Service quality

Improving Service Quality and Productivity

LEARNING OBJECTIVES

Define service quality Diagnose service quality problems using The

Gaps Measuring and improving service quality

Explore key tools for measuring and improving productivity

What Is Service Quality?

COMPONENTS OF QUALITY: SERVICE-BASED

Tangibles: Appearance of physical elements

Reliability: Dependable and accurate performance

Responsiveness: Promptness; helpfulness

Assurance: Competence, courtesy, credibility, security

Empathy: Easy access, good communication, understanding of customer

CAPTURING THE CUSTOMER’S PERSPECTIVE OF SERVICE QUALITY: SERVQUAL

To measure customer satisfaction with various aspects of service

quality- Zeithmal developed a survey research instrument

based on premise that customers evaluate firm’s service quality by

comparing

Their perceptions of service actually received

Their prior expectations of companies in a particular industry

Developed primarily in context of face-to-face encounters

Scale contains 22 items reflecting five dimensions of service quality

Subsequent research has highlighted some limitations of SERVQUAL

SERVQUAL

Respondents complete a series of scales that measure their expectations of companies in a particular industry on a wide array of service characteristics

Susbsequently they are asked to record their perceptions of a specific company whose services they have used

When perceived performance ratings are lower than expectations =poor quality

Reverse= good quality

OTHER CONSIDERATIONS IN SERVICE QUALITY MEASUREMENT

In uncompetitive markets or in situations where customers do not have a free choice, researchers should use needs or wants as comparison standards Time constraints

Services high in credence characteristics may cause consumers to use process factors and tangible cues as proxies to evaluate quality—halo effect Process factors: Customers’ feelings

The Gaps Model—A Conceptual Tool to Identify and Correct Service Quality Problems

SEVEN SERVICE QUALITY GAPS(FIG 14.3)

Customer experience relative to expectations

1. Knowledge Gap

2. Standards Gap

3. Delivery Gap

5. Perceptions Gap

7. Service Gap

Customer needs and expectations

6. Interpretation Gap

4. Internal Communications Gap

MANAGEMENT

CUSTOMER

4.

Customer perceptions of service execution

Management definition of these needs

Translation into design/delivery specs

Execution of design/delivery specs

Advertising and sales promises

Customer interpretation of communications

PRESCRIPTIONS FOR CLOSING THESEVEN SERVICE QUALITY GAPS1. Knowledge gap: Learn what customers expect2. Standards gap: Specify SQ standards that reflect

expectations3. Delivery gap: Ensure service performance meets

standards4. Internal communications gap: Ensure that

communications promises are realistic5. Perceptions gap: Educate customers to see reality of

service quality delivered 6. Interpretation gap: Pretest communications to make

sure message is clear and unambiguous7. Service gap: Close gaps 1 to 6 to meet customer

expectations consistently

Measuring and Improving Service Quality

SOFT AND HARD MEASURES OF SERVICE QUALITY

Soft measures—not easily observed, must be collected by talking to customers, employees, or others Provide direction, guidance, and feedback to employees on

ways to achieve customer satisfaction Can be quantified by measuring customer perceptions and

beliefs For example: SERVQUAL, surveys, and customer advisory panels

Hard measures—can be counted, timed, or measured through audits Typically operational processes or outcomes Standards often set with reference to percentage of

occasions on which a particular measure is achieved Control charts are useful for displaying performance over

time against specific quality standards

COMPOSITION OF FEDEX’S SERVICE QUALITY INDEX—SQI (TABLE 14.4)

Late delivery—right day Late Delivery—wrong dayTracing request unanswered Complaints reopened Missing proofs of delivery Invoice adjustments Missed pickups Lost packages Damaged packages Aircraft delays (minutes) Overcharged (packages missing label) Abandoned calls

151511101010551

Failure Type

Total Failure Points (SQI) =

Weighting Factor

XXX,XXX

Daily Points

XNumber of Incidents

=

Source: See Services Marketing textbook, page 417, for full source information.

CONTROL CHART FOR DEPARTURE DELAYS(FIG 14.3)

J F M A M J J A S O N D

60%

70%

80%

90%

100%

Month

% Flights Departing Within 15 Minutes of Schedule

TOOLS TO ANALYZE AND ADDRESS SERVICE QUALITY PROBLEMS

Fishbone diagram Cause-and-effect diagram to identify potential causes of

problems Pareto Chart

Separating the trivial from the important. Often, a majority of problems is caused by a minority of causes (i.e. the 80/20 rule)

Blueprinting Visualization of service delivery, identifying points where

failures are most likely to occur

TOOLS TO ANALYZE AND ADDRESS SERVICE QUALITY PROBLEMS

Total Quality Management (TQM) ISO 9000

Comprises requirements, definitions, guidelines, and related standards to provide an independent assessment and certification of a firm’s quality management system

Malcolm Baldrige Model Applied to Services To promote best practices in quality management, and

recognizing, and publicizing quality achievements among U.S. firms

Six Sigma Statistically, only 3.4 defects per million opportunities

(1/294,000) Has evolved from defect-reduction approach to an overall

business-improvement approach

CAUSE-AND-EFFECT CHART FOR FLIGHT DEPARTURE DELAYS (FIG 14.4)

Aircraft late to gate

Late food service

Late fuel

Late cabin cleaners

Poor announcement of departures

Weight and balance sheet late

Delayed Departures

Delayed check-in procedure

Acceptance of late passengers

Facilities, Equipment Front-Stage

PersonnelProcedures

Materials,Supplies

Customers

Gate agents cannot process fast enough

Late/unavailable airline crew

Arrive lateOversized bags

Weather Air traffic

Frontstage Personnel

Procedures

Materials, Supplies

BackstagePersonnel

Information

Customers

Other Causes

MechanicalFailures

Late pushback

Late baggage

Late passengersWaiting for pushbackWaiting for fuelling

Late weight and balance sheetLate cabin cleaning/supplies

Other

Newark

All stations, excludingChicago-Midway Hub

Washington Natl.

23.1%23.1%

23.1%15.3%

15.4%

53.3%

15%

11.3%

8.7%

11.7%

33.3%

33.3%19%

9.5%

4.9 %

Case: Analysis of Causes of Flight Departure Delays

BLUEPRINTING Depicts sequence of front-stage interactions

experienced by customers plus supporting backstage activities

Used to identify potential fall points—where failures are most likely to appear

Shows how failures at one point may have a ripple effect later

Managers can identify points which need urgent attention Important first step in preventing service quality

problems

SIX SIGMA METHODOLOGY TO IMPROVE AND REDESIGN SERVICE PROCESSES

Process Improvement Process Design/Redesign Define Identify the problem

Define requirements Set goals

Identify specific or broad problems Define goal/change vision Clarify scope and customer

requirements

Measure Validate problem/process Refine problem/goal Measure key steps/inputs

Measure performance to requirements Gather process efficiency data

Analyze Develop causal hypothesis Identify root causes Validate hypothesis

Identify best practices Assess process design Refine requirements

Improve Develop ideas to measure root causes

Test solutions Measure results

Design new process Implement new process, structures,

and systems

Control Establish measures to maintain performance

Correct problems as needed

Establish measures and reviews to maintain performance

Correct problems as needed

TQM IN A SERVICE CONTEXT: TWELVE CRITICAL DIMENSIONS FOR IMPLEMENTATION Top management commitment and visionary leadership Human resource management Technical system, including service process design and process

management Information and analysis system Benchmarking Continuous improvement Customer focus Employee satisfaction Union intervention and employee relations Social responsibility Servicescapes Service culture

RETURN ON QUALITY (ROQ) Assess costs and benefits of quality initiatives

ROQ approach is based on four assumptions:– Quality is an investment– Quality efforts must be financially accountable– It’s possible to spend too much on quality – Not all quality expenditures are equally valid

Implication: Quality improvement efforts may benefit from being related to productivity improvement programs

To determine feasibility of new quality improvement efforts, determine costs and then relate to anticipated customer response

Determine optimal level of reliability Diminishing returns set in as improvements require higher

investments Know when improving service reliability becomes

uneconomical

WHEN DOES IMPROVING SERVICE RELIABILITY BECOME UNECONOMICAL? (FIG 14.7)

Satisfy Target Customers through Service Recovery

Optimal Point of Reliability: Cost of Failure = Service Recovery

Satisfy Target Customers through Service Delivery as Planned

100%

Serv

ice R

eliab

ilit

y

InvestmentSmall Cost,Large Improvement

Large Cost,Small Improvement

A B C D

Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.

Defining and Measuring Productivity

PRODUCTIVITY IN A SERVICE CONTEXT

Productivity measures amount of output produced relative to the amount of inputs.

Improvement in productivity means an improvement in the ratio of outputs to inputs.

Intangible nature of many service elements makes it hard to measure productivity of service firms, especially for information-based services Difficult in most services because both input and output

are hard to define Relatively simpler in possession-processing services, as

compared to information- and people-processing services

SERVICE EFFICIENCY, PRODUCTIVITY, AND EFFECTIVENESS

Efficiency: Involves comparison to a standard, usually time-based (for example: how long employee takes to perform specific task) Problem: Focus on inputs rather than

outcomes May ignore variations in service

quality/value Productivity: Involves financial valuation of

outputs to inputs Consistent delivery of outcomes desired

by customers should command higher prices

Effectiveness: Degree to which firm meets goals Cannot divorce productivity from quality

and customer satisfaction

MEASURING SERVICE PRODUCTIVITY:VARIABILITY IS A MAJOR PROBLEM

Traditional measures of service output tend to ignore variations in quality or value of service Focus on outputs rather than outcomes Stress efficiency but not effectiveness

Firms that consistently deliver outcomes desired by customers can command higher prices; loyal customers are more profitable

Measures with customers as denominator include: Profitability by customer Capital employed per customer Shareholder equity per customer

Improving Service Productivity

QUESTIONS WHEN DEVELOPING STRATEGIES TO IMPROVE SERVICE PRODUCTIVITY

How to transform inputs into outputs

efficiently?

Will improving productivity hurt quality?

Will improving quality hurt productivity?

Are employees or technology the key to

productivity?

Can customers contribute to higher

productivity?

GENERIC PRODUCTIVITY IMPROVEMENT STRATEGIES

Typical strategies to improve service productivity: Careful control of costs at every step in process Efforts to reduce wasteful use of materials or

labour Replacing workers by automated machines Installing expert systems that allow

paraprofessionals to take on work previously performed by professionals who earn higher salaries

Although improving productivity can be approached incrementally, major gains often require redesigning entire processes

IMPROVING SERVICE PRODUCTIVITY:(1) OPERATIONS-DRIVEN STRATEGIES

Control costs, reduce waste

Set productive capacity to match average demand

Automate labour tasks

Upgrade equipment and systems

Train employees

Broadening array of tasks that a service worker can perform

Leverage less-skilled employees through expert systems

Service process redesign

IMPROVING SERVICE PRODUCTIVITY:(2) CUSTOMER-DRIVEN STRATEGIES

Change timing of customer demand By shifting demand away from peaks, managers

can make better use of firm’s productive assets and provide better service

Involve customers more in production Get customers to self-serve Encourage customers to obtain information and

buy from firm’s corporate websites Ask customers to use third parties

Delegate delivery of supplementary service elements to intermediary organizations

BACKSTAGE AND FRONT-STAGE PRODUCTIVITY CHANGES: IMPLICATIONS FOR CUSTOMERS

Backstage improvements can ripple to front and affect customers Keep abreast of proposed backstage changes, not only

to identify such ripples but also to prepare customers for them

For example: New printing peripherals may affect appearance of bank statements

Front-stage productivity enhancements are especially visible in high contact services Some improvements only require passive acceptance,

while others require customers to change behaviour Must consider impacts on customers and address

customer resistance to changes Better to conduct market research first if changes are

substantial See Service Perspectives 14.1: Managing Customers’

Reluctance to Change

SUMMARY Customers evaluate services using five different

categories Tangibles, reliability, responsiveness, assurance,

empathy There are seven service quality gaps and solutions

presented in the Gaps Model Knowledge, standards, delivery, internal communications

gap, perceptions, interpretation, service Key tools for measuring and improving productivity

are: Fishbone diagram Pareto Chart Blueprinting Total Quality Management (TQM) ISO 9000 Malcolm Baldrige Model Applied to Services Six Sigma