ISM 270ISM 270

Service Engineering and Service Engineering and ManagementManagement

Lecture 4: Service QualityLecture 4: Service Quality

Max MaximilienMax Maximilien

Research Staff MemberResearch Staff Member

IBM Almaden Research CenterIBM Almaden Research Center

Almaden Services Research groupAlmaden Services Research group

12+ years experience in software research, 12+ years experience in software research, architecture, design, and implementationarchitecture, design, and implementation

Research interests in SOA, Web services, Research interests in SOA, Web services, mashups, OOD/P, SE, and Agile methodsmashups, OOD/P, SE, and Agile methods

Ph.D. in computer science from NC State Ph.D. in computer science from NC State University, RaleighUniversity, Raleigh

AnnouncementsAnnouncements

Project on webProject on web Due 13 FebDue 13 Feb

Homework filesHomework files Make sure you get confirmation from Make sure you get confirmation from

Geoff/meGeoff/me

Algorithm for ProjectAlgorithm for Project

Traveling Salesman-type problems very Traveling Salesman-type problems very common in servicescommon in services Delivery of goodsDelivery of goods Mail routesMail routes Sales tourSales tour

Standard problem:Standard problem: Given the distance between each city pair, visit all N Given the distance between each city pair, visit all N

cities in some order, ending back at the basecities in some order, ending back at the base• Objective: Minimize total distance traveledObjective: Minimize total distance traveled

Traveling salesmanTraveling salesman

Standard problem is very difficult to solve (NP – Standard problem is very difficult to solve (NP – complete)complete)

We will use the Clarke-Wright Algorithm (page 499 of We will use the Clarke-Wright Algorithm (page 499 of text)text)

C-W algorithm intuition: C-W algorithm intuition: Start with the path that returns to base between every nodeStart with the path that returns to base between every node Add links between nodes instead of returning in order of Add links between nodes instead of returning in order of

distance gaineddistance gained Stop when no gain can be madeStop when no gain can be made

Note: This is a good heuristicNote: This is a good heuristic Performs well in practice, but not guaranteed to find the best Performs well in practice, but not guaranteed to find the best

solution.solution.

Service QualityService Quality

Learning ObjectivesLearning Objectives Describe the five dimensions of service quality.Describe the five dimensions of service quality. Use the service quality gap model to diagnose Use the service quality gap model to diagnose

quality problems.quality problems. Illustrate how Taguchi methods and poka-yoke Illustrate how Taguchi methods and poka-yoke

methods are applied to quality design.methods are applied to quality design. Perform service quality function deployment.Perform service quality function deployment. Construct a statistical process control chart.Construct a statistical process control chart. Develop unconditional service guarantees.Develop unconditional service guarantees. Plan for service recovery.Plan for service recovery. Perform a walk-through audit (WtA)Perform a walk-through audit (WtA)

Key questionKey question

How to we ensure that our customers are How to we ensure that our customers are having a good experience?having a good experience?

Customer Feedback andCustomer Feedback andWord-of-MouthWord-of-Mouth

The average business only hears from 4% of their customers who The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.not bother to complain, 25% of them have serious problems.

The 4% complainers are more likely to stay with the supplier than The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.are the 96% non-complainers.

About 60% of the complainers would stay as customers if their About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was problem was resolved and 95% would stay if the problem was resolved quickly.resolved quickly.

A dissatisfied customer will tell between 10 and 20 other people A dissatisfied customer will tell between 10 and 20 other people about their problem.about their problem.

A customer who has had a problem resolved by a company will tell A customer who has had a problem resolved by a company will tell about 5 people about their situation.about 5 people about their situation.

Moments of TruthMoments of Truth Each customer contact is called a moment Each customer contact is called a moment

of truth.of truth.

You have the ability to either satisfy or You have the ability to either satisfy or dissatisfy them when you contact them.dissatisfy them when you contact them.

A A service recovery service recovery is satisfying a is satisfying a previously dissatisfied customer and previously dissatisfied customer and making them a loyal customer.making them a loyal customer.

Dimensions of Service QualityDimensions of Service Quality ReliabilityReliability: Perform promised service dependably and : Perform promised service dependably and

accurately. accurately. ExampleExample: receive mail at same time each : receive mail at same time each day.day.

ResponsivenessResponsiveness: Willingness to help customers : Willingness to help customers promptly. promptly. ExampleExample: avoid keeping customers waiting for : avoid keeping customers waiting for no apparent reason. no apparent reason.

AssuranceAssurance: Ability to convey trust and confidence. : Ability to convey trust and confidence. ExampleExample: being polite and showing respect for customer.: being polite and showing respect for customer.

EmpathyEmpathy: Ability to be approachable. : Ability to be approachable. ExampleExample: being a : being a good listener.good listener.

TangiblesTangibles: Physical facilities and facilitating goods. : Physical facilities and facilitating goods. ExampleExample: cleanliness. : cleanliness.

Perceived Service QualityPerceived Service Quality

Word of mouth

Personal needs

Past experience

Expectedservice

Perceivedservice

Service Quality Dimensions

ReliabilityResponsiveness

AssuranceEmpathyTangibles

Service Quality Assessment1. Expectations exceeded ES<PS (Quality surprise)2. Expectations met ES~PS (Satisfactory quality)3. Expectations not met ES>PS (Unacceptable quality)

Service Quality Gap ModelService Quality Gap ModelCustomer

Perceptions

Customer

Expectations

Service

Delivery

Service Standards

ManagementPerceptions of Customer Expectations

Managing the Evidence

Conformance Service Design

Understanding the Customer

Customer Satisfaction GAP 5

Customer / Marketing Research

GAP 1

Conformance GAP 3

Communication GAP 4

Design GAP 2

Service Quality Gap Model

Quality Service by DesignQuality Service by Design Quality in the Service PackageQuality in the Service Package

Budget Hotel exampleBudget Hotel example Taguchi Methods (Robustness)Taguchi Methods (Robustness)

Notifying maids of rooms for cleaningNotifying maids of rooms for cleaning Poka-yoke (fail-safing)Poka-yoke (fail-safing)

Height bar at amusement parkHeight bar at amusement park Quality Function DeploymentQuality Function Deployment

House of Quality House of Quality

Classification of Service FailuresClassification of Service Failureswith Poka-Yoke Opportunitieswith Poka-Yoke Opportunities

Server ErrorsServer ErrorsTaskTask::

Doing work incorrectlyDoing work incorrectly

TreatmentTreatment::

Failure to listen to customerFailure to listen to customer

TangibleTangible::

Failure to wear clean Failure to wear clean uniformuniform

Customer ErrorsCustomer ErrorsPreparationPreparation::

Failure to bring necessary Failure to bring necessary materialsmaterials

EncounterEncounter::

Failure to follow system Failure to follow system flowflow

ResolutionResolution::

Failure to signal service Failure to signal service failurefailure

House of QualityHouse of Quality

Importance

Relative

1 2 3 4 5 Customer Expectations

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Comparison with Volvo Dealer

Weighted score

Improvement difficulty rank

O O

O Weak

Medium

* Strong

9

9

9

Tra

inin

g

Att

itude

Ca

paci

ty

Info

rmat

iion

Equ

ipm

ent

8

7

7

6 6

5 5

5

5

4

4

3 3

3

3

2

2 2

2

+

_

+

Customer Perceptions

o

+

+ +

o

o

o

o

+

o o

o

o o

o Village Volvo

+ Volvo Dealer

Service Elements

Relationships

127 82 63 102 65

1

* *

Achieving Service QualityAchieving Service Quality Cost of Quality (Juran)Cost of Quality (Juran)

Service Process ControlService Process Control

Statistical Process Control (Deming)Statistical Process Control (Deming)

Unconditional Service GuaranteeUnconditional Service Guarantee

Costs of Service QualityCosts of Service Quality(Bank Example)(Bank Example)

Failure costs Detection costs Prevention costsFailure costs Detection costs Prevention costs

External failureExternal failure: Process control Quality planning: Process control Quality planning Loss of future business Peer review Training programLoss of future business Peer review Training program Negative word-of-mouth Supervision Quality auditsNegative word-of-mouth Supervision Quality audits Liability insurance Customer comment card Data acquisition and analysisLiability insurance Customer comment card Data acquisition and analysis Legal judgments InspectionLegal judgments Inspection Recruitment and selection Recruitment and selection Interest penalties Supplier evaluationInterest penalties Supplier evaluation Internal failure:Internal failure: Scrapped forms Scrapped forms ReworkRework Recovery:Recovery: Expedite disruptionExpedite disruption Labor and materialsLabor and materials

Service Process ControlService Process Control

Resources

Identify reasonfor

nonconformance

Establish measure of performance

Monitorconformance torequirements

Take corrective

action

Service concept

Customer input

Customer output

Service process

Control Chart of Departure DelaysControl Chart of Departure Delays

60

70

80

90

100

Per

cen

tag

e o

f fl

igh

ts o

n

tim

e

expected

Lower Control Limit

1998 1999

n

pppUCL

1(3

n

pppLCL

1(3

Unconditional Service Guarantee: Unconditional Service Guarantee: Customer ViewCustomer View

Unconditional (L.L. Bean)Unconditional (L.L. Bean) Easy to understand and communicate Easy to understand and communicate

(Bennigan’s)(Bennigan’s) Meaningful (Domino’s Pizza)Meaningful (Domino’s Pizza) Easy to invoke (Cititravel)Easy to invoke (Cititravel) Easy to collect (Manpower)Easy to collect (Manpower)

Unconditional Service Guarantee: Unconditional Service Guarantee: Management ViewManagement View

Focuses on customers (British Airways)Focuses on customers (British Airways) Sets clear standards (FedEx)Sets clear standards (FedEx) Guarantees feedback (Manpower)Guarantees feedback (Manpower) Promotes an understanding of the service Promotes an understanding of the service

delivery system (Bug Killer)delivery system (Bug Killer) Builds customer loyalty by making Builds customer loyalty by making

expectations explicitexpectations explicit

Customer SatisfactionCustomer Satisfaction All customers want to be satisfied. All customers want to be satisfied.

Customer loyalty is only due to the lack of Customer loyalty is only due to the lack of a better alternativea better alternative

Giving customers some extra value will Giving customers some extra value will delight delight them by exceeding their them by exceeding their expectationsexpectations and insure their return and insure their return

Walk-Through-AuditWalk-Through-Audit Service delivery system should conform to Service delivery system should conform to

customer expectations.customer expectations. Customer impression of service influenced Customer impression of service influenced

by use of all senses.by use of all senses. Service managers lose sensitivity due to Service managers lose sensitivity due to

familiarity.familiarity. Need detailed service audit from a Need detailed service audit from a

customer’s perspective. customer’s perspective.

Patronage

LoyaltySatisfactionRetention

SeverityOf

Failure

PerceivedServiceQuality

Psychological-empathy-apology

Tangible-fair fix-value add

Psychological-apology-show interest

Follow-upService

Recovery

Tangible-small token

ServiceRecoveryExpectations

ServiceRecovery

CustomerLoyalty

ServiceGuarantee

Speed of Recovery

FrontlineDiscretion

ServiceFailure Occurs

ProviderAware ofFailure

Fair Restitution

Pre-recovery Phase Immediate Recovery Phase Follow-up Phase

Service Recovery Framework

Approaches to Service Approaches to Service RecoveryRecovery

Case-by-caseCase-by-case addresses each customer’s addresses each customer’s complaint individually but could lead to complaint individually but could lead to perception of unfairness.perception of unfairness.

Systematic responseSystematic response uses a protocol to handle uses a protocol to handle complaints but needs prior identification of complaints but needs prior identification of critical failure points and continuous updating.critical failure points and continuous updating.

Early interventionEarly intervention attempts to fix problem before attempts to fix problem before the customer is affected.the customer is affected.

Substitute serviceSubstitute service allows rival firm to provide allows rival firm to provide service but could lead to loss of customer.service but could lead to loss of customer.

DiscussionDiscussion

What are the advantages and What are the advantages and disadvantages of delivering high service disadvantages of delivering high service quality, when the service is delivered by quality, when the service is delivered by web or information systems?web or information systems?

The Service EncounterThe Service Encounter

Chapter 7 Learning ObjectivesChapter 7 Learning Objectives

Use the service encounter triad to describe a Use the service encounter triad to describe a service firm’s delivery process.service firm’s delivery process.

Discuss the role of organizational control Discuss the role of organizational control systems for employee empowerment.systems for employee empowerment.

Prepare abstract questions and write situational Prepare abstract questions and write situational vignettes.vignettes.

Discuss the role of customer as coproducer.Discuss the role of customer as coproducer. Describe how elements of the service profit Describe how elements of the service profit

chain lead to revenue growth and profitability.chain lead to revenue growth and profitability.

The Service Encounter TriadThe Service Encounter Triad

Service

Organization

Efficiencyversus

satisfaction

Efficiencyversus

autonomy

CustomerContact

Personnel Perceived control

The Service OrganizationThe Service Organization

CultureCultureServiceMaster (Service to the ServiceMaster (Service to the

Master)Master)Disney (Choice of language)Disney (Choice of language)

EmpowermentEmpowermentInvest in peopleInvest in peopleUse IT to enable personnelUse IT to enable personnelRecruitment and training criticalRecruitment and training criticalPay for performancePay for performance

Organizational ControlOrganizational ControlBeliefsSystems

Tocontribute

Core values& mission

Identify corevalues

BoundarySystems

To do right Specify andenforcerules

Risks to beavoided

DiagnosticControlSystems

To achieve Build cleartargets

Criticalperformancevariables

InteractiveControlSystems

To create Encouragelearning

StrategicUncertainties

Difficult Interactions with Difficult Interactions with CustomersCustomers

Unrealistic customer expectations Unexpected service failureUnrealistic customer expectations Unexpected service failure

1. Unreasonable demands 1. Unavailable service1. Unreasonable demands 1. Unavailable service

2. Demands against policies 2. Slow performance2. Demands against policies 2. Slow performance

3. Unacceptable treatment of 3. Unacceptable service3. Unacceptable treatment of 3. Unacceptable service

employeesemployees

4. Drunkenness 4. Drunkenness

5. Breaking of societal norms5. Breaking of societal norms

6. Special-needs customers6. Special-needs customers

Use scripts to train for proper responseUse scripts to train for proper response

Service Encounter Success FactorsService Encounter Success Factors

Customer Service Provider Human Machine

HumanEmployee selectionInterpersonal skillsSupport technologyEngender trust

User friendlyVerificationSecurityEasy to access

MachineEasy to accessFast responseVerificationRemote monitoring

CompatibilityTrackingVerificationSecurity

Employee Perceptions of Customer Employee Perceptions of Customer Service at a Branch BankService at a Branch Bank

1

2

3

4

5

6

1 2 3 4 5 6

Employee

Cus

tom

er

Terrible

Terrible

Outstanding

Outstanding

Satisfaction Mirror

Higher Customer Satisfaction

More Familiarity with Customer Needs and Ways of Meeting Them

Greater Opportunity for Recoveryfrom Errors

Higher EmployeeSatisfaction

Higher Productivity

Improved Quality of Service

MoreRepeatPurchases

Stronger Tendency to Complain about Service Errors

Lower Costs

Better Results

      

 

Is attitude emphasized?Are job previews utilized?Are customers screened?

Are employees encouraged to refer friends?

 Are referrals from the “best” employees given priority?

Is satisfactionmeasured periodically? Are measurements linked to other functions on the cycle?

Careful Employeeand Customer Selection

 (and Self-selection))

High-Quality Training

Well-DesignedSupport Systems Information Facilities

Greater Latitude to Meet

Customer’s Needs

Clear Limits on, and Expectations

of, Employees

AppropriateRewards

and FrequentRecognition

SatisfiedEmployees

EmployeeReferrals of

Potential JobCandidates

Is training for job and life? Is it an important element of quality of work life?

Do they reflect needs of the service encounter?

Are they designed to foster relationships?

Does it reflect top management “talk”? Is it enough to allow delivery of results to customers?

Do they limit the “right” risks?Are they logical to employees?

Cycle of Capability

Are they linked toservice objectives? Are they balanced between monetary and non-monetary?

 

Service Profit Chain

Internal

Operating strategy andservice delivery system

  Service concept Target market

Servicevalue

Customers

Loyalty

Productivity&

Outputquality

Servicequality

Capability

Satisfaction

Employees Satisfaction Loyalty

Revenuegrowth

External

Profitability

Customer orientation/quality emphasisAllow decision-making latitudeSelection and developmentRewards and recognitionInformation and communicationProvide support systemsFoster teamwork

Quality & productivity improvements yield higher service quality and lower cost

Attractive Value Service designed& delivered tomeet targetedcustomers’ needsSolicit customerfeedback

Lifetime valueRetentionRepeat BusinessReferrals