Customer vs Company Defined Standards

• Customer- defined service standards are not sufficient to bring effectiveness to an organization.

• There is a place in an organization for company defined standards because these standards promote productivity and efficiency.

Hard vs Soft Standards• Hard standards are operational

standards• Soft standards are perceptual standards• Employees tend to accept operational

standards more than perceptual standards

• because they trust the measurement of operational standards to a greater degree.

• Perceptual standards are considered to be subjective

• and more biased than operational standards

Hard Standards• Things that can be counted, timed,

or observed through audits– delivery time– response time

• number of times a phone rings before it is answered

• on time appointments– order correctly filled– number of sales calls per month per

customer

Soft Standards

• Standards that must be documented using perceptual measures.– Courteous– Trustworthy– Communication skills

• Opinion based measures that cannot be observed and must be collected by talking to customers, employees, or others

Examples of Soft Customer-Defined Standards

Developing Standards• Standards are most difficult to develop in

professional service.• For professional services specific, concrete and

standardized behaviors can rarely be stated as standards because their service is complex and depends on the expertise of providers.

• Nevertheless, some standards can be specified.

Mayo Clinic Example

• Every patient will be weighed and have their blood pressure checked.

• Each patient must complete a personal history form.

• Each patient will pay for services upon receipt.

Obtaining Compliance• These particular standards would not be

hard to obtain compliance for because they deal with staff rather than experts.

• However, the professionals and experts would resist standards for themselves– believe their work can not be reduced to

repetitive actions and behaviors.– believe their work relies on their expertise

and may argue that each patient is different.• Any standards developed for experts

must be shown to have value

Service Encounter Customer Requirements Measurements

ServiceQuality

Template for Process Map for Customer-Driven Standards and Measurements

AT&T’s Process Map for Measurements

Reliability (40%)Easy To Use (20%)Features / Functions (40%)

Knowledge (30%)Responsive (25%)Follow-Up (10%)

Delivery Interval Meets Needs (30%)Does Not Break (25%)Installed When Promised (10%)

No Repeat Trouble (30%)Fixed Fast (25%)Kept Informed (10%)

Accuracy, No Surprise (45%)Resolve On First Call (35%)Easy To Understand (10%)

Business Process Customer Need Internal Metric

30% Product

30% Sales

10% Installation

15% Repair

15% Billing

% Repair Call% Calls for HelpFunctional Performance Test

Supervisor Observations% Proposal Made on Time% Follow Up Made

Average Order Interval% Repair Reports% Installed On Due Date

% Repeat ReportsAverage Speed Of Repair% Customers Informed

% Billing Inquiries% Resolved First Call% Billing Inquiries

TotalQuality

Source: AT&T General Business Systems

Process for Setting Customer-Defined Standards

1. Identify Existing or Desired Service Encounter Sequence

2. Translate Customer Expectations Into Behaviors/Actions

4. Set Hard or Soft Standards

5. Develop FeedbackMechanisms

7. Track Measures Against Standards

Measure byAudits or

Operating DataHard Soft

Measure byTransaction-

Based Surveys

3. Select Behaviors/Actions for Standards

6. Establish Measures and Target Levels

8. Update Target Levels and Measures

1. Identify Existing or Desired Service Encounter Sequence

• Describe the service encounter– Scripts– Blueprinting

2. Translate Customer Expectations into Behaviors and Actions

• Conduct marketing research to identify customer expectations

• Translate expectations into concrete specific behaviors and actions– Responsiveness: phones are

answered in three or fewer rings.– Access: location is open 7 days

a week

3. Select Behaviors and Actions for Standards

• Prioritize the behaviors and actions into those for which customer defined standards will be established.

4. Decide Whether Hard or Soft Standards are Appropriate

• Hard• Soft• Both

5. Develop Feedback Mechanisms for Measurement Standards

Capture the process from a customer’s point of view rather than the company’s

Aligning Company Processes with Customer Expectations

Customer Expectations

Customer Process Blueprint

Company Process Blueprint Company Sequential Processes

A B C D E F G H

10 Business Days ?New Card Mailed

Lost Card Reported

Report Lost Card Receive New Card

48 Hours

6. Establish Measures and Target Levels

• Benchmarking• Without this step a company

cannot determine if the standard has been met.

7. Track Measures Against Standards

• Gather data• Analyze data• Act on the information

8. Provide feedback about Performance to Employees

• Service requirements must be communicated through the organization.

• Determine the communication mechanisms

• How frequently will information be shared?

9. Periodically Update Target Levels and Measures

In order to keep up with customer expectations revise the target levels, measures, and customer requirements on a regular basis.

Importance/Performance MatrixHIGH

HIGH

Performance

10.0

8.0

7.0

9.0

LOW

8.0 9.0 10.0

Importance

Improve MaintainDelivers on promises specified in proposal/contract (9.49, 8.51)

Gets project within budget, on time (9.31, 7.84)Completes projects correctly, on time (9.29, 7.68)

Does whatever it takes to correct problems (9.26, 7.96)

Provides equipment that operates as vendor said it would (9.24, 8.14)

Gets price we originally agreed upon (9.21, 8.64)

Takes responsibility for their mistakes (9.18, 8.01)Delivers or installs on promised date (9.02, 7.84)

Tells me cost ahead of time (9.06, 8.46)

Gets back to me whenpromised (9.04, 7.63)

Service Performance Index

Service performance indexes are comprehensive composites of the most critical performance standards.

– Helps the company to understand the most important requirements of the customer.

– Links the service requirements to tangible and measurable aspects of the service.

– Companies use feedback to identify and improve service problems.– Companies should develop reward and recognition systems based

on performance.

Benefits of Customer Satisfaction and Service

Encourages repeat patronage and loyalty

Enhances/promotes positive WOM

Lowers costs of attracting new customers

Customer Satisfaction

and Service Quality

Insulates customers from competition

Can create sustainable advantage

Reduces failure costs

Return on Quality (ROQ) ROQ approach is based on four assumptions:

1. Quality is an investment

2. Quality efforts must be financially accountable

3. It’s possible to spend too much on quality

4. Not all quality expenditures are equally valid

Implication: Quality improvement efforts may benefit from being related to productivity improvement programs

Service Quality

• Service quality is the customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.

• Process and outcome quality are both important.

Evidence of Service from theCustomer’s Point of View

People

Process PhysicalEvidence

People Contact employees Customer him/herself Other customers

ProcessOperational flow of activities Steps in process Flexibility vs. standard Technology vs. human

Physical Evidence Tangible communication Servicescape Guarantees Technology

SatisfactionRelationship

Reliability EmpathyAssurance TangiblesResponsiveness Price

Delivers on timeReturns calls quicklyKnows my industry

Delivers by WednesdayReturns calls in two hoursKnows strengths of my competitors

Requirements:Abstract

Concrete

Dig deeper

Dig deeper

Dig deeper

Diagnosticity:Low

High

General concepts

Dimensions

Behaviors and actions

Attributes

What Customers Expect:Getting to Actionable Steps

ValueSolution Provider

Building a Service Quality Information System

• Complaint analysis• Post-transaction surveys• Ongoing customer surveys• Customer advisory panels• Employee surveys/panels• Focus groups• Mystery shopping• Total market surveys• Capture of service operating data

How Customers Widen theService Performance Gap

• Lack of understanding of their roles

• Not being willing or able to perform their roles

• No rewards for “good performance”

• Interfering with other customers

• Incompatible market segments

Customer Roles in Service Delivery

Productive Resources

Contributors to Service Quality and Satisfaction

Competitors

Customers as Productive Resources

• customers can be thought of as “partial employees”– contributing effort, time, or other resources to the

production process

• customer inputs can affect organization’s productivity

• key issue:– should customers’ roles be expanded? reduced?

Services Production Continuum

1 2 3 4 5 6Gas Station Illustration1. Customer pumps gas and pays at the pump with automation2. Customer pumps gas and goes inside to pay attendant3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation5. Attendant pumps gas and customer goes inside to pay attendant6. Attendant pumps gas and attendant takes payment at the pump

Customer Production Joint Production Firm Production

Customers as Contributors toService Quality and Satisfaction

• Customers can contribute to:– their own satisfaction with the service• by performing their role effectively• by working with the service provider

– the quality of the service they receive• by asking questions• by taking responsibility for their own satisfaction• by complaining when there is a service failure

Importance of Other (“Fellow”) Customersin Service Delivery

• Other customers can detract from satisfaction:– disruptive behaviors– overly demanding behaviors– excessive crowding– incompatible needs

• Other customers can enhance satisfaction:– mere presence– socialization/friendships– roles: assistants, teachers, supporters, mentors

Overcoming Customers’ Reluctance to Accept Changes in Environment & Behavior

• Develop customer trust• Understand customers’ habits and expectations• Pretest new procedures and equipment• Publicize the benefits• Teach customers to use innovations &

promote trial• Monitor performance, continue

to seek improvements

Customers as Competitors

• customers may “compete” with the service provider• “internal exchange” vs. “external exchange”• internal/external decision often based on: – expertise capacity– resources capacity– time capacity– economic rewards– psychic rewards– trust– control

Strategies for Enhancing Customer Participation

Outcomes of Customer Satisfaction

• Increased customer retention

• Positive word-of-mouth communications

• Increased revenues