Improving Service Quality and Productivity

Chapter 14:
Improving Service
Quality and
Productivity
Quality and productivity are twin paths to creating

value for both customers and companies.
Quality focuses on the benefits created for

customers.
productivity addresses financial costs incurred by

firms.
What Is Service
Quality?
3
Quality = Excellence. Recognized only through
Transcendent: experience
Product-based: Quality is precise and measurable
User-based:
Quality lies in the eyes of the beholder
Manufacturing- Quality is in conformance to the firms developed

specifications
based:
Value-based:
Quality is a trade-off between price and value

4
Performance: Primary operating characteristics

Features: Bells and whistles
Reliability: Probability of malfunction or failure
Conformance: Ability to meet specifications
Durability: How long product continues to provide value to
customer
Serviceability: Speed, courtesy, competence
Esthetics: How product appeals to users
Perceived Quality: Associations such as brand name
Measuring and
Improving
Service Quality
The Parasuraman, Zeithaml and Berry model..
Originally identified 10 dimensions of quality and

developed a list of 97 items on a seven point
scale
After testing and subsequent refinement (i.e.

factor analysis) the list was collapsed into a 22item questionnaire covering 5 dimensions) called
SERVQUAL
1.Tangibles
2.Reliability
3.Responsiveness
4.Assurance
5.Empathy
These factors would differ in importance from service

to service e.g. reliability is more important in a bank,
empathy in a hospital!
Components of Quality:
Service-based
Tangibles
Appearance of physical facilities, equipment, personnel and
communication materials.
Reliability
Ability to perform the promised service dependably and
accurately.
Responsiveness
Willingness to help customers and provide prompt service.
Assurance
Knowledge and courtesy of employees and their ability to
convey trust and confidence.
Empathy
The firm provides care and individualized attention to its
customers.
RELIABILITY
Providing service as promised

Dependability in handling customers
service problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records
RESPONSIVENESS
Keeping customers informed as to

when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers
requests
ASSURANCE
Employees who instill confidence in

customers
Making customers feel safe in their
transactions
Employees who are consistently courteous
Employees who have the knowledge to
answer customer questions
EMPATHY
Giving customers individual attention

Employees who deal with customers in a
caring fashion
Having the customers best interest at heart
Employees who understand the needs of
their customers
Convenient business hours
TANGIBLES
Modern equipment
Visually appealing facilities
Employees who have a neat,
professional appearance
Visually appealing materials associated
with the service
10
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
Poor quality
Perceived performance ratings < expectations
Good quality
Perceived performance ratings > expectations
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
11
Gap analysis
The questionnaire is divided into 2 main sections:
Expectations measures what is anticipated in an
ideal service (on a 7-point scale)
Perceptions then measures those aspects of the
service as actually delivered or experienced
Satisfaction (S) is conceptualized as the gap
between expectations and perceptions
S=E-P
SERVQUAL
13
USA General Sample [1990]
Dimension
Weight
Perceptions
Expectations
Tangibles
0.11
5.54
5.16
Reliability
0.32
5.16
6.44
Responsiveness
0.22
5.20
6.36
Assurance
0.19
5.50
6.50
Empathy
0.16
5.16
6.28
Weighted averages [n=1936]

5.28
6.27
(Source: calculated from from Zeithaml, Parasuraman and Berry [1990]
Gap
+0.38
-1.28
-1.16
-1.00
-1.12
)
-0.99
UK Hospital Outpatient Survey
Dimension
Weight
Perceptions
Expectations
Gap
Tangibles
0.13
5.21
5.24
-0.03
Reliability
0.26
5.52
6.31
-0.79
Responsiveness
0.21
5.88
6.17
-0.29
Assurance
0.20
5.98
6.39
-0.41
Empathy
0.20
5.66
6.16
-0.50
Weighted averages [n= 72]

5.67
6.15
-0.48
Finland Hospital Outpatient Survey
Dimension
Weight
Perceptions
Expectations
Gap
Tangibles
0.18
5.64
6.03
-0.38
Reliability
0.21
5.51
6.04
-0.54
Responsiveness
0.20
5.73
6.12
-0.39
Assurance
0.22
5.83
6.23
-0.40
Empathy
0.19
5.74
6.08
-0.35
Weighted averages [n= 135]

5.72
6.14
-0.41
9
8
7
6
O
O
5
4
3
2
1
0
Reliability
Insurance Agency
Responsiveness
Assurance
= Zone of Tolerance
Perception
Empathy
Tangibles
O = Service Quality
17
Hard measures refer to standards and measures that

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
e.g. how many trains arrived late?
Soft measures refer to standards and measures that

cannot easily be observed and 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
e.g. SERVQUAL, surveys, and customer advisory panels
18
Research Objective
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure
for remedial action
Assess companys service performance compared to
competitors; identify service-improvement priorities;
track service improvement over time
Obtain customer feedback while service experience is
fresh; act on feedback quickly if negative patterns develop
Use as input for quantitative surveys; provide a forum
for customers to suggest service-improvement ideas
Measure individual employee service behaviors for use
in coaching, training, performance evaluation,
recognition and rewards; identify systemic strengths
and weaknesses in service
Measure internal service quality; identify employeeperceived obstacles to improve service; track
employee morale and attitudes
Type of Research
Customer Complaint
Solicitation
Relationship and SERVQUAL
Surveys
Post-Transaction Surveys
Customer Focus Groups
Mystery Shopping of
Service Providers
Employee Surveys
Determine the reasons why customers defect
Lost Customer Research
Forecast future expectations of customers; develop

and test new service ideas
Future Expectations Research

19
Key customer-centric SQ measures include:
Total market surveys, annual surveys, transactional surveys

Service feedback cards
Mystery shopping
Analysis of unsolicited feedbackcomplaints and compliments, focus
group discussions, and service reviews
Ongoing surveys of account holders to determine satisfaction

in terms of broader relationship issues
Customer advisory panels offer feedback/advice on
performance
Employee surveys and panels to determine:
Perceptions of the quality of service delivered to customers on specific
dimensions
Barriers to better service
Suggestions for improvement
20
Control charts to monitor a single variable

Offer a simple method of displaying performance over time
against specific quality standards
Are only good if data on which they are based is accurate
Enable easy identification of trends
Service quality indexes

Embrace key activities that have an impact on customers
21
Failure Type
Weighting
Number of
Daily
X
=
Factor
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
Total Failure Points (SQI) =
XXX,XXX
22
% Flights Departing Within

15 Minutes of Schedule
100%
90%
80%
70%
60%
J
Month
23
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
24
25
26
Facilities,
Equipment
Arrive late
Oversized bags
Customers
Customers
Frontstage
Front-Stage
Personnel
Personnel
Procedures
Procedures
Delayed check-in
Aircraft late to Gate agents
procedure
cannot process
gate
fast enough
Mechanical
Acceptance of late
Failures
passengers
Late/unavailable
airline crew
Late pushback
Delayed
Departures
Late food
service
Other Causes
Weather
Air traffic
Late baggage
Poor announcement of
departures
Weight and balance
sheet late
Late fuel
Materials,
Materials,
Supplies
Supplies
Late cabin
cleaners
Backstage
Personnel
Information
27
Case: Analysis of Causes of

Flight Departure Delays
15.3%
23.1%
15.4%
All stations, excluding

Chicago-Midway Hub
11.7%
23.1%
23.1%
Newark
15%
Late passengers
Waiting for pushback
Waiting for
fuelling
19%
33.3%
9.5%
8.7%
11.3%
4.9
%
33.3%
53.3%
Washington Natl.
Late weight and balance sheet

Late cabin cleaning/supplies
Other
28
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
29
Satisfy Target
Customers through
Service Recovery
Service Reliability
100%
Optimal Point of
Reliability: Cost of
Failure = Service
Recovery
B C
Small Cost,
Large Improvement
D
Large Cost,
Small Improvement
Satisfy Target
Customers through
Service Delivery as
Planned
Investment
Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
service that is delivered as planned.
30

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Chapter 14:

Quality and productivity are twin paths to creating

Quality focuses on the benefits created for

productivity addresses financial costs incurred by

Quality = Excellence. Recognized only through

Product-based: Quality is precise and measurable

Quality lies in the eyes of the beholder

Manufacturing- Quality is in conformance to the firms developed

Quality is a trade-off between price and value

Performance: Primary operating characteristics

The Parasuraman, Zeithaml and Berry model..

Originally identified 10 dimensions of quality and

After testing and subsequent refinement (i.e.

These factors would differ in importance from service

Providing service as promised

Keeping customers informed as to

Employees who instill confidence in

Giving customers individual attention

Survey research instrument based on premise that customers

Perceived performance ratings < expectations

Perceived performance ratings > expectations

Developed primarily in context of face-to-face encounters

Scale contains 22 items reflecting five dimensions of service

Subsequent research has highlighted some limitations of

USA General Sample [1990]

Weighted averages [n=1936]

UK Hospital Outpatient Survey

Weighted averages [n= 72]

Finland Hospital Outpatient Survey

Weighted averages [n= 135]

Hard measures refer to standards and measures that

Soft measures refer to standards and measures that

Provide direction, guidance, and feedback to employees on ways

Determine the reasons why customers defect

Lost Customer Research

Forecast future expectations of customers; develop

Future Expectations Research

Key customer-centric SQ measures include:

Total market surveys, annual surveys, transactional surveys

Ongoing surveys of account holders to determine satisfaction

Control charts to monitor a single variable

Service quality indexes

Late deliveryright day

Total Failure Points (SQI) =

% Flights Departing Within

Cause-and-effect diagram to identify potential causes of

Separating the trivial from the important. Often, a majority

Visualization of service delivery, identifying points where

Case: Analysis of Causes of

All stations, excluding

Late weight and balance sheet

Assess costs and benefits of quality initiatives

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

Determine optimal level of reliability

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