Chapter I
SERVICE SECTOR MANAGEMENT WHAT IS SERVICES
Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced and provides added value in forms (such as convenience, timeliness, comfort or health).
That is essentially intangible concerns of its first purchaser.
1.2 DIFFERENCES BETWEEN SERVICES AND CUSTOMER SERVICES Companies like IBM offers repair and maintenance service of equipment, consultancy, training services etc. These services may include a tangible product like a report or train manual. Customer Services , however is the service provided in support of a company’s core product –like answering question , taking orders ,dealing with billing issue , handling complaints etc .Typically there is no charge for customer service is essential for building customer relationship .Customer services are hence different from services provided for sale by a company. Federal Express market and delivers services. It also provides a high level of customer services. Its services are overnight package delivery, and logistics services. Its customer services include well trained staff who can answer all question on telephone, on line tracking of parcels etc.
1.3 CONCEPT OF ‘SERVICE MARKETING’
The perception of service marketing focuses on selling the services in the best interest of users/customers. Marketing a service is meant marketing something intangible. It is marketing a promise. It is more selling yourself.
In the marketing of services, we go through a number of problems directly or indirectly influencing the business index. The problems like market segmentation, marketing information system, behavioural management are studied minutely which simplify the task of formulating a sound mix for marketing, such as Product mix, Promotion mix, Price mix and the Place mix. It is important to mention that we find “People” an important mix of marketing services.
If we market the services in a right direction, the available opportunities can be capitalized on optimally and also it contributes substantially to the process of development.
In view of the above, we observe the following key points regarding the concept or perception of services marketing:
• It is a managerial process of managing the services.
• It is an organized effort for providing a sound foundation for the development of an organization.
• It is a social process helping an organization to understand the emerging social problem and to take part in the social transformation process to justify its existence in the society.
1.4 SERVICE MANAGEMENT Service Management is :
1) To understand the utility the customers rceicve by consuming or using the service
offering of the organization
2) To understand how the organization (personnel, technology, physical resources,
systems and customers)will b able to produce and deliver this utility
3) To understand how the organization should be developed and managed so that the
intended quality can be achieved
4) To make the organization function so that this quality can be delivered on a
continuous basis
1.5 GOODS SERVICE CONTINUUM
As per Theodore Levit “There is no such things as service industries. There are some service industries whose service component are greater (or less) than those of other industries”. Everybody is in service. The point that Leavitt was trying to put across is that with almost every tangible physical product an intangible service component is associated. Therefore every body is in service.
He has further put that goods can be put into two categories
(a) Search goods – Goods which the customer can see, evaluate and try them prior to purchase (soap and shampoo etc.)
(b) Experienced goods – Goods which one can see or evaluate only after the purchase, while being consumed (Holiday, travel etc)
Search goods
Experienced goods: goods, which one can see or evaluate after the purchase like (holidays, travel etc.)
Experienced goods
Prior purchase /
use Tangible
After purchase /
Search goods are tangible goods and the experienced goods are intangible.
Philip kotler suggests 4 categories 1) Pure tangible (salt)
2) Major tangible with minor intangibles (soap)
3) Minor tangible with major intangibles (consultancy) 4) Pure service (teaching)
The above diagram shows the Service – goods continuum – some goods being tangible dominant others being service dominant. The fast food outlets has almost 50/50 of tangible and intangible parts i.e. in this case both tangible factors such (food) and intangible such as (services) is important. That is the reason it come in the middle.
In case of other products like salt there services won’t play any important role so it is more towards tangible and in case of teaching profession it is purely service dominated. We never known about service with out experiencing and in this manner various goods fall in place according to its category i.e. less service oriented or more service oriented.
Soft
drinks Detergents
Salt Automobile Cosmetics
Fast food outlet Ad agency Airlines Investm ent Manage ment Consult ancy Teaching
1.6 GOODS AND SERVICES
GOODS SERVICES RESULTING IMPLICATION
TANGIBLE.
Goods are objects, which can be seen, felt, sensed easily.
INTANGIBLE.
Services are performance or actions, which cannot be tasted, felt, touched. E.G. health care services. (Treatment, surgery)
Services cannot be inventoried. It cannot be patented nor readily displayed or communicated. Pricing of services is very difficult. HOMOGENOUS/STANDA
RDISED
Goods have their own standards & many goods are alike.
HETEROGENOUS.
Services are frequently produced by human beings so no two services will be alike.
E.G. two different clients have different service experience from the same tax accountant.
Service delivery and customer satisfaction depends on employee actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the service delivered matches what is planned.
PRODUCTION AND DISTRIBUTION ARE SEPERATED FROM CONSUMPTION
Goods are produced first, then sold, then consumed.
SIMULTANEOUS PRODUCTION AND CONSUMPTION.
Most services are sold first and then produced and consumed
simultaneously.
E.G. restaurant services are sold first dinning experience is produced and consumed.
Customers participate in & affect the transaction. customers affect each other. Employees affect the service outcome. Decentralization may be essential. Mass production is difficult.
NON-PERISHABLE. Goods can be stored in inventory or resold or even returned.
PERISHABLE.
Services cannot be saved, stored or returned. E.G. bad haircut.
It is difficult to synchronize supply and demand in services. Right quality has to be
delivered in the first instance. CORE VALUE
PRODUCED IN FACTORY COREVALUE PRODUCED IN BUYER SELLER INTERACTIONS.
CUSTOMERS DO NOT PARTICIPATE IN
PRODUCTION PROCESS.
CUSTOMERS PARTICIPATE IN THE PRODUCTION. TRANSFER OF OWNERSHIP A THING NO TRANSFER OF OWNERSHIP.ANACTIVITY/PROCES S
1.7 SOME DEFINITIONS :
** American Marketing association has defined services as “activities, benefits or satisfactions, which are offered for sale or provided in connection with sale o goods”. This definition took a limited view of services as it proposed that services are offered only in connection with sale of goods.
** Robert Judd defined services as “ a market transaction by an enterprise or entrepreneur, where the object of market transaction is other than the transfer of ownership of a tangible commodity”
This recognised three broad areas of services
The right to possess and use a product (rented goods service)
The customs creation, repair, or improvement of a product (owned goods service)
No product elements but rather experience or what might be termed as experiential possession (non-goods service)
** Blois defines services, as “a service is an activity offered for sale which yields benefits and satisfactions without leading to physical change in the form of a good” ** Kotler and Bloom defines services as “an activity or benefit that one party can offer to another that is essentially intangible and dos not result in the ownership of any thing. Its production may not my not be tied up to a physical product”.
** Gummesson says, “ Services is something which can be bought and sold but which you cannot drop on your foot”.
** According Gronross “a service is an activity or series of activities of more or less intangible in nature that normally, not necessarily, take place in interactions between the customer and the service employees and/or physical resources or goods and/or system of the service provider, which are provided as solution to customer problems.”
From this it follows that
Services are by and large activities, or a series of activities rather than things
As a result they are intangible
They take place in interaction between the customer and service provider – which means that services are produced and consumed simultaneously
Customer has a role to play in the production process as services are provided in response to the problems of customers as a solution.
1.8 Characteristics of Services and its Marketing Implications The main Characteristics of Services are :
Intangibility
Inseparability
Perishability Intangibility
Services are actions and hence they are intangible. Due to this it is not possible to stock services and hence fluctuations in demand becomes difficult to manage. Hotels have same number of rooms all through the year but the customers requiring the room are always varying with some months seeing very few customers while other months seeing a rush of customers. Further services cannot be patented and any new concept can be easily copied by competitors. These cannot be readily displayed or easily communicated, and hence it will be difficult for the consumers to assess the quality. This also creates a problem for what to include in advertisements and promotional materials. Further the actual cost of “unit service” is difficult to determine and hence pricing becomes difficult. Inseparability
Services are generally created or supplied simultaneously. They are inseparable. For e.g., the entertainment industry, health experts and other professionals create and offer their service at the same given time. Services and their providers are associated closely and thus, not separable. Donald Cowell states ‘Goods are produced, sold and then consumed whereas the services are sold and then produced and then consumed.’
A service is produced when it is consumed eg. a dinning experience. Thus the customers are present when the service is produced thus other customer play an important role in satisfaction. The service producer also plays an important role in quality. Thus mass production is impossible, it is not possible to get economy of scale by centralisation, operations has to be decentralised to deliver to the consumer directly at convenient locations. A “problem customer” can result in disruption of service production process creating a dissatisfaction for himself, other customers and also to the service producer. Heterogeneity
As services are produced by humans, hence no two services can be identical. Further no two customers are precisely alike and hence their experiences of the same service are different. Even the same customer can be with different frame of mind at different times – which results in differing satisfactions from the same service at different times.
Eg. A tax consultant may provide different a service experience to two different customers on the same day depending upon their needs and on whether the consultant is meeting the customer when he is fresh in the morning or tired at the end of the day. Because of this ensuring a consistent quality becomes a challenging job. The quality depends upon a number of factors like the customer, service provides, other customers (their presence or even absence) etc., hence the service provider cannot know if the service is delivered in a manner which has been originally planned and promoted. Sometimes services are provided by a third party further increasing the heterogeneity. Perishability
Services cannot be stored, saved, resold or returned. A bad haircut cannot be returned or resold to another customer. Hence demand forecasting and creative planning to meet the demand is a problem. Further one has to be right the first time or if things go wrong one should have strong recovery strategies to retain the customer goodwill.
Due to these characteristics of services the marketeers face a major challenge in marketing of Services.
SERVICE
CHARACTERISTICS MARKETING IMPLICATIONS STRATEGIES TO DEAL WITH IMPLICATIONS INTANGIBILITY • Cannot be stored
• No Patents • No ready display • Communication problems • Pricing difficulties • Tangible clues • Personal sources • Organizational image • Cost accounting for prices • Post purchase
communication INSEPARABILITY • Consumer involved in
production
• No mass production • Supply demand match • Employees affect the
service outcome.
• Selection training of contact person • Manage consumer • Multisite location
HETEROGENEITY • Standardization difficult • Quality control difficult • No sure knowledge if
service delivered matches what was planned & promoted.
• Industrialized • Customize
PERISHABILITY • No inventorisation • Difficult to synchronize
supply and demand.
• Cope with fluctuating demand
• Differential pricing • Non-peak demand can be
developed
• Complementary services • Reservation systems • Part-time employees • Peak time efficiency
routines.
• Consumer participation • Expandable facilities can
be planned. • Shared services. • Better match through
SERVICES & GROWTH IN ECONOMY
2.1 REASONS FOR THE GROWTH OF SERVICE INDUSTRY
It is obvious that the growth in the services sector has been substantive. The reasons for this growth are quite a few, some of which are summarized as follows.
• Affluence : - The increase in per capita income from Rupees 238.8 in 1950 to Rupees 11,934.5 in 1998 is an indicator of he increase in general affluence has given rise to service like pest-control, personal security, interior designer, etc. • Leisure time : - People do get some time to travel and holiday and therefore there
is a need for travel agencies, resorts, hotels, and entertainment. There are other’s who would like to utilize this time to improve their career prospects and therefore there is a need for adult education/distance learning/part time courses.
• Life expectancy : - The health programmed have significantly contributed to an increase in life expectancy given rise to services like old age homes, nursing homes, health care, etc.
• Working wives : - As more and more women have started working, the need for day care for children has increased, and so is the care with packed food and home delivery.
• Product complexity : - A large no. of products are now being purchased in households which can be serviced only by specialized persons like water purifies, micro wave ovens, home computers, etc. giving rise to the need for services like after sales service agents for durables, maintenance service providers, etc.
• Life complexity : - As the daily routine gets busier, individuals find it difficult to manage things on their own. Their leads to an obvious need for tax consultants, legal advisors, property advisers, etc.
• Resource scarcity and ecology : - As the natural resources are depleting and need for conservation is increasing, we have seen the coming up of service providers like pollution control agencies, car, pools, water management, etc.
• New products : - the development in information technology has given rise to services like PCOs, Pager service providers, Web Shoppe, etc
2.2 CONTRIBUTION OF SERVICE INDUSTRY TO INDIAN ECONOMY AND WORLD ECONOMY
WORLD SCENARIO
• as economy shifts from developing to developed stage, they will show more and more shift toward services
• today, the fastest growing segments of the US economy is services
• in 1948 54% of the GDP of US was generated by services which is 80% now • employment in this sector which was 55% in 1950 is now 83%
• the US balance of trade in goods has remained in the red for many years, but there has been a trade surplus in services
• today service sector dominates the economics of many developed nations. As countries develop the role of agriculture in the economy declines and that of services increase.(china has 50% GDP from service, 35% from industry, and 15%from agriculture)
• during recession it has been seen that service output declines less than industrial output – the service employment is less sensitive to business cycle fluctuation • globalisation as strategy for service firm is becoming more important
Chapter III
UNDERSTANDING THE CONSUMER
3.1 KNOWLEDGE OF THE BUYER
In buying decisions many times other people also influence the decision. In services these roles are played by many persons. In purchase of any service six distinct roles are played
Initiator : The person who has a specific need and proposes to buy a service
Influencer : The person or group of persons whom the decision maker refers to or who advice the decision maker.
Gate Keeper : The person or organization or promotional material, which act as filter on the range of services which enter the decision choice
Decider : The person who makes the buying decision
Buyer : The person makes the actual purchaser
User : The actual user.
For example if a sales executive wants to do a market tour ……. His boss may be the initiator The travel agency may act as a Gatekeeper
The finance department may be the influencer The administrative department the buyer
The executive the user. In this case the user may have no role in the buying process. Hence while targeting a customer the service provider may have to influence other persons.
3.2 CONSUMER DECISION MAKING.
The consumer’s decision to purchase or reject a product or service is the moment of final truth for the marketer. It signifies the marketing strategy has been wise, insightful and effective, whether it was poorly planned and missed the mark. Marketer are, therefore, interested in the consumer decision-making process by which a consumer selects an alternative amongst the lot available. The decision not to buy is also an alternative. A simple consumer decision-making model, ties together the psychological, social and cultural concepts into an easily understood framework. The decision model has three distinct sets of variables:
1. Input Variables, 2. Process Variables, 3. Output Variables.
Input
Variables:-Input variables are those variables which affect the decision making process and include commercial marketing efforts as well as non-commercial influences from the consumer’s socio-cultural environment.
• Decision
The decision process variables are influenced by consumer’s own psychological fields, which affect their recognition of a need, their pre-purchase search for information and their evaluation of alternatives.
• Output
The output phase of the model includes the actual purchase (either trial or repeat purchase) and post-purchase evaluation. Both pre-purchase and post-purchase evaluation feed back in the form of experience into the consumer’s psychological field and serves to influence future decision processing. (On a holiday a customer may change hotels in between his stay).
Factors Influencing The Buying Behaviour
Situational Factors : Time, Store’s atmosphere, Marketing Stimuli (the occasion)
Personal Factors : Personality, life style, Other demographic factors like age, gender, occupation etc.
Social Factors : Culture, reference group, family
Psychological Factors : Perception, attitude, motivation
3.3 CONSUMER EVALUATION OF SERVICES AND THE QUALITIES INFLUENCING CONSUMER EVALUATION
For ‘consumer’ evaluation process the concept of “goods” has to be considered, as service characteristics have definite implication on the consumer evaluation process. Therefore for service industry, the service provider must understand how consumers choose and evaluate their offerings.
There are three types of products:
• Search product : - search qualities are those attributes of a product which the customer can determine before the purchase. This is more common in physical goods.
• Experience product : - experience qualities are those attributes which can only be determined after the purchase, or during the period of consumption.
• Credence product : - it is being said that certain products have such characteristics which the consumer cannot evaluate even after consumption or purchase. Such characteristics exist invariably in services. e.g.: wheel aligning of the car, astrology etc.
TEN SUCH QUALITIES WHICH INFLUENCE THE CONSUMER’S EVALUATION OF SERVICES (Quality Dimensions of Services)
• Consistency : - it involves consistency and reliability of performances and dependability. It means that the firm performs the service right the first time. It also means that the firm honours its promises especially in terms of accuracy in billing, record keeping and performing the service at the designated time.
• Concern:- it is the willingness or responsiveness of employees to provide the service. It involves timeliness of service or giving prompt service, calling the customer back quickly or mailing the transaction slip immediately.
• Competence: - it means having the required skills and knowledge to perform the service. It involves knowledge and skill of the contact personnel, knowledge and skill of operating support personnel and research capability of the organization. E.g. securities brokerage firm.
• Contact:- it involves approachability, access and ease of contact. It means that the service is easily accessible by telephone; waiting time to receive the services is not extensive, convenient hours of operation and convenient location of service facility.
• Courtesy :- it involves politeness, report, consideration and friendliness of contact personnel. It includes consideration for the consumer’s property. Clean and neat appearance of public contact personnel. E.g. no muddy shoes on the carpet, proper telephone operators etc.
• Communication:- it means keeping consumers informed in a language that they can understand and listen to them. It may mean that the company has to adjust its language for different consumers – increasing the level of sophistication with a well educated consumer and speaking simply and plainly with a novice. It involves explaining the service itself and how much the service will cost explaining the trade-off between service and cost and assuring the customer that a problem will be handled.
• Credibility: - it involves trustworthiness, believability, honesty. It involves having the customer’s best interest at heart thus contributing to credibility, company name and reputation, personal characteristics of the contact personnel and degree of hard sell involved in interaction with the customer.
• Confidentiality: - the security and the freedom from risk or doubt, involving physical safety, financial security or confidentiality.
• Customer knowledge: - it involves making the effort to understand the customer’s needs, i.e. learning the customer’s specific requirements, providing individualized attention and recognizing the regular customer.
• Tangibles: - it includes physical evidence of the service, physical facilities, and appearance of personnel tools or equipments used to provide the service, physical representations of the service such as a plastic credit card or a bank statement and other customers in the service facility.
CHAPTER IV
THE SERVICE ENCOUNTERS (“MOMENT OF TRUTH.”)
4.1 MOMENTS OF TRUTH
From the customer’s point of view, the most vivid impression of service occurs in the service encounter or “Moment Of Truth,” when the customer interacts with the service firm. This is the foundation to “Satisfaction of Service Quality” – it is where the promises are kept or broken. This concept was put forth by Richard Norman, taking the metaphor from Bull Fighting. Most services are results of social acts, which take place in direct contact between the customer and the service provider. At this stage the Customer realises the perceived service quality.
4.2 ENCOUNTER CASCADE
Every Moment of Truth is Important – according to Scandinavian Airlines, each one of their 10 million customers come in contact with 5 employees. Thus the airlines say there 50 million moments of truth – each one is managed well and “They prove they are the BEST”.
However some encounters are more critical. The encounter cascade refers to a series of encounters right from the time a customer comes to take the service. The encounter cascade can be important as any encounter can be critical, as it determines customer satisfaction and loyalty. If it’s the first interaction of the customer then the initial interaction will be the first impression. So, these interactions have to be given importance, as they are critical and influences customer’s perception of the organization.
A customer calling for the repair service may switch to some other company if he is put on hold for a long time or even treated rudely. Even if the technical quality of that firm is superior, the firm may not get a chance to prove themselves in front of the customer. When the customer has had many interactions with firm, each encounter will be important as it will create a combined image of that firm. Many positive experiences will give an image of High Quality and many negative experiences will represent a bad image. Combination of positive and negative interactions will leave the customer confused about the Quality.
It is suggested that not all encounters are equally important in building long-term relations. For every organization, certain encounters can act as a key to customer satisfaction. For example: for MARRIOT hotels, it is the early encounters that are important. In a hospital context, a study of patients revealed that encounters with the nursing staff were more important in predicting the customer satisfaction.
As it is rightly said “one bad apple can ruin the whole basket of apples.” The same applies in this too; one negative encounter can drive the customer away, no matter how many encounters had taken place in the past. So a firm has to give a lot of importance to such encounters.
“A customer who has been using a bank for nearly 15 years is quite happy with the service. He has a huge deposit and many accounts. One fine morning, when he comes out of the bank the watch man asks Rs. 10 for parking charges of his car. He goes inside the bank and informs the clerk at the counter, who directs him to the officer. The officer directs him to the Manager, who says he is helpless as this is a new policy of the bank. The customer who was so happy with the bank services decides to close all his accounts – “Some encounters can be very Critical”.
A Service encounter cascade for a hotel visit
Among the service encounters a hotel customer experiences are checking in, being taken to the room by a bell person, eating a restaurant meal etc as shown in the figure. It is in these encounters that the customer receives an overall view of the organizations service quality and encounter contributes to customer satisfaction and willingness to do business with the organization again. As for the company, each encounter represents an opportunity to prove its potential as a quality service provider and to increase customer loyalty.
Some services have few service encounters and others have many. Mistakes or problems that occur in the early levels of the service cascade can e critical because failure at one point results in greater risk of dissatisfaction in the long run. MARRIOT Hotels learned this through their extensive customer survey to determine what service element
Check- In
Bell person Takes to Room
Restaurant
Meal
Wake-Up Call
contributes to customer loyalty. They found that 4 out of 5 factors came into play in the first 10 minutes of the guest’s stay.
IMPORTANCE OF ENCOUNTERS
Although early events in the encounter cascade are likely to be especially important, any encounter can potentially be critical in determining customer satisfaction and loyalty. If a customer is interacting with the hotel for the first time, the initial encounter will create a first impression of the hotel. In these first encounter situations, the customer frequently has no other basis for judging the hotel, and the initial phone contact or face – to – face experience with the customer can take on excessive importance in the customer’s perceptions of quality. Even when the customer has hade multiple interactions with the hotel, each individual encounter is important in creating a composite image of the hotel in the customer’s memory. Many positive experiences add up to a composite image of high quality, whereas many negative interactions will have a positive effect. On the other hand, a combination of positive and negative interactions will leave the customer feeling unhappy of the hotels quality, doubtful of its consistency in service delivery, and vulnerable to the appeals of competitors.
A large corporate customer of an institutional food provider that provides food service in all of its company dining rooms and cafeterias could have a series of positive encounters with the account manager or the sales person who handles the account. These experiences could be followed by positive encounters with the operation staff that actually set up food service facilities. However, even with these positive encounters, later negative experiences with the staff who serve the food or the accounting department that administers the account and billing procedures can result in a mixture of quality impressions. This variation in experience could result in the corporate customer wondering about the quality of the hotel and unsure of what to expect in the future. Each encounter with different people and department representing the food service provider adds to or detracts from the potential of continuing relationship.
4.3 TYPES OF ENCOUNTERS
A service encounter occurs every time a customer interacts with the service organization. There are three general types of encounters - remote encounters, phone encounters, and face – to – face encounters. A customer may experience any of these types of encounters, or a combination of all three in his or her relations with a service firm.
Types of Service Encounters.
Encounters
Remote
Remote
Encounter:-Encounter can occur without any direct human contact is called as Remote Encounter:-Encounters. Such as, when a customer interacts with a bank through the ATM system, or with Ticketron through an automated ticketing machine, or with a mail-order service through automated dial-in ordering. Remote encounters also occur when the firm sends its billing statements or communicates others types of information to customers by mail. Although there is no direct human contact in these remote encounters, each represents an opportunity for a firm to reinforce or establish perceptions in the customer.
In remote encounter the tangible evidence of the service and the quality of the technical process and system become the primary bases for judging quality.
EXAMPLE:-Services are being delivered through technology, particularly with the advent of Internet applications. Retail purchases, airline ticketing, repair and maintenance troubleshooting, and package and shipment tracking are just a few examples of services available via the Internet. All of these types of service encounters can be considered remote encounters.
Phone
Encounters:-In many organizations, the most frequent type of encounter between a customer and the firm occurs over the telephone is called as phone encounter. Almost all firms (whether goods manufacturers or service businesses) rely on phone encounters in the form of customer-service, general inquiry, or order-taking functions.
The judgment of quality in phone encounters is different from remote encounters because there is greater potential variability in the interaction. Tone of voice, employee knowledge, and effectiveness/efficiency in handling customer issues become important criteria for judging quality in these encounters.
Face-to –Face
Encounters:-A third type of encounter is the one that occurs between an employee and a customer in direct contact is called as Face-to-Face Encounter.
In a hotel, face – to – face encounters occurs between customers and maintenance personnel, receptionist, bellboy, food and beverage servers and others. Determining and understanding service equality issues in face – to –face context is the most complex of all. Both verbal and non-verbal behaviours are important determinants of quality, as are tangible cues such as employee dress and other symbols of service (equipments, informational brochures, physical settings). In face – to – face encounters the customer also play an important role in creating quality service for herself through her own behaviour during the interaction. At Disney theme parks, face-to-face encounters occur between customer and ticket-takers, maintenance personnel, actors in Disney character costumes, ride personnel, food and beverage servers, and others. For a company such as,
IBM, in a business-to-business setting direct encounters occur between the business customers and salespeople, delivery personnel, maintenance representatives, and professional consultants. Of all determining and understanding service quality issues in face-to-face context is the most complex. Both verbal and non-verbal behaviours are important determinants of quality, as are tangible cues such as employee dress and other symbols of service (e.g., equipment, informational brochures, and physical settings). In face-to-face encounters the customer also plays a role in creating quality service for herself through her own behaviour during the interaction.
CHAPTER V
SERVICE FAILURES AND RECOVERY
5.1 SERVICE FAILURES
Even with the Best organizations failures can just happen – they may be due to the service not available when promised, it may be delivered late or too slowly (some times too fast ??), the outcome may be incorrect or poorly executed, or employees may be rude or uncaring. All these types of failures bring about negative experiences. If left unfixed they can result in customers leaving, telling others about the negative experiences or even challenging through consumer courts.
Research has shown that resolving the problems effectively has a strong impact on the customer satisfaction, loyalty, and bottom-line performance. Customers who experience service failures, but are ultimately satisfied based on recovery efforts by the firm, will be more loyal.
THE RECOVERY PARADOX.
It is suggested that customers who are dissatisfied, but experience a high level of excellent service recovery, may be more satisfied and more likely to repurchase than are those who are satisfied at the first place.
For example:-
A hotel customer who arrives & finds there is no room available. In an effort to recover, the front-desk person immediately upgrades this guest to a better room at the same price. The customer is so thrilled with this compensation that he is extremely satisfied with this experience, is even more impressed with the hotel than he was never before, and vows to be loyal into future. The logical, but not very rational, conclusion is that companies should plan to disappoint customers so they can recover &gain even greater loyalty from them as a result. This idea is known to be as Recovery Paradox.
The recovery paradox is more complex than it seem. First of all it is expensive to fix mistakes and would appear ridiculous to encourage service failure-as reliability is the most important aspect of service quality. According to a research it is observed that a customer weight their recent experiences heavily in their decision to buy again. If the experience is negative, overall feelings about the company will decrease and repurchase
intentions will also reduce. If the recovery effort is absolutely superlative then the negative impression can be overcome.
Then there is a recent study which shows no support to recovery paradox. It shows the overall satisfaction was consistently lower for those customers who had experienced a service failure than for those who had experienced no failure, no matter what the recovery effort is. The explanation for why no recovery paradox is suggested by the magnitude of the service failure in this study it is-a three hour airplane flight delay. This type of failure may be too much to be overcome by any recovery effort.
Considering mixed opinions on if recovery paradox exists it is safe to say “doing it right the first time” is the best and safest strategy. When a failure does occur then every effort at superior recovery should be made. In cases where the failure can be fully overcome the failure is less critical, or the recovery effort is clearly superlative, it may be possible to observe evidence of the recovery paradox.
HOW CUSTOMERS RESPOND TO SERVICE FALIURE
If customers initiate action following service failure, the action can be various types. A dissatisfied customer can choose complaint on the spot to the service provider, giving the company the opportunity to respond immediately. Thos is often the best-case scenario for the company it has the second chance right at that movement to satisfy the customer, keep his or her business in the future, and potentially avoids any negative word of mouth.
Some customer chooses not to complaint directly to the provider but rather spread negative word of the mouth about the company to friend, relatives, and coworkers. This negative word of mouth can be extremely detrimental because it can reinforce the customer’s feeling of negativism and spread that negative impression to other as well. Further, the company has no chance to recover unless the negative word of mouth is accompanied by a complaint directly to the company.
CUSTOMER COMPLAINT ACTION FOLLOWING SERVICE FAILURE Service Failure Dissatisfaction/
Negative
emotion
Complaint Action ComplainTo provider Word-of-mouthNegative Third-partyAction
No complain t Action Exit/ Switch
Stay
Exit/ SwitchStay
When there is a failure, customer can respond in a variety of ways as illustrated in the figure. It is assumed that following are the failure, dissatisfaction at some levels will occur for the customer. In fact, research suggest that variety of negative emotion can occur following service failure, including such feeling as anger, discontent, disappointment, self- pity and anxiety.
Many customers are very passive about their dissatisfaction, simply saying or doing nothing, take action or not, at some point the customer will decide weather to stay with that provider or switch to a competitor.
SERVICE RECOVERY STRATEGY
Fail safe the
services encourage complaintsWelcome and Act Quickly
Treat customer Fairly Learn from Recovery experiences Learn from lost customer
1) Fail Safe Your Service
:-The first rule of service quality is to do it right the first time. In this way recovery is unnecessary, customer get what they expect, and the costs of redoing the service and compensating for errors can be avoided. Even more fundamentally, it is important to create a culture of zero defections to ensure doing it right the first time. Within a zero defections culture, everyone understands the importance of reliability. Employee’s and managers aim to satisfy every customer and look for ways to improve service. Employees in a zero defection culture fully understand and appreciate the “lifetime value of a customer” concept. Thus they are motivated to provide quality service every time and to every customer. Dick Chase, noted service operation expert, suggests that services adopt the TQM notion of Poka Yokes to improve service reliability. Poka Yokes are automatic warnings or controls in place to ensure mistakes are not made; essentially they are quality control mechanisms, typically used on assembly lines.
In a hospital setting numerous Poka Yokes ensure that procedures are followed to avoid potentially life-threatening mistakes. For example, trays for surgical instruments have indentations for specific instruments, and each instrument is nested in its appropriate spot. In this way surgeons and their staff know that all instruments are in their places prior to closing the patients’ incision. FAIL- SAFE YOUR SERVICE- DO IT RIGHT THE FIRST TIME
2) Welcome & Encourage
Complaints:-Even in a Zero defections organizations that aims for 100 % service quality, failures occur. A critical component of a service recovery strategy is thus to welcome and encourage complaints. Complaints should be anticipated, encouraged, and tracked. The complaining customer should truly be viewed as a friend.
There are a number of ways to encourage and track complaints. Customer research can be designed specifically to do this through satisfaction surveys, critical incidents studies, and lost customer research.
Part of encouraging complaints also involves teaching customers how to complain. Sometimes they have no idea whom to speak to, what the process is, or what will be involved. It is best to make this process as simple as possible the last thing customers want when they are dissatisfied is to face a complex, difficult to access process for complaining.
One way that the complaining process has been simplified for customers is through technology. New technologies have resulted in easier access for customers to sales and service representatives. Toll-free call canters, e-mail, and pagers are all used to facilitate, encourage, and track complaints, Software application in a number of
companies also allow complaints to be analysed, sorted, responded to, and tracked automatically.
British Airways, encourages, facilitated and tracks customer as a critical component of its effective service recovery process. It is apparent that British Airways is highly dependent on information technology to implement its strategy.
In some cases technology can anticipate problems and complains before they happen, allowing services employees to diagnose problems before the customer recognizes they exist. This is the case at companies such IBM and Caterpillar, where information systems are being implemented to anticipate equipment failures and send out an electronic alert to the local field technician with the nature of the problem as well as which parts and tools will be needed to make the repair.
3) Act
Quickly:-Complaining customer want quick response. Thus if the company welcomes, even encourages, complaints, it must be prepared to act on them quickly. This requires systems and procedures that allow quick action, as well as empowered employees. Following are some guide lines to act quickly :
Take Care of problems on the Front
Line:-Customers want the persons who here their complaints to solve their problems whether a complaints is registered in person, over the phone or via the Internet. The Ritz-Carlton insists that the first person to hear a complaint from a customer “owns” that complaint until he or she is sure it is resolved. That means that if a maintenance employee hears a complaint from a customer while the employee is in the middle of fixing a light in the hotel corridor, he owns that complaint and must be sure that it is handled appropriately before returning to his work.
Empower
Employees:-Employees must be trained and empowered to solve problem as they occur. The company uses customer knowledge database as the key source for immediate problem solving by its customer service representatives. These representatives are empowered to solve the customer’s problem, but at the same time they must adhere to stringent requirements necessary in the health and pharmaceutical administration business.
For service employees, there is a specific and real need for recovery training. Because customers demands that service recovery take place on the spot and quickly, frontline employees need the skills, authority, and incentives to engage in effective recovery. Effective recovery skills include hearing the customer’s problem, taking initiative, identifying solutions, improvising and perhaps bending the rules from time to time.
Allow Customer to Solve Their Own
Problem:-Another way that problem or complaints can be handled quickly is by building systems that allow customers to actually solve their own service needs and fix their own problems. Typically this is done through technology.
Fairly:-In responding quickly, it is also critical to treat each customer fairly. Customers expect to be treated fairly in terms of the outcome they receive, the process by which the service recovery takes place, and the interpersonal treatment they receive.
5) Learn from Recovery
“Problem- resolution situations are more than just opportunities to fix flawed services and strengthen tie with customers. They are also a valuable – but frequently ignored or underutilized – sources of diagnostic, prescriptive information for improving customer’s services. By tracking service recovery efforts and solutions, managers can often learn about systematic problems in the delivery system that needs fixing. By conducting root-cause analysis, forms can identify the sources of the problem and modify processes, sometimes eliminating almost completely the need for recovery.
At the Ritz-Carlton employees record every service recovery opportunity and how it was handled; the employee who gets the complaint is required to do this. This information is then entered into the customer database and analyzed for patterns and systematic service issues that need to be fixed. If needed, a project team is assigned to a problematic area to develop a solution. In addition, the information is entered into the customers personal data file so that when that customer stays at the Ritz- Carlton again
(No matter what hotel), employees can be aware of the previous experience, ensuring that it doesn’t happen again for that particular customer.
6) Learn from Lost
Customer:-Another key component of an effective service recovery strategy is to learn from the customer who defect or decide to leave. Formal market research to discover the reasons customers have left can assist in preventing failures in the future. This type of research is difficult, even painful for companies, however. No one really likes to examine their failures. Yet this is essential for preventing the same mistakes and losing more customers in the future.
This is most effectively done by depth interviews, administered by skilled interviewers who truly understand the business. It may be best to have this type of research done by senior people in the company, particularly in business to business contexts where customers are large and the impact of even one lost customer is great. The type of depth analysis often requires a series of “Why” question or “tell me about that” questions to get at the actual, core reason for the customer’s defection. In conducting this kind of research, it is important to focus on important or profitable customers who have left not just everyone who has left the company. An insurance company in Australia once began this type of research to learn about their lost customers, only to find that the customers they were losing tended to be their least profitable customers anyway. They quickly determined that depth research on how to keep these unprofitable customers would not be a good investment.
7) Return To “Doing It Right”
The set of strategies described follows the figure and leads directly back to the beginning: “fail – safe the service and do it right the first time”. By integrating all of the strategies, hotels will find less and less of a need for service recovery. Yet, when those
situations do occur, they will be prepared to impress the customer and keep their business anyway.
CHAPTER VI
EIGHT COMPONENTS OF INTEGRATED SERVICE MANAGEMENT
6.1 The Marketing Mix (THE 5 P’s OF SERVICES MARKETING)
In order for your business to sell its products and services as successfully as possible, you need to look at what products you are selling in detail to ensure they will be attractive and needed; the price to ensure it is not too cheap or too expensive; where you are best distributing your product; and finally, how you can create interest and awareness for your products. All these elements need to be targeted at the right people at the right time. In order for your business to tackle this correctly, you need to get the right type of mix (marketing mix), the mix should include four main elements: Product, Price, Place and Promotion, by examining each and carefully and adapting them to your customer's needs, you will continue to produce and needed products and services
1) Product element : Managers must select the feature of both the core product (either a good or service) and the bundle of supplementary service elements surrounding it, with reference to the benefit desired by customers and how well competing products perform. In short, they must be attentive to all aspects of the service performance that have the potential to create value for customers
GUEST RELATIONS
The front office should anticipate guest complaints and devise strategies that help staff
effectively resolve the situation. The visibility of the front office means that front desk agents are frequently the first to learn of guest complaints. Front desk agents should be especially attentive to guests with complaints and seek a timely and satisfactory resolution to the problem. Nothing annoys guests more than having their complaints ignored, discounted, or overlooked. While most front office staff do not enjoy receiving complaints, they should understand that very few guest actually enjoy complaining. Employees should also realize that guest who does not have the opportunity to complaint front office staff often tell their friends, relatives, and business associates instead.
When guests find it easy to express their opinions, both the hotel and the guests benefit. The hotel learns of potential or actual problems and has the opportunity to resolve them. For a guest, this can mean a more satisfying stay. When problems are quickly resolved, guest often feels that the cares about his or her needs. From this perspective, every complaint should be welcomed as an opportunity to enhance guest relations.
2) Price and other user costs: - This components addresses management of the expenditures and other outlays incurred by customers in obtaining benefits from the service product. It is not only related to traditional pricing tasks of establishing selling price to customers, setting trade margins and getting credit terms but also, how to minimize other burdens of customers while purchasing such as time, mental and physical efforts and unpleasant sensory experiences such as noises and smells.
3) Place , cyberspace and Time:- Delivering product elements to customers involves decisions on the place and time of delivery as well as on the methods and channels employed. Delivery may involve physical or electronics distribution channels or both),depending on the nature of the service being provided.
4) Promotion and education:- No marketing program can succeed without effective communications.
This component plays three vital roles:
-a)Providing needed information and advice (awareness).
b)Persuading target customers of the merits of a specific product. (Concentrating on a particular segment of the market).
c)Encouraging to take action at a specific time (purchase). Communication is educational in nature for new customers.
Communication can be delivered by individuals such as sales people and trainers, media such as TV, radio, newspaper, magazines, postures, websites etc.
This promotion is usually used as incentives to catch customer’s attention and to motivate them to act.
The above four are the traditional marketing mix. The EXTENDED marketing mix for services marketing is as follows :
5) People: - Many services depend on the direct, personal interaction between customers and a firm’s employees (such as getting a haircut or eating at a restaurant). This interaction strongly influences the customer perception of service quality. So, successful service firm devote significant effort to recruitment, training and motivating their personnel.
6) Physical evidence:- The appearance of buildings, landscaping, vehicle, interior furnishing, equipment, staff members, signs, printed materials, and other visible cues all provide tangible evidence of the firms service quality. The service firms need to manage physical evidence carefully because it can have a profound impact on customers’ impression as the service itself is intangible.
A tangible element such as insurance and advertising is often employed to create meaningful symbols.
7) Process: - It is the method and sequence of actions in which service operating system works.
Badly designed process: - annoys customers which leads to likelihood of service Failures.
8) Productivity and quality: - Productivity relates to how inputs are transformed into outputs that are valued by customers. Improving productivity keeps costs under control. Quality refers to the degree to which a service satisfies customers by meeting their needs, wants and expectations. Service quality helps in product differentiation and building customer loyalty. Invest in quality profitably i.e. by considering incremental cost and incremental revenue.
Thus, these are the 8ps of service management, which are the essence of it. The integration of each p’s is necessary for the successful service management
Collectively these are the tools organizations uses to develop offerings to satisfy their target market(s) ... the only tools at their disposal. Remember: If your marketing mix doesn't meet their needs they will not be satisfied - and if they aren't satisfied you are
unlikely to meet your objectives.
The marketing mix should be viewed as an integrated and coordinated package of benefits that reflect the characteristics of customers and various targeted publics and satisfy their needs, wants, and expectations. Note that the elements of the marketing mix should be integrated because each element of the mix usually has some impact, direct or indirect, on the other three. For example, if you improve the product or service you probably have to change the price because it costs more to produce. Although you may not have to change where the product is delivered to the customer, you will almost certainly have to change the promotion or communication with the customer because you need to tell the customer about the changes you have made in the product and how the changes will make it more desirable and satisfying. One problem in many organizations is that different divisions may be responsible for different elements of the marketing mix. This happens even in well-managed organizations. The result is that the offering is confusing to the target market. Lack of communication among divisions makes this problem worse. And if they don't share the same view of organizational objectives, the problem is worse still.
6.2 PRODUCT MIX 6.2.1 Introduction
‘Product’ includes name, design, features, quality, operational case, packaging, warranties, appearance, range and size. It also includes pre-sale and post-sale services like training, repairs, maintenance and replacements.
According to Philip Kotler “a product is anything that can be offered to market for attention, acquisition use or consumption that satisfy a want or need. It includes physical objects (TV), service (banking), person (political person), place (holiday resort), organization (red cross) and idea (aid awareness).”
Conventionally, a product is an object, which is delivered and consumed. However, in services there is no or very little tangible elements. Hence, what is offered for sale is benefits. Service is a bundle of benefits and has relevance for a specific target market. Hence, the package of benefits should have a customer’s perspective.
6.2.2 Levels of product:
Kotler has identified 5 levels of a product
1) Core product 2) Basic product 3) Expected product 4) Augmented product 5) Potential product
Kotler suggested that a product should be viewed in three levels.
Level 1: Core Product. What is the core benefit your product offers? This is the fundamental benefit or service that the customer is buying. For eg. A customer going to a Hotel is buying rest, sleep etc.
Level 2 Basic Product: Basic functional attributes. All Hotels provide rest and sleep. The aim is to ensure that your potential customers purchase your one service. Thus the functional attributes like Room, Bed, Bath are important.
Level 3 : Expected product : Set of attributes that the buyer expects (Clean room, large towels, quietness)
Level 4: Augmented product: What additional non-tangible benefits can you offer? This meets the customer’s desires beyond his expectations – (Prompt room service, music, aroma etc)
Level 5 : Potential product : The possible evolutions that can be made to make the product a distinguished offer (all suite room)
In a Bank these can be
Core Product (Safety of deposits, Interest, Easy loans Basic product : Savings deposit, FD, Recurring deposit
Expected product : Correct transaction records, timely service, convenient timing Augmented product : Congenial waiting room, Water cooler
Potential product : Greetings for New Year, 24 hour banking
The PACKAGE CONCEPT of Service product – suggests that what you offer to the market si a bundle of different services – tangible and intangible. There is a core service and around it are built the auxiliary or facilitator service. Without this the service would collapse (a bell boy in a Hotel). Yet another service is the supporting service – it is used to increase the product value (a car rental in a hotel).
The basic product is not equivalent to the service product which the customer perceives, which is in fact based on customer’s experience and evaluation. Therefore there is a need for an augmented product – like
Accessibility (number and skills of personnel, convenient timing, location, infrastructure etc.,)
Interaction with service organization (Between employees and customer, with physical and technical resources, with other customers)
The service concept
Consumer participation A Acce Core services Facilitating services Supporting services Accessibi lity of Services Interaction Corporate Image, Word of mouth
Consumer participation.(how well the customer is aware about the process of service delivery, his willingness to share information and use service equipments)
The package should also include the management of service image through encouraged word of mouth and market communication.
6.2.3 Product Decisions
When placing a product within a market many factors and decisions have to be taken into consideration. These include:
Consumer benefits – assess what benefits the consumer looks for Service concept – To translate it to suitable service offer
Develop augmented offer
6.2.4 BRANDING:
One of the most important decisions a marketing manager can make is about branding. The value of brands in today’s environment is phenomenal. Brands have the power of instant sales; they convey a message of confidence, quality and reliability to their target market.
Brands have to be managed well, as some brands can be cash cows for organizations. In many organizations they are represented by brand managers, who have huge resources to ensure their success within the market.
A brand is a tool, which is used by an organization to differentiate itself from competitors. Ask yourself what is the value of a pair of Nike trainers without the brand or the logo? How does your perception change?
Increasingly brand managers are becoming annoyed by ‘copycat’ strategies being employed by supermarket food retail stores particular within the UK. Coca-Cola threatened legal action against UK retailer Simsbury after introducing their Classic Cola, which displayed similar designs and fonts on their cans.
Internet branding is now becoming an essential part of the branding strategy game. Generic names like Bank.com and Business.com have been sold for £m’s. (Recently within the UK banking industry we have seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand managers is to insure that consumers understand that these brands are banks!
Branding of Services and its Importance
Philip Kotlar defines a brand as “a name, a term, a symbol, or a designed or a combination of them which is intended to identify the goods and services of one seller or a group of sellers and to differentiate them from those of competitors”.
