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Return on Quality (ROQ): Making Service Quality Financially Accountable

Return on Quality (ROQ): Making Service Quality Financially Accountable. Roland T. Rust, Anthony J. Zahorik, & Timothy L. Keiningham. 指導老師 : 任維廉 教授 報告者 :9832515 許程詠. 自我介紹. 人種：嘉義人 經歷 : 協同高中→東海工工→交大運管 嗜好 : 上網，打球 論文方向 : 利用灰色理論在遺失資料插補的應用. Abstract.

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Return on Quality (ROQ): Making Service Quality Financially Accountable

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  1. Return on Quality (ROQ):Making Service Quality Financially Accountable Roland T. Rust, Anthony J. Zahorik, & Timothy L. Keiningham 指導老師:任維廉 教授 報告者:9832515許程詠

  2. 自我介紹 • 人種：嘉義人 • 經歷 : 協同高中→東海工工→交大運管 • 嗜好 : 上網，打球 • 論文方向 : 利用灰色理論在遺失資料插補的應用

  3. Abstract • The quality revolution has taken over the thinking of much of American industry. (Dean and Evans 1994) • Highly competitive market require that customers must be satisfied by their purchases or they will go else where. ( Rice 1990) • Wallace company won the Quality Award in 1990 but high spending on Quality produced unsustainable losses so that bankrupt in 2 years. (Hill 1993) • Expenditures on quality do not have obvious profit implication (Aaker and Jacobson 1994)

  4. Abstract • The benefits of quality improvements come in two firms - The improved ability of the firm to attract new customers - Customer become repeat customers when they are satisfied with products.

  5. The ROQ Approach Assumption: • Quality is an investment • Quality efforts must be financially accountable • It is possible to spend too much on quality • Not all quality expenditures are equally valid

  6. Improvement Effort Service Quality Improvement A model of Service Quality Improvement and Profitability Perceived Service Quality and Customer Satisfaction Word-of-Mouth Cost Reduction Customer Retention Attraction of New Customers Revenues and Market Share Profitability

  7. Evaluating Financial Impact • AQ: Actual service Quality • S: Customer Satisfaction • CR: Cost Reduction • R: Customer Retention • MS: Market Share

  8. Drivers of Market Share • Customers retained = • Customers switching to us = • new customers = = • net present value (NPV) • Net present value with additional spending (NPVAS)

  9. ROQ • Let NPV and NPV0 be the net present values of the profit streams for the quality improvement effort and status quo ROQ=(NPV-NPV0)/NPVAS

  10. Driver of customer Satisfaction Process 1 Measures Dimension 1 of Process 2 Measures Customer Retention Measures Overall Measures Process 2 Measures Dimension 2 of Process 2 Measures

  11. Measurement Alternatives • Repurchase intention（重新購買意圖） • Service quality（服務品質） • Customer satisfaction（顧客滿意度） • Disconfirmation（不確定性） • Customer delight（顧客喜好程度） • Cumulative focus versus transaction focus （累積交易 vs 集中交易）

  12. The ROQ Quality Improvement Process Stage1: Preliminary Information Gathering Customer surveys Market information Internal Information Heavy use of management judgment Stage2: Identification of Possible Opportunities Stage3 :Limited Testing of Improvement to Determine Effectiveness Stage4: Financial Projections Based on Hard Data Stage5: Full Rollout of Quality Improvement Efforts

  13. Summary of Managerial Inputs 18 managerial inputs • The key management process must be indentified • Key dimensions of each process must be obtained • Customer retention (Or repurchase intention) • Customer satisfaction (Or a suitable substitute) • Market size must be measured • Current market share must ne estimated • Churn must be estimated • The company’s current retention rate must be estimated • The attraction percentage must be obtained • The market growth rate must be estimated

  14. Summary of Managerial Inputs • The contribution margin from an average customer must be estimated • The cost of capital must be determined • The time horizon must be specified • A specific quality improvement alternative must be identified • The additional expenditures related to this improvement effort must be estimated • Cost savings must be estimated • The satisfaction shift must be estimated • Market test data may be obtained

  15. An Illustration Application • A National Hotel Chain disappointed group(9%): 45% return Satisfied group(75%): 95% return Delight group(16%): 97% return • Calculate ROQ

  16. Conclusions • This article presented a financial approach to quality improvement (ROQ) • Made quality improvement financially accountable • Let manager determine where to spend on service quality

  17. Thanks for your listening

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