Designing Quality Services: S. Thomas Foster, Jr. Boise State University

Chapter 8
Designing Quality Services
S. Thomas Foster, Jr.

Boise State University
Slides Prepared by
Bruce R. Barringer
University of Central Florida
©2001 Prentice-Hall
Chapter Overview
Slide 1 of 2
• Differences between Services and

Manufacturing
• What Do Services Customers Want?
• SERVQUAL
• Designing and Improving the Services
Transaction
• The Customer Benefits Package
• The Globalization of Services
© 2001 Prentice-Hall Transparency 8-2
Chapter Overview
Slide 2 of 2
• Improving Customer Service in

Government
• Quality in Health Care
• A Theory for Service Quality Management

Introduction
• High-quality service is essential for competitiveness

and can even improve employee satisfaction.
• To provide high-quality service, we need a profound
understanding of the needs, wants, and desires of the
customer and an understanding of who the customer
is.
• Quality service is not only an imperative for
competitiveness but also a sign quality maturity.
• Even manufacturing firm eventually focus on
service.
Introduction
• In today’s economy, service still is a major

differential that allows firms to beat competitors
in the marketplace.
• Figure 8.1 shows the power of satisfied
customers.
• If customers are satisfied, they will be loyal.
• Revenue streams will increase – as will profits.

Introduction
• Figure 8.1 How much profit a customer generates

over time

Differences Between Services and
Manufacturing
• If quality is multidimensional for manufactured
products, it will be more so for services.
• Using a contingency perspective, we understand
that the nature of services cause us to approach
service quality improvement from a different
direction than from manufacturing.
• Services are distinguished from manufacturing
on several dimensions.

Manufacturing
Slide 1 of 4
Unique Attributes of Services

1. Services 2. The output
are of services is
intangible heterogeneous
3. Customers are more involved in

the production of services than they
are in manufacturing – occur
© 2001 Prentice-Hall simultaneously Transparency 8-8
Manufacturing
Slide 2 of 4
• Intangible
– Many services are intangible. This means that they
cannot be inventoried or carried in stock over long
periods of time.
• Heterogeneous
– The output of services are also heterogeneous. This
means that for many companies, no two services are
exactly the same.
• Occur simultaneously
– Production and consumption of services often occur
simultaneously.
Manufacturing
Slide 3 of 4
• One useful distinction between services and

manufacturing centers on the aspect of
customer contact.
• Customers tend to be more involved in the
production of services than they are in
production of goods.
• In many restaurants it is uncommon for the
customers to fill their own drinks. This is
called customer co-production.
Manufacturing
• Because customers are actively involved in

producing the services they consume, they create
problems for service providers. The time
required to serve and the varying demands of
customers are two examples.
• Even though customers are the reason for the
existence of services firms, they also make
providing good service difficult.

Manufacturing
• Customer can exert great control over the service

provider and achieve great customization.
• This control can be manifested in a variety of
different ways.
• As a result of this greater customer control,
service facilities, processes, and interactions must
be designed in a way that promotes a positive
encounter with the customer.

Manufacturing
• Internal Versus External Services

– External services are those whose customers
pay the bills.
– Internal services are in-house services such as
data processing, printing, and mail.
– Customer service to internal customers is very
important to internal service because their
services often can be outsourced.
– There is a trend in companies to outsource
internal services.
Manufacturing
Slide 4 of 4
• Voluntary Versus Involuntary Services

– Voluntary services are those services that we
actively seek out and employ of our own
accord.
– Generally, we research a voluntary service and
have certain expectations when we engage its
services.

Manufacturing

– The quintessential example of an involuntary
service is a prison. Other involuntary services
include hospitals, the IRS, the police
department, the fire department, and other
services that you do not choose.
– It is generally more difficult to achieve high
levels of customer satisfaction in involuntary
services.
Manufacturing

– Yet, employees of these involuntary services
organization often desire to provide better
service to the patrons.
– Certainly, our perceptions and expectations of
service quality can be affected by whether the
service is voluntary or involuntary.

How Are Service Quality Issues Different
from Those of Manufacturing?
• Because services attributes are often

intangible, it is sometimes difficult to obtain
hard data relating to services.
• For this reason, many services
organizations that use quality control
charts encounter difficulty in using them or
they use them incorrectly.

• Simultaneous production and consumption of services
means that you have to do it right the first time.
• Customer contact leads to an increase in variability in the
process.
• This leads to a high degree of customization in services
as well as great variability in the time required to
perform services.
• When customers are intimately involved in processes,
there is much more customization and much more
variability than in manufacturing.

• Product Liability
– In services, liability issues often relate to
malpractice, whereas in manufacturing liability
issues typically relate to safety concerns.
– However, services also may have liability
issues.
– Certainly, as time passes, more quality
techniques will be developed specifically for
services.
How Are Service Quality Issues Similar to
Those of Manufacturing?
How are services quality issues similar to

manufacturing?
-- For both manufacturing and service firms, the
customer is the core of the business, and customer
needs provide the major input to design.
-- By focusing on the customer, many
manufacturers and services firms have come to
view themselves as service providers.
What Do Service Customers Want?
Zeithamel, Parasuraman, and Berry’s List of

the Dimensions of Service Quality
Tangibles
Reliability
Responsiveness
Assurance
Empathy
• As in any industry, the concept of leadership is

one that PZB believe is the key to customer.
• They define the attributes of leader in services
are given in Table 8.1.

Attributes of Effective Leaders in Service

Industries ( Table 8.1)
Service Vision
High Standards
In-the-Field Leadership
Style
• A leader who has a service vision really view

service quality as the force underlying
profitability and business success.
• When selecting strategies for improvement,
leaders see quality as the winning strategy.
• The attitude of employees is the key element in
achieving service success.
• Active and involved leadership is very important
to attaining this important organizational
attribute.
• In service, you will notice that some firms are

better something than others.
• Those things do not happen by magic.
• They are the result of a leader with high
standards and a focus on details.

• Outstanding services leaders have an in-the-field

style leadership.
• Because there is so much contact with the
customer in a service system, the field is where
the action is.

SERVQUAL
Slide 1 of 10
• What is SERVQUAL
– SERVQUAL is a survey instrument, developed
by PZB, and for assessing quality along the
five service dimensions discussed in chapter 1.
– The SURVQUAL survey has been used by
many firms and is an off-the-shelf approach
that can be used in many service settings.

SERVQUAL
• The SERVQUAL instrument, a survey, has many

advantages. Among these are:
-- It is accepted as a standard for assessing different dimensions
of services quality.
-- It has been shown to be valid for a number of service
situations.
-- It has been demonstrated to be reliable, meaning that different
readers interpret the questions similarly.
-- The instrument is parsimonious in that it has only 22 items.
This means that it can be filled out quickly by customers and
employees.
-- Finally, it has a standardized analysis procedure to aid
interpretation and results.
SERVQUAL
• Although the SERVQUAL survey is not as widely

used as SQC, it is a standardized approach to
gathering information about customer
perceptions of service quality.
• As such, it provides a base, or a means, to get
started in assessing customer perceptions of
quality.

SERVQUAL
• The SERVQUAL survey has two parts –

customer expectations and customer perceptions.
• Let’s say you desire to improve service quality
along some dimensions.
• The natural question is, “ Which will create the
greater improvement to the system for improving
service?”
• If you understand both customer expectations
and perceptions, we can assess the gap in these
areas.
SERVQUAL
• This type of analysis provides a good way to

understand how best to improve customer
satisfaction.
• Figure 8.2 shows the 22 survey items for
expectations.
• The wording of the statements in the expectations
survey relates to a generic firm in an industry
that interests you.
• Table 8.2 shows the items that address specific
service quality dimensions.
SERVQUAL
• Figure 8.2 SERVQUAL Expectations Survey

SERVQUAL
slide 2 of 10
Table 8.2 SERVQUAL Items and Dimensions
Dimension Items
Tangibles 1-4
Reliability 5-9
Responsiveness 10-13
Assurance 14-17
Empathy 18-22
SERVQUAL
Slide 3 of 10
• The SERVQUAL perceptions survey shown in

Figure 8.3 is administered to customers in the
same way that the expectations survey was
administered.
• Notice that the perceptions survey also
contains 22 items that are matched with the
same five quality dimensions as the
expectations survey.

SERVQUAL
• Figure 8.3 SERVQUAL Perceptions Survey

SERVQUAL
• Gap Analysis
– The SERVQUAL instrument is used to
perform gap analysis. Because services are
often intangible, gaps in communication and
understanding between employees and
customers have a serious negative affect on the
perceptions of services quality.
– The model in Figure 8.4 shows the gaps that
commonly occur that can affect the perceptions
of services quality.
SERVQUAL Instrument
Slide 4 of 10 ( Figure 8.4 Gaps model )
Word-of-mouth
Personal needs Past experience
communication
Expected service
Gap 5
CUSTOMER Perceived service
PROVIDER Gap 4 External

Service delivery communications
Gap 3 to customers
Service quality
Gap 1 specifications
Gap 2
Management perceptions
© 2001 Prentice-Hall of customer expectations Transparency 8-37
SERVQUAL Instrument (Gap Models)
Slide 5 of 10 ( Figure 8.5 Gap 1)
Management
perceptions Gap 1 Expected
of customer service
expectations
Gap 1 shows that there can be a difference between
actual customer expectations and management’s idea
or perception of customer expectations.
Many times, improving processes does not equal
improving customer wants. To truly improve customer
service, we must understand what the customer wants.
Management
Service Gap 2
perceptions
quality
of customer
specifications
expectations
Manager’s expectations of service quality may not match service
quality specifications. This mismatch is demonstrated in gap 2.
Because firms do not specify customer requirements according
to a well-defined process, there is no way to know whether
customer specifications and management expectations are
aligned.
Gap 3 Service
Service
quality
delivery
specifications
Inadequate training, communication, and preparation

of employees who interact with the customer, referred
to as contact personnel, can lower the quality of service
delivered. This mismatch is represented as Gap 3.

Gap 4 External
Service
communications
delivery
to customers
Gap 4 shows the differences between services delivery and external
communications with the customer. Companies influence customer
expectations of services through word-of-mouth and through other
media such as advertising. There could be a difference between
what customers hear you say you are going to deliver as a service
provider and what you actually deliver.
Gap 5
Expected Service Perceived Service
Gap 5 shows the differences between expected services

and perceived service of customers. The difference
between your expectation and your perceptions is directly
related to your perception of service quality.
• The key to closing gap 5 is to first close gaps 1

through 4 through thoughtful systems design,
careful communication with the customer, and a
workforce trained to provide consistently
outstanding customer service.
• As long as these gaps exist, there will be lowered
perceptions of customer service.

SERVQUAL Instrument
Slide 9 of 10
• Assessing Differences in Expectations and

Perceptions by Using the Differencing
Technique
– The differencing technique is used to asses the
differences between expectations and
perceptions.

SERCQUAL Differencing Technique
• 1. Typically, you need a sample size of between 50

and 100 ( sample size, n ) for each of the surveys.
• 2. Separate the SERVQUAL dimensions as
shown in Table 8.2.
• 3. For each respondent, sum your SERVQUAL
scores for the items relating to a given dimension.
• 4. Sum across the n respondents and divide the
total by n.

• Example 8.1 SERVQUAL Differencing

• Example 8.1 (continued)

• The averages for each of the dimensions of
service quality were computed by averaging the
items pertaining to the dimension.
• Finally, differences for the dimensions were
computed as next slide.

SERVQUAL Differencing ( Example 8.1)
Dimension Perception Expectation Difference

Average Average
• Tangibles 6.65 6.425 0.225

• Reliability 3.4 6.02 -2.62
• Responsiveness 5.525 2.4 3.125
• Assurance 4.5 3.275 1.225
• Empathy 2.9 5.86 -2.96

Example 8.1 (Continued)
• The differences shows that the greatest
mismatch exists in the dimension of Empathy,
with Reliability as a close second.
• The training program should focus on
teaching employees to be Empathetic.
• Also, the process improvement efforts should
focus on improving Reliability.
• These changes will lead to the greatest
improvements in customer service.
• Example 8.2: SERVQUAL Two-dimensional

differencing

Designing & Improving the Services
Transaction
• One of the way to improve customers’
perceptions of quality is to improve the process of
delivery of the service.
• Others concepts and tools to improve customers’
perceptions of quality include service
blueprinting, moments of truth concept, and the
Japanese method known as poka-yoke.

Transaction
Slide 1 of 6
• Services Blueprinting
– Lynn Shostack is known for the statement,”
The process is the service.”
– Shostack also developed the process known as
service blueprint.
– A services blueprint is a flowchart that isolates
potential fail points in a process.

Transaction
• There are four steps to developing a service
blueprinting.
1. Identify processes.
2. Isolate fail points.
3. Establish a time frame.
4. Analyze profits.
• Figure 8.11 shows a simple process used by Ms.
Shostack to demonstrate service blueprinting, in
this case for a shoe-shine process.
Transaction
• Figure 8.11 Service blueprinting Example

Transaction
• Notice that Figure 8.11 includes a line of
visibility.
• The area above the line of visibility is referred to
as the front office, and the area below the line of
visibility is referred to as the back office.
• Service process blueprinting places the focus on
front-office activities.
• Service blueprinting is a too to help with
brainstorming activities that lead to customer
service improvement.
Transaction (Services Blueprinting)
Slide 3 of 6
• Steps in Developing a Service Blueprint

– Step 1: Identify processes. In this step,
processes are flowcharted so that the bounds of
the process are identified.
– Step 2: Isolate fail points. Notice the fail point
in the preceding slide. What can happen here?
The wrong color of polish could be applied and
the shoes will be ruined. This would be an
expensive mistake.
Transaction (Services Blueprinting)
Slide 4 of 6
• Step 3: Establish a time frame. In a shoe-shining

operation, time is a major determinant of
profitability. As a result, those steps that lose
time result in lost income.
• Step 4: Analyze profits. As errors occur in the
process, the shoe shiner becomes liable. Because
delays and errors affect profitability, the figure
shoes that after 5 minutes customers being to be
lost and the business person loses money.
Transaction
Slide 5 of 6
• Moments of Truth
– The fail points in the service blueprint are
often referred to as moments of truth. These
are the times at which the customer expects
something to happen.
– Expectations are a major determinant of
customer perceptions of service quality.
– When the customer expects something to
happen, it has to happen.
Transaction
• Moments of Truth
– Customers’ contact with the business can occur
in many different ways.
– All these moments of truth result in either
happy customers or lost customers.
– Moments of truth also can happen at various
stages of the product life cycle.
– A Closer Look at Quality 8.1 considers one
firm that used the moment of truth concept to
improve service.
Transaction
• Poka-Yoke
– The idea behind poka-yoke (or fail-safe) is to ensure
that certain errors will never occur.
– The idea behind fail-safe is to ensure that certain
errors will never occur.
– Just as many processes seem to be designed to fail,
they can also be designed not to fail.
– In service, Chase defines different classifications for
fail-safe devices. These are: Warning methods,
Physical contact methods, and Visual contact methods.
Transaction
• Poka-Yoke
– Fail-safe methods can also be defined using the
“three Ts” ( please see Figure 8.12).
1. Task to be performed.
2. Treatment provided to the customer.
3. Tangibles provided the customer.
-- These poka-yoke classifications and Ts
occur in many different forms.
Transaction
Slide 6 of 6
Figure 8.12 The Three Ts

Treatment
Task to be provided
performed to the
customer
Tangibles provided
the customer
The Customer Benefits Package
Slide 1 of 3
• Customer Benefits Package ( CBP)

– A customer benefits package consists of both
tangibles that define the service and intangibles
that make up the service.
– The tangibles are known as goods-content.
– Intangibles are referred to as service-content.
– CBS are important not only in helping define
what it is that your service firm will provide to the
customer but also in helping to define what will
not be provided
© 2001 Prentice-Hall
to the customer. Transparency 8-63
• The four stages of Service benefit package

design process are as follows (please see
Figure 8.13):
1. Idea/concept generation
2. The definition of a services package
3. Process definition and selection
4. Facilities requirement definition

Slide 2 of 3
Figure 8.13 CBP Design Process

Idea/concept
generation
Define
CBP
Select and
define process
Define
facility
requirements
• As defined by David Collier, the objectives of

CBP design are to:
1. Make sure the final CBP attributes you are using are
the correct ones.
2. Evaluate the relative importance of each attribute in
the customer’s mind.
3. Evaluate each attribute in terms of process and service
encounter capability.
4.Figure out how best to segment the market and position
CBPs in each market.
• Objectives of CBP (continued)

5. Avoid CBP duplication and proliferation.
6. Bring each CBP, and associated process and
service encounters, to market as quickly as
possible. Use the CBP framework and final
attributes to design facilities, processes,
equipment, jobs, and service encounters.
7. Maximize customer satisfaction and profits.

• Deborah Kellogg and Winter Nie provided a service

process/service package matrix.
• As shown in Figure 8.14, firms will offer unique
service packages, selective service packages, restricted
service packages, or generic service packages.
• Strategic issues will affect your ability to provide
unique service package.
• Generic service packages are of the one-size-fits-all
variety, and unique service package are specially
tailored for each customer.
Slide 3 of 3
Figure 8.14 Service Process/CBP Matrix
Unique Selective Restricted Generic

Service Process service service service service
Structure package package package package
Expert service Consulting
Service shop Higher Education
Service factory Package Delivery

• Table 8.3 shows a customer benefits

package from the Slide-Master firm.
• Table 8.4 shows the transition to the
services economy by the Japanese between
1980 and 200.
• The implication is that service competition
will increase on a global scale, as has been
the case in manufacturing for the past 40
years.
• Table 8.3 Final CBP Attributes for Slide-Master

• Table 8.4 Japan’s Economy in the Year 2000

Improving Customer Service In
Government
If customer service is the battlefield for business

leading into the twenty-fists century, then
government is probably the last frontier. There
are some evidence of improvement in several
aspects of government service.
The National Productivity Review reports that
some federal government agencies have adopted
quality management ( see A Closer Look at
Quality).
Improving Customer Service In Government
• As of 1998, the government had developed a

searchable list of 4000 customer service
standards for 750 federal departments and
agencies, and with “ customer-driven
government that matches or exceeds the best
service available in the private sector”
• States are also jumping on the bandwagon. By
1998, 44 states had established quality award
programs.
Improving Customer Service In Government
• It is clear that private sector quality management

practices are being adopted in government.
• Several factors seem to be driving this changes:
-- People want and desire to do good quality work.
-- Because quality management is associated with improved
employee satisfaction, there is a major impetus to improve.
-- Government leaders are mandating standards, strategic plans,
and new levels of performance at all levels of government.
-- Demand for government services is growing at a faster rate
than funding for them.
-- Finally, the threat of privatization in government has led to
improvement in service in many areas.
Quality in Health Care
• Another area of services that is receiving much

attention is health care.
• Several factors have contributed to this
phenomenon:
-- Health care is facing the same “ cost squeeze” that
government is facing.
-- A move toward health maintenance organizations
(HMOs) is causing hospitals to streamline operations.
-- There is increasing diversity in health care.
-- Calls for a nationalized health care system threaten the
status quo and provide the competitive pressures that spur
the impetus to improve.
Quality in Health Care
• Many health care customers are uncomfortable

with these changes to government and health
care.
• If quality approaches are applied, it is probably
best that efforts not focus entirely on efficiency.
• Reliability and empathy are dimensions that can
only be good for health care.

A Theory For Service Quality
Management
• Dr. Scott Sampson developed the Unified Theory

for Services Management provides interesting
insights for quality management.
• This theory consists of several propositions.
• These propositions are based on the definitions of
service that are introduced early in this chapter.
• Some of the propositions are as follows.

Management
Slide 1 of 4
Proposition 1: The Unified Services Theory
“With services, the customer provides significant inputs

into the production process. With manufacturing, groups
of customers may contribute ideas to the design of the
product; however, individual customers’ only part in the
actual process is to select and consume the output.
Nearly all other managerial themes unique to
services are founded in this distinction.
Management
Slide 2 of 4
Proposition 2: The Unreliable Supplier Dilemma
“With services, the customer-suppliers often

provide unreliable inputs.”
This simultaneous relationship as supplier and
customer makes it difficult for the service provider
to control the supplied inputs.

Management
Slide 3 of 4
Proposition 3: Capricious Labor
“With services, customer-labor may ignore, avoid,

or reject technologies or process improvements
which are intended to increase quality and
productivity. As a result, customer buy-in to
process changes must be carefully addressed.”
It is because of many services customers provide
themselves as labor inputs into the production process.
Management
Slide 4 of 4
Proposition 4: Everyone Presumes to be An Expert
“With services, the customer often provides

product specifications (what to make) and
process design (how to make it), often without the
invitation of the service provider.”
It is because of the necessity for customer input in
service processes means that most customers have
extensive experience with the service process.

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Chapter 8

Designing Quality Services

S. Thomas Foster, Jr.

• Differences between Services and

• Improving Customer Service in

© 2001 Prentice-Hall Transparency 8-3

• High-quality service is essential for competitiveness

• In today’s economy, service still is a major

© 2001 Prentice-Hall Transparency 8-5

• Figure 8.1 How much profit a customer generates

© 2001 Prentice-Hall Transparency 8-6

© 2001 Prentice-Hall Transparency 8-7

Unique Attributes of Services

3. Customers are more involved in

• One useful distinction between services and

• Because customers are actively involved in

© 2001 Prentice-Hall Transparency 8-11

• Customer can exert great control over the service

© 2001 Prentice-Hall Transparency 8-12

• Internal Versus External Services

• Voluntary Versus Involuntary Services

© 2001 Prentice-Hall Transparency 8-14

• Voluntary Versus Involuntary Services

• Voluntary Versus Involuntary Services

© 2001 Prentice-Hall Transparency 8-16

• Because services attributes are often

© 2001 Prentice-Hall Transparency 8-17

© 2001 Prentice-Hall Transparency 8-18

How are services quality issues similar to

Zeithamel, Parasuraman, and Berry’s List of

• As in any industry, the concept of leadership is

© 2001 Prentice-Hall Transparency 8-22

Attributes of Effective Leaders in Service

• A leader who has a service vision really view

• In service, you will notice that some firms are

© 2001 Prentice-Hall Transparency 8-25

• Outstanding services leaders have an in-the-field

© 2001 Prentice-Hall Transparency 8-26

© 2001 Prentice-Hall Transparency 8-27

• The SERVQUAL instrument, a survey, has many

• Although the SERVQUAL survey is not as widely

© 2001 Prentice-Hall Transparency 8-29

• The SERVQUAL survey has two parts –

• This type of analysis provides a good way to

• Figure 8.2 SERVQUAL Expectations Survey

© 2001 Prentice-Hall Transparency 8-32

• The SERVQUAL perceptions survey shown in

© 2001 Prentice-Hall Transparency 8-34

• Figure 8.3 SERVQUAL Perceptions Survey

© 2001 Prentice-Hall Transparency 8-35

PROVIDER Gap 4 External

Inadequate training, communication, and preparation

© 2001 Prentice-Hall Transparency 8-40

Gap 5 shows the differences between expected services

• The key to closing gap 5 is to first close gaps 1

© 2001 Prentice-Hall Transparency 8-43

• Assessing Differences in Expectations and

© 2001 Prentice-Hall Transparency 8-44

• 1. Typically, you need a sample size of between 50

© 2001 Prentice-Hall Transparency 8-45

• Example 8.1 SERVQUAL Differencing

© 2001 Prentice-Hall Transparency 8-46

• Example 8.1 (continued)