1 Return on Quality (ROQ): Making Service Quality Financially Accountable 指導老師 : 任維廉 教授 報告者 : 許程詠 Roland T. Rust, Anthony J. Zahorik, & Timothy L. Keiningham

2 自我介紹  人種：嘉義人  經歷 : 協同高中 → 東海工工 → 交大運管  嗜好 : 上網，打球  論文方向 : 利用灰色理論在遺失資料插補的 應用

3 Abstract  The quality revolution has taken over the thinking of much of American industry. (Dean and Evans 1994)  Highly competitive market require that customers must be satisfied by their purchases or they will go else where. ( Rice 1990)  Wallace company won the Quality Award in 1990 but high spending on Quality produced unsustainable losses so that bankrupt in 2 years. (Hill 1993)  Expenditures on quality do not have obvious profit implication (Aaker and Jacobson 1994)

4 Abstract  The benefits of quality improvements come in two firms - The improved ability of the firm to attract - The improved ability of the firm to attract new customers new customers - Customer become repeat customers - Customer become repeat customers when they are satisfied with products. when they are satisfied with products.

5 The ROQ Approach Assumption:  Quality is an investment  Quality efforts must be financially accountable  It is possible to spend too much on quality  Not all quality expenditures are equally valid

6 A model of Service Quality Improvement and Profitability Improvement Effort Service Quality Improvement Perceived Service Quality and Customer Satisfaction Customer Retention Revenues and Market Share Profitability Cost Reduction Word-of-Mouth Attraction of New Customers

7 Evaluating Financial Impact  AQ: Actual service Quality  S: Customer Satisfaction  CR: Cost Reduction  R: Customer Retention  MS: Market Share 

8 Drivers of Market Share  Customers retained =  Customers switching to us =  new customers = =  net present value (NPV)  Net present value with additional spending (NPVAS)

9 ROQ  Let NPV and NPV 0 be the net present values of the profit streams for the quality improvement effort and status quo ROQ=(NPV-NPV 0 )/NPVAS ROQ=(NPV-NPV 0 )/NPVAS

10 Driver of customer Satisfaction Process 1 Measures Customer Retention Measures Overall Measures Process 2 Measures Dimension 2 of Process 2 Measures Dimension 1 of Process 2 Measures

11 Measurement Alternatives  Repurchase intention （重新購買意圖）  Service quality （服務品質）  Customer satisfaction （顧客滿意度）  Disconfirmation （不確定性）  Customer delight （顧客喜好程度）  Cumulative focus versus transaction focus （累積交易 vs 集中交易） （累積交易 vs 集中交易）

12 The ROQ Quality Improvement Process Stage1: Preliminary Information Gathering Customer surveys Market information Internal Information Heavy use of management judgment Stage2: Identification of Possible Opportunities Stage3 :Limited Testing of Improvement to Determine Effectiveness Stage4: Financial Projections Based on Hard Data Stage5: Full Rollout of Quality Improvement Efforts

13 Summary of Managerial Inputs 18 managerial inputs  The key management process must be indentified  Key dimensions of each process must be obtained  Customer retention (Or repurchase intention)  Customer satisfaction (Or a suitable substitute)  Market size must be measured  Current market share must ne estimated  Churn must be estimated  The company’s current retention rate must be estimated  The attraction percentage must be obtained  The market growth rate must be estimated

14 Summary of Managerial Inputs  The contribution margin from an average customer must be estimated  The cost of capital must be determined  The time horizon must be specified  A specific quality improvement alternative must be identified  The additional expenditures related to this improvement effort must be estimated  Cost savings must be estimated  The satisfaction shift must be estimated  Market test data may be obtained

15 An Illustration Application  A National Hotel Chain disappointed group(9%): 45% return disappointed group(9%): 45% return Satisfied group(75%): 95% return Satisfied group(75%): 95% return Delight group(16%): 97% return Delight group(16%): 97% return  Calculate ROQ

16 Conclusions  This article presented a financial approach to quality improvement (ROQ)  Made quality improvement financially accountable  Let manager determine where to spend on service quality

17 Thanks for your listening