Service Quality Management

Intermediate customers are regarded as those customers who purchase goods for resale. For
example, organizations or individuals who operate as distributors, brokers or dealers between the
supplier and the consumer or end user.

Trade Customer: a customer who buys goods for the purpose of a business and not as a
consumer.

Ultimate Customer: The ultimate consumer is the person or group that actually uses or consumes
a product. The ultimate consumer might not be the same as the buyer. The individual or entity
who buys something is the purchasing agent. For marketing executives, it is important to know
who the ultimate consumer is. Ultimate consumers are usually the drivers of sales.

Service
A type of economic activity that is intangible, is not stored and does not result in ownership. A
service is consumed at the point of sale.
Characteristics of Services Compared to Goods
1. Intangibility
2. Heterogeneity
3. Simultaneous production and consumption
4. Perishability

Intangibility
Services cannot be seen, tasted, felt, heard, or smelled before they are bought. But service
companies can try to demonstrate their service quality through physical evidence and
presentation. For example, Mcdonald’s tries to influence buyers by giving an experience of a
good place. Disney is a master at tangibilizing the intangible and creating magical fantasies in its
theme parks.

Heterogeneity
The way a service is provided differs depending on the service provider, it’s time as well as
location.

The quality of services depends on

- Who provides them
- When and where
- To whom
That’s why services are highly variable.

For example, an entertainment program by two different performers will be different. Some
doctors are more empathetic than others.

Simultaneous Production & Consumption

Services are generated and consumed simultaneously and cannot be separated from their
providers, whether they are people or machines. (Also known as inseparability)

A product like a sandwich can be bought now and consumed an hour later. But a service is
generated and consumed at the same time. For example, a barber needs to be present to provide
his/her service of a haircut.

Several strategies exist for getting around the limitations of inseparability. For example, the
service organization can train more service providers and build up client confidence, as H&R
Block has done with its national network of trained tax consultants.
Perishability
Services cannot be stored for later use or sale. In the case of steady demand, perishability is not a
problem but when demand fluctuates, service providers face adjustment problems.

Service Encounters
A consumer's direct contact with a service provider, including both face-to-face interaction and
experience. Service encounters are termed as the building blocks for customers’ perception. This
is also known as moments of truth.

Moments of Truth
- Each customer contact is called a moment of truth.
- You have the ability to either satisfy or dissatisfy them when you contact them.
- A service recovery is satisfying a previously dissatisfied customer and making them a
loyal customer.

From the customer’s point of view, the most vivid impression of service occurs in the service
encounters or “Moment of Truth,” when the customer interacts with the service firm. This is
where the promises are kept or broken. The concept of service encounter was put forth by
Richard Norman, taking the metaphor from bull-fighting. Most services are results of social acts,
which take place in direct contact between the customer and the service provider. At this stage
the customer realizes the perceived service quality.

Every moment of truth is important. According to Scandinavian Airlines, each one of its 10
million customers come in contact with 5 employees. Thus Scandinavian Airlines says there are
50 million moments of truth, each one is managed well, and “they prove they are the BEST”.
High-Contact Service
- Customers visit service facility and remain throughout service delivery
- Active contact between customers and service personnel
- Includes most people-processing service

Examples: Hairdressing or hairstyling services, spa or massage services.

Low-Contact Service
- Little or no physical contact with service personnel
- Contact usually at arm’s length through electronic or physical distribution channels
- New technologies (e.g. the web) help reduce contact levels

Examples: Online shopping, mobile banking, automated car wash, etc.

Medium contact services lie between these two.

More Contact .. More threat….
More contact…. More opportunity….

Challenges for Services

- Defining and improving quality
- Designing and testing new services
- Communicating and maintaining a consistent image
- Accommodating fluctuating demand
- Motivating and sustaining employee commitment
- Coordinating marketing, operations, and human resource efforts
- Setting prices
- Finding a balance between standardization versus personalization
- Ensuring the delivery of consistent quality
Service Quality

Specification
Company: Standard operating procedures
Customer: Personal expectations

Misalignment of company and customer specifications can lead to dissatisfaction, even if the
service is delivered as designed. Effective communication is key in eliminating misalignment.

Measuring and improving quality is more difficult for services than for products because:
- Unsatisfactory service cannot be replaced or repaired
- Intangible and temporary nature

Dimensions of Service Quality

Reliability: Perform promised service dependably and accurately. Reliability means that the
company delivers on its promises-promises about delivery, service provision, problem
resolutions and pricing. Customers want to do business with companies that keep their promises,
particularly their promises about the service outcomes and core service attributes. All companies
need to be aware of customer expectations of reliability. Firms that do not provide the core
service that customers think they are buying fail their customers in the most direct way.
Example: receive mail at the same time each day.

Responsiveness: Willingness to help customers promptly. This dimension emphasizes

attentiveness and promptness in dealing with customer’s requests, questions, complaints and
problems. Responsiveness is communicated to customers by the length of time they have to wait
for assistance, answers to questions or attention to problems. Responsiveness also captures the
notion of flexibility and ability to customize the service to customer needs. Example: avoid
keeping customers waiting for no apparent reason.

Assurance: Ability to convey trust and confidence. This dimension is likely to be particularly
important for the services that the customers feel uncertain about the ability to evaluate.
Example: Showing confidence to the customer.

Empathy: Ability to be approachable. In this competitive world, the customer’s requirements are
rising day after day and it is the companies’ duties to their maximum to meet the demands of
customers, else customers who do not receive individual attention will search elsewhere.
Example: being a good listener.

Tangibles: Physical facilities and facilitating goods. Since services are tangible, customers derive
their perception of service quality by comparing the tangible associated with these services
provided. It is the appearance of the physical facilities, equipment, personnel and communication
materials.

Quality Surprise- if expected service < perceived service

Satisfactory Quality- if expected service = perceived service
Unacceptable Quality- if expected service > perceived service

Components of Customer Expectations

- Desired level service: Wished-for level of service quality that customer believes can and
should be delivered
- Adequate level service: Minimum acceptable level of service
- Predicted service level: Service level that customer believes firm will actually deliver
 - Zone of tolerance: Range within which customers are willing to accept variations in
service delivery

Gaps in Service Quality

Gap 1: Market research gap

Management may not understand how customers formulate their expectations from past
experience, advertising, communication with friends. Management does not always correctly
perceive what customers want.
- Improve market research
- Foster better communication between employees and its frontline employees
- Reduce the number of levels of management that distance the customer

For example, hospital administration may think patients want better food, but patients may be
more concerned with nurse responsiveness.

Gap 2: Design gap

Management unable to formulate target level of service to meet customer expectations and
translate them to specifications.

Management might correctly perceive customers’ wants but not set a performance standard. For
example, hospital administrators may tell the nurses to give “fast” service without specifying
speed in minutes.

- Setting goals and standardizing service delivery tasks can close the gap

Gap 3: Conformance gap

Actual delivery of service cannot meet the specifications set by management. Employees might
be poorly trained or incapable of or unwilling to meet the standard; they may be held to
conflicting standards, such as taking time to listen to customers and serving them fast.

- Lack of teamwork
- Poor employee selection
- Inadequate training
- Inappropriate job design
Gap 4: Communication gap
Discrepancy between service delivery and external communication. Consumer expectations are
affected by statements made by company representatives and ads.
- Exaggerated promises in advertising
- Lack of information provided to contact personnel to give customer
For example, if a hospital brochure shows a beautiful room but the patient finds it cheap and
tacky-looking, external communications have distorted the customer’s expectations.

Gap 5: Customer expectations and perceptions gap

- Customer satisfaction depends on minimizing the four gaps that are associated with
service delivery
- Companies try to measure the gap between expected service and perceived service
through the use of surveys
- SERVQUAL – measures the five dimensions

Poka-Yoke (Fail Safe)

Shigeo Shingo observed that errors occurred, not because employees were incompetent, but
because of interruptions in routines or lapses in attention. He advocated adoption of Poka-Yoke
methods- foolproof devices to prevent employee mistakes.
Example, a hotel reservation employee is expected to make eye-contact with customers. So
Poka-Yoke is to ask the employee to enter the eye-color of the customer.

Since customers also play an active role in service-delivery, you also need Poka-Yoke for them to
prevent them from making errors. Example, frames at airport check-in counters to help
customers determine if their bag can go in the overhead bin as hand luggage.

(Optional)
The term Poka-Yoke was coined in Japan during the 1960s by Shigeo Shingo, an industrial
engineer at Toyota. Poka-Yoke ensures that the right conditions exist before a process step is
executed, thus preventing defects from occurring in the first place. Where this is not possible,
Poka-Yoke performs a detective function, eliminating defects in the process as early as possible.

One of the most common examples is when a car driver with a manual gearbox must press on the
clutch pedal (a process step – Poka-Yoke) before starting the engine. The interlock prevents an
unintended movement of the car.

Benchmarking
Compare your performance with other companies known for being ‘the best in class.’ For every
quality dimension, some firm has earned the reputation for being the best in class. Learn how the
management has achieved to be the best in class to correct your process.
Service Blueprinting: Key Components
1. Define standards for front stage activities
2. Specify physical evidence
3. Identify principal customer actions
4. ……………line of interaction (customers and front stage personnel)..............
5. Front stage actions by customer contact personnel
6. …………... line of visibility (between front stage and backstage)...............
7. Backstage actions by customer contact personnel
8. Support processes involving other service personnel
9. Support processes involving IT

Service is a complex, multi-layered process that involves lots of people and technologies that
work together or don’t, and that’s where service blueprints come into the picture.

(Optional start)
1. Physical evidence
What customers (and employees) come in contact with. Though first in line, it’s usually the last
element added.

Example: This category includes locations, like a physical store or the company website, but also
any signage, receipts, notification or confirmation emails, etc.
2. Customer actions
What customers do during the service experience.

Example: Customers might visit the website, talk to an employee (in person or online), make a
purchase, place an order, accept an order, or receive something.

3. Frontstage or visible employee actions

What customers see and who they interact with. For tech-heavy businesses, add in or replace this
category with the technology that interacts with the customer.

Example: Employees might greet a customer visiting a physical location, respond to questions
through chat, send emails, take an order, or provide status information.

4. Backstage or invisible contact employee actions

All other employee actions, preparations, or responsibilities customers don’t see but that make
the service possible.

Example: Employees might write content for the website/email/etc., provide approval, complete
a review process, make preparations, package an order, etc.

5. Support processes
Internal/additional activities that support the employees providing the service.

Example: Third-party vendors who deliver supplies, a carrier service, equipment or software
used, delivery or payment systems, etc.

Lines
Service blueprints also include lines to separate each category, clarifying how components in a
service process interact with each other. This allows employees and managers to better
understand their role and, most importantly, possible sources of customer dissatisfaction within a
service experience.

Fundamentally, service blueprints center on the customer. They allow for a clear vision of the
service design, which in turn helps organizations refine their processes and deliver pleasing,
memorable customer experiences.

Benefits of using service blueprints

Because services aren’t tangible, it can be difficult to convince decision-makers and executives
that changes need to be made. It can be even more difficult to talk about specific changes without
first having a full picture of the process. Visualizing each step and each interaction in the process
takes away that vagueness and highlights areas for improvement.

Service blueprints empower organizations to optimize their service processes. Additional

benefits include:

Scalability and flexibility

Cross-functionality and knowledge transferability
Competition
Failure analysis

How to create a service blueprint

You can build a service blueprint diagram at any point in your service design.

1. Come up with a customer scenario

Whether you are creating a new process or mapping out an existing one, start with the customer
service scenario you want to explore. It may be beneficial, at this point, to include real customers
in the conversation to ensure that your scenario is as true to customers’ real (or desired)
experiences as possible.

2. Map out the customer experience

Whatever scenario you decide on, plot out the actions the customer will take in chronological
order.

3. Built out from the customer’s actions

Once you have the full customer service experience laid out, add the other categories––frontstage
and backstage actions, support processes, physical evidence, time, etc. to the customer actions.
What do employees do during each action the customer takes? What support processes come into
play?

3. Clarify lanes of responsibility and action

Use the different lines of separation to keep each category in its own clearly marked lane and to
illustrate the ways different actors interact during the service process:

Line of interaction: Where the customer interacts with the service and employees.

Line of visibility: Where the employee or organizational processes become invisible to the
customer.
Line of internal action: Where partners or employees who don’t have contact with the customer
step in to support the service.

4. Clarify cross-functional relationships

After mapping out each category, add another level of detail to your service blueprint by
including arrows. While you will already have laid out the steps in chronological order within
each lane, you can also show the relationships and dependencies that run across different
categories through arrows. If a shape has a single arrow, the exchange occurs in the direction
indicated. A double arrow shows that some agreement must be reached or that the two shapes
depend on each other in some way.

Together, these elements will help you see and find solutions to service processes and customer
experience issues. (Optional end)
—------------------------------------------------------------------------------------------------------------------

Walk through Audit

Impressions about service quality are determined by both the outcome and the process (because
customers are a part of service delivery)

Walk through audit is a customer-focused survey to find the areas for improvement. Entire
customer experience is traced from beginning to end, and a flow chart of customer interaction
with the service system is made.

Customer is asked for his/her impressions on each of these interactions. Customers can provide a
new perspective to service – they can notice things easily as they are new in the system.

Achieving Service Quality

- Cost of Quality
- Service Process Control

Cost of Quality
Obtaining a quality service is not enough. The cost of achieving it must be carefully managed so
that the long-term effect of 'quality costs' on the business is a desirable one. These costs are a
true measure of the quality effort. A competitive service based on a balance between quality and
cost factors is the principal goal of responsible management and operators. This objective is best
accomplished with the aid of a competent analysis of the costs of quality.
Service Process Control
- The control of service quality can be viewed as a feedback control system – where output
is compared with a standard.
- The deviation from the standard is communicated back to the input, and adjustments are
made to the process to keep the output within the defined range.
- Difficult to implement an effective control cycle for service due to the intangible nature
of service, which makes direct measurement difficult – so we proxy or surrogate
measures.
- Simultaneous nature of production and consumption – prevents any direct intervention in
the service process to observe conformance to requirements. Consequently, we ask
customers to express their impression of service quality after the consumption – by which
time we are too late to avoid service failure.
- Instead, we try to focus on delivery process by employing SPC

Quality: Profit or Cost??

Both. Improving quality does require a company to incur costs.

Return on quality storyline:

“Winning back a lost customer can cost up to 50-100 times as much as keeping a current one
satisfied.” Understanding your customer is key to retention.

INSPECTION
- Opinion surveys: about quality of service
- 100 percent inspection: every unit is checked; fatigue error unless automated
- Destructive testing: destructive testing aims to deform or destroy a material to analyze its
point of failure.
- Acceptance sampling: based on statistical sampling table, the associate checks a random
or stratified sample from a larger lot. If the sample is within the acceptable quality level,
the lot passes inspection.

Customer Satisfaction
- All customers want to be satisfied.
- Customer loyalty is only due to the lack of a better alternative
 - Giving customers some extra value will delight them by exceeding their expectations and
insure their return
The McDonald's hot coffee case story: an old lady (Liebeck) got rich suing McDonald’s for her
coffee being too hot

Customer Feedback and Word-of-Mouth

- The average business only hears from 4% of their customers who are dissatisfied with
their products or services. Of the 96% who do not bother to complain, 25% of them have
serious problems.
- The 4% complainers are more likely to stay with the supplier than are the 96%
non-complainers.
- About 60% of the complainers would stay as customers if their problems were resolved
and 95% would stay if the problem was resolved quickly.
- A dissatisfied customer will tell between 10 and 20 other people about their problem.
- A customer who has had a problem resolved by a company will tell about 5 people about
their situation.

Service Recovery
- Disasters can be turned into loyal customers by proper and rapid service recovery
- Frontline workers, therefore, need to be properly trained and given the discretion to make
things right

Service Recovery Strategies

- Act quickly
- Provide adequate explanations
- Treat customers fairly
- Cultivate relationships with customers
 - Learn from recovery experiences
- Learn from lost customers
- Make the service fail-safe
- Encourage and track complaints

Servicescape
Servicescape is defined as the physical environment where a service can take place. It helps to
analyze and identify the impact of a good environment on the service-based industry. For
example, if you have the option of having dinner in a plain room with only basic amenities and
the other place with the soothing ambiance, you will always choose the latter instead of the
former.

The Russell Model of Effect

The Russell model is one of the most influential models to explain the effect of the physical
environment on human behavior. The model posits that emotional response acts as a mediator in
the relationship between environmental stimuli and human behavior.

- Impact of music on restaurant diners

- The effects of scents and the perceptions of store environments
- Aromatherapy: the effects of fragrance on people
- Human responses to color

Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage

Frontline employees are service professionals who work directly with customers. Frontline is an
important source of differentiation and competitive advantage. It is:
- a core part of the product
 - the service firm
- the brand
Frontline also drives customer loyalty, with employees playing key roles in anticipating customer
needs, customizing service delivery and building personalized relationships.

The Cycles of Failure, Mediocrity and Success

Too many managers make short-sighted assumptions about financial implications of:
- Low pay
- Low investment (recruitment, training)
- High turnover human resource strategies

Often costs of short-sighted policies are ignored:

- Costs of constant recruiting, hiring & training
- Lower productivity & lower sales of new workers
- Costs of disruptions to a service while a job remains unfilled
- Loss of departing person’s knowledge of business and customers
- Cost of dissatisfied customers
How to Manage People for Service Advantage?
Staff performance is a function of both ability and motivation. How can we get able service
employees who are motivated to productively deliver service excellence?
1. Hire the right people
2. Enable your people
3. Motivate and energize your people

“The old saying ‘People are your most important asset’ is wrong. The right people are your most
important asset.”- Jim Collins

Emotional Labor
The act of expressing socially desired emotions during service transactions.

Three approaches used by employees:

1. Surface acting (employees alter their displayed feelings to convey a false emotional display
that is faithful to the organization's norms, while their inner feelings remain unchanged)
2. Deep acting (an effortful process through which employees change their internal feelings to
align with organizational expectations)
3. Spontaneous response
Performing emotional labor in response to society’s or management’s display rules can be
stressful. Good HR practice emphasizes selective recruitment, training, counseling strategies to
alleviate stress.

Role Stress in the Frontline

When perceived work role expectations are unclear, incompatible with other expected behaviors,
or too much to handle, role stress is said to occur.

3 main causes of role stress:

1. Person vs. Role: Conflicts between what jobs require and employee’s own personality
and benefits
2. Organization vs. Customer: Dilemma whether to follow company rules or to satisfy
customer demands
3. Customer vs Customer: Conflicts between customers that demand service staff
intervention

Control vs. Involvement Model of Management

Control concentrates 4 key features at top of organization; Involvement pushes them down:
- Information about operating results and measures of competitive performance
- Rewards based on organizational performance (e.g. profit sharing, stock ownership)
- Knowledge/skills enabling employees to understand and contribute to organizational
performance
- Power to influence work procedures and organizational direction (e.g. quality circles,
self-managing teams)
CRM
Customer relationship management (CRM) is a technology for managing all your company's
relationships and interactions with customers and potential customers. The goal is simple:
Improve business relationships to grow your business.

CRM is the timely delivery of excellent service “customer relationship management”

CRM is a combination of business process and technology that seeks to understand a company’s
customers from a number of perspectives including:
- Who they are
- What they do
- What do they like
No complaint is small or insignificant.

Jaycustomers
(Optional)
Types of Jaycustomers:
1. The Thief
- No intention of paying
- Shoplifting
- Stolen Credit cards
- Sneaking into movies

2. The Cheat
- Fake insurance Claims
- Wardrobing
- 100% Satisfaction guaranteed

3. The Vandal
4. The Family Feuder
- Fight with own family
- Food fights
- Fights with other customers
One word that will reinvent how you serve clients: SIMPLICITY
Keep your promise
- Don’t make a promise that you cannot keep
- Create RIGHT expectation
- Don’t mislead
- Hire the right people
- Plan accordingly
- Plan ahead