Service Marketing - Love Lock Chapter-14

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

Chapter 14:Improving Service

Quality and Productivity


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 and

supplementary serviceso Secures firm’s future through increased spending on R&Do May impact service experience—marketers must work to minimize

negative effects, promote positive effects


What Is Service Quality?


Different Perspectives of Service Quality

Transcendent:

Product-based:

User-based:

Manufacturing-based:

Value-based:

Quality = Excellence. Recognized only through experience

Quality is precise and measurable.Diff in qualty = diff in the ingredient

Quality lies in the eyes of the beholder

Quality is in conformance to the firm’s developed specifications

Quality is a trade-off between price and value


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 comparingo Their 0 of service actually received o Their prior expectations of companies in a particular industry

• Poor qualityo Perceived performance ratings < expectations

• Good qualityo Perceived performance ratings > expectations


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


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

Source:Shohreh A. Kaynama (2000), “ A Conceptual Model to Measure Service Quality of Online Companies: E-qual, in Developments in Marketing Science,” Harlan E. Spotts and H. Lee Meadows, eds., Proceedings of the Academy of Marketing Science, Vol. 22, pp. 46–51. For more information pertaining to online service quality see A. Parasuraman, Vlerie A. Zeithaml, and Arvind Malhotra (2005), “E-S-QUAL: A Multiple-Item Scale for Assessing Electronic Service Quality.” Journal of Service Research, Vol. 7. issue 3. pp. 213–234.


The Gaps Model—A Conceptual Tool to Identify and Correct Service Quality

Problems


Seven Service Quality Gaps(Fig 14.3)

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


Prescriptions for Closing theSeven Service Quality Gaps (1) (Table 14.3)

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

2. Standards gap: Specify SQ standards that reflect expectationso Set, communicate, and reinforce customer-oriented service standards

for all work unitso Measure performance and provide regular feedbacko Reward managers and employees



3.Delivery gap: Ensure service performance meets standards 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 realistico Seek comments from frontline employees and operations personnel

about proposed advertising campaignso Get sales staff to involve operations staff in meetings with customerso Ensure that communications sets realistic customer expectations



5. 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

6.Interpretation gap: Pretest communications to make sure message is clear and unambiguouso 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


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 otherso Provide direction, guidance, and feedback to employees on ways to

achieve customer satisfaction o Can be quantified by measuring customer perceptions and beliefs

For example: SERVQUAL, surveys, and customer advisory panels

• Hard measures—can be counted, timed, or measured through auditso Typically operational processes or outcomeso Standards often set with reference to percentage of occasions on which

a particular measure is achieved o Control charts are useful for displaying performance over time against

specific quality standards


Soft Measures of Service Quality

• Key customer-centric SQ measures include:o Total market surveys, annual surveys, transactional surveyso Service feedback cardso Mystery shoppingo Analysis of unsolicited feedback—complaints and compliments, focus

group discussions, and service reviews• 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 serviceo Suggestions for improvement


Hard Measures of Service Quality

• Control charts to monitor a single variableo 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 indexeso Embrace key activities that have an impact on customers


Composition of FedEx’s Service Quality Index—SQI (Table 14.4)

Late delivery—right day Late Delivery—wrong dayTracing request unanswered Complaints reopened Missing proofs of delivery Invoice adjustments Missed pickups Lost packages Damaged packages Aircraft delays (minutes) Overcharged (packages missing label) Abandoned calls

151511

101010551

Failure Type

Total Failure Points (SQI) =

Weighting Factor

XXX,XXX

Daily PointsX

Number of Incidents =


Tools to Analyze and Address Service Quality Problems

• Fishbone diagramo Cause-and-effect diagram to identify potential causes of problems

• Pareto Charto 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


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 Serviceso 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


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 performance

• Correct problems as needed

• Establish measures and reviews to maintain performance

• 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 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

• Determine optimal level of reliability o Diminishing returns set in as improvements require higher investments o Know when improving service reliability becomes uneconomical


Defining and Measuring Productivity


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 outcomeso May ignore variations in service quality/value

• Productivity: Involves financial valuation of outputs to inputso 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


Measuring Service Productivity:Variability Is a Major Problem

• Traditional measures of service output tend to ignore variations in quality or value of serviceo Focus on outputs rather than outcomeso Stress efficiency but not effectiveness

• Measures with customers as denominator include:o Profitability by customero Capital employed per customero Shareholder equity per customer


Improving Service Productivity


Generic Productivity Improvement Strategies

• Typical strategies to improve service productivity:o Careful control of costs at every step in processo Efforts to reduce wasteful use of materials or laboro Replacing workers by automated machineso Installing expert systems

• 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 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


Improving Service Productivity:(2) Customer-driven Strategies

• Change timing of customer demando 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-serveo Encourage customers to obtain information and buy from firm’s

corporate websites • Ask customers to use third parties - Outsourcing

o 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 For example: New printing peripherals may affect appearance of bank

statements

• Front-stage productivity enhancements are especially visible in high contact serviceso Some improvements only require passive acceptance, while others

require customers to change behavioro Address customer resistance to changeso Conduct market research first if changes are substantial


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

• Excessive pressure breeds discontent and frustration among customer contact personnel, who are caught between:

• Better to search for service process redesign opportunities that lead too Improvements in productivityo Simultaneous improvement in service quality

Now You are Perfect Service MarketersSmarter

Effective

Reliable

Vibrant

Intelligent

Courteous

Elegant

SharperManagers for the

Future

Education

Service Marketing - Love Lock Chapter-14