HIPAL University

Higher Institute of Petroleum & Logistics

TOPIC 4 TQM Principles

LEARNING OUTCOMES

 To get familiarized with the basic concept and framework of Total Quality management
 To Understand the contribution of Quality Gurus in TQM Journey
 To grasp the nature and importance of various components that constitute TQM
 To describe and discuss the role of techniques used in TQM

Customer satisfaction
Customer satisfaction is defined as a measurement that determines how happy customers are
with a company’s products, services, and capabilities. Customer satisfaction information,
including surveys and ratings, can help a company determine how to best improve or changes
its products and services.
An organization’s main focus must be to satisfy its customers. This applies to industrial firms,
retail and wholesale businesses, government bodies, service companies, nonprofit
organizations, and every subgroup within an organization.

There are two important questions to ask when establishing customer satisfaction:

1. Who are the customers?

2. What does it take to satisfy them?

Who Are the Customers?

Customers include anyone the organization supplies with products or services. The table below
illustrates some supplier-customer relationships.
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Organizations should not assume they know what the customer wants. Instead, it is important
to understand the voice of the customer, using tools such as customer surveys, focus groups,
and polling. Using these tools, organizations can gain detailed insights as to what their
customers want and better tailor their services or products to meet or exceed customer
expectations.
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How to improve customer satisfaction.
So, there is no question that it is important, but the challenge that so many business owners are
still trying to tackle is how to improve customer service, and subsequently customer
satisfaction. There is no perfect answer to this, and every business has a different customer
base, with different expectations. However, there are a few practices that, when followed, can
improve customer satisfaction regardless of industry.

Listen to customers.
In order to give customers what they want, you have to know what they want. Customers are
more vocal than ever — 65 percent of customers are likely to speak negatively about their
customer service experience. This is something that affects both a business and a brand.
Luckily, keeping tuned in to what people are saying is easier than ever. Using modern customer
service tools, companies are able to track social conversations and address concerns
immediately.

Be proactive.
That tracking becomes important when it comes to avoiding crises, or even simply reaching out
to customers in a positive way. Using the right tools, you can create a customer service culture
that is proactive, rather than reactive.

Practice honesty and manage expectations in marketing.

One of the biggest sources of customer dissatisfaction is when a service or product does not
match up to the customer’s expectations. Marketing efforts should be carefully crafted so that
nothing is promised that cannot be met.

Understand your customers.

People are unique and understanding them on a personal level is the key to unlocking customer
satisfaction. Of course, it is impossible for your marketing team and customer service reps to
understand each individual with whom they interact, but through collecting and utilizing data,
they can better understand their needs and wants, and address them accordingly.

A lot of this comes down to using the right tools. Indeed, perhaps the most important step
forward in recent years regarding how to improve customer satisfaction, has been the
emergence of cloud-based customer support platforms.

How Salesforce can help improve customer service.

One of the best customer service solutions is Salesforce Desk. [Link] is an out-of-the-box
customer service app that works together with other Salesforce solutions to provide a 360-
degree view of each customer. Here are a few ways in which it helps to improve customer
satisfaction.
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1. Customer journey — as mentioned, the modern customer is looking for a personalized,
unified 1-to-1 journey. They want a perfect blend of the digital and physical. For
example, when someone buys something in a brick-and-mortar store, they can go home
and use their app to answer any questions that they have about the product, receiving
the same answers as they would in person. This works in the other direction as well,
with services such as “click and collect.”
2. Self-service — over 90 percent of consumers now expect a brand or organization to
offer a self-service customer support portal. This kind of app benefits both businesses
and customers, by empowering them to help themselves.
3. Analyze customer information — through collecting and analyzing customer data,
companies are able to make customer service proactive, rather than reactive. This
prevents most common customer service issues.
4. Cohesive communication across departments — by working with other Salesforce apps,
such as marketing and sales, Desk can provide a full view of each customer and make
sure that nothing — and no one — is lost in transition.
5. Manage productivity — it also includes agent productivity tools to help with
organization and time management.

Customer satisfaction is about more than just retaining customers. It is about taking pride in
your brand. When your business cares about how to improve customer satisfaction, the results
will soon follow. Salesforce can offer the most comprehensive customer service experience,
creating a business with better results, and a more satisfied customer.

How can you measure customer satisfaction?

The fact that the above definition uses the word “measure” highlights the importance of
measuring customer satisfaction empirically. This is typically done using customer satisfaction
surveys to gather your customers’ opinions on the different aspects of your service. You can
also factor in other metrics like customer retention and loyalty to make assumptions about
customer satisfaction.
By measuring customer satisfaction in this way, you can identify your weaknesses and figure
out how to improve your service in order to increase customer satisfaction levels.

Why is customer satisfaction so important?

It’s much easier to forget about a customer as soon as they leave your store or click away from
your website. So why should we take the time to follow up with our customers and focus on
their satisfaction levels? Here are some of the key reasons why measuring customer satisfaction
and striving to improve it are so important.

Maximize customer lifetime value

Many businesses underestimate the cost of acquiring a new customer. It is much more cost-
effective to invest in retaining existing customers rather than constantly chasing new ones. If
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you focus on customer satisfaction, then those that buy from you are much more likely to buy
from you again.

This increases the lifetime value of that customer, i.e., the amount they spend with you over
their entire lifetime. When customers keep coming back to buy from you, your return on
investment from their customer acquisition cost increases. The bottom line is: satisfied
customers are more loyal and loyal customers are more profitable for your business.

Minimize customer churn

Customer churn refers to those customers that stop buying from you, whether that’s after their
first purchase or after several years of being a loyal customer. Customer churn can be very
costly for your business because it means you need to go back to focusing on getting new
customers. As mentioned above, a satisfied customer is more likely to remain loyal, therefore
decreasing customer churn.

Positive brand exposure

Word of mouth is important to any business. Disgruntled customers will go online and complain
about your business or its products, they’ll write negative reviews, and they’ll recommend your
competitors over you. By improving your customer satisfaction, you not only avoid this, but you
also benefit from positive word of mouth. Satisfied customers will recommend you to friends
and family, talk positively about you online, and, hopefully, write positive reviews on places like
Google, Facebook, and Yelp.

Increase revenue
All businesses want to increase their revenue and grow their business, but they might not
always have the resources to invest in actively growing it. Once you’ve got your customer
satisfaction strategy right, it becomes an effective way to grow your business and its revenue
passively.
While you focus on improving other areas of your business, satisfied customers keep coming
back to buy from you and they keep recommending you to their peers or writing positive
reviews online. This keeps a steady and, hopefully, increasing revenue stream coming in
without you having to constantly work on it. Of course, customer satisfaction is something you
should review on a regular basis to ensure you’re still hitting the nail on the head.

What Is Customer Satisfaction?

Customer satisfaction is a measure of how people feel when interacting with your brand. It can
be influenced by any number of factors, such as:

 perceived product quality

 perceived product value
 convenience
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 customer expectations
 communication
 complaint handling

Every brand, no matter how successful, wants to improve customer satisfaction. To do that,
they need to define two things:
1. who their customers are
2. what it takes to satisfy them

Part one isn’t as simple as it sounds. Let’s take the example of a hospital. It might have two
distinct customer bases:
1. the patients it treats
2. the insurance companies it sells patient data to

Clearly, those two audiences have very different goals, and keeping them happy requires two
vastly different approaches. To make matters even more complicated, satisfying one audience
may sometimes be detrimental to the other’s happiness.

Benefits of Customer Satisfaction

Customer satisfaction is more than just a “nice to have.” Getting it right has specific, tangible
benefits, including:

1. Increase Brand Loyalty

Never take your customers for granted.
According to PwC, 59 percent of U.S. consumers who love a product or brand would ditch it
after several poor experiences. More concerningly, almost one in five would do so after a single
bad experience.

2. Boost Trust
According to Edelman, 81 percent of consumers say brand trust is a deal-breaker or a deciding
factor in their purchase decisions.
Yet trust is pretty thin on the ground, with just 34 percent of consumers saying they trust most
of the brands they use or buy from.
How do you make your brand more trustworthy? One way is to improve satisfaction. According
to a study from Eastern University Sri Lanka, customer satisfaction logically precedes customer
trust; those two things rarely exist in isolation.

3. Attract Positive Word of Mouth

Word-of-mouth marketing is extremely valuable.
To give just one example, 87 percent of consumers read online reviews for local businesses in
2020, up from 81 percent in 2019.
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Unfortunately, consumers are significantly more likely to share negative reviews than they are
positive ones. According to American Express, U.S. consumers tell an average of 15 people
about bad experiences, whereas they only share good experiences with 11 people.
In other words, it’s a numbers game. You know consumers are naturally less inclined to shout
about the good stuff you do, but if your customer satisfaction is high, you’re well placed to reap
the benefits of word-of-mouth marketing.

4. Grow Your Audience and Sales

We already know satisfied customers are more likely to tell their friends and family about your
brand, which in turn gets you in front of a wider audience.
However, did you know those satisfied customers will also spend more?
According to the same American Express survey referenced above, U.S. consumers are
prepared to spend 17 percent more if a brand delivers excellent service.

How to Measure Customer Satisfaction

It’s not enough to simply hope your customer satisfaction will improve. You need concrete
plans to drive it forward, backed by robust data. To do this, you need to gather customer
feedback through polls, surveys, and feedback sessions. Here are three types of feedback to
collect to help you measure customer satisfaction and examples of questions to ask.
1. Overall Satisfaction
It can be helpful to gauge a customer’s general opinion of your product or service before
drilling down into the specifics. Positive answers indicate they are happy with their purchase
decision, while negative ones suggest they have some degree of buyer remorse.

Example question: Overall, how satisfied are you with [Product X]?

2. Repurchase Intent
Given the close ties between customer satisfaction and loyalty, it makes sense to use a
customer’s repeat purchasing plans to measure their general happiness. Consumers who say
they are likely to buy again may also be more likely to leave positive reviews or share their
experience with friends and family.

Example question: Will you shop at [Company X] again in the next month?

3. Word of Mouth
NPS customer satisfaction surveys are centered on a single question about whether or not the
customer would recommend a given brand or product. This sort of feedback allows companies
to understand whether the user’s experience aligns with their expectations.

Example question: Would you recommend [Company X] to your family and friends?
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Steps to Improve Customer Satisfaction
Data is the key to improving customer satisfaction.
However, data alone can’t transform your customers from unhappy to loyal. You have to focus
on gathering data effectively, then use those insights to act. Follow these three steps to make it
happen:

1. Conduct Customer Surveys

Surveys play a key part in your quest to improve customer satisfaction, so the feedback you
generate must be useful.
Unfortunately, there are no guarantees. Even if your survey is perfect, customers don’t always
tell the truth about how they feel. What’s more, they might make mistakes when completing
your survey. In either case, you’re not getting a true picture of customer satisfaction.
However, there are some proactive steps you can take to generate more impactful feedback.

2. Monitor Social Media Mentions

Customer surveys will only get you so far, because they only gather opinions from the types of
people who are happy to fill in surveys—which might exclude a huge chunk of your audience.

3. Implement Constructive Feedback

Once you’ve gathered a bunch of feedback, it’s time to act.
One of the biggest challenges is to identify an effective, repeatable way to prioritize those
actions. After all, it’s unlikely every customer wants the same thing. Some might be asking for
faster shipping; others might want a slicker checkout experience.

Customer Perception of Quality

What is Customer Perception and Why is it Important?
Customer behavior is driven by more than logic. The perceptions customers have of your brand,
its products or services, and its values can have a serious impact on how they interact with you
and how they buy. In fact, fostering positive perceptions can help you build a “sustainable,
loyal, and growing customer base,” according to Forbes.[X]
In marketing, ‘customer perception’ refers to customers’ awareness, their impressions, and
their opinions about your business, products, and brand. Customer perception is shaped by
multiple variables, including direct and indirect interactions with your offerings.
Today, perception impacts buyer decision-making and is a “huge success factor in the retail
industry,” Deloitte reports.[X] Brands who monitor and understand customer perception and
its contributing factors can better identify opportunities to improve customer experiences. In
fact, Forrester defines customer experience (CX) as “your customer’s perceptions of their
interactions with your brand”[X].
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What is the customer perception process?
Modern business leaders emphasize improving customer experiences, but “most companies
have no idea if they are creating value for their customers,” Forrester finds[X]. Another
Forrester analyst observes that value for customers is actually “customers’ perception of what
they get versus what they give up.”[X]
CX professionals who want to see themselves this way—that is, ‘through the eyes of their
customers’—must begin by understanding the three phases of the customer perception
process. The three stages—sensing, organizing, and reacting—are simple in concept, but
difficult to understand in terms of how they truly shape the behavior of consumers and even
business buyers:

1. Sensing: Characterized by the physical senses, customers use this stage to accumulate
‘knowledge’ about a product, service, or brand. This may apply to facts such as clothing
sizes, but also product smells, taste, and touch.
2. Organizing: During this stage, customers make sense of the information they’ve
attained, interpreting its value based on context, personal beliefs, perceptions of
themselves, and other highly subjective factors. At this stage, customers will categorize
the object of their critique and compare it to other objects within their chosen
categories. For example, a consumer hoping to buy a winter coat may prioritize coats by
price, but also color and thickness, during the organizing stage.
3. Reacting: Customers will act based on the sensing and organizing stages, but also
internal and external stimuli ranging from personal history to online reviews. Although
each reaction and its contributing factors are different, buyers tend to go through
similar processes of evaluation before making their decision.

Why is customer perception important?

Perception does more than impact each individual sale; it shapes the long-term relationships—
good or bad—those customers establish with your brand. As a result, every touchpoint your
company has with customers must affect their perception in a positive way.
Businesses that shape positive brand perceptions among customers are more likely to impact
potential customers in indirect ways as well and establish themselves as remarkable compared
to other brands in their space. As Forbes observes:
To improve customer experience and differentiate your brand, you must have positive
customer perceptions. Brands must therefore understand which elements have the broadest
and most profound impact on customer perception. These elements can be both tangible and
abstract, but each has the potential to be shaped deliberately by CX professionals.
Some tangible factors that influence customers’ perceptions include:

 Price: Price should always be part of a comprehensive marketing plan. However,

marketers must understand that context impacts customers’ perception of its value—
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lower is not always better, as often seen in luxury markets where it’s reflective of the
product’s true worth.

 Quality: Quality can apply to multiple attributes in a product—attributes whose

importance will differ from customer to customer. Marketers should understand what
feature most distinguishes their products or services, and which are most desirable in
target markets.

 Branding: Logos, artwork, and even packaging all deliver a message about your company
and your brand. Marketers should ensure these elements meet and exceed customers’
expectations, helping your brand to stand above others.

 Service: Service quality will make or break customer perception, where even companies
with superior products miss out if their service is poor. Customers are more likely to
write online reviews after highly positive or highly negative service experiences, which
can improve or exacerbate brand awareness.

Some less-tangible factors that influence customers’ perceptions include:

 Advertising: What you say about your company, the mediums you choose, and how you
deliver your message can drive customers in both positive and negative directions.

 Reputation: Brand reputations are built over time and can be quite durable. They are
formed from customer experiences with products and services, but also secondary
interactions from third parties (e.g., media coverage). While marketers attempt to
measure their reputations online, sudden events can impact reputation without
warning.
 Influencers: Influencers are people whom customers trust and are among the biggest
factors impacting customer perception aside from the customer’s own personal
experience. Customers who have firsthand experience with your product, service, or
brand are most likely to sway other potential customers during the organizing stage.

Brands have some ability to measure customer perception quantitatively, but this data is best
understood and more profound when explained from the customers themselves. Having
conversations with customers helps to illuminate customer perceptions by probing and
clarifying to uncover the heart of the ‘why’ behind their perceptions.
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Customer Complaints

From the above diagram it is understood that the company should strive for increasing the
intersection portion i.e., Customer Satisfaction.

The Customers are the most important people in the business. Not dependent on the
organization, but the organization depends on them. Not an interruption to work but are the
purpose of it. Doing a favor when they seek business and not vice-versa. A part of business, not
outsiders and they are lifeblood of the business. People who come with their needs and jobs
Deserve the most courteous and attentive treatment.

TYPES OF CUSTOMERS
Internal Customer: The customer inside the company is called internal customers
External Customers: An external customer is the one who used the product or service or who
purchase the products or service or who influences the sale of the product or service.
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CUSTOMER SUPPLY CHAIN

Customer complaints (feedback)

Customer feedback must be continuously solicited and monitored to reduce the dissatisfied
customers as much as possible.
CUSTOMER FEEDBACK OR CUSTOMER COMPLAINT IS REQUIRED
To discover customer dissatisfaction
To identify customer ‘s needs
To discover relative priorities of quality
To compare performance with the competition
To determine opportunities, for improvement

TOOLS USED FOR COLLECTING CUSTOMER COMPLAINTS

Comment card - Low-cost method, usually attached to warranty card Questionnaire - Popular
tool, costly and time consuming - by mail or telephone preferably multiple-choice questions or
a point rating system (1 to 5) or (1 to 10)
Customer Focus groups - Meeting by a representative of the company with the group of
customers. Imprint analysis is an emerging technique to obtain intrinsic feelings using customer
meetings, word associations, discussion, relaxation techniques etc.
Phone - Toll free Telephone numbers
Customer visits - Visit customer's place of business.
Report cards - Usually, send to customer on a quarterly basis.
The internet and computer - It includes newsgroups, electronic bulletin board mailing lists,
Employee feedback.
Mass Customization - Capturing the voice of customers using data of what customer want
instead of what customer is thinking about buying and manufacturing exact what they want.
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STEPS TO SOLVE CUSTOMER COMPLAINTS
 Complaints can be collected from all sources (letters, phone -calls, meetings and verb
inputs)
 Develop procedures for complaint resolution, that include empowering front-line
personnel.
 Analyze complaints, but understand that complaints do not always fit into new
categories
 Work to identify process and material variations and then eliminate the root cause.
 When a survey response is received, a senior manager should contact the customer and
strive to resolve the concern.
 Establish customer satisfaction measures and constantly monitor them. Communicate
complaint information, as well as the result of all investigation solution, to all people in
the organization.
 Provide a monthly complaint report to the quality council for their evaluation and
needed, the assignment of process improvement teams.
 Identify customer's expectations beforehand rather than afterward through complaint
analysis.

Service Quality
Service quality is generally viewed as the output of the service delivery system, especially in the
case of pure service systems.
Moreover, service quality is linked to consumer satisfaction. Service quality is a perception of
the customer.
Customers, however, form opinions about service quality not just from a single reference but
from a host of contributing factors.
Managing the quality of products and services is very important to ensure that the business
excels in meeting the customer requirements and achieves organizational goals. Whether it’s a
manufacturing firm producing hardware or a software company providing services to clients,
quality management is the very essence of continuous improvement and business growth. We
can trace back the origins of modern quality management principles to Henry Ford’s process
and quality management practices that he used in the company’s production lines. However,
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after the Second World War, it was Japan that emerged as the strongest proponent of Quality
Management as they rebuilt their economy with the help of great statisticians and engineers
like Shewhart, Deming and Juran.
The process of managing the quality of services delivered to a customer according to his
expectations is called Service Quality Management. It basically assesses how well a service has
been given, so as to improve its quality in the future, identify problems and correct them to
increase customer satisfaction. Service quality management encompasses the monitoring and
maintenance of the varied services that are offered to customers by an organization.
Whether you are in the software business offering services to clients or operate in the food,
hospitality or travel industry, service quality management is integral to managing customer
expectations and business growth. The service quality can either relate to the service potential
(qualifications of the persons offering service), service process (quickness, reliability etc.) or the
service result (meeting customer expectations).

Dimensions of Service Quality

Measuring of service quality relies on the customer’s perception and this could be different
from the expected service. To determine the gap between services expected and perceived
service, several models are used like the SERVQUAL model, RATER model, e-SERVICE QUALITY
etc. The main dimensions of service quality determination are as follows:

 Reliability – This is the ability to perform the service dependably and accurately, as
promised. In software service, it would be the correct technical functioning of the
application and various features such as GUI features, billing, product information etc.
 Responsiveness – How quickly the services are rendered to the customer and the
promptness of service delivery. With respect to software services, it would be the ability
to respond to customer problems or give solutions.
 Assurance – This is a measure of the ability to convey trust to the customers and how
well they extend the courtesy. Software assurance involves the amount of confidence
the customer has in handling the software application or navigating a site, the belief he
has on the information provided and its clarity, reputation etc.
 Empathy – Giving personalized attention, understanding the requirements and caring
for the customers. The software service would include customized applications, one-to-
one customer attention, security privacy and understanding customer preferences.
 Tangibles – The physical attributes like appearance, equipment, facilities etc. When we
speak of software services, the tangibles would be aesthetics of the software application
or website, navigation features, accessibility, flexibility etc.

It is a combination of two words, Service and Quality where we find emphasis on the availability
of quality services to the ultimate users. The term quality focuses on standard or specification
that a service generating organization promises. We can’t have a clear-cut boundary for quality.
Sky is the limit for quality generation. Scientific inventions and innovations make the ways for
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the generation of quality. More frequency in innovations, less gap in the process of quality up-
gradation.

Meaning of Service Quality:

Service quality is generally viewed as the output of the service delivery system, especially in the
case of pure service systems. Moreover, service quality is linked to consumer satisfaction.
Although there is no consensus in the research community about the direction of causality
relating quality and satisfaction, the common assumption is that service quality leads to
satisfied customers.
For example – customers leaving a restaurant or hotel are asked if they were satisfied with the
service they received. If they answer “no,” one tends to assume that service was poor.

Direct service providers, such as waitresses, also note that at times the best service efforts are
criticized because the customer’s perceptions of the service are clouded by being in a bad mood
or having a disagreement with someone just before arriving at the restaurant.
These service providers recognize that in practice the influence of service quality on customer
satisfaction is affected by other factors, one of which is the customer’s physical and
psychological conditions.

Over the last fifteen years, research on service quality has grown extensively and substantively.
The topic has attracted interest among managers and researchers because of the substantial
effects customer perceptions of service quality have on the satisfaction and loyalty of
customers, as well as on brand equity.

Service quality research has also achieved a truly global scope and significance and attracted
contributions from scholars from many disciplines.

Service quality has been defined keeping in view at least four perspectives:

(i) Excellence – Although the mark of an uncompromising student and high achievement, the
attributes of excellence may change dramatically and rapidly. Excellence is often externally
defined.

(ii) Value – It incorporates multiple attributes, but quality and value are different constructs—
one the perception of meeting or exceeding expectations and the other stressing benefit to the
recipient.
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(iii) Conformance to Specifications – It facilitates precise measurement, but users of a service
may not know or care about internal specifications.

(iv) Meeting and/or Exceeding Expectations – This definition is all-encompassing and applies
across service industries, but expectations change and may be shaped by experiences with
other service providers?

Most marketing and researchers have concentrated on the last perspective. The Gaps Model of
Service Quality reflects that perspective and offers service organizations a framework to
identify services in the form of the gaps that exceed (or fail to meet) customers’ expectations.

Service Quality – Concept

When defining the concept of service quality, one should always start with customers, as
quality is the most important factor for customers and also it is their basis of their opinion,
which will then result in the fact that service quality is achieved if the customer expectations
are achieved.
While doing the service product design process, a significant element is the service quality, as it
influences the volume of demand for a given service product, as well as customer profile of this
service product. The most significant positioning tool of service providers and their offer on the
contemporary service market is the service quality.
The impact of quality service on profit and financial indicators of business performance is an
important aspect to understand in services marketing. Service quality must be viewed as a
strategic force, but also as the key problem of service marketing management.
As it affects the constant improvement of service performance by increasing market share and
profit growth, keep in mind that service quality is a significant source of sustainable competitive
advantage. This will yield an increase in financial results and will achieve sustainable
competitive advantage.
Quality-based service marketing strategy is sustainable, as not all competitors can achieve the
service quality expected by the consumers. Hence those service companies that base their
strategies on the quality have an excellent reputation, and this feature of their quality poses a
barrier to developing competitive copycat marketing strategies.

Quality-based service company management should especially focus on four key areas
important for achieving quality:

i. Service encounters (moments of truth).

ii. Service design.

iii. Service productivity; and

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iv. Service provider’s corporate culture.

Without the appropriate design of service provision systems, service exchange on the market is
not possible as its functioning enables efficient service delivery. In service design decision-
making, the key problem is related to the choice between the service personnel and the
technological support to the service delivery process, depending on whether the service
provider is focused on achieving maximum efficiency.

The main characteristics of service quality are as follows:

(i) Clients are a direct part of the process, bringing perceptions and expectations to the
transaction that become part of their interaction with you.

(ii) Unlike a manufactured product, which can be made, inspected, and controlled for quality
before it is released to the client, service quality cannot be inspected before delivery.

(iii) Because clients participate fully in the transaction, they are concerned both with the output
or result of the transaction, and the process for delivering that outcome.

(iv) In a production environment, eliminating variance is critical to making high-quality goods. In

delivering service, satisfying clients depends not on eliminating variance, but rather on
personalizing the service delivery to the unique circumstances of each transaction. Applying
certain principles consistently rather than providing an identical response to each transaction, is
the key to delivering quality service.

(v) Client satisfaction is subjective. It is made up of two essential ingredients—expectations and

perceptions of delivery. Clients have unique expectations based on their individual experience
and needs. They have their own perception of what they received. Any difference between
what they expected to get and what they perceive they got, will affect their satisfaction

Objectives of Service Quality:

The subject of service quality has aroused considerable recent interest among businesspeople
and academics. Of course, buyers have always been concerned with quality, but the increasing
competitive market for many services has led consumers to become more selective in the
services they choose. Conceptualizing the quality for services is more complex than for goods.
Because of the absence of tangible manifestations, measuring service quality can be difficult
but there are possible research approaches.
Comprehensive models of service quality and their limitations can be studied. Understanding
just what dimensions of quality are of importance to customers is not always easy in their
evaluation process. It is not sufficient for companies to set quality standards in accordance with
misguided assumptions of customers’ expectations.
A further problem in defining service quality lies in the importance which customers often
attach to the quality if the service provider is distinct from its service offers – the two cannot be
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separated as readily as in the case of goods. Finally, issues relating to the setting of quality
standards and implementation of quality management should be studied.

Service Quality – Important Attributes

The process used for goods in evaluating services differs from the process used by consumers.
Goods tend to be high in search qualities whole services tend to be high in accepted quality and
experience.

1. Search Qualities:
Search qualities are attributes that consumers can evaluate prior to purchasing a service or
good. Items such as color, style, fit, feel, smell, and price, are found included in the search
qualities. Some products such as shoes, jeans, washing machines, cars are high in search
qualities.
Raw materials, component parts, and office supplies (business goods) also tend to be high in
search qualities. Consumers can easily evaluate the quality of goods prior to purchase since
they are high in search qualities.

2. Experience Qualities:
Experience qualities are attributes that consumers can evaluate only during or after the
consumption process. Food, catering services, meals, entertainment, and cosmetic surgery are
services high in experience qualities. Under the business services, some services which are high
in experience include lawn services, delivery services etc. Only after the service has been
consumed or during the process of consumption, evaluation takes place. For example, a meal at
a restaurant can only be evaluated once it is eaten and not before.

3. Credence Qualities:
Credence qualities are attributes that consumers have difficulty evaluating even after the
consumption is complete. Consumer services such as accountant services, funeral services,
education, and veterinarian care are examples of services high in credence qualities.
Examples in the business sector would include financial advice, and advertising services. Few
consumers have the medical knowledge or tax knowledge to judge if the service provider
performed the service properly. The same is true for a business trying to evaluate consulting or
advertising services. Clearly, evaluating services high in credence qualities is difficult.

Service Quality – Steps that Lead to a Better Management of Service Quality Delivered to the
Customers

Service quality is vital for any service organization today. This is more so because of the global
competition and the number of players present in the service industry today. One such example
of Gaps in services is seen in the airline Industry. When predictions are inaccurate, however
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customers may still have to wait and sometimes may not be served at all, as when airlines
overbook the number of seats available on a flight.

Victims of overbooking may be compensated for their inconvenience in such cases. To minimize
the no show problem, some organizations (e.g., hotels, airlines, conferences/training programs,
and theaters) charge customers who fail to show up or cancel their reservations within a certain
time frame.

1. Differentiate Waiting Customers:

Not all customers necessarily need to wait the same length of time for service. On the basis of
need or customer priority, some organizations differentiate among customers, allowing some
to experience shorter waits for service than others.
Known as “queue discipline,” such differentiation reflects management policies regarding who
to select next for service. The most popular discipline is first-come, first-served. However, the
rules may apply.

Differentiation can be based on factors such as:

i. Importance of the Customer
ii. Urgency of the Job
iii. Duration of the Service Transaction
iv. Payment of a Premium Price

2. Make Waiting Fun, or At least Tolerable:

Even when they have to wait, customers can be more to less satisfied depending on how the
wait is handled by the organization. Of course, the actual length of the wait will affect how
customers feel about their service experience. But it is not just the actual time spent waiting
that has an impact on customer satisfaction-it’s how customers feel about the wait and their
perceptions during it.
In a Classic article entitled “The Psychology of Waiting Lines,” David Maister proposes several
principles regarding waiting, each of which has implications, for how organizations can make
waiting more pleasurable, or at least tolerable-
i. Unoccupied Time Feels Longer than Occupied
ii. Unexplained Waits are Longer than Explained Waits
iii. Unfair Waits are Longer than Equitable Waits

Service Quality – Methods to Monitor Service Quality

1. Conduct Customer Surveys:

Service organizations should regularly conduct customer-services to know whether the
customers have any issues with the service offered or with service personnel (Refer to example,
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Customer Survey at Sheraton). Questionnaires should be given to customers to elicit their
opinions and rate the quality of service offered by the organization. Also, efforts should be
made to explore the factors leading to any dissatisfaction.

2. Monitor Customer Feedback:

Managers should give special attention to the feedback given by customers in the form of
complaints or suggestions or even compliments. The management should try to find out the
root causes of problems in case of complaints and prevent them from recurring. If the customer
makes some suggestions, the management should consider them, discuss them with employees
for their feasibility and applicability, and implement the ones that are valuable and practicable.

3. Review Service Blueprints, Problem-Tracking System:

The management should constantly review the service blueprints and identify any problems
that exist. If necessary, the management should change the monitoring procedures and
problem tracking procedures. Service blueprinting is the process of representing the entire
service process in the form of a picture/diagram so as to ensure that all the steps in a service
process are covered.

Service quality can be improved if the following areas are given due attention:

i. Identifying primary quality determinants,

ii. Managing customer expectations,
iii. Managing evidence,
iv. Educating customers about the service,
v. Developing a quality culture,
vi. Automating quality,
vii. Following-up the service quality information system,
viii. Employing benchmarking wherever possible, and
ix. Keeping track of internal costs, external costs, and quality maintenance costs.

Customer Retention
Customer retention refers to the activities and actions companies and organizations take to
reduce the number of customer defections. The goal of customer retention programs is to help
companies retain as many customers as possible, often through customer loyalty and brand
loyalty initiatives. It is important to remember that customer retention begins with the first
contact a customer has with a company and continues throughout the entire lifetime of the
relationship.
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Why is customer retention important?
Keeping your current customers happy is generally more cost-effective than acquiring first-time
customers. According to the Harvard Business Review, acquiring a new customer can be five to
25 times more expensive than holding on to an existing one.
You don’t need to spend big on marketing, advertising, or sales outreach. It is easier to turn
existing customers into repeating ones since they already trust your brand from previous
purchases. New customers, however, often require more convincing when it comes to that
initial sale.
Customer loyalty won’t just give you repeat business. Loyal customers are more likely to give
free recommendations to their colleagues, friends, and family. Creating that cycle of retained
customers and buzz marketing is one way your company can cultivate customer loyalty for
long-term success.

Customer Retention Benefits

While most companies traditionally spend more money on customer acquisition because they
view it as a quick and effective way of increasing revenue, customer retention often is faster
and, on average, costs up to seven times less than customer acquisition. Selling to customers
with whom you already have a relationship is often a more effective way of growing revenue
because companies don’t need to attract, educate, and convert new ones.

Companies that shift their focus to customer retention often find it to be a more efficient
process because they are marketing to customers who already have expressed an interest in
the products and are engaged with the brand, making it easier to capitalize on their experiences
with the company. In fact, retention is a more sustainable business model that is a key to
sustainable growth.
The proof is in the numbers: according to studies done by Bain & Company, increasing
customer retention by 5% can lead to an increase in profits of 25% – 95%, and the likelihood of
converting an existing customer into a repeat customer is 60% – 70%, while the probability of
converting a new lead is 5% – 20%, at best.

How to Improve Customer Retention

Obviously, established companies and organizations need to focus on customer retention.
More important, companies are finding that customer profitability tends to increase over the
life of a retained customer, so employing customer retention strategies is a worthwhile use of
company resources. We have compiled some of the more successful customer retention
strategies and techniques and outline them here, for your convenience:

 Set customer expectations – Set customer expectations early and a little lower than you
can provide to eliminate uncertainty about the level of your service and ensure you
always deliver on your promises.
 Become the customers’ trusted advisor – You need to be the expert in your particular
field, so that you can gain customers’ trust and build customer loyalty.
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 Use relationships to build trust – Build relationships with customers in a way that fosters
trust. Do this through shared values and fostering customer relationships.
 Take a proactive approach to customer service – Implement anticipatory service so that
you can eliminate problems before they occur.
 Use social media to build relationships – Use LinkedIn, Twitter, and Facebook to connect
and communicate with customers and give them a space for sharing experiences with
your company, so they can become brand ambassadors.
 Go the extra mile – Going above and beyond will build strong relationships with
customers and build long-term loyalty by paying attention to their needs and issues.
 Make it personal – Personalized service improves customer experience and is something
customers are expecting and demanding. Make their experience personal to strengthen
the bond with your brand.

Measuring Customer Retention and Key Metrics

Attrition rate compliments retention rate. For example, if a company has a 20% attrition rate, it
has an 80% retention rate. Companies’ attrition rates can be defined by the percentage of
customers the company has lost over a given period.

Specifically, companies can determine retention rate by using a simple customer retention rate
formula:
Retention rate = ((CE-CN)/CS))100
CE = number of customers at end of period,
CN = number of new customers acquired during period, and
CS = number of customers at start of period.
At first glance, the formula may look complicated, but it’s not too difficult once you start using
it.
For example, if you start the given period with 200 customers and lose 20 customers but gained
40 customers, at the end of the period you have 220 customers.
220-40 = 180. 180/200 = 0.9, and 0.9 x 100 = 90
The retention rate for the given period was 90%. It is beneficial to track retention rates so
companies can put their customer retention metrics into perspective and measure results over
time.

Customer churn rate

A less direct indicator of customer retention is your churn rate—the percentage of customers
lost during a period of time. Companies that struggle with customer retention usually have a
high churn rate.
Customer churn rate formula
(Y/X) *100 = Z
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Low retention rates or high churn rates could be bad signs. They may signal that something
about your customer experience isn’t going well. But don’t panic—there are several changes
you can make to turn the churn around.

Customer retention examples -

1. Offer a seamless online experience (Amazon)
One of the most basic customer retention examples is meeting customer expectations. And
customers today expect online experiences that are on-par with, or better than, in-person
experiences. In fact, 65 percent of customers want to buy from companies that offer quick and
easy online transactions, according to our Trends Report. And 49 percent gave Amazon the
highest marks for service for that reason.
Are there pain points in your online experience? How can you make things easy for customers?

2. Make every customer feel like a VIP customer (Four Seasons)

Luxury hotels are known for their heritage of high-touch, exclusive customer service. The Four
Seasons is able to expand that feeling of luxury to every customer through its combination of
technology and white glove service. Guests can use Four Seasons Chat to message staff through
channels such as WhatsApp for any inquiry or service, including requests for restaurant
recommendations and reservations, ordering room service, arrival, or early checkout, and even
ordering a private jet.

3. Build empathic customer relationships (Zappos)

If there's one thing the pandemic showed us, it's that empathy is key to building lasting
customer relationships. In fact, 49 percent of customers want agents to be empathetic,
according to our Trends Report. During the pandemic, Zappos started a hotline where
customers could call or chat its support team about anything, even the best Netflix shows.

4. Be proactive (Dollar Shave Club)

Customers expect brands to anticipate their needs and get in front of issues before they even
happen. That's why proactive service is so important in retaining customers. Dollar Shave Club
welcomes website visitors with a chatbot to answer common questions before a customer has
to reach out to customer support or abandons their cart.

5. Support causes your customers care about (Bombas)

54 percent of customers want to buy from companies that prioritize diversity, equity, and
inclusion in their communities and workplaces and 63 percent want to buy from companies
that are socially responsible, according to our Trends Report. Bombas donates a clothing item
to a homeless shelter or homelessness-related charity with every purchase.