Chapter 5

DefiningDefining and and ManagingManaging

Service QualityService Quality

What is Quality (Q)?What is Quality (Q)?

Essentials of Service Quality (SQ)Essentials of Service Quality (SQ)

How to Improve SQHow to Improve SQ

Why Quality Matters Why Quality Matters

The global market is becoming more The global market is becoming more competitive every daycompetitive every day

Companies continually search for new ways to Companies continually search for new ways to gain an edge over their competitors around the gain an edge over their competitors around the globeglobe

Global competition and deregulation in a Global competition and deregulation in a number of industries is forcing companies to number of industries is forcing companies to turn to quality in order to survive turn to quality in order to survive

!

Why Quality Matters – Why Quality Matters – cont.cont. ?Quality is our best assurance of customer Quality is our best assurance of customer allegiance, our strongest defense against allegiance, our strongest defense against foreign competition, and the only path to foreign competition, and the only path to sustained growth and earnings (Welch). sustained growth and earnings (Welch).

Perhaps the most important reason for Perhaps the most important reason for pursuing quality is that pursuing quality is that quality paysquality pays (Deming). (Deming).

Research shows a relationship between quality, Research shows a relationship between quality, market share, and return on investmentmarket share, and return on investment

Relationship betweenRelationship between

Quality, Market Share, and Quality, Market Share, and ROIROI

Higher quality yields a higher return-on-Higher quality yields a higher return-on-investment (ROI) for any given market shareinvestment (ROI) for any given market share

Quality also pays in the form of customer Quality also pays in the form of customer retention -- customer defections represent a retention -- customer defections represent a significant cost to companiessignificant cost to companies

Adopting quality principles strongly correlates Adopting quality principles strongly correlates to corporate stock and earnings appreciation to corporate stock and earnings appreciation

:: Foundation PrinciplesFoundation Principles

Quality is one of the core components of Quality is one of the core components of value in the S-Q-I-P modelvalue in the S-Q-I-P model

While price and image are communicators, While price and image are communicators, product and service quality define the offering product and service quality define the offering in the value propositionin the value proposition

Quality is still a powerful competitive force Quality is still a powerful competitive force facing companiesfacing companies

Key Forces Influencing Quality in the Future

Quality must deliver bottom-line resultsQuality must deliver bottom-line results Management systems will increasingly absorb the Management systems will increasingly absorb the

quality functionquality function Quality will be everyone’s job Quality will be everyone’s job The economic case for a broader application of The economic case for a broader application of

quality will need to be proved quality will need to be proved Global demand for products and services will create Global demand for products and services will create

a global work forcea global work force Trust and confidence in business leaders and Trust and confidence in business leaders and

organizations will decline organizations will decline

SourceSource: Kenneth Case, President of the American Society for Quality: Kenneth Case, President of the American Society for Quality(ASQ) (2002) “Coming Soon: The Future”, Quality(ASQ) (2002) “Coming Soon: The Future”, Quality Progress Progress, Vol. 35 (11), p. 27., Vol. 35 (11), p. 27.

Factors Influencing Change in Factors Influencing Change in Quality PerceptionsQuality Perceptions

■ ■ Modern communications permit and in Modern communications permit and in some cases encourage customers to shift some cases encourage customers to shift

their patronage from one producer to their patronage from one producer to anotheranother

Global competition has resulted in increased Global competition has resulted in increased choice and has raised customer expectations of choice and has raised customer expectations of

what constitutes acceptable quality what constitutes acceptable quality Technology - marketing is a contest for Technology - marketing is a contest for

consumer’s attention and the Internet is now consumer’s attention and the Internet is now competing for that attention as the number of competing for that attention as the number of

Internet users worldwide continues to riseInternet users worldwide continues to rise

What is Quality?What is Quality?

■ ■ "The totality of features and characteristics "The totality of features and characteristics of a product or service that bear on its ability of a product or service that bear on its ability to satisfy stated or implied needs." (to satisfy stated or implied needs." (Kotler)Kotler)

■ ■ Quality must provide goods and services that Quality must provide goods and services that completely satisfy the needs of bothcompletely satisfy the needs of both internal internal and and external customersexternal customers. Quality serves as the . Quality serves as the "bridge" between the producer of goods or "bridge" between the producer of goods or services and its customer. (Johnson & services and its customer. (Johnson & Weinstein)Weinstein)

Deming’s 14-PointDeming’s 14-Point Philosophy on Philosophy on QualityQuality

■ ■ Constancy of PurposeConstancy of Purpose

■ ■ Adopt the New PhilosophyAdopt the New Philosophy

■ ■ Cease Dependence on Mass InspectionCease Dependence on Mass Inspection

■ ■ End the Practice of Awarding BusinessEnd the Practice of Awarding Business

on the Basis of Price Aloneon the Basis of Price Alone

■ ■ Improve Constantly and Forever the System of Improve Constantly and Forever the System of Production and ServiceProduction and Service

■ ■ Institute TrainingInstitute Training

■ ■ Institute LeadershipInstitute Leadership

Cont….

Deming’s 14-PointDeming’s 14-Point Philosophy onPhilosophy on Quality Quality - cont.- cont.

■ ■ Drive Out FearDrive Out Fear

■ ■ Break Down Barriers Among StaffBreak Down Barriers Among Staff

■■Eliminate Slogans, Exhortations and TargetsEliminate Slogans, Exhortations and Targets

■ ■ Eliminate Work QuotasEliminate Work Quotas

■ ■ Remove Barriers to Pride of WorkmanshipRemove Barriers to Pride of Workmanship

■ ■ Institute a Vigorous Program of Education and Institute a Vigorous Program of Education and Self-ImprovementSelf-Improvement

■ ■ Put Everyone to Work on the TransformationPut Everyone to Work on the Transformation

The 6 Sigma Approach to QualityThe 6 Sigma Approach to Quality

DefineDefine the process the processMeasure it to obtain a performance baseline

AnalyzeAnalyze the data to the data to determine where determine where errors are occurringerrors are occurring

IMPROVE the process

Control Control it to ensure the errors do not recur

The Juran Philosophy of QualityThe Juran Philosophy of Quality

Juran, defined quality as Juran, defined quality as "fitness for use" where products " where products possess customer-desired product features and are free from possess customer-desired product features and are free from deficienciesdeficiencies

The Juran philosophy of quality centered around three basic The Juran philosophy of quality centered around three basic quality processes: planning, improvement, and controlquality processes: planning, improvement, and control

Juran believed that there must be a continual striving towardJuran believed that there must be a continual striving toward quality, consisting of a number of steps from research,quality, consisting of a number of steps from research, development, design, specification, planning, processdevelopment, design, specification, planning, process control, etc. and then back to research again control, etc. and then back to research again

Crosby’s Philosophy of QualityCrosby’s Philosophy of Quality

Crosby defines quality as "conformance to Crosby defines quality as "conformance to requirements, not as goodness"requirements, not as goodness"

Crosby believes that quality is created by a Crosby believes that quality is created by a system of prevention, not appraisal (doing it system of prevention, not appraisal (doing it right the fist time or DIRFT), where the right the fist time or DIRFT), where the performance standard is "zero defects -- performance standard is "zero defects -- meeting specifications 100% of the time”. meeting specifications 100% of the time”.

Crosby also believes it is necessary to build a Crosby also believes it is necessary to build a quality-driven corporate culture quality-driven corporate culture

Garvin’s 8 Garvin’s 8 Quality DimensionsQuality Dimensions

Product performanceProduct performance FeaturesFeatures

ReliabilityReliability ConformityConformity

DurabilityDurability ServiceabilityServiceability

Aesthetics Aesthetics Perceived qualityPerceived quality

Quality Function DeploymentQuality Function Deployment ( (QFDQFD))

Integrating the voice of the customer ensures a Integrating the voice of the customer ensures a practice known as practice known as quality function deployment quality function deployment (QFD)(QFD)

The The GOAL OF QFDGOAL OF QFD is to determine not only is to determine not only whatwhat customers want, but which product or service customers want, but which product or service attributes are most important to themattributes are most important to them

This process needs to precede new product or service This process needs to precede new product or service introductions in order to ensure design quality introductions in order to ensure design quality

QFD enables companies to identify and prioritize QFD enables companies to identify and prioritize customer needs and respond to them effectivelycustomer needs and respond to them effectively

Customer Driven Engineering – Customer Driven Engineering – House of QualityHouse of Quality

Engineering attributes (EAs) (e.g., weight on front wheels, tire

characteristics, etc.)

Engineers’ measures of each product on each EA

Customers’ attributes

(CAs)(e.g.,

“traction in dry

conditions”)

Relationships between EAs and

CAs

.05

.01…...

Importance of each CA

Measures of customers’ perceptions

of each product on each CA

SServiceervice Q Qualityuality

Customers also form perceptions of quality Customers also form perceptions of quality during the during the service transaction - service transaction - how effectively how effectively and efficiently the service was delivered and the and efficiently the service was delivered and the speed and convenience of completing the speed and convenience of completing the transaction transaction

Finally, customers evaluate support activities that Finally, customers evaluate support activities that occur after the transaction, that is occur after the transaction, that is post-sale post-sale servicesservices

Definitions of Service Quality

■ ■ Service quality can also be defined according Service quality can also be defined according to both the to both the whatwhat and and howhow a product or service a product or service is delivered. is delivered.

■ ■ Gronroos distinguishes between Gronroos distinguishes between “technical “technical quality” quality” andand “functional quality” “functional quality”..

■ ■ Technical QualityTechnical Quality is concerned with the is concerned with the outcome of the delivered product or service.outcome of the delivered product or service.

cont..cont..

Definitions of Service Quality – cont.

■ ■ Customers use service quality attributes such Customers use service quality attributes such as as reliability, competence, performance, reliability, competence, performance, durabilitydurability, etc. to evaluate technical quality. , etc. to evaluate technical quality.

■■Functional QualityFunctional Quality has more to do with how has more to do with how the technical quality is transferred to the the technical quality is transferred to the consumer. Service quality attributes such as consumer. Service quality attributes such as responsiveness and access would be important responsiveness and access would be important in helping the customer judge the functional in helping the customer judge the functional quality of the service encounter.quality of the service encounter.

Cardinal Principles of Cardinal Principles of SService ervice QQualityuality Listening precedes actionListening precedes action

Reliability is keyReliability is key Flawless execution of the “basics” Flawless execution of the “basics”

Pay attention to service designPay attention to service design Perform service recovery wellPerform service recovery well

Surprise customersSurprise customers Practice “fair play”Practice “fair play” Promote teamworkPromote teamwork

Internal service begets external serviceInternal service begets external service

Adapted from Zemke, Ron (2002)Adapted from Zemke, Ron (2002)

TheThe Service OfferingService Offering

Service quality can also be judged by Service quality can also be judged by considering the various “spheres” or thresholds considering the various “spheres” or thresholds of the service offering as presented in of the service offering as presented in Figure – Figure – 3 Service Levels.3 Service Levels.

The The core benefitcore benefit is the most fundamental level is the most fundamental level for which the service offering stands for, that is, for which the service offering stands for, that is, what the consumer is actually seeking. what the consumer is actually seeking.

contcont..

TheThe Service OfferingService Offering – – cont.cont.

The core benefit represents basic reasons The core benefit represents basic reasons why people buy, such as hunger, safety, why people buy, such as hunger, safety, convenience, confidence, status, self-convenience, confidence, status, self-esteem, and so on. esteem, and so on.

Gonroos uses the term “service concept” to Gonroos uses the term “service concept” to indicate the core of a service offering, such indicate the core of a service offering, such as offering a car rental as a solution to a as offering a car rental as a solution to a short-term transportation need. short-term transportation need.

SATISFIERS

The 3 Service LevelsThe 3 Service Levels

HYGIENE HYGIENE FACTORSFACTORS

CORE BENEFIT

Service Quality ChallengesService Quality Challenges

■ ■ Defining quality for services is more is more difficult than for products because of the difficult than for products because of the intangible, variable nature of service intangible, variable nature of service characteristicscharacteristics

■ ■ Unlike product quality, consumers Unlike product quality, consumers frequently lack the necessary information frequently lack the necessary information to evaluate service quality to evaluate service quality cont.cont.

Service Quality Challenges Service Quality Challenges – cont.– cont.

Quality PerceptionsQuality Perceptions

■ ■ Search quality and experience quality are more are more applicable to determining product qualityapplicable to determining product quality

■ ■ With services, however, consumers are usually With services, however, consumers are usually limited to using limited to using credence quality to evaluate the to evaluate the experience, relying solely on the overall credibility of experience, relying solely on the overall credibility of the service provider the service provider

Service ContinuumService Continuum☛☛Another challenge presented in assessing service Another challenge presented in assessing service

quality arises when quality arises when viewing services along a along a continuum ranging from pre-sale to post-sale activitiescontinuum ranging from pre-sale to post-sale activities

Pre-sale Services

Post-sale Services

Transaction Services

Continuum of Services

Broad DimensionsBroad Dimensions of of Service QualityService Quality

ReliabilityReliability – perform promised service dependably – perform promised service dependably

and accuratelyand accurately Responsiveness Responsiveness - willingness/readiness to provide - willingness/readiness to provide

prompt serviceprompt service CompetenceCompetence - possess knowledge and skill to perform - possess knowledge and skill to perform

the servicethe service Access Access - approachability and ease of contact of - approachability and ease of contact of

service personnelservice personnel CourtesyCourtesy - politeness, consideration, and friendliness - politeness, consideration, and friendliness

of service personnel of service personnel cont…cont…

Broad DimensionsBroad Dimensions of Service Quality – cont. of Service Quality – cont.

CommunicationCommunication - keeping customers informed; listening - keeping customers informed; listening

to customersto customers CredibilityCredibility - trustworthy, believable, honest - trustworthy, believable, honest SecuritySecurity - freedom from danger, risk, or doubt - freedom from danger, risk, or doubt Understanding/knowing customerUnderstanding/knowing customer - knowing customer’s - knowing customer’s

needsneeds TangiblesTangibles - physical evidence of service - physical evidence of service

Parasuraman, A. Zeithaml, V., and Berry, L. (1985). Parasuraman, A. Zeithaml, V., and Berry, L. (1985).

Mapping Service QualityMapping Service Quality

Parasuraman and his colleagues found that service Parasuraman and his colleagues found that service quality is a measure between service quality is a measure between service perceptionsperceptions as as well as well as expectationsexpectations

Service quality stems from a comparison of what a Service quality stems from a comparison of what a consumer feels a service firm consumer feels a service firm shouldshould offer (desires or offer (desires or wants) versus their perception of what the service wants) versus their perception of what the service firm actually firm actually doesdoes offer offer

Ensuring good service quality involves meeting or Ensuring good service quality involves meeting or exceeding consumers’ expectations exceeding consumers’ expectations

1. Research gapcustomer expectations<->mgt. perceptions2. Planning & design gapmgt. perceptions<->service specifications3. Implementation gapservice specifications<->service delivery4. Communication gapservice delivery<->external communication5. Reality gapcustomer expectations<->the experience

SERVQUAL Model: Gap Analysis

GAP 3GAP 3 – – Service Performance Gap

Team WorkTeam Work

Employee Job FitEmployee Job Fit

Technology JobTechnology Job

FitFit

Perceived Perceived

ControlControl

SupervisorySupervisory

Control SystemsControl Systems

Role ConflictRole Conflict

Role AmbiguityRole Ambiguity

Service Service Performance Performance

GapGap

SERVQUALSERVQUAL

Used to operationalize the gaps influencing customer Used to operationalize the gaps influencing customer perceptions perceptions

SERVQUAL is a 21-item instrument that measures SERVQUAL is a 21-item instrument that measures both expectations and customer perceptions of the both expectations and customer perceptions of the service encounter service encounter

Scale reflects the respondent’s “zone of tolerance” or Scale reflects the respondent’s “zone of tolerance” or the range of the company’s performance between the range of the company’s performance between “acceptable” and “desired” service levels“acceptable” and “desired” service levels

Benefits of SERVQUALBenefits of SERVQUALCan serve as anCan serve as an effective diagnostic tool for uncovering effective diagnostic tool for uncovering

broad areas of a company’s service quality shortfalls broad areas of a company’s service quality shortfalls and strengthsand strengths

The SERVQUAL scale is offers the potential to The SERVQUAL scale is offers the potential to determine the relative importance of the 5 major determine the relative importance of the 5 major service quality dimensions-- service quality dimensions-- Reliability, Reliability, Responsiveness, Assurance, TangiblesResponsiveness, Assurance, Tangibles, and , and EmpathyEmpathy -- and to track service quality performance over time-- and to track service quality performance over time

The scale serves as a suitable generic measure of service The scale serves as a suitable generic measure of service

quality, transcending specific functions, companies, quality, transcending specific functions, companies, and industriesand industries

Service Profit ChainService Profit Chain

Researchers have proposed a link between employee Researchers have proposed a link between employee satisfaction, customer satisfaction and firm profit-satisfaction, customer satisfaction and firm profit-ability, known as the ability, known as the service profit chainservice profit chain (SPC (SPC))

The SPC represents an integrative framework for The SPC represents an integrative framework for understanding how operational investments into understanding how operational investments into service quality are related to customer satisfaction service quality are related to customer satisfaction perceptions and how these translate into profits perceptions and how these translate into profits

Improving quality also leads to other desirable Improving quality also leads to other desirable outcomes, such as customer satisfaction outcomes, such as customer satisfaction

Internal Service Delivery --Employees External --Customers

Service Concept

-- Workplace design Workplace design -- Higher -- Higher --- Lifetime Value --- Lifetime Value-- Process Tools-- Process Tools reliability reliability --- Retention --- Retention

-- Rewards/Recognition-- Rewards/Recognition -- Lower costs -- Lower costs --- Referrals --- Referrals

Employee Employee ValueValue

Service Service ValueValue

Service Value Service Value OutcomesOutcomes –C/S, Loyalty

Adapted from Heskett, Sasser, and Schlesinger (1997).

The Service Profit Chain

Profits Profits

Growth Growth

How to Improve QualityHow to Improve Quality

Design services in cooperation with customersDesign services in cooperation with customers

Focus your improvement programs outward, on market "break-Focus your improvement programs outward, on market "break-points" points"

Create a tangible representation of service qualityCreate a tangible representation of service quality

Use teamwork to promote service excellenceUse teamwork to promote service excellence

Create a “service-bias” based on these service quality Create a “service-bias” based on these service quality determinants: professionalism, attitudes/behaviors, determinants: professionalism, attitudes/behaviors, accessibility/flexibility, reliability/trustworthiness, service accessibility/flexibility, reliability/trustworthiness, service recovery, and reputation/credibility cont…recovery, and reputation/credibility cont…

How to Improve Quality – cont..How to Improve Quality – cont..

Develop proper measurementsDevelop proper measurements

Employee selection, job design and training are Employee selection, job design and training are

crucial to building customer satisfaction and SQ crucial to building customer satisfaction and SQ

Reward total quality efforts in marketingReward total quality efforts in marketing

View service as a process, not a series of functionsView service as a process, not a series of functions

Integrate customer information across sales channelsIntegrate customer information across sales channels

Service Quality ExerciseService Quality Exercise

Choose Choose one of these of these

SQ situations: SQ situations: Auto repairAuto repair Hospital visitHospital visit Theme parkTheme park Hair cut Hair cut SupermarketSupermarket Fast food restaurantFast food restaurant Air travelAir travel

Answer these questions:Answer these questions: How unique/standardized is How unique/standardized is

product and/or service?product and/or service? Type of service – search, Type of service – search,

experience, or credence.?experience, or credence.? Pure service or product-Pure service or product-

service blend?service blend? What factor most affects What factor most affects

service quality?service quality? After service is delivered, After service is delivered,

is corrective action is corrective action possible?possible?