Winning in the after-market
After-sales service quality in a broadcast market
Bouke Douma December 2009 University of Groningen
Faculty of Economics and Business Administration
Specialization Business Development Student number: 1349961
Abstract
After-sales service quality is known to be the most important determinant for acquiring a sustainable competitive advantage. In this research we have made a first step to explore this and investigate how organizations can evaluate their after-sales service quality. We have used a literature review and exploratory depth interviews to identify an initial pool of determinants which evaluate after-sales service. These determinants are: credibility, responsiveness, ease of access spare parts, ease of access service provider, reliability, understanding, courtesy, communication, competence and tangibles. To be able to validate these findings we have also carried out quantitative research on these determinants. We have performed a multiple regression analysis to test the sample, which originates from a database of Sony Professional customers, to look for causalities between our independent and dependent variables. The analysis shows that credibility, responsiveness, understanding and tangibles all have a significant relation. We can therefore conclude that these determinants are directly and positively related with after-sales service quality in the broadcast market. Unfortunately the rest of the determinants show no significant relation however since this master thesis is the first to investigate how to evaluate after-sales service the results of this master theses can be perceived as first conclusions which can serve as a basis for further research.
Table of content:
Abstract ... 2
1. Introduction and literature review ... 5
1.1 Services defined ... 6
1.2 Classifying services ... 7
1.3 Quality ... 10
1.4 Service quality ... 11
1.4.1 Disconfirmation model of service quality ... 12
1.4.2 Nordic Service quality model ... 12
1.4.3 SERVQUAL... 14
1.4.4 SERVPERF ... 17
1.4.5 Garvin service quality determinants ... 18
1.5 Importance of service quality for organizations ... 19
1.6 After sales service ... 20
2. Problem statement ... 23
3. Research design ... 25
4. Factors influencing after-sales SQ: A qualitative approach ... 29
4.1 Data sources ... 30
4.2 Data analysis ... 31
5. Hypothesis and Graphical model development ... 33
5.1 Hypothesis development ... 33
5.2 Graphical model ... 38
6. Factors influencing after-sales SQ: A quantitative approach ... 39
6.1 Data collection... 39
6.1.1 Sample selection ... 39
6.1.2 Procedure ... 40
6.2 Measurement and scaling ... 40
6.3 Operationalization of the variables ... 41
6.4 Statistical analysis ... 42
6.5 Pilot study ... 42
7. Data analyses ... 45
7.1 Checking assumptions ... 45
7.1.1 Internal validity ... 45
7.1.2 Assumptions checking regression analysis ... 46
7.2 Correlation ... 51
7.3 Regression model ... 52
7.4 Testing hypothesis ... 55
8. Evaluation after-sales service quality and recommendations Sony ... 59
8.1 Evaluation of Sony Professional after-sales service quality ... 59
8.2 Recommendations to improve after-sales service quality at Sony Professional ... 60
9. Discussion and Conclusion ... 61
9.1 Conclusion and Discussion ... 61
10. References ... 67
Appendix 1 ‘Interview guide qualitative research’ ... 71
Appendix 2 ‘Survey’ ... 74
Appendix 3 ‘Background information Sony Professional Europe’ ... 85
Appendix 4 ‘Cover letter survey’ ... 87
Appendix 5 ‘Coding qualitative research’ ... 88
Appendix 6 ‘Sample Characteristics’ ... 92
Appendix 7 ‘Item scores’ ... 94
Appendix 8 ‘Normality Distribution’ ... 94
Appendix 9 ‘Operationalization determinants’ ... 102
1. Introduction and literature review
An informal survey of participants at the Wharton-Stanford conference on the after-sales service industry in 2005 revealed that many traditional manufacturing firms derive over 50 percent of their revenues from services and expect this figure to continue to increase. Companies recognize that after-sales service is an important source of revenue and profit, customer acquisition and retention, and competitive differentiation (Cohen et al, 2006).
In a context of global competition and decreasing profits from product sales, the after-sales services and activities constitute a relevant profit source as well as a key differentiator for manufacturing companies and resellers (Saccani et al, 2005). Profit generated by after-sales services is often higher than the one obtained with sales. The service market can be four or five times larger than the market for products and it may generate at least three times the turnover of the original purchase during a given product’s life-cycle. It is estimated that service networks in only four US industries (consumer electronics, personal computers, power tools, and vacuum cleaners) could generate revenues of $6 billion to $8 billion a year from after sales service, parts, and ancillary products. Besides being a long-term potential revenue source, the after-sales service constitutes a mean to uncover customer needs and a strategic driver for customer retention. It represents, in fact, ‘‘one of the few constant connections that customers have with a brand’’ influencing customer satisfaction and loyalty (Gaiardelli et al, 2007)
Companies can benefit in several strategic ways by focusing on after-sales services (Grönroos, 2007). Providing support generates a low-risk revenue stream over a long period of time. Aircraft manufacturers, for instance, can reap additional revenues for as long as 25 years after a sale. The longer the life of the asset, the more opportunities companies will find down the line. Also, increasing sales of parts and service-related products costs businesses far less than finding new customers, though they can successfully cross sell and up sell only if the support they offer satisfies existing customers. After sales services can be a source of differentiation as well. Company’s use of contract manufacturers and the development of global manufacturing standards have led to the homogenization of products. Being on par with your rivals in performance,
price, and quality gets you into the game; after-sales services can win you the game. (Kasper, 1989) Finally, when businesses provide aftermarket support, they gain a deep understanding of customer’s technologies, processes, and plans, knowledge that rivals can’t easily acquire. That provides companies with an unlikely, but sustainable, competitive advantage (Cohen et al, 2006)
1.1 Services defined
With regard to service organizations, Levitt (1972) states: “There is no such thing as a
service industry. There are only industries whose service components are greater or less than those of other industries. Everybody is in service.”
The service marketing literature contains many definitions of services. However there are some common features in all of these definitions. At first, these commonalities refer to the fact that services deal with something that is intangible. This means that it is difficult to hold or to stock services (Vermeulen, Dankbaar, 2002). Moreover, the buying of services does not necessarily result in the ownership by means of a physical transfer of the object. Rather, it creates a bundle of benefits during and/or after the interaction between the service provider and the customer that results in a particular experience for the customer (Kasper et al, 2006)
The most accepted definition of services is probably defined by Grönroos (2006):
A service is a process consisting of a series of more or less intangible activities that normally, but not necessarily always, takes place in interactions between the customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems.
For services in general, Grönroos (2006) identifies three basic and more or less generic characteristics:
1. Services are processes consisting of activities or a series of activities.
3. The customer participates as a co-producer in the service production process at least to some extent.
According to Kasper et al (2006) services refer to efforts, deeds or processes consisting of activities or a series of activities performed by the service provider, quite often in close co-operation and interaction with the customer. Technology, especially information and communication technology (ICT) may facilitate these processes. Services may be added to “things” (After-sales service, complaint handling, training, maintenance of a copier) or exist as services on their own. Based on this, Kasper et al define services as: Services are
originally intangible and relatively quickly perishable activities whose buying, which does not always lead to material possession, takes place in an interactive process aimed at creating customer satisfaction.
In this master research we define a service as supporting the customer’s everyday
activities and processes in a value creating manner (Grönroos, 2007). The rationale for
choosing this definition is based on the fact that Gronroos (2007) indicates that this value-supporting offering definitely not only include industrial services such as maintenance, training or repair. It includes the total support, thus including the physical product as well as service processes, such as, deliveries, installing, repair, maintenance and customer training, and so called :hidden services:, such as invoicing, complaints handling, extranets, product documentation and ad hoc interactions between people.
1.2 Classifying services
Not all services are the same. It is therefore important to understand the nature of different services. Consequently, different management approaches need to be considered across the broad spectrum of services. Classifying services is a way of helping us to understand the varied nature of services.
According to the service package model by Fitzsimmons (1994), service is described as a package or bundle of different services, tangibles and intangibles, which together form the service. The package is divided into two main categories: the main service or core
service and auxiliary services or extras, which are sometimes referred to as peripherals or peripheral services, sometimes also as facilitator services.
As noted in the previous paragraph, a distinction is often made between core services and peripheral services. However Gronroos (2007) identifies that it is useful to distinguish between three groups of services.
- Core service
- Enabling services (and goods) - Enhancing services (and goods)
These three groups of services are also acknowledged as the basic service package (Gronroos, 2007). The core service is the reason for a company being on the market. Enabling/facilitating services are also referred to as additional services and these services make it possible for customers to use the core service. Examples are reception services in a hotel or check-in services for airline transportation. Gronroos (2007) also mentions that if enabling services are lacking the core service cannot be consumed. The third type of service is enhancing or supporting services. These, like enabling services, are also auxiliary services but they fulfill another function. Enhancing services do not facilitate the consumption or use of the core service, but are used to increase the value of the service and/or to differentiate the service from those of competitors.
An important example of an enhancing service is after-sales service. Main focus of this master research is after-sales service and this can be classified as an enhancing service because of the value adding and supporting nature. Hotel restaurants and airport lounge services related to air transportation are also examples of enhancing services.
The basic service package is, however, not equivalent to the service offering customers perceive. The basic service package only includes the outcome related features of the service. They do not say anything about ‘how’ the process is perceived. As the perception of the service process cannot be separated from the perception of the elements of the
(2007) therefore expanded his ‘basic service package’ into a more comprehensive model, called the augmented service offering model as illustrated in figure 1.1.
Figure 1.1: Augmented service offering by Grönroos (2007)
In the augmented service offering model by Grönroos (2007) the service process and the interactions between the organization and its customers as well as customer’s co-production efforts are included. In this way the ‘basic service package’ is geared to the total customer perceived quality of services.
In the augmented service offering model by Grönroos (2007), the service process, the buyer-seller interactions or service encounters, are perceived in a number of ways, which differ from situation to situation. Due to the characteristics of most services, there are, however, three basic elements, which constitute the process:
- Accessibility of the service
- Interaction with the service organization - Customer participation
1.3 Quality
There is an old saying that “beauty is in the eye of the beholder”. That means, what is considered beautiful is judged so by the person making the judgment, based on his or her likes and dislikes, social conditioning, social norms, parents and upbringing, surrounding culture and so on. What is beautiful to one person may not be beautiful to another. Like beauty, can we say that quality is in the eye of the beholder, or the mind of the consumer? Is there such a thing as a universal definition of quality, where all people at all times would recognize it? Most people would say there is no universal definition. Quality, to a great degree, is what the customer says it is. How could we know whether we give service which is judged 100 percent satisfactory by 100 percent of our customers? By making the judgment ourselves? No. We would have to ask, observe, find out from the customers themselves, and see whether they recommended us to others and so on. (Peters, 1999). Service quality is defined by the customer’s impression of the service provided. (Parasuraman et al, 1988).
Peter Drucker (1999) says that quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for. A similar definition is given by the American society for quality: ‘a subjective term for which each person has his or her own definition’.
All of the above definitions share a lot of commonalities, the quality of a product or service refers to the perception of the degree to which the product or service meets the customer's expectations. Quality has no specific meaning unless related to a specific function and/or object and can therefore de defined as a perceptual, conditional and somewhat subjective attribute.
Garvin (1983) and Holbrook and Corfman (1985) differentiate between subjective quality (as mentioned above) and objective quality.Holbrook and Corfman (1985), for example, note that customers do not use the term quality in the same way as researchers and
mechanistic and humanistic quality: ‘mechanistic (quality) involves an objective aspect or feature of a thing or event; humanistic (quality) involves the subjective response of people to objects and is therefore a highly relativistic phenomenon that differs between judges (Holbrook and Corfman, 1985). Garvin (1983) discusses five approaches to defining quality, including two (product-based and manufacturing-based) that refer to objective quality and one (user based) that parallels perceived quality.
When we look at maintaining quality within an organization there are so called Quality Management Systems (QMS) which can be defined as a set of policies, processes and procedures required for planning and execution (production / development / service) in the core business area of an organization. QMS integrates the various internal processes within the organization and intends to provide a process approach for project execution. QMS enables the organizations to identify, measure, control and improve the various core business processes that will ultimately lead to improved business performance.
An example of a QMS is ISO 9000; ISO 9000 is a family of standards for quality management systems and is maintained by ISO, the International Organization for Standardization and is administered by accreditation and certification bodies. Some of the requirements in ISO 9001 (which is one of the standards in the ISO 9000 family) include a set of procedures that cover all key processes in the business;
• monitoring processes to ensure they are effective; • keeping adequate records;
• checking output for defects, with appropriate and corrective action where necessary;
• regularly reviewing individual processes and the quality system itself for effectiveness; and
• facilitating continual improvement
1.4 Service quality
It should be evident that service quality is a complex and ephemeral concept which makes it all the more interesting that academics and organizations around the world have pursued service quality with an almost evangelical enthusiasm. The outcome of this
research has been a number of models of which we have made a selection. We will describe the service quality models most relevant for conducting our research.
1.4.1 Disconfirmation model of service quality
The application of quality to the service context was driven in part by the early studies of Oliver (1977), and Olshavsky and Miller (1972) which were based in turn on early research by Carlsmith and Aronson in 1963. The first part of this approach is to recognize that individuals (or in our case customers) are not blank sheets of paper but approach events, including purchases, with some expectation of what will occur. When we actually experience an event (in our case a service), we understand it through our perception of what happened. We then assess the service relative to what we expect. If what we experience was better than expected, then according to this model we are satisfied, if it is worse than we expected than we are dissatisfied. In terms of service quality this model simply states that a customer derived quality assessment based upon the disconfirmation model will depend upon a comparison of expectations relative to performance.
1.4.2 Nordic Service quality model
The disconfirmation theory of service quality was also embraced by Grönroos (1985). Grönroos identified that services are not one big amorphous event but comprise different components which interact to determine overall quality. In his theory, which is also known as the Nordic school, service quality consists of two main constructs: technical quality and functional quality as illustrated in figure 1.2. The technical quality (also referred to as ‘what’) held some tangible elements; what is the service and what need is satisfied? The functional quality (also referred to as ‘how’) is about how the service is delivered and holds service staff interactions, interactions with other customers and the environment in which the service is delivered (Grönroos, 1985). Image is very important to service firms and this can be expected to build up mainly by technical and functional quality of service including the other factors (tradition, ideology, word of mouth, pricing and public relations). One interesting observation from Grönroos is that: ‘An acceptable
excused if the functional quality is good enough’. This observation refers to an evident
asymmetry between dimensions of service which basically means that good performance on one aspect isn’t always a compensation for bad performance on another. This is an important consideration when we look at determinants influencing service quality later in this research.
Figure 1.2: Perceived service quality model by Grönroos (1984)
According to Grönroos (1990), six categories determine customer perceived quality. The categories ‘attitudes and behavior’, ‘accessibility and flexibility’, ‘reliability and trustworthiness’ and ‘recovery’ represent the functional quality dimension. ‘Professionalism and skills’ are related to the technical quality dimension. The categories are illustrated in table 1.3
Grönroos (1994) categories determine perceived service quality
Attitudes and behavior
The customers feel that the service employees (contact persons) are concerned about them and interested in solving their problems in a friendly and spontaneous way (process-related criteria)
Accessibility and The customers feel that the service provider, its location, operating hours, employees, and operational systems are designed and operate so that it is easy to get access to the service
flexibility and so that they are prepared to adjust to the demands and wishes of the customer in a flexible way (process-related criteria)
Reliability and trustworthiness
The customers know that, whatever takes place or has been agreed upon, they can rely on the service provider, its employees and systems, to keep promises and perform with the best interest of the customers at heart (process-related criteria)
Recovery The customers realize that, whenever, something goes wrong or something unpredictable unexpectedly happens, the service provider will immediately and actively take actions to keep them in control of the situation and find a new, acceptable solution (process-related criteria)
Professionalism and skills
The customers realize that the service provider, its employees, operational systems, and physical resources have the knowledge and skills required to solve their problems in a professional way (outcome-related criteria). The complaint procedure is also included in this category
Reputation and credibility
The customers believe that the operations of the service provider can be trusted and give adequate value for money, and that it stands for good performance and values that can be shared by customers and the service provider (image-related criteria)
Table 1.3: customer perceived quality (Grönroos, 1990)
It is widely accepted today that service quality is a multi-dimensional concept. In the above model by Grönroos (1990) there are six different categories which act as components of service quality. The majority of the studies that followed from this research have done the same. Service quality is not viewed as a separate construct, but rather the components are summed to obtain an estimate of service quality. In this master thesis we will share this vision and we expect that after-sales service is build up out of several components.
1.4.3 SERVQUAL
Over the past three decades, numerous researchers have sought to uncover the global services attributes that contribute most significantly to relevant quality assessments (Grönroos, 1983; Pitt et al., 1999). Among them, the Parasuraman et al. (1985) SERVQUAL model has been regarded as most prominent.
Service quality was conceptualized by Parasuraman et al. (1985) as a perception resulting from consumer’s comparison between expected service and perceived service. In the
service gaps were identified as potential pitfalls in delivering the desired service quality. The most important gap is the difference between the perceived service and the expected service (Parasuraman et al., 1985) The SERVQUAL model is illustrated in figure 1.4.
Figure 1.4: The SERVQUAL model (Parasuraman et al., 1985)
According to this model, the service quality is a function of perception and expectations and can be modeled as:
Where:
SQ = overall service quality; k=number of attributes.
Pij = Performance perception of stimulus i with respect to attribute j.
Eij = Service quality expectation for attribute j that is the relevant norm for stimulus i.
Their original, conceptual work consisted of ten service quality constructs as illustrated in table 1.5.
Determinants of Service Quality
RELIABILITY Involves consistency of performance and dependability. It means that the firm performs the service right the first time. It also means that the firm honors its promises. Specifically, it involves: accuracy in billing; keeping records correctly; -performing the service at the designated time.
RESPONSIVENESS Concerns the willingness or readiness of employees to provide service. It involves timeliness of ser-vice: -mailing a transaction slip immediately; -calling the customer back quickly; -giving prompt service (e.g., setting up appointments quickly).
COMPETENCE Means possession of the required skills and knowledge to perform the service. It involves: -knowledge and skill of the contact personnel; -knowledge and skill of operational support personnel; -research capability of the organization, e.g., securities brokerage firm.
ACCESS Involves approachability and ease of contact. It means: -the service is easily accessible by telephone (lines are not busy and they don't put you on hold); -waiting time to receive service (e.g., at a bank) is not extensive; convenient hours of operation; -convenient location of service facility.
COURTESY Involves politeness, respect, consideration, and friendliness of contact personnel (including receptionists, telephone operators, etc.). It includes: -consideration for the consumer's property (e.g., no muddy shoes on the carpet); -clean and neat appearance of public contact personnel.
COMMUNICATION Means keeping customers informed in language they can understand and listening to them. It may mean that the company has to adjust its language for different consumers-increasing the level of sophistication with a well-educated customer and speaking simply and plainly with a novice. It involves: explaining the service itself; -explaining how much the service will cost; --explaining the trade-offs between service and cost; -assuring the consumer that a problem will be handled.
CREDIBILITY Involves trustworthiness, believability, honesty. It involves having the customer's best interests at heart. Contributing to credibility are: -company name; -company reputation; -personal characteristics of the contact personnel; -the degree of hard sell involved in interactions with the customer.
SECURITY Is the freedom from danger, risk, or doubt. It involves: -physical safety (Will I get mugged at the automatic teller machine?); -financial security (Does the company know where my stock certificate is?); -confidentiality (Are my dealings with the company private?).
UNDERSTANDING/
KNOWING THE
CUSTOMER
Involves making the effort to understand the customer's needs. It involves: -learning the customer's specific requirements; -providing individualized attention; -recognizing the regular customer.
TANGIBLES Include the physical evidence of the service: -physical facilities; -appearance of personnel; -tools or equipment used to provide the service; -physical representations of the service, such as a plastic credit card or a bank statement; -other customers in the service facility.
Table 1.5: Determinants of service quality (Parasuraman et al., 1985)
This research was refined with their subsequent scale named SERVQUAL for measuring customer’s perceptions of service quality (Parasuraman et al., 1988). At this point the original ten dimensions of service quality collapsed in to five dimensions as illustrated in table 1.6.
Determinants of Service Quality
TANGIBLES Appearance of physical facilities, equipment, personnel, communication materials, product price and product quality
RESPONIVENESS Willingness to help customers and provide prompt service
ASSURANCE Knowledge and courtesy of employees and their ability to inspire trust and confidence, include courteousness, respect, politeness, professional and honesty.
EMPATHY Caring, individualized attention the firm provides its customers.
Table 1.6: Determinants of service quality (Parasuraman et al., 1985)
SERVQUAL consists of two sections. A 22-item section measuring the service quality expectation within a specific sector and a corresponding 22-item section measuring the perception of service quality of a particular company in that sector (Parasuraman et al., 1988, 1991). SERVQUAL scores were defined as the differences between the expected service quality and the perceived one.
SERVQUAL has been widely used however it was challenged in a number of subsequent studies. Van Dyke and Kappelman (1997) and Babakus and Boller (1992) questioned the conceptual appropriateness of SERVQUAL. They challenged the operationalization of perceived service quality as a difference or gap score, the ambiguity of the expectations construct, and the unsuitability across different industries. Especially the latter is the main objective for conducting our research towards after-sales service quality. The criticism can be summarized as:
- The basic question of whether it is necessary to measure expectations at all. - The way expectations are measured
- The reliability and validity of using different scores - The dimensionality of SERVQUAL
- The number of items in the SERVQUAL scale
1.4.4 SERVPERF
Boulding et al. (1993) found that behavioral intentions, which would eventually lead to a decline or improvement of the organization’s performance, were only influenced by perceptions and not by expectations. They also conclude that if expectations of service quality are raised, perceptions would raise correspondently. This implies that expectations are less relevant for the perceived level of service and that the disconfirmation paradigm becomes less relevant. Cronin and Taylor (1992) shared this idea in their developed SERVPERF model. They examined SERVPERF in four
industries (banking, pest control, dry cleaning and fast food) and found that this measure explained more of the variance in an overall measure of service quality than did SERVQUAL. They also indicated that a psychometrically superior assessment of service quality can be obtained through the SERVQUAL performance items alone. Babakus and Boller (1991) also found that perception scores, by themselves, had stronger correlation with independent measures, such as overall quality, than do the SERVQUAL measures (expectations minus perceptions). These findings are consistent with other research that have compared these methods in the scope of service activities, thus confirming that SERVPERF (performance-only) results in more reliable estimations, greater convergent and discriminant validity, greater explained variance, and consequently less bias than the SERVQUAL scales (Cronin and Taylor, 1992). Because of the superiority of SERVPERF over SERVQUAL in this research we will only look at perceptions and not expectations.
1.4.5 Garvin service quality determinants
Garvin (1987) has developed eight quality dimensions for products and services. Garvin proposes eight critical dimensions of quality that can serve as a framework for strategic analysis. The eight dimensions are in the below table:
Determinants of Service Quality
PERFORMANCE Refers to the products and services primary characteristics
FEATURES Refers to the secondary characteristics
RELIABILITY Refers to the degree to which the product functions and how often errors occur
CONFORMANCE Refers to the degree to which the product fulfill its promise and meets its standards
DURABILITY Refers to a measure of product life
SERVICEABILITY Refers to the speed, courtesy, competence and ease of repair, the timelines with which service appointments are kept, the nature of dealing with service calls or repairs fail to correct outstanding problems
AESTETICS Refers to product design, how the product looks, feels, sounds, tastes or smell
PERCEIVED
SERVICE QUALITY
The dimensions of Garvin (1987) are showing a large amount of overlap with the determinants of Grönroos (2000) and Zeithaml et al. (1985).
1.5 Importance of service quality for organizations
Delivering quality service is considered an essential strategy for success and survival in today's competitive environment (Parasuraman et al. 1985). Many companies have been disappointed by a lack of results from their quality efforts. The financial benefits of quality, which had been assumed as a matter of faith in the "religion of quality," are now being seriously questioned by cost-cutting executives, who cite the highly publicized financial failures of some companies prominent in the quality movement. In this increasingly results-oriented environment, managers must now justify their quality improvement efforts financially. Rust et al (1995) present the "return on quality" approach, which is based on the assumptions that (1) quality is an investment, (2) quality efforts must be financially accountable, (3) it is possible to spend too much on quality, and (4) not all quality expenditures are equally valid. Rust et al (1995) provide a framework that can be used to guide quality improvement efforts. This framework has several attractive features, including ensured managerial relevance and financial accountability and is illustrated in figure 1.7.
Figure 1.7: A model of Service Quality Improvement and Profitability (Rust et al, 1995)
Improvement efforts
Service Quality Improvements
Perceived Service Quality and Customer Satisfaction
Customer Retention
Revenues and Market Share
Profitability
Cost reductions Word of Mouth
Attraction of New Customers
1.6 After sales service
In this research the main focus will be on understanding and evaluating after-sales service quality. As indicated earlier after-sales service can be classified as an enhancing service because of the value adding and supporting nature. After-sales service can be described as the philosophy and all accompanying activities that can help to maximize consumer satisfaction following the purchase or the use of a good or a service by the consumer (Kasper, 2006) or as those actions taking place after the purchase of the product and devoted to support customers in the usage and disposal of goods (Gaiardelli et al, 2007). The relevance of after sales service can be formulated as follows: After-sales support is a litmus test of a firm’s intention towards its customers. In effect, the customer judges the company by its willingness to stand behind its products and provide satisfaction to even the most unreasonable buyer (Kasper, 2006)
After sales service will be among the additional services added to the core service. We believe a distinction should be made between the core service and additional services because of the intrinsic difference between the two. The core service is a main reason for a company being on the market and additional services, in particular after-sales, facilitates the consumption or use of the core service, and is used to increase the value of the service and/or to differentiate the service from those of competitors. Consumers will tend to use after-sales services when core services or goods are not up to standard. The supplier must realize that the consumer’s perception and state of mind will have a strong influence on the perceived quality of after-sales service.
Manufacturers and retailers of capital and consumer goods cannot consider their active role ends with the sale (Levitt, 1983), but rather must provide their customers with a set of supporting after-sales services, such as installation packages, technical advice for use, maintenance/repair, spare parts delivery, product upgrading, etc.
The rationale for such needs and in general for integrating services into the core product offering is based on three main reasons, as pointed out by Oliva and Kallenberg (2003): after-sales economics, customer requirements, and competitive arguments.
First, from an economic perspective, the after-sales service market has been found in some industries, to be up to four or five times larger than the market for product sales (Bundschuh and Dezvane, 2003). Similar evidence is found by Wise and Baumgartner (1999) and Alexander et al. (2002), who state that after-sales may generate more than three times the turnover of the original purchase during a given product’s life-cycle, and often provides profitability higher than product sales. For instance, in 2002, 50 percent of Rolls-Royce’s aero-engines business revenues came from service activities; similar figures are encountered in the elevator industry (Lewis et al., 2004). Moreover, Gallagher et al. (2005) estimate the market of spare parts to be worth $400 billion worldwide.
Second, a steady growth of customer service requirements occurred, pushing manufacturing firms to provide value added services and to outsource no-core services, in order to achieve higher flexibility and efficiency (Lojo, 1997).
Third, there is a competitive point. In a context of global competition and decreasing profit from product sales, after-sales service constitutes a profit source, and also a key differentiator for manufacturing companies. Gallagher et al. (2005) point to after-sales as a way to recover profits lost due to the fierce competition on sales prices of original equipment, representing at the same time “one of the few constant connections that customers have with a brand”. Hence, after-sales is affected by and affects the brand image of a firm (Lewis et al., 2004). After-sales is thus a potential source of competitive advantage for the firm (Goffin, 1999). Therefore, most manufacturing companies are shifting from a traditional product-centric view, in which after-sales is considered a “necessary evil” (Lele, 1997), to a more innovative customer-centric view. However, unexploited opportunities still exist (Wise and Baumgartner, 1999; Gallagher et al., 2005). Finally, a fourth point can be added to the previous ones.
As shown by the literature, the feedback information gathered from the after-sales unit may constitute an essential input to product and service development (Armistead and Clark, 1992; Cohen and Whang, 1997; Thoben et al., 2001), to sales and promotion
activities (Wise and Baumgartner, 1999; Gallagher et al., 2005) as well as to marketing and customer relationship management (Ramaswamy et al., 2002).
2. Problem statement
In today's competitive environment, companies are confronted more and more with declining margins on their products. Looking for other ways to make profits, some of these companies decide to render additional services to the physical product they offer. Companies are also faced with consumers and industrial customers emphasizing the accomplishment of high degrees of customer satisfaction in their exchange relationships. Rendering good services or improving the present level of services to customer standards will minimize the chances that companies will lose business due to inadequate services. Customer services can be used as a competitive tool indeed. In doing business, it is important for a company to know what the customer exactly wants and how they perceive the company's offer.
As already indicated before we also believe a distinction should be made between a core service and an additional service as a core service is the main reason for a company being on the market and additional services (in particular after-sales service) facilitates the consumption or use of the core service, and is used to increase the value of the service and/or to differentiate the service from those of competitors. The four basic characteristics of core services (intangibility, inseparability, heterogeneity and perish ability) may create serious problems for companies in accomplishing a specific degree of after-sales service quality. At the same time, these characteristics may cause problems for customers to judge the services they use or plan to use. Consequently, we can hypothesize that a core service will be different to evaluate in comparison with an additional service.
Due to the intrinsic difference of a core service and an additional service and the increasing importance of this concept, as stressed in the literature review and above, we are going to investigate how we can determine after-sales service quality.
To our knowledge this research will be the first research conducted on evaluating after-sales service quality and will therefore be scientifically challenging. The practical
academic value of this research will be that organizations operating in the broadcast market will be able to evaluate their after-sales service quality using our developed model on after-sales service quality. Moreover, organisations will eventually be able to pick up their profitability by improving their after-sales service quality.
Therefore, the research objective of this thesis is the following:
To investigate how we can evaluate after-sales service quality in the Broadcast market and propose, operationalize and develop an instrument to measure this. Moreover we would like to use the developed model to evaluate after-sales service quality at Sony Professional Europe.
Each component of the main research question may have to be broken down into research questions. The main research questions of this master thesis can be detangled by the following sub-research questions:
1. Which determinants acknowledged in the literature research on service quality can be identified in qualitative research on after-sales service quality in the broadcast market?
2. To what extend are the identified determinants influencing after-sales service quality in the broadcast market?
3. What recommendations can be made to the management of Sony Professional to improve after-sales service quality in the Broadcast market?
These three questions are capable to give a comprehensive answer to our main research question. The next step is determining the research design per question which will answer the separate research questions. In the next chapter of this master thesis these three research questions will be explained.
3. Research design
This chapter will deal with the research design of this master thesis. A research design is a framework for conducting the research. It details the procedures necessary for obtaining the information needed to structure and solve the research questions (Malhortra, 1994) Each of these components will be discussed in detail in this section
Research question 1:
The first research question can be formulated as: Which determinants acknowledged in
the literature research on service quality can be identified in qualitative research on after-sales service quality in the broadcast market?
Exploratory research is used to answer this research question. The objective of exploratory research is to gather preliminary information that will help define problems and suggest hypotheses (Kotler, 2006). Primary data and academic literature is used to answer this question. According to Malhotra (1994), primary data is originated by the researcher for a specific purpose of addressing the problem at hand. It is chosen to use qualitative data in the form of in-depth interviews to provide the primary data. The interviews are held with customers who have a strong affiliation with after-sales service in the B2B broadcast market. The purpose of this data collection method is to find out which factors are influencing after-sales service quality. The depth interviews will be analyzed using ‘Kwalitan’. These (new) determinants are compared to existing determinants that were filtered from external academic literature. The combination of the primary and academic literature should give us an indication of the variables used to evaluate perceived after-sales service quality.
After we’ve indentified the determinants influencing after-sales service quality we will propose our graphical model. A graphical model provides a visual picture of the relationships between our determinants.
Research question 2:
The second research question for this thesis is stated as follows: To what extend are the
identified determinants influencing after-sales service quality in the broadcast market?
To answer this question we will conduct quantitative research. With quantitative research we are going to test the graphical model developed in research question one. Quantitative research is a research methodology that seeks to quantify the data and applies to some form of statistical analysis. The objective of quantitative research is to generalize the results from the sample to the population of interest. As already indicated our population of interest is the broadcast market. We have chosen to perform our research with Sony Professional since Sony Professional uses so called Authorized Service Centers to perform their after-sales service. As a result we’re actually targeting a wide variety of service providers across different countries.
Another reason for choosing Sony Professional is that they have by far the most market share in this industry (72%).
We can classify this research as causal research since it attempts to test the formulated hypotheses given in our graphical model. It investigates the relationships between our independent variables and our dependent variable. According to Emans (2002), surveys can be utilized instead of in-depth interviews when the questions do not need many explanations. The structured surveys will be sent by mail and will be processed by SPSS.
Research question 3
The third research question can be defined as: What recommendations can be made to the
management of Sony Professional to improve after-sales service quality in the B2B Broadcast market?
To answer this research question we will use the qualitative and quantitative research conducted to answer research question one and two. Furthermore we will use existing literature to provide Sony Professional with a comprehensive answer on how to improve their after-sales service in the broadcast market.
As indicated, to answer our research questions we will use multiple research methods to answer our research questions. We can call this triangulation. Triangulation can be described as multimethod/multitrait (Campbell and Fiske, 1995) or convergent validity, and for most part shares the notion of complementary qualitative and quantitative methodologies rather than competing approaches. To be more precise we have used methodological triangulation since we’re using more than one method to gather data, such as depth-interviews, questionnaires, and documents. By using this approach we in our research we increase credibility and validity of the results.
An overview of our research sequence is given in figure 3.2
Figure 3.2: Research structure
Literature review Exploratory research
Graphical model development
Quantitative research
Apply model to Sony Professional Europe Step 1:
Step 2:
Step 3:
Step 4:
Step 5: Provide recommendations to management Sony Professional Europe
4. Factors influencing after-sales service quality: A qualitative approach
Given the fact we were not able to identify scientific literature on how we can evaluate after-sales service quality we will conduct exploratory research to gain an understanding of the determinants affecting after-sales service quality in the broadcast market.
To accomplish this end, we are going to conduct exploratory research by means of semi-structured depth interviews. We will conduct four depth interviews with customers in the broadcast market. The objective of these interviews is to gain further insights into factors important to customers with regards to after-sales service quality in the broadcast market.
Reason for conducting semi-structured depth interview is that they are flexible, allowing new questions to be brought up during the interview as a result of what the interviewee is saying. We have also prepared an interview guide (appendix 1) to help us focus on the topics at hand without restraining them to a particular format. This lack of restrictions can help us fit questions to the interview situation, and to the people we are interviewing (Lindlof & Taylor, 2002). Because there is a general agreement in the literature about the conceptual definition of service quality we will ask general questions about experiences related to after-sales service in the Broadcast market. This is a very common approach in conducting exploratory research (Dabholkar, 1996).
In our depth interviews we will also use the critical incident method developed by Flanagan (1954). The methodological approach of this technique is to ask respondents, in this case customer with experiences of after-sales service, to think of situations where the after-sales service, or any part of the service process including the outcome of that process, clearly deviated from the normal, either in a favorable or unfavorable way. These are critical incidents. Then the respondent is asked to describe, in as much detail as possible, what happened and what made him consider the incident critical. Previously experienced cases have the advantage that the interviewee often retains detailed memories of these cases especially ones that were unusual, challenging, or in one way or another involved “critical decisions” (Hoffman and Lintern 2006).
We will then combine the aspects of the consumers experience that are consistent with the generally accepted conceptual understanding of service quality in the literature (given in chapter one) and with the new factors which came from qualitative use these to suggest determinants which influence perceived after-sales service quality. For example, if customers mention courteousness of the service provider and the literature supports this notion, we will include it.
4.1 Data sources
We have conducted four interviews to gain a better insight in determinants for measuring after-sales service quality. All of these interviews were held with customers who have a strong affiliation with after-sales in the B2B broadcast market. The interviewees are presented in Table 4.1. Name: Profile: X X X X X X X X Table 4.1: Interviewees
The choice for the interviewees was made on contacts gathered during my internship at Sony Netherlands and my work experience at Sony Professional Europe. The aim was to find interviewees, who are closely related to the field of after-sales service. The interviews usually took between sixty and ninety minutes and were usually held at the offices of the respective interviewees. The interviews were (as mentioned earlier) al held in a semi-structured manner. The interviewees were usually briefed beforehand on the subject, although in some cases the subject and the goal of the interview were presented right before the interview. All the interviews have been structured in the same manner. The interviews started with the question of the interviewees presenting themselves and their exact position. The interviews were taped with a digital recorder and notes were
4.2 Data analysis
After having done all four depth interviews, the interviews were transcribed. This resulted in more than 70 pages of data. To handle this large amount of textual data, the depth interviews were analyzed through the help of Kwalitan. Kwalitan is a software program that supports the researcher in analyzing interviews.
With Kwalitan the raw text can be coded into theoretical concepts. We have used all the theoretical concepts (in our case determinants for measuring after-sales service quality) identified in the literature review. They are of crucial importance for computer aided qualitative data analysis (Seidel and Kelle 1995). Although there are different types of coding, codes serve mostly to denote a fact (Seidel and Kelle 1995). For example, if we detected a fragment of text that showed that a customer measured after-sales service quality by looking at ‘speed of repair’ we coded this under the node ‘responsiveness’.
Besides manually selecting fragments of text the software package can automatically detect possible nodes based on text search queries. Selecting codes only manually can result in a substantial researcher bias, causing only to select data which stands out or only find what he or she is looking for (Miles and Huberman 1994).
Reliability and validity are also often concerns in conducting qualitative and interpretive research (Crotty 1998; Shank 2006). Reliability refers to criteria for consistent application or repetition of the research in other contexts. In order to be reliable the research needs to be consistent and accurate (Shank 2006). Validity deals with the notation that what you say you have observed is, in fact, what really happened (Golafshani 2003; Shank 2006).
In order to create more reliability (consistency and accuracy) and validity we have used a couple of common techniques. When interviewing our interviewees we took annotations and asked for elucidation of extra information in situations where information could be
interpreted the wrong way. After transcribing the interviews we also checked back with the interviewees to see whether gained facts where correct.
The coding process is iterative by nature and should grow and evolve when doing the analysis (Creswell 1998). Our analysis was no exception we have therefore welcomed any new determinants derived from the in-depth interviews. The results of our qualitative research can be found in appendix 5.
When doing our analysis we have chosen to combine several determinants because they measured more or less the same determinant. For example, we have combined skills and competence. These determinants where used as separate in literature however since they measure the same construct we have combined them.
Eventually we have identified ten determinants for measuring after-sales service quality. Nine of these determinants were also mentioned in the service quality literature. Most indentified were the determinants ‘Competence/Skills’ and ‘Responsiveness’ with respectively 41 and 39 codes. It makes perfect sense these determinants are among the top ones mentioned since it’s really important in the B2B Broadcast industry to have a very low downtime of your equipment and therefore be up and running quickly. Obviously, in order to be up and running quickly engineers need to have the skills to perform the service (repair). Determinants least mentioned were ‘Tangibles’ and ‘Courtesy’ with respectively 9 and 14 codes. This also makes a lot of sense since courtesy might be of less importance in the B2B market as indicated by Kasper et al (2006). They mention that ‘many people working in the B2B market have a technical background and often pay less attention to social skills’.
We have identified one new determinant for evaluating ‘after-sales service quality’ in the broadcast market namely ‘ease of access spare parts’. Ease of access spare parts was mentioned twenty five times in our qualitative research by customers which indicates a significant influence on after-sales service quality in the broadcast market. We will elaborate more on the identified variables in the next chapter.
5. Hypothesis and Graphical model development
In this chapter we will create our hypothesis and develop a graphical model for evaluating after-sales service quality. The literature as described in chapter one and our exploratory research conducted in chapter four will serve as a basis for constructing the hypotheses and eventually our graphical model.
5.1 Hypothesis development
In this section we will provide the rationale behind our proposed determinants and we will present our developed hypothesis.
Courtesy of the service provider (contact personnel)
Our first proposed determinant which has an influence on after-sales service quality is ‘courtesy’. Courtesy stands for politeness, respect, consideration and friendliness of contact personnel (Grönroos, 2006) Both our qualitative interviews with customers and the literature on service quality suggest that ‘courtesy of the service provider’ is directly related to after-sales service quality in the broadcast market. In our qualitative depth interviews customers mentioned ‘that they expect employees of the service provider to be friendly and polite’ and the determinant was mentioned fourteen times. In the service quality literature Parasuraman et al (1985) include ‘Courtesy’ in the ten determinants used to measure service quality. We therefore propose that:
Hypothesis 1:
Courtesy of the service provider is directly and positively associated with after-sales service quality in the broadcast industry
Understanding of the customer (by the service provider)
Our second proposed determinant which has an influence on after-sales service quality is ‘Understanding of the customer’. Understanding is the effort of the service provider to really know the customers (Grönroos, 2006). In the qualitative interviews conducted all of our interviewees mentioned the fact that understanding is important when looking at
after-sales and it’s coded twenty nine times. One of the interviewees mentions ‘we are an important/valuable customer so we expect to get personal advice by our service provider’. In the service quality literature ‘understanding’ is also an often mentioned determinant (Parasuraman et al. (1985). We therefore propose that:
Hypothesis 2:
Understanding of the customer is directly and positively associated with after-sales service quality in the broadcast industry
Competence/ Skills of the service provider
Our third proposed determinant which has an influence on after-sales service quality is ‘competence/skills’. Competence/Skills (together with responsiveness) was actually mentioned the most in our exploratory research (See appendix 5). Competence can be defined as: ‘possession of the required skill/knowledge to perform the service (Grönroos, 2006). All of our customers pointed out competence is essential in providing excellent after-sales service. One of our interviewees even said that ‘product knowledge and skills to repair a product is vital in providing a good after-sales service in the broadcast market’. The determinant is also the one of most coded namely forty one times. Service quality literature also supports competence as a determinant in service quality. We therefore hypothesize that:
Hypothesis 3:
Competence/Skills of the service provider is directly and positively associated with after-sales service quality in the broadcast industry
Responsiveness of the service provider
Responsiveness can be defined as the willingness to help customers (Grönroos, 2006). As already indicated the determinant responsiveness (together with competence) was referred to most in our depth interviews namely thirty eight times. As pointed out by one of our interviewees ‘everybody expects us to have the news ready to broadcast at seven, if for some reason our camera’s don’t work we expect our service provider to be on-site in less than a second’. Literature also indicates that responsiveness is a key factor in
responsiveness had the second strongest coefficients when looking at the different determinants for measuring service quality. We therefore hypothesize that:
Hypothesis 4:
Responsiveness of the service provider is directly and positively associated with after-sales service quality in the broadcast industry
Credibility/Reputation of the service provider
Our fifth proposed determinant for measuring after-sales service quality is ‘credibility’. The general definition of ‘credibility’ is that customers believe that the operations of the service provider can be trusted and give adequate value for money, and that it stands for good performance and values that can be shared by customers and the service provider (Grönroos, 1990). Credibility is also twenty four times coded in the qualitative interviews. Our interviewees mentioned that they expect service providers to be honest and have their customers’ best interest at heart. One of our interviewees said that ‘when promises are being made we expect the customer to be honest and keep those promises’. Credibility is also referred to in the literature about service quality by Grönroos (1990). We therefore hypothesize that:
Hypothesis 5:
Credibility of the service provider is directly and positively associated with after-sales service quality in the broadcast industry
Reliability of the service provider
Our sixth proposed determinant for measuring after-sales service quality is ‘reliability’. Reliability is the ability to perform the promised service dependably and accurately (Zeithaml, 1985). According to Garvin (1987), the definition of reliability refers to the degree to which the product or service functions and how often errors occur. Grönroos (1990) stipulate that customers realize that when something goes wrong or something unpredictable or unexpectedly happens, the service provider will immediately and actively take actions to keep them in control of the situation and find a new, acceptable solution. Parasuraman et al. (1988, 1991) have consistently observed that reliability has the strongest regression coefficient in the service quality literature which means that it is
an essential determinant for measuring service quality. This and the fact that reliability was often referred to in our depth interviews (29 times) made us hypothesize the following:
Hypothesis 6:
Reliability of the service provider is directly and positively associated with after sales service quality in the broadcast industry
Access of Service provider
Our seventh proposed determinant for measuring after-sales service quality is ‘access of service provider’. Access is defined by Grönroos (2006) as approachability and ease of contact of the service provider. In our qualitative interviews accessibility of the service provider was mentioned thirty six times. All of our interviewees pointed out that ‘convenient hours of contacting’ their service provider was an essential point in evaluating after-sales service quality. Parasuraman et al (1988, 1991) also use accessibility of the service provider as an important determinant for measuring service quality. We therefore hypothesize that:
Hypothesis 7:
Accessibility of the service provider is directly and positively associated with after sales service quality in the broadcast industry
Access Spare parts
Our next proposed determinant for measuring after-sales service quality is ‘access of spare parts’. This determinant is not pointed out in service quality literature and therefore newly identified. All of our interviewees stated that ‘accessibility of spare parts’ is an essential determinant if you are going to evaluate after-sales service quality. It’s coded twenty five times and therefore seems to an important factor when evaluating after-sales service quality in the broadcast market. One of our interviewees mentioned that ‘When we need to repair a camera for a customer we expect spare parts to be available and ready to be delivered the next day. Kasper et al (1989) also see availability of spare parts as an essential determinant when looking at after-sales service quality. We therefore
Hypothesis 8:
Accessibility of spare parts is directly and positively associated with after-sales service quality in the broadcast industry
Tangibles of the service provider
Our ninth proposed determinant for measuring after-sales service quality is ‘tangibles’. Tangibles can be defined as ‘the appearance of physical facilities, equipment, personnel and communication materials’ (Grönroos, 2006). As indicated earlier this determinant was not mentioned too often in our qualitative interviews namely nine times however one of our interviewees pointed out that he ‘appreciates if engineers look like engineers and service center look like proper service centers’. Tangibles are also mentioned in the service quality literature by Parasuraman et al (1994). We therefore hypothesize that:
Hypothesis 9:
Tangibles of the service provider is directly and positively associated with after-sales service quality in the broadcast industry
Communication (Keeping the customer informed)
Our tenth and last proposed determinant for measuring after-sales service quality is ‘communication’. Communication was both mentioned in our depth interviews as well as in the service quality literature and can be defined as ‘keeping customers informed and listen and acknowledge their comments’ (Grönroos, 2006). One of our interviewees pointed out that ‘keeping him informed about the repair process is not a nice to have but a must’. One other interviewees also said that ‘we expect to get a report about the performed repair if receive back our product’. The determinant was coded thirty one times in our qualitative research. Parasuraman et al (1991) also use the determinant ‘Communication’ in their dominating SERVQUAL model. We therefore hypothesize that:
Hypothesis 10:
Communication of the service provider is directly and positively associated with after-sales service quality in the broadcast industry
5.2 Graphical model
Based on the hypothesis develop in the first part of this chapter we have designed a graphical model. For this thesis, a graphical model is used to provide a visual picture of the relationships between determinants. This graphical model presents after-sales service quality (in the B2B broadcast market) as a consequence of ten antecedents and is illustrated in figure 5.1.
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Figure 5.1: Conceptual model determinants related to ‘perceived after-sales service quality in the Broadcast market
Communication of the service provider Courtesy of the service provider Understanding of the customer Competence/Skills of the service provider Responsiveness of the service provider Ease of access service provider
Ease of access spare parts Credibility/Reputation of the service provider Tangibles of the service provider
Reliability of the service provider
