Strategies for Service Quality - Literature review Example

Running Head: STRATEGIES FOR SERVICE QUALITY Strategies for Service Quality of the of the Strategies for Service Quality Introduction The constant shifts in the expectations of customers along with the constantly rising competition have taken the shape of big challenges that organizations are facing today. Moreover, along with other features of shopping, the introduction of new convenience grocery stores has greatly assisted customers with a more personalized way of shopping for all basic items under one roof. However, there are certain challenges that they encounter regarding ensuring sustainability of their businesses along with further development. This chapter will deal with the importance of quality in service of retailing and the analysis of major themes of service quality management in the convenience stores. Service Quality Various business magazines and scholars have defined the concept of service extensively but in different ways. According to Kotler (1988), service is described as the performance of any act that is offered by one party through another and, being intangible, usually does not result in ownership. The production of service can possibly be connected with a physical product. According to American Marketing Association (1960), service refers to the benefits, activities, or satisfactions that the organizations or retailers offer for sale. It was also opined by Nickols (2001), that services usually continue of tangible products which, instead of being produced, are rather than performed. The concept of service quality has been described by Lewison (1994) as being similar to the customer service actions. According to him, service quality is the distinction between customer perceptions and their expectations from the services that has actually been delivered. The theoretical aspect of customer service maintains that, the customers actually purchase the utility that is being derived from the product rather than the purchase of actual product (Lewison, 2000). They derive these service expectations from the comments of other users of the product, their past shopping experience, and from the retailers promotional claims. According to Parasuraman et al., (1985) and Asubonteng et al., (1996), the concept of service quality has been defined as the inconsistency between consumers expectations from organizations regarding the services offered and their perceptions of such service. The concept of quality, in relation to the products, is generally understood by customers as a comparison of expected service with perceived service; they are disappointed if the latter falls short of the former. Thus, the concept of service quality is clearly defined as a comparison of performance with expectation. The gap-model is, thus, the explanation of the perceived service quality which is the direction and degree that the inconsistency between consumers’ expectations and perceptions follow (Parasuraman et al., 1988, p. 17.). According to Berry and his colleagues, the conveniences in a service setting refer to all the many types of convenience which aim in reducing the effort or time of consumers in shopping. This includes credit availability, hours of operation, and other factors that are connected to the capacity of service convenience (Berry et al., 2002, p.1). Thus, the concept of service convenience includes attributes such as operating hours, location, employee services, payment conditions, customer assistance, store and parking access. Characteristics of Service Quality According to Parasuraman et al., (1985, p.42), Douglas & Connor, (2003, p.166), and Ladhari, (2008, p.172), service quality comprises of the intangible elements of a service which include heterogeneity, inseparability, and perish ability. These play a vital role in influencing the quality of service for customers perception. This conveys the meaning that the provider should deliver a well-defined service with regards to their characteristics in order to contribute to customers perception of the service quality. Intangibility The component of intangibility refers to the absence of any physical product, which could be tasted, touched, heard of, or smelled prior to or following the purchase. This, therefore, pertains to the fact that the nature of the product received by customer is not easy to be understood. Intangibility, in grocery stores, is difficult to be evaluated for the reason that the activities of such retailers are usually focused on physical instead of intangible service products. This necessitates the fact that the providers of service need to establish the intangibility level of services (Beamish & Ashford, 2007, p.240). Heterogeneity Heterogeneity is another characteristic if service. It refers to the difference that exists at the various levels of service delivery because of the differing human behaviour, and of consumers and service providers. The example of this feature occurs in situation where a salesperson provides help to a customer at the counter; the same quality of service may not be offered by the same person to next customer (Rust & Oliver, 2000, p. 241-268). This happens due to the variations in the behaviors. Perishability Perishability is one of the major components of service quality which is to be considered by those offering service. It means that, the service cannot be stored for longer time periods or later uses and has to be purchased and consumed immediately. There are chances that it might perish if not used as soon as it is bought. Inseparability The service inseparability refers to the consumption of services just as the purchases take place. For example, while making a telephone call, the individual pays the charges and consumes the service simultaneously. Importance In the current world, where competition is rapidly increasing and product development cycles are shortening, the significance of service quality is usually enhanced and becomes the sustainable key differentiator. For the organizations to survive, the essential aspect is to strive to stay ahead of the predators and competitors through differentiating themselves. One of the ways of achieving this goal is to create and sustain the competitive advantage. The identification of the factors providing advantage over competitors contributes largely to the success of business. The subjective component of the customer service is generally measured by customers in relation to the alignment between the perceived result and expected benefits. Service quality has gained the status of one of the major components of an organizations success due to intense competition and increased expectations of customers in recent years. The market share of organizations and profitability and their profitability relies upon the high quality of service, customers loyalty and long-lasting relationship and the nurturing of customer satisfaction. An improved service profile and a positive service image also contribute largely to the significance of service quality. Service quality is considered to be of pronounced importance especially in the case of in shopping from small convenience stores. The grocery or convenience stores cater provide for the needs of everybody by retailing the consumers goods and food items which are the basic necessities. This makes them significant in terms of their existence and the role played by them in a countrys economy. There have been changes in the pattern of grocery stores functioning with the passage of time, evolving technology, and shifts in consumers characteristics. The needs of consumers are changing on a constant basis and, therefore, the retail stores, proving grocery items, are required to study the consumers behavior constantly and satisfy their needs. This clearly shows that the service quality has impacts on the dealing of grocery stores with activities of retailing. For this purpose, researchers have introduced various models of service quality in order to assess the strengths and weaknesses of the quality of service provided to customers. Service Quality Strategies The present-day changing environments of the corporate world have also changed the ways in which the organizations conducted formal business processes. One of the major areas, featuring diverse approaches and various controversies founded on apparently basic theories, includes the area of strategy. Strategy The term strategy refers to a plan of higher level for the accomplishment of one or multiple goals when certainty prevails. Strategy has been defined by Henry Mintzberg as the sequence of or pattern that exists in a stream of many decisions. It can also be said as the pattern of decisions in particular capacity that depicts stability during the passage of time. On the other hand, the term strategy has been defined by Max McKeown (2011) as the strategy available with regards to the shaping of the future and the attempt of human to utilize available means in order to achieve the desirable ends. Dr. Vladimir Kvint (2009) has also defined strategy as a system which constitutes the finding, formulation, and development of a policy or set of guidelines which will guarantee the long-term success of organization if adhered to in a strict manner. Significance In an organization, strategy serves the purpose of formulating a plan in order to reach a vision that enables the company to differentiate itself in a positive manner from its rivals. The strategy within an organization entails the general direction along with the various elaborated activities which take place on daily basis. The strategic success of the organziation usually relies on having a distinctive and progressive vision with a blend of many other pre-requisites which are required to accomplish the vision in a proper manner (Gamble, Arthur, Strickland, John, 2010, p. 149). Organizations need proper strategies to assist customers, respond to their queries, and establish follow-up procedures to reduce customer stress. Moreover, through a good business strategy in place, the proper and efficient utilization of resources is a guarantee. An organization works with various resources such as human resource, financial resource, and productive resources. Creating an effective strategy ensures the proper utilization of all resources and providing the company a competitive advantage over rivals. In this way, the organziation is able to maintain or enhance the existing market share, develop new products, and gain proprietary control in the relevant industry over advancement of technology. On the other hand, an ineffective and inefficient utilization of resources is likely to result in loss of customers, increased costs and reduced market share (Chowdhary & Prakash, 2007, p.493-509). Strategy performs an important part in the maintaining of service quality. It helps organizations gain competitive advantage over their rivals. A competitive advantage is the situation in which a blend of attributes is acquired by an organization in order to permit it to outperform its rivals (Johnson and Sirkit, 2002, p. 693-701). Such attributes may include easier access to skilled and highly trained human resource or easy access to natural resources. The objectives of a companys strategy refer to the plan for the achievement of benchmarked or desired goals and objectives. Thus through an effective strategy, the organizations, large and small, are able to make continuous improvements and maintain a competitive edge in the industry. Through strategy, they seek to identify and then deliver better and newer ways for meeting the needs and wants of customers. Porter Generic Strategy Among many other strategies, the most famous is the Porter Generic Strategy given by Michael Porter. Porter has elaborated upon a classification scheme comprising of three broad strategies which the business organizations commonly utilize for achieving and maintaining the factor of competitive advantage (Murray, 2000, 390-400). Two dimensions describe these generic strategies: strategic strength and strategic scope. The dimension of strategic strength refers to supply-side aspect and considers the core competency or strength of the company. While, strategic scope is the element on the demand side which observes the composition and size of the target market. The two major and significant competencies given by Porter include the product cost and product differentiation. The following figure illustrates the model of Porters Generic Strategy: The dimensions in the Porter Generic Strategy were initially three in number i.e. the scope of target market, level of differentiation, and product cost. They were also categorized as medium, low, or high, and were put together in an arranged form in a matrix that was three-dimensional. However, during the 1980s the scheme was simplified by reducing the factors into three best strategies. They included differentiation, cost leadership, and market segmentation (or focus) (Wright, 2000, p. 93-101). These three strategies are elaborated upon below: Cost Leadership The strategy of cost leadership leads the organization to obtain market share through attracting customers that are price-sensitive or cost-conscious. They accomplish this through leading with the lowest level of prices in the market segment being targeted. In order to offer such low level of prices successfully along with maintaining the high return on investment and profitability, it is essential that the organziation operates at a cost lower than the competitors in the industry. In order to obtain lower operating costs, the approach of attaining a high asset turnover can be undertaken. In other words, the unit costs are lowered by spreading fixed costs over a bulk of products or large number of services rendered. Another approach to achieving lowest possible price level is to obtain low indirect and direct operating costs through restricting the personalization and customization of service offering, and providing the customers standardized products in high volumes, along with making the offers of basic no-frills products. In this manner, the fewer and standard components result in lower costs of production and the restriction on the models produced guarantee larger runs of production. Organizations can also maintain cost leadership by gaining control over procurement/supply chain in order to guarantee the low costs. (Carman, 2000, pp.33-55). Activities like bulk buying, applying a competitive manner of contract bidding, keeping low inventories, and using Just-in-Time method of inventory purchase can enable organizations to keep lower costs. Along with large-scale businesses that produce in bulk various small businesses also possess the capacity of being cost leaders. For instance, the local convenience or grocery stores may be able to appeal to the price-sensitive customers by offering a limited variety, and hiring labors on minimum wage. Moreover, the innovation of processes or products is also likely to result into making offers for cheaper service or product in such situations where the prices and costs are very high. Differentiation Strategy In order to maintain the market leadership in service quality, the organizations may adopt the strategy of differentiating its products and services and compete successfully. This strategy is suitable in situations where there is a non price-sensitive customer segment being targeted, and the market is saturated or competitive. It is applicable if the target customers have few particular needs and are not served properly, and a distinctive capabilities and resource base is available to the firm. A winning strategy of differentiation is exhibited by the organizations accomplishments of increased revenue per unit, a best price for service or product, or the loyalty of consumers towards the company and the brand has enhanced. Marketing Strategies The technological advancements, globalization of the markets, and enhanced economic cooperation are some of the major factors forcing the organizations to obtain more sophistication and be confident in the development and execution of their marketing efforts (Ueltschy and Krampf 2001). Among many other strategies, marketing strategies are used by organizations to maintain leadership in the industry and serve customers to their satisfaction. David Aaker defines the marketing strategy as a process which permits a company to focus the available resources on the most favorable opportunities accompanying the objectives of attain a sustainable competitive advantage and boosting sales. It comprises of all the long-term and basic activities in the category of marketing which concentrate on the assessment of an organizations strategic initial situation along with the development, appraisal and choice strategies which are market-oriented in order to contribute to the companys market objectives and goals (Homburg, Christian; Sabine, Harley, 2009, p. 21-45). There are different types of marketing strategies that may be adopted by business organizations. They may vary due to the different situations of various business organizations. Some of the commonly used marketing strategies include the following: Strategies on the basis of Market dominance In this category, the organizations are categorized on the basis of their industry dominance or market share. These are: Leader Follower Challenger Nicher Shaw, Eric (2012) developed a structure for various marketing strategies as follows: Market introduction strategies The marketing strategist, at introduction, has either penetration or niche to make a choice from. Market growth strategies At this stage, there are two more strategic alternatives that may be available to market manager for selection: brand expansion (Borden, Ansoff, Kerin and Peterson, 1978) or segment expansion (Smith, Ansoff). Market maturity strategies During the maturity stage, the organizations growth of sales boosts, reaches the level of stability and begins to fall. In the early period of maturity, the organizations may commonly put into practice the BCG Matrix through which the organizations hold or maintain a stabilized marketing mix. Market decline strategies Lastly, the sales of the firm decline at some point in time and it is then when the costs begin to exceed the revenues. At this stage, rising costs and declining sales compel the marketing managers to formulate a divesting strategy necessary. Some other marketing strategies that can possibly be put into practice by organizations include: Marketing mix The marketing mix was introduced by Borden (1964) with the description of a mixer of ingredients. Differentiation and segmentation strategies Smith (1956) explains that in product differentiation, the organization attempts at bending and making the wills of demand and supply interact. This refers to the differentiating or distinguishing one or multiple aspect(s) of the companys marketing mix and make it unique from its rivals. It can be in a large segment or mass market having relatively homogeneous preferences of customers. Penetration and skimming strategies The organization following the skimming strategy launches a high-priced product. Once the market for it has been tapped and least price sensitive segment explored, the price is slowly reduced, searching potential demand at all individual level of prices. On the other hand, the companies starting up with penetration pricing begins from the low price at introduction stage and quickly capture market share and sales, however with lower margins of profitability. The marketing strategies can prove to be of big help in value addition to the service providers. Whether it is a large scale manufacturer or small-scale convenience stores, the implementation of marketing strategies help in meeting the needs of customers and thus, result in enhancing the customer satisfaction. They achieve this through identifying, understanding and fulfilling the needs and wants of customers in an effective manner. But also say how maybe internal marketing is just as important interaction of employee and customer. Moreover, the service quality may be maintained through internal marketing which involves managing and involving the organizations staffs in the marketing programs by assigning and training them to perform their role in the marketing process (Shaw, 2012, p. 30–55). Besides this CRM strategy is the most important of all strategies in order to maintain service quality in all types of businesses. Customer Relationship Management (CRM) In the advanced era of innovation and administration, organizations are required to focus more on customers than all other aspects. An organziation having a satisfied customer base is likely to thrive and flourish. Organizations make use of the Customer Relationship Management (CRM) model in order to manage the interaction with existing and potential customers. The utilization of CRM requires an effective use and management of technology for the purpose of marketing, organization, customer service, automation, synchronization of sales, and all types of technical support. The concept of CRM is a feature which is customer-oriented and provides one-to-one solutions to the requirements of customers, response of service on the basis of customer input, direct customer communications and has customer service centers which assist in solving the customers problems (Hasan, Rahman, Khan, 2013, p. 121-131). One of the major characteristics of CRM is the automation of sales force. Through this function, organizations can mechanize the recording and monitoring of a customers accounts histories for the purpose of future or repeated sales; they can also coordinate sales, apply sales promotion analysis, and coordinate marketing, retail outlets, sales, and call centers for the purpose of realizing the sales force automation. Customer Relationship Management (CRM) makes an extensive use of technology and involves following the value delivery skills and trends of technology. This is done through utilizing mechanized operation in order to make available the updated and latest customer data. Moreover, the CRM works with opportunity management which assists the organizations monitor and manage the unpredictable demand and growth along with implementation of a good model of forecast in order to incorporate sales projections with the sales history (DeGregor, Dennison, 2011, p. 35-50). The strategy of CRM is able to retain customers and help organziation in improving and sustaining service quality. Being a customer-centered approach, the CRM focuses on the fulfillment of needs and wants along with customers preferences, instead of customer leverage. Through the utilization of technology, the CRM efforts result in the increased ability of organization to manage, in an effective manner the critical relationships and position it for offering expanded and new services to the customer-base (Nguyen & Mutum, 2012, p. 400-419). They also drive revenues and profitability by assisting their customer is the better decision making process. Through such activities, they add value and establish interactive relationships by engaging individual customers. Moreover, they offer tailored marketing and provide individual customer service in order to improve service quality. Critical Analysis of the Service Strategies used by the Retailers Any firms economic survival depends upon its capacity to offer such products that possess the potential to fulfill the wants and needs of consumers along with the provision of utility sufficiently. This forms the basis of the concept of marketing and also the basis of the organizations key objective. In order to attain this objective, the firms require a complete understanding of the ways in which customers assess the quality or worth of services being offered, and their selection of one organization by giving it preference over another on the basis of long term patronage. The requirement for the survival of organization has resulted in an enhanced focus on the quality of service that is being delivered in the provision of both intangible and tangible goods. An increased demand of retailing and convenience shopping mirrors the various societal trends that have been building in past few decades. These trends include the technological progress, greater incomes, competition, and a large number of women in the workforce. The customers, faced by time constraints, value easy and quick shopping excursions and expect to buy most of the things from one place in order to facilitate their needs. This factor has made the retailing industry become global and the concept of convenience stores appears to be an appealing form in the emerging markets (Deloitte, 2007). There are various factors which develop customers perception of the type of shopping experiences. Such perceptions are usually impacted or determined by numerous aspects including facilities, performance of employees, quality of services, and prices of products among many others. However, retail image of the customer pertains to the ways in which customers and other people perceive retailers. Among many other factors responsible for this image, the service quality provided by the retailers or convenience stores play a vital part. According to Berman and Evans (2005), the image of a retailer heavily relies upon the customers psychological feelings in the retail outlet or the ‘atmosphere’ they are provided. This proves service quality strategies to be contributing effectively in customer satisfaction. The small-scale convenience stores or retailers need to adopt strategies to attract customers with the help of small budget available. Since they do not possess the facilities that the supermarkets or other large-scale stores have, they are required to rely on personalized solutions for customers. The convenience stores have to depend on good service quality, by ensuring personalized services, and a good marketing mix that would price the product competitively and place it in easy access of consumers. Being small scale retail outlet, the convenience stores are required to locate on prominent locations as well as in neighborhoods. For example, a small outlet near gas station or in residential area would result in good sales. Besides this, such stores are required to provide their customers attractions such as small discounts, gift hampers and occasional wishes to let them know that they are cared for. Not only this, but a proper execution of CRM strategies and a good retailer-client relationship can enhance the customers perception regarding the retailer and his products. Conclusion The concept of service quality has gained momentum in the current age of advancements. With the increased awareness among customers, their needs and preferences are also shifting making it essential for the organizations to change their traditional ways of offering services. 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