1. Quality and Productivity
Chapter 14:
Improving Service
Quality and Productivity

2. Overview of Chapter 14
Integrating service quality and productivity strategies
What is service quality?
The Gaps Model—a conceptual tool to identify and correct service quality problems
Measuring and improving service quality
Defining and measuring productivity
Improving service productivity

3. Integrating Service Quality and Productivity Strategies

4. Integrating Service Quality and Productivity Strategies
Quality and productivity are twin paths to creating value for both customers and companies
Quality focuses on the benefits created for customers; productivity addresses financial costs incurred by firm
Importance of productivity:
Keeps costs down to improve profits and/or reduce prices
Enables firms to spend more on improving customer service and supplementary services
Secures firm’s future through increased spending on R&D
May impact service experience—marketers must work to minimize negative effects, promote positive effects

5. What Is Service Quality?

6. Different Perspectives of Service Quality
Quality = Excellence. Recognized only through experience
Transcendent:
Product-based:
Quality is precise and measurable
User-based:
Quality lies in the eyes of the beholder
Manufacturing-based:
Quality is in conformance to the firm’s developed specifications
Value-based:
Quality is a trade-off between price and value

7. Components of Quality: Manufacturing-based
Performance: Primary operating characteristics
Features: Bells and whistles
Reliability: Probability of malfunction or failure
Conformance: Ability to meet specifications
Durability: How long product continues to provide value to customer
Serviceability: Speed, courtesy, competence
Esthetics: How product appeals to users
Perceived Quality: Associations such as brand name

8. 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

9. Capturing the Customer’s Perspective of Service Quality: SERVQUAL (1)
Survey research instrument based on premise that customers evaluate firm’s service quality by comparing
Their perceptions of service actually received
Their prior expectations of companies in a particular industry
Poor quality
Perceived performance ratings < expectations
Good quality
Perceived performance ratings > expectations

10. How Customers Might Evaluate Online Businesses: Seven Dimensions of E-S-QUAL
Accessibility : Is site easily found?
Navigation: How easy is it to move around the site?
Design and presentation: Image projected from site?
Content and purpose: Substance and richness of site
Currency and accuracy
Responsiveness:Firm’s propensity to respond to s
Interactivity, customization, and personalization
Reputation and security
Source:Shohreh A. Kaynama (2000), “ A Conceptual Model to Measure Service Quality of Online Companies: E-qual, in Developments in Marketing Science,” Harlan E. Spotts and H. Lee Meadows, eds., Proceedings of the Academy of Marketing Science, Vol. 22, pp. 46–51. For more information pertaining to online service quality see A. Parasuraman, Vlerie A. Zeithaml, and Arvind Malhotra (2005), “E-S-QUAL: A Multiple-Item Scale for Assessing Electronic Service Quality.” Journal of Service Research, Vol. 7. issue 3. pp. 213–234.

11. 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 quality—halo effect
Process factors: Customers’ feelings

12. The Gaps Model—A Conceptual Tool to Identify and Correct Service Quality Problems

13. Seven Service Quality Gaps (Fig 14.3)
CUSTOMER
Customer needs and expectations
1. Knowledge Gap
MANAGEMENT
Management definition of these needs
2. Standards Gap
Translation into design/delivery specs
4. Internal Communications Gap
3. Delivery Gap
Execution of design/delivery specs
Advertising and sales promises 4.
5. Perceptions Gap
6. Interpretation Gap
Customer perceptions of service execution
Customer interpretation of communications
7. Service Gap
Customer experience relative to expectations

14. Prescriptions for Closing the Seven Service Quality Gaps (1) (Table 14
Knowledge gap: Learn what customers expect
Understand customer expectations
Improve communication between frontline staff and management
Turn information and insights into action
Standards gap: Specify SQ standards that reflect expectations
Set, communicate, and reinforce customer-oriented service standards for all work units
Measure performance and provide regular feedback
Reward managers and employees

15. Prescriptions for Closing the Seven Service Quality Gaps (2) (Table 14
Delivery gap: Ensure service performance meets standards
Clarify employee roles
Train employees in priority setting and time management
Eliminate role conflict among employees
Develop good reward system
Internal communications gap: Ensure that communications promises are realistic
Seek comments from frontline employees and operations personnel about proposed advertising campaigns
Get sales staff to involve operations staff in meetings with customers
Ensure that communications sets realistic customer expectations

16. Prescriptions for Closing the Seven Service Quality Gaps (3) (Table 14
Perceptions gap: Educate customers to see reality of service quality delivered
Keep customers informed during service delivery and debrief after delivery
Provide physical evidence
Interpretation gap: Pretest communications to make sure message is clear and unambiguous
Present communication materials to a sample of customers in advance of publication
Service gap: Close gaps 1 to 6 to meet customer expectations consistently

17. Measuring and Improving Service Quality

18. Soft and Hard Measures of Service Quality
Soft measures—not 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 measures—can 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

19. Soft Measures of Service Quality
Key customer-centric SQ measures include:
Total market surveys, annual surveys, transactional surveys
Service feedback cards
Mystery shopping
Analysis of unsolicited feedback—complaints and compliments, focus group discussions, and service reviews
Ongoing surveys of account holders to determine satisfaction in terms of broader relationship issues
Customer advisory panels offer feedback/advice on performance
Employee surveys and panels to determine:
Perceptions of the quality of service delivered to customers on specific dimensions
Barriers to better service
Suggestions for improvement

20. Hard Measures of Service Quality
Control charts to monitor a single variable
Offer a simple method of displaying performance over time against specific quality standards
Are only good if data on which they are based is accurate
Enable easy identification of trends
Service quality indexes
Embrace key activities that have an impact on customers

21. Composition of FedEx’s Service Quality Index—SQI (Table 14.4)
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 1 5 10
Failure Type
Total Failure Points (SQI) =
Weighting Factor
XXX,XXX
Daily Points X
Number of Incidents =

22. 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

23. Tools to Analyze and Address Service Quality Problems (Appendix)
Total Quality Management (TQM)
ISO 9000
Comprises requirements, definitions, guidelines, and related standards to provide an independent assessment and certification of a firm’s 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

24. Cause-and-Effect Chart for Flight Departure Delays (Fig 14.5)
Facilities,
Equipment
Frontstage
Personnel
Procedures
Front-Stage
Procedures
Personnel
Aircraft late to gate
Gate agents cannot process
fast enough
Delayed check-in procedure
Arrive late
Oversized bags
Mechanical
Failures
Late pushback
Acceptance of late passengers
Customers
Customers
Late/unavailable
airline crew
Delayed
Departures
Late food service
Late cabin cleaners
Other Causes
Poor announcement of departures
Late fuel
Weather
Air traffic
Late baggage
Weight and balance sheet late
Materials,
Supplies
Backstage
Personnel
Information
Materials,
Supplies

25. All stations, excluding
Case: Analysis of Causes of Flight Departure Delays
4.9 %
All stations, excluding
Chicago-Midway Hub
15.3%
23.1%
19%
33.3%
15.4%
11.7%
9.5%
8.7%
23.1%
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 fuelling
Other

26. Blueprinting
Depicts sequence of front-stage interactions experienced by customers plus supporting backstage activities
Used to identify potential fall points—where 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

27. Six Sigma Methodology to Improve and Redesign Service Processes
Process Improvement
Process Design/Redesign
Define
Identify the problem
Define requirements
Set goals
Identify specific or broad problems
Define goal/change vision
Clarify scope and customer requirements
Measure
Validate problem/process
Refine problem/goal
Measure key steps/inputs
Measure performance to requirements
Gather process efficiency data
Analyze
Develop causal hypothesis
Identify root causes
Validate hypothesis
Identify best practices
Assess process design
Refine requirements
Improve
Develop ideas to measure root causes
Test solutions
Measure results
Design new process
Implement new process, structures, and systems
Control
Establish measures to maintain performance
Correct problems as needed
Establish measures and reviews to maintain performance

28. 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

29. 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
It’s 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

30. When Does Improving Service Reliability Become Uneconomical. (Fig 14
Satisfy Target Customers through Service Recovery
100%
Optimal Point of Reliability: Cost of Failure = Service Recovery
Service Reliability
Satisfy Target Customers through Service Delivery as Planned A B C D
Investment
Small Cost,
Large Improvement
Large Cost,
Small Improvement
Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.

31. Defining and Measuring Productivity

32. 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

33. 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

34. 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

35. Improving Service Productivity

36. 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?

37. 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 labor
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 ? ? ?

38. Improving Service Productivity: (1) Operations-driven Strategies
Control costs, reduce waste
Set productive capacity to match average demand
Automate labor 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

39. Improving Service Productivity: (2) Customer-driven Strategies
Change timing of customer demand
By shifting demand away from peaks, managers can make better use of firm’s productive assets and provide better service
Involve customers more in production
Get customers to self-serve
Encourage customers to obtain information and buy from firm’s corporate websites
Ask customers to use third parties
Delegate delivery of supplementary service elements to intermediary organizations

40. 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 behavior
Must consider impacts on customers and address customer resistance to changes
Better to conduct market research first if changes are substantial

41. A Caution on Cost Reduction Strategies
In absence of new technology, most attempts to improve service productivity seek to eliminate waste and reduce labor costs
Workers who try to do several things at once may perform each task poorly
Excessive pressure breeds discontent and frustration among customer contact personnel, who are caught between:
Meeting customer needs
Achieving management's productivity goals
Better to search for service process redesign opportunities that lead to
Improvements in productivity
Simultaneous improvement in service quality
See Service Perspectives 14.2: Biometrics

42. Summary of Chapter 14: Improving Service Quality and Productivity (1)
Quality and productivity need to be considered jointly in marketing services
Service quality is a combination of manufacturing-based components of quality and service-based components
SERVQUAL is used to measure customer perceptions of service quality and the dimensions are:
Credibility
Security
Access
Communication
Understanding the customer
Tangibles
Reliability
Responsiveness
Competence
Courtesy

43. Summary of Chapter 14: Improving Service Quality and Productivity (2)
Research consolidated service quality dimensions into five
Tangibles
Reliability
Responsiveness
Competence
Courtesy
The GAPS model is a tool to diagnose problems in service design and delivery. Service gap is the most critical and can only be closed if the other six gaps are closed
Both soft and hard measures used to measure service quality

44. Summary of Chapter 14: Improving Service Quality and Productivity (3)
Tools used to analyze and address service quality problems:
Fishbone diagram
Pareto chart
Blueprinting
TQM
ISO9000
Malcolm-Baldrige Model
Six sigma
Measuring productivity in services is difficult—there is a need to determine when service reliability becomes uneconomical
Efficiency, productivity, and effectiveness need to be distinguished when measuring service quality

45. Summary of Chapter 14: Improving Service Quality and Productivity (4)
To improve service productivity, there are generic improvement strategies and customer-driven approaches
Customer-driven approaches to improving productivity include:
Changing timing of customer demand
Involving customers more in production
Asking customers to use third parties
Backstage and front-stage productivity changes both affect customers
Cost-reduction strategies should be used with caution as this may impact service quality negatively. A better way may be to look for service process redesign opportunities