Editor’s note: William Nowell is president and CEO of ServiceTrac, a Scottsdale, Ariz., research and mystery shopping firm.

Intense development, consolidation and growth present challenges to today’s companies that arguably exceed those at any time in the past. The new ways to win seem counter to tradition: act small, like an entrepreneur. Even if you are large, stay nimble; be intimate with your customers. Focus on strengthening relationships with them. And most importantly, remember the secret is to be a customer service-based business. The companies that are able to keep a customer focus will continue to be successful even into the foreseeable future when availability of options and price will no longer be key differentiators for potential customers.

The movement to develop intimacy and an understanding of how customers define value has grown from a groundswell to a tidal wave. Value reflects a customer’s wish to get more for the money, time and effort they have invested. The first step in creating value involves understanding what value means from a customer’s point of view, how value perceptions are formed, how they can be influenced and how customers relate service quality and price in the deliberations about perceived value.

Many companies address the value issue by providing a variety of services and price options and by offering flexibility; others focus on providing specialized service in niches of the market where customers can get the exact services they need, provided in an environment that is tailored to their situation.

As important as value is, and in the light of these examples, it is interesting that recent studies revealed that questions about perceived value are not usually present in industry satisfaction questionnaires, and when they are, the ratings are often not impressive. There is still room for companies to better understand value.

Critical strategy

You can’t visit the issue of value without including service quality. Most industry managers agree that customer service is the most critical strategy to long-term viability, more than any other initiative - especially since, in many industries, price no longer differentiates companies. This is an important concept because, in the absence of a value (quality service) differentiation, price ends up being the factor most widely used by customers to make purchase decisions.

Progressive companies need to understand how customers define value (quality service) and then deliver on the standards set, and powerfully and convincingly communicate to the customers to effectively close the gap between customer perceptions and customer expectations.

Unless companies understand these changes and adjust for their impact when designing, marketing and delivering services, they are unlikely to succeed.

Introducing the Gaps Model for Customer Service

The Gaps Model of Customer Service Quality was developed by Valerie Zenthaml and the Texas A&M University Center for Retailing Studies. It outlines the potential roadblocks that hinder a service organization’s ability to close the gap between the customer’s expectations - "the standards or reference points by which a service experience is provided" - and perceived service - "the customer’s perception of what actually did, should or will occur." For example, when you visit a fast-food restaurant, you expect a level of service significantly different than what you would encounter at an expensive restaurant. Many factors affect customers’ expectations, including marketing, advertising and sales promotions as well as innate personal needs, word-of-mouth and competitive offerings. Knowing what customers want and how they assess what they receive is the best way to design effective services and position your company for success.

For a better understanding of the steps companies can take to measure service satisfaction, we can briefly discuss the four key potential gaps.

Gap 1: not knowing what customers expect

Gap 2: not selecting the right service standards

Gap 3: not delivering the service standards

Gap 4: not matching performance to promises

Gap 1
It is important to know what customers and their family members expect. Sometimes this is as simple as sitting down with the customers on a regular basis and having a conversation; and at times it can involve much more detailed and rigorous research, including industry focus groups, satisfaction surveys and structural brainstorming. Recently, one company took the time and effort to perform several detailed focus groups with customers and potential customers to discuss what they liked about a proposed store design. The results of that research helped shape the design of the building and the design of the service programs that were being developed. We can never know too much about the changing needs and expectations of our customers.

Gap 2
Accurate perceptions of a customer’s needs are important, but not sufficient, for delivering superior quality service. Sometimes the service standards are not designed properly due to a belief that the standard is unattainable, e.g., adapting a standard of 100 percent satisfaction in a specific area. Although these assumptions are valid in some situations, they are often rationalizations for management to tackle head-on the difficult challenge of setting service standards. When setting service standards, it is important to have commitment. The quality of service is determined by the standards set. Employees need to understand how the company and customers define a quality job by having quality standards clearly defined. Employees’ performance can be measured and employees can be trained effectively. Leadership is also important when addressing standards. As Nordstrom President Bruce Nordstrom has said, "Employees will do what is clearly communicated, consistently measured and openly rewarded every single time."

Strategic measurement systems are also necessary to close this gap. If customer satisfaction is to become a focus of strategy, companies must incorporate state-of-the-art measurement systems. These systems should be backed by reliable research and be carried out in a manner consistent with satisfaction measurement protocol.

In an effort to help with this issue, some mystery shopping companies have created national benchmarks. These companies collected up to 100,000 surveys in 1998 and benchmarked the results to create the first mystery shopping satisfaction database. By using a standardized survey tool, which has been professionally designed, and using the database to compare results, companies can accelerate the process of creating superior quality standards. Industry benchmarks are available in many different industries including automotive, housing, medical, retail, etc.

Gap 3
Standards need to be backed by appropriate resources (people, systems, and technology). By far the most important resource is people. Progressive companies need to ensure that the people they hire have a customer service attitude and a real appreciation for the senior customer. Companies have learned that the way they deliver service is much more important to the overall perceived quality than the array of services they provide.

Employees need to understand the role they play in the company and its ability to deliver on its mission. The employees need to work as a team and they need to be trained properly. As new industries develop, it will become increasingly important for technological advances such as interactive CD-ROM or computer-based training to be incorporated as a standard tool to insure that front-line employees have the attitude, skills and knowledge to provide the service outlined in the standards. It’s interesting that convenience store companies such as Circle K Food Stores interview, do skills assessment and provide the first seven hours of training to new employees on CD-ROM before the employee is ever allowed to meet a customer.

Gap 4
Promises made by companies through its advertising, sales force and other communications may raise customer expectations. If communications set up unrealistic expectations for customers, the actual experiences will be disappointing. One prevalent area this can happen in is the initial meeting and adjustment period. Research has shown that potential customers have a great deal of apprehension about the purchase process. It is important that the marketing person set up realistic expectations about how the process will flow, and that the company have a clear program of integrating, so to speak, a new prospect into the company to keep the fresh positive impression about the company as high as possible through the purchase process.

Pulling it all together

Making your company customer-focused starts with a mission and a vision, including the process through which the company’s values are designed to complement customers’ values and are brought to life in the everyday operation of the company. Superior quality requires attention to details and to the measurement of perceptions and expectations, and systems to address issues before they are allowed to detract from the vision. It also requires leadership to continue to drive the values of the company to the front-line interactions that each employee has with each customer. Management and front-line service providers must understand their goals and have the resources to deliver what is promised.