Ass. Prof. Ozge Ozgen - Managing through excellence

04.11.2012

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Olympian Summer School

Managing through Excellence in Services Marketing

Assist. Prof. Dr. Ozge Ozgen

Department of International Business and Trade

Faculty of Business, Dokuz Eylul University, Izmir - Turkey

July 29, 2012 - Olympia Summer Schools - 2012

Basic Differences of Services

Customers do not obtain ownership

Intangible performances

Customer Involvement in the production process

People as part of the product

Greater variability in operational inputs and outputs

Harder for customers to evaluate

Importance of time factor

Summer Schools - 2012

Service Excellence

Being in a journey, not a destination

requires insistence and consistence

A goal that you attain with people, not something that you do to people

Hard to grasp


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Service Excellence

Meeting customers’ present needs, anticipating prospective needs and enhancing on-going relationship

Achieving customer delight

Satisfaction vs. delight

Satisfaction is judgement (perfomance>expectations)

Emotions, such as delight, are human affects resulting from judgements about satisfaction with a service.

Delight is “an expression of very high satisfaction” resulting from surprisingly good performance (Oliver, Rust and Varki, 1997)

Delight = Joy + Surprise (Plutchik, 1980)


Understanding of Service Excellence (Johnston, 2004)

Delivering the promise

Providing personal touch

Going the extra mile

Dealing with problems

Service Quality

Customization

Understanding the Customer Needs

Service Recovery


Different Perspectives of Service Quality

Product-based: Quality is precise and measurable

User-based: Quality lies in the eyes of the beholder

Manufacturing-based: Quality is in conformance to the firm’s developed specifications

Value-based: Quality is a trade-off between price and value


Service Quality and Understanding Customer Needs: Three Models

SERVQUAL (Parasuraman, Zeithaml and Berry, 1988)

KANO (Kano, Seraku, Takahashi and Tsjui, 1984)

QUALITY FUNCTION DEPLOYMENT (Akao, 1990)

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Components of Quality: Manufacturing-based

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


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 Customer’s Perspective of Service Quality: SERVQUAL (1)

Survey research instrument based on premise that customers evaluate firm’s service quality by comparing

Their perceptions of service actually received

Their prior expectations of companies in a particular industry

Perceived performance ratings vs. expectations

Scale contains 22 items reflecting five dimensions of service quality

Subsequent research has highlighted some limitations of SERVQUAL


Other Considerations in Service Quality Measurement

Services high in credence characteristics may cause consumers to use process factors and tangible cues as proxies to evaluate quality—halo effect

Time constraints

Process factors: Customers’ feelings

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The Gaps Model—A Conceptual Tool to

Identify and Correct Service Quality

Problems


Seven Service Quality Gaps (5-Gaps Model created by Parasuraman, Zeithaml, and Berry, 1985)

Customer experience relative to expectations

1. Knowledge Gap

2. Standards Gap

3. Delivery Gap

5. Perceptions Gap

7. Service Gap

Customer needs and expectations

6. Interpretation Gap

4. Internal Communications Gap

MANAGEMENT

CUSTOMER

4.

Customer perceptions of service execution

Management definition of these needs

Translation into design/delivery specs

Execution of design/delivery specs

Advertising and sales promises

Customer interpretation of communications


KANO Model

Eg: Good brakes

Eg: Gas consumption

Eg: MP3 Player according to driver’s mood

Source: Berger, C., Blauth R., Boger D., et al. (1993), “A Special Issue on Kano’s Methods for Understanding Customer-defined Quality”, Center for Quality of Management Journal, 2 (4), p. 4.


Quality Function Deployment

1. What are the qualities the customer desire?

2. What function(s) must this product serve and what functions

must we use to provide this product or service?

3. Based upon the resources we have available, how can we

best provide what our customer wants?

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Ho

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Summer Schools - 2012 04.11.2012 18

Go to GEMBA, Listen Your Customer

GEMBA: the place where the real action takes place,

where a consumer puts the good or service that he/she

bought into use

See customers in action to understand their unknown

unspoken needs.

If you will analyze the Olympia,

where is GEMBA?


Measuring and Improving

Service Quality


Soft and Hard Measures of Service Quality

Soft measures— not easily observed, must be collected by talking to customers, employees, or others

Hard measures— can be counted, timed, or measured through audits

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Cause-and-Effect Chart for Flight Departure Delays

Aircraft late to gate

Late food service

Late fuel

Late cabin cleaners

Poor announcement of departures

Weight and balance sheet late

Delayed Departures

Delayed check-in procedure

Acceptance of late passengers

Facilities, Equipment

Front-Stage Personnel

Procedures

Materials, Supplies

Customers

Gate agents cannot process fast enough

Late/unavailable airline crew

Arrive late Oversized bags

Weather Air traffic

Frontstage Personnel

Procedures

Materials, Supplies

Backstage Personnel

Information

Customers

Other Causes

Mechanical Failures Late pushback

Late baggage


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

Olympian Summer School


Service Failures

the situation in which the prospective outcomes of a service

process or the process itself cannot be accomplished by the

service provider and

cannot meet the customers’ former expectations

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Long Waiting Times May Indicate Need for Service Process Redesign


Types of Service Failures

1st Classification

• Service system failure

• Failures in implicit or explicit customer requests

• Unprompted and unsolicited employee actions

2nd Classification

• Outcome failure

• Process failure

• Outcome and Process Failure


Types of Service Failures (1st Classification)

Service system failure

unavailable service

• delayed flight or the hotel’s making excess reservation

slow service without reason

• delay of meal in a restaurant

other core service failures

• cold food or loss of package during freight transportation



Failures in implicit or explicit customer requests:

This occurs chiefly when employees are unable to comply with the customer’s individual needs

• food not cooked to order

• seating problems

• seating smokers in non-smoking section

• not to find specific menu for a vegetarian

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Unprompted and unsolicited employee actions:

This includes behavior of employees that is unacceptable to customers

• level of attention (ignoring the customer)

• unusual actions (abusive and improper touching)

• cultural norms

• Gestalt (customer evaluating the whole of the holiday as dissatisfaction without identifying a certain reason)

• adverse conditions (employee behavior under stressful event)


Types of Service Failures (2nd Classification)

Outcome failure

some aspect of the core service is not delivered

room is unclean, flight is delayed

Process failure

the core service is delivered in a deficient manner

front-desk personnel of hotel is impolite


www.ratemyprofessors.com

He makes me hate life and management. Maybe he should change his clothes once in awhile? Run away from this guy.

You can’t cheat in her class, because no one knows the answers.

BORING! But I learned there are 137 tiles on the ceiling.

He will destroy you like an academic ninja.

His class was like milk. It was good for just two weeks.

All the professors in the world should attend at least one of his lectures, so they know what is a real teaching

Houston we have a problem.


Understanding Customer Responses to Service Failure

Why do customers complain?

What proportion of unhappy customers complain?

Why don’t unhappy customers complain?

Where do customers complain?

What do customers expect once they have made a complaint?

A. Had unhappy childhoods? B. Do they have a genetical problem? C. Have trouble in their primary relationships?

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Why don’t Customers Complain?

Don’t know how to complain to

Don’t think it will do any good

May doubt their own subjective evaluation

May want to avoid confrontation

May lack expertise

Customers often view complaining as difficult and unpleasant


Customer Response Categories to Service Failures

Dissatisfactory service

Take some form of public action

Take some form of private action

Complain to the service firm

Complain to a third party

Take legal action to seek redress

Defect

(switch provider)

Negative

word-of-mouth

Take no action


Complaining Outcomes

Voice

HIGH:

Store manager

MEDIUM:

Sales clerk

LOW:

No one associated with the store

Exit

HIGH:

Never purchases again

MEDIUM:

Only purchases if other alternatives are not available

LOW:

Continue to shop as usual

Retaliation

HIGH:

Tells lots of people and attempts to physically

damage

MEDIUM:

tell a few people and created minor

inconveniences

LOW:

does not retaliate at all


Service Recoveries

all the actions taken by the service provider in order to diminish the effects of the failure or fix the problem or even eliminate it totally,

under the conditions that the organization meets the failure via complaints or some other sources etc.

to correct the failure at first hand

to eliminate all of the prospective negative effects

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Service Recovery Strategies

Discount

Replacement

Refund

No charge

Gift giving

Apology

Failure escalation

Nothing


Importance of Service Recovery

The effects on trust, customer satisfaction and loyalty

Positive vs. negative word-of-mouth

Recovery paradox was developed by Etzel and Silverman (1981)

“it may be those who experience the gracious and efficient handling of a complaint who become a company’s best customer.”

“a good recovery can turn angry, frustrated customers into loyal ones.”

Note: Not all research support this paradox


Perceived Justice

Distributive Justice Procedural Justice Interactional Justice

Relates with outcome of service recovery

Relates with the methods of processing complaints and service recovery

Relates with the treatment of employees during complaint handling

• Refund • Discounts • Gifts

• Accessibility • Timing • Speed • Flexibility

Employees’ • Empathy • Courtesy • Sensitivity • Treatment

Justice Theory

SERVICE RECOVERY OPTIONS

Your Tokyo flight delayed one day and you have to

delay your all appointments in Tokyo.

Airline company provides free hotel for him or they arrange another flight from another airline company in two hours.

He waits 6 hours in airport than airline company arrange a hotel or in one hour he goes to hotel.

Employees of airline company do not inform passengers about delay and its reasons or they are so professional and sensitive to all passengers.

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How to Enable Effective Service Recovery

Be proactive—on the spot, before customers complain

Plan recovery procedures

Teach recovery skills to relevant personnel

Empower personnel to use judgment and skills to develop recovery solutions


CRISIS IN SERVICES

The cumulative impact of service failures may result in crisis

Characteristics of a crisis

Crises involve a wide range of stakeholders

There are time pressures requiring an urgent response

A crisis usually results from a surprise to the organization

There is a high degree of ambiguity, in which cause and effects are unclear

A crisis creates a significant threat to an organization’s strategic goals


Crisis Response Strategies

Defensive strategies

Accommodative strategies

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Air France Crash

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Bernardo Souza, who said his brother and sister-in-law were

on the flight, complained he had received no details from Air

France.

"I had to come to the airport but when I arrived I just found

an empty counter," he was quoted as saying by Reuters

news agency.


Response of Air France

Earlier, Air France chief executive Pierre-Henri Gourgeon told reporters: "We are without a doubt faced with an air disaster." He added: "The entire company is thinking of the families and shares their pain."

From press release of Air France

Air France is doing its utmost to provide support for relatives and friends.

Medical and psychological assistance involving 15 specialist physicians has been set up at Paris-Charles de Gaulle 2 and Rio de Janeiro airports.

Some one hundred voluntary members of Air France staff are backing up the teams in Paris-Charles de Gaulle and Rio de Janeiro.

Air France has also established a special toll-free number for the relatives and friends of passengers.


It is all about emotions...

Emotions are also another important outcome of the service recovery


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Key References Akao, Y. (ed.) (1990), Quality Function Deployment: Integrating Customer Requirements into Product Design, Productivity Press, Cambridge, MA. Berger, C., Blauth R., Boger D., et al. (1993), “A Special Issue on Kano’s Methods for Understanding Customer-defined Quality”, Center for Quality of Management Journal, 2 (4). Coombs, W. T. (1998), “An analytic framework for crisis situations: Better responses from a better understanding of the situation”, Journal of Public Relations Research, Vol.10, pp. 177-191. Johnston, R. (2004) “Towards a Better Understanding of Service Excellence”, Managing Service Quality, 14(2/3), 129-133. Kano, N., N. Seraku, F. Takahashi ve S. Tsjui, (1984), "Attractive Quality and Must-be Quality", Hinshitsu, 14(2), 147-56. Mattila A. (2001). The effectiveness of service recovery in a multi industry setting. Journal of Services Marketing, 15(7), 583-596. Maxham III, J.G., (2001). Service recovery’s influence on consumer satisfaction, positive word-of-mouth, and purchase intentions. Journal of Business Research, 54(1), 11-24. Oliver, R. L., Rust, R. T., and Varki S. (1997) “Customer Delight: Foundations, Findings and Managerial Insight”, Journal of Retailing, 73, Fall, 311-336. Parasuraman A., Zeithaml, V. A., and Berry L. L. (1985) “A Conceptual Model of Service Quality and Its Implications for Future Research”, Journal of Marketing, 49, Fall, 41-50. Plutchik, R. (1980), Emotion: A Psychoevolutionary Synthesis, New York: Harper & Row. Smith, A.K., Bolton, R.N. & Wagner, J. (1999). A model of customer satisfaction with service encounters involving failure and recovery. Journal of Marketing Research, 36, August, 356-372.


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Ass. Prof. Ozge Ozgen - Managing through excellence