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Service industry in India

The services sector has been at the forefront of the rapid growth of the Indian economy, contributing nearly 63 per cent of the GDP in 2007-08. The sector has come to play an increasingly dominant role in the economy accounting for 59.6 per cent of the overall average growth in GDP in the last eight years between 2000-01 and 2007-08. As per the Central Statistical Organisation, the services sector has continued to grow in the fourth quarter of 2008-09. Trade, hotels, transport and communication grew 6.3 per cent in January-March 2009 from a year earlier, vs. 5.9 per cent in October-December 2008. Financing, insurance, real estate and business services grew an annual 9.5 per cent in January-March, 2009 vs. 8.3 per cent in October-December 2008. Lead indicators suggest that the pace of expansion in the services sector activity is likely to be sustained even in the next financial year. Foreign tourist arrivals (FTAs) during January to June 2009 were 2.5 million. Railways freight traffic increased to 833.03 million tonnes during fiscal 2008-09 from 794.21 million tonnes carried during 2007-08, an increase of 4.89 per cent. At the end of April 2009, the total number of telephone connections reached 441.47 million, registering an overall tele-density of 37.94. Cargo handled at major ports during April–December 2008–09 has been 391.80 MT as against 378.82 MT in the corresponding period last fiscal. The prospects for growth in the Indian services sector over the next year continues to be robust, according to a survey by KPMG, conducted across the BRIC (Brazil, Russia, India and China) countries in spring 2009. The survey revealed that 31.3 per cent Indian companies saw their activity levels improving. Around 37 per cent forecast new order growth in one year‘s time, compared with 16 per cent that anticipate a fall. Even capital expenditure at Indian services firms is anticipated to rise in the year ahead, with 43 per cent of companies saying they plan to increase spending on fixed assets. Revenues are expected to grow by 31.1 per cent of firms, while 32.5 per cent believe their profits will increase.

Courtesy: CII website

Service Quality

Service Quality

Service quality is a concept that has aroused considerable interest and debate in the research literature because of the difficulties in both defining it and measuring it with no overall consensus emerging on either (Wisniewski, 2001). There are a number of different "definitions" as to what is meant by service quality. One that is commonly used defines service quality as the extent to which a service meets customers’ needs or expectations (Lewis and Mitchell, 1990; Dotchin and Oakland, 1994a; Asubonteng et al ., 1996; Wisniewski and Donnelly, 1996). Service quality can thus be defined as the difference between customer expectations of service and perceived service. If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs (Parasuraman et al ., 1985; Lewis and Mitchell, 1990).

Always there exists an important question: why should service quality be measured? Measurement allows for comparison before and after changes, for the location of quality related problems and for the establishment of clear standards for service delivery. Edvardsen et al . (1994) state that, in their experience, the starting point in developing quality in services is analysis and measurement. The SERVQUAL approach, which is studied in this paper is the most common method for measuring service quality.

Model of Service Quality Gaps

There are seven major gaps in the service quality concept, which are shown in Figure 1. The model is an extension of Parasuraman et al. (1985). According to the following explanation (ASI Quality Systems, 1992; Curry, 1999; Luk and Layton, 2002), the three important gaps, which are more associated with the external customers are Gap1, Gap5 and Gap6; since they have a direct relationship with customers.

· Gap1: Customers’ expectations versus management perceptions: as a result of the lack of a marketing research orientation, inadequate upward communication and too many layers of management.

· Gap2: Management perceptions versus service specifications: as a result of inadequate commitment to service quality, a perception of unfeasibility inadequate task standardisation and an absence of goal setting.

· Gap3: Service specifications versus service delivery: as a result of role ambiguity and conflict, poor employee-job fit and poor technology-job fit, inappropriate supervisory control systems, lack of perceived control and lack of teamwork.

· Gap4: Service delivery versus external communication: as a result of inadequate horizontal communications and propensity to over-promise.

· Gap5: The discrepancy between customer expectations and their perceptions of the service delivered: as a result of the influences exerted from the customer side and the shortfalls (gaps) on the part of the service provider. In this case, customer expectations are influenced by the extent of personal needs, word of mouth recommendation and past service experiences.

· Gap6: The discrepancy between customer expectations and employees’ perceptions: as a result of the differences in the understanding of customer expectations by front-line service providers.

· Gap7: The discrepancy between employee’s perceptions and management perceptions: as a result of the differences in the understanding of customer expectations between managers and service providers.

According to Brown and Bond (1995), "the gap model is one of the best received and most heuristically valuable contributions to the services literature". The model identifies seven key discrepancies or gaps relating to managerial perceptions of service quality, and tasks associated with service delivery to customers. The first six gaps (Gap 1, Gap 2, Gap 3, Gap 4, Gap 6 and Gap 7) are identified as functions of the way in which service is delivered, whereas Gap 5 pertains to the customer and as such is considered to be the true measure of service quality. The Gap on which the SERVQUAL methodology has influence is Gap 5. In the following, the SERVQUAL approach is demonstrated.

SERVQUAL – A service quality measurement model

Clearly, from a Best Value perspective the measurement of service quality in the service sector should take into account customer expectations of service as well as perceptions of service. However, as Robinson (1999) concludes: "It is apparent that there is little consensus of opinion and much disagreement about how to measure service quality". One service quality measurement model that has been extensively applied is the SERVQUAL model developed by Parasuraman et al . (1985, 1986, 1988, 1991, 1993, 1994; Zeithaml et al. , 1990). SERVQUAL as the most often used approach for measuring service quality has been to compare customers' expectations before a service encounter and their perceptions of the actual service delivered (Gronroos, 1982; Lewis and Booms, 1983; Parasuraman et al. , 1985). The SERVQUAL instrument has been the predominant method used to measure consumers’ perceptions of service quality. It has five generic dimensions or factors and are stated as follows (van Iwaarden et al. , 2003):

(1) Tangibles : Physical facilities, equipment and appearance of personnel.

(2) Reliability: Ability to perform the promised service dependably and accurately.

(3) Responsiveness : Willingness to help customers and provide prompt service.

(4) Assurance (including competence, courtesy, credibility and security): Knowledge and courtesy of employees and their ability to inspire trust and confidence.

(5) Empathy (including access, communication, understanding the customer): Caring and individualized attention that the firm provides to its customers.

In the SERVQUAL instrument, 22 statements measure the performance across these five dimensions, using a seven point likert scale measuring both customer expectations and perceptions (Gabbie and O'neill, 1996). It is important to note that without adequate information on both the quality of services expected and perceptions of services received then feedback from customer surveys can be highly misleading from both a policy and an operational perspective.