An Alternative Approach in Service Quality

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An Alternative Approachin Service Quality:

An e-Banking Case StudyMARVIN E. GONZLEZ, RENE DENTISTE MUELLER, AND RHONDA W. MACK

COLLEGE OF CHARLESTON, MARKETING AND SUPPLY CHAIN MANAGEMENT

2008, ASQ

Todays consumers are increasingly rigorous in choosing

products in terms of their demands and preferences.

To be competitive, businesses must design services that

do not just satisfy customers, they must also delight

them. The quality of a product or service is judged

ultimately in terms of perceived customer satisfaction

and delight. Previous service quality researchers have

successfully used SERVQUAL and other scales to measure

and improve service quality in a variety of industries.

While these approaches have successfully conveyed the

quality philosophies of America and Europe, other

countries have approached quality differently. Japanese

quality systems such as Kansei engineering (KE) and

quality function deployment (QFD), for example, are

increasingly popular and offer an alternative way to

incorporate the customers voice in the development and

improvement of service quality systems. While tradition-

ally used in manufacturing sectors, these approaches

can also be applied successfully in service sectors. This

study uses data from the National Bank of Spain

(NBS) to demonstrate the KE and QFD procedures and

show how the customers voice can be designed into its

e-banking system.

Key words: banking services, customer satisfaction,

Kansei engineering, quality engineering, QFD, service

management, service quality

INTRODUCTIONThe introduction of e-banking to the traditional bank-

ing industry has permanently changed the relationshipbetween customers and banking service suppliers. What

was once a high personal contact industry often consists

of a diverse array of impersonal services ranging from

electronic funds transfers to computer banking, online

mortgage services, and online customer bill paying.

Indeed, e-banking is rapidly becoming an essential

means for banks to sell their products and services

(Amato-McCoy 2005). In 2003, for example, about 91

percent of U.S. households held bank accounts and 93

percent of those used at least one electronic transfer of funds option with their account (Kolodinsky and

Hogarth 2004). Online banking has also been shown to

be positively related to customer satisfaction, retention,

and reduced operational costs (Bauer, Hammerschmidt,

and Falk 2005; Polatoglu and Serap 2001).

Past research has shown that new online customer

acquisition costs are as much as 20 to 40 percent higher

than traditional customer acquisition costs (Reibstein

2002; Reichheld 1996). It is somewhat alarming then to

find that the American Banker (2000) reported that

one-third of electronic banking customers stopped

usage because of service dissatisfaction or complexity.

Reibstein (2002) argues that e-banking will be prof-

itable only if firms can retain existing customers. In

order to attain high levels of customer satisfaction, and

thus customer retention, e-banking customers needs

must first be understood. Yet, at present, online banking

is one of the least understood delivery channels for retail

banking services (Aladwani 2001).


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An Alternative Approach in Service Quality: An e-Banking Case Study

In the past, many executives simply trusted their

intuition that higher customer satisfaction would lead to

improved company performance (Homburg, Koschate,and Hoyer 2005). Currently, there is little or no guidance

for managers on how to design and implement customersatisfaction systems successfully (Piercy and Morgan1995; Powaga 2002). It is not well understood, for exam-

ple, what the components of such a system should be or

how they should be managed to yield maximum benefitto the firm (Griffin et al. 1995; Hauser and Clausing

1988; Westbrook 2000). As a result, many customer satis-

faction systems initiatives fail to reach their potential interms of providing the hoped-for benefits of either

increased customer satisfaction or improved financial

performance. This has resulted in a growing frustration

among managers with their firms consumer satisfactionprograms (Reichheld 1996).

Several researchers have produced seminal worksregarding service quality, and these have become very

useful for understanding and measuring the service

quality concept. Gronroos (1984), for example, developeda two-dimensional model that included technical quality

(what the customer receives) and functional quality

(how the service is received). Recognizing that cus-tomers evaluations of service quality operate on a much

higher level of complexity, the SERVQUAL research team(Parasuraman, Zeithaml, and Berry 1985; 1991; andZeithaml, Berry, and Parasuraman 1996) identified (and

refined) a number of dimensions (determinants) for

measuring service quality and did so in terms of gapsbetween customers expectations and their perceptions of

the firms actual performance. The researchers maintain

that a business that exceeds customer expectations has agood quality service. More recently, Brady, Cronin, and

Brand (2002) argued that service quality is performance-based rather than expectation-based, and the researchers

present a hierarchical three-dimensional model incor-

porating interaction (attitude, behavior, and expertiseof customers and salespeople), environmental (ambient

conditions, design, and social factors), and outcome

(social factors, waiting times, tangibles, and valence) factors. While conceptually different, each of the

approaches acknowledges, among other things, that:

1) quality is defined best by the customers themselves;2) service quality is multidimensional and highly

complex; 3) consumer-oriented research is essential;

and 4) for the service to be successful, customer

requirements need to be successfully communicated to

those who design and perform the service.Within the service industry, SERVQUAL (Parasuraman,

Zeithaml, and Berry 1985; 1991; 1994) has been the mostwidely accepted and used instrument to measure theservice quality of an organization and, hence, it has been

subjected to more criticism. Van Dyke, Kappelman, and

Prybutok (1997), for example, argue that the uniformapplicability of the measure to all service industries has

created problems with reliability and validity. Based on

their recent review of SERVQUAL in e-commerce studies,Alzola and Robaina (2005) also argue that the idiosyn-

crasies of electronic transactions require a different

measure for electronic service industries. Indeed, Teas

and Palan (1997) and Teas (1993) have argued that tobe more useful and valuable, the preciseness of the

conceptual and operational definitions of SERVQUALmust be improved.

Another problem with previous service quality meas-

ures is that they focus on fixed quality attributes, whichleaves them with a historical orientation designed to

correct or improve the product or service. The result is that

service quality is primarily measured in terms of customerdissatisfaction. Likewise, in the quest to develop universal

models that are context independent, the research focushas been external to the customer in that the list of serviceattributes is not a genuine reflection of the consumers

view (Schembri and Sandberg 2002). Most of the service

quality research has focused on the more easily measuredtechnical aspects of service while the more emotional

aspects, those aspects that transcend simple satisfaction

and result in consumer delight, are often overlooked.In contrast, the Japanese have developed quality

systems such as Kansei engineering (KE) and quality function deployment (QFD) to better understand cus-

tomer needs and then design customer pleasure and

enjoyment into the product beforeit is manufactured. KEfocuses research efforts on getting customers to articulate

their emotional feelings and impressions about a product

so that product designers can better understand whatdelights consumers; QFD builds a system that allows the

consumers voice (in this case Kansei) to be heard by the

engineer. Bolt and Mazur (1999) argue that QFD differsfrom traditional quality approaches that focus on zero

defects because it recognizes that nothing goes wrong


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does not mean everything is right. While the techniques

have been widely used in manufacturing, the application

of KE in combination with QFD in the service industryis uncommon (Gonzalez et al. 2005).

This study uses data from the National Bank of Spain(NBS) study to demonstrate how the procedures of KE

and QFD can be used to communicate the voice of the

customer to other functional areas so that customer

satisfaction and delight can be built into e-commerce

services. This methodology offers an alternative approach

to traditional service quality initiatives and is particularly

useful for transcending solely design characteristics and

incorporating more emotionally appealing aspects into

design.

THEORY FRAMEWORKBecause of increased economic and competitive pres-

sures and rapidly changing technologies, manufactur-

ers have begun to change their production strategy

from a production orientation (product-out) to a con-

sumer orientation (market-in) in order to improve

their performance and competitiveness. A market-in

strategy implies production based on the consumers

desires and preferences whereas a product-out strategy

implies that production is based on design strategyregardless of the consumers demands and preferences.

Traditional product-out strategy has focused on

improving reliability, functionality, usability, appearance,

and other design characteristics. Consumer satisfaction,

however, is influenced not simply by cognition (what

consumers know or believe they know about the product

or how it performs) but also by affect (how they feel about

the product). Consequently, consumers purchase products

based not only on product features (price, quality, func-

tionality, and so on), they also purchase or use productsbased on emotions, that is, affection, enjoyment, impres-

sions, intuition, sensations, and so on (Nagamachi 2002).

To be truly successful, businesses need to create goods and

services that are not simply of high technical quality

they must also have emotional appeal and be pleasing,

that is, they must elicit not simply consumer satisfaction

but also consumer delight or enjoyment.

In Japan, the term Kanseiis used to describe the

feeling of harmony that derives from the overall feelings

or impressions one has about objects and the way each

individual component contributes to the overall feeling

of harmony. Nagamachi (2002) introduced KE as an

ergonomic consumer-oriented technology that incorpo-

rates the emotional aspects (Kansei) of design into newproduct development in order to delight or create pleas-

ure for customers. Essentially, KE is about achieving the

feeling of harmony with ones environment and the

human intervention needed to maximize emotional

design. Accordingly, KE is a proactive product develop-

ment methodology that translates customers overall

impressions, feelings, and demands on existing products

or concepts into design solutions and concrete design

parameters (Schtte et al. 2004).

The KE methodology recognizes that consumers are

not always able to articulate the emotional meanings of

objects and, therefore, a key part of KE is the exploration

of the consumers emotional reactions to a good or serv-

ice, trying to make sense of what consumers say, and then

designing products and services with Kansei in mind. The

KE process begins with consumers expressing Kansei with

abstract adjectives known as Kansei words. Kansei

words are then analytically examined and mapped in

order to visually conceptualize human feelings given by

the Kansei words. Researchers then incorporate the key

sensory attributes identified into product design. If theconsumers feelings can be implemented in the new

product, he or she will be more satisfied and comfort-

able with the product and enjoy it more. By using KE,

designers are able to target their customers with more

appropriate products and services and, at the same time,

reduce costs by reducing product and service diversity.

QUALITY FUNCTION

DEPLOYMENTAkao (1990) designed QFD as a method for definingdesign qualities that are in keeping with customer expec-

tations and then translating the customer requirements

into design targets and critical quality assurance points

that can be used throughout the production/service

development phase. Through a number of stages, the

QFD process is able to link the voice of the customer with

the voice of the engineer in order to build a quality prod-

uct. By placing information in a collection of matrices

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and tables, researchers build a house of quality (HOQ).

The HOQ is a useful visual aid and serves as a conceptual

map that facilitates planning and communications

between individuals who often have different problems,

responsibilities, and priorities.By employing QFD, manufacturers and service

providers are able to deploy customer requirements into

measurable quality characteristics and create products

and services that satisfy those requirements (Hauser

and Clausing 1988). The two fundamental purposes of

QFD are: 1) to improve the communication of cus-

tomer requirements throughout the organization; and

2) to improve the completeness of specifications and to

make them traceable directly to customer requirements

and needs (Gonzlez 2001). QFD helps clarify vague or

hidden customer requirements and prevents changes or

misunderstandings by systematically analyzing their

root benefits (Bolt and Mazur 1999). In recent years,

QFD has become a widely used systematic process that

helps cross-functional teams identify and resolve issues

involved in providing products, processes, services, and

strategies in order to enhance customer satisfaction

(Gonzlez, Quesada, and Bahill 2003).

Several researchers have applied QFD to different

service areas (Miyoung and Oh 1998; Trappey, Trappey,

and Hwang 1996; Stuart and Tax 1996; Cadogan,Diamantopoulos, and Mortanges 1999; Pun, Chin, and

Lau 2000; Peters 1988; Gonzlez, Quesada, and Bahill

2003; Gonzalez et al. 2005); however, it was originally used

in product development and design. Benefits that arise

from these and other reported QFD applications include

fewer design and service costs, fewer and earlier design

changes, reduced product development time, fewer startup

problems, better company performance, more reliable

input for marketing strategies, improved service quality,

and, above all, increased customer satisfaction (Jae et al.1998; Franceschini and Rossetto 1995). QFD provides

organizations with a quantitative tool that can add relia-

bility and efficiency of the translation of the customer

requirements into the service elements of an organization.

SERVICE QUALITY IN E-BANKINGAcross all service industries, service quality is a key

driver of profit performance (Schoeffler, Buzzell, and

Heany 1974) and a critical issue as businesses struggle to

maintain a comparative advantage in the marketplace

(Kandampully and Duddy 1999). Because financial

services, particularly banks, compete in the marketplace

with generally undifferentiated products, service qualityoften becomes the primary competitive weapon (Stafford

1996) and the most important factor in the success of

new financial services (Easingwood and Storey 1993).

Indeed, Bennett (2003) maintains that a competitive

edge in banking originates almost exclusively from

service quality and is essential for success and survival

in todays competitive banking environment (Trappey,

Trappey, and Hwang 1996).

Researchers have shown that banks that excel in

quality service have a distinct marketing edge and

improved levels of service quality relate to higher rev-

enues, increased cross-sell ratios, and higher customer

retention (Bennett 2003). Quality products and services

have also been shown to enhance a banks reputation,

improve customer retention, attract new customers,

increase financial performance and profitability (Julian

and Balasubramanian 1994; Zeithaml, Berry, and

Parasuraman 1996), and expand market share (Bowen

and Hedges 1993). Despite its importance to the banking

industry, limited research has been conducted that con-

siders customer requirements (needs and demands) andservice elements togethereven though considerable

research has been conducted separately on service quality

(Bolton 1998; Parasuraman, Zeithaml, and Berry 1985;

1991) and product quality (Garvin 1988).

The National Bank of SpainNBS is the oldest bank in Spain and one of its most suc-

cessful. During the last decade, however, new banking

competition has developed in Spain, making it difficultto increase the number of NBS customers. Without

appropriate e-banking services, it will be difficult for

NBS to keep the customers it currently has. Its tradi-

tional e-banking services, like those of most banks, were

developed from the designers perspective with an

emphasis on high technical quality of service offerings.

To be truly competitive, NBS decided it had to put more

focus on customers needs and, in particular, needed to

have e-banking services that customers would actually


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use. This means that regardless of the services developed,

customers have to be more than just satisfied with the

technical aspects of e-bankingthey have to be com-

fortable with the services and enjoy using them. To help

NBS understand the emotional aspects of e-bankingservices and ensure the voice of the customer reaches the

designers, NBS decided to employ KE and QFD. This

study used the general methodology depicted in Figure 1.

Sample DetailsTo obtain information on customer requirements, a sur-

vey of users of routine services of the NBS was used.

Respondents were randomly selected from the banks

customer records. A total of 3800 surveys were sent by

electronic mail and 1256 were returned (33.1 percentresponse rate). Thirty-five percent of the respondents

were female and 65 percent were male; the average

respondents age was 25.2 years. Eighty-five percent of the

respondents reported using Internet financial services.

The questionnaire was divided into three sections and

included open- and closed-ended questions designed to

obtain general demographic and behaviorist information,

specifics about individual customer requirements and

demands, and benchmarking details. The questionnaire

was validated using a pre-test with a sample of 200 users.

KANSEI ENGINEERINGMETHODOLOGYThe KE methodology is a three-phase process that

includes: 1) generating the consumers feelings and

impressions (expressed in Kansei words); 2) clustering

(reducing) the number of Kansei words by statistically

examining the correlations among Kansei words; and

3) presenting the Kansei words back to customers sothey can rate the service on the Kansei features.

With KE, Kansei words (adjectives) are generated by

consumers themselves through open-ended questioning.

During this stage of the research, customers articulate,

with their own natural language, their expectations, gen-

eral emotions, and feelings about e-banking services.

From the 1256 surveys returned, researchers manually

identified and categorized 250 feelings and emotions

using the inter-judge reliability procedure suggested by

Perreault and Leigh (1989) (The inter-judge reliability

index exceeded 85 percent.)

To evaluate customers feelings and emotions, the

Kansei words were quantitatively analyzed and the rela-

tionships among words were identified and quantifiedusing the dynamic analysis method (see Forrester 1961

and Gonzlez, Quesada, and Bahill 2003). (Dynamic

analysis helps reduce the number of variables and finds

general correlations among observations). For example,

using the approach developed by Gonzlez and Eckelman

(1999), the expectation security was selected as a pri-

mary expectation after the dynamic process showed that

16 Kansei words were related to this expectation (security).

Figure 2 shows the relationships of the Kansei words in the

initial screen (for the expectation identified as security).

Though dynamic analysis gives designers a better

understanding of the complexity of relationships

between variables, it reduces the number of items by

only 30 percent (in this research, dynamic analysis

helped reduce the number of customer expectations

from 250 to 75). To further reduce the number of

items, factor analysis (varimax rotation) was used.

Factor analysis is an interdependence technique

used to study order and structure of multivariate data

(see Thompson 2004). By using factor analysis, the

team was able to see if seemingly unrelated items (vari-ables) were positively correlated. If the Kansei words are

related, the Kansei words can be reduced to a fewer

number of dimensions (factors), that is, collectively the

Kansei words generated may be describing a single

multidimensional feeling.

To conduct the factor analysis, researchers separated

the objective aspects from the subjective affective aspects

and analyzed them separately. The ten items with the

lowest item-to-total correlations were deleted. Using this

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Kanseianalysis

Generation

Reduction

Presentation

Customerdemands

Operationalservice

Finalservice

QFDanalysis

Design

of ane-bankingservice

Figure 1 General methodology applied.

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smaller set of 65 items and the criterion to retain factors

with values greater than 1.0, six customer expectations

factors were identified that explained 52 percent of the

variance. Keeping in mind that one of the goals at this

stage was to reduce the number of items further, the

researchers systematically deleted items that loaded

ambiguously (factor loadings greater than 0.45 on

more than one factor). Several iterations of analyses

were conducted until a stable and interpretable set of

results was obtained. The final solution contained 19

customer expectations. The original 250 Kansei words

were thus reduced to a more manageable 19 Kansei

concepts or feelings. Figure 3 depicts the reduction

process used in this study.

The second KE phase is for translating Kansei into

concrete customer expectations or needs. To do this,

researchers statistically analyzed the latent structure of

feelings (the implicit relations among adjectives and

physical attributes, that is, color size) of each component.The third KE phase often presents the design elements

(customer expectations derived from the second phase) to

the consumer using computer graphic techniques such

as computer-aided design (CAD). For this research, the

design aspects identified in phase 2 were subsequently

presented to customers via a survey. The customers then

prioritized their expectations as per the QFD analysis

(Akao 1972). Figure 3 depicts the Kansei methodology

applied in this study.

QUALITY FUNCTIONDEPLOYMENT METHODOLOGYQFD (also known as the House of Quality, HOQ) is a

systems engineering-type approach designed to transfer

the concepts of quality control from the service process

into the new product development process by using cus-

tomer statements (that is, the voice of the customer). Thefoundation of the HOQ is the belief that products should

be designed, from the very beginning, to reflect cus-

tomers desires and tastes (Hauser and Clausing 1988).

Through a series of matrices documenting information

collected and analyzed, cross-functional teams are able

to plan better products or services. The HOQ, conse-

quently, is a useful visual aid that serves as a conceptual

map that facilitates planning and communications

between individuals who often have different problems,

responsibilities, and priorities.In this case, the researchers used DecisionCapture

Software and the conventional four-phased, manu-

facturing-based QFD methodology developed by

Hauser and Clausing (1988) was modified slightly to

make it applicable to the service industry (banking).

Specifically, the four-phased methodology was trans-

formed into a three-phase action-based methodology.

The conventional terminology used in most QFD

studies also had to be modified so that it would be

Help in all transactions

++

+

+

+

+ +

+

+ + +

+

+

+

+ +++

+ +

+

Bank reputation

Marketing strategy

Time in market Transaction receipt

System reliability

Autodidactic system

Confidentiality

Customer expectation Direct Indirect (first level) Total value

Safe transactions 4+ 0+ 4+Safe locations 4+ 3+ 7+Safe systems 5+ 2+ 7+Security 3+ 13+ 16+Bank reputation 2+ 2+ 4+Service location 3+ 3+ 6+

Transaction warranty

Step-by-step explanation

Safe transactions

Safe system

Safe locations

Online help

Security

Worldwideservice

Accessibility

Service location

HomeOffice

WorkEasy to find

Figure 2 Dynamic relationships among Kansei words (based in Gonzalez 1999 approach).

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relevant to the service

industry. These stages

included: 1) HOQ (plan-

ning matrix); 2) critical

part matrix; and 3)action matrix:

Stage 1: HOQ (planning

matrix). Activities in

this phase focus on

understanding cus-

tomers in the banking

business and include

the following: identify-

ing customer require-

ments, that is, customerattributes (CA) or

words derived from KE

analysis; analyzing

customer requirements

in order to establish

what needs to be done

to the product (also

known as the whats);

and identifying how

current engineering

methods and processes

can be used to design

the product (the

hows). This stage also involves ranking service

elements, establishing correlations between cus-

tomer and service elements, and developing and

analyzing the HOQ.

Stage 2 (critical part matrix). This stage corre-

sponds to parts planning of manufacturing-based

QFD and links the service elements identified instage 1 to service operations.

Stage 3 (action plans matrix). In this phase, an

action plan is developed based on the information

obtained in the previous two phases.

To illustrate the methodology, results from the NBS

study were used. The application of KE and QFD

enabled the researchers to translate research findings

into actionable strategies. In the next section the

authors explain in detail each stage of the strategy.

STAGE 1: DEVELOPINGA PLANNING MATRIXIdentifying the CustomersLike most banks, NBS has many different types of cus-

tomers, and the needs of one segment are unlikely to be

the same as another. The KE and QFD processes, conse-quently, have to be applied to each different customer

segment. In this study, NBS decided to concentrate on its

current nonbusiness, e-banking customers because:

1) NBS wants to recruit new customers with superior

e-banking services; 2) NBS wants to reduce operating

costs by increasing the number of its current customers

who use e-banking services and by redesigning or dis-

carding e-banking services that customers do not want or

need; and 3) NBS thinks that this segment of customers

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Tool tips

Standardization

Safety

Accessibility

Multibranch

Kansei words (First and second level) Final customerexpectation

Safe transactions Online help Help in all transactions Transaction warranty Step-by-step explanation Information available Interaction with the bank

Safe locations Accessibility Service location

Home Work Anyplace

Worldwide service Easy to find

Safe system Bank reputation

Marketing strategy Time in business

Transaction receipt Confidentiality

Autodidactic system System reliability

Figure 3 Example of reduction process of the Kansei words.

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may be the most vulnerable to defection and, conse-

quently, it seeks to retain them with better e-bankingservices.

Identifying CustomerRequirements and ImportanceThe first step in applying KE methodology is to generate

the Kansei words (feelings) and specify the domain. In

this case, customer feelings (expressed in Kansei words)

about new bank services were generated and categorized

using the techniques outlined earlier. In order to deter-mine the customer expectations, the Kansei process was

applied to each feeling found. This was done by creating

the Kansei words and presenting them to the consumer

for ranking. They rated the same Kansei words gathered

before to determine if the resulting list matched the

Kansei identified by the customer.

The output from the factor analysis showed 19 cus-

tomer expectations remaining for further analyses. The

process continues to cycle until the people involved in the

project are satisfied with the results. Through these

processes, individual customer Kansei are grouped intocommon customer requirement categories. Before this

can happen, however, further data reduction is normally

needed. This was done by using the Customer Window

Quadrant (CWQ) technique designed by Intel (2002).

Using the CWQ, customer requirements were summa-

rized, as shown in Figure 4. The CWQ is an analytical

quality tool designed to cluster and classify customer

requirements based on the level of importance and

satisfaction of each characteristic (Gonzlez et al.

2005). There are four quadrants whose characteristics

and guidelines are described as follows:

Quadrant A: The customer wants it but does not get

it. Rated as high importance/low satisfaction, it is

the critical quadrant. All customer requirements

placed here require immediate action. Companies

must set up an action plan to move the critical ones

to quadrant B as soon as possible.

Quadrant B: The customer wants it and gets it. Rated

as high importance/high satisfaction, this is the most

Wants

Does not get

High

A B

C DImportance

Does not want

Satisfaction High

GetsCustomer does not want it

and does not get it

Special cardsSpecial codes

Summary of accounts in papersUser-friendly human interfaceOpennessSpecial servicesSaving costsSaving timeInformation updated/real time

Customer wants itand does not get it

Multibranch capabilityWeb accessibilityStandardizationTool tipsIntegration of open e-mail systemsSafety

Customer wants itand does get it

User-friendly human interfaceBrowser status informationManual focus for mouseAccessibility for hearing-impaired

customers

Customer does not want itand does get it anyway

Figure 4 Customer windows quadrant.

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desired quadrant. All important and critical customer

requirements should be here and stay here. Companies

must improve and monitor all quality characteristics

placed here.

Quadrant C. The customer does not want it but gets itanyway. Rated as low importance/high satisfaction,

items found here are needless and possibly costly.

Action should be taken to remove these items if the

customer requirement being offered is expensive or

represents any other type of risk to the organization.

If the quality characteristic placed here is eliminated

or reduced, perhaps the customer will not notice it.

Quadrant D. The customer does not want it and does

not get it. Rated as low importance/low satisfaction,

items in this quadrant are of the lowest importanceand should not be the focus for now. Companies

should not take any action unless there are changes in

the market, service strategy, or customer requirements.

The results of the application of the CWQ showed

the following clustering based on customer weighting

as described in the process-planning matrix mentioned

previously, namely:

Quadrant A: Six customer requirements were placed

here (see Figure 4). An action plan should be set up to

describe how to move these customer requirements to

quadrant B.

Quadrant B: Four customer requirements were

placed here (see Figure 4). A special plan should be

defined to maintain, improve, and monitor these

customer requirements.

In addition, some customer requirements were clas-

sified under quadrants C and D; however, only those

considered as critical were shown in quadrants A and B.

Assuming an attractive price structure, if thesecustomer-identified requirements are largely met,

providers can count on good acceptance compared to

other competitors. While electronic access to services

should always be cheaper than other distribution

channels, it should be used as an incentive to access

added-value services that induce customers to conduct

electronically based bank transactions. As obvious as

these requirements may seem, they have been ignored

frequently with the result that many individual and

joint attempts to use new Internet services have been

mothballed owing to insufficient user acceptance.

The final number of customer expectations analyzed

in this study was 10 (after all the process reduction).

Analyzing the CustomerRequirements (Whats)In this section of the product planning stage, the number

of complaints, the different goals (targets), and the eval-

uations of the different competitors were considered.

Table 1 shows the capability of the bank to satisfy cus-

tomer requirements as compared to other banks that

provide similar services. The information is summarized

in the HOQ, such as the sales point (the areas in whichthe company has the ability to sell the product, based

on how well each customer requirement is met), the

improvement ratio (which relates the goal or target to the

current performance measure in a specific requirement),

and the overall importance (a computed value relating

the importance to the customer, the improvement ratio,

and the sales point). All of this information helps deter-

mine what kind of actions must be taken in order to

improve the banks customer ratings for the different

customer requirements. As can be seen in Table 1, there is a difference

between the importance assigned by the customer and

the importance assigned after the final evaluation, that

is, after analyzing the different criteria in the matrix

(overall importance). One significant aspect to note

from this table is that the overall importance (impor-

tance assigned by the customer, the improvement ratio,

and the sales point) and importance assigned by the

customer should always be in agreement. For instance,

Web accessibility (2), tool tips (4), and safety (6) are thefactors rated highest by the customers. In the NBS case,

the highest factors in overall importance are also the

same as those identified by the customers. Thus, there is

confirmation that the team listened to the customers

feelings.

Sales points (or selling points) show those design

aspects that a company can emphasize in its marketing

message, that is, they are attributes that may generate

new business. Items are classified by the research team

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50 QMJ VOL. 15, NO. 1/ 2008, ASQ


as sales points based how the customer prioritizes items

and how well the customers believe the firm competes

on these items. A sales point of 1.25 is used to indicate

a strong sales point (or competitive advantage), 1.2indicates a lesser sales point, and 1.0 indicates no sales

point (Gonzlez 2001). Traditionally, with QFD, there

should be no more than three major or primary sales

points and two minor or secondary sales points in order

to keep the marketing message focused. In this case,

the sales point for all requirements is 1.0, meaning

NBS has no advantage over the competition. Since NBS

does not have any sales points at this time, it needs to

improve all aspects of customer expectations in order to

be competitive in the market.

Based on overall importance, tools tips and Webaccessibility are the most critical customer requirements;

these are followed by safety and multibranch capability.

In the case of safety, the improvement ratio is less than

the other two highly rated requirements, namely, tools

tips and Web accessibility. This means that the bank

needs to dedicate more effort in these two areas (as

opposed to safety), since the difference between the future

desired value and the current value is not as high as with

the other two requirements.

One of the main reasons for employing QFD was to

develop services that delight customers and motivate

them to use NBSs services. Table 1 shows the perception

of service requirements for NBS and two of its mostimportant competitors in the Spanish marketplace. NBS

does not have any sales point at this time, in comparison

with its competitors (in Table 1 the column sales point

needs to be greater than 1 to be a sales point). Also, Table

1 shows that future NBS service requires an increment of

improved performance (improvement ratio column) in

all customer requirements because the two competitors

have better results.

As previously discussed, by determining the

improvement factor, goals can be set and a general

strategy for responding to each customer requirementcan be designed. The improvement factor in all cases is

greater or equal than 1; therefore, corrective actions

must be taken in all of the customer requirements to

achieve and maintain the level of satisfaction and

importance demanded by the NBS customers.

Identification of the sale points will allow the market-

ing department to design and launch a marketing

strategy that will highlight these points as strengths

and order winners.

Table 1 Competitive analysis of NBS.

Customer requirementsMultibranch capability 4.2 4.8 4.0 4.1 4.2 4.2 1.0 4.4 9.7 1.0

Web accessibility 5.0 3.2 3.5 3.4 4.1 4.0 1.1 5.5 12.3 1.0

Standardization 3.8 4.9 3.8 3.5 4.1 4.0 1.0 4.0 8.8 1.0

Tool tips 4.6 4.5 3.5 3.8 4.2 4.0 1.1 5.1 11.3 1.0

Integration in open e-mail system 4.0 3.1 3.8 4.1 4.2 4.1 1.1 4.2 9.4 1.0

Safety 4.8 3.8 3.9 3.8 4.1 4.0 1.0 4.9 10.9 1.0

User-friendly human interface 4.0 3.4 4.0 4.1 4.2 4.2 1.0 4.2 9.3 1.0

Browser status information 4.2 4.8 3.9 4.0 4.1 4.0 1.0 4.3 9.5 1.0

Manual focus for mouse 4.0 4.1 3.5 4.0 4.1 4.0 1.1 4.4 9.8 1.0

Accessibility for hearing-impaired customers 3.8 4.0 4.2 4.5 4.6 4.5 1.1 4.0 9.0 1.0

**Sales point column contains information characterizing the ability to sell the product or service, based on how well each customer need is met. 2008,

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Identifying Current Methods

and Processes or ServiceElements (Hows)Customer requirements (which are derived from cus-

tomers feelings) must be translated into specific activities

within the current methods and processes of the organi-

zation (how the bank meets the requirements of its cus-

tomers). Unfortunately, customer requirements are not

often stated in terms of the organizations current

processes and methods. This situation is even more diffi-

cult when talking about customers qualitative feelings.

Therefore, customer requirements (the whats) need to betranslated into service elements (the hows). The service

elements are placed at the top of the HOQ. While tradi-

tional quality tools were developed to handle quantitative

data, a new set of tools was created to handle the more

qualitative language and relationships associated with

nonmanufacturing activities (Akao 1990).

Basically, hows are ways of achieving whats. By

answering the question: What can we control that

allows us to meet our customers objectives? the project

team identified seven technical requirements, including

operational requirements, as well as customer service

requirements. Table 2 lists the final service elements

selected through this process. In the critical matrix, theseservice elements are divided in two sections: operational

and customer service.

The next step was to fill out the relationship (central)

area of the matrix by correlating technical requirements

to individual customer needs in order to determine

strength of the relationship and impact on the need. To

satisfy the customer feeling provided in Table 1, a set of

operational services was designed. The research team took

into consideration customer expectations and, as a first

level of importance, the feelings about the service providedby the Kansei word for each case. In the matrix presented

in Table 3 the operational service activities are shown.

Ranking Service ElementsThe tradeoffs, located in the roof of the HOQ, indicate

the synergistic or detrimental impacts of changes in the

service design measures (specifications). They are used to

identify critical compromises in the design. Because these

www.asq.org 51

Table 2 Customer service requirements.

Information reformatting Bank documents (all the documents related with customers) will be provided in alternative formats at noadditional charge to the customers. Formats include large print, Braille, audiocassette, or computer disk.

Talking ATMs Talking ATMs will be located throughout the country where customers can use standard headphones toaccess financial services. Compatible headphones can also be used from other banks with talking ATMs.

Raised line check Bank will provide line checks for the visually impaired. These checks are larger enough with embossedguidelines that are easily felt.

Web accessibility The Web page design requirements recommended by the World Wide Web Consortium (W3C) in itsWeb Content Accessibility Guidelines 1.0. We will develop design practices that help customers identify,interpret, and understand information presented on our Web site. These standards are currently beingapplied to improve the accessibility of our Web site.

Account numbers For security reasons, only the last three or four digits of your account number will be revealed on our site.Each of the remaining digits will be replaced with an nonnumerical character. All the customer will haveis an online code that will be the requirement for use of the bank Web site.

Personalizing accounts To assist in locating account information, you may change the passwords used for your accounts. Visitingthe corresponding Personalize Summary page to change your account passwords.

Auto speak tool tips Many links contain additional information that can be read by software designed for visually impairedusers. This information will be revealed as a tool tip, on the status bar, as table headings, in tablesummaries, or in the title attribute.

Auxiliary aids and services We work to assist customers with disabilities in conducting their routine banking business with no unduefinancial burden.

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52 QMJ VOL. 15, NO. 1/ 2008, ASQ


compromises are almost always necessary, they should be

examined as part of the QFD effort in order to minimize

design change expenses.

Establishing Correlations

Between the Customer andthe Service ElementsQFD requires looking at each customer requirement and

assessing how the other service design characteristics

(specifications) help to improve or worsen that customer

requirement. The direction of improvement is determined

by the research team, which assigns +1 to represent what

the team perceives to be a positive improvement, -1 to rep-

resent a negative improvement, and, if the team believes

there is no relationship, the cell is left blank. Because the

customer requirements (whats) have been translated intoservice design elements (hows) using the customers own

words, Table 3 appears as a symmetric matrix. Table 3

essentially summarizes the relationship between customer

requirements and service design characteristics.

As can be seen, there is evidence of a positive relation-

ship between the customer requirement Web Accessibility

and also from the service requirements talking automatic

teller machines (ATM), auto speak tool-tips, and auxil-

iary aids and services. This means that if customers are

looking for more comfort and availability when they

use the online service of the NBS, then satisfying the

service elements mentioned previously will satisfy part

of the customer comfort requirements.

Safety and standardization are two important cus-

tomer requirements that the research team evaluated

as feelings about the incorporation of improvementin the NBS service. Among the customer expectations

analyzed, all the service design elements were covered,

adding more consistency to the QFD solution. It is

important to remember that customer expectations and

service design elements have been evaluated by the cus-

tomers themselves by doing comparisons with the most

important e-bank Web site services available on the

Spanish market (benchmarking analysis).

Developing and Analyzingthe House of QualityThe HOQ matrix (planning matrix) depicts all the infor-

mation about the customer requirements and the service

elements and provides information that is useful in deter-

mining what service properties are important in meeting

the demands of the customers.

As can be seen in Figure 5, the NBS needs to

enhance all customer requirements because in all cases,

Table 3 Operational service activities.Raised Auto Auxiliary

Service Information Talking line Web Account Personalizing speak aids andrequirements reformatting ATM checks accessibility numbers accounts tooltips services

Informationreformatting 1 1 1 1 1 1

Talking ATM 1 -1 1

Raised line checks 1 -1

Web accessibility -1 1 1 -1 1

Account numbers 1 -1

Personalizingaccounts 1 1 1 1

Auto speak tool tips 1 -1 1

Auxiliary aidsand services 1 1 1 1 1

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the customer evaluations are under the average and

behind the competitors (performance gap). The HOQ

also provides information about the evaluation of the

service elements (hows). The following hows were found

to be the most important and need to be considered in the

final action plans: talking ATMs (151.0), account num-

bers (169.8.0), and auto speak tool-tips (140.2).

Moreover, the HOQ shows that improvements are needed

in the following customer requirements: standardization

(3.0), tool-tips (2.0), integration in open e-mail systems

(3.0), manual focus for mouse (3.0), and accessibility for

hearing-impaired customers. These customer require-

ments received the lowest evaluations in the comparative

analysis and need to be addressed in order to satisfy cus-

tomer expectations. It is important to remember that

customer expectations were derived from a list of cus-

tomer feelings; therefore, if these expectations are satisfied,

customer feelings will be satisfied appropriately.

www.asq.org 53

Direction of improvement 1

Multibranch capability 1 4.2 4.0 1

Web accessibility 25.0 3.5 2

Standardization 3 3.8 3.0 3

Tool tips 4 4.6 2.0 4

Integration in open e-mail systems 5 4.0 3.0 5

Safety 6 4.8 3.5 6

User-friendly interface 7 4.0 3.5 7

Browser status information 8 4.2 3.5 8

Manual focus for mouse 9 4.0 3.0 9

Accessibil ity for hearing-impaired customers 10 3.8 3.0 10

Importance of product attributes 1

Relative importance of product attributes 2

Wachovia performance 3

Caja Madrid performance 4

Our product 5

Target values 6

1

4.1

3.0

4.1

3.5

9.5

84.6

2

4.0

1.0

4.1

3.8

17.0

151.0

3

4.0

3.2

4.0

4.0

14.3

127.2

4

4.5

3.0

4.8

3.9

4.0

36.0

5

4.0

3.8

4.0

4.1

19.1

169.8

6

4.5

3.9

4.6

3.9

9.4

84.0

7

4.0

1.0

1

1

15.8

140.2

8

4.0

1.0

3.5

1

10.9

97.0

1

Importancetothecustomer

1

Informationre

formatting

2

TalkingATMs

3

Raised

linechec

ks

4

Webaccessi

bility

5

Accountnum

bers

6

Persona

lizingaccounts

7

Autospea

ktoo

ltips

8

Auxiliaryaidsan

dservices

1

Perceptionso

fourcurrentpro

duct

Max=4.9

Perceptionso

fWachovia

Perceptionso

fCajaMa

dri

d

Min=3.1

Direction of Improvement

Maximize 1.0

Target 0.0

Minimize 1.0

Tradeoffs

Synergy 1.0

Compromise 1.0

Figure 5 Planning matrix (HOQ).

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54 QMJ VOL. 15, NO. 1/ 2008, ASQ


STAGE 2Developing the CriticalPart Matrix

As can be seen in Figure 6, the critical parts for each

service element are divided into two sections: operational

and customer service. Several indicators are shown inthis matrix; for example, importance of service attribute

and target values are two indicators that help determine

what the bank needs to do in order to incorporate vari-

ous elements into the services it provides. In addition,

the part matrix shows competitive information about the

position of NBS with respect to two other banks in Spain.

In general, the competitors show a better performance in

each of the service elements (performance gap) common

to the banks in customer requirements.

Some interesting conclusions can be drawn from the

critical matrix. The service elements that are considered

of vital importance, for example, are: 1) talking ATMs,

and 2) account numbers (ability of the bank to keep

account numbers safe). It is important to note that the

service element auto speak tool-tips is highly

demanded by customers; however, none of the banks

currently have a solution for this problemthey areonly considering for this in the future. If the NBS wants

to delight its customers, special efforts must be made in

these critical areas in order to meet the customer

requirements shown in the HOQ matrix (see Figure 6).

STAGE 3Developing Action PlansThis study of the NBS indicates that three major action

Direction of improvement 1

Information reformatting 1 84.6 9.5 3.5 4.1 3.0 4.1 1

Talking ATMs 2 151.0 17.0 3.8 4.1 1.0 4.0 2

Raised line checks 3 127.2 14.3 4.0 4.0 3.2 4.0 3

Web accessibility 4 36.0 4.0 3.9 4.8 3.0 4.5 4

Account numbers 5 169.8 19.1 4.1 4.0 3.8 4.0 5

Personalizing accounts 6 84.0 9.4 3.9 4.6 3.9 4.5 6

Auto speak tool tips 7 140.2 15.8 1 1 1.0 4.0 7

Auxiliary aids and services 8 97.0 10.9 1 3.5 1.0 4.0 8

Importance of product 1attributes

Relative importance of 2product attributes

Target values 3

1 2

4.5

7.8

1085.4

3

4.5

16.1

2242.8

4

4.0

15.1

2106.6

5

4.5

12.5

1744.0

6 7

4.2

3.5

489.6

8

4.5

24.6

3429.0

9

4.0

20.5

2863.6

1

Directiono

fimprovement

1

Operationa

l

2

Websitedesign

3

Liveservice(chat)

4

Newtechno

logyequipment

5

New

ban

kservices

6

Customerservice

7

Informationavailability

8

Persona

lcare

9

Trainingavailableforcustom

er

1

Importanceo

fpro

ductattrib

utes

2

Relativeimportanceo

fproductattributes

3

Wachoviaper

formance

4

CajaMa

dri

dper

formance

5

Ourpro

duct

6

Targetva

lues

Direction of Improvement

Maximize 1.0

Target 0.0

Minimize 1.0

Standard 9-3-1

Strong 9.0

Moderate 3.0

Weak 1.0

Figure 6 Critical part matrix.

2008,

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plans should be implemented in order to satisfy the cus-

tomer requirements identified in this study: 1) investment

in new information technology including equipment,

software, and professional personnel; 2) increased

customer involvement through frequent contacts and

feedback, phone interviews, surveys, and so on; and 3) the

creation of continuous improvement teams that evaluate

customer requirements and the competitors performance

www.asq.org 55

Table 4 Action plans.

Table IVaction plans

IT 3.5 4.5 1.0 O M L H M Increase Update % Reduction in Follow-up Information AImprovements bank system customer complaints survey technology,

services using IT systems. professionalAverage time of personnelsystem downtime.

1-800 phone 3.0 4.5 1.5 CS M M M M Lost New % Increase in market. Phone Information Bservice customers customers # of new customers. survey customer

Average time of centerresponse.

Updated 3.4 5.0 1.6 O H H H H Increase New % Reduction in External Information Asecurity confidence customers customer complaints. audit technology,systems # of system professional

breakouts. personnel

Evaluation 3.0 4.5 1.5 O H H M H Bad Update % Reduction in Evaluation Training in Cteams service system customer complaints. form by quality and

% of new customers. Internet customer% Reduction in cycle servicetime. # new projects.

Customer 3.5 5.0 1.5 CS M M M M Increase New % Increase in Evaluation Training in Bfeedback confidence customers customer involvement. form by quali ty and

% increase in Internet customer

customer satisfaction. serviceMonitoring 3.1 4.5 1.4 CS L M H M Increase Update % Reduction in Phone Training in Ccustomer confidence system customer complaints. sur vey quality andexpectations # of customer customer

expectations moved to servicequadrant B in CWQ.

Reduce 3.5 4.5 1.0 CS L L H M none New % Reduction in Quality Information Bop. costs customers operating costs while cost technology,

keeping customer analysis professionalsatisfaction high. tool personnel

Notation DescriptionO OperationalCS Customer serviceH HighM MediumL Low

A Plan A: Involves an investment in new information technology including equipment, software, and professional personnelB Plan B: Increase the customer involvement by frequent contacts and feedback, phone interviews, surveys, etc.C Plan C: Creation of continuous improvement teams that evaluate permanently the customer requirements and the competitors performance

Current

Target

Performancegap

Boun

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ditions

Ease

Cost

Like

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ccess

Risk

Sideeffects

De

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ble

Indicator

Measure

dby

Resourcesnee

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d

Action

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56 QMJ VOL. 15, NO. 1/ 2008, ASQ


(benchmarking). A summary of recommended actions

to be taken is depicted in Table 4; these have also been

coupled with selected project management issues

recommended for further information and follow up.

CONCLUSIONS ANDRECOMMENDATIONSThe future of service firms lies in their ability to respond

quickly to customer expectations and needs, and quality

has become a major competitive tool in the quest to

recruit and retain increasingly demanding customers.

This is particularly true in e-banking where banks

compete with relatively undifferentiated products.

Recently, Japanese methods have received a lot of atten-tion from manufacturers interested in improving serv-

ice quality. One of the most popular methods is KE,

which defines quality in terms of the emotional appeal

products hold. According to the KE philosophy, by

incorporating consumers emotional feelings into

design features, products will be more pleasing and

more likely to delight customers, not simply satisfy

them. KE provides the technology for translating the

emotional voice of the customer into design character-

istics. QFD, also from Japan, provides the frameworknecessary for bringing the voice of the customer to the

engineer through a systematic process.

Using these combined tools allows management to

fully understand and identify those service components

that are most important to customers as determinants of

satisfaction and, thus, use sometimes-scarce organiza-

tional resources wisely. This research project has demon-

strated how these two technologies can be applied to

e-banking services. To date, marketing strategies for

Spanish banks have been oriented around defensive tradi-

tional tactics hoping to prevent customer switching. Theresults of this research present NBSs decision makers with

valuable and detailed information on customers feelings

about the various aspects of bank servicesinformation

that is needed to strategically plan online offerings to its

Spanish customers. Specific results from the study show

that most of the important objective measures gathered

from the customers is talking ATMs, safety of account

numbers, and auto speak tool-tips. NBSs competition,

Caja Madrid, was shown to be the leader in the first two,

which means that NBS must improve in these areas to

remain competitive. None of the banks studied, however,

showed any services related to auto speak tool-tips (which

customers said they wanted but were not getting). NBS,

consequently, should be able to gain a competitive advan-tage by developing this component into its e-banking

services. Indeed, if they develop auto speak tool-tips

ahead of their competitors, they should gain a first in

the market competitive advantage.The analysis of customer requirements and service

elements also shows that focusing on Web accessibility

will improve the critical customer requirements, sinceit is highly correlated with the three other aspects ofquality service (talking ATMs, auto speak tool-tips, andauxiliary aids). Moreover, the HOQ matrices show that

improvements are needed in the following customerrequirements: standardization, integration in opene-mail systems, and manual focus for mouse andaccessibility for hearing-impaired customers

The use of KE and QFD tools to clarify and incorpo-rate the voice of the customer in service design allowsorganizations to provide the exact e-commerce services

desired by the customer to achieve high levels of cus-tomer satisfaction and delight. The benefits obviouslycenter on customer satisfaction leading to high levels of

customer retention and thus lower costs for attractingnew customers. In addition, the cost efficiencies ofonline banking further increase the value of these toolsin redirecting customers from high traditional bankingservices to cost-efficient online services. As services

increasingly rely on the interaction between customersand technology, identification and translation of thetrue emotional voice of the customer is vital in captur-

ing design aspect implications that will allow the serviceprovider to effectively and profitably compete.

In general the results from this research provide an

excellent step-by-step case study for managers in otherservice organizations. Using KE and QFD as a baseline for

the analysis of customer requirements, managers are

provided with: 1) customer-based improvement strategies

based on the specific service elements identified; and

2) action plans for the different requirements that

demand managerial action. As these results show, the

implications for competitive positioning and effective

resource allocation could be significantwith improved

ability to not only improve customer quality perceptions,


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but to improve those service components that are directly

tied to the organizations success. This can be true espe-

cially in industries where technology allows for rapid

product and service duplication resulting in somewhat

homogenous brand offerings. Being responsive to thetrue customer voice can be invaluable.

IMPLICATIONSThis study contributes to the marketing literature in

several ways. First, it presents two quality tools infre-

quently used in service design as options that go beyond

traditional service quality measurements. Second, it illu-

minates the opportunities to improve measurements of

customer perceptions of quality by combining existing

concepts. Finally, it makes a contribution to those serviceareas where homogeneity is increasingly a problem by

illustrating the use of tools that allow service providers to

design a truly customer-centric service system reflecting

and incorporating actual consumers emotional reactions

to a service. This goes beyond the high technical quality

components that can today be so easily duplicated.

Future research can build upon these finds by:

1) expanding the scope from banking to other types of

industries in order to analyze the applicability of the

proposed tools; and 2) applying the same methodologyto other banking industries for developing a model for

customer-oriented banking structures.

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BIOGRAPHIES

Marvin E. Gonzlez is an assistant professor of decision sciencesand MIS at the College of Charleston. He received his doctorate

from Purdue University, his masters degree from ITESM, Mexico,and his bachelors degree in industrial engineering from ITCR,Costa Rica. He is the author of the book QFD: A Road for Listeningto Customer Expectations. He is currently engaged as investigator ondifferent projects related to advanced manufacturing technologies,customer loyalty, e-health systems, e-banking services design, supplychain management and quality management. He can be reached bye-mail at [email protected] .

Rene Dentiste Mueller is a marketing professor at the College ofCharleston and director of Global Trade Initiate (GTI). She receivedher doctorate from DeMontfort University (England). Her currentresearch interests are in the area of cross-cultural marketing. Mueller

has published in many journals including the Journal of InternationalBusiness Studies and International Marketing Review. She is theprincipal investigator of several major grant projects and is workingwith collaborators in Austria, Brazil, Canada, China, and Mexico.

Rhonda W. Mack is a marketing professor at the College ofCharleston. She received her doctorate from the University ofGeorgia. Her current research interests are in the areas of consumerinformation usage in various service industry sectors, internationalservices marketing, and customer loyalty. She has published innumerous journals including the Journal of Advertising Research,Computers in Industrial Engineering, Journal of Small BusinessManagement, and Managing Service Quality.

An Alternative Approach in Service Quality

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