1. Service Systems Productivity and Quality
Compiled by:
Alex J. Ruiz-Torres, Ph.D.
From information developed by many.
Some slides from: THE MANAGEMENT AND CONTROL OF QUALITY, 5e, © 2002 South-Western/Thomson LearningTM Some adapted from D254, Service Operations, Professor Joy Field

2. Outline
Customer Satisfaction
Dimensions of Quality
Philosophies

3. Customer Satisfaction
Satisfaction is the result of an event; loyalty is a behavior caused by one or multiple such events
Loyal customers spend more, are willing to pay higher prices, refer new clients, and are less costly to do business with.
Rule of thumb: It costs 5-10 times more to find a new customer than to keep an existing one satisfied.
Customers need to have as many as twelve positive experiences with a service provider in order to overcome the negative effects of one bad experience

4. Customer Satisfaction
Loyal customer is one who
Makes regular purchases (Repeat business)
Purchases across product and service lines (Share of Wallet)
Refers others (Word of Mouth or Referenceability)
Demonstrates immunity to the pull of the competition (Retention)

5. Customer Satisfaction
Four stage model of loyalty (Oliver, 1997, 1999) – sequence of distinct phases cognitive, affective, conative (intentional), action (behavioral)
Cognitive loyalty refers to the existence of beliefs that (typically) a brand is preferable to others
Affective loyalty reflects a favorable attitude or liking based on satisfied usage
Conative loyalty constitutes the development of behavioral intentions characterized by a deeper level of commitment
Action loyalty relates to the conversion of intentions to action, accompanied by a willingness to overcome impediments to such action

6. Customer Satisfaction
Key elements to CS
Define and segment key customer groups and markets
Understand the voice of the customer (VOC)
Understand linkages between VOC and design, production, and delivery
Build relationships through commitments, provide accessibility to people and information, set service standards, and follow-up on transactions
Effective complaint management processes
Measure customer satisfaction for improvement

7. Customer Satisfaction
Customer Segmentation
Segmentation allows companies to target groups effectively, and allocate marketing resources to best effect.
Traditional segmentation focuses on identifying customer groups based on demographics and attributes such as attitude and psychological profiles.
Value-based segmentation, on the other hand, looks at groups of customers in terms of the revenue they generate and the costs of establishing and maintaining relationships with them.

8. CS: Key Dimensions of Quality
Performance – primary operating characteristics
Features – “bells and whistles”
Reliability – probability of operating for specific time and conditions of use
Conformance – degree to which characteristics match standards
Durability - amount of use before deterioration or replacement
Serviceability – speed, courtesy, and competence of repair
Aesthetics – look, feel, sound, taste, smell

9. CS: Key Dimensions of Service Quality
Reliability – ability to provide what was promised; delivered product on schedule, correct diagnosis and treatment of problem.
Assurance – knowledge and courtesy of employees and ability to convey trust
Tangibles – physical facilities and appearance of personnel
Empathy – degree of caring and individual attention (eg. ability to listen to customer)
Responsiveness – willingness to help customers and provide prompt service. Not having customers wait.

10. Customer Listening Posts
Comment cards and formal surveys
Focus groups
Direct customer contact
Field intelligence
Complaint analysis
Internet monitoring

11. Service Quality
Service Quality is measured by comparing a customer’s expected service, which comes from word-of-mouth, personal needs and past experience, with his or her perceptions of service.
The Measurement of Satisfaction is based on whether the expectations were met, not met, or exceeded.

12. Service Quality Perceived SQ Word of mouth Personal needs Past
experience
Expected
service
Perceived
Service Quality
Dimensions
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Service Quality Assessment
1. Expectations exceeded
ES<PS (Quality surprise)
2. Expectations met
ES~PS (Satisfactory quality)
3. Expectations not met
ES>PS (Unacceptable quality)

13. Moment of Truth Each customer contact is called a moment of truth.
You have the ability to either satisfy or dissatisfy them when you contact them.
A service recovery is satisfying a previously dissatisfied customer and making them a loyal customer.

14. Service Design - Failures
Server Errors
Task:
Doing work incorrectly
Treatment:
Failure to listen to customer
Tangible:
Failure to wear clean uniform
Customer Errors
Preparation:
Failure to bring
necessary materials
Encounter:
Failure to follow system flow

15. Service Design Quality Function Deployment – House of Quality
Matrix that links customer requirements to product features.
In services the “top level” customer expectations are reliability, responsiveness, assurance, empathy, and tangibles.
“top level” service features relate to facilities, procedures, training, equipment,…
Technical requirements
Voice of
the
customer
Relationship
matrix
Technical requirement
priorities
Customer
requirement
Competitive
evaluation
Interrelationships

16. Service Design

17. Walk through audit
Service delivery system should conform to customer expectations.
Customer impression of service influenced by use of all senses.
Service managers lose sensitivity due to familiarity.
Need detailed service audit from a customer’s perspective.

18. Customer Feedback and Word-of-Mouth
The average business only hears from 4% of their customers who are dissatisfied with their products or services. Of the 96% who do not bother to complain, 25% of them have serious problems.
The 4% complainers are more likely to stay with the supplier than are the 96% non-complainers.
About 60% of the complainers would stay as customers if their problem was resolved and 95% would stay if the problem was resolved quickly.
A dissatisfied customer will tell between 10 and 20 other people about their problem.
A customer who has had a problem resolved by a company will tell about 5 people about their situation.

19. Service Guarantee
Offer dissatisfied customer a refund, discount, or free service.
Advertising the firm’s commitment to quality
Focuses employees by defining performance standards explicitly
Builds a loyal customer base
Motivating effect on employees
Customer feedback

20. Approaches to Service Recovery
Case-by-case addresses each customer’s complaint individually but could lead to perception of unfairness.
Systematic response uses a protocol to handle complaints but needs prior identification of critical failure points and continuous updating.
Early intervention attempts to fix problem before the customer is affected.
Substitute service allows rival firm to provide service but could lead to loss of customer.