improving service quality and productivity
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Improving Service Quality and 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 - PowerPoint PPT PresentationTRANSCRIPT
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 1
Improving Service
Quality and Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 2
Integrating Service Quality and Productivity Strategies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 3
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 4
What Is Service Quality?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 5
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 6
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
Aesthetics: How product appeals to users
Perceived Quality: Associations such as brand name
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 7
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 8
Capturing the Customer’s Perspective of Service Quality: SERVQUAL (1)
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
Poor quality Perceived performance ratings < expectations
Good quality Perceived performance ratings > expectations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 9
Capturing the Customer’s Perspective of Service Quality: SERVQUAL (2)
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 10
How Customers Might Evaluate Online Businesses: Seven Dimensions of E-S-QUAL
Accessibility : Is site easily found?
Navigation: How easy is it to move around the site?
Design and presentation: Image projected from site?
Content and purpose: Substance and richness of site
Currency and accuracy Responsiveness:Firm’s propensity to respond to
e-mails Interactivity, customization, and personalization Reputation and security
Source:Shohreh A. Kaynama (2000), “ A Conceptual Model to Measure Service Quality of Online Companies: E-qual, in Developments in Marketing Science,” Harlan E. Spotts and H. Lee Meadows, eds., Proceedings of the Academy of Marketing Science, Vol. 22, pp. 46–51. For more information pertaining to online service quality see A. Parasuraman, Vlerie A. Zeithaml, and Arvind Malhotra (2005), “E-S-QUAL: A Multiple-Item Scale for Assessing Electronic Service Quality.” Journal of Service Research, Vol. 7. issue 3. pp. 213–234.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 11
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 12
The Gaps Model—A Conceptual Tool to Identify and Correct
Service Quality Problems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 13
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 14
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 15
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 16
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 17
Measuring and Improving Service Quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 18
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 19
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 20
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 21
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 22
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 23
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 24
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 25
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/goalMeasure 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 26
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 27
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 28
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.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 29
Defining and Measuring Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 30
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 31
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 32
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 33
Improving Service Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 34
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?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 35
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
? ? ?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 36
Long Waiting Times May Indicate Need for Service Process Redesign (Fig 14.8)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 37
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 38
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 39
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 behavior
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 40
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