Cabin crew strategic quality management

In this research, we studied operations of Vietnam Airlines in terms of quality management in in-inflight service basing mainly on the total customer service concept.. The Vietnam Airlin

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PROGRAMME DE MAITRIES EN MANAGEMENT – BELGIQUE

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PHAM XUAN THANG

CABIN CREW STRATEGIC QUALITY MANAGEMENT

THESIS MASTER OF BUSINESS ADMINISTRATION

Advisor : Vice Professor – Doctor Phan Dang Tuat

Ho Chi Minh City, Vietnam

(2006)

This is my original work Any data, result or quote in the project

Is clearly identified

Pham Xuan Thang

1.1 Rationale 1

1.2 Problem statement 1

1.3 Research objectives 4

1.4 Scope and limitation 4

1.5 Research framework 5

Chapter 2 LITERATURE REVIEW 6

2.1 Literature review 6

2.1.1 The ABC of service 1 6

2.1.2 The cascade of quality 2 7

2.1.3 Quality service 3 9

2.1.4 Service quality 11

2.1.5 A six point-plan to provide total customer service 15

2.2 The framework for internal analysis : Setting the stage 23

2.2.1 The service strategy 23

2.2.2 Leaders’ commitment 24

2.2.3 Front-line customer service staff 24

2.2.4 Service design and Standards 26

2.2.5 Measurement service performance 27

Chapter 3 ANALYSIS TO IDENTIFY THE CRITICAL SERVICE FACTORS 28

3.1 Identify market segment 28

3.1.1 Viet nam Airlines’ Competitiveness without alliances 28

3.1.2 Return on Investment 29

3.1.3 Ability to compete on price 30

3.1.4 Entry barriers to the market 30

3.3 Grouping and Labeling service factors 38

3.4 Ranking the relative importance of these service factors identified 41

3.5 The Findings 43

3.6 VNA critical service factors in in-flight service applying for the customer survey period from 2003 to 2006 48

Chapter 4 ASSESS THE CURRENT IN-FLIGHT SERVICE PERFOMANCE OF VIETNAM AIRLINES 50

4.1 Vietnam Airlines and Cabin Crew – organization structures 50

4.2 Evaluation of Vietnam airlines in-flight service 52

4.3 Regarding to the VN customer survey results nearly three thousand passengers at the East of Asia and Vietnam sectors in 2006, the findings are as follows 59

4.4 Vietnam Airlines performance with other competitors performance 60

Chapter 5 ANALYSIS OF THE CURRENT VIETNAM AIRLINES – INTERNAL SYSTEM THAT ARE RESPONSIBLE FOR THE DELIVERY OF ITS IN-FLIGHT SERVICE 68

5.1 The service strategy 68

5.1.1 Strategic segments 68

5.1.2 Products, Value added services and marketing 70

5.2 The Leaders’ commitment 72

5.2.1 Does management often refer to “service heroes or legends” 73

5.2.2 Does management praise on time and publicly individuals/ teams with special 73

style ? 74

5.3 Front-line customer service staff 74

5.3.1 Recruitment policy 74

5.3.2 Training 77

5.3.3 Motivating 81

5.4 Service design and Standards 84

5.4.1 Do staff know where are potential service failures and how to recover them ? 85

5.4.2 Systems to assure that materials, foods, cleaning, mechanical and electrical services, etc furnished by suppliers or support functions meet the company’s performance requirement 85

5.5 Measurement service performance 86

5.5.1 There are methods/system for the company to regularly measure customer satisfaction, staff satisfaction 86

5.5.2 Information about customer satisfaction & complaints are communicated well to all levels (staff to manager and vice versa, and between staff from different teams) 88

Chapter 6 CONCLUSION 89

Chapter 7 HOW TO IMPROVE VIETNAM AIRLINES IN-FLIGHT SERVICE 94

7.1 How To Improve Vietnam Airlines Inflight Service 94

7.1.1 Review on the service strategy and policies 94

7.1.2 Review at Leader’s Commitment 95

7.1.3 Front-line customer service staff 95

7.2 Concluding remarks 98

Figure 3-2: Average regional revenue by nationality of the three-year period

2002-2005 34

Figure 3-3: Average revenue by travelling purpose of the three-year period 2002 - 2005 34

Figure 3-4: Average revenue by nationality & travelling purpose of 2003-2005 35

Figure 4-1: VNA Organization Chart 50

Figure 4-2: Cabin Crew Organizational Chart 51

Figure 4-3: Safety; On-time departure 54

Figure 4-4: Cabin Crew Service 54

Figure 4-5: Reading materials 55

Figure 4-6: Food and Drinks 56

Figure 4-7: Entertainment services 56

Figure 4-8: Business facilities 56

Figure 4-9: Cabin conditions 57

Figure 4-10: Business - Cabin Crew Service 61

Figure 4-11: Business - Problem solving 61

Figure 4-12: Business - Food and drinks 62

Figure 4-13: Business - Reading materials 62

Figure 4-14: Business- Entertainment services 62

Figure 4-15: Business facilities 63

Figure 4-16: Business - Cabin conditions 63

Figure 4-17: Tourist view-cabin crew service 64

Figure 4-18: Tourist view-problems solving 64

Figure 4-21: Tourist-entertainment service 65 Figure 4-22: Tourist-business facilities 65 Figure 4-23: Tourist-cabin condidtions 66

DXB : Dubai, U.A Emirates

CDG : Charles De Gaulle Airport, PARIS, FRANCE

KHH : Kaoshiung, Taiwan

KIX : New KanSai Airport, OSAKA province, JAPAN

SIN : Singapore

HAN : Noibai airport -Hanoi Vietnam

HCMC : Hochiminh City, Viet nam

SGN : Tansonnhat Airport-Hochiminh City Viet nam

Nha : Nha Trang Airport- Nha Trang city, Vietnam

HPH : Hai Phong Airport, Hai phong city, Vietnam

VN : Vietnam Airlines

CCD : Cabin crew Division

Cabin Attendent : The Airline staff working on the Aircraft to serve Passengers ICAO : International civil aviation organization

CAAV : Civil Aviation Authority of Vietnam

In-flight service/ On board service : Cabin Attendants serve passengers on the

aircraft

Pre-flight briefing : short meeting of Cabin crew teem before each flight to

assign clearly tasks for each member

Ground handling : Ground staffs serve Passengers before and after the flight at

the airport

Indicate what major sources of data you expect to look for

TOEIC : Test Of English for International Communication

products or services, but it is also to create a “culture of excellence” and to improve the quality of work for serving customer better

The strategic quality management of airline industry is one of the service sector,

it is more difficult than in the manufacturing sector because of three unique characteristics: Intangibility, which causes difficulties in outcome measurements; Heterogeneity, by which the quality depends on a vast different kind of services; and Inseparability of production and consumption, by which the service provider have no time to test their product before delivering it to customers

Vietnam Airlines has developed itself quality strategies during the last 10 years, especially Its quality in in-flight service It is nowadays recognized by partners and customers as a quality company with warmly and professional teams

In this research, we studied operations of Vietnam Airlines in terms of quality management in in-inflight service basing mainly on the total customer service concept By analyzing the service delivery process in comparison with six-steps guidelines, we suggested a recommendation plan for the company to implement continuous improvement to enhance its competitive advantages in such a dynamic industry

The Vietnam Airlines-Cabin Crew, as a service organization in itself, should plan Its actions towards the excellence of service quality performance through better management practices and effective organization The ultimate goal is to

get highest level of customer satisfaction

Professor - Doctor Phan Dang Tuat, who served as my local coach, for him valuable guidance, support and comments on my research paper Despite the complexity and scope of the topic, He convinced me that I should take this research for my own company due to its potential implications My great thanks also extend to Vice Professor – Doctor Ngo Kim Thanh, Director of Business Management Economy in Industry and Building subject at Hanoi National University of Economy’s Business Management Department; and to the dedicated staffs who have greatly helped me during my MBA study as well as during this research

Secondly, I am very grateful to the Board of Directors of Vietnam Airlines Corporation, Cabin Crew Department for providing me time release to pursuit of the MBA program at the Ho Chi Minh Open University and Solvay Business School/University Libre of Bruxelles

Many thanks for the staffs of the Vietnam Airlines – Cabin Crew – for offering

me their unconditional trust and intense discussion

Last but not least, with all my love, I am heartily indebted to my wife, my Daughter and my Son to have brought me up My deepest gratitude also goes to

my beloved family for their tremendous sacrifices, enthusiastic supports to my today’s successful

Pham Xuan Thang

Ho Chi Minh city, Vietnam

December November 2006

Chapter1 INTRODUCTION 1.1 Rationale

In a time of change, airline transportation service as in any other industry, there are always some airlines who perform more successfully than others These airlines who are performing well are remarkable not by their level of profit, but by the way they manage the changing environment and particularly by their dedication to serving the customer

as means to profit These airlines which accept the primary role of the customer in their business are most likely to survive and prosper in the years ahead

The typical character of the airline industry is to provide mainly service, but with accompanying minor products and goods The passenger is mainly buying a service, namely the transportation in an aircraft to his (her) destination However, the trip includes small tangible products, like food and drink, a magazine or newspaper

The service requires an expensive product, the aircraft, but the primary item is service Since the aircraft and service is basically the same, the competition tends to focus on the “extras” being small tangibles or services, like the temporary use of a blanket on board

Vietnam Airlines (VN) is a small carrier in the airline world Applying the above philosophy to survive, VN always aims at constantly improving its service quality, comprising both ground services and in-flight services, in order to meet customer's demand

1.2 Problem statement

In the coming years, the international visitors choosing Vietnam for tourist and business reason predicted an increase of 10-12 % per year to the

2010 VNA has a great opportunity for develop but also have to face with

a tense competition, especially among them there are some airlines achieving the world class standard of service quality

Vietnam Airlines currently provided a satisfactory level equal to that practiced by average airline operators but lower far from the top service level

The Vietnam Airlines Management has clearly stated their mission to

2010 to become one of the twenty most favored carriers in Asian region, regarding to service quality; be one of five leading Asian carriers selected

by customers (through passenger survey conducted by researching organizations and air magazines)

But now If compared with some direct competitors (having direct flights to Vietnam) i.e : Singapore Airlines (SQ), Cathay Pacific (CX), Japan Airlines (JAL),…Vietnam Airlines in-flight services is still not competitive The short-term goal of Vietnam Airlines is to provide in-flight services performance equal to or higher than those of airlines that have direct flights to Vietnam

With these aggressive targets, it certainly needs a coherent set of actions aimed at gaining a sustainable advantage over competition, improving Its position in customers’ image The Vietnam Airlines-Cabin Crew, as a service organization in itself, should plan Its actions towards the excellence of service quality performance through better management

practices and effective organization The ultimate goal is to get highest level of customer satisfaction

1.3 Research objectives

• To identify target market segments of Vietnam Airlines

• To identify the service factors for Vietnam Airlines’ target customers

• To assess the current performance of Vietnam Airlines in-flight service

as compared to key competitors

• To analyze the internal environment of Vietnam Airlines-Cabin Crew and identify Its strong and weak points

• To recommend a plan to strategically improve the service performance

of Vietnam Airlines-Cabin Crew

1.4 Scope and limitation

The research will be conducted using in-deep interviews method for major data collections

The research will focus the service performance within the Cabin Crew division not including aircraft or seat configuration

REVIEW LITERATURE &

FRAMEWORK BUILDING

SERVICE QUALITY MODELS

TOTAL CUSTOMER SERVICE

KEY CUSTOMERS SURVEY

INTERNAL ANALYSIS

ASSESSMENT OF

CURRENT SERVICE

PERFORMANCES

Chapter 2 LITERATURE REVIEW 2.1 Literature review

2.1.1 The ABC of service 1

The quality of customer service depends entirely on human factors These can be summed up in the ABC of customer service :

A ttitude

B ehaviour

C ompetence

Good attitude :

The basis of a good atti1tude to customer care is accepting that :

- Customers are the most important people in our working life;

- Satisfying their needs is our most important task

We need to respect our customers-which means meeting their needs in

a way which is friendly without becoming too ‘familiar’ Managers, supervisors and team leaders should constantly remind their staff of these ideas, and make sure they provide a consistent example for the team members to follow

- When team members accept that customers are the most important people

It makes sense to do that little bit extra to help them

- When team members accept that satisfying customers’ needs is the most important task

1 “Caring for the customer”, Author :Howard Senter, Published for NEBS management, third edition, Page 37

It makes sense to give serving customers priority over all their other tasks

Behavior :

Behavior means what you actually do for (and to) the customer Staff may have a very good attitude towards customers without knowing how to put this into practice

Anyone who deals with customers must treat them the way they expect to

be treated-which is promptly, efficiently and with respect

Competence:

Customers will accept being efficiently transferred to a competent person,

or being told that a competent person will phone them back But it would

be much better if the person who spoke to them in the first instance was able to provide a proper answer

2.1.2 The cascade of quality 2

In both production and services, one effective route to quality of service and total customer satisfaction is the CASCADE formula :

Quality of products and service

Total customer satisfaction

It is in these encounters that customers receive a snapshot of the

organization’s service quality, and each encounter contributes to the

customer’s overall satisfaction and willingness to do business with the

organization again From the organization’s point of view, each encounter thus presents an opportunity to prove its potential as a quality service

provider and to increase customer loyalty

This really comes down to quality supervision : It is supervisor’s task to achieve a CASCADE of quality towards customer satisfaction

• Commitment to customer satisfaction from the teamwork can only come

if managers and supervisors demonstrate clearly their own commitment

to it

• Ability is crucial : Staff must have the skills needed to perform to standard, whether they work in production, in a service capacity, or in direct customer contact roles

• Standards must be set and measured, so that everyone knows what the target is and what more needs to be done to achieve it

• Lack of proper communication between managers, supervisors and staff leads to misunderstandings, errors and dissatisfaction No one can produce a quality product in these conditions

• Attention to detail marks the difference between those who only talk about customer satisfaction, and those who are really committed to succeed

• Excellence is the result, if the formula is followed

2.1.3 Quality service 3

Quality service is service that consistently m2eets or exceeds customer expectations

The value of customer :

What is the value of a loyal guest ?

- “Present value” of a guest as the first-time sale you make to him or her

- “Future value” of the same guests as the revenue potential from that guest over a specified period of time

The cost of customer dissatisfaction :

Failure to meet needs and expectations is assumed to result in customer dissatisfaction

The potential value of customers demonstrates that when dissatisfied guests walk out the door, they take with them a sizable chunk of future business Also, the total amount of future business at risk increases in relation to the negative impressions about the business that dissatisfied customers pass on to others

Moments of truth : Jan Carlzon, president of Scandinavian Airlines

System (SAS), coined the term “moment of truth” For Carlzon, moment

of truth are the interactions between a customer and the airline staff that virtually bring the company to life for a particular customer at a specific moment in time

Authors Karl Albrecht and Ron Zemke forged the moments-of-truth concept into a revolutionary approach to service management Going

2

“MANAGING for QUALITY in the HOSPITALLITY INDUSTRY” By Robert H.Woods, Ph.D, CHRE Judy Z.King, Copyright 1996 By the EDUCATIONAL INSTITUTE of the AMERICAN HOTEL & MOTEL ASSOCIATION 1407 South Harrison Road, P.O.Box 1240, East Lansing, Michigan 48826, Page 93

beyond the perspective of guest and staff interaction, they defined a moment of truth as “any episode in which the customer comes into contact with any aspect of the organization and get an impression of the quality of its service”

“Empowerment” : The redistribution of power within an organization

enabling managers, supervisors, and employees to perform their job more efficiently and effectively The overall goal of empowerment is to enhance service to guests and increase profits for the organization by releasing decision-making responsibility, authority, and accountability to every level within the organization To successfully empower staff members, managers must first enable them and then support their decisions and actions

Managers enable their employees by providing the necessary skills training to help them become competent in performing the fundamental tasks of their jobs Skills training is absolutely fundamental to quality service and is most effective when it provides employees with the “why” behind the “how-to” of their jobs

The cost of staff dissatisfaction

Few service businesses can succeed without a loyal, satisfied staff Especially for hotels, restaurants, and other hospitality operations, survival and success depend more on the developing and retaining a committed and productive staff than on managing a revolving door of terminated employees and new-hires

One of the keys to retaining staff members is to increase their level of satisfaction with their jobs Staff members stay with a company longer

when they perceive value in the quality of their work environment and feel adequately compensated for the work they perform

The staff’s perception of work value and internal service

Staff members perceive value and quality in much the same way as customers A customer’s perception of value is based on price and the quality of service received; Staff members perceive value in relation to their paychecks and the quality of their work environment

2.1.4 Service quality 3

Defining :

Service quality is a critical component of customer perceptions

Customer satisfaction can be defined by comparing perceptions of service received with expectations of service desired

Dimensions of service quality :

Five principal dimensions listed in order of declining relative importance

Five dimensions Description

1 Reliability Ability to perform the promised service dependably and

accurately

2 Responsiveness Willingness to help customer and provide prompt service

3 Assurance Knowledge and courtesy of employees and their ability to

inspire trust and confidence

4 Empathy Caring, individualized attention the firm provides its customer

5 Tangibles Physical facility, equipment, and appearance of personnel

PERSONAL NEEDS

PERCEIVED SERVICE

PERCEIVED SERVICE QUALITY

1.Expectations exceeded ES<PS (Quality surprise) 2.Expectations met

ES=PS (Satisfactory quality) 3.Expectations not met ES>PS (Unacceptable quality)

PAST EXPERIENCE WORD OF

MOUTH

Gaps in service quality

• Gap 1: difference between expectations and perceptions

• Gap 2: not knowing what customers expect

• Gap 3: not having the right service designs and standards

• Gap 4: not delivering to service standards

• Gap 5: not matching performance to promises

Service Delivery Communications External

to Customers

Customer-Driven Service Designs and Standards

Company Perceptions of Consumer Expectations

Gap 5 CUSTOMER

Perceived Service

Scope of service quality

A comprehensive view of the service system is necessary to identify the possible measures of service quality Thus should be biased from five perspectives : Content, process, structure, outcome, and impact

2.1.5 A six point-plan to provide total customer service 4

Point 1: Strategy

Developing a strategy is fundamental to winning the customer service war Companies that have clear, well-focused service strategies are better able to optimize the production and delivery of service

Step 1- Segment:

Unlike classical marketing segmentation, segmentation for customer service focuses on customers’ expectations more than their needs Several customer service segments may exist within one market segment, and one customer service segment can cut across several market segments

Step 2 - Find out what customers expect :

Concentrate on the most important customers and highlight the differences between your company’s notions of great service and theirs When doing research, start with open-ended questions and focus groups, and move on from there to more formal methods, always seeking to preserve qualitative truth instead of generating thousands of highly accurate but largely misleading numbers

As part of the research, look at competitors’ strategies; understand where they are in the service life cycle and how to leapfrog them or to finesse

4

Total customer service, Copyright 1989 by William H.Davidow and Bro Uttal, Page 46

their advantages Avoid getting caught in a downward spiral of service, or cost/price squeeze; try instead to push competitor into the spiral

Step 3 - Set customers’ expectations : Develop a communication plan that will influence customers to expect a little less service than they will get

Point 2: Leadership

Leadership helps make strategy a day-to-day reality Unless top managers profess the religion of customer service, employees will view the most elegant strategy as just another easily ignored public relations campaign Leaders of companies that shine in customer service adhere to three principles:

Principle 1 - Foster a service –oriented culture:

Leaders help create and nurture cultures by communicating values They worship at the altar of customer service every day, and they do it visibly They are personally involved in service activities They back up slogans with dramatic, often costly actions To inculcate values they stress two-way communications, opening their doors to all employees and using weekly meetings of work groups to inform, to inspire, and to solve service problems They put values into action by treating employees exactly as they want employees to treat customers

Principle 2 - Make customer service everybody’s business :

Unless every employee assumes responsibility for the customer’s experience, service dies Leaders encourage each employee to feel and act as if he or she owns the company

Principle 3 - Declare war on bureaucracy:

Red tape and recalcitrant middle managers will sabotage service every time To produce effective, efficient customer service, leaders keep policies , procedures, and other formal control mechanisms to a minimum, relying instead on cultural control They re-educate middle managers and supervisors to focus on serving and supporting front-line employees, measuring their performance by surveying the service they render to internal customers

Point 3 : People policies

To customers, front-line workers embody service Yet service workers often are the pariahs of corporate society, the lowest in the pecking order Customers judge service by the quality of their interactions with the people who provide it Companies known for great customer service outspend their competitors to ensure that customer – contact workers do a superior job They generally adhere to three principles:

Principle 1 - Work ceaselessly to hire the right people:

Service leaders take as much care in hiring customer service employees

as they would in selecting business partners Since attitude is more telling than experience, they look for people whose personalities predispose them to produce good service and to fit in well with the service culture The most sophisticated companies search out target groups whose life situations fit well with the job requirements

Principle 2 - Train, train and retrain:

Companies that produce superior service strike a balance between social training, which is usually informal, and technical training, which must be

formal and highly specific Their training activities emphasize service to internal customers, as well as to external ones( i.e corporate teamwork) Unless their transactions with customers are highly standardized and industrialized, these companies avoid “ smile - and – dial” programs, which tend to produce behavior that customers feel is phony They cross – train employees to increase their abilities to solve customer problems on their own At some point in their careers, managers and supervisors will have participated in at least some of the training programs that front- line workers undergo

Principle 3 - Motivate lavishly:

Customer service calls for heroic emotional labor, and the more contact employees have with customers, the more motivation they need To create service heroes and legends, the service leaders use a panoply of awards programs, and they make the awards frequent and meaningful, both emotionally and materially They pay customer service workers well enough to show their importance to the company’s success, and they give employees genuine career paths instead of making service a dead – end job

Point 4 : Service by design

When a core service or product is designed without customer service in mind, the task of producing outstanding service becomes virtually impossible Constant breakdowns drive up costs The difficulty of repair frustrates service employees and customers alike

Designing core services to optimize customer service is harder than designing serviceable products, but the tasks are similar In both cases the key is to pinpoint likely points of failure and provide for quick response and repair

Effective design for service calls for accommodating customer behavior, but customers behave in quirky, unpredictable ways They always seem to

be polluting the designer’s unsullied vision Fortunately, designers respond well to clear rules Here are three that will ensure they keep customer service and satisfaction in mind:

Chase the failure points:

First get a clear understanding of how the core product or service can break down Pay special attention to the ways in which customers may cause unexpected failures Then design the company’s responses to failure so they will exceed customer expectations

Sign up the service staff:

Only the people who have to fix products or compensate for failed services know the real problems Get them to join the design team from the start, and let them participate as equals with team members from R&D, manufacturing, and marketing Don’t let pressures for attractive, low – cost products – or elegant, high- priced ones – over- overwhelm the importance of designing products for serviceability

Share the work:

Producing outstanding service at reasonable cost is almost impossible without the help of customers and of labor – saving devices like electronic

intelligence Savy designers get customers to co-produce, to do more of the work themselves They also grab every chance to incorporate diagnostic equipment into the core product or service

Point 5: The backbone of service : Infrastructure

Infrastructure is the backbone of customer service Clearly, no company can deliver service without building a service factory And thanks to economies of scale and scope, the few competitors that possess the most efficient service factories also possess a self – reinforcing advantage Investments in infrastructure are always heavy, and they’re usually much heavier than nạve managers expect

When creating infrastructures, keep in mind three principles:

Plan for the long haul:

Very few investments in infrastructure begin to show a positive return in less than three years Even five years of negative cash flow isn’t unusual

So building an infrastructure calls for deep pockets

Of course, there are many ways to manage and moderate this investment Third- party service organizations often can be used to handle locations where volume is too low to justify a full – blown field office Information systems and electronic hardware almost always reduce levels of investment in physical facilities and levels of spending for service employees The size of the infrastructure needed to meet a given level of demand can be reduced by offering customers different tiers of service and charging less for tiers that burden the infrastructure less

The lesson is simple: Don’t underestimate the amount of investment your infrastructure requires Under investing may permit a smart competitor to push your company into an eternal game of catch- up

Match the infrastructure to the customer:

The more a service factory reflects the needs, expectations and abilities of the customers it’s supposed to serve, the more effective and efficient that factory will be More effective because the factory will do a better job of meeting and exceeding customers’ expectations; more efficient because the customized factory is streamlined , and because it helps customers co – produce service

One measure of how tightly an infrastructure is tailored to the customer is whether that infrastructure would suit quite different customers If it would, then it’s probably not well matched to the customers you’re trying

to serve

Tightly tailored infrastructures have a hidden advantage If they meet customer needs and expectations uniquely well, customers are happy to pay whatever premium is needed to fund the first – rate service factory

Leapfrog the growth of sales and service:

It’s impossible to match exactly the demand for service that sales create with the supply of service that infrastructures make possible

The secret is timing When sales threaten to overwhelm service, get the sales force to lay off until the growth of the infrastructure catches up Otherwise, their very success will tarnish your company’s hard- won reputation When the infrastructure has much roomed so much that the

company is awash in idle capacity, turn off the money faucet until sales create enough demand to take up the slack It’s impossible to achieve perfectly balanced growth, frequent little leapfrogs will do just fine

Point 6 : Keeping track : Measurement

Lacking good measures, no company can assess its progress or adjust to changes in customer expectations No manager can reward employees appropriately, tune his strategy and infrastructure to customer needs, or design products and service delivery systems that support outstanding service Without valid measurement systems, it’s impossible to know what actions are required to improve customer service

When designing measurement systems, keep three principles in mind:

Let your customers say what counts:

Most measures are designed by and for the company that uses them They serve the needs of operations managers and administrators, not the needs

of customers, and they ensure that front- line workers will wear blinders

To avoid this syndrome, make customer satisfaction measures an integral part of the measurement system and check constantly to see that process and product measures are aligned with what matters to the customer Don’t target ten- day delivery when most customers expect next – day service

Beware the wrong carrot:

It’s funny thing: people tend to do what they are told to do and what they’re rewarded for doing Unfortunately, they tend to do those things to the exclusion of everything else Unless you pick individual measures

very carefully and design a system that balances process, product and satisfaction measures, sub optimization is a certainly Instead of dangling

a single carrot, hold out a garden salad of complementary measures

Close the loop:

The only way to get people’s attention and positively affect their behavior toward customers is to make the measurement systems matter Tie them

to compensation, both psychic and monetary Back them up by promoting managers who exceed the standards and investigating – or ‘ helping” – those who don’t Use feedback from the measurement systems, especially from customer surveys, to develop and promote new processes, products and services

2.2 The framework for internal analysis : Setting the stage

2.2.1 The service strategy

The first and most important step toward outstanding service is developing

a service strategy Strategy sets the stage and defines the constraints for all the other steps

Developing a strategy means segmenting customers according to their service expectations, identifying segments that are the best targets for the company, finding out exactly what are expectations of these target segments, looking at competitors’ strategies understanding where they are standing in this target segments, and positioning the services your company will offer to target customers Ideally the mix of services & the levels your company offer must be hard for your competitors to counter

The research will determine if top management is capable of defining service strategy & can relate to the following : strategic segments, products, value added services, and marketing

2.2.2 Leaders’ commitment

No company can triumph in customer service unless its leaders drive the process and drive it hard Given great service often calls for staff to do hard emotional work in order to create positive social processes Nobody will put his heart on this without constant demonstrations of commitment from the top

The research will look for evidences to check if top management consistently demonstrate their commitment in customer service, foster a service oriented culture, pronounce their beliefs and back up their work with dramatic actions

2.2.3 Front-line customer service staff

To customers, front-line staff embody service In other words, customers judge service by the quality of their interactions with the people who provide it The more contact staff have with customers, the more critical his performance is to perceptions of service quality

In companies known for great customer services their human resource policy must adhere to three principles:

• Hire the right people: look for people whose attitudes and personalities predispose them to produce good service

• Train, train and retrain: strike a balance between social training which

is usually informal, and technical training, which must be formal and highly specific

• Motivate: to create service heroes use award program that are frequent, meaningful, both emotionally and materially Also pay customer service staff well enough to show their importance to the company’s success And give staff genuine career paths instead of making service a dead-end job

People policies that shape performance of front-line customer service staff :

Recruitment policy :

The research will examine if employee selection criteria and methods geared to what customers believe important such as caring, patient, putting passenger first, not being bossy

Training policy :

The research questions include how are the company’s social training (Interpersonal values, attitudes, customer service techniques) and technical training (preparing & presenting a meal, fixing minor mechanical problems, first aid,); If there are vertical cross-training (front line staff experience back office jobs such as handling reservations, tracing lost baggage); And senior and middle managers share certain training experience with front line staff…) and technical training or not

Motivating people :

The research will investigate if there are perceivable links between measures of customer satisfaction, quality of customer service output to employee reward and promotion & payment

2.2.4 Service design and Standards

A great help in designing a core service is to chart the steps of providing the service and how those steps interact By closely looking at these steps

of the service delivery process, one will be able to :

- Identify opportunities for modify/improving/offer new services

- Identify potential service failure points, often because of the customer role in the service, and laying out steps to recover that will exceed customer expectation

The design of core service will determine :

- The layout of the service facility

- The type, size, etc of service equipment, especially those will be used

by customers

- The order of the service delivery process and sub processes

- The standards or specifications (time, quality, quantity) for each service components including those provided by suppliers, by support functions

- The systems to ensure the service delivery meet the set standards & specifications & how to recover them when there is service failure

The research thus will try to find out if :

- There are clear set and well communicated standards/specifications for major services components in in-flight service

- Staff know where are potential service failures and how to recover them

- There are systems to assure that materials, foods, cleaning, mechanical and electrical services, etc furnished by suppliers or support functions meet the company’s performance requirement

2.2.5 Measurement service performance

Three principles:

Let your customers say what counts:

Make customer satisfaction measures an integral part of the measurement system and check constantly to see that the process and product measures are aligned with what matters to the customers

Create a closer alignment between the information needed to measure service quality and the information needed to operate the business :

This can be done by seeking the help of the employees who will be measured If employees are clear about the company service strategy, how their work will contribute to the overall customer satisfaction objectives then they are in very good position to help management to set service standards or specifications for service outputs that meeting customers expectations

Tie measurement system to actions :

Staff’s achievement of quality standards must be the basis for their awards, link at least partly to their compensation Those who perform below quality standards must receive special help Also use feedback from the measurement systems, especially from customer surveys, to improve current services, develop and promote new services

The research aims to determine if :

• There are methods/system for the company to regularly measure

customer satisfaction, staff satisfaction

• Information about customer satisfaction & complaints are

communicated well to all levels (staff to manager and vice versa, and between staff from different teams)

Chapter 3

ANALYSIS TO IDENTIFY THE CRITICAL SERVICE FACTORS

To deliver superior customer service, it is necessary to understand what are customer expectations? However, different customer segments have different expectations about the service Thus, which segments should be the focus for this analysis They should be the best target customers for Vietnam Airlines now and

in the next two – five years

Based on the above mentioned concepts & models, the following framework is developed in order to diagram the internal system of VN that are responsible for the delivery of its in-flight service :

3.1 Identify market segment

To identify the best segment for VN, we should analyze carefully the following criteria :

3.1.1 Vietnam Airlines’ Competitiveness without alliances

In general, traffic growth on U.S — European routes has been the most significant where strong alliances and Open Skies are dominated Alliances can drastically take advantages in its incremental pick-up of revenue possibly due to increased passenger flows in an already-developed market

Other advantages resulting from an alliance include, among others, joint marketing programs (targeted fare sales, tour programs, frequent flyer incentives, more revenue opportunities for frequent flyer plans, etc.), strengthened network with single-brand product, increased hub connectivity (more city-pairs, feed traffic, etc.) and a more comprehensive

product to attract premium traffic (business passenger, corporations, mega-agency business contracts, etc.)

At the moment, Vietnam Airlines is still not a member of any world airline alliances yet, and due to its weakness in technology (lack of wide-body aircrafts B747 or A340, K380) , still inefficiently running European route which overall results in very low revenue and profit, partially because most

of its flights to Europe are occupied by tourists with a very low price level

of air-fare and only a small percentage of business-class passengers

3.1.2 Return on Investment

In some cases a carrier may possess the route authority to serve a particular market, but is uncertain about how long it will take to reach an acceptable return This is critical to the decision process since aircraft represent significant capital expenditure, especially aircraft flown on international routes that are typically wide-bodies The cost of operating can be quite high since the fixed costs usually are spread over only a single round-trip Also, the competition may be well entrenched,

especially if it has the “home field” advantage

Would Vietnam Airlines decide to take part in this venture business, Vietnam Airlines is still a late comer in these fierce competition markets, and has to compete not only with direct competitors (direct flights) but also

with other regional low-cost carriers because of hub and spoke strategies,

focusing only on low-end markets To operate in the trans-continent sectors, Vietnam Airlines has to invest much more in its flying facilities compared to regional sectors i.e., very expenses wide-body and non-stop aircraft, complicated navigation procedures, high value entertainment system, in-