1. Chapter 06 Service Quality McGraw-Hill/Irwin Service Management: Operations, Strategy, and Information Technology, 6e Copyright © 2008 by The McGraw-Hill Companies, Inc. All Rights Reserved.

2. Learning Objectives Describe and illustrate the five dimensions of service quality. Use the service quality gap model to diagnose quality problems. Illustrate how poka-yoke methods are applied to quality design in services. Perform service quality function deployment. Construct a statistical process control chart. Develop unconditional service guarantees. Discuss the concept of a service recovery. Perform a walk-through audit (WtA) 6-2

3. Moments 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. 6-3

4. Dimensions of Service Quality Reliability: Perform promised service dependably and accurately. Example: receive mail at same time each day. Responsiveness: Willingness to help customers promptly. Example: avoid keeping customers waiting for no apparent reason. 6-4

5. Dimensions of Service Quality Assurance: Ability to convey trust and confidence. Example: being polite and showing respect for customer. Empathy: Ability to be approachable. Example: being a good listener. Tangibles: Physical facilities and facilitating goods. Example: cleanliness. 6-5

6. Perceived Service Quality Word of mouth Personal needs Past experience Expected service Perceived service 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) 6-6

7. Service Quality Gap Model 6-7

8. Quality Service by Design Quality in the Service Package Budget Hotel example Poka-yoke (fail-safing) Height bar at amusement park Quality Function Deployment House of Quality 6-8

9. Classification of Service 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 Resolution: Failure to signal service failure 6-9

10. House of Quality 6-10

11. Achieving Service Quality Cost of Quality (Juran) Statistical Process Control (Deming) Unconditional Service Guarantee 6-11

12. Costs of Service Quality (Bank Example) Failure costs Detection costs Prevention costs External failure: Process control Quality planning Loss of future business Peer review Training program Negative word-of-mouth Supervision Quality audits Liability insurance Customer comment card Data acquisition and analysis Legal judgments Inspection Recruitment and selection Interest penalties Supplier evaluation Internal failure: Scrapped forms Rework Recovery: Expedite disruption Labor and materials 6-12

13. Control Chart of Departure Delays expected Lower Control Limit 19981999 6-13

14. Unconditional Service Guarantee: Customer View Unconditional (L.L. Bean) Easy to understand and communicate (Bennigan’s) Meaningful (Domino’s Pizza) Easy to invoke (Cititravel) Easy to collect (Manpower) 6-14

15. Unconditional Service Guarantee: Management View Focuses on customers (British Airways) Sets clear standards (FedEx) Guarantees feedback (Manpower) Promotes an understanding of the service delivery system (Bug Killer) Builds customer loyalty by making expectations explicit 6-15

16. Customer Satisfaction All customers want to be satisfied. Customer loyalty is only due to the lack of a better alternative Giving customers some extra value will delight them by exceeding their expectations and insure their return 6-16

17. 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. 6-17

18. Service Recovery Framework Patronag e Loyalty Satisfactio n Retention Severity Of Failure Perceived Service Quality Psychological -empathy -apology Tangible -fair fix -value add Psychological -apology -show interest Follow-up Service Recovery Tangible -small token Service Recovery Expectations Service Recovery Customer Loyalty Service Guarantee Speed of Recovery Frontline Discretion Service Failure Occurs Provider Aware of Failure Fair Restitutio n Pre-recovery PhaseImmediate Recovery Phase Follow-up Phase 6-18

19. 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. 6-19

20. 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. 6-20

21. Topics for Discussion How do the five dimensions of service quality differ from those of product quality? Why is measuring service quality so difficult? Illustrate the four components in the cost of quality for a service. Why do service firms hesitate to offer a service guarantee? How can recovery from a service failure be a blessing in disguise? 6-21

22. Interactive Exercise The class breaks into small groups. Each group identifies the worst service experience and the best service experience that any member has had. Return to class and discuss what has been learned about service quality. 6-22

23. The Complaint Letter 1. Briefly summarize the complaints and compliments in Dr. Loflin’s letter. 2. Critique the letter of Gail Pearson in reply to Dr. Loflin. What are the strengths and weaknesses of the letter? 3. Prepare an “improved” response letter from Gail Pearson 4. What further action should Gail Pearson take in view of this incident? 6-23

24. The Museum of Art and Design 1. Critique the WtA gap analysis. Could there be other explanations for the gaps? 2. Make recommendations for closing the gaps found in the WtA. 6-24