Customers Expectations Versus Management Perceptions

Eating is observably a daily action and necessity for all human beings. Depending on individuals reason for eating at restaurants, individual intentionally or instinctively assess a multifarious set of attributes ahead of choosing a restaurant. The significance involved to these restaurant attributes is ultimately evaluated in the customer’s mind, leading to a decision of purchasing (Johnson and Champaner, 2004). Thus, this study is to investigate how much service quality can have an impact on customer satisfaction and retention especially in our Mauritian context at KFC. As there is a casual inter-relationship between customer satisfaction and service quality, this study aims to find out the effectiveness of the service dimensions of service quality which leads to customer satisfaction and finally to retention at KFC. All the main aspects will be analyzed and recommendations will be drawn out for better improvement.

Company Background

History

Kentucky Fried Chicken (KFC) was founded by Colonel Harland Sanders in 1952 and its primary focus is fried chicken. KFC also offers grilled and roasted chicken products, wraps, salads, sandwiches and desserts as well beef based products outside the USA. Although the death of Sanders in 1980, he remains a vital part of the firm’s branding and advertisements, and ‘Colonel Sanders’ or ‘The Colonel’ is a metonym for the company itself. In 1991, the abbreviated form of its name ‘KFC’ was adopted by the company.

The Present

KFC operates more than 5,200 restaurants in the United States and more than 15,000 units around the world. In 109 countries and territories around the world, KFC everyday serves more than 12 million customers. KFC is world famous for its Original Recipe fried chicken, made with the same secret blend of 11 herbs and spices Colonel Harland Sanders perfected more than a half century ago. Based on the Fortune 500 List, KFC is ranked on 239 positions with revenues in excess of $11 billion in 2008.

Introduction of KFC in Mauritius

With time, consumers were more demanding for large variety of food and then, the first KFC outlet was launched in Mauritius-1983. Pick N Eat is the company which operates the KFC franchise in Mauritius. KFC has carved a solid reputation as a quick service restaurant which provides quality products and service. Across our island, 18 outlets are spread out and 10,000 customers daily are enjoying their finger-linking favorites in the consumer-friendly environment.

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Background of the program

In the fierce competition, the market trend has changed noticeably from agricultural to service market. The service sector especially fast food industry is in a rapid growth and gain a position in the market due to lack of time to prepare food and dual income families. All of the fast food businesses are trying their best to improve their service quality in order to make customer satisfied and return back to them again. They are concentrating more on service quality in order to meet the needs and expectations of the customer. The more satisfied the customers are, the more likely they are to return to the restaurant. The restaurant industry has undoubtedly not been free from either augmented competition or from increasing customer expectations regarding quality. According to the Kaplan and Norton (2001) the importance of the perceived quality in order to get the retention effect in restaurant industry is always considered as a main element to retain in the customers and the business. The main reason behind that in this industry entry barrier are usually low and any one can easily enter due to investment required that is not on the higher side. So the point is that when ever consumer is satisfy from the arrangement by the management, the quality of the food provided by the staff members with the positive attitude than this result in increasing the loyalty towards the particular restaurant and increases the retention intensions of the customers.

Problem Statement

‘Service quality is a vital strategy for any restaurants, success and repeat business and it has long been defined by adopting a rather more customer-oriented view and not by the restaurateur-oriented’ (Saleh and Ryan, 1991). Customer is the key role in any business, without any customer it is difficult to do business. It is necessary to work closely with your customer. As customers can also create your business, thus, customer is the major part of business and also in the market. Business runs through customer, without the customer there is no business. Due to the increasing competition with other restaurants and quality-conscious’ customers, it is vital to carry out this research. There is a need for further improvement in order to face the competitors and meet the increasing customers’ expectation concerning quality. Based on the actual service quality performance of KFC, it is important to identify if customers are satisfied with the current situation and are likely to retain at KFC or switch to other competitors. Also, to find out the factors of service quality that leads to customer satisfaction and retention. From the above reasons, it is important that the service performance meets or exceeds customers and their expectation, the customer will be satisfied. Service quality is an antecedent of customer satisfaction.

Research Objectives

-To assess customers’ expectation and perception level towards service quality.

-To analyze the discrepancy gap between customers’ expectation and perception level towards service quality.

-To identify the discrepancy gap between customer expectations and employees’ perceptions at KFC.

-To explore the service aspects of the dimensions which have an influence on customer satisfaction and retention?

Research Questions

-What is the level of customers’ expectation and perception towards service quality?

-What is the discrepancy gap between customers’ expectation and perception towards service quality?

-What is the discrepancy gap between customer expectations and employees’ perceptions at KFC?

-What are the service aspects of the dimensions which have an influence on customer satisfaction and retention?

Aims of the study

This study is to find out whether the service dimensions have an impact on customer satisfaction and retention at KFC by using the SERVQUAL Model by Parasuraman, Zenithaml, and Berry (1988). It will also explore the service aspects that affect and influence customer satisfaction and retention.

Significance of the study

This study will act as a practical guideline for KFC, especially the management and the front line employees which may increased a higher level of customer satisfaction in the near future. The results of this quantitative assessment of service quality may provide some insights into how customers rate the service and assessed customer satisfaction at KFC. The outcomes will utilize as a basis to improve their existing service quality or to develop a new one in order to meet with the customers’ needs and satisfy them. Furthermore it will help KFC managers to know if they are providing services according to the norms established by customers. The management will be able to come up with a strategy for upgrading their service quality which will definitely lead to customer satisfaction and retention. All these views of customers will help KFC to remedy problems if there are and maintain their service quality.

Phases of the discussion

Introduction

In the first chapter, the problem area is discussed with a deeper understanding regarding the research. The problem discussion ends with a research objectives and questions. In the end of this chapter, the contributions of this research are also presented.

Literature Review

In the second chapter, the literature review of service quality’s impact on customer satisfaction and retention is discussed with the following purposes of assessing customers’ expectation, customers and employees’ perception, identifying their gaps and the influencing service quality aspects.

Research Methodology

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Analysis

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Conclusion and Recommendation

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Conclusion

The first chapter provided us a background to the outline of the dissertation. It contained the research context, which is, identify the problems, and establish its aims and its objectives, set out the research questions and finally present the outline of the study.

Chapter 2- LITERATURE REVIEW

2.1 Introduction

This chapter will give an overview of literature and models that presented by writers and journalists. It will support the research objective presented in the previous chapter. The chapter will elaborate the concepts of service, service quality, customer satisfaction, customer retention, service quality dimensions, the gaps and others.

2.2 Service

There are many definitions concerning the concept of service by researchers. (Parasuraman et al. 1985). Gronroos (1983) defined service as: “An activity or series of activities of more or less intangibles nature that normally, but not necessarily, take place in interactions between the customer and service employees and/or physical resources or goods and / or systems of service provider, which are provided as solutions to customer problems”. Service is: “Any primary or complementary activity that does not directly. Produce a physical product – that is, the non-goods part of the transaction between customer and provider” (Payne, 1993). Whereas Kotler et. al. (1999) defined service as any activity or benefit that one party offers to another which is essentially intangible and does not result in the ownership of anything, and it may or may not be tied to a physical product. In today market, products heavily rely on its service to acquire competitive advantage and to satisfy customers’ needs.

2.3 Service Quality

In the service industry, service quality has become a crucial tool. Practitioners are interested in the concept of service quality, which has an advantageous effect on outcome performance for the company. Service quality is a critical element of customer perceptions as well as in determining customer satisfaction. Various experts have defined service quality differently. Parasuraman et al. (1985) proposed a formal definition of service quality as “the degree and direction of discrepancy between customers’ service perception and expectation.” If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs. Asubonteng et al. (1996) defines ‘service quality as the extent to which a service meets customers, need and expectation’. Hooley, Saunders and Piercy (2004) “A prime factor in differentiating the product or service from that of competitors is quality. Quality concerns the fitness for purpose of a product or service. For manufactured products that can include the durability, appearance or grade of the product while in services it often comes down to the tangible elements of the services, the reliability and responsiveness of the service provider, the assurance provided of the value of service and empathy, or caring attention, received.”

2.4 SERVQUAL Approach

The SERVQUAL framework has come up for the purpose to improve service quality in services and retailing organizations as it has suggest that customer satisfaction is based on multiple factors rather than one. The SERVQUAL method developed by Parasuraman et al. in 1988 is a technique used to perform a gap analysis of an organization’s service quality performance against customer service quality needs. Parasuraman et al. (1988) came up with five dimensions (grouped with 22 attributes) to measure service quality are tangibles, reliability, responsiveness, assurance and empathy. The SERVQUAL instrument is regarded as a reliable method of measuring service quality (explore customers’ expectation and perceptions), which in turn leads to a measurement of customer satisfaction.

2.4.1 SERVQUAL Dimensions

In 1985, Parasuraman et al. has identified ten determinants for measuring service quality: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding or knowing the customer and tangibles. Later, in 1998, Parasuraman et al. refined the model to the useful acronym RATER:-

Reliability

It is defined as ‘the ability to perform the promised service dependably and accurately’ or ‘delivering on its promises’ (Zeithaml et al., 2006, p. 117). It is one of the most important service components for customers as it implies ‘doing it right the first time’. The service organizations need to keep its promise and maintain an error free record. The reliability factor: the staff performs tasks that have been promised to guests and resolve problems encountered by guests. For the food & beverage industry, reliability can be interpreted to mean fresh food delivered at the correct temperature and accurately the first time (Andaleeb & Conway, 2006).

Assurance

It is defined as the ability of staff to inspire confidence and trust. Assurance is defined as “the employees’ knowledge and courtesy and the service provider’s ability to inspire trust and confidence” (Zeithaml et al., 2006, p. 119). The staff can handle effectively complaints and problems from the guests. Customers are more likely to use tangible evidence to assess the assurance dimension such as awards or special certificates which give a new customer confidence.

Tangibles

Tangible is defined as the physical facilities, equipment, staff appearance and others. It translates to the restaurant’s interiors, the appearance and condition of the cutlery, tableware, and uniform of the staff, the appearance and design of the menu, restaurant signage and advertisements (Zeithamal et al., 2006). Tangibles are used by firms to convey image and signal quality (Zeithaml et al., 2006). Customers use this dimension to evaluate the quality.

Empathy

Empathy is the extent to which caring individualized service is given to a customer. The customer is treated as a king. Many small companies use this ability to provide customized services as a competitive advantage over the larger firms (Zeithaml et al., 2006). Empathy may be important to ensure customer loyalty as the server knows how the customer likes his or her food prepared. In return, the customer is easily approach and spell out their needs to the service provider. If a company looks its customer as an individual, as result, the company will come as a winner.

Responsiveness

Responsiveness is defined as “the willingness to help customers and provide prompt service” (Zeithaml et al., 2006, p. 117). The service provider has the ability to deal customer requests, questions, problems and complaints with attentiveness and promptness in a timely manner and it is crucial for the customers. In order to be responsive, a service provider has to determine how long it would take to get answer or to solve a problem. To be successful, companies need to look at responsiveness from the view point of the customer rather than the company’s perspective (Zeithaml et al., 2006). This dimension captures the notion of flexibility and ability to customize the service according to the customer needs.

2.4.2 Service Quality Gaps Model

In 1990, Zeithaml, Parasuraman and Berry have developed a survey instrument to measure the gap between customer’s expectation for excellence and their perception of actual service delivered. The SERVQUAL model uses the terms that describe one or more determinants of a “quality service encounter”. SERVQUAL as the most often used approach for measuring service quality has been to compare customer’s expectation before service encounter and their perception of the actual service delivered (Gronroos, 1982, Lewis and Booms, 1983; Parasuraman et al., 1985). There are seven major gaps in the service quality concept, out of which Gap 1, Gap 5 and Gap 6 are more associated with the external customers as they have a direct relationship with customers.

Figure 1: SERVQUAL or Gaps Model

(Zeithaml Parasuaman Berry 1988)

Gap 1: Customers’ expectations versus management perceptions

It is the knowledge gap which portrays the difference between the management beliefs about customers, expectations and what customers actually need and expect. This gap happens when there is insufficient flow of communication upwards, lack of marketing research orientation and too many level of management.

Gap 2: Management perceptions versus service specifications

It is a policy gap where a difference occurs between management perceptions regarding customers’ expectations and service specifications are set for service delivery. The reasons for this gap are unfeasibility, inadequate commitment to service quality and task standardization as well as an absence of goal setting.

Gap 3: Service specifications versus service delivery

It is the difference between the service specifications and the service delivery teams’ actual performance on these specifications. The gap is a result of poor employee-job fit, lack of perceived control and lack of teamwork.

Gap 4: Service delivery versus external communication

The communication gap is the difference between what the company communicates and what is actually delivers to the customer. It is due to inadequate horizontal communications and propensity to over- promise.

Gap 5: The discrepancy between customer expectations and their perceptions of the service delivered

It is the difference between what has actually delivered and what customers feel they have received. Customer expectations are influenced by the extent of personal needs, past service experiences and word of mouth recommendation. The difference occurs when customers are influenced and service provider has shortfalls.

Gap 6: The discrepancy between customer expectations and employees’ perceptions

The service quality gap is what the customers expect to receive and their perception of the service that is actually delivered. There is a difference in the understanding of customer expectations by front-line service provider.

Gap 7: The discrepancy between employee’s perceptions and management perceptions

This gap is mainly an internal difference in the organization such as differences in understanding of customer expectations between management and employees.

2.3 Customer Satisfaction

Customer satisfaction is the heart of marketing. Customer satisfaction is the customer’s evaluation of the service or product against if their needs and expectations are meant. Richard L. Oliver (1997, P.13) define customer satisfaction as ‘Satisfaction is the consumer’s fulfillment response. It is a judgment that a product or service feature, or the product or service itself, provides a pleasurable level of consumption-related fulfillment.’ Satisfaction is influenced by customers’ emotional responses, their attributions and their perceptions of equity. As Kotler (2000, p.36) defined that ‘satisfaction is a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or outcome) in relation to his or her expectation.’ Johnston and Clark (2005) defined “Service as the combination of outcomes and experience delivered to and receives by a customer. Customers therefore judge the quality of the service on the experience as well as the outcome.”

2.5 Customer Retention

Lovelock (2004) illustrates importance of customer retention “The hardest part of a business is customer retention. If a company does not retain its customers, inevitably it will fail. Marketing essentially means keeping customer loyalty.” When an organization is able to retain a customer in a good way, the customers will be loyal with the firm for lifetime. Laura Lake (2010) defined “Customer retention is not only a cost effective and profitable strategy, but in today’s business world it’s necessary. This is especially true when you remember that 80% of your sales come from 20% of your customer and clients..” Hill and Alexander (2006) defined “It is becoming accepted that there is a strong link between customer satisfaction, customer retention and profitability.” After providing all service to customer, means that the organization understands customer expectation well, according to the customer expectation, organization provide all service and customer is loyal to the organization. It makes profit for the organization and organization has to retain by providing continues good services, more better customer satisfaction and that will be profitability for the organization. So, organization has to make strong relation with customers.

2.6 Customers’ expectations and perceptions

2.6.1 Customers’ expectations

Consumers expect to be delivered quality products and services; therefore expectations play an important role in the customer satisfaction formation. The term expectations really matters to companies because they want to know what customers’ expectations are. According to Oliver (1981) “… expectations are consumer-defined probabilities of the occurrence of positive and negative events if the consumer engages in some behavior”. Customers form their expectations from their past experience, friends’ advice, and marketers’ and competitors’ information and promises. Organizations in order to keep expectations from rising, they have to perform services properly from the first time (Parasuraman et al. 1988). Thus, customer expectations for the service are likely to rise when the service is not performed as promised. Expectations serve as reference points in customer’s assessment of performance (Cronin& Taylor, 1992). “The purpose of trying to understand customers’ expectations is to try to ensure that service can be designed and delivered in order to meet those expectations. If the operation meets the expectations, or indeed exceeds them, then customers are satisfied with the service. If they are satisfied they are more likely to become valuable customers who not only use the service again, but are positively disposed towards it and may even recommend it to other’ Johnston and Clark (2005). Therefore, the perceived service quality is viewed as the difference between consumers’ perceptions and expectations for the service provided.

2.6.2 Customers’ perceptions

Mc Kenna (2000) is of opinion that perception is a vital process in a person’s life where he or she has to manage and interpret a situation or an event to define a particular respond. Service firms must understand the concept of service quality from the point of view of the customer, not from the view point of the service firm or service provider. Besides, customer perceives services in the response to quality pertaining to the service and the extent to which they are satisfied with the overall service with their experiences (Zeithaml and Bitner 2003). The customer satisfaction is determined by the customers’ perceptions and expectations of the service quality. Customer perceives services in terms of the quality of the service and how satisfied they are overall with their experience. The customers’ perception varies from customer to customer and each one has different beliefs towards the services that play a crucial role in determining customer satisfaction. ‘Therefore, customer perception and customer satisfaction are very closely linked together, because if the perceived service is close to customer’s expectations it leads to satisfaction. Satisfied customers provide recommendations; maintain loyalty towards the company and customers in turn are more likely to pay price premiums’ (Reichheld, 1996). As such, perceived service quality is a key component of customer satisfaction.

2.7 Relationship between service quality and customer satisfaction

A great emphasis need to be heightened on service quality and customer satisfaction. Sureshchandar et al, (2003) identified that strong relationships exist between service quality and customer satisfaction while emphasizing that these two are conceptually distinct constructs from the customers’ point of view. Spreng and Mackoy (1996) also showed that service quality leads to customer satisfaction while working on the model developed by Oliver (1997). Customer satisfaction and the quality of food have long been acknowledged as a essential function for success and endurance in competitive marketplace that have been connected to consumer behavioral intentions as purchase and loyalty intention, their willingness to widen positive word of mouth, recommendation, and complaint intention (Olsen, 2002). Customers’ perceived service quality has a positive effect on customer satisfaction.

2.8 Relationship between service quality and customer retention

Service Quality is viewed as a vital means for customer retention. Service quality is regarded as one of key factors for service differentiation and competitive advantage for a business. It has been argued that service excellence enhances customers’ inclination to buy again, to buy more, to buy other services, to become less price sensitive, and to tell others about their positive experiences (Anderson and Fornell, 1994; Anderson et al.,

1994; Rust et al., 1995; Zeithaml et al., 1996; Bolton et al., 2000). A study by Zeithaml et al. (1996), determines that service quality influences different intentions, such as giving recommendations, doing more business, and willingness to pay more. When customers perceive that they are receiving better quality service for their money, they believe they are receiving “good value”, which increases their loyalty to the service provider (Bolton et al., 2000).

3.0 Comparison between authors

Many researchers and writers have their own opinion regarding service quality, customer satisfaction and customer retention. These opinions will definitely shed light and need to determine which is more applicable in this research work. Service quality has many definitions but the most common is the match of customers’ expectation and their experience. Asubonteng et al’s definition is more relevant to this study as it describe as ‘the extent to which a service meets customers, need and expectation’. The SERVQUAL model is valued as an all purpose measurement and Parasuraman et al’s definition has used in this study. Some authors define the service quality gaps model similarly as a mean to measure customer’s expectation and customer’s perception. The SERVQUAL dimensions in this study have mostly used the definition of Zeithaml et al which are Reliability- to perform dependably and accurately’, Assurance- knowledge, courtesy, trust and confidence, Tangibility- the physical evidence of the service, Empathy- caring individualized service to customer, Responsiveness- the willingness to help. Oliver, Kotler, Johnston and Clark illustrate customer satisfaction as a positive response of the consumer’s expectation. Customer retention becomes a necessity for the success of a business. Oliver, Johnston and Clark agreed with the fact that customers’ expectation should be understand in order to design better service and meet their expectation. Then, the customer will be satisfied and Parasuraman et al. explained that in order to increase the level of expectation, the task must be done properly at the first time itself. Regarding customers’ perception, Mc Kenna, Zeithaml and Bitner share the same opinion that it the way of customer to interpret their experience and if they are satisfied.

4.0 Application of the theory at KFC

Internationally, a service quality assurance team conducts regular surveys in every KFC restaurant in every country. The evaluation is mainly attributed by the aspects of CHAMPS including cleanliness, hospitality, accuracy, maintenance, product quality standard and speed of service. This is to evaluate the customers’ experience whether they are satisfied or not with the products and services.

In Mauritius, KFC has already executed the theory of service quality and conduct survey regarding the services locally. A Hazard Analysis Critical Control Point (HACCP) program is implemented in order to identify, evaluate and control any physical and environmental hazards in the work place. KFC restaurants in Mauritius are constantly checked through internal audits and checks by the parent company with the aspects of CHAMPS. KFC has its own training center recognized by the franchisor for their staffs and also have achieved National Quality Award. The most significant policy of KFC is evaluating the customers’ experience with KFC restaurants, whether they are satisfied or not with the products and services, and they can also put their comments and suggestions for further improvements of the products and services of KFC. Today for Mauritians, KFC restaurants has become the preferred eating spots, living and amusement spots for the families and young people especially.

5.0 Conclusion

The literature review shows some general agreement by writers that the concept of service quality is an antecedent of customer satisfaction and retention. High service quality will obviously lead to high levels of customer satisfaction and result in customer retention. Finally, the SERVQUAL Model was established as a widely used and reliable method of measuring service quality.