Importance of Service Quality in Business: A Literature Review

This literature review explores the significance of service quality in business and its impact on consumer satisfaction. It discusses the Nordic model and the SERVQUAL model, as well as the relationship between service quality and consumer satisfaction. The review also highlights the methodologies used and previous studies conducted on the topic.

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Author Note

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Introduction
The term service quality referred to the comparison of expectations of a service with the
alleged performance which in turn has lead the equation SQ=P-E. Service quality is considered
to be a highly crucial part of a business. An organization whose management which provides
high service quality has the potential to meet consumer expectations while remaining
competitive economically. The chief aim of conducting the literature review on service quality is
to understand the factors that should be considered by the management of an organization to
ensure high service quality (Ali and Raza 2017). Conducting a literature review will help the
research to gain effective knowledge on the impact of service quality on business. The different
factors of service quality that will be analysed include the impact of the SERVQUAL model on
service quality of businesses and how service quality is related to consumer satisfaction. For
ensuring the authenticity of the literature review, 10 academic articles relevant to the research
topic has been selected. For ensuring the relevancy of the literature review to contemporary
service quality issues, research papers published within after 2015 will be considered eligible for
the literature review. The organizational pattern that will be selected for the literature review
includes Theoretical review.
Discussion
Historical Backgrounds
The first model based that was developed based on service quality of an organization was
the Nordic model. Gronroos was the first who developed Nordic Model and found that the
dimension of the service quality in the global terms is consists of both functional as well as
technological quality. In his model, Goonroos had recognized two dimensions of service quality

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dimensions, namely, the technical quality as well as the functional quality. While the technical
quality is found to be focused on the result from the respective service with the help of
interaction with the service providers, the functional quality has been found to be associated with
the process dimension which possesses the potential to evaluate the manner of the delivery of the
respective services from the service provider.
In the year 1988, Parasuraman, Zeithaml, and Berry proposed the second perspective
associated with the service quality, popularly known as the SERVQUAL model (Ngo and
Nguyen 2016). The term SERVQUAL model refers to a multidimensional research instrument
which is designed for capturing the expectation of the consumers as well as the perceptions
associated with the service and the five dimensions which are believed to representing the
service quality. The five dimensions associated with the SERVQUAL Model include reliability,
assurance, tangibles, empathy and responsiveness. Reliability in business refers to the ability of
performing the promised service in an accurate way as well as dependably. When it comes to
assurance, it can be defined as the courtesy as well as knowledge of the employees that helps
them to gain the confidence and trust of the consumers. Tangibles are referred to the appearance
of physical facilities, personnel, equipments as well as communication materials that helps the
management to enhance the organization’s service quality. Empathy can be defined as the
provision of caring a well as individualized attention to the consumers. Finally, responsiveness
of an organization is measured by the willingness of the same to help the consumers provide
prompt action.
Nguyen et al. (2018) have pointed out that the term quality and satisfaction can be used
interchangeably in business and service quality is nothing but one of the components associated
with consumer satisfaction. According to the SERVQUAL model there exist three well

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documented characteristics of services that need to be understood in order to gain an appropriate
perception of the service quality. These three characteristics include intangibility, heterogeneity
as well as inseparability. Firstly, most of the services are intangible since they are mere
performance instead of objects and accurate manufacturing specifications concerning uniform
quality cannot easily be set or determined. Majority of the services are not quantifiable and hence
cannot be measured or tested.
Methodologies
The purpose of this report is to understand the importance of service quality in business.
For this literature review, the secondary data collection method has been used for collecting
information associated with the topic. Secondary data for this literature review has been collected
through academic research articles and books (Sumaedi and Yarmen 2015). The total number of
research papers from which the data has been collected is 10. As the data base for collecting
secondary data, Google scholar has been used. Considering the fact that the research topic of this
literature review includes the significance of service quality in business, data has been collection
using key words like, ‘importance of the SERVQUAL model in business”, “importance of
service quality in the retail industry” and “importance of service quality in the hotel industry”. In
order to select the most suitable research articles for the mentioned research, the following
inclusion and exclusion criteria has been used. The inclusion criterions that have been used for
the literature review are as follows:
1. Qualitative and quantitative research on service quality
2. Theoretical analysis of service quality
3. Included studies have been published within the last 5 years

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The exclusion criteria are as follows:
1. Articles written in languages other than English has not been taken
2. Articles that has been published in authentic data bases like Google scholar has not been
taken
3. Articles that possess their publishment date before 2013 has not been selected.
Previous studies on the topic
Rauch et al. (2015) in his study has pointed out the relationship that takes place between
the service quality as well as the consumer satisfaction in the Pakistani Islamic Banks. This
research paper has employed a modified SERVQUAL model with the help of introducing a
dimension of compliance for service industry. A questionnaire-based field survey has been
conducted with the assistance of modified SERVQUAL dimensions. It has been found that
service quality of the mentioned bank is directly associated with the consumer satisfaction.
Furthermore, this study suggested that in order to enhance the consumer satisfaction, it is highly
crucial for the policy makers of the mentioned bank to access the behavioural intentions of the
Islamic bank consumers.
Theodorakis, Kaplanidou and Karabaxoglou (2015) have pointed out the increasing
competitiveness as well as fundamental changes in the business industry have enhanced the
necessity for superior service quality within the organizations. The two mentioned factors are
forcing the firms to implement a consumer focus strategies that has the potential to raise
consumer related constricts like consumer satisfaction, service quality as well as consumer
loyalty for enhancing the performance of the firm. These factors are highly essential in order to
gain competitive advantage over the existing competitors in the market. It has been found that

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organizations that provides effective service quality possess higher consumer base as well as
loyalty compared to the organizations that lacks the same. Ali (2016) pointed out that service
quality is a highly crucial factor when it comes to hotel industry. Some of the major
characteristics as well as activities of a successful business includes appropriate presentation as
well as qualitative services. These factors enhance the expectations of the consumers in a good
number of ways that includes pre booking to post stay. Consumers select hotels on the basis of
the factors like the variety of the hotel services, reliability, quality as well as price. Lu et al.
(2015) suggested that both service quality as well as consumer satisfaction is critical for the
survival of the service. Both of the mentioned factors are intangible. However, the exact
definition is still controversial. Consumer satisfaction refers to a psychological concept that
includes the feelings of well being as well as pressure that results from what one hopes for as
well as expectation from a service. When it comes to service quality in the hospitality industry,
the chief aim of the factor is to gain competitive advantage as well as confidence of the
consumers in the highly competitive marketplace. Thus, it is considered as a highly significant
concept as well as a critical success factor in the mentioned industry. Hapsari, Clemes and Dean
(2016) stated that in the hotel industry the three major direction of the service quality includes
the physical facilities, employees as well as materials. The two aspects in which the service
quality can be segregated include the functional quality and the technical quality. However
Bansal and Taylor (2015) argued that functional quality, technical quality and environment are
the three dimensions of service quality that needs to be considered by the managers of the hotel
industry on a priority basis.
Mainstream versus alternative viewpoints

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Van Lierop and El-Geneidy (2016) argued that in spite of being interrelated concept a
good number of differences exists between the service quality as well as the consumer
satisfaction. While consumer satisfaction is considered to be the evaluation of the product or
services in accordance to the prior expectations of the consumers, service quality is the
estimation of the overall quality of an organization by the consumers. In retail and fast food
industry the difference between consumer satisfaction as well as consumer service can be easily
understood. Several times, the service quality of a company does not directly impose impact on
the consumer satisfaction of the same. Fast food centres with low investment costs generally
targets local consumers. The regular consumers are aware of what to expect from this store and,
hence, are generally satisfied with the food, price and service. However, lack of investment costs
ensures that the service quality of the institution is not high. Hussain, Al Nasser and Husain
(2015) have pointed out it is highly crucial for an organization to have its service quality well
aligned with the competitive strategy of the firm. Drastically and abrupt change in the service
quality will lead an organization to change their target consumers that can result in decrement in
the competitive advantage, existing consumer base and hence revenue of the same.
Conclusion
From the above literature review, it can be clearly understood that service quality of an
organization is highly associated with consumer satisfaction. When it comes to service quality in
the hospitality industry, the chief aim of the factor is to gain competitive advantage as well as
confidence of the consumers in the highly competitive marketplace. Thus, it is considered as a
highly significant concept as well as a critical success factor in the mentioned industry. A good
number of researchers have pointed out that the increasing competitiveness as well as
fundamental changes in the business industry has enhanced the necessity for superior service

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quality within the organizations. However, this factors have been counter argued with the fact
that that there exists a basic difference between consumer satisfaction and service quality. It is
highly crucial for an organization to have its service quality well aligned with the competitive
strategy of the firm. The major gap that have been noticed while performing the literature review
is that while a good number of researchers have been conducted on the relation between service
quality and consumer satisfaction, limited number of researches have been performed on the
impact of service quality on retail organizations. Therefore it has created a huge opportunity for
future researchers to conduct research on the same.

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Reference list
Ali, F., 2016. Hotel website quality, perceived flow, customer satisfaction and purchase
intention. Journal of Hospitality and Tourism Technology, 7(2), pp.213-228.
Ali, M. and Raza, S.A., 2017. Service quality perception and customer satisfaction in Islamic
banks of Pakistan: the modified SERVQUAL model. Total Quality Management & Business
Excellence, 28(5-6), pp.559-577.
Bansal, H.S. and Taylor, S., 2015. Investigating the relationship between service quality,
satisfaction and switching intentions. In Proceedings of the 1997 Academy of Marketing Science
(AMS) Annual Conference (pp. 304-313). Springer, Cham.
Hapsari, R., Clemes, M. and Dean, D., 2016. The mediating role of perceived value on the
relationship between service quality and customer satisfaction: Evidence from Indonesian airline
passengers. Procedia Economics and Finance, 35, pp.388-395.
Hussain, R., Al Nasser, A. and Hussain, Y.K., 2015. Service quality and customer satisfaction of
a UAE-based airline: An empirical investigation. Journal of Air Transport Management, 42,
pp.167-175.
Lu, C., Berchoux, C., Marek, M. W., & Chen, B. (2015). Service quality and customer
satisfaction: qualitative research implications for luxury hotels. International Journal of Culture,
Tourism and Hospitality Research, 9(2), 168-182.
Ngo, V.M. and Nguyen, H.H., 2016. The relationship between service quality, customer
satisfaction and customer loyalty: An investigation in Vietnamese retail banking sector. Journal
of Competitiveness.

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Nguyen, Q., Nisar, T.M., Knox, D. and Prabhakar, G.P., 2018. Understanding customer
satisfaction in the UK quick service restaurant industry: The influence of the tangible attributes
of perceived service quality. British Food Journal, 120(6), pp.1207-1222.
Rauch, D.A., Collins, M.D., Nale, R.D. and Barr, P.B., 2015. Measuring service quality in mid-
scale hotels. International Journal of Contemporary Hospitality Management, 27(1), pp.87-106.
Sumaedi, S. and Yarmen, M., 2015. Measuring perceived service quality of fast food restaurant
in Islamic country: A conceptual framework. Procedia Food Science, 3, pp.119-131.
Theodorakis, N.D., Kaplanidou, K. and Karabaxoglou, I., 2015. Effect of event service quality
and satisfaction on happiness among runners of a recurring sport event. Leisure Sciences, 37(1),
pp.87-107.
Van Lierop, D. and El-Geneidy, A., 2016. Enjoying loyalty: The relationship between service
quality, customer satisfaction, and behavioral intentions in public transit. Research in
Transportation Economics, 59, pp.50-59.