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Middle East Performance Measurement & Benchmarking Conference

Challenges of Measurements in

Service Industry

21st to 22nd June 2004, Dubai

Sunil ThawaniManager – TQM Department

Union National Bank, Abu DhabiSthawani@unb.com

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Purpose of PresentationPurpose of Presentation

Concepts and unique features of Service Quality;

Service Quality model; Causes of service quality problems; Challenges of measurement in Service

Quality; Establishing service quality performance

standards and Benchmarking.

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Service IndustriesService Industries

Retailing; Distribution; Financial services – banking, insurance; Hotels and tourism; Leisure, recreation, entertainment; Professional and business services like

accountancy, marketing, law, consulting; Healthcare; Software etc.

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Growth of goods and services exports, 1980-2000

0

50

100

150

200

250

300

350

400

Pe

rce

nta

ge

(1

98

0=

10

0)

0

1500

3000

4500

6000

7500

9000

10500

12000

Bill

ion

$

Goods Services

Services growth

Goods growth

GDP growth

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Share of commercial services and goods in world trade, 1980-2000

Goods

84%

16%Services 1980

2000Services19%

81%

Goods6

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Service Industry - Facts

Service industries generate over 2/3rd of GNP and employment in developed countries - ISSN Journal Volume 22,

2004) 9 out of 10 jobs are created by Services economy –

“Delivering Service Quality” by Valerie, Parsuraman and Leonard”;

Of the top 100 revenue earners worldwide, 55% are service firms – www.service-growth.com

Top service firm in revenue worldwide – Wal-Mart is a service firm;

Service firms produced 45% more revenue per employee than manufacturing firms;

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Service Quality

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What Makes Service Quality UniqueWhat Makes Service Quality Unique

1. Service is intangible - it cannot be easily measured, tested and verified in advance of sales to assure quality;

2. Services are perishable;3. Precise standards like manufacturing can rarely be

set;4. It is created and consumed simultaneously or near

simultaneously; Service Production and Consumption are often inseparable i.e. Customer is in service factory.

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What Makes Service Quality UniqueWhat Makes Service Quality Unique

6. Services offered can vary from “Producer to Producer” e.g. outlet to outlet;

7. Outcome of Service is as important as process of delivery; assessment of quality is made during the service delivery process.

8. Service Quality is more difficult for customer, to evaluate, than product quality;

9. Customer cannot retain the actual service. The effect of the service can be retained.

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Service Quality Model

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Word of Mouth

Perceived Service Quality

Personal Needs

Perceived Service.

Past Experience

External Cummications

Expected Service

Customers' Assessment of Service Quality

“Delivering Service Quality” by Valerie, Parsuraman and Leonard”

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Service Quality GapService Quality Gap

The gap between expected and perceivedservice is a measure of service quality Expectation > Service perceived =

Exceptional Quality, Expectations < Service perceived =

Unacceptable quality. Expectations = Service perceived =

Satisfactory Quality.

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Challenges of Measurements in Service Quality

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Word of Mouth

Perceived Service Quality

Personal Needs

Perceived Service.

Past Experience

External Cummications

Expected Service

Customers' Assessment of Service Quality

Dimensions of Service Quality

TangiblesReliability

ResponsivenessCompetence

CourtesyCredibilitySecurityAccess

CommunicationUnderstanding the

Customer

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Reliability" Ability to perform the promised service dependably & accurately"

Competence"Possession of the required

skills and knowledge to perform the service"

Responsiveness"Willingness to help customers and provide prompt service"

Definition of Dimensions

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Security"Freedom from danger, risk, or

doubt"

Access"Approachability and ease of

contact"

Communication"Keeping Customers informed

in language they can understand and listening to

them"

Definition of Dimensions

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Dimension MeasurementsDimension Measurements

Reliability – On time delivery performance, Errors in invoices

Responsiveness – Cycle time (speed)

Access – Availability (24x7), Downtime of web

Credibility – Financial Ratings, Image

Mix of Performance Indicators and Perception Measures

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Causes of Service Quality Gaps (Customer Dissatisfaction)

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Gap 1Gap 1Customer Expectations

(Expected Service)

Managements Perception of Customer Expectations

1. Lack of Market Research Orientation;

2. Inadequate upward communication;

3. Too many levels of management

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Gap 2Gap 2

Service Quality Specifications

Management Perceptions of Customer Expectations

1. Inadequate management commitment to Service Quality

2. Perception of infeasibility3. Absence of goal setting

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Gap 3Gap 3

Service Delivery

Service Quality Specifications

1. Role ambiguity 2. Role conflict3. Poor technology4. Lack of team work5. Poor employee – job fit

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Gap 4Gap 4

Service Delivery

External Communications

to Customers

1. Propensity to over-promise

2. Inadequate horizontal communication

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Past ExperiencePersonal Needs

Expected Service

Perceived Service

Service Delivery External communication to consumers

Word-of-mouthCommunication

Converting perceptions into service quality specifications

Management perceptions of consumer expectations

GAP 5

GAP 2

GAP 3

GAP 4

GAP 1

Marketer

Service Provider

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Establishing Service Quality Performance Standards

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Performance StandardsPerformance Standards

Qualitative;Quantitative;Benchmark (In line with Customer

expectations).

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FedEx Service Quality IndicatorFedEx Service Quality Indicator(Quantitative)(Quantitative)

No. of damaged packages; No. of lost packages; Missed pickups; Aircraft delays; Reopened complaints (complaints not solved first time); Wrong day late deliveries; Right day wrong delivery; Abandoned calls; Invoice adjustment requests; Missing proof of deliveries.

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Concluding Thoughts

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Challenges of Performance Challenges of Performance MeasurementsMeasurements

Deciding strategy - Customer satisfaction vs. Customer delight;

Developing Service Quality dimensions specific to business needs;

Defining the dimensions; Developing common understanding throughout the

organization - Achieving clear focus & direction; Establishing measurement framework; Utilizing measurements; Benchmark to set targets; Aligning measurement techniques with the

dimensions; Addressing Service Quality Gaps.

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Quality/ Profit Relationship Quality/ Profit Relationship

0

5

10

15

20

25

30

35

20 40 60 80 100

Return on Sales

Return onInvstmnt

Inferior Superior

Relative Quality

%

Source: Robert Buzell & Bradley Gale, PIMS Principle

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ConclusionConclusion

Service excellence pays off richly;Superior service quality is proving to be a

winning competitive strategy;Effective and appropriate Measurements

can help achieve Service Excellence;

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Thank you

Q & A