MIT Sloan Management Review

In the 1970s, Theodore Levitt presented a “production-line approach to service” as the remedy for the sector’s problems of inefficient operations and dissatisfied customers. He argued that the secrets of the production-line approach could be discovered, quite simply, by looking at the world of manufacturing. Industrial practices such as the simplification of tasks and the [...]

In recent years, changes in the business environment have made it harder for firms to maintain long-term sales growth and profitability levels. Global competition has increased dramatically. A larger selection of products and services is available to the same set of buyers, with little growth in overall markets. Thus satisfied customers are important to companies [...]

In the 1980s, U.S. manufacturers turned to quality as a way to create competitive advantage and sustain customer loyalty. The 1990s are emerging as the era for customer satisfaction in service industries. Service quality and customer satisfaction are important to marketers because a customer’s evaluation of a purchase is thought to determine the likelihood of [...]

Total quality management (TQM) has become accepted practice in services. Concepts from TQM in manufacturing, such as benchmarking, diagnostic tools (fishbone diagrams, Pareto charts, and so on), and customer-driven design (through quality function deployment), have joined with such concepts as service guarantees and service recovery planning to drive the quality philosophies of many service firms. [...]

A Fortune “500” company uses discounted cash flow analysis to evaluate investment proposals. The company used the same discount rate from 1973 to 1986. Why? The formula for calculating the discount rate was established in 1973, the underlying methodology was never documented, and the person who derived the formula had left the company. Meanwhile, the [...]

The costs of ensuring good quality and recovering from poor quality have often been found to total 25 percent to 30 percent of sales revenue. No wonder cost of quality (COQ) programs are attractive to senior managers. Kaplan defines such a program in a manufacturing context as “a financial, systemwide measure of the costs associated [...]

Empowering service workers has acquired almost a “born again” religious fervor. Tom Peters calls it “purposeful chaos.” Robert Waterman dubs it “directed autonomy.” It has also been called the “art of improvisation.”
Yet in the mid-1970s, the production-line approach to service was the darling child of service gurus. They advocated facing the customer with standardized, procedurally [...]

A national preoccupation with U.S. international industrial competitiveness, driven by our continuing enormous balance of payments deficit, has tended to focus media and political attention during the 1980s on manufacturing. A torrent of books and articles has inundated business managers, offering guidance on how to improve manufacturing performance. Terms like “world class manufacturing” and “dynamic [...]

UNDERSTANDING CUSTOMER expectations is a prerequisite for delivering superior service; customers compare perceptions with expectations when judging a firm’s service.1 However, the nature of customer service expectations and how they are formed has remained ambiguous. Researchers have defined customer service expectations in a variety of ways but with no conceptual framework to link different types [...]

DOES THIS SOUND familiar? A large retail company (or bank or fast food chain) designs its customer contact positions to be filled by people who are willing, at least temporarily, to work for wages marginally above statutory minimums. It simplifies the jobs, reducing them to a series of repetitive, boring tasks that require minimal training. [...]