Measuring Overall Perceived Service Quality Using a Modified SERQUAL Model

Introduction The National Insurance of Grenada, Carriacou and Pettit Martinique came into force on the 4th of April 1983 by N.I.S Law 14|1983.(National Insurance Scheme ) National Insurance is equivalent to what is referred to in other countries as "Social Security". Over the last two and a half decades it has extended its services to include approximately 16 benefits. (National Insurance Scheme ) As most service institution they have begun the move towards a customer oriented operation approach. To determine the general consensus on their overall perceived service quality a SERVQUAL instrument was developed and the results of this survey will be the bases of this research paper. For the SERQUAL questionnaire instrument refer to the appendix. The purpose of this research paper is to use a modified SERQUAL instrument to determine whether reliability is the most significant dimension in explaining overall perceived service quality for a

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financial institution. In the article "What Do You Really Know About...Customer Satisfaction?" John H Sheridan’s unique view can be used to summarized the premise of the SERQUAL model and this research paper; it is not satisfaction, per se what drives success, it is market perceived relative quality. (Sheridan)The SERQUAL model will be used to determine how well overall perceived service quality is explained by the following 4 dimensions; tangibility, responsiveness, reliability and assurance. In Parasuraman’s article “SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Quality Service” overall perceived service quality was defined as “the consumer’s judgment about an entity’s overall excellence or superiority.” (Parasuraman,Zeithamal and Berry) A more specific hypothesis will also be tested after the initial SERQUAL model is applied. The hypothesis can be stated as reliability is the most significant variable in the explanation of overall perceived quality will be examined through this model.

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Functional Form ( + + + +) expected signs for each variable OPSQ =f(Tang Real Resp Ass )+ εReal - Reliability Resp - Responsiveness Ass - Assurance Tang - Tangibility OSPQ- overall perceived service quality

Overall Perceived Service Quality = β0 +β1Real + β2RESP +β3ASS +β4Tang

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Literature Review SERVQUALIn Parasuraman’s paper SERVQUAL is defines as a 22 item instrument developed for the purpose assessing a customer’s perception of service quality. (Parasuraman, Zeithamal and Berry) SERQUAL has become the staples in many service and retail industries worldwide as a measure of their service quality. Parasuraman states that the reason service quality is harder to measure than the quality of goods is due to three properties “unique to service: intangibility, heterogeneity, and inseparability of production and service.” (Parasuraman, Zeithamal and Berry) The problem of measuring quality comes from researchers’ in the field continued inability to determine a standard measurement due to the unique properties of services as previously stated.

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In this research paper the SERQUAL instrument is altered from its original conception, to a modern version of the instrument; only perception questions are used in quantifying the perceived service quality.Perceived Service QualityPerceived Service Quality as stated in the introduction for the purpose of this research paper will be defined as “the consumer’s judgment about an entity’s overall excellence or superiority.” To further define Perceived Service Quality we will define what it is not by examining closely related terms which may be misinterpreted as perceived service quality.The first concept to be disassociated with perceived service quality is the concept of objective quality. The main distinction comes from the fact consumers and researchers define quality differently. Researchers tend to separate the mechanistic and humanistic quality while consumers tend to see it as inseparable. (Parasuraman,Zeithamal and Berry) For the purpose of this research we will use the consumers perspective.

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The Second distinction needed for the purpose of this paper is quality and satisfaction. Perceived Service Quality is a global judgment, or attitude, relating to the superiority of the service, whereas satisfaction is related to a specific transaction. (Parasuraman, Zeithamal andBerry) As a result you can view the two as related; satisfaction over a period of time results in customers perceived service quality.The final distinction needed to be made for the purpose of this paper is customer expectation vs. customer perception. Perceived quality is viewed “as the degree and direction of discrepancy between consumers’ perception and expectations.” (Parasuraman, Zeithamaland Berry) Expectation is defined as what they feel a service provider should offer rather than would offer. This definition of expectations as it relates to service quality differs from the definition as it relates to consumer satisfaction. (Parasuraman, Zeithamal and Berry)Dimensions of Service Quality The dimensions of service quality being measured for the purpose of this paper are based upon the original 10 SERQUAL dimensions. These 10 dimensions are captured in the following 4 dimensions used on the survey instrument. The 5 original dimensions are Tangibility, Reliability, Responsiveness, Empathy and Assurance. Tangibles can be

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characterized as the appearance of personnel along with the physical features of the surroundings. (Parasuraman, Zeithamal and Berry) Reliability would be defined as the “ability to perform the promised service dependably and accurately.” (Parasuraman, Zeithamal andBerry) Responsiveness is the “willingness to help customers and provide prompt service.” (Parasuraman, Zeithamal and Berry) Assurance describes the employees “knowledge and courtesy”; leading to their ability to inspire trust and confidence. (Parasuraman,Zeithamal and Berry) Empathy which would encompass the “caring individualized attention the firm provides its customers.” (Parasuraman, Zeithamal and Berry) Empathy for the purpose of this research and industry is expected to be theoretically unjustified, and statistically insignificant in its inclusion in this regression. Therefore, it will be excluded and the original dimension of communication which was absorbed by empathy in SERQUAL’s initial creation will be transferred to the responsiveness dimension. These assumptions will be justified later in the Modifications and Assumptions made in the SERQUAL Instrument section of this paper. Based upon the industry being measured the variable expected to explain Perceived Service Quality the greatest would be reliability and assurance.(Parasuraman, Zeithamal and Berry)

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Modification and Assumptions made in SERQUAL Instrument

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In collecting the data through survey’s a number of modifications have been made to make the data more meaningful for the purpose of the research. The original SERQUAL instrument requires 44 questions 22 measuring expectation and 22 measuring perception. Within these questions they are broken up into one of 5 groups corresponding to one of the 5 dimensions used to measure Perceived Service Quality. The weighted average of these values would then be used to run the regression to determine the significance and overall fit of the model as it relates to explaining Perceived Service Quality. For the purpose of this regression and collecting demographic information for more detailed research the survey instrument was modified. The survey is only done to determine the Perceived Service Quality; no expectation questions are done reducing the instrument size automatically by 50 percent. The instrument is further reduced by refining the multiple questions on each dimension to 4 question about reliability, 4 questions about responsiveness, 2 questions about assurance and 1 question about tangibility. The number of questions for each dimension also conforms to the original SERQUAL papers view on the importance placed on each dimension for a financial institution. With this in mind the creators of this survey also removed

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the empathy aspect of the survey. They elected instead to place the communication aspect which was placed in the empathy dimension, in the into the responsiveness dimension. The expectation portion of the survey was taken away because the author of this paper agrees with Thomas P. Van Dyke, Leon A. Kappelman, and Victor R. Prybutok in their article “Measuring Information Systems Service Quality: Concerns on the Use of the SERVQUAL Questionnaire” where they rationalized its exclusion in the following statement: “The direct measurement of one's perception of service quality that is the outcome of this cognitive evaluation process seems more likely to yield a valid and reliable outcome.” (Van Dyke, Kappelman and Prybutok)Based on these modifications to the original instrument the author of this paper will use the term SERQUAL to refer to the modified instrument and variables for the remainder of this paper and not the original model and instrument.

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Regression Results of regression

Model Summaryb

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate Durbin-Watson

1 .842a .709 .688 .21629 1.839

a. Predictors: (Constant), tang, real, resp, ass

b. Dependent Variable: OPSQ

ANOVAb

Model Sum of Squares Df Mean Square F Sig.

1 Regression 6.277 4 1.569 33.543 .000a

Residual 2.573 55 .047

Total 8.850 59

a. Predictors: (Constant), tang, real, resp, ass

b. Dependent Variable: OPSQ

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Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) .572 .322 1.776 .081

Real .250 .074 .295 3.362 .001

Resp .196 .080 .232 2.457 .017

Ass .392 .085 .461 4.622 .000

Tang .028 .053 .039 .522 .604

a. Dependent Variable: OPSQ

Analysis of Regression Results Page 12 of 25

OPSQ = 0.572 +0.250Real +0.196Resp +0.392Ass +.028TangThe regression resulted in all the expected signs of the equation. It also demonstrated a good fit with a R2 of 0.842 and an adjusted R2 of 0.709. The variables representing responsiveness, assurance and reliability are statistically and signs are all positive as expected. The variable representing tangibility is statistically insignificant and has the correct sign. The statistical insignificance of the tangibility variable is expected based upon the literature review. It however is theoretically justified especially in a financial institution. A Durbin Watson test was performed to determine if there was serial correlation between any of the variables. Based on the Durbin Watson test no serial correlation was detected. This regression was the seconded run on the data. The first run suffered from an unexpectedly low R2 and statistically insignificant value for the responsiveness t-score. After reexamining the data it was discovered in calculating the weighted average values a math error was done on the responsiveness and reliability values. After correcting this error the regression was redone and the values, signs, t-scores and fit all conformed to the researchers expectation based on the literature reviewed.

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Based on the regression results the original question of the research paper can be restated and answered. The purpose of this research paper was to test the hypothesis that reliability is the most important statistical dimension in explaining overall perceived service quality. Based upon the model the hypothesis can be accepted which conforms to the original SERQUAL model as it relates to financial institutions.

Conclusion It can be concluded after conducting this research paper that the benefits of a standard measure of overall perceived service quality or satisfaction needs to be developed or adopted. As the researcher of this paper demonstrated modifications can and have been made to the instrument resulting in a stronger theoretical bases for identical statistical results as it relates to overall perceived service quality. Based upon this research paper the researcher would suggest that businesses within the financial sector in particular National Insurance

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Scheme seek to maximize service quality by improving factors which contribute to their service reliability and assurance. The researcher of this paper would also recommend that future researchers using the SERQUAL model to create a survey identify the areas of significance in their industry based on the original 10 dimensions not the reduced 5 dimension model. This suggestion is based upon literature review and the researchers study of management information system. Both show that as we go further into an online environment communication will become as significant as reliability and assurance with empathy already theoretically unjustified in most areas responsiveness may soon follow with reduced human interaction.

BibliographyNational Insurance Scheme . National Insurance Scheme Grenada. 1 Janurary 2012. 21 May 2012.

Parasuraman, Valarie A. Zeithamal and Leonard L. Berry. "SERVQUAL: A Multiple-Item Scale for Measuring Consumer Perceptions of Quality Service." Journal of Retailing (1988): 12-40.

Sheridan, John H. "What Do You Really Know About...Customer Satisfaction?." Industry Week (1994): 63.

Van Dyke, Thomas P., Leon A. Kappelman and Victor R. Prybutok. "Measuring Information Systems Service Quality: Concerns on the Use of the SERVQUAL Questionnaire." MIS Quaterly (1997): 196-208.

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Appendix:Questionnaire used to gather data The following statements relate to your feelings on the service you received from the National Insurance. Please show the extent to which you believe the NIS has the feature described in the statement.

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Each statement should be ranked as follows:

1 - Strongly Disagree 2 - Disagree 3 - Neither 4 - Agree 5 - Strongly Agree

1. What was the purpose of your most recent interaction with the NIS in the last two months?

To pick up form ( ) To pick up cheque ( )

To submit claim form ( ) To make a complain ( )

To register as employer ( ) Request statement of contribution ( )

To register as employee ( ) To make inquires ( )

To get a new card ( ) Other (Please Specify)_________________

(If response to question 1 is to submit claim form answer questions 2 to 21)

(Any other response answer questions 5 to 21)

2. Which benefit did you claim?

Maternity Allowance ( ) Age Pension ( )

Sickness ( ) Reduced Age ( )

Funeral ( ) Survivors Pension ( )

Maternity Grant ( ) Invalidity Pension ( )

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Age Grant ( ) Employment Injury ( )

Survivors Grant ( ) Medical Expense ( )

Invalidity Grant ( ) Disablement Pension ( )

Disablement Grant ( ) Death Benefit ( )

3. Which payment method would you prefer?

Direct bank deposit ( )

Pick up cheque at the Office ( )

Receive cheque via mail ( )

Statement SD D N A SA

4. The NIS pay benefits to their claimants in a timely manner.(reliability)

5. When the NIS promises to resolve a matter by a certain time, it does so.(reliability)

6. When you have a problem, the NIS shows a sincere interest in solving it.(responsiveness)

7. The NIS Officers went all out to provide assistance.(responsiveness)

8. Employees in the NIS give you prompt service.(responsiveness)

9. Employees in the NIS are always willing to help you.(responsiveness)

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Statement SD D N A SA

10. Employees in the NIS are consistently courteous with you.(assurance)

11. Employees in the NIS are knowledgeable.(assurance)

12. The NIS has operating hours convenient to all its customers.(reliability)

13. The overall rating of the NIS customer service is excellent.(reliability)

14. The NIS physical features are visually appealing.(tangibility)

15. What is it you like most about the NIS?

……………………………………………………………………………………………....

………………………………………………………………………………………………

………………………………………………………………………………………………

 

16. What are the things the NIS could do better?

………………………………………………………………………………………………

……………………………………………………………………………………………....

………………………………………………………………………………………………

 

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17. What recommendations do you have to improve the overall service and operations of the NIS?

................................................................................................................................................

................................................................................................................................................

................................................................................................................................................

18. What is your gender? (Interviewer Please Indicate) Female( ) Male ( )

19. In which age range are you? 16-19 ( ) 20-24 ( ) 25-29 ( ) 30-34 ( )

35-39 ( ) 40-44 ( ) 45-49 ( ) 50-54 ( )

55-59 ( ) 60+ ( )

20. What is your highest level of Education? Primary School ( )Secondary School ( )

Tertiary ( )

University ( )

21. Which Industry do you work? Manufacturing ( )Electricity, Gas and Water ( )

Construction ( )

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Education ( )

Health and Social Work ( )

Transport, Storage and Communication ( )Financial Intermediation

( )

Public Administration and Defence ( )

Real Estate, Renting & Business Service ( )

Other Communities, Social & Personal Services ( )Extra-territorial Organization and Bodies

( ) Private Households( )

Debushers ( )

Agriculture, Fishing & Forestry ( ) Restaurants & Hotels

( )

COMMENTS

First Regression

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Model Summaryb

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate Durbin-Watson

1 .654a .427 .385 .35678 2.350

a. Predictors: (Constant), Tangability, Responsiveness, Reliability, Assurance

b. Dependent Variable: Perceived Service Quality

ANOVAb

Model Sum of Squares df Mean Square F Sig.

1 Regression 5.126 4 1.282 10.068 .000a

Residual 6.874 54 .127

Total 12.000 58

a. Predictors: (Constant), Tangability, Responsiveness, Reliability, Assurance

b. Dependent Variable: Perceived Service Quality

Residuals Statisticsa

Minimum Maximum Mean Std. Deviation N

Predicted Value 3.4761 5.0675 4.0000 .29730 59

Residual -1.47613 .85524 .00000 .34425 59

Std. Predicted Value -1.762 3.591 .000 1.000 59

Std. Residual -4.137 2.397 .000 .965 59

a. Dependent Variable: Perceived Service Quality

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Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

t Sig.B Std. Error Beta

1 (Constant) -.262 .683 -.384 .702

Reliability .316 .138 .274 2.295 .026

Responsiveness .238 .187 .173 1.274 .208

Assurance .449 .196 .314 2.284 .026

Tangability .080 .070 .120 1.135 .261

a. Dependent Variable: Perceived Service Quality

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Data Used in second regression OPSQ Real Resp ASS Tang

4.00 3.75 3.67 4.00 4.004.00 4.50 4.33 4.50 4.003.00 3.00 3.67 3.00 4.004.00 4.00 4.00 4.00 4.004.00 3.75 4.00 4.00 4.004.00 3.00 3.67 4.00 4.004.00 3.50 4.00 4.00 4.004.00 4.00 4.00 4.00 2.004.00 3.25 3.67 4.00 4.004.00 3.50 3.67 4.00 2.004.00 4.25 4.00 4.00 4.004.00 4.25 4.00 4.00 5.004.00 4.00 3.67 4.00 4.004.00 4.00 4.00 4.00 4.004.00 3.75 3.67 4.00 4.004.00 3.50 3.33 4.00 4.004.00 3.50 4.00 3.00 4.004.00 4.00 4.00 4.00 4.004.00 3.75 4.00 4.00 3.004.00 3.75 3.67 4.00 3.004.00 4.00 4.00 4.00 4.004.00 4.00 4.00 4.00 4.005.00 5.00 4.67 5.00 5.004.00 4.00 3.67 4.00 4.004.00 4.00 4.00 4.00 4.004.00 3.25 4.67 4.00 4.004.00 3.25 3.67 4.00 4.004.00 4.00 4.00 4.00 4.004.00 3.50 3.67 4.00 4.004.00 4.00 4.00 4.00 4.004.00 4.25 3.67 4.00 4.005.00 4.00 5.00 5.00 5.004.00 3.50 3.00 4.00 4.003.00 2.75 3.33 3.00 4.004.00 4.00 4.00 4.00 4.004.00 4.00 3.67 4.00 4.004.00 3.75 3.67 4.00 4.004.00 4.00 3.33 4.00 4.004.00 4.00 4.00 4.00 4.00

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4.00 3.75 3.33 4.00 4.00OPSQ Real Resp ASS Tang

4.00 3.50 4.67 5.00 4.004.00 4.25 4.00 4.00 2.004.00 4.25 4.33 4.50 4.004.00 3.25 4.33 4.50 4.004.00 3.50 3.67 4.00 4.004.00 3.00 3.67 4.00 4.003.00 3.00 2.33 3.50 4.004.00 4.25 3.00 4.00 4.004.00 4.00 3.67 4.00 4.004.00 4.00 4.00 4.00 4.004.00 4.00 4.00 4.00 4.004.00 3.25 4.00 4.00 4.004.00 4.00 4.00 4.00 4.005.00 4.75 5.00 5.00 5.004.00 4.25 4.00 5.00 4.004.00 3.75 3.67 4.00 4.003.00 3.00 3.67 3.00 4.004.00 4.00 4.00 4.00 4.003.00 3.00 3.33 4.00 4.003.00 3.50 3.00 2.50 4.00

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