Unit 3: Service Quality and Productivity

SERVICE QUALITY AND PRODUCTIVITY

Service quality refers to how well a service meets or exceeds customer expectations.
Productivity refers to the efficiency with which a service organization uses its resources to deliver quality service.

Concept of Service Quality

Service quality is the customer’s judgment about the overall excellence or superiority of a service.

Key Characteristics

• Services are intangible → customers use perception to judge quality
• Quality depends on service delivery, not just features
• Quality varies because service is human-intensive

Dimensions of Service Quality (by Parasuraman, Zeithaml, Berry)

1. Reliability – Consistent and dependable service
2. Responsiveness – Willingness to help customers quickly
3. Assurance – Employees’ knowledge and courtesy, trust creation
4. Empathy – Caring, individualized attention
5. Tangibles – Physical facilities, cleanliness, appearance of staff

SERVQUAL Model (Service Quality Model)

SERVQUAL is a widely used tool to measure gaps between customer expectations and their perceptions of service performance.

Structure of SERVQUAL

The model measures service quality = Perception − Expectation
(If P > E → satisfied; P < E → dissatisfied)

The 5 SERVQUAL Dimensions

Dimension	Meaning	Examples
Reliability	Ability to perform promised service accurately	On-time delivery, correct billing
Responsiveness	Prompt service, willingness to help	Quick check-in, fast complaint handling
Assurance	Safety, trust, employee knowledge	Skilled staff, polite behavior
Empathy	Personal care and attention	Understanding customer needs
Tangibles	Physical appearance and equipment	Clean facility, modern tools

How SERVQUAL Works

1. Survey customers on expectations (E)
2. Survey perceptions after service (P)
3. Compute gap: SQ = P – E
4. Analyze gaps by dimension
5. Identify weak areas for improvement

GAP Model of Service Quality

The Gap Model explains why service delivery fails.

Gap 1: Knowledge Gap

Difference between customer expectations and management’s understanding of those expectations.
Cause: poor market research or communication.

Gap 2: Design/Standards Gap

Difference between management’s understanding of expectations and service quality standards.
Cause: unrealistic standards, poor processes.

Gap 3: Delivery Gap

Difference between service standards and actual service delivery.
Cause: undertrained staff, capacity issues, lack of teamwork.

Gap 4: Communication Gap

Difference between service delivered and what is promised in marketing.
Cause: overpromising in ads, misleading messages.

Gap 5: Customer Gap (Most Important)

Difference between customer expectations and perceptions.
This is the primary measure of service quality.
(It is influenced by all other 4 gaps)

Techniques for Measuring Service Quality

1. SERVQUAL Surveys

Measures perception vs expectation across 5 dimensions.

2. Customer Satisfaction Surveys

• Online forms
• Feedback cards
• Post-service SMS/Email surveys

Useful for quick quality checks.

3. Mystery Shopping

Trained evaluators act as customers to secretly assess:

• Service behavior
• Cleanliness
• Compliance with standards
• Waiting time

Used by restaurants, banks, retail, hotels.

4. Service Quality Audits

Formal audits of:

• Service standards
• Processes
• Employee performance
• Legal compliance

5. Customer Complaints Analysis

Analyzing complaints to find:

• Frequent service failures
• Root causes
• Improvement areas

6. Critical Incident Technique (CIT)

Collecting customer stories of:

• Very good service incidents
• Very bad service incidents

Helps identify key drivers of satisfaction.

7. Customer Journey Mapping

Tracking the entire service experience, from first contact to service completion. Identifies pain points.

8. Net Promoter Score (NPS)

Single question:
“How likely are you to recommend us to others?”
Score helps measure loyalty.

9. Customer Effort Score (CES)

Measures how easy it is for customers to get service.
Lower effort = higher satisfaction

Summary Table

Topic	Meaning	Key Points
Service Quality	Judgment of service excellence	Based on customer expectations & perceptions
SERVQUAL	Measures gap between expectation & perception	5 dimensions: RATER
Gap Model	Explains reasons for service failures	Gap 1–4 internal gaps, Gap 5 customer gap
Measurement Techniques	Tools to assess service performance	Surveys, mystery shopping, NPS, audits

Productivity in Service Operations

Productivity in services means how efficiently a service organization uses its resources (people, time, technology, money) to deliver services.

Formula (Basic)

Productivity = Output / Input

Unique Challenges in Service Productivity

• Services are intangible → cannot be stored
• High involvement of people → performance varies
• Customer participation affects productivity
• Variability in demand

Ways to Improve Service Productivity

1. Standardization

• Use SOPs (standard operating procedures) Example: McDonald’s food assembly process

2. Technology Integration

• Self-service kiosks
• Online booking
• ATMs
• Chatbots

3. Employee Training & Multiskilling

• Cross-trained staff improves speed Example: Hotel employees trained for reception + billing

4. Process Redesign

• Reduce unnecessary steps
• Streamline flow
• Lean service principles

5. Capacity Utilization

• Reducing idle time
• Using part-time staff during peak hours

Balancing Productivity and Customer Satisfaction

This is important because higher productivity may reduce service experience.

Trade-Off

• Faster service → may appear rushed
• Cost-cutting → may reduce personal attention
• Automation → may reduce human touch

How to Balance Both?

1. Use Technology WITHOUT losing human touch Example: Online check-in + personal greeting at hotel lobby
2. Match staff with demand peaks - Reduces waiting time while controlling cost
3. Empower employees - Employees should be able to solve problems without approvals
4. Focus on quality, not just speed - Balance speed with personalization
5. Service Design Thinking - Design processes from customer’s point of view

Service Recovery Strategies

Service recovery = Actions taken to fix a service failure and restore customer satisfaction.

Why It Matters

• A well-handled failure increases customer loyalty
• Customers tell others about bad experiences → affects brand

Steps in Effective Service Recovery 

1. Apologize sincerely - Acknowledge the issue.
2. Take responsibility - Do not blame the customer.
3. Provide a quick solution - Time is critical.
4. Empower employees - Allow frontline staff to fix issues instantly.
5. Offer compensation - Refund, discount, replacement, free service.
6. Follow-up - Ensure customer satisfaction after recovery.

Types of Service Recovery Strategies

Strategy	Meaning	Example
Complaint handling	Immediate resolution	Bank resolves ATM error instantly
Empowerment	Employees can take decisions	Hotel receptionist upgrades room
Service Guarantees	Promise of quality and compensation	Domino’s "30 minutes delivery guarantee"
Root cause analysis	Fix underlying problems	Airlines reducing overbooking after complaints

Customer Retention Strategies

Customer retention focuses on keeping existing customers rather than getting new ones.

Key Customer Retention Techniques

1. Loyalty Programs - Reward points, discounts, membership benefits. Example: Amazon Prime, airline frequent flyer programs.
2. Personalized Service - Remember customer preferences, history, habits.
3. CRM Systems - Maintain customer data and provide customized offers.
4. Consistent Service Quality - Quality should be stable and reliable.
5. Proactive Communication - Notify customers about delays, offers, follow-up services.
6. Emotional Connection - Friendly staff, trust, empathy.
7. Feedback Systems - Actively collect and act on customer feedback.

Service Guarantee Strategies

A service guarantee is a promise of service quality backed by compensation if the service fails.

Purpose

• Reduces customer risk
• Builds trust
• Forces company to improve quality
• Encourages employees to perform consistently

Types of Service Guarantees

Type	Meaning	Example
Unconditional Guarantee	Promise without conditions	“Full refund if not satisfied”
Service Attribute Guarantee	Guarantee on specific features	“Delivery within 24 hours”
Combined Guarantee	Both service & outcome guaranteed	E-commerce delivery + product satisfaction
Implicit Guarantee	Unspoken assurance	Brand reputation (Taj Hotels)

Characteristics of an Effective Guarantee

• Simple to understand
• Easy to claim
• Meaningful compensation
• Reliable and believable

Case Study Analysis & Industry Examples

Below are MBA-ready case studies to support understanding.

Case Study 1: Domino’s 30-Minute Delivery

Problem - Customers expected fast delivery → delays hurt satisfaction.

Strategy

• Introduced “30 minutes or free” service guarantee.

Improved delivery productivity using:

• Route optimization
• Store expansion (location strategy)
• Better staffing and scheduling

Outcome

• Higher customer satisfaction
• Improved brand image
• Competitive advantage in the food delivery market

Case Study 2: Amazon Customer Service

Problem - High customer expectations for fast delivery & instant help.

Strategy

• Prime one-day delivery
• Hassle-free returns (service recovery)
• Chatbot + human support balance
• Personalized recommendations
• Loyalty through Prime membership

Outcome

• Very high customer retention
• Strong service productivity through automation

Case Study 3: Starbucks Experience

Key Areas

• Service environment (ambience, music)
• Personalized service (customer name on cup)
• Employee empowerment
• Quick service + quality focus

Outcome

• High satisfaction and loyalty despite premium pricing

Case Study 4: Indigo Airlines (India)

Challenge

Airline industry suffers from delays, dissatisfaction.

Strategy

• On-time performance
• Standardized processes
• Efficient staff scheduling
• Simplified in-flight services
• Complaint-based recovery

Outcome

• Highest on-time record
• Strong brand image

Summary Table

Topic	Meaning	Tools
Service Productivity	Efficient use of resources	Technology, training, SOPs
Balance Productivity vs Satisfaction	Improvement without harming experience	Staff planning, design thinking
Service Recovery	Fixing service failures	Apology, compensation, empowerment
Customer Retention	Keeping long-term customers	Loyalty programs, CRM, personalization
Service Guarantees	Promise backed by compensation	Unconditional, attribute, combined
Case Studies	Real examples	Domino’s, Amazon, Starbucks, Indigo