Chapter 14:

Improving Service
Quality and
Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 1
Overview of Chapter 14

1.Integrating service quality and productivity

strategies
2.What is service quality?
3.The Gaps Model
4.Measuring and improving service quality
5.Defining and measuring productivity
6.Improving service productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 2
1. Integrating Service Quality and
Productivity Strategies

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 3
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:
o Keeps costs down to improve profits and/or reduce prices
o Enables firms to spend more on improving customer service
o Secures firm’s future through increased spending on R&D
o May impact service experience—marketers must work to minimize
negative effects, promote positive effects

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 4
2. What Is Service Quality?

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 5
Components of Quality:
Manufacturing-based View

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

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 6
Components of Quality:
Service-based View*

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

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 7
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
o Their perceptions of service actually received
o Their prior expectations of companies in a particular
industry*

• Poor quality
o Perceived performance ratings < expectations

• Good quality
o Perceived performance ratings > expectations

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 8
Capturing the Customer’s Perspective of
Service Quality: SERVQUAL (2)

• Developed primarily in context of face-to-face

encounters
• Scale contains 22 items reflecting five
dimensions of service quality
• Subsequent research has highlighted some
limitations of SERVQUAL
• See Research Insights 14.1: Measuring E-
Service Quality*

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 9
 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 e-
mails
• Interactivity, customization, and personalization
• Reputation and security

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 10
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

• Services high in credence characteristics may cause

consumers to use process factors and tangible cues as
proxies to evaluate quality—halo effect
o Process factors: Customers’ feelings

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 11
 3. The Gaps Model

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 12
Seven Service Quality Gaps
(Fig 14.3)

Customer needs and CUSTOMER

expectations

1. Knowledge Gap
MANAGEMENT
Management definition
of these needs

2. Standards Gap

Translation into
design/delivery specs
4. Internal Communications
3. Delivery Gap Gap

Execution of 4. Advertising and sales

design/delivery specs promises

5. Perceptions Gap 6. Interpretation Gap

Customer perceptions Customer interpretation
of service execution of communications
7. Service Gap
Customer experience
relative to expectations

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 13
Prescriptions for Closing the
Seven Service Quality Gaps (1) (Table 14.3)

1. Knowledge gap: Learn what customers expect

o Understand customer expectations
o Improve communication between frontline staff and
management
o Turn information and insights into action
– Standards gap: Specify SQ standards that reflect
expectations
o Set, communicate, and reinforce customer-oriented
service standards for all work units
o Measure performance and provide regular feedback
o Reward managers and employees

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 14
Prescriptions for Closing the
Seven Service Quality Gaps (2) (Table 14.3)

1. Delivery gap: Ensure service performance meets

standards
o Clarify employee roles
o Train employees in priority setting and time management
o Eliminate role conflict among employees
o Develop good reward system
– Internal communications gap: Ensure that
communications promises are realistic
o Seek comments from frontline employees and operations personnel
about proposed advertising campaigns
o Get sales staff to involve operations staff in meetings with customers
o Ensure that communications sets realistic customer expectations

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 15
Prescriptions for Closing the
Seven Service Quality Gaps (3) (Table 14.3)

1. Perceptions gap: Educate customers to see reality of

service quality delivered
o Keep customers informed during service delivery and debrief after
delivery
o Provide physical evidence
– Interpretation gap: Pretest communications to make
sure message is clear and unambiguous
o Present communication materials to a sample of customers in
advance of publication
– Service gap: Close gaps 1 to 6 to meet customer
expectations consistently

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 16
4. Measuring and Improving
Service Quality

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 17
Soft Measures of Service Quality

• Key customer-centric SQ measures include:

o Total market surveys, annual surveys, transactional surveys
o Service feedback cards
o Mystery shopping
o Analysis of unsolicited feedback
• 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:
o Perceptions of the quality of service delivered to customers on specific
dimensions
o Barriers to better service
o Suggestions for improvement

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 18
Hard Measures of Service Quality

• Control charts to monitor a single variable

o Offer a simple method of displaying performance over time against
specific quality standards
o Are only good if data on which they are based is accurate
o Enable easy identification of trends
• Service quality indexes*
o Embrace key activities that have an impact on customers

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 19
Composition of FedEx’s
Service Quality Index—SQI (Table 14.4)

Weighting Number of Daily

Failure Type Factor X
Incidents
=
Points
Late delivery—right day 1
Late Delivery—wrong day 5
Tracing request unanswered 1
Complaints reopened 5
Missing proofs of delivery 1
Invoice adjustments 1
Missed pickups 10
Lost packages 10
Damaged packages 10
Aircraft delays (minutes) 5
Overcharged (packages missing label) 5
Abandoned calls 1

Total Failure Points (SQI) = XXX,XXX

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 20
 Control Chart for Departure Delays
(Fig 14.4)

% Flights Departing Within

15 Minutes of Schedule

100%

90%

80%

70%

60%

J F M A M J J A S O N D

Month
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 21
Tools to Analyze and Address
Service Quality Problems

• Fishbone diagram
o Cause-and-effect diagram to identify potential causes of problems
• Pareto Chart
o 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
o Visualization of service delivery, identifying points where failures are
most likely to occur

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 22
Cause-and-Effect Chart for
Flight Departure Delays (Fig 14.5)

Facilities, Frontstage
Front-Stage Procedures
Procedures
Equipment Personnel
Personnel

Aircraft late to Gate agents cannot Delayed check-in

Arrive late gate process procedure
Oversized bags Mechanical fast enough Acceptance of late
Customers Failures passengers
Customers Late/unavailable
Late pushback airline crew
Delayed
Departures
Late food Late cabin
service cleaners
Other Causes Poor announcement of
Weather departures
Late baggage
Air traffic Weight and balance
Late fuel
sheet late

Materials,
Materials,
Supplies
Backstage Information
Supplies Personnel

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 23
Case: Analysis of Causes of
Flight Departure Delays

4.9
All stations, excluding
15.3% 23.1% %
Chicago-Midway Hub
19%
33.3%
15.4% 11.7%
9.5%
23.1% 8.7%
23.1% 33.3%
11.3% 53.3%

Newark 15% Washington Natl.

Late passengers Late weight and balance sheet

Waiting for pushback Late cabin cleaning/supplies
Waiting for Other
fuelling
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 24
Blueprinting (more in Ch. 8)

• 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
o Important first step in preventing service quality
problems

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 25
Tools to Analyze and Address
Service Quality Problems (Appendix)
• Total Quality Management (TQM)
• ISO 9000
o 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
o To promote best practices in quality management, and recognizing,
and publicizing quality achievements among U.S. firms
• Six Sigma
o Statistically, only 3.4 defects per million opportunities (1/294,000)
o Has evolved from defect-reduction approach to an overall business-
improvement approach

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 26
Return On Quality (ROQ)

• Assess costs and benefits of quality initiatives

o 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
o Implication: Quality improvement efforts may benefit from being related
to productivity improvement programs
o To determine feasibility of new quality improvement efforts, determine
costs and then relate to anticipated customer response
• Determine optimal level of reliability
o Diminishing returns set in as improvements require higher investments
o Know when improving service reliability becomes uneconomical

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 27
 When Does Improving Service Reliability
Become Uneconomical? (Fig 14.7)

100% Satisfy Target

Customers through
Service Recovery

Optimal Point of
Reliability: Cost of
Failure = Service
Recovery
Service Reliability

Satisfy Target
Customers through
Service Delivery as
A B C D Planned

Investment
Small Cost, Large Cost, Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
Large Improvement Small Improvement service that is delivered as planned.

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 28
5. Defining and Measuring
Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 29
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
o Difficult in most services because both input and output are hard
to define
o Relatively simpler in possession-processing services, as
compared to information- and people-processing services

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 30
Service Efficiency, Productivity, and
Effectiveness

• Efficiency: Involves comparison to a standard, usually

time-based (for example: how long employee takes to
perform specific task)
o Problem: Focus on inputs rather than outcomes
o May ignore variations in service quality/value
• Productivity: Involves financial valuation of outputs to
inputs
o Consistent delivery of outcomes desired by customers
should command higher prices
• Effectiveness: Degree to which firm meets goals
o Cannot divorce productivity from quality and customer
satisfaction

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 31
Measuring Service Productivity:
Variability Is a Major Problem

• Traditional measures of service output tend to ignore

variations in quality or value of service
o Focus on outputs rather than outcomes
o 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:
o Profitability by customer
o Capital employed per customer
o Shareholder equity per customer

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 32
6. Improving Service Productivity

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 33
Questions When Developing Strategies
to Improve Service Productivity

1. How to transform inputs into outputs

efficiently?
2. Will improving productivity hurt quality?
3. Will improving quality hurt productivity?
4. Are employees or technology the key to
productivity?
5. Can customers contribute to higher
productivity?

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 34
Generic Productivity
Improvement Strategies

• Typical strategies to improve service productivity:

o Careful control of costs at every step in process
o Efforts to reduce wasteful use of materials or labor
o Replacing workers by automated machines
o 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

? ? ?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 35
Long Waiting Times May Indicate Need
for Service Process Redesign (Fig 14.8)

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 36
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*

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 37
Improving Service Productivity:
(2) Customer-driven Strategies

• Change timing of customer demand

o 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
o Get customers to self-serve
o Encourage customers to obtain information and buy from firm’s
corporate websites
• Ask customers to use third parties
o Delegate delivery of supplementary service elements to intermediary
organizations

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 38
Backstage and Front-stage Productivity
Changes: Implications for Customers

• Backstage improvements can ripple to front and affect customers

o 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
o Some improvements only require passive acceptance, while others
require customers to change behavior
o Must consider impacts on customers and address customer
resistance to changes
o Better to conduct market research first if changes are substantial
• See Service Perspectives 14.1: Managing Customers’ Reluctance to
Change* (p. 439)

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 39
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:
o Meeting customer needs
o Achieving management's productivity goals
• Better to search for service process redesign
opportunities that lead to
o Improvements in productivity
o Simultaneous improvement in service quality
o See Service Perspectives 14.2: Biometrics

Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 40