Designing Quality Services Chapter 8 Designing Quality Services S. Thomas Foster, Jr. Boise State University PowerPoint prepared by Dave Magee University of Kentucky Lexington Community College ©2004 Prentice-Hall

Chapter Overview Differences between Services and Manufacturing What Do Services Customers Want? SERVQUAL Designing and Improving the Services Transaction The Customer Benefits Package The Globalization of Services Improving Customer Service in Government Quality in Health Care A Theory for Service Quality Management

Differences Between Services and Manufacturing Slide 1 of 3 Unique Attributes of Services The output of services is heterogeneous Services are intangible The production and consumption of services often occur simultaneously Customers are more involved in the production of services than they are in manufacturing

Differences Between Services and Manufacturing Slide 2 of 3 Intangible Many service attributes are intangible. This means that they cannot be inventoried or carried in stock over long periods of time. Heterogeneous This means that for many companies, no two services are exactly the same. Simultaneous Production and Consumption Customer Contact Customers tend to be more involved in the production of services than they are in manufacturing.

Differences Between Services and Manufacturing Slide 3 of 3 Internal Versus External Services External services are those whose customers pay the bills. Internal services are in-house services such as data processing, printing, and mail. Voluntary Versus Involuntary Services Voluntary services are those services that we actively seek out and employ of our own accord. The quintessential example of an involuntary service is a prison. Other involuntary services include hospitals, the IRS, and the fire department.

How Are Service Quality Issues Different from Those of Manufacturing How Are Service Quality Issues Different from Those of Manufacturing? Slide 1 of 3 Availability of Data Simultaneous Production and Consumption Customer Contact Design of Services Product Liability

How Are Service Quality Issues Different from Those of Manufacturing How Are Service Quality Issues Different from Those of Manufacturing? Slide 2 of 3 Availability of Data Because services attributes are often intangible, it is sometimes difficult to obtain hard data relating to services. Simultaneous Production and Consumption Service must be done right the first time. Customer Contact Leads to an increase in the variability in the service, a high degree of customization and great variability in the time required to perform the service.

How Are Service Quality Issues Different from Those of Manufacturing How Are Service Quality Issues Different from Those of Manufacturing? Slide 3 of 3 Design of Services Must take into account variables such as customer moods and feelings. Product Liability In services, liability issues often relate to malpractice, whereas in manufacturing liability issues typically relate to safety concerns.

How Are Service Quality Issues Similar to Those of Manufacturing? For both manufacturing and service firms, the customer is the core of the business, and customer needs provide the major input to design.

What Do Services Customers Want? Slide 1 of 2 Zeithamel, Parasuraman, and Berry’s List of the Dimensions of Service Quality Tangibles Reliability Responsiveness Assurance Empathy

What Do Services Customers Want? Slide 2 of 2 Attributes of Effective Leaders in Service Industries Service Vision High Standards In-the-Field Leadership Style

SERVQUAL Instrument Slide 1 of 12 A survey instrument for assessing quality along five service dimensions Tangibles Reliability Responsiveness Assurance Empathy The SERVQUAL survey has been used by many firms and is an off-the-shelf approach that can be used in many service settings.

SERVQUAL Instrument Slide 2 of 12 Advantages of SERVQUAL Accepted as a standard for assessing different dimensions of services quality. Shown to be valid for a number of different service situations. Demonstrated to be reliable, meaning that different readers interpret the questions similarly. Only has 22 items making it parsimonious. It can be filled out quickly by customers and employees. Has a standardized analysis procedure to aid interpretation and results.

SERVQUAL Instrument Slide 3 of 12 SERVQUAL survey has two parts Customer expectations Customer perceptions Gap Analysis The SERVQUAL instrument is used to perform gap analysis. Gaps in communication and understanding between employees and customers have a serious negative affect on the perceptions of services quality.

SERVQUAL Instrument Slide 4 of 12 SERVQUAL Items and Dimensions Dimension Items Tangibles 1-4 Reliability 5-9 Responsiveness 10-13 Assurance 14-17 Empathy 18-22

SERVQUAL Instrument Slide 5 of 12 Word-of-mouth communication Personal needs Past experience Expected service Gap 5 Perceived service CUSTOMER PROVIDER Gap 4 External communications to customers Service delivery Gap 3 Service quality specifications Gap 1 Gaps Model Figure 8.4 Gap 2 Management perceptions of customer expectations

SERVQUAL Instrument (Gap Models) Slide 6 of 12 Figure 8.5 Management perceptions of customer expectations Expected service Gap 1 Gap 1 shows that there can be a difference between actual customer expectations and management’s idea or perception of customer expectations.

SERVQUAL Instrument (Gap Models) Slide 7 of 12 Figure 8.6 Service quality specifications Management perceptions of customer expectations Gap 2 Manager’s expectations of service quality may not match service quality specifications. This mismatch is demonstrated in gap 2.

SERVQUAL Instrument (Gap Models) Slide 8 of 12 Figure 8.7 Service delivery Service quality specifications Gap 3 Inadequate training, communication, and preparation of employees who interact with the customer, referred to as contact personnel, can lower the quality of service delivered. This mismatch is represented as Gap 3.

SERVQUAL Instrument (Gap Models) Slide 9 of 12 Figure 8.8 Service delivery External communications to customers Gap 4 Gap 4 shows the differences between services delivery and external communications with the customer.

SERVQUAL Instrument (Gap Models) Slide 10 of 12 Figure 8.9 Expected service Perceived service Gap 5 Gap 5 is the difference between perceived and expected services. The key to closing this gap is to first close gaps 1 through 4 through thoughtful system design, careful communication with the customer, and a workforce trained to provide consistently outstanding customer service.

SERVQUAL Instrument Slide 11 of 12 Differencing Technique The differencing technique is used to assess the differences between expectations and perceptions. Simple Differencing The averages for each dimension of service quality is computed by averaging the items pertaining to each dimension and then computing the difference. Two-Dimensional Differencing Very useful for evaluating responses when there is enough variation in different dimensions. The vertical axis reflects the expectations score and the horizontal axis relates to the perceptions score.

SERVQUAL Instrument Slide 12 of 12 Two-Dimensional Differencing Plane Figure 6.10 EXPECTATIONS 7 . Tangibles Reliability . 6 Empathy . 5 PERCEPTIONS 4 1 2 3 5 6 7 . Assurance 3 . Responsiveness 2 1

Designing & Improving the Services Transaction Slide 1 of 5 Services Blueprinting A services blueprint is a flowchart that isolates potential fail points in a process. Steps to developing a service blueprint. 1. Identify processes 2. Isolate fail points 3. Establish a time frame 4. Analyze profits

Designing & Improving the Services Transaction (Services Blueprinting) Slide 2 of 5 Services Blueprinting Example Figure 8.11 Standard execution time 2 minutes Brush shoes Apply polish Buff Collect payment Total acceptable execution time 5 minutes 30 seconds 30 seconds 45 seconds 15 seconds Fail point Wrong color wax Clean shoes Materials (e.g., polish, cloth) Seen by customer 45 seconds Line of visibility Not seen by customer but necessary to performance Select and purchase supplies

Designing & Improving the Services Transaction (Services Blueprinting) Slide 3 of 5 Steps in Developing a Service Blueprint Step 1: Identify processes. Processes are flowcharted so that the bounds of the process are identified. Step 2: Isolate fail points. What can happen here? What could go wrong. Mistakes can be expensive. Step 3: Establish a time frame. Time can be a major determinant of profitability. Those steps that lose time result in lost income. Time standards should be established for each step in the process. Step 4: Analyze profits. As errors occur in the process, the service provider becomes liable. Because delays and errors affect profitability, the provide could lose money.

Designing & Improving the Services Transaction Slide 4 of 5 Line of Visibility Identifies the point beyond which activities are not seen by the customer, but still influence performance. Moments of Truth The fail points in the service blueprint are also referred to as moments of truth. These are times at which the customer expects something to happen. Poka-Yoke The idea behind poka-yoke (or fail-safing) is to ensure that certain errors will never occur.

Designing & Improving the Services Transaction Slide 5 of 5 Fail Safe Methods Can Also Be Described as the Three Ts Task Treatment Tangibles Figure 8.12

The Customer Benefits Package Slide 1 of 3 Customer Benefits Package (CBP) A customer benefits package consists of both tangibles that define the service and intangibles that make up the service. Tangibles are known as goods-content. Intangibles are referred to as service-content. Stages of Service Design Process 1. Idea/concept generation 2. The definition of a services package 3. Process definition and selection 4. Facilities requirement definition

The Customer Benefits Package Slide 2 of 3 CBP Design Process Figure 8.13 Idea/concept generation Define CBP Select and define process Define facility requirements

The Customer Benefits Package Slide 3 of 3 Process/CBP Matrix Figure 8.14 Service Process Structure Unique service package Selective service package Restricted service package Generic service package Expert service Consulting Service shop Higher Education Service factory Package Delivery

Globalization of Services The trend toward globalization the way we manage service quality. Eastern European and Eastern Asian countries are following the lead of the United States by transferring labor and GDP into the services sector. The implication is that service competition will increase on a global scale, as has been the case in manufacturing for the past 40 years.

Improving Customer Service In Government If customer service is the battlefield for business leading into the twenty-first century, then government is probably the last frontier. There are some evidences of improvement in several aspects of government service.

Quality in Health Care Several factors have contributed to increased attention in the area of health care Health care is facing the same “cost squeeze” that government is facing. A move toward HMO’s is causing hospitals to streamline operations. There is increasing diversity in health care. Calls for a nationalized health care system threaten the status quo an provide the competitive pressures that spur the impetus to improve.

A Theory For Service Quality Management Slide 1 of 5 Proposition 1: The Unified Services Theory Proposition 2: The Unreliable Supplier Dilemma Proposition 3: Capricious Labor Proposition 4: Everyone Presumes to be An Expert

A Theory For Service Quality Management Slide 2 of 5 Proposition 1: The Unified Services Theory “With services, the customer provides significant inputs into the production process. With manufacturing, groups of customers may contribute ideas to the design of the product; however, individual customers’ only part in the actual process is to select and consume the output. Nearly all other managerial themes unique to services are founded in this distinction.

A Theory For Service Quality Management Slide 3 of 5 Proposition 2: The Unreliable Supplier Dilemma “With services, the customer-suppliers often provide unreliable inputs.”

A Theory For Service Quality Management Slide 4 of 5 Proposition 3: Capricious Labor “With services, customer-labor may ignore, avoid, or reject technologies or process improvements which are intended to increase quality and productivity. As a result, customer buy-in to process changes must be carefully addressed.”

A Theory For Service Quality Management Slide 5 of 5 Proposition 4: Everyone Presumes to be An Expert “With services, the customer often provides product specifications (what to make) and process design (how to make it), often without the invitation of the service provider.”

Summary Differences between Services and Manufacturing What Do Services Customers Want? SERVQUAL Designing and Improving the Services Transaction The Customer Benefits Package The Globalization of Services Improving Customer Service in Government Quality in Health Care A Theory for Service Quality Management