Download Dissertation Proposal - The Invisible Water Utility

Research Synopsis
The Invisible Water Utility
The Influence of Organisational Behaviour on
Customer Perception in Urban Water Supply
Peter Prevos
Third
Hemisphere
Publishing
c Peter Prevos (2014)
invisiblewater.org
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Typeset in LATEX
In the past water utilities were dominated by engineers, now they are dominated
by economists. In the future water utilities should be dominated by marketers.
Paraphrased from anonymous survey respondent.
Contents
1 Introduction
2 Literature Review
2.1 Water Utility Marketing . .
2.2 Market Orientation . . . .
2.3 The Attitudes of Engineers
2.4 Service Quality . . . . . .
2.5 Involvement . . . . . . . .
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3 Research Method
3.1 Research questions . . . . . . . . . . . . . . . . . . . . . . . .
3.2 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.3 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . .
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4 Dissertation Structure
4.1 Marketing essential services: A stakeholder view of water utility
service provision . . . . . . . . . . . . . . . . . . . . . . . . .
4.2 Water utility marketing: A research agenda . . . . . . . . . . . .
4.3 Using network analysis for axial coding in grounded theory . . .
4.4 The influence of engineers on market orientation in services . . .
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4.5
4.6
4.7
4.8
4.9
SERVAQUA :
Towards a Service Quality model for water utilities
using the Nordic model . . . . . . . . . . . . . . . . . . . . . .
Operationalising the Nordic Model of service quality for service
factories: An empirical exploration in water utilities . . . . . . .
The nature of consumer involvement in water utilities . . . . . .
The relationship between market orientation and service quality
in water utilities: A case study approach . . . . . . . . . . . . .
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . .
References
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Chapter 1
Introduction
Water follows a natural cycle that starts in the ocean and flows through evaporation and rain into rivers and groundwater, eventually flowing back into the ocean.
Water is as such freely available to humans, animals and other organisms to be
used for survival. However, in densely populated areas, water is in its natural
state not suitable for human consumption (Hrudey and Hrudey, 2004; Salzman,
2012). In most urban centres water is purified and pressurised and provided into
homes and businesses by specialised service providers, the water utilities. The
main purpose of these organisations is to add value to the natural water cycle
by removing chemical and microbial contaminants, pressuring the water and
delivering it into their customer’s home. The filtration process renders the water
suitable for consumption and the pressure ads value for consumers by increasing
the convenience of using the water. The relationship between the natural water
cycle and the role of water utilities is visualised in figure 1.1. Each of the arrows
indicates a point where water utilities add value to the natural water cycle.
Most water utilities are managed by engineers and scientists, focused on solving
technical and scientific problems related to service provision, but with little
attention to how marketing theory can be used to enhance services provision.
1
2
Introduction
Figure 1.1: Water utilities and the natural water cycle.
The technocratic narrative of the professional literature on tap water supply is
largely myopic of the intangible aspects of the service process (Allon, 2006;
Morgan and Smith, 2013). Marketing related issues in urban water supply are
also largely ignored in scholarly marketing literature (Patsiaouras et al., 2014).
Marketing is not considered to be a natural partner for urban water service
providers because of the monopolistic nature of the industry.
The distinguishing factor of services delivered in a natural monopoly is that
dissatisfied customers cannot change service provider. Without the threat of
defection by customers, there is limited intrinsic motivation for the organisation
to maximise service quality (Flynn, 1990). This also applies to water utilities as
the monopolistic providers of tap water services have repeatedly been criticised
for being inefficient and lacking customer focus (Auriol and Picard, 2009; Deichmann and Lall, 2007; Karbowiak, 2003). This dissertation seeks to bridge the
gap between the natural-science dominated discourse in water utilities and social
science based marketing theories. The distance between the two disciplines
might not be as large as it would seem. Marketing is after all, in the words
of Kotler and Levy (1969) “customer satisfaction engineering”.
The working title of this thesis is: The Invisible Water Utility: The Influence
Introduction
3
of Organisational Behaviour on Customer Perception in Urban Water Supply.
The first part of the title refers to the managerial aspect of the research problem
and to the fact that water utilities as a service provider are de-facto invisible
to the customer. Services provided by water utilities are neither differentiated
nor branded and are enjoyed as a matter-of-course by their customers. The
invisibility of the process of service provision and the fact that utilities are
natural monopolies has also made water utilities invisible to business scholars,
especially in the area of marketing (Patsiaouras et al., 2014). The second part
of the working title refers to the academic context within which this research is
being conducted and the main research question:
What is the relationship between organisational behaviour in water
utilities and service quality as perceived by domestic customers?
This research focuses on the retail of drinking water to urban customers through
reticulated networks. Other types of services provided by water utilities, such
as recycled water and sanitation (sewage collection and reclamation) fall outside
the scope of this research.
The primary objective of this dissertation is to contribute to the discussion on
using private sector marketing concepts in the management of public services,
such as urban water supply. This objective will be achieved through the development of theory regarding the relationship between the attitudes and behaviours of
employees and the perceptions of consumers about the performance of service
providers. From an academic perspective, this dissertation seeks to enhance
understanding into how market orientation relates to service quality in ‘service
factories’, with specific reference to the role of engineers in technologically
driven services. Service factories are services that require a low intensity of
labour, rely on incidental interaction between customers and the service provider
and they only allow for a low level of customisation (Schmenner, 1986). Furthermore, this dissertation seeks to addresses a gap in knowledge regarding the
measurement of quality in services dominated by tangible elements. Lastly, this
dissertation assesses the influence of consumer involvement on perceptions of
quality held by water utility customers. The managerial objective of this dissertation is to enhance the current discourse on customer centric service provision in
Introduction
4
reticulated water by developing marketing theory specific to this sector to assist
managers with maximising customer value. This objective is realised through
commercialisation of the outcomes of this research.
This report discusses the literature salient to the research problem and defines
questions derived from this review. The report closes with a proposed methodology and implementation plan to achieve the stated objectives.
Chapter 2
Literature Review
2.1
Water Utility Marketing
Industry Literature
Water utilities generally focus on the technological aspects of service provision,
unaware of the intangible value of the service they provide. The reason for this
detachment can be traced back to the dominance of engineering in water utilities
(Morgan and Smith, 2013), ignoring the intrinsic value of water to the personal
lives of people (Allon and Sofoulis, 2006).
This attitude can be observed by reviewing industry literature. A textbook on
business skills for utility engineers specifically excludes marketing as a relevant
discipline as it is perceived to be “peripheral to most issues facing utility engineers” (Brown, 2010, p. x). The book does, however, contain hundreds of
references to customers related topics, such as willingness to pay and service
expectations, both of which are firmly placed within the domain of marketing.
To confirm this observation a broad review of industry literature has been undertaken. The International Water Association (IWA) publishes a range of peer
5
Literature Review
6
reviewed books and journals on a wide range of aspects related to water utility
management. A systematic search for marketing related topics has been undertaken to identify relevant journal articles. This search uncovered more than
200 articles published in ten journals published by the IWA. Analysis of the
article’s abstracts shows that industry literature on marketing related topics can
be clustered in four communities of enquiry (Figure 2.1). A community of enquiry is a collection of publications that discusses similar topics (refer to section
3.2 for details on the methodology to undertake this review). Identified topics
are shows as circles, with the diameter of the circle related to the frequency of
occurrence. The width of the lines is related to the number of times the topics
are discussed within the same article and communities of enquiry are indicated
with the coloured areas.
The first community of enquiry relates to journal articles discussing service
quality related topics. This community is dominated by discussions on the
relationship between asset management and customer perceptions of service,
including sensory perception of water: the colour, taste and odour of water (e.g.
Burlingame and Mackey, 2007; Dietrich et al., 2014; McGuire, 1995). The
main problem under consideration in this literature is how asset management
practices influence customer perception. This community of literature also focuses on the physical causes of customer complaints (e.g. Boxall et al., 2003;
Franceys and Gerlach, 2011), but is limited to the utility’s perspective of quality,
without taking the customer’s perspective into account. The industry literature
focuses on the psychophysical processes of perception and the physical causes
of customer complaints, i.e. the contaminants in the water. The psychological
aspects of perception and complaint behaviour are largely ignored in this stream
of literature.
Second community of enquiry discusses customer related issues, such as service
involvement, brand image and market research undertaken by utilities (e.g. Santos, 2000; Fife-Schaw et al., 2008). This community overlaps with the papers
discussing sensory perception issues through deliberations about product image
and product acceptance, as they relate to the physical properties of the water.
The topics in this second community are related to intangible aspects of service
delivery, whereas the quality related community discusses the tangible aspects
Literature Review
7
Figure 2.1: Industry literature communities of enquiry.
of service provision.
The third community discusses consumer behaviour related topics. Most discussed topics in this area of enquiry are related to pricing and willingness to pay
(e.g. Meij et al., 2005; Mugabi et al., 2010). With water prices continuously
increasing above inflation rates due to high investments required to maintain the
level of service, willingness to pay has become a focus area within the industry.
Consumer behaviour related papers also discuss methods to estimate consumption patterns of utility customers and the relationship between pricing and water
use (e.g. Salman et al., 2008; Wyatt and Alshafey, 2012). In extension to these
topics, some articles discuss the use of social marketing to manage consumer
Literature Review
8
demand (e.g. Addo-Yobo and Njiru, 2006; Banerjee et al., 2007; Freeman et al.,
2009).
Fourth and last community of enquiry relates to articles discussing strategic
utility management topics such as privatisation, regulation and supply chain
issues (e.g. Adams, 2008; Rock et al., 2012). Regulation is one of the drivers
of the focus on customer satisfaction within the utility sector and is often related
to discussions on how to measure performance within a water utility (Braadbaart,
2007). Several benchmarking methods exist within this sector, but they are
generally focussed on the utility’s perspective (Allan et al., 2013; Cabrera, 2011),
without specific reference to the customer’s perspectives of quality.
Scholarly business literature
Kurland and Zell (2010) reviewed 135 water-related articles in business journals
and developed a taxonomy of water related research. Their taxonomy contains
six areas of interest: water quality, water quantity, use of water, sustainable
resource management, company management and industry management. This
review did, however, not consider any economics or marketing journals, without
providing justification.
Journals in the field of economics have spent a great deal of attention to water
utilities, mainly in relation to privatisation. One of the justifications for privatisation in economics literature is that privately owned firms will be able to
deliver improved customer outcomes (Auriol and Picard, 2009; Chisari et al.,
1999; Cunha and Cooper, 2002; Hart et al., 1997; Glennon, 2005; Rexha et al.,
2000; Tan, 2012). However, empirical research on the impact of privatisation
of networked services has been largely myopic of the implications on service
quality (Fumagalli et al., 2007; Lee et al., 2011). The existing studies base their
conclusions on theoretical economic considerations and logic relationships, with
limited reference to marketing theory.
Economists assert that a privately owned service provider maximises quality
to match willingness to pay, primarily motivated by profitability and seeking
to maximise prices and minimise cost. This is the basic principle of the Organisational Behaviour Hypothesis, which posits a causal relationship between
Literature Review
9
ownership and service quality (Crew and Kleindorfer, 1979; Fumagalli et al.,
2007). This hypothesis holds that the mode of ownership of an organisation
influences service quality trough the behaviour of managers. This hypothesis
is based on a series of assumptions on how managers in different ownership
settings are inclined to behave through job design, staff empowerment and development (Fumagalli et al., 2007).
If it is accepted that privately owned service providers minimise cost, that maximising quality increases willingness to pay and that privately owned corporations seek to maximise profitability then it follows logically a privately owned
corporation will maximise service quality. This line of reasoning does, however,
rely on assumptions for which there is only a low degree of empirical evidence.
The relationship between mode of ownership and efficiency is disputed in economic literature and willingness to pay relies on more variables than service
quality alone (Homburg et al., 2005). Ownership is therefore neither a necessary
nor a sufficient condition for maximisation of service quality and the organisational behaviour hypothesis requires empirical validation.
A review of water utility marketing literature was undertaken using a list of journals from the Academy of Marketing Science website and a ranking of marketing
related journals published by the Australian Business Deans Council. A total of
110 journals were searched for content on water related topics. The majority
of articles on water marketing discuss issues related to bottled water, which
were excluded from further analysis. This resulted in 24 relevant journal articles
discussing marketing related content with respect to water utilities, covering a
wide range of topics, which can be divided in business level topics and customer
related topics.
At business level, the literature discusses issues related to business strategy,
such as Bottom-of-the-Pyramid marketing (Rangan et al., 2011; Weidner et al.,
2010) and delivering improved water supplies in developing countries. Ability
and willingness to pay is a major concern in these circumstances (Perez-Pineda
and Quintanilla-Armijo, 2013). Other business related topics are privatisation
(Lackman, 1994) and diversification of private water utilities (Hunter, 1990).
At the customer level, most attention has been given to the efficacy of social
Literature Review
10
marketing to manage water consumption (Hastings et al., 2000; Lowe et al.,
2014; Madill and Ziegler, 2012; Patsiaouras et al., 2014). Second stream of
research at the customer level in water utility marketing relates to customer
perceptions of water utility service delivery (McCoy, 2014). One of the earlier
papers in this field of study proposes a model for measuring service quality
(Babakus and Boller, 1992; Babakus, 1993).
Summary
The water utility industry literature shows an interest in marketing related topics,
but rarely invokes marketing theory to better inform service provision. Scholarly
literature on water utility marketing is sparse and spread across a wide range of
topics. Literature in the field of economics discuses the relationship between service quality and managerial behaviour in water utilities, but has largely based this
on economic theory and logical relationships, with limited empirical support.
Given the focus on customer service in water utilities by regulators, politicians
and public expectations (Auriol and Picard, 2009; Deichmann and Lall, 2007;
Karbowiak, 2003), there is a need for empirical validation of the relationship
between organisational behaviour and customer perception.
2.2
Market Orientation
Organisational behaviour in water utilities can be modelled using the market
orientation construct, the independent variable for this dissertation. The business
philosophy of the marketing concept holds that organisational success is positively influenced by the extent to which a firm satisfies the needs of customers.
Peter Drucker (1954), early proponent of the marketing concept philosophy,
viewed marketing as the “whole of the business seen from the customer’s point
of view”. Marketing is as such an integrated activity that informs engineers,
designers and manufacturers on what customers want (Drucker, 1954). The
market orientation construct was developed to operationalise these philosophical
foundations of marketing (Chad et al., 2013; Lafferty and Hult, 2001).
Literature Review
11
Several conceptualisations of market orientation exist, each of which defining
it from a different perspective. These views can be categorised in two schools
of thought (Lafferty and Hult, 2001). The first school provides a managerial
focus on market orientation, which consists of three perspectives. The decisionmaking perspective conceptualises market orientation as an organisational process which incorporates a strong commitment by management to share information between departments and practice open decision making across the organisation (Shapiro, 1988). The decision-making perspective consists of three
characteristics: (1) information permeates every corporate function; (2) strategic
and tactical decisions are made interfunctionally and interdivisionally and; (3)
divisions and functions make well-coordinated decisions and execute them with
a sense of commitment. In the market intelligence perspective, market orientation is the “organisation-wide generation of market intelligence pertaining
to current and future customer needs, dissemination of the intelligence across
departments, and organisation-wide responsiveness to it” (Kohli and Jaworsky,
1990, p. 6). Last managerial perspective has a strategic focus where market
orientation is defined as the “degree to which the business unit obtains and
uses information from customers, develops a strategy which will meet customer
needs, and implements that strategy by being responsive to customer needs and
wants” (Ruekert, 1992, p. 228). This perspective focuses on the ability of an
organisation to understand customers and their ability to plan and implement
strategies to meet the needs and wants of the marketplace.
Second school of thought in the market orientation discourse provides a cultural
focus, which was developed almost concurrently with the managerial view. In
this approach, market orientation is defined as the “culture that most effectively and efficiently creates the necessary behaviours for the creation of superior
value for buyers and, thus, continuous superior performance for the business”
(Narver and Slater, 1990, p. 21). This view focuses on three behavioural components: customer orientation, competitor orientation and interfunctional orientation. This perspective was further enhanced through a focus on the attitudinal
dimension of the customer orientation dimension, which is defined as “the set
of beliefs that puts the customer’s interest first, while not excluding those of all
stakeholders, such as owners, managers and employees, in order to develop a
Literature Review
12
long-term profitable enterprise” (Deshpandé et al., 1993, p. 27).
Synthesis of these five perspectives revealed similarities that can be considered to
reflect a general agreement as to what constitutes the basic foundation of a market orientation. The four general areas of agreement in the above summarised
perspectives include (1) an emphasis on customers; (2) the importance of shared
information; (3) coordination of activities between business units and; (4) being
responsive to taking appropriate action (Lafferty and Hult, 2001).
The existence of a market orientation in an organisation has been shown to be
positively related to business performance on various indicators. Within the
context of for-profit industries, Narver and Slater (1990) investigated the impact
of market orientation on Return on Assets (ROA). Other performance indicators
have also been used to report on the impact of a market orientation, such as
innovativeness (Deshpandé et al., 1993) and combinations of other business
performance metrics (Harrison-Walker, 2001), including service quality (Chang
and Chen, 1998; Daniel, 1998; Lam et al., 2012; McGrath, 2009; Ramayah et al.,
2011; Samat et al., 2006; Voon, 2006; Yoo and Park, 2007).
Research in market orientation has largely been focused on its effect on profitability and other financial parameters. In its original conceptualisation, the
marketing concept was considered to be limited to profit oriented organisations.
Drucker (1954) specifically excluded marketing as a function for government
and non-profit organisations. This view has since been contradicted. Although
the original definition of market orientation is based on commercial ventures
operating in a competitive environment, the concept has also been applied to
non-profit sectors and government services (Newsome, 1999; Whelan et al.,
2010).
This dissertation follows the culturally based behavioural perspective of market
orientation. This conceptualisation has been used because it extends beyond
the specific structures and processes practised in a market-oriented company
and goes more to the core of the marketing concept on which this construct
is based and focuses on the values that exist within the corporation (Lafferty
and Hult, 2001). Methodologies to operationalise market orientation are based
on approaches in commercial and competitive industries. The culturally based
Literature Review
13
approach was also chosen as it is more applicable to a non-profit environment.
The culturally based approach is operationalised through the market orientation
construct, as developed by Narver and Slater (1990). This construct consists
of three behavioural components: customer orientation, competitor orientation
and interfunctional coordination. Customer and competitor orientation include
all activities that involve obtaining information about customers and competing
firms and disseminating that information through the business. More specifically, customer orientation involves the understanding of customers in order to
be able to provide superior value. Competitor orientation involves the firm’s
understanding the strengths, weaknesses and capabilities of current and potential competitors. Third behavioural component is interfunctional coordination,
which consists of the firm’s coordinated efforts to deliver superior value to customers. This component is defined as the coordinated utilisation of the firm’s
resources in creating superior value for customers (Narver and Slater, 1990).
Due to the monopolistic nature of tap water supply, the competitor orientation
component of the original construct has not been further considered in this dissertation.
2.3
The Attitudes of Engineers
The attitudes of engineers and their relationships with customer facing teams
in the organisation are hypothesised to be a moderating factor of market orientation. The relationship between engineers and marketers has been researched
extensively, with a focus on the relationship between Research & Design and
marketing departments in product industries, but not in the services sector (Shaw
and Shaw, 2003). The development of an effective interface between engineering
and marketing sections is considered vital for the successful development of
technological products (Lancaster, 1995; Shaw and Shaw, 1998). The importance of good relationships between marketing and engineering personnel is also
acknowledged in engineering literature (Edwards, 1995; Norman, 1997; Taylor,
2011; Visser, 1996; Workman, 1995). The effective integration of engineering
activities into the supply chain of services can be considered an aspect of a
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14
market orientation as engineering is often the starting point of the marketing
process (Drucker, 1954).
The literature on the role of engineers in the marketing process identifies several
sources of the potential for conflict between engineers and marketers. Differences in tasks, goals and objectives; polarisation of behaviour through a tension
between standardisation and customisation and stereotyping of personality traits
of the two professional fields have been discussed in the literature (Weinrauch
and Anderson, 1982). Engineers and marketers have different educational backgrounds and occupy different ‘thought-worlds’. Engineers form a single professional group with formalised science-based education, while marketers stem
from more diverse backgrounds (Shaw and Shaw, 2003).
Research exploring the relationship between marketers and engineers in service
delivery is limited and most studies focuses on product development. One specific study of managers in engineering services firms in Australia found that
managers with stronger technical-focused values exhibit weaker market oriented
behaviours (Rexha et al., 2000). The attitudes of engineers towards the marketing of services are, however, equally important as they are in the marketing of
products. In services that rely on equipment engineering plays an instrumental
role in the delivery of services (Thomas, 1978). The behaviour of engineers
directly impacts the customer’s experience due to the inseparability of service
production and consumption. Following the theatrical metaphor (Grove et al.,
2000), engineers in such industries are mainly employed in ‘back-stage’ roles
and have a major influence on how core services are delivered to customers,
with ‘front-stage’ customer service staff managing supplementary services, such
as complaints handling and billing.
The relationship between engineers and marketing staff has been hypothesised
to act as a moderator for the market orientation of water utilities. A range of
methodologies has been used in previous research on the relationship between
engineers and marketing employees, most of which are limited to descriptive
statistics. Shaw et al. (2004) followed a psychometric approach and used a
questionnaire based on previous research (Gupta et al., 1985; Gupta and Wilemon, 1991; Parry and Song, 1993). They found a six-factor solution, with
Literature Review
15
the ‘poor relationship’ factor explaining most of the variance. This construct
describes the level of potential for conflict between employees with engineering
education and employees with marketing responsibilities. The construct is based
on the attitudes of employees towards the relationship between engineers and
marketing employees and includes concepts such as mutual communication,
trust and understanding {Shaw et al. 2004}.
The ‘poor relationship’ construct, or Engineering-Marketing Interface, is hypothesised to negatively influence market orientation. The higher the level of
tension between the two professional groups, the lower the level of market orientation. A higher level of tension between engineers and marketing staff is
considered to lead to lower levels of interfunctional coordination, which contributes to lower levels of market orientation. The hypothesis of the relationship
between the Engineering-Marketing Interface and Market Orientation is based
on the theoretical discourse on attitudes as a cause of behaviour (Ajzen, 1991).
2.4
Service Quality
The main dependent variable of this research is the service quality received by
consumers of tap water. The concept of quality can be easily visualised, but is
notoriously hard to define. Definitions can be based on one of several concepts,
such as “innate excellence”, “quantity of some ingredient or attribute possessed
by a product”, “consumers’ preferences”, “conformance to specifications”, or
“performance at an acceptable price or cost” (Garvin, 1988). Most definitions of
quality relate to products and are less suitable to services. The concept of service
quality has been developed to account for the specific characteristics of services.
Quality in services is defined with reference to the performance of a service.
Service quality is a model of how the quality of service provision is perceived
by customers. It is a measure of how well the level of the delivered services
matches customer expectations on a consistent basis (Parasuraman et al., 1991).
Understanding how services are evaluated is of managerial importance as it
will enable the organisation to influence these evaluations in the desired direction (Grönroos, 1990). Service quality is of both academic and managerial
Literature Review
16
importance because of its apparent relationship to costs, profitability, customer
satisfaction and positive word of mouth. Service quality is widely regarded as
a driver for corporate marketing and of financial performance (Buttle, 1996;
Carrillat et al., 2007). A rich literature on service quality has been published
in the past three decades, which saw the development of two distinct schools of
thought, the Anglo-Saxon and the Nordic model (Brogowicz et al., 1990).
The discourse on service quality is dominated by the ubiquitous SERVQUAL gapmodel approach (Parasuraman et al., 1985, 1988). In this model, service quality
is conceptualised as a gap between what the customer expects from a class
of service providers, e.g. all hotels, and their evaluation of the performance
of a particular service provider (Buttle, 1996), e.g. the Langham Hotel. The
SERVQUAL construct consists of five dimensions: reliability, assurance, tangibility, empathy and responsiveness, four of which are related to intangible elements
of service provision. One major weakness of the SERVQUAL methodology is
that its dimensions are weighted towards the intangible aspects of a service.
Intangibility is not a modifier that defines services, but instead should be viewed
as a characteristic of the provided service state. Products and services can as such
not be dichotomously classified as either tangible or intangible, but rather follow
a continuum along the degree of tangibility (Shostack, 1977). The assumption
of the dominance of intangible elements renders SERVQUAL less suitable to
services characterised by tangible elements. A further objection to SERVQUAL,
germane to this dissertation, is that the gap model gives primacy to the process of
service delivery, ignoring the outcomes of the service encounter (Buttle, 1996).
Although the gap model recognises that actual service delivery (intrinsic quality)
influences the level of perceived service quality, the model only measures the gap
between expected service and perceived service, ignoring the gap between the
level of actual service and perceived service (Parasuraman et al., 1985). This gap
is of importance in services dominated by tangible elements, where the level of
actual service can be more easily assessed by customers and service providers.
In the Nordic model of service quality, first defined by (Grönroos, 1984, 1990),
total perceived service quality is the outcome of an evaluation process where the
customer compares context specific expectations of quality with the experienced
quality. The expectations of quality are specific to the firm under consideration
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and not based on the total class of service providers, as is the case in the AngloSaxon model. The expected service is influenced by the marketing activities of
the service provider and external influences, such as word-of-mouth, corporate
image and customer needs. In the Nordic model, the outcome of the service
and the process of service delivery are both recognised as forming part of the
experienced quality.
The outcomes of the service delivery process are the benefits the consumer
receives as a result of interacting with the service provider. In the Nordic model
this outcome is expressed in the technical quality of the service, which can be
assessed by the customer, just like the technical dimensions of a product. Services are produced in interaction between the consumer and the service provider,
technical quality alone can therefore not account for the quality as perceived by
the customer. Customers are not only interested in the outcome of a service process, they are also interested in how the service is provided, they are interested
in the functional quality of the service. These considerations make the Nordic
model more suitable to operationalise service quality in tap water then the more
commonly used SERVQUAL model.
Perceptions of customers are modelled using the service quality construct. A
new model is under development based on the Nordic model (Grönroos, 1984).
This service quality model, tentatively named SERVAQUA, is an industry specific
measurement tool. The two dimensions of this model are technical quality,
a measure of what the consumer receives, and functional quality, which is a
measure of how the service is provided (Grönroos, 1984). The technical quality
relates to the perceptions consumers hold about the physical parameters of water
supply, such as taste, colour and continuity of supply. Functional quality relates
to the intangible aspects of service delivery, such as billing, customer enquiries
and other special interactions between the service provider and the customer.
The technical quality of a service can be subjectively assessed by the consumer.
Within the tap water context, the technical quality of the service is determined
by the experiential qualities of the supply. However, services are produced in
interaction between the service provider and consumers. The technical quality
dimension will therefore not account for the total quality that the consumer
Literature Review
18
perceives and will also be influenced by the way in which the technical quality is
transferred functionally. Grönroos (1984) indicated that technical and functional
quality are interrelated, but argued that functional quality was more important to
the quality of the service, as perceived by customers, than the other factors and
that the performance of staff in direct contact with customers can compensate
for a lower technical quality Brogowicz et al. (1990).
The hypothesis for the main research question is that the level of market orientation positively influences the level of service quality. In other words, utilities
that focus on the necessary behaviours for the creation of superior value for
customers will be perceived by customers as having a higher level of service
that utilities that focus on these behaviour to a lesser extent.
2.5
Involvement
The fact that water is essential to life suggests that consumers of tap water
have a high level of involvement with the service. Contrary to this commonsense intuition, practitioner experience and literature states that tap water is a
low-involvement service (Babakus, 1993; Fagan, 2011; Vloerbergh et al., 2007;
Watson et al., 2002). However, the level of consumer involvement with tap water
services has until now, not been empirically verified.
The involvement a consumer has with a product or service is a person’s perceived
relevance of the product or service, based on their inherent needs, values and
interests (Zaichkowsky, 1985). Consumer involvement is a multi-dimensional
construct in which at least three aspects can be distinguished. Product or service
involvement related to a consumer’s level of interest in the particular product
or service. Message-response involvement or advertising involvement relates to
a person’s interest in processing marketing communications. Thirdly, purchase
involvement is the level to which consumers are motivated in investing time in
purchasing a product or service (Solomon et al., 2010). Given the monopolistic
environment, the type of involvement mostly relevant to tap water is product
involvement.
The level of involvement that consumers have with a product or a service has
Literature Review
19
been found to be predictive of perceptions of quality in previous work. For example product involvement of wine consumers impacts the way in which quality
is evaluated. Highly involved consumers are surer when it comes to evaluate
wine quality in an objective manner while lowly involved consumers believe that
lack of experience to undertake such evaluation properly (Espejel et al., 2009).
The level of consumer involvement with a service also moderates the perceived
benefits offered by the service provider. Highly involved consumers perceive
greater benefits than less involved consumers (Kinard and Capella, 2006).
A commonly used methodology to measure consumer involvement is the Personal Involvement Inventory (Zaichkowsky, 1994). This scale defines involvement as a two-dimensional scale: cognitive and affective involvement. In line
with these previous findings it is hypothesised that the Personal Involvement
Index for tap water moderates perceptions of quality with the service. The higher
the level of involvement of the consumer, the higher the perception of quality
across both dimensions of the service quality construct.
Chapter 3
Research Method
3.1
Research questions
This brief review of the literature unpacks the main research question into a
series of sub-questions. The review of industry and marketing literature on
the topic of water utility marketing raises two questions, regarding empirical
verification of the conclusions drawn from the literature review and development
of a research agenda for water utility marketing. These two questions form the
foundation for this dissertation and set the agenda for the subsequent research.
A third question is concerned with developing a detailed methodology of the
technique developed to analyse the industry literature:
• How do stakeholders of water utilities form perceptions of service provision?
• How can marketing theory be used to enhance service provision in water
utilities?
The methodology used to answer the second research question involves an innovative machine based learning approach to analysing large amounts of literature,
20
Research Method
21
which raises a new research question:
• How can network analysis be employed to assist with axial coding in
grounded theory?
The deliberations on market orientation and the role of engineers within service
organisations leads to the fourth research question. This questions extends the
discussion on the role of engineers in product marketing to the marketing of
services:
• How does the attitude of service factory engineers influence market orientation of water utilities?
The review of service quality raises three research questions. The first question
introduces the SERVAQUA model, developed to measure service quality in water
utilities. Question two refers to an empirical verification of the model and testing
the relationships between the dimensions in the model. The last question tests
the hypothesis regarding the relationship between service quality and consumer
involvement:
• How can the Nordic Model be used to describe service quality in water
utilities?
• What is the relationship between technical and functional quality in services dominated by tangible elements?
• How does involvement influence perceptions of quality in water utility
customers?
Last question to be answered in this dissertation is the main question posed in
the introduction of this report:
• What is the relationship between market orientation in water utilities and
service quality as perceived by domestic customers?
Research Method
3.2
22
Methodology
This research is primarily conducted using quantitative analysis. These methods
are suitable given the maturity of the market orientation and service quality
constructs. Management is, however, a social science and can not be fully
understood with numerical methods alone. Ontologically, organisational culture
and customer perception are not, in Kantian terms, a ding an sich that is directly
available to empirical research. Although the phenomena of corporate culture
and quality are available for interrogation through the outlined constructs, the
fullness of these phenomena cannot be grasped in quantitative methods alone.
Quantitative methods have become the gold standard for business research, but
are problematic due to difficulties with controlling confounding variables, making it impossible to prove causality in a dynamic social environment (Liamputtong and Eddy, 2005; Smith et al., 1995). Quantitative research in social sciences, such as management, comes at an epistemological price. The dynamics of
reality are reduced to statistics, losing the stories of the people that the research
is actually about. Interpretive methods are required to compliment mathematical
methods in order to obtain a full understanding of the phenomena under consideration (Smith et al., 1995). Essentially contested phenomena (Gallie, 1956),
such as organisational culture and quality, cannot be grasped by relying on
numerical methods. Following Wilhelm Dilthey’s hermeneutic approach, qualitative methods assists in the Verstehen (understanding) of social phenomenons
while quantitative methods are essential to the Erklärung (explanation) of social
phenomena (Astley, 1985; Worms et al., 1998). For a complete understanding of
the research problem under consideration, both a qualitative understanding and
a quantitative explanation of the salient constructs is required (Hanson, 2006).
Following these considerations, the methodology proposed for this dissertation
is a sequential mixed-method approach (Morse, 1991). The first phase encompasses a qualitative exploration to develop a tentative model for water utility
marketing. The second phase employs a quantitative operationalisation of the
proposed customer and employee constructs to validate the model. In the final
phase the relationship between market orientation and service quality are assessed using a comparative case-study approach. The relationships between the
Research Method
23
data sets used in this research are visualised in figure 3.1 on the following page.
Exploratory Research
The purpose of the exploratory research is to develop the theoretical foundations for the further research and provide data to test the content validity of the
service quality and engineering attitude constructs. Managers of organisations
representing water utility customers were interviewed on how the behaviours
and attitudes of water utility employees impact customer perception. Respondents were also asked to provide their views on what constitutes a high level of
service from the customer’s perspective. This information was analysed using a
grounded theory approach to construct a empirical model (Strauss and Corbin,
1990). A grounded theory is one that is inductively derived from the study of the
phenomenon it represents. Concepts, categories and themes are identified and
developed as the research is conducted, following an adductive reasoning model
(Charmaz, 2006; Flick, 2009; Liamputtong and Eddy, 2005; Strauss and Corbin,
1990). Grounded theory is often used in business studies and is considered useful
in the pilot stages of large-scale survey studies (Martin, 1986; Storberg-Walker,
2007).
The exploratory phase also includes an analysis of water utility industry literature for marketing related content. This review was undertaken using a hybrid
methodology combining a qualitative grounded theory literature review (Wolfswinkel et al., 2011) with quantitative network analysis techniques to structure
the review (Wijngaert et al., 2012). The network was analysed using community
detection algorithms (Orman and Labatut, 2009) to detect patterns in the literature. This hybrid methodology has not been previously published and has been
developed specifically for this dissertation.
Quantitative Phase
In the quantitative phase the hypothesised constructs are operationalised through
questionnaires based on literature (Babakus, 1993; Narver and Slater, 1990;
Shaw et al., 2004; Zaichkowsky, 1994) and the exploratory research. Table 3.1
provides an overview of all collected data.
Research Method
24
Figure 3.1: Overview of respondents and data sets.
Data is currently being collected from water utilities in Australia and other countries. Separate online surveys were administered to employees and customers
of participating water utilities. The dimensionality and internal consistency of
the constructs will be assessed using standard psychometric analysis, such as
exploratory factor analysis (Churchill, 1979; DeVellis, 2011). Hypotheses will
be tested using linear regression models. Qualitative information obtained in
the utility surveys can be used to triangulate the quantitative responses (Hanson,
2006; Morse, 1991; Teddlie and Tashakkori, 2009).
Research Method
25
Case Study
The relationship between market orientation and service quality will be assessed
in the final phase of the research. Previous work on the relationship between
market orientation and business performance has been undertaken in a variety
of industries (Chang and Chen, 1998; Daniel, 1998; Lam et al., 2012; McGrath,
2009; Ramayah et al., 2011; Samat et al., 2006; Voon, 2006; Yoo and Park,
2007), however, the methodologies used to establish this relationship mostly
rely on dependent samples and self-assessed service quality by managers. This
method weakens the validity of these previous findings as service quality is
defined as the perception of quality held by customers and not the perceptions
held by managers.
In this dissertation, independent samples of employees and customers of participating water utilities have been used in order to strengthen the validity of
the conclusions. This methodology comes, however, at an epistemological cost.
The measures are moved from the employee level to the business level, which
implies that a large number of participating organisations is required in order to
draw conclusions using a regression model.
To mitigate the practical problem of respondent recruitment, a comparative case
study methodology will used in lieu of regression methods. This approach
involves a small number of cases in their real life context. Case studies were
developed for each utility, based on the organisation-level quantitative and qualitative information derived from the surveys. To assess the relationship between
market orientation and service quality, the data from each case was analysed
qualitatively. Data analysis in a comparative case study consists of comparing
the rank-order of the independent variable with the rank-order of the dependent
variable (Dul and Hak, 2008).
3.3
Data Collection
Data collection is currently in progress. Two of the six studies have been completed and two further studies are currently in progress. Ethics approval was
obtained in 2012 (Application No. 70/12PG).
26
Research Method
Construct / phenomenon
Customer perspectives
Water utility management discourse
Engineering-Marketing Interface
Market Orientation
Type of education
Function within the organisation
Service Involvement
Service Quality
Contact frequency
Intensity of financial hardship
Source
Interviews
IWA journals abstracts
Shaw et al., 2004
Narver and Slater, 1990
Zaichkowsky, 1994
Babakus, 1993
Respondents
Customer groups
NA
Employees
Customers
Research Question
RQ1, RQ5
RQ2, RQ3
RQ4
RQ4, RQ8
RQ4
RQ4
RQ7
RQ6, RQ7, RQ8
RQ6
RQ6
Table 3.1: Relationship between data sets and research questions.
Collection of data has progressed slowly due to the low willingness of utilities to
participate in the case study. Some utilities have cited concerns with anonymity
as the main reason, even after it was pointed out that collection would occur
under ethical regulations.
Should the six case studies not be able to be completed before the end of 2016 alternative options are available. Responses from water utility customers can also
be obtained directly through commercial survey organisations such as Qualtrics.
Responses from water utility professionals can be procured through professional
networks. This will enable providing an answer to all questions, except for the
case study.
Generalisability
The deliberations on market orientation in this dissertation are generalisable to
service factories. Examples of such services outside the water utility sphere
are energy retail, telecommunications, Internet services, online banking and
shopping and local government.
The service quality model developed in this dissertation is specific to services
that are dominated by tangible elements, such as tap water, fast food restaurants
and repair services (Shostack, 1977).
The findings presented in this dissertation can be considered generalisable across
Research Method
27
all reticulated water services. These types of services are highly uniform across
markets in developed urban areas around the globe (MarketLine, 2013). Given
the practical impossibility of service differentiation and internationalisation of
supply technology and technical standards, the conclusions from this research
are applicable across the industry. The research is, however, only applicable to
urban customers that do not require water as an input to a commercial production
process.
Chapter 4
Dissertation Structure
The dissertation will consist of an anthology of thematic chapters discussing the
various aspects of water utility marketing, flanked by introductory and closing
chapters, in the style of a thesis by publication.
The introduction provides the academic and managerial context of the research,
introduces the constructs under consideration and outlines the overall structure
of the dissertation. The thematic chapters address the research questions and the
final chapter addresses the contribution to theory including the emerging marketing model for water utilities, the contribution to practice and policy, limitations
of the study and future research directions. Refer to the appendix for a detailed
overview of the proposed dissertation structure.
This approach has been chosen to maximise the potential for published papers,
either during the development of the dissertation or post doctoral. The overview
provided below includes reference to targeted journals for each thematic chapter.
Any publication during the dissertation development period will be jointly submitted by the student and PhD supervisors, with the student as first author.
28
Dissertation Structure
4.1
29
Marketing essential services: A stakeholder
view of water utility service provision
Problem:
Due to the monopolistic nature of this sector, water utilities are
mostly ignored by marketing scholars and vice versa, marketing
scholarship is largely ignored by water management professionals.
Purpose:
This paper proposes a preliminary model for water utility marketing
based on theoretical macromarketing deliberations and empirical
information about customer focus in water utilities.
Methodology: Employees of organisations representing water utility customers
in advocacy matters were interviewed on their views of marketing
related matters in this sector.
Interviews with customer stakeholder groups.
Data:
Relevance: The increased attention on customer centric service provision driven
by regulation justifies the development of marketing theory for water utilities.
4.2
Water utility marketing: A research agenda
Problem:
This paper builds on the problem definition from the previous paper.
Purpose:
The purpose of this paper is to analyse the application of marketing
theory in the water utility sector. The paper proposes a research
agenda for theory development of water utility marketing.
Methodology: Abstracts of water utility industry journals have been analysed
using grounded theory to identify marketing related discourse. A
network was created from the coded abstracts which was subsequently analysed with community detection methods to visualise
relationships between communities of discourse.
Data:
Industry journal abstracts.
Dissertation Structure
30
Relevance: The application of marketing theory in water utilities is sparse. The
use of industry literature and the methodology to analyse the literature are innovative.
4.3
Using network analysis for axial coding in
grounded theory
Problem:
The volume of literature to be reviewed by grows exponentially,
complicating the task of keeping a coherent overview of the discourse in an area of interest. Limited systematic methodology have
been developed for literature review compared to empirical research
methods and philosophical approaches to science.
Purpose:
This paper combines proposals for systematic literature review published recently, i.e. community detection methods in network analysis, based on a grounded theory review of the literature.
Relevance: This proposed methodology provides a quantitative assessment of
the qualitative grounded theory analysis.
4.4
The influence of engineers on market
orientation in services
Problem:
Service factories are often dominated by engineers. Little is known
about the influence engineers have on the level of market orientation
of a service provider.
Purpose:
The objective of this research is to investigate how the attitudes of
engineers influences dimensions of a market orientation of a water
utility.
Hypothesis: A low level of attention for marketing by engineers results in a
lower level of market orientation.
31
Dissertation Structure
Methodology: Surveys are being administered to water utility employees. Data
is analysed using psychometric modelling and linear regression.
Employee surveys (Engineering-Marketing Interface, Market Orientation).
Data:
Managerial: This research can assist managers in improving their level of market orientation by influencing the attitudes of engineers towards
marketing.
Scholarly: The relationship attitudes of engineers towards marketing has been
extensively discussed in relation to product development. No such
research has, however, been undertaken in services.
4.5
SERVAQUA :
Towards a Service Quality model
for water utilities using the Nordic model
Problem:
Statement: The often cited SERVQUAL is only suitable for services
dominated by intangible elements as it ignores the gap between
actual and perceived service quality. This is an important distinction
in service dominated by tangibles, such as water, fast food and so
on.
Purpose:
This paper operationalises the Grönroos (1984) model to measure
service quality to develop an industry specific model, tentatively
named SERVAQUA, for water utilities. This paper is based on earlier
work by the author (Prevos, 2012, 2013).
Managerial: The SERVAQUA scale can be used by utilities and regulators of
utilities to measure service quality.
Scholarly: No service quality scale base on marketing theory, incorporating
both technical and functional quality exist for this industry. This
paper is a first attempt to operationalise the Nordic model of service
quality.
32
Dissertation Structure
4.6
Operationalising the Nordic Model of service
quality for service factories: An empirical
exploration in water utilities
Problem:
The SERVAQUA model was proposed conceptually. This paper will
provide empirical verification of the theoretical assumptions made
in the Nordic model for service quality.
Purpose:
This paper operationalises the
previous paper.
SERVAQUA
model proposed in the
Hypothesis: The level of functional quality is independent of the level of technical quality.
Methodology: Surveys are being administered to water utility customers. Data
is analysed using psychometric modelling and linear regression.
Customer surveys: Service Quality.
Data:
Managerial: The SERVAQUA scale can be used by utilities and regulators of
utilities to measure service quality.
Scholarly: No service quality scale base on marketing theory, incorporating
both technical and functional quality exist for this industry. This
paper is a first attempt to operationalise the Nordic model of service
quality.
4.7
The nature of consumer involvement in water
utilities
Problem:
Industry literature and practitioner experience states that consumer
involvement in water utilities is low. Intuition predicts that involvement for an essential product such as tap water should be high.
Dissertation Structure
Purpose:
33
To resolve the contradiction between intuition and assumptions made
in the literature, the level of involvement needs to be measured.
Hypothesis: The level of service quality is higher for customers with a high level
of consumer involvement.
Methodology: Surveys are being administered to water utility customers. Data
will be analysed using psychometric modelling and linear regression.
Customer surveys: Involvement, Service Quality.
Data:
Managerial: Improved understanding of the impact of involvement on business performance can enable practitioners to improve perceptions
of quality through enhanced customer engagement.
Scholarly: The level of involvement in urban water services has not been measured. Involvement is important because of its relationship to willingness to pay and perceptions of quality. This research links to
work undertaken in food marketing, where the level of involvement
and knowledge of a product influenced perceptions of quality.
4.8
The relationship between market orientation
and service quality in water utilities: A case
study approach
Problem:
Most previous research on the relationship between market orientation and service quality has been based on dependent samples, measuring service quality from the perspective of the service provider.
This raises questions regarding the validity of these previous findings.
Purpose:
To develop a model to assess the relationship between market orientation and service quality based on independent samples.
Dissertation Structure
34
Methodology: A series of case studies has been developed using data from water utilities. These case studies asses market orientation from the
business’ perspective and service quality from the customers’ perspective.
Data:
Employee Surveys: Market Orientation. Customer surveys: Service
Quality.
Hypothesis: The rank order of cases, according to the observed values of market orientation, is exactly the same as the rank order of the cases
according to the observed values of service quality.
Managerial: Improved understanding of the relationship between market orientation and service quality will enable practitioners to improve
service provision by implementing a market orientation.
Scholarly: This paper corrects the methodological issues found in previous
work on this problem.
4.9
Conclusion
The final chapter synthesises the previous chapters and proposes a model for
water utility marketing. The purpose of this model is to provide a reference
point for further research into the problems surrounding customer focus in water utilities and to provide a starting point for implementing customer focused
service strategies in utilities.
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