Improving Service Quality and Productivity
Overview
Integrating service quality and productivity strategies
What is service quality?
The Gaps Model—a conceptual tool to identify and correct service quality problems
Measuring and improving service quality
Defining and measuring productivity
Improving service productivity
Integrating Service Quality and Productivity Strategies
Integrating Service Quality and Productivity Strategies
Quality and productivity are twin paths to creating value for both customers and companies
Quality focuses on the benefits created for customers; productivity addresses financial costs incurred by firm
Importance of productivity:
Keeps costs down to improve profits and/or reduce prices Enables firms to spend more on improving customer service
and supplementary services Secures firm’s future through increased spending on R&D May impact service experience—marketers must work to
minimize negative effects, promote positive effects
What Is Service Quality?
Different Perspectives of Service Quality
Transcendent:
Product-based:
User-based:
Manufacturing-based:
Value-based:
Quality = Excellence. Recognized only through experience
Quality is precise and measurable
Quality lies in the eyes of the beholder
Quality is in conformance to the firm’s developed specifications
Quality is a trade-off between price and value
Components of Quality: Manufacturing-based
Performance: Primary operating characteristics
Features: Bells and whistles
Reliability: Probability of malfunction or failure
Conformance: Ability to meet specifications
Durability: How long product continues to provide value to customer
Serviceability: Speed, courtesy, competence
Esthetics: How product appeals to users
Perceived Quality: Associations such as brand name
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
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 Gaps (1) (Table 14.3)
1. Knowledge gap: Learn what customers expect
Understand customer expectations Improve communication between frontline staff and
management Turn information and insights into action
2. Standards gap: Specify SQ standards that reflect expectations
Set, communicate, and reinforce customer-oriented service standards for all work units
Measure performance and provide regular feedback Reward managers and employees
Prescriptions for Closing theSeven Service Quality Gaps (2) (Table 14.3)
3. Delivery gap: Ensure service performance meets standards Clarify employee roles Train employees in priority setting and time management Eliminate role conflict among employees Develop good reward system
4. Internal communications gap: Ensure that communications promises are realistic Seek comments from frontline employees and operations
personnel about proposed advertising campaigns Get sales staff to involve operations staff in meetings with
customers Ensure that communications sets realistic customer
expectations
Prescriptions for Closing theSeven Service Quality Gaps (3) (Table 14.3)
5. Perceptions gap: Educate customers to see reality of service quality delivered
Keep customers informed during service delivery and debrief after delivery
Provide physical evidence
6. Interpretation gap: Pretest communications to make sure message is clear and unambiguous
Present communication materials to a sample of customers in advance of publication
7. 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
Soft Measures of Service Quality
Key customer-centric SQ measures include: Total market surveys, annual surveys, transactional surveys Service feedback cards Mystery shopping Analysis of unsolicited feedback—complaints and
compliments, focus group discussions, and service reviews
Ongoing surveys of account holders to determine satisfaction in terms of broader relationship issues
Customer advisory panels offer feedback/advice on performance
Employee surveys and panels to determine: Perceptions of the quality of service delivered to customers on
specific dimensions Barriers to better service Suggestions for improvement
Hard Measures of Service Quality
Control charts to monitor a single variable Offer a simple method of displaying performance over time
against specific quality standards Are only good if data on which they are based is accurate Enable easy identification of trends
Service quality indexes
Embrace key activities that have an impact on customers
Composition of FedEx’s Service Quality Index—SQI
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
151511
101010551
Failure Type
Total Failure Points (SQI) =
Weighting Factor
XXX,XXX
Daily Points
XNumber of Incidents
=
Control Chart for Departure Delays(Fig 14.4)
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 (Appendix)
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 14.5)
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-StagePersonnel
Procedures
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 passengers
Waiting 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?
Satisfy Target Customers through Service Recovery
Optimal Point of Reliability: Cost of Failure = Service
Recovery
Satisfy Target Customers through Service Delivery as
Planned
100%
Ser
vice
Rel
iab
ilit
y
InvestmentSmall Cost,
Large ImprovementLarge 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 labor 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
? ? ?
Long Waiting Times May Indicate Need for Service Process Redesign
Improving Service Productivity:(1) Operations-driven Strategies
Control costs, reduce waste
Set productive capacity to match average demand
Automate labor 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
A Caution on Cost Reduction Strategies
In absence of new technology, most attempts to improve service productivity seek to eliminate waste and reduce labor costs
Workers who try to do several things at once may perform each task poorly
Excessive pressure breeds discontent and frustration among customer contact personnel, who are caught between: Meeting customer needs Achieving management's productivity goals
Better to search for service process redesign opportunities that lead to Improvements in productivity Simultaneous improvement in service quality See Service Perspectives 14.2: Biometrics
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