Improving Service Quality and Productivity: Chapter 14-1

Chapter 14
Improving Service
Quality and
Productivity
Copyright 2008 Pearson Education Canada Services Marketing, Canadian Edition Chapter 14- 1
Learning Objectives - Chapter 14
Define service quality
Diagnose service quality problems using The Gaps

Measuring and improving service quality
Explore key tools for measuring and improving productivity
What Is Service Quality?
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
Capturing the Customers Perspective of
Service Quality: SERVQUAL
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
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
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
The Gaps ModelA Conceptual Tool to
Identify and Correct Service Quality
Problems
Seven Service Quality Gaps
(Fig 14.3)
Customer needs and CUSTOMER

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

design/delivery specs promises
5. Perceptions Gap 6. Interpretation Gap

Customer perceptions Customer interpretation
of service execution of communications
7. Service Gap
Customer experience
relative to expectations
Prescriptions for Closing the
Seven Service Quality Gaps (Table 14.3)
1. Knowledge gap: Learn what customers expect
2. Standards gap: Specify SQ standards that reflect expectations
3. Delivery gap: Ensure service performance meets standards
4. Internal communications gap: Ensure that communications promises

are realistic
5. Perceptions gap: Educate customers to see reality of service quality

delivered
6. Interpretation gap: Pretest communications to make sure message is

clear and unambiguous
7. Service gap: Close gaps 1 to 6 to meet customer expectations

consistently
Measuring and Improving
Service Quality
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
Composition of FedExs
Service Quality IndexSQI (Table 14.4)
Weighting Number of Daily

Failure Type Factor
X =
Incidents Points
Late deliveryright day 1
Late Deliverywrong day 5
Tracing request unanswered 1
Complaints reopened 5
Missing proofs of delivery 1
Invoice adjustments 1
Missed pickups 10
Lost packages 10
Damaged packages 10
Aircraft delays (minutes) 5
Overcharged (packages missing label) 5
Abandoned calls 1
Source: See Services Marketing textbook, page 417,

for full source information. Total Failure Points (SQI) = XXX,XXX
Control Chart for Departure Delays
(Fig 14.3)
% Flights Departing Within

15 Minutes of Schedule
100%
90%
80%
70%
60%
J F M A M J J A S O N D
Month
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
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 business-
improvement approach
Cause-and-Effect Chart for
Flight Departure Delays (Fig 14.4)
Facilities, Frontstage
Front-Stage
Procedures
Procedures
Equipment Personnel
Personnel
Aircraft late to Gate agents Delayed check-in

Arrive late gate cannot process procedure
Oversized bags Mechanical fast enough
Acceptance of late
Customers Failures
Customers Late/unavailable passengers
Late pushback airline crew
Delayed
Departures
Late food Late cabin
service cleaners
Other Causes Poor announcement of
Weather Late baggage departures
Air traffic
Late fuel Weight and balance
sheet late
Materials,
Materials, Backstage Information
Supplies
Supplies Personnel
Case: Analysis of Causes of
Flight Departure Delays (Fig 14.5)
4.9
All stations, excluding
15.3% 23.1% %
Chicago-Midway Hub
19%
33.3%
15.4% 11.7%
9.5%
23.1% 8.7%
33.3%
23.1%
11.3% 53.3%
Newark 15% Washington Natl.
Late passengers Late weight and balance sheet

Waiting for pushback Late cabin cleaning/supplies
Waiting for Other Source: For full source information, see Services
Marketing textbook, page 419.
fuelling
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
Six Sigma Methodology to
Improve and Redesign Service Processes
Process Improvement Process Design/Redesign

Define Identify the problem Identify specific or broad problems
Define requirements Define goal/change vision
Set goals Clarify scope and customer requirements
Measure Validate problem/process Measure performance to requirements
Refine problem/goal Gather process efficiency data
Measure key steps/inputs
Analyze Develop causal hypothesis Identify best practices
Identify root causes Assess process design
Validate hypothesis Refine requirements
Improve Develop ideas to measure root Design new process

causes Implement new process, structures, and
Test solutions systems
Measure results
Control Establish measures to maintain Establish measures and reviews to maintain

performance performance
Correct problems as needed Correct problems as needed
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
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
When Does Improving Service Reliability
Become Uneconomical? (Fig 14.7)
Satisfy Target
100%
Customers 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
Small Cost, Large Cost, Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
Large Improvement Small Improvement service that is delivered as planned.
Defining and Measuring Productivity
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
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
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
Improving Service Productivity
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?
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 labour
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
Improving Service Productivity:
(1) Operations-Driven Strategies
Control costs, reduce waste
Set productive capacity to match average demand
Automate labour 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
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
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 behaviour
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
Summary Chapter 14
Customers evaluate services using five different categories

Tangibles, reliability, responsiveness, assurance, empathy
There are seven service quality gaps and solutions presented in the
Gaps Model
Knowledge, standards, delivery, internal communications gap, perceptions,
interpretation, service
Key tools for measuring and improving productivity are:
Fishbone diagram
Pareto Chart
Blueprinting
Total Quality Management (TQM)
ISO 9000
Malcolm Baldrige Model Applied to Services
Six Sigma

Improving Service Quality and Productivity: Chapter 14-1

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Chapter 14

Define service quality

Diagnose service quality problems using The Gaps

Explore key tools for measuring and improving productivity

Tangibles: Appearance of physical elements

Reliability: Dependable and accurate performance

Responsiveness: Promptness; helpfulness

Assurance: Competence, courtesy, credibility,

Survey research instrument based on premise that

Scale contains 22 items reflecting five dimensions of

Subsequent research has highlighted some limitations of

See Research Insights 14.1: Measuring E-Service Quality

In uncompetitive markets or in situations where customers

Services high in credence characteristics may cause

Customer needs and CUSTOMER

Execution of 4. Advertising and sales

5. Perceptions Gap 6. Interpretation Gap

2. Standards gap: Specify SQ standards that reflect expectations

3. Delivery gap: Ensure service performance meets standards

4. Internal communications gap: Ensure that communications promises

5. Perceptions gap: Educate customers to see reality of service quality

6. Interpretation gap: Pretest communications to make sure message is

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

Soft measuresnot easily observed, must be collected by

Hard measurescan be counted, timed, or measured

Weighting Number of Daily

Source: See Services Marketing textbook, page 417,

% Flights Departing Within

Aircraft late to Gate agents Delayed check-in

Newark 15% Washington Natl.

Late passengers Late weight and balance sheet

Depicts sequence of front-stage interactions experienced

Process Improvement Process Design/Redesign

Improve Develop ideas to measure root Design new process

Control Establish measures to maintain Establish measures and reviews to maintain

Assess costs and benefits of quality initiatives

Determine optimal level of reliability

Productivity measures amount of output produced relative to the

Improvement in productivity means an improvement in the ratio

Intangible nature of many service elements makes it hard to

Traditional measures of service output tend to ignore

Firms that consistently deliver outcomes desired by

Measures with customers as denominator include:

How to transform inputs into outputs efficiently?

Typical strategies to improve service productivity:

Although improving productivity can be approached

Control costs, reduce waste

Set productive capacity to match average demand

Automate labour tasks

Upgrade equipment and systems

Broadening array of tasks that a service worker can perform

Leverage less-skilled employees through expert systems

Service process redesign

Change timing of customer demand

Involve customers more in production

Ask customers to use third parties

Backstage improvements can ripple to front and affect customers

Front-stage productivity enhancements are especially visible in high

Customers evaluate services using five different categories

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