Chapter 14Improving Service Quality and ProductivityImportance of Productivity and Quality for Service Marketers Productivity Helps to keep costs down lower prices to develop market, compete better increase margins to permit larger marketing budgets raise profits to invest in service innovation May impact service experience (must avoid negatives) May require customer involvement, cooperationQuality Gain competitive advantage, maintain loyalty Increase value (may permit h
Improving Service Quality and Productivity
Importance of Productivity and Quality for Service Marketers Productivity
Helps to keep costs down lower prices to develop market, compete better increase margins to permit larger marketing budgets raise profits to invest in service innovation
May impact service experience (must avoid negatives) May require customer involvement, cooperationQuality
Gain competitive advantage, maintain loyalty Increase value (may permit higher margins) Improve profits
Perspectives on Service QualityTranscendental: Quality = excellence. Recognized only throughexperience
Product-Based: Quality is precise and measurable User-Based: ManufacturingBased: Value-Based:Quality lies in the eyes of the beholder Quality is conformance to the firms developed specifications Quality is a trade-off between price and value
Dimensions of Service Quality
Tangibles Reliability Responsiveness Assurance
competence, courtesy credibility security
Empathy access communication understanding of customer
Seven Service Quality Gaps (Fig. 14.1)Customer needs and expectations
1. Knowledge GapManagement definition of these needs
2. Standards GapTranslation into design/delivery specs
3. Delivery GapExecution of design/delivery specs
Advertising and sales promises
5. Perceptions GapCustomer perceptions of product execution
6. Interpretation GapCustomer interpretation of communications
Service GapCustomer experience relative to expectations
Prescriptions for Closing Service Quality Gaps(Table 14.3)
Knowledge: Learn what customers expect--conductresearch, dialogue, feedback
Standards: Specify SQ standards that reflect expectations Delivery: Ensure service performance matches specs-consider roles of employees, equipment, customers marketing promises delivery
Internal communications: Ensure performance levels match Perceptions:Educate customers to see reality of service
Interpretation: Pretest communications to make suremessage is clear and unambiguous.
Hard and Soft Measures of Service Quality
Hard measures refer to standards and measures that canbe counted, timed or measured through audits typically operational processes or outcomes e.g. how many trains arrived late?
Soft measures refer to standards and measures that cannoteasily be observed and must be collected by talking to customers, employees or others e.g. SERVQUAL, surveys, and customer advisory panels.
Control charts are useful for displaying performance overtime against specific quality standards.
Hard Measures of Service Quality
Control charts to monitora single variable
Service quality indexes Root cause analysis(fishbone charts)
Composition e of FedExs Service Quality Index (SQI) (Table 14.4)Failure TypeWeighting X Factor1 5 1 5 1 1 10 10 10 5 5 1
No of Daily = Incidents Points
Late Delivery Right Day Late Delivery Wrong Day Tracing request unanswered Complaints reopened Missing proofs of delivery Invoice adjustments Missed pickups Lost packages Damaged packages Aircraft Delays (minutes) Overcharged (packages missing label) Abandoned calls
Total Failure Points (SQI) = XXX,XXX
Control Chart: Percent of Flights Leaving within 15 Minutes of Schedule (Fig. 14.2)
100% 90% 80% 70% 60%J F M A M J J A S O N D
Tools to Address Service Quality Problems
Fishbone diagrams: A cause-and-effect diagram to identifypotential causes of problems.
Pareto charts: 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: A visualization of service delivery. It allowsone to identify fail points in both the frontstage and backstage.
Cause and Effect Chart for Airline Departure Delays (Fig. 14.3)Facilities, EquipmentArrive late Oversized bags
Frontstage Front-Stage Personnel Personnel
Delayed check-in Gate agents Aircraft late to procedure gate cannot process Mechanical fast enough Acceptance of late Failures passengers Late/unavailable Late pushback airline crew
Delayed Departures Other CausesWeather Air traffic Late food service Late baggage Late fuelMaterials, Materials, Supplies Supplies
Late cabin cleaners
Poor announcement of departures Weight and balance sheet late
Analysis of Causes of Flight Departure Delays (Fig. 14.4)4.9 % 19% 9.5% 33.3% 53.3% Washington Natl. Late weight and balance sheet Late cabin cleaning / supplies Other 33.3%
15.3% 15.4% 23.1%
All stations, excluding Chicago-Midway Hub 11.7%
8.7% 11.3% 15%
Late passengers Waiting for pushback Waiting for fueling
Return on Quality (ROQ)
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 benefitbeing related to productivity improvement programs
When Does Improving Service Reliability Become Uneconomical? (Fig. 14.5)Satisfy Target Customers Through Service Recovery Optimal Point of Reliability: Cost of Failure = Service Recovery Satisfy Target Customers Through Service Delivery as Planned
D InvestmentLarge Cost, Small Improvement
Small Cost, Large Improvement
Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.
Productivity in a Service Context
Productivity measures amount of output produced relativeto the amount of inputs.
Improvement in productivity means an improvement in theratio of outputs to inputs.
Intangible nature of many service elements makes it hard
to measure the productivity of service firms, especially for information based services.
Efficiency, Effectiveness, and Productivity
Efficiency: comparison to a standard--usually time-based(e.g., how long employee takes to perform specific task) Problem: focus on inputs rather than outcomes May ignore variations in quality or value of service
Effectiveness: degree to which firm is meeting its goals Cannot divorce productivity from quality/customer satisfaction
Productivity: financial valuation of outputs to inputs Consistent delivery of outcomes desired by customers should
command higher prices
Measuring Service Productivity
Traditional measures of service output tend to ignorevariations in quality or value of serviceefficiency but not effectiveness. That is, they focus on outputs rather than outcomes, and stress
Firms that are more effective in consistently delivering Measures with customers as denominator include: profitability by customer capital employed per customer shareholder equity per customer
outcomes desired by customers can command higher prices. Furthermore, loyal customers are more profitable.
Questions to Ask 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?
Operations-driven vs. Customer-driven Actions to Improve Service ProductivityOperations-driven strategies
Control costs, reduce waste Change timing of Set productive capacity to customer demandmatch average demand
Automate labor tasks Upgrade equipment andsystems
Involve customers more inproduction parties
Train employees Leverage less-skilled
Ask customers to use third
employees through expert systems
Backstage and Frontstage Productivity Changes: Implications for Customers
Backstage improvements can ripple to the front stage andaffect customersstatements. e.g., new printing peripherals may affect appearance of bank
Front-stage productivity enhancements are especiallyvisible in high contact services. Some may just require passive acceptance by customers Others require customers to change their scripts and behavior.
Overcoming Customers Reluctance to Accept Changes in Environment and Behavior
Develop customer trust Understand customers habits and expectations Pretest new procedures and equipment Publicize the benefits Teach customers to use innovations and promote trial Monitor performance, continue to seek improvements
Six Sigma Methodology to Improve and Redesign Customer Service ProcessesProcess Improvement Process Design/RedesignDefine Measure Analyze Improve
Identify the problem Define requirements Set goals Validate problem/process Refine problem/goal Measure key steps/inputs Develop causal hypothesis Identify root causes Validate hypothesis Develop ideas to measure root causes Test solutions Measure results Establish measures to maintain performance Correct problems if needed
Identify specific or broad problems Define goal/change vision Clarify scope & customer requirements Measure performance to requirements Gather process efficiency data Identify best practices Assess process design Refine requirements