Ch4: Improving SERVICE

QUALITY and PRODUCTIVITY

 Service Quality, Productivity, and
Profitability
• Quality focuses on the benefits created for
customers;
• Productivity addresses financial costs incurred
by firm
• Service quality  satisfaction  profitability
• Productivity  reducing costs  profitability
• The relationship productivity and service
quality is more complex
• The general notion of a service productivity–
customer satisfaction trade-off
Direct and indirect effects
 Service quality vs satisfaction
• satisfaction is generally viewed as a broader concept,
• whereas service quality focuses specifically on dimensions
of service.
• Service quality is a focused evaluation that reflects the
customer’s perception of reliability, responsiveness,
assurance, empathy and tangibles.
• Satisfaction, on the other hand, is more inclusive: it is
influenced by
– perceptions of service quality,
– product quality and price
– as well as situational factors
– and personal factors.
• Identifying and correcting service quality Problems  gaps
model
Dimensions of Service Quality

Tangibles • Appearance of physical elements

• Dependable and accurate

Reliability performance

Responsiveness • Promptness; helpfulness

• Competence, courtesy, credibility,

Assurance security

• Easy access, good communication,

Empathy understanding of customer
Suggestions for Closing the
Six Service Quality Gaps
Suggestions for Closing the
Six Service Quality Gaps
Suggestions for Closing the
Six Service Quality Gaps
Suggestions for Closing the
Six Service Quality Gaps
 Measures of Service Quality

Soft Measures Hard Measures

 Not easily observed, must be  Can be counted, timed, or
collected by talking to measured through audits
customers, employees or others
 Typically operational processes
 Provide direction, guidance and or outcomes
feedback to employees on ways
to achieve customer satisfaction  Standards often set with
reference to percentage of
 Can be quantified by measuring occasions on which a particular
customer perceptions and measure is achieved
beliefs

 e.g., SERVQUAL, surveys, and

customer advisory panel
 Key Objectives of Effective Customer
Feedback Systems
1) Assessment and Benchmarking of Service
Quality and Performance. “How satisfied are our
customers?”
2) Customer-Driven Learning and Improvements
• “What makes our customers happy or unhappy?”
• Strengths and weaknesses
3) Creating a Customer-Oriented Service Culture
The “voice of the customer” inside the organization
Use a Mix of Customer Feedback Collection Tools
– Total market survey (including competitors)
– Annual survey on overall satisfaction
– Transactional survey
– Service feedback cards and messages
– Mystery shopping
– Unsolicited feedback (e.g., complaints)
– Focus group discussions
– Service reviews
– Online reviews and discussions
1) A monthly Service Performance Update
2) A quarterly Service Performance Review
3) An annual Service Performance Report
• Representativeness and reliability are required
for quantitative feedback
Hard Measures of Service Quality

• Service quality indexes

– Embrace key activities that have an impact on customers

• Control charts to monitor a single variable

– Offer a simple method of displaying performance over time
against specific quality standards
– Enable easy identification of trends
– Are only good if data on which they are based are accurate

• FedEx: One of the first service companies to

understand the need for an index of service quality that
embraced all the key activities that affect customers
 Hard measures
• FedEx: single, composite index on a frequent basis
approach quality measurement from the baseline of
zero failures
It’s only when you examine the types of failures, the
number that occur of each type, and the reasons why,
that you begin to improve the quality of your service
• How can we show performance on hard measures?
• Control charts are a simple method of displaying
performance over time against specifi c quality
standards
Control Chart for Departure Delays
Homework: case study
Next slides are not included in your
assignment
 Tools to Analyze and Address Service
Quality Problems
• Root Cause Analysis: The Fishbone Diagram

• Managers and staff brainstorm all the possible reasons

that might cause a specific problem.
• The reasons are then grouped into one of five
categories—Equipment, Manpower (or People),
Material, Procedures, and Other—
• To apply this tool better to service organizations, we
show an extended framework that has eight rather
than five groupings
• Combined with Pareto Analysis
• Pareto Analysis
• In the airline example, findings showed that
88% of late departures from the airports
served by the company were caused by only
four of all the possible factors (15%)
• In fact, more than half the delays were caused
by a single factor: acceptance of late
passengers
 Blueprinting—A Powerful Tool for
Identifying Fail Points
• Blueprints allow us to probe further and
identify where exactly in a service process the
problem was caused
 reTurn On QualiTy
assumptions
(1) quality is an investment,
(2) quality efforts must make sense financially,
(3) it is possible to spend too much on quality,
(4) not all quality expenditures are equally
justified
• Methods that can help to identify the
improvements with the greatest impact on
customer satisfaction and purchase behaviors
include
– the importance-performance matrix,
– multiple regression analyses
– marginal utility analysis (MUA): uses direct
questioning of customers on their improvement
priorities (e.g., “if you could make an improvement . . .
which four would be your top priorities ?”).
The importance-performance matrix
 When Does Improving Service
Reliability Become Uneconomical?

Satisfy Target Customers

100% Through Service
Recovery
Service Reliability

Optimal Point of
Reliability: Cost of Failure
= Service Recovery

Satisfy Target Customers

Through Service Delivery
as Planned
A B C D

Investment
Small Cost, Large Cost,
Large Improvement Small Improvement
 DeFininG anD MeaSurinG
PrODucTiviTy
• Simply defined, productivity measures the
amount of output produced relative to the
amount of input used.
• How to improve productivity?
 Service Productivity, Efficiency, and
Effectiveness
• Efficiency is a measure of how well you do
things and involves comparison to a standard
that is usually time-based
 Efficiency is doing the thing right
• Effectiveness can be defined as the degree to
which an organization meets its goals and
desired outcomes, which would typically
include customer satisfaction.
 Effectiveness is doing the right thing
• Classical techniques of productivity and
efficiency measurement focus on outputs and
benchmarking rather than outcomes.
 iMPrOvinG Service PrODucTiviTy
• “better, faster, and cheaper.”
 Generic Productivity
Improvement Strategies

 Typical strategies to improve service productivity:

– Careful control of costs – Teaching employees how to
work more productively
– Efforts to reduce wasteful use
of materials or labor – Broadening variety of tasks that
service worker can perform
– Matching productive capacity to
average demand levels – Installing expert systems that
allow paraprofessionals to take
– Replacing workers by
on work previously performed
automated machines or self-
by professionals
service technologies

 Although improving productivity can be approached

incrementally, major gains often require redesigning entire
processes
 Customer-Driven Strategies to
Improve Productivity

• 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
Implications of Backstage and Front-
Stage Changes for Customers

• Backstage changes may impact customers

– Keep track of proposed backstage changes, and prepare
customers for them
- e.g., 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 impact on customers and address customer
resistance to changes
A Note of Caution on Mere Cost
Reduction Strategies

• Without new technology, firms improve service

productivity by eliminating waste and reducing labor
costs

• Multitasking can reduce productivity

• Excessive pressure breeds discontent and frustration

among customer contact personnel

• It is often better to search for service process redesign

opportunities that lead to quantum leaps in
improvements in productivity and service quality at the
same time
 Systematic Approaches to Improving
Service
Quality and Productivity
• Total Quality Management (TQM)
• ISO 9000 Certification
• Six Sigma
• Define-Measure-Analyze-Improve-Control
(DMAIC)
DMAIC
• The Malcolm Baldrige model with the goal of
promoting best practices in quality
management and recognizing and publicizing
quality achievements among U.S. firms.