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 customer’s 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 customer’s 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 individuals5. 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.

PerceivedService

Expected ServiceCUSTOMER

COMPANY

CustomerGap

Gap 1

Gap 2

Gap 3

External Communications

to CustomersGap 4ServiceDelivery

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

PersonnelProcedures

Materials,Supplies

Customers

Gate agents cannot process

fast enough

Late/unavailable airline crew

Arrive lateOversized bags

Weather Air traffic

Frontstage Personnel

Procedure

Materials, Supplies

BackstagePersonnel

Information

Customers

Other Causes

MechanicalFailures

Late pushback

Late baggage

Pareto charts: Analysis of Causes of Flight Departure Delays

Late passengersWaiting for pushbackWaiting for fueling

Late weight and balance sheetLate cabin cleaning / suppliesOther

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

Loya

lty (R

eten

tion)

Verydissatisfied Dissatisfied

Neithersatisfied

nor dissatisfiedSatisfied

VerySatisfied

Satisfaction

Near Apostle

Zone of Defection

Zone of Indifference

Zone of Affection

Terrorist

Apostle

Identifying Best Customers1. Estimating Lifetime Value (LTV)

– The expected contribution from the customer to the service organization’s 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 Loyalty1. Build aFoundationfor Loyalty

2. Create LoyaltyBonds

3. Reduce Churn Drivers

CustomerLoyalty

Be selective in acquisition

Conduct churn diagnosticSegment 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.