MEASURING SERVICE QUALITY IN RETAIL SECTOR

Marketing Models
A Term Paper on Measuring Service Quality in
Retail Sector

Submitted to:
Professor V Jayashree

Department of Marketing

Vignana Jyothi Institute of Management

GROUP-12

Rakesh K-09136

Pratheeka -09159

Pratyusha B-09233

Syamly Satyan-09254

1
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

ACKNOWLEDGEMENT

We would like to acknowledge and extend our heartfelt gratitude to Mrs. V Jayashree, Lecturer

of Marketing; Vignana Jyothi Institute of Management Who helped us in completing this paper

successfully and also our peers who supported us in every step. Thank you all once again.

2
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

Contents
ABSTRACT....................................................................................................................................................2
INTRODUCTION...........................................................................................................................................2
LITERATURE REVIEW....................................................................................................................................2
SERVICE QUALITY MEASURMENT................................................................................................................2
SERVICE QUALITY DIMENSIONS...................................................................................................................2
STORE SIZE...................................................................................................................................................2
SERVICE QUALITY AND STORE SIZE..............................................................................................................2
CONCEPTUAL FRAME WORK FOR RETAIL SERVICE QUALITY.......................................................................2
A SURVEY TO MEASURE THE EFFICIENCY OF RETAIL OUTLETS IN INDIA......................................................2
REFERENCES................................................................................................................................................2

3
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

ABSTRACT

In the highly competitive retail sector, the provision and measurement of superior retail service
quality is crucial for gaining a sustainable competitive advantage. Service quality is an important
strategic weapon in retail contexts, particularly in developing defensive marketing strategies. The
measurement of service quality in a retail setting is somewhat different from the measurement of
service quality in other pure service settings. The most widely known and discussed scale for
measuring service quality -SERVQUAL- has not been successfully adapted to and validated in a
retail store environment. Lately RSQS has been widely used to measure the service quality in
retail stores. This paper is an attempt to measure service quality in retail stores by considering
various attributes

INTRODUCTION

Of all services marketing topics, service quality has gained much research prominence in recent
years. Existing research indicates that consumers satisfied with service quality are most likely to
remain loyal. Service quality is perceived as a tool to increase value for the consumer; as a
means of positioning in a competitive environment and to ensure consumer satisfaction retention
and patronage .With greater choice and increasing awareness, Indian consumers are more
demanding of quality service and players can no longer afford to neglect customer service issues.
Much of the attention focused on the service quality construct is attributable to the SERVQUAL
instrument developed by Parasuraman, Zeithaml & Berry (1988) for measuring service quality.
Several studies subsequently employed the SERVQUAL to measure service quality and to assess
the validity and reliability of the scale across a wide range of industries .Little is known about
service quality perceptions in India because research focus has primarily been on developed
countries .Given the relatively mature markets where the service quality scales have been
developed, it seems unlikely that these measures would be applicable to India without
adaptation.

4
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

Service quality in retailing is different from any other product/service environment. For this
reason, Dabholkar, Thorpe and Rentz (1996) developed the Retail Service Quality Scale (RSQS)
for measuring retail service quality. The RSQS has a five dimensional structure of which three
dimensions comprise of two subdimensions each. Studies assessing the applicability of the
RSQS have reported encouraging results.

LITERATURE REVIEW

Ghobadian et al. (1994) posit that most of the service quality definitions fall within the
“customer led” category. Juran (1999) elaborates the definition of customer led quality as
“features of products which meet customers’ needs and thereby provide customer satisfaction.”
As service quality relates to meeting customers’ needs, we will be looking at “perceived service
quality” in order to understand consumers (Arnauld et al., 2002). Grönroos (1984) and
Parasuraman et al., (1985) looks at perceived quality of service as the difference between
customers’ expectation and their perceptions of the actual service received. Other researchers
look at perceived service quality as an attitude. Arnauld et al., (2002) defined perceived quality
“whether in reference to a product or service” as “the consumers’ evaluative judgment about an
entity’s overall excellence or superiority in providing desired benefits”. Hoffman & Bateson
(2001) defines service quality as an attitude “formed by a long-term, overall evaluation of a
performance”. Attitude is defined as “a consumer’s overall, enduring evaluation of a concept or
object, such as a person, a brand, or a service.”(Arnauld et al, 2002) Service quality as “an
attitude” is consistent with the views of Parasuraman et al., (1988), Cronin & Taylor (1992) &
Sureshchandar et al., (2002). Basis of the view is elaborated by the latter: “As perceived service
quality portrays a general, overall appraisal of service i.e. a global value judgment on the
superiority of the overall service, it is viewed as similar to attitude.” Feinburg & de Ruyter
(1995) pointed the importance of adapting the definition of service quality in different cultures.
Ueltschy & Krampf (2001) contended that differences in culture affect measure of quality in a
service sector. They encapsulated service quality measures as “culturally sensitive” and “may not
perform properly or comparatively in a culturally diverse group domestically or abroad”.
Cultural factors are said to have greater influence on people’s evaluation of services than on their
evaluations of physical goods due to involvement of customer contact and interaction with

5
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

employees while a service is delivered (Mattila, 1999). Feinburg & de Ruyter (1995) postulated
that the differences “require adapting service quality to an international setting”. Furthermore,
the service quality dimensions that are critical most to consumers vary according to culture and
industry (Winsted, 1999).

SERVICE QUALITY MEASURMENT

It is difficult to measure service quality as compared to good’s quality. The difficulty to measure
is due to fewer tangible cues available when consumers purchase services, fewer search
properties, but higher in experience and credence properties, as compared to goods. It also
requires higher consumer involvement in the consumption process. Researchers operationalize
the service quality construct either as a gap between expectation of service and perceived
performance of service, or just perceived performance alone. On the other hand, service quality
dimensions are seen as the criteria to assess service quality. The earliest research on service
quality dimensions was done by Grönroos (1984). He found that the perceived quality of a
service is affected by the experience that the consumer went through for a service. Therefore, he
encapsulated the perceived quality of a given service as the outcome of an evaluation process; a
comparison between the consumer expectations of the service with his perceptions of the service
he has received. He also pointed that expectation is influence by traditions, ideology, word-of-
mouth communication, and previous experience with the service and the consumer’s perception
of the service itself determines his perceived service. However, he did not discuss the
relationship between perception and expectation and how it influences service quality. Grönroos
(1984) found that “service quality” comprises of three global dimensions.
 The first dimension is the technical quality. This dimension refers to the outcome or what
is delivered or what the customer gets from the service. For a retail store, technical
quality may include the range of products offered and the availability of parking space.
 The next dimension is the functional quality which refers to the manner in which the
service is delivered or how it is delivered. Customers of a retail store will measure
whether the salespeople are friendly or whether products are easily returnable.

6
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

 Finally, the last dimension is the corporate image. The store’s image is built by mainly
both technical and functional quality and to some extent other factors like the traditional
marketing activities.

The most popular service quality model in the 1990s is the model by Parasuraman et al. Their
model supported Grönroos’ findings on as the models are based on these three underlying
themes:
 Service quality is more difficult for the consumer to evaluate than goods quality;
 Service quality perceptions result from a comparison of consumer expectations with
actual service performance;
 Quality expectations are not made solely on the outcome of the service; they also involve
evaluations of the process of the service”.

1. SERVQUAL METHOD-
Unlike Grönroos (1984) who used global measure of service quality, Parasuraman et al.
identified several items in measuring service quality. They argued that consumers used similar
criteria irrespective of the type of service in measuring service quality. They then group these
criteria into 10 key categories which they labeled as “service quality determinants”. The
determinants are reliability, responsiveness, competence, access, courtesy, communication,
credibility, security, understanding/knowing the customer, and tangibles. Later in another
research, they refined the dimensions into only five dimensions - tangibles, reliability,
responsiveness, assurance, and empathy. This model is popularly called the SERVQUAL
model
 Tangibles- The appearance of physical facilities, equipment, appearance of personnel,
and communication materials
 Reliability- The ability to perform the promised service dependably and accurately
 Responsiveness -The willingness to help customers and provide prompt service
 Assurance- The knowledge and courtesy of employees and their ability to inspire trust
and confidence
 Empathy- The caring, individualized attention the firm provides to its customers

7
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

2. RSQS METHOD

Due to the failure of SERVQUAL to be fully adapted and validated in a retail store setting that
offers a mixture of services and merchandise, Dabholkar et al. developed the Retail Service
Quality Scale (RSQS). Taking into account retailing-related dimensions retailing existing
literature, the researchers adopted 17 items from SERVQUAL and added 11 new items based on
their research.
The scale that has high construct reliability and validity in measuring service quality in
department stores include:
 Physical aspects – Retail store appearance and store layout.
 Reliability – Retailers keep to their promises and do the right things.
 Personal interaction – Store personnel are courteous, helpful, and inspire confidence in
customers.
 Problem solving – Store personnel are capable to handle returns and exchanges,
customers’ problems and complaints.
 Policy – Store’s policy on merchandise quality, parking, operation hours, and credit cards

Service quality is defined as ‘a global judgment or attitude, relating to the overall superiority of
the service. The SERVQUAL proposes a gap based conceptualization of service quality where
the gap indicates the extent to which the service obtained confirms to expectations. In
SERVQUAL, both - store service performance and consumer expectations of the store service,
are explicitly measured to assess the ‘gap’.
Conceptually, this gap assessment assumes that the statement of desired attribute levels is the
yardstick a consumer uses to assess store service performance. Schnieder and White (2004)
provide a list of several other yardsticks that can be used by a consumer to evaluate store service
delivery. Even empirically, several researchers find the performance perceptions to be sufficient
in assessing service quality as compared to the gap. This resulted in the adoption of the
SERVPERF instrument instead of the gap based measure of SERVQUAL. SERVPERF is the
performance battery of SERVQUAL. Similar to and originating from the SERVPERF, the RSQS

8
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

is a performance based measure of service quality but specific to the retail context. Given the
lack of theoretical support, a triangulation of research technique has been developed to discover
the factor structure of service quality. It consisted of phenomenological interviews with three
retail customers, exploratory in-depth interviews with six customers and a qualitative study
tracking the thought processes of three customers during an actual shopping experience at a
store. Combining these findings they proposed a hierarchical factor structure for retail service
quality consisting of five dimensions - Physical aspects, Reliability, Personal interaction,
Problem solving and Policy. These are also referred to as the second-order factors because they
are comprised of several sub-dimensions. Each of the first three dimensions has two sub-
dimensions each. These six sub-dimensions, also called the first-order factors which are labeled
as Appearance, Convenience, Promises, Doing-it-right, Inspiring confidence and
Courteousness/helpfulness

SERVICE QUALITY DIMENSIONS

1. PHYSICAL ASPECTS

Service is said to be distinguished from goods due to its intangibility. The tangibility aspects of a
service have a significant effect on perceived service quality. The tangibility importance varies
according to types of service. For a retail store, the tangibility aspect will be critical as the
retailers offer a mix of merchandise and service quality .Specifically, the physical environment
plays an important role in the service encounter of the grocery industry.
The importance of physical environment in a service setting is due to its ability to influence
consumer attitudes, behavior intention and behavior. As customers are involved in the production
and consumption process of a service conducted within a physical environment, the physical
environment will have a deep impact on customers’ perception of service experiences
Many marketers also noted that physical environment is often used as cues of a firm’s
competences and quality by consumers before a purchase. Specifically, proper layout in a store
will reduce shopper’s search time, color combine with lighting were suggested to “affect
consumers’ cognitive representation and affective reaction” and a light pleasing scent affects
shoppers’ perceptions of a shopping environment in which the latter will have a significant effect

9
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

on shoppers’ mood. Good ambient conditions also have significant effects in shopper’s behavior.
Ambient conditions include color, music, temperature, lighting, and scent. Spatial layout refers
to the arrangement, size, shape, and spatial relationships of machinery, equipment, and
furnishings. Functionality refers to the capability of machinery, equipment, and furnishings to
enhance performance and achieve customer goals. Lastly, signs, symbols, and artifacts act as
signals that communicate information about the service place to customers.

2. RELIABILITY

The reliability dimension comprise of “promises” and “doing it right” sub dimensions. Besides
fulfilling promise and performing the right service as part of reliability, the researchers added the
availability of merchandise as part of the “doing it right” sub dimension. According to a survey
by PricewaterhouseCoopers, consumers in Asia demand superb quality, especially the
availability of merchandise in stores, much more than the Western customers.

3. INTER PERSONAL RELATIONSHIP

The interaction among store personnel and store customers are important as customers are more
loyal to a store if the store is seen as warm, friendly, and impulsive. Several researchers has
studied this dimension in different or across cultures and found that the interpretation of the
dimension and importance of each item in the dimension is affected by the culture of the society.
Dabholkar et al., put forward that the personal interaction has two sub dimensions namely
inspiring confidence of customers by store personnel and courteousness/helpfulness of store
personnel. Inspiring confidence of customers includes error-free sales transactions and record,
the ability to answer customers questions, the behavior of employees in this store instill
confidence in customers, and customers feel safe in their transactions with this store.
Incorporated in the courteousness/helpfulness factor are employees are prompt service to
customers, employees tell customers exactly when services will be performed, customers are
given individual attention, employees are consistently courteous with customers, and employees
treat customers courteously on the telephone. Also, sales personnel should be aware of new
products, technical developments, prices, and other variations of store offerings.

10
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

4. PROBLEM SOLVING

Dabholkar et al proposed a new dimension “problem solving” which was not addressed in
SERVQUAL. This dimension incorporated store’s willingness to handle returns and exchanges,
shows a sincere interest in solving customers’ problems, and also store personnel’s ability to
handle customer complaints directly and immediately. They highlighted the need to have
problem solving as a dimension by itself because of the importance of “service recovery” in
providing good service.

5. POLICY

Store policy influences various aspects of service quality. Store policy includes high quality
merchandise, parking facilities, convenient operating hours, acceptance of major credit cards,
and store’s own credit card. The service quality measurement of the retail stores should include
the measure of service quality and product quality as retail stores offer a mix of services and
products. Evaluation of quality of service should include evaluation on the performance of the
physical goods offered to customers.

STORE SIZE

Store size is used as a critical basis of grocery stores categorization due to shoppers’ preference
to “form simple perceptual categories of grocery stores”. The researcher discovered that when
grocery shoppers were spontaneously asked to describe the grocery stores they patron, they
would first mentioned the size of the stores. Categorizing of grocery stores according to store
type or store format is seen as ambiguous and complex by consumers. As a result store, type or
store format, as a basis of grocery stores categorization, was also linked to store size.
Furthermore, consumers will use expectations of a store category (store size in this case) to guide
their perception and evaluation of a particular store or a store choice. Due to the importance of
store size to in consumers’ perception of grocery stores, this thesis will use store size as a basis
of categorization for consumers’ evaluation of a store’s service quality.

11
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

SERVICE QUALITY AND STORE SIZE

Different sizes of firms were said to have several critical difference. The researchers posited that
the flat structure of small to medium sized firms leads to a more flexible work environment
where managers or owners will tend to interact directly with customers, tend to be ‘people
oriented’ instead of ‘system oriented’, and tend to be more flexible. Large firms are typically
highly structured with formalized procedure set for all activities with high emphasize on
standardization and specialization. The effects of the structure in relations to the size of the firms
are reflected in the retail sector.

The survival of the smaller, traditional food store in a competitive environment is attributable to
the nature of the service structure. Smaller stores allow customers to purchase most goods at
smaller amount, and promotes strong bond between shop owners and their customers. Many
researchers confirmed that small, independent neighborhood stores gives out more personal
service, extra attention, and customized advice against the more anonymous, standard self-
service that is offered in larger store chains. In another research, small grocery stores are
perceived to provide personal contacts, personal attention and care, personal customer service,
personal conversations and interpersonal relations, and convenience of being near and allow for
quick and easy shopping.
However, smaller stores have been viewed negatively as having crammed spaces, expensive
products, product run outs, and narrow product range. On the other hand, the medium-sized
grocery stores or the more modern supermarkets, capture the sales of food items due to shopping
comfort and parking facilities (both related to service quality) although the prices of the similar
items maybe relatively higher than smaller store.

12
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

CONCEPTUAL FRAME WORK FOR RETAIL SERVICE QUALITY

13
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

The Frame work illustrates that store size will be the moderating variable in the relationship
between the dimensions and the overall service quality perceptions measure. Based on the
literature review, it is expected that the inter- personal relationship and problem solving
dimensions will contribute significantly to the overall service quality measure of a small-sized
grocery store, the physical aspects and inter-personal relationship dimensions contribute
significantly to the overall service quality measure of a medium-sized grocery store, and the
physical aspects, reliability, and policy dimensions will contribute significantly to the overall
service quality measure of a large-sized grocery retailer.

A SURVEY TO MEASURE THE EFFICIENCY OF RETAIL OUTLETS IN INDIA

India has one of the largest numbers of retail outlets in the world. The sector is witnessing
exponential growth with retail developments taking place not only in major cities and metros but
even in tier-II and tier-III cities in India. In the next phase of retail revolution in India, the
companies are going to woo the rural segment as the hinterland has witnessed an upsurge in
economic development over the past few years hence maximum growth is expected to come
from rural markets.

To know the same, a sample survey has been conduced with 41 people to measure the efficiency
of service sector in India by taking various attributes that help to measure the effectiveness of
service outlets. Big Bazaar, Pantaloons, Metro, Central and Shoppers Stop are surveyed in our
study and the service quality of these outlets is measured with various attributes that help in
knowing the service quality of these firms.

14
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

ANALYSIS OF THE SURVEY

1.  Which store consistently provides the best values for your money?

best value for money

Big bazar central 12%
pantaloons shoppers stop metro
15%

49%

5%

20%

2. Which store is most likely to have what you want in stock?

which store is most likely to have what you want

in stock?
Big bazar central pantaloons shoppers stop metro
23% 5%
35%

5%

33%

15
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

3. Which store has best advertised sales and specials?

which store has best advertised sales and specials

Big bazar central pantaloons shoppers stop metro
17%
34%

10%

39%

4. Which store has best quality merchandise?

which store has best quality merchandise?

Big bazar central pantaloons shoppers stop metro

7% 15%

39% 24%

15%

16
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

5. Which store has lowest prices over all?

lowest price over all

Big bazar central pantaloons shoppers stop metro
17%
5%

2%

10%

66%

6. Which store provides least value for money?

store that provides least value of money

Big bazar central pantaloons shoppers stop metro
12% 24%

17%

12%
34%

17
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

7. Which store has the highest prices over all?

store that has highest prices

Big bazar central pantaloons shoppers stop metro
2% 2%
29%

51%

15%

8. Which store has poorest quality merchandise?

Poorest quality merchandise

Big bazar central pantaloons shoppers stop metro
5%
5%
16%

58%

16%

18
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

9. Which store has convenient layout for shopping?

best store layout for shopping

Big bazar central pantaloons shoppers stop metro
18%
35%

8% 40%

10.  which store has the widest selection of national brand merchandise?

wide selection of national brand merchandise

Big bazar central pantaloons shoppers stop metro
27% 10%

46%
17%

19
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

CONCLUSION

Service quality is the most important aspect of the retail sector which increases the customer
value and it will help to retain customer loyalty. Measuring quality of service requires customer
involvement. They measure it by calculating the difference between expected performance and
actual performance. Service quality should be measured in three different dimensions like
technical quality, functional quality and corporate image. SERVQUAL method can be used to
measure tangibility, reliability, responsiveness, assurance and empathy and RSQS method
measures physical aspects, reliability, personal interaction, problem solving capability and policy
of the store. These two models are combined together to form the hierarchical factor structure
and which includes appearance, convenience, promise, doing-it-right, inspiring confidence and
helpfulness. Also store size is very important when evaluating service quality. Interpersonal
relationship, physical aspects, policy of the outlet and problem solving dimensions will add value
to the over all service quality of the retail industry.

20
 MEASURING SERVICE QUALITY IN RETAIL SECTOR

REFERENCES

 Measuring Retail Service Quality: Examining Applicability of International Research

Perspectives in India Subhashini Kaul -Research publications- IIM-A
 Service Quality Dimensions: A Study on Various Sizes of Grocery Retailers –
A conceptual Paper,Nor Khalidah Abu, Faculty of Business Administration, University
Tun Abdul Razak.
 Identifying service quality dimensions by Understanding consumer preferences in retail
sector- Mathew Thomas- Harvard business review
 Retail businesses and services businesses- Berry L L –Journal of Retailing
 A service quality model and its marketing implications- Gronroos, Journal of the
academy of marketing science.
 Measuring retail service quality- Boshoff, C., & Terblanche, N. S, South African journal
of business management.

21