1 Service Quality

2 What is service quality? u Q is conformance to specifications u Q is the degree to which customer expectations are satisfied u Q means doing it right the first time u Q is the fair exchange of price and value u Q is consistent attention to detail u Q is the philosophy of the organization to excell

3 What is service quality? Quality DesignConformance StrategicTactical Fitness for use A budget hotel that conforms to design requirements is a quality hotel. Luxury ≠ quality

4 The quality challenge u Subjectivity in the customer’s perception of quality –Customer’s perception of quality can be based on one or a small number of features of the service package –The rating of the service will vary by individual –Quality is often judged in relation to price

5 The quality challenge u Simultaneous production and consumption –Multiple customer contact points –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 may disrupt Q for other customers –Difficult to measure –Difficult to correct mistakes

6 Dimensions of Service Quality u Reliability: Perform promised service dependably and accurately. Example: deliver newspapers at same time each day. –Doing it right the first time. –The firm honoring its promises u Responsiveness: Willingness to help customers promptly (timeliness). Example: avoid keeping customers waiting for no apparent reason.

7 Dimensions of Service Quality u Assurance: Ability to convey trust and confidence. –Competence: required skills –Credibility: believability, honesty u Empathy: Ability to be approachable. Example: being a good listener. –Courtesy: politeness, respect –Communication: informing the customer in a language they can undertsand u Tangibles: Physical facilities and facilitating goods. Example: cleanliness.

8 Perceived Service Quality Word of mouth Personal needs Past experience Expected service Perceived service Service Quality Dimensions Reliability Responsiveness Assurance Empathy Tangibles Service Quality Assessment 1. Expectations exceeded PS>ES (Quality surprise) 2. Expectations met ES~PS (Satisfactory quality) 3. Expectations not met PS<ES (Unacceptable quality)

9 Gaps in Service Quality Word -of-mouth communications Personal needsPast experience Expected service External communications to consumers Perceived service Service delivery (including pre- and post-contacts) Translation of perceptions into service quality specifications Management perceptions of consumer expectations GAP 5 GAP 3 GAP 2 GAP 1GAP 4 Customer Provider

10 Gaps in Service Quality u GAP 1: management doesn’t understand customer expectations –improve market research –Reduce levels in hierarchy –Communicate with contact employees u GAP 2:lack of mngt committment to Q; infeasibility of meeting expectations –Set goals –Standardize service delivery

11 Gaps in Service Quality u GAP 3: service performance gap; due to lack of teamwork, insufficient training, wrong employee selection, wrong job design. u GAP 4: discrepancy between service delivery and expectations of customers formed through advertising etc. –Exaggerated promises –Lack of info provided to contact personnel

12 Gaps in Service Quality u GAP 5: discrepency between customers’ expected service and percieved service. u Measuring service quality (reliability, responsiveness, assurance, empathy, tangibles) –SERVQUAL instrument to measure the 5 dimensions of service quality »First part measures expectations »Second part measures perceptions

13 Scope of Service Quality u Content: are standard procedures being followed? u Process: is the sequence of events logical and well coordinated? (Check lists, drill practices) u Structure: are physical facilities and organizational design adequate? (personnel + equipment) –Doctors’ practice: X-ray, lab, ratio of nurses to doctors)

14 Scope of Service Quality u Outcome: the end result; quality of output. Is the customer satisfied? –Number of customer complaints –infection rate per 1000 surgeries –Satisfaction of employees with their own performance u Impact: long range effect of service on customer –Police – security –Health – life expectancy, infant mortality rate –Education – literacy rate –Commerce – number of items sold

15 Quality Service by Design u Q cannot be inspected into a product or service u Q cannot be added on Q must be designed into the service

16 Quality Service by Design u Quality in the Service Package u Taguchi Methods (Robustness) u Poka-yoke (fail-safing) u Quality Function Deployment

17 Quality in the Service Package u Explicitly define in measurable terms what constitutes conformance requirements for each element of the service package. u Philip Crosby’s definition: ‘conformance to requirements’ u Example: quality requirements in budget hotel

18 Taguchi Methods u Genichi Tagushi: robust design to ensure proper functioning under adverse conditions. u Q is achieved by consistently meeting design specifications u Budget hotel example: use computer to notify housekeeping; uniform treatment of guests, consistent preparation of rooms.

19 Poka-Yoke - Failsafing u Shigeo Shingo: errors happen not because of incompetence but because of ‘lack of attention’ u So, use in-process mechanisms to foolproof rather than inspection u Poka-Yoke for customer as well as service provider

20 Classification of Service Failures Server Errors Task: Doing work incorrectly (french-fry scoop, checklist) Treatment: Failure to listen to customer (enter customer eye-color) Tangible: Failure to clean facilities (mirror for employees, automatic spell- check) Customer Errors Preparation: Failure to bring necessary materials (filling forms) Encounter: Failure to follow instructions (height bar at Disney, frame for carry-on luggage) Resolution: Failure to learn from experience (tray-return stands, trash cans at exit; beep from computer)

21 Quality Function Deployment u House of quality translates customer satisfaction into measurable specifications for service design 1. Establish aim: assess competitive position 2. Determine customer expectations 3. Determine service elements 4. Determine strength of relationship between service elements (roof)

22 Quality Function Deployment 5. Determine assocation between customer expectations and service elements (0-9) 6. Weigh the service elements 7. Rank service element improvement difficulty 8. Assess competition 9. Strategic assessment and goal setting

23 House of Quality

24 Achieving Service Quality u Cost of Quality (Juran) u Service Process Control u Statistical Process Control (Deming) u Unconditional Service Guarantee

25 Costs of Service Quality Failure costs Detection costs Prevention costs External failure: Process control Quality planning Customer complaints Peer review Training program Warranty charges Supervision Quality audits Liability insurance Customer comment card Data acquisition and analysis Legal judgments Inspection Preventive maintenance Loss of repeat service Supplier evaluation Recruitment and selection Internal failure: Scrap Rework Recovery: Expedite Labor and materials

26 Service Process Control (feedback mechanism) Resources Identify reason for nonconformance Establish measure of performance Monitor conformance to requirements Take corrective action Service concept Customer input Customer output Service process

27 Control Chart of Departure Delays expected Lower Control Limit

28 Unconditional Service Guarantee: Customer View u Unconditional (L.L. Bean, no questions asked) u Easy to understand and communicate (free pizza if late delivery) u Meaningful (Domino’s Pizza, rebate if late delivery) u Easy to invoke (no forms, Toys R Us price guarantee) u Easy to collect (on the spot)

29 Unconditional Service Guarantee: Management View u Focuses on customers (British Airways) u Sets clear standards (FedEx by 10:30 am) u Guarantees feedback (agency rings customer the next day) u Promotes an understanding of the service delivery system (identify fail points before setting guarantees) u Builds customer loyalty

30 Customer Satisfaction u All customers want to be satisfied. u Customer loyalty is only due to the lack of a better alternative u Giving customers some extra value will delight them by exceeding their expectations and ensure their return

31 Expressing Dissatisfaction Dissatisfaction occurs Action No Action Public Action Private Action Seek redress directly from the firm Take legal action Complaint to business, private, or governmental agencies Stop buying the product or boycott the seller Warn friends about the product and /or seller

32 Customer Feedback and Word- of-Mouth u 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% of them have serious problems. u The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers. u About 60% of the complainers would stay as customers if their problems was resolved and 95% would stay if the problem was resolved quickly. u A dissatisfied customer will tell between 10 and 20 other people about their problem. u A customer who has had a problem resolved by a company will tell about 5 people about their situation.

33 Number of People Told Based on Level of Dissatisfaction

34 Action Taken Based on Level of Dissatisfaction

35 Approaches to Service Recovery u Case-by-case addresses each customer’s complaint individually but could lead to perception of unfairness (persistent vs reasonable complainers). u Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating. Consistent and timely. u Early intervention attempts to fix problem before the customer is affected, or notifies customer. u Substitute service allows rival firm to provide service but could lead to loss of customer.