Transcript Slide 1

Service Quality
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.
Dimensions of Service Quality
• Reliability: Perform promised service
dependably and accurately.
– Example: receive mail at same time each day.
• Responsiveness: Willingness to help
customers promptly.
– Example: avoid keeping customers waiting for no
apparent reason.
Dimensions of Service Quality
• Assurance: Ability to convey trust and confidence.
– Example: being polite and showing respect for customer.
• Empathy: Ability to be approachable.
– Example: being a good listener.
• Tangibles: Physical facilities and facilitating goods.
– Example: cleanliness.
Perceived Service Quality
Word of
mouth
Service Quality
Dimensions
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Personal
needs
Expected
service
Perceived
service
Past
experience
Service Quality Assessment
1. Expectations exceeded
ES<PS (Quality surprise)
2. Expectations met
ES~PS (Satisfactory quality)
3. Expectations not met
ES>PS (Unacceptable quality)
Service Quality Gap Model
Service
Quality
Gap
Model
Customer
Customer
Perceptions
Managing the
Evidence
Customer Satisfaction
GAP 5
Expectations
Customer /
Marketing Research
GAP 1
Communication
GAP 4
Understanding
the Customer
Management
Perceptions
of Customer
Expectations
Service
Delivery
Conformance
GAP 3
Design GAP 2
Conformance
Service
Standards
Service Design
Quality Service by Design
• Quality in the Service Package
– Budget Hotel example
• Taguchi Methods (Robustness)
– Notifying maids of rooms for cleaning
• Poka-yoke (fail-safeing)
– Height bar at amusement park
• Quality Function Deployment
– House of Quality
Classification of Service Failures
with Poka-Yoke Opportunities
Server Errors
Task:
Doing work incorrectly
Treatment:
Failure to listen to customer
Tangible:
Failure to wear clean uniform
Customer Errors
Preparation:
Failure to bring necessary
materials
Encounter:
Failure to follow system flow
Resolution:
Failure to signal service
failure
House of Quality
Achieving Service Quality
• Cost of Quality (Juran)
• Service Process Control
• Statistical Process Control (Deming)
• Unconditional Service Guarantee
Costs of Service Quality
Failure costs
External failure:
Loss of future business
Negative word-of-mouth
Liability insurance
Legal judgments
Interest penalties
Internal failure:
Scrapped forms
Rework
Recovery:
Expedite disruption
Labor and materials
Detection costs
Process control
Peer review
Supervision
Customer comment card
Inspection
Prevention costs
Quality planning
Training program
Quality audits
Data acquisition and analysis
Recruitment and selection
Supplier evaluation
Service Process Control
Customer
input
Service
process
Resources
Take
corrective
action
Identify reason
for
nonconformance
Service
concept
Customer
output
Monitor
conformance to
requirements
Establish
measure of
performance
Control Chart of Departure Delays
expected
Lower Control Limit
1998
p(1  p
UCL  p  3
n
1999
p(1  p
LCL  p  3
n
Unconditional Service Guarantee:
Customer View
•
•
•
•
•
Unconditional (Big Bazaar)
Easy to understand and communicate (dish tv)
Meaningful (Domino’s Pizza)
Easy to invoke (Apparel)
Easy to collect (Manpower)
Unconditional Service Guarantee:
Management View
•
•
•
•
Focuses on customers (British Airways)
Sets clear standards (FedEx)
Guarantees feedback (Manpower)
Promotes an understanding of the service
delivery system (Bug Killer)
• Builds customer loyalty by making
expectations explicit
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
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 problem
was 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.
Walk-Through-Audit
• Service delivery system should conform to
customer expectations.
• Customer impression of service influenced by
use of all senses.
• Service managers lose sensitivity due to
familiarity.
• Need detailed service audit from a customer’s
perspective.
Severity
Of
Failure
Service
Failure
Occurs
Patronage
Perceived
Service
Quality
Psychological
-empathy
-apology
Provider
Aware of
Failure
Service
Recovery
Expectations
Customer
Loyalty
Service
Guarantee
Pre-recovery Phase
Tangible
-fair fix
-value add
Fair
Restitution
Service
Recovery
Speed of
Recovery
Psychological
-apology
-show interest
Frontline
Discretion
Immediate Recovery Phase
Follow-up
Service
Recovery
Loyalty
Satisfaction
Retention
Tangible
-small token
Follow-up Phase
Service Recovery Framework
Approaches to Service Recovery
• Case-by-case addresses each customer’s complaint
individually but could lead to perception of unfairness.
• Systematic response uses a protocol to handle complaints
but needs prior identification of critical failure points and
continuous updating.
• Early intervention attempts to fix problem before the
customer is affected.
• Substitute service allows rival firm to provide service but
could lead to loss of customer.
Service Quality Gap Model
Service
Quality
Gap
Model
Customer
Customer
Perceptions
Managing the
Evidence
Customer Satisfaction
GAP 5
Expectations
Customer /
Marketing Research
GAP 1
Communication
GAP 4
Understanding
the Customer
Management
Perceptions
of Customer
Expectations
Service
Delivery
Conformance
GAP 3
Design GAP 2
Conformance
Service
Standards
Service Design
The key drivers of the Knowledge Gap
 Ineffective market research
 Insufficient market research
 Market research that asks the wrong questions
 Inadequate use of marketing research
 Lack of upward communication
 Lack of direct interaction between management and customers
 Insufficient communication between contact employees and managers
 Too many layers between customers and top management
 Insufficient relationship focus
 Lack of market segmentation – doing too little for too many
 Focus on transaction rather than relationships
 Focus on new customers at the cost of existing customers
 Inadequate service recovery
 Lack of listening to customer complaints
 Failure to make amends when things so wrong
 No recovery mechanisms in place
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The key drivers of the Standards Gap
 Poor service design
 Unsystematic new service development process
 Fuzzy service designs
 Failure to connect service design to service positioning
 Absence of customer-driven standards
 Lack of standards
 Absence of process management to focus on customer requirements
 Absence of formal process for setting service quality goals
 Inappropriate physical infrastructure and servicescape
 Failure to develop tangibles in line with customer expectations
 Servicescape design does not meet customer and employee needs
 Inadequate maintenance and updating of the servicescape
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The key drivers of the Delivery Gap
 Poor human resource policies
 Ineffective recruitment
 Role ambiguity and role conflict
 Poor employee-technology fit
 Inappropriate evaluation and compensation
 Lack of empowerment, control and teamwork
 Customers who do not fulfill roles
 Customers who lack knowledge of their roles and responsibilities
 Customers who negatively impact each other

Problems with service intermediaries
 Conflict over objectives and performance
 Difficulty controlling quality and consistency
 Tension between empowerment and control

Failure to match supply and demand
 Failure to smooth peaks and valleys of demand
 Inappropriate customer mix
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The key drivers of the Communications Gap
 Lack of integrated service marketing communications
 Tendency not to coordinate distinct pieces of communication
 Absence of interactive element
 Absence of strong internal marketing program
 Ineffective management of customer expectations
 Absence of expectation management
 Lack of adequate education for customers

Overpromising
 In advertising
 In personal selling
 Through physical infrastructure cues

Inadequate horizontal communication
 Between sales and operations
 Between advertising and operations
 Differences in policies and procedures across branches and units
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Remember
Knowledge – Standards – Delivery – Communications
Do I know what the customers wants?
If I know what the customer wants, have I designed the service standards accordingly?
If I have designed the service standards well, am I delivering to those standards?
Am I managing communications with the customer to set expectations and influence
service perceptions in the best way possible?
K-S-D-C!
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Potential projects
 Apply the GAP model of services to the project you have chosen
 Evaluate what are the main gaps that negatively effect the service
experience. You may conduct in-depth interviews of customers at some
stage to make sure the gaps are what you “think” they are.
 Following from your analysis, what strategy should your client adopt to
address each of the gaps? Detail the specific, actionable steps.
Copyright Dr. AK Rao
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Topic 3: Two broad service “metaphors”


Copyright Dr. AK Rao
Two extreme metaphorical interpretations of
services:

Service as drama (the emotional criterion)

Service as process (the efficiency criterion)
Most services are designed according to the
efficiency criterion. Adding some drama can help
distinguish services and make them memorable.
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Combining the metaphors
All process
Mix of drama
AND
process
All drama
Many great
services
reside here!!
Copyright Dr. AK Rao
30
Most services are process-intensive … some drama can help!
Dramatic gestures need not be
expensive ones! Small hole-in-the
wall eatery owners (in India) will
often cool down your boiling hot tea
of coffee by pouring it between two
vessels from a height.
Copyright Dr. AK Rao
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Ways to inject drama
Pizza dough takes a leap…
Rumali Roti cooked on a tawa
Copyright Dr. AK Rao
32
Ways to inject drama
At the Jasmine Seafood Restaurant
in San Diego, you can order fresh
seafood or pick live seafood from
one of six fish tanks. The claim:
“Nothing is fresher than picking your
own seafood swimming in the
tanks.”
Copyright Dr. AK Rao
33
Topic 4: Setting Standards and Designing services
– Approaches and Tools
Employee-focused design
Service quality-focused design
Customer experience-focused design
Process flow-focused design
Time target-focused design
Physical environment-focused design
Activity ownership-focused design
Efficiency-focused design
Rewards and retention-focused design
Copyright Dr. AK Rao
34
Standards and Design Approach 1:
Employee-focused standards and design
Old model: Puts workers who deliver customer-service
last.
New model: Puts frontline workers first and designs the
business system around them.
 Value investments in people as much as
investments in machines and sometimes more.
 Use technology to support, not replace, the frontline.
 Make recruitment and training as crucial for the
frontline workers as for the top-line managers.
 Link compensation to performance at every level.
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Core rationale for employee-focused standards and design
The service-profit chain: Discuss
Let’s focus within the box…
Courtesy: http://www.marlow.com/AboutMarlow/Quality/profit5.gif
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How employee satisfaction drives employee loyalty and employee
productivity: The Wegmans grocery chain
Wegmans does not hesitate to pay to attract really
top culinary talent.
The company has shelled out $54 million for
college scholarships to more than 17,500 full- and
part-time employees over the past 20 years. It
thinks nothing of sending, say, cheese manager
Terri Zodarecky on a ten-day sojourn to
cheesemakers in London, Paris, and Italy.
It invests in making employees experts in the
foods they deal with.
It gives employees great flexibility in terms of what
they can do to deliver great customer satisfaction.
www.fortune.com
37
How does this impact employee loyalty?
All that means Wegmans' labor costs run between 15%
and 17% of sales, compared with 12% for industry.
But its annual turnover rate for full-time employees is just
6%, compared to19% for similar grocery chains.
Almost 6,000 Wegmans employees—about 20%—have
ten or more years of service, and 806 have a quartercentury under their belts.
All this in an industry where annual turnover costs can
exceed profits by more than 40%,
While it has no publicly traded stock, its operating
margins are about 7.5%, double what the big four grocers
earn. Its sales per square foot are 50% higher than the
$9.29 industry average.
www.fortune.com
38
An important point
If a service delivery fails, look for both “human” and “systemic”
failures. Don’t just yell at the human, that’s the easy thing to do!
 Horst Schulze, the legendary leader of Ritz-Carlton Hotels
describes how a manager solved the problem of room-service
breakfasts arriving late and cold.
 If you were the hotel manager and received complaints about
meals arriving cold, what would you do?
 Typical response: The hotel manager yells at the room-service
manager, the room service managers yells at his
subordinates, who in turn yell at the cooks, and the food
delivery staff.
 What really happened?
Copyright Dr. AK Rao
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Employee-focused standards and design: What do you focus on?
Are you hiring employees right?
 Are you hiring the right kind of people in terms of skills and capabilities?
 Are you hiring the right kind of people in terms of personality fit?
Are you training employees right?
 Are you providing your people with the depth and width of knowledge they require to
perform excellently at their jobs?
 Have you designed jobs so that your people can find meaning and joy at work?
Are you treating and motivating employees right?
 Have you made employees feel valued?
 Have you done away with dead-end jobs in your company?
 Are you compensating your people well and saving money via higher retention, rather
than trying to save by paying less in the short term?
Copyright Dr. AK Rao
40
Standards and Design Approach 2:
Service quality-focused standards and design
How do customers evaluate service quality? The SERVQUAL framework
Tangible aspects Physical facilities, equipment, appearance of
personnel
Reliability
Ability to perform promised service dependably and
accurately
Responsiveness
Willingness to help customers and provide prompt
service
Assurance
Knowledge and courtesy of employees and their ability
to inspire trust and confidence.
Empathy
Caring, individualized attention the firm provides its
customers
Copyright Dr. AK Rao
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RELIABILITY
SERVQUAL Scale Items
ASSURANCE






Providing service as promised
Dependability in handling
customers’ service problems
Performing services right the first
time
Providing services at the promised
time
Maintaining error-free records



EMPATHY



RESPONSIVENESS




Keeping customers informed as to
when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers’
requests
Copyright Dr. Valarie Zeithaml
Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous
Employees who have the knowledge to answer
customer questions


Giving customers individual attention
Employees who deal with customers in a caring fashion
Having the customer’s best interest at heart
Employees who understand the needs of their
customers
Convenient business hours
TANGIBLES




Modern equipment
Visually appealing facilities
Employees who have a neat, professional appearance
Visually appealing materials associated with the
service
Implementing SERVQUAL
 SERVQUAL is best implemented in a Satisfaction = Performance –
Expectations framework.
 Therefore, ideally, one should measure both expectations and
performance.
 Ideally, one should temporally separate the measures of
expectations and performance.
 Here are the systematic steps to follow…
Copyright Dr. AK Rao
43
Implementing SERVQUAL: Step 1

Measure expectations using a 7 point Likert scale. Measure expectations for each
item under Reliability, Assurance, Responsiveness, Empathy and Tangibles.

A typical item in this Expectations measurement survey could be:
Survey header: These questions pertain what you consider to be the absolutely
excellent firms in the service category.
When customers have a problem, excellent firms will show a sincere interest
in solving it.
Strongly disagree
1
2
Strongly agree.
3
4
5
6
7

Ask these expectations for the “excellent firms” for all the items in the SERVQUAL
instrument (see previous slide).

Important: At the end of the survey, ask participants to allocate 100 points
between Reliability, Assurance, Responsiveness, Empathy and Tangibles
Copyright Dr. AK Rao
44
Implementing SERVQUAL: Step 2

Let some time pass.

Measure performance evaluations for the target company using a 7 point Likert
scale. Measure expectations for each item under Reliability, Assurance,
Responsiveness, Empathy and Tangibles.

A typical item in this Expectations measurement survey could be:
When customers have a problem, company XYZ shows a sincere interest in
solving it.
Strongly disagree
1
2
Strongly agree.
3
4
5
6
7

Ask these evaluations for firm XYZ for all the items in the SERVQUAL instrument
(see previous slide). Use consistent wordings as for the Expectations survey.

Important: At the end of the survey, ask the respondents for an overall measure of
satisfaction with company XYZ’s service, using a 7 point scale (“Not at all
satisfied” to “Very satisfied.”)
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Copyright Dr. AK Rao
Implementing SERVQUAL: Step 3
 Analyze and report the data. Consider using the following format.
 Alternatively, you can report the data at the level of the individual items.
 You can also perform a regression with overall satisfaction as the
dependent variable and the gap scores as the explanatory variables to
understand what exactly is driving customer satisfaction…
Copyright Dr. AK Rao
46
Service-quality focused standards and design: Summary
 The SERVQUAL approach offers a well-tested, robust
approach to measure service quality.
 The focus here is on designing services that ultimately rate
well when their quality is measured using the SERVQUAL
framework.
Copyright Dr. AK Rao
47
Standards and Design Approach 3:
Customer experience-focused standards and design
 Careful attention to the pattern of customer experiences
 Application of knowledge regarding customer perceptions and
cognitions
 Here are the systematic steps to follow…
Copyright Dr. AK Rao
48
Step 1: Manage the timing of payments and consumption
Payments and consumption at a Chicago health club…
Figure from “Pricing and the Psychology of Consumption” by John Gourville and Dilip Soman in Harvard Business Review,
49
September 2002.
Quality of service experience
Step 2: Manage the sequence of the service experience with care
Quiz: What would
determine the final
customer memories of the
experience?
Time
Copyright Dr. AK Rao
50
Finish strong and maintain strong “high points”
Finish strong:
 Cruise lines end each
day with raffles, contests,
shows.
 End cruise with the
captain’s dinner
 Pass out keepsakes or
wine bottles on reaching
the home port
Copyright Dr. AK Rao
51
Get the bad experiences out of the way early
 Delayed planes: Let
customers know about
the delay and the reason
as soon as possible.
 Doctors: Perform
uncomfortable
procedures first.
 Deliver the bad news as
soon as possible.
Copyright Dr. AK Rao
52
Step 3: Build commitment through choice
 Giving customers choices makes them feel
empowered.
 XEROX: Had problems with providing
service for customers on account of crossscheduling and lack of timely appearance.
 Xerox implemented a system that allowed
customers to rate the severity of the problem
and the time by which they needed
attention.
 personnel would arrive more quickly for an
urgent problem than for a minor one.
Copyright Dr. AK Rao
 Customer satisfaction increased sharply,
and the number of repair calls went down.
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Discuss: Why?
Step 4: Given people rituals and stick to them
 Rituals help customers find
comfort, familiarity, and order.
 The famous McKinsey “uhhuh, uh-huh..”
Copyright Dr. AK Rao
54
Step 5: Reduce the amount of “uncertain” wait
 You have a doctor’s appointment at 9
AM.
 You arrive at 8.40 AM.
 You cheerfully wait until 9 AM.
 But, by 9.04 AM, you are restless and
unhappy.
 You don’t know how much longer it is
going to take.
Copyright Dr. AK Rao
55
Summary: Customer experience-focused standards and design
 Careful attention to the pattern of customer experiences
 5 Steps to keep in mind towards designing the customer
experience in the service environment.
Copyright Dr. AK Rao
56
Standards and Design Approach 4:
Process flow-focused standards and design
 Key tool: “Service blueprint”
 Breakdown of the service delivery process into:
 Physical evidence
 Customer actions
 Onstage employee actions (employee “in touch” with
customers)
 Backstage employee actions
 Service support processes
 Example…
Copyright Dr. AK Rao
57
Reproduced from “Services Marketing” by Zeithaml, Bitner and Gremler.
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Summary: Process flow-focused standards and design
 Key tool: “Service blueprint”
 Useful because:
 It provides a certain concreteness to the service experience
 It helps managers build new services
 It helps managers redesign existing services
 It helps managers understand how some actions at one part of
the service process can affect outcomes that may seem
distant from that part of the process (e.g., It helps ALL hotel
staff to know that a particular guest has been let down by the
hotel staff in some context.)
Copyright Dr. AK Rao
59
Standards and Design Approach 5:
Time target-focused standards and design
 Careful attention to bringing down the total elapsed time between order
and service delivery.
 The story of Jefferson Pilot Financial*:
 JPF undertook a detailed examination of its New Business Unit’s operations.
 Considerable variation on service quality:
 Applications requiring physician’s statement took 1-2 months for
processing.
 Processing times for other applications were even more variable –
35% standard deviation.
 10% of all applications required rework.
 JPF decided to learn from the manufacturing industry – a 5-person “lean
team” was set up…
*Adapted from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.
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Targets and results at
Jefferson Pilot Financial
Figure from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.
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The secret?
 Adoption of the “model-cell” approach in which the company sets
up a fully functioning microcosm of its entire process in one of its
businesses.
 The serves almost as an experiment – learning helps refine the
process design.
 Broad transformation approach follows.
 Steps to be followed…
Copyright Dr. AK Rao
62
Cellular production
The cellular approach is to organize the entire manufacturing process
for particular or similar products into one group of team members and
machines known as a "Cell". These "cells" are arranged in continuous
layout to facilitate a variety of operations.
Steps to design such a process in a service context…
From: http://www.cellularmanufacturing.com/Pages/whatmain.html
Copyright Dr. AK Rao
63
Cellular service “production” : Step 1: Co-locate linked processes
 All steps in the process should physically
proximate.
 At JPF, work groups were located by function.
 Employees receiving applications from
independent advisors/agents and those sorting
them were on different floors – one day or
more for the files to be transferred by internal
mail.
 Once receivers and sorters were co-located, it
took just a few minutes.
Another advantage: The old attitude: “All I’m responsible for is XYZ”
began to fade.
64
Copyright Dr. AK Rao
Step 2: Standardize procedures
 JPF had given employees considerable
latitude in managing their work.
 What resulted was a mix of filing and
sorting systems – some did it by policy
holder, others by policy numbers…
 When employees were absent,
substitutes found it difficult to manage.
 The lean team insisted that all files be
stored alphabetically in a specific drawer
at each work station.
 Physical workspace was reconfigured so that the supervisor could, while
walking by, determine the level of pending and processed files.
Copyright Dr. AK Rao
65
Step 3: Eliminate “loopbacks”
 A loopback occurs when work returns to a
previous stage for processing.
 JPL recognized that all sections of the
initial application were sent back to the
receiver to be sorted, physically assembled
and turned in to the insurance advisor
interacting with the client…this led to
delays in processing new
applications…leaving the downstream idle.
 JPL split the receiving team in half,
allocating the halves separately to
receiving and to reassembling policies.
 The change also eliminated role and effort allocation confusion on
the part of employees and reduced delays.
Copyright Dr. AK Rao
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Step 4: Set a common tempo
 JPL smoothed out the work flow by applying the
concept of “takt” time (German for musical
meter)
 To satisfy market demand, each cell in the New
Bus. division had to process 10
applications/hour.
 The takt time was one application every 6
minutes.
 The lean team members timed each work
element of the model cell, such as retrieving the
application, keying in information, etc.
 They established a “base time” for each
application, and challenged the cell members to
beat it.
Copyright Dr. AK Rao
67
Step 5: Balance loads in the service production line
 JPL recognized that its work allocation
system was inefficient. JPF had allocated
incoming applications by channel
(doctor/no-doctor) and then alphabetically.
 Therefore, an application from Tom
Anderson would go to the A-C team even if
another team was idle.
 In the model cell, alphabetical allocation
was replaced by sequential allocation so
each team received the same number of
allocations.
 This utilized employees better and was
also perceived to be more fair.
Copyright Dr. AK Rao
68
Step 6: Segregate complexity
 Ever stood in line at a bank behind a
customer who took forever?
 At JPL, applications that needed and
did not need a physician’ statement
were all processed together.
 The model cell divided itself into two
groups to handle each of these
application types.
 The turnaround time for cases not
needing a doctor’s statement fell more
than 80%!
Copyright Dr. AK Rao
69
Step 7: Establish appropriate target metrics and post results
 A firm’s metrics may impede productivity. For
example, a call center that measures time
spent on phone by reps could suffer from
repeat calls and unsatisfied customers.
 Lean production principle: Measure
performance and productivity from the
customer’s perspective.
 Old metric: Time from application receipt by
the New Business division to the time the
approved policy was bound and printed. New
metric: Time from application mailing by
customer to the time the independent
advisor receives a completed policy.
Copyright Dr. AK Rao
70
Step 7: Establish appropriate target metrics and post results
Figure from “The Lean Service Machine” by Cynthia Karen Swank in Harvard Business Review, October 2003.
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Summary: Time target-focused standards and design
 Careful attention to the time spent in processing
customer services.
 Redesign of the service “factory” using lessons from
cellular manufacturing.
 7 Steps to keep in mind towards reducing the total time
required to deliver the customer service (as viewed from
the customer’s perspective).
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Standards and Design Approach 6:
Physical environment-focused standards and design
 Careful attention to designing the “props” or the elements of the
physical environment in which the service is delivered.
 The story of the Mayo Clinic*:
 Mayo understands that its customers look for evidence of competence,
caring and integrity, drawing inferences about what they cannot see
from what they can see.
 Mayo does not leave the nature of the physical evidence to chance –
instead it uses every opportunity to offer patients and their families
concrete and convincing evidence of its strengths and values.
 This process of “evidence management” is an organized, explicit
approach to present customers with coherent, honest evidence of your
capabilities.
 How does the evidence management process work at Mayo Clinic?
*Based on “Clueing in Customers” by Leonard L. Berry and Neeli Bendapudi in Harvard Business Review.
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STEP 1: Setting up the clues in people
Make customers the center of the organization
 Mayo patients describe their care as being organized
around their needs rather than the doctor’s schedule or
the hospital’s processes.
 Consistent focus on patients is the Mayo culture:
 “When I had a colonoscopy, my doctor waited
personally to tell me I had a polyp because he
remembered my husband died from small bowel
cancer and he knew I would be worried I had the
same thing.”
 “My oncologist is…the kindest man I have ever
met. He related some of his personal life to me. I was
more than my problem to him. He related to me as a
person.”
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William Mayo’s credo: The best interest of the
patient is the only interest to be considered.” 75
Setting up the clues in people
Hire customer-oriented people
 Mayo’s interviews of prospective employees
are focused on eliciting information about their
values, rather than getting them to choose the
correct “answer.”
 For example, an applicant who identifies
making a difference in a patient’s life as their
proudest moment is more likely to fit in with
the Mayo culture than one who recounts
achieving a career milestone.
 The feeling of pride and the alignment of the
employees’ attitudes with the Mayo culture
lowers turnover across the board – 4% versus
industry-wide 20% for nurses.
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Setting up the clues in people
Use storytelling to set lofty employee standards
Another STORY recounted during training…
 A critically ill patient was admitted to the Scottsdale
hospital just before her daughter’s wedding and
was unlikely to live to see it.
 The bride told the hospital chaplain how much she
wanted her mother to witness the wedding.
 Within hours, the hospital atrium was transformed
into a wedding chapel with flowers, balloons and
confetti. The cake was supplied by the employees,
and hospital chaplain officiated. A volunteer played
the piano.
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 On every floor, hospital staff, patients, and visiting
families ringed the atrium balconies, like “angels
from above” to quote the bride.
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STEP 2: Setting up the clues in collaboration
Coordinate resources towards delivering customer service
 From Mayo, patients perceive an integrated
coordinated response to their medical
conditions, AND to their psychological, social,
spiritual, and financial needs.
 If a doctor cannot answer a question, she
freely admits it to the patient and brings the
relevant expert into the team.
 Patient: “I have a lot of problems, and I like
that I can go to Mayo and be seen by a team
of specialists who work together to see the
big picture.”
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STEP 2: Setting up the clues in collaboration
Design incentives to support coordination
 All physicians are salaried so they don’t lose
money by referring patients to colleagues.
 A cardiac surgeon: “By not having our
economics tied to our cases, we are free to
do what comes naturally…to help one
another.”
 The “star billing” system is discouraged…
doctors who want to shine alone and
maximize income don’t work at Mayo.
 A physician: “I never feel I am in a room by
myself, even when I am.”
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STEP 2: Setting up the clues in collaboration
Create technologies and abilities that support coordination
 Mayo admitted a skin cancer patient at risk
for metastasis, and owing to impending
surgery at risk for nerve injury and
disfigurement.
 The Mayo ENT specialist in Scottsdale
called together 20 doctors from 3
campuses to discuss the case.
 The team, assembled in a day, met by
videoconference for 1.5 hours and reached
a consensus on the course of treatment,
including how to sample the patient’s
lymph nodes and reconstruct the surgical
wound.
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STEP 2: Setting up the clues in collaboration
Make the coordination transparent to the patient
 Mayo’s electronic medical record
(EMR) system improves the clinic’s
ability to present a seamless,
collaborative organization to the
patient.
 A patient: “On my last visit, the doctor
pulled up all my test scores from the
past five years on a computer and
showed me the trends and we
discussed what to do. I thought that
was excellent.”
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STEP 3: Setting up the clues in tangibles
Make the “entry” and public spaces friendly
 Mayo’s facilities have been designed
explicitly to relieve stress, offer refuge, and
create positive distractions.
 Architect: “I would like the patients to feel a
little better before they see their doctors.”
 The Gonda building has spectacular open
spaces, marble stairwell and floor, and a
multistory wall of windows overlooking a
garden.
Mayo Clinic’s Gonda Building in Rochester, MN.
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STEP 3: Setting up the clues in tangibles
Make the private spaces more accessible and friendly
 In examination rooms, the physician’s desk
is adjacent to a sofa large enough for the
patient and family members – this removes
the desk as a barrier between doctors and
patients.
Mammography room at Mayo Clinic’s Gonda
Building in Rochester, MN.
 Staff members write down the names of
attending doctors and nurses in every
patient’s room, which helps patients keep
track of multiple caregivers and lets them
know that there’s a real person in charge.
 In hospital showers, microwaves, and chairs
that convert to beds are available for family
members.
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STEP 3: Setting up the clues in tangibles
Make the private spaces more accessible and friendly
 The resuscitation equipment in pediatric
examination is hidden behind a large picture
(which slides out of the way when the
equipment is needed).
 At the Scottsdale campus, a car was lifted
into the building to help patients in physical
rehabilitation practice getting in and out in
the privacy of the hospital.
Mayo Clinic’s Gonda Building in Rochester, MN: A
library is available for patients to learn more about
their diagnosis, with access to health educators to
assist in their research.
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 Buildings include quiet, darkened spaces
where patients can rest between
appointments.
 A patient: “It did not seem like a doctor’s
office when we went to Mayo. There was no
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tension.”
STEP 3: Setting up the clues in tangibles
Pay attention to detailed physical evidence
Story of the dirty shoelace, as recounted by employee
Mary Ann Morris
 A supervisor noticed that her shoelaces were dirty
where they were threaded through the eyelets of the
shoes and asked her to clean them.
 Morris was offended and noted that she worked in a
lab, not with patients.
 Her boss replied that Morris has contact with patients
in ways she did not recognize – in the street with her
badge on, or passing them on the hospital floors.
 Morris understood, over time, that everything she did,
down to her shoelaces, represented her commitment
and that of the Mayo Clinic to patients and visitors.
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Summary: Physical environment-focused standards and design
 Careful attention to designing the “props” or the elements of the
physical environment in which the service.
 Organizations must “clue-in” customers by paying attention to:
 Setting up clues in people
 Setting up clues in the collaborative process
 Setting up clues in the tangibles
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Standards and Design Approach 7:
Activity ownership-focused standards and design
 Careful attention to how you can design services that address the
customer’s broader problem “scenario.” Particularly useful in the
context of the Internet.
 The story of National Semiconductor’s Webench*:
 Design engineers construct electronic devices for their companies or
for their manufacturing agents.
 The design engineers do not buy in bulk but their role early in the
product development process can lead to large orders down the road.
 In 1994, NS established a website to provide product information to
design engineers – the website was successful, but Phil Gibson, NA’s
vice-President of Web business believed it could do much more.
 In the late 1990s, Gibson launched an ambitious effort to better
understanding how design engineers work and how they could be
supported…
* Based on “Get inside the lives of your customers” by Patricia B. Seybold in Harvard Business Review (May 2001).
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Going about it: Map customer activities
On studying the design engineer’s
scenario in the context of building a
power supply unit, the SWAT team
assembled by Gibson broke down
their tasks into 4 steps:
 Choose a part
 Create a design
 Analyze the design (using powerful
simulation tools)
 Build a prototype
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Going about it: Facilitating the mapped activities
NS created a set of online applications called Webench:
 The engineer specifies the overall parameters of the power
supply unit and identify key components.
 Webench automatically generates possible designs, tech
specs, parts lists, prices, and cost-benefit analyses.
 The engineer refines designs until a satisfactory one appears.
 The engineer can run real-time simulations of the design,
using a software NS has licensed and offers on the site.
 The engineer can alter the design and rerun the simulation as
often as needed.
 The engineer can save all the iterations in a private portfolio
or e-mail them to colleagues who can run the simulations.
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 With a mouse click, the system can generate a bill of material
for the final prototype that may include parts from NS and
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other companies.
Going about it: Some early missteps
 At the outset, NS decided to charge engineers to
use the simulation tool to recoup the costs of
licensing the software.
 Engineers came to the site in droves but backed out
when asked to input their credit card number.
Comment?
Solution
 NS realized that instead of nickel and dime-ing
customers, the bigger rewards were down the road
–large orders!
 Gibson: “One integrated-socket win with Nokia
translates into 40 million units for us”
 It provided the simulation facility for free.
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The result
 Webench configured 20,000 power supplies/year.
 Engineers finished in hours what took them days.
 They explored alternatives they would never have
before…one engineer went through 250 iterations.
 Engineer: “Using these tools, I can go from an idea
to a prototype in a few clicks. NS has thought of
everything I need—from a huge catalog of parts to
fast simulations.”
 By Fall 2000, 31000 individuals were visiting the
website and generating 3000 orders every day.
 NS estimates it saves customers an average of 50
hours, or $3000 in monetary savings per design.
 Expanded concept to design circuitry as well.
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Summary: Activity ownership-focused standards and design
 Careful attention to how you can design services that address
the customer’s broader problem “scenario.”
 By focusing on the problems that customers face rather than
the offerings that they buy, you can find ways to make life
easier for them.
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Standards and Design Approach 8:
Efficiency-focused design
 Careful attention to how you can design services that give the
greatest (output/input) ratio.*
 Need to consider both the customer and the provider perspectives.
 The following principles can help find opportunities for designing
efficient services…
* Based on “Lean Consumption” by James P. Womack and Daniel T. Jones in Harvard Business Review (March 2005).
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Principle 1: Tackle the source, not the symptoms of inefficiency
 Fujitsu Services provides IT services and call centers
globally. Fujitsu was often paid “per complaint handled.”
 Fujitsu took over the desk contract for BMI Airlines in
2001. Fujitsu found that over half the calls to the help
desks were from airline agents whose printers broke
down. – they could not print boarding passes and
baggage tags. Even flights were delayed on this account.
 Fujitsu determined that the problem was with the low
quality printers deployed by BMI. Fujitsu convinced BMI to
upgrade these printers.
 The number of printer related calls were cut down by more
than 80% in 18 months.
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 Simultaneously, Fujitsu negotiated with BMI to change its
payment terms to “number of potential users of the IT
desk services.”
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Principle 2: Manipulate demand to maximize asset utilization
 Demand for tennis at a Southeastern US resort
peaked in July and August, way beyond capacity.
 New, distant courts would cost $12,000 each.
 How the resort managers reacted:
 Warned guests about overcrowding.
 Reservation system that steered demand to
non-peak times of the day
 Charged double play the same as single play
 Set up tennis mixers and round robins to
facilitate partner picking for doubles play
 Opened courts at 6 AM
 Added floodlights for night play
 Intensively promoted alternative activities
 Tennis became a profitable operation!
* Based on “Match supply and demand in service industries ” by Earl Sasser in Harvard Business Review (December 1976).
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Principle 3: Increase customer participation
Vinoklet Winery in Cincinnati takes self-serve
to a new level: On weekend evenings, you
grill your own meal.
Customer review: “After helping ourselves to
bread and crunchy green salad (included),
our uncooked entrees arrived at our outdoor
table. With some trepidation I headed toward
the huge industrial grill, surrounded by repeat
Vinoklet visitors who extolled the virtues of
this beautiful place while deftly seasoning and
turning their own meals, not needing the
posted directions.”
Some of the foods available for self grilling at
include chicken, steak, fish,and pork chops.
Copyright Dr. AK Rao
I did a bang-up job on our New York strip
steak ($17.95)…”
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Principle 4: Move away from the culture of “face time”
 Marriott managers had to cope with a historical culture
of “face time”—the longer you were at work, the better.
 Result: Discontented employees who did not see their
future there.
 “Management Flexibility” test program was launched
at 3 Marriott hotels.
 Only truly necessary meeting were scheduled.
 Managers attended only those parts of the
meeting that were relevant to them.
 Front desk managers’ schedules traditionally
overlapped one hour—reduced to 15 minutes.
Boston’s Copley Marriott was one of
the program test sites.
 At the end of the test, managers at the 3 hotels were
working 5-7 hours less per week.
 Customer satisfaction and managerial productivity
stayed strong; retention improved.
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* Based on “Changing a culture of face time” by Bill Munck in Harvard Business Review (November 2001).
Move away from the culture of “face time”
PERCENTAGE OF MARRIOTT MANAGERS WHO SAID…
“The emphasis is on hours worked, not
on things accomplished.”
“My job is so demanding, I can’t take
care of personal/family
responsibilities”
43%
15%
77%
36%
83%
“I feel drained at the end of the day”
59%
“Management is supportive of less facetime.”
Before pilot test
56%
73%
After pilot test
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Summary: Efficiency-focused design
 Careful attention to how you can design services that give the
greatest (output/input) ratio.*
 Need to focus on creating both internal (within-firm/operational)
and external (customer-focused) efficiencies.
 We covered 4 principles can help find opportunities for designing
efficient services.
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Standards and Design Approach 9:
Rewards and retention-focused design
 Careful attention to how you can design services and associated
rewards that promote customer loyalty and increased spending.
 Closely related to the customer lifetime value concept.
 The following principles can help managers design the RIGHT kind
of loyalty and retention programs…
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Design discount programs and other customer incentives that
create, rather than transfer, value
 Rewards Network offers discounts at chosen
restaurants for an upfront payment.
 Rewards Network pays restaurant owners
some cash upfront to participate in the
program – mostly cash-strapped ones jump in.
 Faced with this competition, other wellperforming restaurants have jumped in.
 In the long run, the restaurants do not benefit
– customers and Rewards Network do! Why?
 Problem with incentive design: Restaurant goers get the same discount at
any restaurant – not linked to consumption patterns.
 The fact that the discount is available at multiple restaurants promotes
switching.
 Little real value is created – the program does not ensure that customers will
dine out more often or that they will focus on a single or a few restaurants.
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Summary: Rewards and retention-focused design
 Rewards and retention strategies must aim to reward the right
customers, must ideally be linked to usage patterns and must
ultimately benefit the FIRM that provides the rewards.
 Your best customers may not need the rewards…make sure
you are not overspending on them.
 Managers must design the RIGHT kind of loyalty and retention
programs…
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Designing and delivering quality services – done so far…
Employee-focused design
Service quality-focused design
Customer experience-focused design
Process flow-focused design
Time target-focused design
Physical environment-focused design
Activity ownership-focused design
Efficiency-focused design
Rewards and retention-focused design
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