Exam 3

Question 1

Service quality is hard to maintain because:

Answer 1

1. Subjective standards used by customers
2. “Defect” in a service product has a much broader meaning
3. Impossibility of inspecting a service before delivering it
4. Human involvement à greater variability in output
5. Challenge of supervising a large army of frontline servers scattered in 100s of service facilities located close to customers
6. Ignorance about true cost of lack of quality

Question 2

Why does “defect” in a service-product have a much broader meaning than in a physical product?

Answer 2

The process and outcome are both being evaluated. Technically accurate service but the customer gets annoyed or miffed.

Question 3

What are the internal costs of poor service quality or service failures?

Answer 3

· Rework (i.e. mistake in bank statement)
· Facility downtime (i.e. spilled drink on a patron or a burned steak)
· Loss of morale (due to poor work atmosphere)
· Higher employee turnover rate (which puts:
o Added burden on the existing employees to train new ones and
o May lead to poor pool of recruits by discouraging good candidates)

Question 4

What are the external costs of poor service quality or service failure?

Answer 4

· Type 1: Verifiable failure costs
o Guarantee costs
- (i.e. good night’s sleep or your money back; airlines – denied boarding compensation)
- Note: service à intangible à verifiable failure costs tend to be much lower than tangible products (no scrap pile); you don’t get a refund if you don’t like the play
o Lost future profit stream from lost customers
· Type 2: Non-verifiable costs (to customers)
o Customer’s out-of-pocket expenses
o Customer’s time
o Emotional costs/aggravation
· Type 3: Recovery costs: To compensate for service quality lapses (usually) before the end of a service encounter and prior to the loss of a customer

Question 5

Understand problems in measuring costs of poor quality.

Answer 5

1. Intangibility
2. Lack of error data
3. Low priority on resources required to install a quality-cost measurement system
4. Design of traditional accounting systems

Question 6

To measure the cost of inadequate quality, what information is needed?

Answer 6

Information needed:
· What actually happened in an encounter
· How employees and customers felt after the incident
· Subsequent action on the part of the
o Employees à staying on the job? Morale high?
o Customers à repeating their purchases?
· Recovery costs

Question 7

How is the information obtained to measure the cost of inadequate quality?

Answer 7

Obtaining the information:

1. Service events:
2. Mystery shoppers
3. Service perception measurement:
4. Subsequent customer actions:

Question 8

What are some of the internal measures of service quality?

Answer 8

Internal measures are designed to provide objective measures of the firm’s performance: on-time rate, order fill rate, service rate

Question 9

What are the strengths and weaknesses of the internal measures of service quality?

Answer 9

Strengths:
·
Weaknesses
· Firm’s viewpoint, not customers
· Exceeding on some internal measures may not be important to customers (i.e. if you serve food quickly, that may not matter to the customer because they wanted to sit and have drinks)
· Fails to measure customers’ experiences

Question 10

What are some customer measures of service quality?

Answer 10

Opinions and attitudes of customers

Question 11

the causes of various gaps in Service Quality Gap Model

Answer 11

· Gap 1: the difference between what consumers expect of a service and what management perceives that consumers expect (what you expect vs what I think you expect)
· Gap 2: the difference between what management perceives and what consumers expect and the quality specifications set for service delivery
· Gap 3: the difference between the quality specifications set for service delivery and the actual quality of service delivery
· Gap 4: the difference between the actual quality of service delivery and the quality of service delivery described in the firm’s external communications
· Gap 5: the difference between customers’ expectations of service and their perception of the service actually delivered

Question 12

Understand the four properties of numbers and how these relate to the measures of central tendency.

Answer 12

· Nominal property: place holders (i.e. male = 1, female = 2)
o Cannot do the average
· Ordinal property: the larger the number the greater the property
o It conveys order, however, difference in numbers (ranks) is not meaningful (it says nothing about the difference of academic achievement between the two ranks – the difference between a junior and a sophomore (3-2) does not equal the achievement difference between a senior and a junior (4-3))
o Can do the mode or the median
· Interval: the intervals between numbers are meaningful with respect to the attribute being measured
o The differences (but not absolute numbers) can be compared – i.e. differences between “1” and “2” and “3”; also the difference between “2” and “4” is twice the difference between “1” and “2”
o We cannot compare the absolute magnitude of the numbers because in an interval scale the zero point is established arbitrarily
o Biggest mistake in surveys: the descriptors do not create equal-appearing intervals (Poor, Satisfactory, Very satisfactory, Excellent)
· Ratio property: many attributes possess natural or absolute zero
o Can compare absolute magnitude and can compare intervals, rank objects according to magnitude or use the numbers to identify the objects
o Geometric mean, arithmetic mean, median, and mode are all legitimate measures
o Note: each higher order property subsumes all lower order properties

Question 13

How does reliability of a measure differ from its validity?

Answer 13

You can be reliable without being valid but cannot be valid without being reliable – thus a valid instrument is reliable, but a reliable instrument may not be valid.

Question 14

Reliability

Answer 14

Reliability attempts to answer the question: is this instrument/measure consistent? If an object/concept/construct is being measured repeatedly, and assuming that it has not changed from one measurement to the next, a reliable measure will provide the same response
- Ex: a reliable thermometer will record the same ambient temp, assuming the temp does not change

Question 15

Validity

Answer 15

Validity attempts to answer the question: is this instrument/measure measuring what it is supposed to measure?
- Ex: can an ability to throw stones be a measure of one’s intelligence?

Question 16

Why do we measure customer satisfaction?

Answer 16

1. Get baseline data on customers’ sentiment and how it affects customer retention and other critical variables
2. Determine your company’s strengths/weaknesses on various dimensions (where do you stand vs. the competition?)
3. Based on #2, where to deploy your resources to improve customer satisfaction (i.e. restaurant isn’t perceived as clean then you should work to improve the cleanliness; if you’re an airline and your food is bad then you should change it)
4. To determine the effectiveness of prior interventions (allow some time, then measure again to see if changes had effect)

Question 17

The steps before the survey

Answer 17

1. Clear identification of purpose
   a. Why is it being done?
   b. What exactly will be measured? (questionnaire details)
2. Exploratory research before preparing the questionnaire
   a. Why?
   i. To ask the right questions (concerning the business process) in the right manner (the customers’ own words)
   b. How?
   i. Focus groups
   ii. Complaints
   iii. Suggestions
3. Sampling
   a. Who should be included?
   i. Current customers
   ii. Prospective customers
   iii. Former customers
   b. Which sampling method?
   i. Probability vs. non probability
4. Who should conduct the survey?
   a. External researcher/company to avoid potential bias

Question 18

Understand the various aspects of designing satisfaction questionnaires.

Answer 18

1. Wording should reflect customers’ terminology – not researchers’ jargon. (Discover customers’ language)
2. Appropriate mix of closed-end (multiple choice) and open-ended (essay) questions.
   a) Limit the number of open-ended questions
   b) Why? They are longer and harder to fill out
   c) Convert essay questions into multiple choice
3. Include a few (1 or 2) open-ended questions at the end of the questionnaire

Question 19

What are the five general dimensions that influence customers’ assessment
of service quality? What is the rank-ordering of these dimensions?

Answer 19

Reliability, responsiveness, assurance, empathy, tangibles

Question 20

Explain the three pillars of support for service reliability.

Answer 20

1. Service Leadership: the top management must understand that 100% service quality should be the goal. They should not strive for less than 100%. They foster the attitude “if it isn’t fixed, it will break” as opposed to “if it’s not broken, don’t fix it”
2. Thorough Service Reliability: a service should not be introduced to a market prematurely; it must undergo rigorous testing. Doing a soft-open is always a good idea before launching the service full scale. Pre-launch testing, service blueprinting, and post-launch testing are all important aspects of service testing.
3. Infrastructure for error-free service: Personnel and teamwork issues.

Question 21

Discuss the guidelines for the specifics of excellent service recovery.

Answer 21

1. Identify Service Problems: Monitor customer complaints; conduct customer research; monitor service process
2. Resolve Problems Effectively: Nurture the people factor; make amends for the hassle factor
3. Learn from Recovery Experience: Conduct root-cause analysis; modify service-process monitoring; set up problem-tracking system

Question 22

What is “double deviation”?

Answer 22

“First, the company deviated from acceptable practice, and then it deviated again by not satisfactorily addressing the problem.” — when the company has a service failure and then also fails to fix it when the customer complains

Question 23

Why is it more important to manage online complaints that the offline
ones?

Answer 23

Online complaints can go viral.

Question 24

In what respect are most existing service guarantees deficient? What is a good service guarantee?

Answer 24

Most existing service guarantees are limited in scope and difficult to use

A good service guarantee is:

(1) unconditional,
(2) easy to understand and communicate,
(3) meaningful,
(4) easy (and painless) to invoke, and
(5) easy and quick to collect on

Question 25

Why does a service guarantee work?

Answer 25

1. it pushes the entire company to focus on customers’ definition of good service—not on executives’ assumptions.
2. it sets clear performance standards, which boost employee performance and morale.
3. it generates reliable data (through pay-outs) when performance is poor.
4. it forces an organization to examine its entire service-delivery system for possible failure points.
5. it builds customer loyalty, sales, and market share.

Question 26

Under what conditions is a guarantee most useful? Least useful?

Answer 26

Most useful:
- The perceived risk is high
Least Useful:
- the company is perceived by the market to be the quality leader in its industry;
- every employee is inculcated with the “absolute customer satisfaction” philosophy;
- employees are empowered to take whatever corrective action is necessary to handle complaints;
- errors are few;
- and a stated guarantee would be at odds with the company’s image.

Question 27

How do traditional (or merely good) managers’ views on service quality differ from the views of breakthrough service managers’? What assumptions are made about the cost of quality by these two groups of managers?

Answer 27

Traditional: once the extent of lack of quality is very low, then you cannot bring it below this. —- Don’t think 100% satisfaction is possible
Enlightened: if something fails, you have to make up for it; “replace plus 1”;they don’t subscribe to the idea that costs of appraisal and prevention rise geometrically to infinity as service approaches 100%; they understand the high cost of poor quality, not just in terms of lost customers but poor employee satisfaction and morale —- aim for 100% satisfaction