Case Study

In the retail banking world costs of poor quality are going up and at least some of these costs are self-inflicted. But now some banks are providing to pay cash to wronged customers for every mistake they make. Centre bank, the telephone-banking service of Bank of Scotland, is one bank which is putting its money where its mouth is. It pays at least £10 to customers if the bank makes a mistake.
‘We think we have a good level of service already,’ says the bank. ‘We aren’t saying that we want to make mistakes, but we want to show customers that we are determined to present good service.’

One of the first quality schemes of this type originated at the Colorado National Bank of Denver. It used slogan of ‘putting its money where its mouth is’ or PIMWIMI for short. Its strategy was straightforward: if ‘quality’ was actually guaranteed to customers, then the customer relationship would be strengthened. The programme had three main principles:

The responsiveness, accuracy and courtesy of the service delivery would be guaranteed Systems would be monitored for customer friendliness and front-line staff would be empowered to influence situations in which service quality could be enhanced It would be easy for customers to express their opinions of the service, in order to gain feedback on progress Customers must not wait more than three minutes in a teller line, more than five minutes in Personal Banking, Personal Finance or Customer Assistance, and they should be received in a friendly manner, greeted by name and receive next-day turnaround on enquiries and personal loan applications, while expecting no less than 100 per cent accuracy throughout. The scheme called for the bank to:

‘Give a note from the President in the form of a $5 bill, every time a customer had cause for complaint, either due to system failure or staff behaviour’.

No problem was ever too small to be considered worthy of the $5 compensation – if it merited a man or a mention of disappointment, then $5 was a small price to pay, to recover that customer’s favour. The level of payoff remained at zero, however, well into the scheme.

You are required to answer the following problems:

(a) Critically analyse the service concept of the Colorado National Bank of Denver.

(b) Critically assess the five specific dimensions of service quality identified by Parasuraman, Zeithaml and Berry (1988) to this situation.

(c) Evaluate the guarantee provided in the case study.