MANAGING CUSTOMER

EXPECTATIONS AND
PERCEPTIONS
CHAPTER 5

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 • In terms of customer perceived quality, operations managers need to understand, and influence,
their customers’ expectations to ensure they provide a service that meets or possibly exceeds
those expectations.
INTRODUCTION • If, as a result, customers are satisfied, or indeed delighted, they are more likely to become
valuable customers who not only use the service again but are positively disposed towards it and
may even recommend it to others (we sometimes refer to this as their post-purchase intentions).
Indeed, customers are the ultimate arbiters of the quality of the service.

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 WHAT IS CUSTOMER SATISFACTION?
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 • In simple terms, satisfaction is the result of customers’ overall assessment of their perceptions of the service
(the service process, their experiences and outcomes such as the quality of the ‘products’, the benefits
obtained and perceived value for money), compared to their prior expectations (see Figure 5.1 ).

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 • If customers’ perceptions of the service match their expectations (P=E) then they should be satisfied (or at least satisfied).
If their perception of the service exceeds their expectations (P>E) then they will be more than satisfied, even delighted. If
their perceptions of the service do not meet their expectations (P<E) then they may be dissatisfied, even disgusted or
outraged.

• Importantly satisfaction is a continuum, from extreme delight to extreme dissatisfaction. As well as satisfaction being the
customer’s overall assessment of the service, the customer may also feel delighted, satisfied, or dissatisfied with the
individual steps (transactions or touch points) in the service process. This is sometimes referred to as transaction
satisfaction.

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 PERCEPTIONS–EXPECTATIONS GAP
• If there is a mismatch between perceptions and expectations, this, in simple terms, is usually caused by either a mismatch
between expectations and the service (Gap 1 in Figure 5.3 ) and/or a mismatch between the service and customers’
perceptions of it (Gap 2 in Figure 5.3) .

• There are several reasons why Gap 1 might exist. The service may have been inappropriately specified, designed or
enacted, or there may be insufficient resources to meet expectations. It is also possible that the customer may have
inappropriate expectations. An inappropriate specification or design of the service may be the result of a poor
understanding of customer expectations by managers.

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 • Managers may have not put enough time and effort
into either specifying the service or getting feedback
from customers about what they feel to be an
appropriate type or level of service. Insufficient
resources may be the result of a poor understanding of
market requirements or demand profiles.

• These ‘internal’ reasons often stem from a lack of

determination to deliver consistent standards.

• Managers frequently report that their organisation

does not take time and trouble to understand what its
customers require and therefore the service design
process is flawed from the outset. This flows into poor
or inappropriate service design and results in poor
resource utilisation.

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 • Inappropriate expectations may be the result of inappropriate marketing, promises made by the
organisation that cannot be delivered, or inappropriate word-of-mouth referrals or organisational
image, which may be a result of poor service experiences in the past.

• Also, there are some customers who have quite unrealistic expectations of some service
organisations and can cause a great deal of aggravation and nuisance as a result. These
individuals either need their expectations reshaping before or during service delivery, or
removing from the operation, if this is feasible

• Gap 2 may be the result of either incorrect provision of a service or customers inappropriately
perceiving the service. Incorrect provision is not unusual in many service organisations.

• Service operations are often complex, human-based activities and things do go wrong.

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 • A mismatch as a result of poor service provision can be removed or at least reduced through service
recovery. Table 5.1 summarises the reasons for the existence of the gaps and therefore dissatisfied
customers.

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 DOWNSIDES OF THE EXPECTATION–PERCEPTION APPROACH TO CUSTOMER PERCEIVED SERVICE QUALITY

• Service could be perceived to be ‘good’ when it is ‘bad’ .

• If customer expectations are particularly low (and indeed may have been deliberately created that
way), poor operational service quality may be perceived as highly satisfying because expectations have
been exceeded. This may look like a reasonable state, but it is clearly one that makes for-profit
organisations vulnerable to competitive threat from higher-quality providers, or may lead to
government ‘interference’ in public sector organisations.

• Service could be perceived to be ‘bad’ when it is ‘good’ .

• Likewise, it is also possible that if expectations are high, due to over-promising, for example, then a
good operational service may be seen as inadequate.

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 • Service that was ‘good’ last time may only be ‘OK’ this time .

• If a service was perceived to have been ‘good’ then the customers’ expectations may be raised for next
time; thus they may well be less satisfied on subsequent occasions, despite the fact that the operational
quality of the service has remained unchanged. This is a problem encountered by Disney. Visitors’ first
encounter with the Magic Kingdom is often so good, much better than expected, that subsequent visits
are sometimes reported to be poorer in quality, i.e. less satisfactory.

• Satisfied customers may switch .

• Even though a particular service may meet customers’ expectations and customers are satisfied,
customers may still switch suppliers, if there is a choice.

• Alternative service providers may offer a superior level of service or additional service features, or
customers may be naturally disloyal or inquisitive. When it comes to measuring satisfaction, we need to
remember to also measure the customers’ post-purchase intentions; in particular, will they return?

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 CONFIDENCE
• Whereas satisfaction is an assessment by the customer following a service experience, confidence, or the
lack of it, does not require previous experience or contact with the organisation.

• This is an important notion for all organisations, and especially those with which people may have no or little
contact, for example, social services, police, fire services, coroners’ courts, hospitals, local schools and legal
services. Confidence is about having belief, trust or faith in an organisation, its staff and services.

• Our feeling of confidence in organisations such as the police will not only affect our feeling of well-being and
our quality of life but importantly it may well influence how we interact with that organisation, i.e. our
predisposition towards it. If we feel confident in the local police service, for example, we may, when caught
for a minor offence, be more willing to co-operate with the police.

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 • Furthermore, if we feel confident in the police we may be more willing to provide assistance as a
witness at an incident, or provide information about suspicious events, or even support officers
attending incidents (or at least not make their jobs more difficult). All of this helps to improve the
performance of the police service itself. Confidence may also affect our willingness to fund the
police through local taxation.

• For some organisations, understanding and measuring customer confidence may be more
appropriate than customer satisfaction. Indeed some people might argue that customer
satisfaction is a wholly inappropriate measure to be applied to some of the police service’s
customers (i.e. criminals).

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 • Research has shown that our confidence pre-service, i.e. before we receive any service, is influenced
primarily by three things over which the organisation may have very limited control or influence:

• personal beliefs (beliefs held by the individual about that organisation)

• media (for example television (news or even drama) coverage of the organisation)

• word-of-mouth (the communicated experiences of others)

• and three things that organisations have control and influence over:

• visibility of the organisation, its services and its employees

• familiarity with the organisation’s employees, services or abilities

• communication ( knowledge of the service and its abilities).

• By managing these factors, organisations can have an important impact on their potential customers and the
efficiency and effectiveness of the service they deliver.

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 WHAT INFLUENCES EXPECTATIONS AND PERCEPTIONS?
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 PERCEPTIONS
• Our perceptions are our own personal impression and interpretation of the service provided and so
customers will perceive each service in their own personal, emotional and sometimes irrational way. We use
our senses, vision, smell, touch, taste and hearing, to experience the world around us and the services we
receive.

• How we perceive a service (and all other events) depends upon the experiences each of us have had in our
past, our culture, language, beliefs, values, interests and assumptions i.e looking at the same thing.’

• ‘Reality’ is not always real. For example, much has been written about the placebo effect, where
reassurances, or incantations, from a doctor (or other ‘professional’), with or without a pill with no medicinal
properties (or a professional’s report), has a significant effect on most people’s psychological and also
physical well-being.

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 • A service received is what we each, individually, perceive it
to be. For example, if a customer has had a privileged
background and is used to being looked after, their
experience of a high-class restaurant may well be quite
different to someone from a more humble background (or a
different country).

• While the privileged person may experience and perceive

attentive staff and appreciate well-laid tables, the other
person may find the staff obsequious and overbearing, and
the number of knives and forks confusing, even anxiety-
making.

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 • In service (and indeed in business and life situations) we may filter our experiences even more:

• Selective filtering .

• We tend to only notice what is relevant to current needs and ‘ignore’ other parts of the experience. The
‘privileged’ person may notice a mark on the tablecloth and complain, the other person may not even
notice it.

• Selective distortion .

• We tend to modify and seek information that supports personal beliefs and prejudices. The European
visiting an American restaurant may well notice the size of the portions being served, confirming their
personal prejudices about Americans.

• Selective retention .

• We tend to remember only those things that are relevant to our needs and beliefs. After a restaurant
meal, some diners may remember and talk about the quality of the food, others the state of the toilets
and others the attentive, or good looking, staff.

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 EXPECTATIONS
• Our expectations of a service will lie somewhere on a range, or continuum, between ideal and intolerable
(see Figure 5.4 ). An intolerable train journey may be one that arrives very late, or even not at all, where the
carriages are filthy and the staff abusive. An ideal train journey might be clean, on time, very fast, and
include chauffeur-driven transport at either end.

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 • Some points on this continuum could be defined as follows:
• Ideal - The best possible.
• Ideal feasible - The level of service that a customer believes should be provided
given the price or the industry standard.
• Desirable - The standard that the customer wants to receive.
• Deserved - The level of performance that the customer ought to receive, given the
perceived costs.
• Minimum tolerable - The minimum tolerable standards – those that must be
achieved.
• Intolerable - The standards the customers should not receive.

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 • Our expectations, defined as what we believe to be likely, i.e. what we believe will happen, rather than should happen,
may not be a single point on this scale but a range (see Figure 5.4 ).

• This range, or zone, of expectations, as shown in Figure 5.4 , is sometimes referred to as the zone of tolerance. This zone
of what could be considered to be an ‘acceptable’ level of service by a customer is shown in Figure 5.5 .

• The importance of this zone of tolerance is that customers may accept variation within a range of performance and any
increase or decrease in performance within this area will only have a marginal effect on perceptions.

• Only when performance moves outside of this range will it have any real effect on perceived service quality.

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 INFLUENCING EXPECTATIONS
• The positioning of our expectations on the continuum between intolerable and ideal will be influenced by
many things (see Figure 5.6 ). Our expectations about a train journey might be influenced by our previous
experiences and the price we are paying, for example.

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 • Price often has a large influence on expectations. The higher the price, the higher up the continuum towards
ideal are customers’ expectations. Expectations of a customer flying tourist class from Paris to Chicago will
be at a different level to customers flying business or first class.

• All three customers will have similar expectations about safety and timeliness, but expectations about
legroom, quality of food, attentiveness of the service and ease of check-in may vary considerably. Price is
perhaps one of the most important influences as customers are concerned not just about the service and
their experiences and outcomes but also its value

• Alternative services available will also help define and set expectations. If you know that one airline
provides a limo service when flying business class, you may expect other carriers to do the same.

• Marketing can have a considerable influence on expectations. Marketing, image, branding and advertising
campaigns help set expectations, often at great cost to the organisation.

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 • Word-of-mouth marketing, which is less controllable, can have a profound effect on a customer’s expectations. Indeed, in
some situations, word-of-mouth may have a stronger influence than organisational marketing.

• Previous experience will help shape expectations, as prior knowledge not only makes them clearer and sharper but allows
customers more accurately to position them on the scale.

• Previous experience also acts as a moderator on marketing information either from the organisation or from word-of-
mouth. It is important to note that previous experience may not be of the service provider in question but may be of other
service providers.

• Customers’ mood and attitude can affect their expectations. Someone in a bad mood or with a poor attitude to an
organisation may have heightened expectations; someone less concerned and more tolerant may have a wider zone of
tolerance and thus a wider range of expectations.

• Confidence about an organisation, even before we have used an organisation, will also influence our expectations. If we
have confidence in our child’s new school because of its reputation, for example, we may have a higher set of expectations
as to how we and our child will be treated.

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 • Expectations are dynamic. They are not
fixed on a continuum between
intolerable and ideal.

• They will change over time and indeed

during the service itself. Customers are
continually experiencing many service
situations and consuming services.

• Their expectations are under continual

review and change. So what a customer
may have felt to have been acceptable
last time may well be different next
time, as influenced by some of the
factors above.

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 EXPECTATIONS OF A
SERVICE NEVER USED

• Because our expectations can be

based on what we believe to be
likely, we therefore do not need to
have experienced a service to
have expectations about it. These
may be quite clear and explicit if
they have, for example, witnessed
such events second-hand, perhaps
on television or in novels.

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 HOW CAN EXPECTATIONS AND
PERCEPTIONS BE ‘MANAGED’?
Two key roles for operations managers that we will cover in this section are, firstly, how

they can manage and influence customer expectations and, secondly, how they can manage

( manipulate) customers’ perceptions during the service process

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 MANAGING EXPECTATIONS
• While one might argue that managing expectations is predominantly the role of marketers, operations do
have two important roles to play here.

• Firstly it is the duty of operations managers to ensure that the marketing and strategy functions within an
organisation know the capabilities of the operation, the nature and quality of service that it can actually
deliver and indeed what it can’t. This enables the marketing function to try to influence customers’
expectations so that there is a good chance those expectations will be met.

• Secondly, the operation has an opportunity to influence and shape customer expectations during the early
stages of a service process.

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 • Careful attention to the design of the first few
steps of the service and the clues and messages
is required to help set the right expectations. For
example, the customer entering a restaurant
sees the way that it is set out and will draw
conclusions about the level of service provided.

• If the tables and chairs are functional and there

are no tablecloths or decorations, customers will
be more prepared to expect simpler service than
if they go into one with comfortable seats,
tablecloths and ornate decorations.

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 HOW CAN SERVICE QUALITY BE
OPERATIONALIZED?
Both operational service quality and perceived service quality can be defined in terms of the quality factors or dimensions of
service quality. These factors enable operations managers to capture and operationalize expectations to help understand the
nature of expectations and perceptions, create instruments to measure customer satisfaction and create service specifications

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 SERVICE QUALITY FACTORS
• The service quality factors are those attributes of service about which customers may have expectations and which need
to be delivered at some specified level.

• Figure 5.15 provides eighteen quality factors which attempt to capture the totality of service quality.

• These eighteen may be consolidated into broader dimensions and indeed may not capture every aspect of service quality
for every organisation. However, they are at least a starting point to help us defi ne, deliver and measure service quality.

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 • These factors have been defined as follows:

• Access . The physical approachability of the service location, including the ease of finding one’s way around the service process or route through the
process.

• Aesthetics . The extent to which the components of the service and their experience of it are agreeable or pleasing to the customer, including both
the appearance and the ambience of the service environment, the appearance and presentation of service facilities, ‘products’ and staff.

• Attentiveness/helpfulness . The extent to which the service, particularly contact staff, either provide help to the customer or give the impression of
being interested in the customer and show a willingness to serve.

• Availability . The availability of service process, facilities, staff and ‘products’ to the customer. In the case of contact staff this means both the
staff/customer ratio and the amount of time each staff member has available to spend with each customer. It also includes both the quantity and
range of services (and ‘products’) available to the customer.

• Care . The concern, consideration, sympathy and patience shown to the customer. This includes the extent to which the customer is put at ease by the
service and made to feel emotionally (rather than physically) comfortable.

• Cleanliness/tidiness . The cleanliness, neat and tidy appearance of the inputs to the service process, including the service environment, facilities,
equipment, the contact staff and even other customers.

• Comfort . The physical comfort of the service environment and facilities.

• Commitment . The staff ’s apparent commitment to their work, including the pride and satisfaction they apparently take in their job, their diligence
and thoroughness.

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 • Communication . The ability of service staff to communicate with customers in a way they will understand. This includes
the clarity, completeness and accuracy of both verbal and written information communicated to the customer and the
ability to listen to and understand the customer.

• Competence . The skill, expertise and professionalism with which the service is executed. This includes the carrying out of
correct procedures, correct execution of customer instructions, the degree of ‘product’ or service knowledge exhibited by
contact staff, the provision of good, sound advice and the general ability to do a good job.

• Courtesy . The politeness, respect and propriety shown by the service, usually contact staff, in dealing with customers and
their property. This includes the ability of staff to be unobtrusive and un-interfering when appropriate.

• Flexibility . A willingness on the part of the service worker to amend or alter the nature of the service to meet the needs
of the customer.

• Friendliness . The warmth and personal approachability (rather than physical approachability) of the service, particularly
of contact staff, including a cheerful attitude and the ability to make the customer feel welcome.

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 • Functionality . The serviceability and fitness for purpose of service.

• Integrity . The honesty, justice, fairness and trustworthiness with which customers are treated by the service organisation.

• Reliability . The reliability and consistency of performance of the service and its staff. This includes punctual service delivery and
the ability to keep to agreements made with the customer.

• Responsiveness . The speed and timeliness of service delivery. This includes the speed of throughput and the ability of the service
to respond promptly to customer service requests, with minimal waiting and queuing time.

• Security . The personal safety of customers and their possessions while participating in or benefiting from the service process. This
includes the maintenance of confidentiality.

• These factors cover many aspects of a service, which we defined in Chapter 1 , including:

• Inputs: for example, staff availability, appearance, and competence; the appearance, aesthetics, accessibility and comfort of the
facilities.

• The service process: for example, process reliability, staff responsiveness and communication skills, the functionality and reliability of
the technology.

• The service experience: for example; staff friendliness and courtesy, and a feeling of security.

• Outcomes: for example, the functionality and reliability of the service received.

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 HYGIENE AND ENHANCING FACTORS
• Although they will vary from organisation to organisation and also from customer to customer, the service quality factors can be divided
into four groups. These groupings are defi ned in terms of a factor’s ability to dissatisfy and/or delight:

• Hygiene factors are those that need to be in place: if they are they will satisfy, if not they will be a source of dissatisfaction. They are not
likely to be a source of delight. For a bank, security, integrity and functionality, for example, are expected to be acceptable; if they are not
acceptable they will dissatisfy. On the other hand, if these factors are over-specified they will not delight. A very large number of security
checks will not delight customers; indeed they could dissatisfy them. Having all cash machines in perfect working order all of the time will
not delight them either.

• Enhancing factors have the potential to delight if they are present, but if they are not there they are not likely to dissatisfy the customer.
Customers of a bank may be delighted with a warm, caring approach by a member of staff or their flexibility in dealing with a problem;
however, these things are not necessarily expected so, if they are not provided, their absence may not lead to dissatisfaction.

• Critical factors have the potential to both delight and dissatisfy. Responsiveness, communication and competence of bank staff and systems
must be at least acceptable so as not to dissatisfy the customer, but if more than acceptable they have the potential to delight.

• Neutral factors have little effect on satisfaction. The comfort or aesthetics of a banking hall may play no part in customers’ satisfaction or
dissatisfaction.

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 HOW CAN MANAGERS CAPTURE
CUSTOMERS’ EXPECTATIONS?
The eighteen quality factors provide a base to help us understand and define customer expectations
(whether for internal or external customers) and defi ne appropriate levels, i.e. create
the internal operational quality specification.

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 METHODS TO CAPTURE CUSTOMER EXPECTATIONS
• Questionnaires and surveys , written or verbal, can be a good means of soliciting opinions about an organisation’s
services and to identify what customers find important.

• Focus groups usually comprise groups of about fifteen customers with a trained facilitator, brought together to
discuss one or a few aspects of a particular existing or planned service.

• Customer advisory panels are similar to focus groups but are likely to meet regularly with a more structured
agenda.

• New/lost customer surveys are very useful ways of finding out what attracts customers to the organisation and
indeed why they left. While many organisations are now conducting exit interviews, the most successful rely
heavily upon the direct involvement of senior managers to ensure appropriate access, information and action.

• Complaint/compliment analysis can be undertaken upon customers’ voluntary contributions, although they tend
to be more negative than positive.

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 HOW CAN A SERVICE BE SPECIFIED?
Operational service quality is the operation’s assessment of how well the service was delivered
to its specification, i.e. its conformance to specification. There are a few key
questions we want to cover here, including where the specification comes from, what it looks
like and how we ensure conformance to it.

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 WHERE DOES A SPECIFICATION COME FROM?

• A service specification is an extension of the service concept. The service concept provides a broad
description about the service provided, the customer experience and its outcomes

• This in turn should either be based on the needs, requirements and expectations of customers, or
alternatively have been devised by the organisation because it believes that there will be a need or desire
for it.

• The specification then takes the elements of the concept and identifies the quality factors associated with
each, details the standards to be achieved in each and the organisation’s procedures to ensure conformance
to the standard (operational control).

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 WHAT DOES A SPECIFICATION LOOK LIKE?
• There will be several quality factors associated with each element of a service (see Table 5.2 ).

• An airline, for example, will have several quality factors associated with each flight, such as being on time, safe,
professional delay handling, disabled access to flight etc.

• There will be other quality factors associated with the cabin staff and service, such as attentive staff, safety aware
staff, competent staff etc. The catering will also have its quality factors, such as quality of the meal, passengers
having a choice of meal, staff competence in serving the meal etc.

• There will be standards associated with each factor, some of them explicit and others tacit. For example, the
airline’s standard for ‘on time’ might be plus or minus five minutes.

• Its standard for attentive staff might be their level of friendliness and having two or three interactions with each
passenger. Some of these standards may be set down in operating manuals or in regulations.

• Others may be more tacit and shared through oral instructions, pictures, or shared understandings through role-
play during training.

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 HOW DO WE ENSURE CONFORMANCE TO THE SPECIFICATION?

• Service organisations will have a variety of means of ensuring conformance for each of these factors.

• Ensuring on-time departure will require co-ordination with ground staff to ensure all passengers’ bags are
loaded promptly, discussions with air traffic control to establish clearance on time and checks for weather
problems to allow for changes in route and increasing average speed to ensure an on-time arrival.

• The airline’s desire for attentive staff will be checked by supervisors on board providing coaching to
members of staff where necessary. Appropriate recruitment and training procedures will also have a role to
play in ensuring that staff look after their passengers well.

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 CONCLUSION
• Understanding what satisfies and delights customers is something that must be continually addressed, using a
variety of means to ensure that the answers do not fall into well established patterns because the way the
questions are asked does not vary sufficiently.

• Customer satisfaction is something that can be managed to some extent by influencing customers’ perceptions and
expectations of service delivery.

• It is no accident that many of those companies that have a reputation for excellent service spend time and money
listening to customers. Disney, for example, invented a new term for the activity of collecting information from
customers. It is called ‘guestology’ – reflecting Disney’s approach to treating its visitors as guests rather than mere
‘customers’.

• We also need to consider operational service quality. Operations managers need to create a specification for their
service which reflects customer needs and expectations. In service organisations this is not straightforward. But
let’s start with perceived service quality – the customer’s perspective

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 END OF CHAPTER

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