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TOPICS IN SERVICES MARKETING



                  S.                             Section           Pages
                  No.
                   1          Service Marketing                     2-8
                    2         GAPS Model                           9-10
                    3         Decision making & Evaluation of      11-18
                              Services
                    4         Customers Expectation of Service     19-32
                    5         Building Customer Relationship       33-44
                    6         Service Blue Printing                45-47
                    7         Marketing Information System         48-49
                    8         Employees Role in Service Delivery   50-55
                    9         Customers Role in Service Delivery   55-60
                   10         Managing Demand and Supply           60-68
                   11         Yield Management                     68-69
                   12         Pricing of Services                  69-73




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SERVICES MARKETING


Services are deeds, processes and performances.

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

Ex.: Transportation, Communication, Educational services etc.

Services Vs Customer Service

Customer service is the service provided in support of a company’s core products. This core product
could also be a service.

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


                      31%                        24%                          46%
1970




                      36%                        26%                           38%
1980



1995                   41%                         31%                         31%




2005                            61%                           19%                20%



                SERVICES                                 NDUSTRY             AGRICULTURE

                              % AGE OF GDP IN INDIA

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


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Tangibility Spectrum




 Salt
        Soft drinks
                 Detergents

                        Automobiles
                             Cosmetics


                                     Fast food outlets


                                                                       Intangible Dominant

Tangible Dominant


                                     Fast food outlets


                                                  Advertising
                                                  Agencies




                                                            Airlines

                                                                Investment

                                                                       Management

                                                                              Consulting

                                                                                    Teaching

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


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Differences between Goods and Services
________________________________________________________________________________

Goods             Services                Resulting Implication
________________________________________________________________________________

Tangible                Intangible                     Services cannot be inventoried
                                                       Cannot be readily displayed or communicated
                                                       Pricing is difficult

Production separate     Simultaneous                   Customers participate in and affect the
from consumption                                       transaction.
                                                       Customers affect each other.
                                                       Employees affect service outcome.
                                                       Decentralization may be essential.
                                                       Mass production is difficult.

Standardized            Variability/ Heterogeneous     Service delivery and customer
                                                       satisfaction depend on employees
                                                       actions.
                                                       Service quality depends on many
                                                       uncontrollable factors.
                                                       There is no sure knowledge that the
                                                       planned and promoted.

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




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The Service Marketing Triangle


“Building service relationships: It’s all about promises.”

                                              COMPANY


       Internal Marketing
      (Enabling promises)
                                                                          External Marketing
                                                                          (Making promises)




                        PROVIDERS                                CUSTOMERS

                                      Interactive marketing
                                       (Keeping promises)



                                 The Services Triangle and Technology


                                          Company




                                                    Technology




                    Providers                                      Customers




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“Understanding and leveraging the role of customer service in external, interactive and internal
marketing.”


                                Expanded Marketing Mix for Services

Product                                                   Place

Physical Good Features                                    Channel Type
Quality Level                                             Exposure
Accessories                                               Intermediaries
Packaging                                                 Outlet Locations
Warranties                                                Transportation
Product Lines                                             Storage
Branding                                                  Managing Channels

Promotion                                                 Price

Promotion Blend
                                                          Flexibility
Sales People:                                             Price Level
       Number                                             Terms
       Selection                                          Differentiation
       Training                                           Discounts
       Incentives                                         Allowances
Advertising
       Targets
       Media Types
       Types of Ads
       Copy thrust
       Sales Promotion
       Publicity


People                           Physical Evidence                Process

Employees                        Facility Design                  Flow of activities
      Recruitment                Equipment                        Standardized
      Training                   Signage                          Customized
      Motivation                 Employee Dress                   No. of steps
      Rewards                    Other tangibles                         Simple
      Teamwork                           Reports                         Complex
Customers                                Business cards           Customer Involvement
      Education                          Statements
      Training                           Guarantees



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Expanded Mix for Services

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

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

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

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


Marketing of Services: Issues and Challenges

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




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CONTINUUM OF EVALUATION FOR DIFFER TYPES OF PRODUCTS




HIGH IN SEARCH                HIGH IN EXPERIENCE           HIGH IN CREDENCE
QUALITIES                     QUALITIES                    QUALITIES




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GAPS MODEL OF SERVICE QUALITY



                                     EXPECTED
                                      SERVICE



                                                            Customer Gap 5
                                     PERCEIVED
                                      SERVICE




     GAP 1
                                        SERVICE                          EXTERNAL
                                       DELIVERY                          COMMUNICATIONS
                                                                         TO CUSTOMERS
                          GAP 3                            GAP 4


                                     CUSTOMER- DRIVEN
                                      SERVICE DESIGNS
                                       AND STANDARDS


                          GAP 2


                                  COMPANY PERCEPTIONS OF
                                        CONSUMER
                                      EXPECTATIONS




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THE CUSTOMER GAP


        EXPECTED
         SERVICE


                CUSTOMER
                    GAP
       PERCEIVED
        SERVICE




The Provider Gaps

Gap 1- Not knowing what customers expects.

Gap 2 - Not selecting the right service designs & standards

Gap 3 - Not delivering to service standards

Gap 4 – not matches performance to promises




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CATEGORIES IN CONSUMER DECISION MAKING AND EVALUATION OF SERVICES.




       INFORMATION
                                                         EVALUATION OF
       SEARCH
                                                         ALTERNATIVES
       USE OF PERSONAL
                                                         EVOKED SET
       SOURCES
                                                         EMOTION AND MOOD
       PERCEIVED RISK



                                       CULTURE
                              Values & Attitudes
                              Manners & Customs
                              Material culture
                              Aesthetics
                              Educational & social
                              institution
                              Language



           PURCHASE &
           CONSUMPTION                                  POST PURCHASE
           SERVICE PROVISIO AS                          EVALUATION
           DRAMA                                        ATTRIBUTION OF
           SERVICE ROLES AND                            DISSATISFACTION
           SCRIPTS.                                     INNOVATION DIFFUSION
           COMPATABILITY OF                             BRAND LOYALTY
           CUSTOMERS




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SERVICES: CATEGORIES IN THE DECISION-MAKING PROCESS


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


INFORMATION SEARCH: -

    •   Use of personal source

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

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

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


    •   Perceived risk

        Compare to good more risk would be involved in purchase of services.

            -   Intangible nature
            -   Since services are non-standardized always more uncertainty would accompany about the
                outcome each time it is purchased.
            -   Services not accompanied by any warranties.


EVALUATION OF SERVICE ALTERNATIVES

EVOKED SET

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

Reasons

        1. Difference in retailing between goods and services

                •   Retail outlet would display competing brands in close proximity
                •   To purchase services on other hand, the consumer visits an establishment (e.g. a bank,
                    a drycleaner or a hair salon) that almost always offer only a single “brand” for sale


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2. Consumers are unlikely to find more than one or two businesses providing the same services in
           a given geographic area, whereas they may find numerous retail outlets carrying the identical
           manufacture’s product.

        3. Difficulty to obtain adequate prepurchase information about services.

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

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

SERVICE PURCHASE AND CONSUMPTION

Emotion and mood are feeling states that influence people’s (and therefore customers) perceptions and
evaluations of their experiences.

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

Emotions are more intense stable and pervasive.

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

Ways in which mood can affect the behavior of service customer

            •   Positive moods can make customers more obliging and willing to participate in behaviors
                that help service encounters succeed.
            •   Moods and emotions influence service encounters is to bias the way they judge service
                encounters and providers. Evaluation of service is consistent with the polarity (positive or
                negative) mood or emotion.
            •   Moods and emotion affect the way information about service is absorbed and retrieved.

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

SERVICE PROVISION AS DRAMA

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

Among the aspects of a service that can be considered in this way are:
  • Selection of personnel (auditioning the actors)
  • Training of the personnel (rehearsing)
  • Clearly defining the role (scripting the performance)

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•   Creating the service environment (setting the stage)
    •   Deciding which aspect of the service should be performed in the presence of customer (on stage)
    •   Which should be performed in the backroom (back stage)


    Importance Of Service Actors Increases When:

        •   Degree of personal contact increases (as in hospital, restaurant or resort)
        •   Services involve repeat contact and service actors have the discretion in determining the nature
            of the service and how it is delivered ( as in education, medical services, legal services)


SERVICES ROLES AND SCRIPTS

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

Service employees need to perform their roles according to expectations of the customers. The customer’s
role must also be performed well. If customers are informed and educated about the expectations and
requirements of the service.

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

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

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

THE COMPATIBILITY OF SERVICE CUSTOMERS

The mere presence of customers in churches, restaurants, bars and spectacular sports is important.
If no one else shows up, customers will not get to socialize with others, one of the primary expectations in
these types of services.
However if number of customers becomes so dense that crowding occurs, customers may also be
dissatisfied.
Customers can be incompatible for many reasons –
    • Difference in beliefs
    • Values
    • Experience
    • Abilities to pay
    • Appearance
    • Age, health etc.

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

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

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

POST PURCHASE EVALUATION

       •    Attribution Of Dissatisfaction

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

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

            -The stylist (for lack of skill)
            - Or herself (choosing the wrong style or not communicating her own needs)

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

e.g.        - Doctor’s diagnosis depends greatly on this
           - Dry cleaner’s success in removing a spot depends on the customer’s knowledge
              of its cause

(Incase of products consumer’s main form of participation is the act of purchase. Consumer may attribute
failure to receive satisfaction to her own decision-making error, but hold the producer responsible for
product performance.)

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

•      Innovation Diffusion

The rate of diffusion of an Innovation depends on the Consumer’s Perceptions of the innovation with
regard to Five Characteristics:

                    •   Relative Advantage
                    •   Compatibility
                    •   Communicability
                    •   Divisibility
                    •   Complexity



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

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

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

•   Brand Loyalty

The degree to which consumers are committed to particular brands of goods or services depends on a
number of factors:
   • Cost of changing brands (switching cost)
   • Availability of substitutes
   • Perceived risk associated with the purchase
   • Degree to which they obtained satisfaction in past

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

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

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

         The Role Of Culture In Services

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

Culture would include:

    1.   Language (both verbal and non verbal)
    2.   Values and attitudes
    3.   Manners and customs
    4.   Material culture
    5.   Aesthetics
    6.   Education and social institutions

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

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




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


    •   VALUES AND ATTITUDES DIFFER ACROSS CULTURES

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

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

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

    •   MANNERS AND CUSTOMS

        Manners and customs represent a culture’s views of appropriate ways of behaving.

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

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

    •   MATERIAL CULTURE

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

        E.g.
        Zoos in Japan very cramped compared to USA
        Mortgages in Japan for houses     100yrs
                      USA                  30yrs
                      India                20yrs

    •   AESTHETICS

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

        E.g.
    Earthy tones of Japanese restaurants as against glossy red evident in their Chinese competitor’s
    establishments.

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•   EDUCATIONAL AND SOCIAL INSTITUTIONS

        Both kinds of institutions are affected by and are transmission agents of culture. Education
        includes the process of transmitting skills and knowledge, and thus may take place in school and
        in less formal ‘training’ circumstances. The structure and functioning of each are heavily
        influenced by culture. Culture manifests itself most dramatically in the people contact or our social
        institutions

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




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CUSTOMER EXPECTATIONS OF SERVICE

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

EXPECTED SERVICE: - two levels of expectations

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


                                       Desired Service


                                           Zone of
                                          Tolerance

                                      Adequate Service



Dual customer expectation levels & the zone of tolerance


    DESIRED SERVICE expectations seem to be the same for that defined by the customer
    E.g.
    Desired expectation of
        1. Expensive restaurant
              a. Elegant surroundings
              b. Gracious employees
              c. Candle light
              d. And fine food

        2. Fast food restaurant
              a. Quick
              b. Convenient
              c. Tasty food in clean setting

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

E.g.
        Within fast food restaurant, a customer may hold higher expectations for Mac Donald’s than for
        Wimpy’s.


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ZONE OF TOLERANCE

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

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

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

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

DIFFERENT CUSTOMERS POSSESS DIFFERENT ZONES OF TOLEREANCE

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

An individual customer’s zone of tolerance increases or decreases depending on a number of factors
including company-controlled factors such as price.

“Price increases don’t really drive up expectations. But tolerance level will become more stringent / less
flexible with the increase.”

ZONES OF TOLERANCE VARY FOR SERVICE DIMENSION

Customer’s tolerance zones also vary for different service attributes or dimensions. The more important
the factor, the narrower the zone of tolerance is likely to be.

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




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Desired Service
                                                                       Desired Service
             Level of
             expectatio




                                    Zone of
                                   Tolerance
                                                                           Zone of
                                Adequate Service                          Tolerance


                                                                      Adequate Service




                              Most important factors             Least important factors




                                   Zone of tolerance for different services



ZONE OF TOLERANCE VARY FOR FIRST-TIMEAND RECOVERY SERVICE

FIRST-TIME SERVICE

        Outcome

        Process


RECOVERY SERVICE

        Outcome

        Process

                                           Low                                             High

                          Expectations




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




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Nature & Determinants Of Customer Expectations Of Service



           sensitivity to service.
Enduring Service Intensifiers                                                                     Explicit Service Promises
Derived Expectations                                                                            Advertising
Personal Service Philosophies                                                                   Personal Selling
                                                                                                Contacts
                                                                                                Other Communications

Personal needs
                                                                                                   Implicit Service Promises
                                                                                                Tangibles
Transitory Service Intensifiers                                                                 Price
Emergencies
Service Problems
                                                                                                Word Of Mouth
                                                                                                  Personal
Perceived Service Alternatives                        Desired Service                             “Expert” (Consumer Report
                                                                                                  Publicity Consultants)
Self Perceives Service Role                         Expected Service
                                                        Zone of
                                                       Tolerance                                Past Experience

Situational Factors
Bad Weather                                           Adequate Service
Catastrophe                                                                                     Predicted Service
Random Over Demand



                                                                         Gap 5 (Customer Gap)

                                                    Perceived Service




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FACTORS INFLUENCING DESIRED SERVICES




     ENDURING SERVICE
       INTENSIFIERS
                                                            EXPECTED SERVICE


                                                             DESIRED SERVICE




      PERSONAL NEEDS
                                                                  ZONE
                                                                    OF
                                                                TOLERANCE


                                                            ADEQUATE SERVICE




Personal Needs:- Those states or conditions essential to the physical or psychological well being of
the customer, are pivotal factors that share the level of desired service
        Personal needs fall into
               Physical, social and psychological functional categories.

Enduring Service Intensifiers:- Are individual stable factors that lead the customer to a
heightened sensitivity to service
       Two factors under this are
              Derived Service Expectations
              Personal Service Philosophy

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


Personal Service Philosophy:- The customer’s underlying generic attitude about the meaning of
services and the proper conduct of service providers



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


CUSTOMER PERCEPTIONS OF SERVICE

Perceptions are always considered relative to expectations.

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

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

Internal and External Customer Perceptions

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

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



RELIABILITY


                                                                  SITUATIONAL
RESPONSIVENESS                                                      FACTORS
                                        SERVICE
                                        QUALITY


ASSURANCE

                                                                   CUSTOMER
                                       PRODUCT                    SATISFACTION
                                       QUALITY

EMPATHY




TANGIBLES                                 PRICE
                                                                   PERSONAL
                                                                    FACTORS




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CUSTOMER PERCEPTIONS OF QUALITY AND CUSTOMER SATISFACTION

                        CUSTOMER SATISFACTION

Satisfaction of the customer’s evaluation of a product or service in terms of wherher that product or
services has met their needs and expectations.

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

CUSTOMER SATISFACTION IS INFLUENCED BY:-

1       PRODUCT AND SERVICE FEATURES:- Influence significantly customers satisfaction.
                              1.
e.g.    For service such as resort hotel, important features might include the pool area, restaurants,
        room comfort and privacy, helpfulness and courtesy of staff, room price and so forth

        Through focus, companies would determine what the feature and attributes are for their
        service and the measure perceptions of those features as well as overall satisfaction level.

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



2      CONSUMER EMOTIONS:- Consumer’s emotions can also affect their perceptions of
       satisfaction with products and services.

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

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

3.      ATTRIBUTIONS FOR SERVICE SUCCESS OR FAILURE:-

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

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


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For many services, customer’s atleast take partial responsibilities for how things turn out.

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

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


OUTCOMES OF CUSTOMER SATISFACTION

RELATION SHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY IN
COMPETITIVE INDUSTRY




                                100



                                 80



                                 60



                                 40



                                 20




                                  1        2                  3                   4           5


                         Very             Dissatisfied            Neither             Satisfied   Very
                         Dissatisfied                             satisfied nor                   Satisfied
                                                                  dissatisfied




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RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY IN
COMPETITIVE INDUSTRY


SERVICE QUALITY

Service quality is a focused evaluation that reflects the customer’s perception of specific dimensions
of services:- Reliability, Responsiveness, Assurance, Empathy, Tangibles.

PROCESS VERSUS TECHNICAL OUTCOME QUALITY

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

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

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

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

SERVICE QUALITY DIMENSION

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

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

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

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

       •   ASSURANCE:- Employee’s knowledge and courtesy and their ability to inspire trust and
           confidence

       •   EMPATHY:- Caring, individualized attention given to customers

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




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EXAMPLES OF HOW CUSTOMERS JUDGE THE FIVE DIMENSIONS OF SERVICE
QUALITY

                          CAR REPAIR                          INFORMATION
                          (COMSUMER)                          PROCESSING(INTERNAL)

Reliability               Problem fixed the first time        Provides needed information
                          and ready when promised             when requested


Responsiveness            Accessible; no waiting;             Prompt response to requests;
                          responds to requests                not “Bureaucratic”, deals with
                                                              problems promptly


Assurance                 Knowledge mechanics                 Knowledge staff: well trained;
                                                              credentials


Empathy                   Acknowledges customers by           Knows internal customers as
                          name; remembers previous            individuals; understands
                          problems and preferences            individual and departmental
                                                              needs


Tangibles                 Repair facility; waiting area;      Internal reports; office area;
                          uniforms; equipment                 dress of employees



BUILDING BLOCKS OF SATISFACTION AND SERVICE QUALITY

The service encounter or the moment of truth.

Interactive marketing

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

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

SERVICE ENCOUNTER OR “MOMENTS OF TRUTH”

From a customer’s point of view, the most vivid impression of service occurs in the service
encounter, or the “moment of truth”.


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

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

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

THE IMPORTANCE OF ENCOUNTERS

 CHECK IN



       BELL PERSON TAKES TO ROOM



                                RESTAURANT MEAL



                                                       WAKE UP CALL



                                                                        CHECK OUT



A SERVICE ENCOUNTER CASCADE FOR A HOTEL VISIT


TYPES OF SERVICE ENCOUNTERS

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

    1) REMOTE ENCOUNTER
    2) PHONE
    3) FACE-TO-FACE

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

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



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

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

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

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

SOURCE OF PLEASURE AND DISPLEASURE IN SERVICE ENCOUNTERS

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

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

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

     When did the incidence happen?

     What specific circumstances led up this situation?

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

     What resulted that made you feel the interaction was satisfying (or
      dissatisfying)?

     What could or should have been done differently?

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

    1) RECOVERY (after failure)
    2) ADAPTABILITY
    3) SPONTANIETY
    4) COPING

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

    1) RECOVERY : Employee response to service delivery system pailures

    2) ADAPTABILITY: Employee response to customer needs and requests


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3) SPONTANEITY: Unprompted and unsolicited employee action

    4) COPING: Employee response to problem customers

GENERAL SERVICE BEHAVIORS – DO’S AND DON’T

THEME                         DO                             DON’T

Recovery                      Acknowledge problem            Ignore customer blame
                              explain causes apologize       customer leave customer to
                                                             “fend for him/herself”

                              Compensate / upgrade           Downgrade
                              layout options                 Act as if nothing

                              Take responsibility            “Pass the buck”


Adaptability                  Recognize the seriousness      Ignore
                              of the need acknowledge
                                                             Promise, but fail to follow
                              Anticipate                     through show
                                                             unwillingness to try
                              Attempt to accommodate
                                                             Embarrass the customer
                              Adjust the system              laugh at the customer
                                                             avoid responsibility “pass
                              Explain rules / policies       the buck”
                              take responsibility


Spontaneity                   Take time be attentive         Exhibit impatience ignore
                              anticipate needs listen        yell / laugh / swear steal
                              provide information show       from customer
                              empathy                        discriminate


Coping                        Listen                         Take customer’s
                                                             dissatisfaction personally

                              Try to accommodate             Let customer’s
                                                             dissatisfaction affect others
                              Explain let go of the
                              customer



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BUILDING CUSTOMER RELATIONSHIP

RELATIONSHIP MARKETING

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

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

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

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

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

•   Change in mind set
•   Organizational culture
•   And employee reward systems.

GOALS OF RELATIONSHIP MARKETING

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

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



                                                         ENHANSING


                                                              RETAINING


                                                                    SATISFYING


                                                                              ACQUIRING




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CUSTOMER GOALS OF RELATIONSHIP MARKETING

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

BENEFITS OF CUSTOMER / FIRM RELATIONSHIPS

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

BENEFITS FOR CUSTOMERS

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

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

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

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

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

    •   CONFIDENCE BENEFITS
    •   SOCIAL BENEFITS
    •   SPECIAL TREATMENT BENEFITS

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

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

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

SOCIAL BENEFITS
Overtime, customers develop a sense of familiarity and even a social relationship with their service
providers.



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

A quote from the research where a customer describes her hair stylist: “I like him….. he’s really
funny and always has lots of good jokes. He’s kind of like a friends now…..it’s you’re used to. You
enjoy doing business with them”.

SPECIAL TREAMTEMT BENEFITS

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

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

BENEFITS FOR THE ORGANISATIONS

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

    •   INCREASING PURCHASES
    •   LOWER COSTS
    •   FREE ADVERTISING THROUGH WORD OF MOUTH
    •   EMPLOYEE RETENTION


LIFE TIME VALUE OF A CUSTOMER

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

ESTIMATING LIFETIME VALUE

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

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

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

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

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



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Thus the value of his company’s business for Federal Express was about $ 360,000

It is estimated that the average fed ex delivery person stops at 40 business the size of Peter’s
business each day
               $ 360,000 / company x 40 companies
                              $ 14,000,000

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




THE CUSTOMER ISN’T ALWAYS RIGHT


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

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

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

e.g; a credit card company will not like deal with the customer who doesn’t pay the bills on time or
someone who doesn’t uses it to an extent the company expect.


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




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SERVICE RECOVERY

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

Failure occurs for all kinds of reasons

-       The service may be unavailable when promised
-       It may be delivered late or too slowly
-       The outcome may be incorrect or poorly executed
-       Employees may be rude or uncaring

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

Left Unfixed

-       They can result in customers leaving
-       Telling other customers about their negative experiences
-       Even challenging the organization through customers rights organizations or legal channels

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

-       Customer satisfaction
-       Loyalty
-       Bottom line performance

It has been observed that customers who experience service failures, but are ultimately satisfied
based on recovery efforts by the firm, will be more loyal than those whose problems are not
resolved.

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

Those who never complain are likely least likely to repurchase




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Unhappy Customers                                   9%
who donot
complain                                                      37%




Unhappy customers
who do complain

                                                    19%
Complaints not
resolved                                                       46%




                                                                     54%

Complaints                                                                 70%
resolved




Complaints resolved                                                              82%
quickly
                                                                                       95%




                              Percentage of Customers who will buy again




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An effective Service Recovery strategy can

-       Increase customer Satisfaction and Loyalty
-       Generate positive Word of Mouth

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

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

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

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

THE RECOVERY PARADOX

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

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

This idea has become known as the RECOVERY PAPADOX.

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

1       It is expensive to fix mistakes.
2       Empirical Research suggests that only under the very highest levels of customers’ Service
        Recovery ratings will we observe increased satisfaction and loyalty.

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

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

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




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How Customers Respond To Service Failures




                                                     Service Failure




                                                   Dissatisfaction/
                                                  Negative Emotions




                 Complaint Action                                        No Complaint Action




Complain to       Negative word        Third Party
 Provider           of mouth             Action




 Exit/Switch                    Stay                       Exit/Switch                Stay




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Customer Complaint Action Following Service Failure


Variety of negative emotions can occur following a service failure, including such feelings as anger,
discontent, disappointment, self pity and anxiety.

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

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

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

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

TYPES OF CUSTOMER COMPLAINT ACTIONS

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

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

If they don’t complain immediately, customers may choose to complain later to the provider by
phone or in writing, or even write or call the corporate offices of the company.

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

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

TYPES OF COMPLAINERS

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

These categories are:

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

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

-       They are unlikely to say anything to the provider
-       Less likely than others to spread negative Word of Mouth, unlikely to complain to third
        party.
-       They often doubt the effectiveness of complaining, thinking the consequences will not merit
        the time and the effort they will expend.

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

-       Less likely to spread the negative word of mouth, to switch patronage, or to go to third
        parties with their complaints.
-       These customers to be viewed as the service providers friend.
-       Actively complain and give company a second chance.
-       They believe complaining has social benefits and therefore don’t hesitate to voice their
        opinion.

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

-       They feel alienated from the market place.
-       They are angry with the service provider although they do believe that complaining to the
        service provider can have a social benefits.
-       They are less likely to give the service provide a second chance.


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

-       They will complain to the provider, they will tell others, and they are more likely than
        any other group to complain to third parties.
-       They have a very optimistic sense of the potential positive consequences of all types of
        complaining.

WHY DO ( AND DON’T) PEOPLE COMPLAIN?

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

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

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

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

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

A very small number of consumers have “ complaining” personalities – they just like to complain or
cause trouble.

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

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They often see complaining as a waste of their effort .

WHEN THEY COMPLAIN, WHAT DO CUSTOMERS EXPECT

Customers want justice and fairness in handling their complaints

Customers are looking for:     OUTCAME FAIRNESS
                               PROCEDURAL FAIRNESS
                               INTERACTIONAL FAIRNESS

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

        The company’s “ punishment should fit the crime”.

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

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

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

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

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

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

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

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

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

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


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

        SWITCHING VERSUS STAYING FOLLOWING SERVICE RECOVERY

        Ultimately, how a Service Recovery failure is handled and the customer’s reaction to
        recovery effort can influence future decisions to remain loyal to the service provider or to
        switch to another provider.

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

        The nature of the Customer’s Relationship with the firm may also influence whether the
        customer stays or switches providers.

        There are three types of relationships viz.

         -“True Relationships” where the customer has had repeated contact overtime with the
        same service provider.

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

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

        These customers are more likely to change.

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

        Individual customer’s attitude towards switching will strongly influence whether he or she
        ultimately stays with the provider.

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

        Finally, the decision to switch to a different service provider may not occur immediately
        following service failure or poor service recovery, but may follow an accumulation of
        events.

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




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

        By intervening earlier in the process companies can prevent at time customer’s decision to
        switch.


    SERVICE BLUEPRINTING

    Services commonly lack concrete specifications.

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

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

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

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

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

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


                    Service        Points of Contacts
                    Blueprint

                                   Evidence


                                      Service Blueprinting
Blueprint Components

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

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




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Physical Evidence

Customer Actions

Line of Interaction

On Stage Contact

Employees Actions

Line Of Visibility

Back Stage Contact

Employee Actions


Line of Internal Interaction




Support Processes




    SERVICE BLUEPRINT COMPONENTS

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

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

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

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


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

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

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

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

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

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




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MARKETING INFORMATION SYSTEM

Marketing Information System is defined as an assembly of inter-related information subsystems:
receiving, processing and disseminating information on a continued basis to help make marketing
decision.

Type of Research                                    Primary Research Objectives

Complaint solicitation                              To identify/attend to dissatisfied customers

                                                    To identify common service failure points

Critical incident studies                           To identify “best practices” at transaction level
                                                    To identify customers requirements as input for
                                                    qualitative studies
                                                    To identify common service failure points
                                                    To identify systemic strengths and weaknesses
                                                    in customer-contact services

Requirements                                        To identify customer requirements as input for
research                                            qualitative research

Trailer calls                                       To obtain immediate feedback on performance
                                                    of service transactions
                                                    To measure effectiveness of changes in service
                                                    delivery
                                                    To assess service performance of individuals
                                                    and teams
                                                    To use as input for process improvements
                                                    To identify common service failure points

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

Process checkpoint evaluations                      To determine customer perceptions of long term
                                                    professional services during service provision
                                                    To identify service problems and solve them
                                                    early in the service relationship

Market –oriented ethnography                        To research customers in natural settings
                                                    To study customers from cultures other than
                                                    your home country

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Type of Research                            Primary Research Objectives

Mystery                                     To measure individual employee performance
shopping                                    for evaluation , recognition and rewards
                                            To identify systemic strengths and weaknesses
                                            in customer-contact services

Customer                                    To monitor changing customer expectations
panels                                      To provide a forum for customers to suggest and
                                            evaluate new service ideas

Lost customer research                      To identify reasons for customer defection

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

Future expectations                         To forecast future expectations of customers
research                                    To develop and test new service ideas




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EMPLOYEES’ ROLE IN SERVICE DELIVERY




        CUSTOMER




                                                                 Service Delivery
        COMPANY
                                                     Service
                                                   Performance
                                                       Gap

                                                              Customer-Driven
                                                             Service Designs and
                                                                 Standards




The Critical Importance of Service Employees

It is very important to focus on employees because :

    •   They are the service
    •   They are the organization in the customer’s eyes
    •   They are the brands
    •   They are the marketers

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In many cases , the contact employee is the service – there is nothing else. E.g. in most personal and
professional services (like haircutting, physical trainers, child care , cleaning /maintenance etc.) the
contact employees provide s the entire service single handedly. The offering is the employee. Thus
investing in the employee to improve the service parallels making a direct investment in the
improvement of a manufactured product.

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

Whether acknowledged or not , actively selling or not, service employees perform marketing
functions. They can perform these functions well, to the organization’s advantage, or poorly to the
organization’s detriment.

Employee Satisfaction, Customer Satisfaction and Profits

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

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

                                      The Service Profit Chain




BOUNDARY-SPANNING ROLES

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



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

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

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

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

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

These positions require:

    •   Mental Labor
    •   Physical Labor
    •   Emotional Labor

Emotional Labor

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

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

Emotional Labor draws on people’s feeling (often requiring them to suppress their true feelings) to
be effective in their jobs. A front-line service employee who is having a bad day or isn’t feeling just
right is still expected to put on the face of the organization when dealing with customers.

The organizations need to carefully selecting the people who can handle emotional stress, training
them in needed skills (like listening and problem solving), and teaching or giving them coping
abilities and strategies (via job rotation, scheduled breaks, teamwork or other techniques).


SOURCES OF CONFLICT

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

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Projectsformba.blogspot.com              Services Marketing
As these employees represent the customer to the organization and often need to manage a number
of customers simultaneously, front liners inevitably have to deal with conflicts, including
person/role conflicts, organization/client conflict, and inter-client conflicts.


1. Person/Role Conflicts : In some situations the front-line employees 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 to wear specific clothing or change
some aspect of their appearance to confirm to the job requirements. E.g A young lawyer, just out of
college may feel an internal conflict with his new role when his employer requires him to cut his
long hair and trade his casual clothes for three piece suit.

2. Organization/Client Conflict : A more common type of conflict for front-line service
employees is the conflict between their two bosses, the organization and the individual customer.
Service employees are typically rewarded for following certain standards , rules, and procedures.

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

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

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

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

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

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


                                                                                                     53
Projectsformba.blogspot.com             Services Marketing
Strategies for Closing GAP 3

A complex combination of strategies is needed to ensure that service employees are willing and able
to deliver quality services and that they stay motivated to perform in customer-oriented, service
minded ways. These strategies for enabling service promises are often referred to as internal
marketing .

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

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 towards closing gap3.

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

    •   Hire the right people
    •   Develop people to deliver service quality
    •   Provide the needed support systems
    •   Retain the best people




                                                                                                  54
Projectsformba.blogspot.com            Services Marketing
HUMAN RESOURCE STRATEGIES FOR CLOSING GAP3




                                                     Hire for service
                                                     competencies
                                     Compete           and service     Be the
                                       for the         inclination    preferred
                                        best                          employer
                                       people
                          Measure and                                                 Train for
                         reward strong                Hire the right               technical and
                            service                      people                      interactive
                                                                                        skills

                                                                       Develop
                           Treat        Retain the     Customer-       people to
                         employees        best          Oriented        deliver         Empower
                             as          people         Service         service        employees
                         customers                      Delivery        quality


                                                     Provide needed
                                Include                                               Promote
                                                        support
                              employees                 systems                      teamwork
                                 in the
                              company’s
                                 vision Develop
                                         service-       Provide Measure internal
                                         oriented     supportive service quality
                                         internal     technology
                                        processes         and
                                                      equipment




                        CUSTOMER’S ROLES IN SERVICE DELIVERY

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

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

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

The Importance of Customers in Service Delivery

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



                                                                                                        55
Projectsformba.blogspot.com                  Services Marketing
Because the customers receiving the service participates in the delivery process, he or she can
contribute to gap 3 through appropriate or inappropriate, effective or ineffective , productive or
unproductive behaviors.

Customers who are unprepared in terms of what they want to order can soak up the customer
service representative’s time as they seek advice. Similarly, shoppers who are not prepared with
their credit cards can “put the representative on hold” while they search for their credit cards or go
to another room or even out of their cars to get them. Meanwhile, other customers and calls are left
unattended, causing longer wait times and potential dissatisfaction.


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

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

All three of these are required in case for a CA to prepare a client’s income tax return effectively.
Information in the form of tax history, marital status, and number of dependents. Effort in putting
the information together in a useful fashion. Physical Possessions such as receipts and past tax
returns.

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




                                                                                                        56
Projectsformba.blogspot.com             Services Marketing
LEVELS OF CUSTOMER PARTICIPATION ACROSS DIFFERENT SERVICES



Low: Consumer Presence               Moderate : Consumer           High : Customer Concretes the
Required during Service              Inputs Required during        Service Product
delivery                             Service Creation

Products are standardized .      Client inputs customize a         Active client participation
                                 standard service.                 guides the customized service.

Service is provided regardless   Provision for service requires    Service cannot be created apart
of any individual purchase.      customer purchase.                from the customer’s purchase
                                                                   and active participation

Payment may be the only          Customer inputs                   Customer inputs are mandatory
required customer input.         (information, materials) are      and concrete the outcome.
                                 necessary for an adequate
                                 outcome, but the service firm
                                 provides the service

End Consumer Examples

Airline travel                   Haircut                           Marriage counseling
Motel stay                       Annual physical test              Personal training
Fast-food restaurant             Full-service restaurant           Weight reduction program
                                                                   Major illness or surgery

Business-to-Business
Customers examples

Uniform cleaning service         Agency-created advertising        Management consulting
Pest Control                     campaign                          Executive management seminar
Interior greenery maintenance    Payroll service                   Installation of computer
service                          Freight transportation            network



OTHER CUSTOMERS

In many service contexts customers receive the service simultaneously with other customers or must
wait their turn while other customers are being served. In both cases, “other customers” are present
in the service environment and can effect the nature of the service outcome or process. Other
customers can either enhance or detract from customer satisfaction and the perception of quality.



                                                                                                 57
Projectsformba.blogspot.com            Services Marketing
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Topics in Service Marketing

  • 1. TOPICS IN SERVICES MARKETING S. Section Pages No. 1 Service Marketing 2-8 2 GAPS Model 9-10 3 Decision making & Evaluation of 11-18 Services 4 Customers Expectation of Service 19-32 5 Building Customer Relationship 33-44 6 Service Blue Printing 45-47 7 Marketing Information System 48-49 8 Employees Role in Service Delivery 50-55 9 Customers Role in Service Delivery 55-60 10 Managing Demand and Supply 60-68 11 Yield Management 68-69 12 Pricing of Services 69-73 1 Projectsformba.blogspot.com Services Marketing
  • 2. SERVICES MARKETING Services are deeds, processes and performances. Services include all economic activities whose output is not a physical product or construction, is generally consumed at the time it is produced, and provides added value in forms (such as convenience, amusement, timeliness, comfort or health) that are essentially intangible concerns of its first purchaser. Ex.: Transportation, Communication, Educational services etc. Services Vs Customer Service Customer service is the service provided in support of a company’s core products. This core product could also be a service. Services tend to be more intangible than manufactured products and manufactured products tend to be more tangible than services. 31% 24% 46% 1970 36% 26% 38% 1980 1995 41% 31% 31% 2005 61% 19% 20% SERVICES NDUSTRY AGRICULTURE % AGE OF GDP IN INDIA Thus we see in India over the years the services are contributing more towards the GDP as compared to what it was couple of decades ago. 2 Projectsformba.blogspot.com Services Marketing
  • 3. Tangibility Spectrum Salt Soft drinks Detergents Automobiles Cosmetics Fast food outlets Intangible Dominant Tangible Dominant Fast food outlets Advertising Agencies Airlines Investment Management Consulting Teaching The above diagram shows us that there are no pure products or pure services. Instead services tend to be more intangible than manufactured products, and manufactured products tend to be more tangible than services. 3 Projectsformba.blogspot.com Services Marketing
  • 4. Differences between Goods and Services ________________________________________________________________________________ Goods Services Resulting Implication ________________________________________________________________________________ Tangible Intangible Services cannot be inventoried Cannot be readily displayed or communicated Pricing is difficult Production separate Simultaneous Customers participate in and affect the from consumption transaction. Customers affect each other. Employees affect service outcome. Decentralization may be essential. Mass production is difficult. Standardized Variability/ Heterogeneous Service delivery and customer satisfaction depend on employees actions. Service quality depends on many uncontrollable factors. There is no sure knowledge that the planned and promoted. Non-perishable Perishable It is difficult to synchronize supply and demand with services. Services cannot be returned or resold. 4 Projectsformba.blogspot.com Services Marketing
  • 5. The Service Marketing Triangle “Building service relationships: It’s all about promises.” COMPANY Internal Marketing (Enabling promises) External Marketing (Making promises) PROVIDERS CUSTOMERS Interactive marketing (Keeping promises) The Services Triangle and Technology Company Technology Providers Customers 5 Projectsformba.blogspot.com Services Marketing
  • 6. “Understanding and leveraging the role of customer service in external, interactive and internal marketing.” Expanded Marketing Mix for Services Product Place Physical Good Features Channel Type Quality Level Exposure Accessories Intermediaries Packaging Outlet Locations Warranties Transportation Product Lines Storage Branding Managing Channels Promotion Price Promotion Blend Flexibility Sales People: Price Level Number Terms Selection Differentiation Training Discounts Incentives Allowances Advertising Targets Media Types Types of Ads Copy thrust Sales Promotion Publicity People Physical Evidence Process Employees Facility Design Flow of activities Recruitment Equipment Standardized Training Signage Customized Motivation Employee Dress No. of steps Rewards Other tangibles Simple Teamwork Reports Complex Customers Business cards Customer Involvement Education Statements Training Guarantees 6 Projectsformba.blogspot.com Services Marketing
  • 7. Expanded Mix for Services Apart from Product, place, promotion and price, for Services we have People, Physical Evidence and Process 1) People: All human actors who play part in service delivery and thus influence the buyers perceptions namely, the firms personnel, the customer and other customers in the service environment. 2) Physical evidence: The environment in which the service is delivered and where the firm and the customer interact, and any tangible component that facilitate performance or communication of the service. 3) Process: The actual procedures mechanisms, the flow of activities by which the service is delivered- the service delivery and operating system. Marketing of Services: Issues and Challenges 1. Performance itself is the product. 2. Services are produced after they are sold. 3. Core benefit in services is intangible. 4. Producers of service play the dual role of marketers. 5. Differentiating is difficult in services. 6. Service quality has many dimensions. 7. People factor is important. 8. Customer’s behavioral response affects service quality. 7 Projectsformba.blogspot.com Services Marketing
  • 8. CONTINUUM OF EVALUATION FOR DIFFER TYPES OF PRODUCTS HIGH IN SEARCH HIGH IN EXPERIENCE HIGH IN CREDENCE QUALITIES QUALITIES QUALITIES 8 Projectsformba.blogspot.com Services Marketing
  • 9. GAPS MODEL OF SERVICE QUALITY EXPECTED SERVICE Customer Gap 5 PERCEIVED SERVICE GAP 1 SERVICE EXTERNAL DELIVERY COMMUNICATIONS TO CUSTOMERS GAP 3 GAP 4 CUSTOMER- DRIVEN SERVICE DESIGNS AND STANDARDS GAP 2 COMPANY PERCEPTIONS OF CONSUMER EXPECTATIONS 9 Projectsformba.blogspot.com Services Marketing
  • 10. THE CUSTOMER GAP EXPECTED SERVICE CUSTOMER GAP PERCEIVED SERVICE The Provider Gaps Gap 1- Not knowing what customers expects. Gap 2 - Not selecting the right service designs & standards Gap 3 - Not delivering to service standards Gap 4 – not matches performance to promises 10 Projectsformba.blogspot.com Services Marketing
  • 11. CATEGORIES IN CONSUMER DECISION MAKING AND EVALUATION OF SERVICES. INFORMATION EVALUATION OF SEARCH ALTERNATIVES USE OF PERSONAL EVOKED SET SOURCES EMOTION AND MOOD PERCEIVED RISK CULTURE Values & Attitudes Manners & Customs Material culture Aesthetics Educational & social institution Language PURCHASE & CONSUMPTION POST PURCHASE SERVICE PROVISIO AS EVALUATION DRAMA ATTRIBUTION OF SERVICE ROLES AND DISSATISFACTION SCRIPTS. INNOVATION DIFFUSION COMPATABILITY OF BRAND LOYALTY CUSTOMERS 11 Projectsformba.blogspot.com Services Marketing
  • 12. SERVICES: CATEGORIES IN THE DECISION-MAKING PROCESS For Services the sequence of information search, Evaluation of alternatives, Purchase and consumption & Post purchase evaluation do not occur in a linear sequence the way they most often do in purchase of goods. INFORMATION SEARCH: - • Use of personal source For purchasing goods use of both personal and non-personal sources is done as both effectively convey information about search qualities. For services, consumers rely to a great extent on personal sources for several reasons. As mass media can convey about search qualities but can communicate little about experience qualities. • Perceived risk Compare to good more risk would be involved in purchase of services. - Intangible nature - Since services are non-standardized always more uncertainty would accompany about the outcome each time it is purchased. - Services not accompanied by any warranties. EVALUATION OF SERVICE ALTERNATIVES EVOKED SET The evoked set of alternatives –that group of products a consumer considers acceptable options in a given product category -is likely to be smaller with services than goods. Reasons 1. Difference in retailing between goods and services • Retail outlet would display competing brands in close proximity • To purchase services on other hand, the consumer visits an establishment (e.g. a bank, a drycleaner or a hair salon) that almost always offer only a single “brand” for sale 12 Projectsformba.blogspot.com Services Marketing
  • 13. 2. Consumers are unlikely to find more than one or two businesses providing the same services in a given geographic area, whereas they may find numerous retail outlets carrying the identical manufacture’s product. 3. Difficulty to obtain adequate prepurchase information about services. 4. Or non professional services sometimes the consumer may perform the services for himself e.g. cleaning homes themselves against hiring housekeepers, tax preparation etc. Hence customers’ evoked set frequently includes self provision of the service. SERVICE PURCHASE AND CONSUMPTION Emotion and mood are feeling states that influence people’s (and therefore customers) perceptions and evaluations of their experiences. Moods are transient feeling states that occur at specific time and in specific situations. Emotions are more intense stable and pervasive. Any service characterized by human interaction is strongly dependent on the moods and emotions of the service providers, the service customers and the other customers, and other customers receiving services at the same time. Ways in which mood can affect the behavior of service customer • Positive moods can make customers more obliging and willing to participate in behaviors that help service encounters succeed. • Moods and emotions influence service encounters is to bias the way they judge service encounters and providers. Evaluation of service is consistent with the polarity (positive or negative) mood or emotion. • Moods and emotion affect the way information about service is absorbed and retrieved. Service marketers need to be aware of the moods and emotions of customers and service employees and should attempt to influence those moods and emotions in positive ways. SERVICE PROVISION AS DRAMA Both service provision and drama aim to create and maintain a desirable impression before an audience. The drama metaphor offers a useful way to conceive of service performances. Among the aspects of a service that can be considered in this way are: • Selection of personnel (auditioning the actors) • Training of the personnel (rehearsing) • Clearly defining the role (scripting the performance) 13 Projectsformba.blogspot.com Services Marketing
  • 14. Creating the service environment (setting the stage) • Deciding which aspect of the service should be performed in the presence of customer (on stage) • Which should be performed in the backroom (back stage) Importance Of Service Actors Increases When: • Degree of personal contact increases (as in hospital, restaurant or resort) • Services involve repeat contact and service actors have the discretion in determining the nature of the service and how it is delivered ( as in education, medical services, legal services) SERVICES ROLES AND SCRIPTS Roles are defined as combinations of social clues that guide and direct behaviors in a given setting. The success of any service performance depends in part on how well the “role set” or players- both service employees and customers- act out their roles. Service employees need to perform their roles according to expectations of the customers. The customer’s role must also be performed well. If customers are informed and educated about the expectations and requirements of the service. If customer cooperates with the service provider to deliver the best possible service, the service performance is likely to be successful. One of the factors that most influences the effectiveness of role performance is a script. A script is a coherent sequence of events expected by the individual, involving her either as a participants or as an observer. Conformance to scripts is satisfying to the customer while deviations leads to confusion and dissatisfaction. THE COMPATIBILITY OF SERVICE CUSTOMERS The mere presence of customers in churches, restaurants, bars and spectacular sports is important. If no one else shows up, customers will not get to socialize with others, one of the primary expectations in these types of services. However if number of customers becomes so dense that crowding occurs, customers may also be dissatisfied. Customers can be incompatible for many reasons – • Difference in beliefs • Values • Experience • Abilities to pay • Appearance • Age, health etc. 14 Projectsformba.blogspot.com Services Marketing
  • 15. The service marketer must anticipate, acknowledge and deal with heterogeneous customers who have the potential to be incompatible. The service marketer can also bring homogeneous customers together and solidify relationships between them. Customer compatibility is a factor that influences customer satisfaction, particularly in high contact service. POST PURCHASE EVALUATION • Attribution Of Dissatisfaction When a customer is dissatisfied with the services they purchased they may attribute their dissatisfaction to provider and also to themselves (as they participate in the service process) e.g. disappointed from a haircut ,the customer may blame -The stylist (for lack of skill) - Or herself (choosing the wrong style or not communicating her own needs) The quality of many services depends on the information the customer brings to the service encounter. e.g. - Doctor’s diagnosis depends greatly on this - Dry cleaner’s success in removing a spot depends on the customer’s knowledge of its cause (Incase of products consumer’s main form of participation is the act of purchase. Consumer may attribute failure to receive satisfaction to her own decision-making error, but hold the producer responsible for product performance.) Hence consumers may complain less frequently about services than about goods. • Innovation Diffusion The rate of diffusion of an Innovation depends on the Consumer’s Perceptions of the innovation with regard to Five Characteristics: • Relative Advantage • Compatibility • Communicability • Divisibility • Complexity 15 Projectsformba.blogspot.com Services Marketing
  • 16. Services as a group are less communicable, less divisible, more complex and probably less compatible than goods. Consumers adopt innovations in services more slowly than they adopt innovations of products. Marketers may need to concentrate on incentives to trial when introducing a new service. • Brand Loyalty The degree to which consumers are committed to particular brands of goods or services depends on a number of factors: • Cost of changing brands (switching cost) • Availability of substitutes • Perceived risk associated with the purchase • Degree to which they obtained satisfaction in past Consumers are more brand loyal with services than products. Brand loyalty has two sides. The fact that a service provider’s own customers are brand loyal is not a problem. The fact that customers of the provider’s competition are difficult to capture , however creates special challenges. Brand loyalty is described as a “ Means of economizing decision effort by substituting habit for repeated, deliberate decision.” This functions as a device for reducing the risk of consumer decision. The Role Of Culture In Services Culture is learned, shared, and transmitted from one generation to the next, and is multidimensional. Culture would include: 1. Language (both verbal and non verbal) 2. Values and attitudes 3. Manners and customs 4. Material culture 5. Aesthetics 6. Education and social institutions These cultural universals are manifestations of the “way of life” of any group of people. Service marketers must be particularly sensitive to culture because of customer contact and interaction with employees. 16 Projectsformba.blogspot.com Services Marketing
  • 17. Culture is important when we consider international services marketing – taking the service from one country and offering them in others; but it is also critical within countries. • VALUES AND ATTITUDES DIFFER ACROSS CULTURES Values and attitudes help to determine what member of a culture think is right, important, and / or desirable. Consumer behaviors flow from values and attitudes; service marketers who want their services adopted across cultures must understand these differences. E.g. US brands have ‘exotic’ appeal to other cultures, but USA cannot take it as a long-term strategy. As nationalism in some cultures could work against this. • MANNERS AND CUSTOMS Manners and customs represent a culture’s views of appropriate ways of behaving. It is important to monitor differences in manners and customs, because they can have direct affect on the service customer. E.g. Central and western European employees are perplexed by western expectations that unhappy workers put on a “happy face” when dealing with customers. • MATERIAL CULTURE Material culture consists of tangible products of culture. It is “the stuff we own” Why people own and how they use and display material possessions varies around the world. E.g. Zoos in Japan very cramped compared to USA Mortgages in Japan for houses 100yrs USA 30yrs India 20yrs • AESTHETICS Aesthetics refers to cultural idea about beauty and good taste. These are reflected in music, art, drama, and dance as well as appreciation of color and form. E.g. Earthy tones of Japanese restaurants as against glossy red evident in their Chinese competitor’s establishments. 17 Projectsformba.blogspot.com Services Marketing
  • 18. EDUCATIONAL AND SOCIAL INSTITUTIONS Both kinds of institutions are affected by and are transmission agents of culture. Education includes the process of transmitting skills and knowledge, and thus may take place in school and in less formal ‘training’ circumstances. The structure and functioning of each are heavily influenced by culture. Culture manifests itself most dramatically in the people contact or our social institutions E.g. Western way of imparting education in a session whenever you have a doubt you would ask from the instructor. But in traditional eastern set up the students would learn by being with the instructor and asking questions was not encouraged. 18 Projectsformba.blogspot.com Services Marketing
  • 19. CUSTOMER EXPECTATIONS OF SERVICE Customer expectations are beliefs about service delivery that function as standards or reference point against which performance is judged. Knowing what customer expects is the first and possibly most critical step in delivering quality service. EXPECTED SERVICE: - two levels of expectations a. Desired service: - the service customer hopes to receive - the “wished for” level of performance. b. Adequate service: - the level of service the customer will accept. Desired Service Zone of Tolerance Adequate Service Dual customer expectation levels & the zone of tolerance DESIRED SERVICE expectations seem to be the same for that defined by the customer E.g. Desired expectation of 1. Expensive restaurant a. Elegant surroundings b. Gracious employees c. Candle light d. And fine food 2. Fast food restaurant a. Quick b. Convenient c. Tasty food in clean setting The adequate service expectation level however is likely to vary for different firms within a category. E.g. Within fast food restaurant, a customer may hold higher expectations for Mac Donald’s than for Wimpy’s. 19 Projectsformba.blogspot.com Services Marketing
  • 20. ZONE OF TOLERANCE As service are heterogeneous in that performance may vary across providers, across employees from the same provider, and even within the same service employee. The extent to which customer recognizes and are willing to accept this variation is called the zone of tolerance. The zone of tolerance can be considered as the range or window in which customers do not particularly notice service performance. When it falls outside the range (either very low or very high), the services get customer’s attention in either a positive or negative way. Note: Marketer must understand not just the size and boundary levels for the zone of tolerance but also when and how the tolerance zone fluctuates within a give customer. DIFFERENT CUSTOMERS POSSESS DIFFERENT ZONES OF TOLEREANCE E.g. Busy customers who are pressed for the time and therefore desire short wait times in general would also hold a constrained range for the length of acceptable wait times. An individual customer’s zone of tolerance increases or decreases depending on a number of factors including company-controlled factors such as price. “Price increases don’t really drive up expectations. But tolerance level will become more stringent / less flexible with the increase.” ZONES OF TOLERANCE VARY FOR SERVICE DIMENSION Customer’s tolerance zones also vary for different service attributes or dimensions. The more important the factor, the narrower the zone of tolerance is likely to be. In general customers are likely to be less tolerant about unreliable service (broken promises, service errors) than other service deficiencies. 20 Projectsformba.blogspot.com Services Marketing
  • 21. Desired Service Desired Service Level of expectatio Zone of Tolerance Zone of Adequate Service Tolerance Adequate Service Most important factors Least important factors Zone of tolerance for different services ZONE OF TOLERANCE VARY FOR FIRST-TIMEAND RECOVERY SERVICE FIRST-TIME SERVICE Outcome Process RECOVERY SERVICE Outcome Process Low High Expectations 21 Projectsformba.blogspot.com Services Marketing
  • 22. The fluctuation in the individual customer’s zone of tolerance is more a function of changes in adequate service level which moves readily up and down due to situational circumstances than in desired service level, which tends to move upward incrementally due to accumulated experiences. 22 Projectsformba.blogspot.com Services Marketing
  • 23. Nature & Determinants Of Customer Expectations Of Service sensitivity to service. Enduring Service Intensifiers Explicit Service Promises Derived Expectations Advertising Personal Service Philosophies Personal Selling Contacts Other Communications Personal needs Implicit Service Promises Tangibles Transitory Service Intensifiers Price Emergencies Service Problems Word Of Mouth Personal Perceived Service Alternatives Desired Service “Expert” (Consumer Report Publicity Consultants) Self Perceives Service Role Expected Service Zone of Tolerance Past Experience Situational Factors Bad Weather Adequate Service Catastrophe Predicted Service Random Over Demand Gap 5 (Customer Gap) Perceived Service 23 Projectsformba.blogspot.com Services Marketing
  • 24. FACTORS INFLUENCING DESIRED SERVICES ENDURING SERVICE INTENSIFIERS EXPECTED SERVICE DESIRED SERVICE PERSONAL NEEDS ZONE OF TOLERANCE ADEQUATE SERVICE Personal Needs:- Those states or conditions essential to the physical or psychological well being of the customer, are pivotal factors that share the level of desired service Personal needs fall into Physical, social and psychological functional categories. Enduring Service Intensifiers:- Are individual stable factors that lead the customer to a heightened sensitivity to service Two factors under this are Derived Service Expectations Personal Service Philosophy Derived Service Expectations:- When customer expectations are driven by another person or group of people Personal Service Philosophy:- The customer’s underlying generic attitude about the meaning of services and the proper conduct of service providers 24 Projectsformba.blogspot.com Services Marketing
  • 25. e.g. Customers who have themselves been in service business would in general have strong service philosophies. CUSTOMER PERCEPTIONS OF SERVICE Perceptions are always considered relative to expectations. Customers perceive services in terms of the quality of the service and how satisfied they are overall with their experiences. Satisfaction is generally viewed as a broader concept while Service quality assessment focuses on dimensions of service. Internal and External Customer Perceptions e.g. A telephone repair person depends on services provided by the dispatchers vehicle maintenance crew, the repair person is the Internal Customer for the dispatchers and the vehicle maintenance crew. Any customer who calls up for the repair of his equipment is the External Customer for the service repair person. RELIABILITY SITUATIONAL RESPONSIVENESS FACTORS SERVICE QUALITY ASSURANCE CUSTOMER PRODUCT SATISFACTION QUALITY EMPATHY TANGIBLES PRICE PERSONAL FACTORS 25 Projectsformba.blogspot.com Services Marketing
  • 26. CUSTOMER PERCEPTIONS OF QUALITY AND CUSTOMER SATISFACTION CUSTOMER SATISFACTION Satisfaction of the customer’s evaluation of a product or service in terms of wherher that product or services has met their needs and expectations. Failure to meet needs and expectations is assumed to result in dissatisfaction with the product or service. CUSTOMER SATISFACTION IS INFLUENCED BY:- 1 PRODUCT AND SERVICE FEATURES:- Influence significantly customers satisfaction. 1. e.g. For service such as resort hotel, important features might include the pool area, restaurants, room comfort and privacy, helpfulness and courtesy of staff, room price and so forth Through focus, companies would determine what the feature and attributes are for their service and the measure perceptions of those features as well as overall satisfaction level. Customer would make trade offs among different service features (e.g. price level V/s. quality V/s. friendliness of personnel) depending on the type of service being evaluated and the criticality of the service. 2 CONSUMER EMOTIONS:- Consumer’s emotions can also affect their perceptions of satisfaction with products and services. These emotions can be stable, pre-existing emotions mood state. e.g. When you are at a very happy stage in your life (such as when you are on vacation), and your good happy mood and positive frame of mind has influenced how you feel about the services you experience. 3. ATTRIBUTIONS FOR SERVICE SUCCESS OR FAILURE:- Attributions – the perceived causes of events- influence perception of satisfaction as well. e.g. In a weight loss organization if a customer fails to lose weight as hoped for, she will likely search for the causes – was it something that she did, was the diet plan ineffective, or did circumstances simply not allow her to follow the diet regimen. 26 Projectsformba.blogspot.com Services Marketing
  • 27. For many services, customer’s atleast take partial responsibilities for how things turn out. 4 PERCEPTIONS OF EQUITY OR FAIRNESS:- customer satisfaction is influenced by perception of equity and fairness. e.g. Have I been treated fairly compared with other customers? OUTCOMES OF CUSTOMER SATISFACTION RELATION SHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY IN COMPETITIVE INDUSTRY 100 80 60 40 20 1 2 3 4 5 Very Dissatisfied Neither Satisfied Very Dissatisfied satisfied nor Satisfied dissatisfied 27 Projectsformba.blogspot.com Services Marketing
  • 28. RELATIONSHIP BETWEEN CUSTOMER SATISFACTION AND LOYALTY IN COMPETITIVE INDUSTRY SERVICE QUALITY Service quality is a focused evaluation that reflects the customer’s perception of specific dimensions of services:- Reliability, Responsiveness, Assurance, Empathy, Tangibles. PROCESS VERSUS TECHNICAL OUTCOME QUALITY Ultimately the consumers judge the quality of services on their perceptions of the technical outcome provided and on how that outcome was delivered. e.g. Restaurant customer will judge the service on her perceptions of the meal (technical outcome quality) and on how the meal was served and how the employees interacted wit her (process quality) When outcome is difficult to evaluate the customer will base their judgment of quality on process dimensions In most of the legal service or service where face to face interaction was their, courtesy was an extremely powerful signal and the level of courtesy accounted for at least 60% of the variation in how happy or angry a respondent was with the attorney. SERVICE QUALITY DIMENSION Research suggests that customers do not perceive quality as a unidimensional concept. That is, customer’s assessment of quality include perception of multiple factors. Researchers have found that consumers consider five dimensions in their assessment of service quality; • RELIABILITY:- Ability to perform the promised service dependably and accurately. • RESPONSIVENESS:- Willingness to help customers and provide prompt service. • ASSURANCE:- Employee’s knowledge and courtesy and their ability to inspire trust and confidence • EMPATHY:- Caring, individualized attention given to customers • TANGIBLES:- Appearance of physical facilities, equipment, personnel, and written material 28 Projectsformba.blogspot.com Services Marketing
  • 29. EXAMPLES OF HOW CUSTOMERS JUDGE THE FIVE DIMENSIONS OF SERVICE QUALITY CAR REPAIR INFORMATION (COMSUMER) PROCESSING(INTERNAL) Reliability Problem fixed the first time Provides needed information and ready when promised when requested Responsiveness Accessible; no waiting; Prompt response to requests; responds to requests not “Bureaucratic”, deals with problems promptly Assurance Knowledge mechanics Knowledge staff: well trained; credentials Empathy Acknowledges customers by Knows internal customers as name; remembers previous individuals; understands problems and preferences individual and departmental needs Tangibles Repair facility; waiting area; Internal reports; office area; uniforms; equipment dress of employees BUILDING BLOCKS OF SATISFACTION AND SERVICE QUALITY The service encounter or the moment of truth. Interactive marketing This is where the promises are kept or broken. Real time marketing It is from these service encounters that customers build their perceptions. SERVICE ENCOUNTER OR “MOMENTS OF TRUTH” From a customer’s point of view, the most vivid impression of service occurs in the service encounter, or the “moment of truth”. 29 Projectsformba.blogspot.com Services Marketing
  • 30. e.g. For a hotel customer service encounters are checking into the hotel, being taken into the room by a bell boy, eating a restaurant meal, requesting a wake up call, checking out. From the organizations point of view, each encounter thus presents an opportunity to prove its potential as a quality service provider and to increase customer loyalty. For Disney Amusement park – 74 customer encounters For Mariott Hotel - 4 of the top 5 factors come into play in the first 10 minutes of the guest stay. THE IMPORTANCE OF ENCOUNTERS CHECK IN BELL PERSON TAKES TO ROOM RESTAURANT MEAL WAKE UP CALL CHECK OUT A SERVICE ENCOUNTER CASCADE FOR A HOTEL VISIT TYPES OF SERVICE ENCOUNTERS A service encounter occurs every time a customer interact with the service organization: There are three types of service encounters:- 1) REMOTE ENCOUNTER 2) PHONE 3) FACE-TO-FACE 1) REMOTE ENCOUNTER:- Encounters which occur without any direct human contacts (e.g. ATM, Co having sent a bill). In this encounters the tangible evidence of the service and the technical process and systems become primary basis for judging. 30 Projectsformba.blogspot.com Services Marketing
  • 31. 2) PHONE ENCOUNTERS:- There is a greater potential variability in the interaction compared to remote encounter Tone of voice, employee knowledge, and effectiveness / efficiency in handling customer issues become important criteria for judging quality in these encounters. 3) FACE-TO-FACE ENCOUNTERS:- this is direct contact between an employee and a customer. Determining and understanding service quality issues in face-to-face counters is the most complex of all. Both verbal and non verbal behaviors are important determinants of quality, as are tangible cues such as employees dress etc. SOURCE OF PLEASURE AND DISPLEASURE IN SERVICE ENCOUNTERS Critical incidence technique is used to get customers and employees to provide verbatim stories about satisfying and dissatisfying service encounters they have experienced. With this technique, customers (either internal or external) are asked the following questions:  Think of a time when, as a customer you had a particularly satisfying (or dissatisfying) interaction with –  When did the incidence happen?  What specific circumstances led up this situation?  Exactly what did the employee (firm) say or do?  What resulted that made you feel the interaction was satisfying (or dissatisfying)?  What could or should have been done differently? On this basis of thousands on service encounter stories, four common themes- 1) RECOVERY (after failure) 2) ADAPTABILITY 3) SPONTANIETY 4) COPING Have been identified as the sources of customer satisfaction / dissatisfaction in memorable service encounter. 1) RECOVERY : Employee response to service delivery system pailures 2) ADAPTABILITY: Employee response to customer needs and requests 31 Projectsformba.blogspot.com Services Marketing
  • 32. 3) SPONTANEITY: Unprompted and unsolicited employee action 4) COPING: Employee response to problem customers GENERAL SERVICE BEHAVIORS – DO’S AND DON’T THEME DO DON’T Recovery Acknowledge problem Ignore customer blame explain causes apologize customer leave customer to “fend for him/herself” Compensate / upgrade Downgrade layout options Act as if nothing Take responsibility “Pass the buck” Adaptability Recognize the seriousness Ignore of the need acknowledge Promise, but fail to follow Anticipate through show unwillingness to try Attempt to accommodate Embarrass the customer Adjust the system laugh at the customer avoid responsibility “pass Explain rules / policies the buck” take responsibility Spontaneity Take time be attentive Exhibit impatience ignore anticipate needs listen yell / laugh / swear steal provide information show from customer empathy discriminate Coping Listen Take customer’s dissatisfaction personally Try to accommodate Let customer’s dissatisfaction affect others Explain let go of the customer 32 Projectsformba.blogspot.com Services Marketing
  • 33. BUILDING CUSTOMER RELATIONSHIP RELATIONSHIP MARKETING There has been a shift from a transactions to a relationship focus in marketing. Customers become partners and the firm must make long-term commitments to maintaining those relationships with quality, service and innovation. Relationship marketing essentially represents a paradigm shift within marketing- Away from an acquisitions / transactions focus toward a retention / relationship focus. Relationship marketing (or relationship management) is a philosophy of doing business, a strategic orientation, that focuses on keeping and improving current customers, rather than acquiring new customers. Historically, marketers have been more concerned with acquisition of customers, so a shift to a relationship strategy often represents : • Change in mind set • Organizational culture • And employee reward systems. GOALS OF RELATIONSHIP MARKETING The primary goal of relationship marketing is to build and maintain a base of committed customers who are profitable for the organization. To achieve this goal, the firm will focus on the attraction, retention and enhancement of customer relationships. ENHANSING RETAINING SATISFYING ACQUIRING 33 Projectsformba.blogspot.com Services Marketing
  • 34. CUSTOMER GOALS OF RELATIONSHIP MARKETING Loyal customers not only provide a solid base for the organization, they may represent growth potentials. BENEFITS OF CUSTOMER / FIRM RELATIONSHIPS Both parties benefit i.e., customer / firm from customer retention. It is not only in the best interest of the organization to build and maintain a loyal customer base, but customers themselves also benefit from long-term associations. BENEFITS FOR CUSTOMERS Customers will remain loyal to a firm when they receive greater value relative to what they expect from competing firms Value represents a trade-off for the consumer between the “given” and the “get” components. Consumers are more likely to stay in a relationship when the gets (quality, satisfaction, specific benefits) exceed the gives (monetary and non monetary costs) Beyond the specific inherent benefits of receiving service value, customers also benefit in other ways from long term associations with firm. Research has uncovered specific types of relational benefits, these are:- • CONFIDENCE BENEFITS • SOCIAL BENEFITS • SPECIAL TREATMENT BENEFITS CONFIDENCE BENEFITS These benefits comprise feelings of trust or confidence in the providers, alongwith a sense of a reduced anxiety and comfort in knowing what to expect. Across all of the services studied in the research just cited, confidence benefits were the most important to customers. e.g. Child Care Provider Once the child care has been identified and established a satisfying relationship with a good caregiver family stress is reduced and the quality of life improved. SOCIAL BENEFITS Overtime, customers develop a sense of familiarity and even a social relationship with their service providers. 34 Projectsformba.blogspot.com Services Marketing
  • 35. In some long-term customer / firm relationship a service provider may actually become part of the customer’s social support system. A quote from the research where a customer describes her hair stylist: “I like him….. he’s really funny and always has lots of good jokes. He’s kind of like a friends now…..it’s you’re used to. You enjoy doing business with them”. SPECIAL TREAMTEMT BENEFITS Special treatment includes such things as getting the benefit of doubt, being given a special deal or price, getting preferential treatment. e.g. Doctor asking you to come is minutes before starting his consultation with the customers. BENEFITS FOR THE ORGANISATIONS The benefits to an organization of maintaining and developing a loyal customer base are numerous. They can be linked directly to the firm’s bottom line. • INCREASING PURCHASES • LOWER COSTS • FREE ADVERTISING THROUGH WORD OF MOUTH • EMPLOYEE RETENTION LIFE TIME VALUE OF A CUSTOMER Life time value of a customer is a concept or calculation that looks at customer from the point of view of their lifetime revenue and profitability contributions to a company. ESTIMATING LIFETIME VALUE If companies knew how much it really costs to lose a customer, they would be able to make accurate evaluations of investments designed to retain customers. e.g. Tom Peters calculated lifetime value of his small firm (20 person office) as a customer of Federal Express as follows Business from Tom Peters office per month $ 1500 Assuming a 10-year average lifetime for a customer in the express mail industry, the value $ 1500 / month x 12 month / year x 10 years = $180000 Going further, a happy customer will create at least one new customer via word of mouth $ 180,000 x 2 (New customers) = $ 360,000 35 Projectsformba.blogspot.com Services Marketing
  • 36. Thus the value of his company’s business for Federal Express was about $ 360,000 It is estimated that the average fed ex delivery person stops at 40 business the size of Peter’s business each day $ 360,000 / company x 40 companies $ 14,000,000 Thus the average employee of Federal Express is managing a $ 14,000,000 portfolio of lifetime business for the company. THE CUSTOMER ISN’T ALWAYS RIGHT THE WRONG SEGMENT: A company cannot target its services to all customers; some segments will be more appropriate than the others. It would not be beneficial to either the company or the customer to establish a relationship with the customer whose needs the company can’t meet. e.g; a resort company which gets the old people and young crowd together at the same time at the resort. NOT PROFITABLE IN THE LONG TERM : some segments of the customers will not be profitable for the company even if their needs can be met by the services offered. e.g; a credit card company will not like deal with the customer who doesn’t pay the bills on time or someone who doesn’t uses it to an extent the company expect. DIFFICULT CUSTOMER: some customers put huge demands on the company and as such company would not be Interested in such customer. Eg. Some ad agencies say that some clients would make them do lot many presentations and finally at times award the contracts to someoneelse who is known to them. 36 Projectsformba.blogspot.com Services Marketing
  • 37. SERVICE RECOVERY Service Recovery refers to the action taken by an organization response to a service failure. Failure occurs for all kinds of reasons - The service may be unavailable when promised - It may be delivered late or too slowly - The outcome may be incorrect or poorly executed - Employees may be rude or uncaring All of these types of failures bring about negative feelings and responses for the customers. Left Unfixed - They can result in customers leaving - Telling other customers about their negative experiences - Even challenging the organization through customers rights organizations or legal channels Research has shown that resolving customer problems effectively has a strong impact on - Customer satisfaction - Loyalty - Bottom line performance It has been observed that customers who experience service failures, but are ultimately satisfied based on recovery efforts by the firm, will be more loyal than those whose problems are not resolved. Those who complain and their problems resolved quickly are much more likely to repurchase than are those whose complaints were not resolved. Those who never complain are likely least likely to repurchase 37 Projectsformba.blogspot.com Services Marketing
  • 38. Unhappy Customers 9% who donot complain 37% Unhappy customers who do complain 19% Complaints not resolved 46% 54% Complaints 70% resolved Complaints resolved 82% quickly 95% Percentage of Customers who will buy again 38 Projectsformba.blogspot.com Services Marketing
  • 39. An effective Service Recovery strategy can - Increase customer Satisfaction and Loyalty - Generate positive Word of Mouth A well designed, well documented services strategy also provides information that can be used to improve service as part of a continuous improvement effort Ineffective Service Recovery Strategies can lead to customers who are so dissatisfied they become “Terrorist”, actively pursuing opportunities to openly criticize the company. Repeated Service Failures without an effective Recovery Strategy in place can aggravate even the best employees. The costs in Employee Morale and even lost employee can be huge. THE RECOVERY PARADOX It is suggested that customers who are dissatisfied, but experience a high level of excellent service recovery, may ultimately be even more satisfied and more likely to repurchase than are those who were satisfied I the first place. The logical but not very rational conclusion is that companies should plan to disappoint customers so that they can recover and gain even greater loyalty from them as a result. This idea has become known as the RECOVERY PAPADOX. Recovery Paradox is more complex than it may seem on the surface. 1 It is expensive to fix mistakes. 2 Empirical Research suggests that only under the very highest levels of customers’ Service Recovery ratings will we observe increased satisfaction and loyalty. It is safe to say that “ Doing it right the first time “ is still the best and safest strategy. However, when a failure does occur, then every effort at a superior Recovery should be made to mitigate its negative effects. In cases where the failure can be fully overcome, the failure is less critical, or the Recovery Effort is clearly superlative, it may be possible to observe evidence of the Recovery Paradox. 39 Projectsformba.blogspot.com Services Marketing
  • 40. How Customers Respond To Service Failures Service Failure Dissatisfaction/ Negative Emotions Complaint Action No Complaint Action Complain to Negative word Third Party Provider of mouth Action Exit/Switch Stay Exit/Switch Stay 40 Projectsformba.blogspot.com Services Marketing
  • 41. Customer Complaint Action Following Service Failure Variety of negative emotions can occur following a service failure, including such feelings as anger, discontent, disappointment, self pity and anxiety. These initial negative responses will affect how customers evaluate the Service Recovery effort and presumably their ultimate decision to return to the service provider or not. Many customers are very passive about their dissatisfaction, simply saying or doing nothing. It is known that those who donot complain are least likely to return. For companies, customer passivity in the face of dissatisfaction is threat to future success. TYPES OF CUSTOMER COMPLAINT ACTIONS If customers initiate actions following service failure , the action can be of various types as shown in the Fig. From company’s point of view any customer who complains on the spot is the best case scenario. Company has the chance to respond immediately. If they don’t complain immediately, customers may choose to complain later to the provider by phone or in writing, or even write or call the corporate offices of the company. In all the above cases, the company has a chance to recover. These Proactive types of complaining behavior is preferred as voice responses or Seeking Redress. TYPES OF COMPLAINERS Four categories on how the customers respond to failures have been identifies. These categories are: (1) Passives (2) Voicers (3) Irate (4)Activist (1) Passives: This group of customers is least likely to take any action . - They are unlikely to say anything to the provider - Less likely than others to spread negative Word of Mouth, unlikely to complain to third party. - They often doubt the effectiveness of complaining, thinking the consequences will not merit the time and the effort they will expend. 41 Projectsformba.blogspot.com Services Marketing
  • 42. (2) Voicers: These customers actively complain to the service provider - Less likely to spread the negative word of mouth, to switch patronage, or to go to third parties with their complaints. - These customers to be viewed as the service providers friend. - Actively complain and give company a second chance. - They believe complaining has social benefits and therefore don’t hesitate to voice their opinion. (3) Irates: These customers are more likely to engage in negative word of mouth to friends and relatives and to switch providers than are others. - They feel alienated from the market place. - They are angry with the service provider although they do believe that complaining to the service provider can have a social benefits. - They are less likely to give the service provide a second chance. (4) Activists: These consumers are characterized by above average propensity to complain on all dimensions. - They will complain to the provider, they will tell others, and they are more likely than any other group to complain to third parties. - They have a very optimistic sense of the potential positive consequences of all types of complaining. WHY DO ( AND DON’T) PEOPLE COMPLAIN? The categories just described suggest that some customers are more likely to complain than others. As individuals, these customers believe that positive consequences may occur and that there are social benefits of complaining, and their personal norms support their complaining behavior. They believe they will and should be provided compensation for the service failure in some form. They believe that fair treatment and an good service are their due, and that in case of service failure, someone should make good. In some cases they feel a social obligation to complain – to help others avoid similar situations or to punish the service provider. A very small number of consumers have “ complaining” personalities – they just like to complain or cause trouble. Those who are unlikely to take any action hold the opposite beliefs. 42 Projectsformba.blogspot.com Services Marketing
  • 43. They often see complaining as a waste of their effort . WHEN THEY COMPLAIN, WHAT DO CUSTOMERS EXPECT Customers want justice and fairness in handling their complaints Customers are looking for: OUTCAME FAIRNESS PROCEDURAL FAIRNESS INTERACTIONAL FAIRNESS 1. Outcome Fairness: They expect equity in the exchange- i.e. they want to feel that the company has “Paid” for its mistakes in a manner at least equal to what the customer has suffered. The company’s “ punishment should fit the crime”. They also appreciate it when a company gives them choices in terms of compensation. E.g. A hotel guest should be offered the choice of a refund or free upgrade to a better room in compensation for a room not being available on arrival. On the other hand, customers can be comfortable if they are overly compensated. E.g. Domino’s Pizza offered not to charge if the driver arrived after 30 minutes guarantee delivery time. Many customers were not comfortable asking for this level of compensation, especially if the driver was only few minutes late. 2. Procedural Fairness: In addition to fair compensation, customers expect fairness in terms of policies, rule and timeliness of the complaint process. They want easy access to the complaint process and they want things handled quickly, preferably by the first person they contact. Fair procedures are characterized by clarity, speed and absence of hassles. Unfair procedures are those that customers perceive as slow, prolonged and inconvenient. Customers also feel it is unfair if they have to prove their case- when the assumption seems to be they are wrong or lying until they can prove otherwise. 3. Interactive Fairness: Customers expect to be treated politely, with care and honesty. This form of fairness can dominate the others if customers feel the company and its employees have uncaring attitudes and have done little to try to resolve the problem. Often rude and uncaring behavior of employees is due to lack of training and empowerment- a frustrated, frontline employee who has no authority to compensate the customer may 43 Projectsformba.blogspot.com Services Marketing
  • 44. easily respond in an aloof and uncaring manner, especially if the customer is angry and/or rude. SWITCHING VERSUS STAYING FOLLOWING SERVICE RECOVERY Ultimately, how a Service Recovery failure is handled and the customer’s reaction to recovery effort can influence future decisions to remain loyal to the service provider or to switch to another provider. The more serious the failure, the more likely the customer to switch no matter what the recovery effort. The nature of the Customer’s Relationship with the firm may also influence whether the customer stays or switches providers. There are three types of relationships viz. -“True Relationships” where the customer has had repeated contact overtime with the same service provider. These customers are more forgiving of poorly handled service failures and are less likely to switch than others. - “First Time Encounter” Relationship is where the customer has had only one contact, on a transaction basis, with the provider. These customers are more likely to change. - “Pseudo Relationship” is one where the customer has interacted many times with the same company, but with different service provider (people) each time. Individual customer’s attitude towards switching will strongly influence whether he or she ultimately stays with the provider. Thus certain customers will have greater propensity to switch service providers no matter how their Service Failure situations are handled. Finally, the decision to switch to a different service provider may not occur immediately following service failure or poor service recovery, but may follow an accumulation of events. The service switching can be viewed as a process resulting from a series of decisions and critical service encounters overtime, rather than one specific moment in time when a decision is made. 44 Projectsformba.blogspot.com Services Marketing
  • 45. This process orientation suggests that companies could potentially track customer interactions and predict the likelihood of defection based on a series of events. By intervening earlier in the process companies can prevent at time customer’s decision to switch. SERVICE BLUEPRINTING Services commonly lack concrete specifications. Products on the other hand are produced with concrete and detailed plans, written specifications and engineering drawings. A Service ,even a complex one, might be introduced without any formal, objective depiction of process. A Service Blueprint is a picture or map that accurately portrays the service system. This is to assume that the different people involved in providing it can understand and deal with it objectively regardless of their individual points of view. Blueprints are particularly useful at the design and redesign stage of development. A Service Blueprint visually displays the service by simultaneously depicting the process of service delivery, the points of customer contact, the roles of customers and employees, and the visible elements of the service. Process Service Points of Contacts Blueprint Evidence Service Blueprinting Blueprint Components The key components of Service Blueprints are shown in the fig. They are Customers actions, “ On Stage” Contact Employee Actions, “BackStage” Contact Employee Action and Support processes. 45 Projectsformba.blogspot.com Services Marketing
  • 46. Physical Evidence Customer Actions Line of Interaction On Stage Contact Employees Actions Line Of Visibility Back Stage Contact Employee Actions Line of Internal Interaction Support Processes SERVICE BLUEPRINT COMPONENTS The customer actions area encompasses the steps, choices, activities and interactions that the customer performs in the process of purchasing, consuming and evaluating the service. E.g. Ina legal services the customer actions might include a decision to contact an attorney, phone calls to the attorney, face to face meetings, receipt of documents and receipt of bill. Onstage Employee actions are the steps and activities that the contact employee performs that are visible to the customer. Backstage employee actions are the steps and actions that occur behind the scenes to support the on stage activities. 46 Projectsformba.blogspot.com Services Marketing
  • 47. The support processes cover the internal services, steps and interactions that take place to support the contact employees in delivering the service. Line of Interaction represents the direct interactions between the customer and the organization. Anytime a vertical line crosses the horizontal line of interaction, a direct contact between the customer and the organization or a service encounter has occurred. Line of Visibility separates all service activities that are visible to the customer from those that are not visible. Line of Internal Interaction separates contact employee activities from those of other service support activities and people. Vertical Lines cutting across the line of Internal Interaction represent internal service encounters. 47 Projectsformba.blogspot.com Services Marketing
  • 48. MARKETING INFORMATION SYSTEM Marketing Information System is defined as an assembly of inter-related information subsystems: receiving, processing and disseminating information on a continued basis to help make marketing decision. Type of Research Primary Research Objectives Complaint solicitation To identify/attend to dissatisfied customers To identify common service failure points Critical incident studies To identify “best practices” at transaction level To identify customers requirements as input for qualitative studies To identify common service failure points To identify systemic strengths and weaknesses in customer-contact services Requirements To identify customer requirements as input for research qualitative research Trailer calls To obtain immediate feedback on performance of service transactions To measure effectiveness of changes in service delivery To assess service performance of individuals and teams To use as input for process improvements To identify common service failure points Service expectation meetings and reviews To create dialogue with important customers To identify what individual large customers expect and then to assure that it is delivered To close the loop with important customers Process checkpoint evaluations To determine customer perceptions of long term professional services during service provision To identify service problems and solve them early in the service relationship Market –oriented ethnography To research customers in natural settings To study customers from cultures other than your home country 48 Projectsformba.blogspot.com Services Marketing
  • 49. Type of Research Primary Research Objectives Mystery To measure individual employee performance shopping for evaluation , recognition and rewards To identify systemic strengths and weaknesses in customer-contact services Customer To monitor changing customer expectations panels To provide a forum for customers to suggest and evaluate new service ideas Lost customer research To identify reasons for customer defection Database marketing research To identify the individual requirements of customers using information technology and database information Future expectations To forecast future expectations of customers research To develop and test new service ideas 49 Projectsformba.blogspot.com Services Marketing
  • 50. EMPLOYEES’ ROLE IN SERVICE DELIVERY CUSTOMER Service Delivery COMPANY Service Performance Gap Customer-Driven Service Designs and Standards The Critical Importance of Service Employees It is very important to focus on employees because : • They are the service • They are the organization in the customer’s eyes • They are the brands • They are the marketers 50 Projectsformba.blogspot.com Services Marketing
  • 51. In many cases , the contact employee is the service – there is nothing else. E.g. in most personal and professional services (like haircutting, physical trainers, child care , cleaning /maintenance etc.) the contact employees provide s the entire service single handedly. The offering is the employee. Thus investing in the employee to improve the service parallels making a direct investment in the improvement of a manufactured product. Because contact employees represent the organization and can directly influence customer satisfaction, they perform the role of marketers. They physically embody the product and are the walking billboards from the promotional point of view. Whether acknowledged or not , actively selling or not, service employees perform marketing functions. They can perform these functions well, to the organization’s advantage, or poorly to the organization’s detriment. Employee Satisfaction, Customer Satisfaction and Profits There is a concrete evidence that satisfied employees make for satisfied customers (satisfied customers can, in turn, reinforce employees’ sense of satisfaction in their jobs). Some have gone so far as to suggest that unless service employees are happy in their jobs, customer satisfaction will be difficult to achieve. Research has shown that both a climate for service and a climate for employee well-being are highly correlated with overall customer perceptions of service quality. The Service Profit Chain BOUNDARY-SPANNING ROLES The front-line service employees are referred to as boundary spanners because they operate at the organization’s boundary. They provide link between the external customer and environment and 51 Projectsformba.blogspot.com Services Marketing
  • 52. internal operations of the organization. They serve the critical function in understanding , filtering and interpreting information and resources to and from the organization and external constituencies. Who are these boundary spanners? What type of people and positions comprise critical boundary- spanning roles? Their skills and experience cover the full spectrum of jobs and careers. In industries such as fast food, hotels, telecommunication, and retail, the boundary spanners are the least skilled, lowest paid employees in the organization. They are order takers, front desk employees, telephone operators, store clerks, truck drivers, and delivery people. In other Industries, boundary spanners are well paid, highly educated professionals – for example, doctors, lawyers, accountants, consultants, architects, and teachers. No matter what the level of skill or pay, boundary-spanning positions are often high-stress jobs. These positions require: • Mental Labor • Physical Labor • Emotional Labor Emotional Labor This refers to the labor that goes beyond the physical or mental skills needed to deliver quality service. It means delivering smiles, making eye contact, showing sincere interest, and engaging in friendly conversation with people who are essentially strangers and who may or may not ever see again. Friendliness, courtesy, empathy, and responsiveness directed towards customers all require huge amount of emotional labor from the front-line employees who shoulder the responsibility for the organization. Emotional Labor draws on people’s feeling (often requiring them to suppress their true feelings) to be effective in their jobs. A front-line service employee who is having a bad day or isn’t feeling just right is still expected to put on the face of the organization when dealing with customers. The organizations need to carefully selecting the people who can handle emotional stress, training them in needed skills (like listening and problem solving), and teaching or giving them coping abilities and strategies (via job rotation, scheduled breaks, teamwork or other techniques). SOURCES OF CONFLICT Front-line employees often face interpersonal and interorganizational conflicts on the job. Their frustration and confusion can, if left unattended, lead to stress, job dissatisfaction, a diminished ability to serve customers, and burnout. 52 Projectsformba.blogspot.com Services Marketing
  • 53. As these employees represent the customer to the organization and often need to manage a number of customers simultaneously, front liners inevitably have to deal with conflicts, including person/role conflicts, organization/client conflict, and inter-client conflicts. 1. Person/Role Conflicts : In some situations the front-line employees 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 to wear specific clothing or change some aspect of their appearance to confirm to the job requirements. E.g A young lawyer, just out of college may feel an internal conflict with his new role when his employer requires him to cut his long hair and trade his casual clothes for three piece suit. 2. Organization/Client Conflict : A more common type of conflict for front-line service employees is the conflict between their two bosses, the organization and the individual customer. Service employees are typically rewarded for following certain standards , rules, and procedures. Ideally these rules and standards are customer based. When they are not, or when a customers makes excessive demand, the employee has to choose whether to follow the rules or satisfy the demands. So an employee has two bosses one customer and one in the organization to whom he is reporting. These conflicts are especially severe when service employees depend directly on the customer for income. E.g. employees who depend on tips or commissions are likely to face greater levels of organization/client conflict because they have even greater incentives to identify with the customer. 3. Interclient Conflict : Sometimes conflict occurs for boundary spanners when there are incompatible expectations and requirements from two or more customers. This occurs most often when the service provider is serving the customers in turn (a bank teller, a ticketing agent, a doctor) or is serving many customers simultaneously (teachers, entertainers). In case of serving customers in turn , the service provider may satisfy one customer by spending additional time, customizing the service , and being very flexible in meeting the customer’s needs> Meanwhile, waiting customers are becoming dissatisfied because their needs are not being met in a timely manner. Beyond the timing issue, different clients may prefer different modes of service delivery. Having to serve one client who prefers personal recognition and a degree of familiarity in the presence of another client who is all business and would prefer little interpersonal interaction can also create conflict for the employee. In the case of serving many customers at the same time, it is often difficult or impossible to serve the full range of needs of a group of heterogeneous customers simultaneously. This type of conflict is readily apparent in any college classroom where the instructor must meet a multitude of expectations and different preferences for formats and style. 53 Projectsformba.blogspot.com Services Marketing
  • 54. Strategies for Closing GAP 3 A complex combination of strategies is needed to ensure that service employees are willing and able to deliver quality services and that they stay motivated to perform in customer-oriented, service minded ways. These strategies for enabling service promises are often referred to as internal marketing . Even during slow economic times, the importance of attracting, developing, and retaining good people in knowledge and service based industries cannot be overemphasized. 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 towards closing gap3. To build a customer-oriented ,service-minded workforce, an organization must : • Hire the right people • Develop people to deliver service quality • Provide the needed support systems • Retain the best people 54 Projectsformba.blogspot.com Services Marketing
  • 55. HUMAN RESOURCE STRATEGIES FOR CLOSING GAP3 Hire for service competencies Compete and service Be the for the inclination preferred best employer people Measure and Train for reward strong Hire the right technical and service people interactive skills Develop Treat Retain the Customer- people to employees best Oriented deliver Empower as people Service service employees customers Delivery quality Provide needed Include Promote support employees systems teamwork in the company’s vision Develop service- Provide Measure internal oriented supportive service quality internal technology processes and equipment CUSTOMER’S ROLES IN SERVICE DELIVERY Service customers are often present in the “factory” (the place the service is produced and/or consumed), interacting with employees and with other customers. E.g In a classroom or training situation, students (customers) are sitting in the factory interacting with the instructor and other students as they consume the educational services. Since these customers are present during service production, customers can contribute to or detract from the successful delivery of the service and to their own satisfaction. The Importance of Customers in Service Delivery Customer participation at some level is inevitable in service delivery. Services are actions or performances, typically produced and consumed simultaneously. In many situations employees, customers and even others in the service environment interact to produce the ultimate service outcome. 55 Projectsformba.blogspot.com Services Marketing
  • 56. Because the customers receiving the service participates in the delivery process, he or she can contribute to gap 3 through appropriate or inappropriate, effective or ineffective , productive or unproductive behaviors. Customers who are unprepared in terms of what they want to order can soak up the customer service representative’s time as they seek advice. Similarly, shoppers who are not prepared with their credit cards can “put the representative on hold” while they search for their credit cards or go to another room or even out of their cars to get them. Meanwhile, other customers and calls are left unattended, causing longer wait times and potential dissatisfaction. The level of participation – low, medium, high – varies across services. In some cases, all that is required is the customers physical presence (low level of participation), with the employees of the firm doing all of the service production work, as in case of a ghazal concert. The listeners must be present to receive the entertainment service. In other cases, consumer inputs are required to aid the service organization in creating the service (moderate level of participation). Inputs can include information, effort or physical possessions. All three of these are required in case for a CA to prepare a client’s income tax return effectively. Information in the form of tax history, marital status, and number of dependents. Effort in putting the information together in a useful fashion. Physical Possessions such as receipts and past tax returns. Incase of long term consulting engagements involvement of the customers high as they co create the service. 56 Projectsformba.blogspot.com Services Marketing
  • 57. LEVELS OF CUSTOMER PARTICIPATION ACROSS DIFFERENT SERVICES Low: Consumer Presence Moderate : Consumer High : Customer Concretes the Required during Service Inputs Required during Service Product delivery Service Creation Products are standardized . Client inputs customize a Active client participation standard service. guides the customized service. Service is provided regardless Provision for service requires Service cannot be created apart of any individual purchase. customer purchase. from the customer’s purchase and active participation Payment may be the only Customer inputs Customer inputs are mandatory required customer input. (information, materials) are and concrete the outcome. necessary for an adequate outcome, but the service firm provides the service End Consumer Examples Airline travel Haircut Marriage counseling Motel stay Annual physical test Personal training Fast-food restaurant Full-service restaurant Weight reduction program Major illness or surgery Business-to-Business Customers examples Uniform cleaning service Agency-created advertising Management consulting Pest Control campaign Executive management seminar Interior greenery maintenance Payroll service Installation of computer service Freight transportation network OTHER CUSTOMERS In many service contexts customers receive the service simultaneously with other customers or must wait their turn while other customers are being served. In both cases, “other customers” are present in the service environment and can effect the nature of the service outcome or process. Other customers can either enhance or detract from customer satisfaction and the perception of quality. 57 Projectsformba.blogspot.com Services Marketing