The customer is . . .

Anyone who receives the companys services, including:

external customers (outside the organization, business customers, suppliers, partners, end consumers) internal customers (inside the organization, e.g., other departments, fellow employees)

What is customer satisfaction?

a consumers post-purchase evaluation of the overall service experience (processes and outcomes) Purrrrrr ...an affective (emotional) state or feeling reaction.. the consumers needs, desires and expectations during the course of the service experience have been met or exceeded

Delighting the customer

Merely satisfying the customer is not enough. A customer is delighted when the service firm delivers something of value over and above what was expected. A delighted customer is more likely to remain loyal.
fantastic!

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

What factors influence customer satisfaction?

Expectations
what we expected from the service

Perceptions
what we perceived that we received from the service

Disconfirmation
difference between expectations and perceptions
dissatisfied, merely satisfied, delighted

Four types of expectations

Desired (ideal)
optimum level of performance, excellence

Equitable (deserved)
what customers feel they should receive

Predictive
what customers expect to happen

Adequate
minimum tolerable level

Factors Influencing Customer Satisfaction

Product quality Service quality Price Specific product or service features Consumer emotions Attributions for service success or failure Perceptions of equity or fairness Other consumers, family members, and coworkers Personal factors Situational factors experience word of mouth marketing communications explicit service promises awareness of competing brands implicit service promises tangibles, price

Quality

What Is Quality? The degree to which special causes of variation [defects] are controlled or eliminated from a system.*

Service Quality
The customers judgment of overall excellence of the service provided in relation to the quality that was expected. Service quality assessments are formed on judgments of: outcome quality interaction quality Customer Gap physical environment quality

The Five Dimensions of Service Quality(RATER scale)

Reliability Providing service as promised Dependability in handling customers service problems Performing services right and first time Providing services at the promised time Maintaining error-free records Assurance Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions Tangibles Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service

Empathy Giving customers individual attention Employees who deal with customers in a caring fashion Having the customers best interest at heart Employees who understand the needs of their customers Convenient business hours Responsiveness Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers requests

Managing Service Quality

quality is more difficult to define in services; depends on customers perception it is very difficult to maintain consistent quality perceived quality varies across customers, and over time and circumstances the customer is concerned about the quality of the core product or outcome, the process of service delivery, and interaction with staff
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Benefits of customer satisfaction and service quality

Insulates customers from competition Encourages repeat patronage & loyalty

Customer Can create sustainable advantage Satisfaction (& service quality)

Enhances/promotes positive WOM

Reduces failure costs

Lowers costs of attracting new customers

Customer Perceptions of Quality and Customer Satisfaction

Gaps Model of Service Quality

Customer Gap: is caused by: Provider Gap 1 (Knowledge (Listening) Gap):
not knowing what customers expect

Provider Gap 2 (Service Design & Standards Gap):

not having the right service designs and standards

Provider Gap 3 (Service Performance Gap):

not delivering to service standards

Provider Gap 4 (Communication Gap):

not matching performance to promises

Determinants of Perceived Service Quality

Word of Mouth Personal Needs Past Experience

Expected Service Service Quality Gap

External Communication to Customers Perceived Service Quality

Perceived Service

A. Parasuraman, University of Miami; not to be reproduced or disseminated without the authors permission

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

Expected service Perceived service

Service Award

Determinants of Service Quality

Parsuraman has identified, such qualities which may influence the consumers evaluation of services are:
1.Consistency: 8.Confidentiality:

2.Concern:
3.Competence: 4.Contact:

9.Customer Knowledge:
10.Tangibles:

5.Courtesy:
6.Communication: 7.Credibility:

Consistency:

Service Award

It involves consistency and reliability of performance and dependability. It means that the firm performs the service at right and first time. It also means that the firm honors its promises specifically, in terms of accuracy in billing; record keeping and performing the service at the designated time.

Concern:

Service Award

The willingness or responsiveness of employees to provide service. It involves timeliness of service or giving prompt service. e.g. setting up appointments quickly, calling the customer back quickly; or Mailing a transaction slip immediately

Competence:

Service Award

It means having the required skills and knowledge to perform the service. It involves knowledge and skill of the contact personnel; knowledge and skill of operational support personnel and research capability of the organization. e.g., securities brokerage firm

Contact:

Service Award

It involves approachability, access and ease of contact. It means the service is easily accessible by telephone

(lines are not busy and customers are not put on hold)
Waiting time to receive service e.g.,Bank: convenient hours Convenient location of service facility.

Courtesy:

Service Award

It involves politeness, respect, consideration, and friendliness of contact personnel including receptionists, telephone operators, etc. It includes consideration for the consumer's property, clean and neat appearance of public contact personnel.

Communication:

Service Award

Communicating in language they can understand and listening to them. Increasing the level of sophistication and speaking simply and plainly with a novice. It involves explaining the service: how much the service will cost trade-offs between service and cost; assuring that a problem will be handled.

Credibility:

Service Award

It involves trustworthiness, believability, honesty. It involves having the customer's best interests at heart contributing to credibility are company name and reputation; personal characteristics of the contact personnel and degree of hard sell involved in interactions with the customer.

Confidentiality: The Security and the freedom from risk or doubt, involving physical safety (will I get the services at the automatic teller machine?); Financial security (does the company know where my stock certificate is?) or confidentiality (Are my dealings with the company private?).

Service Award

Customer Knowledge:

It involves making the effort to understand the customer's needs, i.e., learning requirements; the customer's specific

Providing individualized attention and recognizing the regular customer.

Service Award

Tangibles:

Include the physical evidence of the service, physical facilities; appearance of personnel; tools or equipment used to provide the service,
physical representations of the service, such as a plastic credit card or a bank statement and other customers in the service facility.

The Gaps Model of Service Quality

Consumer Personal needs

Word-of-mouth communication s
GAP 5

Past experience

Expected service

Perceived service

Marketer

Service delivery (including pre- and postcontacts)

GAP 3

GAP 4

External communications to consumers

GAP 1

Translations of perceptions into service quality specifications GAP 2 Management perceptions of consumer expectations

Customer expectations

Reasons for Customer Gap 5

Not knowing what customers expect Not selecting the right service standards and designs Not delivering to service standards Not matching performance to promised

Customer perceptions

Customers expectations

Reasons for provider gap I

Inadequate marketing research orientation Lack of upward communication

Insufficient relationship focus

Inadequate service recovery

Companys perceptions of customer expectations

Translation of perceptions into service quality specifications

Poor service design

Reasons for provider gap 2

Absence of customer-defined service standards Inappropriate physical evidence and servicescape

Management perceptions of customer expectations

Customer-driven service designs and standards

Reasons for provider gap 3

Poor human resource policies Failure to match supply and demand Customer not fulfilling their roles Problems with service intermediaries

Service delivery

External communications to consumers

Reasons for provider gap 4

Lack of integration of marketing communications Inadequate management of customer expectations Overpromising Inadequate horizontal communications

Service delivery

Revised version of Seven Service Quality Gaps

Customer needs and expectations 1. Knowledge Gap Management definition of these needs 2. Standards Gap Translation into design/delivery specs

CUSTOMER MANAGEMENT

3. Delivery Gap
Execution of design/delivery specs 5. Perceptions Gap Customer perceptions of service execution 7. Service Gap Customer experience relative to expectations 4.

4. Internal Gap Advertising and sales promises

Communications

6. Interpretation Gap Customer interpretation of communications

Strategy for Closing the Seven Service Quality Gaps (1)

1. Knowledge gap: Learn what customers expect
Understand customer expectations Improve communication between frontline staff and management Turn information and insights into action

2. 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

3. Delivery gap: Ensure service performance meets standards

Strategy for Closing the Seven Service Quality Gaps (2)

Clarify employee roles Train employees in priority setting and time management Eliminate role conflict among employees Develop good reward system

4. 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

Strategy for Closing the Seven Service Quality Gaps (3)

5. Perceptions gap: Educate customers to see reality of service quality delivered
Keep customers informed during service delivery and debrief after delivery Provide physical evidence

6. Interpretation gap: Pretest communications to make sure message is clear and unambiguous
Present communication materials to a sample of customers in advance of publication

7. Service gap: Close gaps 1 to 6 to meet customer expectations consistently

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

Cause-and-Effect Chart for Flight Departure Delays

Facilities, Equipment Frontstage Front-Stage Personnel Personnel Procedures
Procedures

Arrive late Oversized bags

Customers
Customers

Delayed check-in Gate agents Aircraft late to procedure gate cannot process Mechanical fast enough Acceptance of late Failures Late/unavailable passengers Late pushback airline crew

Delayed Departures Other Causes

Weather Air traffic Late fuel
Materials, Materials, Supplies Supplies

Late food service Late baggage

Late cabin cleaners

Poor announcement of departures Weight and balance sheet late

Backstage Personnel

Information

Blueprinting
Depicts sequence of front-stage interactions experienced by customers plus supporting backstage activities Used to identify potential fall pointswhere 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

Managing Service Quality

Quality is hard to define, measure, control, and communicate Quality is defined by the consumer Its important to measure customer satisfaction with an organizations service quality. Customers see five important components: Core service must measure up. Quality of service, meeting expectations. Technical aspects of delivery. Interaction with people who deliver service. Affective dimensions: How customers feel.

What is productivity?
output relative to input
input - labour, capital, equipment etc output - service outcome and service process

need to focus on outcomes as well as outputs

that is, quality and quantity

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

Traditional approaches to improving service productivity

control costs at each step match productive capacity to average demand to avoid excess capacity automate where possible provide support resources for efficient and effective performance train employees install expert systems

The trade off..

Improving productivity sometimes means that customers do not receive personalised service Need to gain a balance between high tech and high touch Customers dont want to talk to machines when they have a problem.

Customer driven approaches to improving productivity

Educating customers to avoid peak times
reducing fluctuations in demand

Increasing customer involvement

partial employee (self-service)
roles and scripts

reducing contact (arms length)

Ask customers to use intermediaries for support services

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

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

Improving Service Productivity

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?

 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

Generic Productivity Improvement Strategies

Although improving productivity can be approached incrementally, major gains often require redesigning entire processes

Productivity and Quality

Productivity and quality must work hand in hand Improving productivity key to reducing costs Improving and maintaining quality essential for building customer satisfaction and loyalty Ideally, strategies should be sought to improve both productivity and quality simultaneously technology often the key
Technology-based innovations have potential to create high payoffs But, must be user friendly and deliver valued customer benefits