chapter 14 improving service quality and productivity

Copyright © 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 14- 1

Chapter 14

Improving Service Quality and Productivity


Learning Objectives - Chapter 14

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 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

See Research Insights 14.1: Measuring E-Service 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 Gaps (Table 14.3)

1. Knowledge gap: Learn what customers expect

2. Standards gap: Specify SQ standards that reflect expectations

3. Delivery gap: Ensure service performance meets standards

4. Internal communications gap: Ensure that communications promises are realistic

5. Perceptions gap: Educate customers to see reality of service quality delivered

6. Interpretation gap: Pretest communications to make sure message is clear and unambiguous

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


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

151511

101010551

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 (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 14.4)

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-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 (Fig 14.5)

Source: For full source information, see Services Marketing textbook, page 419.


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%

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 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 – Chapter 14

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

chapter 14 improving service quality and productivity

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