Improving Service Quality and

Productivity
LEARNING OBJECTIVES

Define service quality

Diagnose service quality problems using The
Gaps Measuring and improving service quality
Explore key tools for measuring and improving
productivity
What Is Service Quality?
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
 CAPTURING THE CUSTOMERS PERSPECTIVE
OF SERVICE QUALITY: SERVQUAL
To measure customer satisfaction with various aspects of service
quality- Zeithmal developed a survey research instrument
based on premise that customers evaluate firms service quality by
comparing
Their perceptions of service actually received
Their prior expectations of companies in a particular industry

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

SERVQUAL
Respondents complete a series of scales that
measure their expectations of companies in a
particular industry on a wide array of service
characteristics
Susbsequently they are asked to record their
perceptions of a specific company whose services
they have used
When perceived performance ratings are lower
than expectations =poor quality
Reverse= good quality
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 qualityhalo
effect
Process factors: Customers feelings
The Gaps ModelA Conceptual
Tool to Identify and Correct
Service Quality Problems
SEVEN SERVICE QUALITY GAPS
(FIG 14.3)
Customer needs and CUSTOMER
expectations

1. Knowledge Gap
Management
MANAGEMENT
definition of these
needs
2. Standards Gap

Translation into
design/delivery specs
4. Internal
3. Delivery Gap Communications Gap
Execution of Advertising and
4.
design/delivery sales promises
specs
5. Perceptions Gap 6. Interpretation Gap
Customer Customer
perceptions of interpretation of
service execution communications
7. Service Gap
Customer experience
relative to
expectations
PRESCRIPTIONS FOR CLOSING THE
SEVEN SERVICE QUALITY GAPS
1. Knowledge gap: Learn what customers expect
2. Standards gap: Specify SQ standards that reflect
expectations
3. Delivery gap: Ensure service performance meets
standards
4. Internal communications gap: Ensure that
communications promises are realistic
5. Perceptions gap: Educate customers to see reality of
service quality delivered
6. Interpretation gap: Pretest communications to make sure
message is clear and unambiguous
7. Service gap: Close gaps 1 to 6 to meet customer
expectations consistently
Measuring and Improving
Service Quality
 SOFT AND HARD MEASURES
OF SERVICE QUALITY
Soft measuresnot 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 measurescan 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
 COMPOSITION OF FEDEXS
SERVICE QUALITY INDEXSQI (TABLE 14.4)

Weighting Number of Daily

Failure Type Factor
X =
Incidents Points
Late deliveryright day 1
Late Deliverywrong day 5
Tracing request unanswered 1
Complaints reopened 5
Missing proofs of delivery 1
Invoice adjustments 1
Missed pickups 1
Lost packages 0
Damaged packages 1
Aircraft delays (minutes) 0
Overcharged (packages missing label) 1
Abandoned calls 0
5
Source: See Services Marketing textbook, page 417, 5
for full source information. Total Failure
1 Points (SQI) =XXX,XXX
 CONTROL CHART FOR DEPARTURE
DELAYS
(FIG 14.3)

% Flights Departing Within

15 Minutes of Schedule

100%

90%

80%

70%

60%

J F M A M J J A S O N D

Month
 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
 TOOLS TO ANALYZE AND ADDRESS
SERVICE QUALITY PROBLEMS
Total Quality Management (TQM)
ISO 9000
Comprises requirements, definitions, guidelines, and related
standards to provide an independent assessment and certification
of a firms 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
CAUSE-AND-EFFECT CHART FOR
FLIGHT DEPARTURE DELAYS (FIG 14.4)
Facilities, Frontstage
Front-Stage
Procedures
Procedures
Equipment Personnel
Personnel

Aircraft late Gate agents Delayed check-in

Arrive late to gate cannot process procedure
Oversized Mechanical
bags Acceptance of late
Customers Failures fast enough
Customers Late/unavailablepassengers
Late pushback airline crew
Delayed
Departure
Late food Late cabin
s
service cleaners
Other Poor announcement of
Causes
Weather Late baggage departures
Air traffic Weight and balance
Late fuel
sheet late

Materials,
Materials,
Supplies
Backstage Informatio
Supplies Personnel n
Case: Analysis of Causes of
Flight Departure Delays

4.9
All stations, excluding
15.3% 23.1% %
Chicago-Midway Hub
19%
33.3%
15.4% 11.7%
9.5%
23.1% 8.7%
33.3%
23.1%
11.3% 53.3%

Newark 15% Washington Natl.

Late passengers Late weight and balance sheet

Waiting for pushback Late cabin cleaning/supplies
Waiting for Other
fuelling
 BLUEPRINTING
Depicts sequence of front-stage interactions experienced
by customers plus supporting backstage activities
Used to identify potential fall pointswhere 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
SIX SIGMA METHODOLOGY TO
IMPROVE AND REDESIGN SERVICE
PROCESSES
Process Improvement
Define Identify the problem
Define requirements
Set goals
Measure Validate problem/process
Refine problem/goal
Measure key steps/inputs
Analyze Develop causal hypothesis
Identify root causes
Validate hypothesis
Improve Develop ideas to measure root
causes
Test solutions
Measure results
Control Establish measures to maintain Establish measures and reviews to maintain
performance
Correct problems as needed
Process Design/Redesign
Identify specific or broad problems
Define goal/change vision
Clarify scope and customer requirements
Measure performance to requirements
Gather process efficiency data
Identify best practices
Assess process design
Refine requirements
Design new process
Implement new process, structures, and
systems
performance
Correct problems as needed
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
 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
Its 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
 WHEN DOES IMPROVING SERVICE
RELIABILITY BECOME
UNECONOMICAL? (FIG 14.7)
Satisfy Target
100%
Customers through
Service Recovery
Service Reliability

Optimal Point of
Reliability: Cost of
Failure = Service
Recovery

Satisfy Target
Customers through
Service Delivery as
A B C D Planned

Investment
Small Cost, Large Cost, Assumption: Customers are equally (or even more)
Large Improvement Small Improvement satisfied with the service recovery provided than
with a service that is delivered as planned.
Defining and Measuring
Productivity
 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
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
 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
Improving Service
Productivity
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?

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 labour
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
 IMPROVING SERVICE PRODUCTIVITY:
(1) OPERATIONS-DRIVEN STRATEGIES
Control costs, reduce waste
Set productive capacity to match average demand
Automate labour 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
IMPROVING SERVICE PRODUCTIVITY:
(2) CUSTOMER-DRIVEN STRATEGIES
Change timing of customer demand
By shifting demand away from peaks, managers can
make better use of firms productive assets and
provide better service
Involve customers more in production
Get customers to self-serve
Encourage customers to obtain information and buy
from firms corporate websites
Ask customers to use third parties
Delegate delivery of supplementary service elements
to intermediary organizations
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 behaviour
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
SUMMARY
Customers evaluate services using five different categories
Tangibles, reliability, responsiveness, assurance, empathy
There are seven service quality gaps and solutions
presented in the Gaps Model
Knowledge, standards, delivery, internal communications gap,
perceptions, interpretation, service
Key tools for measuring and improving productivity are:
Fishbone diagram
Pareto Chart
Blueprinting
Total Quality Management (TQM)
ISO 9000
Malcolm Baldrige Model Applied to Services
Six Sigma