Service Productivity, Quality and

Innovation: Implications for Service-

Design Practice and Research

Professor A. ―Parsu‖ Parasuraman

University of Miami

Service Science Factory Presentation

Maastricht University
Maastricht, Netherlands
21 January 2011
 October 23, 2000
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 2
 Some Preliminary Observations
 Service continues to be mediocre in
many sectors
 Gains in service productivity of firms
may lead to lower service quality as
experienced by customers
 Service innovations may not necessarily
lead to gains in service productivity and
quality
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 3
 Service Productivity, Quality and
Innovation are Intertwined

Service
Productivity

Service Service
Quality Innovation

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 4

 What is Service
Productivity?
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 5
 Simple Definition of Productivity

Output Input

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 6

 Traditional View of Service
Productivity

Company’s
Inputs

Service Productivity

Company’s
Outputs
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 7
 Proposed View of Service
Productivity

Service productivity can and

should be evaluated from the
perspectives of both companies
and customers

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 8

 Components of Service
Productivity

 Inputs from company’s perspective: Labor, capital

investments, ongoing expenses, etc.
 Inputs from customer’s perspective: Monetary cost,
time, effort, mental stress, etc.
 Outputs from company’s perspective: Revenue,
profits, customer loyalty, etc.
 Outputs from customer’s perspective: Value,
satisfaction, service experience, etc.

© Professor A. Parasuraman; not to be reproduced or disseminated without permission

 A Company-Customer Conceptualization of
Service Productivity

Company’s Perspective Customer’s Perspective

Inputs Inputs
[Labor, Equipment, [Time, Effort, Emotional
Technology, etc.] Energy, etc.]

Productivity Missing
Service Productivity
Link!
Quality!

Outputs Outputs
[Sales, Profits, Market [Service Performance,
Share, etc.] Satisfaction, etc.]

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 10

 What is Service
Quality?
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 11
 From Customers’ Perspective…
 Service quality results from a
comparison customers’ service
expectations with their actual
service experience
 Their service experience frequently
falls short of their expectations

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 12

 Determinants of Customers’
Evaluation of a Service

 The outcome and the process of the

service delivery

 Whether the service is routine or

nonroutine

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 A Common Disconnect between Companies and
Customers
Customers affected
……and perhaps by
this
Nature of Service disproportionately
by this……
Routine Nonroutine

Process

Service
Delivery
Outcome

Most customer svc.

……and perhaps
standards fall
some fall here
here……
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 14
 From a Company’s Perspective…

 Delivering superior service quality

on a sustained basis is a major
challenge
 This challenge arises because of
four key internal deficiencies or
―gaps‖ within the organization

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 15

 Conceptual Model of Service
Quality – GAPS Model
CUSTOMER SERVICE ORGANIZATION
Organization’s
Market Service
Understanding of
Information Standards
Customers’ Expectations Gap
Gap
Service
Expectations Organization’s
GAP 1 Service Standards
GAP 2
Service
Quality GAP 5 Service Performance
Gap GAP 3 Gap

GAP 4
Customers’ Organization’s
Service Service
Perceptions Performance
Organization’s Internal
Communications Communication
to Customers Gap
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 16
 GAP 1: Market Information Gap

Do you have an accurate

understanding of customers’
expectations?

No or not sure

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 17

 GAP 2: Service Standards Gap
Do you have service standards
and are they aligned with
customers’ expectations?

No or not sure

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 18

 GAP 3: Service Performance Gap

Does your service delivery meet

your own internal standards?

No or not sure

―McDonald’s Finds Angry

Customers on Its Menu‖
-The Wall Street Journal

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 19

 GAP 4: Internal Communication Gap

Are all your interfaces and

interactions with your customers
synchronized?

No or not sure

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 20

 Prerequisite for Superior
Customer Experience

Close Gaps 1-4 &

hence Gap 5!

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 21

 An Important Implication of the
Four Organizational Gaps

The internal organizational

gaps not only lead to poor
service quality but also
adversely affect service
productivity!
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 22
 Svc. Gaps—Svc. Productivity Link

Organizational Gaps

Managerial: Gaps 1&2 Employee/Systems: Gaps 3&4

Resource Misallocation and Customer Frustration

Focus on ―wrong‖ attributes Service delivery deficiencies

Opportunities for Improving Service Productivity

Reallocation of resources Better customer service

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 23

 A Dual Conceptualization of Service
Productivity: A Second Look

Company’s Perspective Customer’s Perspective

Inputs Inputs
─
[Labor, Equipment, [Time, Effort, Emotional
Technology, etc.] Energy, etc.]

+ ─
Productivity Service Productivity
+ Quality +

Outputs Outputs
[Sales, Profits, Market [Service Performance,
Share, etc.] + Satisfaction, etc.]

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 24

 Role of Technology in Service
Delivery

The ―Technology Readiness‖

Construct and Its Implications

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 25

 Pyramid Model of Services
Marketing

Technology

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 26

 An Important Implication of the
Pyramid Model

An organization’s ability to use

technology effectively in
marketing to and serving
customers critically depends on
the technology readiness of its
customers and employees
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 27
 What is Technology Readiness?

Technology Readiness [TR] refers

to ―people’s propensity to
embrace and use new
technologies for accomplishing
goals in home life and at work‖

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 28

 Drivers of Technology Readiness

Contributors Optimism Innovativeness

Technology Readiness

Inhibitors Discomfort Insecurity

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 29

 TR Scores by Dimension and
Overall TRI*
4,5

3,5

Mean 2,5

TR 2

Scores
1,5

0,5

OPT INN DIS INS TRI

1999 .
2000 2001. 2002 . 2004 . 2006 2007 2009

*Data are for U.S.A.

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 30
 Five TR-Based Customer Segments

Optimism Innovative Discomfort Insecurity

-ness
Explorers High High Low Low

Pioneers High High High High

Skeptics Low Low Low Low

Paranoids High Low High High

Laggards Low Low High High

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 31

 High-Tech versus High-Touch
Customer Service
High
Explorers
Appeal of High-Tech
Service Channels

Pioneers

Skeptics

Paranoids

Laggards
Low
Low High
Appeal of High-Touch Service
Channels
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 32
 An Important Implication of
Technology Readiness

To be effective, the implementation

of any technology-based service
innovation has to take into account
the technology readiness of its
intended users

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 33

 Typology of Service Innovations
Impact on Svc. Productivity: Co. Perspective
Favorable Unfavorable

Favorable Win-Win Unaffordable

Impact on Svc.
Productivity:
Customer
Perspective

Unfavorable Short-sighted Dumb

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 34

 Service Innovation Should Ideally
Lead to Service Enhancements
That:
 Take into account customers’ service
expectations (as well as their
resources/capabilities)
 Increase service productivity from
both company and customer
perspectives
 Focus not only on developing
completely new services but also on
the process of service delivery
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 35
 Evolution Required for Effective
Service Enhancements

Service
Productivity
Service
Productivity

Service Service
Service Service Quality Innovation
Quality Innovation

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 36

 Critical Issues Worthy of Scholarly
Research

 Mathematical/analytical modeling of tradeoffs

between the two conceptualizations of service
productivity
 Metrics for operationalizing input and output
constructs embedded in the dual conceptualization
of service productivity
 Approaches for assessing and classifying service
enhancements into the productivity-based typology
 Refining the two-dimensional typology – e.g., by
adding dimensions such as ―ease of resource
transfer‖
© Professor A. Parasuraman; not to be reproduced or disseminated without permission 37
 Critical Issues Worthy of Scholarly
Research (continued)

 Exploring ways for fostering greater inter-functional

collaboration—particularly among marketing,
operations, human resources, and
accounting/finance—when developing service
innovations
 Developing process innovations that focus
specifically on improving the efficiency and
effectiveness of service recovery

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 38

 Sources of Additional Information

www.technoreadymarketing.com

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 39

 Sources of Additional Information

Parasuraman, A. ―Service Productivity, Quality and

Innovation: Implications for Service-Design
Practice and Research,‖ International Journal of
Quality and Service Sciences, Vol. 2, Issue 3,
2010, pp. 277-286.

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 40

 Thank You!

© Professor A. Parasuraman; not to be reproduced or disseminated without permission 41