, knowledge-related, social, cultural, ideological and psychological bonds.

Source: Adapted from Liljander, V. & Strandvik, T., The nature of relationships in services. In Advances in Services Marketing and Management, Vol. 4. Greenwich, CT: The JAI Press, copyright © 1995, p. 144 with permission from Elsevier.

The customer-perceived episode-level value, as well as bonds that exist in the relationship, influence the customer’s image of the service provider. As in the image concept in the basic perceived service quality model, the image incorporates the customers’ old and recent experiences with the firm and builds a bridge to the relationship level of the model. The image functions as a filter when the customer perceives the next episode or service encounter. As in the model of perceived quality described in the previous section, perceptions of quality and value of episodes or service encounters following each other accumulate into perceived quality of the relationship. According to the Liljander–Strandvik model the customer compares the firm’s ongoing performance in subsequent service encounters (relationship performance) with a comparison standard and, based on that comparison, relationship quality emerges. When the customer compares this quality perception perceived long-term sacrifice (relationship sacrifice), the value of the relationship at a given point in time is perceived (relationship value). This affects long-term satisfaction with the service provider (relationship satisfaction), which in turn feeds into the image on the one hand and into future behaviour (loyalty and commitment) on the other hand.²⁸

From a management point of view this model of relationship quality offers a good description of the mechanisms of relationship quality. It demonstrates how customers proceed through the service process over time and perceive their relationship with a service provider. The model includes several concepts, such as bonds, value and sacrifice, and connections between concepts which help managers understand the process and determine where action should be taken. Some of these concepts will be discussed further in Chapter 6. The major strength of this model is its multi-faceted nature. It demonstrates to managers how perceived quality is formed and accumulates over time as the relationship evolves, and describes which factors need to be taken into account when managing quality in an ongoing relationship context. It should guide managers towards a comprehensive approach to understanding relationship quality and quality management to make customer-oriented decisions.²⁹ However, it is not a measurement model.

TABLE 4.2

The Liljander–Strandvik model of relationship quality.

Type of bond	Examples
Legal bond	A contract between the customer and service provider (e.g. telephone company, cable TV, electricity, bank services).
Economic bond	Lack of resources may force the customer to buy a service that fits the customer’s budget; price reductions based on relationship.
Technological bond	The purchase of a specific product that requires the use of a specified deal for repairs/maintenance and/or original spare parts from manufacturer or retailer.
Geographical bond	Limited possibilities to buy the service from other than one or a few service providers because of distance and/or lack of transportation.
Time-related bond	A service provider may be used because of suitable business hours or because of a flexible appointment system. Customers are limited by business hours set by service providers (e.g. child care from 8 am to 4 pm) or employers (office hours and limited lunch hour).
Knowledge-related bond	The customer may have an established relationship with a doctor who knows the customer’s medical history. A customer’s relation to a bank teller may be strong because of the teller’s knowledge about the customer’s business which facilitates the transactions. It also works the other way, so that the customer gains knowledge about the service provider (e.g. the scripts of how to behave are known to the customer, which reduces uncertainty).
Social bond	Social bonds exist when the customer and the service personnel know each other well. Contact is easy, there is mutual trust (services can be handled by phoning the bank, the customer does not have to go there personally).
Cultural bond	Customers may identify themselves with a subculture (e.g. language, country) and therefore relate more strongly to certain companies or products made by certain countries.
Ideological bond	Customers may be inclined to prefer some service providers because of certain personal values (e.g. environmentally friendly products, avoiding companies that exploit nature, support local or national products over imported products).
Psychological bond	The customer is convinced of the superiority of a certain service provider (brand image).

Source: Adapted from Liljander, V. & Strandvik, T., The nature of relationships in services. In Advances in Services Marketing and Management, Vol. 4. Greenwich, CT: The JAI Press, copyright © 1995, p. 153 with permission from Elsevier.

THE DYNAMICS OF EXPECTATIONS

The Liljander–Strandvik model of relationship quality implies that a range of comparison standards can be used by customers to compare their experiences of quality attributes. As has been noted earlier, it may often be best to use no comparison standard at all, but simply to measure customers’ experiences of various quality attributes. However, customers’ expectations do theoretically form an important factor influencing perceived service quality both on an episode (service encounter) level and on a relationship level. Regardless of whether expectations are measured or not, in order to understand how quality is perceived in an ongoing relationship, one has to understand how expectations develop throughout the relationship. This is important for several reasons. First, customers’ expectations should be managed, so that they do not expect the impossible. Second, it is critical to understand that customers may not expect the same aspects of quality at a later stage in the relationship as they do in the beginning, and why this change has taken place. Third, one has to know the inherent mechanisms of the dynamics of expectations to be able to manage expectations.

Jukka Ojasalo³⁰ studied the way the quality of professional service develops in a customer relationship over time. Although this study was carried out in the professional service area, the dynamics of expectations revealed in the study seem to be valid for any types of service in customer relationships. Figure 4.8 illustrates the expectations model.

In the long term, three different types of expectations can be identified: fuzzy, explicit and implicit expectations. These can be characterized in the following way:³¹

• Fuzzy expectations exist when customers expect a service provider to solve a problem but do not have a clear understanding of what should be done.

• Explicit expectations are clear in customers’ minds in advance of the service processes. They can be divided into realistic and unrealistic expectations.

• Implicit expectations refer to elements of a service that are so obvious to customers that they do not consciously think about them but take them for granted.

FIGURE 4.8

A dynamic model of expectations.
Source: Ojasalo, J., Quality Dynamics in Professional Services. Helsinki: Hanken Swedish School of Economics, Finland/CERS, 1999, p. 97. Reproduced by permission.

FUZZY EXPECTATIONS

It is essential for a service provider to understand which fuzzy expectations customers may have, because even though customers cannot consciously formulate such expectations, they still have an impact on satisfaction with quality. Customers may feel that there is a need for service or for a change of their current state in general, but they do not have a clear understanding of what would fulfil this need or change the current situation. Such fuzzy expectations are very real, because customers expect something to be done. If the service rendered by the service provider does not fulfil such fuzzy expectations, customers are disappointed. They feel that something is missing, and they do not understand why they are not satisfied. Fuzzy expectations remain fuzzy.

The service provider should be aware of the existence of such expectations and try to make them surface in the form of explicit expectations. Only then can it be sure that a satisfactory service is provided. Otherwise the service organization may be faced with unhappy and frustrated customers. The existence of such fuzzy expectations has been recognized for a long time in professional service.³² Similar situations also occur in other types of service to organizations and individuals alike.

A manufacturing firm that looks for security service does not necessarily understand what needs to be done to provide full security, for example, for its plants. A provider of security service makes an offering that seems appropriate but the manufacturer may still feel that more could be done. The customer may not know what could or should be done and cannot make his expectations explicit, but he still expects something more, and customer remains unsatisfied. For example, restaurant customers often have unclear fuzzy expectations about what they want from an evening at a restaurant. They know that they want to have a good time, but not what will make them feel that they are having one. If the evening does not offer experiences that fulfil this unspecified wish for a good time, they will leave the restaurant disappointed. In all these examples, fuzzy expectations exist. If the service provider can make these explicit for the customer and for itself, there is a greater opportunity to satisfy the customer.

EXPLICIT EXPECTATIONS

Customers actively and consciously assume that explicit expectations will be met. However, some of these expectations may be unrealistic. For example, a customer who believes that a financial advisor will always be able to manage his funds so that their value grows may one day be very disappointed. It is important for service providers to help customers adjust unrealistic expectations into more realistic ones. If this is done, the likelihood that a service is provided which will meet customers’ expectations will be much higher. In the beginning of a relationship, but of course also as it continues, the service provider should be very careful in what promises it makes. The more vague promises are, the bigger the risk is that customers will form unrealistic explicit expectations. Such ‘implied-in-fact’ promises³³ are extremely dangerous, because the customer is led to believe that the service offered will include features that in fact are not included. Unclear and deliberately vague sales messages easily lead to such ‘implied-in-fact’ promises, and to possibly unrealistic explicit expectations.

IMPLICIT EXPECTATIONS

Customers may take for granted that a service provider will fulfil their implicit expectations, because these are so obvious that they are never clearly expressed. Because of this, the service provider may neglect them and not include elements that are required to fulfil such expectations in the service offering. Often customers do not even consciously think about implicit expectations, as long as they are fulfilled. However, the existence of such expectations becomes obvious when they are not met by the service provided, and in that situation dissatisfaction occurs. It is important that service providers make sure that no implicit expectations remain undetected, so that the service offering can be designed to meet all expectations, not only the explicit ones.

Referring back to Figure 4.8, the thick arrows demonstrate intentional dynamics; that is, how the service provider can and should actively manage expectations. Fuzzy and implicit expectations should be detected and made explicit. Fuzzy expectations become less fuzzy if they are focused on by the service provider. As the relationship continues, the service organization knows what to do and the customer learns what to expect. Implicit expectations become explicit if they are not fulfilled. Unrealistic expectations should be detected and customers should be made aware of what is realistic to expect.

The dotted lines in the figure indicate what could be called unintentional dynamics; that is, shifts in the nature and range of expectations that take place over time without interference from the service provider as the relationship proceeds.

Customers calibrate fuzzy expectations into explicit ones and unrealistic expectations into realistic ones as time goes by, and they learn what they explicitly need and want as well as accept what it is unrealistic to expect. Of course, the effect of these unintentional dynamics processes is not always positive in the sense that customers accept that unrealistic expectations really are unrealistic. They may shift to another firm, which may have the capability to fulfil expectations that were considered unrealistic by the previous service provider.

The dotted arrow in the figure (from explicit expectations towards implicit expectations) demonstrates another type of learning process that creates unintentional expectations dynamics. As customers get used to a certain level of quality in a relationship, some expectations that were originally explicitly expressed become implicit. Customers do not think of them any more and, as long as everything continues as before, no problems occur. However, if the service provider changes something in the service offering – for example, a new service employee takes over a task in the relationship and starts to carry it out in a different way to what the customer is used to – the customer may become disappointed. The implicit expectation becomes explicit once again.

A FRAMEWORK FOR MANAGING CUSTOMER EXPECTATIONS

Jukka Ojasalo offers a framework for managing expectations, which is illustrated in Figure 4.9.³⁴ The goal is to find ways of avoiding pitfalls created by incorrect or inaccurate expectations. If the customers’ expectations are fuzzy, the marketer should help them focus their expectations and make them as precise as possible. On the other hand, if expectations are implicit, and there is a risk that they will have a negative effect on customers’ perceptions at a later stage, marketers need to make customers reveal such expectations and make them explicit. Finally, unrealistic expectations held by customers should be calibrated by marketers, such that they become realistic.

FIGURE 4.9

A framework for managing customer expectations.
Source: Ojasalo, J., Managing expectations in professions services. Managing Service Quality, 11(3); 2001: 206. Reproduced by permission of Emerald Group Publishing Ltd.

NOTES

1.  Grönroos, C., Strategic Management and Marketing in the Service Sector. Helsinki/Helsingfors: Swedish School of Economics, Finland, 1982 (published in the USA in 1983 by Marketing Science Institute and in the UK in 1984 by Chartwell-Bratt). See also Grönroos, C., A service quality model and its marketing implications. European Journal of Marketing, 18(4), 1984, 36–44. Evert Gummesson was probably the first service marketing researcher to express the quality of services as perceived quality: in the context of professional services he concludes that ‘(quality) becomes a matter of subjectively perceived quality’ (emphasis as in the original publication). See Gummesson, E., Models of Professional Service Marketing. Stockholm, Sweden: Liber/Marketing Technique Centre, 1979, p. 9.

2.  There is, however, some criticism of the use of customers’ expectations as the only comparison standard in models and measurements of perceived service quality. See Liljander, V., Comparison Standards in Perceived Service Quality, diss. Helsinki/Helsingfors, Finland: Hanken Swedish School of Economics, Finland/CERS, 1995.

3.  The importance of the process-related functional quality alongside the outcome-related technical quality was first observed in a service context in Grönroos, C., A service quality model and its marketing implications. European Journal of Marketing, 18(4), 1984, 36–44. The impact of these two quality dimensions have been studied in various contexts, recently as explanations of customer happiness. Both dimensions are found to have an impact on happiness. See De Keyser, A. & Lariviere, B., How technical and functional quality drive consumer happiness: moderating influences of channel usage. Journal of Service Management, 25(1), 2014, 30–48.

4.  Rust, R.T. & Oliver, R.L., Service quality: insights and managerial implications from the frontier. In Rust, R.T. & Oliver, R.L. (eds), Service Quality: New Directions in Theory and Practice. Thousand Oaks, CA: Sage Publications, 1994.

5.  See Brady & Cronin Jr., Some thoughts on conceptualizing perceived service quality: A hierarchical approach. Journal of Marketing, 65(Jul), 2001, 34–49.

6.  Bitner, M.J., Servicescapes: the impact of physical surroundings on customers and employees. Journal of Marketing, 56(Apr), 1992, 57–71. The servicescape consists of the physical resources, technology and other physical elements surrounding the service process. It helps to create the ambience of the service process. Thus, it is expected to have an impact on the way service employees and customers behave and interact in service encounters.

7.  Holmlund, M., Perceived Quality in Business Relationships, diss. Helsinki/Helsingfors, Finland: Hanken Swedish School of Economics, Finland/CERS, 1997.

8.  Normann, R., Service Management, 2nd edn. New York: John Wiley & Sons, 1992.

9.  Liljander, V. & Strandvik, T., Emotions in service satisfaction. International Journal of Service Industry Management, 8(2), 1997, 148–169. See also Jang, S. & Namkung, Y., Perceived quality, emotions, and behavioral intentions: application of an extended Mehrabian–Russell model to restaurants. Journal of Business Research, 62, 2009, 451–460, and Hume, M. & Sullivan Mort, G. The consequence of appraisal emotion, service quality, perceived value and customer satisfaction on repurchase intent in the performing arts. Journal of Services Marketing, 24(2), 2010, 170, 182.

10.  White, C.J., Towards an understanding of the relationship between mood, emotions, service quality and customer loyalty intentions. Service Industries Journal, 26(9), 2006, 837–847. See Also Gardner, M.P., Mood states and consumer behavior: a critical review. Journal of Consumer Research, 12(Dec), 1985, 281–300.

11.  Knowles, P.A., Grove, S.J. & Pickett, G.M., Mood versus service quality effects on customers’ responses to service organizations and service encounters. Journal of Service Research, 2(2), 1999, 189–199.

12.  The conceptual and empirical results of their studies of service quality have been reported in a large number of articles. Key aspects are presented in Berry, L.L. & Parasuraman, A., Marketing Services. Competing Through Quality. New York: The Free Press, 1992 and in Zeithaml, V.A. & Bitner, M.J., Services Marketing, 2nd edn. New York: McGraw-Hill, 2000.

13.  Parasuraman, A., Zeithaml, V.A. & Berry, L.L., SERVQUAL: a multiple-item scale for measuring consumer perceptions of service quality. Journal of Retailing, 64(Spring), 1988, 12–40.

14.  A detailed description of the SERVQUAL instrument as well as the attributes used to measure the five determinants can be found in Parasuraman, A., Berry, L.L. & Zeithaml, V.A., Refinement and reassessment of the SERVQUAL scale. Journal of Retailing, 67(4), 1991, 420–450.

15.  Murphy, P., Service performance measurement using simple techniques really works. Journal of Marketing Practice: Applied Marketing Science, 5(2), 1999, 56–73.

16.  Grönroos, C., Toward a third phase in service quality research: challenges and future directions. In Swartz, T.A., Bowen, D.E. & Brown, S.W. (eds), Advances in Services Marketing and Management, Vol. 2. Greenwich, CT: JAI Press, 1993, p. 56.

17.  Liljander, op. cit.

18.  Cronin Jr., J.J. & Taylor, S.A., Measuring service quality: a re-examination and extension. Journal of Marketing, 56(Jul), 1992, 55–68. See also Cronin Jr., J.J. & Taylor, S.A., SERVPERF versus SERVQUAL: reconciling performance-based and perceptions-minus-expectations measurement of service quality. Journal of Marketing, 58, 1994, 125–131.

19.  Roos, I., Methods of investigating critical incidents: a comparative review. Journal of Service Research, 4(3), 2002, 193–204. See also, for example, Bitner, M.J., Booms, B.H. & Tetrault, M.S., The service encounter: diagnosing favorable and unfavorable incidents. Journal of Marketing, 54(Jan), 1990, 71–84 and Edvardsson, B., Service breakdowns: a study of critical incidents in an airline. International Journal of Service Industry Management, 3(4), 1992, 17–29.

20.  Reimer, A. & Kuehn, R., The impact of servicescape on quality perception. European Journal of Marketing, 39(7–8), 2005, 785–808. See also Bitner, op. cit. and Rust & Oliver, op. cit.

21.  Grönroos, 1993, op. cit.

22.  Athanasopoulou, P., Relationship quality: a critical literature review and research agenda. European Journal of Marketing, 43(5–6), 2009, 583–561. Evert Gummesson introduced the relationship quality concept in 1987 as part of a study of quality in an Ericsson quality programme. With this concept he drew attention to the fact that relationships are part of customer perceived quality. See Gummesson, E., Quality – The Ericsson Approach. Stockholm, Sweden: Ericsson, 1987.

23.  Relationship quality has been studied to a very limited extent. Therefore, general attributes or antecedents of relationship quality cannot be presented. There are some studies that give valuable indications. From a consumer brand perspective, see Gifford Jr., D., Moving beyond loyalty. Harvard Business Review, 75(Mar–Apr), 1997, 9–10 and Fournier, S., Consumers and their brands: developing relationship theory in consumer research. Journal of Consumer Research, 24(4), 1998, 343–373 and from a business relationship perspective, see Leuthesser, L., Supplier relational behavior: an empirical assessment. Industrial Marketing Management, 26(3), 1997, 245–254. For a recent study see Roos, I., Gustafsson, A. & Edvardsson, B., Defining relationship quality for customer-driven business development. International Journal of Service Industry Management, 17(2), 2006, 207–223.

24.  This observation has always been evident in Nordic School research into service marketing, and it has become more and more evident as the relationship aspect of buyer–seller interactions in services and in any types of business is studied. See Gummesson, E., Total relationship marketing: experimenting with a synthesis of research frontiers. Australasian Marketing Journal, 7(1), 1999, 72–85 and Grönroos, C., A service-orientated approach to the marketing of services. European Journal of Marketing, 12(8), 1978, 588–601.

25.  Holmlund, 1997, op. cit. Although this framework was originally developed in a business-to-business context, it is equally suited for understanding and analysing relationships in consumer markets.

26.  In the context of services the interaction process has been studied in terms of acts, episodes and relationships. According to Liljander and Strandvik an episode is, for example, a visit to a bank office to discuss a loan, whereas an act is the meeting with the loan officer during the visit. Several interactions related to, for example, withdrawal of money, payment of bills, etc. form a relationship. See Liljander, V., Introducing deserved service and equity into service quality models. In Kleinaltenkamp, M. (ed.), Dienstleistungsmarketing – Konzeptionen und Anwendungen. Berlin, Germany: Gabler Edition Wissenschaft, 1994, pp. 1–30. In German. See also Liljander, V. & Strandvik, T., The nature of customer relationships in services. In Swartz, T.A., Bowen, D.E. & Brown, S.W. (eds), Advances in Services Marketing and Management, Vol. 4. Greenwich, CT: JAI Press, 1995, pp. 141–167. Holmlund has added a sequence level and has, based on these concepts, offered a relationship framework. See Holmlund, 1997, op. cit.

27.  Liljander & Strandvik, op. cit.

28.  Compare also Andreassen, T.W. & Lindestad, B., The effect of corporate image in the formation of customer loyalty. Journal of Service Research, 1(1), 1998, 82–92.

29.  In ongoing relationships a two-party situation is formed. When developing instruments for the measurement of relationship quality, especially in business-to-business markets, this fact should be taken into account: the quality perception of both parties in the relationship should be measured. An interesting conceptual foundation for such an instrument is developed in Holmlund, M. & Strandvik, T., Perception configuration in business relationships. Management Decision, 37(9), 2000, 686–696.

30.  Ojasalo, J., Quality Dynamics in Professional Services. Helsinki/Helsingfors: Swedish School of Economics Finland/CERS, 1999. This analysis of the nature and management of expectation has been further developed in Ojasalo, J., Managing customer expectations in professional services. Managing Service Quality, 11(3), 2001, 200–212.

31.  Ojasalo, op. cit.

32.  See, for example, Wittreich, W.J., How to buy/sell professional services. Harvard Business Review, Mar–Apr, 1966, 127–138, where the author discusses confusion relating to clients who wish to purchase marketing communication and management consultancy services.

33.  The term ‘implied-in-fact’ promises is used by Henrik Calonius to indicate unclear promises by marketers that create unrealistic expectations. See Calonius, H., The promise concept. In Blomqvist, H.C., Grönroos, C. & Lindqvist, L.-J. (eds), Economics and Marketing. Essays in Honour of Gösta Mickwitz. Helsinki/Helsingfors: Swedish School of Economics, Finland, 1992, pp. 37–56.

34.  Ojasalo, op. cit., 2001, 206.

FURTHER READING

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Gummesson, E. (1999) Total relationship marketing: experimenting with a synthesis of research frontiers. Australasian Marketing Journal, 7(1), 72–85.

Holmlund, M. (1997) Perceived Quality in Business Relationships. Helsinki/Helsingfors: Hanken Swedish School of Economics, Finland/CERS Centre for Relationship Marketing and Service Management.

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Liljander, V. (1995) Comparison Standards in Perceived Service Quality, Helsinki/Helsingfors: Hanken Swedish School of Economics, Finland/CERS Centre for Relationship Marketing and Service Management.

Liljander, V. & Strandvik, T. (1995) The nature of customer relationships in services. In Swartz, T.A., Bowen, D.E. & Brown, S.W. (eds), Advances in Services Marketing and Management, Vol. 4. Greenwich, CT: JAI Press, pp. 141–167.

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