This document provides an overview and summary of Chapter 14 from a marketing textbook. The chapter discusses improving service quality and productivity. It covers integrating quality and productivity strategies, defining service quality, using the GAP model to identify quality problems, measuring quality, learning from customer feedback, analyzing quality issues, return on quality, defining and measuring productivity, and improving productivity. The chapter provides frameworks and tools to help firms enhance both service quality and productivity.

1. JAN 2013 Semester
1
Service Quality
MKTG 1268
Lecture Ten
Improving Service
Quality and
Productivity
(Chapter 14)

2. Overview of Chapter 14
2
 Integrating Service Quality and Productivity
Strategies
 What is Service Quality?
 The GAP Model – A Conceptual Tool to Identify
and Correct Service Quality Problems
 Measuring and Improving Service Quality
 Learning From Customer Feedback

3. Overview of Chapter 14 (cont’d)
3
 Hard Measures of Service Quality
 Tools to Analyze and Address Service
Quality Problems
 Return on Quality
 Defining and Measuring Productivity
 Improving Service Productivity

4. The Difficulty of Measuring and Managing Service Quality : What Does It
Mean? From Whose Point of View?
4

5. Productivity and quality in a service context
5
 Service managers need to focus on both productivity and
quality from the customer’s point of view to ensure long-term
financial success. Service quality is the extent to which a
service meets or exceeds customer expectations.
 Productivity measures how efficiently a service firm can turn
inputs into outputs. Productivity and quality were historically
seen as issues for operations managers, so companies
focused on making internal process improvements that were
not necessarily linked to customer service priorities.
Continuing efforts to understand and improve quality
reinforces the idea that quality is customer defined.

6. Integrating Service Quality and
Productivity Strategies
6
 Quality and productivity are twin paths to
creating value for both customers and companies
 Quality focuses on the benefits created for
customers; productivity addresses financial costs
incurred by firm
 Ifservice processes are more efficient and increase
productivity, this may not result in better quality
experience for customers
 Getting service employees to work faster to increase
productivity may sometimes be welcomed by
customers, but at other times feel rushed and
unwanted
 Marketing, operations and human resource
managers need to work together for quality and
productivity improvement

7. 7
WHAT IS
SERVICE QUALITY?

8. Dimensions of Service Quality
8
Tangibles: Appearance of physical elements
Reliability: Dependable and accurate performance
Responsiveness: Promptness; helpfulness
Assurance: Competence, courtesy, credibility, security
Empathy: Easy access, good communication,
understanding of customer
8

9. Table 14.1
Dimensions of
Service Quality
9

10. Service Excellence in
Private Banking
The Assurance
Dimension
10

11. 11
THE GAP MODEL – A
CONCEPTUAL TOOL TO
IDENTIFY AND CORRECT
SERVICE QUALITY PROBLEMS

12. The GAP Model for identifying and correcting
service quality problems
12
 The GAP model (Figure. 14.3) is a diagnostic
tool relates quality standards to customer
expectations.
 The GAP model of service quality identifies
gaps where a discrepancy may occur between
the service provider’s performance and the
customer’s expectations

13. Six Service Quality Gaps (Fig. 14.3)
13
13

14. Summary of the 6 Gaps
14
 Gap 1, the Knowledge Gap relates to a lack of management
understanding of what customers expect.
 Gap 2, the Standards Gap is a failure to translate managers’ perceptions
of customer expectations into the quality standards established for service
delivery.
 Gap 3, the Delivery Gap is the difference between specified delivery
standards and the firm’s actual performance.
 Gap 4, the Communications Gap is the difference between what the
company communicates and what is actually delivered to the customer.
 Gap 5, the Perceptions Gap is the difference between what the company
has actually delivered and what the customer perceives s/he has received
(note this perception may be wrong due to difficulty in evaluating the
service).
 Gap 6 (the overall gap) or the Service Gap is the difference between what
the customer perceives and his/her original expectations.

15. Suggestions for Closing the
6 Service Quality Gaps (1) (Table 14.2)
15
15

16. Suggestions for Closing the
6 Service Quality Gaps (2) (Table 14.2)
16
16

17. Suggestions for Closing the
6 Service Quality Gaps (3) (Table 14.2)
17
17

18. Suggestions for Closing the
18
6 Service Quality Gaps (4) (Table 14.2)
18

19. 19
MEASURING AND
IMPROVING
SERVICE QUALITY

20. Soft and Hard Measures of Service Quality
20
 Soft measures —not easily observed, must be
collected by talking to customers, employees or
others
 Provide direction, guidance and feedback to
employees on ways to achieve customer satisfaction
 Can be quantified by measuring customer perceptions
and beliefs
 e.g. SERVQUAL, surveys, and customer advisory panels
 Hard measures —can be counted, timed or
measured through audits
 Typically operational processes or outcomes
 Standards often set with reference to percentage of
occasions on which a particular measure is achieved

21. Using Social Media to
Collect Customer
Feedback
21

22. 22
LEARNING FROM
CUSTOMER FEEDBACK

23. Key Objectives of Effective Customer Feedback
Systems
23
It is critical for companies to learn from
customers and change according to
shifting customer needs and perceptions.
An effective customer feedback system
enables a firm to
 Assess and benchmark its service
quality and performance
 Initiate customer driven learning and
improvements
 Create a customer-orientated service
culture.

24. Key Objectives of Effective Customer Feedback
Systems
24
 Together, these allow the
company to understand
where it stands against the
best in the market, how it is
perceived by its customers,
and help improve its service
offering to satisfy (if not
delight) its customers.

25. Customer Feedback Collection Tools
25
 Total market surveys
 Annual surveys
 Transactional surveys
 Service feedback cards
 Mystery shopping
 Unsolicited customer
feedback
 Focus group discussions
 Service reviews

26. Key Customer Feedback Collection Tools:
Strengths and Weakness (Table 14.3)
26
26

27. 27

28. Analysis, Reporting and Dissemination of Customer
Feedback
28
 Choosing the relevant feedback tools and collecting
customer feedback is meaningless if the information is
not passed back to the relevant parties to take
action
 Reporting system needs to deliver feedback to
frontline staff, process owners, branch/department
managers and top management
 Three types of performance reports:
 Monthly Service Performance Update
 Quarterly Service Performance Review
 Annual Service Performance Report

29. 29

30. Hard Measures of Service Quality
30
 Service quality indexes (SQI)
 Embrace key activities that have an impact on customers
 Control charts to monitor a single variable
 Offer a simple method of displaying performance over
time against specific quality standards
 Enable easy identification of trends
 Are only good if data on which based are accurate

31. Control Chart for Departure Delays
(Fig. 14.8)
31
31

32. Service Insights 14.2
Fedex Service Quality
Index (SQI)
32

33. 33
TOOLS TO ANALYZE AND
ADDRESS SERVICE
QUALITY PROBLEMS

34. Tools to Analyze and Address
Service Quality Problems
34
 Fishbone diagram
 Cause-and-effect diagram to identify potential causes
of problems
 Pareto Chart
 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 Covered in Chapter 8
 Visualization of service delivery, identifying points
where failures are most likely to occur

35. Cause-and-Effect Chart for Flight Departure Delays (Fig. 14.9)
35
35

36. Pareto Analysis of Causes of Flight Departure Delays (Fig. 14.10)
36
36

37. Return On Quality (ROQ)
37
 Assess costs and benefits of quality initiatives
 ROQ approach is based on four assumptions:
– Quality is an investment
– Quality efforts must be financially accountable
– It’s possible to spend too much on quality
– Not all quality expenditures are equally valid
 Implication: Quality improvement efforts may benefit from
being related to productivity improvement programs

38. Return On Quality (ROQ)
38
 To see if new quality improvement efforts make
sense, determine costs and then relate to
anticipated customer response
 Determine optimal level of reliability
 Diminishing returns set in as improvements require
higher investments
 Know when improving service reliability becomes
uneconomical

39. When Does Improving Service Reliability Become Uneconomical?
(Fig. 14.11)
39
39

40. Productivity in a Service Context
40
 Productivity measures amount of output produced
relative to the amount of inputs.
 Improvement in productivity means an improvement in the
ratio of outputs to inputs.
 Intangible nature of many service elements makes it hard
to measure productivity of service firms, especially for
information- based services
 Difficult in most services because both input and output are
hard to define
 Relatively simpler in possession-processing services, as
compared to information- and people-processing services

41. Service Efficiency, Productivity and Effectiveness
 Efficiency: involves comparison to a
standard, usually time-based (e.g., how
long employee takes to perform specific
task)
 Problem: focus on inputs rather than
outcomes
 May ignore variations in service
quality/value
 Productivity: involves financial value of
outputs to inputs
 Consistent delivery of outcomes desired by
customers should command higher prices
 Effectiveness: degree to which firm
meets goals
 Cannot divorce productivity from quality
and customer satisfaction
41

42. Discussion Question: Why is productivity a more
difficult issue for service firms?
42
 Manufacturing deals with tangible elements created and assembled in an
environment designed for productivity and normally excluding customers.
Manufacturing procedures are usually simpler to control, and the inputs and
outputs more readily measured. It is relatively easy to standardize a
manufactured product.
 By contrast, most services deal with intangible processes, the output is more
likely to be customized, and many operational procedures take place in
real time in the presence of customers with diverse needs and expectations.
Service factories for people-processing services must be designed with
customer satisfaction as well as productivity in mind.
 In such a context, it’s more difficult to measure service inputs and outputs,
harder to control the performance of employees who may be working
without direct supervision, more difficult to define and measure the output
of employees who work on multiple tasks rather than specializing on a
single activity, and hard to control and measure the performance of
customers who are actively involved in the production and delivery process.

43. Discussion Question: Why is productivity a more
difficult issue for service firms?
43
 The services that are perhaps easiest to measure on
productivity are those that
 (1) are low contact in nature so that most processes
take place backstage,
 (2) engage in what is termed quasi-manufacturing (e.g.,
food service, repair, and maintenance), so that there
are significant physical inputs and outputs, or
 (3) where customers are “batched” (i.e., served
simultaneously, as in a bus or a class) and their behavior
tightly controlled (airlines are a good case in point).

44. Generic Productivity Improvement Strategies
44
 Typical strategies to improve service productivity:
 Careful control of costs at every step in process
 Efforts to reduce wasteful use of materials or labor
 Matching productive capacity to average rather than peak
demand levels
 Replacing workers by automated machines or self-service
technologies
 Teaching employees how to work more productively
 Broadening variety of tasks that service worker can perform
 Installing expert systems that allow paraprofessionals to take on
work previously performed by professionals who earn higher
salaries
 Although improving productivity can be approached incrementally,
major gains often require redesigning entire processes

45. Need to Redesign the Service Process
45

46. Customer-driven Ways to Improve Productivity
46
 Change timing of customer demand
 By shifting demand away from peaks, managers
can make better use of firm’s productive assets and
provide better service
 Involve customers more in production
 Get customers to self-serve
 Encourage customers to obtain information and buy
from firm’s corporate Websites
 Ask customers to use third parties
 Delegate delivery of supplementary service
elements to intermediary organizations

47. Customer-Driven Approaches To Improve Productivity
47

48. Backstage and Front-Stage Productivity Changes: Implications for
Customers
48
 Front-stage productivity enhancements are
especially visible in high contact services
 Some improvements only require passive acceptance,
while others require customers to change behavior
 Must consider impacts on customers and address
customer resistance to changes
 Backstage changes may impact customers
 Keep track of proposed backstage changes, and
prepare customers for them
 e.g., new printing peripherals may affect appearance of bank
statements
 See Service Insights 14.3 : Managing Customers’
Reluctance to Change

49. Backstage and Front-Stage Productivity Changes:
Implications for Customers
49
It should be noted that backstage changes filter through to the frontline,
and frontline changes to improve productivity can impact customers.
Marketing communications can play a big part in preparing customers
for the change and explain the rationale and benefits and what the new
behavior expected of the customer is. Managing customers’ reluctance
to change is also very important
Service Insights 14.3 People are comfortable with the familiar. When individuals have to
change their habits and lifestyle, they may become resistant to change. In order to help
customers to ease the transition to a different set of behavior pattern, firms can:
1. Develop customer trust
2. Understand customers’ habits and expectations—empathize and understand why they
behave a certain way
3. Pretest new procedures and equipment
4. Publicize the benefits
5. Teach customers to use innovations and promote trial
6. Monitor performance and seek continual improvements

50. A Caution on Cost Reduction Strategies
50
 Most attempts to improve service
productivity seek to eliminate waste
and reduce labor costs and does not
involve new technology
 Reducing staff means workers try to do
several things at once and may perform
each task poorly
 Better to search for service process
redesign opportunities that lead to
 Improvements in productivity
 Simultaneous improvement in service
quality
 See Service Insights 14.4: Biometrics

51. Summary of Chapter 14: Improving
Service Quality and Productivity (1)
51
 Quality and productivity need to be considered
jointly in marketing services
 Research consolidated service quality dimensions into
five
 Tangibles
 Reliability
 Responsiveness
 Competence
 Courtesy
 GAP model is a tool to diagnose problems in service
design and delivery. Service gap is the most critical
and can only be closed if the other six gaps are
closed

52. Summary of Chapter 14: Improving
Service Quality and Productivity (2)
52
 Both soft and hard measures used to measure service
quality
 We can learn from customer feedback--key objectives:
 Assessment and benchmarking of service quality and
performance
 Customer-driven learning and improvements
 Creating a customer-oriented service culture

53. Summary of Chapter 14: Improving
Service Quality and Productivity (3)
53
 A mix of customer feedback collection tools can help
to deliver needed information to firms
 Total market surveys, annual survey, and transactional
surveys
 Service feedback cards
 Mystery shopping
 Unsolicited customer feedback
 Focus group discussions and service reviews
 Capture unsolicited feedback
 Feedback must be analyzed, reported, disseminated
and used

54. Summary of Chapter 14: Improving
Service Quality and Productivity (4)
54
 Hard measure of service quality include service
index and control charts
 Tools used to analyze and address service quality
problems
 Fishbone diagram
 Pareto chart
 Blueprinting
 Measuring productivity in services is difficult – a --
and there is a need to determine when service
reliability becomes uneconomical
 Efficiency, productivity and effectiveness need to be
distinguished when measuring service quality

55. Summary of Chapter 14: Improving
Service Quality and Productivity (5)
55
 To improve service productivity, there are generic
improvement strategies and customer-driven
approaches
 Customer-driven approaches to improving
productivity include
 Changing timing of customer demand
 Involving customers more in production
 Asking customers to use third parties
 Backstage and front-stage productivity changes both
affect customers
 Cost-reduction strategies should be used with caution
as this may impact service quality negatively. A
better way may be to look for service process
redesign opportunities

56. SERVQUAL – See Appendix 14.1
(also see Table14.5 on page 464)
56
 Service-based components: The SERVQUAL Scale
 SERVQUAL (Appendix 14.1) is a survey research
instrument based on the premise that customers can
evaluate a firm’s service quality by comparing their
service perceptions with their prior expectations.
 In its basic form, the scale contains 21 perception
items and 21 expectation items, reflecting five
dimensions of service quality:

57. Appendix 14.1
The SERVQUAL
Scale
57

58. Approaches to Productivity and Quality
Improvement and Standardization (Appendix 14.3)
58
 TQM and Six Sigma are established quality and
productivity initiatives with their respective set of tools
and methods for managing and improving service
quality and productivity. ome of these tools are also
now increasingly used in companies that may not have
embraced the entire TQM or Six Sigma concept.
 The Fishbone diagram, Pareto Analysis, and control
charts are examples of tools that originated from TQM
but have found their way to common use among
companies interested in improving service quality. The
DMAIC model, a Six Sigma improvement model, is also
commonly used for analyzing and improving business
processes.

59. The DMAIC Model
59

60. Approaches to Productivity and Quality
Improvement and Standardization (Appendix 14.3)
60
 The Malcolm-Baldrige Awards and the ISO 9000 certification
comprises requirements, standards, guidelines, definitions, and
related standards that provide an independent assessment and
certification of whether companies are practicing best practices in
quality management and are a benchmark of quality
achievements.
 Companies, in managing and improving quality and productivity,
should consider the approach that is best aligned with the overall
business strategy and adopt a mixture of tools from the above
systemic approaches depending on their own needs and desired
level of sophistication.
 For example, TQM tools can be used at any level of sophistication
by any service firm, although the Six Sigma initiative requires
much more commitment and investments.

61. Practice Exam Essay Question:
61
 List and describe each of the five service
quality (e.g. SERVQUAL) dimensions.
 How does/can your lecturer for MKTG1268
Service Quality (i.e. the provider of education
as a form of service), demonstrate each of
these five dimensions

62. Sample Practice Exam Essay Question: read the following
case study and answer the question (next page)
62

63. Question for the exam case study:
• Using the GAPs model, identify THREE gaps
that explain why there is a difference in the
satisfaction levels between subsidized and
unsubsidized patients at the restructured
hospitals. Suggest FOUR ways restructured
hospitals can close the gaps.
63