Improving Service
Quality and
Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 1
Integrating Service Quality and
Productivity Strategies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 2
Integrating Service Quality and
Productivity Strategies
 Quality and productivity are twin paths to creating value
for both customers and companies
 Quality focuses on the benefits created for customers;
productivity addresses financial costs incurred by firm
 Importance of productivity:
 Keeps costs down to improve profits and/or reduce prices
 Enables firms to spend more on improving customer service and
supplementary services
 Secures firm’s future through increased spending on R&D
 May impact service experience—marketers must work to minimize
negative effects, promote positive effects
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 3
What Is Service Quality?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 4
Different Perspectives of Service Quality
Transcendent:
Quality = Excellence. Recognized only through
experience
Product-based: Quality is precise and measurable
User-based:
Quality lies in the eyes of the beholder
Manufacturing- Quality is in conformance to the firm’s developed
based:
specifications
Value-based:
Quality is a trade-off between price and value
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 5
Components of Quality:
Manufacturing-based
Performance: Primary operating characteristics
Features: Bells and whistles
Reliability: Probability of malfunction or failure
Conformance: Ability to meet specifications
Durability: How long product continues to provide value to
customer
Serviceability: Speed, courtesy, competence
Aesthetics: How product appeals to users
Perceived Quality: Associations such as brand name
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 6
Components of Quality:
Service-based
Tangibles: Appearance of physical elements
Reliability: Dependable and accurate performance
Responsiveness: Promptness; helpfulness
Assurance: Competence, courtesy, credibility,
security
Empathy: Easy access, good communication,
understanding of customer
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 7
Capturing the Customer’s Perspective of
Service Quality: SERVQUAL (1)
 Survey research instrument based on premise that
customers evaluate firm’s service quality by comparing
 Their perceptions of service actually received
 Their prior expectations of companies in a particular industry
 Poor quality
 Perceived performance ratings < expectations
 Good quality
 Perceived performance ratings > expectations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 8
Capturing the Customer’s Perspective of
Service Quality: SERVQUAL (2)
 Developed primarily in context of face-to-face
encounters
 Scale contains 22 items reflecting five dimensions of
service quality
 Subsequent research has highlighted some limitations of
SERVQUAL
 See Research Insights 14.1: Measuring E-Service Quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 9
How Customers Might Evaluate Online
Businesses: Seven Dimensions of E-S-QUAL

Accessibility : Is site easily found?

Navigation: How easy is it to move around the site?

Design and presentation: Image projected from site?

Content and purpose: Substance and richness of site

Currency and accuracy


Responsiveness:Firm’s propensity to respond to e-mails
Interactivity, customization, and personalization

Reputation and security
Source:Shohreh A. Kaynama (2000), “ A Conceptual Model to Measure Service Quality of Online Companies: E-qual, in Developments in Marketing
Science,” Harlan E. Spotts and H. Lee Meadows, eds., Proceedings of the Academy of Marketing Science, Vol. 22, pp. 46–51. For more information
pertaining to online service quality see A. Parasuraman, Vlerie A. Zeithaml, and Arvind Malhotra (2005), “E-S-QUAL: A Multiple-Item Scale for Assessing
Electronic Service Quality.” Journal of Service Research, Vol. 7. issue 3. pp. 213–234.
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 10
Other Considerations in
Service Quality Measurement
 In uncompetitive markets or in situations where
customers do not have a free choice, researchers should
use needs or wants as comparison standards
 Time constraints
 Services high in credence characteristics may cause
consumers to use process factors and tangible cues as
proxies to evaluate quality—halo effect
 Process factors: Customers’ feelings
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 11
The Gaps Model—A Conceptual Tool to
Identify and Correct Service Quality
Problems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 12
Seven Service Quality Gaps
(Fig 14.3)
Customer needs and
expectations
CUSTOMER
1. Knowledge Gap
MANAGEMENT
Management definition
of these needs
2. Standards Gap
Translation into
design/delivery specs
4. Internal
Communications Gap
3. Delivery Gap
Execution of
design/delivery specs
Advertising and sales
promises
4.
6. Interpretation Gap
5. Perceptions Gap
Customer perceptions
of service execution
Customer interpretation
of communications
7. Service Gap
Customer experience
relative to expectations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 13
Prescriptions for Closing the
Seven Service Quality Gaps (1)
(Table 14.3)
1. Knowledge gap: Learn what customers expect
 Understand customer expectations
 Improve communication between frontline staff and management
 Turn information and insights into action
2. Standards gap: Specify SQ standards that reflect
expectations
 Set, communicate, and reinforce customer-oriented service
standards for all work units
 Measure performance and provide regular feedback
 Reward managers and employees
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 14
Prescriptions for Closing the
Seven Service Quality Gaps (2)
(Table 14.3)
3. Delivery gap: Ensure service performance meets
standards




Clarify employee roles
Train employees in priority setting and time management
Eliminate role conflict among employees
Develop good reward system
4. Internal communications gap: Ensure that
communications promises are realistic
 Seek comments from frontline employees and operations personnel
about proposed advertising campaigns
 Get sales staff to involve operations staff in meetings with
customers
 Ensure that communications sets realistic customer expectations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 15
Prescriptions for Closing the
Seven Service Quality Gaps (3)
(Table 14.3)
5. Perceptions gap: Educate customers to see reality of
service quality delivered
 Keep customers informed during service delivery and debrief after
delivery
 Provide physical evidence
6. Interpretation gap: Pretest communications to make
sure message is clear and unambiguous
 Present communication materials to a sample of customers in
advance of publication
7. Service gap: Close gaps 1 to 6 to meet customer
expectations consistently
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 16
Measuring and Improving
Service Quality
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 17
Soft and Hard Measures
of Service Quality
 Soft measures—not easily observed, must be collected by
talking to customers, employees, or others
 Provide direction, guidance, and feedback to employees on ways to
achieve customer satisfaction
 Can be quantified by measuring customer perceptions and beliefs
― For example: SERVQUAL, surveys, and customer advisory panels
 Hard measures—can be counted, timed, or measured
through audits
 Typically operational processes or outcomes
 Standards often set with reference to percentage of occasions on
which a particular measure is achieved
 Control charts are useful for displaying performance over time
against specific quality standards
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 18
Soft Measures of Service Quality
 Key customer-centric SQ measures include:




Total market surveys, annual surveys, transactional surveys
Service feedback cards
Mystery shopping
Analysis of unsolicited feedback—complaints and compliments, focus
group discussions, and service reviews
 Ongoing surveys of account holders to determine satisfaction in
terms of broader relationship issues
 Customer advisory panels offer feedback/advice on performance
 Employee surveys and panels to determine:
 Perceptions of the quality of service delivered to customers on
specific dimensions
 Barriers to better service
 Suggestions for improvement
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 19
Hard Measures of Service Quality
 Control charts to monitor a single variable
 Offer a simple method of displaying performance over time against
specific quality standards
 Are only good if data on which they are based is accurate
 Enable easy identification of trends
 Service quality indexes
 Embrace key activities that have an impact on customers
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 20
Tools to Analyze and Address
Service Quality Problems
 Fishbone diagram
 Cause-and-effect diagram to identify potential causes of problems
 Pareto Chart
 Separating the trivial from the important. Often, a majority of
problems is caused by a minority of causes (i.e. the 80/20 rule)
 Blueprinting
 Visualization of service delivery, identifying points where failures
are most likely to occur
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 21
Tools to Analyze and Address
Service Quality Problems (Appendix)
 Total Quality Management (TQM)
 ISO 9000
 Comprises requirements, definitions, guidelines, and related
standards to provide an independent assessment and certification of
a firm’s quality management system
 Malcolm Baldrige Model Applied to Services
 To promote best practices in quality management, and recognizing,
and publicizing quality achievements among U.S. firms
 Six Sigma
 Statistically, only 3.4 defects per million opportunities (1/294,000)
 Has evolved from defect-reduction approach to an overall businessimprovement approach
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 22
Cause-and-Effect Chart for
Flight Departure Delays (Fig 14.5)
Facilities,
Equipment
Arrive late
Oversized bags
Customers
Customers
Frontstage
Front-Stage
Personnel
Personnel
Procedures
Procedures
Delayed check-in
Gate agents
Aircraft late to
procedure
gate
cannot process
fast enough
Mechanical
Acceptance of late
Failures
passengers
Late/unavailable
Late pushback
airline crew
Delayed
Departures
Late food
service
Other Causes
Weather
Air traffic
Late cabin
cleaners
Poor announcement of
departures
Late baggage
Weight and balance
sheet late
Late fuel
Materials,
Materials,
Supplies
Supplies
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Backstage
Personnel
Information
Services Marketing 6/E
Chapter 14 - 23
Blueprinting
 Depicts sequence of front-stage interactions
experienced by customers plus supporting backstage
activities
 Used to identify potential fall points—where failures are
most likely to appear
 Shows how failures at one point may have a ripple
effect later
 Managers can identify points which need urgent
attention
 Important first step in preventing service quality problems
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 24
Six Sigma Methodology to
Improve and Redesign Service Processes
Process Improvement
Process Design/Redesign
Define
 Identify the problem
 Define requirements
 Set goals
 Identify specific or broad problems
 Define goal/change vision
 Clarify scope and customer requirements
Measure
 Validate problem/process
 Refine problem/goal
 Measure key steps/inputs
 Measure performance to requirements
 Gather process efficiency data
Analyze
 Develop causal hypothesis
 Identify root causes
 Validate hypothesis
 Identify best practices
 Assess process design
 Refine requirements
Improve
 Develop ideas to measure root  Design new process
causes
 Implement new process, structures, and
 Test solutions
systems
 Measure results
Control
 Establish measures to
maintain performance
 Correct problems as needed
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
 Establish measures and reviews to
maintain performance
 Correct problems as needed
Services Marketing 6/E
Chapter 14 - 25
TQM in a Service Context:
Twelve Critical Dimensions for Implementation
 Top management commitment and visionary leadership
 Human resource management
 Technical system, including service process design and process
management
 Information and analysis system
 Benchmarking
 Continuous improvement
 Customer focus
 Employee satisfaction
 Union intervention and employee relations
 Social responsibility
 Servicescapes
 Service culture
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 26
Return On Quality (ROQ)
 Assess costs and benefits of quality initiatives
 ROQ approach is based on four assumptions:
– Quality is an investment
– Quality efforts must be financially accountable
– It’s possible to spend too much on quality
– Not all quality expenditures are equally valid
 Implication: Quality improvement efforts may benefit from being
related to productivity improvement programs
 To determine feasibility of new quality improvement efforts,
determine costs and then relate to anticipated customer response
 Determine optimal level of reliability
 Diminishing returns set in as improvements require higher investments
 Know when improving service reliability becomes uneconomical
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 27
When Does Improving Service Reliability
Become Uneconomical? (Fig 14.7)
Satisfy Target
Customers through
Service Recovery
Service Reliability
100%
Optimal Point of
Reliability: Cost of
Failure = Service
Recovery
A
B C
Small Cost,
Large Improvement
Satisfy Target
Customers through
Service Delivery as
Planned
D
Large Cost,
Small Improvement
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Investment
Assumption: Customers are equally (or even more)
satisfied with the service recovery provided than with a
service that is delivered as planned.
Services Marketing 6/E
Chapter 14 - 28
Defining and Measuring Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 29
Productivity in a Service Context
 Productivity measures amount of output produced relative to
the amount of inputs.
 Improvement in productivity means an improvement in the
ratio of outputs to inputs.
 Intangible nature of many service elements makes it hard to
measure productivity of service firms, especially for
information-based services
 Difficult in most services because both input and output are
hard to define
 Relatively simpler in possession-processing services, as
compared to information- and people-processing services
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 30
Service Efficiency, Productivity,
and Effectiveness
 Efficiency: Involves comparison to a standard,
usually time-based (for example: how long
employee takes to perform specific task)
 Problem: Focus on inputs rather than
outcomes
 May ignore variations in service quality/value
 Productivity: Involves financial valuation of
outputs to inputs
 Consistent delivery of outcomes desired by
customers should command higher prices
 Effectiveness: Degree to which firm meets goals
 Cannot divorce productivity from quality and
customer satisfaction
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 31
Measuring Service Productivity:
Variability Is a Major Problem
 Traditional measures of service output tend to ignore
variations in quality or value of service
 Focus on outputs rather than outcomes
 Stress efficiency but not effectiveness
 Firms that consistently deliver outcomes desired by
customers can command higher prices; loyal customers
are more profitable
 Measures with customers as denominator include:
 Profitability by customer
 Capital employed per customer
 Shareholder equity per customer
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 32
Improving Service Productivity
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 33
Questions When Developing Strategies
to Improve Service Productivity


How to transform inputs into outputs efficiently?
Will improving productivity hurt quality?



Will improving quality hurt productivity?
Are employees or technology the key to productivity?
Can customers contribute to higher productivity?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 34
Generic Productivity
Improvement Strategies
 Typical strategies to improve service productivity:




Careful control of costs at every step in process
Efforts to reduce wasteful use of materials or labor
Replacing workers by automated machines
Installing expert systems that allow paraprofessionals to take on
work previously performed by professionals who earn higher salaries
 Although improving productivity can be approached
incrementally, major gains often require redesigning
entire processes
?
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
?
?
Services Marketing 6/E
Chapter 14 - 35
Long Waiting Times May Indicate Need
for Service Process Redesign (Fig 14.8)
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 36
Improving Service Productivity:
(1) Operations-driven Strategies
 Control costs, reduce waste
 Set productive capacity to match average demand
 Automate labor tasks
 Upgrade equipment and systems
 Train employees
 Broadening array of tasks that a service worker can perform
 Leverage less-skilled employees through expert systems
 Service process redesign
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 37
Improving Service Productivity:
(2) Customer-driven Strategies
 Change timing of customer demand
 By shifting demand away from peaks, managers can make better
use of firm’s productive assets and provide better service
 Involve customers more in production
 Get customers to self-serve
 Encourage customers to obtain information and buy from firm’s
corporate websites
 Ask customers to use third parties
 Delegate delivery of supplementary service elements to
intermediary organizations
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 38
Backstage and Front-stage Productivity
Changes: Implications for Customers
 Backstage improvements can ripple to front and affect customers
 Keep abreast of proposed backstage changes, not only to identify
such ripples but also to prepare customers for them
― For example: New printing peripherals may affect appearance of bank
statements
 Front-stage productivity enhancements are especially visible in high
contact services
 Some improvements only require passive acceptance, while others
require customers to change behavior
 Must consider impacts on customers and address customer
resistance to changes
 Better to conduct market research first if changes are substantial
 See Service Perspectives 14.1: Managing Customers’ Reluctance to
Change
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 39
A Caution on Cost Reduction Strategies
 In absence of new technology, most attempts to
improve service productivity seek to eliminate
waste and reduce labor costs
 Workers who try to do several things at once may
perform each task poorly
 Excessive pressure breeds discontent and
frustration among customer contact personnel,
who are caught between:
 Meeting customer needs
 Achieving management's productivity goals
 Better to search for service process redesign
opportunities that lead to
 Improvements in productivity
 Simultaneous improvement in service quality
 See Service Perspectives 14.2: Biometrics
Slide © 2007 by Christopher Lovelock and Jochen Wirtz
Services Marketing 6/E
Chapter 14 - 40