Improving Service Quality and Productivity: Services Marketing, Canadian Edition 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 Customer’s Perspective of
Service Quality: SERVQUAL
 Survey research instrument based on premise that
customers evaluate firm’s 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 quality—halo effect
 Process factors: Customers’ feelings
The Gaps Model—A 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

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

Customer perceptions Customer
of service execution interpretation of
7. Service Gap communications
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 measures—not 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 measures—can 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 FedEx’s
Service Quality Index—SQI (Table 14.4)
Weighting Number of Daily

Failure Type Factor
X =
Incidents Points
Late delivery—right day 1
Late Delivery—wrong 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 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
 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 Procedures

Front-Stage Procedures
Equipment Personnel
Personnel
Aircraft late to Gate agents Delayed check-in

Arrive late gate cannot process procedure
Oversized Mechanical fast enough
bags 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 points—where 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
– 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? (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 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
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

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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,

 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

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 measures—not easily observed, must be collected by

 Hard measures—can be counted, timed, or measured

Weighting Number of Daily

Source: See Services Marketing textbook, page 417,

% Flights Departing Within

Facilities, Frontstage Procedures

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

 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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