Improving Service Quality and

Productivity

LEARNING OBJECTIVES
Define service quality
Diagnose service quality problems using The
Gaps Measuring and improving service quality
Explore key tools for measuring and improving
productivity

What Is Service Quality?

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

CAPTURING THE CUSTOMERS PERSPECTIVE

OF SERVICE QUALITY: SERVQUAL

To measure customer satisfaction with various aspects of service

quality- Zeithmal developed a survey research instrument

based on premise that customers evaluate firms service quality by

comparing

Their perceptions of service actually received

Their prior expectations of companies in a particular industry

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

SERVQUAL
Respondents complete a series of scales that
measure their expectations of companies in a
particular industry on a wide array of service
characteristics
Susbsequently they are asked to record their
perceptions of a specific company whose services
they have used
When perceived performance ratings are lower
than expectations =poor quality
Reverse= good quality

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 qualityhalo
effect
Process

factors: Customers feelings

The Gaps ModelA Conceptual

Tool to Identify and Correct
Service Quality Problems

SEVEN SERVICE QUALITY GAPS

(FIG 14.3)

Customer needs and

expectations

CUSTOMER

1. Knowledge Gap
Management
definition of these
needs
2. Standards Gap
Translation into
design/delivery specs
3. Delivery Gap
Execution of
4.
design/delivery
specs
5. Perceptions Gap
Customer
perceptions of
service execution
7. Service Gap
Customer experience
relative to
expectations

MANAGEMENT

4. Internal
Communications Gap
Advertising and
sales promises
6. Interpretation Gap
Customer
interpretation of
communications

PRESCRIPTIONS FOR CLOSING THE

SEVEN SERVICE QUALITY GAPS
1.
2.
3.
4.
5.
6.
7.

Knowledge gap: Learn what customers expect

Standards gap: Specify SQ standards that reflect
expectations
Delivery gap: Ensure service performance meets
standards
Internal communications gap: Ensure that
communications promises are realistic
Perceptions gap: Educate customers to see reality of
service quality delivered
Interpretation gap: Pretest communications to make sure
message is clear and unambiguous
Service gap: Close gaps 1 to 6 to meet customer
expectations consistently

Measuring and Improving

Service Quality

SOFT AND HARD MEASURES

OF SERVICE QUALITY

Soft measuresnot 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 measurescan 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

COMPOSITION OF FEDEXS
SERVICE QUALITY INDEXSQI
Failure Type

Weighting
Factor

(TABLE 14.4)

Number of Daily
=
Incidents
Points

Late deliveryright day

1
Late Deliverywrong day
5
Tracing request unanswered
1
Complaints reopened
5
Missing proofs of delivery
1
Invoice adjustments
1
Missed pickups
1
Lost packages
0
Damaged packages
1
Aircraft delays (minutes)
0
Overcharged (packages missing label)
1
Abandoned calls
0
5
5
Source: See Services Marketing textbook, page 417,
for full source information.
Total Failure
Points (SQI) =XXX,XXX
1

CONTROL CHART FOR DEPARTURE

DELAYS
(FIG 14.3)

% Flights Departing Within

15 Minutes of Schedule

100%
90%
80%
70%
60%
J

Month

TOOLS TO ANALYZE AND ADDRESS

SERVICE QUALITY PROBLEMS

Fishbone diagram
Cause-and-effect

problems

diagram to identify potential causes of

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

failures

of service delivery, identifying points where

are most likely to occur

TOOLS TO ANALYZE AND ADDRESS

SERVICE QUALITY PROBLEMS

Total Quality Management (TQM)

ISO 9000

Comprises

requirements, definitions, guidelines, and related

standards to provide an independent assessment and certification
of a firms 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

CAUSE-AND-EFFECT CHART FOR

FLIGHT DEPARTURE DELAYS (FIG 14.4)
Facilities,
Equipment
Arrive late
Oversized
bags

Customers
Customers

Other
Causes
Weather

Air traffic

Frontstage
Front-Stage
Personnel
Personnel

Procedures
Procedures

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

Late food
service
Late baggage
Late fuel
Materials,
Materials,
Supplies
Supplies

Backstage
Personnel

Late cabin
cleaners

Delayed
Departure
s

Poor announcement of
departures
Weight and balance
sheet late

Informatio
n

Case: Analysis of Causes of

Flight Departure Delays
15.3%

23.1%

15.4%

All stations, excluding

Chicago-Midway Hub
11.7%

23.1%

23.1%

Newark

15%

Late passengers
Waiting for pushback
Waiting for
fuelling

33.3%

9.5%

8.7%
11.3%

19%

4.9
%

53.3%

33.3%

Washington Natl.
Late weight and balance sheet
Late cabin cleaning/supplies
Other

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

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 Establish measures and reviews to maintain

performance
performance
Correct problems as needed
Correct problems as needed

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

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
Its 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

WHEN DOES IMPROVING SERVICE

RELIABILITY BECOME
UNECONOMICAL? (FIG 14.7)
Satisfy Target
Customers through
Service Recovery

Service Reliability

100%

Optimal Point of
Reliability: Cost of
Failure = Service
Recovery

B C

Large Cost,
Small Cost,
Large Improvement Small Improvement

Satisfy Target
Customers through
Service Delivery as
Planned

Investment

Assumption: Customers are equally (or even more)

satisfied with the service recovery provided than
with a service that is delivered as planned.

Defining and Measuring

Productivity

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

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

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?

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 labour
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

IMPROVING SERVICE PRODUCTIVITY:

(1) OPERATIONS-DRIVEN STRATEGIES

Control costs, reduce waste

Set productive capacity to match average demand
Automate labour 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

IMPROVING SERVICE PRODUCTIVITY:

(2) CUSTOMER-DRIVEN STRATEGIES

Change timing of customer demand

By

shifting demand away from peaks, managers can

make better use of firms productive assets and
provide better service

Involve customers more in production

Get

customers to self-serve
Encourage customers to obtain information and buy
from firms corporate websites

Ask customers to use third parties

Delegate

delivery of supplementary service elements

to intermediary organizations

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 behaviour
Must consider impacts on customers and address
customer resistance to changes
Better to conduct market research first if changes are
substantial
See Service Perspectives 14.1: Managing Customers Reluctance
to Change

SUMMARY

Customers evaluate services using five different categories

There are seven service quality gaps and solutions

presented in the Gaps Model

Tangibles, reliability, responsiveness, assurance, empathy

Knowledge, standards, delivery, internal communications gap,

perceptions, interpretation, service

Key tools for measuring and improving productivity are:

Fishbone diagram
Pareto Chart
Blueprinting
Total Quality Management (TQM)
ISO 9000
Malcolm Baldrige Model Applied to Services
Six Sigma