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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

Text of sevice quality productivity

Chapter 14

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

CUSTOMER

1. Knowledge GapManagement definition of these needs

MANAGEMENT

2. Standards GapTranslation into design/delivery specs

3. Delivery GapExecution of design/delivery specs

4. I.C.Gap

Advertising and sales promises

5. Perceptions GapCustomer perceptions of product execution

6. Interpretation GapCustomer interpretation of communications

7.

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)

Pareto analysis

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

Month

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

ProcedureProcedures

Customers Customers

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

Backstage Personnel

Information

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%

23.1%

All stations, excluding Chicago-Midway Hub 11.7%

23.1%

8.7% 11.3% 15%

Newark

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

from

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

100%

Service Reliability

A

B

C

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

Customer-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

Control

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