Service Quality and Customer Satisfaction

Operations Analytics/
Service Management in Key Sectors
LECTURE 3
Service Quality and
Customer Satisfaction
Importance of Service Quality
§ Customer Retention: High service quality leads to customer satisfaction, fostering loyalty
and repeat business.
§ Financial Performance: Prioritizing service quality boosts financial performance with
satisfied, loyal customers, driving increased sales, higher customer lifetime value, and positive
impacts on revenue and profitability.
§ Competitive Advantage: Superior service quality differentiates a business from its
competitors, attracting and retaining customers.
Impact of Service Quality on Customer Satisfaction

§ Expectation Alignment: Meeting or exceeding customer expectations produces a positive
perception of the service.
§ Trust and Reliability: High service quality builds trust; customers are more satisfied with
consistent and reliable services.
§ Customer Loyalty: Prioritizing service quality fosters customer loyalty, encouraging repeat
business and recommendations.
§ Positive Word-of-mouth: Satisfied customers share positive experiences, leading to new
customer acquisitions through word-of-mouth.
§ Brand Reputation: Excellent service contributes to a positive brand image, attracting
customers and solidifying market position.
For example, Swiggy's success is attributed to its wide

restaurant network and its commitment to service quality.
The platform ensures timely deliveries, accurate order
fulfilment, and responsive customer support. Customers
who consistently receive high-quality service from Swiggy
are more likely to be satisfied, repeat their orders, and
recommend the platform to others.
Measuring and Monitoring Service Quality

Measuring service quality is crucial to identifying improvement areas and gauging strategies'
effectiveness. Some key metrics to evaluate service quality include:
1. Customer Feedback Surveys: Customer feedback surveys, including Net Promoter Score
(NPS), satisfaction ratings, and open-ended questions, provide valuable insights into service
perception, areas for improvement, and customer preferences.
For example, Zomato utilizes customer feedback surveys to gather
insights into user experiences, preferences, and the quality of their
services.
2
2. Net Promoter Score (NPS): NPS categorizes customers as promoters, passives, or detractors,
providing a clear view of overall satisfaction. Companies use NPS calculations to gauge loyalty,
identify advocates, and pinpoint areas for improvement to convert detractors into promoters.
For example, Airtel uses NPS to gauge customer satisfaction and
loyalty, identifying areas for improvement in its network and
customer service.
3. Customer Effort Score (CES): CES measures customer effort in interacting with a brand.
Lower scores indicate ease, while higher scores may signal areas needing improvement in
the purchase or support process.
For example, BigBasket uses CES to assess the ease of
shopping, ensuring a hassle-free experience for customers
ordering groceries online.
4. First Contact Resolution (FCR): FCR measures the percentage of issues resolved in the first
interaction, indicating effective service delivery. A high FCR score reflects prompt problem
resolution and boosts customer satisfaction.
For example, ICICI Prudential Life Insurance emphasizes FCR
to promptly address customer queries and concerns, providing
efficient and effective support in the insurance sector.
5. Customer Retention Rate: The retention rate, calculated as the percentage of customers
staying over time, reflects satisfaction and loyalty. It's a vital indicator for building lasting
relationships, helping companies identify concerns and implement strategies to maintain
customer loyalty.
For example, Tanishq focuses on customer retention by offering quality
products, personalized services, and loyalty programs to build lasting
relationships with customers in the jewelry industry.
6. Customer Satisfaction Survey: Customer satisfaction surveys are structured questionnaires

designed to systematically collect and measure customer opinions and satisfaction levels
regarding specific aspects of a product, service, or the overall customer experience.
For example, Amazon conducts customer satisfaction surveys
to gather feedback on product quality, delivery speed, customer
service, and online shopping experience.
3
Service Recovery Strategies
Service recovery is contacting customers with a poor experience to identify and resolve their issues.
Companies can rebuild their brand’s reputation and reclaim lost customers by performing service
recovery.
1. Prompt Acknowledgment:
§ Swiftly acknowledge the customer's complaint to demonstrate their concerns are being
taken seriously.
§ Acknowledgement can be through various channels, such as in-person, phone, email, or
social media, depending on the nature of the business.
2. Empathy and Understanding:

§ Show empathy and understanding towards the customer's situation. Validate their feelings
and frustrations.
§ Make the customer feel heard and valued by expressing genuine concern for their
experience.
3. Apologize and Take Responsibility:

§ Offer a sincere apology for any inconvenience or dissatisfaction experienced by the
customer.
§ Take responsibility for the issue, even if it was beyond your control. This helps build trust
and demonstrates a commitment to resolving the problem.
4. Provide a Solution:
§ Propose a tangible and practical solution to address the customer's complaint. This may
involve rectifying the issue, offering a replacement, refunding, or implementing changes to
prevent recurring problems.
§ Ensure that the solution aligns with the severity of the complaint and is fair to the customer.
5. Follow-Up and Continuous Improvement:

§ After resolving the issue, follow up with the customer to ensure their satisfaction and
inquire if anything else can be done.
§ Use customer feedback as an opportunity for continuous improvement. Analyze trends in
complaints to identify systemic issues and implement changes to prevent similar problems
in the future.
Reference:
§ 【Service Quality: What it is, How to Measure, Improve & Tools】. (n.d.). https://www.uphint.com/post/service-
quality-what-it-is-how-to-measure-improve-and-tools
§ Shields, K. (2021, August 8). Chapter 3: Managing a customer service team. Pressbooks.
https://ecampusontario.pressbooks.pub/customercentricstrategy/chapter/chapter-3-managing-a-customer-
service-team/

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Service Quality and Customer Satisfaction

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Operations Analytics/

Service Management in Key Sectors

Impact of Service Quality on Customer Satisfaction

For example, Swiggy's success is attributed to its wide

Measuring and Monitoring Service Quality

6. Customer Satisfaction Survey: Customer satisfaction surveys are structured questionnaires

2. Empathy and Understanding:

3. Apologize and Take Responsibility:

5. Follow-Up and Continuous Improvement:

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