Marketing Services Final Exam Review

8/3/2019 Marketing Services Final Exam Review

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Marketing Services Final Exam Review

y Understanding customer requirements is the first step in delivering high service

quality.

y In most service companies, integrating the work of the marketing function and theoperations function (appropriately called functional integration) is not a typical

approach; more frequently these two functions operate separately ± setting andachieving their own goals ± rather than pursuing a joint goal of developing the

operations standard that best meet customer expectations.

y Standardization of Service Behaviors and Actions

o S tandardization usually implies a non-varying sequential process ± similar to

the mass production of goods ± in which each step is laid out in order and alloutcomes are uniform, whereas customization usually refers to some level of

adaptation or tailoring of the process to the individual customer.

o The goal of standardization is for the service firm to produce a consistent

product from one transaction to the next.o The goal of customization for the service firm is to develop services that

meet each customer¶s individual needs.

o Standardization of service can take three forms:

Substitution of technology for personal contact and human

effort.

Improvement in work methods. Combinations of these two methods.

o Standardization, whether accomplished by technology or by improvements inwork processes, reduces gap 2. Customer-defined standardization ensures

that the most critical elements of a service are performed as expected by

customers, not just that every action in a service is executed in a performedmanner. One example of compatibility involves the time limits manycompanies establish for customer service calls.

y Formal Services Targets and Goals

o Companies that have been successful in delivering consistently high servicequality are noted for establishing formal standards to guide employees in

providing service.

y Customer ± Not Company ± Defined Standards o One company-defined standard that often does not meet customer

expectations is the common practice of voice activated telephone supportsystems that do not allow consumers to speak to humans.

o Many organizations have switched from labor-intensive practice of havingcustomer representatives to these ³automated´ systems. To close gap 2,

standards set by companies must be based on customer requirements andexpectations rather than just on internal company goals.

o A company must set customer-defined standards: operational standards based on pivotal customer requirements visible to and measured by

customers



o K nowing customer requirements, priorities, and expectation levels can be both effective and efficient.

y Types of Customer-Defined Service Standards

o The types of standards that close provider gap 2 are customer-defined

standards: operational goals and measures based on pivotal customer

requirements visible to and measured by customers rather than on concernssuch as productivity or efficiency.

y Hard Customer-Defined Standards:

o All the FedEx standards that comprise its SQI fall into the category of hard

standards and measures: things that can be counted, timed, or observed through audits.

o To address the need for reliability, companies can institute a ³do it right thefirst time´ and an ³honor your promises´ value system by establishing

reliability standards.

o One of the best examples of customer-defined hard standards in the Internet

context is the set of summary metrics that Dell Computer uses for fulfillment:

They include: Ship to target (STT) ± the percentage of orders delivered on time

with complete accuracy.

Initial field incident rate (IFIR) ± the frequency of customer problems.

On time first time fix (OTFTF) ± the percentage of problemsfixed on the first visit by a service representative arriving at the

time promised.

y Soft Customer-Defined Standards:

o Soft measures are those that must be documented using perceptual data. We

call the second category of customer-defined standards soft standards and

measures because they are opinion based measures and cannot be directlyobserved. Talking to customers, employees, or others must collect them. Softstandards provide direction, guidance, and feedback to employees in a way to

achieve customer satisfaction and can be quantified by measuring customer perceptions and beliefs. Soft standards are especially important for person-to-

person interactions such as selling process and the delivery process for professional services.

y One-Time Fixes: One times fixes are technology, policy, or procedure changes that,

when instituted, address customer requirements. We further define one-time fixes asthose company standards that can be met by an outlet (e.g. a franchisee) making a

one-time change that does not involve employees and therefore does not require

motivation and monitoring to ensure compliance.o One-time fixes are often accomplished by technology. Some technology, in

particular computer databases that contain information on individual needs

and interests of customers, allows the company to standardize the essentialelements of service delivery. These elements include information

databases, automated transactions, and scheduling and delivery systems.



o One-time fixes also deal with aspects of service that go beyond human performance: rules and policies, operating hours, product quality, and

price.

y Basing Standards on the Service Encounter Sequence: A customer¶s overall

service quality evaluation is the accumulation of evaluations of multiple service

experiences.o In establishing standards firms are concerned with service encounter quality,

because they want to understand for each service encounter the specific

requirements and priorities of the customer. When these priorities are known, providers can focus on them as the aspects of the service encounters for

which standards should be established. Therefore, one of the first steps inestablishing customer-defined standards is to delineate the service encounter

sequence.

o Alternatively, service blueprints can be used to identify the sequence by

noting all the customers¶ activities across the top of the blueprint. Verticallines from customer activities into the lower levels of the blueprint signal the

points at which the service encounters take place.y Expressing Customer Requirements as Specific Behaviors and Actions: Effective

service standards are defined in very specific ways the enable employees to

understand what they are being asked to deliver. At best, these standards are set andmeasured in terms of specific human responses and actions.

o When the company invested in a customer-defined standards project, theresulting measurements system was far more useful in diagnosing student

requirements because the research focused on specific behaviors and actions of instructors that met student requirements. Instead of a single broad

requirement or three general attributes, the requirements of students werearticulated in 14 specific behaviors and actions that related to the instructor

and 11 specific behaviors and actions related to the course content.y Measuring Behaviors and Actions:

o Hard Measurements:

Missing proofs of delivery: the number of invoices that do notinclude proof-of-delivery paperwork.

Damaged packages: the number of claims for cost of contents for packages with visible or concealed damages.

Wrong day late deliveries: the number of packages deliveredafter the commitment date.

Traces: the number of package status and proof of deliveryrequests from customers that cannot be answered through data

contained in the computer systemy Other gauges of hard measures include service guarantee

lapses (the number of times a service guarantee is invoked

because the service did not meet the promise), amount of time (as in the number of hours or days to respond to a

question or complaint or minutes waited in line), andfrequencies associated with relevant standards (such as the



number of visits made to customers or the number of abandoned telephone inquiries).

o Soft Measurements: Two types of perceptual measurements can documentcustomers¶ opinions about whether performance met the standards

established: trailer calls and relationship surveys. R elationship and

SER VQUAL surveys cover all aspects of the customer¶s relationship withthe company, are typically expressed in attributes, and are usually completedonce per year. Trailer calls are associated with specific service encounters,

are short (approximately six or seven questions), and are administered asclose in time to a specific service encounter as possible.

y Developing Customer-Defined Standards

o Step 1: Identify Existing or Desired Service Encounter Sequence: The

first step involves describing or portraying the service encounter sequence.

o Step 2: Translate Customer Expectations into Behaviors and Actions for

Each Service Encounter: The input to step 2 is existing research oncustomer expectations. In this step, abstract customer requirements and

expectations must be translated into concrete, specific behaviors and actionsassociated with each service encounter. A bstract requirements (like

reliability) can call for a different behavior or action in each serviceencounter, and these differences must be probed.

o Step 3: Select Behaviors and Actions for Standards: This stage involves

prioritizing the behaviors and actions, of which there will be many, into thosefor which customer-defined standards will be established. The following are

the most important criteria for creation of standards:

T he standards are based on behaviors and actions that are very

important to customers. Customer-defined standards need tofocus on what is very important to customers.

T he standards cover performance that needs to be improved or maintained . Customer-defined standards should be established

for behaviors that customers feel are important and that need to beimproved (or maintained). The company gets the highest leverage

or biggest impact from focusing on behaviors and actions thatneed to be improved.

T he standards cover behaviors and actions employees can

improve. Employees perform according to standards only if they

understand, accept, and have control over the behaviors andactions specified in the standards. Holding customer-contact

people to standards they cannot control (such as product quality or time lag in introduction of new products) does not result in

improvement. For this reason, service standards should cover

controllable aspects of employees¶ jobs.

T he standards are accepted by employees. Employees will perform to standards consistently only if they understand and

accept the standards. Imposing standards on unwilling employeesoften leads to resistance, resentment, absenteeism, and even

turnover.



T he standards are predictive rather than reactive. Customer defined standards should not be established on the basis of

complaints or other forms of reactive feedback. R ather thanwaiting for dissatisfied customers to explain, the company should

actively seek both positive and negative perceptions of customers

in advance of complaints. T he standards are challenging but realistic. If standards are not

challenging, employees get little reinforcement for mastering

them. On the other hand, unrealistically high standards leave anemployee feeling dissatisfied with performance and frustrated by

not being able to attain the goal.

o Step 4: Decide WhetherHard of Soft Standards Are Appropriate:

However, unless the hard standard adequately captures the expected behavior and action, it is not customer defined. The best way to decide whether a hard

standard is appropriate is to first establish a soft standard by means of trailer calls and then determine over time which operational aspect most correlates

to this soft measure. o Step 5: Develop Feedback Mechanisms for Measurement to Standards:

Hard standards typically involve mechanical counts or technology-enabledmeasurement of time or errors. Soft standards require perceptual

measurements through the use of trailer surveys or employee monitoring.Employee monitoring is illustrated by the practice of supervisors listening in

on employee telephone interactions with customers.

o Step 6: Establish Measures and Target Levels: This next step requires that

companies establish target levels for the standards. Without this step thecompany lacks a way to quantify whether the standards are being met. Each

time a complaint is made to the company, and each time one is resolved,employees record the times.

Another technique is a simple perception ± action correlationstudy. When the service consists of repetitive processes,

companies can relate levels of customer satisfaction with actual performance of a behavior or task.

o Step 7: Track Measures Against Standards

o Step 8: Provide Feedback about Performance to Employees

o Step 9: Periodically Update Target Levels and Measures: The final stepinvolves revising the target levels, measures, and even customer

requirements regularly enough to keep up with customer expectations.

y Developing Service Performance Indexes: One outcome from following the processfor developing customer-defined standards is a service performance index. S ervice

performance indexes are comprehensive composites of the most critical performancestandards. Development of an index begins by identifying the set of customer-defined

standards that the company will use to drive behavior.

y What is Physical Evidence?

o Effective design of physical, tangible evidence is important for closing

provider gap 2.



o They include all aspects of the organization¶s physical facility (theservicescape) as well as other forms of tangible communication.

o Elements of the servicescape that affect customers include both exterior attributes (such as signage, parking, and the landscape) and interior

attributes (such as design, layout, equipment, and décor) o N

ote that webpages, and virtual servicescapes conveyed over the internet aremore recent forms of physical evidence that companies can use tocommunicate about the service experience, making services more tangible

for customers both before and after the purchase.

o Services (such as hospitals, resorts, and childcare) rely heavily on physical

evidence to communicate and create customer experiences. Others(insurance, express mail) provide limited physical evidence for customers.

y How Does Physical Evidence Affect the Customer Experience?

o In all cases, the physical evidence of the service will influence the flow of the

experience, the meaning customers attach to it, their satisfaction, and their emotional connections with the company delivering the experience.

o C lue management refers to the process of clearly identifying and managingall the various clues that customers use to form their impressions and feelings

about the company. o Included in this set of clues is what Carbone refers to as mechanics clues, or

the physical and tangible clues that we focus on in this chapter.

y Types of Servicescapes

o Servicescape Usage: First, organizations differ in terms of whom the

servicescape will affect.

o At one extreme is the self-service environment, in which the customer

performs most of the activities and few if any employees are involved. o At the other extreme of the use dimension is the remote service, which has

little or not customer involvement with the servicescape.Telecommunications, utilities, financial consultants, editorial, and mail-order

services are examples of services that can be provided without the customer ever seeing the service facility.

o I nterpersonal services are placed between the two extremes and representsituations in which both the customer and the employee and present and

active in the servicescape. Examples abound, such as hotels, restaurants,hospitals, educational settings, and banks.

y Servicescape Complexity: Some service environments are very simple, with fewelements, few spaces, and few pieces of equipment. Such environments are termedlean. Shopping mall information kiosks, and FedEx drop-off kiosks and stores would

be considered lean environments because both provide service from one simplestructure.

o Other servicescapes are very complicated, with many elements and manyforms. They are termed elaborate environments. An example is a hospital

with its many floors and rooms, sophisticated equipment, and complexvariability in functions performed within the physical facility.



y Strategic Roles of the Servicescape

o Package: Similar to a tangible product¶s package, the servicescape and other

elements of physical evidence essentially ³wrap´ the service and convey toconsumers an external image of ³what is inside.´ Product packages are

designed to portray a particular image as well as to evoke a particular sensory

or emotional reaction. The servicescape is the outward appearance of theorganization and thus can be critical in forming initial impressions or settingup customer expectations ± it is a visual metaphor for the intangible service.

o Facilitator: The servicescape can also serve as a facilitator in aiding the performances of persons in the environment. How the setting is designed can

enhance or inhibit the efficient flow of activities in the service setting,making it easier or harder for customers and employees to accomplish their

goals.

o Socializer: The design of the servicescape aids in the socialization of both

employees and customers in the sense that it helps convey expected roles, behaviors, and relationships. The design of the facility can also suggest to

customers what their role is relative to employees, what parts of theservicescape they are welcome in and which are for employees only, how

they should behave while in the environment, and what types of interactionsare encouraged.

The goal is to be the customer¶s ³third place´, that is a place

where customers think of spending time when not at work or

at home.

o Differentiator: The design of the physical facility can differentiate a firmfrom its competitors and signal the market segment that the service is

intended for. Given its power as a differentiator, changes in the physicalenvironment can be used to reposition a firm and/or to attract new market

segments. y The Underlying Framework : The framework for understanding servicescape effects

on behavior follow from basic stimulus ± organism ± response theory. In theframework the multidimensional environment is the stimulus, consumers and

employees are the organisms that respond to the stimuli, and behaviors are detectedat the environment are the responses. The assumptions are that dimensions of the

servicescape will affect the customers and employees and that they will behave incertain ways depending on the internal reactions to the servicescape.

y Behaviors in the Servicescape: That human behavior is influenced by the physicalsetting in which it occurs is essentially a truism.

o Individual Behaviors: Environmental psychologists suggest that individuals

react to places with two general, and opposite, forms of behavior: approachand avoidance.

Approach Behaviors include all positive behaviors that might bedirected at a particular place, such as desire to stay, explore, work,

and affiliate. Avoidance Behaviors reflect the opposite ± a desire not to stay,

to explore, to work, or to affiliate.



o Social Interactions: In addition to its effects on their individual behaviors,the servicescape influences the nature and quality of customer and employee

interactions, most directly in interpersonal services. It has been stated that³all social interaction is affected by the physical container in which it

occurs´. The ³physical container´ can affect the nature of social interaction

in terms of the duration of interaction and the actual progression of events. In many service situations, a firm may want to ensure a particular

progression of events (a ³standard script´) and limit the duration

of service.

o Internal Responses to the Servicescape: Employees and customer respond

to dimensions of their physical surroundings cognitively, emotionally, and physiologically, and those responses are what influence their behaviors in the

environment. In other words, the perceived servicescape does not directly cause

people to behave in certain ways. Although the internal responsesare discussed independently here, they are clearly interdependent:

a person¶s beliefs about a place, a cognitive response, may wellinfluence the person¶s emotional response, and vice versa.

o Environment and Cognition: The perceived servicescape can have an effecton people¶s beliefs about a place and their beliefs about the people and

products found in that place. In a sense, the servicescape can be viewed as aform of nonverbal communication, imparting meaning through what is called

³objective language´.

o Environment and Emotion: The perceived servicescape can directly elicit

emotional responses that, in turn, influence behaviors. Just being in a particular place can make a person feel happy, lighthearted, and relaxed,

whereas being in another place may make that person feel sad, depressed,and gloomy. They have concluded that any environment, whether natural or

engineered, will elicit emotions that can by captured by two basicdimensions:

(1) Pleasure/Displeasure

(2) Degree of Arousal (amount of stimulation or excitement)

Servicescapes that are both pleasant and arousing would betermed exciting . Whereas those that are unpleasant and

nonarousing, or sleepy, would be termed relaxing . Unpleasant servicescapes that are arousing would be called

distressing , whereas unpleasant, sleepy, servicescapes would begloomy.

o Environment and Physiology: The perceived servicescape may also affect people in purely physiological ways. Noise that is too loud may cause

physical discomfort, the temperature of a room may cause people to shiver or perspire, the air quality may make it difficult to breathe, and the glare of

lighting may decrease ability to see and may cause physical pain. Such research fits under the rubric of human factors design of

ergonomics. Human factors research systematically applies



relevant information about human capabilities and limitations tothe design of items and procedures that people use.

o Variations in Individual Responses: Personality differences as well astemporary conditions such as moods or the purpose for being there can cause

variations in how people respond to the servicescape. Our personality trait

that has been shown to affect how people respond to environments is arousal seeking . Arousal seekers enjoy and look for high levels of stimulation,whereas arousal avoiders prefer low levels of stimulation. Thus an arousal

avoider in a loud, bright dance club with flashing lights might show strongdislike for the environment, whereas an arousal seeker would be very happy.

In a related note, it has been suggested that some people are better screeners of environmental stimuli than others. Screeners of

stimuli would be able to experience a high level of stimulation butnot be affected by it. Nonscreeners would be highly affected and

might exhibit extreme responses even to low levels of stimuli.

y Environmental Dimensions of the Servicescape: S pecifically, environmental

dimensions of the physical surroundings can include all the objective physical factorsthat can be controlled by the firm to enhance (or constrain) employee and customer

actions. There is an endless list of possibilities: lighting, color, signage, textures,quality of materials, styles of furnishings, layout, wall décor, temperature, and so on.Hundreds of potential elements have been categorized into three composite

dimensions: o Ambient Conditions include background characteristics or the environment

such as temperature, lighting, noise, music, scent, and color. As a generalrule, ambient conditions affect the five senses.

o Spatial Layout and Functionality: Because service environments generallyexist to fulfill specific purposes or needs of customers, spatial layout and

functionality of the physical surroundings are particularly important. Theimportance of facility layout is particularly apparent in retail, hospitality, and

leisure settings. S patial layout refers to the ways in which machinery, equipment,

and furnishings are arranged; the size and shape of those items;and the spatial relationships among them.

F unctionality refers to the ability of the same items to facilitatethe accomplishment of customer and employee goals.

o Signs, Symbols, and Artifacts: Many items in the physical environmentserve as explicit or implicit signals that communicate about the place to its

users. S igns displayed on the exterior and interior of a structure are

examples of explicit communicators. They can be used as labels(names of company, name of department, and so on) for

directional purposes (entrances or exits), and to communicaterules of behavior (no smoking, children must be accompanied by

an adult). S ymbols and Artifacts may communicate less directly than signs,

giving implicit cues to users about the meaning of the place and



norms and expectations for behavior in the place. Qualityconstruction materials, artwork, certificates and photographs,

floor coverings, and personal objects displayed in theenvironment can all communicate symbolic meaning and create

an overall aesthetic impression.

y Guidelines for Physical Evidence Strategy o Recognize the Strategic Impact of Physical Evidence: For physical

evidence strategy to be effective, it must be linked clearly to the

organization¶s overall goals and vision. Thus planners must know what thesegoals are and then determine how the physical evidence strategy can support

them. At a minimum, the basic service concept must be defined, the targetmarkets (both internal and external) identified, and the firm¶s broad vision of

its future known. o Blueprint the Physical Evidence of Service: The next step is to blueprint

the service. Everyone in the organization should be able to see the service process and the existing elements of physical evidence. An effective way to

depict service evidence is through a service blueprint. To make the blueprint even more useful, photographs or

videotape of the process can be added to develop a photographic blueprint that provides a vivid picture of physical evidence fromthe customer¶s point of view.

o Clarify Strategic Roles of the Servicescape: Clarifying the strategic role of the servicescape forces recognition of the importance of the servicescape in

creating customer experiences.

y Service Culture: The behavior of employees in an organization will be heavily

influenced by the culture of that organization, or the pervasive norms and values thatshape individual and group behavior. C orporate culture has been defined as ³the

pattern of shared values and beliefs that give the members of an organizationmeaning, and provide them with the rules for behavior in the organization´. C ulture

has been defined more informally as the ³the way we do things around here´. o Experts have suggested that a customer-oriented, service-oriented

organization will have at its heart a service culture, defined as ³a culturewhere an appreciation for good service exists, and where giving good service

to internal as well as ultimate, external customers is considered a natural wayof life and one of the most important norms by everyone.

o First, a service culture exists if there is an ³appreciation for good service´. o A second important point in this definition is that good service is given to

internal as well as external customers.

o Finally, in a service culture good service is ³a way of life´ and it comesnaturally because it is an important norm of the organization.

y Exhibiting Service Leadership: Espoused values ± what managers say the values are ± tend to have less impact on employees than enacted values ± what employees

believe the values to be because of what they observe management actually doing .That is, culture is what employees perceive that management really believes, and

employees gain an understanding of what is important in the organization through the



daily experiences they have with those people in key roles throughout theorganization.

y Developing a Service Culture: If, however, an organization has a culture rooted in product-, operations-, or government regulation ± oriented traditions, no single

strategy will magically change it into a service culture.

y The Critical Role of Service Employees: ³In a service organization, if you¶re notserving the customer, you¶d better be serving someone who is´. People ± frontline

employees and those supporting them from behind the scenes ± are critical to thesuccess of any service organization. The importance of people in the marketing of

services is captured in the people element of the services marketing mix, which isdescribed as all the human actors who play a part in service delivery and thus

influence the buyer¶s perceptions; namely, the firm¶s personnel, the customer, and other customers in the service environment. The key focus in this chapter is on

customer-contact service employees because: o They are the service.

o They are the organization in the customer¶s eyes.

o They are the brand.

o They are marketers. Often, the contact employee is the service ± there is nothing else.

For example, in most personal and professional services (likehaircutting, personal trainers, child care, or counseling) the

contact employee provides the entire service singlehandedly. Theoffering is the employee. Thus, investing in the employee to

improve the service parallels making a direct investment in theimprovement of a manufactured product.

Even if the contact employee does not perform the serviceentirely, he or she may still personify the firm in the customer¶s

eyes. All the employees of a law firm or health clinic ± from the professionals who provide service to the receptionists and office

staff ± represent the firm to the client. Service employees are the brand . A Merrill Lynch financial

advisor, a Nordstrom sales associate, a Southwest Airlines flightattendant ± in each case, the primary image that a customer has of

the firm is formed by interactions the customer has with theemployees of that firm.

Because contact employees represent the organization and candirectly influence customer satisfaction, they perform the role of

marketers. They physically embody the product and are walking

billboards from a promotional standpoint. y The Services Triangle: Services marketing is about promises ± promises made and

promises kept to customers. A strategic framework known as the services triangle visually reinforces the importance of people in the ability of the firms to keep their

promises and succeed in building customer relationships. The triangle shows the threeinterlinked groups that work together to develop, promote, and deliver services.

These key players are labeled on the points of the triangle: the company (or SBU or

department or ³management´), the customers, and the providers. Providers can be



the firm¶s employees, subcontractors, or outsourced entities who actually deliver thecompany¶s services. Between these three points on the triangle, three types of

marketing must be successfully carried out for a service to succeed: external

marketing, interactive marketing, and internal marketing.

o On the right side of the triangle are the external marketing efforts that the

firm engages in to develop its customers¶ expectations and make promises tocustomers regarding what is to be delivered. Anything or anyone thatcommunicates to the customer before service delivery can be viewed as part

of this external marketing function. o On the bottom of the triangle is what has been termed interactive

marketing or real-time marketing . Here is where promises are kept or broken by the firm¶s employees, subcontractors, or agents; if promises are

not kept, customers become dissatisfied and eventually leave.

o The left side of the triangle suggests the critical role played by internal

marketing . Management engages in these activities to aid the providers intheir ability to deliver on the service promise: recruiting, training,

motivating, rewarding, and providing equipment and technology. y Employee Satisfaction, Customer Satisfaction, and Profits: Satisfied employees

make for satisfied customers (and satisfied customers can, in turn, reinforceemployees¶ sense of satisfaction in their jobs).

o R esearch has shown that both a climate for service and a climate for

employee well-being are highly correlated with overall customer perceptionsof service quality. That is, both service climate and human resource

management experiences that employees have within their organizations arereflected in how customers experience the service.

o The underlying logic connecting employee satisfaction and loyalty tocustomer satisfaction and loyalty and ultimately profit is illustrated by the

service profit chain. o The service profit chain suggests that there are critical linkages among

internal service quality; employee satisfaction/productivity; the value of services provided to the customer; and ultimately customer satisfaction,

retention, and profits. o That is, employee satisfaction does not cause customer satisfaction;

rather the two are interrelated and feed off each other.

y The Effect of Employee Behaviors on Service Quality Dimensions: Customers¶

perceptions of service quality will be affected by the customer-oriented behaviors of employees. In fact, all five dimensions of service quality can be influenced directly by service employees.

o Delivering the service as promised ± reliability ± is often totally within thecontrol of frontline employees.

o Frontline employees directly influence customer perceptions of

responsiveness through their personal willingness to help and their

promptness in serving customers.

o The assurance dimension of service quality is highly dependent on

employees¶ ability to communicate their credibility and to inspire the

customer¶s trust and confidence in the firm.



o E mpathy implies that employees will pay attention, listen, adapt, and be

flexible in delivering what individual customers need.

o Employee appearance and dress are important aspects of the tangibles

dimension of quality, along with many factors that are independent of

service employees (the service facility, décor, brochures, signage, and so

on). y Boundary-Spanning Roles: The frontline service employees are referred to as

boundary-spanners because they operate at the organization¶s boundary. Boundary-

spanners provide a link between the external customer and environment and theinternal operations of the organization. They serve a critical function in

understanding, filtering, and interpreting information and resources to and from theorganization and its external constituencies. No matter what the level of skill or pay,

boundary-spanning positions are often high stress jobs.

y Emotional Labor: The term emotional labor was coined by Arlie Hochschild to refer to the labor that goes beyond the physical or mental skills needed to deliver quality

service. Boundary-spanning service employees are expected to align their displayed

emotions with organizationally desired emotions via their use of emotional labor.Such labor includes delivering smiles, making eye contact, showing sincere interest,and engaging in friendly conversation with complete strangers who may never be

seen again. o For the organization, such strategies include carefully selecting people who

can handle emotional stress, training them in the needed skills (like listeningand problem solving), and teaching or giving them coping abilities and

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

y Sources of Conflict

o Person/Role Conflict: In some situations, boundary spanners feel conflict

between what they are asked to do and their own personalities, orientations,

or values. Person/role conflict also arises when employees are required towear specific clothing or change some aspect of their appearance to conformto job requirements.

o Organization/Client Conflict: A more common type of conflict for frontlineservice employees is the conflict between their two bosses, the organization

and the individual customer. The organization/client conflict is greatest whenthe employee is believes the organization is wrong in its policies and must

decide whether to accommodate the client and risk losing the job, or tofollow the policies.

o Interclient Conflict: Sometimes conflict occurs for boundary spanners whenincompatible expectations and requirements arise from two or more

customers. This situation occurs most often when the service provider isserving customers in turn (a bank teller, a ticketing agent, a doctor ) or is

serving many customers simultaneously (teachers, entertainers). Whenserving customers in turn, the provider may satisfy one customer by spending

additional time, customizing the service, and being flexible in meeting thecustomer¶s needs. Meanwhile, waiting customers may become dissatisfied

because their needs are not being met in a timely way.



y Strategies for Delivering Service Quality Through People: These strategies for enabling service promises are often referred to as internal marketing . The importance

of attracting, developing, and retaining good people in knowledge- and service- basedindustries cannot be overemphasized.

o By approaching human resource decisions and strategies from the point of

view that the primary goal is to motivate and enable employees to deliver customer-oriented promises successfully, an organization will move towarddelivering service quality through its people. The strategies presented here

are organized around four basis themes: To build a customer-oriented,

service-minded workforce, an organization must

Hire the right people:

y C ompete for the Best People: ³Competing for talentmarket share´ is an approach that suggests that firms act as

marketers in their pursuit of the best employees, just asthey use their marketing expertise to compete for

customers. Firms that think of recruiting as a marketing

activity will address issues of market (employee)segmentation, product (job) design, and promotion of

job availability in way that attract potential long-term

employees.

o A complementary strategy is to interview

multiple employees for every position.

y H ire for S ervice C ompetencies and S ervice I nclination:Once potential employees have been identified,

organizations need to be conscientious in interviewing andscreening to identify the best people from the pool of

candidates. Service employees need two complimentary

capacities: service competencies and service inclinations o S ervice competencies are the skills and knowledge

necessary to do the job. In many cases, employees

validate competencies by achieving particular degrees and certifications, such as attaining a

doctor of law degree and passing the relevant state bar examinations. In other cases, service

competencies may not be degree-related but mayinstead relate to basic intelligence or physical

requirements. o S ervice inclination is a potential employees

interest in doing service-related work ± which isreflected in their attitudes toward service and

orientation toward serving customers and other onthe job.

y Be the Preferred E mployer : One way to attract the best people is to be known as the preferred employer in a particular industry or in a particular location. Other

strategies that support a goal of being the preferred



employer include extensive training career andadvancement opportunities, excellent internal support,

attractive incentives, and quality goods and services withwhich employees are proud to be associated.

Develop people to deliver service quality: The organization

must train and work with these individuals to ensure service performance.

y T rain for T echnical and I nteractive S kills: To provide

quality service, employees need ongoing training in thenecessary technical skills and in interactive skills.

Examples of technical skills are working with accountingsystems in hotels, cash machine procedures in a retail

store. Service employees also need training in interactive skills that allow them to provide courteous, caring,

responsive, and empathetic service.

y E mpower E mployees: Empowerment means giving

employees the authority, skills, tools, and desire to servethe customer. Although the key to empowerment is givingemployees authority to make decisions on the customer¶s

behalf, authority alone is not enough. Employees need theknowledge to make these decisions, and they need

incentives to help them to make the right decisions.R esearch suggests that organizations well suited to

empowerment strategies are ones in which: o The business strategy is one of differentiation

and customization.

o Customers are long-term relationship

customers. o Technology is nonroutine or complex.

o The business environment is unpredictable

o Managers and employees have high growth and

social needs and strong interpersonal skills.

y Promote T eamwork : Because service jobs are frequentlydemanding, and challenging, a teamwork environment will

help alleviate some of the stresses and strains. By promoting teamwork, an organization can enhance the

employees¶ abilities to deliver excellent service while thecamaraderie and support enhance their inclination to be

excellent service providers. Provide the needed support systems

y M easure I nternal S ervice Quality: One way to encouragesupportive internal service relationships is to measure andreward internal service. By first acknowledging that

everyone in the organization has a customer and thenmeasuring customer perceptions of internal service



quality, an organization can begin to develop an internalquality culture.

y Develop S ervice Oriented I nternal Processes: To bestsupport service personnel in their delivery of quality

service, an organization¶s internal procedures must

support quality service performance. Providing service-and customer- oriented internal processes can thereforeimply a need for total redesign of systems. This kind of

redesign of systems and processes has become known as³process reengineering´

Retain the best people

y I nclude E mployees in the C ompany¶s Vision: People whodeliver service day in and day out need to understand how

their work fits into the big picture of the organization andits goals. What this strategy means in practice is that the

vision is communicated to employees frequently and that

it is communicated by top managers, often by the CEO. y T reat E mployees at C ustomers: If employees feel valued

and their needs are taken care of, they are more likely towith the organization.

y M easure and Reward S trong S ervice Performers:R eward systems may value productivity, sales, or someother dimension that can potentially work against

providing good service. Even those workers who areintrinsically motivated to deliver high service quality will

become discouraged at some point and start lookingelsewhere if their efforts are not recognized and rewarded.

R eward systems need to be linked to the organization¶svision and to outcome that are truly important.

o For salespeople the bulk of their incentivecompensation was paid only after the company

knew the level of customer satisfaction ± four quarters after the sales contract was signed.

o In many organizations employees are encouragedto recognize each other by personally giving a

³peer award´ to an employee they believe hasexcelled in providing service to the customer.

y Because customers are participants in service production and delivery, they can

potentially contribute to the widening of gap 3, the service performance gap. That is,customers themselves can influence whether the service meets customer-defined

specifications. Sometimes customers contribute to gap 3 because they lack understanding of their roles and exactly what they can or should do in a given

situation, particularly if the customer is confronting a service concept for the firsttime.

y The Importance of Customers in Service Co-creation and Delivery



o Customer Receiving the Service: Because the customer participates in thedelivery process, he can contribute to narrowing or widening gap 3 through

behaviors that are appropriate or inappropriate, effective or ineffective, productive or unproductive. The level of customer participation ± low,

medium, and high ± varies across services.

In some cases, all that is required is the customer¶s physical presence (low level of participation), with the employees of thefirm doing all the service production work; an example is a

concert. In other situations, 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 for a CPA to prepare aclient¶s tax return effectively.

In some situations, customers are truly co-creators of the service(high level of participation). For these services, customers have

important participation roles that will affect the nature of theservice outcome; an example is a weight loss program.

o Fellow Customers: In many service contexts, customers receive and/or co-create the service simultaneously with other customers or must wait their turn

while other customers are being served. In both cases, ³fellow customers´ are present in the service environment and can affect the nature of the service

outcome or process. Fellow customers can enhance or detract from customer satisfaction and perceptions of quality.

Fellow customers can negatively affect the service experience

by exhibiting disruptive behaviors, causing delays, excessively

crowding, and manifesting compatible needs.

Customers who are being served simulataneously but who

have incompatible needs can negatively affect each other. This

situation occurs in restaurants, college classrooms, hospitals,

and any service establishment in which multiple segments are

served simultaneously.

y Customers as Productive Resources: Service customers have been referred to as³partial employees´ of the organization ± human resources who contribute to theorganization¶s productive capacity. In other words, if customers contribute effort,

time or other resources to the service production process, they should be consideredas part of the organization.

o In a business-to-business services context, the contributions of the client canenhance the overall productivity of the firm in both quality and quantity.

o Because customers influence both the quality and quantity of production,some experts believe the delivery system should be isolated as much as

possible from customer inputs to reduce the uncertainty they can bring intothe production process. This view sees customers as a major source of

uncertainty ± in the timing of their demands and the uncontrollability of their attitudes and actions.



o If customers see no clear benefit to being involved in coproduction (e.g.,lower prices, quicker access, better quality outcome), then they are likely to

resent and resist the coproduction roles, particularly if they feel their own productivity or efficiency is suffering to benefit the company.

y Customers as Competitors: If self-service customers can be viewed as resources of

the firm, or as ³partial employees´, they could in some cases partially perform theservice or perform the entire service for themselves and not need the provider at all.Whether to produce a service for themselves ( internal exchange) ± for example,

child care, home maintenance, or car repair ± or have someone else provide theservice for them ( external exchange) is a common dilemma for consumers. Whether

a household or a firm chooses to produce a particular service for itself of

contract externally for the service depends on a variety of factors. A proposed

model of internal/external exchange suggests that such decisions depend on the

following:

o Expertise Capacity: The likelihood of producing the service internally isincreased if the household or firm has the specific skills or knowledge needed

to produce it. Having the expertise will not necessarily result in internalservice production, because other factors such as available resources and

time will also influence the decision. o Resource Capacity: For a firm or household to produce a service internally,

they must have the needed resources including people, space, money,

equipment, and materials. If the resources are not available internally,external exchange is more likely.

o Time Capacity: Time is a critical factor in internal/external exchangedecisions. Firms with adequate time capacity are more likely to produce

services internally. o Economic Rewards: The economic advantage or disadvantages of a

particular exchange decision will be influential in choosing between internaland external options. The actual monetary costs of the two options will sway

the decision. o Psychic Rewards: R ewards of noneconomic nature have a potentially strong

influence or exchange decisions. Psychic rewards include degree of satisfaction, enjoyment, gratification, or happiness that is associated with the

external or internal exchange. o Trust: In this context, trust means the degree of confidence or certainty that

the firm has in the various exchange options. The decision will depend tosome extent on the level of self-trust in producing the service versus trust of

others. o Control: The firm¶s desire for control over process and outcome of the

exchange will also influence the internal/external choice. Entities that desirecan implement a high degree of control over the task are more likely to

engage in internal exchange.

y Self-Service Technologies ± The Ultimate in Customer Participation: SST¶s areservices produced entirely by the customer without any direct involvement or

interaction with the firm¶s employees. As such, SSTs represent the ultimate form of



customer participation along a continuum from services that are produced entirely bythe firm to those that are produced entirely by the customer.

o Customer Usage of SSTs: Some of the SSTs listed earlier ± ATMs, onlineordering, Internet information search ± have been very successful, embraced

by customers for the benefits they provide in terms of convenience,

accessibility, and ease of use. SSTs failures result when customers see little personal benefit in the new technology or when they do not have the abilityto use it or know what they are supposed to do. Customer readiness is a

major factor in the adoption of SSTs by customers.

y Define Customers¶ Roles: In developing strategies for addressing customer

involvement in service co-creation and delivery, the organization first determineswhat type of participation is desirable from customers and how the customer wishes

to participate. Identifying the current level of customer participation as the starting point. The service may require only the customer¶s presence (a concert), or it may

require moderate levels of input from the customer in the form of effort or information (haircut or tax preparation), or it may require the customer to actually co-

create the service outcome (fitness training, consulting). o Once the desired level of participation (from both the customer and firm) is

clear, the organization can define more specifically what the customer¶s roleand tasks entail ± in essence the customer¶s ³job description´. The jobdescription will vary with the type of service and the organization¶s desired

position within its industry. It might entail helping oneself, helping others, or promoting the company.

y Helping Oneself : In many cases the organization may decide to increase the level of customer involvement in service delivery through active participation. In such

situations, the customer becomes a productive resource, performing aspects of theservice previously performed by employees or others. The result may be increased

productivity for the firm and/or increased value, quality, and satisfaction for thecustomer.

y Helping Others: Sometimes the customer may be called on to help others who areexperiencing the service.

y Promoting the Company: In some cases the customer¶s job may include a sales or promotional element. Many service organizations are imaginative in getting their

current customers to work as promoters or salespeople, by doing such things asoffering incentive referrals.

y Individual Differences: In defining customers¶ roles it is important to remember thatnot everyone will want to participate. Some customers enjoy self-service, whereasother prefer to have the service performed entirely for them. For example, customers

with a high ³need for human interaction´ are less likely to try new self-serviceoptions offered via the Internet and automated phone systems.

y Recruit, Educate, and Reward Customers: o Recruit the Right C ustomer : The expected roles and responsibilities of

customers should be clearly communicated in advertising, personal selling,

and other company messages. By previewing their roles and what is requiredof them in the service process, customers can self-elect into (or out of ) the

relationship. Self-selection should result in enhanced perceptions of service



quality from the customer¶s point of view and reduced uncertainty for theorganization.

o E ducate and T rain C ustomers to Perform E ffectively: Customers need to beeducated, or in essence ³socialized´, so that they can perform their roles

effectively. Through the socialization process, service customers gain an

appreciation of specific organizational values, develop the abilities necessaryto function within a specific context, understand what is expected of them,and acquire the skills and knowledge to interact with employees and other

customers. On site, customers require two kinds of orientation: place

orientation (Where am I? How do I get from here to there) and function

orientation (How does this organization work? What am I supposed to

do?)

y Manage the Customer Mix: Serving incompatible customer segments is a big issueat sporting events where families with children may be sitting next to loud, drunk, and

obnoxious fans. o The process of managing multiple and sometimes conflicting segments is

known as compatibility management , broadly defined as ³a process of firstattracting homogenous consumers to the service environment, then actively

managing both the physical environment and customer-to-customer encounters in such a way as to enhance satisfying encounters and minimizedissatisfying encounters.

y Delivery Models of the Future: Two distinct service marketers are involved indelivering services through intermediaries: the service principle, and the service

deliver , or intermediary. The service principle is the entity that creates the serviceconcept (whose counterpart is the manufacturer of physical goods), and the service

deliverer is the entity that interacts with the customer in the actual execution of theservice (whose counterpart is the distributor, wholesaler, or retailer of physical

goods). y Service Distribution

o Direct Delivery of Service: Many services are delivered directly from the

service producer to the consumer. That is, in contrast to channel for goods,channels for services are often direct ± with the creator of the service (i.e.,

the service principle) selling directly to and interacting directly with thecustomer. Examples include, air travel, health care, and consulting services.

o Delivery of Service Through Intermediaries: Intermediaries often deliver services and perform several important functions for service principles. First,

they coproduce the service, fulfilling service principles¶ promises tocustomers. Franchise services such as haircutting, key making, and dry

cleaning are produced by the intermediary (the franchisee) using a processdeveloped by the service principle. In many financial or professional

services, intermediaries function as the glue between the brand or companyname and the customer by building the trusting relationship required in these

complex and expert offerings. The primary types of intermediaries used inservice delivery are:

Franchisees are service outlets licensed by a principle to deliver a unique service concept it has created and popularized.



Agents and Brokers are representatives who distribute and sellservices of one or more service suppliers.

Electronic Channels include all forms of service provisionthrough television, telephone, interactive multimedia, and

computers. Many financial and information services are currently

distributed through electronic media: banking, bill paying, andeducation.

y R etailers that sell only services (movie theaters, film

processing kiosks) or retail services that support physical products (automobile dealers, gas stations) can also be

described as dealers or franchises. o Direct of Company Owned Channels: The general benefits of company

owned outlets are control, consistency, and maintenance of image. But themajor benefit of distributing through company owned outlets is that the

company has complete control over the outlets. One of the most criticalimplications of this type of control is that the owner can mainstream

consistency in service provision. Control over firing, hiring, and motivatingemployees is also a benefit of company owned channels. Using company owned channels also allows the company to

expand or contract sites without being bound by contractualagreements with other entities.

A final benefit of company owned outlets is that the companyowns the customer relationship. Therefore, one of the most

important issues in service delivery is who owns the customer relationship ± the store or the employee.

With company owned channels, the company owns both the storeand the employee and therefore has control over the customer

relationship. The disadvantages with company owned channels is the company

must bear all financial risk, meaning they must find all capitalneeded for expanding the business. Also, large companies are

rarely experts in local markets ± they know their business, but notall markets. This disadvantage is especially evident when

companies expand into other countries.

y Franchising: Franchising is the most common type of distribution in services, with

more than 320,000 U.S. franchisers in 75 different industries licensing their brandnames, business processes or formats, unique products, services, or reputations inreturn for fees and royalties.

y The Franchiser¶s Perspective: A franchiser typically expands business through thismethod because it expects the benefits described in the following section:

o Leveraged Business Format for Greater Expansion and Revenues

o Consistency in Outlets

o K nowledge of Local Markets

o Shared Financial Risk and More Working Capital

o Difficulty in Maintaining and Motivating Franchisees

o Highly Publicized Disputes between Franchisees and Franchisers



o Inconsistent Quality

o Customer Relationships Controlled by the Franchisee Rather Than the

Franchiser.

y The Franchisee¶s Perspective: From the franchisee¶s perspective, one of the main

benefits of franchising is obtaining an established business format on which to base a

business, something one expert has defined as an ³entrepreneur in a prepackaged box,a super-efficient distribution of services and goods through a decentralized web.´ A second benefit is receiving national or regional brand marketing. Finally, franchising

minimizes the risk of starting a business. o Disadvantages for franchisees also exist. One of the biggest problems is

encroachment ± the opening of new units near existing ones without

compensation to the existing franchisee. When encroachment occurs,

potential revenues are diminished and competition is increased. Another frequent disadvantage involves disappointing profits and revenues.

y Agents and Brokers: o An agent is an intermediary who acts on behalf of a service principle (such

as a real estate agent) or a customer and is authorized to make agreements between the principle and the customer. Some agents, called selling agents,work with the principle and have contractual authority to sell a principle¶s

output (such as travel or insurance), usually because the principle lacks theresources or desire to do so. Purchasing agents often have long-term

relationships with buyers and help them in evaluating and making purchases. o A broker is an intermediary who brings buyers and sellers together while

assisting in negotiation. Brokers are paid by the party who hired them, rarely become involved in financing or assuming risk, and are not long-term

representatives of buyers or sellers.

y Benefits of Agents and Brokers: Three main categories of travel intermediaries

exist: tour packagers, retail travel agents, and specialty channelers (includingincentive travel firms, meeting and convention planners, hotel representatives,association executives, and corporate travel offices).

o Reduced Selling and Distribution Costs

o Possession of Special Skills and K nowledge: Tour packagers have a more

specialized role ± they assemble, promote, and price bundles of travelservices from travel suppliers, then offer these bundles either to travelers

themselves or to retail travel agents. S pecialty channelers have even morespecialized roles ± some work in corporate travel offices to lend their skills to

an entire corporation. o Wide Representation: Because agents and brokers are paid by commission

rather than by salary, there is little risk or disadvantage to the service principle in extending the service offerings to a wide geography.

o K nowledge of Local Markets: They know or learn the unique needs of different markets, including international markets.

o Customer Choice: Travel and insurance agents provide a retailing servicefor customers ± they represent the services of multiple suppliers.

y Challenges of Delivering Service through Agents and Brokers



o Loss of ControlOver Pricing: As representatives of service principles andexperts on customer markets, agents and brokers are typically empowered to

negotiate price, configure services, and otherwise alter the marketing of a principle¶s service. This issue could be particularly important ± and possibly

detrimental ± when a service provider depends on a particular (high) price to

convey a level of service quality. If the price can be changed, it might dropthe to a level that undermines the quality image. o Representation of Multiple Service Principles: When independent agents

represent multiple suppliers, they can offer customers a wide range of choices. From the perspective of the service principle, however, customer

choice means that the agent represents ± and in many cases advocates ± acompetitive service offering.

Read the highlighted areas in the rest of the book.

Documents

Marketing Services Final Exam Review