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Group8 SecB Caterpillar
Group8 SecB Caterpillar
It provides a wide range of products used in many different industries. Major machine
applications address earth- moving needs, urban and general construction, earth moving
projects, material handling of quarries and industrial applications, diesel engines and power
generators. The company also offers many services that complement its products. This includes
refurbish used machine and engine components into like new condition, financing and
insurance services for equipment owners, equipment rental and logistic services.
The principal advantage of this company over its competitors is its dealers which form a
distribution unmatched in the industry. But at present, it faces a danger of not meeting its five
year growth targets unless it moves from a product focus to customer focus.
The vision of the company is to develop and deploy a plan for services that could be sold with
Caterpillar’s heavy equipment in the form of customer service agreements (CSA). It is currently
facing the difficulties including lack of consistency across Latin American counties, inability to
deliver and calculate costs and benefits of CSAs. The company has used the Gap model of
service marketing to figure out the nature and impact of each gap on customer experience,
brand positioning and service differentiation. The company decided to conduct a pilot program
for CSAs by working through the gaps model at three dealers in Latin America. Each dealer
assigned project leaders from their dealerships that served as members of the core project
team. After completing the assessment of service gap, the key issues of the four gaps were
identified. The company after analyzing is planning to develop, design and deliver CSAs in the
three dealerships by covering the gaps identified.
Question 1
What else do you need to learn in the Listening Gap (Gap 1) about customer needs and
expectations? LACD had general information from the customer value surveys, but this
information did not tell them what service features customers expected in the CSAs. What
were they and how could they find out? In particular, how could they find out what they
needed to know to established standards in the Design and Standards Gap (Gap 2)?
Gap 1 is the difference between customer expectations and company perceptions of those
expectations. Customer expectation is what the customer expects according to available
resources and is influenced by cultural background, family lifestyle, A-I-O (Attitudes, Interests,
and Opinions), personality, demographics, advertising, experience with similar products and
information. In a customer orientated strategy, delivering a quality service for a specific product
should be based on a clear understanding of the target market. Understanding customer needs
and knowing customer expectations could be the best way to close the gap. In the given
scenario, Caterpillar’s understanding of customer expectations only included data from Surveys.
To find out what they needed to know, their understanding of the Listening Gap should have
included the following:-
Source: Parasuraman, A., Zeithaml, V.A., Berry L.L. 1985. A Conceptual of Service Quality and its Implications
for Future Research. Journal of Marketing 49, 41-50.
Question 2
Should they offer different CSAs to the different segments of general construction? What
would that imply for research, standards, and implementation?
Yes. Customer Service Agreements are flexible contracts that include virtually any services
customer wanted and the dealers could provide. Caterpillar should offer different CSAs to
different segments of general construction as per their needs and requirements.
Brand Essence
Benefits
Discriminator
Customer Insight
Competitive
Target
Environment
COMPETITIVE ENVIRONMENT
TARGET
CUSTOMER INSIGHT
It highlights the latent need behind a customer buying CSA and also finds out why a customer
would not buy it.
Reliability Assurance
Perform promised Inspire trust and Tangibles
service dependably confidence to Service physicality
and accurately customers
Empathy Responsiveness
Individual attention Willingness to provide
to customers prompt service
REASONS TO BELIEVE
Existing brand name of Caterpillar
Caterpillar dealers form a distribution channel unmatched in the industry and the dealer
network gives them a competitive advantage.
Customer Loyalty due to quality service provided by field technicians and
recommendations given on the machine conditions.
DISCRIMINATOR
Use of trained expertise to deliver promises with prompt customized services and quality
machine condition advice
BRAND ESSENCE
The essence can be captured in “Prompt Customized Service”
Question 3
What standards and measures should be set in the Design and Standards Gap (Gap 2) to deliver
to customer expectations? How formal should they be? How should LACD create and design
the new CSAs? How should they get everyone in the dealerships to learn about them and get
on board to deliver them?
The company should make use of both Hard as well as Soft Standards to deliver to the
Customer Expectations.
Hard Soft
On time delivery
Standards Standards Interpersonal skills of
-Number of field technicians
equipments left
- Listen
- Number of late or
missed service - Take ownership of
request processing call
- Ship to target - Be knowledgeable
Responsiveness
- Provide human
Problems fixed after assistance when
first time customer reports
problem
Product compliance to
requirements
Resolution of
- Order accuracy
problems
- Resolve problems at
Machine inspection first visit
and monitor condition
- Communicate and
of tractor
give adequate
- Increased number of instructions
personal visits - Take all the time
necessary
Caterpillar LACD should create and design the CSAs such that they are able to address the
Service Design and Standards Gap (Gap 2). The Gap 2 occurs due to the following:-
1. Poor service design
a. Unclear, undefined service design
b. Badly designed service design
c. Unsystematically process of new service development
2. Absence of customer defined standards
a. Standards are not defined respecting customers’ demands
b. There is no procedural management focusing upon customers’ demands
c. Lack of formalised processes needed for installation of adequate goals of service
quality.
3. Inappropriate physical evidence and servicescape
a. Failure to develop perceptible values in accordance with customers’
expectations
b. Service ambience is not created to suit the needs of customers and employees
c. Inadequacy when innovating the ambience and undertaking necessary
reparations
The company may make use of SERVQUAL surveys to understand the customer’s relationship
with the company (soft measurements) and determine the appropriate standards.
WHAT do we need
WHEN
to communicate?
communication
needs to take
place?
To avoid ambiguities and possible misperceptions of service, Caterpillar should opt for more
Formal standards to enhance the delivery of their offerings. This will ensure uniformity across
all dealers and locations and may improve the image of the company w.r.t. CSAs.
To get everyone to learn about CSAs and get on board to deliver them, Caterpillar may adopt
the following techniques:-
Provide Regular Communications to Dealerships
Offer Training and Education
Create Systems and Online Portals
Ask for Feedback and Input from Dealerships
Revise existing systems based on Feedback
Question 4
How should the dealerships overcome all the Performance Gap (Gap 3) issues that they faced in
order to insure consistent delivery?
The service performance gap is the discrepancy between the development of customer-driven
service standards and actual service performance by company employees. This gap means that
quality specifications are not met by performance in the service production and delivery
process. The reasons for the emergence of Gap 3 are the following:
Oversights in the human resources management:
o Bad reputation
o Unclear roles and conflict of interests
o Poor system of evaluation and praising
o Lack of team work, inadequate jurisdiction
Poor cooperation of customers
o Customers do not understand or do not know what their role and responsibility
in the service process are
o Customers make a negative influence among themselves
Problems with servicing agents:
o Conflicts concerning aims and performances;
o Problems with the control of quality and consistency;
o Conflicts concerning jurisdiction and controls
Badly harmonized offer and demand
o Failure to soften the demanding extremes;
o Poor choice of customers/segments;
o Excessive reliance upon the price when balancing the demand.
Communication is the most visible or intrusive of marketing activities but its value is limited
unless it is used intelligently in conjunction with other marketing efforts. In a service setting,
marketing communications tools are especially important because they help create powerful
images and a sense of credibility, confidence and reassurance. Prospective customers may need
information and advice about what service options are available to them, where and when
these services are available, how much they cost and what specific features, functions and
service benefits they offer. Because services are performances rather than objects, their
benefits can be difficult to communicate to customers, especially when the service in question
does not involve any tangible actions to customers or their possessions. The implications of
such difficulties and advertising strategies are discussed in the figure below.
Address
Service
Intangibility
Manage
Internal Manage
Marketing Service
Communica Goal: Service Promises
tion Delivery
equal to or
greater than
promises
Manage
Manage
Customer
Customer
Expectation
Education
s
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