Service Quality and Customer

Satisfaction

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 Factors Forming Customers’ Expectations
1. Market communication: Direct and
indirect channels
2. Image: The image of a service firm at the
corporate level as well as the local level.
3. Word-of-mouth communication: Advice
and information support from others.
4. Customer needs: the need intensity of
consumers.
5. Customers’ past experiences
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 Measures of Service Quality
Customer-defined standards and measures of service quality can
be grouped into two broad categories:
1. Soft measures
2. Hard measures
• Soft measures refer to the standards and measures that cannot
easily be observed and must be collected by talking to customers,
employees or others.
• Soft standards provide direction, guidance and feedback to
employees on ways to achieve customer satisfaction and can be
quantified by measuring customer perceptions and beliefs.
Example:
 SERVQUAL
 Surveys, service feedback cards, mystery shopping, focus group
discussions, service reviews, customer advisory panels,
employee surveys and panels. 3
 …Measures of Service Quality
• Hard measures refer to the standards and measures that can
be counted, timed or measured through audits.
• Hard measures typically refers to operational processes or
outcomes and include such data as uptime, service response
times, failure rates, and delivery costs.
Example:
 How many telephone calls were abandoned while the customer
was on hold?
 How many minutes customers had to wait in line at a particular
stage in the service delivery?
 The time require to complete a specific task
 The temperature of a particular food item
 How many trains arrived late?
 How many bags were lost?
 how many patients made a complete recovery following a specific
type of operation?
 How many orders were filled correctly?
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 Scope of Service Quality
Quality from five perspectives:
1. Content: Are standard procedures being
followed?
2. Process: Is the sequence of events in the service
process appropriate?
3. Structure: Are the physical facilities and
organizational design adequate for the service?
4. Outcome: What change in the status has the
service effected? Is the consumer satisfied?
5. Impact: What is the long-range effect of the
service on the consumer?
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 Five Myths and Truths of Service Quality
Evert Gummesson (1991), “Truths and Myths in Service Quality”,
International Journal of Service Industry Management, 2(3): 7-16.

• Myth 1: Service quality is difficult to assess

because services are intangible. Goods’ quality is
easy to assess because goods are tangible.
– Truth: service quality is different from goods’ quality, but
there is no evidence that it is more difficult to assess.
Service quality has not been approached systematically
enough. It has lived in the shadow of goods’ quality
management system. The degree of controllability is
different for services due to co-production with
customers, limited control over certain elements of
service delivery process, design of final form of service on
the spot and intrafunctional dependency.
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 …Five Myths and Truths of Service Quality
• Myth 2: Better quality costs more and causes prices to
go up. It is more or less a linear relationship between
cost and quality.
– Truth: “Quality is free”, the slogan of Philip Crosby,
has become famous for reversing this myth. The
truth is that there is no general relationship.
Sometimes high quality leads to higher costs; higher
costs leads to lower quality; costs may go up and
quality may remain the same and costs may go up
and quality may go down. Anything may happen in
services in different occasions and in different
processes.
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…Five Myths and Truths of Service Quality

• Myth 3: Variability of service quality is a major

problem because of the customer’s role and
customer-perceived quality and satisfaction.
– Truth: Along with service delivery process, the
service design and the ability to manage quality
internally with the support of operations
management and statistical quality control
influence service quality. Service quality must be
managed internally and externally.

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 …Five Myths and Truths of Service Quality
• Myth 4: Market research, training programs, quality
circles, measurement techniques, improved service
design, incentive schemes to employees, and a host of
strategies such as continuous improvements and zero
defects will guarantee improved service quality.
– Truth: All these are to some extent superficial, if the
commitment by management and staff is not genuine
and does not come from heart. As services evolve in
interaction with customers, empathy, compassion,
emotions, involvement, sense of humor, tacit
knowledge and intuition- all dimensions of the love
factor become essential, in the decisive contributions
to service quality.
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…Five Myths and Truths of Service Quality

• Myth 5: Improved service quality leads to

improved quality perceptions by consumers.
– Truth: Not necessarily always. You can
improve customer-perceived quality, without
changing the service, by putting the
expectations on the right level. Raising
expectations too much may create
dissatisfied customers.

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 Philosophies Relating to Service Quality
1. Quality must be perceived by customers
2. Quality must be reflected in every company activity
3. Quality requires total employee commitment
4. Quality can always be improved
5. Quality does not cost more
6. Quality improvement sometimes requires quantum
leaps
7. Everyone contributes to customer-perceived
quality
8. Quality should be monitored by the employees
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 Zero Defects versus Zero Defections
• Zero defects: A model used in manufacturing
that strives for no defects in goods produced. It is
the target quality standards for manufacturing
firms. There should not be any defects in
performance, and the goal should be to achieve
100% perfection.
• Zero defections: A model used by service
providers that strives for no customer defections
to competitors. In the case of services, customers
are sold promises first. If the service firm does
not fulfill the promises made to the customers,
they will leave the company.
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 Service Excellence
• Service excellence means offering superior quality performance
consistently and often beyond the bench-marking performances.
• It requires well-defined organizational processes, policies, procedures and
quality-oriented service culture.
Ford, Heaton & Brown (2001) provide the following guidelines to achieve
service excellence:
1. Base decisions on what the customers want and expect.
2. Think and act in terms of the entire customer experience.
3. Continuously improve all parts of the customer experience.
4. Hire and reward people who can effectively build relationships with
customers.
5. Train employees on how to cope with emotional labor costs.
6. Create and sustain a strong service culture.
7. Avoid failing your customers twice.
8. Empower customers to co-produce their own experience.
9. Get managers to lead from the front, not the top.
10. Treat all customers as if they were guests.
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 Research Approaches on Service Quality
The following are some of the research approaches through
which service firms can have useful information on general or
specific issues related to service quality:
1. Regular customer surveys
2. Use of consumer panel
3. Transactional analysis
4. Perception surveys
5. Mystery shopping
6. Analysis of complaints
7. Employees’ research
8. Post-transaction surveys
9. Focus group interviews
10. Similar industry studies
11. Intermediary research
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 Service Quality Spells Profits
Costs
Defensive
Marketing Volume of Margins
Purchases

Price
Premium
Service Customer
Quality Retention
Word of
Mouth Profits
Market
Share
Sales
Offensive Reputation
Marketing
Price
Premium
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 Productivity in a Service Context
• Productivity measures the amount of output produced relative to
the amount of inputs used. Hence, improvements in productivity
require an increase in the ratio of outputs to inputs.
• Intangible nature of many service elements makes it hard to
measure the productivity of service firms, especially for
information based services
• Measuring Productivity:
– Quantitative measures of productivity: Here management is
trying to improve the numbers of output or finished products
or services. Example: counting the number of customers
served per unit of time.
– Qualitative measures of productivity: Here management is
trying to improve the quality of output or finished products or
services. This technique give stress on efficiency but neglect
effectiveness. 16
 Levels of Productivity
Level of productivity means the units of analysis used to
calculate or define productivity.
1. Aggregate productivity is the total level of
productivity achieved by a country.
2. Industry productivity is the total productivity
achieved by all the firms in a particular industry.
3. Company productivity is the level of productivity
achieved by an individual company.
4. Unit productivity refers to the productivity achieved
by a unit or department within an organization.
5. Individual productivity is the level of productivity
attained by a single person.
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 Types of Productivity
1. Total factor productivity is an overall indicator of how
well an organization uses all its resources, such as labor,
capital, materials and energy, to create all its products and
services.
Outputs
Productivity = ----------
Inputs
2. Partial productivity relates the value of all output to the
value of major categories of input (Like- Labor), using the
ratio,
Total output
Productivity = ---------------
Partial input
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 …Types of Productivity
Outputs
Labor Productivity = --------------
Direct labor

Example:
Comparison between productivity of one of GP
customer care center and Robi customer care center:
• Productivity (GP) = 125/15 = 8.33 [here, 125=customer,
15=employee]
• Productivity (Robi) = 100/8 = 12.5 [here, 100=customer,
8=employee]
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 Importance of Productivity
From company point of view:
1. Efficiency measure of a employee
2. More benefit for the organization
3. Meet consumer competitive priorities
4. Less waste
From customer or societal point of view:
1. Lower price for product or services
2. Quality product
3. Economic growth
4. Higher standard of living
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 Factors Influencing Productivity

1. Coordination with all of the departments

in an organization.
2. Proper implementation of various
statistical tools.
3. Managerial and non-managerial efficiency.
4. Workers skill and attitudes.
5. Technology.
6. Operation system.
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 Improving Productivity
Productivity can be improved following two ways:
1. by improving operations
2. by increasing employee involvement
Operations can be improved by;
i. Spending more on Research & Development (R&D): One
way that firms can improve operations is by spending
more on R&D. R&D spending helps identify new products,
new uses for existing products and new methods for
making products. Each of these research activities
contributes to productivity.
ii. Reassessing & Revamping transformation facilities:
Another way firms can boost productivity through
operations is by reassessing (to judge again the quality or
value of something) and revamping (to give something a
new form or structure) their transformation facilities. 22
 …Improving Productivity
Employee involvement can be improved by;
i. Participation in decision making: Participation can
enhance quality. It can also boost productivity.
ii. Cross training: Increasing the flexibility of an
organization’s workforce by training employees to
perform several different jobs. Such as cross training
allows the firm to function with fewer workers
because workers can be transferred easily to areas
where they are most needed.
iii. Rewards: Rewards are essential to making employee
involvement work. Firms must reward people for
learning new skill and using them proficiently.
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 Strategies for Improving Productivity
• Company-driven approaches:
1. Careful control of costs at every step in the process.
2. Efforts to reduce wasteful use of materials or labor.
3. Matching productive capacity to average levels of demand.
4. Replacing workers by automated machines.
5. Providing employees with equipment and databases that
enable them to work faster and/or to a higher level of quality.
6. Teaching employees how to work more productively.
7. Broadening the array of tasks that a service worker can
perform.
• Customer-driven approaches:
1. Changing the timing of customer demand.
2. Involve customers more in production.
3. Ask customer to use third parties.
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 Total Quality Management (TQM)
• TQM is a strategic commitment to improving quality by
combining statistical quality control methods with a
cultural commitment to seeking incremental
improvements that increase productivity and lower costs.
• TQM involves the organization’s long-term commitment
to the continuous improvement of quality throughout the
organization, and with the active participation of all
members at all levels-to meet and exceed customers’
expectations.
• TQM is defined as creating an organizational culture
committed to the continuous improvement of skills,
teamwork, processes, product and service quality, and
customer satisfaction. 25
 Principles of TQM
1. Do it right the first time:
“Errors, if any, should be caught and corrected at
the source, i.e., where the work is performed.”
2. Be customer-centered:
Customer-centered means,
• Anticipating the customers’ needs
• Listening to the customer
• Learning how to satisfy the customer, and
• Responding appropriately to the customer
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 …Principles of TQM
3. Make continuous improvement a way of life:
The Japanese word for continuous improvement is KAIZEN,
which means improving the overall system by constantly
improving the little details. KAIZEN practitioners view quality
as an endless journey, not a final destination. They are
always experimenting, measuring, adjusting, and improving.
There are four general avenues for continuous improvement:
i. Improved and more consistent product & service quality
ii. Faster cycle time (in cycle ranging from product development to
order processing to payroll processing)
iii. Greater flexibility (faster response to changing customer demands
and new technology)
iv. Lower costs and less waste (eliminating needless steps, scrap,
rework, and non-value adding activities)
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 …Principles of TQM
4. Build teamwork and empowerment:
TQM is employee-driven. It empowers
employees at all level in order to top their
full creativity, motivation, and commitment.
Empowerment means making employees
full partners in the decision-making process
and giving them the necessary tools and
rewards.

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 Elements of TQM
1. Strategic Commitment: The starting point for TQM is a strategic
commitment by top management. Such commitment is important
for several reasons. First, the organizational culture must change to
recognize that quality is not an ideal but is instead an objective
goal that must be pursued. Second, a decision to pursue the goal of
quality carries with it some real costs-for expenditures such as new
equipment and facilities. Thus without a commitment from top
management, quality improvement will prove to be just a slogan.
2. Employee involvement: Employee involvement is another critical
ingredient in TQM. Almost all successful quality enhancement
programs involve making the person responsible for doing the job
responsible for making sure it is done right. Work teams (are
responsible for the daily work of the organization; when
empowered, they are self-managed teams) are common vehicles
for increasing employee involvement. 29
 …Elements of TQM
3. Materials: Another important part of TQM is improving
the quality of the materials that organization use.
4. Technology: New forms of technology are also useful in
TQM programs. Automation and robots, for example, can
often make products with higher precision and better
consistency than can people. Investing in higher-grade
machines capable of doing jobs more precisely and
reliably often improves quality.
5. Methods: Improved methods can improve product and
service quality. Methods are operating system used by
the organization during the actual transformation
process.
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 Tools and Techniques of TQM
1. Benchmarking: Benchmarking is the practice of identifying,
studying, and building upon the best practices in one’s
industry or in the world. Benchmarking is the process of
learning how other firms do things in an exceptionally high
quality manner. There are two types of Benchmarking;
within industry, across industries.
2. Outsourcing: Another innovation for improving quality is
outsourcing. Outsourcing is the process of subcontracting
services and operations to other firms that can do them
cheaper and/or better. If a business performs each and
every one of its own administrative and business service
sand operations, it is almost certain to be doing at least
some of them in an inefficient and/or low quality manner. If
those areas can be identified and outsourced, the firm will
save money and realize a higher quality service or
operation.
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 …Tools & Techniques of TQM
3. Speed: A third popular TQM technique is speed.
Speed is the time, needed by the organization to
get something accomplished, and it can be
emphasized in any area, including developing,
making, and distributing products or services.
Guidelines for increasing the speed of operations:
i. Minimize the number of approvals needed to do
something
ii. Use work teams as a basis for organization
iii. Develop and adhere to a schedule
iv. Integrate speed into the organization’s culture
v. Don’t ignore distribution
vi. Start from scratch
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 …Tools & Techniques of TQM
4. ISO 9000: ISO 9000 refers to a set of quality standards
created by the International organization for
standardization. Five such standards, numbered 9000 to
9001, cover areas such as product testing, employee
training, record keeping, supplier relations, and repair
policies and procedures. Firms that want to meet these
standards apply for certification and are audited by a firm
chosen by the organization’s domestic affiliate. These
auditors review every aspect of the firm’s business
operations in relation to the standards.
5. Statistical Quality Control: Statistical Quality Control is
primarily concerned with managing quality. It is a set of
specific statistical techniques that can be used to monitor
quality; includes acceptance sampling and in-process
sampling. Also there are another tools & techniques: Flow
Chart, Cause-and-Effect Analysis, Pareto Analysis, Control
Chart, Histogram, Scatter Diagram, Run Chart. 33
THE END

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