Chapter 8 ©2001 Prentice-Hall S. Thomas Foster, Jr. Boise State University Slides Prepared by Bruce...

Chapter 8Chapter 8

S. Thomas Foster, Jr.S. Thomas Foster, Jr.Boise State UniversityBoise State University

Slides Prepared bySlides Prepared byBruce R. BarringerBruce R. Barringer

University of Central FloridaUniversity of Central Florida

S. Thomas Foster, Jr.S. Thomas Foster, Jr.Boise State UniversityBoise State University

Slides Prepared bySlides Prepared byBruce R. BarringerBruce R. Barringer

University of Central FloridaUniversity of Central Florida

Designing Quality ServicesDesigning Quality Services

Chapter OverviewSlide 1 of 2

• 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

Chapter OverviewSlide 2 of 2

• Improving Customer Service in Government

• Quality in Health Care

• A Theory for Service Quality Management

IntroductionIntroduction

• High-quality service is essential for competitiveness and can even improve employee satisfaction.

• To provide high-quality service, we need a profound understanding of the needs, wants, and desires of the customer and an understanding of who the customer is.

• Quality service is not only an imperative for competitiveness but also a sign quality maturity.

• Even manufacturing firm eventually focus on service.

• In today’s economy, service still is a major differential that allows firms to beat competitors in the marketplace.

• Figure 8.1 shows the power of satisfied customers.

• If customers are satisfied, they will be loyal.

• Revenue streams will increase – as will profits.

• Figure 8.1 How much profit a customer generates over time

Differences Between Services and Manufacturing

Differences Between Services and Manufacturing• If quality is multidimensional for manufactured

products, it will be more so for services.

• Using a contingency perspective, we understand that the nature of services cause us to approach service quality improvement from a different direction than from manufacturing.

• Services are distinguished from manufacturing on several dimensions.

Unique Attributes of Services

1. Services are

intangible

2. The output of services is

heterogeneous

3. Customers are more involved in the production of services than they

are in manufacturing – occur simultaneously

• Intangible– Many services are intangible. This means that they

cannot be inventoried or carried in stock over long periods of time.

• Heterogeneous– The output of services are also heterogeneous. This

means that for many companies, no two services are exactly the same.

• Occur simultaneously– Production and consumption of services often occur

simultaneously.

• One useful distinction between services and manufacturing centers on the aspect of customer contact.

• Customers tend to be more involved in the production of services than they are in production of goods.

• In many restaurants it is uncommon for the customers to fill their own drinks. This is called customer co-production.

• Because customers are actively involved in producing the services they consume, they create problems for service providers. The time required to serve and the varying demands of customers are two examples.

• Even though customers are the reason for the existence of services firms, they also make providing good service difficult.

• Customer can exert great control over the service provider and achieve great customization.

• This control can be manifested in a variety of different ways.

• As a result of this greater customer control, service facilities, processes, and interactions must be designed in a way that promotes a positive encounter with the customer.

• 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.– Customer service to internal customers is very

important to internal service because their services often can be outsourced.

– There is a trend in companies to outsource internal services.

• Voluntary Versus Involuntary Services– Voluntary services are those services that we

actively seek out and employ of our own accord.

– Generally, we research a voluntary service and have certain expectations when we engage its services.

• Voluntary Versus Involuntary Services– The quintessential example of an involuntary

service is a prison. Other involuntary services include hospitals, the IRS, the police department, the fire department, and other services that you do not choose.

– It is generally more difficult to achieve high levels of customer satisfaction in involuntary services.

• Voluntary Versus Involuntary Services– Yet, employees of these involuntary services

organization often desire to provide better service to the patrons.

– Certainly, our perceptions and expectations of service quality can be affected by whether the service is voluntary or involuntary.

How Are Service Quality Issues Different from Those of

Manufacturing?

• Because services attributes are often intangible, it is sometimes difficult to obtain hard data relating to services.

• For this reason, many services organizations that use quality control charts encounter difficulty in using them or they use them incorrectly.

Manufacturing?

Manufacturing?• Simultaneous production and consumption of services

means that you have to do it right the first time.• Customer contact leads to an increase in variability in

the process.• This leads to a high degree of customization in services

as well as great variability in the time required to perform services.

• When customers are intimately involved in processes, there is much more customization and much more variability than in manufacturing.

Manufacturing?

Manufacturing?• Product Liability

– In services, liability issues often relate to malpractice, whereas in manufacturing liability issues typically relate to safety concerns.

– However, services also may have liability issues.

– Certainly, as time passes, more quality techniques will be developed specifically for services.

How Are Service Quality Issues Similar to Those of

Manufacturing?

How Are Service Quality Issues Similar to Those of

Manufacturing?

How are services quality issues similar to manufacturing?

-- For both manufacturing and service firms, the customer is the core of the business, and customer needs provide the major input to design.

-- By focusing on the customer, many manufacturers and services firms have come to view themselves as service providers.

What Do Service Customers Want?

Zeithamel, Parasuraman, and Berry’s List of the Dimensions of Service Quality

TangiblesTangiblesTangiblesTangibles

ReliabilityReliabilityReliabilityReliability

ResponsivenessResponsivenessResponsivenessResponsiveness

AssuranceAssuranceAssuranceAssurance

EmpathyEmpathyEmpathyEmpathy

• As in any industry, the concept of leadership is one that PZB believe is the key to customer.

• They define the attributes of leader in services are given in Table 8.1.

Attributes of Effective Leaders in Service Industries ( Table 8.1)

In-the-Field Leadership In-the-Field Leadership StyleStyle

High StandardsHigh StandardsHigh StandardsHigh Standards

Service VisionService VisionService VisionService Vision

• A leader who has a service vision really view service quality as the force underlying profitability and business success.

• When selecting strategies for improvement, leaders see quality as the winning strategy.

• The attitude of employees is the key element in achieving service success.

• Active and involved leadership is very important to attaining this important organizational attribute.

• In service, you will notice that some firms are better something than others.

• Those things do not happen by magic.

• They are the result of a leader with high standards and a focus on details.

• Outstanding services leaders have an in-the-field style leadership.

• Because there is so much contact with the customer in a service system, the field is where the action is.

SERVQUAL Slide 1 of 10

• What is SERVQUAL– SERVQUAL is a survey instrument, developed

by PZB, and for assessing quality along the five service dimensions discussed in chapter 1.

– The SURVQUAL survey has been used by many firms and is an off-the-shelf approach that can be used in many service settings.

SERVQUALSERVQUAL

• The SERVQUAL instrument, a survey, has many advantages. Among these are:

-- It is accepted as a standard for assessing different dimensions of services quality.

-- It has been shown to be valid for a number of service situations. -- It has been demonstrated to be reliable, meaning that different

readers interpret the questions similarly. -- The instrument is parsimonious in that it has only 22 items. This

means that it can be filled out quickly by customers and employees.

-- Finally, it has a standardized analysis procedure to aid interpretation and results.

SERVQUALSERVQUAL

• Although the SERVQUAL survey is not as widely used as SQC, it is a standardized approach to gathering information about customer perceptions of service quality.

• As such, it provides a base, or a means, to get started in assessing customer perceptions of quality.

SERVQUALSERVQUAL

• The SERVQUAL survey has two parts – customer expectations and customer perceptions.

• Let’s say you desire to improve service quality along some dimensions.

• The natural question is, “ Which will create the greater improvement to the system for improving service?”

• If you understand both customer expectations and perceptions, we can assess the gap in these areas.

SERVQUALSERVQUAL

• This type of analysis provides a good way to understand how best to improve customer satisfaction.

• Figure 8.2 shows the 22 survey items for expectations.

• The wording of the statements in the expectations survey relates to a generic firm in an industry that interests you.

• Table 8.2 shows the items that address specific service quality dimensions.

SERVQUALSERVQUAL

• Figure 8.2 SERVQUAL Expectations Survey

SERVQUAL slide 2 of 10

Table 8.2 SERVQUAL Items and Dimensions

Dimension ItemsTangibles 1-4

Reliability 5-9

Responsiveness 10-13

Assurance 14-17

Empathy 18-22

SERVQUAL Slide 3 of 10

• The SERVQUAL perceptions survey shown in Figure 8.3 is administered to customers in the same way that the expectations survey was administered.

• Notice that the perceptions survey also contains 22 items that are matched with the same five quality dimensions as the expectations survey.

SERVQUAL SERVQUAL

• Figure 8.3 SERVQUAL Perceptions Survey

SERVQUALSERVQUAL

• Gap Analysis– The SERVQUAL instrument is used to

perform gap analysis. Because services are often intangible, gaps in communication and understanding between employees and customers have a serious negative affect on the perceptions of services quality.

– The model in Figure 8.4 shows the gaps that commonly occur that can affect the perceptions of services quality.

SERVQUAL InstrumentSlide 4 of 10 ( Figure 8.4 Gaps model )

Management perceptionsof customer expectations

Service quality specifications

Service deliveryService delivery

Perceived servicePerceived service

Expected serviceExpected service

Personal needsPersonal needs Past experiencePast experienceWord-of-mouthcommunication

Word-of-mouthcommunication

External communications

to customers

External communications

to customers

CUSTOMER

PROVIDER Gap 4

Gap 1Gap 2

SERVQUAL Instrument (Gap Models)

of 10 ( Figure 8.5 Gap 1)

Managementperceptionsof customerexpectations

Expectedservice

Gap 1 shows that there can be a difference betweenactual customer expectations and management’s ideaor perception of customer expectations.Many times, improving processes does not equal improving customer wants. To truly improve customerservice, we must understand what the customer wants.

Service quality

specifications

Service quality

specifications

Managementperceptionsof customerexpectations

Manager’s expectations of service quality may not match service quality specifications. This mismatch is demonstrated in gap 2.Because firms do not specify customer requirements according to a well-defined process, there is no way to know whether customer specifications and management expectations are aligned.

Service delivery

Servicequality

specifications

Servicequality

specifications

Inadequate training, communication, and preparationof employees who interact with the customer, referredto as contact personnel, can lower the quality of service

delivered. This mismatch is represented as Gap 3.

Servicedelivery

Externalcommunications

to customers

Externalcommunications

to customers

Gap 4 shows the differences between services delivery and external communications with the customer. Companies influence customer expectations of services through word-of-mouth and through other media such as advertising. There could be a difference between what customers hear you say you are going to deliver as a service provider and what you actually deliver.

Expected ServiceExpected Service Perceived ServicePerceived ServiceGap 5

Gap 5 shows the differences between expected services and perceived service of customers. The difference between your expectation and your perceptions is directly related to your perception of service quality.

• The key to closing gap 5 is to first close gaps 1 through 4 through thoughtful systems design, careful communication with the customer, and a workforce trained to provide consistently outstanding customer service.

• As long as these gaps exist, there will be lowered perceptions of customer service.

SERVQUAL InstrumentSlide 9 of 10

• Assessing Differences in Expectations and Perceptions by Using the Differencing Technique– The differencing technique is used to asses the

differences between expectations and perceptions.

SERCQUAL Differencing Technique

• 1. Typically, you need a sample size of between 50 and 100 ( sample size, n ) for each of the surveys.

• 2. Separate the SERVQUAL dimensions as shown in Table 8.2.

• 3. For each respondent, sum your SERVQUAL scores for the items relating to a given dimension.

• 4. Sum across the n respondents and divide the total by n.

• Example 8.1 SERVQUAL Differencing

• Example 8.1 (continued)

• The averages for each of the dimensions of service quality were computed by averaging the items pertaining to the dimension.

• Finally, differences for the dimensions were computed as next slide.

SERVQUAL Differencing ( Example 8.1)

Dimension Perception Expectation Difference

Average Average

• Tangibles 6.65 6.425 0.225• Reliability 3.4 6.02 -2.62 • Responsiveness 5.525 2.4 3.125• Assurance 4.5 3.275 1.225• Empathy 2.9 5.86 -2.96

Example 8.1 (Continued)Example 8.1 (Continued)

• The differences shows that the greatest mismatch exists in the dimension of Empathy, with Reliability as a close second.

• The training program should focus on teaching employees to be Empathetic.

• Also, the process improvement efforts should focus on improving Reliability.

• These changes will lead to the greatest improvements in customer service.

• Example 8.2: SERVQUAL Two-dimensional differencing

Designing & Improving the Services Transaction

• One of the way to improve customers’ perceptions of quality is to improve the process of delivery of the service.

• Others concepts and tools to improve customers’ perceptions of quality include service blueprinting, moments of truth concept, and the Japanese method known as poka-yoke.

• Services Blueprinting– Lynn Shostack is known for the statement,”

The process is the service.”

– Shostack also developed the process known as service blueprint.

– A services blueprint is a flowchart that isolates potential fail points in a process.

• There are four steps to developing a service blueprinting.

1. Identify processes.

2. Isolate fail points.

3. Establish a time frame.

4. Analyze profits.

• Figure 8.11 shows a simple process used by Ms. Shostack to demonstrate service blueprinting, in this case for a shoe-shine process.

• Figure 8.11 Service blueprinting Example

• Notice that Figure 8.11 includes a line of visibility.

• The area above the line of visibility is referred to as the front office, and the area below the line of visibility is referred to as the back office.

• Service process blueprinting places the focus on front-office activities.

• Service blueprinting is a too to help with brainstorming activities that lead to customer service improvement.

Designing & Improving the Services Transaction (Services

Blueprinting)Slide 3 of 6

• Steps in Developing a Service Blueprint– Step 1: Identify processes. In this step,

processes are flowcharted so that the bounds of the process are identified.

– Step 2: Isolate fail points. Notice the fail point in the preceding slide. What can happen here? The wrong color of polish could be applied and the shoes will be ruined. This would be an expensive mistake.

• Step 3: Establish a time frame. In a shoe-shining operation, time is a major determinant of profitability. As a result, those steps that lose time result in lost income.

• Step 4: Analyze profits. As errors occur in the process, the shoe shiner becomes liable. Because delays and errors affect profitability, the figure shoes that after 5 minutes customers being to be lost and the business person loses money.

• Moments of Truth – The fail points in the service blueprint are

often referred to as moments of truth. These are the times at which the customer expects something to happen.

– Expectations are a major determinant of customer perceptions of service quality.

– When the customer expects something to happen, it has to happen.

• Moments of Truth – Customers’ contact with the business can

occur in many different ways.– All these moments of truth result in either

happy customers or lost customers.– Moments of truth also can happen at various

stages of the product life cycle.– A Closer Look at Quality 8.1 considers one

firm that used the moment of truth concept to improve service.

• Poka-Yoke– The idea behind poka-yoke (or fail-safe) is to ensure

that certain errors will never occur.– The idea behind fail-safe is to ensure that certain

errors will never occur.– Just as many processes seem to be designed to fail,

they can also be designed not to fail.– In service, Chase defines different classifications for

fail-safe devices. These are: Warning methods, Physical contact methods, and Visual contact methods.

• Poka-Yoke– Fail-safe methods can also be defined using the

“three Ts” ( please see Figure 8.12).

1. Task to be performed.

2. Treatment provided to the customer.

3. Tangibles provided the customer.

-- These poka-yoke classifications and Ts occur in many different forms.

Figure 8.12 The Three Ts

Tangibles provided the customer

Treatment provided

to the customer

Task to be performed

The Customer Benefits Package

• Customer Benefits Package ( CBP)– A customer benefits package consists of both

tangibles that define the service and intangibles that make up the service.

– The tangibles are known as goods-content.– Intangibles are referred to as service-content.– CBS are important not only in helping define

what it is that your service firm will provide to the customer but also in helping to define what will not be provided to the customer.

The Customer Benefits PackageThe Customer Benefits Package

• The four stages of Service benefit package design process are as follows (please see Figure 8.13):

1. Idea/concept generation 2. The definition of a services package 3. Process definition and selection 4. Facilities requirement definition

The Customer Benefits Package

Figure 8.13 CBP Design Process

Idea/conceptgeneration

DefineCBP

Select and define process

Definefacility

requirements

Definefacility

requirements

• As defined by David Collier, the objectives of CBP design are to:

1. Make sure the final CBP attributes you are using are the correct ones.

2. Evaluate the relative importance of each attribute in the customer’s mind.

3. Evaluate each attribute in terms of process and service encounter capability.

4.Figure out how best to segment the market and position CBPs in each market.

• Objectives of CBP (continued) 5. Avoid CBP duplication and proliferation.

6. Bring each CBP, and associated process and service encounters, to market as quickly as possible. Use the CBP framework and final attributes to design facilities, processes, equipment, jobs, and service encounters.

7. Maximize customer satisfaction and profits.

• Deborah Kellogg and Winter Nie provided a service process/service package matrix.

• As shown in Figure 8.14, firms will offer unique service packages, selective service packages, restricted service packages, or generic service packages.

• Strategic issues will affect your ability to provide unique service package.

• Generic service packages are of the one-size-fits-all variety, and unique service package are specially tailored for each customer.

The Customer Benefits Package Slide 3 of 3

Figure 8.14 Service Process/CBP Matrix

Expert service

Service shop

Service factory

Service Process Structure

Consulting

Higher Education

Package Delivery

Unique service package

Generic service package

Selective service package

Restricted service package

• Table 8.3 shows a customer benefits package from the Slide-Master firm.

• Table 8.4 shows the transition to the services economy by the Japanese between 1980 and 200.

• The implication is that service competition will increase on a global scale, as has been the case in manufacturing for the past 40 years.

• Table 8.3 Final CBP Attributes for Slide-Master

• Table 8.4 Japan’s Economy in the Year 2000

Improving Customer Service In Government

If customer service is the battlefield for business leading into the twenty-fists century, then government is probably the last frontier. There are some evidence of improvement in several aspects of government service.

The National Productivity Review reports that some federal government agencies have adopted quality management ( see A Closer Look at Quality).

Improving Customer Service In GovernmentImproving Customer Service In Government

• As of 1998, the government had developed a searchable list of 4000 customer service standards for 750 federal departments and agencies, and with “ customer-driven government that matches or exceeds the best service available in the private sector”

• States are also jumping on the bandwagon. By 1998, 44 states had established quality award programs.

Improving Customer Service In GovernmentImproving Customer Service In Government

• It is clear that private sector quality management practices are being adopted in government.

• Several factors seem to be driving this changes: -- People want and desire to do good quality work. -- Because quality management is associated with improved

employee satisfaction, there is a major impetus to improve. -- Government leaders are mandating standards, strategic plans,

and new levels of performance at all levels of government. -- Demand for government services is growing at a faster rate

than funding for them. -- Finally, the threat of privatization in government has led to

improvement in service in many areas.

Quality in Health CareQuality in Health Care

• Another area of services that is receiving much attention is health care.

• Several factors have contributed to this phenomenon:

-- Health care is facing the same “ cost squeeze” that government is facing.

-- A move toward health maintenance organizations (HMOs) is causing hospitals to streamline operations.

-- There is increasing diversity in health care. -- Calls for a nationalized health care system threaten the

status quo and provide the competitive pressures that spur the impetus to improve.

Quality in Health CareQuality in Health Care

• Many health care customers are uncomfortable with these changes to government and health care.

• If quality approaches are applied, it is probably best that efforts not focus entirely on efficiency.

• Reliability and empathy are dimensions that can only be good for health care.

A Theory For Service Quality Management

• Dr. Scott Sampson developed the Unified Theory for Services Management provides interesting insights for quality management.

• This theory consists of several propositions.

• These propositions are based on the definitions of service that are introduced early in this chapter.

• Some of the propositions are as follows.

Proposition 1: The Unified Services Theory

“With services, the customer provides significant inputsinto the production process. With manufacturing, groupsof customers may contribute ideas to the design of theproduct; however, individual customers’ only part in theactual process is to select and consume the output.Nearly all other managerial themes unique to services are founded in this distinction.

Proposition 1: The Unified Services Theory

“With services, the customer provides significant inputsinto the production process. With manufacturing, groupsof customers may contribute ideas to the design of theproduct; however, individual customers’ only part in theactual process is to select and consume the output.Nearly all other managerial themes unique to services are founded in this distinction.

Proposition 2: The Unreliable Supplier Dilemma

“With services, the customer-suppliers oftenprovide unreliable inputs.”This simultaneous relationship as supplier and customer makes it difficult for the service providerto control the supplied inputs.

Proposition 2: The Unreliable Supplier Dilemma

“With services, the customer-suppliers oftenprovide unreliable inputs.”This simultaneous relationship as supplier and customer makes it difficult for the service providerto control the supplied inputs.

Proposition 3: Capricious Labor

“With services, customer-labor may ignore, avoid,or reject technologies or process improvementswhich are intended to increase quality and productivity. As a result, customer buy-in toprocess changes must be carefully addressed.”It is because of many services customers provide themselves as labor inputs into the production process.

Proposition 3: Capricious Labor

“With services, customer-labor may ignore, avoid,or reject technologies or process improvementswhich are intended to increase quality and productivity. As a result, customer buy-in toprocess changes must be carefully addressed.”It is because of many services customers provide themselves as labor inputs into the production process.

Proposition 4: Everyone Presumes to be An Expert

“With services, the customer often providesproduct specifications (what to make) and process design (how to make it), often without theinvitation of the service provider.”It is because of the necessity for customer input in service processes means that most customers have extensive experience with the service process.

Proposition 4: Everyone Presumes to be An Expert

“With services, the customer often providesproduct specifications (what to make) and process design (how to make it), often without theinvitation of the service provider.”It is because of the necessity for customer input in service processes means that most customers have extensive experience with the service process.

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