1 Chapter 12 Understanding Service Quality 1 Chapter 12 UNDERSTANDING SERVICE QUALITY McGraw-Hill/Irwin © 2003 The McGraw-Hill Companies, Inc., All Rights Reserved.

2 Chapter 12 Understanding Service Quality 2 LEARNING OBJECTIVES Identify the differences between the quality of tangible goods and the quality of services. Present the different dimensions of quality for goods and for services. Introduce the major components of quality theory and the theorists who contributed to it. Distinguish between technical quality and functional quality. Understand how customer expectations affect their perception of quality. Present the role of certification and awards for recognizing outstanding quality.

3 Chapter 12 Understanding Service Quality 3 DIMENSIONS OF PRODUCT QUALITY Performance Features Reliability Durability Conformance Serviceability Aesthetics Perceived Quality Source: Garvin,D. “Competing on the eight dimensions of quality,” Harvard Business Review, November December 1987.

4 Chapter 12 Understanding Service Quality 4 MEASURES OF RELIABILITY Mean Time to First Failure (MTFF) Mean Time Between Failures (MTBF) Failure Rate per Unit of Time

5 Chapter 12 Understanding Service Quality 5 DIMENSIONS OF SERVICE QUALITY Source: Parasuraman A., L.L. Berry and V.A. Zeithaml, (1990), Understanding Measuring and Improving Service Quality: Findings from a Multiphase Research Program, The Free Press. Reliability Tangibles Responsiveness Assurance Empathy Service Outcome Service Process

6 Chapter 12 Understanding Service Quality 6 Exhibit 12.1 DEMING’S FOURTEEN POINTS 1.Create consistency of purpose for continuous improvement of product and service. 2.Adopt the new philosophy (mistakes and negativism are unacceptable.) 3.Cease dependence upon mass inspection. 4.End the practice of awarding business on price tag alone. 5.Improve constantly and forever the system of production and service. 6.Institute training. 7.Institute leadership. Source: Walton, M. The Deming Management Method, Putnam Publishing Group, New York, 1986.

7 Chapter 12 Understanding Service Quality 7 Exhibit 12.1 (Continued) DEMING’S FOURTEEN POINTS 8.Drive out fear. 9.Break down barriers between staff areas. 10.Eliminate slogans, exhortations, and targets for the workforce. 11.Eliminate numerical quotas. 12.Remove barriers to pride of workmanship. 13.Institute a vigorous program of education and training. 14.Take action to accomplish the transformation. Source: Walton, M. The Deming Management Method, Putnam Publishing Group, New York, 1986.

8 Chapter 12 Understanding Service Quality 8 COST OF QUALITY The cost of poor quality is the difference between the actual operating cost and what the operating cost would have been if there had been no errors or failures by either the systems or the staff. Source: Bland, F.M., Maynard, J., and Herbert, D.W., “Quality Costing of an Administrative Process,” The TQM Magazine, Volume ii, 1999, p

9 Chapter 12 Understanding Service Quality 9 Exhibit 12.2 CATEGORIES OF QUALITY COSTS Prevention Costs: Costs associated with preventing poor quality expended before a product or service is produced. Appraisal Costs: Costs that are incurred for inspection and testing to determine the condition of the product during and after it is produced but before it is released to the customer. Internal Failure Costs: Costs of producing defective products or services before they reach the customer. External Failure Costs: Costs associated with having defective products or services received by customers. Source: Juran, J.M. Quality Control Handbook, McGraw-Hill, New York, 1951.

10 Chapter 12 Understanding Service Quality 10 Exhibit 12.3 THE COST OF QUALITY FRAMEWORK High 100 Cost 0 Failure Costs Total Cost Prevention and Appraisal Costs Percent Conforming Low

11 Chapter 12 Understanding Service Quality 11 MAJOR QUALITY THEORISTS Deming Feigenbaum Juran Crosby Taguchi Ishikawa

12 Chapter 12 Understanding Service Quality 12 Exhibit 12.4 QUALITY THEORY: PUTTING IT ALL TOGETHER Ishikawa Garvin Feigenbaum Deming Taguchi Crosby Juran COMMITMENT COST CONTROL CUSTOMER FOCUS Empowerment Leadership Data

13 Chapter 12 Understanding Service Quality 13 DEFINING SERVICE QUALITY Technical Quality: related to the core element of service. Functional Quality: relates to the customers’ perception of how the service is delivered.

14 Chapter 12 Understanding Service Quality 14 CUSTOMER SATISFACTION Satisfaction = (Perception of Performance) – (Expectation) Customers will be satisfied when their perceptions of performance exceed their expectations.

15 Chapter 12 Understanding Service Quality 15 1.Improve Customers’ Perceptions of Performance 2.Decrease Customers’ Expectations TWO WAYS TO INCREASE CUSTOMER SATISFACTION

16 Chapter 12 Understanding Service Quality 16 Exhibit 12.6 THE SERVICE QUALITY GAP MODEL Word-of-MouthPersonal NeedsPast Experience Expected Service Perceived Service External Communication to Customers Service Delivery Service Quality Specifications Management Perceptions of Customer Expectations CUSTOMER PROVIDER Gap 1 Gap 2 Gap 3 Gap 4 Gap 5 Source: Parasuraman A., L.L. Berry and V.A.. Zeithaml, (1990), Understanding Measuring and Improving Service Quality: Findings from a Multiphase Research Program, The Free Press.

17 Chapter 12 Understanding Service Quality 17 QUALITY CERTIFICATION AND AWARDS International Organization for Standardization ISO-9000 Malcolm Baldrige National Quality Award

18 Chapter 12 Understanding Service Quality 18 KEY TERMS Functional Quality Technical Quality Reliability Tangibles Responsiveness Empathy