Definition of Service

Services are deeds, performances and processes provided or coproduced by one entity or person for and with another entity or person (Zeithaml et al, 2009). This definition of service includes both core service and physical goods. Vargo and Lusch (2004) provided a more inclusive definition of service with the derived service perspective, suggesting that all products and physical goods are valued for the inherent service they provide and that the value derived from physical goods is really the service provided by the goods not the good itself. Services differ from product due to their intangibility, heterogeneity, simultaneous production and consumption and perishability. The automotive service industry is mainly involved in delivering pure service, with car servicing, MoT tests, accident repairs, among others.

Classification of Services

Zeithaml et al (2009) classified products into three categories using the works of economists;

Search qualities – attributes that consumers can determine before purchasing the product. Search qualities include colour, style, price, fit, feel, hardness and smell. Example of products are clothing, automobile, furniture and jewellery

Experience qualities – attributes that can be determined only after purchase or during consumption. Experience qualities include taste and wearability and examples include vacation packages and restaurant services.

Credence qualities – attributes that consumer may find very difficult to evaluate even after purchase and consumption. Examples of products include wheel alignment (auto repair), medical operation, etc. Most customers may lack the technical skills to properly evaluate these services even after consumption.

Service classification continuum (Zeithaml et al., 2009)

It is viewed in a continuum because some may be very difficult to place in a distinction category. It is important for service marketer to take step to reduce potential buyers’ perceived risk with service or goods high on the experience and credence qualities by providing timely information and servicescape elements especially in the delivery of automobile repair service.

Rust et al (1996) suggested that the product a company markets may differ in the extent to which they involve the transfer of ownership of physical goods. They however stressed that intangible components play the pivotal role in winning and maintaining customer satisfaction. They offered four components of service based on the assertion above: physical product, service product, service environment and service delivery.

Product components (Rust et al., 1996)

The physical product is what the company transfers to the customer that can be seen and touched – tangible and physically real. Examples include house, automobile, computers, books, food, etc. There is well-developed method of ensuring that product design meets customer needs, for example Total Quality Management.

The service product is the core performance purchased by the customer – the flow of events designed to provide a desired result. It refers to that part of the experience apart from the transfer of physical good and includes customer interactions with the firm’s personnel.

The service environment (or servicescape) is the physical backdrop that surrounds the service. They identified three distinct elements that can be manipulated in the service environment: the ambient conditions (lighting and background music), the spatial layout and the signs and symbols. A lot of research has gone into finding out the impact of servicescape on customer experience and satisfaction (for example Bitner, 1992; Wall & Berry, 2007) and their findings are usually affirmative – satisfaction is affected either positively or negatively.

The service delivery refers to what actually takes place when customers buy the service. The service product defines how the service works in theory, but the service delivery is how the works in actuality. The table shows an example of the classifications discussed above.

Industry

Physical Product

Service Product

Service Environment

Service Delivery

Auto

The car

Title transfer, warranty

Showroom, car lot

Test drive and sales pitch, repair time

University

Degree

Residence, placement

Classrooms, accommodation

Teaching performance

Product components (Rust et. al 1996)

Concepts of Customer Satisfaction

Customer satisfaction emerged as a distinct area of inquiry in the 1970s (Churchill & Surprenant, 1982), and companies both big and small have realised the strategic benefits of service quality and customer satisfaction as competition has become more intense and global. The achievement of customer satisfaction has become a good business practice across firms and industries (Szymanski & Henard, 200 cited in Yu et al, 2005).

Definition of Customer Satisfaction

Several definitions have been offered for customer satisfaction over the past three decades. Anderson et al. (1994) suggested two definitions of customer satisfaction, in accordance with the two broad classes of customer experiences identified by the literature – transaction specific experiences and cumulative experiences (Mittal et al, 1999 cited in Zeithaml et al, 2009). With a transaction-specific experience, customer satisfaction is defined as the post-choice evaluative judgement of a specific purchase occasion. Whereas a cumulative experience, customer satisfaction is determined as a result of a customer’s evaluation of his or her total purchase and consumption experience over time. Oliver (1997) defined satisfaction as “… the consumer’s fulfilment response. It is a judgement that a product or service feature, or the product or service itself, provides a pleasurable level of consumption related fulfilment”. It is the ability of the service or product to meet the customer’s needs and expectations (cited in Zeithaml et al, 2009). Fornell et al. (1996) in their CSI model defined customer satisfaction as a function of customer expectations, perceived quality, and perceived value.

Why is Customer Satisfaction Important to Businesses?

Customer satisfaction helps companies in many ways, some of which include:

Customer satisfaction information helps companies to evaluate their ability in meeting customers’ needs and expectations effectively (Zeithaml et al, 2009).

It also helps companies to analyse the performance of an offering to customers in order to identify areas for improvements as well as what areas customers consider to be very important to them (Zeithaml et al, 2009).

Companies can predict customer retention and loyalty as well as organisational profitability through satisfaction surveys. Research has suggested that customer satisfaction leads to company profitability (Bei & Chiao, 2001; Heskett et al., 1997). Studies have shown a positive correlation between customer satisfaction and customer retention and loyalty (Zeithaml et al., 1996; Heskett et al., 1997). Reichheld (1990) asserted that customer satisfaction accounted for about 40% of customer retention. In the automotive service industry, customers who are satisfied with a dealer might buy multiple vehicles as their income and status increase (especially high value vehicles) and also keep going back to that dealer for every service throughout their lifetime. The figure below depicts the relationship between satisfaction and customer loyalty.

Customers who are satisfied with a company’s offering may tell others about it – positive word-of-moth, just as dissatisfied customer also bad mouth the company to other. Goodman (2009) suggested that dissatisfied customers tell on average ten people about the company as against 5 people by satisfied customer. Goodman (2009) also asserted that it cost five times to attract a new customer than to maintain a current customer. Therefore it is imperative for service businesses to satisfied customer on a consisted basis.

Determination of Customer Satisfaction

Several studies have identified the factors that influence customer satisfaction over the years (Fornell et al., 1996; Yu et al 2005; Zeithaml et al., 2009). The factors identified in these studies are mostly similar in what aspect of customer satisfaction they are measuring. Some of the factors that have been identified include customer’s expectation, perceived service quality, perceived value, product quality, price, situational factors as well as personal factors. Some of these studies will be looked at in detail in the following paragraphs, examining their relation merits and demerits.

Customer Satisfaction Indexes

Fornell et al. (1996) developed the American Customer Satisfaction Index (ACSI) based on the Swedish Customer Satisfaction Index. The ACSI is an economic indicator based on modelling of customer evaluations of the quality of goods and services produced and purchased in the United States. Its main purpose according to Te-King Chein et al. (2003) is to gain an insight into the interaction between the customers and businesses, such that enough customer satisfaction information can be provided as a referential data in planning better policy decision making. The ACSI uses customer interviews as input to a multi-equation econometric model developed at the University of Michigan’s Ross School of Business.  It is a cause-and-effect model showing drivers of satisfaction on the left side (customer expectations, perceived quality, and perceived value), satisfaction (ACSI) in the centre, and outcomes of satisfaction on the right side (customer complaints and customer loyalty, including customer retention and price tolerance). The indexes (as shown in the figure below) use multivariable components measured by several questions shown as a 0 to 100 scale.

Source: Fornell et al. (1996)

Each of these factors is explained below in accordance with Fornell et al. (1996). The first three are known as the determinant of customer satisfaction and the last two are the consequence of customer satisfaction.

Customer Expectations are customer’s anticipation of the quality of a company’s products or services. They emphasise that the “market’s expectations represent both the served market’s prior consumption experience with the firm’s offering – including non-experiential information available through sources such as advertising and word-of-mouth – and a forecast of the supplier’s ability to deliver quality in the future”. They postulated that customer expectations have a direct and positive influence on overall customer satisfaction with an organisation because of the on-going relationship with customer. It also influences both perceived quality and perceived value as shown in the figure.

Perceived Quality is a measure of customer’s evaluation of a recent consumption experience of a company’s products or services. They stated that quality is measured in terms of both customization (the degree to which a product or service meets the customer’s individual needs) and reliability (the frequency with which things go wrong with the product or service). This is also said to have a direct and positive impact on overall satisfaction.

Perceived Value is a measure of quality relative to price paid – value for money (Anderson et al., 1994). They asserted that price has more impact on satisfaction in a customer’s first purchase experience but a lesser impact on satisfaction for repeat purchases.

Customer Complaints are measured as a percentage of customers who have complained to a company directly about a product or service within a specified period of of time. They stated that satisfaction is negatively correlated to customer complaints – the more satisfied the customers, the less likely they are to complain.

Customer Loyalty is a combination of the customer’s professed likelihood to repurchase from the same company in the future, and the likelihood to purchase a company’s products or services at various price points (price tolerance).  Customer loyalty is the critical component of the model because it equals profitability (Heskett et al., 1997; Reichheld and Sasser, 1990).

The European Consumer Satisfaction Index (ECSI) is also an adapted version of the Swedish Customer Satisfaction Barometer (Fornell, 1992) and very similar to the ACSI. Unlike the ACSI with six variables, the ECSI has seven variables with “corporate image” being the seventh and optional variable (ECSI Technical Committee, 1998) and refers to the brand name and what kind of associations the customers get from the product/company. The variable perceived quality has been grouped into ‘software’ and ‘hardware’: where software relates to the services like guarantee given, after sale customisation and hardware which relates to the specifications of the product in the eyes of the customer. similarly, Eklöf (2000) suggested that perceived quality can be distinguished into perceived product quality and perceived service quality; where perceived service quality is the assessment of recent consumption experience of associated services like customer service, range of services and products, conditions of product display while perceived products quality relates to the attributes of the core product and product. The figure below presents the detail of the ECSI index.

Source: ECSI Technical Committee, 1998

The three indexes have set the pace for other countries to follow; they include Russia, Switzerland, Norway, Taiwan, Germany and Turkey ().

Zeithaml et al.’s Customer Satisfaction Model

Zeithaml et al. (2009) suggested an all inclusive customer satisfaction model. This model has five factors that drive customer satisfaction; they are service quality (SERVQUAL), product quality, price, situational and personal factors (such as emotions and moods) as shown in the figure below.

Source: Customer Satiafaction Model (Zeithaml et al., 2009)

The concept of product quality is similar to other models presented above. Personal factors such as customer emotions affect satisfaction either in a positive or negative way (example, Price et al., 1995; Gremler et al., 2006; Liljander and Strandvik, 1997). Wong (2004, pp 369) argued that “during the consumption experience, various types of emotions can be elicited, and these customer emotions convey important information on how the customer will ultimately assess the service encounter and subsequently, the overall relationship quality”. Studies in video retailing (Gremler et al., 2006), government labour bureau service (Liljander and Strandvik, 1997) and river-rafting (Price et al., 1995) have shown that customers satisfaction is influenced by their emotions with positive emotions (such as happiness, pleasure and elation) having a positive influence while negative emotion (such as anger, depression, guilt and humiliation) affecting satisfaction negatively. Shaw and Ivens (2002) advised businesses to view customer emotions as a major differentiation factor contributing to customer satisfaction, especially where customers are actively involved in the service delivery (for example Disney Land).

Price as a Determinant of Customer Satisfaction

The factor “perceived value” in the other models presented above is also similar to price but only relate to an aspect of pricing described as demand-based pricing (Zeithaml et al., 2009). The influence of price on satisfaction has been given a lot of attention by researchers over the years (Anderson et al., 1994; Gerstner, 1985; Steenkamp and Hoffman, 1994). However, pricing is sometimes limited to only the monetary value of service or product (Olson, 1977) in many researches as in the models above.

Salvador et al. (2006) stressed that the concept of price should be expanded to include the actual cost of the service and other associated costs. They suggested that price has two dimensions: the objective price paid (monetary) and the cost of obtaining the service (how adequate the fees for the labour performed by the customer and in comparison with the cost of other services). Zeithaml (1988) provided a precise classification of price component into objective price, monetary price and sacrifice. Other studies have also found that customers do not only remember the amount paid for service but the amount of personal cost, such as time or effort (Dickson and Sawyer, 1985; Zeithaml, 1982), indicating that the monetary cost is not the most important factor for the customer. Salvador et al. (2006) based on the work of Horovitz (2000), suggested price include value, benefit and cost. Customer received value when the benefit from a product or service is more than the cost buying it.

Salvador et al. (2006) concluded that the cost or price of service from the customer point of view can be grouped into three: (1) amount paid; (2) cost and effort required to obtain the product or service (understand the service, find the place, time required to find a good salesperson, etc) and (c) cost and effort required for proper use of the product or service (return of wrong shipments, poor quality, time needed to solve problems, etc). Therefore, the actual monetary price paid for a service is sometimes a small part of the total cost of obtaining a service or product which is what the other models above did not expatiate in detail.

Horovitz (2000) suggested that services be limited to the strategy of ‘outpacing’ – a service that can reduce its costs, reinvesting all or part of the savings from lowering the price to customers, and at the sometime maintaining or even increasing the benefits to increase value for the customer. He therefore proposed three ways to dealing with this: (a) reducing the cost and the price without touching the benefits (savings strategy); (b) increasing benefits and reducing costs at the same time (value replacement strategy); and finally, (c) increasing the benefits with the same cost structure (improvement strategy).

Some studies (Singh & Sirdeshmukh, 2000; Bei & Chiao, 2001; Anderson et al., 1994) have found that the price paid for a product or service plays an important in influencing customers’ satisfaction and loyalty to a company. Jiang & Rosenbloom (2005) postulated that customers’ perception of price has a positive impact on satisfaction and behavioural intentions. Yieh et al. (2007) asserted that customer may use price as an extrinsic signal of service quality by a company, for example, where quality is difficult to assess. According to Anderson et al. (1994, p. 54) ‘. . . customer satisfaction is dependent on value, where value can be viewed as the ratio of perceived quality relative to price or benefits received relative to costs incurred’.

Service Quality as a Determinant of Customer Satisfaction

The service quality models (both the gaps model and SERVQUAL) assume that customers come into a service encounter with a prior expectation, this expectation is then matched with the actual service experience to determine the service quality of that organisation (Zeithaml et al 1985; Grönroos 1990). The customer is satisfied if actual service experience meets expected service, he/she is dissatisfied if actual service falls below expected service and delighted if actual service exceeds expected service. Studies (for example Rust and Oliver, 1994; Zeithaml et al., 1988; Boulding et al., 1993; Anderson and Sullivan, 1993; Fornell et al., 1996) have agreed that service quality is an antecedent to customer satisfaction, therefore adequate discussion of this topic is done here.

The Gaps model of service quality

Zeithaml et al (1985) identified five service quality gaps that lead to poor quality of services delivered by an organisation. The model suggests that service quality is the difference between customers’ expectations and customer perceptions of the actual service delivery, referring to this difference as gaps. Ghobadian et al. (1994) suggested that a gap is a significant obstacle to achieving a satisfactory level of service quality.

To reduce the customer gap, companies have to reduce four gaps:

Gap 1 – The Listening Gap: difference between customer expectations and company perception of customers’ expectations

Gap 2 – The Service Design and Standards Gap: difference between the company perception of customers’ expectations and the customer-driven service designs and standards

Gap 3 – The Performance Gap: difference between customer-driven service designs and standards and the service delivery

Gap4 – The Communication Gap: difference between the service delivery and the external communication to customers

Gap 5 – The Customer Gap: the difference between customer’s expectations and perceptions of services provided by an organization.

The first four are known as the provider’s gaps which give rise to the customer gap. To close the customer gap, providers must first close the first four gaps in the order presented above. The understanding of this will enable service businesses to deliver a consistent level of service that meets or exceeds customer expectation leading to customer repeat business and profitability. The figure below shows a Gaps model.

Gaps Model of service quality (Zeithaml et al., 1985)

Researchers (Dabholkar et al., 2000; Gronroose, 1990; Teas, 1993) have raised concerns about the definition and measurement of expectation in the gaps model. They stated that while customer perceptions can be defined and measured in a straightforward fashion – as customers experience the service, expectations on the other hand is subject to different definitions and interpretations by different authors. The meaning of perceived service is similar to the ones offered above. Zeithaml et al. (2009, p32) described customer perceptions as “…subjective assessment of actual service experience”. Customer expectation will be discussed further as the models above did not offer enough explanations.

Customer Expectations and the Zone of Tolerance (ZoT)

Boulding et al. (1993) defined customer expectations as “…pre-trial beliefs about a product or service”. Churchill & Surprenant (1982) stated that a customer’s expectations are: (1) confirmed when a product performs as expected, (2) negatively disconfirmed when the product performs more poorly than expected, and (3) positively disconfirmed when the product performs better than expected based on the disconfirmation theory (Oliver, 1980).

Tse & Wilton (1988) proposed three definitions of customer expectations. The first is equitable performance – a normative standard for performance based on implicit relationships between an individual’s cost/investment and anticipated rewards. In this instance, expectations are likely to be influenced by the price paid, the effort invested, and previous product experiences. The second is ideal product performance – ideal product performance scenario from a customer’s perspective, such that expectations may be based on previous product experiences, messages gleaned from advertisements, or word-of-mouth communications. The third is expected product performance – product’s most likely performance.

Customer’s expected service can either be adequate (“minimum tolerable expectation”) or desired (“should be” and “can be”) service and the amount of variation that customers are willing to accept is known as Zone of Tolerance (Zeithaml et al 1993). The more important a customer deems a service encounter or dimension (for example, reliability) to be, the higher the desired service and narrower the ZoT and vice versa. When service experience exceeds the desired level, customers become delighted and are dissatisfied when service experience falls below the adequate level.

Johnston (1995) identified three main applications of zone of tolerance: (1) as a description of an outcome state, (2) of a range of pre-performance expectations and (3) as the satisfactory range of in-process service performances

The outcome state: the service quality models assume this application with their three outcomes: satisfaction (adequate service quality), dissatisfaction (poor quality service) and delight (high service quality).

Pre-performance expectations: this may range from “minimum tolerable” to “ideal” (Miller, 1977) cited in Johnston (1995) with “desirable” and “adequate” (Zeithaml et al 1993) somewhere in between.

The in-process service performances: Berry and Parasuraman (1991) suggested that the zone of tolerance is an in-process service performance and define it as

“…a range of service performance that a customer considers satisfactory. A performance below the tolerance zone will engender customer frustration and decrease customer loyalty. A performance level above the tolerance zone will pleasantly surprise customers and strengthen their loyalty”.

The definition offered by Berry and Parasuraman (1991) encapsulates the other two, emphasising the variation of service performance that customers are willing to accept and that customers become dissatisfied when performance fall below the adequate level. The ZoT is dynamic and changes according to what the customer deems to be important as well the particular service encounter (see figure below for factors that influence the ZoT).

Source: Factors that influence Desired and Predicted service (Zeithaml et al., 2009)

The diagram indicates the factors affecting desired and adequate service with the arrows. Desired service is influenced by personal service philosophy and lasting service intensifiers. Predicted service is a somewhat adequate judgement of what a customer is likely to receive in a particular service interaction and therefore influences adequate service. It is influenced by service promises (implicit and explicit), word-of-mouth communication by other customer and past service experience. Other factors that influence adequate service are temporary service intensifiers, perceived service alternatives, self-perceived service role and situational. Even though not all these factors are within the control of service firms, they can be influenced through customer education, making realistic promises, conducting market research, among others (Zeithaml et al., 2009).

SERVQUAL Scale of Measuring Service Quality

The SERVQUAL model was developed by Zeithaml et al (1988) to measures the quality of service on five identified quality dimension. This scale was developed base on the Gap models to generate a 22 items, representing five service quality dimension based on the difference between customers’ expectations and perception, explained below.

Reliability: Ability to perform the promised service dependably and accurately

Assurance: knowledgeable and courtesy of employees and their ability to inspire trust and confidence

Responsiveness: willingness to help customers and provides prompt service

Empathy: caring, individualised attention the firm provides its customers

Tangibles: appearance of physical facility, equipment and staff

Gronroos (1984) has group the dimension into process and outcome dimensions; with the process being responsiveness, empathy and tangible while the outcome dimensions are reliability and assurance. Brady and Cronin (2001) classified service dimensions into: interaction (attitude, behaviour and expertise), physical environment (ambient, design and social factors) and outcome quality (waiting time, tangible and valence).

The model is can be referred to as a diagnostic tool for identifying broad areas of a company’s service quality strengths and weaknesses (Tan and Pawitra, 2001).

Some of benefits of the SERVQUAL methodology are summarised below.

It gives customers the opportunity to offer their views regarding service encounters.

It enables management to look at the perceptions from both business and customers’ perspective.

By closing the gaps, businesses can use the information generated to formulate strategies to ensure customer expectations are fulfilled on a consisted basis (Tan and Pawitra, 2001).

Although the above dimensions are applicable to most service environment, their adaptation to a particular situation is the most important factor that businesses must take into account and not to apply them to all businesses on a wholesale fashion. According to Tan and Pawitra (2001), SERVQUAL is limited as it addresses only continuous improvement in a fast moving world where continuous improvement alone may not ensure business success unless blended with service and product innovation. Shen et al. (2000) emphasise the need for innovation as the key to becoming competitive in the global economy. Brito et al., (2007, p. 466) also suggested that the use of dimensions unlike the attribute themselves are limited in giving “…specific guidance on where to act in the design or improvement of service operation”.

SERVPERF Scale

The SERVPERF scale, also known as “performance only” model, was developed by Cronin and Taylor (1992) to address the issue with the measurability and definition challenges of the SERVQUAL scale (as explained above) by eliminating the expectation construct of the SERVQUAL scale and using only performance. It assumes that respondents providing their ratings have already unconsciously compared performance perceptions with expectations and measuring expectation again is redundancy. Evidence was gathered across four industries (fast food, banks, pest control, and dry cleaning) to support the model. Although the SERVQUAL has enjoyed wide application across different industries and countries than this model, studies (Brady et al., 2002; Babakus and Boller, 1992) have suggested that the SERVPERF scale showed superior results when applied in conjunction with the SERVQUAL scale through the use of its single-item scale. On the other hand, research conducted by Quester and Romaniuk (1997) suggested that the SERVQUAL is a better predictor of service quality than SERVPERF. Carrillat et al. (2007) in their bid to end the years long debate between the two models, suggested that both model are adequate and equally valid predictors of overall service quality with the use of meta-analysis. This can be viewed as the final stopper to more than a decade long debate.

It must however be emphasised that the two models are more complementary than competing and that the key is adopting a particular model to the business needs. This study would adopt the SERVQUAL methodology because of it wide usage. This would enable the researcher to compare the results of this study to other researchers.

Service Quality Dimensions in the Automotive Service Industry

Dealerships are vitally important in influencing customers’ overall satisfaction because they are the most important point of contact for both potential and actual customers during the buying and usage stages (Huber and Herrmann, 2001). A study conducted by Martiall and James (1977) cited on servicing works during the initial stage of using a vehicle indicated that customer satisfaction with a dealer is highly influenced by high quality and fault-free repairs. According to a study conducted by Korte (1995) cited in Huber and Herrmann (2001), about 68% of customers very satisfied with a dealer are likely to purchase the same car as against 45 percent of dissatisfied customers willing to purchase the same product. He also found that if customer satisfaction with a dealer falls from “very satisfied” to “very dissatisfied”, there will be a 75 %corresponding fall in sales as against a 15.6% fall for the brand, meaning that dissatisfied customers with a dealer are more likely to change another dealer but may not necessa