CHAPTER 9 - CUSTOMER-DEFINED SERVICE STANDARDS

FACTORS NECESSARY FOR APPROPRIATE SERVICE STANDARDS

1. Standardization of Service Behaviors and Actions

- The goal of standardization is for the service firm to produce a consistent (a
nonvarying sequential process) service product from one transaction to the next and
to develop a service that meets each customer’s individual needs.
- Some executives and managers believe that services cannot be
standardized/standardizing tasks is inconsistent with employee empowerment (that
employees will feel controlled)/services are too intangible to be measured -> vague
and loose standard setting with little or no measurement or feedback.
- In reality, many service tasks are routine (opening checking accounts or spraying
lawns for weeds) -> specific rules and standards can be fairly easily established and
effectively executed.

3 forms of standardizations:
1. substitution of technology for personal contact and human effort
+ e.g: mobile applications for ordering take-out; coffee vending machine.
+ Allows the firm to calibrate service standards such as the length of time a
transaction takes, the accuracy with which operations are performed, and the
number of problems that occur.
2. improvement in work methods.
+ e.g: home cleaning methods by maid services, opening credit card,..
+ Understand completely the process by which the service is delivered -> more easily
establishes appropriate service standards.
3. combinations of these two methods.

2. Formal Service Targets and Goals

- Companies that have been successful in delivering consistently high service quality
are noted for establishing formal standards to guide employees in providing service.
Types of formal goal setting:
1. Specific targets for individual behaviors or actions:
For example: If the service goal for employee behavior is stated in such a general
term as “call the customer back quickly” -> Different employees interpret in their own
ways -> inconsistent service.
=> The standard provides little direction, vague and not measurable.
2. The overall department or company target, most frequently expressed as a
percentage in all execution.
For example: set an overall goal “to call the customer back within four hours 97
percent of the time” and collect data over a month’s or year’s time to evaluate the
extent to which it meets the target.

3. Customer-, Not Company-, Defined Standards

Company defined:
- Established to reach internal company goals for productivity, efficiency, cost, or
technical quality.
 - Often does not meet customer expectations (voice-activated telephone support
systems that do not allow customers to speak to humans).
- To close gap 2, a company must set customer-defined standards: operational
standards based on pivotal customer requirements identified by customers.

Customer-defined:
- Anchoring service standards on customers can save money by identifying customer
values -> eliminating activities and features that the customer either does not notice
or will not pay for.
- For example: Key desires of customers visiting a Department of Transportation
office is to not have to wait a long time -> government in Oregon priority to improve
service: get wait times down ( no more than 20 mins because based on the survey,
people generally expected to wait no more than 20 minutes for service).
Solution: DMV encouraged the use of alternative channels, such as online services
for simple transaction like vehicle registration renewals)/ adding express counters
and information kiosks/ scheduled relief help between offices.

TYPES OF CUSTOMER-DEFINED SERVICE STANDARDS

- The types of standards that close provider gap 2 are customer-defined
standards: operational goals and measures based on pivotal customer
requirements identified by customers.

1. Hard Customer-Defined Standards

- FedEx standards that constitute its SQI fall into the category of hard
standards and measures: things that can be counted, timed, or observed
through audits.
- Many of the FedEx standards relate to on-time delivery and not making
mistakes, and for good reason.
 - Most frequent customer complaints are associated with service mistakes or
problems (32 % of all complaints) or poor product performance (30 % of all
complaints).
- To address the need for reliability, companies can institute a “do it right the
first time” and an “honor your promises” value system by establishing
reliability standards.
For example: service performed correctly the first time, the equipment was
installed correctly and was able to be used immediately, company
representative arrives when promised or the delivery is made at the time the
customer expects it (right on time).
- Reliability is often the most important concern of service customers.
For example: on-time and accurate fulfillment of orders in electronic retailing.
Such as Dell: After talking to many customers, Dell learned that customers
simply wanted Dell to deliver what the customer ordered when Dell said they
would. They track its performance on this reliability metric and reward
employees based on how well they do, ensuring employees are working
toward goals.

=> Hard service standards for responsiveness are set to ensure the speed or
promptness with which companies deliver products.

2. Soft Customer-Defined Standards

- Soft standards provide direction, guidance, and feedback to employees in
ways to achieve customer satisfaction and can be examined by measuring
customer perceptions and beliefs.
- Soft standards are especially important for person-to-person interactions such
as the selling process and the delivery process for professional services.
- Unlike the hard service standards, soft standards are not easily quantifiable,
but a firm’s performance on these standards can be assessed via surveys
and other means that capture customer perceptions of how the firm is doing
on the standards.
For example: A casino has identified five soft service standards to encourage
its employees to provide an appropriate level of attention and respect to
its guests—two issues that its customers have indicated are important to
them. Two of these standards are for employees to “display a demeanor that
could be described as friendly, polite, cheerful, or upbeat” and to “offer an
appropriate verbal greeting” when interacting with customers.

3. One-Time Fixes
- One-time fixes are technology, policy, or procedure changes that, when
instituted, address customer requirements.
- One-time fixes also defined as company standards that can be met by an
outlet (e.g., a franchisee) making a one-time change that does not involve
employees.
- Organizations with multiple outlets often must clearly define these standards
to ensure consistency.
- One-time fixes are often accomplished by technology bcs technology can
simplify and improve customer service. For example: In recent years some
 hospital emergency rooms have added check-in kiosks so that patients can
enter personal information and reduce time spent waiting in line to register.

DEVELOPMENT OF CUSTOMER-DEFINED SERVICE STANDARDS

1. Turning Customer Requirements into Specific Behaviors and Actions

Step 1: Identify Existing or Desired Service Encounter Sequence

- Establishing standards firms are concerned with service encounter quality and thus
want to understand the specific requirements and priorities of the customer for each
service encounter.
- Identifying the sequence can be done by listing the sequential steps and activities
that the customer experiences in receiving the service.
- A firm might also consider which of its service encounters have the greatest impact
on customers. For example: Marriott has found that encounters in the first 10 minutes
of a hotel stay are the most critical, leading to a focus on customers’ front-desk
experiences
Step 2: Translate Customer Expectations into Specific Behaviors and Actions
- Setting a standard in broad conceptual terms, such as “improve skills in the
company,” is ineffective because the standard is difficult to interpret, measure, and
achieve -> translating the data into specific actions to deliver better customer service.
- Figure 9.3 shows different levels of abstraction/concreteness for standards in a
service firm.
- At the very abstract level are customer requirements too general to be useful to
employees: customers want satisfaction, value, and relationships.
If we dig still deeper beneath the attribute level, we get to specific behaviors and
actions at the appropriate level of specificity for setting standards -> abstract
customer requirements and expectations must be translated into concrete,
specific behaviors and actions associated with each service encounter.
 Step 3: Determine Appropriate Standards
- Hard standards consist of quantifiable measures of employee behaviors and
actions.
- Soft standards are often concerned with more abstract requirements or
issues.
- Best way to determine: establish a soft standard by means of trailer calls and
then determine over time which operational aspect most correlates to this soft
measure.
- Prioritizing the behaviors and actions into those for which customer-defined
standards will be established.
The most important criteria for creation of appropriate service standards:
1. The standards are based on behaviors and actions that are very important to customers.
2. The standards cover performance that needs to be improved or maintained.
3. The standards cover behaviors and actions employees have control over and can
improve.
4. The standards are understood and accepted by employees.
5. The standards are predictive rather than reactive based on current and future
customer expectations rather than past complaints.
6. The standards are challenging but realistic.
Step 4: Develop Measurements for Standards
Hard measurements:
- Involve mechanical counts or technology-enabled measurement of time or errors.
- Can be measured continuously and operationally without asking the customer’s
opinion of them (Point that distinguishes them from soft measurements).
Some of the actual measurements of hard standards (of the FedEx Express SQI):
- Missing packages: the number of packages that do not have a final disposition scan
or have no package status scans for two consecutive business days after the commit date.
- Damaged packages: the number of claims filed by customers for cost of contents
for packages with visible or concealed damage.
 - Wrong day, late deliveries: the number of packages delivered after the commitment
date.

Soft measurements: based on customer perceptions that often cannot be directly observed.
- Relationship and SERVQUAL surveys cover all aspects of the customer’s
relationship with the company, are typically expressed in attributes, and are usually
completed once per year.
- Posttransaction surveys are associated with specific service encounters, are short
(~ six or seven questions), and are administered as close in time to a specific service
encounter as possible/can be administered continuously.

Step 5: Establish Target Levels for the Standards

- Without this step the company lacks a way to quantify whether the standards are
being met.

(Figure 9.4 provides a good example of an approach that can be used to set
standards for timeliness in responding to complaints in a service company)

Each time a complaint is made to the company, and each time one is resolved,
employees can record the times -> ask each customer his or her satisfaction with the
resolving performance -> plot the information from each complaint to determine how
well the company is performing and where the company would like to be in the future.

Another technique is a simple perception-action correlation study.

- When the service consists of repetitive processes, companies can relate
levels of customer satis- faction with actual performance of a behavior or task.
- For example: determine the standard for customers’ wait-time in a line.
Gather information includes both customer perceptions of their wait in line
(soft perceptual measure) and the amount of time they actually stand in line
(hard operations measure).
Step 6: Track Measures against Standards
- FedEx and Disney have careful and comprehensive fact-based systems that provide
information about their operations and allow them to continually examinecaompany
performance in comparison to its service standards.
- An example of Granite Rock, has systems in place to gather, analyze, and act on
information. Statistical process control and other types of charts are everywhere,
tracking a wide range of issues—from characteristics of its concrete and crushed
stone to processes such as the time it takes customers to fill their trucks.
- Customer complaints are also tracked through what the company calls
“product-service discrepancy reports” -> show how long it takes to resolve complaints
and provide detailed quarterly analyses of trends.

Step 7: Provide Feedback about Performance to Employees

- Example of such feedback is employee monitoring: the practice of supervisors
listening in on employee telephone interactions with customers.
- The purpose of such monitoring is often to provide feedback on employee
performance to the service standards set by the organization.
- Ensuring that performance captures the process from the customer’s view rather
than the company’s perspective. For example: A supervisor monitoring an employee
should focus on how adequately she handles the customer’s request.

Step 8: Periodically Update Target Levels and Measures

- Revising the target levels, measures, and even customer require- ments regularly
enough to keep up with customer expectations.
- For example: Facebook initially set a benchmark of five minutes for firms to receive
the Facebook “very responsive” badge in responding to their customers. However,
many businesses indicated that an average response time of five minutes was
unrealistic. As a result of this feedback, Facebook revised that number to a more
realistic 15 minutes.

Developing Service Performance Indexes

- One outcome of following the process for developing customer-defined standards is
a service performance index (comprehensive compos- ites of the most critical
performance standards).
- Most companies build these indexes by understanding the most important
requirements of the customer -> linking these requirements to tangible and
measurable aspects -> using the feedback from these indexes to identify and
improve service problems.