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Marketing and Services Management TITLE OF ASSIGNMENT: FINAL ASSIGNMENT ON GAP MODEL ON SERVICE QUALITY AND CUSTOMER RELATIONSHIP MANAGEMENT.

Submitted to Dr. Roy Damary and Dr. Peter McGregor Date 27th July, 2015 Type of Assignment Individual Submitted by Name of Student Sanjay Vaid Roll No 00436743

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Table of Contents

Introduction: _________________________________________________________________________________ 3

Gap Model of Service Quality: ___________________________________________________________________ 3

Customer Relationship Management: _____________________________________________________________ 7

Customer relationship management and quality of service: __________________________________________ 8

Bonds affecting customer relationship Management: _______________________________________________ 9

Customer relationship revenue: _______________________________________________________________ 10

Customer Relationship Management process and knowledge management: ____________________________ 11

Gap model for service quality used by IT industry: _________________________________________________ 12

Gap 1: The "Service Concept Gap."___________________________________________________________ 14

Gap 2: The "Information technology service delivery Gap" ________________________________________ 14

Gap 3: Service Performance Gap ____________________________________________________________ 14

Gap 4: The Communication Gap: ____________________________________________________________ 14

Customer Relationship Management by Indian Information Technology_____________________________ 15

Works Cited ________________________________________________________________________________ 18

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Introduction:

The concept of quality is of great importance to marketers since quality drives the development of all

marketing strategies. In today's era of globalization, the focus area of the organization is changing from

profit maximization to the maximization of profit through increased customer satisfaction.

Total quality management is meeting customer expectation (Kesseler, 1995) (Kong & Muthuswamy, 2011).

The person who first debated the buzz word ‘quality' were Peters and Waterman, who talked about it in their

work In Search of Excellence.

Gap Model of Service Quality:

A Parsuraman, Leonard L. Berry, and Valeria Zeithaml did pioneering work in the area of Service

marketing and quality; they don't only write more than a dozen of research papers, beginning 1985. They

also did a monograph on 1990 for the Marketing Science Institute and a series of two books on the same

theme. Their research supported the point that quality is the foundation of services marketing.

In 1985 Parashurama, Berry and Valeria developed a model; their model indicated that the customer quality

perceptions is influenced by a series of five distinct gaps occurring in the organization. The five Gaps were:

(Parsuraman, et al., 1985)

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`

Customer

Service Provider

Gap 1 Customer Expectation: Difference between consumers and management's perceptions of consumer

expectations.

Gap 2 Service quality specifications gap: Difference between management perception of consumer

expectations of service quality and specifications.

Gap 3 Service delivery gap – The delta between service quality specifications and the actual service

delivered.

Gap 4 External communication gap: Difference between service delivery and what's communicated about

the service to consumers.

Expected

Service

Perceived

Service

External

Communication

to customers.

Services Delivery (Including

Pre- and post Contract)

Customer driven service design and standards

Company perception of

consumer expectation

Customer Gap

Service design and standard gap.

Communication gap

Performance gap

Word of mouth

Communication

Personal needs Past Experience

Gap 5

Gap 2 Gap 1

Gap 4

Gap 3

Figure 1.2 Gaps model of services quality

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Gap 5 Expected service gap: The delta between the perceived service and expected service. This gap

depends on the direction and size of the first four gaps associated with the delivery of service quality.

According to the model, the service quality is a function of perception and expectation and can be modeled

as:

SQ= ∑ (𝑷𝑰𝑱𝑲𝑱=𝟏 − 𝑬𝑰𝑱)

Where:

SQ is overall service quality; k is number of attributes

PIJ is performance perception of stimulus i with respect of attributes j.

EIJ is Service quality expectation for attributes j that is a relevant norm for stimulus i. (Deshmukh, et al.,

2005)

The next research focused on developing a procedure for quantifying the customer's service quality and was

named SERQUAL. Pasasuraman et al. developed ten determinants of service quality, namely access,

communication, competence, courtesy, competence, reliability, credibility, responsiveness, security,

tangibles, and understanding the customer. These ten service quality determinates further were collapsed in

into five dimensions. (Shanker, 2002) (Samson & Parker, 1994)

Reliability: The ability to deliver the promised service dependently and accurately.

Tangibles: The appearance of physical facilities, equipment, marketing and communication material, and

personnel.

Responsiveness: The Willingness and commitment to help customers and provide prompt service.

Assurance: The ability of employees to convey trust, confidence and creditability with their knowledge,

courtesy and competence.

Empathy: caring, understanding and providing individual attention to the customer.

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(Parsuraman, et al., 1988)

In 1991, SERVQUAL was revised by the same team of researchers, they identified and exhaustive set of

constructs that would affect the magnitude and direction of the gaps. The constructs primarily involve

managing employees, communication and consequences of the process, but five dimension structure

remained the same. Led to an extended service quality model (Figure 1.3).

Figure 1.3

Marketing Research Orientation

Upgrade Communication

Level of Management

Management Commitment to

Service quality

Goal Setting

Task Standardization

Perception of Feasibility

Team Work

Employee Job Fit

Technology Job Fit

Perceived Control

Perceived Control

Supervisory Control

Role Conflict Control

Role Ambiguity Control

Employee Job Fit

Horizontal Communication

Gap 1

Gap 2

Gap 3

Gap 4

Gap 5(Service

Quality)

Tangibles

Reliability

Responsive

ness

Assurance

Empathy

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Source: 1 (Parsuraman, et al., 1990) (Deshmukh, et al., 2005)

Further with the extensive research conducted by Pasuramna, Leonard and Valarie suggest that service

quality deficiencies perceived by customers are caused by following organizatio nal gaps:

Marketing Information Gap: Incorrect and adequate understanding of the management of customers service

expectations.

Standard Gap: Managements failure to develop service design and performance specification reflecting

customer's expectation.

Service performance gap: Standards should be backed by appropriate resources (people, systems, and

technology) and must be enforced to be effective. That is the employee's performance must be measured and

compensated on the basis of those standards.

Communication Gaps: ‘The communication gap, illustrates the difference between service delivery and

service provider's external communication’ (Zeithaml, et al., 2013) (Shanker, 2002)

Customer Relationship Management:

Customer relationship management is managing the relationship with customers for profitable and long

lasting relationship, the loyalty of customers for the company.

There has been a shift from a transaction to relationship focus marketing. The customer becomes partners,

and the firms must make long-term commitments to maintaining those relationships with quality, service

and innovation.

Galbearth and Rogers define customer relationship management as follows:

Propensity to Overpromise

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Activities a business performs to identify, qualify, acquire, develop and retain increasingly loyal and

profitable customers. Through delivering the right product or service, to the right customer, through the right

channel, at the right time and the right cost. CRM integrates sales, marketing, service, enterprise resource

planning and supply chain management functions through business process automation, technology

solutions, and information resource to maximize each customer contact. ‘CRM facilities relationships among

enterprises, their customers, business partners, suppliers, and employees. ’ (Galbreath & Rogers, 1999)

(Law, et al., 2003)

As internet penetration grows, and more customers have access to internet and mobile, any customer can be

reached irrelevant of distance and time limitation. Furthermore customer have access to all kind of

information to make informed decision, so customer relationship know has to maintained in the virtual

world as well through blogs, mailers, messages, podcast etc.

Customer relationship management and quality of service:

Swift's (Swift, 2000) perspective is: "Customer relationship management is an enterprise approach to

understanding and influencing prospective customer behavior. By meaningful communications to improve

customer acquisition, customer engagement, customer retention, customer loyalty, and customer

profitability." (Law, et al., 2003)

Service quality is a prerequisite for a long-term sustainable customer relationship. Similarly, profitability

and revenue yield customer is also a pre-requisite for a sustainable customer relationship.

Also, there can be a situation that the Service quality is judged low but the customer satisfaction is high and

this can be due to service fits the customer budget. It might also be the result of the low sacrifice of some

other type. There are also possibilities of the high quality of perceived service and low satisfaction for other

reasons.

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Expected outcome

Service fits the customer’s restricted budge or fits the customer preferences.

Service too expensive for the customer or does not fit the customer preference (Fornell & Wernerfelt, 1987)

Expected outcome.

Source: (Liljander & Strandvik, 1994) (Storbacka, et al., 1994)

Figure 1.4 The link between Service quality and customer satisfaction.

Bonds affecting customer relationship Management:

Six different types of bond have been suggested within interactive approach and network approach of

industrial marketing. ((Dwyer, et al., 1987) (Easton & Araujo, 1989) (Ford, 1980) (Fornell, 1992)

(Storbacka, et al., 1994)). ‘These are social bonds, technological bonds, knowledge bonds, planning bonds

and legal/economic bonds’. These bonds are also found in the consumer market. Liljander and Strandvik

(Liljander & Strandvik, 1995) ‘have suggested that ‘customer may also have ideological, geographical,

cultural, and psychological bonds to a service provider . They propose ten different types of bond can be

identified in the consumer market; legal, economical, technological, time, knowledge, financial, social,

cultural, ideological and physiological.'

Lijander and Strandvik Agrue that the first five bonds constitute effective exit barrier for the consumer. The

other five bounds represent perpetual factors that are difficult to measure and manage by the firm.

The Longevity of the relationship can originate from extrinsic relationship factors such as the market

structure in which relationship exists. Similarly intrinsic relationship factors such as relationship strength

Low High

Customer Satisfaction

Low

Hig

h

Service

Quality

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and geographical structure. and the handling of critical episodes during the relationship also is the another

factor.

Market concentration is an important extrinsic factor. The Relationship in a monopolistic or Oligopolistic

market is very different from a highly competitive market. The number of competitors or alternatives

influences customer interest and possible evaluating alternatives.

Customer relationship revenue:

Customer relationship between relationship longevity and customer relationship profitability can be

understood from framework developed by Storbacka (Storbacka, 1993) (Storbacka, 1994a) which enables

analysis of profitability of particular relationship. The relationship generates a certain income that we call

relationship revenue, relationship revenue is the share of total volume that the customer spends in the

particular industry – the total industry volume (TIV). The total industry volume is in turn a segment of the

total amount of money that the customer has at his/her disposal, and they divide this money among many

different needs or priorities, including saving. The revenue spend on different segments might not be the

same.

TIV RR= Relationship revenue; TIV = Total industry volume; CTV = Customer’s total volume

RR

TIV

CTV Service

Provider

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Source: (Storbacka & Luukinen, 1994) Figure 1.5 Relationship revenue as a portion of customer’s total volume.

As shown figure 1.5 in the relationship marketing approach the measure of TIV or CTV (Customer total

volume) as RR (Relationship Revenue) helps us understand patronage behavior of the customer. RR/TIV

ratio is called patronage concentration, bigger the quota the stronger the provider's position is and stronger

the relationship. Also if RR<TIV, it implies that since the customer has relationship with other providers in

the same industry; the customer is a partial customer. Partial customer is a key potential to increase

relationship volume and thus relationship revenue. The provider could also increase RR/CTV ratios i.e., also

try to cross-sell products outside its industry to customers.

Customer Relationship Management process and knowledge management:

Customer relationship management requires strong integration of business process that involves customers

to integrate marketing, sales and service activities. These customer-oriented CRM processes are mostly

unstructured and non-transactional. Their performance is predominantly influenced by the underlying supply

knowledge of product, market, and customer (Day, 2000) (Demarest, 1997) (Drucker, 1999) (Gebert, et al.,

2003)

Customer relationship management process is considered knowledge- oriented process with a strong

correlation to Knowledge intensity and process complexity. The Knowledge flow in CRM process is can be

classified as Knowledge for customers, Knowledge about customers, and Knowledge from customers.

(Garcia-Murillo & Annabi, 2002) (Gebert, et al., 2003)

Gaps Model of Service Quality and Customer relationship applied to contemporary marketing practice for

organization:

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Gap model for service quality used by IT industry:

We would consider Indian IT industry which provides Information Technology and consulting services to

customers across the globe. The major objectives of firms using gaps model should be to measure client's

expectations and perceptions service quality provided by consulting engineers, to determine the relative

importance of the features. This constitutes service quality to ascertain the extent to which IT firms

understand and meet these expectations. And to explore the ways in which consulting firms can identify and

exploit opportunities to improve their service in an increasingly competitive industry.

The Service quality when analyzing SERVQUA 5 dimension in service Industry should include:

Tangibles – the appearance of communication material and products, e.g. profile of engineers, detailed and

accurate documents, white sheets, etc., use of appropriate material and equipment.

Assurance – legal terms in the master service agreement, SLA experience, the scope of work document,

technically expert and readily available staff that can maintain client confidentiality.

Reliability – the ability to deliver high-quality service, in agreed timeline and budget.

Empathy – personalized attention and regular reviews by principle and staff, with understanding of industry

and parameter within which the client operates. For example: If a company take a contract of software

development and this software is required by customer to launch its product in market and time for go to

market is critical vis-a-vie completion, hence for customer confidentiality and timely delivery is of high

importance.

Communication: clear and regular communication with all concern people at client throughout the job,

related to the project, development, milestones, scheduling, staff, problems, any foreseen delays, client

expectations, etc.

Responsiveness – Onsite account manager, project manager or project coordinator to closely monitor project

and customer concern, at being the bridge between the project team and client. The extra dimension with

emphasis on close client focus.

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Information Technology Services Customer Customer

Information Technology Service Provider

Figure 1.5 Information technology service quality gaps model

Expected IT Service

Perceived

Service

External Communication to customers.

Actual Information

Technology Service

delivered Service

Customer driven service design and standards

Translation of perceptions of IS Customer’s Expectations into Service Quality Specification.

Customer Gap

Service design and standard gap.

Communication gap

Performance gap

Environmental Organizational Variable

Customer needs Past Information Service Experience

Gap 5

Gap 2 “Service Delivery Gap”

Gap 1 “IT Service Concept Gap”

Gap 4

Gap 3 “Service delivery gap”

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Gap 1: The "Service Concept Gap."

The "Service Concept Gap" (Gap) 1 – Listening to gap this is due to Information Service Provider having

the different perception of customer expectation for some reasons. First, Information technology service

provider technical bias or lack of sensitivity, may simply not seek major inputs from customers in

developing an Information service concept (Bostrom & Heinen, 1977). Second 'even when Information

technology providers seek out customer involvement, the Information customer may not be knowledgeable

or capable of clearly identifying available information technologies, systems or services to meet needs'

(Ackoff, 1967). Third there might be no continues line of communication between Information technology

service provider and their customer. Finally, the complex patterns of interactions among Information

Technology customer and provider may distort communications. (Markus, 1983) (Kettinger & Lee, 1995)

Gap 2: The "Information technology service delivery Gap"

This Gap indicates the inability of Information Technology service provider to transform customer

requirement specifications into tangible product and service deliverable. This can be first due to resource

restrictions; secondly, the service provider may not have the technical or business expertise to effectively

deliver a service. Third, can be due to changing customer requirements or business conditions may render

delivered services suboptimal. Finally, the delivery of service is often dependent on operational, procedural

capabilities as to capacity to provide error-free operational and attain of formal service level.

Gap 3: Service Performance Gap

This Gap indicates the inability of the Service provide to meet the customer requirement, which can be

mitigated by effective human resource policies, role fulfillment and effective alignment with service

intermediaries and Aligning of Gap and demand.

Gap 4: The Communication Gap:

This Gap is mitigated by communication gap between company employees and customers, avoiding over

promise and ensuring that different stakeholders with the organization communicate amongst themselves to

ensure the quality of service is delivered.

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Also, the Information technology company has to vary of the fact that they do not price their service so high

that customer expectation is raised. The pricing should be in line to customer's perception.

All major IT companies in India Tata Consultancy Services, Wipro Limited, Infosys Ltd, Tech Mahindra

Ltd, etc. used the gaps model of service quality. The author has not specifically taken the example of a

particular company as most of such companies perform their projects for an individual customer under a

non-disclosure agreement.

Customer Relationship Management by Indian Information Technology

Figure 1.6 Levels of Relationship Strategies

The information technology companies have structured customer relationship strategies and they follow the

ten bonds mentioned in the literature review above. First five bonds as mentioned are exit barrier legal,

economical, technological, time, knowledge. Other than this the other bonds which Indian IT sector does

focus on are financial bonds, Social Bonds, Customization bonds, structural bonds.

Excellent

service and

value

1. Financial bonds

2. Social

Bonds

3. Customization

bonds

4. Structural

Bonds

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Figure 1.7 DIE CRM gap model

Most Information technology companies follow the DIE CRM gap model:

The first gap level existences reveal obstacle in customer relationship management due lack of customer

orientation. Few companies has devoted adequate attention to studying what kind of customer attention their

customers expect.

Strategy

Organization People

managemen

t

Technology

Multi-channel Integration

What current

structure

supports

What top management sets

What are people

capable of doing

What technology in use allows

What the various

channels deliver

Customer

expectation

s

Customer’s

perceptions

Level 1 gap

Level 4

gap

Level 3 gap

Level 2 gap

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The second gap level addresses the way organization; technology and management are coordinated align. If

people are not adequately skilled, trained and motivated to follow, the process required by CRM Strategy

full implementation of the Customer relationship management will not be achieved.

The third gap level refers to the facts that strategy and resources should be effectively be transformed into a

set of planned actions. (Sergios & Eric, 2008)

The fourth gap is the customer- specific and measure the difference between customer's expectations in

terms of relationship and their perceptions of company's Customer relationship management policy and

actions. In fact, customer is exposed to CRM activities interaction via various companies' initiatives like

calls, email, personal contacts, for customer follow-up. This gives customer perception how the company

treats them and when customer's perception fits or exceeds their expectations than satisfaction results. IT

Companies have dedicated account managers, program manager and program coordinators for the purpose

of customer relationship management.

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