Quality in Retail Banking

R.F. Blanchard
TSB Bank plc, and

Quality in Retail Banking 5

Received August 1993 Revised May 1994

R.L. Galloway
Leicester Business School, De Montfort University, Leicester, UK
Introduction The UK financial services sector has seen a growing intensity of competition within the marketplace, particularly over the last decade. This competition emerged in the 1970s (de Moubray, 1989) when banks and building societies based their major competitive strategy on the traditional marketing mix elements of product, price, promotion and place. However this led, in the eyes of the customer, to homogeneity rather than distinction, with an apparently common market concept and perceived competitive strategy based on full product lines (Howcroft, 1991). In a developing environment of consumer awareness (Lewis and Entwistle, 1990) leading to a greater degree of consumer sovereignty, no organization can afford to neglect customer needs (Goodstadt and Marti, 1990). Coupled with a widely reported over-capacity within the Financial Services marketplace, a key differentiator leading to competitive advantage is obviously necessary. There is considerable support for the argument that this should be quality of service (Berry et al., 1989; Edwards and Smith, 1989; Ross and Shetty, 1985). That the banks are failing in this is evidenced by The Association of British Chambers of Commerce, which, in a 1992 survey of its members, found banks to be sterile and uncommunicative in their customer relationships, while in 1992 a Consumers Association survey found 10 per cent of customers unhappy with the service of their accounts, twice the number reported in 1990. The UK banks are not unique in this. Raddon (1987) reported that 40 per cent of those customers switching financial institutions in the USA did so because of service problems, while Grubbs and Reidenbach (1991) reported a figure of 25 per cent closing accounts for the same reason. The banks are not unaware of this and most are addressing the issue of quality of service in one way or another, though the evidence cited above suggests that these attempts have had little impact on customer perception. This article describes work carried out during 1991 and 1992 within the TSB to determine the perceptions of both customers and staff of the requirements of a quality service in retail banking. TSB Bank plc is the sixth largest bank in the UK with a network of 1,400 branches and 7 million customers.
The authors wish to thank TSB Bank plc for assistance in carrying out the research described and for permission to publish.

International Journal of Service Industry Management, Vol. 5 No. 4, 1994, pp. 5-23. MCB University Press, 0956-4233

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Frameworks While a universally accepted definition of quality is still not available the majority of writers on service quality support a customer centred definition (e.g. Eiglier and Langeard quoted in Le Blanc and Nguyen, 1988; Garvin, 1983; Gummesson, 1988; Kathawala and Elmuti, 1991; Lewis, 1989; Oakland, 1986) with the reservation that customer expectations are not necessarily consistent or predictable (Haywood-Farmer, 1987; Peters, 1985). The definition produced by Howcroft (1991) that service quality in banking implies consistently anticipating and satisfying the needs and expectations of customers covers most of the issues raised. In particular, it is customer centred, but in requiring the definition of needs it does not presume upon the customers prior knowledge or technical competence, while in allowing for expectations it implies that the service should take account of this prior knowledge and experience. It also implies an awareness of the dynamic nature of customer expectations in requiring that these be anticipated. In view of its comprehensive coverage it is the one favoured by the authors. This, of course, implies that banks, in seeking to provide a high quality service, should identify these needs and expectations and establish the way in which customers prioritize them. Most authors agree that service consists of an outcome and a process element, where outcome is the achievement (or not) of some end by the customer (for example, cash from a cash dispenser, an appropriate insurance policy or loan) and process is the interaction between the customer and the service unit. The variation in tangibility of the service, and the presence of the customer in the process, frequently make it difficult to define the boundary between the two. The situation is further complicated by the fact that perception of quality is heavily influenced by expectation (Lyth and Johnston, 1988). Despite this the process or functional element is perhaps the most important in creating immediate impressions of quality. This division alone is too imprecise to be of much value in the design of services and further classification of service quality has been addressed by a number of authors. Lehtinen and Lehtinen (in Le Blanc and Nguyen, 1988) identify the three dimensions of: (1) physical quality equipment, premises, tangibles; (2) corporate quality image and profile of the organization; (3) interactive quality customer contact with service personnel and other customers. Grnroos (1988) identifies the five key determinants of service quality as: (1) professionalism and skills (technical (outcome related)); (2) reputation and credibility (image related); (3) behaviour and attitudes; (4) accessibility and flexibility; and (5) reliability and trustworthiness.

The first of these being technical (outcome related) and the last four are functional (process related). The most widely reported framework is that proposed by Parasuraman et al. (1988) as the basis of SERVQUAL, consisting of the five dimensions of service quality tangibles, reliability, responsiveness, assurance and empathy. These in turn are a consolidation of ten dimensions as shown in Table I. The models proposed by Grnroos and by Parasuraman et al. have a substantial superficial attraction. They appear to address a complex issue and break it down into a reasonable but not excessive number of components. Difficulties arise on closer examination. The elements are far too closely interlinked to form the basis of a rigorous analysis of the service situation, and they do not map unambiguously onto the basic classification of outcome, process and expectation. Figure 1 shows this mapping. The model of Lehtinen and Lehtinen shows the most unambiguous linkage, but even this can be questioned. In service encounters with very low tangible content (e.g. entertainment) the interaction is the outcome, and there are no doubt occasions when corporate image is what is being bought. Professionalism and skill and accessibility and flexibility (Grnroos) and tangibles and reliability (SERVQUAL) all have obvious elements of both process and outcome. Even empathy which, at least in Financial Services, is a process issue, may well be a primary outcome when the service is mainly personal (e.g. counselling or less formally, hairdresser or bartender). If service quality is to be measured, less ambiguous parameters are necessary, and it appears that the fundamental ambiguity lies in the overlap of process and outcome. These are not separate dimensions since dimensions are by definition orthogonal and, at least in principle, measurable. Likewise the SERVQUAL dimensions are not true dimensions. These issues are addressed again later in the context of the data collected.

Quality in Retail Banking 7

SERVQUAL Tangibles Reliability Responsiveness Assurance

Components Tangibles Reliability Responsiveness Competence Courtesy Credibility Security Access Communication Understanding Table I. SERVQUAL Dimensions

Empathy

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Outcome Tangibles

Expectation Corporate image Reputation and credibility

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Premises Professionalism and skill Accessibility and flexibility Reliability and trustworthiness

Assurance

Tangibles reliability

Interactive Behaviour and attitudes

Responsiveness Empathy
Process

Figure 1. Classification of Some Service Dimensions

Source: Lehtinen and Lehtinen, Grnroos, SERVQUAL

Parasuraman et al. also propose a model of the determinants of service quality which identifies five opportunities for quality failure to arise (service gaps). This model is shown in Figure 2. The model can be perceived as a process for the design of a service: management develop an understanding of customer expectations, use this to set up relevant quality specifications, ensure that the service is designed and operated to those specifications, and ensure that customers are correctly informed of the service standards. It also provides a framework for analysing quality failures by identifying the gaps in this process which cause a mismatch between customer expectation and customer experience (perceived service). Since this is a general model of the service process it does not suffer from the problems of defining and measuring service quality and does not require a rigorous definition of service quality to enable it to be used. Methodology The article describes two linked sets of data. The first, collected in March/April 1991 by the consultancy Research International Specialist Units Ltd, consisted

Expected service Gap 1 Management perception of expected service Gap 2 Service quality specification Gap 3 Gap 4 Communication to customer

Quality in Retail Banking 9

Gap 5

Service delivery

Perceived service

Figure 2. Service Gap Model of the Service Process

of a questionnaire completed during interview with 439 current/deposit account customers of the bank. Respondents were recruited outside a quota sample (reflecting size and location) of 71 bank branches and interviewed at home. The sample itself was a quota sample reflecting lifestage (the categories, representing age/status, being youth, independent, family, emptynester/retired), sex and socioeconomic class of the banks customers. Fourhundred-and-one valid replies were analysed. The questionnaire covered a very wide range of issues and only the relevant part of the questionnaire is shown in Appendix 1. The 31 aspects covered were generated during panel discussions with 50 customers. This was followed in late 1992 by a survey of staff. This took the form of five structured interviews with management and four focused discussion groups, each with eight members of staff. The managers were selected randomly, while the discussion groups were selected to reflect the balance of back and front office functions. In order to maximize the likelihood of uninhibited discussion, management were not present during the discussion groups nor were records of the discussions made available to them. The views of a total of 39 staff were thus obtained. This research was carried out by Front Line Market Research under the direction of the authors. The discussion guide used is shown in Appendix 2. The models proposed by Parasuraman et al., as described above,

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were considered the most widely verified and applicable models and were therefore initially used as a framework for developing and analysing the data. Findings Customer Perceptions Relative importance weights were calculated for each of the 31 attributes and are shown in Table II. These attributes were then related to the SERVQUAL dimensions and to whether they represented process or outcome issues as shown in Table III. This

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Rank 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31.

Attribute Privacy of discussions Politeness of counter staff Willingness to help Way staff treat customers Cash in machines Speed and efficiency of transactions Staff listen Tills open at busy times Staff available to help Informing of account changes Way mistakes are handled Clarity of staff answers Charges clear and explained Attitude of bank when lending Person for questions Availability of enquiries desk Return/replace cash card Queue at branch Opening hours Appearance of branch Taking time to match product/need Staffs product knowledge Overdraft charges Ease of getting to branch Queues at cash machines Ease of understanding letters Informed of progress of applications Relevant direct mail Telephones answered quickly Getting right person on phone Speed of mortgage confirmation

Relative importance 100 92 90 86 77 72 71 64 57 54 50 49 46 41 38 35 32 32 29 29 28 27 27 26 19 18 14 11 10 8 5

Table II. Customer Ranking of Service Attributes

Attribute 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. Privacy of discussions Politeness of counter staff Willingness to help Way staff treat customers Cash in machines Speed and efficiency of transactions Staff listen Tills open at busy times Staff available to help Informing of account changes Way mistakes are handled Clarity of staff answers Charges clear and explained Attitude of bank when lending Person for questions Availability of enquiries desk Return/replace cash card Queue at branch Opening hours Appearance of branch Taking time to match product/need Staffs product knowledge Overdraft charges Ease of getting to branch Queues at cash machines Ease of understanding letters Informed of progress of applications Relevant direct mail Telephones answered quickly Getting right person on phone Speed of mortgage confirmation

SERVQUAL dimension Tan/ass Ass Res Res/ass ATan/rel Tan/red Res/emp Rel/res Rel/res/emp Rel/emp Res/ass Emp Emp Res/ass/emp Tan/rel/res Tan/rel/res Tan/rel/res Tan/rel//res Tan/res Tan/ass Res/ass Res/ass Tan Tan/emp Tan/emp Rel/res/ass Rel/res/ass Tan/res Tan/rel/res Tan/rel Tan/rel/res

Process/ outcome Process Process Process Process Outcome Process/outcome Process Process Process Process/outcome Process/outcome Process/outcome Process/outcome Process Process Process Outcome Process Process Process Process Process Outcome Process Process Process Process/outcome Outcome Process Process Process

Quality in Retail Banking 11

ass = assurance; res = responsiveness; emp = empathy; tan = tangibles; rel = reliability

Table III. Relationship of Attributes to SERVQUAL Dimensions

relationship was established subjectively by the authors in discussion, but it is suggested that in most cases the association is self-evident. The data show quite clearly that the SERVQUAL dimensions are not exclusive, at least from the viewpoint of customers expression of needs, and there is certainly room for discussion of the relative balance of the elements (for example on item 10, to what extent should the provision of information be considered a tangible?), but in general the attributes identified as important by

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customers fit conveniently into the SERVQUAL dimensions without undue strain. By weighting the SERVQUAL dimensions by the relative weights given to the attributes by customers, it is possible to develop a crude ranking. This is shown in Table IV. This clearly shows the expected pattern that service customers attach considerably more significance to the process elements of the service, rather than the outcomes, when judging quality. Indeed, when the two alternatives of process and outcome are weighted in this way, the ratio is 82 per cent process to 18 per cent outcome. This has obvious implications for service design. What is less clear is the utility of the more detailed breakdown into SERVQUAL dimensions. Responsiveness is seen as the most important of these, but in referring back to the original customer-determined issues, this is seen to contain elements of interpersonal behaviour (willingness to help; staff listen; way staff treat customers) and much harder issues such as tills open at busy times. The dimension is not focused on specific issues which either the customer or the service designer are likely to address. This might not matter if the SERVQUAL dimensions represented some underlying structure, but their ambiguity and overlap suggests that this is not the case. A rigorous basis for analysis would require a classification of service quality which avoids ambiguity, by being based on genuinely orthogonal dimensions, and allows for variation between different types of service to be represented by measurement of the magnitude of a particular dimension. The authors suggest that the basis for one such dimension, the process/outcome distinction, has already been described and has been widely recognized as a key issue in service design. However it seems more reasonable to regard this as a dimension rather than a dichotomy, with a particular aspect of any service being located at some intermediate point between the two extremes. This is consistent with Figure 1 and explains the substantial overlap between process and outcome necessary to accommodate most attempts to classify service quality. Two other potential candidates are: (1) Subjective/objective, which provides a measure of the degree to which the quality of that aspect of the service under consideration can be objectively specified. For example, the availability of cash in cash
SERVQUAL dimension Responsiveness Assurance Empathy Tangibles Reliability Relative weight 100 70 52 47 44

Table IV. Ranking of SERVQUAL Dimensions by Customers

machines is entirely objective since it is either there or not, whereas such issues as staff listen to me or politeness of staff are far more subjective. One customers politeness might be anothers obsequiousness. The issue here is not so much whether the aspect can be measured but the degree to which customers perceptions are consistent. Speed/efficiency of transactions can be measured but customers ideas of what constitutes fast are variable. For example a study of customer perceptions of service in a supermarket (Harridence, 1992) found that the elderly tended to prefer a slower checkout service since it increased the opportunity for social interaction. The establishment of a value for this dimension would assist the service designer by indicating the nature and appropriateness of control measures and the need for allowing discretion to service personnel, as well as indicating opportunity/need for customer selection and training. This dimension in particular links to the issue of prior expectations, and the greater the subjective content of the service encounter, the greater contribution expectations would be expected to make to perceived service quality. (2) Soft/hard. This terminology is derived from the systems field and widely used in discussion of service issues. It is used here in the sense that hard represents physical aspects of the service while soft represents interpersonal interaction. The authors suggest that this dimension is orthogonal to both the process/outcome dimension and the subjective/objective dimension, although there is perhaps more correlation with the latter in that objective aspects are more likely to be hard. Thus premises, equipment, and tangibles involved in the transaction are hard, whereas staff attitude is soft. It is widely recognized that soft issues are more difficult to deal with The soft side is harder (Vandermerwe, 1993) thus a measure of the relative importance of soft issues will give an indication of the likely difficulty of managing and improving service quality. An element which has been considered and rejected is the tangible/intangible dimension as this is well covered by subjective/objective and soft/hard. Seeking to apply these three dimensions to the attributes identified as important begs the question of measurement, another property of a true dimension. At this stage no more than a three-position scale has been attempted with each attribute being assigned to either the mid point, or one extreme, of each dimension, the values being assigned subjectively by the authors. The rationale behind the assignment is in most cases self-evident (i.e. privacy of discussions is a process issue, but criteria for judging privacy are reasonably objective and the issue is hard in that privacy depends on fixed facilities; way staff treat customers is again process, and while some forms of staff behaviour might be universally considered unacceptable, the influence of the customers perceptions and attitudes makes this highly subjective. Concerned with interpersonal interaction, it is self-evidently soft). Where a mixed

Quality in Retail Banking 13

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subjective/objective value has been assigned this is because the resolution depends heavily on customer perception, but there are reasonably well established norms, i.e. certain types of behaviour would generally be recognized as polite. Given the subjective nature of this assignment, it was considered inappropriate to attempt a more precise measurement than the 50:50 point chosen. The results are shown in Table V. Weighting these by the relative weights given to the attributes by customers yields the breakdown shown in Table VI. This effectively plots the location of this particular service within a three-dimensional matrix. This yields the

Attribute Privacy of discussions Politeness of counter staff Willingness to help Way staff treat customers Cash in machines Speed and efficiency of transactions Staff listen Tills open at busy times Staff available to help Informing of account changes Way mistakes are handled Clarity of staff answers Charges clear and explained Attitude of bank when lending Person for questions Availability of enquiries desk Return/replace cash card Queue at branch Opening hours Appearance of branch Taking time to match product/need Staffs product knowledge Overdraft charges Ease of getting to branch Queues at cash machines Ease of understanding letters Informed of progress of applications Relevant direct mail Telephones answered quickly Getting right person on phone Speed of mortgage confirmation

Process/ outcome P P P P O P/O P P P P/O P/O P/O O P P P O P P P P P O P P P P/O O P P P

Subjective/ objective O S/O S/O S O S/O S O S/O O S S S/O S O O O S/O O S/O S/O O O S/O S/O S/O S/O S/O O O S/O

Soft/ hard H S S S H S/H S H H H S S S/H S H H H H H H S/H S/H H H H S/H H H H S/H H

Table V. Service Attributes and Dimension

interesting result that although process issues dominate perception of service quality, as has been widely reported, this does not carry with it the frequentlymade assumption that quality issues are therefore soft and difficult to define. In fact issues which can be classed as objective seem marginally more important than those classed as subjective, while hard issues are almost as important as soft issues in this case. Staff Perceptions The structured discussions and interviews were designed to establish the staffs perception of customer expectations and their perception of how well these were met. Discussion leaders reported a strong sense of participation and consensus in all groups. Analysis was carried out by classifying relevant quotations. Staff perception of customer expectations is shown in Table VII. While it is not possible to rank these, responsiveness and assurance among the SERVQUAL dimensions are clearly more prominent than the others showing a very close agreement between staff perception and customer expectation. When these are linked to the three dimensions of process/outcome, subjective/objective and soft/hard the results shown in Table VIII are obtained. Again, although weighting is not possible, a very close agreement with customer expectations is apparent. Staff perceptions of possible causes of service failure were classified using the Gap model shown in Figure 2. It was found that all comments could be unambiguously assigned to particular gaps and the outcome is shown in Table IX.

Quality in Retail Banking 15

% Process Subjective Soft 83 47 53 Outcome Objective Hard

% 17 53 47

Table VI. Location of Service within Dimensions

Expectation Not to have to wait to be served Polite friendly staff Cash in ATMs Not to be dealt with by staff distracted by other business Not to be dealt with by staff who lack confidence/knowledge Not to be kept waiting for an appointment Privacy Welcoming environment

SERVQUAL dimension Responsiveness Assurance Reliability/tangible Responsiveness/assurance Assurance Reliability/responsiveness Assurance/tangible Assurance/empathy

Table VII. Staff Perception of Customer Expectations

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Expectation Not to have to wait to be served Polite friendly staff Cash in ATMs Not to be dealt with by staff distracted by other business Not to be dealt with by staff who lack confidence/knowledge Not to be kept waiting for an appointment Privacy Welcoming environment

Process/ outcome P P O P P P/O P P

Subjective/ objective S/O S/O O O S/O S/O O S/O

Soft/ hard H S H S/H S H H H

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Table VIII. Staff Perception of Customer Expectations

The low incidence of gap 1 issues is not surprising given the very close agreement between customer expectations and the banks perceptions of customer expectations (while it might be argued that gap 1 is really a senior management concern, a much wider awareness would be expected in an organization seeking to promote quality). Gap 5 identifies the importance of management acquiring accurate information about customer expectations and using this information as a first step in developing service quality. As described above, extensive research had been undertaken by the bank and it is apparent that a clear understanding of customer expectations was emerging. Gap 2 arose largely from the perception that there was no published set of service standards: we dont have any set down, we just try and offer the customer the best service we can. The fact that it was not particularly dominant may be explained by the profusion of local standards that were discovered and the very clear perception of customer expectations expressed by staff. This may suggest that a high level of awareness of customer needs among service personnel could reduce the need for formal standards, but in the authors opinion a lack of standard service guidelines across the branch

Number Gap 1 Gap 2 Gap 3 Gap 4 Table IX. Classification of Staff Perceptions Gap 5 Customer expectation/management perception Management perception/quality specification Quality specification/service delivery Service delivery/external communications Expected service/perceived service 10 34 53 24 10

Percentage 7.6 26.0 40.5 18.3 7.6

network does have strategic implications regarding the closing of gap 2. While informal standards are encouraging, such initiatives need to be replaced by integrated standards consistent with the organizations strategic objectives, particularly in a multi-location organization where inconsistency can give rise to problems. That causes problems when our customers go elsewhere and you say it will be all right but the other branch dont do it. The preponderance of indications of gap 3 problems reinforces the susceptibility of this gap to service failure and occurs when there is a difference between service specification and delivery. Inconsistencies of service delivery are influenced by inexperience, the perceived lack of importance placed on the role of front-line personnel and the need to develop further awareness of the internal customer-supplier chain. While staff clearly understood its importance, the potential vulnerability of service delivery could be reduced by building teamwork and shared values in order to enable the component parts of the customer-supplier chain to become more congruent. Customer contact is not seen as valued: everyone sees it (counter service) as like a lower down job and conflict between front and back office staff was frequently felt: staff need educating as to what the service centres (back office) do and service centres need educating as to what branches do. Gap 4 was primarily concerned with the organizations failure to communicate effectively with customers: our adverts dont tell people anything about what we do, do they?. This is a criticism which could be applied to almost all corporate advertising. As Zeithaml et al. (1990) mention, by neglecting to inform customers of those areas where the organization is undertaking to enhance service quality, it may be forgoing opportunities to influence customer service perceptions and thus reduce gap 5. This failure applied both to services and to processes: they [the customers] dont want any problems [but] they dont realize the bank procedures we have to go through. Consequently service perception could be enhanced by educating customers and thus influencing expectations. Discussion The authors acquired this work part way through, after the original customer survey had been carried out, and therefore had no influence on the structure of this phase. The original intention had been to analyse the data using the SERVQUAL classification and link this to staff perceptions using the Gap model. The failure of the SERVQUAL model to provide any particularly useful insights into how service might be improved led to the attempt to develop an alternative model of greater utility. It may well be that had the original survey been conceived within the SERVQUAL model this model might have proved more useful, but this does not affect the validity of the analysis produced, based as it was on clearly articulated customer concerns. The quality of the data must be considered good since the data collection was designed and administered by professionals in the field of opinion research.

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The implications of the findings for retail banking are clear. Customers overwhelmingly consider the process elements of the service when evaluating quality. They are seeking a responsive service with a high level of assurance. One that gives an impression of competence and credibility, one that can be trusted. What is of interest is that the staff, at least in this bank, demonstrated a clear and accurate perception of customer expectations and recognized the need to meet these. The staffs perception of the reasons for service quality failure corresponded well with this situation, in that relatively little importance was attached to gap 1 (perception of customer requirements). It is perhaps surprising that gap 2 (service standards) was not considered more important given the apparent absence of established service standards, but if, as was the case here, staff feel that they have a clear perception of customer expectations, it is probable that the need for standards is seen as less important. However the need for consistency, particularly in a multi-location organization, would seem to overrule an ad hoc approach. The most significant cause of service quality failure was the perceived failure of the organization to value the primary customer contact role sufficiently (gap 3). Whether by accident or design, a culture appears to have developed in which this role is seen as the lowest status and lowest paid in the organization. Gap 4 (external communications) reflects the staffs perception that customers are not well informed about services or procedures. This was both positive (advertising does not make clear the service which is available) and negative (customers are unsure of banking procedures, tariffs etc.) and suggests scope for customer education as a simple means of improving quality by narrowing this gap. Of the models considered, the gap model of Parasuraman et al. proved to fit the data perfectly and provided an excellent framework for analysis. It provided a clear and unambiguous basis for the classification of staff perceptions of the causes of service failure and indicated clearly the means and responsibilities for reducing or eliminating those causes. In the opinion of the authors, this model is general enough to be very widely applicable, and specific enough to give actionable diagnostic information. The SERVQUAL dimensions were less convincing. While superficially attractive they did not readily align with customer statements of expectations and in many cases customer statements involved at least two of the SERVQUAL dimensions. This interdependence is, of course, widely recognized, but as a result the use of the term dimension is invalid, and the lack of clarity it introduces does substantially reduce the value of the model. There are particular problems with reliability which appears to qualify the other four attributes as well as being an independent issue, i.e. the requirement for cash to be available in ATMs at all times is quite clearly a reliability issue, while the politeness of staff is an assurance issue, but how reliably should staff be polite? Perhaps reliability is a prerequisite for quality service in all cases and therefore in a different category to the other dimensions which may or may not be significant in a particular service.

As a result of these shortcomings the authors propose a model based on the three dimensions of process/outcome, subjective/objective, and soft/hard. These are, at least in principle, measurable, and are in the authors opinion probably orthogonal. This model has the advantage of allowing service attributes to be allocated a value within each dimension, and provides a classification which avoids overlap and ambiguity. A more important question is: does it assist in understanding service quality? In the authors opinion, its application to the customer data presented in this case demonstrates a potential utility which at least warrants further investigation. The model clearly demonstrated that process is far more important than outcome in determining customer perceptions of service quality, but it also demonstrated that, in the case of this particular service, subjective and objective, and hard and soft, issues were about equally balanced. This suggests that although interpersonal and subjective issues are important, and a proper balance of attention in design and monitoring is necessary, addressing the hard and objective issues could more readily provide, and monitor, a high quality service in a fairly prescriptive and reproducible manner. In other words, objective and hard aspects of this service are as important as the subjective and soft aspects but can be much more readily identified and specified. It is suggested that the use of these three dimensions to analyse customer perceptions/requirements can direct the service designers attention to those areas which are important for a good quality service and identify their relative importance and ease of attainment. It is further suggested that these three dimensions may well form the basis for a useful and rigorous classification of services. Further work is obviously required on the model proposed. This one example, while significant in size and scope, was not set up to test such a model, and the results are at best indicative of potential. Future work should include investigation of other service activities, but more importantly, should include development of a methodology which can assign values to the three dimensions proposed during the data collection phase. This would enable both the theoretical basis behind the model (are the dimensions really orthogonal?) and its generality to be tested.
References Berry, L.L., Bennett, D.R. and Brown, C.W. (1989), Service Quality. A Profit Strategy for Financial Institutions, Dow Jones-Irwin, Homewood, IL. Consumers Association (1992), Current Accounts Which?, November, pp. 6-13. de Moubray, G. (1989), Quality of Service The Key to Competitive Advantage, Journal of Chartered Building Societies Institute, Vol. 43 No. 194, pp. 19-22. Edwards, S. and Smith, S. (1989), Banking on Total Quality, Total Quality Management, February, pp. 97-100. Garvin, D.A. (1983), Quality on the Line, Harvard Business Review, September-October, p. 68. Goodstadt, P. and Marti, R. (1990), Quality Service at National Westminster Bank The Continual Striving for Excellence, International Journal of Quality & Reliability Management, Vol. 7 No. 4, pp. 19-28.

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Grnroos, C. (1988), Service Quality: The Six Criteria of Good Perceived Service Quality, Review of Business, Vol. 9 No. 3, pp. 10-13. Grubbs, R.M. and Reidenbach, E.R. (1991), Customer Service Renaissance: Lessons from the Banking Wars, Probus, Chicago, IL, p. 8. Gummesson, E. (1988), Service Quality and Product Quality Combined, Review of Business, Vol. 9 No. 3, pp. 14-19. Harridence, M.N. (1992), The Role of Customer Care within a Cooperative Societys Retail Division, unpublished. Haywood-Farmer, J. (1987), A Conceptual Model of Service Quality, International Journal of Operations & Production Management, Vol. 8 No. 6, November, pp. 19-29. Howcroft, J.B. (1991), Customer Satisfaction in Retail Banking, Service Industries Journal, January, pp. 11-17. Kathawala, Y. and Elmuti, D. (1991), Quality in the Service Industry, Management Research News, Vol. 14 No. 3, pp. 13-6. Le Blanc, G. and Nguyen, N. (1988), Customers Perceptions of Service Quality in Financial Institutions, International Journal of Bank Marketing, Vol. 6 No. 4, pp. 7-18. Lewis, B.R. (1989), Quality in the Service Sector: A Review, International Journal of Bank Marketing, Vol. 7 No. 5, pp. 4-12. Lewis, B.R. and Entwistle T.W. (1990), Managing the Service Encounter: A Focus on the Employee, International Journal of Service Industry Management, Vol. 1 No. 3, pp. 41-52. Lyth, D.M. and Johnston, R. (1988), A Framework for Designing Quality into Service Operations, Management of Service Operations, Proceedings from Operations Management Association UK Annual International Conference, pp. 221-9. Oakland, J.S. (1986), Systematic Quality Management in Banking, Service Industries Journal, July, pp. 193-204. Parasuraman, A., Zeithaml, V.A. and Berry, L.L. (1988), SERVQUAL: A Multiple-item Scale for Measuring Consumer Perceptions of Service Quality, Journal of Retailing, Vol. 64 No. 1, Spring. Peters. T.J. (1985), Service: Where Battles Are Won or Lost, Managers Magazine, March, pp. 28-33. Raddon, G.H. (1987), Quality Service A Low-cost Profit Strategy, Bank Marketing, September, pp. 10-2. Ross, J.E. and Shetty, Y.K. (1985), Making Quality a Fundamental Part of Strategy, Long Range Planning, Vol. 18 No. 1, pp. 53-8. Vandermerwe, S. (1993), From Tin Soldiers to Russian Dolls, Butterworth-Heinemann, Oxford, p. 106. Zeithaml, V.A., Parasuraman, A. and Berry, L.L. (1990), Delivering Quality Service. Balancing Customer Perceptions and Expectations, The Free Press, New York, NY, pp. 43-5. Appendix 1 Part B Strength of Feeling Rating S2. I now want to show you the list of statements again. Thinking about your dealings with TSB, I would like you to read each statement and write in a score of between one and ten to describe how strongly you would feel about each aspect of bank service if it were to change for the better or worse. You will see from the questionnaire that a score of ten would mean you feel very strongly about this aspect of service if it were to change. A score of one indicates you do not feel at all strongly about the aspect of service. Please write in the box on the right of each statement the number that relates to how strongly you feel about each statement if the quality of service from TSB changed.

The scores in between show varying degrees of strength of feeling. You may choose any number from 1-10, but please give 10 only to those you feel really strongly about. HAND QUESTIONNAIRE TO RESPONDENT

Quality in Retail Banking 21

1 2 3 4 5 I feel not at all strongly about

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31.

7 8 9 10 I feel very strongly about WRITE IN (1-10) HERE Willingness to be helpful n (62) Speed of dealing with transactions at counters effectively n (64) Number of people usually in front of me in a queue in branch n (65) Tills available at busy times n (66) The way staff treat customers n (67) Staff listening to me Availability of appropriate person in branch with time to deal n (68) with my questions n (69) Cash in cash machines n (70) Length of queues at cash machines n (71) Opening hours n (72) Ease of getting to branches n (73) Staffs product knowledge n (74) Taking time to find the right service/account for my needs n (75) Privacy to discuss personal financial matters n (76) Attitude of bank when lending me money n (07) Overdraft charges n (08) Getting the right person on the phone n (09) The way mistakes are handled n (10) Bank charges clearly defined and explained n (11) Return or replacement of cash machine card n (12) Speed of written confirmation of mortgage offer n (13) Being kept informed on progress of any application for a service n (14) General appearance of branch n (15) Receipt of informative leaflets and brochures n (16) Keeping you up to date on your accounts n (17) Politeness of counter staff n (18) Ease of understanding letters n (19) Availability of enquiries desk n (20) Staff available to help n (21) Ability of staff to answer queries in plain English n (22) Telephones answered quickly

Figure A1. Strength of Feeling Rating Sheet

IJSIM 5,4

Appendix 2 Discussion Guide: Staff Research (1) What is the current understanding of customer service levels
q

how is good/bad/indifferent service gauged by customer by staff

22
q

(discuss any differences which emerge) what standards of customer service have been laid down by TSB and why (discuss in detail)
q

to what extent do staff feel they have been provided with official guidelines on TSBs expectations of them in this area how effectively have these guidelines been communicated to staff are the guidelines which have been provided adequate or do they require further clarification on what basis do staff feel the guidelines have been determined to what extent are they based on customer standards/expectations are customers aware that TSB rates customer service very highly and has specific expectations of staff how would customers be aware of this

how satisfactory do staff consider the general level of customer service to be within TSB what priority do staff feel TSB places on customer service/meeting customers expectations what effort does TSB make to find out what customers want what priority do staff feel they place on customer service relative to their other responsibilities as employees of TSB, what aspects do they feel are most important what effort do they make to find out what customers want what priority do customers place on customer service, what aspects are most important to them is it a reasonable expectation that staff and customers should place similar emphasis on customer service or are the perspectives of the two sides bound to differ

(2)

How important is service perceived to be from staff and customer positions

q

q q

q q

(3)

Are there any specific areas of concern for staff about gaps which exist between customers expectations of service and the actual service they receive
q q q

list and discuss all areas of which staff are aware why do these gaps exist are customers expectations realistic if not, how can TSB staff overcome customer disappointment and attempt to persuade them to change their expectation are the Banks expectations of staff realistic in context of Service Quality are standards of performance clear and attainable do staff feel empowered to undertake their role

how is TSBs record in providing customer service felt to compare with that of competitors (if anything is known about this)

who, if anyone, is achieving a better level of customer service and how are they managing to achieve this is it felt that other measures of success suffer to any extent (or do they improve) if a high priority is placed on customer service can customer service, in fact, be pursued too energetically with negative consequences to what extent does the Bank respond to changes in customers expectations

Quality in Retail Banking 23

what specific customer service issues, if any, do staff consider should have been more effectively addressed by TSB and what are perceived to be the problems hindering delivery here

(4)

Are there any problem areas known to have been overlooked/not addressed through TQM/Service Quality
q q

what are these how important is it that these problem areas should be addressed immediately and why is this felt to be the case how successful has this proved do staff feel they share common objectives with the Bank in terms of Service Quality (and any other areas) is there a culture of teamwork achievement and shared values amongst peers/a sense of staff and management working together to what extent do staff feel that Senior Management are fully committed to Service Quality how clearly have they demonstrated this is this perceived to be a long-term commitment does Senior Management encourage this are staff views on Service Quality considered

(5) (6)

To what extent has Service Quality been implemented for internal customers
q

How do staff feel the Bank treats them

q q q

how many opportunities do staff have to discuss views with Senior Management

(7)

Do staff have any solutions which they feel would help them deliver service to a standard which is closer to customer requirements
q q q

what changes would they propose how would these be effected how would staff feel about an appraisal/reward scheme in the context of Service Quality (would this be congruent).