An empirical assessment of comparative approaches to service quality measurement

Avinandan Mukherjee
Montclair State University, Montclair, New Jersey, USA, and

Prithwiraj Nath
XLRI, Jamshedpur, India
Abstract Purpose The purpose of this paper is to propose and empirically assess three comparative approaches to measuring service quality: modied gap model, TOPSIS and loss function. Aims to argue for the use of TOPSIS from decision sciences, and Loss function from operations research and engineering, as alternative approaches to the gap model. Design/methodology/approach The empirical evidence is provided by large sample consumer data on the service quality for leading Indian commercial banks. The service quality evaluations obtained from these three distinct methods are compared and tested for their mutual agreement. Findings Findings show that the rankings obtained from different methods are statistically in agreement, suggesting that the alternative approaches can provide equally good measurement of service quality. But they should not be used in an interchangeable manner. Research/limitations/implications Research shows that a single measure of overall service quality based on gap model is over-simplistic. It would be more useful to explore a richer prole of customer service quality provided by different measurement approaches. Each methodology has its own advantages and disadvantages, and should be used based on its suitability for a particular application. Practical implications This research offers profound practical implications. It offers managers with a framework of service quality improvement that measures service quality gaps, selects an optimal combination of attribute levels to deliver customer satisfaction, and focuses on reducing the future loss caused by poor quality. Originality/value Extant marketing literature is replete with gap model applications for measuring service quality. Drawing from interdisciplinary literature, alternatives are provided to the traditional gap model, which show equally good measurement with greater suitability of application under certain conditions. Keywords Customer services quality, Quality management, Gap analysis, SERVQUAL, Quality assessment Paper type Research paper

Introduction
The objective of the study is to assess and compare the effectiveness of measuring service quality using three different approaches, viz., modied Gap Model (Parasuraman et al., 1985, 1991), TOPSIS (Hwang and Lin, 1987) and Loss Function (Ross, 1988). In this study, we also attempt to develop a framework for measuring service quality using these three different methods. Research on measurement of service quality has been considered important by both practitioners and academicians over more than a decade. Gap model based on the SERVQUAL instrument is a well-known and widelyused measurement approach. In this paper, we argue for the use of TOPSIS and Loss function as alternative approaches to the gap model. The use of these alternative approaches in services marketing literature is rare, and provides new direction to service quality measurement.
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The empirical evidence for this paper is provided by data on the service quality for leading Indian commercial banks. The service quality evaluations obtained from these three distinct methods are compared and tested for their mutual agreement, thereby placing the gap model amongst a set of appropriate methods in measuring this intangible construct. In this paper, we argue for the viability of TOPSIS and Taguchi loss function as effective additional approaches to measure service quality. However, it should be noted that TOPSIS, loss function and the gap model do not necessarily replace each other. These three approaches address different aspects of service quality management and therefore need not always be viewed as alternative to each other. In fact, these three approaches can be viewed as complementary to each other in achieving the ultimate goal of service quality diagnostics and improvement. TOPSIS is an operational/ design approach that helps select the optimal levels of service quality attributes that would facilitate the delivery of customer satisfaction. This technique can be extremely useful for service design. Similarly, loss function is better suited to highlight the future long term damage caused by not delivering on customer dened service standards. This approach is strategic in nature
The authors are grateful to the Editor (Professor Charles L. Martin) and the two anonymous reviewers for their constructive comments and valuable ideas on earlier versions of the manuscript.

Journal of Services Marketing 19/3 (2005) 174 184 q Emerald Group Publishing Limited [ISSN 0887-6045] [DOI 10.1108/08876040510596858]

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Comparative approaches to service quality measurement Avinandan Mukherjee and Prithwiraj Nath

Journal of Services Marketing Volume 19 Number 3 2005 174 184

and therefore eminently suited to predict the long term competitive performance. Gap model is perhaps best suited to highlight the current performance of a service provider by identifying the delivery gaps. Current research on service quality has shown that customers think in terms of adequate and desired expectation and develop a zone of tolerance when evaluating service quality. This is the extent to which customers recognize and are willing to accept a variation in the service. So, the objective of the service provider would be to remain as close to the desired level and as far as possible (on the positive side with cost consideration) from the adequate level. In a way, we can say that this objective emulates the philosophy of any multi-criteria decision making method, where we need to minimize the distance from the positive ideal solution (PIS) and maximize the distance from the negative ideal solution (NIS). So, it is a seemingly conicting decision and the rm tries to trade-off its position with respect to these two reference points. In the services marketing literature, this approach of optimizing the distance between the desired and the adequate service levels has not been discussed. Moreover, services marketing literature talks about arranging the zone of tolerance levels by attributes according to their levels of importance (Zeithaml and Bitner, 2003), but does not attempt to nd out an overall value of the service. In our study, we have specically used TOPSIS to address this unexplored area by proposing an overall closeness rating (OCR). Further, the performance of a service organization on all the attributes and dimensions of service quality may not always move in the same direction. To improve on the responsiveness to customer queries, a bank ofcial may design a display board outlining various FAQs, but may not be in a position to sit with each customer and explain him/ her all the banking products in detail. So, a balancing act needs to be carried out by the customer contact employees to cater to the requirements from all quarters in a timely fashion as far as possible. Traditional SERVQUAL-based gap model approach cannot handle such a compromising situation, where improvement in one attribute may be at the cost of deterioration in the other. To address such problems, we propose a quadratic Taguchi loss function, where the effect of such conicting criteria are squared and an overall performance index is developed in form of the loss function value. The bank having the least loss value is taken to be the best performer in providing quality service to its customers.

care (Lee et al., 2000), hotel (Soteriou and Chase, 1998) and particularly in banking (Athanassopoulos, 1998; Soteriou and Zenios, 1999). However, the gap model has been criticized on both methodological and conceptual grounds (Carman, 1990; Bolton and Drew, 1991; Cronin and Taylor, 1992; Teas, 1993; Brown et al., 1993). Cronin and Taylor (1992) proposed that the performance based measurement approach (SERVPERF), being more in conformance with the existing attitude and customer satisfaction literature, is superior to the performance-expectation gap method. Teas (1993) questioned the validity of perception-expectation gap with conceptual and operational problem in the denition of the expectation. Brown et al. (1993) raised psychometric concerns regarding the use of difference score and felt that the gap model would display poor reliability, because expectation and perception could be positively correlated. They also suggested that if the statistical variance of performance score and expectation score are different, any tests of statistical signicance would become more complex. Subsequently, Parasuraman et al. (1993, 1994) established both theoretically and empirically the superiority of the gap model over the other proposed measures. However, gap model still suffers from some theoretical shortcomings such as the type of expectation used in calculating quality scores, or absence of any established expectation for services not experienced before use. In this study, we attempt to compare the gap model with alternative approaches from the literature of multicriteria decision making and loss functions. TOPSIS Some of the computational and operational criticisms of the gap model discussed earlier can be addressed by using the Technique for Order Preference by Similarity to Ideal Solution or TOPSIS (Hwang and Lin, 1987). The gap model using SERVQUAL involves nding out the difference between the expectation (Eij) and the perception (Pij) of a customer from a service provider, in our case, a retail bank. It tends to compute the average of these difference gures to ascertain the aggregate measure for service quality. But there is a problem when these gaps are of different signs. The positive and negative deviations may cancel out leading to unrealistic results. A customer who is dissatised with the reliability of the bank teller may not feel compensated by the better decor of the branch. In case of conicting multi-criteria analysis, TOPSIS is a popular technique used for rank ordering units by preference or similarity to ideal solution. The underlying logic of TOPSIS is rooted in the ideal solution and the negative ideal solution. Ideal solution is composed of all best values attainable of criteria, whereas negative ideal solution is made up of all worst values (Tsaur et al., 2002). Its fundamental premise is that the best alternative, say ith, should have the shortest Euclidean distance: S Sr ij 2 r j 2 1=2 i r j 1

Theoretical background
Gap model Parasuraman et al. (1988, 1991) developed the gap model as an approach to measuring service quality. The service quality gap model conceptualizes perceived service quality as the service quality gap, which is the difference between expectation of service quality from an excellent service provider and the perception of service quality from the current service provider. Parasuraman et al. (1988) identied ve service dimensions from their survey across industries and developed the service quality measurement scale called SERVQUAL. The gap model has emerged as the most popular measurement approach of service quality and has been extensively applied in different service sectors like health 175

from the positive ideal solution, where is the best value of each attribute, and should have the farthest distance from the negative ideal solution: S 2 Sr ij 2 r j 2 1=2 i 2

Comparative approaches to service quality measurement Avinandan Mukherjee and Prithwiraj Nath

Journal of Services Marketing Volume 19 Number 3 2005 174 184

where r- is the worst value of each attribute. The alternative j with the highest overall closeness rating (OCR): OCR S =S S 2 i i i 3

is chosen as the best (Zanakis et al., 1998). The detailed stepby-step algorithm of TOPSIS is provided in the Appendix. TOPSIS has been used to solve multi-criteria decision making problem in various scenarios, e.g. to choose a balanced nutrition so that a person can maximize his carbohydrate intake, minimize cholesterol intake and also minimize his expenditure from his daily diet requirements (Hwang et al., 1993); for water quality management by maintaining river water quality by setting waste reduction requirements at the sources of pollution and also minimizing on the additional efuent treatment costs (Lai et al., 1994); to develop a new performance measurement of manufacturing system using both nancial and non-nancial criteria simultaneously where traditional performance based measurement systems are inadequate (Kim et al., 1997); and for inter-company comparison based on their nancial ratios and indicate performance difference between companies on each nancial ratio where traditional ratio analysis often give contradictory results (Deng et al., 2000). Service quality loss The loss function approach was introduced by Genichi Taguchi (Taguchi and Clausing, 1990), and is a technique traditionally applied to the manufacturing industry. Taguchis ndings showed that any nite variability in a service (or process) quality characteristic incurs a cost, commonly referred to as Taguchis loss (Kulkarni and Prybutok, 2004). As an alternate method of evaluating service quality, we propose the concept of measuring service quality loss, which occurs due to the disconrmation that a customer faces due to the banks inability to satisfy his/her requirements and fulll the expectations. The bank experiencing the least loss is said to perform the best. The idea of loss originated from the regret function rst introduced in the context of game theory by Savage (1954). The Bayesian decision theorists in estimation problems dened loss function to be the difference between the estimator of sample statistic and the population parameter where the sample statistic should converge stochastically to population parameter as the sample size increase (DeGroot, 1970). In literature, different types of loss functions have been discussed. The most commonly used are: Categorical Loss (C), Linear Loss (L) and Quadratic Loss (Q), which are dened as: iC ij 1 if P ij , E ij and Cij 0 otherwise iiLij P ij 2 E ij if P ij , E ij and Lij 0 otherwise iiiQij P ij 2 E ij if P ij , E ij and Qij 0 otherwise However, the above loss functions do not consider that the overestimation or the underestimation of the population parameter may have different consequences. A loss function that takes care of this is known as LINEX (X) loss function (Varian, 1975), which can be expressed in the present context as: X ij bexp{aP ij 2 E ij } 2 aP ij 2 Ei j 2 1 with a 0; b . 0 5
2

The constant a determines the shape of the loss function and the constant b serves to scale the loss function. As a measure of service quality provided by the Indian banks to their customers, modied Taguchi loss function (Ross, 1988) is used here, where the overall service loss is calculated depending on the performance along the ve SERVQUAL dimensions. As it is always better to provide as much service as possible (the larger the better characteristic), the modied weighted Taguchi loss function L (z) (Li and Chen, 1998) was used in this study: Lz Swk :max0; 1=mk 2 zk 2 :1 3sk =2 mk 2 zk 2 6 where wk: weight of the attribute; (mk: maximum value of the kth attribute; zk: mean of the measurement of the kth attribute and s2: variance of the measurement of the kth k attribute. Quality control, quality assurance, and total quality management are all concerned with managing and controlling variations in quality. The less variation a system has the better quality it provides. Using the Taylor expansion Series, Taguchi (1986) developed a mathematical model in which loss is a quadratic function of the deviation of the quality of interest from its target value. Based on this concept, sound management decisions can be made regarding the true worth of quality improvement efforts. Taguchi loss function has been applied in the manufacturing industry like the spring coil manufacturing process (Caporaletti et al., 1993) and also in service industry like airlines (Li and Chen, 1998). Economic process control under uncertainty has been modeled using loss function approach. Felicien and Ord (2000) measured the degree of customer dissatisfaction with a product in terms of quality, quantity and delivery timing using loss function approach by taking into account the variability in the production process. A decision analysis on the estimation of market price of individual townhouse units was obtained using the loss function techniques. Selling price was estimated using linear loss function and market price was adjusted due to asymmetry using a LINEX loss function (Cain and Janssen, 1999). A tool management model which determines optimal tool setting and tool replacement time balancing its quality loss and replacement cost was developed using a quadratic loss function (Jeang, 1998). Categorical, linear and quadratic loss functions have been used to measure banking service in UK (Hussey, 1999). Taguchi loss function has also been applied to multi-criteria decision-making problems in management areas such as real estate (Kethley et al., 2002; Festervand et al., 2001); employee performance (Roslund, 1989); and supplier selection (Quigley and McNamara, 1992; Snow, 1993). Testing independence of ranking methods We used Kendalls coefcient of concordance (W) to test the independence of ranking of banks by different methods. The statistic is given by:
N X

Ri 2 R2 7

i1

NN 2 2 1=12

where, N: number of units; Ri: average of the ranks obtained 2 by the units; R: grand average of the ranks obtained by all the 176

Comparative approaches to service quality measurement Avinandan Mukherjee and Prithwiraj Nath

Journal of Services Marketing Volume 19 Number 3 2005 174 184

units combined. W expresses the degree of agreement and 0# W # 1. For N . 7; wecalculated x2 kN 2 1W

2

Here, chi-square x is approximately distributed with N-1 degrees of freedom where k is the number of ranking methods used (Siegel and Castellan, 1988).

Methodology
Instrument Since SERVQUAL has been well accepted and tested in measuring service quality across industries and even widely applied in the banking sector, we decided to use the SERVQUAL dimensions with some modications to measure the level of service provided by the Indian commercial banks. To test the content or face validity of modied SERVQUAL (Parasuraman et al., 1991) in the context of the Indian banking sector, we conducted indepth interviews with ten customers of two nationalized banks followed by a pre-test among 15 customers of three nationalized banks of varying size as measured by their deposit balance. This led to some modications in the SERVQUAL items. Items like convenient location of the branch (close to home/work); availability of bank employees at respective counters; ability of the employees to offer advice on investments/tax benets; and availability of top ofcials if needed, which were not included in the original SERVQUAL, gured quite prominently in the depth interviews with the Indian bank customers, and were included in our research instrument. To test the ve-dimensional structure of the instrument, the 25 items were factor analyzed with Promax rotation (see Table I for item loadings). Five factors explained 70.37 percent of the cumulative variance, which was satisfactory (Hair et al., 1995). However, the pattern of loading of each item did not exactly follow the ve dimensionality structure of SERVQUAL. Some of the items had to be re-organized among the ve dimensions. Since we followed SERVQUAL to a very large extent with addition of just a few extra items and due to its wide applicability in measuring bank service quality (Angur et al., 1999; Newman, 2001), we did not perform conrmatory factor analysis for assessment of unidimensionality as suggested by Gerbing and Anderson (1988) for scale development. Concurrent validity of our modied scale was tested later by comparing the gap model results with the results obtained from TOPSIS and loss function, and we obtained similar results. Thus, from the ve-factor structure along with the reliability measures, we concluded that our modied SERVQUAL scale was adequate for measuring service quality of Indian public sector banks without further alterations. Our nal questionnaire had 25 items organized along the ve standard SERVQUAL dimensions. The ve dimensions of service quality, their denitions, the items and their factor loadings are provided in Table I. The instrument had four sections. Section one had demographic questions. Section two provided the denitions of the ve dimensions in our modied SERVQUAL and elicited the relative importance of the dimensions using a constant sum rating scale, where 177

respondents were asked to distribute 100 points among the ve dimensions according to the order of importance. Martilla and James (1977) and Singh (1992) advise that the usefulness of a measure is severely limited if the importance of evaluative criteria is not sought. Zeithaml et al. (1990) and Parasuraman et al. (1991) amended the original SERVQUAL instrument to include a customer supplied constant sum scale to assess importance weights across dimensions. Carman (1990) suggests that both importance and expectations for service quality should be measured with perceptions. We adopted the constant sum approach because of its wide usage in services research. Though DeSarbo et al. (1994) discuss the problems of using explicit importance weights and instead suggest using range of regression weights as the indicators of importance, such an approach was not adopted in our research because of the lack of an overall service quality measure, and the fact that a ratio-scaled constant sum measure does induce a mental trade-off in respondents making the task more realistic. In section three, the items within each of the ve dimensions were described and the respondents were again asked to distribute 100 points using a constant sum rating method among these items under each dimension according to their order of importance. Here, we slightly deviated from the classical gap model, as we wanted to nd out the relative importance of the items under each dimension. Section four required respondents to rate their expectations from a best bank and perceptions on their own bank on each item in our modied SERVQUAL. All items were coded in a 7point Likert scale with 1 denoting completely disagree and 7 denoting completely agree. Reliability measures of the dimensions were checked by Cronbachs alpha (Cronbach, 1951). The average value of 0.846, and the lowest value of 0.761 were both more than the required value of 0.7 (Nunnally, 1978), thus showing high degree of internal consistency. The reliability coefcients are furnished in Table I. Comparative service performance measure using gap model The service quality gap is described by the following equation:

 SQ Swi P ij 2 E ij j

where P ij perception of service dimension i for respondent j, and Eij expectation of service dimension i for respondent j, wi weight of dimension i. Comparative service performance measure using TOPSIS Next, we slightly modied the TOPSIS approach by introducing weights to determine the maximum (Emax) of the expectation value a customer has from an excellent bank along with the maximum (Pmax), minimum (Pmin) and the actual (Pactual) values of his perception about his own bank.

Comparative approaches to service quality measurement Avinandan Mukherjee and Prithwiraj Nath

Journal of Services Marketing Volume 19 Number 3 2005 174 184

Table I Modied SERVQUAL: factor structure, dimensions, denitions, items, factor loadings and reliability coefcients of multi-item scale of service quality
Factors/items Tangibles (Cronbachs alpha 5 0.761) The appearance of physical facilities, equipments, personnel and communication materials VAR 1: Good decoration inside the bank VAR 2: Modern equipment like computers VAR 3: Good sitting facility for waiting inside the bank VAR 4: Neat dress and appearance of the employees VAR 5: Convenient location of the branch (close to home/work) Responsiveness (Cronbachs alpha 5 0.905) The willingness to help customers and provide prompt service VAR 6: Fast responses from employees to customers requests VAR 7: Speedy redressal of complaints VAR 8: Prompt service from the employees VAR 9: Willingness of the employees to help customers VAR 10: Fast transactions (opening of new accounts, balance information, deposits, drafts, cheque clearance, etc.) Reliability (Cronbachs alpha 5 0.875) The ability to perform the promised service dependably and accurately VAR 11: A cooperative reception counter VAR 12: Availability of the employees at respective counters VAR 13: Availability of top ofcials in case of need VAR 14: Lack of mistakes and error free records VAR 15: Dependable services from the employees on time VAR 16: Employees show sincere interest in solving customers problems Assurance (Cronbachs alpha 5 0.839) The knowledge and courtesy of employees and their ability to convey trust and condence VAR 17: Courtesy of counter employees and branch manager VAR 18: Trustworthiness of employees VAR 19: Safety inside the bank and condentiality in transactions VAR 20: Knowledge of employees to handle customers questions VAR 21: Ability of the employees to give advice on investments/ tax benets Empathy (Cronbachs alpha 5 0.849) The caring, individualized attention provided to the customers VAR 22: Convenient operating hours VAR 23: Employees care for customers interests VAR 24: Employees take care to explain the banking rules to the customers VAR 25: Attentiveness of employees to customers specic banking needs Item loading

0.688 0.759 0.778 0.725 0.845

0.717 0.653 0.989 0.822 0.907

0.424 0.700 0.511 0.979 0.625 0.857

0.647 0.789 0.449 0.654 0.559

0.713 0.574 0.774 0.576

The Euclidean distances are calculated as: D Swi P ijmax 2 E jmax 2 1=2 i D2 Swi P ijmax 2 P jmin 2 1=2 i d Swi P ijactual 2 P jmax 2 1=2 i d 2 Swi P ijactual 2 P jmin 2 1=2 i with overall closeness rating (OCR) D =D D2 d =d d 2 i i i i i i 14 10 11 12 13

The graphical representation of TOPSIS is provided in Figure 1. 178

Comparative service performance measure using service quality loss We then used loss function as a measure of service quality. Modied Taguchi loss function (Ross, 1988) was used and the overall service loss was calculated based on the performance along the ve SERVQUAL dimensions. Taguchi loss function is a quadratic curve which represents customers dissatisfaction (or loss) associated with service performance. The curve is centered on the target value which represents the customers expected performance. Customers become increasingly dissatised as the performance moves away from the target. The lower and the upper customer tolerance levels are customer-dened limits of the lack in performance (Ross, 1988). In calculating Taguchi loss function, the quadratic loss function was adopted in our study, as the quadratic loss function is perhaps better suited to mimic customers evaluation. There is evidence that customers tend to penalize a service company in an increasingly stronger manner as the companys service moves away from

Comparative approaches to service quality measurement Avinandan Mukherjee and Prithwiraj Nath

Journal of Services Marketing Volume 19 Number 3 2005 174 184

Figure 1 Service level comparison using TOPSIS

customer dened standards. The graphical representation of loss function is provided in Figure 2. Sampling and data collection We chose the Indian banking sector for the study. With the nancial sector growing rapidly and undergoing a dynamic pace of restructuring in the face of intense competition, it has become imperative for Indian banks to continuously monitor their level of service delivery, changing customer demands, and the drivers of satisfaction to retain their protable customers (Mukherjee et al., 2003). The study was conducted among the customers of all the 27 large public sector commercial banks operating in India (Verma Committee, 1999). We purposefully chose only urban customers as they had other banking options from private and multinational banks and were more exposed to different levels of service quality. The banks were divided into three categories according to their number of branches, and the number of customers from each bank was selected according to that proportion so that banks with more number of branches got better representation in the sample. The respondents were approached within the bank premises to remove any discrepancy as most of them held multiple accounts with different banks. The questionnaire was Figure 2 The loss function

personally administered and respondents were asked about their opinion of the bank in which they were interviewed. Cluster sampling was used to select the bank branches and systematic sampling was used to select the respondents in each branch where each working day was divided into two equal periods and every fth customer entering the bank premises was approached. For each bank, between three to ve branches were visited. Based on the bank category, 12, 15 or 22 customers were selected for each of the 27 banks with the total number of valid respondents nally reaching 410. Non-response bias was assessed by conducting a survey among 30 non-respondents and 30 respondents chosen randomly and asking them to answer two questions on their level of satisfaction and loyalty towards the bank (Mentzer et al., 2001). They were asked to rate using a seven-point scale from very dissatised to very satised on their level of overall satisfaction with the bank (Oliver and Bearden, 1983) and their level of disconrmation (current level minus the desired level) of the attribute levels (Westbrook and Oliver, 1981). The t-tests of the group means revealed no signicant differences between respondents and non-respondents. Thus, we can infer that non-response bias was not a problem. The demographic prole of the sample is furnished in Table II.

Results
The analysis was carried out in three stages, as described in this section. Gap model results First, we calculated overall level of service quality and by individual dimensions using modied gap model for all the 27 banks and ranked them accordingly. We took the difference of expectation from an excellent bank and perception from their own bank as proposed by Parasuraman et al. (1991) and then multiplied with the importance score for each of the items within each dimension and also with the importance of each dimension to get the overall service quality value. The smaller the difference, the better did the bank perform in delivering quality service to its customers. We found responsiveness to be the most important dimension followed by reliability, which is contrary to the earlier ndings (Parasuraman et al., Table II Demographic prole of the sample (size 410)
Demographics Number (%) 325 (79.27) 85 (20.73) 42 144 105 65 54 (10.24) (35.12) (25.62) (15.85) (13.17)

Gender Male Female Age Below 25 years 25-35 years 35-45 years 45-55 years Above 55 years Income Less than Rs.10,000 (Indian currency) Rs.10,000 to Rs.20,000 More than Rs.20,000

255 (62.2) 90 (21.95) 65 (15.85)

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1991) of reliability as the most important service quality dimension. The relative importance of each SERVQUAL dimension is furnished in Table III. On the dimension of responsiveness, items like promptness in service, fast transactions and quick responses to customer came out to be critical. For each bank, the difference of their dimension scores from the industry average was calculated to nd out their relative performance along these dimensions. Overall service quality gures were used to rank the 27 Indian commercial banks. The best ve and the worst ve banks according to this ranking are listed in Table IV. It was found that the average return on asset ratio for the ve best banks was 0.854 whereas it was 0.554 for the ve worst banks. Prot per employee gure (in 100,000s Indian Rupees) was 0.95 for the best banks compared to 0.59 for the worst lot. Although this does not statistically show the positive effect of service quality on nancial performance (it was beyond the purview of this study), a signicant linkage was evident. TOPSIS results Thus, applying the modied gap model helps the banks to identify their relative performance along the ve different service dimensions. But since their resources are limited, there may be conict on which dimension to rst improve upon. This is similar to any multiple criteria decision-making problem and TOPSIS gives the closeness rating of each bank to the ideal solution and remoteness from the negative ideal solution (Kim et al., 1997). A bank should provide an optimal level of service lower or higher level would lead to lower customer satisfaction or excessive resource utilization respectively. We calculated distance of each bank from the positive ideal and the negative ideal levels of service. The customers of the all the 27 banks had rated their expectation from an excellent bank as well as perception about their own bank. We calculated the maximum of the expectation (Emax) value for each of the ve SERVQUAL dimensions for individual banks. We also calculated the maximum of the Table III Relative importance of SERVQUAL dimensions for Indian bank customers
Dimensions Responsiveness Reliability Empathy Tangible Assurance SERVQUAL scores weightage 0.471 0.369 0.308 0.274 0.238

perception score (Pmax) which is the positive ideal solution, minimum of the perception score (Pmin) being the negative ideal solution and the actual (Pactual) perception value as given by the bank customers (refer to equations 10-14). Distance of the banks on each of the ve dimensions with their importance were calculated to nd the overall closeness rating (OCR) such that a bank is nearest to its positive ideal solution and farthest from its negative ideal solution. Based on this ranking, the best ve and the worst ve banks are listed in Table V. Service quality loss results Finally, we used the concept of service loss as an alternative approach to measuring service quality. The modied Taguchi loss function for larger the better characteristics was used to calculate the overall loss incurred by each bank due to improper service delivery. We calculated the overall service loss as well as the loss on each of the ve SERVQUAL dimensions, and used the larger the better characteristic which means it is better if we have larger values for each dimension (refer to equation 3). The best performers are those for whom the loss is the least. Expectedly, the better banks scored much above the industry average. From this analysis, nancial loss on each dimension can be obtained and steps can be taken by the bank management to reduce these losses. Based on the ranking, the best ve and the worst ve banks are listed in Table VI. The performance of best and worst banks on each SERVQUAL dimension based on loss function is described in Table VII. Statistical analysis of rankings obtained from the three different methods We obtained the rankings of the 27 Indian public sector banks using three different methods of modied gap model, TOPSIS and loss function. Our null hypothesis was that rankings obtained from the different methods are statistically independent. We used Kendalls coefcient of concordance W, which measures the degree of agreement among the Table V Ranking of the best ve and the worst ve banks: comparative service performance using TOPSIS
Best banks Canara Bank State Bank of Hyderabad Corporation Bank State Bank of Bikaner State Bank of Suarashtra Worst banks Bank of Maharashtra Punjab and Sind Bank State Bank of India State Bank of Indore Bank of Baroda

Table IV Ranking of the best ve and the worst ve banks: comparative service performance using modied gap model
Best banks Corporation Bank Bank of India Indian Overseas Bank State Bank of Saurashtra State Bank of Patiala Worst banks State Bank of India Union Bank of India Vijaya Bank Bank of Maharashtra Andhra Bank

Table VI Ranking of the best ve and the worst ve banks: comparative service performance using service loss function
Best banks Bank of India Corporation Bank Indian Overseas Bank State Bank of Travancore State Bank of Hyderabad Worst banks Union Bank of India Bank of Maharashtra State Bank of India Punjab and Sind Bank Andhra Bank

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Journal of Services Marketing Volume 19 Number 3 2005 174 184

Table VII Performance of best two banks and worst two banks on each SERVQUAL dimension based on loss function
Tangibles Bank of India Corporation Bank Union Bank of India Bank of Maharashtra 0.728 0.134 20.052 20.058 Responsiveness 0.059 0.12 2 0.06 2 0.045 Reliability 0.026 0.192 20.057 20.037 Assurance 0.07 0.286 20.06 20.071 Empathy 0.248 0.22 2 0.048 2 0.045

different methods in ranking units. Using equations 7 and 8, Kendalls coefcient W is 0.723 with computed chi-square value of 56.394, which exceeds the critical value of chi-square distribution (54.05) for the level of signicance a 0:001 for 26 degrees of freedom. So, the null hypothesis is rejected at this level of signicance.

Discussions and conclusion

The primary contribution of our study is methodological. We have compared the gap model approach, widely used in marketing literature, with popular approaches in other streams of literature: TOPSIS from decision sciences and loss function from operations research and engineering. We rst computed service quality of banks using a modied version of gap model. Closeness to the ideal solution was then obtained by TOPSIS. This was followed by Taguchi loss function to identify the service losses incurred by each bank. Statistical tests demonstrated mutual agreement of the different ranking methods. Our ndings apparently suggest that the alternative methodologies can provide equally good measurement of service quality. But, they should not be used in an interchangeable manner. Our research shows that a single measure of overall service quality is over-simplistic. It would be more useful to explore a richer prole of customer service quality provided by different measurement approaches. Each methodology has its own advantages and disadvantages, and should be used based on its suitability for a particular application. While the gap model provides a good starting point for analysis, modications in terms of other approaches might be required in specic contexts. In gap model, problems with average approach to aggregate service quality measures arise when gaps have different signs and positive and negative deviations cancel each other out. This is realistic only when the dimensions are compensatory. However, at times, service quality dimensions are non-compensatory. For example, a customer who is dissatised with billing accuracy is unlikely to feel compensated by its speedy arrival. TOPSIS addresses this problem by choosing the most preferred alternative as having not only the shortest distance from the positive ideal solution, but also the longest distance from the negative ideal solution. TOPSIS has advantages over other approaches, because it has: a sound logic that embodies the rationale of human choice; a scalar value that considers the best and worst alternatives simultaneously; and a simple computation procedure that can be easily programmed on a spreadsheet (Kim et al., 1997). TOPSIS is capable of depicting the pursuit of the best performance of a companys service operation for each evaluation criterion in a simple mathematical form. Further, TOPSIS allows objective weights to be incorporated into the comparison process. However, while considering a solution with the shortest 181

distance to the positive ideal solution and the greatest distance to the negative ideal solution, TOPSIS does not consider the relative importance of these distances (Opricovic and Tzeng, 2003). When the bank performance is evaluated by service loss, action can be taken when the loss is greater than the competitors. Service quality loss generally treats all positive service quality gaps as zero, and computes the proportion or percentage of service quality items that register negative gaps (Hussey, 1999). The negative gap readings are squared thus amplifying their effect and making their sign positive. Lower the service quality loss, higher the index of satisfaction for service quality performance. Service loss functions are very robust, and have the ability to combine different dimensions of service quality into the common index of Taguchi loss. This is possible even if the dimensions have different units of measures and varying magnitude of scale. The non-linear forms place more value to those outcomes that are closer to the target level. Service loss functions also score well on some of the criteria designed by Stewart (1992): use of use by nonexperts; transparency of the logic of the method to the decision maker; and freedom of ambiguity regarding interpretation of inputs required from the decision maker. However, the main drawback of service loss functions is its weight sensitivity and the fact that the decision maker (bank manager) may have problems identifying appropriate goals and weights (Festervand et al., 2001). Loss function approach is best applied when the objective is not to obtain an optimal solution, but to rank a number of entities to a more manageable subset. The purpose is to augment the information available to the decision maker, rather than to use it unilaterally in deciding the course of action (Festervand et al., 2001). A comparison of the three approaches to service quality measurement has been summarised in Table VIII. To sum up our argument, we demonstrate through our study the applications of three comparative approaches to service quality measurement based on SERVQUAL items and dimensions developed by Parasuraman et al. (1988). The modied gap model can be used to nd out the minimum level of customer expectation and the perceived performance with respect to the expectation. The overall closeness rating of each bank from the ideal combination (positive and negative) can be identied using TOPSIS. Bankers should also focus on the service losses from each attribute through the loss function approach, and take steps for loss minimization in their policy decisions. Service loss gets transformed into lower satisfaction, which causes customer defection. In this paper, we provide a multidimensional guideline for decision makers in the service industries to translate the customer feedback into managerial actions for improving overall level of service quality and customer satisfaction. The three techniques for service quality measurement can be accommodated in a framework of service quality

Comparative approaches to service quality measurement Avinandan Mukherjee and Prithwiraj Nath

Journal of Services Marketing Volume 19 Number 3 2005 174 184

Table VIII Comparison of the three approaches to service quality measurement

Modied gap model Key references Philosophical base Parasuraman et al. (1985, 1988, 1991, 1993, 1994) Ranking based on service quality gap difference between expectation and perception TOPSIS Hwang and Lin (1987) Ranking based on the shortest distance from the positive ideal solution and longest distance from the negative ideal solution Positive ideal and negative ideal solutions OCR S /(S S-) i i i S [S(rij r )2]1/2 i j S- [S(rij r-)2]1/2 i j Textile companies, water quality, manufacturing performance Sound logic, scalar value, best and worst alternatives simultaneously, easy computation Relative importance of distances from positive and negative solutions not considered Loss function Taguchi (1986) Ranking based on variation in service quality characteristic from maximum value Maximum value possible

Reference point Customer expectations for measurement Mathematical formulation SQ Swi jPij Eijj (notations in text) Management applications from literature Advantages Numerous across service sectors, e.g. bank, healthcare, hotel, telecommunication Easily understood, widely adopted, conceptually appealing Perception alone may be more relevant than gap, positive correlation between expectation and perception, statistical variance different for expectation and perception, gaps of different signs averaged, compensatory design

L (z) Swk.[max (0, 1/(mk-zk)]2. [13 s2/ (mk-zk)2] k Banks, real estate, airlines, employee performance, supplier selection, coil spring manufacturing Non-linear, robust, easy to use, logical, common index
Weight sensitivity, no optimal solution

Weaknesses

improvement that measures service quality gaps, selects an optimal combination of attribute levels to deliver customer satisfaction, and focuses on reducing the future loss caused by poor quality. Using only one approach to service quality measurement is over simplistic and multiple methods need to be incorporated. These techniques, when used in a complementary manner, can achieve much more than simple measurement.

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Step Three: Identify positive ideal and negative ideal solution. The positive ideal solution dened as A and the negative ideal solution dened as A- are dened in terms of weighted normalized values: A maxi vi1 ; maxi vi2 ; . . . ; maxi vin v ; v ; . . . ; v 1 2 n A2 mini vi1 ; mini vi2 ; . . . ; mini vin v2 ; v2 ; . . . ; v2 1 2 n Step Four: Calculate separation measures The distance between alternatives is measured by their Euclidean distance. The separation of each alternative from the positive ideal solution A is: v ! u n  2 u X t i 1; 2; . . . ; m vij 2 vj Si
j1

Appendix. Algorithm of TOPSIS

The method is presented as a series of successive steps (Kim et al., 1997). Step One: Calculate normalized ratings The vector normalization is used for computing rij, which is given as: s m X r ij xij= x2 i 1; 2; . . . ; mj 1; 2; . . . ; n ij
i1

Similarly, separation from the negative ideal solution A- is: v ! u n  2 u X 2 2 t vij 2 vj Si i 1; 2; . . . ; m

j1

Step Two: Calculate weighted normalized ratings The weighted normalized value vij is calculated as vij wj rij where i 1,2, . . . , mj 1,2, . . . , n and wj is the weight of the jth attribute

Step Five: Calculate similarities to ideal solution (overall closeness rating-OCR): C i S 2 = S S 2 i 1; 2; . . . ; m i i i The larger is the index, the better is the performance of the alternative. Step Six: Rank alternatives in descending order.

184