Suresh Paul Antony

SERVICE QUALITY Indian Institute of Management

Tiruchirappalli
spa@iimtrichy.ac.in
AGENDA
Service quality & productivity strategies
Service quality?
The Gaps model
Customer expectations
Customer perceptions
Service quality
 How to measure & improve?
 Soft & hard measures
 Tools to analyze & address problems
Improving service productivity
Integrating service quality and
productivity strategies
INTEGRATING SERVICE QUALITY AND
PRODUCTIVITY STRATEGIES
Quality & productivity create value
for customers & companies
Quality focuses on benefits created
for customers
Productivity addresses financial costs
incurred by firm
Importance of productivity
 Keep costs down to improve profits and/or
reduce prices
 Enable firms to spend more on improving
customer service & supplementary services
 Secure firm's future thro’ increased
spending on R&D
 May impact service experience
What is service quality?
DIFFERENT PERSPECTIVES OF SERVICE QUALITY
Transcendent Manufacturing-based
• Quality = Excellence • Quality is in
• Recognized only conformance to firm’s
through experience developed
specifications

User-based Value-based
• Quality lies in the • Quality is a trade-off
eyes of the beholder between price & value
SERVICE QUALITY
Customer's judgment of overall excellence of service provided in relation to quality
that was expected.
Service quality assessments formed on judgments of:
 outcome quality
 interaction quality
 physical environment quality
DIMENSIONS OF SERVICE QUALITY
Reliability Assurance
 Perform promised service  Knowledge & courtesy of
dependably and accurately employees
 Dependable & accurate performance  Ability to inspire trust & confidence
 Receive mail at same time each day  Competence, courtesy, credibility, security
Responsiveness  Be polite & show respect for customer
 Willingness to help customers
promptly
 Promptness & helpfulness
 Avoid keeping customers waiting for no
apparent reason
DIMENSIONS OF SERVICE QUALITY
Empathy
 Ability to be approachable
 Caring, individualized attention firm provides its customers
 Easy access, good communication, understanding of customer
 Being a good listener
Tangibles
 Physical facilities, equipment & facilitating goods
 Appearance of personnel
 Appearance of physical elements
 Cleanliness
HOW CUSTOMERS JUDGE 5 DIMENSIONS OF
SERVICE QUALITY
COSTS OF SERVICE QUALITY: BANK EXAMPLE
Failure costs Detection costs Prevention costs
External failure: Process control Quality planning
Loss of future business Peer review Training program
Negative word-of-mouth Supervision Quality audits
Liability insurance Customer comment card Data acquisition & analysis
Legal judgments Inspection Recruitment & selection
Interest penalties Supplier evaluation
Internal failure:
Scrapped forms
Rework
Recovery:
Expedite disruption
The Gaps model
THE CUSTOMER GAP

EXPECTED
SERVICE

CUSTOMER GAP

PERCEIVED
SERVICE
KEY FACTORS LEADING TO THE
CUSTOMER GAP
Customer Customer
Gap Expectations

PG 1: Not knowing what customers expect

PG 2: Not selecting right service designs &
standards
PG 3: Not delivering to service standards
PG 4: Not matching performance to
promises

Customer
Perceptions
GAPS MODEL OF SERVICE QUALITY
Customer / Service Gap
 Expectations vs. perceptions

PG 1: Listening / Knowledge Gap

 not knowing what customers expect

PG 2: Service design & standards / Policy Gap

 not having the right service designs and standards

PG 3: Service performance / Delivery Gap

 not delivering to service standards

PG 4: Communication Gap
 not matching performance to promises
PROVIDER GAP 1
CUSTOMER

Customer
expectations

Perceived
Service

COMPANY

PG 1: Listening /
Knowledge Gap Company
perceptions of
customer
expectations
KEY FACTORS LEADING TO PG 1
PROVIDER GAP 2
CUSTOMER

COMPANY Customer-driven
service designs and
standards
PG 2: Service Design &
Company Standards / Policy Gap
perceptions of
customer
expectations
KEY FACTORS LEADING TO PG 2
PROVIDER GAP 3
CUSTOMER

COMPANY Service delivery

PG 3: Service
Performance /
Customer-driven
Delivery Gap
service designs and
standards

2-20
KEY FACTORS LEADING TO PG 3
PROVIDER GAP 4
CUSTOMER

PG 4: Communication Gap
External
COMPANY Service delivery
communications to
customers
KEY FACTORS LEADING TO PG 4
GAPS MODEL OF SERVICE QUALITY
WAYS TO USE GAP ANALYSIS
Overall Strategic Assessment
 How are we doing overall in meeting /
exceeding expectations?
 How are we doing overall in closing 4
PGs?
 Which gaps represent our strengths &
where are our weaknesses?
Specific Service Implementation
 Who is the customer?
 What is the service?
 Are we consistently meeting/exceeding
customer expectations with this service?
 If not, where are the gaps and what
changes are needed? (Examine PG 1-4
for this particular service.)
Customer expectations of
service
POSSIBLE LEVELS OF CUSTOMER EXPECTATIONS
ZONE OF TOLERANCE: DUAL CUSTOMER
EXPECTATION LEVELS
Desired Service ← Delights

Zone of
Tolerance ← Desirables

Adequate Service ← Musts

ZONE OF TOLERANCE
The range of expectations between desired & adequate
 can be wide or narrow
 can change over time
 can vary among individuals
 may vary with the type of product/service
ZONES OF TOLERANCE FOR DIFFERENT
SERVICE DIMENSIONS
FACTORS THAT INFLUENCE DESIRED SERVICE
FACTORS THAT INFLUENCE ADEQUATE SERVICE
FACTORS THAT INFLUENCE DESIRED & PREDICTED
SERVICE
FAQS ABOUT CUSTOMER EXPECTATIONS
What does a service marketer do if customer expectations are “unrealistic”?
Should a company try to delight the customer?
How does a company exceed customers' service expectations?
Do customers' service expectations continually escalate?
How does a service company stay ahead of competition in meeting customer
expectations?
Customer perceptions of
service
THE CUSTOMER IS . . .
Anyone who receives the company's services, including
external customers
 outside the organization
 business customers, suppliers, partners, end consumers
internal customers
 inside the organization
 other departments, fellow employees
CUSTOMER PERCEPTIONS OF QUALITY &
CUSTOMER SATISFACTION
FACTORS INFLUENCING CUSTOMER SATISFACTION
Product quality
Service quality
Price
Specific product or service features
Consumer emotions
Attributions for service success or failure
Perceptions of equity or fairness
Other consumers, family members & coworkers
Personal factors
Situational factors
OUTCOMES OF CUSTOMER SATISFACTION
Increased customer loyalty
Positive word-of-mouth communications
Increased revenues
Increased return to shareholders
CS-LOYALTY RELATIONSHIP IN COMPETITIVE
INDUSTRIES
SERVICE ENCOUNTER / MOMENTS OF TRUTH
Each customer contact an But an opportunity
‘encounter’  Build trust
 When customer interacts with firm  Reinforce quality
 Outcome  Build brand identity
 (Dis)satisfaction  Increase loyalty
 (Dis)loyalty

Types of encounters
 Remote encounters, phone
encounters, face-to-face encounters
SERVICE ENCOUNTER CASCADE: HOTEL VISIT
SERVICE ENCOUNTER CASCADE: AN INDUSTRIAL
PURCHASE
Sales Call

Delivery and Installation

Servicing

Ordering Supplies

Billing
SERVICE ENCOUNTERS: OPPORTUNITY TO BUILD
SATISFACTION & QUALITY
COMMON THEMES IN CRITICAL SERVICE
ENCOUNTERS RESEARCH

Recovery: Adaptability:
employee response employee response
to service delivery to customer needs
system failure and requests

Coping: Spontaneity:
employee response unprompted and
to problem customers unsolicited employee
actions and attitudes
GENERAL SERVICE BEHAVIORS BASED ON
ENCOUNTER THEMES: RECOVERY
GENERAL SERVICE BEHAVIORS BASED ON
ENCOUNTER THEMES: ADAPTABILITY
GENERAL SERVICE BEHAVIORS BASED ON
ENCOUNTER THEMES: SPONTANEITY
GENERAL SERVICE BEHAVIORS BASED ON
ENCOUNTER THEMES: COPING
Measuring and improving
service quality
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
 SERVQUAL, surveys, and customer advisory
panel
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
Soft measures of service
quality
CUSTOMER FEEDBACK SYSTEMS: KEY OBJECTIVES
Assessment & benchmarking
of service quality and
performance
Customer-driven learning
and improvements
Creating a customer-
oriented service culture
CUSTOMER FEEDBACK COLLECTION TOOLS
Total market Post- Ongoing
surveys transaction customer
surveys surveys

Customer Employee
advisory surveys/panels Focus groups
panels

Mystery Complaint
shopping analysis
CUSTOMER FEEDBACK COLLECTION TOOLS:
STRENGTHS & WEAKNESSES POTENTIAL
LEVEL OF MEASUREMENT FOR FIRST COST
TRANSACTION REPRESENTATIVE/ SERVICE HAND EFFECTIVENESS
COLLECTION TOOLS FIRM PROCESS SPECIFIC ACTIONABLE RELIABLE RECOVERY LEARNING
Total Market Survey
(Incl. Competitors)
Annual Survey on
Overall Satisfaction
Transactional Survey

Service Feedback
Cards
Mystery Shopping
Unsolicited Feedback
(e.g., complaints)
Focus Group
Discussions
Service Reviews
ANALYSIS, REPORTING, AND DISSEMINATION OF
CUSTOMER FEEDBACK
Relevant feedback tools & collecting customer feedback should be channeled back
the relevant parties to take action
Three common types of performance reports
 Monthly service performance update
 Quarterly service performance review
 Annual service performance report
Hard measures of service
quality
HARD MEASURES OF SERVICE QUALITY
Service quality indexes
 Embrace key activities that have impact on customers
Control charts to monitor single variable
 Offer simple method of displaying performance over time against specific quality standards
 Enable easy identification of trends
 Are only good if data on which they are based are accurate
FedEx
 One of 1st service companies to understand need for an index of service quality that embraced all key
activities that affect customers
CONTROL CHART FOR DEPARTURE DELAYS
Tools to analyze and address
service quality problems
TOOLS TO ANALYZE AND ADDRESS
SERVICE QUALITY PROBLEMS
Fishbone diagram
 Cause-and-effect diagram
 Identify potential causes of problems

Pareto chart
 Separate trivial from important
 Often, majority of problems caused by minority of causes
 80/20

Blueprinting
 Visualise service delivery
 Identify points where failures most likely to occur
FISHBONE DIAGRAM: FLIGHT DEPARTURE DELAYS
PARETO CHART: FLIGHT DEPARTURE DELAYS
BLUEPRINTING
Depicts sequence of front-stage interactions experienced by customers + supporting
backstage activities
Used to identify potential fail points
 Where failures are most likely to appear
Shows how failures at one point can have ripple effect
Managers can identify points which need urgent attention
 Important 1st step in preventing service quality problems
RETURN ON QUALITY (ROQ)
Assess costs & benefits of quality Determine optimal level of reliability
initiatives  Diminishing returns set in as improvements
 ROQ approach based on 4 assumptions require higher investments
 Quality an investment  Know when improving service reliability
 Quality efforts must be financially becomes uneconomical
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 & then relate to anticipated
customer response
WHEN DOES IMPROVING SERVICE RELIABILITY
BECOME UNECONOMICAL?
Satisfy Target Customers
100% Through Service Recovery
Service Reliability

Optimal Point of
Reliability: Cost of Failure
= Service Recovery

Satisfy Target Customers

Through Service Delivery as
Planned
A B C D

Investment Assumption: Customers are equally (or even more)

Small Cost, Large Cost,
Large Improvement Small Improvement satisfied with service recovery than with service
that is delivered as planned.
PRODUCTIVITY IN A SERVICE CONTEXT
Productivity
 Amount of output produced relative to amount of inputs
 Productivity improvement => Outputs-inputs ratio improvement

Intangible nature of service makes it hard to measure productivity of service firms,

esp. for info-based services
 Both input & output are hard to define
 Relatively simpler in possession-processing services, as compared to info- & people-processing services
SERVICE EFFICIENCY, PRODUCTIVITY,
AND EFFECTIVENESS
Efficiency
 Involves comparison to a standard, usually time-based
 Ex. How long employee takes to perform specific task
 Focus on inputs rather than outcomes and 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 & customer satisfaction
Improving service productivity
GENERIC PRODUCTIVITY
IMPROVEMENT STRATEGIES
Typical strategies to improve service productivity
 Careful control of costs
 Reduce wasteful use of materials or labor
 Match productive capacity to average demand levels
 Replace workers by automated machines or SSTs
 Teach employees how to work more productively
 Broaden variety of tasks that service worker can perform
 Install expert systems that allow paraprofessionals to take on work
previously performed by professionals
Although improving productivity can be approached incrementally,
major gains often require redesigning entire processes
CUSTOMER-DRIVEN STRATEGIES TO IMPROVE
PRODUCTIVITY
Change timing of customer demand
 Shift demand away from peaks
 Make better use of firm's productive assets & provide better service
Involve customers more in production
 Get customers to self-serve
 Encourage customers to obtain info & buy from firm's websites
Ask customers to use 3rd parties
 Delegate delivery of supplementary service elements to intermediary organizations
BACKSTAGE & FRONT-STAGE CHANGES:
IMPLICATIONS FOR CUSTOMERS
Backstage changes may impact customers
 Keep track of proposed backstage changes & prepare customers for them
 Ex. new printing peripherals may affect appearance of bank statements

Front-stage productivity enhancements are esp. visible in high contact services

 Some improvements only require passive acceptance, while others require customers to change
behavior
 Must consider impact on customers & address customer resistance to changes
MERE COST REDUCTION STRATEGIES: NOTE OF
CAUTION
Without new technology, firms improve service productivity by eliminating waste &
reducing labor costs
Multitasking can reduce productivity
Excessive pressure breeds discontent & frustration among customer contact personnel
Often better to search for service process redesign opps that lead to quantum leaps
in improvements in productivity & service quality at the same time
Appendix
SERVQUAL
Based on premise that Developed primarily in context
customers evaluate firm’s of face-to-face service
service quality by comparing encounters
 Perceptions of service quality 22 items reflecting 5 dimensions
actually received with Need to customize scale to
 Prior expectations of companies in research context
particular industry
 Recent research suggests that it is
 Poor Quality not generalizable
 Perceived performance ratings <
expectations
 Good Quality
 Perceived performance ratings >
expectations
TOOLS TO ANALYZE AND ADDRESS
SERVICE QUALITY PROBLEMS
Total Quality Management (TQM) Six Sigma & Lean Six Sigma
ISO 9000  Statistically, only 3.4 defects per million
 Comprises requirements, definitions, opportunities (1/294,000)
guidelines & related standards to provide  Has evolved from defect-reduction
independent assessment & certification of approach to overall business-improvement
firm's quality management system approach
Malcolm Baldrige Model applied to
services
 To promote best practices in quality
management, and recognizing, and
publicizing quality achievements among US
firms
 Many countries around world have
adapted Malcolm Baldrige Model
INTERACTIVE EXERCISE
Identify worst service experience & best service experience that anyone has had
Teams report to class what has been learned about service quality
AND NOW WHAT QUESTIONS DO WE HAVE?