Consumer Perceptions of Service

• Provide a solid basis for understanding what influences customer perceptions of service and
the relationships among customer satisfaction, service quality, and individual service
encounters.

• Demonstrate the importance of customer satisfaction—what it is, the factors that influence
it, and the significant outcomes resulting from it.

• Develop critical knowledge of service quality and its five key dimensions: reliability,
responsiveness, empathy, assurance, and tangibles.

• Show that service encounters, or the “moments of truth” are the essential building blocks
from which customers form their perceptions.

The customer is . . .

Anyone who receives the company’s services, including:

– external customers (outside the organization, business customers, suppliers,

partners, end consumers)

– internal customers (inside the organization, e.g., other departments, fellow

employees)

Customer Perceptions of Quality and Customer Satisfaction

Factors Influencing Customer Satisfaction

 • Product quality
• Service quality
• Price
• Specific product or service features
• Consumer emotions
• Attributions for service success or failure
• Perceptions of equity or fairness
• Other consumers, family members, and coworkers
• Personal factors
• Situational factors

Outcomes of Customer Satisfaction

• Increased customer loyalty
• Positive word-of-mouth communications
• Increased revenues
• Increased return to shareholders

Service Quality
• The customer’s judgment of overall excellence of the service provided in relation to the
quality that was expected.
• Service quality assessments are formed on judgments of:
– outcome quality
– interaction quality
– physical environment quality

The Five Dimensions of Service Quality

Assessing Features Using the Kano Model

 The Kano model of customer satisfaction was developed by Japanese academic and consultant
Noriaki Kano. It separates the features of a product or service into three categories:

Kano proposed asking customers two almost identical questions about each feature: how would
they feel if the feature were present, and how would they feel if the feature were absent. Each
question (both “present” and “absent” versions) can be answered with one of the following:

I like it that way.

I expect it to be that way.
I am neutral.
I can live with it that way.
I dislike it that way.

Found on: https://www.webretailer.com/lean-commerce/delight-customers-kano-model/#/

The Kano model says customer satisfaction is not simply proportional to one-dimensional features,
but rather the product should include additional attributes such as “must-have” and “exciter”
features. The Kano model classifies customer requirements into five categories:
1. Basic/threshold attributes
2. Performance/linear/one-dimensional attributes
3. Excite/delight attributes
4. Indifferent attributes
5. Reverse attributes
Any product should first and foremost meet the basic attributes. Without basic attributes, the
product may not even survive in the market. Once the basic attributes are met, the product
should maximize the performance attributes and should include as many exciters and
delighters as possible.
Basic/Threshold Attributes
These are the bare-minimum features a product must have to meet customer demands, and
they are essential for the product’s survival. These features alone will not increase customer
satisfaction, but not implementing these features will lead to customer dissatisfaction. These
features are taken for granted by the customer, and without them, the customer may not even
be interested in the product.
Michelle expected several basic things to be included with her ticket purchase: comfortable
seating, controlled temperature, a good view, and many more. Obviously, having these features
does not make her pleased, but not having them will definitely disappoint her.
Performance/Linear/One-Dimensional Attributes
The more performance attributes, the more customer satisfaction results. These are the
features customers are more interested in, and the price customers are willing to pay depends
on these attributes. These features result in customer satisfaction when fulfilled and customer
dissatisfaction when not fulfilled.
Michelle paid to watch the movie on a giant screen in 3D. If the 3D quality is better than she
had expected, she would probably be more satisfied; if the 3D quality is worse than she had
expected, she would be dissatisfied.
Excite/Delight Attributes
These features result in increased customer satisfaction when implemented but do not cause
dissatisfaction when not implemented. These attributes are not expected by the customers and
can often stratify their latent needs. This is where the product is truly differentiated from
competitors. With time, customers will get used to the excite and delight features, and once
they get accustomed, these features will not be delighters any more. These features would,
eventually, morph into basic attributes.
Michelle has been told at the theater that every ticket purchase includes a free soda and
medium popcorn. She likely would be very delighted and would probably recommend this
theater to many of her friends. Because she did not expect these freebies, she would not have
been disappointed if the ticket had not included them.
Notice that if the theater continues to give the free soda and popcorn, the next time Michelle
goes to the theater, she would expect these freebies with her ticket purchase. At that time this
feature would become part of her basic requirements and would no longer be a delighter.
Indifferent Attributes
Customers are indifferent to these features; either they don’t pay attention to them or they are
not aware of these features. These attributes are of little or no consequence to the customer.
The satisfaction level neither decreases nor increases because of these features. Because
adding features involves cost, time, and resources, these features should be minimized or
avoided to the extent possible.
The theater uses a Sony 4K cinema projector with an advanced SXRD microdisplay chip that
uses reflective liquid crystal technology to create more than four thousand pixels horizontally,
and the seats are fitted with highly sophisticated tracking serial number devices. For most of
the general audience, these features do not mean anything. As long as the picture resolution is
good, it will in no way influence their decision in choosing the theater.
Reverse Attributes
Reverse attributes may not be very common. This refers to added functionality resulting in
dissatisfaction. Reverse attributes cause customer dissatisfaction, and not having these
attributes increases customer satisfaction.
Michelle was asked to install the theater app on her smartphone and scan the barcode on the
ticket to find the location of her seat. This feature is technologically advanced, and many
people may find it overwhelming and puzzling to use.
Customer Survey
After identifying and categorizing the features into basic/threshold, performance/linear/one-
dimensional, excite/delight, indifferent, and reverse, a customer survey may be conducted to
further break down and understand the customers’ preferences and needs.
A typical survey consists of paired comparison questions with an ordinal five-point scale. The
goal is to design these questions so that half of the pair represents having a feature (functional
form) and the other half indicates not having the feature (dysfunctional form).
Functional form of question:
How would you feel if the theater seats were fitted with seat heaters?
[1] I like it [2] I must have it [3] I am neutral [4] I can live with it [5] I dislike it
Dysfunctional form of question:
How would you feel if the theater seats were not fitted with seat heaters?
[1] I like it [2] I must have it [3] I am neutral [4] I can live with it [5] I dislike it
For the above pair, if the customer answers “I like it” for the functional question and “I can live
with it” for the dysfunctional question, that means implementing the heated seats feature will
excite the customer. See the below Kano evaluation table for other combinations.
Structure of the Kano questionnaire
Agreed customer requirements

1. Organization, instead of trying to save resource should provide adequate resources for
understanding the correct requirements. Every service offering is different which dictates
that determining customer requirements is not a one time affair. Even in manufacturing ,
requirements of customers may change suddenly. Invest Time For Understanding
Customer Requirement
2. In a service industry, the customers meet the service provider and express their
requirements orally. In Service Industry it is difficult to described the end product in clear
terms. Service offering is more easily described through subjective parameters rather than
objective parameters. Because of this, service industry must always ensure customer
satisfaction. Find out the Right Requirements First
3. Fear of senior management coming to know about the problem. Belief that
communications may lead to more work without additional payment Too busy with other jobs
in hand Ego interfering with communications Customer may not be available till the
delivery time Reasons when doubts about requirements may not be able to clarify.
4. Checklist will be given to customers and filled up before they discuss about the service to
be provided. This is use to clarify or understand the requirements/preference of the
customers. Checklist for eliminating Communication Gap
5. Clearly define the customer’s preference, it might be based on the contract or verbal
communication. Before the final acceptance of the contract, the both parties, the customer
and Service provider should get a contract review done. Review The
Contract/Requirements
6. Service provider cannot afford to say “No” Always. project for a change Before even
agreeing to provide the service, the customer and the service provider should agree upon
how to amend the service agreement later on. Foresee and Provide for Amendments
7. The organization should document its policy and procedure for methodology for
requirement elicitation from customers including communication, review of contracts and
handling conflicts between customer and organization. Documenting Customers
requirement by policy for employees/organization and customers guide.  As Deming said,
“IT is not meeting our own requirements, but the customers” for success of the business.
Documented Policy
8. Manual/guide of Employees in handling Customers. Revision can be done as necessary.
The senior management person will be the one to formulate the Code base from the
observations. Whatever mistakes and pitfalls are found should be identified and
documented. Code of good Customer Handling Practices Two Checkpoints in a service
requirement Finalization. 1. Initial Discussion the customer contact person has with the
customer. 2. Contract Review in the organization.
Complaint Recovery Process

BBB - Better Business Bureau

When member service goes wrong, think “damage control”. A good recovery process can turn
angry, frustrated members into loyal ones. It can create more goodwill than if things had gone
smoothly in the first place.

On the other hand, the failure to resolve the problem results in the member spreading their
dissatisfaction to many other people. Think about the last time you had a complaint that was not
resolved. How many relatives, friends and co-workers did you tell? Studies have shown that for
every 100 dissatisfied members, 4 will formally complain, 91 will tell 8-10 others, and 5 will tell 20
others. That turns into over 800 people receiving a negative view of the credit union!

Five Steps to Service Recovery

1. Apologize. Start by telling the member, personally and sincerely, “I’m sorry.” Members don’t care
whose fault the problem was – they want someone to champion their cause. So sincerely
apologize on behalf of the credit union and take responsibility for the error.

2. Listen and empathize. You need to listen, and you need to care. These are the tools for service
recovery. Avoid using phrases such as, “I understand” and “I know how you feel.”. There is no way
you can understand how someone else feels. Instead try, “I can only imagine how you feel.”,
“That’s got to be so frustrating.”, or “What an unfortunate situation.”. Listening and empathizing
helps members unwind and feel like they are being understood.

3. Fix the problem. Once made aware of the situation, the employee must do whatever is
necessary to resolve the problem, as quickly as possible. One of the most effective ways to move
forward is to ask the member what he or she would like to have happen. To solve problems,
employees must be empowered. They must be able to bend and break the rules in order to satisfy
the member. However, most of the time, all the member wants is what they originally asked for.

4. Offer atonement. A recovery process will be valued by members if it includes, even symbolically,
some form of atonement. “I’d like to make it up to you.” The bigger the service problem, and the
more valued the member, the bigger the atonement will have to be to restore the member to a
state of satisfaction. Providing a refund, gift card or other compensation, depending on the severity
of the problem, remains a powerful method for service recovery.

No credit union can afford to lose members, if only because it costs much more to replace a
member than it does to retain one – five times more, most experts agree. A credit union’s effort to
ensure that its members are satisfied over the long term is rewarded by an increase in revenue
through repeat business, referral sales, decreased member maintenance costs, and reduced
exposure to price competition.

5. Follow-up. A few days after you feel the problem has been fixed, follow up. Call the member and
ask, “Have we fixed everything for you?” and “What else can we do for you?”. Make sure they are
satisfied.

It is important to create a service recovery process (like above) that includes specifically defined
steps that must be followed. Create examples of service recovery with strict instructions for
employees to meet or exceed them. For example, in the case of a mis-posted loan payment, offer
to let the member skip a payment or give them a gift card. Have pre-printed coupons for a 1/4 % off
their next loan or a free order of checks.

Train employees. All employees should be trained to follow the above five steps. Use real
examples of complaints in the training. How would you handle it? What could we have done
better? Make sure employees understand the extent of their empowerment. If you want to be able
to deal effectively with complaints, it is necessary that you absorb the process. That is something
that takes practice.

Customer Feedback and Complaint Resolution