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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 1 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 Presentation

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Page 1: Improving Service   Quality and Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 1

Improving Service

Quality and Productivity

Page 2: 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

Page 3: Improving Service   Quality and Productivity

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

Page 4: Improving Service   Quality and Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 4

What Is Service Quality?

Page 5: Improving Service   Quality and Productivity

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

Page 6: Improving Service   Quality and Productivity

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

Page 7: Improving Service   Quality and Productivity

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

Page 8: Improving Service   Quality and Productivity

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

Page 9: Improving Service   Quality and Productivity

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

Page 10: Improving Service   Quality and Productivity

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.

Page 11: Improving Service   Quality and Productivity

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

Page 12: Improving Service   Quality and Productivity

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

Page 13: Improving Service   Quality and Productivity

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

Page 14: Improving Service   Quality and Productivity

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

Page 15: Improving Service   Quality and Productivity

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

Page 16: Improving Service   Quality and Productivity

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

Page 17: Improving Service   Quality and Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 17

Measuring and Improving Service Quality

Page 18: Improving Service   Quality and Productivity

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

Page 19: Improving Service   Quality and Productivity

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

Page 20: Improving Service   Quality and Productivity

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

Page 21: Improving Service   Quality and Productivity

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

Page 22: Improving Service   Quality and Productivity

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

Page 23: Improving Service   Quality and Productivity

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

Page 24: Improving Service   Quality and Productivity

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

Page 25: Improving Service   Quality and Productivity

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

Page 26: Improving Service   Quality and Productivity

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

Page 27: Improving Service   Quality and Productivity

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

Page 28: Improving Service   Quality and Productivity

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.

Page 29: Improving Service   Quality and Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 29

Defining and Measuring Productivity

Page 30: Improving Service   Quality and 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

Page 31: Improving Service   Quality and Productivity

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

Page 32: Improving Service   Quality and Productivity

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

Page 33: Improving Service   Quality and Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 33

Improving Service Productivity

Page 34: Improving Service   Quality and 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?

Page 35: Improving Service   Quality and 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

? ? ?

Page 36: Improving Service   Quality and Productivity

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)

Page 37: Improving Service   Quality and Productivity

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

Page 38: Improving Service   Quality and Productivity

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

Page 39: Improving Service   Quality and Productivity

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

Page 40: Improving Service   Quality and Productivity

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