Mba III Services Management [14mbamm303] Notes

SERVICES MARKETING 14MBAMM303

Dept. of MBA/SJBIT Page 1

Subject Code: 14MBA MM303 IA Marks: 50

No. of Lecture Hours / Week: 04 Exam Hours: 03

Total Number of Lecture Hours: 56 Exam Marks: 100

Practical Component: 01 Hour / Week

Module 1: (6 hours)

Introduction to services: Concepts, contribution and reasons for the growth of services sector,

difference in goods and service in marketing, myths about services, characteristics of services,

concept of service marketing triangle, service marketing mix, GAP models of service quality.

Marketing challenges in service industry.

Module 2: (6 hours)

Consumer behaviour in services: Search, Experience and Credence property, consumer

expectation of services, two levels of expectation, Zone of tolerance, Factors influencing

customer expectation of services. Customer perception of services-Factors that influence

customer perception of service, Service encounters, Customer satisfaction, Strategies for

influencing customer perception.

Module 3: (6 hours)

Understanding customer expectation through market research: Key reasons for GAP 1,

using marketing research to understand customer expectation, Types of service research,

Building customer relationship through retention strategies Relationship marketing, Evaluation

of customer relationships, Benefits of customer relationship, levels of retention strategies,

Market segmentation-Basis & targeting in services.

Module 4: (10 hours)

Customer defined service standards: Hard & Soft standards, process for developing

customer defined standards Leadership &Measurement system for market driven service

performance-key reasons for GAP-2 service leadership- Creation of service vision and

implementation, Service quality as profit strategy, Role of service quality In offensive and

defensive marketing.

Service design and positioning-Challenges of service design, new service development-types,

stages. Service blue printing-Using & reading blue prints. Service positioning-positioning on the

five dimensions of service quality, Service Recovery.



Module 5: (8 Hours)

Employee role in service designing: importance of service employee, Boundary spanning roles,

Emotional labour, Source of conflict, Quality- productivity trade off, Strategies for closing

GAP3.

Customers role in service delivery-Importance of customer & customers role in service

delivery, Strategies for enhancing-Customer participation, Delivery through intermediaries-Key

intermediaries for service delivery, Intermediary control strategies.

Module 6: (8 hours)

Role of marketing communication-Key reasons for GAP 4 involving communication, four

categories of strategies to match service promises with delivery, Methodology to exceed

customer expectation.

Pricing of services-Role of price and value in provider GAP 4, Role of non-monitory cost, Price

as an indicator of service quality Approaches to pricing services, pricing strategies.

Module 7: (6 hours)

Physical evidence in services: Types of service spaces- Role of service scapes, Frame work for

understanding service scapes & its effect on Behaviour-Guidance for physical evidence

strategies.



CONTENTS:

MODULE CHAPTER NAME PAGE NO.

1 Introduction to services 4 15

2 Consumer Behaviour in services 16 - 21

3 Understanding customer expectation through market research 22 30

4 Customer defined service standards 31 - 61

5 Employee role in service designing 62 - 76

6 Role of marketing communication 77 - 95

7 Physical evidence in services 96 - 113



Module: 1

Introduction to services: Concepts, contribution and reasons for the growth of services sector,

difference in goods and service in marketing, myths about services, characteristics of services,

concept of service marketing triangle, service marketing mix, GAP models of service quality.

Marketing challenges in service industry.

The American Marketing Association defines services as - Activities, benefits and satisfactions

which are offered for sale or are provided in connection with the sale of goods. Concepts of

service marketing are:

Service as a product

Customer service

Services as value add for goods

Service embedded in a tangible product

Contribution and growth of service sector

The growth of service industries can be traced to the economic development of society and the

socio-cultural changes that have accompanied it. Changing environmental forces brought out of

the services in forefront of the economy. Those environmental forces separately or in

combination create new type of service. The following environmental factors are responsible to

make a new service.

1. Economic affluence: One, of the key factors for the growth of demand for services is the

economic affluence. The size of the middle income consumer is raising fast and the

percentage of the very poor households declining. The rural households in the upper

income category are growing at a much faster pace than the urban households in the

corresponding categories. The Economic liberalization Process has had a positive impact

on the Indian households. Their income as well as their expenditure has been pushed,

creating a demand for many goods and services

2. Changing Role of Women: Traditionally the Indian woman was confined to household

activities. But with the changing time there has been a change in the traditional way of

thinking in the society. Women are now allowed to work. They are employed in defense

services, police services, postal services, software services, health services, hospital



services, entertainment industries, Business Process Outsourcing and so on.

The percentage of working women has been growing rapidly. The changing role of

women has created a market for a number of product and services. Earning women prefer

to hire services in order to minimize the innumerable roles that they are required to

perform. The demand by woman is forcing service organizations to be more innovative in

their approach.

3. Cultural Changes: Change is the underlying philosophy of culture place of change in

Indian culture is not uniform. However, during the last century the factors of change are

prominent. The emergence of the nuclear family system in place of the traditional joint

family system creates a demand for a host of services like education, health care,

entertainment, telecommunication, transport, tourism and so on. There has been a

marked change in the thought Processes relating to investment, leisure time perception

and so on which has created a huge demand for services.

4. I.T. Revolution: For the last 15 years in India IT became one of the key service

businesses of the country. India has the largest software skilled population in the world.

The domestic market as well as the international market has grown substantially.

Realizing the potential for this area many state governments have made IT as their most,

prioritized segment states such as Karnataka, Andhra Pradesh, Madhya Pradesh

Maharashtra and Delhi have already achieved substantial progress in Information

Technology the In Ile years to come Lille IT enabled se Aces will have a bright future.

The growth. Of population, industrialization and indiscriminate consumptions have

affected the, natural resources, environment and the ecological balance. Due to this there

is an imbalance of the ecology various service organizations have been promoted in order

to take up social marketing. Thousands of crores of rupees are being spent on

safeguarding the rare animals and birds, water pollution, conservation of oil & energy

and research to develop new technologies that can promote effective use of natural

resources and safeguard the environment.

5. Development of Markets: During the last few decades the wholesaler and the retailer

population has grown in the country. Urban India has become a cluster of wholesaling

and retailing business. In the Semi urban areas, retailing has spread to the nooks and

corners of the streets and in the rural areas retail business is significantly present. A new



breed of organizations, offering marketing services has come up. The government also

offers marketing services to the small-scale agricultural farmers, artisans and other

traditional business sectors such as promotion of regulated markets, export promotion

councils, development boards etc.

6. Market orientation: The changing competitive situation and demand supply positions

has forced the manufacturing organization to shift their philosophy from production

orientation to market orientation. Market is a service function that has been added in the

organization. The pressures in the market has further forced the manufacturing

organizations to have marketing research, accounting, auditing, financial management,

human resource management and marketing research divisions all of which are services

functions.

7. Economic liberalization: The economic liberalization of the 1991 has brought many

changes in the Indian scenario. With the Disinvestment and the Privatization policies the

state owned monopolies in many service areas came to an end Multinationals were

permitted to enter the Indian market. Liberal lending policies and lower interest rates

motivated many people to become self-employed. Different sectors like Banking,

Insurance, Power projects, Telecommunication, Hospitality sector, Health Services,

Entertainment, Air transport, and Courier services witnessed intense competition, due to

the entry of multinationals. The flow of time-tested service technology from various parts

of the world changed the attitude of the Indian consumer towards sources.

8. Export potential: India is considered to be a Potential source for services. There are a

number of services that India offers to various parts of the world like banking, insurance,

transportation co data services, accounting services, construction labor, designing,

entertainment, education, health services, software services and tourism. Tourism and

software services are among the major foreign exchange earners of the country and that

the growth rate is also very high as compared to the other sectors



Difference between goods and services

Goods Services Resulting Implications

Tangible Intangible Services cannot be inventoried.

Services cannot be patented.

Services cannot be readily displayed or communicated.

Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend on

employee actions. Service quality depends on many

uncontrollable factors.

There is no sure knowledge that the service delivered matches

what was planned and promoted.

Production

separate

from

consumption

Production

separate from

consumption

Simultaneous

production and consumption

Customers participate in and affect the transaction.

Customers affect each other.

Employees affect the service outcome.

Decentralization may be essential.

Nonperishable Perishable It is difficult to synchronize supply

and demand with services.

Services cannot be returned or resold.

Myths about services:

Myth is a popular belief which is over simplified that tends to explain only part of phenomena.

The following are the myths commonly held about services.

Myth 1-A Service Economy produces services at the expense of other sector.

The service sector is growing at very fast pace. Eventually advanced countries will produce only

services and there will be no manufactured goods output at all. This belief is there because sector

is growing so rapidly that other sectors cannot grow at the same pace. This fear is baseless. In

fact both manufacturing and service sector have grown.



In manufacturing sectors there are more workers than before, the manufacture sector itself needs

services. Therefore service sectors support manufacturing sector and not growing at the expense

of manufacturing.

Secondly it is fact that need for services can be felt very easily modern day consumer spend more

money on services than for manufacturing of goods.

Thirdly some services in fact aid to improve and increase production and productivity.

Myth 2-Service jobs are Low paying and Low level.

Many people think service jobs are of fast food employees, hairdressers, stores, clerks etc. this is

not true. There are service sectors like law, accounting, banking and medicine etc. which are not

of low pay category, another misconception about this sector is that service business is small in

size, though it may employ a large number of people and may dominate GDP.

Myth 3-Service production is labor intensive and low in productivity.

It is a myth service labor intensive; production is sluggish, creating a drag on the economy.

While hotel, travel agency may be less capital intensive, services like airlines,

telecommunication, insurance etc. are quite capital intensive.

Myth 4-Service is necessary evil for manufacturing firms.

Traditionally many manufacturers were of view that so called after sales service was only adding

to cost and in no way it is profitable. The traditional view was that service was equated to repair,

maintenance and handling of complaints. Many manufacturers view services as a profit centre

and use it as a vehicle to differentiate their product from that of competitors.

Myth 5-Managing services is just like Managing manufacturing Business.

This myth will lead us to study of service marketing Many felt that there was not much

difference between product and services made out to be. It was only in 1980 that it was felt by

marketers and top management personal that there is a substantial difference between the

services and product marketing.



Characteristics of services

Inseparable-From the point where it is consumed and from the provider of the service.

For e.g.: You cannot take a live performance home to consume it (A DVD of the same

performance would be a product, not a service).

Intangible-And cannot have a real, physical presence as does a product,

for e.g., motor insurance may have a certificate, but the financial service itself cannot be touched

i.e., it is intangible.

Perishable-In that once it has occurred it cannot be repeated in exactly the same way

For e.g,once a 100 meters Olympic final has been run there will be no other for 4 more years,

and even then it will be staged in a different place with many different finalist.

Variability-Since the human involvement of service provision means no that two services will

be completely identical.

For e.g., Returning to the same garage time and time again for a service on your car might see

different levels of customer satisfaction, or speediness of work.

Right of ownership- is not taken to the service, since you merely experience it,

for eg, an example an engineer may service your air-conditioning, but you do not own the

service, the engineer or his equipment. You cannot sell it on once it has been consumed, and do

not take ownership of it.

Types of Service Marketing:

1. Business Services-Consultation, Banking, Insurance, Medical, Lawyers.

2. Trade Services-Retailing, Repair, Wholesale, Advertising.

3. Infrastructure Services-Communication, Transportation, Oil, Power.

4. Personal Services-Restaurants, Health Clubs, Swimming pools, Gymnasium.

Entertainment Services-Cinema, Amphi theatre, FM Radio, T.V.

6. Public Services-Education, Police, Defence, P.W.D.

7. Government Services-Railways, Postal etc.

In a service, components may be tangible or tangible.

Teaching-Intangible. This is pure service.

A house coated with new paint-Tangible



8. Continuous Supply Service/Casual Supply Services: Supply of communication service-

Specialized service obtained only when needed Musician during a party in marriage

9. Service Based on Consumer Participation:

Example1: Dental Care

Example2: Beauty Parlor-In these cases consumer involvement is more.

In some cases like polishing furniture at home to improve the look. Here consumer participation

is less. Psychological satisfaction is more.

10. Machine Oriented v/s Person/Oriented Services:

a) Machine oriented Services-Telephone, Fax.etc.

b) Man oriented Services-Legal Service, Teaching.

The Services Marketing Mix

A. Traditional Marketing Mix

All elements within the control of the firm that communicate the firms capabilities and image to

customers or that influence customer satisfaction with the firms product and services:

Product

Price

Place

Promotion

B. Expanded Mix for Services (7P's).

Product: The product concept in service sector is the way in which organization seek to satisfy

consumer need. A product here refers to service rendered

Ex: Banks come under financial Sector,

Products are: Savings account, Fixed Deposit, Recurring Deposit, Current Account, and Loan,

therefore service rendered by banks are important. Therefore the product concept in any financial

sector is the financial rendered.

Ex: Loan Sanctioning is one such service.

Price: This is similar to the product pricing. Total price, discount, mode of payment, price

discrimination are similar to these adopted in product marketing the vital factor in pricing the

service is the quality.



Quality of service determines the price of service. Time is also a determinant of price.

Ex: The rate of interest charged on loan is the rpice, 5% interest for 2years.This is how price is

determined for the service. Price discrimination also takes place.

Similarly students concession in bus fares which is different for senior citizens indicate the price

differentiated.

Place: This refers to distribution channel of service-How the service will reach the customer?

Ex: Location re it has to be located? How students can get the

services of getting technical education, what is the level of demand for that courses. All these

issues are considered and engineering institute is established in place convenient to large number

of students.

Thus Place concept is refers to the accessibility to service provided.

Promotion: Advertising public relations are used as promotional tool in services. But in

services, provider of services themselves becomes an important element of promotion mix.

People: Here people refer to service provider. In a product concept manufacturer will have

control measure as manufacturing operations are concerned Consumers are not bothered about

the way in which the product is manufactured. But in case of services, the service provider is in

direct touch with the customer. His behavior and operating process decides the product quality. If

the customer is not happy with the type of service provided the producer of the service will lose

the market.

Process: In some services, consumers also become co-producers.Ex: A self service hotel, where

food provided in the counter to get his food. Here there are no servers at the table. In some

places, consumers themselves have to put the rubbish after eating in to a disposable bin.

Therefore production process is a part of marketing mix.

Physical Evidence: This will form a part of marketing mix. The consumers of service cannot

examine the service before purchasing it, as in the case of products. Therefore they need tangible

evidence to satisfy themselves regarding the quality of service.



Concept of Service Marketing Triangle:

1. External Marketing: "Setting the

Promise" Marketing to END-

USERS. Involves pricing strategy,

promotional activities, and all

communication with customers.

Performed to capture the attention of

the market, and arouse interest in the

service.

2. Internal Marketing: "Enabling

the Promise" Marketing to EMPLOYEES. Involves training, motivational, and teamwork

programs, and all communication with employees. Performed to enable employees to perform

the service effectively, and keep up the promise made to the customer.

3. Interactive Marketing: (Moment of Truth, Service Encounter) This refers to the decisive

moment of interaction between the front-office employees and customers, i.e. delivery of service.

This step is of utmost importance, because if the employee falters at this level, all prior efforts

made towards establishing a relationship with the customer, would be wasted.

GAP models of service quality:

Theory of the Gaps Model

Perceived service quality can be defined as, according to the Model, the difference between

consumers expectation and Perceptions which eventually depends on the size and the direction of

the four gaps concerning the delivery of service quality on the companys side (Fig. 1;

Parasuraman, Zeithaml,

Berry).

Customer Gap = f (Gap 1, Gap 2, Gap 3, Gap 4)



The magnitude and the

direction of each gap will affect

the service quality. For

instance,

Gap 3 will be favorable if the

delivery of a service exceeds

the standards of service

required by the rganization,

and it will be unfavorable

when the specifications of the

service delivered are not met.

The key points for each gap can be summarized as follows:

Customer gap: The difference between Customer expectations and perceptions the Service

quality gap.

Gap 1: The difference between what customers expected and management Perceived about the

expectation of customers.

Gap 2: The difference between Managements perceptions of customer Expectations and the

translation of those perceptions into service Quality specifications and designs.

Gap 3: The difference between Specifications or standards of service quality and the actual

service delivered to customers.

Gap 4: The difference between the services delivered to customers and the Promise of the firm

to customers about its service quality.

Applications of the Gaps Model

First of all the model clearly determines the two different types of gaps in service marketing,

namely the customer gap and the provider gaps. The latter is considered as internal gaps within a

service firm. This model really views the services as a structured, integrated model which



connects external customers to internal services between the different functions in a service

organization.

Ten determinants of Service Quality:

1. Access

2. Communication

3. Competence

4. Courtesy

5. Credibility

6. Reliability

7. Responsiveness

8. Securities

9. Tangibles

10. Understanding/Knowing Customers

Marketing challenges in service industry

There are some inherent challenges in marketing a service business, but they can be overcome.

When marketing services, you apply the same marketing mix principles used for products: place,

price, promotion and product -- which is your service. Added to this mix are emphases on

people, process and physical evidence. Develop a plan that carefully considers these essentials so

you can identify the challenges and devise strategies to overcome them.

Intangible

One of the most obvious challenges in marketing services is that you are selling something

intangible. People can touch and see a product and are exchanging money for something they

need and can take home to use. Conversely, people only see the results of a service, which may

not always be immediate. It requires faith on the customers part that they will get the desired

results for their money. For example, if you own a cleaning service, you have to convince your

customers to trust you that their homes will be cleaned to their satisfaction.



Demonstrating Empathy

Convince your customers in your marketing efforts that you understand their problems and are

offering a solution. Do this using people, processes and physical evidence. For example, if you

and your employees have families and work full time, this identifies with working families who

have no time for housecleaning. Before-and-after pictures in your marketing materials, such as

your website, brochures and advertising, are all physical evidence.

Competitive Pricing

How you price your services is an important marketing element. You need to be competitive, so

research several competitors prices to gauge what your prospective customers expect to pay.

Then assess your costs -- your overhead such as rent, insurance, salaries and supplies -- to

determine if you can meet your costs and make a profit with that pricing.

People

As a services company, marketing your people, including you, is paramount. A service is

consumed when its purchased or produced -- just the results or effects linger, and sometimes

temporarily. For example, your customers home will get dirty again, so the result of your

cleaning delivery is temporary. The client may or may not call you again based on the overall

experience.

Defining and improving quality

Ensuring the delivery of consistent quality

Designing and testing new services

Communicating and maintaining a consistent image

Accommodating fluctuating demand

Motivating and sustaining employee commitment

Coordinating marketing, operations, and human resource efforts

Setting prices

Finding a balance between standardization versus customization



Module 2: (6 hours)

Consumer behavior in services: Search, Experience and Credence property, consumer

expectation of services, two levels of expectation, Zone of tolerance, Factors influencing

customer expectation of services. Customer perception of services-Factors that influence

customer perception of service, Service encounters, Customer satisfaction, Strategies for

influencing customer perception.

Search Qualities: Attributes that a consumer can determine before purchasing a product

Experience Qualities: Attributes that can discerned only after purchase or during consumption

Credence Quality: Includes characteristics that the consumer may find impossible to evaluate

even after purchase and consumption

Customer Expectations of service

Customer expectations are beliefs about service delivery that function as standards or reference

points against which performance is judged

For successful service marketing the following aspects of expectations need to be explored and

understand.

1) What types of expectation standards do customers hold about services?

2) What factors most influence the formation of these expectations?

3) What role these factors play in changing expectations?

4) How can a service company meet or exceed customer expectations?

Meaning and types of service expectation

Expectations are reference points against which service delivery is compared

Expected service: there are two levels of expectations are:

1) Desired service: it is the wished for level of performance i.e. the level of service the

customer hopes to receive. It is a blend of what the customer believes can be and should be.

For e.g. a customer expects a neat, clean, spacious berth on a train which would make this

journey comfortable.

2) Adequate service

It is threshold level of acceptable service i.e. minimum level of service the customer will accept.



It represents the minimum tolerable expectation the bottom level of performance acceptable to

the customer. The adequate expectation level may vary for different firms with in a category or

subcategory

Zone of tolerance (ZOT)

Services are heterogeneous in that performance may vary across providers, across employees

from the same provider and even with the same service employee.

ZOT is the range or window in which customers do not particularly notice service performance

ZOT can expand or contract within a customer marketers must understand not just the size and

boundary levels for the ZOT but also when and how the tolerance zone fluctuates within a given

customer

Factors of desired service expectations

a) Personal needs:

Those states or conditions essential to the physical or psychological well-being of the customer

are pivotal factors that shape what we desire in service. It can include physical, social,

psychological and functional needs.

b) Enduring service intensifiers:

They are individual, stable factors that lead the customer to a heightened sensitivity to service.

Enduring intensifier is personal service philosophy-i.e. the customers underlying generic

attitude about the meaning of service and the conduct of service providers

Sources of Adequate service Expectations:

These factors are short term and fluctuate more than the factors that influence desired service

a. Transitory Service intensifiers: They are temporary, usually short term, individual

factors that make a customer more aware of the need for the need for service

b. Perceived service Alternative: They are other providers from whom the customer can

obtain service. The customers perception that service alternatives exist raises the level of

adequate service and narrow the zone of tolerance.

c. Self-perceived service role: it is the perception of the degree to which customers exert

an influence on the level of service they receive i.e. how well they believe they are

performing their own roles in service delivery



d. Situational Factors: Service performance conditions that customers view as beyond the

control of the service provider, in general situational factors temporarily lower the level

of adequate service, widening the ZOT

e. Predicted service: the level of service customers believe they are likely to get. It is

typically an estimate of the service a customer will receive in an individual transaction

rather than in the overall relationship with a service provider.

Current issues involving customer service expectation

Companies and marketers fear to ask customer expectations as they feel it may be

unrealistic and extravagant and this may lift their expectations still higher

The customer just wants the service to be delivered as promised but the marketer fails in

meeting even these basic expectations

Asking customers their expectations does not raise the level of expectations but heightens

the belief that the company will do something with the inform that surfaces

The company may not be able to and indeed does not always have to deliver to expressed

expectations but at least it needs to acknowledge to customer that they have heard the input

and are trying to address their issues

One way is to give the reasons to customers why the company is not able to provide the

service currently and also describe the efforts planned to address them

Another way is to campaign to educate customers about ways to use and improve the

service they currently receive

Some under promise to increase the likelihood of meeting or exceeding customers

expectation

Customer perception of service

Customer perceive service in terms of the quality of the service and how satisfied they are

overall with their experiences

Customer satisfaction

Satisfaction is the customers fulfillment response. It is a judgment that a product or service

feature, or the product or service itself, provides a pleasurable level of consumption related

fulfillment



Satisfaction can be viewed as contentment, pleasure, delight. or even relief.

Satisfaction is a dynamic , moving target that may evolve over time, influenced by a

variety of factors

Factors influence on customers satisfactions

1) Product and service features

Customer satisfaction with a product or service is influenced significantly by the customers

evaluation of product or service features

2) Consumer Emotions

These emotions can be stable, preexisting emotions like mood state or life satisfaction

3) Attributions for service success of failure

Attributes the perceived causes of events influence perception of satisfaction as well

4) Perception of equity or fairness

Notions of fairness are central to customers perceptions of satisfaction with products and

service,

Consumers are checking if they have been treated fairly compared to other customers, have paid

better prices or have received better quality of service

5) Other consumer, family members and coworkers

In addition to product and service features and ones own individual feelings and beliefs

consumer satisfaction is often influenced by other people

Service quality

for pure service , service quality will be the dominant element in customers evaluations

for customers service and service which offered with physical product, service quality may

be very critical in determining customer satisfaction

Service encounters

It is the from the service encounters that build their perceptions service encounters or moments

of Truth. The most vivid impression of service occurs in the service encounters or moment of

truth when the customer interacts with the service firm



Types of service encounters

1) Remote Encounters

2) Phone Encounters

3) Face-To Face Encounters

1) Remote Encounters:

There is no direct human contact e.g. ATM, mail order, internet website etc. here the

tangible evidence of the service and the quality of the technical process and systems become the

primary bases for judging quality. Such encounters provide the firm an opportunity to reinforce

or establish quality perception in the customer

2) Phone Encounters

Almost all firms rely on phone encounters in the forms of customer service, general inquiry or

order taking functions. The judgment of quality is based on variability in the interaction. Tone of

voice, employee knowledge, and effectiveness/efficiency in handling customer issues become

important criteria for judging quality

3) Face-to-Face Encounters

It occurs between customer and salespeople, delivery personnel, maintenance rep, professional

consultant etc determining and understanding service quality issues in face to face context is the

most complex of all. Both verbal and nonverbal behaviors are important determinants of quality,

as are tangible cues such as employees dress and other symbols of service like equipment,

broachers, physical setting etc. in such customer, the customer also plays a role in creating

quality service for herself through her own behavior during interaction

Strategies for influencing customer perception

Measure and manage customer satisfaction and service quality

The strategy for customer focused firms is to measure and monitor customer satisfaction and

service quality. Such measurement need to track trends, to diagnose problems, and to link other

customer focused strategies.

Aim for customer quality and satisfaction is every service encounters

Many firms aims for zero or 100 percent satisfaction in every encounter. To achieve this

require clear documentation of all of the point of contact between the organization and its

customer.

Plan for effective Recovery



Facilitate adaptability and flexibility

Encourage spontaneity

Help employee cope with problem customer

Manage the dimensions of quality at the encounter level

3) Manage the evidence of service to reinforce perception

The evidence of service people, process, and physical evidence provides a frame work for

planning marketing strategies. Essentially tangibilize the service for the customer and thus

represent important means for creating positive perception.



Company Perceptions of Consumer Expectations

Module 03

Understanding customer expectation through market research: Key reasons for GAP 1,

using marketing research to understand customer expectation, Types of service research,

Building customer relationship through retention strategies - Relationship marketing, Evaluation

of customer relationships, Benefits of customer relationship, levels of retention strategies,

Market segmentation-Basis & targeting in services.

Customers have different expectations re services or expected service

Desired service customer hopes to receive

Adequate service the level of service the customer may accept

Key reasons for GAP 1:

Listening gap

a. Not interacting directly with customers to understand their expectations

b. Unwilling to ask customers expectations

c. Understanding of customers perception

Provider GAP 1

Expected Service

CUSTOMER

COMPANY

GAP 1



Understanding Customer Expectations and Perceptions Through Marketing Research

Using Marketing Research to Understand Customer Expectations

Elements in an Effective Services Marketing Research Program

Analyzing and Interpreting Marketing Research Findings

Using Marketing Research Information

Upward Communication

Common Research Objectives for Services

To identify dissatisfied customers

To discover customer requirements or expectations

To monitor and track service performance

To assess overall company performance compared to competition

To assess gaps between customer expectations and perceptions

To gauge effectiveness of changes in service

To appraise service performance of individuals and teams for rewards

To determine expectations for a new service

To monitor changing expectations in an industry

To forecast future expectations

Types of service research

Includes Qualitative Research

Includes Quantitative Research

Includes Perceptions and Expectations of Customers

Includes Measures of Loyalty or Behavioral Intentions

Balances Cost and Value of Information

Includes Statistical Validity When Necessary

Measures Priorities or Importance

Occurs with Appropriate Frequency



Identify dissatisfied customers to attempt recovery; identify most common categories of

service failure for remedial action - Customer Complaint Solicitation

Assess companys service performance compared to competitors; identify service-

improvement priorities; track service improvement over time - Relationship Surveys

Obtain customer feedback while service experience is still fresh; act on feedback quickly

if negative patterns develop - Post-Transaction Surveys

Use as input for quantitative surveys; provide a forum for customers to suggest service-

improvement ideas - Customer Focus Groups

Measure individual employee service behaviors for use in coaching, training,

performance evaluation, recognition and rewards; identify systemic strengths and

weaknesses in service - Mystery Shopping of Service Providers

Measure internal service quality; identify employee-perceived obstacles to improve

service; track employee morale and attitudes - Employee Surveys

Determine the reasons why customers defect- Lost Customer Research

To forecast future expectations of customers, To develop and test new service ideas -

Future Expectations Research

Stages in the Research Process

Stage 1 : Define Problem

Stage 2 : Develop Measurement Strategy

Stage 3 : Implement Research Program

Stage 4 : Collect and Tabulate Data

Stage 5 : Interpret and Analyze Findings

Stage 6 : Report Findings

Building customer relationship through retention strategies

It has been called the decade of the customer, the customer millennium, and virtually every name

that can incorporate customer within. Theres nothing new about businesses focusing on

customers or wanting to be customer-centered. However, in todays marketplace just saying an



enterprise is customer-centric is not enough. It is a promise that organizations must keep. The

problem is that most organizations still fall short of this goal.

Customer-centric, an organization must have customers at the center of its business. Many

organizations are sales-focused and not marketing-oriented. Many enterprises that have a

marketing focus are brand- or product-centric. Being a customer-centered organization is much

more complex than it appears.

Focus on Customer Equity

In their book, Driving Customer Equity: How Customer Lifetime Value is Reshaping Corporate

Strategy, Roland Rust, Valarie Zeithaml, and Katherine Lemon write about a conceptual

framework that realigns an organizations strategies to make it more customer-centered and to

help it build Customer Equity. They define a firms customer equity as the total discounted

lifetime value of all of its customers. The concept of Customer Lifetime Value is well known to

traditional mail-order and direct marketing firms there are three drivers of customer equity and

organizations should focus on those that most influence the organization:

Value equity

Brand equity

Retention equity

Profitability, Retention Measures of Customer Equity

Central to this idea is that organizations must balance growth with profitability. Growth requires

acquisition, which is expensive and a significant expense to an organization. Retention yields

profitability but must be balanced to maximize value.

Loyalty and Satisfaction

While satisfaction and loyalty are related, they are different attributes of marketing effectiveness.

Satisfaction reflects how well an organization fulfills customer expectations of quality, service,

and other material elements of a brands value proposition. Both logic and emotion affect

satisfaction. Loyalty is a behavioral system of repetition that helps to build value over time. It is

transactional in nature and becomes habitual (e.g., stopping at a Starbucks on the way to the

office). While it may seem counter-intuitive, organizations dont always need to satisfy

customers to generate loyalty.



Contractual, emotional, or functional loyalty are types of loyalty that are less dependent upon

satisfaction to affect purchase events or trigger defections. Service gaffs, the kinds reported in

satisfaction surveys, are often ignored or forgiven. This is common where there is a long-term

emotional bond to a brand, where loyalty is based on vendor agreements (e.g., where a purchase

threshold must be met to qualify for a discount), or where loyalty is based on convenience (e.g.,

the only air carrier with nonstop flights to a destination).

Customer Relationship Management (CRM) is a ubiquitous acronym that has no single

definition. The accepted definition of CRM is often different for each organization and for

different groups within the organization. Marketing may have its definition of CRM, sales its

definition, customer service its definition, and information technology (IT) its definition.

There are three factors that influence the success of CRM programs:

People

Process

Technology

The People factor

People are the most important factor in the success of CRM. No other business strategy cuts

across so many organizational lines or requires so much interdepartmental cooperation. This is

not something that can be implemented with an e-mail asking everyone to just get along. It

requires that top management make clear that the goals of CRM are one of their priorities.

Management must invest resources and let staffers know that they expect a return on the

investment for CRM.

The Process Factor

One of the outcomes of CRM is that the many business processes are automated. Most CRM

systems come with their own built-in business processes. They are usually generic and dont

correspond to the way that an organizations processes work. Trying to make these processes

work can be a difficult and frustrating task. Some organizations simply take their old processes

and try to implement them within their new CRM system. Generally, these processes need a

complete review to learn which can be implemented, which need updating, and which need to be

replaced.



The Technology Factor

Technology is the most difficult factor, given the number of CRM alternatives now available.

Organizations need to know what capabilities they are looking for, which of their current

systems they must integrate with CRM, and have some idea of their budget. There are endless

CRM vendors and applications from which to choose, and the number continues to grow.

There is Enterprise cRM (e.g., PeopleSoft) as well as applications for various functions of CRM

(sales force automation, campaign management, call center management, etc.). There are

installed software solutions (e.g. Oracle) as well as hosted services (Salesforce.com). The

choices of solutions and vendors are endless. However, enterprises must do their due diligence.

They shouldnt believe what vendors tell them without doing a thorough review. They should

have realtime examples of the software in action, not just PowerPoint presentations or sample

reports.

Relationship marketing

Relationship marketing is a philosophy of doing business that focuses on keeping and improving

current customers, does not necessarily emphasize acquiring new customers is usually cheaper

(for the firm) - to keep a current customer costs less than to attract a new one goal = to build and

maintain a base of committed customers who are profitable for the organization thus, the focus is

on the attraction, retention, and enhancement of customer relationships

Goals:

Enhancing, Retaining, Satisfying and Getting

Value of a customer

Income

Expected Customer Lifetime

Average Revenue (month/year)

Other Customers convinced via WOM

Employee Loyalty??

Expenses



Costs of Serving Customer Increase??

Loyal customers: is the one who

Shows Behavioral Commitment

buys from only one supplier, even though other options exist

increasingly buys more and more from a particular supplier

provides constructive feedback/suggestions

Exhibits Psychological Commitment

wouldnt consider terminating the relationship--psychological commitment

has a positive attitude about the supplier

says good things about the supplier

Evaluation of customer relationships

Evaluation of customer relationships done in the basis of Value equity, Brand equity and

Retention equity

Benefits to the Organization of Customer Loyalty

loyal customers tend to spend more with the organization over time

on average costs of relationship maintenance are lower than new customer costs

employee retention is more likely with a stable customer base



lifetime value of a customer can be very high

Benefits to the Customer:

inherent benefits in getting good value

economic, social, and continuity benefits

contribution to sense of well-being and quality of life and other psychological

benefits

avoidance of change

simplified decision making

social support and friendships

special deals

or

Benefits for Customers: Assuming they have a choice, customers will remain loyal to a firm

when they receive greater value relative to what they expect from competing firms. Remember

that perceived value is the consumers overall assessment of the utility of a product based on

perceptions of what is received and what is given. Value represents a trade off for the consumer

between the give and the get components. Consumers are more likely to stay in a relationship

when he gets (quality, satisfaction, specific benefits) exceed the gives (monetary and no

monetary costs) When firms can consistently deliver value from the customers point of view,

clearly the customers benefits and has an incentive to stay in the relationship.

In addition to the specific inherent benefits of receiving service vale, customers also benefit from

long-term relationships because such associations contribute to a sense of well-being and quality

of life. Building a long-term relationship with a service provider can reduce consumer stress as

initial problems, if any, are solved special needs are accommodated, and the consumer learns

what to expect. This is particularly true for complex services (eg. Legal, medical, education), for

services where there is high ego involvement (eg., hair styling, health club, weight loss

program), and for services that require large investments (eg. Corporate banking, insurance,

architecture). After a time the consumer begins to trust the provider and a count on a consistent

level of quality service. Ego investment, trust are the important factors.



Most consumers (Whether individuals or business) have many competing demands for their time

and money and are continually searching for ways to balance and simplify decision making to

improve the quality of their lives. When they can maintain a relationship with a service provider

they free up time for other concerns and priorities. And excellent example is the case of dual

career families, for which the decision about who should care for their children during the

workday is one of the most important decisions they make. Once they have identified and

established a satisfying relationship with a good caregiver (whether it be can individual a day

care center, or a preschool) family stress is reduced and the quality of family life is improved.

Should something happen, that requires a change in caregivers, or should the relationship quality

deteriorate for any reason, family stress levels immediately increase. Thus, a stable relationship

with a good child-care provider is directly reflected in quality of life. Frequently families are

willing to pay premium prices to maintain stable, predictable, high quality care for their children.

Eg: Boarding Schools, Hostel facilities, etc.,

Benefits for the Organization: The benefits to an organization of maintaining and developing a

loyal customer base are numerous. They can be linked directly to the firms bottom line.

Increasing Purchase: As consumers get to know a firm and are satisfied with the quality of its

services relative to that if its competitors, they will tend to give more their business to the firm.

And as customers mature (in terms of age, life cycle, growth of business). They frequently

require more of a particular service. Eg: Laundry, Haircutting.

a) Lowest Costs: There are many start-up costs associated with attracting new customers. The

include advertising and other promotion costs, operating costs of setting up accounts and

systems, and time costs of getting to know the customer. Sometimes these initial costs can

outweigh their revenue expected from the new customers in the short term. A prime example

occurs in the insurance industry. Typically the insurer doent recover its up-front selling costs

until the third of fourth year of the relationship. Thus, from a profit point of view, there would

seem to be great incentive to keep new customers once the initial investment has been made. Eg:

Hotels.

Even ongoing relationship maintenance costs are likely to drop over time. For example, early in

a relationship a customer is likely to have questions and to encounter problems as he or she

learns to use the service. Once learning has taken place the customer will have fewer problems



and questions (assuming the quality of service is maintained at a high level) and the service

provider will incur fewer costs in serving the customer. Eg: Hotels, Airlines.

b) Free Advertising through word of mouth: When a product is complex an difficult to

evaluate. And there is risk involved in the decision to buy it as is the case with many services

consumers most often look to others for advice on which providers to consider. Satisfied. Loyal

customers are likely to provide a firm with strong word of mouth endorsements. This form of

advertising can be more effective than any paid advertising the firm might use, and has the added

benefit of reducing the costs of attracting new customers. Eg: Consumer and Consumer durable

products.

c) Employee Retention: It is easier for a firm to retain employees when it has a stable base o

satisfied customers. People like to work for companies whose customers are happy and loyal.

Their jobs are more satisfying and they are able to spend more of their time fostering

relationships than scrambling for new customers, In turn, customers are more satisfied

andbecome even better customer a positive upward spiral. Because employees stay with the firm

longer, service quality improves and costs of turnover are reduced, adding further to profits.

Relationship building becomes difficult with new employees. Eg: Bank Manager.

d) Lifetime value of a customer: If companies knew how must it really costs to lose a customer,

they would be able to make accurate evaluations of investments designed to retain customer.

Unfortunately, todays accounting systems do not capture the value of a loyal customer. One

way of documenting the value of loyal customers is to estimate the increased value or profits that

accrue for each additional customer who remains loyal to the company rather than defecting to

the competition.

Strategies for Building Relationships:

Foundations:

Excellent Quality/Value

Careful Segmentation

Bonding Strategies:

Financial Bonds

Social & Psychological Bonds



Structural Bonds

Customization Bonds

Relationship Strategies Wheel

Levels of customer retention strategies

Excellent Quality and Value

1. Financial Bonds

o Volume and Frequency Rewards

o Stable Pricing

o Bundling and Cross Selling

2. Social Bonds

o Continuous Relationships

o Personal Relationships

o Social Bonds Among Customers

3. Customization Bonds

o Customer Intimacy

o Mass Customization

o Anticipation/ Innovation

4. Structural Bonds

o Shared Processes and Equipment

o Joint Investments

o Integrated Information Systems

Steps in Market Segmentation and Targeting for Services:

Identify Bases for Segmenting the Market

Develop Profiles of Resulting Segments

Develop Measures of Segment Attractive- ness

Select the Target Segments

Ensure that Segments Are Compatible



Market segmentation splits up a market into different types (segments) to enable a business to

better target its products to the relevant customers.

Market segmentation offers the following potential benefits to a business:

Better matching of

customer needs

Customer needs differ. Creating separate products for each segment

makes sense

Enhanced profits for

business

Customers have different disposable incomes and vary in how

sensitive they are to price. By segmenting markets, businesses can

raise average prices and subsequently enhance profits

Better opportunities

for growth

Market segmentation can build sales. For example, customers can be

encouraged to "trade-up" after being sold an introductory, lower-priced

product

Retain more

customers

By marketing products that appeal to customers at different stages of

their life ("life-cycle"), a business can retain customers who might

otherwise switch to competing products and brands.

Target marketing

communications

Businesses need to deliver their marketing message to a relevant

customer audience. By segmenting markets, the target customer can be

reached more often and at lower cost

Gain share of the

market segment

Through careful segmentation and targeting, businesses can often

achieve competitive production and marketing costs and become the

preferred choice of customers and distributors

Identify bases for segmenting the market: Market segments are formed by grouping customers who

share characteristics that are in some way meaningful to the design, delivery, promotion, or pricing

of the service. Common segmentation bases for consumer markets include demographic

segmentation, geographic segmentation, psychographic segmentation, and behavioral segmentation.

Segments may be identified on the basis of one of these characteristics or a combination.



Marketing principles, Market

Segmentation and Market Targeting:

Geographic Segmentation: Dividing

the market to form different geographic

units such as nations, countries or

states.

Psychographic Segmentation:

Dividing buyers to form groups based

on social class, life style or personality

characteristics.

Behavioral Segmentation: Dividing buyers to form groups based on knowledge, attitude, uses

or responses to a service.

Requirements for effective segmentation: Measurability: The degree to which the size and

purchasing power of the segments can be measured.

Accessibility: The degree to which the segments can be reached and served.

Substantiality: The degree to which the segments are large or profitable enough.

Action ability: The degree to which effective program can be designed for attracting and

servicing of the segments.

Criteria for Evaluation Market Segments for Market targeting: Segment size and Growth:

includes information on current sales, projected growth rates and expected profit margins.

Segment structural attractiveness: Includes current and potential competitors, Substitute

products and services, relative power of buyers and relative power of suppliers.

Company objectives and Resources: Involves whether the segment fits the companys

objective.

Demographic Segmentation: In other cases, geographic variables (nations, countries, states,

regions) form the base for dividing the market place of identifying potential unmet needs.

Psychographics Segmentation: Many times, it is not a particular demographic or geographic

variable that defines the market segment, but rather a shared sense of values, a common life



style, or common personality characteristic among consumers in the segment. A service based on

psychographic segmentation will focus on such factors in the design and delivery of the service.

Behavioral Segmentation: At other times, a segmentation strategy may be formed around

behavioral characteristics of consumer such as their knowledge, attitudes or usage patterns.

In businesses to business marketing the applications situation of the organization form the basis

for segmentation? Such applications situations as technology needs, product usage, or service

requirements are examples. To illustrate, an institutional food service provider may have

different service configurations for the large manufacturer segment that requires full service

executive dening facilities and large volume cafeterias than it would have for the hospital market

segment that uses a centralized kitchen facility to disperse a wide variety of dietary

configurations.

Develop profiles of Resulting Segments: Once the segments have been identified, it is critical

to develop profiles of the in consumer markets, these profiles usually involve demographic

characterizations of psychographic or usage segments. Of most importance in this stage is clearly

understanding how and whether the segments differ from each other in terms of their profiles. If

they are not different from each other, the benefits to be derived from segmentation, that is, from

more precisely identifying sets of customers will not be realized.

Develop Measures of segment Attractiveness: The fact that segments of customers exist does

not justify a firms choice of them as targets. Segments must be evaluated in terms of their

attractiveness. The size and purchasing power of the segments must be measurable so that the

company can determine if the segments are worth the investment in marketing and relationship

costs associated with the group. They must be profitable in the long term in terms of revenues

generated, and they also should not place a disproportionate drain on the firms time and /or

human energy. These costs are not always easy to determine in advance.

The chosen segments also must be accessible, meaning that advertising or marketing vehicles

must exist to allow the company to reach the customers in the segments.

Select the Target Segments: Based upon the evaluation criteria in step 3, the services marketer

will select the target segment or segments for the service. The service firm must decide if the



segment is large enough and trending toward growth. Market size will be estimated and demand

forecasts completed to determine whether the segment provides strong potential.

Competitive analysis, including an evaluation of current and potential. Competitive analysis,

including an evaluation of current and potential competitors, substitute products and services and

relative power of buyers and relative power of suppliers, will also help in the final selection of

target segments. Finally, the firm must decide whether serving the segment is consistent with

company objectives and resources.

Ensure that the target segments are compatible: This step, of all the steps in segmentation

strategy, is arguably more critical for service companies than for goods companies. Because

services are often performed in the presence of the customer, the services marketer must be

certain that the customers are compatible with each other for example, families who are attracted

by the discounted prices and college students on their fees it may find that the two groups do not

merge well. It may be possible to manage the segments in this example so that they do not

directly interact with each other but if not, they may negatively influence each others

experiences, hurting the hotel future business. In identifying segments it is thus important to

think through how they will use the service and whether segments will be compatible.

Retention Strategies:

1. Monitor Relationships: A basic strategy for customer retention is to implement a through

means of monitoring and evaluating relationship quality over time. Current customers should be

surveyed to determine their perceptions of value received, quality, satisfaction with services and

satisfaction with the provider relative to competitors. The organizations will also regularly

communicate with its customers in person or over the telephone. In a competitive market, it is

difficult to retain customers unless they are receiving a base level of quality and value.

A well designed customer data has is also a foundation for customer retention strategies.

Knowing who the organizations current customers are (names, addresses, phone numbers, etc.,)

what their buying behavior is, the revenue they generate, the related costs to serve them, their

preferences, and relevant segmentation information (ie., demographics, life style, usage patterns)

forms the foundation of a customer data base. In cases of customers leaving the organization,

information on termination would also existing the data base.



Three levels of Retention Strategies:

Level 1: At level 1 the customer is tied to the firm primarily through financial incentives lower

prices for greater volume purchases or lower prices for customers who have been with the firm a

long time. Examples of level 1 relationship marketing are not hard to find. Thinkabout the airline

industry and related travel service industries like hotels and car rental companies Frequent

flyer programs provide financial incentives and rewards for travelers who bring more of their

business to a particular airline. Hotels and car rental companies do the same. One reason these

financial incentive programs proliferate is that they are not difficult to initiate and frequently

result in at least short term advantages to a firm since, unless combined with an other

relationship strategy, they dont serve to differentiate the firm from its competitors in the long

run. Many travelers belong to several frequent flyer programs and dont hesitate to trade off

among them. And there is considerable customer switching every month among the major

telecommunication suppliers. While price and other financial incentives are important to

customers, they are generally not difficult for competitors to imitate since the only customized

element of the marketing mix is price. Eg. Swiss air, Luftansa offer big gifts and discounts for

fliers exceeding certain Kilometers in a year.

Level 2: Level 2 strategies bind customers to the firm through more than pricing incentives.

While price is still assumed to be important, level 2 retention marketers build long-term

relationships through social as well as financial bonds. Customers are viewed as clients not

nameless faces and become individuals whose needs and wants the firm seeks to understand.

Services are customized to fit individual needs and marketers find ways of staying in touch with

their customers, thereby developing social bonds with them. For example in a study of customer

firm relationships in the insurance industry, it was found that behaviours such as staying in touch

with clients to assess their changing needs, providing personal touches like cards and gifts and

sharing personal information with clients all served to increase the likelihood that the client

would stay with the firm. Personal relationship becomes very important.

Social bonds are common among professional service provides (eg. Lawyers, accountants,

teachers and their clients as well as among personal care providers (hair dressers, counselors,

health care providers) and their clients.

A dentist who takes a few minutes to review her patients file before coming in to the exam room

is able to jog her memory on personal facts about the patient (occupation, family details, interest,



dental health history). By bringing these personal details into the conversation, the dentist reveals

her genuine interest in the patient as an individual and builds social bonds. Eg: Car garage

empathy plays a vital role.

Sometimes relationships are formed with the organization due to the social bonds that develop

among customers rather than between customers and the provider of the service. This is

frequently the case in health clubs, country clubs, educational settings and other service

environments where customers interact with each other. Over time the social relationships they

have with other customers are important factors that keep them not be change the organization

from switching to another organization. Women who exercise together regularly at a health club

may develop social ties and friendships that bind them to each other and to the particular fitness

center where they work out. People who vacation at the same place during the same weeks every

year build bonds with others who vacation there at the same time. Social tie up acts as a

motivator.

Level 3: Level 3 strategies are the most difficult to imitate and involve (1) Structural as well as

(2) financial and (3) social bonds between the customer and the firm. Structural bonds are

created by providing services to the client that are highly customized and frequently designed

right into the service delivery system for that client. Structural bonds often are created by

providing customized services to the client that are technology based and serve to make the

customer more productive. Some concrete examples will help to demonstrate the effectiveness of

structural bonds in building relationships.

By working closely with its hospital customer will improve hospital supply ordering, delivery

and billing that have greatly enhanced their value as a supplier.

For Example hospital specific pallet architecture that meant all items arriving at a particular

hospital were shrinking wrapped with labels visible for easy identification. Separate pallets were

assembled to reflect the individual hospitals storage system, so that instead of miscellaneous

supplies arriving in boxes they arrived on client friendly pallets designed to suit the

distribution needs of the particular hospital. Eg: Supply of items from wholesaler to retailer with

proper identification.



Retaining Customers when things go wrong: As we have seen, reliability and doing it right

the first time are extremely important factors in Customers judgment of service quality. Yet for

even the best of firms, service failures and mistakes are inevitable and because service is often

performed in the presence of the customer errors and failures are difficult to hide or disguise. It is

usually not possible to start over as it might be with a manufactured product. When things go

wrong, the consumer is presented with a good reason to switch providers and to tell others not to

use the service. Effective recovery is thus essential to save and even build the relationship. If the

organization fails in recovery, it has failed the customer twice a double deviation from customer

expectations.

Track and Anticipate recovery opportunities: The customer who complains is your friend

customers who dont complain are likely not to come back, and further they may influence other

customers to not try the service. Building on this notion, organizations need systems to track and

identify failures, viewing them as opportunities to save and retain customer relationships.

An effective service recovery strategy requires identification of failure points in the system

through listening to customers. This means not only monitoring complaints, but really listening

and being active in searching out potential failure points. Take complaint as a compliment for

corrective action.

Take Care of Customer problems on the Front Line: Form the customers point of view, the

most effective recovery is accomplished, when a front line worker can take the initiative to solve

the problem on the spot. Acknowledgement of the problem, an apology, an explanation when

appropriate and a solution to the problems are often all the customer wants. Sometimes the

solution may be a refund retailers with liberal, return policies build customer loyalty through

refunding or trading in defective merchandise, no questions asked.

Solve Problems Quickly: Once the failure points are identified, employees must act quickly to

solve problems as they occur. A problem not solved can quickly escalate. Sometimes employees

can even anticipate problems before they arise and surprise customers with a solution.



Module 4: (10 hours)

Customer defined service standards: Hard & Soft standards, process for developing

customer defined standards.

Leadership & Measurement system for market driven service performance-key reasons for

GAP-2 service leadership- Creation of service vision and implementation, Service quality as

profit strategy, Role of service quality In offensive and defensive marketing.

Service design and positioning-Challenges of service design, new service development-types,

stages. Service blue printing-Using & reading blue prints. Service positioning-positioning on the

five dimensions of service quality, Service Recovery.

Hard customer defined standards: Things that can be counted, timed, or observed through

audits (time, numbers of events)

Soft customer defined standards: Opinion-based measures that cannot be observed and must be

collected by talking to customers (perceptions, beliefs)

Hard and Soft Service Standards at Ford:

1. Appointment available within one day of customers requested service day

2. Write-up begins within four minutes

3. Service needs are courteously identified, accurately recorded on repair order and verified

with customer

4. Service status provided within one minute of inquiry

5. Vehicle serviced right on first visit

6. Vehicle ready at agreed-upon time

7. Thorough explanation given of work done, coverage and charges

Hard standards: The standards 1,2,4,5&6 can be measured & audited.

Soft standards: The standards 3&7 require customer opinion.

Company Defined: Internal- Productivity, Efficiency, Costs or technical quality.

Customer Defined: Requirements that is visible and assessed/ measured by consumers.



Process for developing customer defined standards

1. Identify Existing or Desired Service Encounter Sequence: Similar to AT & Ts

example.

2. Translate Customer Expectations Into behaviour/actions: Abstract customer

expectations are translated into concrete specific behaviours/actions associated with each

encounter.

3. Select behaviors/actions for standards: Standards are based on behaviors and actions

that are very important for the customers. Standards cover performance that needs to be

improved or maintained. Standards are accepted by employees. Standards are predictive

rather than reactive. Standards are challenging but realistic.

4. Set Hard or Soft Standards: Companies are biased towards hard standard. First

establish a soft standard.

5. Develop Feedback Mechanisms: Hard standards involve mechanical counts or

technology enabled measurements. Soft standards- employee monitoring through

customer feedback.



6. Establish measures and target levels: Ccompanies can relate levels of customer

satisfaction with actual performance of a behaviour.

Eg: Airline waiting line.

7. Track measure against standards: Figuring out what goes wrong and prevent it from

happening again.

8. Provide feedback about performance to employees: Communication of performance

on its service quality to its employees to identify and correct problems.

Key reasons for GAP-2 service leadership

It is the gap between company perceptions of consumer expectations & customer driven service

standards and designs.

Not having the right service quality design & standards.

Poor service design

Absence of customer driven standards

Inappropriate physical evidence and service scape

The reason for GAP-2 is inadequate leadership. Service leadership does not mean meeting

companies efficiency standards or productivity standard of the company. Service leadership

means trying to achieve excellence in the area of customer wants.

When mangers are not committed to service quality, fromthepoint of view of the customers, they

do not realize that the organization is not working towards customer satisfaction. Sometimes

managers think that the service quality adds to the cost and they do not contribute towards

profitability.

This is because; it is very difficult to find a link between quality and financial return. This is

similar to the link between quality and financial return. This is similar to the link between

advertising and sales, because, a sale does not go up due to advertising. There are many factors

such as, Pricing, Image, etc.

Service Leadership:

Service leadership can be discussed w.r.to, to the model as shown:

Vision



Vision Statement

*Formulating the

vision

*Promoting

Commitment

Implementation of Vision

Structuring

Selecting, Acculturating and Training

Motivating

Managing Information

Team Building

Promoting Change & Risk Taking

A leader creates a Vision: Vision is nothing but image of the future. A leader must have

developed a mental image of a possible future state of the organization. We call this as vision,

may be vague, like a dream, but the vision is the target, which the leader should achieve.

It is necessary for a leader to have a vision, which is pre-requisite for service excellence. It has

been found that organizations with extremely good vision are found to be four times better rated

than companies with a poor vision.

1. Synthesizing the Vision:

I. Synthesizing means combining.

Here the leader is combining the past and the future.

The future is called FORESIGHT,

The past is called HINDSIGHT,

The Foresight will ensure that vision is quite appropriate with the future environment.

The Hindsight will ensure that organizational culture and tradition are not violated.

II.Clearly Articulating the vision. (Nothing but vision statement)

Service visions may be simple or complex, the best vision statement should be:



Brief and clear

Eg: 1) To become the best nursing care system in the world

2) Any time, anywhere communication.

III.Promoting Commitment.

One of the examples for a service leader to create commitment is to travel to all the outlets and

supervise personally to find out how service is going on and what is a satisfaction level of the

customers. This follows the principle that if you are a leader, you better lead.Therefore, a

leader should lead by example.

This is one of the ways to motivate the other employees and let them know that you want to see

what they are doing and what they can do.

Implementation of Vision:

A leader implements the service vision. During the process of implemen

Documents

Mba III Services Management [14mbamm303] Notes