Service Marketing Final 29102012

7/28/2019 Service Marketing Final 29102012

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TOPICS IN SERVICES MARKETING

Services Marketing

S.

No.

Section Pages

1 Service Marketing 2-8

2 GAPS Model 9-10

3 Decision making & Evaluation of

Services

11-18

4 Customers Expectation of Service 19-32

5 Building Customer Relationship 33-44

6 Service Blue Printing 45-47

7 Marketing Information System 48-49

8 Employees Role in Service Delivery 50-55

9 Customers Role in Service Delivery 55-60

10 Managing Demand and Supply 60-68

11 Yield Management 68-69

12 Pricing of Services 69-73

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SERVICES MARKETING

Services are deeds, processes and performances.

Services include all economic activities whose output is not a physical product or construction, isgenerally consumed at the time it is produced, and provides added value in forms (such as convenience,amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser.

Ex.: Transportation, Communication, Educational services etc.

Services Vs Customer Service

Customer service is the service provided in support of a companys core products. This core productcould also be a service.

Services Marketing2


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Services tend to be more intangible than manufactured products and manufactured products tend to bemore tangible than services.

1970

1980

1995

2005

SERVICES NDUSTRY AGRICULTURE

% AGE OF GDP IN INDIA

Thus we see in India over the years the services are contributing more towards the GDP as compared towhat it was couple of decades ago.

Tangibility Spectrum

SaltSoft drinks

Detergents

AutomobilesCosmetics

Fast food outlets

Services Marketing3

46%

36% 26% 38%

41% 31% 31%

57% 22% 21%

31% 24%


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Intangible Dominant

Tangible Dominant

Fast food outlets

AdvertisingAgencies

Airlines

Investment

Management

Consulting

Teaching

The above diagram shows us that there are no pure products or pure services. Instead services tend to bemore intangible than manufactured products, and manufactured products tend to be more tangible thanservices.

Differences between Goods and Services

________________________________________________________________________________

Goods Services Resulting Implication

________________________________________________________________________________

Tangible Intangible Services cannot be inventoriedCannot be readily displayed or communicatedPricing is difficult

Production separate Simultaneous Customers participate in and affect thefrom consumption transaction.

Customers affect each other.Employees affect service outcome.Decentralization may be essential.

Services Marketing4


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Mass production is difficult.

Standardized Variability/ Heterogeneous Service delivery and customersatisfaction depend on employeesactions.

Service quality depends on manyuncontrollable factors.There is no sure knowledge that theplanned and promoted.

Non-perishable Perishable It is difficult to synchronize supply anddemand with services.Services cannot be returned or resold.

The Service Marketing Triangle

Building service relationships: Its all about promises.

COMPANY

Services Marketing5

Internal Marketing

(Enabling promises)External Marketing(Making promises)


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PROVIDERS CUSTOMERS

The Services Triangle and Technology

Understanding and leveraging the role of customer service in external, interactive and internalmarketing.

Expanded Marketing Mix for Services

Product Place

Physical Good Features Channel TypeQuality Level ExposureAccessories IntermediariesPackaging Outlet LocationsWarranties TransportationProduct Lines StorageBranding Managing Channels

Services Marketing6

Interactive marketing

(Keeping promises)

Providers

Company

Customers

Technology


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Promotion Price

Promotion BlendFlexibility

Sales People: Price Level

Number TermsSelection DifferentiationTraining DiscountsIncentives Allowances

AdvertisingTargetsMedia TypesTypes of AdsCopy thrustSales PromotionPublicity

People Physical Evidence Process

Employees Facility Design Flow of activitiesRecruitment Equipment StandardizedTraining Signage CustomizedMotivation Employee Dress No. of stepsRewards Other tangibles SimpleTeamwork Reports Complex

Customers Business cards Customer InvolvementEducation StatementsTraining Guarantees

Expanded Mix for Services

Apart from Product, place, promotion and price, for Services we have People, Physical Evidence andProcess

1) People: All human actors who play part in service delivery and thus influence the buyersperceptions namely, the firms personnel, the customer and other customers in the serviceenvironment.

2) Physical evidence: The environment in which the service is delivered and where the firm and thecustomer interact, and any tangible component that facilitate performance or communication ofthe service.

Services Marketing7


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3) Process: The actual procedures mechanisms, the flow of activities by which the service isdelivered- the service delivery and operating system.

Marketing of Services: Issues and Challenges

1. Performance itself is the product.2. Services are produced after they are sold.3. Core benefit in services is intangible.4. Producers of service play the dual role of marketers.5. Differentiating is difficult in services.6. Service quality has many dimensions.7. People factor is important.8. Customers behavioral response affects service quality.

CONTINUUM OF EVALUATION FOR DIFFER TYPES OF PRODUCTS

Services Marketing8


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HIGH IN SEARCH HIGH IN EXPERIENCE HIGH IN CREDENCE

QUALITIES QUALITIES QUALITIES

Services Marketing9

EXPECTEDSERVICE

PERCEIVED

SERVICE

SERVICE

DELIVERY

CUSTOMER- DRIVEN

SERVICE DESIGNS

AND STANDARDS

COMPANY PERCEPTIONS OF

CONSUMEREXPECTATIONS

EXTERNAL

COMMUNICATIONS

TO CUSTOMERS

Customer Gap 5

GAP 1

GAP 3

GAP 2

GAP 4

GAPS MODEL OF SERVICE QUALITY


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THE CUSTOMER GAP

Services Marketing10

EXPECTEDSERVICE

PERCEIVEDSERVICE


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CUSTOMERGAP

The Provider Gaps

Gap 1- Not knowing what customers expects.

Gap 2 - Not selecting the right service designs & standards

Gap 3 - Not delivering to service standards

Gap 4 not matches performance to promises

CATEGORIES IN CONSUMER DECISION MAKING AND EVALUATION OF SERVICES.



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SERVICES: CATEGORIES IN THE DECISION-MAKING PROCESS

For Services the sequence of information search, Evaluation of alternatives, Purchase and consumption &Post purchase evaluation do not occur in a linear sequence the way they most often do in purchase ofgoods.


INFORMATION

SEARCH

USE OF PERSONALSOURCES

PERCEIVED RISK

EVALUATION OF

ALTERNATIVES

EVOKED SETEMOTION AND MOOD

PURCHASE &

CONSUMPTION

SERVICE PROVISIO ASDRAMASERVICE ROLES ANDSCRIPTS.COMPATABILITY OFCUSTOMERS

POST PURCHASE

EVALUATION

ATTRIBUTION OFDISSATISFACTIONINNOVATION DIFFUSIONBRAND LOYALTY

CULTURE

Values & AttitudesManners & CustomsMaterial cultureAestheticsEducational & socialinstitution

Language


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INFORMATION SEARCH: -

Use of personal source

For purchasing goods use of both personal and non-personal sources is done as both effectivelyconvey information about search qualities.

For services, consumers rely to a great extent on personal sources for several reasons.

As mass media can convey about search qualities but can communicate little about experiencequalities.

Perceived risk

Compare to good more risk would be involved in purchase of services.- Intangible nature- Since services are non-standardized always more uncertainty would accompany about the

outcome each time it is purchased.- Services not accompanied by any warranties.

EVALUATION OF SERVICE ALTERNATIVES

EVOKED SET

The evoked set of alternatives that group of products a consumer considers acceptable options in a givenproduct category -is likely to be smaller with services than goods.

Reasons

1. Difference in retailing between goods and services

Retail outlet would display competing brands in close proximity

To purchase services on other hand, the consumer visits an establishment (e.g. a bank,

a drycleaner or a hair salon) that almost always offer only a single brand for sale

2. Consumers are unlikely to find more than one or two businesses providing the same services ina given geographic area, whereas they may find numerous retail outlets carrying the identicalmanufactures product.

3. Difficulty to obtain adequate prepurchase information about services.



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4. Or non professional services sometimes the consumer may perform the services for himselfe.g. cleaning homes themselves against hiring housekeepers, tax preparation etc.

Hence customers evoked set frequently includes self provision of the service.

SERVICE PURCHASE AND CONSUMPTION

Emotion and mood are feeling states that influence peoples (and therefore customers) perceptions andevaluations of their experiences.

Moods are transient feeling states that occur at specific time and in specific situations.

Emotions are more intense stable and pervasive.

Any service characterized by human interaction is strongly dependent on the moods and emotions of theservice providers, the service customers and the other customers, and other customers receiving services

at the same time.

Ways in which mood can affect the behavior of service customer

Positive moods can make customers more obliging and willing to participate in behaviors

that help service encounters succeed.

Moods and emotions influence service encounters is to bias the way they judge service

encounters and providers. Evaluation of service is consistent with the polarity (positive ornegative) mood or emotion.

Moods and emotion affect the way information about service is absorbed and retrieved.

Service marketers need to be aware of the moods and emotions of customers and service employees andshould attempt to influence those moods and emotions in positive ways.

SERVICE PROVISION AS DRAMA

Both service provision and drama aim to create and maintain a desirable impression before an audience.The drama metaphor offers a useful way to conceive of service performances.

Among the aspects of a service that can be considered in this way are:

Selection of personnel (auditioning the actors)

Training of the personnel (rehearsing)

Clearly defining the role (scripting the performance) Creating the service environment (setting the stage)

Deciding which aspect of the service should be performed in the presence of customer (on stage)

Which should be performed in the backroom (back stage)

Importance Of Service Actors Increases When:



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Degree of personal contact increases (as in hospital, restaurant or resort)

Services involve repeat contact and service actors have the discretion in determining the nature

of the service and how it is delivered ( as in education, medical services, legal services)

SERVICES ROLES AND SCRIPTS

Roles are defined as combinations of social clues that guide and direct behaviors in a given setting.The success of any service performance depends in part on how well the role set or players- bothservice employees and customers- act out their roles.

Service employees need to perform their roles according to expectations of the customers. The customersrole must also be performed well. If customers are informed and educated about the expectations andrequirements of the service.

If customer cooperates with the service provider to deliver the best possible service, the serviceperformance is likely to be successful.

One of the factors that most influences the effectiveness of role performance is a script.A script is a coherent sequence of events expected by the individual, involving her either as a participantsor as an observer.

Conformance to scripts is satisfying to the customer while deviations leads to confusion anddissatisfaction.

THE COMPATIBILITY OF SERVICE CUSTOMERS

The mere presence of customers in churches, restaurants, bars and spectacular sports is important.If no one else shows up, customers will not get to socialize with others, one of the primary expectations inthese types of services.However if number of customers becomes so dense that crowding occurs, customers may also bedissatisfied.Customers can be incompatible for many reasons

Difference in beliefs

Values

Experience

Abilities to pay

Appearance

Age, health etc.

The service marketer must anticipate, acknowledge and deal with heterogeneous customers who have thepotential to be incompatible.



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The service marketer can also bring homogeneous customers together and solidify relationships betweenthem.

Customer compatibility is a factor that influences customer satisfaction, particularly in high contactservice.

POST PURCHASE EVALUATION

Attribution Of Dissatisfaction

When a customer is dissatisfied with the services they purchased they may attribute their dissatisfaction toprovider and also to themselves (as they participate in the service process)

e.g. disappointed from a haircut ,the customer may blame

-The stylist (for lack of skill)

- Or herself (choosing the wrong style or not communicating her own needs)

The quality of many services depends on the information the customer brings to the service encounter.

e.g. - Doctors diagnosis depends greatly on this- Dry cleaners success in removing a spot depends on the customers knowledge

of its cause

(Incase of products consumers main form of participation is the act of purchase. Consumer may attributefailure to receive satisfaction to her own decision-making error, but hold the producer responsible forproduct performance.)

Hence consumers may complain less frequently about services than about goods.

Innovation Diffusion

The rate of diffusion of an Innovation depends on the Consumers Perceptions of the innovation withregard to Five Characteristics:

Relative Advantage

Compatibility

Communicability

Divisibility Complexity

Services as a group are less communicable, less divisible, more complex and probably less compatiblethan goods.

Consumers adopt innovations in services more slowly than they adopt innovations of products.



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Marketers may need to concentrate on incentives to trial when introducing a new service.

Brand Loyalty

The degree to which consumers are committed to particular brands of goods or services depends on a

number of factors: Cost of changing brands (switching cost)

Availability of substitutes

Perceived risk associated with the purchase

Degree to which they obtained satisfaction in past

Consumers are more brand loyal with services than products.Brand loyalty has two sides.The fact that a service providers own customers are brand loyal is not a problem.The fact that customers of the providers competition are difficult to capture , however creates specialchallenges.

Brand loyalty is described as a Means of economizing decision effort by substituting habit for repeated,deliberate decision.

This functions as a device for reducing the risk of consumer decision.

The Role Of Culture In Services

Culture is learned, shared, and transmitted from one generation to the next, and is multidimensional.

Culture would include:

1. Language (both verbal and non verbal)2. Values and attitudes3. Manners and customs4. Material culture5. Aesthetics6. Education and social institutions

These cultural universals are manifestations of the way of life of any group of people.

Service marketers must be particularly sensitive to culture because of customer contact and interaction

with employees.

Culture is important when we consider international services marketing taking the service from onecountry and offering them in others; but it is also critical within countries.

VALUES AND ATTITUDES DIFFERACROSS CULTURES



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Values and attitudes help to determine what member of a culture think is right, important, and / ordesirable.

Consumer behaviors flow from values and attitudes; service marketers who want their servicesadopted across cultures must understand these differences.

E.g.US brands have exotic appeal to other cultures, but USA cannot take it as a long-term strategy.As nationalism in some cultures could work against this.

MANNERS AND CUSTOMS

Manners and customs represent a cultures views of appropriate ways of behaving.

It is important to monitor differences in manners and customs, because they can have direct affecton the service customer.

E.g.Central and western European employees are perplexed by western expectations that unhappyworkers put on a happy face when dealing with customers.

MATERIAL CULTURE

Material culture consists of tangible products of culture. It is the stuff we own Why people ownand how they use and display material possessions varies around the world.

E.g.

Zoos in Japan very cramped compared to USAMortgages in Japan for houses 100yrs

USA 30yrsIndia 20yrs

AESTHETICS

Aesthetics refers to cultural idea about beauty and good taste. These are reflected in music, art,drama, and dance as well as appreciation of color and form.

E.g.

Earthy tones of Japanese restaurants as against glossy red evident in their Chinese competitorsestablishments.

EDUCATIONAL AND SOCIAL INSTITUTIONS



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Both kinds of institutions are affected by and are transmission agents of culture. Educationincludes the process of transmitting skills and knowledge, and thus may take place in school andin less formal training circumstances. The structure and functioning of each are heavilyinfluenced by culture. Culture manifests itself most dramatically in the people contact or our socialinstitutions

E.g.Western way of imparting education in a session whenever you have a doubt you would ask fromthe instructor. But in traditional eastern set up the students would learn by being with theinstructor and asking questions was not encouraged.

CUSTOMER EXPECTATIONS OF SERVICE



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Customer expectations are beliefs about service delivery that function as standards or referencepoint against which performance is judged. Knowing what customer expects is the first andpossibly most critical step in delivering quality service.

EXPECTED SERVICE: - two levels of expectations

a. Desired service: - the service customer hopes to receive - the wished for level of performance.b. Adequate service: - the level of service the customer will accept.

Dual customer expectation levels & the zone of tolerance

DESIRED SERVICE expectations seem to be the same for that defined by the customerE.g.Desired expectation of

1. Expensive restauranta. Elegant surroundingsb. Gracious employeesc. Candle lightd. And fine food

2. Fast food restauranta. Quick b. Convenientc. Tasty food in clean setting

The adequate service expectation level however is likely to vary for different firms within acategory.

E.g.Within fast food restaurant, a customer may hold higher expectations for Mac Donalds than forWimpys.

ZONE OF TOLERANCE


Desired Service

Zone ofTolerance

Adequate Service


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As service are heterogeneous in that performance may vary across providers, across employees from thesame provider, and even within the same service employee.

The extent to which customer recognizes and are willing to accept this variation is called the zone of

tolerance.

The zone of tolerance can be considered as the range or window in which customers do not particularlynotice service performance. When it falls outside the range (either very low or very high), the services getcustomers attention in either a positive or negative way.

Note: Marketer must understand not just the size and boundary levels for the zone of tolerance but alsowhen and how the tolerance zone fluctuates within a give customer.

DIFFERENT CUSTOMERS POSSESS DIFFERENT ZONES OF TOLEREANCE

E.g.Busy customers who are pressed for the time and therefore desire short wait times in general would alsohold a constrained range for the length of acceptable wait times.

An individual customers zone of tolerance increases or decreases depending on a number of factorsincluding company-controlled factors such as price.

Price increases dont really drive up expectations. But tolerance level will become more stringent / less

flexible with the increase.

ZONES OF TOLERANCE VARY FORSERVICE DIMENSION

Customers tolerance zones also vary for different service attributes or dimensions. The more importantthe factor, the narrower the zone of tolerance is likely to be.

In general customers are likely to be less tolerant about unreliable service (broken promises, serviceerrors) than other service deficiencies.


Level

of

expectatio

Desired Service

Zone ofTolerance

Adequate Service

Desired Service

Zone ofTolerance

Adequate Service

Most important factors Least important factors


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Zone of tolerance for different services

ZONEOFTOLERANCEVARYFORFIRST-TIMEANDRECOVERYSERVICE

FIRST-TIMESERVICE

Outcome

Process

RECOVERYSERVICE

Outcome

Process

Low High

Expectations

The fluctuation in the individual customers zone of tolerance is more a function of changes in adequateservice level which moves readily up and down due to situational circumstances than in desired servicelevel, which tends to move upward incrementally due to accumulated experiences.



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Nature & Determinants Of Customer Expectations Of Service

sensitivity to service.

Services Marketing

Perceived Service

Expected Service

Zone of

Tolerance

Desired Service

Adequate Service

Explicit Service PAdvertising

Personal SellingContactsOther Communications

Implicit Service Pr

TangiblesPrice

Word Of Mouth

Personal

Expert (ConsumPublicity Consultan

Past Experience

Predicted Service

during Service Intensifiersived Expectations

sonal Service Philosophies

rsonal needs

ansitory Service Intensifiers

ergenciesvice Problems

ceived Service Alternatives

f Perceives Service Role

uational Factors

d Weatherastrophe

ndom Over Demand

Gap 5 (Customer Gap)

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FACTORS INFLUENCING DESIRED SERVICES

EXPECTED SERVICE

ZONEOF

TOLERANCE

Personal Needs:- Those states or conditions essential to the physical or psychological well being ofthe customer, are pivotal factors that share the level of desired service

Personal needs fall intoPhysical, social and psychological functional categories.

Enduring Service Intensifiers:- Are individual stable factors that lead the customer to aheightened sensitivity to service

Two factors under this areDerived Service ExpectationsPersonal Service Philosophy

Derived Service Expectations:- When customer expectations are driven by another person orgroup of people

Personal Service Philosophy:- The customers underlying generic attitude about the meaning ofservices and the proper conduct of service providers

Services Marketing

ENDURING SERVICEINTENSIFIERS

PERSONAL NEEDS

ADEQUATE SERVICE

DESIRED SERVICE

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e.g. Customers who have themselves been in service business would in general have strongservice philosophies.

CUSTOMER PERCEPTIONS OF SERVICE

Perceptions are always considered relative to expectations.

Customers perceive services in terms of the quality of the service and how satisfied they are overallwith their experiences.

Satisfaction is generally viewed as a broader concept whileService quality assessment focuses on dimensions of service.

Internal and External Customer Perceptions

e.g. A telephone repair person depends on services provided by the dispatchers vehiclemaintenance crew, the repair person is the Internal Customer for the dispatchers and thevehicle maintenance crew.

Any customer who calls up for the repair of his equipment is the External Customer for theservice repair person.

RELIABILITY

RESPONSIVENESS

ASSURANCE

EMPATHY

TANGIBLES

Services Marketing

SERVICEQUALITY

PRICE

PRODUCTQUALITY

SITUATIONALFACTORS

CUSTOMERSATISFACTION

PERSONALFACTORS

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CUSTOMER PERCEPTIONS OF QUALITY AND CUSTOMER SATISFACTION

CUSTOMER SATISFACTION

Satisfaction of the customers evaluation of a product or service in terms of wherher that product orservices has met their needs and expectations.

Failure to meet needs and expectations is assumed to result in dissatisfaction with the product orservice.

CUSTOMER SATISFACTION IS INFLUENCED BY:-

1 PRODUCT AND SERVICE FEATURES:- Influence significantly customers satisfaction.

1.e.g. For service such as resort hotel, important features might include the pool area, restaurants,room comfort and privacy, helpfulness and courtesy of staff, room price and so forth

Through focus, companies would determine what the feature and attributes are for their

service and the measure perceptions of those features as well as overall satisfaction level.

Customer would make trade offs among different service features (e.g. price level V/s.quality V/s. friendliness of personnel) depending on the type of service being evaluated andthe criticality of the service.

2 CONSUMER EMOTIONS:- Consumers emotions can also affect their perceptions ofsatisfaction with products and services.

These emotions can be stable, pre-existing emotions mood state.

e.g. When you are at a very happy stage in your life (such as when you are on vacation), andyour good happy mood and positive frame of mind has influenced how you feel about theservices you experience.

3. ATTRIBUTIONS FOR SERVICE SUCCESS OR FAILURE:-

Attributions the perceived causes of events- influence perception of satisfaction as well.

e.g. In a weight loss organization if a customer fails to lose weight as hoped for, she will likelysearch for the causes was it something that she did, was the diet plan ineffective, or didcircumstances simply not allow her to follow the diet regimen.



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For many services, customers atleast take partial responsibilities for how things turn out.

4 PERCEPTIONS OF EQUITY OR FAIRNESS:- customer satisfaction is influenced byperception of equity and fairness.

e.g. Have I been treated fairly compared with other customers?

OUTCOMES OF CUSTOMER SATISFACTION

RELATION SHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY IN

COMPETITIVE INDUSTRY

RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY IN

COMPETITIVE INDUSTRY

Services Marketing

100

80

60

40

20

1 2 3 4 5

VeryDissatisfied Dissatisfied Neither satisfied nordissatisfied

Satisfied VerySatisfied

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SERVICE QUALITY

Service quality is a focused evaluation that reflects the customers perception of specific dimensions

of services:- Reliability, Responsiveness, Assurance, Empathy, Tangibles.

PROCESS VERSUS TECHNICAL OUTCOME QUALITY

Ultimately the consumers judge the quality of services on their perceptions of the technical outcomeprovided and on how that outcome was delivered.

e.g. Restaurant customer will judge the service on her perceptions of the meal (technicaloutcome quality) and on how the meal was served and how the employees interacted wit her(process quality)

When outcome is difficult to evaluate the customer will base their judgment of quality on processdimensions

In most of the legal service or service where face to face interaction was their, courtesy was anextremely powerful signal and the level of courtesy accounted for at least 60% of the variation inhow happy or angry a respondent was with the attorney.

SERVICE QUALITY DIMENSION

Research suggests that customers do not perceive quality as a unidimensional concept. That is,customers assessment of quality include perception of multiple factors.

Researchers have found that consumers consider five dimensions in their assessment of servicequality;

RELIABILITY:- Ability to perform the promised service dependably and accurately.

RESPONSIVENESS:- Willingness to help customers and provide prompt service.

ASSURANCE:- Employees knowledge and courtesy and their ability to inspire trust and

confidence

EMPATHY:- Caring, individualized attention given to customers

TANGIBLES:- Appearance of physical facilities, equipment, personnel, and written

material



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EXAMPLES OF HOW CUSTOMERS JUDGE THE FIVE DIMENSIONS OF SERVICE

QUALITY

CAR REPAIR

(COMSUMER)

INFORMATION

PROCESSING(INTERNAL)

Reliability Problem fixed the first timeand ready when promised

Provides needed informationwhen requested

Responsiveness Accessible; no waiting;responds to requests

Prompt response to requests;not Bureaucratic, deals withproblems promptly

Assurance Knowledge mechanics Knowledge staff: well trained;

credentials

Empathy Acknowledges customers byname; remembers previousproblems and preferences

Knows internal customers asindividuals; understandsindividual and departmentalneeds

Tangibles Repair facility; waiting area;uniforms; equipment

Internal reports; office area;dress of employees

BUILDING BLOCKS OF SATISFACTION AND SERVICE QUALITY

The service encounter or the moment of truth.

Interactive marketing

This is where the promises are kept or broken. Real time marketing

It is from these service encounters that customers build their perceptions.

SERVICE ENCOUNTER OR MOMENTS OF TRUTH

From a customers point of view, the most vivid impression of service occurs in the serviceencounter, or the moment of truth.



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e.g. For a hotel customer service encounters are checking into the hotel, being taken into the roomby a bell boy, eating a restaurant meal, requesting a wake up call, checking out.

From the organizations point of view, each encounter thus presents an opportunity to prove itspotential as a quality service provider and to increase customer loyalty.

For Disney Amusement park 74 customer encountersFor Mariott Hotel - 4 of the top 5 factors come into play in the first 10 minutes of the guest stay.

THE IMPORTANCE OF ENCOUNTERS

A SERVICE ENCOUNTER CASCADE FOR A HOTEL VISIT

TYPES OF SERVICE ENCOUNTERS

A service encounter occurs every time a customer interact with the service organization:There are three types of service encounters:-

1) REMOTE ENCOUNTER2) PHONE3) FACE-TO-FACE

1) REMOTE ENCOUNTER:- Encounters which occur without any direct human contacts (e.g.ATM, Co having sent a bill).

In this encounters the tangible evidence of the service and the technical process and systemsbecome primary basis for judging.

Services Marketing

CHECK IN

BELL PERSON TAKES TO ROOM

RESTAURANT MEAL

WAKE UP CALL

CHECK OUT

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2) PHONE ENCOUNTERS:- There is a greater potential variability in the interaction compared toremote encounter

Tone of voice, employee knowledge, and effectiveness / efficiency in handling customer issuesbecome important criteria for judging quality in these encounters.

3) FACE-TO-FACE ENCOUNTERS:- this is direct contact between an employee and a customer.

Determining and understanding service quality issues in face-to-face counters is the mostcomplex of all. Both verbal and non verbal behaviors are important determinants of quality, asare tangible cues such as employees dress etc.

SOURCE OF PLEASURE AND DISPLEASURE IN SERVICE ENCOUNTERS

Critical incidence technique is used to get customers and employees to provide verbatim storiesabout satisfying and dissatisfying service encounters they have experienced.

With this technique, customers (either internal or external) are asked the following questions:

Think of a time when, as a customer you had a particularly satisfying (or dissatisfying)interaction with

When did the incidence happen?

What specific circumstances led up this situation?

Exactly what did the employee (firm) say or do?

What resulted that made you feel the interaction was satisfying (ordissatisfying)?

What could or should have been done differently?

On this basis of thousands on service encounter stories, four common themes-

1) RECOVERY (after failure)2) ADAPTABILITY3) SPONTANIETY

4) COPING

Have been identified as the sources of customer satisfaction / dissatisfaction in memorable serviceencounter.

1) RECOVERY : Employee response to service delivery system pailures

2) ADAPTABILITY: Employee response to customer needs and requests



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3) SPONTANEITY: Unprompted and unsolicited employee action

4) COPING: Employee response to problem customers

GENERAL SERVICE BEHAVIORS DOS AND DONT

THEME DO DONT

Recovery Acknowledge problemexplain causes apologize

Compensate / upgradelayout options

Take responsibility

Ignore customer blamecustomer leave customer tofend for him/herself

DowngradeAct as if nothing

Pass the buck

Adaptability Recognize the seriousnessof the need acknowledge

Anticipate

Attempt to accommodate

Adjust the system

Explain rules / policiestake responsibility

Ignore

Promise, but fail to followthrough showunwillingness to try

Embarrass the customerlaugh at the customer

avoid responsibility passthe buck

Spontaneity Take time be attentiveanticipate needs listenprovide information showempathy

Exhibit impatience ignoreyell / laugh / swear stealfrom customerdiscriminate

Coping Listen

Try to accommodate

Explain let go of thecustomer

Take customersdissatisfaction personally

Let customersdissatisfaction affect others



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BUILDING CUSTOMER RELATIONSHIP

RELATIONSHIP MARKETING

There has been a shift from a transactions to a relationship focus in marketing.

Customers become partners and the firm must make long-term commitments to maintaining thoserelationships with quality, service and innovation.

Relationship marketing essentially represents a paradigm shift within marketing-Away from an acquisitions / transactions focus toward a retention / relationship focus.

Relationship marketing (or relationship management) is a philosophy of doing business, a strategicorientation, that focuses on keeping and improving current customers, rather than acquiring newcustomers.

Historically, marketers have been more concerned with acquisition of customers, so a shift to arelationship strategy often represents :

Change in mind set

Organizational culture

And employee reward systems.

GOALS OF RELATIONSHIP MARKETING

The primary goal of relationship marketing is to build and maintain a base of committed customerswho are profitable for the organization.

To achieve this goal, the firm will focus on the attraction, retention and enhancement of customerrelationships.

Services Marketing

ENHANSING

RETAINING

SATISFYING

ACQUIRING

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CUSTOMER GOALS OF RELATIONSHIP MARKETING

Loyal customers not only provide a solid base for the organization, they may represent growthpotentials.

BENEFITS OF CUSTOMER / FIRM RELATIONSHIPS

Both parties benefit i.e., customer / firm from customer retention. It is not only in the best interest ofthe organization to build and maintain a loyal customer base, but customers themselves also benefitfrom long-term associations.

BENEFITS FOR CUSTOMERS

Customers will remain loyal to a firm when they receive greater value relative to what they expectfrom competing firms

Value represents a trade-off for the consumer between the given and the get components.

Consumers are more likely to stay in a relationship when the gets (quality, satisfaction, specificbenefits) exceed the gives (monetary and non monetary costs)

Beyond the specific inherent benefits of receiving service value, customers also benefit in otherways from long term associations with firm.

Research has uncovered specific types of relational benefits, these are:-

CONFIDENCE BENEFITS SOCIAL BENEFITS

SPECIAL TREATMENT BENEFITS

CONFIDENCE BENEFITSThese benefits comprise feelings of trust or confidence in the providers, alongwith a sense of areduced anxiety and comfort in knowing what to expect.

Across all of the services studied in the research just cited, confidence benefits were the mostimportant to customers.

e.g. Child Care ProviderOnce the child care has been identified and established a satisfying relationship with a goodcaregiver family stress is reduced and the quality of life improved.

SOCIAL BENEFITSOvertime, customers develop a sense of familiarity and even a social relationship with their serviceproviders.



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In some long-term customer / firm relationship a service provider may actually become part of thecustomers social support system.

A quote from the research where a customer describes her hair stylist: I like him.. hes reallyfunny and always has lots of good jokes. Hes kind of like a friends now..its youre used to. You

enjoy doing business with them.

SPECIAL TREAMTEMT BENEFITS

Special treatment includes such things as getting the benefit of doubt, being given a special deal orprice, getting preferential treatment.

e.g. Doctor asking you to come is minutes before starting his consultation with the customers.

BENEFITS FOR THE ORGANISATIONS

The benefits to an organization of maintaining and developing a loyal customer base are numerous.They can be linked directly to the firms bottom line.

INCREASING PURCHASES

LOWER COSTS

FREE ADVERTISING THROUGH WORD OF MOUTH

EMPLOYEE RETENTION

LIFE TIME VALUE OF A CUSTOMER

Life time value of a customer is a concept or calculation that looks at customer from the point ofview of their lifetime revenue and profitability contributions to a company.

ESTIMATING LIFETIME VALUE

If companies knew how much it really costs to lose a customer, they would be able to makeaccurate evaluations of investments designed to retain customers.

e.g. Tom Peters calculated lifetime value of his small firm (20 person office) as a customer ofFederal Express as follows

Business from Tom Peters office per month $ 1500Assuming a 10-year average lifetime for a customer in the express mail industry, the value $ 1500 /month x 12 month / year x 10 years = $180000

Going further, a happy customer will create at least one new customer via word of mouth

$ 180,000 x 2 (New customers) = $ 360,000



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Thus the value of his companys business for Federal Express was about $ 360,000

It is estimated that the average fed ex delivery person stops at 40 business the size of Petersbusiness each day

$ 360,000 / company x 40 companies

$ 14,000,000

Thus the average employee of Federal Express is managing a $ 14,000,000 portfolio of lifetimebusiness for the company.

THE CUSTOMER ISNT ALWAYS RIGHT

THE WRONG SEGMENT: A company cannot target its services to all customers; some segmentswill be more appropriate than the others. It would not be beneficial to either the company or thecustomer to establish a relationship with the customer whose needs the company cant meet.

e.g; a resort company which gets the old people and young crowd together at the same time at theresort.

NOT PROFITABLE IN THE LONG TERM : some segments of the customers will not beprofitable for the company even if their needs can be met by the services offered.

e.g; a credit card company will not like deal with the customer who doesnt pay the bills on time orsomeone who doesnt uses it to an extent the company expect.

DIFFICULT CUSTOMER: some customers put huge demands on the company and as suchcompany would not be Interested in such customer.Eg. Some ad agencies say that some clients would make them do lot many presentations and finallyat times award the contracts to someoneelse who is known to them.



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SERVICE RECOVERY

Service Recovery refers to the action taken by an organization response to a service failure.

Failure occurs for all kinds of reasons

- The service may be unavailable when promised

- It may be delivered late or too slowly

- The outcome may be incorrect or poorly executed

- Employees may be rude or uncaring

All of these types of failures bring about negative feelings and responses for the customers.

Left Unfixed

- They can result in customers leaving

- Telling other customers about their negative experiences

- Even challenging the organization through customers rights organizations or legal channels

Research has shown that resolving customer problems effectively has a strong impact on

- Customer satisfaction

- Loyalty

- Bottom line performance

It has been observed that customers who experience service failures, but are ultimately satisfiedbased on recovery efforts by the firm, will be more loyal than those whose problems are notresolved.

Those who complain and their problems resolved quickly are much more likely to repurchase thanare those whose complaints were not resolved.

Those who never complain are likely least likely to repurchase



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Unhappy Customers

who donotcomplain

Unhappy customers

who do complain

Complaints not

resolved

Complaints

resolved

Complaints resolvedquickly

Percentage of Customers who will buy again

Services Marketing

9%

37%

19%

46%

54%

70%

82%

95%

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An effective Service Recovery strategy can

- Increase customer Satisfaction and Loyalty

- Generate positive Word of Mouth

A well designed, well documented services strategy also provides information that can be used toimprove service as part of a continuous improvement effort

Ineffective Service Recovery Strategies can lead to customers who are so dissatisfied they becomeTerrorist, actively pursuing opportunities to openly criticize the company.

Repeated Service Failures without an effective Recovery Strategy in place can aggravate even thebest employees.

The costs in Employee Morale and even lost employee can be huge.

THE RECOVERY PARADOX

It is suggested that customers who are dissatisfied, but experience a high level of excellent servicerecovery, may ultimately be even more satisfied and more likely to repurchase than are those whowere satisfied I the first place.

The logical but not very rational conclusion is that companies should plan to disappoint customersso that they can recover and gain even greater loyalty from them as a result.

This idea has become known as the RECOVERY PAPADOX.

Recovery Paradox is more complex than it may seem on the surface.

1 It is expensive to fix mistakes.2 Empirical Research suggests that only under the very highest levels of customers Service

Recovery ratings will we observe increased satisfaction and loyalty.

It is safe to say that Doing it right the first time is still the best and safest strategy.

However, when a failure does occur, then every effort at a superior Recovery should be made tomitigate its negative effects.

In cases where the failure can be fully overcome, the failure is less critical, or the Recovery Effort isclearly superlative, it may be possible to observe evidence of the Recovery Paradox.



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How Customers Respond To Service Failures

Services Marketing

Service Failure

Dissatisfaction/Negative Emotions

Complaint Action No Complaint Action

omplain toProvider

Negative wordof mouth

Third PartyAction

Exit/Switch Stay Exit/Switch Stay

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Customer Complaint Action Following Service Failure

Variety of negative emotions can occur following a service failure, including such feelings as anger,

discontent, disappointment, self pity and anxiety.

These initial negative responses will affect how customers evaluate the Service Recovery effort andpresumably their ultimate decision to return to the service provider or not.

Many customers are very passive about their dissatisfaction, simply saying or doing nothing.

It is known that those who donot complain are least likely to return.

For companies, customer passivity in the face of dissatisfaction is threat to future success.

TYPES OF CUSTOMER COMPLAINT ACTIONS

If customers initiate actions following service failure , the action can be of various types as shownin the Fig.

From companys point of view any customer who complains on the spot is the best case scenario.Company has the chance to respond immediately.

If they dont complain immediately, customers may choose to complain later to the provider byphone or in writing, or even write or call the corporate offices of the company.

In all the above cases, the company has a chance to recover.

These Proactive types of complaining behavior is preferred as voice responses or Seeking Redress.

TYPES OF COMPLAINERS

Four categories on how the customers respond to failures have been identifies.

These categories are:

(1) Passives (2) Voicers (3) Irate (4)Activist

(1) Passives: This group of customers is least likely to take any action .

- They are unlikely to say anything to the provider

- Less likely than others to spread negative Word of Mouth, unlikely to complain to thirdparty.

- They often doubt the effectiveness of complaining, thinking the consequences will not meritthe time and the effort they will expend.



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(2) Voicers: These customers actively complain to the service provider

- Less likely to spread the negative word of mouth, to switch patronage, or to go to thirdparties with their complaints.

- These customers to be viewed as the service providers friend.- Actively complain and give company a second chance.

- They believe complaining has social benefits and therefore dont hesitate to voice theiropinion.

(3) Irates: These customers are more likely to engage in negative word of mouth to friends andrelatives and to switch providers than are others.

- They feel alienated from the market place.

- They are angry with the service provider although they do believe that complaining to theservice provider can have a social benefits.

- They are less likely to give the service provide a second chance.

(4) Activists: These consumers are characterized by above average propensity to complain on alldimensions.

- They will complain to the provider, they will tell others, and they are more likely thanany other group to complain to third parties.

- They have a very optimistic sense of the potential positive consequences of all types ofcomplaining.

WHY DO ( AND DONT) PEOPLE COMPLAIN?

The categories just described suggest that some customers are more likely to complain than others.

As individuals, these customers believe that positive consequences may occur and that there aresocial benefits of complaining, and their personal norms support their complaining behavior.

They believe they will and should be provided compensation for the service failure in some form.

They believe that fair treatment and an good service are their due, and that in case of service failure,someone should make good.

In some cases they feel a social obligation to complain to help others avoid similar situations or topunish the service provider.

A very small number of consumers have complaining personalities they just like to complain orcause trouble.

Those who are unlikely to take any action hold the opposite beliefs.



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They often see complaining as a waste of their effort .

WHEN THEY COMPLAIN, WHAT DO CUSTOMERS EXPECT

Customers want justice and fairness in handling their complaints

Customers are looking for: OUTCOME FAIRNESSPROCEDURAL FAIRNESSINTERACTIONAL FAIRNESS

1. Outcome Fairness: They expect equity in the exchange- i.e. they want to feel that thecompany has Paid for its mistakes in a manner at least equal to what the customer hassuffered.

The companys punishment should fit the crime.

They also appreciate it when a company gives them choices in terms of compensation. E.g.A hotel guest should be offered the choice of a refund or free upgrade to a better room incompensation for a room not being available on arrival.

On the other hand, customers can be comfortable if they are overly compensated. E.g.Dominos Pizza offered not to charge if the driver arrived after 30 minutes guaranteedelivery time. Many customers were not comfortable asking for this level of compensation,especially if the driver was only few minutes late.

2. Procedural Fairness: In addition to fair compensation, customers expect fairness in termsof policies, rule and timeliness of the complaint process.

They want easy access to the complaint process and they want things handled quickly,preferably by the first person they contact.

Fair procedures are characterized by clarity, speed and absence of hassles.

Unfair procedures are those that customers perceive as slow, prolonged and inconvenient.

Customers also feel it is unfair if they have to prove their case- when the assumption seemsto be they are wrong or lying until they can prove otherwise.

3. Interactive Fairness: Customers expect to be treated politely, with care and honesty.

This form of fairness can dominate the others if customers feel the company and itsemployees have uncaring attitudes and have done little to try to resolve the problem.

Often rude and uncaring behavior of employees is due to lack of training and empowerment-a frustrated, frontline employee who has no authority to compensate the customer may



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easily respond in an aloof and uncaring manner, especially if the customer is angry and/orrude.

SWITCHING VERSUS STAYING FOLLOWING SERVICE RECOVERY

Ultimately, how a Service Recovery failure is handled and the customers reaction torecovery effort can influence future decisions to remain loyal to the service provider or toswitch to another provider.

The more serious the failure, the more likely the customer to switch no matter what therecovery effort.

The nature of the Customers Relationship with the firm may also influence whether thecustomer stays or switches providers.

There are three types of relationships viz.

-True Relationships where the customer has had repeated contact overtime with thesame service provider.

These customers are more forgiving of poorly handled service failures and are less likely toswitch than others.

- First Time Encounter Relationship is where the customer has had only one contact, ona transaction basis, with the provider.

These customers are more likely to change.

- Pseudo Relationship is one where the customer has interacted many times with thesame company, but with different service provider (people) each time.

Individual customers attitude towards switching will strongly influence whether he or sheultimately stays with the provider.

Thus certain customers will have greater propensity to switch service providers no matterhow their Service Failure situations are handled.

Finally, the decision to switch to a different service provider may not occur immediatelyfollowing service failure or poor service recovery, but may follow an accumulation ofevents.

The service switching can be viewed as a process resulting from a series of decisions andcritical service encounters overtime, rather than one specific moment in time when adecision is made.



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This process orientation suggests that companies could potentially track customerinteractions and predict the likelihood of defection based on a series of events.

By intervening earlier in the process companies can prevent at time customers decision toswitch.

SERVICE BLUEPRINTING

Services commonly lack concrete specifications.

Products on the other hand are produced with concrete and detailed plans, written specificationsand engineering drawings.

A Service ,even a complex one, might be introduced without any formal, objective depiction ofprocess.

A Service Blueprint is a picture or map that accurately portrays the service system.

This is to assume that the different people involved in providing it can understand and deal withit objectively regardless of their individual points of view.

Blueprints are particularly useful at the design and redesign stage of development.

A Service Blueprint visually displays the service by simultaneously depicting the process ofservice delivery, the points of customer contact, the roles of customers and employees, and thevisible elements of the service.

Service Blueprinting

Blueprint Components

The key components of Service Blueprints are shown in the fig.

They are Customers actions, On Stage Contact Employee Actions, BackStage ContactEmployee Action and Support processes.

Services Marketing

ServiceBlueprint

Process

Points of Contacts

Evidence

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Physical Evidence

Customer Actions

Line of Interaction

On Stage Contact

Employees Actions

Line Of Visibility

Back Stage Contact

Employee Actions

Line of Internal Interaction

Support Processes

SERVICE BLUEPRINT COMPONENTS

The customer actions area encompasses the steps, choices, activities and interactions that thecustomer performs in the process of purchasing, consuming and evaluating the service.

E.g. Ina legal services the customer actions might include a decision to contact an attorney,phone calls to the attorney, face to face meetings, receipt of documents and receipt of bill.

Onstage Employee actions are the steps and activities that the contact employee performs thatare visible to the customer.

Backstage employee actions are the steps and actions that occur behind the scenes to support theon stage activities.



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The support processes cover the internal services, steps and interactions that take place tosupport the contact employees in delivering the service.

Line of Interaction represents the direct interactions between the customer and the organization.

Anytime a vertical line crosses the horizontal line of interaction, a direct contact between thecustomer and the organization or a service encounter has occurred.

Line of Visibility separates all service activities that are visible to the customer from those thatare not visible.

Line of Internal Interaction separates contact employee activities from those of other servicesupport activities and people.

Vertical Lines cutting across the line of Internal Interaction represent internal service

encounters.



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MARKETING INFORMATION SYSTEM

Marketing Information System is defined as an assembly of inter-related information subsystems:

receiving, processing and disseminating information on a continued basis to help make marketingdecision.

Type of Research Primary Research Objectives

Complaint solicitation To identify/attend to dissatisfied customers

To identify common service failure points

Critical incident studies To identify best practices at transaction levelTo identify customers requirements as input for

qualitative studiesTo identify common service failure pointsTo identify systemic strengths and weaknessesin customer-contact services

Requirementsresearch

To identify customer requirements as input forqualitative research

Trailer calls To obtain immediate feedback on performanceof service transactionsTo measure effectiveness of changes in service

deliveryTo assess service performance of individualsand teamsTo use as input for process improvementsTo identify common service failure points

Service expectation meetings and reviews To create dialogue with important customersTo identify what individual large customersexpect and then to assure that it is deliveredTo close the loop with important customers

Process checkpoint evaluations To determine customer perceptions of long termprofessional services during service provisionTo identify service problems and solve themearly in the service relationship

Market oriented ethnography To research customers in natural settingsTo study customers from cultures other thanyour home country



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Type of Research Primary Research Objectives

Mysteryshopping

To measure individual employee performancefor evaluation , recognition and rewardsTo identify systemic strengths and weaknessesin customer-contact services

Customerpanels

To monitor changing customer expectationsTo provide a forum for customers to suggest andevaluate new service ideas

Lost customer research To identify reasons for customer defection

Database marketing research To identify the individual requirements of customers using information technology anddatabase information

Future expectationsresearch

To forecast future expectations of customersTo develop and test new service ideas



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EMPLOYEES ROLE IN SERVICE DELIVERY

The Critical Importance of Service Employees

It is very important to focus on employees because :

They are the service

They are the organization in the customers eyes

They are the brands

They are the marketers

Services Marketing

ServiceService

PerformancePerformance

GapGap

CUSTOMERCUSTOMER

COMPANYCOMPANYService DeliveryService Delivery

Customer-DrivenCustomer-Driven

Service Designs andService Designs andStandardsStandards

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In many cases , the contact employee is the service there is nothing else. E.g. in most personal andprofessional services (like haircutting, physical trainers, child care , cleaning /maintenance etc.) the

contact employees provide s the entire service single handedly. The offering is the employee. Thusinvesting in the employee to improve the service parallels making a direct investment in theimprovement of a manufactured product.

Because contact employees represent the organization and can directly influence customersatisfaction, they perform the role of marketers. They physically embody the product and are thewalking billboards from the promotional point of view.

Whether acknowledged or not , actively selling or not, service employees perform marketingfunctions. They can perform these functions well, to the organizations advantage, or poorly to theorganizations detriment.

Employee Satisfaction, Customer Satisfaction and Profits

There is a concrete evidence that satisfied employees make for satisfied customers (satisfiedcustomers can, in turn, reinforce employees sense of satisfaction in their jobs). Some have gone sofar as to suggest that unless service employees are happy in their jobs, customer satisfaction will bedifficult to achieve.

Research has shown that both a climate for service and a climate for employee well-being arehighly correlated with overall customer perceptions of service quality.

The Service Profit Chain

BOUNDARY-SPANNING ROLES

The front-line service employees are referred to as boundary spanners because they operate at theorganizations boundary. They provide link between the external customer and environment and



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internal operations of the organization. They serve the critical function in understanding , filteringand interpreting information and resources to and from the organization and external constituencies.

Who are these boundary spanners? What type of people and positions comprise critical boundary-spanning roles? Their skills and experience cover the full spectrum of jobs and careers.

In industries such as fast food, hotels, telecommunication, and retail, the boundary spanners are theleast skilled, lowest paid employees in the organization. They are order takers, front deskemployees, telephone operators, store clerks, truck drivers, and delivery people.

In other Industries, boundary spanners are well paid, highly educated professionals for example,doctors, lawyers, accountants, consultants, architects, and teachers.

No matter what the level of skill or pay, boundary-spanning positions are often high-stress jobs.

These positions require:

Mental Labor

Physical Labor

Emotional Labor

Emotional Labor

This refers to the labor that goes beyond the physical or mental skills needed to deliver qualityservice. It means delivering smiles, making eye contact, showing sincere interest, and engaging infriendly conversation with people who are essentially strangers and who may or may not ever seeagain.

Friendliness, courtesy, empathy, and responsiveness directed towards customers all require hugeamount of emotional labor from the front-line employees who shoulder the responsibility for theorganization.

Emotional Labor draws on peoples feeling (often requiring them to suppress their true feelings) tobe effective in their jobs. A front-line service employee who is having a bad day or isnt feeling justright is still expected to put on the face of the organization when dealing with customers.

The organizations need to carefully selecting the people who can handle emotional stress, trainingthem in needed skills (like listening and problem solving), and teaching or giving them coping

abilities and strategies (via job rotation, scheduled breaks, teamwork or other techniques).

SOURCES OF CONFLICT

Front-line employees often face interpersonal and interorganizational conflicts on the job. Theirfrustration and confusion can, if left unattended, lead to stress, job dissatisfaction, a diminishedability to serve customers, and burnout.



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As these employees represent the customer to the organization and often need to manage a numberof customers simultaneously, front liners inevitably have to deal with conflicts, includingperson/role conflicts, organization/client conflict, and inter-client conflicts.

1. Person/Role Conflicts : In some situations the front-line employees feel conflict between whatthey are asked to do and their own personalities, orientations, or values.

Person/role conflict also arises when employees are required to wear specific clothing or changesome aspect of their appearance to confirm to the job requirements. E.g A young lawyer, just out ofcollege may feel an internal conflict with his new role when his employer requires him to cut hislong hair and trade his casual clothes for three piece suit.

2. Organization/Client Conflict : A more common type of conflict for front-line serviceemployees is the conflict between their two bosses, the organization and the individual customer.

Service employees are typically rewarded for following certain standards , rules, and procedures.

Ideally these rules and standards are customer based. When they are not, or when a customersmakes excessive demand, the employee has to choose whether to follow the rules or satisfy thedemands.

So an employee has two bosses one customer and one in the organization to whom he is reporting.These conflicts are especially severe when service employees depend directly on the customer forincome. E.g. employees who depend on tips or commissions are likely to face greater levels oforganization/client conflict because they have even greater incentives to identify with the customer.

3. Interclient Conflict : Sometimes conflict occurs for boundary spanners when there areincompatible expectations and requirements from two or more customers. This occurs most oftenwhen the service provider is serving the customers in turn (a bank teller, a ticketing agent, a doctor)or is serving many customers simultaneously (teachers, entertainers).

In case of serving customers in turn , the service provider may satisfy one customer by spendingadditional time, customizing the service , and being very flexible in meeting the customers needs>Meanwhile, waiting customers are becoming dissatisfied because their needs are not being met in atimely manner.

Beyond the timing issue, different clients may prefer different modes of service delivery. Having toserve one client who prefers personal recognition and a degree of familiarity in the presence ofanother client who is all business and would prefer little interpersonal interaction can also createconflict for the employee.

In the case of serving many customers at the same time, it is often difficult or impossible to servethe full range of needs of a group of heterogeneous customers simultaneously. This type of conflictis readily apparent in any college classroom where the instructor must meet a multitude ofexpectations and different preferences for formats and style.



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Strategies for Closing GAP 3

A complex combination of strategies is needed to ensure that service employees are willing and able

to deliver quality services and that they stay motivated to perform in customer-oriented, serviceminded ways. These strategies for enabling service promises are often referred to as internalmarketing.

Even during slow economic times, the importance of attracting, developing, and retaining goodpeople in knowledge and service based industries cannot be overemphasized.

By approaching human resource decisions and strategies from the point of view that the primarygoal is to motivate and enable employees to deliver customer-oriented promises successfully, anorganization will move towards closing gap3.

To build a customer-oriented ,service-minded workforce, an organization must :

Hire the right people

Develop people to deliver service quality

Provide the needed support systems

Retain the best people



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CUSTOMERS ROLES IN SERVICE DELIVERY

Service customers are often present in the factory (the place the service is produced and/orconsumed), interacting with employees and with other customers.

E.g In a classroom or training situation, students (customers) are sitting in the factory interactingwith the instructor and other students as they consume the educational services.

Since these customers are present during service production, customers can contribute to or detractfrom the successful delivery of the service and to their own satisfaction.

The Importance of Customers in Service Delivery

Customer participation at some level is inevitable in service delivery. Services are actions orperformances, typically produced and consumed simultaneously. In many situations employees,customers and even others in the service environment interact to produce the ultimate serviceoutcome.

Services Marketing

Provideneeded support

systems

Hire the

right people

Retain thebest

people

Developpeople to

deliverservice

quality

Hire for servicecompetencies

andservice

inclination

Competefor

the bestpeople

Measure andreward strong

serviceperformers

Treatemployees

as

customers

Includeemployees

inthe

companysvision

Developservice-orientedinternal

processes

Providesupportivetechnology

andequipment

Measureinternal service

quality

Promoteteamwork

Empoweremployees

Train fortechnical and

interactiveskills

Be thepreferredemployer

Customer-OrientedService

Delivery

HUMAN RESOURCE STRATEGIES FOR CLOSING GAP3

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Because the customers receiving the service participates in the delivery process, he or she cancontribute to gap 3 through appropriate or inappropriate, effective or ineffective , productive orunproductive behaviors.

Customers who are unprepared in terms of what they want to order can soak up the customer

service representatives time as they seek advice. Similarly, shoppers who are not prepared withtheir credit cards can put the representative on hold while they search for their credit cards or goto another room or even out of their cars to get them. Meanwhile, other customers and calls are leftunattended, causing longer wait times and potential dissatisfaction.

The level of participation low, medium, high varies across services. In some cases, all that isrequired is the customers physical presence (low level of participation), with the employees of thefirm doing all of the service production work, as in case of a ghazal concert. The listeners must bepresent to receive the entertainment service.

In other cases, consumer inputs are required to aid the service organization in creating the service(moderate level of participation). Inputs can include information, effort or physical possessions.

All three of these are required in case for a CA to prepare a clients income tax return effectively.Information in the form of tax history, marital status, and number of dependents.Effortin puttingthe information together in a useful fashion.Physical Possessions such as receipts and past taxreturns.

Incase of long term consulting engagements involvement of the customers high as they co create theservice.



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LEVELS OF CUSTOMER PARTICIPATION ACROSS DIFFERENT SERVICES

OTHER CUSTOMERS

In many service contexts customers receive the service simultaneously with other customers or mustwait their turn while other customers are being served. In both cases, other customers are presentin the service environment and can effect the nature of the service outcome or process. Othercustomers can either enhance or detract from customer satisfaction and the perception of quality.

Services Marketing

Low: Consumer PresenceRequired during Servicedelivery

Moderate : ConsumerInputs Required duringService Creation

High : Customer Concretes theService Product

Products are standardized . Client inputs customize astandard service.

Active client participationguides the customized service.

Service is provided regardlessof any individual purchase.

Provision for service requirescustomer purchase.

Service cannot be created apartfrom the customers purchaseand active participation

Payment may be the onlyrequired customer input. Customer inputs(information, materials) arenecessary for an adequateoutcome, but the service firmprovides the service

Customer inputs are mandatoryand concrete the outcome.

End Consumer Examples

Airline travelMotel stayFast-food restaurant

HaircutAnnual physical testFull-service restaurant

Marriage counselingPersonal trainingWeight reduction program

Major illness or surgery

Business-to-Business

Customers examples

Uniform cleaning servicePest ControlInterior greenery maintenanceservice

Agency-created advertisingcampaignPayroll serviceFreight transportation

Management consultingExecutive management seminarInstallation of computernetwork

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Some of the ways other customers can negatively affect the service experience are by exhibitingdisruptive behaviors, causing delays, overusing, excessively crowding, and manifestingincompatible needs.

Sometimes mere presence of other customers enhances the experience. This is true in sporting

events, in movie theatres, and in other entertainment venues. The presence of other patrons isessential for true enjoyment of the experience. In other cases the customers provide a positive socialdimension to the service experience.

CUSTOMERS ROLES

1. Customers as Productive Process

Service customers are referred to as partial employees of the organization human resources whocontribute to the organizations productive capacity. In other words, if customers contribute effort,time or other resources to the service production process, they should be considered as part of the

organization.

Customers inputs can affect the organizations productivity through both quality of what theycontribute and the resulting quality and quantity of output generated. E.g. research suggest that in anIT consulting context, clients who clearly articulate the solution they desire , provide neededinformation in a timely manner , communicate openly, gain the commitment of key internalstakeholders, and raise the issues during the process before it is too late will get better service.

2. Customers as Contributors to Service Quality and Satisfaction

Another role customers can play in services delivery is that of contributor to their own satisfactionand the ultimate quality of the services they receive.

Customers may care little that they have increased the productivity of the organization through theirparticipation, but they likely care a great deal about whether their needs are fulfilled.

Effective customer participation can increase the likelihood that needs are met and that the benefitsthe customer seeks are actually attained.

Think about service s such as health care, education, personal fitness, and weight loss, where theservice outcome is highly dependent on the customers participation. In these cases, unless thecustomers perform their roles effectively, the desired service outcomes are not possible.

Research has shown that in education , active participation by students as opposed to passivelistening increases learning a9the desired service output) significantly.



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WHICH CUSTOMER (A OR B) WILL BE MOST SATISFIED?

For each scenario, ask Which customer (A or B) will be most satisfied and receive the greatest

quality and value, and why?

Scenario 1: A Major International Hotel: Guest A called the desk right after check-in to reportthat his TV was not working and that the light over the bed was burned out; both problems were

fixed immediately. The hotel staff exchanged his TV for one that worked and fixed the light bulb.

Later they brought him a fruit plate to make up for the inconvenience. Guest B did not communicateto management until checkout time that his TV did not work he could not read in his bed. His

complaints were over- heard by guests checking in, who wondered whether they had chosen the

right place to stay.

Scenario 2: Office of a Professional Tax Preparer: Client A has organized into categories the

information necessary to do her taxes and has provided all documents requested by the accountant.Client B has a box full of papers and receipts, many of which are not relevant to her taxes but

which she brought along just in case.

Scenario 3: An Airline Right from London to New York: Passenger A arrives for the flight with

a portable tape player and reading material and wearing warm clothes; passenger A also called

ahead to order a special meal. Passenger B who arrives empty-handed, becomes annoyed when the

crew runs out of blankets, complains about the magazine selection and the meal, and startsfidgeting after the movie.

Scenario 4: Architectural Consultation for Remodeling an Office Building: Client A has invited

the architects to meet with its remodeling and design committee made up of managers, staff, andcustomers in order to lay the ground- work for a major remodeling job that will affect everyone

who works in the building as well as customers. The committee has already formulated initial ideas

and surveyed staff and customers for input. Client B has invited architects in following a decision

the week previously to remodel the building; the design committee is two managers who arepreoccupied with other more immediate tasks and have little idea what they need or what customers

and staff would prefer in terms of a redesign of the office space.

3. Customers as CompetitorsA final role played by service customers is that of potential competitor. If self-service customerscan be viewed as resources of the firm, or as partial employees, self-service customers could insome cases partially perform the service or perform the entire service for themselves and not needthe provider at all.

Customers thus in that sense are competitors of the companies that supply the service. Whether toproduce a service for themselves (internal exchange) - for example, child care, home maintenance



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or have someone else provide the service for them (external exchange) is a common dilemma forconsumers.

Similar internal versus external exchange decisions are made by organizations.

Firms frequently choose to outsource service activities such as payroll, data processing, research,accounting, maintenance, and facilities management. They find that it is advantageous to focus ontheir core businesses and leave these essential support services to others with greater expertise.

Alternatively, a firm may decide to stop purchasing services externally and bring the serviceproduction process in-house.

MANAGING DEMAND AND CAPACITY

The fundamental issue underlying supply and demand management in services is the lack ofinventory capability. Unlike manufacturing firms, service firms cannot build up inventories duringpeak periods of slow demand to use later when demand increases.

This lack of inventory capability is due to the perishability of services and their simultaneousproduction and consumption.

An airline seat that is not sold on a given flight cannot be resold the following day : the productivecapacity of the seat has perished.

The lack of inventory capability combined with the fluctuating demand leads to variety of potentialoutcomes.



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Variations in Demand Relative to Capacity

As shown above in the diagram there are four basic scenarios that can result from differentcombinations of capacity and demand :

1. Excess Demand : The level of demand exceeds maximum capacity. In this situation somecustomers will be turned away, resulting in lost business opportunities.

For the customers who do not receive the service, its quality may not match what was promisedbecause of crowding or overtaxing of staff and facilities.

2. Demand exceeds optimum capacity : No one is being turned away, but the quality of servicemay still suffer because of overuse, crowding, or staff being pushed beyond their abilities to deliverconsistent quality.3. Demand and supply are balanced at the level of optimum capacity : Staff and facilities areoccupied at an ideal level . No one is overworked, facilities can be maintained , and customers arereceiving quality service without undesirable delays.

4. Excess Capacity : Demand is below optimum capacity. Productive resources in the form oflabor, equipment, and facilities are underutilized, resulting in lost productivity and lower profits.

Services Marketing

VOLUME DEMANDEDVOLUME DEMANDED

TIME CYCLE 1TIME CYCLE 1 TIME CYCLE 2TIME CYCLE 2

Maximum AvailableMaximum Available

CapacityCapacity

Optimum CapacityOptimum Capacity

(Demand and Supply(Demand and SupplyWell BalancedWell Balanced

Low UtilizationLow Utilization

(May Send Bad Signals)(May Send Bad Signals)

Demand exceeds capacityDemand exceeds capacity

(business is lost)(business is lost)

Demand exceedsDemand exceedsoptimum capacityoptimum capacity(quality declines)(quality declines)

ExcessExcess

capacitycapacity

(wasted resources)(wasted resources)

CAPACITY UTILIZEDCAPACITY UTILIZED

61


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Customers may receive excellent service on an individual level because they have the full use of thefacilities, no waiting , and complete attention from the staff. If, however service quality depends onthe presence of other customers, customers may be disappointed or may worry that they havechosen an inferior service provider.

UNDERSTANDING DEMAND PATTERNS

To manage fluctuating demand in a service business, it is likely to have a clear understanding ofdemand patterns, why they wary, and the market segments that comprise demand at different pointsin time.

1. Charting Demand Patterns : First, the organization needs to chart the level of demand overrelevant time periods. Organizations that have good computerized customer information systemscan do this very accurately.

The others may need to chart demand patterns more informally.

2. Predictable Cycles : In looking at the graphic representation of demand levels, is there apredictable cycle daily (variations occur by hours), weekly (variations occur by day), monthly(variations occur by the month), and/or yearly (variations occur according to months or seasons)?

If there is a predictable cycle , what are the underlying causes? This can help a service provider indealing with the customers in a much better way.

3. Random Demand Fluctuations : Sometimes the patterns of demand appear to be randomthere is no apparent predictable cycle. Yet even in this case, causes can often be identified.

For example. day to-day changes in the weather may affect use of recreational, shopping, or

entertainment facilities. Although the weather cannot be predicted far in advance, it may be possibleto anticipate demand a day or two ahead. Health-related events also cannot be predicted. Accidents,heart attacks, and births all increase demand for hospital services, but the level of demand cannotgenerally be determined in advance. Natural disasters such as floods, fires, and hurricanes candramatically increase the need for such services as insurance, telecommunications, and health care.Acts of war and terrorism such as that experienced in the United States on September 11, 2001,general instantaneous need for services that cant be predicted.

AT&T was faced with a sudden increase in demand for services to the mi1i during the Gulf War.During this period, 500,000 U.S. troops were deployed to the Middle East, many without advance

warning. Before their deployment these men and women had little time to attend to personalbusiness, and all of them left behind concerned family and friends. With mail delivery between theUnited States and the Middle East taking more tha

Service Marketing Final 29102012

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