Service Quality PDF

Chapter 14:
Improving Service
Quality and Productivity
Slide 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 1
Overview of Chapter 14
Integrating service quality and productivity strategies
What is service quality?
The Gaps Modela conceptual tool to identify and
correct service quality problems
Measuring and improving service quality
Defining and measuring productivity
Improving service productivity
Chapter 14 - 2
Integrating Service Quality and

Productivity Strategies
Chapter 14 - 3
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 firms future through increased spending on R&D
May impact service experiencemarketers must work to minimize
negative effects, promote positive effects
Chapter 14 - 4
What Is Service Quality?
Chapter 14 - 5
Different Perspectives of Service Quality

Transcendent:
Quality = Excellence. Recognized only through

experience
Product-based: Quality is precise and measurable
User-based:
Quality lies in the eyes of the beholder
Manufacturing- Quality is in conformance to the firms developed

based:
specifications
Value-based:
Quality is a trade-off between price and value
Chapter 14 - 6
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
Chapter 14 - 7
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
Chapter 14 - 8
Capturing the Customers Perspective of

Service Quality: SERVQUAL (1)
Survey research instrument based on premise that
customers evaluate firms 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
Chapter 14 - 9
Capturing the Customers 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
Chapter 14 - 10
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:Firms 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. 4651. 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. 213234.
Chapter 14 - 11
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 qualityhalo effect
Process factors: Customers feelings
Chapter 14 - 12
The Gaps ModelA Conceptual Tool to

Identify and Correct Service Quality
Problems
Chapter 14 - 13
Seven Service Quality Gaps

(Fig 14.3)
Customer needs and
expectations
CUSTOMER
1. Knowledge Gap
MANAGEMENT
Management definition
of these needs
2. Standards Gap
Translation into
design/delivery specs
4. Internal
Communications Gap
3. Delivery Gap
Execution of
design/delivery specs
Advertising and sales

promises
4.
6. Interpretation Gap
5. Perceptions Gap
Customer perceptions
of service execution
Customer interpretation
of communications
7. Service Gap
Customer experience
relative to expectations
Chapter 14 - 14
Prescriptions for Closing the

Seven 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
Chapter 14 - 15

(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
Chapter 14 - 16

(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
Chapter 14 - 17
Measuring and Improving

Service Quality
Chapter 14 - 18
Soft and Hard Measures

of Service Quality
Soft measuresnot 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 measurescan 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
Chapter 14 - 19
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 feedbackcomplaints 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
Chapter 14 - 20
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
Chapter 14 - 21
Composition of FedExs
Service Quality IndexSQI
Failure Type
(Table 14.4)
Weighting
Number of
Daily
X
=
Factor
Incidents
Points
Late deliveryright day

Late Deliverywrong 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
Total Failure Points (SQI) = XXX,XXX

Chapter 14 - 22
Control Chart for Departure Delays

(Fig 14.4)
% Flights Departing Within
15 Minutes of Schedule
100%
90%
80%
70%
60%
J
Month
Chapter 14 - 23
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
Chapter 14 - 24
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 firms 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 businessimprovement approach
Chapter 14 - 25
Cause-and-Effect Chart for

Flight Departure Delays (Fig 14.5)
Facilities,
Equipment
Arrive late
Oversized bags
Customers
Customers
Frontstage
Front-Stage
Personnel
Personnel
Procedures
Procedures
Delayed check-in
Gate agents
Aircraft late to
procedure
gate
cannot process
fast enough
Mechanical
Acceptance of late
Failures
passengers
Late/unavailable
Late pushback
airline crew
Delayed
Departures
Late food
service
Other Causes
Weather
Air traffic
Late cabin
cleaners
Poor announcement of
departures
Late baggage
Weight and balance

sheet late
Late fuel
Materials,
Materials,
Supplies
Supplies
Backstage
Personnel
Information
Chapter 14 - 26
Case: Analysis of Causes of

Flight Departure Delays
15.3%
All stations, excluding

Chicago-Midway Hub
23.1%
15.4%
11.7%
23.1%
53.3%
15%
Late passengers
Waiting for pushback
Waiting for
fuelling
33.3%
33.3%
23.1%
Newark
19%
9.5%
8.7%
11.3%
4.9
%
Washington Natl.
Late weight and balance sheet

Late cabin cleaning/supplies
Other
Chapter 14 - 27
Blueprinting
Depicts sequence of front-stage interactions
experienced by customers plus supporting backstage
activities
Used to identify potential fall pointswhere 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
Chapter 14 - 28
Six Sigma Methodology to

Improve and Redesign Service Processes
Define
Process Improvement
Process Design/Redesign
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
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 Design new process

Implement new process, structures, and
causes
systems
Test solutions
Measure results
Control
Establish measures to
maintain performance
Correct problems as needed
Refine problem/goal
Measure key steps/inputs
Establish measures and reviews to

maintain performance
Correct problems as needed
Chapter 14 - 29
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
Chapter 14 - 30
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
Its 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
Chapter 14 - 31
When Does Improving Service Reliability

Become Uneconomical? (Fig 14.7)
Satisfy Target
Customers through
Service Recovery
Service Reliability
100%
Optimal Point of
Reliability: Cost of
Failure = Service
Recovery
B C
Small Cost,
Large Improvement
Satisfy Target
Customers through
Service Delivery as
Planned
D
Large Cost,
Small Improvement
Investment
Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
service that is delivered as planned.
Chapter 14 - 32
Defining and Measuring Productivity
Chapter 14 - 33
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
Chapter 14 - 34
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
Chapter 14 - 35
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
Chapter 14 - 36
Improving Service Productivity
Chapter 14 - 37
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?
Chapter 14 - 38
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
?
?
Chapter 14 - 39
Long Waiting Times May Indicate Need

for Service Process Redesign (Fig 14.8)
Chapter 14 - 40
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
Chapter 14 - 41
Improving Service Productivity:

(2) Customer-driven Strategies
Change timing of customer demand
By shifting demand away from peaks, managers can make better
use of firms productive assets and provide better service
Involve customers more in production

Get customers to self-serve
Encourage customers to obtain information and buy from firms
corporate websites
Ask customers to use third parties

Delegate delivery of supplementary service elements to
intermediary organizations
Chapter 14 - 42
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
Chapter 14 - 43
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
Chapter 14 - 44
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
Chapter 14 - 45

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
Chapter 14 - 46

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 difficultthere is a need to

determine when service reliability becomes uneconomical
Efficiency, productivity, and effectiveness need to be
distinguished when measuring service quality
Chapter 14 - 47

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
Chapter 14 - 48

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Chapter 14:

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Integrating Service Quality and

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Integrating Service Quality and

Services Marketing 6/E

What Is Service Quality?

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Different Perspectives of Service Quality

Quality = Excellence. Recognized only through

Product-based: Quality is precise and measurable

Quality lies in the eyes of the beholder

Manufacturing- Quality is in conformance to the firms developed

Quality is a trade-off between price and value

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Services Marketing 6/E

Tangibles: Appearance of physical elements

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Capturing the Customers Perspective of

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Capturing the Customers Perspective of

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

How Customers Might Evaluate Online

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:Firms propensity to respond to e-mails

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Services high in credence characteristics may cause

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

The Gaps ModelA Conceptual Tool to

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Seven Service Quality Gaps

Advertising and sales

Services Marketing 6/E

Prescriptions for Closing the

1. Knowledge gap: Learn what customers expect

2. Standards gap: Specify SQ standards that reflect

Slide 2007 by Christopher Lovelock and Jochen Wirtz

Services Marketing 6/E

Prescriptions for Closing the

3. Delivery gap: Ensure service performance meets

4. Internal communications gap: Ensure that

Services Marketing 6/E

Prescriptions for Closing the

5. Perceptions gap: Educate customers to see reality of

6. Interpretation gap: Pretest communications to make

7. Service gap: Close gaps 1 to 6 to meet customer