Developing a new key performance index for measuring service quality

Purpose – The purpose of this research is to develop a new key performance index (KPI) and its interval estimation for measuring the service quality from customers' perceptions, since most service quality data follow non‐normal distribution. Design/methodology/approach – Based on the non‐normal process capability indices used in manufacturing industries, a new KPI suitable for measuring service quality is developed using Parasuraman's 5th Gap between customers' expectation and perception. Moreover, the confidence interval of the proposed KPI is established using the bootstrapping method. Findings – The quantitative method for measuring the service quality through the new KPI and its interval estimation is illustrated by a realistic example. The results show that the new KPI allows practising managers to evaluate the actual service quality level delivered within each of five SERVQUAL categories and prioritize the possible improvement projects from customers' perspectives. Moreover, compared with the traditional method of sample size determination, a substantial amount of cost savings can be expected by using the suggested sample sizes. Practical implications – The paper presents a structured approach of opportunity assessment for improving service quality from a strategic alignment perspective, particularly in the five dimensions: tangibles, reliability, responsiveness, assurance, and empathy. The new approach provides practising managers with a decision‐making tool for measuring service quality, detecting problematic situations and selecting the most urgent improvement project. Once the existing service problems are identified and improvement projects are prioritized, it can lead to the direction of continuous improvement for any service industry. Originality/value – Given a managerial target on any desired service level as well as customers' perceptions and expectations, the new KPI could be applied to any non‐normal service quality and other survey data. Thus, the corporate performance in terms of key factors of business success can also be measured by the new KPI, which may lead to managing complexities and enhancing sustainability in service industries.