Service Quality A multi-disciplinary perspective

IEEE CASE Workshop Aug 22 2009

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So what is Service Science?

IBM Services Research

Service is value-cocreation, that is, useful changes that result from communication, planning, or other purposeful interactions between distinct entities. A service system is a collection of entities and interactions that cocreate value, that is, a set of distinct configurations of resources (including people, organizations, shared information, and technology) that are better off working together than working alone. Service Science aims to create a body of knowledge that describes, explains, predicts, and improves valuecocreation between entities as they interact, that is, relying on methods and standards used by a community to account for observable phenomenon with conceptual frameworks, theories, models, and laws that can be empirically tested. So the object of study value-cocreation, the basic abstraction is the service system, and the ultimate goal is develop methods and theories that can be used to explain and improve value-cocreation in service systems.

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Distinguishing services from goods

IBM Services Research

Inseparability
Services are created and consumed at the same time Services cannot be fully inventoried (exception knowledge services) Demand fluctuations cannot be solved by inventory processes Quality control cannot be achieved before consumption

Heterogeneity
From the clients perspective, there is typically a wide variation in service offerings Personalization of services increases their heterogeneous nature Perceived quality-of-service varies from one client to the next

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Distinguishing services from goods

IBM Services Research

Intangibility
Services are ideas and concepts that are part of a process The client typically relies on the service providers reputation and the trust they have with them to help predict quality-of-service and make service choices Regulations and governance are means to assuring some acceptable level of quality-of-service

Perishability
Any service capacity that goes unused is perished Services cannot be stored so that when not used to maximum capacity the service provider is losing opportunities Service capability estimation and planning are key aspects for service management

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Framework: Services as Theatre

(James Teboul, Service is Front Stage, 2005)
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Back-Stage
Raw material / components; bits of information TRANSFORMATION employees, equipment and technology Finished product; processed informatio n; knowledge Customer with a problem or requirement

Front-Stage
PERFORMANCE Direct interaction with employees, equipment, dcor and other customers Customer with a solution or transformed

Product aspect Back-stage activities

Service Aspect Front-stage activities

Product excellence and scale

Solution

Commodities Relatively pure goods Service-intensive goods and consumer durables

industry

services

Industrialization Experience

Goods and informationintensive services Relatively pure services

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Service Discipline Classification System

IBM Services Research

A. General
1. 2. 3. 4. 5. 6. Service Science Education Research in Service Science Service Science Policy History of Services Case Studies Miscellaneous

D. Service Management

G. Service Arts
1. 2. 3. 4. 5. Service Arts Theory Traditional Service Arts Performance Arts History of Service Arts Service Arts Education

1. Service Marketing 2. Service Operations 3. Service Management

4. Service Lifecycle 5. Service Innovation Management

6. Service Quality
7. 8. 9. 10. 11. 12.

B. Service Foundations
1. 2. 3. 4. 5. 6. 7. 8. Service Theory Service Philosophy Economics of Services Theoretical Models of Services Mathematical Models of Services Service Complexity Theory Service Innovation Theory Service Foundations Education

Human Resources Management Customer Relationship Management Services Sourcing Services Law Globalization of Services Service Business Education

H. Service Industries
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. The Service Industry Utilities Wholesale Trade Retail Trade Transportation and Warehousing Information Services Finance and Insurance Real Estate and Rental Professional and Technical Services Management Services Administrative and Support Services Educational Services Health Care and Social Assistance Arts, Entertainment, and Recreation Accommodation and Food Services Public Administration Services Other Service Industries

E. Human Aspects of Services

1. Service Systems Evolution 2. Behavioral Models of Services 3. Decision Making in Services 5. 6. 7. 8. 9.

C. Service Engineering
1. 2. 3. 4. 5. 6. 7. 8. Service Engineering Theory Service Operations Service Standards Service Optimization Service Systems Engineering Service Supply Chains Service Engineering Management Service Systems Performance

4. People in Service Systems

Organizational Change in Services Social Aspects of Services Cognitive Aspects of Services Customer Psychology Education in Human Aspects of Services Service Design Theory Service Design Methodology Service Representation Aesthetics of Services Service Design Education

9. Service Quality Engineering F. Service Design

10. 11. 12. 13. New Services Engineering Computer Services Information Technology Services Service Engineering Education 1. 2. 3. 4. 5.

Claudio Pinhanez & Paul Kontogiorgis, A proposal for a service science discipline classification systems, Presented at Frontiers in Service Conference, October 2008
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Service Quality Conceptual Context

IBM Services Research

Technical
Manufacturing based (objective or conformance) - Quality is the extent to which a product conforms to technical standards. Quality is measured objectively by number of deviations from these standards or number of defects ("zero-defect" policy) Used for measuring quality of standardized products that are massproduced

User based
Quality is determined by the user Quality is subjective and hinges on the individual perceptions of customers. Quality is high when customers say it is and not always when product conforms to technical criteria.

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Why is Service Quality multi-disciplinary?

IBM Services Research

Economics lens Quality is an investment which organizations make to get positive returns (shareholder value, revenues and profits) Marketing lens Quality drives customer satisfaction and loyalty Operations lens Quality is driven by process discipline and driving efficiencies in the system. Behavioral lens Quality drives customer behavior and intentions. Similarly since services is more people oriented, behaviors of service delivery personnel impacts quality of service delivered Human Resources lens Service climate of an organization impacts quality Version 1.0

What disciplines ?
IBM Services Research

Disciplines involved
Econometrics (Revenue, profit, return on assets estimation) Marketing Research (Measuring customer satisfaction) Marketing Science (Modeling customer retention) Operations Research (Modeling Service Supply Chain Quality) Organizational Behavior (Assessing impact of service encounter) Psychology (Assessing impact of service climate) HR (Assessing impact of training) Strategy (Assessing impact of outsourcing strategy and governance) Information Systems (Assess impact of technology in quality) Legal (Service Contracts)

When the study of Service Quality of an IS/IT based or IT enabled service system is required, theories from the above disciplines need to be looked at in a combined manner to arrive at new Service Science theories at the intersection of these disciplines
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What is Customer Satisfaction ?

IBM Services Research

Customers feelings in response to evaluations of one or more use experiences with a service/product Customer Satisfaction two conceptualizations
Transaction-specific state of affect of customer after a simple transaction ensues between provider and customer. Transactional satisfaction is typically leveraged for service diagnostics. Consumer Research deals with transactional models of satisfaction service encounter level Cumulative state of affect of customer after a cumulative set of transactions between provider and receiver over a longer duration of time. Typically satisfaction models belong here. Cumulative satisfaction is a fundamental indicator of a firms current and long term business performance

Kano model is a theory of customer satisfaction

Attractive (Delighters) Be Differentiated One-Dimensional (Satisfiers) Be Competitive Must-Be (Basic) Be Competent

Expectation Disconfirmation Model

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Kanos model of customer satisfaction

(Berger et al., 1993)

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Expectation Disconfirmation

(Oliver, 1980, 1994 etc.,)

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What is Customer Loyalty?

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Loyal customer is one who

Makes regular purchases (Repeat business) Purchases across product and service lines (Share of Wallet) Refers others (Word of Mouth or Referenceability) Demonstrates immunity to the pull of the competition (Retention)

Four stage model of loyalty (Oliver, 1997, 1999) sequence of distinct phases cognitive, affective, conative (intentional), action (behavioral)
Cognitive loyalty refers to the existence of beliefs that (typically) a brand is preferable to others Affective loyalty reflects a favorable attitude or liking based on satisfied usage Conative loyalty constitutes the development of behavioral intentions characterized by a deeper level of commitment Action loyalty relates to the conversion of intentions to action, accompanied by a willingness to overcome impediments to such action
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Net Promoter Score (NPS)

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Net Promoter is a customer loyalty metric developed by (and a registered trademark of) Fred Reichheld, Bain & Company, and Satmetrix. Claim is that a company's Net Promoter Score correlates with revenue growth Customers asked a single question on a 0 to 10 rating scale: How likely is it that you would recommend our company to a friend or colleague?
Promoters (9-10 rating) Passives (7-8 rating) Detractors (0-6 rating)

The percentage of Detractors is then subtracted from the percentage of Promoters to obtain a Net Promoter score. Score of 75% or above is considered quite high.
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What is Customer Value?

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Customer value is a customer's perceived preference for and evaluation of those product attributes, attribute performances and consequences arising from use that facilitate (or block) achieving the customer's goals and purposes in use situations Customer Value Hierarchy Model (Woodruff, 1997)

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Technical Service Quality Operations Perspective

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Focus on driving efficiencies and reducing defects through process discipline in manufacturing or service delivery Six Sigma
Six Sigma seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and variability in manufacturing and business processes VOC (Voice of Customer) Voice of the customer (VOC) is the process of capturing a customer's requirements. They are generally conducted at the start of any new product, process, or service design initiative in order to better understand the customers wants and needs, and as the key input for new product definition. The VOC is translated into Critical To Quality (CTQ) technical requirements

Lean
Lean production practice considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination Value Stream Mapping (VSM) - used to analyze the flow of materials and information currently required to bring a product or service to a consumer

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Technical Service Quality Operations Perspective

IBM Services Research

For a detailed and in-depth literature review see Defining the concept of supply chain quality management and its relevance to academic and industrial practice, C.J.Robinson, M.K. Malhotra, International Journal of Production Economics, 2005 SCQM (Supply Chain Quality Management)
SCQM is the formal coordination and integration of business processes involving all partner organizations in the supply channel to measure, analyze and continually improve products, services, and processes in order to create value and achieve satisfaction of intermediate and final customers in the marketplace

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Technical Service Quality Operations Perspective

IBM Services Research

Evolutionary timeline and focus of SCQM Quality practices must advance from current traditional and product-based mindsets to an interorganizational supply chain orientation involving customers, suppliers, and other partners. Perhaps the most essential difference in this transition of traditional activities is a shift from a product to a process orientation Supply channel quality must integrate both service and production processes across the supply network and beyond the boundaries of individual firms
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Service Quality Models in Services User based

IBM Services Research

Focus on meeting client expectations (client perception client expectation)

For a detailed models comparison see Service quality models: a review, N. Seth, S.G. Deshmukh, P.Vrat, International Journal of Quality & Reliability Management, 2005, Volume 22 For a detailed and in-depth literature review see Service Quality, Profitability, and the Economic Worth of Customers: What We Know and What We Need to Learn, V.A. Zeithaml, Journal of the Academy of Marketing Science, 2000, Volume 28

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Perceived Service Quality Marketing perspective

IBM Services Research

Some seminal models we would cover briefly here

Technical and functional quality model Nordic (Gronroos, 1984) GAP model, SERVQUAL or RATER (Parasuraman et al., 1985,1988) Performance only model SERVPERF (Cronin and Taylor, 1992) Three component model (Rust and Oliver, 1994) Multilevel model (Dabholkar, Thorpe and Rentz, 1996) Hierarchical model (Brady & Cronin Jr., 2001)

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Perceived Service Quality Gronroos (1984)

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Parasuraman et al. (1985)

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Zeithaml et al. (1988)

IBM Services Research

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SERVQUAL vs. SERVPERF (Cronin and Taylor, 1992)

IBM Services Research

Servqual Quality = f (Performance, Expectations) Servperf Quality = f (Performance) Better measurement of Service Quality The 5 factors were the same across both models Service Quality is a long-term attitude which is best measured by just perceptions instead of Expectancy-Disconfirmation

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Rust and Oliver (1994)

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(Dabholkar, Thorpe and Rentz, 1996)

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Brady and Cronin (2001)

IBM Services Research

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Marketing Models of Service and Relationships

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Focus on managing customer satisfaction, relationships, loyalty behaviors and connecting it to financial performance Perceived Service Quality is a key antecedent of customer satisfaction (Attitudinal theory of cognition -> affect -> intention) For a review of the marketing models, see Marketing Models of Service and Relationships R.T. Rust, T. S. Chung, Marketing Science 2006, Volume 25

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Marketing Models of Service and Relationships

IBM Services Research

Some seminal models we would cover here

Multistage Model (Bolton and Drew, 1991) Relationship Marketing Model (Storbacka 1994) Return on Quality (RoQ) Model (Rust, Zahorik, Keiningham,1995) American Customer Satisfaction Index (ACSI) Model (Fornell, 1996) Service Profit Chain (Heskett, Sasser, and Schlesinger, 1997)

A comparison of several models

Removing the contextual lens: A multinational, multi-setting comparison of service evaluation models, Brady et al. Journal of Retailing, 2005

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Bolton, Drew (1991)

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Storbacka (1994)
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Rust, Zahorik, Keiningham (1995)

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ACSI Model (Fornell,1996)

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Service Profit Chain (Heskett, Sasser, and Schlesinger, 1997)

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Comprehensive Model (Brady et al., 2005)

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Organizational Behavior in Service Quality

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Focus on managing delivery personnel behaviors and service climate to drive quality and customer satisfaction Not much focus in this area as of now and hence this is very interesting to explore in isolation as well as in a holistic comprehensive model with quality, satisfaction, value and loyalty Service Climate:
Shared employee perceptions of the policies, practices, procedures and behaviors that get rewarded, supported and expected with regard to customer service and customer service quality Degree to which internal functioning of an organization is experienced as one focused on service quality

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SERV-OR
IBM Services Research

Organizational service-orientation
an organization-wide embracement of a basic set of relatively enduring organizational policies, practices and procedures intended to support and reward service-giving behaviors that create and deliver "service excellence"
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Research avenues
IBM Services Research

Most of the theories and research happened in B2C space. It is of utmost interest to develop and validate theories in B2B space where the interactions are complex, expectations evolve temporally and relationships are intended to be long-term, idiosyncratic Research integrating OB, Psychology models and theories into the comprehensive service quality models Is it just SQ -> Sat -> Loyalty or does it also work the other way Initial loyalty -> Sat -> SQ ? Is there a virtuous cycle towards growth or a destructive spiraling down and what causes that effect ? How does relationship factors play a role in the above effects ? How does the maturity of governance model between provider, client and cultural values of the client and provider impact client expectations and satisfaction ? Is there a difference between accrual of trust & confidence from the client perspective vs. perception of the same from the provider ?
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Research avenues
IBM Services Research

Is brand image a burden (increased expectations) or boon (allays short-term negative satisfaction impact over loyalty) ? What are the dynamics ? How does client expectations evolve over time in long term outsourcing relationships ? Is it good for client to start with low expectations and provider to meet that or exceed that ? Do expectations play a significant role in B2B services because of significant co-production ? SCQM across inter-organizational supply chains has received scant research attention, even though that perspective is sorely needed in delivering value to customers in often globally scattered supply chains. So interdisciplinary research bringing the Service Quality and SCM areas together is a key topic And more

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Summary
IBM Services Research

Service Quality is an exciting and interesting avenue for research of academic and industry interest

Service Quality research is inherently multi-disciplinary in nature

We touched upon some of the seminal approaches towards quality that have evolved in the Operations, Marketing and Organization Sciences There is much more to learn and explore

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