Middle East

Performance Measurement &

Benchmarking Conference

Challenges of Measurements
in
Service Industry
21st to 22nd June 2004, Dubai

Sunil Thawani
Manager – TQM Department
Union National Bank, Abu Dhabi
Sthawani@unb.com

1
 Purpose of Presentation

 Concepts and unique features of Service

Quality;
 Service Quality model;
 Causes of service quality problems;
 Challenges of measurement in Service
Quality;
 Establishing service quality performance
standards and Benchmarking.

2
 Service Industries
 Retailing;
 Distribution;
 Financial services – banking, insurance;
 Hotels and tourism;
 Leisure, recreation, entertainment;
 Professional and business services like
accountancy, marketing, law, consulting;
 Healthcare;
 Software etc.

3
 Growth of goods and services exports, 1980-2000

Goods Services
400 12000
350 10500
Goods growth

Billion $
300 9000
Percentage (1980=100)

Services growth
250 7500
200 6000
150 GDP growth
4500
100 3000
50 1500
0 0

4
 Share of commercial services and goods in
world trade, 1980-2000

Services 1980
16%

84%
Goods

Services 2000
19%

81%
Goods 6
5
 Service Industry - Facts
 Service industries generate over 2/3rd of GNP and
employment in developed countries - ISSN Journal Volume 22,
2004)

 9 out of 10 jobs are created by Services economy –

“Delivering Service Quality” by Valerie, Parsuraman and Leonard”;
 Of the top 100 revenue earners worldwide, 55% are
service firms – www.service-growth.com
 Top service firm in revenue worldwide – Wal-Mart is
a service firm;
 Service firms produced 45% more revenue per
employee than manufacturing firms;

6
Service Quality

7
 What Makes Service Quality Unique

1. Service is intangible - it cannot be easily

measured, tested and verified in advance of sales
to assure quality;
2. Services are perishable;
3. Precise standards like manufacturing can rarely be
set;
4. It is created and consumed simultaneously or near
simultaneously; Service Production and
Consumption are often inseparable i.e. Customer
is in service factory.

8
 What Makes Service Quality Unique

6. Services offered can vary from “Producer to

Producer” e.g. outlet to outlet;
7. Outcome of Service is as important as process of
delivery; assessment of quality is made during the
service delivery process.
8. Service Quality is more difficult for customer, to
evaluate, than product quality;
9. Customer cannot retain the actual service. The effect
of the service can be retained.

9
Service Quality Model

10
 Customers' Assessment of
Service Quality

Word of Personal Past External

Mouth Needs Experience Cummications

Expected
Service

Perceived
Service
Quality

Perceived
Service.

“Delivering Service Quality” by Valerie,

Parsuraman and Leonard”
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 Service Quality Gap
The gap between expected and perceived
service is a measure of service quality
 Expectation > Service perceived =
Exceptional Quality,
 Expectations < Service perceived =
Unacceptable quality.
 Expectations = Service perceived =
Satisfactory Quality.

12
Challenges of Measurements
in Service Quality

13
 Customers' Assessment of
Service Quality

Word of Personal Past External

Mouth Needs Experience Cummications
Dimensions of
Service Quality

Tangibles
Reliability Expected
Responsiveness Service
Competence
Courtesy
Perceived
Credibility Service
Security Quality
Access
Communication
Understanding the Perceived
Customer Service.

14
 Definition of Dimensions

Reliability
" Ability to perform the promised
service dependably & accurately"

Responsiveness
"Willingness to help customers
and provide prompt service"

Competence
"Possession of the required
skills and knowledge to perform
the service"

15
 Definition of Dimensions

Security
"Freedom from danger, risk, or
doubt"

Access
"Approachability and ease of
contact"

Communication
"Keeping Customers informed
in language they can
understand and listening to
them" 16
 Dimension Measurements
 Reliability – On time delivery performance, Errors in
invoices

 Responsiveness – Cycle time (speed)

 Access – Availability (24x7), Downtime of web

 Credibility – Financial Ratings, Image

Mix of Performance Indicators and Perception Measures

17
Causes of Service Quality
Gaps (Customer
Dissatisfaction)

18
 Gap 1
Customer Expectations
(Expected Service)

1. Lack of Market Research

Orientation;
2. Inadequate upward
communication;
3. Too many levels of
management

Managements Perception
of Customer Expectations
19
 Gap 2
Management Perceptions of
Customer Expectations

1. Inadequate management
commitment to Service Quality
2. Perception of infeasibility
3. Absence of goal setting

Service Quality Specifications

20
 Gap 3
Service Quality Specifications

1. Role ambiguity
2. Role conflict
3. Poor technology
4. Lack of team work
5. Poor employee – job fit

Service Delivery

21
 Gap 4

Service Delivery

1. Propensity to over-
promise
2. Inadequate horizontal
communication

External
Communications
to Customers
22
 Marketer

Word-of-mouth
Communication Personal Needs Past Experience

Expected Service

GAP 5
Perceived Service

GAP 1 Service Delivery External

GAP communication
3 to consumers
GAP
Converting perceptions into 4
GAP service quality specifications
2

Management perceptions of
consumer expectations

Service Provider 23
Establishing Service Quality
Performance Standards

24
 Performance Standards

 Qualitative;
 Quantitative;
 Benchmark (In line with Customer
expectations).

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 FedEx Service Quality Indicator
(Quantitative)
 No. of damaged packages;
 No. of lost packages;
 Missed pickups;
 Aircraft delays;
 Reopened complaints (complaints not solved first time);
 Wrong day late deliveries;
 Right day wrong delivery;
 Abandoned calls;
 Invoice adjustment requests;
 Missing proof of deliveries.
26
Concluding Thoughts

27
 Challenges of Performance
Measurements
 Deciding strategy - Customer satisfaction vs.
Customer delight;
 Developing Service Quality dimensions specific to
business needs;
 Defining the dimensions;
 Developing common understanding throughout the
organization - Achieving clear focus & direction;
 Establishing measurement framework;
 Utilizing measurements;
 Benchmark to set targets;
 Aligning measurement techniques with the
dimensions;
 Addressing Service Quality Gaps.
28
 Quality/ Profit Relationship

35
30
25
% 20
15 Return on Sales

10
Return on
Invstmnt
5
0
20 40 60 80 100
Inferior Superior

Relative Quality
Source: Robert Buzell & Bradley Gale, PIMS Principle
29
 Conclusion

 Service excellence pays off richly;

 Superior service quality is proving to be a
winning competitive strategy;
 Effective and appropriate Measurements
can help achieve Service Excellence;

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Thank you

Q&A

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