Berry, Parasuraman (1997).pdf

To improve service, companies mtist use multiple research approaches am.ongdifferent customer groups to ensure that they are hearing what customers are

saying and responding to their suggestions.

Listening to the Customer The Concept of a Service-Quality

Information SystemLeonard L. Berry A. Parasuraman

The quality of listening has an impact on thequality of service. Firms intent on improvingservice need to listen continuously to threetypes of customers: external customers who have ex-perienced the firm's service; competitors' customerswho the firm wotild like to make its own; and internalcustomers (employees) who depend on internal ser-vices to provide their own services. Without the voic-es of these groups guiding investment in service im-provement, all companies can hope for are marginalgains.

In this paper, we discuss the concept of a service-quality information system. We argue that compa-nies need to establish ongoing listening systems usingmtiltiple methods among different customer groups.A single service-quality study is a snapshot taken at apoint in time and from a partictilar angle. Deeper in-sight and more informed decision making come froma continuing series of snapshots taken from variousangles and through different lenses, which form theessence of systematic listening.

Systematic ListeningA service-quality information system uses mtiltiple re-search approaches to systematically capture, organize,and disseminate service-quality information to sup-port decision making. Continuously generated data

flow into databases that decision makers can use onboth a regtilarly scheduled and as-needed basis.

The use of multiple research approaches is neces-sary because each approach has limitations as well asstrengths. Combining approaches enables a firm totap the strengths of each and compensate for weak-nesses. Continuotis data collection and disseminationinforms and educates decision makers about the pat-terns of change for example, customers' shifiiingservice priorities and declining or improving perfor-mance in the company's or the competitors' service.

An effective service-quality information system of-fers a company's executives a larger view of service qual-ity along with a composite of many smaller pictures. Itteaches decision makers which service attributes are im-portant to ctistomers and prospects, what parts of thefirm's service system are working well or breakingdown, and which service investments are paying off! Aservice-quality information system helps to focus ser-vice improvement planning and resotirce allocation. Itcan help sustain managers' motivation for service im-provement by comparing the service performance ofvarious tinits in the organization and linking compen-sation to these results. And it can be the basis for an ef-

Leonard L. Berry is a professor of marketing, the J.C. Penney Chair ofRetailing Studies, and director. Center for Retailing Studies, TexasA&M University. A. Parasuraman holds the James W. McLamoreChair in Marketing, University of Miami.

SLOAN MANAGEMENT REVIEW/SPRING 1997 BERRY & PARASURAMAN 65

Figure 1 Principal Benefits of an Effective Service-Quality Information System

Encourages and enables management/to incorporate the voice of the customer

/ into decision making.

/ / Reveals customers' service priorities.

Service-QualityInformationSystem

I Identifies service improvement priorities'ly/ and guides resource-allocation decisions.

_ Allows the tracking of company andcompetitor service performance over time

, Discloses the impact of service qualityinitiatives and investments.

Offers performance-based data to* reward excellent service and correctpoor service.

Source: L. Berry, On Great Service: A Framework for Action {Nevi York:FreePress. 1995|p. 34.

fective first-line employee reward system by identify-ing the most effective service providers. (See Figure 1for the principal benefits of a service-quality infor-mation system.)

The task of improving service in organizations iscomplex. It involves knowing what to do on multiplefronts, such as technology, service systems, employeeselection, training and education, and reward systems.It involves knowing when to take these initiatives. Itinvolves knowing how to implement these actionsand how to transform activity into sustainable im-provement. Genuine service improvement requires anintegrated strategy based on systematic listening. Un-related, incomplete studies, outdated research, andfindings about customers that are not shared provideinstifficient support for improving service.

Approaches to Service ResearchA company can choose from many possible researchapproaches to build a service-quality information sys-tem (see Table 1). A firm would not use all approachesin the table in the same system; too much informa-tion obscures the most meaningflil insights and mayintimidate intended tisers. Conversely, incomplete in-formation injects needless guessing into decision mak-ing or, worse, paints a false picture. The nature of the

service, the firm's service strategy, and the needs of theinformation users determine which service-quality re-search approaches to use.

An industrial equipment manufacturer might wishto use service reviews to benefit from unfiltered dia-logue with mtiltiple users, reach consensus on servicesupport priorities, and solidify relationships. A restau-rant, with a transaction-oriented business, wotild findservice reviews far less efficient than other approach-es. Because of the relationship nature of its business, alimotisine service should consider new, declining, andlost-customer surveys. It should identify any nega-tives that tarnish new ctistomers' first impressions, orcause other customers to be less loyal or to defect, soit can take corrective measures. A taxi company prob-ably wouldn't use these surveys because of a minimalrelationship-marketing potential. A firm whose strat-egy emphasizes service reliability surely wotild wantto capture and analyze customer service complaintsto identify where the service system is breaking down.A company whose strategy depends on point-of-saleservice excellence should consider mystery shoppingresearch, which generates feedback on specific serviceproviders.

Four research approaches summarized in the tableapply to virtually all organizations and can be consid-ered essential components of a service-quality informa-tion system: transactional surveys; customer complaint,comment, and inquiry capttire; total market stirveys;and employee surveys. These approaches enstire cover-age of the three customer types (external customers,competitors' customers, internal customers), doctimentfailure-prone parts of the service system, and provideboth transaction-specific and overall service feedback.

Personal Involvement in ListeningA service-quality information system does not replacethe need for managers to interact directly with cus-tomers. Becoming well informed about service qualityrequires more than reading or hearing the results ofstructured, quantitative studies. It also requires thatdecision makers become personally involved in listen-ing to the voices of their customers, which can includeparticipating in or observing qualitative research, suchas service reviews and foctis groups. And it can includeless formal interactions with customers, such as whenairline executives query passengers on fiights and re-

66 BERRY & PARASURAMAN SLOAN MANAGEMENT REVIEW/SPRING 1997

Table 1 Research Approaches for Building Service-Quality Information Systems

Type Description

Transactional surveys* Service satisfactionsurvey of customersfollowing a serviceencounter.

Mystery shopping Researchers become"customers" to expe-rience and evaluatethe quality of servicedelivered.

New, declining, and Surveys to determine whylost-customer surveys customers select the firm.

reduce their buying, orleave the firm.

Focus group interviews Directed questioning ofa small group, usuallyeight to twelve people.Questions focus on aspecific topic. Can beused with customer.noncustomer, oremployee groups.

Customer advisory A group of customers re-panels cruited to periodically pro-

vide the firm with feedbackand advice on service per-formance and other issues.Data are obtained in meet-ings, over the telephone.through mail questionnaires.or via other means. Employ-ee panels also can beformed.

Service reviews Periodic visits with cus-tomers (or a class ofcustomers) to discussand assess the servicerelationship. Should bea formal process with acommon set of questions.capture of responses in adatabase, and follow-upcommunication withcustomers.

Purpose

Obtain customer feed-back while service expe-rience is still fresh; actonfeedback quickly if negativepatterns develop.

Measure individual employ-ee service behaviors for usein coaching, training, perfor-mance evaluation, recognition.and rewards; identify systemicstrengths and weaknesses incustomer-contact service.

Assess the role servicequality and other issuesplay in customer patron-age and loyalty.

Provide a forum forparticipants to suggestservice improvementideas; offer fast.informal feedback onservice issues.

Obtain in-depth, timelyfeedback and suggestionsabout service qualityfrom experienced customerswho cooperate becauseof "membership" natureof the panel.

Identify customer expec-tations and perceptionsof the company's serviceperformance and improve-ment priorities in a face-to-face conversation.A view of the future, notjust a study of the past.Opportunity to includemultiple decision makersand decision influencersin the discussions.

Highlighted approaches normally would be part of any service-quality information system.'Frequencies of use vary among companies.

Frequency'''

Continuous

Quarterly

Continuous

As needed

Quarterly

Annually orsemiannually

Limitations

Focuses on customers'most recent experiencerather than their overallassessment. Noncustomersare excluded.

Subjective evaluations;researchers may be more"judgmental" than customerswould be; expense limitsrepetitions; potential tohurt employee morale ifimproperly used.

Firm must be able to identifyand monitor service usageon a per-customer basis.

Dynamics of group interviewmay prevent certain issuesfrom surfacing. Focusgroups are, in effect.brainstorming sessions;the information generatedis not projectable to thepopulation of interest. Focusgroup research is mostvaluable when coupled withprojectable research.

May not be projectable toentire customer base. Ex-cludes noncustomers. Panel-ists may assume role of"expert" and become lessrepresentative of customerbase.

Time consuming and expen-sive. Most appropriate forfirms marketing complexservices on an ongoing,relationship basis.

(continued)


Tahle 1 Research Approaches for Building Service-Quality Information Systems (continued)

Type

Customer complaintcomment, and inquirycapture*

Total market surveys

Employee field reporting

Employee surveys

Service operatingdata capture

Description

System to retain.categorize, track, anddistribute customercomplaints and othercommunications withthe company.

Surveys that measure cus-tomers' overall assessmentof a company's service.Research includes bothexternal customers andcompetitors' customers.i.e., the total market.

Formal process forgathering, categorizing.and distributing fieldemployee intelligenceabout service issues.

Surveys concerning theservice employees provideand receive, and the qualityof their work lives.

A system to retain, cate-gorize, track, and distributekey service-performanceoperating data, such as ser-vice response times, servicefailure rates, and service de-livery costs.

Purpose

Identify most common typesof service failure for correc-tive action. Identify throughcustomer communicationsopportunities to improve ser-vice or otherwise strengthencustomer relationships.

Assess company's serviceperformance comparedto competitors; identifyservice-improvementpriorities; track serviceimprovement over time.

Capture and share at themanagement level intelli-gence about customers'service expectations andperceptions gathered inthe field.

Measure internal servicequality; identify employee-perceived obstacles toimproved service; trackemployee morale andattitudes. Employee sur-veys help answer "why"service performance iswhat it is.

Monitor service performanceindicators and take correc-tive action to improve perfor-mance as necessary. Relateoperating performance datato customer and employeefeedback.

'Highlighted approaches normally would be part of any service-quality information system.^Frequencies of use vary among companies.

Frequency^

Continuous

Semiannuallyor quarterly

Continuous tomonthly

Quarterly

Continuous

Limitations

Dissatisfied customersfrequently do not complaindirectly to the company.Analysis of customercomplaints and commentsoffers only a partial pictureof the state of service.

Measures customers' over-all service assessmentsbut does not capture assess-ments of specific serviceencounters.

Some employees will be moreconscientious and efficientreporters than others. Employ-ees may be unwilling to pro-vide negative information tomanagement.

The strength of employee sur-veys is also a weakness; em-ployees view service deliveryfrom their own vantage point.subject to their own biases.Employees can offer valuableinsights into the root causesof service problems but arenot always objective or correctin their interpretations.

Operating performance datamay not be relevant tocustomers' perceptions ofservice. Focus is on what isoccurring but not why.

tailers accompany customers through their stores toask them what they see, like, and dislike.

In 1993, the cash management division of First Na-tional Bank of Chicago changed its customer satisfac-tion stirveys fi'om mail questionnaires to telephone in-terviews. The change was prompted by poor responserates to the mail survey and customers' su^estions forimproving survey effectiveness: conduct the surveys byphone because they are more efficient and have bankemployees who can act on problems make the calls.

First Chicago recruited senior and middle man-

agers to conduct three prescheduled twenty-minutephone interviews per month and write reports on eachcall for the database. Managers were trained to do theinterviews and passed a certification test before survey-ing their first customer. They surveyed each employeeof the client firm who had significant contact with thebank. Bank managers were responsible for "actionitems" that surfaced in the interviews. The bank's vicepresident of quality assurance, Aleta Holub, remarked,"We've really seen a cultural change from getting ev-eryone a litde closer to the customer."'


Direcdy hearing the voices of customers, noncus-tomers, and employees adds richness, meaning, andperspective to the interpretation of quantitative data.The First Chicago case illtistrates the potential impactembedded in literally hearing the customer's voice,rather than hearing only a distilled or numeric repre-sentation of it. McQuarrie makes the point: "Every-one believes his or her own eyes and ears first. Keyplayers hear about problems and needs direcdy fromthe most credible source the ctistomer. Learning isenhanced becatise of the vivid and compelling qualityof first-hand knowledge."^

A well-designed and -implemented service-qualityinformadon system raises the probability that a compa-ny will invest service improvement money in ways thatactually improve service. It also continually under-scores the need to improve service. Continually captur-ing and disseminating data reveal not only progress,but problems; not only strengths, but weaknesses.Quality service is a never-ending journey. An effecdveservice-quality information system reminds everyonethat more work needs to be done.

Developing an Effective Service-QualityInformation SystemThe primary test of a service-quality informadon sys-tem is the extent to which it informs and guides ser-vice-improvement decision making. Another impor-tant test is the extent to which the system modvatesboth managerial and nonmanagerial employees to im-prove service. There are five gtiidelines for developinga system that can meet these tests:1. Measure service expectations.2. Emphasize information quality.3. Capture customers' words.4. Link service performance to business restilts.5. Reach every employee.

The core success factors embedded are the coverageof external, compedtors,' and internal customers; theuse of multiple measures; and ongoing measurement.

Measure Service ExpectationsMeasuring service performance per se is not as mean-ingflil as meastiring performance relative to customers'expectations. Customers' service expectadons providea frame of reference for their assessment of the service.

Figure 2 Service Quality Ratings for a ComputerManufacturer

Note: The dots indicate perceived service. The vertical boxes indicate customers'zones of toierance bounded on the top by their desired service expectations andthe bottom by their adequate service expectations.

Assume, for example, that a company measures onlycustomers' percepdons of service performance using a9-point scale. It receives an average perception scoreof 7.3 on the service attribute "Performs the serviceright the first time." How should managers interpretthis score? Is it a good score? Without knowing whatcustomers expect, this is a difficult question. There isno basis for gauging the rating. Managers' interpreta-tion of the 7.3 perception score wotild likely be fardifferent if customers' average expectation rating forthis attribute were 8.2 rather than 7.0. As researchersGoodman et al. ask: "How satisfied is a satisfied cus-tomer? When is good, good enough? Unfortunately,companies that ask their customers how sadsfied theyare but fail to research ctistomers' expectations cannotanswer these questions."^

We collected service quality data from a computermanufacturer's customers (see Figure 2). We mea-sured two levels of expectations: desired service (whatthe customer believes the service should be and canbe) and adequate service, (the minimal level of serviceacceptable to the customer). The top of the tolerancezone represents customers' average desired service-expectation score, the bottom, their average adequate


Figure 3 Service Quality Ratings for a Retail Chain

g

Note: The dots indicate perceived service. The vertical boxes indicate customers'zones of toierance bounded on the top by their desired service expectations andthe bottom by their adequate service expectations.

service-expectation score. Service performance is su-perior if perception scores exceed the zone of toler-ance, acceptable if perceptions are within the zone,and unacceptable if perceptions are below the zone.

Comparing the perceptions-only data with thecombined perceptions-expectations data demonstratesthe diagnostic value of measuring customers' expecta-tions. Were the computer manufacturer to measureonly customer perceptions, its management wouldhave litde guidance for investing service improvementresources. The perception scores are similar across theservice dimensions. However, the inclusion of expecta-tions data clearly shows that improving service reliabil-ity should take priority over improving tangibles. Al-though reliability and tangibles have identical percep-tion scores, customers' expectations for reliable serviceare much higher. Whereas customers' perceptions bare-ly exceed adequate-level expectations for reliability,they exceed desired-level expectations for tangibles.

We also contrasted perceptions-only and percep-tions-expectations data for a retail chain (see Figure 3).Without expectations data, management may concludethat the firm's service quality is acceptable because allperception scores are more than a full point above the

scale's midpoint of 5. However, the addition of expec-tations scores suggests a much different conclusion,with service performance on four of the five dimen-sions not even meeting customers' minimum expec-tations.''

Documenting the value of measuring customer ex-pectations in service quality research is necessary be-cause perceptions-only research is common. Mea-suring expectations adds complexity and possiblylength to the survey process and can be more expen-sive. Moreover, accurately measuring expectations isnot easy. The best way to do it .and whether it is evennecessary are the subject of debate.' Advocates of per-ceptions-only measurement typically point out thatservice perception scores explain more variance in anoverall service quality measure than a combined ex-pectations-perceptions measure. Perceptions ratingsconsistently explain more variance, most likely be-cause pieces of the whole (perceptions of specific ser-vice attributes) are being regressed against the whole(an overall service perception measure). So why is itso critical to measure customer expectations of ser-vice? Because, as Figures 2 and 3 show, managerslearn more about improving service when customerexpectations provide a frame of reference for inter-preting perception ratings.

Emphasize Information QualityQuality of information not quantity is the ob-jective in building a service-quality information sys-tem. The test of information quality is to ask if theinformation is: Relevant? Precise? Useful? In context? Credible? Understandable? Timely?

Relevant service-quaiivy information focuses decisionmakers' attention on the most important issues to meetand exceed external customer expectations, convertprospects, and enable employees to improve service.The more a service-quality information system focuseson the service priorities of the three customer types, themore likely managers will invest in the most appropri-ate initiatives that can make a positive difference.


Measuring the importance of service attributes is notthe same as measuring customers' service expectations,although they are closely related. Customers' expecta-tions are the comparison standards they use to judgethe performance of various service attributes. How-ever, the service attributes are not uniformly impor-

nformation precision and usefulnessgo hand in hand. Informationthat is overly broad or general

is not useful.

tant to customers, and it is necessary to specificallymeasure their relative importance to monitor compa-ny and competitor performance on those attributesthat drive customers' overall perceptions of servicequality.

Information precision and usefulness go hand inhand. Information that is overly broad or general is notuseflil. Researcher Brian Lunde commented: "One ofthe worst criticisms that could be made by a line man-ager about a company's . . . information is that it is 'in-teresting.' 'Interesting' is code for 'useless.' The infor-mation simply must be specific enough that executives. . . can take action make decisions, set priorities,launch programs, cancel projects."'^

Information on what must be done to improveservice is useful. Chase Manhattan Bank has deter-mined empirically that the approval process is the pri-mary driver of customers' quality perceptions for itsmortgage loan service. Accordingly, Chase's serviceinformation system tracks its performance on themortgage approval process compared to its principalcompetitors. However, Chase does not stop with over-all perceptions of the mortgage approval process. Italso investigates "sub-drivers" such as quick approval,communication, the appraisal process, amount of pa-perwork, and unchanging loan amount. The infor-mation is sufFiciendy precise so manners know whatto do and can assign implementation accountabili-ties. They review data patterns regtilarly at man^e-ment meetings.^

An effective service-quality information system pre-sents information dynamically. At any point in time.

the system's output tells what is becoming more or lessimportant the context. Fresh data are more valuablewhen presented in the context of past data. The studyof trend data reveals patterns, nuances, and insightsthat one-time data cannot possibly reveal. Is the in-vestment in new telephone technology paying off?Was it a good idea to redesign the account-openingprocedures? Is the company's new investment in train-ing reducing error rates? Has competitor advertisingabout service influenced customer expectations? Hasthe competitor's new store prototype given its serviceratings a boost? Only trend data can answer these andmyriad other questions. Ongoing research using com-mon measures across study periods generates trenddata that provide context and aid interpretation.

A service-quality information system will not mo-tivate managerial and nonmanagerial employees un-less the information is credible. Employees in low-rated units may be embarrassed and financially hurtby the system's output and may question the infor-mation's validity. Companies can improve informa-tion credibility by seeking input from operating unitson the design of research approaches and the devel-opment of specific questions. Information sessions toexplain research approaches to employees, with anopportunity for questions and answers, also can beuseful. Clear explanations of the research method andsample size should accompany the dissemination ofresults. Multiple measures a fundamental tenet ofservice-quality information systems enhance in-formation credibility when different measures pointto similar conclusions. The use of an outside researchfirm for data collection can help convey impartiality.

Information quality also is determined by whetherthe information is understandable to intended users.Relevance, usefiilness, and credibility all are enhancedwith easily imderstood research information. Unfami-liar statistical jargon and symbols confuse, intimidate,and discourage users, leading to feigned use of the sys-tem and incorrect interpretations of its output. Thereshould be a concerted effort to design a user-friendlysystem with uniform reports and clear presentation ofdata.

The timeliness oi^mioTma.non influences its quality.All the other attributes of information quality are ren-dered impotent if information is not available whendecision makers need it. Companies should collect


data to support their natural decision making andplanning cycles. Monthly transacdonal survey reportsshotild be ready for the monthly man^ement meet-ing, total market survey results shotild feed the annualplanning and budgeting process, customer complaintanalyses shotild be ready for the twice-a-month meet-ings of the service-improvement leadership team. Thedesign of databases shotild accommodate trend-dataretrieval for managers as needed. Companies shotildcontinually explore ways to accelerate data collectionand dissemination. Firms might fax or e-mail ques-tionnaires to respondents rather than use the postalservice. Research results might be distributed internal-ly on a company's intranet.

The information quality tests of relevance, precision,usefijlness, context, credibility, understandability, andtimeliness are not absolutes. Improving informationquality is a journey of trial and error, experience curveefiects, user feedback, and new knowledge. Btiildingan effective system is a never-ending process of refine-ment. Larry Brandt, associate director of ctistomer ser-vice at AMP, a mantifacttirer of electrical and electron-ic connectors, points out the necessity of continuousimprovement: "We need to constandy evaluate whatit is we're measuring, why we're doing it, and whetherthe results are worthwhile in the organization's big pic-ture, or we run the risk of wasting time and effort."'^

Capture Customers' WordsThe best service-quality information systems are builtwith qualitative and quantitative databases, ratherthan stricdy the latter. Quantified data are summaries;averages of customers' perceptions of a very specific ser-vice issue are still averages. Quantitative data bringmany benefits to the service informadon table, includ-ing easy analysis, comparability from one period tothe next, and potential projectability. What numbersdon't offer are the tone, infiection, feeling, and "wordpictures" from customers' voices. A service quality re-port showing that 4 percent of the customer base isvery dissatisfied and another 13 percent is somewhatdissatisfied with the company's service may not getmanagement's attention. However, if the report in-cludes customers' verbatim comments, it may receivea very different reaction.

GTE Supply and Lexus customers illustrate the im-portance of capturing customers' words. GTE Supply

purchases numerous products needed for the tele-phone operations of its customers, the local telephonecompanies. By implementing a systematic survey ofcustomers' needs and opinions, GTE has improvedservice quality. The survey generates both quandtadveand qualitative data for each customer. Current nu-merical quality ratings are compared to previous re-sults to spot problems. In addition, the survey askstwo open-ended quesdons: "Why do you say that?"(in response to a closed-ended overall quality ques-don) and "What improvements, if any, cotild be made

AIthough Lexus was manufacturingcars with few mechanicalproblems, the extra careshown in the sales and service

process strongly influenced buyersatisfaction.

by Supply?" The company enters the customers' ownwords into a database and presents them to its man-agers along with the numerical data. GTE researchersJames Drew and Tye Fussell remarked: "Tabtilationsof survey questions can highlight specific transactioncharacteristics in need of improvement from the cus-tomer's viewpoint. In contrast, open-ended commentsare especially effective in motivating first-level man-agers and giving the tabtiladons substance and a hu-man touch."'

Toyota introduced the Lexus line of luxury cars inthe late 1980s, and by the early 1990s, the cars hadvaulted to the top of the J.D. Power & Associates rat-ings in customer satisfaction. Soon afber, another luxu-ry carmaker retained Custom Research Inc. (CRI), amarketing research firm, to find out why Lexus own-ers were so satisfied. CRI conducted a series of focusgroups to hear the Lexus story in the owners' words.Most of the Lexus drivers e^erly volunteered storiesabout the special care and attention they had receivedfrom their Lexus dealer. It became clear that althoughLexus was manufacturing cars with few mechanicalproblems, the extra care shown in the sales and serviceprocess strongly influenced buyer satisfaction. Owners


felt pampered and respected as valued Lexus cus-tomers. For example, one female owner mentionedseveral times during the focus group that she hadnever had a problem with her Lexus. However, onfiarther probing, she said, "Well, I suppose you cotildcall the four times they had to replace the windshielda 'problem.' But frankly, they took care of it so welland always gave me a loaner car, so I never really con-sidered it a 'problem' until you mentioned it now."CRI's research showed that the Lexus policy of alwaysoffering service customers a loaner car took almost allthe pain out of the service experience. These insightsfrom the focus groups helped explain the reasons be-hind the high J.D. Power satisfaction scores. Andthey gave CRI's client a view of the Lexus ownershipexperience not evident from the scores alone.

When ctistomers express their views on videotape,the effect is even more compelling than printed verba-tim comments. For company personnel, nothing beatsseeing the intensity of customers' comments. South-west Airlines shows contact employees videotapes ofpassengers complaining about service. Colleen Barrett,executive vice president for customers, states: "Whenwe show the tape, you can hear a pin drop. It's fasci-nating to see the faces of employees while they'rewatching. When they realize the ctistomer is talkingabout them, it's pretty chilling. That has far more im-pact than anything I can say."'"

During the past few years, Levi Strauss & Co., oneof the world's most successfiil companies, has beencompletely transforming its business processes, sys-tems, and facilities. Improving the speed and reliabili-ty of distribudon has been its principal objective. Theteam leading the transformation tised videotaped in-terviews with customers to help convince the em-ployees in such a successfiil company that change wasessential. One big customer said, "We trust many ofyour competitors implicidy. We sample their deliver-ies. We open all Levi's deliveries." Another customerstated, "Your lead dmes are the worst. If you weren'tLevi's, you'd be gone.""

Companies investing in service-quality informationsystems shotild consider using what McQuarrie calls"perennial quesdons."'^ A perennial question is open-ended and allows customers to speak direcdy aboutwhat concerns them most. Companies should ask itconsistendy and save responses in a database to ascer-

tain data patterns. GTE Supply's question, "Whatimprovements, if any, cotild be made by Supply?" is aperennial question. McQuarrie offers this example:"What things do we do partictilarly well or pardcu-larly poorly, relative to our competitors?" Examples ofperennial questions directed to employees include: What is the biggest problem you face every day try-ing to deliver high-quality service to your customers? If you were president of the company and couldmake only one change to improve service quality, whatchange wotild you make?"

Combining customers' words with their numbershas synergy. The combination, when well executed,produces a high level of realism that not only informsbut educates, not only guides but motivates.

Link Service Perfonnance to Business ResultsInttiitively, it makes sense that delivering quality servicehelps a company at the bottom line. Indeed, acctimu-ladng evidence suggests that excellent service enables afirm to strengthen customer loyalty and increase mar-ket share.''' However, companies need not rely on out-side evidence on this issue. Firms can develop theirown evidence of the profit impact of service quality tomake the investment more credible and fact-based forthe planning and budgeting process.

A service-quality information system should in-clude the impact of service performance on businessresults. An important benefit of new, declining, andlost-customer surveys is the measurement of marketgains and damage linked to service quality. Surveyscan reveal the number and percentage of new cus-tomers who selected the company for service-relatedreasons. Declining and lost-customer surveys can de-termine why customers are buying less or defecting,allowing estimates of revenue lost due to service. Cal-ctilating lost revenue because of service dissatisfaction,categorized by specific types of service dissadsfaction,is a dependable way to focus management attendonon service improvement. By computing the averagecosts for reperforming botched services and mtildply-ing them by frequency of occurrence, companies alsocan calculate the out-of-pocket costs of poor service.Combining lost revenue and out-of-pocket costs at-tributable to poor service generally will produce a sumfar greater than management wotild assume withoutformal estimation.


Table 2 Customers'

Behavioral-IntentionsDimension

Loyalty to Company

Propensity to Switch

Willingness toPay More

External Responseto Problem

Internal Responseto Problem

Statements of Intention

ItemLabel

123

45

67

8

9

10

11

12

13

Item Wording*

Say positive things about XYZ to other people.Recommend XYZ to someone who seeks your advice.Encourage friends and relatives to do businesswith XYZ.Consider XYZ your first choice to buy services.Do more business with XYZ in the next few years.

Do less business with XYZ in the next few years.Take some of your business to a competitor thatoffers better prices.

Continue to do business with XYZ if its pricesincrease somewhat.Pay a higher price than competitors charge for thebenefits you currently receive from XYZ.

Switch to a competitor if you experience a problemwith XYZ's service.Complain to other customers if you experience aproblem with XYZ's service.Complain to external agencies, such as the BetterBusiness Bureau, if you experience a problem withXYZ's service.

Complain to XYZ's employees if you experience aproblem with XYZ's service.

Each item was accompanied by a 7-point likelihood scale |1 = "Not at All Likely" and 7 = "Extremely Likely").

Firms also can directly estimate the profit impactof effective service recovery by measuring complainingcustomers' satisfaction with the handling of their com-plaints and their repurchase intentions. Technical Assis-tance Research Programs (TARP) has conducted ex-tensive studies documenting the much stronger repur-chase intentions of complaining customers who arecompletely satisfied with the firm's response comparedto dissatisfied ctistomers (complainants and noncom-plainants) who remain dissatisfied. Firms can monitorthe relationship between service recovery and businessresults by measuring dissatisfied customers' propensityto complain (the higher the better because of the op-portunity to resolve the complaint), and by measuringcomplaining customers' satisfaction with the firm's re-sponse and their repurchase intentions. These data canbe used to estimate the return on investment in service

recovery, i.e., profits attributed to ser-vice recovery divided by the costs ofservice recovery.'^

Another way to gauge the marketimpact of service quality is to meastirecustomers' repurchase and other be-havioral intentions in transactionaland total market surveys. The surveyscan ask respondents to rate how likelyit is that they will, for example, rec-ommend the firm, do more businesswith the firm in the next few years, ortake some business to a competitorwith better prices. Respondents' in-tentions can then be regressed againsttheir perceptions of service quality toreveal associations between customers'service experiences and their futureintentions concerning the firm. Wehave investigated empirically a batteryof thirteen behavioral intention state-ments. Using factor analysis, the thir-teen-item battery reconfigured intofive dimensions (see Table 2)."^

Our research shows strong relation-ships between service performanceand ctistomer loyalty and propensityto switch (see Figure 4). Customerswhose service perceptions were belowthe zone of tolerance were less loyal

and more likely to switch to a competitor than ctis-tomers whose perceptions exceeded the zone. Cus-tomers exhibited some willingness to pay more for bet-ter service, particularly as service perceptions rose frominadequate to desired. Intentions to complain external-ly fell slighdy across the zone.'^ (The internal responsedimension is omitted from our analysis because it isbased on a single item fi-om the thirteen-item scale.)

Companies that measure customers' behavioral in-tentions (or actual behaviors) and monitor their sen-sitivity to changes in service performance gain valuableinformation on both why and how to invest in serviceimprovement. Assessing the bottom-line impact of ser-vice performance will motivate managerial and non-managerial employees to implement needed changes. Itwill help a company move from just talking about ser-vice to improving service.


Figure 4 Relationship between Service Quality andCustomers' Intentions for Computer Manufacturer

7 r Loyalty

Pay More

Propensity to Switch

Adequate ; Desired. Service , Service

Perceived Service Quality

Reach Every EmployeeA service-quality information system can be beneficialonly if decision makers use it. Accordingly, it must bemore than a data collection system; it must also be acommunications system. Determining who receiveswhat information in what form and when is a principaldesign challenge. Chase Manhattan Bank vice presidentJohn Gre^ commented: "I cannot stressenough the need to systematize the useof survey information, a key learningpoint for tis in the last couple of years. Itis not just how actionable the data are,but also the system for regtilarly review-ing the data and making decisions thatdetermine effectiveness."'"

All employees are decision makers asthey regtilarly make decisions that deter-mine the effectiveness of their actions;therefore, a service-quality informationsystem should disseminate relevant ser-vice information to everyone in the or-ganization. Front-line service providers,for example, should receive informationabout the expectations and perceptionsof the external or internal customersthey serve. These personnel might re-ceive information different from whatexecutives receive and in different

forms (for example, in training classes, newsletters, andvideos) but they should be included in the system.Companies miss an important teaching, reinforcing,culture-building opportunity when they don't sharerelevant service information with employees lower inthe hierarchy.

John Deere shares customer feedback with everyemployee. Its system is designed so that employees indifferent functions receive the information in an appro-priate form, e.g., via e-mail, a hard copy of customercomments posted on btilletin boards, and specializedmonthly reports. Les Teplicky, manager of after-marketsupport at John Deere, stated: "You need senior man-agement buy-in, good data collection, clear analysis but all that won't matter unless every employee seessomething in the information for them.""

Just as in the design of any product, knowing theneeds of information users is critical to designing aservice-quality information system. The system shouldrevolve around what information different kinds ofemployees need to help them make good decisions andhow and when to communicate the information. (SeeTable 3 for types of questions to include in both pre-design and postimplementation surveys of targeted in-formation users.) Packaging the right information foreach audience and presenting it efi^ ectively is key to

Table 3 Questions for Service-Quality Information System Users

Predesign What would you like to know about

the customers you serve

What type of information wouldhelp you improve service in ourcompany?

What type of information wouldyou like to have about your ownservice performance? About yourwork unit? About the company?About the competition?

If you presently receive informationon customer service, what type of in-formation is most valuable to you?Why? What is least valuable? Why?

What are your preferred ways ofreceiving customer serviceinformation? How often would youlike to receive this information?

Postimplementation Are you receiving the information you

need to help the company improve itsservice? (for managers)Are you receiving the information youneed to best serve your customers?(for frontline employees)

What information on customer servicewould you like to receive that youcurrently do not receive? How wouldthis additional information help you?

What customer service information thatyou receive is most valuable to you? Why?What is least valuable? Why?

Do you receive customer service informa-tion on a timely basis? Please explain.

What could the company do to improvethe usefulness of the customer serviceinformation it provides you?


the success of a service-quality information system. AsPeter Drucker stated: "Knowledge is power. In post-capitalism, power comes ftom transmitting informa-tion to make it productive, not hiding it."^ "

When listening to customers becomes a habit in acompany, when managers find it unthinkable to makeservice investment decisions unaided by relevant infor-mation, when employees eagerly await next month'sservice performance scores to gauge progress, when vir-tually all employees tmderstand the service improve-ment priorities then it is clear that the organization issystematically tising information to improve service.

References1. Quoted in "First Chicago Shelves Paper Surveys, Asks Managers toUse the Telephone for Customer Satisfaction Research," The ServiceEdge, volume 8, March 1995, p. 4.2. E.F. McQuarrie, "Taking a Road Trip," Marketing Management,volume 3, Spring 1995, p. 11.3. J.A. Goodman, S.M. Broetzmann, and C. Adamson, "Ineffective That's the Problem with Customer Satisfaction Surveys," QualityProgress, volume 25, May 1992, p. 35.4. For a detailed discussion of this study, see:A. Parasuraman, V.A. Zeithaml, and L.L. Berry, "Alternative Scalesfor Measuring Service Quality: A Comparative Assessment Based onPsychometric and Diagnostic Criteria," Journal of Retailing, volume70, Fall 1994, pp. 201-230.5. See A. Parasuraman, VA. Zeithaml, and L.L. Berry, "Reassessment ofExpectations as a Comparison Standard in Measuring Service Quality:Implications for Further Research," Journal of Marketing, volume 58,January 1994, pp. 111-124;J.J. Cronin and S.A. Taylor, "SERVPERF Versus SERVQUAL:

Reconciling Performance-Based and Perceptions-Minus-ExpectationsMeasurement of Service Quality," Journal of Marketing, volume 58,January 1994, pp. 125-131; andK.R. Teas, "Expectations as a Comparison Standard in MeasuringService Qtiality: An Assessment of a Resssesstnem," Journal of Marketing,volume 58, January 1994, pp. 132-139.6. B.S. Lunde, "When Being Perfect Is Not Enough," MarketingResearch, volume 5, Winter 1993, p. 26.7. J.P. Gregg, "Listening to the Voice of the Customer" (Nashville,Tennessee: Frontiers in Services Conference, presentation, October1995).8. Quoted in "Changes in Satisfaction Demands and TechnologyAlter the How's, What's, and Why's of Measurement," The ServiceEdge, volume 8, January 1995, p. 2.9. J.H. Drew and T.R. Fussell, "Becoming Partners with Internal Cus-tomers," Quality Progress, volume 29, October 1996, p. 52.10. Quoted in "Some Ways to Coddle Customers on a Budget," TheService Edge, volume 6, September 1993, p. 4.I L D . Sheff, "Levi's Changes Everything," Fast Company, volume 2,June-July 1996, p. 67.12. McQuarrie (1995), p. 12.13. L.L. Berry, On Great Service: A Framework for Action (New York:Free Press, 1995), pp. 51-52.14. See V A Zeithaml, LL. Berry, and A. Parasuraman, "The BehavioralConsequences of Service Quality," Journal of Marketing, volume 60,April 1996, pp. 31-46; andR.D. Buzzell and B.T. Gale, The PIMS Principles (New York: FreePress, 1987).15. See Consumer Complaint Handling in America: An Update Study(Washington, D .C: Technical Assistance Research Programs Institute,April 1986).16. Zeithaml etal. (1996).17. Ibid.18. Personal correspondence.19. Quoted in "Rallying the Troops," On Achieving Excellence, volumell,February 1996, p. 2.20. Interview with Peter F. Drucker, Harvard Business Review, volume71, May-June 1993, p. 120.

Reprint 3835


Documents

Berry, Parasuraman (1997).pdf