Service Quality

Competing through Service Quality

Example of Service Industries

Health Care – Hospital, medical practice, dentistry, eye care Professional Services – Accounting, Legal, Architectural, IT Financial Services – Banking, Investment advising, Insurance Hospitality – Restaurant, Hotel/Motel, Bed & Breakfast - Ski resort, rafting

Example of Service Industries

Travel – Airlines, travel agencies, theme park Others – Hair styling, Pest control, Plumbing, Lawn maintenance, Counselling services, Health club

Each will survive only if the customers come back!

Evolution of QA Methods

Inspection

SPC

DOE

Taguchi

Quality Mgmt

Systems

Six Sigma

2000 1995 1990 1985 1975 1930 1950

Implications of Perishability of Service

It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Moments of Truth in Service

Each customer contact is called a “moment of truth” You have the ability to either satisfy or dissatisfy them when you contact them A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer

Customer Acceptance Criteria: Now it is the total experience

Criteria

1. Performance

2. Aesthetics

3. Special features, Convenience High tech

4. Safety

Product

Automobile

Everything works, fit & finish Ride, handing, grade of materials used Interior design, soft touch Gauge/control placement Cellular phone, CD player

Antilock brakes, airbags

Service

Auto Repair

All work done, at agreed price Friendliness, courtesy. Competency, quickness Clean work/waiting area Location, call when ready Computer diagnostics Separate waiting area

Customer Acceptance Criteria: Now it is the total experience

Criteria Product

Automobile

Service

Auto Repair

5. Reliability

6. Durability

7. Perceived quality

8. Service after sale

Infrequency of breakdowns

Useful life in miles, resistance To rust & corrosion

Top-rated car

Handling of complaints and/or requests for information

Work done correctly, ready when promised

Work holds up over time

Award-winning service department

Handing of complaints

The Dimensions of Service Quality

Reliability: Perform promised service dependably and accurately. Example: Receive postal mail at same time each day Responsiveness: Willingness to help customers promptly. Example: Avoid keeping customers waiting for no apparent reason.

The Dimensions of Service Quality

Assurance: Ability to convey trust and confidence. Example: Being polite and showing respect for customer. Empathy: Ability to be approachable. Example: Being a good listener. Tangibles: Physical facilities and facilitating goods. Example: Cleanliness See Kano model to prioritize customer needs.

Some sources of satisfaction are intangible The Tangibility Spectrum

Tangible Dominant

Intangible Dominant

Salt

Soft Drinks

Detergents Automobiles

Cosmetics Fast Food Outlets

Advertising Agencies Fast Food Outlets

Airlines Investment Management Consulting

Teaching

Customer Satisfaction

• All customers want to be satisfied • Customer loyalty is only due to the lack of a better

alternative • Giving customers some extra value may delight them if it

exceeds their expectations to cause their return • The Kano model is a good approach to address satisfaction

How Serious Customer Feedback and Word-of-Mouth

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

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

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

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

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

Ability to Detect Likelihood of Occurrence Degree of Severity Rating

Sure that the potential failure will be detected and prevented before reaching the next customer

Very remote possibility Customer will not at all observe the adverse effect

1

Almost sure that the potential failure will be detected and prevented before reaching the next customer

Low failure with supporting documents

Customer will experience slight discomfort 2

Less chance that the potential failure will reach the next customer undetected

Low failure without supporting documents

Customer will experience annoyance because of slight degradation of performance

3

Some controls may detect the potential from reaching the real customers

Occasional failures Customer dissatisfied due to reduce performance

4

Moderate chances that the potential failure will reach the next customer

Moderate failure rate with supporting documents

Customer is uncomfortable 5

Best “1”to Worst “10” ratings for Failure to Serve

Ability to Detect Likelihood of Occurrence Degree of Severity Rating

High chances that the potential failure will reach the next customer

Very remote possibility Warranty repairs 6

Little chance of potential failure being detected

High failure rate with supporting documents

High degree of customer dissatisfaction 7

Very little chance of potential failure being detected

High failure rate with supporting documents

Very high degree of customer dissatisfaction

8

Potential failure will not be detected

Occasional failures Negative impact on customers 9

Potential failure will not be detected

Moderate failure rate with supporting documents

Negative impact on customers 10

Best “1”to Worst “10” ratings for Failure to Serve

But many things can be done!

• Note the five dimensions of service quality – reliability, responsiveness, empathy, assurance and tangibles

• Use the service quality gap model (next slide) to diagnose quality problems

• Perform service quality function deployment • Use the Kano model to prioritize customer requirements • Construct a statistical process control chart to monitor • Develop unconditional service guarantees • Plan for service recovery • Perform a walk-through audit (WtA)

Seek out where the Service Quality Gap exists

Customer Perceptions

Service Delivery

Customer Expectations

Management Perceptions of Customer Expectations

Service Standards

Managing the Evidence

Conformance

Understanding the Customer

Service Design

Communications GAP 4

Customer Satisfaction GAP 5

Customer Marketing Research GAP 1

Conformance GAP 3

Design GAP 2

The best approach: Raise the Quality of Service by Design

• Quality in the Service Package Budget Hotels • Taguchi Methods (Robustness) – Customer’s notifying room

cleaning maids • Poka-yoke (fail-safing) – Height bar at amusement park • Quality Function Deployment & Kano model – House of Quality,

maximising satisfaction

Classification of Service Failures with Poka-Yoke Opportunities

Server Errors Task: Doing work incorrectly Treatment: Failure to listen to customer Tangible: Failure to wear clean uniform

Customer Errors Preparation: Failure to bring necessary materials (at ATMs) Encounter: Failure to follow system flow Resolution: Failure to signal service failure

Recall Six Sigma!

Six Sigma business process improvement projects have two objectives: Variability reduction: In the context of service the customer’s experience should meet or exceed her expectations and be consistent Loss Reduction: Any defective service delivery, material, time or monetary loss should be minimized

Case: Quality Monitoring (Control Metrics implemented at…

CCU began Six Sigma with extensive customer survey: - What all things did a customer want the Credit Union to provide

her - Which of these the CU would consider to be of strategic value to

its own vision/mission

This survey determined the required Dimensions of Teller Performance (QFD used): • Technical Knowledge/Skills – 35% • Service Quality/Professionalism – 40% • Teamwork – 25%

Service Quality/Professionalism Targets • Average at least 3 on all feedbacks – 45% • No more than two controllable negative complaints from

members per year – 35% • No more than one counselling session about dress code per year

– 20% Teamwork Targets • No more than two legitimate peer complaints per year – 50% • No more than 6 absences (occurrences) per year – 50%

Survey led to setting performance targets for Tellers

• Technical Knowledge/Skills Targets • Over/Short no more that $300.00 per year – 25% • No more than 12 times out per year – 25% • Balance within 30 minutes after last member has been helped

and performs necessary corrections – 10% • No more than 5 controllable errors per month – 30% • Average minimum teller transactions/month including Saturdays

– 10% • Controllable errors can include but are not limited to: Errors found on non-cash audits; Error on logs; Errors detected by member calls; Errors found during “out of balance” searches; All reversals; Repetitive errors; Force balancing

The Rubric

• Criteria • Unsatisfactory • Below Requirements • Meets Requirements • Exceeds Requirements • Significantly Exceeds Requirements

Some Good Practices in Service Quality Management

Cost of Quality (Juran) – Think prevention! Service Process Control – Monitor how you are performing Statistical Process Control (Deming – Variability reduction) Unconditional Service Guarantee (Kano)

Costs of Service Quality (Bank Example)

Failure costs External Failure • Loss of future business • Negative word-of-mouth • Liability insurance • Legal judgments • Inherent penalties Internal Failure • Scrapped forms • Rework Recovery • Expedite disruption • Labour and materials

Detection costs Process control • Peer review Supervision Customer comment card Inspection

Prevention costs Quality planning • Training program Quality audits Data acquisition and analysis Recruitment and selection Supplier evaluation

Minimise Optimise

Costs of Service Quality (Bank Example) This is a continuous version of DMAIC

Resources Service Process

Customer Input

Customer Output

Take corrective action

Identify reason for

nonconformance

Monitor conformance to

requirements

Establish measure of performance

Service concept