Chapter-8Service Quality Management

• What are services?The word service originally associated with the work performed by servants for their masters.

“ the action of serving, helping or benefiting; conduct tending to the welfare or advantage of another”

Services are acts, deeds, performance or efforts.The aim of service is to provide solution to the customers problem.

SRM/M1/SS

Services is an activity or series of activities take place by interaction between customer and service employees

It’s an economic activity which is consumed at a time it is produced and provide added value in forms of Convenience, amusement, timeliness , comfort or health

SRM/M1/SS

Services Defined…

“Activities, Benefits or Satisfactions which are offered for sale

or provided in connection with the sale of goods”

American Marketing Association

SRM/M1/SS

Services Defined…

“Separately identifiable, intangible activities which provide want satisfaction

when marketed to consumers and/or industrial users and which are not necessarily tied to the sale of a

product or another service”

William J. Stanton

SRM/M1/SS

Services Defined…

“Any activity or benefit that one party can offer to another that is essentially intangible and does not

result in the ownership of anything.Its production may or may not be tied to a physical

product”

Philip Kotler and Bloom

SRM/M1/SS

Goods Vs. Services• Goods are tangible

• Goods are homogeneous

• Goods are produced in the factory

• Production, distribution and consumption are separate and independent functions in goods

• Services are intangible

• Services are heterogeneous

• Services are produced in buyer-seller interactions

• Production, distribution and consumption take place simultaneously in the case of services

Why Services Marketing ???

SRM/M1/SS

Goods Vs. Services

• Consumers do not generally participate in the production of goods

• Goods can be stored

• In sale of goods, transfer of ownership takes place

• Consumers are co-producers in services

• Services can not be stored

• In the sale of services, transfer of ownership will not take place

SRM/M1/SS

Characteristics of Services…

• Intangibility• Inseparability• Variability• Perishability• Customer participation• No ownership

SRM/M1/SS

Perishability…

• Challenges :- Storage of service is not

possible- Sales volume

continuously in relation to the capacity

- Time pressure in sales

• Strategic Options :- Demand management- Capacity management- Tactical approaches- Continuous study on

demand patterns and competitive parameters

SRM/M1/SS

Customer Participation…

• Challenges :- Customers are not

controllable- Production quality also

depends upon customer’s knowledge and ability to participate

- Customers are evaluating at every stage of service production

• Strategic Options:- Effective external marketing- Customer education and

training- Effective interactive

marketing- Management of

movements of truth- Effective internal marketing

SRM/M1/SS

No ownership…

• Challenges:- Nothing remains after

consumption- Very less time to the

consumer to evaluate the product

- High consumer dissonance

• Strategic Options:- Making communication

tangible- Customer relationship

marketing- Managing high level of

company image

SRM/M1/SS

Classifications of Services in Economy

Value Added ServicesFinancing, Leasing, Insurance

Infrastructure serviceCommunications, Transportation, Utilities, BankingManufacturing Services inside companyFinance, Accounting, Legal , R&D and design

Distribution serviceWholesaling, Retailing, Repairing

SRM/M1/SS

Cont…..

Personal ServiceHealth care, Restaurants, Hotels

Business Service supporting Manufacturing Consulting, Auditing, Advertising, Waste Disposal

Governments ServiceMilitary, Education, Judicial, Police and fire protection

SRM/M1/SS

Service Classification :Service process Matrix

SRM/M1/SS

LOW High

LOW

High Mass services•Retailing•Wholesaling•School•Retail aspect of commercial Banking

Service factory•Airlines•Trucking•Hotels•Resorts & Recreation

Service Shop•Hospitals•Auto Repair•Other repair services

Professional Services•Physicians•Lawyers•Accountants•Architects

De

gre

e o

f L

ab

or

inte

nsi

ty

Degree of Interaction and Customization

Dimensions of Service Quality

The Gaps Model

Six Service Quality Gaps

Gap 1: The Knowledge Gap Gap 2: The Policy Gap Gap 3: The Delivery Gap Gap 4: The Communications Gap Gap 5: The Perceptions Gap Gap 6: The Service Quality Gap

SRM/M1/SS

Suggestions for Closing the Six Service Quality Gaps

Suggestions for Closing the Six Service Quality Gaps

Suggestions for Closing the Six Service Quality Gaps

Suggestions for Closing the Six Service Quality Gaps

Measuring and Improving Service Quality

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

e.g., SERVQUAL, surveys, and customer advisory panel

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

Customer Feedback Collection Tools

Hard Measures of Service Quality

Hard Measures of Service Quality

• Service quality indexes– Embrace key activities that have an impact on customers

• Control charts to monitor a single variable– Offer a simple method of displaying performance over time against

specific quality standards – Enable easy identification of trends – Are only good if data on which they are based are accurate

• FedEx: One of the first service companies to understand the need for an index of service quality that embraced all the key activities that affect customers

Control Chart for Departure Delays

Tools to Analyze and Address Service Quality

Problems

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 are 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

Cause-and-Effect Chart for Flight Departure Delays

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 fail points

– where failures are most likely to appear

• Shows how failures at one point can have a ripple effect

• Managers can identify points which need urgent attention

– Important first step in preventing service quality problems

© Oxford University Press 2008. All rights reserved.

35

Service Blueprinting

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

Ser

vice

Rel

iabi

lity

100%

A B

Investment

Small Cost,Large Improvement

Large Cost,Small Improvement

C D

Satisfy Target Customers Through Service Delivery as

Planned

Satisfy Target Customers Through Service Delivery as

Planned

Satisfy Target Customers Through Service Recovery

Satisfy Target Customers Through Service Recovery

Optimal Point of Reliability: Cost of Failure = Service

Recovery

Optimal Point of Reliability: Cost of Failure = Service

Recovery

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

as planned.

When Does Improving Service Reliability Become Uneconomical?

Productivity in a Service Context

• Productivity: amount of output produced relative to amount of inputs– Improvement in productivity means an improvement in the ratio of outputs to

inputs.

• Intangible nature of service makes it hard to measure productivity of service firms, especially for information-based services– 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 (e.g., how long employee takes to perform specific task)– Focus on inputs rather than outcomes and 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

40

Stopwatch Time Study

• Standard time duration means the time taken by an average worker to perform a task at a sustainable rate under the given facility arrangements.

• A performance rating (P) is multiplied with the observed time of the job to arrive at the normal time (N) of the job.

• Standard time (S) is normal time plus allowances. Allowances have to be made for time consumed in adjusting or repairing the machines, workers drinking water, or taking rest breaks.