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Measuring Service Quality August 1, 2016

Posted by Tim Rodgers in Operations, Quality.
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Product quality seems easy to measure. We just have to sit down with the people who will be using the product or the part or the subassembly and ask them what physical characteristics are important: dimensions and tolerances, chemical composition, electrical performance measurements, strength, weight, and the like. These are things we can then measure, either directly or through test results, on a representative sample from the production process. If we’ve defined the “fitness for use” characteristics correctly, based on what the customer tells us, then we can determine whether or not our processes can reliably produce products that meet those requirements.

Service quality is harder to measure. The trouble starts with defining the requirements. Who are the customers and what do they want? There may be a lot of them, possibly millions of them, with new ones every day. They each have their own set of unique expectations that might change from day to day. They may not be able to articulate their requirements, or at least not in a way that can be acted upon. Services are typically customized for individual customers, and there’s no standard level of performance. What’s acceptable to one customer may not be acceptable to another.

Service quality can include dimensions beyond the immediate characteristics of the service rendered. For example, a customer may value empathy or prompt and timely service over service accuracy. Service quality may not even be immediately apparent. A customer may decide some time later that the quality of the service was unsatisfactory.

Service businesses typically use some kind of customer satisfaction survey to measure quality, leaving it to the customer to determine whatever dimensions or elements that are most important to them. On-line reviews like Yelp provide the same kind of information. Many companies are using more sophisticated metrics such as net promoter score to assess changes in customer loyalty.

It’s important to listen to the voice of the customer, but this is a fundamentally flawed approach for objectively measuring service quality. The vast majority of customers do not respond to a request for feedback, so you can legitimately question whether your responses are a representative and statistically significant sample size. Individual customers are obviously very subjective when giving their assessment of service quality, and they’re hardly a calibrated measurement system. It’s not even clear that there’s a correlation between what customers say about service quality and basic financial measures like revenue and expenses.

That leads me to my somewhat radical proposal. Customer satisfaction surveys are useful, but don’t use them as a proxy for service quality. Use financial measures instead, specifically cost of quality. How much does poor service quality cost the business? This includes customer complaints that require rework, but it should also include mistakes discovered by employees and corrected before the customer sees the work.

Note that it would be great if you could measure incremental revenue lost or gained due to service quality. However it’s very difficult to isolate the cause of revenue changes and say with any certainty that it’s due to changes in service quality rather than other factors.

 

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