SM7 Ch14 Quality

Services Marketing
Chapter 14:
Improving Service
Quality and
Productivity
Slide © 2010 by Lovelock & Wirtz Services Marketing 7/e Chapter 14 – Page 1
Overview of Chapter 14
Services Marketing
 Integrating Service Quality and Productivity Strategies
 What is Service Quality?
 The Gaps Model
 Measuring and improving service quality
 Learning from Customer Feedback
 Hard Measures of Service Quality
 Tools to Analyze and Address Service Quality Problems
 Defining and Measuring Quality
 Improving Service Productivity
Services Marketing
Integrating Service Quality and

Productivity Strategies
Integrating Service Quality and
Productivity Strategies
Services Marketing
 Quality and productivity create value for customers and

companies
 Quality focuses on the 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 and
supplementary services
 Secure firm’s future through increased spending on R&D
 May impact service experience
Services Marketing
What is Service Quality?
Different Perspectives of Service
Quality
Services Marketing
Manufacturing-based:
Transcendent:
Quality is in
Quality = Excellence.
conformance to the
Recognized only firm’s developed
through experience specifications
User-based: Value-based:
Quality lies in the Quality is a trade-
eyes of the off between price
beholder and value
Dimensions of Service Quality
Services Marketing
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
Services Marketing
The Gaps Model
Six Service Quality Gaps
Services Marketing
Suggestions for Closing the
Services Marketing
Services Marketing
Services Marketing
Services Marketing
Services Marketing
Measuring and Improving

Service Quality
Measures of Service Quality
Services Marketing
Soft Measures Hard Measures

 Not easily observed, must be  Can be counted, timed, or
collected by talking to customers, measured through audits
employees or others
 Typically operational processes or
 Provide direction, guidance and outcomes
feedback to employees on ways to
achieve customer satisfaction  Standards often set with reference
to percentage of occasions on
 Can be quantified by measuring which a particular measure is
customer perceptions and beliefs achieved
 e.g., SERVQUAL, surveys, and

customer advisory panel
Services Marketing
Learning from Customer

Feedback
Key Objectives of
Customer Feedback Systems
Services Marketing
 Assessment and
benchmarking of service
quality and performance
 Customer-driven
learning and
improvements
 Creating a customer-
oriented service culture
Customer Feedback Collection
Tools
Services Marketing
Post- Ongoing
Total market
transaction customer
surveys surveys surveys
Customer
advisory
Employee Focus
surveys/panels groups
panels
Mystery Complaint
shopping analysis
Strengths and Weaknesses of
Customer Feedback Collection Tools
Services Marketing
LEVEL OF MEASUREMENT
POTENTIAL
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
Services Marketing
 Relevant feedback tools and collecting customer feedback

should be channeled back to the relevant parties to take
action
 Three common types of performance reports:

 Monthly Service Performance Update
 Quarterly Service Performance Review
 Annual Service Performance Report
Services Marketing
Hard Measures of
Service Quality
Hard Measures of Service Quality
Services Marketing
 Service quality indexes

 Embrace key activities that have an impact on customers
 Control charts to monitor a single variable

 Offer a 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 the first service companies to understand

the need for an index of service quality that embraced all
the key activities that affect customers
Control Chart for Departure Delays
Services Marketing
Services Marketing
Tools to Analyze and Address

Service Quality Problems
Services Marketing
 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 are 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
Cause-and-Effect Chart for
Flight Departure Delays
Services Marketing
Analysis of Causes of Flight
Departure Delays
Services Marketing
Blueprinting
Services Marketing
 Depicts sequence of front-stage interactions experienced

by customers plus supporting backstage activities
 Used to identify potential fail points
 where failures are most likely to appear
 Shows how failures at one point can have a ripple effect
 Managers can identify points which need urgent attention
 Important first step in preventing service quality problems
Return On Quality (ROQ)
Services Marketing
 Assess costs and benefits of quality initiatives

 ROQ approach is based on four assumptions:
- quality is an investment
- quality efforts must be financially 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 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?
Services Marketing
Satisfy
SatisfyTarget
TargetCustomers
Customers
Through Service
Through Service
100%
Recovery
Recovery
Service Reliability
Optimal
OptimalPoint
Pointofof
Reliability:
Reliability:Cost
Costofof
Failure
Failure==Service
Service
Recovery
Recovery
Satisfy
SatisfyTarget
TargetCustomers
Customers
Through
Through ServiceDelivery
Service Delivery
as Planned
as Planned
A B C D
Small Cost, Investment

Large Cost,
Large Improvement Small Improvement Assumption: Customers are equally (or even more)
satisfied with the service recovery than with a service
that is delivered as planned.
Productivity in a Service Context
Services Marketing
 Productivity: amount of output produced relative to amount of

inputs
 Improvement in productivity means an improvement in the ratio of outputs
to inputs.
 Intangible nature of service makes it hard to measure

productivity of service firms, especially for information-based
services
 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
Services Marketing
 Efficiency: involves comparison to a standard, usually time-

based (e.g., 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 and customer satisfaction
Services Marketing
Improving Service
Productivity
Generic Productivity
Improvement Strategies
Services Marketing
 Typical strategies to improve service productivity:

 Careful control of costs  Teaching employees how to
work more productively
 Efforts to reduce wasteful use
of materials or labor  Broadening variety of tasks
that service worker can
 Matching productive capacity perform
to average demand levels
 Installing expert systems that
 Replacing workers by allow paraprofessionals to take
automated machines or self- on work previously performed
service technologies by professionals
 Although improving productivity can be approached

incrementally, major gains often require redesigning entire
processes
Customer-Driven Strategies to
Improve Productivity
Services Marketing
 Change timing of customer demand

 By shifting demand away from peaks, managers can make better
use of firm’s productive assets and provide better service
 Involve customers more in production

 Get customers to self-serve
 Encourage customers to obtain information and buy from firm’s
corporate websites
 Ask customers to use third parties

 Delegate delivery of supplementary service elements to
intermediary organizations
Implications of Backstage and
Front-Stage Changes for Customers
Services Marketing
 Backstage changes may impact customers

 Keep track of proposed backstage changes, and prepare
customers for them
-e.g., 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 impact on customers and address customer
resistance to changes
A Note of Caution on Mere
Cost Reduction Strategies
Services Marketing
 Without new technology, firms improve service productivity

by eliminating waste and reducing labor costs
 Multitasking can reduce productivity
 Excessive pressure breeds discontent and frustration

among customer contact personnel
 It is often better to search for service process redesign

opportunities that lead to quantum leaps in improvements
in productivity and service quality at the same time
Summary
Services Marketing
 Service quality has five key dimensions: Tangibles, Reliability,

Responsiveness, Competence, Courtesy
 GAPS model can be used to diagnose and address service
quality problems:
 Gap 1: The Knowledge Gap
 Gap 2: The Policy Gap
 Gap 3: The Delivery Gap
 Gap 4: The Communications Gap
 Gap 5: The Perceptions Gap
 Gap 6: The Service Quality Gap
 Customer feedback systems are used to:

 Assess and benchmark service quality and performance
 Institutionalize customer-driven learning and improvements
 Create a customer-oriented service culture
Summary
Services Marketing
 Efficiency, productivity, and effectiveness need to be

distinguished when measuring service quality
 Customer-driven approaches to improving productivity include

 Changing timing of customer demand
 Involving customers more in production
 Asking customers to use third parties
 Use cost-reduction strategies with caution if they are not driven by new
technology or process redesign - they may reduce service quality!
Services Marketing
Appendix
SERVQUAL
Services Marketing
 Survey research instrument based on premise that customers

evaluate firm’s service quality by comparing:
 their perceptions of service quality actually received with
 their prior expectations of companies in a particular industry
 Poor Quality: Perceived performance ratings < expectations
 Good Quality: Perceived performance ratings > expectations
 Developed primarily in context of face-to-face service
encounters
 Scale contains 22 items reflecting five dimensions of service
quality
 Scale may have to be customized to the research context as
recent research suggests that it is not generalizable
Services Marketing
 Total Quality Management (TQM)
 ISO 9000
 Comprises requirements, definitions, guidelines, and related standards to provide
an independent assessment and certification of a firm’s 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
 Many countries around the world have adapted the Malcolm Baldrige Model
 Six Sigma & Lean 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

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Services Marketing

 Integrating Service Quality and Productivity Strategies

 What is Service Quality?

 The Gaps Model

 Measuring and improving service quality

 Learning from Customer Feedback

 Hard Measures of Service Quality

 Tools to Analyze and Address Service Quality Problems

 Defining and Measuring Quality

 Improving Service Productivity

Integrating Service Quality and

 Quality and productivity create value for customers and

 Quality focuses on the benefits created for customers;

What is Service Quality?

Tangibles Appearance of physical elements

Reliability Dependable and accurate performance

Assurance Competence, courtesy, credibility, security

The Gaps Model

Measuring and Improving

Soft Measures Hard Measures

 e.g., SERVQUAL, surveys, and

Learning from Customer

Total Market Survey (Incl.

Annual Survey on Overall

Service Feedback Cards

Focus Group Discussions

 Relevant feedback tools and collecting customer feedback

 Three common types of performance reports:

 Service quality indexes

 Control charts to monitor a single variable

 FedEx: One of the first service companies to understand

Tools to Analyze and Address

 Depicts sequence of front-stage interactions experienced

 Used to identify potential fail points

 where failures are most likely to appear

 Shows how failures at one point can have a ripple effect

 Managers can identify points which need urgent attention

 Important first step in preventing service quality problems

 Assess costs and benefits of quality initiatives

 Implication: Quality improvement efforts may benefit from being related to

 Determine optimal level of reliability

Small Cost, Investment

 Productivity: amount of output produced relative to amount of

 Intangible nature of service makes it hard to measure

 Efficiency: involves comparison to a standard, usually time-

 Productivity: involves financial valuation of outputs to inputs

 Effectiveness: degree to which firm meets goals

 Typical strategies to improve service productivity:

 Although improving productivity can be approached

 Change timing of customer demand

 Involve customers more in production

 Ask customers to use third parties

 Backstage changes may impact customers

 Front-stage productivity enhancements are especially

 Without new technology, firms improve service productivity

 Multitasking can reduce productivity

 Excessive pressure breeds discontent and frustration

 It is often better to search for service process redesign

 Service quality has five key dimensions: Tangibles, Reliability,

 Customer feedback systems are used to: