Best Practice in Service Quality Measurement

Service, not price, is what makes loyal customers.

Published: Wednesday, October 21, 2009 - 16:59

Story update 10/23/2009: The link to the prerecorded webinar mentioned at the end of the article has been corrected.

The U.S. economy runs on service. From front-line service in transactional industries such as retail, banking, hospitality and food service, to technical support for high-tech or industrial products, service has become an increasingly important component of our economy. 

Unfortunately, customer perception of poor quality service often strikes without warning. A recent Harvard Business Review article (“What Service Customers Really Want,” September, 2009) reports that customers experiencing poor quality often stop doing business with the offending companies without warning or complaint. On average, 40 percent of customers with poor experiences do not return. Research over the years indicates that service quality contributes more to customer loss than price.

While businesses realize this, managers continue to struggle with defining and measuring quality service and linking those measures back to the direct supervision of employees providing the service. The following are some best practices that will help managers to navigate service quality planning and measurement:

Leadership and service quality

Just because a concept has become a cliché does not make it obsolete, just the opposite. It is has become a cliché because it is true. Quality professionals have known about the importance of senior leadership for decades; it is still true today that buy-in from the top is essential for your program success.

Leaders play many roles and have many responsibilities. Effective leaders:

• Act as change agents—they play a specific role in the planning and implementation of the change management process.
• Empower others—based on a belief that employees have the ability to take on more responsibility and authority than has traditionally been given to them and that heightened productivity and a better quality of work life will result.
• Execute through others
• Guide by influence

It’s easier to set a positive example if you have a clear vision of what you want to accomplish as a leader and enlist the help of your team. Take GE CEO Jeffrey Immelt, a highly capably executive of a corporate giant—GE had 2008 revenues of $183 billion and employs 327,000 people. Immelt has a vision to convert GE into an eco-friendly economic force. Not an easy challenge considering the company’s size and its history of polluting various water supplies. He has branded business practices, services and products as Ecomagination and has shared these values and vision with his employees—enlisting them in the journey despite push back from those who are just concerned about revenue.

Immelt is looking at the big picture. He won’t sacrifice revenue for his cause, but his goal is to align earnings with ethics. Immelt is already earning rave reviews for his leadership abilities and vision and GE has increased revenues from Ecomagination by $17 billion dollars. 

Many well-intentioned people get frustrated when their company appears to be heading in a direction they don’t like, or are pursuing questionable strategies. It may be a good idea to assess the overall state of your company’s leadership, especially if you are leading or implementing an initiative that requires people to change the way they think or work.

Assess current state

Understanding where you are is the first step on the path to improvement. By completing an assessment of your current state you will be able to understand the history of how you got to where you are today in regard to service quality, where you are and where you want to go, and how to focus improvement efforts. Current state will include how your leadership support, roles and responsibilities, company culture, and strategies are aligned.

Type of business: Where on the continuum does your organization fall?

Business to Business < ... > Business to customer

Service only < ... > Service as part of manufacturer

Relationship < ... > Transactional

Key Accounts < ... > Mass Market

Strategy: Where on the continuum does your organization fall?

Clear strategy and goals < ... > Vague goals

Alignment of strategic plan from top management to operations and divisions < ... > Unclear top-down direction

Organization: Where on the continuum does your organization fall?

Behavioral definitions and standards < ... > Ad hoc approach

Centralized control and authority < ... > Distributed or autonomous culture

Customer metrics < ... > No customer metrics

Sophisticated internal metrics < ... > Rudimentary internal metrics

Low degree of analytical sophistication < ... > High degree of analytical sophistication

Leverage existing corporate culture

Herb Kelleher, founder of Southwest Airlines, famously said, “Culture is what happens when no one is looking.” A company’s culture could also be thought of as the overall work environment. Culture is not a mysterious secret. It is created from a series of decisions, both large and small, that build a mindset over time. One key to success is to make those decisions consciously, not blindly based on rote or habit.

The following tools help bring the discussion about culture into a more conscious, mindful framework:

Vision Statement: Explains what the company wants to become and what it hopes to achieve. This desired future state is an expression of where the organization is headed, what it’s intended to be or how it wishes to be perceived in the future.

Mission Statement: Explains the purpose or reasons for existing as an organization; it provides the focus for the organization and defines its scope of business.

Values: Clarify the behaviors that the organization expects in order to move toward its vision and mission. They reflect an organization’s personality and culture.

Goal: A statement of general intent, aim or desire; it is the point toward which management directs its efforts and resources. Goals are often nonquantitative.

Objective: A quantitative statement of future expectations and an indication of when those expectations should be achieved; it flows from goals and clarifies what people must accomplish.

Segment Customers

Customers are not all the same. They purchase for different reasons, have different drivers of satisfaction and loyalty, and have different perceptions of value. In order to better understand all customers and meet—and exceed—their needs, it is necessary to divide your customers into various segments based on similarities in product and service needs.

The most common segmentation methods are summarized below:

• Convenience
  • Geography
  • Language 
• “Firmographics”
  • Company size
  • Products used
• Actions
  • Purchase behavior
  • Price, delivery and quality requirements
• Needs
  • Reliability
  • Prestige
  • Innovation

Understand your cycle of service

This “cycle of service” is also known as the "customer life cycle." It shows the various life stages of a customer’s relationship with your organization, product, or service. These dimensions need to be tied to your measurement system.

Measure customer satisfaction and loyalty

There's a big difference between customer satisfaction and customer loyalty.

Customer satisfaction is the result of delivering a product or service that meets customer requirements, needs, and expectations. It is determined by how well the performance delivered matches the customer’s expectation. Measurement at various customer “touch points” provides valuable input.

Customer loyalty is indicated by repeat business and active customer marketing of your brand name and products.

Satisfaction means “I may like it but I could easily switch for price, availability, color, and other considerations.” Satisfaction does not indicate reticence to try a new provider. Loyalty, on the other hand, does indicate a reluctance to switch brands.

Use multiple listening posts

Listening posts are used to “listen” to the customers. Not only can a listening post provide a picture of who customers are and what’s important to them, it can also help identify areas for improvement.

Listening posts can be internal or external, can be a tool to understand customers and an early indicator of potential future problems, and provide information that can be used to reinforce or inhibit behaviors that affect customers.

Customer and market listening posts can include qualitative elements like inbound customer comments and complaints, mystery shopping, field observations, and customer advisory panels. Quantitative elements may include comprehensive customer/market expectations surveys, benchmarking and event-driven surveys, as well as ad hoc marketing research.

One example of a customer listening post can be found with Best Buy stores. According to Mike Fisher, senior director of lean Six Sigma for Best Buy’s corporate campus in Richfield, Minnesota, the store has instituted a TRUST model that ensures that employees thank consumers for coming into the store, respect their opinions, understand their needs, solve challenges together and thank and support the ongoing consumer relationship.

“Our goal is to put more sales staff or 'blue shirts’ on the sales floor instead of handling paper work and other duties,” Fisher says. “That way they are immediately available to assist consumers with their questions and needs.”

Recover from mistakes

Service recovery strategies are used to reduce or neutralize a customer’s dissatisfaction. If handled appropriately, a situation that begins with customer dissatisfaction can result not only in customer satisfaction but also customer loyalty.

Bath & Body Works, for example, provides its staff with training in how to detect and respond to unspoken needs and are told to ”treat a return like a sale,” because a properly handled return will often move the customer to buy something else. To avoid stock issues, Bath & Body Works also carries a bigger inventory of merchandise than other similar retailers and when they do run into issues with a discontinued product, staff can provide customers with an “I’m sorry for your disappointment” gift card.

Effective service recovery programs take accountability for the error, respond quickly, “make it right” with the customer (offer free services, coupons or service replacement), and track recovery data.

Recovery data can come from call centers, customer surveys, front-line customer service representatives, analysis of written correspondence (e-mails, letters, etc.) and a review of warranty claims and manufacturing data. Timely service recovery is essential to client retention and provides inputs into your improvement program. There is a risk of reputation-loss related to not having an effective service recovery strategy in place, as one dissatisfied customer will often tell 10 others about their “bad” experience with your organization. 

Managing the quality of service is a never-ending, dynamic challenge. In the words of a famous Bob Marley song, “You can’t please all the people all the time, but you can please some people some of the time.” A wise manager knows which quality tools to use at the right time in order to increase the number of people they please.

Learn more about service quality measurement from the author during a free webinar available on demand via Intro to Service Quality Measurement.

About The Author

Jim Jubelirer

Jim Jubelirer has designed and implemented programs that bring the voice of the customer into organizations facing complex competitive challenges. His clients are from a wide variety of industries and include a fast-growing division of a Fortune 50 company, America’s most profitable company, and one of the world’s largest financial services firms. Jubelirer has also conducted global research projects and worked with managers from 25 countries. Jim is also an instructor at ASQ (American Society for Quality) and will host a training series on customer service measurement in November. For more information, visit www.asq.org/service-quality-measurement.