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MSQ 15,3

A strategic service quality approach using analytic hierarchy process

Clare Chua Chow and Peter Luk
Ryerson University, Toronto, Canada
Abstract
Purpose The paper aims to develop a technique that considers competition using the analytic hierarchy process (AHP) framework to measure service quality. Design/methodology/approach The present study adapted the AHP methodology to the measurement of service quality, involving ve steps referred to as analytical hierarchy process for service quality (AHP-SQ). Subsequently, the authors demonstrate how the technique can be applied to the fast-food restaurants. Findings The AHP-SQ approach described in this study thus assists management to devise and maintain a relevant, competitive plan for ongoing improvements in service quality. Specically, such analysis enables the following questions to be addressed: How does the rm perform in terms of service quality in relation to its competitors?; Given the rms resources, which service initiatives will enhance its service competitiveness?; Which service areas require immediate improvement?; How should the rms service improvement be prioritized?, and What opportunities exist for service improvement in relation to the competition? Research limitations/implications It would be important to consider the right dimensions of service quality that are relevant to the respective industry. It would also be essential to collect responses from customers who have utilized the services of the focal rm as well as its competitors in order to have an accurate opinion. Practical implications The framework proposed here allows management to address two main issues pertaining to its competitive advantage: establishing its performance ranking in the marketplace; and identifying the service elements that most require improvement. Originality/value The paper develops a cohesive approach to help managers identify which reliability, assurance, tangibles, empathy, responsiveness (RATER) service dimensions require attention to create a sustainable competitive advantage. It offers a bigger picture in service-quality management. Keywords SERVQUAL, Analytical hierarchy process, Gap analysis, Customer satisfaction, Competitive strategy, Service quality assurance Paper type Research paper

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Introduction In the presence of erce competition, service rms strive to stay in the forefront of todays marketplace by offering quality service. Research has shown that service quality is an essential strategy for winning and retaining customers (Ghobadian et al., 1994; Buzzell and Gale, 1987, Zeithaml, 2000). Indeed, the quality of service is more important than price in differentiating a service rm from its competitors and in fostering customer loyalty (Kandampully and Suhartanto, 2000, 2003). Delivering
The authors would like to thank the editor and all the reviewers of this article for their valuable comments. Also they wish to thank Professor Martin Evans and Professor Dan Remenyi for reviewing this article prior to submission to the journal. The authors gratefully acknowledge Dr Ross Gilham for his assistance. The authors propose that collected data from fast food restaurants to help them illustrate that service quality can be managed with their proposed approach.

Managing Service Quality Vol. 15 No. 3, 2005 pp. 278-289 q Emerald Group Publishing Limited 0960-4529 DOI 10.1108/09604520510597827

quality service is thus vital if rms are to increase market share and protability. However, in attempting to increase market share, most assessments of service quality do not consider the strategies of competitors. Parasuraman et al. (1990) noted that it is essential for a service rm to compare its strengths and weaknesses against those of its competitors when developing priorities for service improvement. The present paper develops an approach that will assist managers in prioritizing aspects of service improvement while taking account of the service priorities of competitors. The approach advocated here assists management in addressing the following questions: . How does the rm perform in terms of service quality in relation to its competitors? . Given the rms resources, which service initiatives will enhance its service competitiveness? . Which service areas require immediate improvement? . How should the rms service improvement be prioritized? . What opportunities exist for service improvement in relation to the competition? Literature review Measuring service quality is a challenging task because the concept of service quality is inherently intangible in nature and difcult to dene (Kandampully, 1997). Measuring improvements in service quality is even more challenging (Parasuraman et al., 1990). Commonly used techniques for measuring service quality include customer service audits (Takeuchi and Quelch, 1983), gap analysis (Zeithaml et al., 1988), SERVQUAL (Parasuraman et al., 1988), SERVPERF (Cronin and Taylor, 1994), critical incident technique (Bitner et al., 1990), and sequential incident technique (Stauss and Weinlich, 1997). A common feature of all these methods is that they all focus on measuring internal service quality without considering the strategies of competitors. As Min and Min (1997, p. 582) pointed out with respect to SERVQUAL: [It] alone may not help evaluate the rms comparative service performance. Such consideration of competitors is important. Indeed, Parasuraman et al. (1990) provided ve guidelines for conducting service-quality research one of which was measuring service performance in relation to competition. In response to this need, a few instruments have been developed that include an assessment of the competition in measuring service quality. Parasuraman et al. (1988), Min and Min (1996, 1997), and Min et al. (2002) all attempted to measure competitive service quality. Moreover, Parasuraman et al. (1990) suggested adapting the SERVQUAL instrument to measure service quality in relation to competition. SERVQUAL is a well-established gap-assessment methodology that can be used to develop service-improvement initiatives by examining the gap between expectations and perceptions. The adapted SERVQUAL instrument (Parasuraman et al., 1991) uses a non-comparative evaluation model that is, customers of rm A are asked to state their perception or their expectation of rm As services and another group of customers are asked to state their perception or their expectation of rm Bs services. After obtaining the perceptions and expectations, the SERVQUAL scores are calculated and gaps between the two rms are assessed. In addition to this adaptation, Johns and Tyas (1996) have extended the use of SERVQUAL to include competitors. Moreover, Fick and Ritchie (1991) have employed

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the SERVQUAL instrument to compare services provided by various types of organizations within the travel and tourism industry. The difculty with these approaches is that SERVQUAL requires the collection of several sets of data to do a competitive analysis. For example, if SERVQUAL is used to conduct a comparative analysis of three rms, three sets of questionnaires are required; each with 44 statements assuming the original 22 items of Parasuraman et al. (1988). Authors have questioned the value and purpose of the separate data sets (Johns and Tyas, 1996). The present study takes a different perspective. Rather than use a non-comparative model, the approach advocated here uses a comparative evaluation model that is, the customers are asked to compare rm A and rm B with regard to a service dimension, and then rate their satisfaction level for either rm A or B. The paper develops a cohesive approach using analytic hierarchy process (AHP) to help managers identify which reliability, assurance, tangibles, empathy, responsiveness (RATER) service dimensions require attention to create a sustainable competitive advantage. AHP is used as a comparative service-improvement technique for two reasons. First, the AHP technique allows pairwise comparisons to be made among the alternatives with respect to the service dimensions. This provides a more meaningful analysis for developing a competitive set of service attributes that will satisfy customers and assist the service provider in outperforming its competitors. Second, to determine comparative service performances, AHP requires the collection of only one set of data as opposed to several sets with the adapted SERVQUAL instrument.

Conceptual framework for the study The AHP technique, which was developed by Saaty (1980, 1990, 1994), uses a process of pairwise comparisons to determine the relative importance (and thus the priority) of alternatives in a multi-criteria decision-making problem. AHP involves decomposing a complex and unstructured problem into a set of variables that are organized into a hierarchy (as shown in Figure 1). It enables decision-makers to make choices among a number of alternatives and criteria by formulating priorities and making a series of tradeoffs. Although the AHP technique was originally developed for solving multi-criteria decision-making problems, its practicality and versatility has allowed AHP to be widely applied in many different areas including marketing (Wind and Saaty, 1980) and accounting/auditing (Arrington et al., 1984). Zahedi (1989) has provided a comprehensive survey of the application of AHP. The present study adapted the AHP methodology to the measurement of service quality. The industry chosen for the study was the fast-food restaurant industry. The service quality problem was structured into a two-level hierarchical form (as shown in Figure 1). The rst level the service-dimension level addressed the relative importance of various service dimensions in dening service quality. Customers were asked to compare pairs of service dimensions (for example, tangibles versus reliability) and to indicate whether they felt that one dimension was equal to, more important than or less important than another dimension. The second level of the hierarchy the choice level compared the performance of service providers (in this case, fast-food restaurants) with respect to the service dimensions. The customers were asked to state their preference for the restaurants in a pairwise manner on a nine-point relational satisfaction scale.

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Figure 1. Service quality management: AHP framework

The AHP procedure thus provided a ranking order of rms with respect to the dimensions that dene service quality, as well providing relative standings of each service provider with respect to its competitors. Data collection Questionnaire design In accordance with the conceptual framework described above, the questionnaire was structured into two sections. The rst section contained ten pairwise comparison items for customer evaluation of the importance of service dimensions in fast-food restaurants. To minimize interpretation bias, respondents were provided with denitions of each service dimension. The judgments were based on a nine-point relational scale of importance similar to the one used in the original AHP instrument (Saaty, 1980). According to the scale used in this study, 1 represented Equally important; 2 Equally important to somewhat important; 3 Somewhat important; 4 Somewhat important to moderately important; 5 Moderately important, 6 Moderately important to very important, 7 Very important; 8 Very important to extremely important; 9 Extremely important. The second section of the questionnaire (corresponding to the second level of the hierarchy), contained ve questions to evaluate customers satisfaction with dining in three fast-food restaurants (McDonalds, Burger King, and Harveys) with respect to the ve dimensions. Within each of these ve questions were three sub-questions that compared McDonalds with Burger King, McDonalds with Harveys, and Burger King with Harveys. Again, the judgments were based on a nine-point relational scale of satisfaction. In this case, 1 represented Equally satised; 2 Equally satised to somewhat satised; 3 Somewhat satised, 4 Somewhat satised to moderately satised, 5 Moderately satised; 6 Moderately satised to very satised; 7 Very satised; 8 Very satised to extremely satised; 9 Extremely satised. An example of the instructions and questions is provided in Figure 2.

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Figure 2.

Sample Over a three-week period, the questionnaire was administered to customers who were leaving or entering the McDonalds restaurant at Bay Street, Toronto, Canada. Overall, about one in four customers who were approached was willing to ll in the questionnaire. Johns and Tyas (1996) also encountered the problem of respondents not being willing to participate in a survey. In the present study, each respondent was given a dollar for participating in the survey. The respondents were rst screened to ensure that they had patronised all three fast-food restaurants (McDonalds, Burger King, and Harveys) in the past four months. A total of 80 customers participated in the survey. After checking for inconsistencies (see Data analysis, below), eight respondents were excluded giving a response rate of 84 percent. Data analysis Each respondents weights and scores were computed using Microsoft EXCEL. Then all respondents weights and satisfaction scores were analyzed using SPSS. Applying the AHP methodology to service quality involved ve steps referred to here as analytic hierarchy process for service quality (AHP-SQ). The AHP-SQ steps were as follows: (1) Step 1. Obtain customers tradeoff judgments for the service dimension and restaurant choice displayed in the pairwise comparison matrices. (2) Step 2. Check for consistency. (3) Step 3. Compute the weights of the service dimensions and satisfaction scores for the restaurant choice of each respondent. (4) Step 4. Compute the mean overall weights and satisfaction scores over all respondents. (5) Step 5. Compute the quality gap. Each of these is described below. Step 1 As described above, a questionnaire was used to gather the respondents pairwise comparison judgments for the two levels in the hierarchy (see Figure 1). These were used as inputs for two pairwise comparison matrices one for the service-dimension level and the other for the choice level (as shown in Tables I and II).

The pairwise comparison matrix for the service-dimension level shows service dimensions at the top and on the left (Table I). Based on the judgments of the respondents, the matrix shows numerical values (based on the nine-point importance scales) denoting the importance of the service dimension on the left relative to the importance of the service dimension at the top. A high value denotes that the service dimension on the left is more important than the service dimension at the top. For the choice level of the hierarchy, the restaurants were compared with each other to determine relative satisfaction with each restaurant with respect to each of the service dimensions. Five pairwise comparison matrices were constructed at this level one for each of the service dimensions. However, due to the limitations of space, only one matrix is displayed for tangibles (as shown in Table II). The cell values in the matrix denoted as aij represent the customers judgments. The remaining cells of the pairwise comparison matrix were placed with the inverse of the respondents corresponding value (denoted as 1/aij). Step 2 After the respondents judgments had been obtained, it was necessary to check the consistency of each respondents tradeoff judgments. This was measured by a consistency index (denoted as CI), equivalent to lmax 2 n=n 2 1 where n stands for number of service dimensions and lmax denotes the largest eigenvalue. Eigenvalues are a set of scalars associated with a linear system of equations (or a matrix equation). They are the square roots of judgment values, and a consistency index was derived by Saaty (1980) to check for any inconsistent judgments. For example, if a respondent prefers A to B, and B to C, that respondent cannot prefer C to A. The CI index should be low, so that the ratings will not be affected. For each respondent, the CI was computed for each pairwise comparison matrix. A CI value of 0.15 was adopted as the allowable upper limit (Sato, 2004). Only those samples with a CI value equal to or smaller than 0.15 were accepted for analysis. Step 3 After checking for the consistency of the respondents judgments, the product of the respondents importance judgments for each service dimension obtained in step 1 was

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Service dimension level Tangibles Reliability Responsiveness Assurance Empathy

Tangibles 1 1/a12 1/a13 1/a14 a15

Reliability a12 1 1/a23 1/a24 1/a25

Responsiveness a13 a23 1 1/a34 1/a35

Assurance a14 a24 a34 1 1/a45

Empathy a15 a25 a35 a45 1 Table I. Pairwise comparison matrix for service dimension level

Based on tangibles McDonalds Burger King Harveys

McDonalds 1 1/b12 1/b13

Burger King b12 1 1/b23

Harveys b13 b23 1 Table II. Pairwise comparison matrix for choice level

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noted, and the fth root of the product was then calculated to obtain the relative weights. The rows in the pairwise comparison matrix were then added together. The weights were then normalized by computing the sum of each row and then dividing each row by the corresponding sum. The same computation procedure was performed for the respondents satisfaction ratings of the fast-food restaurants. These were then converted into satisfaction scores (or priorities). Step 4 The results obtained in step 3 were then synthesized. The overall satisfaction score was obtained by multiplying the weights with the satisfaction scores. All the respondents overall satisfaction scores were then averaged to obtain a mean overall satisfaction score for each restaurant. The mean overall satisfaction score was used to rank the restaurants. The restaurant with the highest score was regarded as the market leader. Step 5 The quality gap (QGapi) of each service dimension was derived from the discrepancy between the satisfaction scores of the focal rm (McDonalds) and that of the best performer (referred to as the market leader in step 4). The mathematical form of the quality gap was dened as follows: QGapi S iF 2 S iM where: QGapi i SiF SiM quality gap for dimension i; service dimension (tangibles, reliability, responsiveness, assurance, empathy); satisfaction scores for dimension i of the focal restaurant; and satisfaction scores for dimension i of the market leader. ;i

A positive value for QGapi indicates that the focal rm outperformed the market leader on the dimension i. A negative gap indicates that the focal rm underperformed relative to the market leader. A QGapi value of zero means that the focal rm performed well on the dimension i compared with the market leader. Findings and discussion The ndings are summarized in Tables III and IV. As previously noted, McDonalds was selected as the focal rm in this study for illustrative purposes. In other words, McDonalds could use this study to establish which service dimensions should be improved to achieve a competitive advantage. Table III shows the mean importance ranking of the service dimensions. The results show that the customers regarded empathy as the highest priority in assessing service quality of a fast-food restaurant. It is apparent that it is important for a restaurant to provide a caring and personalized service to customers. Customers regarded tangibles (the appearance of the restaurants physical facilities, equipment, personnel, and communication materials) as the second most important dimension of service quality. Assurance, dened as the knowledge and courtesy of a restaurants

employees and their ability to convey trust and condence (Parasuraman et al., 1988), was viewed as the third most important aspect of the service experience. It is apparent that diners like to have a knowledgeable employee when being served, and prefer to dine in a comfortable atmosphere. Reliability (a restaurants ability to perform the promised service dependably and accurately) and responsiveness (a restaurants willingness to help customers and provide prompt service) were not rated as highly as the other aspects of service quality. However, the rankings depicted in Table III are not sufcient to develop a service-improvement agenda. Although the service dimension of empathy was ranked rst in terms of importance to the customers, McDonalds should not immediately allocate limited resources to this dimension without rst comparing its own performance on this dimension against that of its competitors. Table IV shows the service performances of McDonalds in comparison with its competitors. The results show that Harveys rated as the best overall performer, with McDonalds and Burger King approximately equal in overall ranking. For each service dimension, the restaurants were ranked with the mean weighted satisfaction scores. It is apparent that McDonalds did well on the dimension of empathy in which it ranked better than Harveys (even though, overall, Harveys was the market leader). To assess which dimension McDonalds should accord highest priority to improve its services, it is necessary to consider McDonalds position on each dimension with
Service dimensions Tangibles Reliability Responsiveness Assurance Empathy Mean importance 0.21 0.16 0.15 0.18 0.29 Ranking 2 4 5 3 1

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Table III. Ranking of mean importance by service dimensions

Mean weighted satisfaction scores Dimensions Tangibles Reliability Responsiveness Assurance Empathy Mean overall satisfaction scores Ranking based on overall satisfaction scores McDonalds 0.31 (2) 0.15 (3) 0.25 (3) 0.17 (3) 0.39 (1) 0.30 3 Burger King 0.23 (3) 0.26 (2) 0.27 (2) 0.24 (2) 0.37 (2) 0.31 2 Harveys 0.46 (1) 0.59 (1) 0.48 (1) 0.60 (1) 0.24 (3) 0.39 1 Mean QGapi 20.15 SD 0:58 20.44 SD 0:35 20.22 SD 0:50 20.43 SD 0:32 0.14 SD 0:45 QGapi ranking 4 1 3 2 -

Note: Sample size is 62; the number in parentheses denotes the ranking of restaurants by dimension; SD standard deviation

Table IV. Mean overall satisfaction scores and gap scores

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respect to its competitors. Having established Harveys as the market leader, the mean QGapi for McDonalds was calculated for each dimension. Four out of the ve dimensions had negative QGapi values. This implies that McDonalds under-performs in the dimensions of tangibles, reliability, responsiveness, and assurance when compared with Harveys. To develop a strategy of service improvement, it is necessary to prioritize these services. The largest QGapi negative value implies that a large satisfaction discrepancy exists between the focal rm and the market leader. McDonalds reliability dimension ranked rst in this respect which implies that it needs to improve its ability to perform its services dependably and accurately. Assurance ranked second on the gap (only slightly below reliability) and this should therefore be the second priority. McDonalds should then focus on responsiveness, followed by tangibles. The customers rated McDonalds highly on the empathy dimension relative to Harveys and Burger King. Managerial implications and recommendations Many restaurants utilize customer feedback cards to obtain information on customer perceptions of the quality of service. Such cards typically pose questions about the various dimensions of customer service including questions on the knowledge of the server, the timeliness of the service, and the physical appearance of the restaurant. It is important to note that such customer-satisfaction surveys seek feedback only from customers who attend the restaurant responsible for the survey; and the surveys ask questions only about the service at that particular restaurant. Whether these respondents are (or have been) customers of competitors is ignored, and their opinions on competitors are also ignored. Data collected from such survey methods are clearly insufcient for devising an adequate competitive strategy. The approach presented in this paper addresses this issue. When applied correctly, the comparative knowledge that can be obtained from the methods described in this study can drastically improve important business outcomes. Adapting the AHP methodology in the manner proposed in this paper allows managers to prioritize service dimensions and to compute a gap analysis in a way that provides a competitive perspective in managing service quality. Applying this approach, managers are able to address the following questions: . What is the rms competitive position, and how does the rms overall performance compare with its competitors? . Which service dimensions can be improved to enhance competitiveness? . Constrained by limited resources, which service dimensions should be given top priority? The framework proposed here allows management to address two main issues pertaining to its competitive advantage: (1) establishing its performance ranking in the marketplace; and (2) identifying the service elements that most require improvement. In particular, the satisfaction disparity indicates which dimension the rm should concentrate on to enhance its competitive position. Creating a competitive advantage does give a rm an edge over its competitors. However, customers have many alternatives, and a competitive advantage might not necessarily be sustained. Even if customers are satised with the services of a given

rm at the present time, they might nd that they are even more satised with a competitors improved services. All strategies that strive for a competitive advantage must be constantly market-driven and market-aware. This can be achieved only if the opinions of customers about competitors are known. The AHP-SQ approach described in the present study thus assists management to devise and maintain a relevant, competitive plan for ongoing improvements in service quality. It offers a bigger picture in service-quality management. Limitations and research directions Although the customers in the present study had visited all three fast-food restaurants during the preceding four months, a limitation of the present study is that it did not investigate switching behavior among the respondents. Future research could address this question. A further limitation in the present approach is that it does not provide guidance on action to be taken. Although it identies which service dimensions require improvement, the present framework does not provide guidance on an appropriate action plan to address deciencies. Future studies could extend the framework in this respect. A third limitation is that the framework adopted only the SERVQUAL service dimensions. Future studies could consider incorporating other dimensions in extending the framework proposed here. With respect to generalizability, although the model was applied in the present study to fast-food restaurants, the authors believe that it could be used by a variety of service industries to evaluate service performance against that of competitors.
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Babakus, E. and Mangold, W.G. (1992), Adapting the SERVQUAL scale to hospital services: an empirical investigation, Health Services Research, Vol. 26 No. 6, pp. 767-86. Barsky, J.D. (1992), Customer satisfaction in the hotel industry: meaning and measurement, Hospitality Research Journal, Vol. 16 No. 1, pp. 51-73. Brown, T.J., Churchill, G.A. Jr and Peter, J.P. (1993), Improving the measurement of service quality, Journal of Retailing, Vol. 69 No. 1, pp. 127-39. Brysland, A. and Curry, A. (2001), Service improvements in public services using SERVQUAL, Managing Service Quality, Vol. 11 No. 6, pp. 389-401. Buttle, F. (1996), SERVQUAL: review, critique, research agenda, European Journal of Marketing, Vol. 30 No. 1, pp. 8-32. Carman, J.M. (1990), Consumer perceptions of service quality: an assessment of the SERVQUAL dimensions, Journal of Retailing, Vol. 66 No. 1, pp. 33-55. Forman, E.H. and Saaty, T.L. (1986), Expert Choice, The Decision Support Software Co., Pittsburg, PA. Johnston, L.L., Dotson, M.J. and Dunlap, B.J. (1988), Service quality determinants and effectiveness in the real estate brokerage industry, The Journal of Real Estate Research, Vol. 3 No. 1, pp. 21-36. Kandampully, J. and Menguc, B. (2000), Managerial practices to sustain service quality: an empirical investigation of New Zealand service rms, Marketing Intelligence & Planning, Vol. 18 No. 4, pp. 175-84. Kanji, G.K. (1996), Improving the discrimination of SERVQUAL by using magnitude scaling, Total Quality Management in Action, 1st ed., Chapman & Hall, London, pp. 267-70. Knutson, B., Stevens, P., Wullaert, C. and Patton, M. (1991), LODGSERV: a service quality index for the lodging industry, Hospitality Research Journal, Vol. 14 No. 2, pp. 277-84. Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1985), A conceptual model of service quality and its implications for future research, Journal of Marketing, Vol. 49 Fall, pp. 41-50. Saleh, F. and Ryan, C. (1991), Analysing services quality in the hospitality industry using the SERVQUAL model, Services Industries Journal, Vol. 11 No. 3, pp. 324-45. Spreng, R.A. and Mackoy, R.D. (1996), An empirical examination of a model of perceived service quality and satisfaction, Journal of Retailing, Vol. 72 No. 2, pp. 201-14. Wong, A. and Sohal, A. (2002), Customers perspectives on service quality and relationship quality in retail encounters, Managing Service Quality, Vol. 12 No. 6, pp. 424-33. Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1993), The nature and determinants of customer satisfaction of service, Journal of the Academy of Marketing Research, Vol. 21 No. 1, pp. 1-12. Zeithaml, V.A., Berry, L.L. and Parasuraman, A. (1996), The behavioral consequences of service quality, Journal of Marketing, Vol. 60, April, pp. 31-46.

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