Module IV: Service Quality

Concept of service quality.

GAP Model of service quality.
Measuring and improving service quality.
Concept of SERVQUAL system,
Concept of CRM and enhancing quality
through it,
Introduction of six sigma.

1.Disconfirmation of expectations
(Oliver 1980)
2.The three-component
model Rust & Oliver (1994)
Source: Rust & Oliver, 1994. p. 11
3. Service quality (SERVQUAL)
The customers judgment of overall excellence of the
service provided in relation to the quality that was
expected.
Service quality is a focused evaluation that reflects the
customers perception .
This perception is based on five factors relevant to the
context.

1. Reliability-delivering promises
2. Assurance inspiring trust & confidence
3. Tangibles- representing the service physically
4. Empathy-treating customers as individuals
5. Responsiveness-being willing to help


Gaps Model of Service Quality
CUSTOMER gap
Provider gap: can be of 4 types
Gap 1: Not knowing what customers expect.
Gap 2: Not selecting the right service
designs and standards.
Gap 3: Not delivering to service standards.
Gap 4: Not matching performance to
promises.
Perceived
Service
Expected
Service
CUSTOMER
COMPANY
Customer
Gap
Gap 1
Gap 2
Gap 3
External
Communications
to Customers
Gap 4
Service
Delivery
Customer-Driven
Service Designs and
Standards
Company Perceptions
of Consumer
Expectations
Gaps Model of Service Quality
Key Factors Leading to Provider
Gap1
Insufficient marketing research
Insufficient communication between
contact employees and managers
Focus on transactions rather than
relationships
Lack of encouragement to listen to
customer complaints, hence inadequate
service recovery.
Key Factors Leading to Provider
Gap 2
Poor service design, Unsystematic new
service development process
Absence of process management to focus
on customer requirements
Failure to develop tangibles in line with
customer expectations
Servicescape design that does not meet
customer and employee needs
Key Factors Leading to Provider
Gap 3
Deficiencies in human resource policies-
Ineffective recruitment, Role ambiguity and
role conflict
Customers who lack knowledge of their
roles and responsibilities
Problems with service intermediaries
Failure to match supply and demand
Key Factors Leading to Provider
Gap 4
Lack of integrated services marketing
communications
Ineffective management of customer
expectations
Overpromising in advertising, personal
selling & physical evidence.
Inadequate horizontal communications
between sales, advertising and operations

Prescriptions for Closing Service
Quality Gaps
Knowledge: Learn what customers expect--
conduct research, dialogue, feedback
Standards: Specify standards that reflect
expectations
Delivery: Ensure service performance matches
specs--consider roles of employees, equipment,
customers
Internal communications: Ensure performance
levels match marketing promises
Perceptions: Educate customers to see reality
of service delivery
Interpretation: Pretest communications to make
sure message is clear and unambiguous.

Hard and Soft Measures of Service
Quality
Hard measures refer to standards and measures that
can be counted, timed or measured through audits
typically operational processes or outcomes
e.g. how many trains arrived late?


Soft measures refer to standards and measures that
cannot easily be observed and must be collected by
talking to customers, employees or others
e.g. SERVQUAL, surveys, and customer advisory
panels.
Tools to Address Service Quality
Problems
Fishbone diagrams: A cause-and-effect diagram to
identify potential causes of problems.

Pareto charts: 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: A visualization of service delivery. It
allows one to identify fail points in both the frontstage
and backstage
Cause and Effect Chart for
Airline Departure Delays
Aircraft late to
gate
Late food
service



Late fuel
Late cabin
cleaners
Poor announcement of
departures
Weight and balance
sheet late
Delayed
Departures
Delayed check-in
procedure
Acceptance of late
passengers
Facilities,
Equipment
Front-Stage
Personnel
Procedures
Materials,
Supplies
Customers
Gate agents
cannot process
fast enough
Late/unavailable
airline crew
Arrive late
Oversized bags
Weather
Air traffic
Frontstage
Personnel
Procedure
Materials,
Supplies
Backstage
Personnel
Information
Customers
Other Causes
Mechanical
Failures

Late pushback
Late baggage
Pareto charts: Analysis of Causes of
Flight Departure Delays
Late passengers
Waiting for pushback
Waiting for fueling
Late weight and balance sheet
Late cabin cleaning / supplies
Other
Bombay
All stations
chennai
23.1%
23.1%
23.1%
15.3%
15.4%
53.3%
15%
11.3%
8.7%
11.7%
33.3%
33.3%
19%
9.5%
4.9
%
Service blueprint as a tool
Backstage and Frontstage Productivity Changes:
Implications for Customers
Backstage improvements can ripple to the front
stage and affect customers
e.g., new printing peripherals may affect appearance of
bank statements.
Front-stage quality enhancements are especially
visible in high contact services.
Fail points need to be checked.
Loyalty and CRM for services
Loyalty is reliance on a particular brand or
company even though numerous
satisfactory alternatives may exist.

Trust, commitment, ethical practices,
fulfillment of promises, emotional bonding,
personalization and customer orientation
are the key elements in the relationship
building process.
What Makes Loyal Customers More
Profitable?
Tend to spend more as relationship develops
may consolidate purchases to one supplier
Cost less to serve
less need for information and assistance
make fewer mistakes
Recommend new customers to firm (act as unpaid
sales people)
Trust leads to willingness to pay regular prices vs.
shopping for discounts
The Customer Satisfaction-
Loyalty Relationship
0
20
40
60
80
100
1 2 3 4 5
L
o
y
a
l
t
y

(
R
e
t
e
n
t
i
o
n
)

Very
dissatisfied
Dissatisfied
Neither
satisfied
nor dissatisfied
Satisfied
Very
Satisfied
Satisfaction
Near Apostle
Zone of Defection
Zone of Indifference
Zone of Affection
Terrorist
Apostle
Identifying Best Customers
1. Estimating Lifetime Value (LTV)
The expected contribution from the
customer to the service
organizations profits over his or
her entire relationship with the
service organization

Use past behaviors to forecast
future purchases

2. RFM Analysis
Classifying Customers by recency,
frequency, and monetary value of
purchases
Drivers of Service Switching
Service
Switching
Service Encounter Failures
Uncaring
Impolite
Unresponsive
Unknowledgeable
Response to Service Failure
Negative Response
No Response
Reluctant Response
Pricing
High Price
Price Increases
Unfair Pricing
Deceptive Pricing
Inconvenience
Location/Hours
Wait for Appointment
Wait for Service
Competition
Found Better Service
Ethical Problems
Cheat
Hard Sell
Involuntary Switching
Customer Moved
Provider Closed
Value Proposition
Others
Service Failure / Recovery
Core Service Failure
Service Mistakes
Billing Errors
Service Catastrophe
Unsafe
Conflict of Interest

The Wheel of Loyalty
1. Build a
Foundation
for Loyalty

2. Create Loyalty
Bonds
3. Reduce
Churn Drivers
Customer
Loyalty
Be selective in acquisition

Conduct churn diagnostic
Segment the market
Use effective tiering
of service.
Deliver quality
service.
Deepen the
relationship
Give loyalty
rewards
Build higher
level bonds

Implement complaint
handling & service
recovery
Address key churn drivers
Increase switching
costs
Enabled through:
Frontline staff
Account
managers
Membership
programs
CRM
Systems
Six sigma approach for quality
Six Sigma provides a suitable strategy with appropriate
indicators toward continuous improvement.
Six Sigma methodology and statistical methods ensure the
throughout improvement in quality and reduction in rejects.

What is Six Sigma?
Sigma is a Greek alphabet and is used in statistics as a
measure of variation in a process i.e. the capability of the
process to perform defect free work.
A defect is anything that results in customer dissatisfaction.
As sigma increases, cost goes down while profitability,
productivity and customer satisfaction go up.
Six sigma is a high performance, data driven approach for
analyzing the root causes of business processes/ problems
and solving them.
Six Sigma improvement model
Phase 1- Define: The team clearly specifies the problem and
quantifies its financial impact on the company.

Phase 2- Measure:. The team identifies potential causes for the
problem by applying a variety of tools.

Phase 3- Analyze: the team determines what actually causes the
problem. Once the relationship between the causes and effects is
understood,

Phase 4- Improve: the team implements changes to improve
process performance.

Phase 5- Control: the team selects and implements methods to
control future process variation. This vital step assures that the
same problem will not return in the future.