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Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 1
Chapter 14: Improving Service Quality and Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 2
Overview of Chapter 14
Integrating service quality and productivity strategies
What is service quality?
The Gaps Model—a conceptual tool to identify and correct service quality problems
Measuring and improving service quality
Defining and measuring productivity
Improving service productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 3
Integrating Service Quality and Productivity Strategies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 4
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: Keeps costs down to improve profits and/or reduce prices Enables firms to spend more on improving customer service
and supplementary services Secures firm’s future through increased spending on R&D May impact service experience—marketers must work to
minimize negative effects, promote positive effects
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 5
What Is Service Quality?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 6
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
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 7
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 8
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 9
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
Poor quality Perceived performance ratings < expectations
Good quality Perceived performance ratings > expectations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 10
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 Subsequent research has highlighted some
limitations of SERVQUAL See Research Insights 14.1: Measuring E-
Service Quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 11
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.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 12
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 quality—halo effect Process factors: Customers’ feelings
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 13
The Gaps Model—A Conceptual Tool to Identify and Correct
Service Quality Problems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 14
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 15
Prescriptions for Closing theSeven Service Quality Gaps (1) (Table 14.3)
1. Knowledge gap: Learn what customers expect Understand customer expectations Improve communication between frontline staff and
management Turn information and insights into action
2. Standards gap: Specify SQ standards that reflect expectations Set, communicate, and reinforce customer-oriented service
standards for all work units Measure performance and provide regular feedback Reward managers and employees
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 16
Prescriptions for Closing theSeven Service Quality Gaps (2) (Table 14.3)
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 realistic Seek comments from frontline employees and operations
personnel about proposed advertising campaigns Get sales staff to involve operations staff in meetings with
customers Ensure that communications sets realistic customer expectations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 17
Prescriptions for Closing theSeven Service Quality Gaps (3) (Table 14.3)
5. Perceptions gap: Educate customers to see reality of service quality delivered Keep customers informed during service delivery and
debrief after delivery Provide physical evidence
6. Interpretation gap: Pretest communications to make sure message is clear and unambiguous 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 18
Measuring and Improving Service Quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 19
Soft and Hard Measures of Service Quality 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 20
Soft Measures of Service Quality
Key customer-centric SQ measures 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 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:
Perceptions of the quality of service delivered to customers on specific dimensions
Barriers to better service Suggestions for improvement
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 21
Hard Measures of Service Quality
Control charts to monitor a single variable 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
Service quality indexes Embrace key activities that have an impact on
customers
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 22
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 =
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 23
Control Chart for Departure Delays(Fig 14.4)
J F M A M J J A S O N D
60%
70%
80%
90%
100%
Month
% Flights Departing Within 15 Minutes of Schedule
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 24
Tools to Analyze and Address Service Quality Problems
Fishbone diagram Cause-and-effect diagram to identify potential causes of
problems
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 of service delivery, identifying points where
failures are most likely to occur
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 25
Tools to Analyze and Address Service Quality Problems (Appendix)
Total Quality Management (TQM) ISO 9000
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 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 26
Cause-and-Effect Chart for Flight Departure Delays (Fig 14.5)
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
PersonnelProcedures
Materials,Supplies
Customers
Gate agents cannot process
fast enough
Late/unavailable airline crew
Arrive lateOversized bags
Weather Air traffic
Frontstage Personnel
Procedures
Materials, Supplies
BackstagePersonnel
Information
Customers
Other Causes
MechanicalFailures
Late pushback
Late baggage
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 27
Late passengersWaiting for pushbackWaiting for fuelling
Late weight and balance sheetLate cabin cleaning/suppliesOther
Newark
All stations, excludingChicago-Midway Hub
Washington Natl.
23.1%23.1%
23.1%15.3%
15.4%
53.3%
15%
11.3%
8.7%
11.7%
33.3%
33.3%19%
9.5%
4.9 %
Case: Analysis of Causes of Flight Departure Delays
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 28
Blueprinting
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
Managers can identify points which need urgent attention Important first step in preventing service quality problems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 29
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
requirementsMeasure
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 30
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 31
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– 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
Determine optimal level of reliability Diminishing returns set in as improvements require higher
investments Know when improving service reliability becomes uneconomical
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 32
When Does Improving Service Reliability Become Uneconomical? (Fig 14.7)
Satisfy Target Customers through Service Recovery
Optimal Point of Reliability: Cost of Failure = Service
Recovery
Satisfy Target Customers through Service Delivery as
Planned
100%
Serv
ice
Rel
iabi
lity
InvestmentSmall Cost,
Large ImprovementLarge Cost,
Small Improvement
A B C D
Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 33
Defining and Measuring Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 34
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 35
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 36
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 37
Improving Service Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 38
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?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 39
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 labor 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
? ? ?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 40
Long Waiting Times May Indicate Need for Service Process Redesign (Fig 14.8)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 41
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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 42
Improving Service Productivity:(2) 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 43
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 behavior 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
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 44
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
Workers who try to do several things at once may perform each task poorly
Excessive pressure breeds discontent and frustration among customer contact personnel, who are caught between: Meeting customer needs Achieving management's productivity goals
Better to search for service process redesign opportunities that lead to Improvements in productivity Simultaneous improvement in service quality See Service Perspectives 14.2: Biometrics
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 45
Summary of Chapter 14: Improving Service Quality and Productivity (1) Quality and productivity need to be considered
jointly in marketing services Service quality is a combination of manufacturing-
based components of quality and service-based components
SERVQUAL is used to measure customer perceptions of service quality and the dimensions are: Credibility Security Access Communication Understanding the customer Tangibles Reliability Responsiveness Competence Courtesy
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 46
Summary of Chapter 14: Improving Service Quality and Productivity (2)
Research consolidated service quality dimensions into five Tangibles Reliability Responsiveness Competence Courtesy
The GAPS model is a tool to diagnose problems in service design and delivery. Service gap is the most critical and can only be closed if the other six gaps are closed
Both soft and hard measures used to measure service quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 47
Summary of Chapter 14: Improving Service Quality and Productivity (3)
Tools used to analyze and address service quality problems: Fishbone diagram Pareto chart Blueprinting TQM ISO9000 Malcolm-Baldrige Model Six sigma
Measuring productivity in services is difficult—there is a need to determine when service reliability becomes uneconomical
Efficiency, productivity, and effectiveness need to be distinguished when measuring service quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz Services Marketing 6/E Chapter 14 - 48
Summary of Chapter 14: Improving Service Quality and Productivity (4)
To improve service productivity, there are generic improvement strategies and customer-driven approaches
Customer-driven approaches to improving productivity include: Changing timing of customer demand Involving customers more in production Asking customers to use third parties
Backstage and front-stage productivity changes both affect customers
Cost-reduction strategies should be used with caution as this may impact service quality negatively. A better way may be to look for service process redesign opportunities