MKT 346: Marketing of Services Dr. Houston Chapter 14: Improving Service Quality and Productivity

Service Quality and Productivity Relationship Service Quality Productivity Value Creation for Customers & Companies

Integrating Service Quality and Productivity Strategies  Service quality focuses on customer benefits  Productivity addresses firm’s financial costs  Marketing, operations and human resource managers need to work together for quality and productivity improvement

Different Perspectives of Service Quality Quality = excellence (recognized only through experience) Transcendent Quality is conformance to the firm’s specifications Manufacturing Based Quality lies in the eyes of the beholder User Based Quality is a tradeoff between price and value Value Based

Dimensions of Service Quality Service Quality Dimensions TangiblesReliabilityResponsibilityAssuranceEmpathy

Six Service Quality Gaps (Fig. 14.5)

Service Quality Gap 1: The Knowledge Gap  Difference between  what customers expect  what managers think customers expect  Primary Causes:  Management’s failure to identify customer expectations  Reduction Strategies:  Conduct market research  Communicate with customers  Encourage front-line communication to managers  Educate managers about customer expectations

Service Quality Gap 2: The Policy Gap  Difference between:  What managers understand about customer expectations  The standards that management sets for service delivery  Primary Causes:  Resource constraints  Management makes policies to not deliver due to costs  Reduction Strategies:  Top management commitment  Service quality goals in addition to profit goals

Service Quality Gap 3: The Delivery Gap  Difference between:  Service quality specifications  Delivery of those specifications  Primary Causes:  Employees unaware of specifications  Employees do not have appropriate skills  Employees unwilling to perform the work  Reduction Strategies:  Enhance teamwork  Ensure employee-job fit  Employee control and supervision

Service Quality Gap 4: The Communications Gap  Difference between:  Service delivered  External communications about the service  Primary Causes:  Poor or lack of communications  Over-promising to customers  Reduction Strategies:  Increase horizontal communications  Avoid propensity to over-promise

Service Quality Gap 5: The Perception Gap  Difference between:  Service actually delivered  What customers feel they have received  Primary Causes:  Services are intangible  Reduction Strategies:  Make service quality tangible (service environment)  Provide physical evidence of service (replaced parts)  Openly communicate about the service delivered

Service Quality Gap 6: The Service Quality Gap  Cumulative outcome of gaps 1-5  Gap is reduced by closing gaps 1-5

Soft and Hard Measures of Service Quality  Soft measures  not easily observed  must be collected by talking to customers/employees/others  EXAMPLE: SERVQUAL instrument to measure perceptions  Hard measures  can be counted, timed or measured through audits  EXAMPLE: control charts

Soft Measure of Service Quality: SERVQUAL Instrument  A generic survey instrument  21 questions to measure 5 dimensions  Measures dimensions of service quality  Measures expectations of the ideal firm  Has strengths and weaknesses  Must be adapted to specific industry!  See SERVQUAL handout

Hard Measures of Service Quality  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  Enable easy identification of trends  Helpful only if data used is accurate

 Assessment and benchmarking of service quality  Customer-driven learning and improvements  Creating a customer-oriented service culture Key Objectives of Effective Customer Feedback Systems

Customer Feedback Collection Tools  Total market surveys  Annual surveys  Transactional surveys  Service feedback cards  Mystery shopping  Unsolicited customer feedback  Focus group discussions  Service reviews

 Reporting system needs to deliver feedback to:  Frontline staff  Process owners  Branch/department managers  Top management  Three types of performance reports:  Monthly Service Performance Update  Quarterly Service Performance Review  Annual Service Performance Report Analysis, Reporting and Dissemination of Customer Feedback

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

Productivity in a Service Context  Amount of output produced relative to the amount of inputs  Difficult to measure productivity of service firms

Generic Productivity Improvement Strategies  Typical strategies to improve service productivity:  Careful control of costs at every step in process  Reduce wasteful use of materials or labor  Match productive capacity to average rather than peak demand levels  Replace workers with machines and technology  Teach employees how to work more productively  Broaden variety of tasks that service worker can perform  Install expert systems that allow paraprofessionals to take on work previously performed by professionals who earn higher salaries

Customer-Driven Ways to Improve Productivity  Change timing of customer demand  Shift demand away from peak periods  Involve customers more in production  Get customers to self-serve  Encourage customers to use corporate website  Ask customers to use third parties  Delegate delivery of supplementary service elements to intermediary organizations (i.e., travel agency)

Backstage and Front-Stage Productivity Changes: Implications for Customers  Backstage changes may impact customers  Prepare customers for proposed backstage changes  Examples: new check formats, new required forms  Front-stage productivity enhancements are especially visible in high contact services  Some may require customers to change behavior  Must address customer resistance to changes

Managing Customer Resistance to Change  Develop customer trust  Understand customers’ habits and expectations  Pretest new procedures and equipment  Publicize the benefits  Teach customers to use innovations  Promote trial usage  Monitor performance  Continue to seek improvements

A Caution on Cost Reduction Strategies  Most attempts to improve service productivity seek to eliminate waste and reduce labor costs and does not involve new technology  Reducing staff means workers try to do several things at once and may perform each task poorly  Better to search for service process redesign opportunities:  Improvements in productivity  Simultaneous improvement in service quality

MKT 346 Key Concepts: Chapter 14  What is service quality?  Different perspectives on service quality  Five dimensions of service quality  The Gap Model of service quality (and six service quality gaps)  Soft and hard measures of service quality  Key objectives of effective customer feedback systems  Customer feedback collection tools  Three types of performance reports (related to customer feedback)  Tools to analyze and address service quality problems  Generic productivity improvement strategies  Customer-driven ways to improve productivity  Backstage and front-stage productivity changes  Managing customer reluctance to change