Value in the Service Industry

Like their manufacturing counterparts, most successful service organizations have adopted a new model since the 1980s. They shifted the emphasis from financially optimizing assets to customer satisfaction. The emphasis has shifted from emulating old-design manufacturing to making the core technology flexible, highlighting the key role of the front-line employee to satisfy customers.

Service standards are more demanding because customers are becoing increasingly sensi­tive to quality. The focus has shifted from efficiently “manufactured” service items towards a more flexible model of responding to a more quality-sensitive customer. At Rover Cars, they use the term “Extraordinary Customer Satisfaction” to express their focus on the customer. The system has moved from the closed system of the old-design organization to the open system of the new design, incorporating the customer’s requirements at the centre of their operations.

Quality processes are directly related to value. The value-added approach can be either explicit or implicit. Explicit value can be measured and can be clearly defined or visible. Implicit value is not easily converted to currency and is related to perceived performance needs or image.

Table 16.2 lists the five ways in which an organization such as a restaurant can incorpo­rate quality into its service. Strategic resource allocation in the organization determined to meet/exceed customer needs will enable a careful design and flawless delivery of the service. Such a strategy limits, if not eliminates the need for resource allocation for inspection and fixing activities.

Many organizations work hard to design quality and think through delivery barriers. For example, the Ritz Hotel builds quality into its operations by allocating major resources to service recovery. It recognizes that its customers will not come back if Ritz makes errors. At Safeway Superstores, they guarantee “Refund and Replace.” If their customer finds defects in the goods purchased, an appropriate substitute plus a full refund is provided.

Source: Poornima M. Charantimath (2017), Total Quality Management, Pearson; 3rd edition.