Improving Service Quality and Productivity

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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What is Service Quality? The Customer Gap

Customer Gap

Service quality is the customers judgment of overall excellence of the service provided in relation to the quality that was expected.
Services Marketing 5/E

Slide 2004 by Christopher Lovelock and Jochen Wirtz

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Service Quality

The customers judgment of overall excellence of the

service provided in relation to the quality that was expected.

Service quality assessments are formed on judgments of:

outcome quality interaction quality physical environment quality

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Integrating service quality & productivity strategies

Similarly,
reasons:

improving productivity is important to marketers for several

1.

It helps to keep costs down. Lower costs either mean higher profits or the ability to hold down prices. The company with the lowest costs in an industry has the option to position itself as the low-price leader usually a significant advantage among price-sensitive market segments. Firms with lower costs also generate higher margins, giving those firms the option of spending more than the competition in marketing activities, improved customer service & supplementary services.

2.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Cont..
3. Improving productivity generates the opportunity to secure the firms longterm future through investments in new service technologies & in research to create superior new services, improved features & innovative delivery systems.

Thus,

quality & productivity are twin paths to creating value for both customers & companies. In broad terms, quality focuses on the benefits created for the customers side of the equation, & productivity is the financial costs incurred by the firm , which may subsequently be passed on to the customers, primarily in the form of price.

Carefully

integrating quality & productivity improvement programs will improve the long-term profitability of the firm.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Perspectives on Service Quality

Transcendental: Quality = excellence. Recognized only through
experience

Product-Based: Quality is precise and measurable User-Based: ManufacturingBased:

Quality lies in the eyes of the beholder Quality is conformance to the firms developed specifications Quality is a trade-off between price and value

Value-Based:

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Contrasting Quality components in Manufacturing & Services

Manufacturing-Based components of quality:

1.
2. 3.

Performance- Primary operating characteristics Features Reliability- Probability of malfunction or failure

4.
5.

Conformance- ability to meet specification

Durability- how long the product continues to provide value to the customer

6.
7.

Serviceability- speed, courtesy, competence & ease of having problems fixed.

Aesthetics- how the product appeals to any or all the users.
Services Marketing 5/E

Slide 2004 by Christopher Lovelock and Jochen Wirtz

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Service-based components of quality

Tangibles - appearance of physical elements

Reliability- dependable, accurate performance

Responsiveness- promptness & helpfulness

Assurance Empathy
competence, courtesy credibility security

access communication understanding of customer

Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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How Customers Judge the Five Dimensions of Service Quality

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Capturing the customers perspective of service quality

To measure customer satisfaction with different aspects of service quality

Zeithmal developed a survey research instrument called SERVQUAL.

It

is based on the premise that customers can evaluate a firms service quality by comparing their perceptions of its service with their own expectations.

SERVQUAL is seen as a generic measurement tool that can be applied

across a broad spectrum of service industries. In its basic form, the scale contains 21 perception items & a series of expectation items, reflecting the five dimensions of service quality.

Respondents complete a series of scales that measure their expectations

of companies in a particular industry on a wide array of specific service characteristics.

Using those same characteristics, respondents are subsequently asked

record their perceptions.
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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The SERVQUAL Scale

The SERVQUAL scale includes 5 dimensions: tangibles, responsiveness,

reliability, assurance, & empathy. Within each dimension are several items measured on a seven-point scale from strongly agree to strongly disagree for a total of 21 items.

SERVQUAL Questions
Note: For actual survey respondents, instructions are also included, & each statement is accompanied by a seven-scale ranging from strongly agree=7 to strongly disagree=1. Only the end points of the scale are labeled; there are no words above the numbers 2 & 6 Tangibles:

Excellent banks (refer to cable TV companies, hospitals, or the appropriate

service business throughout the questionnaire) will have modern looking equipment.
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Cont.

The physical facilities at excellent banks will be visually appealing.

Employees at excellent banks will be neat in appearance

Materials (e.g., brochures or statements) associated with the service will be
visually appealing in an excellent bank. Reliability

When excellent banks promise to do something by a certain time, they will

do so.

When customers have a problem, excellent banks will show a sincere

interest in solving it.

Excellent banks will perform the service right the first time
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Cont..

Excellent banks will provide their services at the time they promise to do so

Excellent banks will insists on error-free records

Responsiveness

Employees of excellent banks will tell customers exactly when service will
be performed

Employees of excellent banks will give prompt service to customers Employees of excellent banks will always be willing to help customers

Employees of excellent banks will never be too busy to respond to

customer requests

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Services Marketing 5/E

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Cont.
Assurance

The behavior of employees of excellent banks will instill confidence in

customers

Customers of excellent banks will feel safe in their transactions

Employees of excellent banks will be consistently courteous with

customers Empathy

Excellent banks will give customers individual attention

Excellent banks will have operating hours convenient to customers Excellent banks will have employees who give customers personal
attention
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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The GAP Model: A Conceptual tool to identify & correct service quality problems
Gaps in Service Design & Delivery

Gaps are the difference between what customers expected & what they
perceived was delivered.

The knowledge gap is the difference between what service providers

believe customers expect & customers actual needs & expectations

The standards gap is the difference between managements perceptions

of customer expectations & the quality standards established for service delivery

The delivery gap is the difference between specified delivery standards

& the service providers actual performance on these standards

The internal communications gap is the difference between what the

companys advertising & sales personnel think are the products features, performance & service quality level & what is actually delivered
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Cont

The perceptions gap is the difference between what is, in fact, delivered
& what customers perceive they have received (because they are unable to accurately evaluate service quality)

The

interpretation gap is the difference between what a service providers communication efforts( in advance of service delivery) promise & what a customer thinks was promised by these communications

The
Gaps

service gap is the difference between what customers expect to receive & their perceptions of the service that is delivered.
1,5,6 & 7 represents external gaps between the customer & the organization. Gaps 2,3 & 4 are internal gaps occurring between different functions & departments within the organization

Gaps at any point in service design & delivery can damage relationships
with customers. The service gap is the most critical; hence, the ultimate goal in improving service quality is to close or narrow this gap.
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Seven Service Quality Gaps

Customer needs and expectations

CUSTOMER

1. Knowledge Gap
Management definition of these needs

MANAGEMENT

2. Standards Gap
Translation into design/delivery specs

3. Delivery Gap
Execution of design/delivery specs

4. I.C.Gap

Advertising and sales promises

5. Perceptions Gap
Customer perceptions of product execution

6. Interpretation Gap
Customer interpretation of communications

7.

Service Gap
Customer experience relative to expectations

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Prescriptions for Closing Service Quality Gaps

1.

Learn what customers expect Understand customer expectations through research, compliant analysis, customer panels etc. Increase direct interactions between managers & customers to improve understanding

2.

Establish the right service quality standards

Ensure that top management displays ongoing commitment to quality as defined by customers

Train managers in the skills needed to lead employees to deliver quality service
Measure performance & provide regular feedback
Services Marketing 5/E

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Cont
3. Ensure that service performance meets standards

Clarify employee roles

Match employees to jobs by selecting for the abilities & skills needed to
perform each job well 4. Ensure that the communication promises are realistic

Seek inputs from operations personnel when new advertising programs are
being created

Develop advertising that features real employees performing their jobs

5. Keep customers informed during service delivery & also debrief them at the end 6. Pretest communication materials to a sample of customers in advance
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Measuring & improving service quality

Hard measures refer to standards and measures that can

be counted, timed or measured through audits
typically operational processes or outcomes e.g. how many trains arrived late?

Soft measures refer to standards and measures that cannot

easily be observed and must be collected by talking to customers, employees or others
e.g. SERVQUAL, surveys, and customer advisory panels.

Control charts are useful for displaying performance over

time against specific quality standards.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Composition e of FedExs Service Quality Index (SQI)

Failure Type
Weighting X Factor
1 5 1 5 1 1 10 10 10 5 5 1

No of Daily = Incidents Points

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

Total Failure Points (SQI) =

Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Control Chart: Percent of Flights Leaving within 15 Minutes of Schedule

100% 90% 80% 70% 60%

J F M A M J J A S O N D

Month
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E

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Tools to Address Service Quality Problems

Fishbone diagrams: A cause-and-effect diagram to identify

potential causes of problems.

Pareto charts: 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: A visualization of service delivery. It allows

one to identify fail points in both the frontstage and backstage.

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Cause and Effect Chart for Airline Departure Delays

Facilities, Equipment Frontstage Front-Stage Personnel Personnel Procedure
Procedures

Arrive late Oversized bags

Customers
Customers

Delayed check-in Gate agents Aircraft late to procedure gate cannot process Mechanical fast enough Acceptance of late Failures passengers Late/unavailable Late pushback airline crew

Delayed Departures Other Causes

Weather Air traffic Late food service Late baggage Late fuel
Materials, Materials, Supplies Supplies

Late cabin cleaners

Poor announcement of departures Weight and balance sheet late

Backstage Personnel

Information

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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Return on Quality (ROQ)

ROQ approach is based on four assumptions:

Quality is an investment

Quality efforts must be financially accountable

Its possible to spend too much on quality Not all quality expenditures are equally valid

Implication: Quality improvement efforts may benefit

being related to productivity improvement programs

from

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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POKA-YOKES: An effective tool to design fail points out of service processes

Poka-Yokes in a service context is the need to address not only server errors
but also customer errors

Server poka-yokes ensure

that service staff do things correctly, as requested in the right order & in the right speed

Some service firms use poka-yokes to ensure that certain steps or standards
in the customer staff interaction are adhered to.

Customer
encounter

poka-yokes usually focus on preparing the customer for the

Slide 2004 by Christopher Lovelock and Jochen Wirtz

Services Marketing 5/E

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When Does Improving Service Reliability Become Uneconomical?

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

D Investment

Small Cost, Large Improvement

Large Cost, Small Improvement

Services Marketing 5/E

Assumption: Customers are equally (or even more) satisfied with the service recovery provided than with a service that is delivered as planned.

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