Chapter 3- Service quality and productivity.pdf
- 2. Distinguish the customer gaps and marketer gaps in service quality Formulate strategies on addressing service quality gaps Analyze the relationship between service quality and customer satisfaction Critically review the usage of SERVQUAL model
- 4. Service quality has two window view: Internal quality is all about entire service delivery process. While external quality is all about the conformance and compliance to design standards, its about customer’s perception. Definition of Service Quality Quality is the totality of features and characteristics of product of service that bears on its ability to satisfy given needs of customers. Service quality means that high standard of performance that consistently meets or exceeds customer expectations.
- 5. Both customer satisfaction and service quality are defined as contrasting customers’ expectations with their performance perceptions. Service quality and customer satisfaction have a positive relationship. Recognizing and meeting customer expectations through high levels of service quality help distinguish the company’s service from those of its rivals. Satisfaction and service quality are very different constructs. Specifically, satisfaction is an evaluation of a single consumption experience, a fleeting judgment, and a direct and immediate response to that experience. In contrast, service quality refers to relatively stable attitudes and beliefs about a firm, which can differ significantly from satisfaction.
- 7. Service quality can be viewed form multiple perspectives: Product based – Quality is precise and measurable Based on measurable parameters. Suitable for goods. E.g. no. of times a telephone rings before being picked by a service provider? E.g.. Delivery of Domino’s Pizza
- 8. User based From customer’s perspectives “quality is in the eyes of beholder (customers).” E.g. excellent movie made by director but not found enjoyable by viewers Challenges: • What the customer expects • Which attributes to be included for garnering the largest appeal from the largest group of customers • How to differentiate between those attributes that provide satisfaction and those that imply quality
- 9. Manufacturing based Based on conformance (how well something) Quality is perceived as an outcomes of production process Quality perceived high, if it conforms to design specification
- 10. Value Based Equate quality with value Quality is a trade–off between price and value Provider has to maintain balance between conformance and performance, evaluating benefits and price to customer satisfaction Transcendental Quality can be only experienced but cannot either be spoken or documented about, render it impractical for quality managers E.g. tourism
- 11. Customers from opinions about service quality not just from a single reference but from a host of contributing factors . Service marketers need to understand all the dimensions used by customers to evaluate service quality.
- 13. This dimensions is shown to have the highest influence on the customer perception of quality. It is ability to perform the promised service dependably and accurately. When service delivery fails the first times, a service provider may get a second chance to provide the same service in the phase called “Recovery”. High expectation come under greater scrutiny, increase possibility of customer dissatisfaction, It ensure timely delivery of service time after time.
- 14. Customers may have queries, special requests, complaints, their own problems, etc. Thus, front line employees may have been trained or equipped to deliver standardised services. It is the willingness to help the customers or willingness to go that extra distance that is called responsiveness. Understand the customer’s viewpoint and then respond accordingly Speedy response to a customers request
- 15. It is ability of company to inspire trust and confidence in the service delivery. Important for service involves high risk E.g. medical service, financial securities, legal affairs, property developer/ builders, etc. When the customer hear from previous customers about the company and its service delivery, they feel assured and develop a more positive attitude towards company.
- 16. When a service provider puts himself in the shoes of the customers, he may see the customer’s viewpoint better. When customers feel that the provider is making his best effort to see their viewpoint, it may be good enough for most customers. E.g. special treatment to old age customer or physically disable customers or female.
- 17. The job of the tangible and physical evidence of a service is multi-functional. E.g. waiting area of clinic Doctor’s certificate Uniforms Interior designing Other tangibles thing Tangibles provide the customer proof of the quality of service.
- 18. Service quality is an approach to manage business processes in order to ensure full satisfaction of the customers & quality in service provided. It works as an antecedent of customer satisfaction. If expectations are greater than performance, then perceived quality is less than satisfactory and hence customer dissatisfaction occurs. SERVQUAL is a service quality framework, developed in the eighties by Zeithaml, Parasuraman & Berry, aiming at measuring the scale of Quality in the service sectors. SERVQUAL was originally measured on 10 aspects of service quality: reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding the customer, and tangibles, to measure the gap between customer expectations and experience.
- 20. In 1988 the 10 components were collapsed into five dimensions (RATER). Reliability, tangibles and responsiveness remained distinct, but the remaining seven components collapsed into two aggregate dimensions, assurance and empathy. Parasuraman et al. developed a 22-scale instrument with which to measure customers’ expectations and perceptions (E and P) of the five RATER dimensions. Four or five numbered items are used to measure each dimension. The instrument is administered twice in different forms, first to measure expectations and second to measure perceptions. Dimensions Scale Reliability 4 Assurance 5 Tangibles 4 Empathy 5 Responsiveness 4
- 21. The five SERVQUAL dimensions are: R-A-T-E-R: 1. RESPONSIVENESS - Willingness to help customers and provide prompt service 2. ASSURANCE - Knowledge and courtesy of employees and their ability to convey trust and confidence 3. TANGIBLES - Appearance of physical facilities, equipment, personnel, and communication materials 4. EMPATHY - Caring, individualized attention the firm provides its customers 5. RELIABILITY - Ability to perform the promised service dependably and accurately
- 22. GAP 1: Not knowing what customers expect GAP 2: wrong service quality standards GAP 3: The service performance gap GAP 4: promises do not match actual delivery GAP 5: The difference between customer perception and expectation
- 23. Gap 1 Commonly known as the management perception gap Gap 1 results from a difference between what customers expect and what management perceives these expectations to be. It indicates a problem with the understanding of the market. This can occur, as a result of insufficient research or communication failures. E.g. : Management of ABC Dry cleaning Ltd perceives that a particular segment simply expects low prices on its service, when in fact, the expectation is a value-for- money service. The SERVQUAL Gaps Management Perceptions of Customer Expectations Expected Service
- 24. Gap 2 Commonly known as quality specification gap. Gap 2 results from a difference between management perceptions of what customers expect and the specifications that management draws up when detailing the service quality delivery actions that are required. Service design and performance standards are pre- requisites for bridging this gap. E.g. : Most hotels do not do housekeeping in a room on the day the customer is checking out. But has management realised that the customer who is doing a late checking out wants a clean room during that day? Service Quality Specifications Management Perceptions of Customer Expectations The SERVQUAL Gaps
- 25. Gap 3 Commonly known as the Service delivery gap. Gap 3 results from a mismatch between the service delivery specifications required by management and the actual service that is delivered by front line staff. It is the difference between customer-driven service design & standards, and the service delivery of the provider. Managers need to audit the customer experience that their organization currently delivers in order to make sure it lives up to the expected level. E.g. : Usually, all restaurants need to attend to every request and orders of the customers. But very often when customers place orders, they either do not receive the orders at all or the waiter has confused it with that of another customer. Service Delivery Service Quality Specifications The SERVQUAL Gaps
- 26. Gap 4 Commonly known as market communication gap. This is the gap between the delivery of the customer experience and what is communicated to customers, i.e. the discrepancy between actual service and the promised one All too often organizations exaggerate what will be provided to customers, or discuss the best case rather than the likely case, raising customer expectations and harming customer perceptions. E.g. A company commercialising slimming products boasts that customers may lose up to 4-5 kgs/week. But they do not specify that a strict diet and regular exercise must accompany the treatment for it to have the desired effect. Service Delivery External Communications to Customers The SERVQUAL Gaps
- 27. Gap 5 • Commonly known as the perceived service quality gap. • Gap 5 may be identified as the overall difference between the expected service and the perceived service experienced. Gap 5 results from the combination of Gaps 1 to 4 • Customers' expectations have been shaped by word of mouth, their personal needs and their own past service experiences. • Unless Gap 5 is kept under check, it may result in lost customers, bad reputation, negative corporate image. Expected Service Perceived Service The SERVQUAL Gaps
- 28. GAP 1 - not knowing what customers expect E.g. : XYZ Events Ltd organised a wedding with the usual white and blue decorations, when the customer had expected something new and original. Causes: Lack of a marketing orientation to quality Poorly interpreted information about customer’s expectations Research not focused on demand quality Too many layers between the front line personnel & top level management Causes for the Gaps
- 29. GAP 2 - The wrong service quality standards E.g. : XYZ Events Ltd perceived that the customer wanted a very nice reception with at least 2 waiters at each table, but management eventually decided otherwise to reduce costs. Causes: inadequate commitment to service quality lack of perception of feasibility inadequate task standardization the absence of goal setting Insufficient planning of procedures Causes for the Gaps
- 30. GAP 3 - The service performance gap E.g. : XYZ Events Ltd had promised the most exquisite catering and wedding cake, but the food was not appreciable and the bride didn’t like the cake at all. Causes: Poor employee or technology fit - the wrong person or wrong system for the job Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role conflict Failure to match demand and supply Too much or too little control Lack of teamwork within the organisation Causes for the Gaps
- 31. GAP 4 - When promises do not match actual delivery E.g. : XYZ Events Ltd promised to have a Mercedes limousine for the entry of the groom, but eventually the latter was given a simple Nissan Sunny. Causes: inadequate horizontal communication Over-promising in external communication campaign Failure to manage customer expectations Failure to perform according to specifications given to customers Causes for the Gaps
- 32. GAP 5 - The difference between customer perception of service and the expectation they had Usually the cause is the occurrence of the 4 other Gaps, which results in a difference between customer perception and the expectation they had. Ultimately the groom’s experience was way too far from what he had expected, and thus results in dissatisfaction. Other causes can be: cultural background, family lifestyle, personality, demographics, advertising, experience with similar service information available online Causes for the Gaps
- 33. Strategies to close the gap Educate Management about what customer expect Implement market research procedures. Implement an effective customer feedback system. Increase interactions between customers and management. Facilitate & encourage communication between front line staff and management. Challenges Customers’ expectations are differ and changing Management ability to understand the customers’ expectations. Gap 1- Knowledge Gap/Management Perception Gap
- 34. Strategies to close the gap Establish the right Service processes and specify standards Get the customer service process right Develop tiered service products that meet customer expectations Set, Communicate & reinforce measurable customer oriented service standards for all divisions Challenges Gap 2 – The Policy Gap/ Standard Gap/ Quality specification Gap Gap 1 leads to create Gap 2 Different Customer expectations
- 35. Strategies to close the gap Ensure that performance meets standards Ensure that customer service teams are motivated and able to meet service standards. Install the right technology, equipment, support processes and capacity. Manage customers for service quality. Challenges Gap 3 – The Delivery Gap Can only customer service team do it? Right people to do it? Do every company do customer expectation management?
- 36. Strategies to close the gap Close the internal communications gap by ensuring that communications promises are realistic and correctly understood by customers. Educate managers responsible for sales and marketing communications about operational capabilities Ensure than communications content sets realistic customer expectations. Be specific with promises and manage customers’ understanding of communication content. Challenges Gap 4 – The Communication Gap Understanding of business by advertising agency
- 37. Strategies to close the gap Challenges Close gap 1 to 4 consistently meet customer expectations Gap 5 – The Service Quality Gap Individual customers are different and same customer changing
- 38. Soft measures—not 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 measures—can 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
- 39. It includes decisions of followings two aspects: Key objectives of effective customer feedback system Key customer-centric SQ measures (Use of mix of customer feedback collection tools) include: • Total market surveys, annual surveys, transactional surveys • Service feedback cards • Mystery shopping • Analysis of unsolicited feedback—complaints and compliments • Focus group discussions, and service reviews
- 40. Many strategies have included that in increasing competitive markets, it is very important to learn change that happens in market. Specific objectives of effective customer feedback system includes three major categories: Assessment and benchmarking of service quality and performance Customer driven learning and improvements Creating a customer oriented service culture
- 41. How satisfied are our customers? This objectives includes learning about how well a firm performed in comparison to its main competitors, How it performed in comparison to the previous year Whether investments in certain service aspects have paid off in terms of customer satisfaction Where firm wants to be in coming years? Objective: motivate managers and service staff to improvement of performance
- 42. Objective is to answer the question: What makes out customers happy or unhappy? What are out strengths we want to represent? What are our weakness we need to improve? This helps to firm to identify the areas where more investment can be made for improvement of service quality.
- 43. It is concerned with the organisation on customer needs and customer satisfaction and focus on the entire organisation towards a service quality culture.
- 44. There are various tools for collecting feedback of customers. Each tools have their own strengths and weakness, service marketer can used any one or combination of tools for collection of feedback from customers. Total market surveys, annual surveys, transactional surveys Service feedback cards Mystery shopping Analysis of unsolicited feedback—complaints and compliments focus group discussions, and service review
- 45. Market and annual survey measure satisfaction with all major customer service processes and products. It could be based on indexed or weighted data. While transactional surveys are conducted after customers have completed a specific transaction. Such a survey is more actionable and can tell the firm why customers are happy or unhappy with the process. The potential for service recovery is important and should be designed into feedback collection tools.
- 46. This is powerful and inexpensive tool involves giving customers a feedback card at the end of completion of service. This is used through email or other central customer feedback unit.
- 47. Service marketers often use it to determine whether frontline staff are displaying desired behaviours. Banks, retailers, car rental firms and hotels are used it more actively. It gives highly actionable and in-depth insights for coaching, training and performance evaluation.
- 48. Customer complaints, compliments and suggestions can be transformed into a stream of information that can be used to help monitor quality and highlight improvements needed to the service design and delivery. It is sources of detailed feedback on what makes customer unhappy and what delights them.
- 49. It give great specific insights on potential service improvements and ideas. Focus groups are organised by key customer segments or user groups to focus on the needs of these users. In depth and one-to-one interview has been conducted once in a year by senior executive of the firm. It provides insight about service quality as well as help to retain most valuable customers and get potentials for service recovery.
- 50. Hard measures refers to operational process or outcomes and include such data as time, service response times, failure rate and delivery cost of service. In complex service multiple measures of service quality will be recorded at different points. In low contact service, many operational measures apply to backstage activities. Two measures: Service quality index Control charts
- 51. To improve service quality, organisation can examine Types of service failure, Number of times that occur Reasons of it. Service quality index measures daily the occurrence of different activities that lead to customer dissatisfaction. An annual goal is set for the average SQI, based on reducing the occurrence of failure over the previous year.
- 52. Late delivery—right day Late Delivery—wrong day Tracing 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 1 5 1 5 1 1 10 10 10 5 5 1 Failure Type Total Failure Points (SQI) = Weighting Factor XXX,XXX Daily Points X Number of Incidents =
- 53. It helps to displaying performance on hard measures over time against specific quality standards. It use to monitor and communicate individual variables or an overall index. Offer a simple method of displaying performance over time against specific quality standards Are only good if data on which they are based is accurate Enable easy identification of trends
- 55. After having assessed service quality using soft and hard measures, the service marketers needs to analyse the service quality problems and take corrective actions. The tools for analyse and address service quality problems are as follows: Root Cause analysis Pareto analysis Blueprinting Return on Quality
- 56. Developed by Japanese quality expert – Kaoru Ishikawa Brainstorming for all possible reasons for specific problems groups of managers and staff. Resulting factors can be divided in five categories: Equipment Manpower • Front stage • Back stage Material Procedure Information Known as fishbone diagram because of its shape.
- 57. 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 Frontstage Personnel Procedures Materials, Supplies Backstage Personnel Information Mechanical Failures Late pushback Late baggage Arrive late Oversized bags Weather Air traffic Customers Other Causes
- 58. Developed by Italian economist To identify the principal causes of observed outcomes Pareto Analysis uses the Pareto Principle – also known as the "80/20 Rule" . The Pareto Principle states that 80 percent of a project's benefit comes from 20 percent of the work. Or, conversely, that 80 percent of problems can be traced back to 20 percent of causes. Pareto Analysis identifies the problem areas or tasks that will have the biggest payoff. The tool has several benefits, including: Identifying and prioritizing problems and tasks. Helping people to organize their workloads more effectively. Improving productivity. Improving profitability.
- 59. Late passengers Waiting for pushback Waiting for fuelling Late weight and balance sheet Late cabin cleaning/supplies Other Airport - A All Airport Airport - B 23.1% 23.1% 23.1% 15.3% 53.3% 15% 11.3% 8.7% 11.7% 33.3% 33.3% 19% 9.5% 4.9 % 23.1% 23.1% 23.1% 15.3% 15.4%
- 60. Depicts sequence of front-stage interactions experienced by customers plus supporting backstage activities Used to identify potential fall points—where failures are most likely to appear Shows how failures at one point may have a ripple effect later in process Managers can identify points which need urgent attention Important first step in preventing service quality problems
- 61. To understand the financial implications, ROQ has been used by service marketers. Assess costs and benefits of quality initiatives 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 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
- 62. Determine optimal level of reliability diminishing returns set in as improvements require higher investments Know up to when improving service reliability • Up to the point when incremental improvements equals the cost of service recovery or cost of service failure.
- 63. Satisfy Target Customers through Service Recovery Optimal Point of Reliability: Cost of Failure = Service Recovery Satisfy Target Customers through Service Delivery as Planned 100% Service Reliability Investment Small Cost, Large Improvement Large Cost, Small Improvement A B C D
- 64. A firm need to ensure that it can deliver quality experience more efficiently to improve its long term profitability. Defining productivity in service 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. Improvements in productivity require an increase in the ratio of output to inputs ; Cutting resources required to create a given volume of output Increasing the output obtained from a given level of inputs
- 65. 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 In people processing service, such as hospital no. of patients treated in year, average bed occupy Consideration of different variables – difference in patients, difference in outcomes.
- 66. Efficiency: Involves comparison of actual performance with standard, usually time-based (for example: how long employee takes to perform specific task) Problem: Focus on outputs 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
- 67. 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
- 68. Generic Productivity Improvement Strategies Controlling cost at every step in the process Reducing waste of materials and labor Matching productivity capacity to average level of demand Replacing workers by automated machines and customer operated self services technologies Provide employees with equipment and data Training employees to work more productively Broadening the array of tasks that a service worker can perform Installing Expert Systems
- 69. Customer-Driven Strategies 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
- 70. Front Stage efforts to improve productivity High contact services : enhancements are visible • Passive acceptance • Customers to adopt to new patterns • Market research (loss of business, cancel out productivity gains) Back stage efforts to improve productivity Depend on whether they affect or are noticed by customers Ripple effect (extends front stage and affect customer) Prepare customers for the changes Promote as a service enhancement
- 71. Caution on Cost Reduction Strategies Tends to center on efforts to eliminate waste and reduce labor costs ; Cutback on frontline staff (remaining work hard/fast) Insufficient personnel to serve customers Staff exhausted, make mistakes, treat customers badly Multi-tasking : poor job at each task Caught between trying to meet customer needs and achieve management’s productivity goals
- 72. Designing for six Sigma (DFSS)