Describes the five attributes of quality service and explains how to identify customer expectations Christopher H. Lovelock Visiting Senior Lecturer, Sloan School of Management, MIT No one has done more than this energetic trio to insist that service quality must be defined from a customer-driven perspective. The research findings described in this book yield a practical, commonsense structure to help managers close the gaps that separate customers from the quality service experiences they seek. -- Review Valarie A. Zeithaml is associate professor at the Fuqua School of Business at Duke University. The recipient of three distinguished teaching awards, Dr. Zeithaml has written articles for the Journal of Consumer Research, Journal of Marketing, and the Journal of Retailing. Chapter 1 SERVICE LEADERSHIP SPELLS PROFITS Service quality is a central issue in America today. In a recent Gallup survey, executives ranked the improvement of service and tangible product quality as the single most critical challenge facing U.S. business. One reason service quality has become such an important issue is that America's economy has become a service economy. Services account for approximately three-fourths of the gross national product and nine out of ten new jobs the economy creates. As David Birch writes: It used to be that we were good at growing things. We still are, but with virtually no people involved. Agricultural employment has gone from well over half of all jobs to about 2% of them. It used to be that we were good at making things. We still are, but with very few people involved....Today, only 9% of American workers actually labor in factories. Yet, we have created millions of jobs....It's not surprising that what these people are doing instead of making things is providing services. Virtually all organizations compete to some degree on the basis of service. It is difficult to name even one industry for which service matters are unimportant. Study the strategies of manufacturing companies such as Ford Motor Company or Corning Glass Works and what you find is a paramount role for service. Indeed, as the decade of the 1990's unfolds, more and more executives in manufacturing firms will be as keenly interested in service quality as executives in banking, health-care, and transportation businesses are today. As manufacturing executives find it increasingly difficult to establish sustainable, technology-based competitive advantages, they will direct added attention and resources to value-added service as a truer source of superiority. And as manufacturers compete more on service, there will be less distinction between manufacturing and service businesses. Services are also crucial to America's future as a worldwide competitor. The U.S. government is counting on significant growth in net service exports in the 1990's to play a key role in addressing the country's balance of trade problems. And yet, America's net positive trade balance in services fell steadily throughout the 1980's, prompting some observers to suggest that the United States is on the verge of taking the same international beating in services that it has already endured in manufacturing. The principal culprit is seen as mediocre service quality. As Quinn and Gagnon write: It will take hard and dedicated work not to dissipate our broadbased lead in services, as we did in manufacturing. Many of the same causes of lost position are beginning to appear. Daily we encounter the same inattention to quality, emphasis on scale economies rather than customers' concerns, and short-term financial orientation that earlier injured manufacturing. The central role for services in the American economy is a key factor behind service quality's rising prominence as an institutional and societal issue. Services are so much a part of what we produce, consume, and export in this nation that it would be surprising if we weren't concerned about quality. A second factor behind service quality's rising prominence is that superior quality is proving to be a winning competitive strategy. McDonald's. Federal Express. Nordstrom. American Airlines. American Express. L. L. Bean. Domino's Pizza. Disney World. Club Med. Deluxe Corporation. Marriott. IBM. In every nook and cranny of the service economy, the leading companies are obsessed with service excellence. They use service to be different; they use service to increase productivity; they use service to earn the customers' loyalty; they use service to fan positive word-of-mouth advertising; they use service to seek some shelter from price competition. Service excellence pays off richly for reasons we develop in more detail later in this chapter. With service excellence, everyone wins. Customers win. Employees win. Management wins. Stockholders win. Communities win. The country wins. THE URGENT NEED FOR SERVICE LEADERSHIP How do we explain the incongruity that service excellence pays off and yet is in such