Service Quality

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Service Quality – A multi-disciplinary perspective

IEEE CASE WorkshopAug 22 2009

© Copyright IBM Corporation 2009. All rights reserved.

IBM Services Research

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So what is Service Science?

� Service is value-cocreation, that is, useful changes that result from communication, planning, or other purposeful interactions between distinct entities.

� A service system is a collection of entities and interactions that cocreate value, that is, a set of distinct configurations of resources (including people, organizations, shared information, and technology) that are better off working together than working alone.

� Service Science aims to create a body of knowledge that describes, explains, predicts, and improves value-cocreation between entities as they interact, that is, relying on methods and standards used by a community to account for observable phenomenon with conceptual frameworks, theories, models, and laws that can be empirically tested.

� So the object of study value-cocreation, the basic abstraction is the service system, and the ultimate goal is develop methods and theories that can be used to explain and improve value-cocreation in service systems.


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© Copyright IBM Corporation 2009.

All rights reserved.

Distinguishing services from goods

Inseparability

� Services are created and consumed at the same time

� Services cannot be “fully” inventoried (exception knowledge services)

� Demand fluctuations cannot be solved by inventory processes

� Quality control cannot be achieved before consumption

Heterogeneity

� From the client’s perspective, there is typically a wide variation in service

offerings

� Personalization of services increases their heterogeneous nature

� Perceived quality-of-service varies from one client to the next


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Distinguishing services from goods

Intangibility

� Services are ideas and concepts that are part of a process

� The client typically relies on the service providers’ reputation and the trust they

have with them to help predict quality-of-service and make service choices

� Regulations and governance are means to assuring some acceptable level of

quality-of-service

Perishability

� Any service capacity that goes unused is perished

� Services cannot be stored so that when not used to maximum capacity the

service provider is losing opportunities

� Service capability estimation and planning are key aspects for service

management


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Framework: Services as Theatre (James Teboul, “Service is Front Stage”, 2005)

CommoditiesRelatively pure goods

Service-intensive goods and consumer durables

Goods and information-intensive services

Relatively pure services

Front-StageBack-Stage

PERFORMANCE

Direct interaction with employees,

equipment, décor and other customers

Customer with a

problem or requirement

Customer with a

solution or transformed

Raw material /

components; bits of

information

Finished product;

processed informatio

n; knowledge

TRANSFORMATION

employees,equipment

andtechnology

Product excellence and scale

Product aspectBack-stage activities

Service AspectFront-stage activities

Industrial-ization

Experience

Solution

industry

services


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Service Discipline Classification System

A. General1. Service Science Education2. Research in Service Science3. Service Science Policy4. History of Services5. Case Studies6. Miscellaneous

B. Service Foundations1. Service Theory2. Service Philosophy3. Economics of Services4. Theoretical Models of Services5. Mathematical Models of Services6. Service Complexity Theory 7. Service Innovation Theory8. Service Foundations Education

C. Service Engineering1. Service Engineering Theory2. Service Operations 3. Service Standards4. Service Optimization 5. Service Systems Engineering 6. Service Supply Chains7. Service Engineering Management8. Service Systems Performance9. Service Quality Engineering 10. New Services Engineering11. Computer Services12. Information Technology Services13. Service Engineering Education

D. Service Management1. Service Marketing2. Service Operations 3. Service Management 4. Service Lifecycle 5. Service Innovation Management6. Service Quality7. Human Resources Management 8. Customer Relationship Management 9. Services Sourcing10. Services Law11. Globalization of Services12. Service Business Education

E. Human Aspects of Services1. Service Systems Evolution2. Behavioral Models of Services3. Decision Making in Services4. People in Service Systems5. Organizational Change in Services6. Social Aspects of Services7. Cognitive Aspects of Services8. Customer Psychology9. Education in Human Aspects of

Services

F. Service Design1. Service Design Theory 2. Service Design Methodology 3. Service Representation 4. Aesthetics of Services5. Service Design Education

Claudio Pinhanez & Paul Kontogiorgis, “A proposal for a service science discipline classification systems,”

Presented at Frontiers in Service Conference, October 2008

G. Service Arts1. Service Arts Theory 2. Traditional Service Arts3. Performance Arts4. History of Service Arts5. Service Arts Education

H. Service Industries1. The Service Industry2. Utilities3. Wholesale Trade4. Retail Trade5. Transportation and Warehousing6. Information Services7. Finance and Insurance8. Real Estate and Rental9. Professional and Technical Services10. Management Services11. Administrative and Support Services12. Educational Services13. Health Care and Social Assistance14. Arts, Entertainment, and Recreation15. Accommodation and Food Services16. Public Administration Services17. Other Service Industries


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Service Quality – Conceptual Context

� Technical– Manufacturing based (objective or conformance) - Quality is the extent

to which a product conforms to technical standards. Quality is

measured objectively by number of deviations from these standards or

number of defects ("zero-defect" policy)

– Used for measuring quality of standardized products that are mass-

produced

� User based– Quality is determined by the user

– Quality is subjective and hinges on the individual perceptions of

customers. Quality is high when customers say it is and not always

when product conforms to technical criteria.


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Why is Service Quality multi-disciplinary?

� Economics lens – Quality is an investment which organizations make to get positive returns (shareholder value, revenues and profits)

� Marketing lens – Quality drives customer satisfaction and loyalty

� Operations lens – Quality is driven by process discipline and driving efficiencies in the system.

� Behavioral lens – Quality drives customer behavior and intentions. Similarly since services is more people oriented, behaviors of service delivery personnel impacts quality of service delivered

� Human Resources lens – Service climate of an organization impacts quality


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What disciplines ?

� Disciplines involved– Econometrics (Revenue, profit, return on assets estimation)

– Marketing Research (Measuring customer satisfaction)

– Marketing Science (Modeling customer retention)

– Operations Research (Modeling Service Supply Chain Quality)

– Organizational Behavior (Assessing impact of service encounter)

– Psychology (Assessing impact of service climate)

– HR (Assessing impact of training)

– Strategy (Assessing impact of outsourcing strategy and governance)

– Information Systems (Assess impact of technology in quality)

– Legal (Service Contracts)

� When the study of Service Quality of an IS/IT based or IT enabled service system is required, theories from the above disciplines need to be looked at in a combined manner to arrive at new “Service Science” theories at the intersection of these disciplines


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What is Customer Satisfaction ?

� Customers feelings in response to evaluations of one or more use

experiences with a service/product

� Customer Satisfaction – two conceptualizations– Transaction-specific – state of affect of customer after a simple

transaction ensues between provider and customer. Transactional

satisfaction is typically leveraged for service diagnostics. Consumer

Research deals with transactional models of satisfaction – service

encounter level

– Cumulative – state of affect of customer after a cumulative set of

transactions between provider and receiver over a longer duration of

time. Typically satisfaction models belong here. Cumulative satisfaction

is a fundamental indicator of a firms current and long term business

performance

� Kano model is a theory of customer satisfaction– Attractive (Delighters) – Be Differentiated

– One-Dimensional (Satisfiers) – Be Competitive

– Must-Be (Basic) – Be Competent

� Expectation Disconfirmation Model


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Kano’s model of customer satisfaction (Berger et al., 1993)


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Expectation Disconfirmation (Oliver, 1980, 1994 etc.,)


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What is Customer Loyalty?

� Loyal customer is one who· Makes regular purchases (Repeat business)

· Purchases across product and service lines (Share of Wallet)

· Refers others (Word of Mouth or Referenceability)

· Demonstrates immunity to the pull of the competition (Retention)

� Four stage model of loyalty (Oliver, 1997, 1999) – sequence of distinct phases cognitive, affective, conative (intentional), action (behavioral)– Cognitive loyalty refers to the existence of beliefs that (typically) a

brand is preferable to others

– Affective loyalty reflects a favorable attitude or liking based on satisfied

usage

– Conative loyalty constitutes the development of behavioral intentions

characterized by a deeper level of commitment

– Action loyalty relates to the conversion of intentions to action,

accompanied by a willingness to overcome impediments to such action


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Net Promoter Score (NPS)

� Net Promoter is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. Claim is that a company's Net Promoter Score correlates with revenue growth

� Customers asked a single question on a 0 to 10 rating scale: “How likely is it that you would recommend our company to a friend or colleague?”– Promoters (9-10 rating)

– Passives (7-8 rating)

– Detractors (0-6 rating)

� The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter score.

� Score of 75% or above is considered quite high.


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What is Customer Value?

� Customer value is a customer's perceived preference for and evaluation of those product attributes, attribute performances and consequences arising from use that facilitate (or block) achieving the customer's goals and purposes in use situations

� Customer Value Hierarchy Model (Woodruff, 1997)


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Technical Service Quality – Operations Perspective

Focus on driving efficiencies and reducing defects through process discipline in manufacturing or service delivery

� Six Sigma – Six Sigma seeks to improve the quality of process outputs by identifying and removing the

causes of defects (errors) and variability in manufacturing and business processes

– VOC (Voice of Customer) Voice of the customer (VOC) is the process of capturing a customer's requirements. They are generally conducted at the start of any new product, process, or service design initiative in order to better understand the customer’s wants and needs, and as the key input for new product definition. The VOC is translated into Critical To Quality (CTQ) technical requirements

� Lean– Lean production practice considers the expenditure of resources for any goal other than the

creation of value for the end customer to be wasteful, and thus a target for elimination

– Value Stream Mapping (VSM) - used to analyze the flow of materials and information currently required to bring a product or service to a consumer


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� For a detailed and in-depth literature review see “Defining the concept of supply chain quality management and its relevance to academic and industrial practice”, C.J.Robinson, M.K. Malhotra, International Journal of Production Economics, 2005

� SCQM (Supply Chain Quality Management)

– SCQM is the formal coordination and integration of business

processes involving all partner organizations in the supply channel to

measure, analyze and continually improve products, services, and

processes in order to create value and achieve satisfaction of

intermediate and final customers in the marketplace


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Evolutionary timeline and focus of SCQM

� Quality practices must advance from current traditional and product-based mindsets to an inter-organizational supply chain orientation involving customers, suppliers, and other partners. Perhaps the most essential difference in this transition of traditional activities is a shift from a “product to a process orientation”

� Supply channel quality must integrate both service and production processes across the supply network and beyond the boundaries of individual firms


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Service Quality Models in Services – User based

� Focus on meeting client expectations (client perception – client expectation)

� For a detailed models comparison see “Service quality models: a review”, N. Seth, S.G. Deshmukh, P.Vrat, International Journal of Quality & Reliability Management, 2005, Volume 22

� For a detailed and in-depth literature review see “Service Quality, Profitability, and the Economic Worth of Customers: What We Know and What We Need to Learn”, V.A. Zeithaml, Journal of the Academy of Marketing Science, 2000, Volume 28


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Perceived Service Quality – Marketing perspective

� Some seminal models we would cover briefly here

– Technical and functional quality model – Nordic (Gronroos, 1984)

– GAP model, SERVQUAL or RATER (Parasuraman et al., 1985,1988)

– Performance only model – SERVPERF (Cronin and Taylor, 1992)

– Three component model – (Rust and Oliver, 1994)

– Multilevel model – (Dabholkar, Thorpe and Rentz, 1996)

– Hierarchical model – (Brady & Cronin Jr., 2001)


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Perceived Service Quality – Gronroos (1984)


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Parasuraman et al. (1985)


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Zeithaml et al. (1988)


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SERVQUAL vs. SERVPERF (Cronin and Taylor, 1992)

� Servqual� Quality = f (Performance, Expectations)

� Servperf� Quality = f (Performance)� Better measurement of Service Quality

� The 5 factors were the same across both models

� Service Quality is a long-term attitude which is best measured by just perceptions instead of Expectancy-Disconfirmation


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Rust and Oliver (1994)


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(Dabholkar, Thorpe and Rentz, 1996)


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Brady and Cronin (2001)


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Marketing Models of Service and Relationships

� Focus on managing customer satisfaction, relationships, loyalty behaviors and connecting it to financial performance

� Perceived Service Quality is a key antecedent of customer satisfaction (Attitudinal theory of cognition -> affect -> intention)

� For a review of the marketing models, see “Marketing Models of Service and Relationships” R.T. Rust, T. S. Chung, Marketing Science 2006, Volume 25


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Marketing Models of Service and Relationships

� Some seminal models we would cover here

– Multistage Model – (Bolton and Drew, 1991)

– Relationship Marketing Model – (Storbacka 1994)

– Return on Quality (RoQ) Model – (Rust, Zahorik, Keiningham,1995)

– American Customer Satisfaction Index (ACSI) Model – (Fornell, 1996)

– Service Profit Chain – (Heskett, Sasser, and Schlesinger, 1997)

� A comparison of several models– “Removing the contextual lens: A multinational, multi-setting comparison

of service evaluation models”, Brady et al. Journal of Retailing, 2005


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Bolton, Drew (1991)


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Storbacka (1994)


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Rust, Zahorik, Keiningham (1995)


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ACSI Model (Fornell,1996)


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Service Profit Chain (Heskett, Sasser, and Schlesinger, 1997)


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Comprehensive Model (Brady et al., 2005)


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Organizational Behavior in Service Quality

� Focus on managing delivery personnel behaviors and service climate to drive quality and customer satisfaction

� Not much focus in this area as of now and hence this is very interesting to explore in isolation as well as in a holistic comprehensive model with quality, satisfaction, value and loyalty

� Service Climate: – Shared employee perceptions of the policies, practices, procedures

and behaviors that get rewarded, supported and expected with regard

to customer service and customer service quality

– Degree to which internal functioning of an organization is experienced

as one focused on service quality


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SERV-OR

Organizational service-orientationan organization-wide embracement of a basic set of relatively enduring organizational policies, practices

and procedures intended to support and reward service-giving behaviors that create and deliver "service excellence"


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Research avenues …

� Most of the theories and research happened in B2C space. It is of utmost

interest to develop and validate theories in B2B space where the interactions

are complex, expectations evolve temporally and relationships are intended to

be long-term, idiosyncratic

� Research integrating OB, Psychology models and theories into the

comprehensive service quality models

� Is it just SQ -> Sat -> Loyalty or does it also work the other way Initial loyalty ->

Sat -> SQ ? Is there a virtuous cycle towards growth or a destructive spiraling

down and what causes that effect ? How does relationship factors play a role in

the above effects ?

� How does the maturity of governance model between provider, client and

cultural values of the client and provider impact client expectations and

satisfaction ?

� Is there a difference between accrual of trust & confidence from the client

perspective vs. perception of the same from the provider ?


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Research avenues …

� Is brand image a burden (increased expectations) or boon (allays short-term

negative satisfaction impact over loyalty) ? What are the dynamics ?

� How does client expectations evolve over time in long term outsourcing

relationships ? Is it good for client to start with low expectations and provider to

meet that or exceed that ?

� Do expectations play a significant role in B2B services because of significant

co-production ?

� SCQM across inter-organizational supply chains has received scant research

attention, even though that perspective is sorely needed in delivering value to

customers in often globally scattered supply chains. So interdisciplinary

research bringing the Service Quality and SCM areas together is a key topic

� And more …


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Summary

� Service Quality is an exciting and interesting avenue for research of academic and industry interest

� Service Quality research is inherently multi-disciplinary in nature

� We touched upon some of the seminal approaches towards quality that have evolved in the Operations, Marketing and Organization Sciences

� There is much more to learn and explore …

Service Quality

Documents

service industries1

service arts1

service marketing

service management4

service lifecycle

service quality7

service foundations1

service engineering1