Improving the Profitability of Servigas

March 4, 2010

Competitive Analysis: best service, but 
most expensive
Best Gas Maintenance Service Providers
Worst Servigas Iberdrola Endesa Naturgas Unión
Fenosa

Annual Gas/heating Pipework, gas Gas/heating 3 Service Installation

preventive installation appliances & installation & offerings and gas
Service Offerings

maintenance & appliances heating circuit appliances appliances

With or w/o
heating
Technical Free call-out Free call-out Free call-out Free call-out Free call-out
Assistance Labor free- Free labor 3hr Labor free- Labor free- 6 month
(Call Center) 3hr Covers €50 3hr 3hr guarantee
Available (in parts) 6-month
24/7/365 Available guarantee
24/7/365

Home repair Within 3 hrs Within 48-hrs 3 hours Depends Depends

service (working working days
days)
Annual Rates €116.13* €84 to €97 €61 to €85 €59 to €113 €59 to €85
(promotions)
*5-year Mandatory Inspection included within annual subscription fee 2

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 Servigas estimated P&L
2008 VS. 2009 Forecast
Servigas % Gas Natural % % Business
(million) (million) Servigas
Net Revenues 140,0 100,0% 13.544 100,0% 1,03%
Gross Margin 140,0 100,0% 3.749 27,7% 3,73%
Operating Cost 107,0 76,4% 1.184 8,7% 9,04%
Var Cost 97,0
Fix Cost (10%) 10,0
EBITDA 33,0 23,6% 2.565 18,9% 1,29%
Depreciation 3,8 2,7% 726 5,4% 0,52%
Provisions 0,5 0,3% 44 0,3% 1,03%
Operating profit 29 20,6% 1.795 13,3% 1,60%

Above average profits due to low costs,

ie. try maximize contribution margin

Service Operational Blueprint 

Call Installation
Customer Follow-up
Center Business

Problem
resolved by Complaints
Calls Service Call Center
Center for Mobility
assistance Service
Forward to Happy
Inst. Business Customer

6% resolved 2/3 within

Avg. p.a.: 1 call / over phone normal bus. Within 3h
(14€) Hours (70€) 97%
customer, 35% at least
satisfaction
requests for 96% of the
Rest: to Inst. 1/3 outside 12% churn
repairs time
Bus. (10€) (140€)

2
 4 initiatives
Money back a) 48 hr versus 3 hr
b) More regular hours

10% remote
Contract renegotiation
resolution

Comparison of initiatives
Initiatives/ Positive Aspects Negative Aspect Quantitative Analysis
Evaluation
Service level • Lower cost (higher resource • Disappoints customers Savings 10,1 Mill €
utilization/ better planning) (Expectations of 3 hour (B/E growth rate -25%)
3h -> 48h service)
• All visits in regular hours
• Easier to control

CC filtering • Offers choice to customer (Better • May weaken quality Savings €5 Mill € (-
Urgent tiered design) perception of Servigas (need training costs)
• Lower cost (higher resource to offer alternative offer or (B/E growth rate -13%)
utilization/ better planning) design)
• Reduces number of repetitive • Requires training and
calls/home repairs depends on people skills

CC remote • Reduce home visits • Weakens perception of Savings €1,75 Mill €

solution • Improves quality perception of premium service package (-training costs)
Call Center service • Requires training

Re • Incentives preemptive service • Potential low quality Costs + 1Mill €

Negotiation • Angry installm. Complicated
to renegotiate

Money back • Improves quality perception • May also weaken quality Cost +2,1 Mill €
• Low complaints/attrition perception (B/E growth rate = 5%)
• Strengthens their USP • Administrative nightmare

3
 Current offer (2015)

Achieving breaktrough services 
The “Return on Quality” Model

Cost Profits

PROFIT LEVERS

Operations Customer
Service
Design & Satisfaction
Quality
Execution
4 3 2 1
DELIVERY OPERATING VALUE TARGET MARKET
SYSTEM MODEL PROPOSITION

Based on Rust et al. 1995. “Getting Return on Quality.” Journal of Marketing

4
 Determinants of Perceived Service Quality

Word of Personal Past

Mouth Needs Experience

External
Expected Communication
Service to Customers
Service
Quality Satisfaction
Gap with Service
Perceived
Service
A. Parasuraman, University of Miami 9

Revised SERVQUAL Items
Reliability (delivering on promise) Empathy (understanding customers)
1. Providing services as promised 14. Giving customers individual attention

2. Dependability in handling customers' 15. Employees who deal with customers in a caring
service problems fashion

3. Performing services right the first time 16. Having the customer's best interest at heart

4. Providing services at the promised time 17.Employees who understand the needs of their
customers
5. Keeping customers informed about when
services will be performed
Tangibles (Physical service elements)
Responsiveness (prompt response)
18. Modern equipment
6. Prompt service to customers
19. Visually appealing facilities
7. Willingness to help customers
20. Employees who have a neat, professional appearance
8. Readiness to respond to customers' requests
21. Visually appealing materials associated with the service
9. Not too busy to attend customers’ requests
22. Convenient business hours
Assurance (trust and confidence)
10. Employees who instill confidence in
customers
11. Making customers feel safe in their
transactions
12. Employees who are consistently courteous
13. Employees who have the knowledge to
answer customer
Source: Servqual, questions
A. Parasuraman, Zeithaml 10

5
 Service Quality Delivery
Servqual “Gap Model”

Customer
Expectations Satisfaction Perceptions
(Gap 5)
Gap 1 Gap 4
Marketing, Customer side Communication, Service
Customer
Recovery
knowledge,
Segmentation Company side
1
PERCEPTION OF SERVICE VALUE SERVICE
CUSTOMER PROP + SERVICE DELIVERY
EXPECTATIONS MODEL DESIGN (CONTROL)

Gap 2 Gap 3
Concept design, Delivery,
2ª/b Standards, 4 3 Performance
Economic Model Measurement,
Compliance

Source: Servqual, A. Parasuraman, Zeithaml

Mapping Service Quality Delivery
Defining adequate information

Customer
Expectations Perceptions
Satisfaction

• Global market surveys •External communication

• Customer panel surveys •Guarantees
•Mission and alike
• “Focus groups” interviews

PERCEPTION OF SERVICE VALUE SERVICE

CUSTOMER PROP + SERVICE DELIVERY
EXPECTATIONS MODEL DESIGN (Control)

•KPI
•Scripts •Objective process indicators
•Pokayokes •Mystery “shoppers”
•1st line-employee report

6
Expectation Gap 1: Knowledge
(Understanding customer expectations)
GAP 1
TOOLS
Perception of • Smart customer (big) data
Expectations • Market surveys
• Customer panel surveys and focus groups
• Kano model

ASPECTS TO CONSIDER
• Customer data properly segmented
• Distinguish between MUST BE and DELIGHTERS
• Customer should prioritize attributes (e.g., 100
points distribution)
• Confirm WTP and make actionable

Expectations knowledge
How  are expectatiosn formed? 

Service provider
Communication

Word-of-mouth Expectations Price/Cost

Complementary life style

Past experiences
Services used

7
 Perception of
Expectations Gap 2: Design
(Define service standards)
GAP 2
TOOLS
Service Standards • Value curves
• Customer journey analysis
• Scripting
• Poka-yokes

ASPECTS TO CONSIDER
• Recognize trade-offs based on service positioning
• Define clear customer-driven standards and
KPIs (e.g., waiting times, …) and communicate
them to employees
• Leverage psychology of perceptions

Translating value proposition into an operations design

High

Relative 2 Stars
level in
value
proposition
1 Star

Low

8
 Service Design
Remember Customer Corridor

• MoT: OTSU vs Ideal Profile

Service Design 
Specification Tools

• Rules of behavior

• Scripts/Standardization

• Service Poka‐yokes (for customers and 
employees)

• KPIs (level of service)

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 Service design
The psychology of scripts

1. Bad news at the beginning (Charge at SPAs at the start of the 
service?)

2. Pool pain and segment pleasure

3. Finish upward (Champagne cup at the end of flight, not 
payment)

4. Offer options to customers so that they feel in control of the 
situation (e.g. omnichannels)

5. Allow customer to hold to their habits and not get disoriented 
because of changes (e.g. new webs)

Standards Gap 3: Delivery
(Ensure performance and compliance)
GAP 3
TOOLS
Service • Hard process indicators
Delivery
• Soft mystery shoppers /
Customer
perception satisfaction surveys
• Hard customer transactional
• Front line-employee reports

ASPECTS TO CONSIDER
• Relevance of measurement vs complexity
• Weights of measurable service attributes
• Cost-control (customer base, time series)
• Long-term effect on organization behavior and
improvement

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 Performance measuring 
What do we measure and how?
Customer •Service •Employee •Operational
Business Customer indicators
Behavior quality performance
performance Satisfaction aspects •(SOPs)
Churn •(Reviews)

•Sales •% • Net •Mystery Superior/Peer • On-time

growth defection Promoter shoppers evaluation Delivery
•Profit •Share of Score •TRIM • Cost per
wallet … • Satisfaction •Call interaction
scores supervision
• Complaint
letters

Direct impact of business

• But…
No always actionable ¿Link between profit and
customer expectations?
Reactive and short term Clear directions of improvement
 Force customers to elicit
priorities  Danger of over-engineering
 No always directly actionable  Avoid employees
•21
(link to operational schizophrenia (e.g. efficiency
dimensions) vs. service)

Soft Indicators (Surveys)
Implementation Issues
• Interpretation of absolute/relative thresholds
• “Biased average”, understand differences 
• From “aggregate” to segmented views (eg. SBUX case)
• Importance of trends

• Timeliness/method
• On‐site allows for details in dimensions (customer will remember)
• Off‐site correlates all answers (i.e., “the one number you need to ask”) – from 
“movie to photo” 

• Respondent bias
• Optional surveys tend to gather extremes

• Ownership of survey process linked to objective (“could you please 
fill this survey for me…”)

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 Key takeaways

• Service quality is a multidimensional construct – not easy 
to measure. 
• SERVQUAL (and SERFPERF) are widely used models to 
measure perceived (stated) service quality.
• Service quality is a strong driver of customer satisfaction 
and is consequence of the gap between perceived value 
and expectations
• This gap itself is the result of several other gaps on the 
company side
• Companies need to establish a systematic “listening 
system” – this is even more important the more we co‐
create services with our customers

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