Service Ops Ch06

Because learning changes everything.
Chapter 6
Service Quality
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Moments of Truth
• Each customer contact is called a moment of truth.
• You have the ability to either satisfy or dissatisfy them

when you contact them.
• A service recovery is satisfying a previously dissatisfied

customer and making them a loyal customer.
© McGraw Hill, LLC 2

Defining the Dimensions of Quality
Quality in Goods Quality in Services
• Performance. • Reliability.
• Reliability. • Tangibles.
• Durability. • Responsiveness.
• Serviceability. • Assurance.
• Features. • Empathy.
• Aesthetics.
• Conformance.
• Perceived quality.

Dimensions of Service Quality (RATER
model) 1
• Reliability: Perform promised service dependably and

accurately. Example: receive mail at same time each day.
• Assurance: Ability to convey trust and confidence.

Example: being polite and showing respect for customer.
• Tangibles: Physical facilities and facilitating goods.

Example: cleanliness.

Dimensions of Service Quality (RATER
model) 2
Empathy: Ability to be approachable.

Example: being a good listener.
Responsiveness: Willingness to help customers
promptly.
Example: avoid keeping customers waiting for no
apparent reason.

Figure 6.1 Perceived Service Quality
Access the text alternative for slide images.

Figure 6.3 Service Quality Gap Model
Customer Customer Satisfaction Customer

GAP 5
Perceptions Expectations
Managing the Customer / Understanding

Evidence Marketing Research the Customer
Communication
GAP 4 GAP 1
Management
Service
Perceptions
Delivery of Customer
Expectations
Conformance
Design GAP 2
GAP 3
Conformance Service Design
Service
Standards

6-8
Gaps in Service Quality

➢ Gap1: Market Research gap
✓ Management may not understand how customers formulate their
expectations from past experience, advertising, communication with
friends, strategy for closing the gap:
❖ Improve market research
❖ Foster better communication between management and its frontline
employees with customers
❖ Reduce the number of levels of management that distance the customer
➢ Gap 2: Design gap
✓ Management unable to formulate target level of service, to meet
customer expectations, and translate them to specifications due to
lack of management commitment.
❖ Setting goals and standardizing service delivery tasks can close the gap
6-9
Continued….
➢ Gap 3: Conformance gap
✓ Actual delivery of service cannot meet the specifications set by
management
❖ Lack of teamwork
❖ Poor employee selection
❖ Inadequate training
❖ Inappropriate job design
➢ Gap 4: Communication gap

✓ Discrepancy between service delivery and external communication
❖ Exaggerated promises in advertising
❖ Lack of information provided to service provider to give customers
6-10
Continued…..
➢ Gap 5: Customer expectations and perceptions gap
✓ Customer satisfaction depends on minimizing the four gaps that
are associated with service delivery
✓ Companies try to measure the gap between expected service

and perceived service through the use of surveys)
✓ SERVQUAL – measures the five dimensions

6-11
Service Quality
 Quality can neither be inspected nor somehow added
 Satisfaction is determined by many intangible
 Quality often extend beyond immediate encounter
 Servqual measure Gap between Expected & Perceived
 Periodic customer survey
 Quality begin with design of Service Delivery System

6-12
Scope of service quality

➢ View quality from five perspectives
1. Content – are standard procedures being followed?
2. Process – is the sequence of events in the service process

appropriate?
3. Structure – are the physical facilities and organizational design

adequate for the service?
4. Outcome –change in the status -Is the consumer satisfied?
5. Impact – what is the long-range effect of the service on the

consumer?
6-13
Quality Service by Design
1. Quality service in Package

2. Taguchi method
3. Poka-Yoke
4. Quality function deployment
6-14
1. Quality in the Service Package
Budget Hotel example Supporting facility

➢ Design of the building
➢ Facilitating goods
➢ Room furnishings like bedside tables, carpet cleaning
➢ Explicit services
➢ Maids are trained to clean and make up rooms
➢ Implicit services
➢ Pleasant appearances of individuals at front office
6-15
Quality requirement for Hotel

6-16
2.Taguchi approach to design quality
• Statistical method to improve the quality
• Quality Should be designed into p/s and not inspected
• Quality is best achieved by minimizing the deviation
• The cost due to loss is not limited to remanufacturing,

rework due to bad quality
• This cost is spread over lifetime of the goods or service
• The cost includes goodwill cost, loss of customer , cost to

integrate with other parts
6-17
2. Taguchi Method (Robustness)
➢ Robust designs to serve under adverse conditions
➢ Robustness concept also applied to the service process –

e.g. using online computer to notify the cleaning staff when
the room is vacated
➢ Taguchi emphasized that quality was achieved by

consistently meeting the design specifications
➢ Cost to society of poor quality was measured by the square

of the deviation from the target
6-18
Taguchi Quality loss function

6-19
Determining tolerances
6-20
Solution
6-21
Example
 Company C received an average of 10 complaints per

month last year. In current month they received 15
complaints (y). Management sets an acceptable level at 2
(tolerance). It costs the company Rs.50 directly per
complaint to correct the problems. They determined the cost
in lost sales to be Rs.100. Total cost per complaint Rs.150.
What is the quality loss to the company C?
6-22
k =Rs.150/22 = Rs.37.50
L(y) = 37.50 (15-10)2
= 37.50 (5)2
= 37.50 (25)
= Rs.937.50 is loss per month for company C

6-23
6-24
6-25
6-26
k =Rs.150/22 = Rs.37.50
L(y) = 37.50 (15-10)2
= 37.50 (5)2
= 37.50 (25)
= Rs.937.50 is loss per month for company C
=37.5(5^2+10^2) if minimum is better
=37.5*125
=4687.5
6-27
6-28
6-29
 Example 12-9 Customer tolerances for the height of a

steering mechanism are 1.5 ± 0.020 m. For a product that
just exceeds these limits, the cost to the customer forgetting
it fixed is $50.
 Ten products are randomly selected and yield the following
heights (in meters):
1.53,1.49,1.50,1.49,1.48,1.52,1.54,1.53,1.51, and 1.52.
 Find the average loss per product item.
6-30
Example 12-10 Refer to Example 12-9 concerning the

height of a steering mechanism.
The manufacturer is considering changing the production
process to reduce the variability in the output. The
additional cost for the new process is estimated to be
$5.50/item. The annual production is 20,000 items.
Eight items are randomly selected from the new process,
yielding the following heights: 1.51, 1.50, 1.49,1.52,
1.52, 1.50, 1.48, 1.51. Is the new process cost efficient?
If so, what is the annual savings?
6-31
6-32
Example 12-11 Refer to Example 12-9 concerning the

height of a steering mechanism.
The manufacturer decides to rework the height, prior to
shipping the product, at a cost of $3.00 per item. What
should the manufacturer's tolerance be?
6-33
3.Poka -Yoke
 Poka: Unintentional errors
 Yokeru: To prevent
 Fail safe technique
 Defects occur because of errors
 Some poka yoke examples

 Room light switch off when locked
 Antitheft alarm
 Tag attached to garments

6-34
3. Poka-Yoke (Fail safing)
➢ Shigeo Shingo observed that errors occurred, not because

employees were incompetent, but because of interruptions
in routines or lapses in attention.
➢ Poka-Yoke methods – foolproof devices to prevent

employee mistakes.
➢ customers play an active role in service-delivery - Poka-

Yoke for them to prevent them from making errors.
6-35
Classification of Service Failures with

Poka-Yoke Opportunities
Server Errors Customer Errors
Task: Preparation:
Doing work incorrectly Failure to bring necessary materials
Doing work not required Failure to understand role in transaction
Doing work in the wrong order Failure to engage in correct service
Doing work too slowly Encounter:
Treatment: Failure to remember steps in process
Failure to listen to customer Failure to follow system flow
Failure to acknowledge the customer Failure to specify desires
Failure to react appropriately Failure to follow instructions
Tangible: Resolution:
Failure to clean facilities Failure to signal service failure
Failure to wear clean uniform Failure to learn from experience
Failure to control environmental factors Failure to adjust expectations
Failure to proofread documents Failure to execute post-encounter action
6-36
Examples
 French fry scoop at Mc Donald’s- Consistent serving of
potatoes (Task)
 Tellers in Bank- enter customer’s eye colour (Treatment)
 Automatic spell check-Email service provider (Tangible)
 Comprehensive medical check up - Customer’s information

(Preparation)
 Airport check-in counters- size of carry-on luggage
(Encounter)
 Trash-bin at the exits of facilities (Resolution)
6-37
4.Quality Function Deployment
 QFD ensures that customer needs /requirements “Voice of

Customer” are met
 Customer values are considered as input into the early stage

of service conception.
 To develop a service as per customer’s requirements in less

time and with less design cost.
 It is a planning, communication and documentation

technique mostly represented as ‘House of quality’
6-38
House of Quality
Relationships
* Strong
Medium
O Weak
Relative
O O
* * Customer Perc eptions
Servic e Elements
Informatiion
o Village Volvo
Equipment
Imp
orta
Capacity
Attitude
nce + Volvo Dealer
Training
Customer Expectations 1 2 3 4 5
Reliability 9 8 5 5 + o
Responsiveness 7 3 9 3 2 o +
Assurance 6 5 9 6 + o
Empathy 4 7 + o
Tangibles 2 2 3 + o
+
o o
Comparison with Volvo Dealer o o
_ o
Weighted score 127 82 63 102 65

Improvement difficulty rank 4 5 1 3 2
6-39
QFD steps
1. Identify the customer and record customer requirements or

attributes.
2. Identify the service design elements and relate them with
customer attributes.
3. Determine the interrelationships between any pair of
service design elements.
4. Weighing service element to assess improvement
requirements
5. Assessment of competition
6-40
5. Benchmarking
➢ Compare your performance with other companies known for

being ‘the best in class
➢ For every quality dimension, some firm has earned the

reputation for being the best in class
➢ Learn how the management has achieved to be the best in

class to correct your process
6-41
 https://www.youtube.com/watch?v=zeCkr5OQBj8

 https://www.youtube.com/watch?v=vh1kkOOyAi0
6-42
6. Walk-Through-Audit
➢ servicequality -the outcome and the process (as customers
are a part of service delivery)
➢ Walk through audit is a customer-focused to find the areas for
improvement
➢ Entire customer experience is traced from beginning to end,
➢ Customer is asked for his impressions
➢ Customers can provide a new perspective to service – they

can notice things easily as they are new in the system
➢ Servicemanagers and employees can get de-sensitized to
service deteriorations
6-43
Audit questions
The questions include nine categories of variables:
(1) maintenance items,
(2) person-to-person service,
(3) waiting,
(4) table and place settings,
(5) ambiance,
(6) food presentation,
(7) check presentation,
(8) promotion and suggestive selling
(9) tipping.
6-44
Restaurant satisfaction survey

6-45
Achieving Service Quality
1. Cost of Quality
2. Service Process Control
3. Statistical Process Control (Deming)
4. Unconditional Service Guarantee
6-46
1. Cost of Quality
➢ Products can be returned if faulty; but what about faulty services?
✓ Legal recourse – for example in medical it may lead to more procedures and tests
leading to higher cost
➢ Prevention cost
✓ Costs associated with activities that prevent failure
➢ Detection cost
✓ Costs incurred to ascertain the condition of a service to determine whether it conforms
to safety standards
➢ Internal failure
✓ Costs incurred to correct nonconforming work prior to delivery
➢ External failure
✓ Costs incurred to correct nonconforming work after delivery to customer to correct.
➢ $1 in invested in prevention = $100 in detection = $10,000 in failure cost
(Juran)
6-47
Costs of Service Quality

Failure costs Detection costs Prevention costs
External failure:
Loss of future business Process control Quality planning
Negative word-of-mouth Peer review Training program
Liability insurance Supervision Quality audits
Legal judgments Customer comment card Data acquisition and analysis
Interest penalties Inspection Recruitment and selection
Supplier evaluation
Internal failure:
Scrapped forms
Rework
Recovery:
Expedite disruption
Labor and materials
6-48

➢ The control of service quality - feedback – where output is
compared with a standard value.(mean)
➢ The deviation from the standard is communicated back to the
input, and adjustments to the process
➢ Difficult to implement the control for service due to the
intangible nature of service.
➢ Simultaneous nature of production and consumption – prevents
to observe conformance to requirements.
❖ customers to express their impression of service quality after the
consumption – by which time it is too late to avoid service failure.
❖ focus on delivery process by employing SPC

6-49
Service Process Control
Customer
input Service
concept
Service Customer
Resources output
process
Take Monitor Establish

corrective conformance to measure of
action requirements performance
Identify reason
for
nonconformance
6-50

Ambulance response time
6-51
Western electric decision rules

 1.
One point plots outside the three-sigma control limits,
2. Two out of three consecutive points plot beyond the
two-sigma warning limits,
3. Four out of five consecutive points plot at a
distance of one-sigma or beyond from the center line,
or
4. Eight consecutive points plot on one side of the
center line.
6-52
6-53
4. Unconditional Service Guarantee:

Customer View
➢ Unconditional (L.L. Bean) – without exception
➢ Easy to understand and communicate to the customer
➢ Meaningful
(Domino’s Pizza) – it should provide
compensation -that is meaningful
➢ Easy to invoke (Cititravel) – not to fill out cumbersome forms
or go through a lengthy process
➢ Easy to collect – should be given soon after the service
lapse and after a significant time
6-54
6-55
6-56
Unconditional Service Guarantee:

Management View
➢ Focuses on customers (British Airways) :care and
concern, initiative, problem solving
➢ Setsclear standards (FedEx) – knows when the service
has failed, delivery by 10.30
➢ Guarantees feedback (Manpower) – gets data on service
failure because dissatisfied customers
➢ Promotes an understanding of the service delivery
system (Bug Killer) – you will have a better understanding
of your service delivery process
➢ Builds customer loyalty by making expectations explicit
6-57
Customer Feedback and

Word-of-Mouth
➢ The average business only hears from 4% of their customers
who are dissatisfied with their products or services.
➢ Of the 96% who do not bother to complain, 25% of them
have serious problems.
➢ The4% complainers are more likely to stay with the supplier
than are the 96% non-complainers.
➢ About 60% of the complainers would stay as customers if their
problem was resolved and 95% would stay if the problem was
resolved quickly.
➢A dissatisfied customer will tell between 10 and 20 other
people about the problem.
➢A customer who has had a problem resolved by a company
will tell about 5 people about their situation.
6-58
Service Recovery
➢ Disasterscan be turned into loyal customers by proper and rapid
service recovery
➢ Frontline
workers, therefore, need to be properly trained and
given the discretionary power to make things right.
➢ Approaches to service recovery
✓ Case-by-case addresses each customer’s complaint individually
✓ Systematic response uses a protocol to handle complaints -
identification of critical failure points.
✓ Early intervention attempts to fix problem before the customer is
affected.
✓ Substitute service allows rival firm to provide service but could lead
to loss of customer.
6-59
Compliant handling Policy of one

hospital
 Every complaint is treated as a gift.
 We welcome complaints.
 We encourage customers to complain.
 We make it easy to complain.
 We handle complaints fast.
 We treat policy in a fair manner.
 We empower our employees to handle complaints.
 We have customer- and employee-friendly systems to
handle complaints.
 We reward employees who handle complaints well.
 We keep records of complaints and learn from them.
6-60
Service Recovery Framework

6-61
Ladder of Quality
1. Inspection : Quality is checked after delivery
2. SPC : Quality assurance
3. Quality training program
4. Cost of quality
5. Unconditional service guarantee
6. Quality service by design
7. QFD: Voice of customer
6-62
INSPECTION
➢ Opinion surveys - about quality of service
➢ 100 percent inspection - every unit is checked; fatigue

error unless automated
➢ First article inspection - usually after the process is set up
➢ Destructive testing
➢ Acceptance sampling - based on statistical sampling table,

the associate checks a random or stratified sample from a
larger lot. If the sample is within the acceptable quality level,
the lot passes inspection.
Process focus
➢ Process capability means capable of meeting customer

requirements or specifications.
COMMON CAUSE vs
SPECIAL CAUSE VARIATION
➢ Assignable-cause variation:
➢ Common cause variation:
➢ Statistical Control: when a process output is free of all

special cause variation.
➢A process in control may still have common cause

variation.
➢ Continuous improvement aims to reduce common

cause variation.
VARIABLES AND ATTRIBUTES
➢ Variables data result from measuring or computing the

amount of or value of a quality characteristic. This data is
continuous.
➢ Attributes data - measurement is not required, just a

classifying judgment: maybe yes /no for friendly service;
good or bad for a car wash; small, medium, large melons.
TOOLS FOR PROCESS IMPROVEMENT
➢ Coarse Grained Analysis

✓ Check Sheet –
✓ Histograms -)
✓ Pareto Analysis
✓ Process flowchart:
✓ Fishbone chart (cause and effect diagram

continued
➢ Fine Grained Tools
✓ Scatter diagram and correlation:
✓ Run diagram:
Process control charts:
➢ The run diagram plots data on every unit,
➢ The process control chart, less precisely referred to as the

quality control chart, relies on sampling.
➢ Can detect unusual process variation, which calls for corrective action.
➢ Mean chart and range chart

✓ Central line for the mean and the range charts
✓ Upper and lower control limits for the mean chart
✓ Upper and lower control limit for the range chart
➢ Process capability Analysis
✓ Cp versus Cpk
Figure 6.8 x-Chart for Ambulance Response
p (1 − p p (1 − p
UCL = p + 3 LCL = p − 3
n n

6-71
Thanks
Customer View
• Unconditional (L.L. Bean).
• Easy to understand and communicate (Bennigan’s).
• Meaningful (Domino’s Pizza).
• Easy to invoke (Cititravel).
• Easy to collect (Manpower).

Management View
• Focuses on customers (British Airways).
• Sets clear standards (FedEx).
• Guarantees feedback (Manpower).
• Promotes an understanding of the service delivery system
(Bug Killer).
• Builds customer loyalty by making expectations explicit.

Customer Satisfaction
• All customers want to be satisfied.
• Customer loyalty is only due to the lack of a better
alternative.
• Giving customers some extra value will delight them by
exceeding their expectations and insure their return.

Customer Feedback and Word-of-Mouth
• The average business only hears from 4% of their customers

who are dissatisfied with their products or services. Of the 96%
who do not bother to complain, 25% of them have serious
problems.
• The 4% complainers are more likely to stay with the supplier
than are the 96% non-complainers.
• About 60% of the complainers would stay as customers if their
problem was resolved and 95% would stay if the problem was
resolved quickly.
• A dissatisfied customer will tell between 10 and 20 other people
about their problem.
• A customer who has had a problem resolved by a company will
tell about 5 people about their situation.

Figure 6.11 Phases in Service Recovery

Approaches to Service Recovery
• Case-by-case addresses each customer’s complaint
individually but could lead to perception of unfairness.
• Systematic response uses a protocol to handle complaints
but needs prior identification of critical failure points and
continuous updating.
• Early intervention attempts to fix problem before the
customer is affected.
• Substitute service allows rival firm to provide service but
could lead to loss of customer.

Thanks

Topics for Discussion
• How do the five dimensions of service quality differ from
those of product quality?
• Why is measuring service quality so difficult?
• Illustrate the four components in the cost of quality for a
service.
• Why do service firms hesitate to offer a service guarantee?
• How can recovery from a service failure be a blessing in
disguise?

Interactive Exercise
The class breaks into small groups. Each group identifies the
worst service experience and the best service experience
that any member has had. Return to class and discuss what
has been learned about service quality.

The Complaint Letter
1. Briefly summarize the complaints and compliments in Dr.
Loflin’s letter.
2. Critique the letter of Gail Pearson in reply to Dr. Loflin.
What are the strengths and weaknesses of the letter?
3. Prepare an “improved” response letter from Gail Pearson.
4. What further action should Gail Pearson take in view of
this incident?

The Helsinki Museum of Art and Design
1. Critique the WtA gap analysis. Could there be other

explanations for the gaps?
2. Make recommendations for closing the gaps found in the
WtA.

6-88
House of Quality
6-89
4. Quality Function Deployment

➢ Allows to incorporate the voice of the customer into the design of the product/service
– to measure the conformance of specifications for product /service
➢ 1. Establish the aim of the project – assess Village Volvo’s competitive position
➢ 2. Determine customer expectations (rows) – interviews etc.
➢ 3. Describe the elements of the service (columns)
➢ 4. Roof of the house - note the strength of relationship between the service elements
➢ 5. Body of the matrix – relationship between service elements (columns) and
customer expectations (rows)
➢ 6. Weighting the service elements – rating customer expectations; getting weighted
scores for each column (basement)
➢ 7. Basement – service element improvement difficulty rank
➢ 8. Assessment of competition –
➢ RHS (comparison on customer satisfaction)
➢ Comparison on strength of the service elements
90
Table 6.3 Classification of Service Failures
 Server Errors  Customer Errors

 Task: Doing work  Preparation: Failure to
incorrectly bring necessary materials
 Treatment: Failure to listen  Encounter: Failure to
to customer follow system flow
 Tangible: Failure to wear  Resolution: Failure to
clean uniform signal service failure
Learning Objectives
• Describe and illustrate dimensions of service quality.
• Use the service quality gap model to diagnose quality
problems.
• Apply poka-yoke methods to a service.
• Perform service quality function deployment.
• Construct a statistical process control chart for a service
operation.
• Describe unconditional service guarantees.
• Perform a walk-through audit (WtA).
• Explain the concept of service recovery.

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Because learning changes everything.

• Each customer contact is called a moment of truth.

• You have the ability to either satisfy or dissatisfy them

• A service recovery is satisfying a previously dissatisfied

© McGraw Hill, LLC 2

© McGraw Hill, LLC 3

• Reliability: Perform promised service dependably and

• Assurance: Ability to convey trust and confidence.

• Tangibles: Physical facilities and facilitating goods.

© McGraw Hill, LLC 4

Empathy: Ability to be approachable.

© McGraw Hill, LLC 5

Access the text alternative for slide images.

Customer Customer Satisfaction Customer

Managing the Customer / Understanding

Access the text alternative for slide images.

Gaps in Service Quality

➢ Gap 4: Communication gap

✓ Companies try to measure the gap between expected service

✓ SERVQUAL – measures the five dimensions

 Quality can neither be inspected nor somehow added

 Satisfaction is determined by many intangible

 Quality often extend beyond immediate encounter

 Servqual measure Gap between Expected & Perceived

 Periodic customer survey

 Quality begin with design of Service Delivery System

Scope of service quality

2. Process – is the sequence of events in the service process

3. Structure – are the physical facilities and organizational design

4. Outcome –change in the status -Is the consumer satisfied?

5. Impact – what is the long-range effect of the service on the

Quality Service by Design

1. Quality service in Package

1. Quality in the Service Package

Budget Hotel example Supporting facility

Quality requirement for Hotel

2.Taguchi approach to design quality

• Statistical method to improve the quality

• Quality Should be designed into p/s and not inspected

• Quality is best achieved by minimizing the deviation

• The cost due to loss is not limited to remanufacturing,

• This cost is spread over lifetime of the goods or service

• The cost includes goodwill cost, loss of customer , cost to

2. Taguchi Method (Robustness)

➢ Robust designs to serve under adverse conditions

➢ Robustness concept also applied to the service process –

➢ Taguchi emphasized that quality was achieved by

➢ Cost to society of poor quality was measured by the square

Taguchi Quality loss function

 Company C received an average of 10 complaints per

L(y) = 37.50 (15-10)2

= Rs.937.50 is loss per month for company C

L(y) = 37.50 (15-10)2

= Rs.937.50 is loss per month for company C

=37.5(5^2+10^2) if minimum is better

 Example 12-9 Customer tolerances for the height of a

Example 12-10 Refer to Example 12-9 concerning the

Example 12-11 Refer to Example 12-9 concerning the

 Poka: Unintentional errors

 Fail safe technique

 Defects occur because of errors

 Some poka yoke examples

 Tag attached to garments