Khaled Mahmud

IBA, University of Dhaka


Intermediate Customer/ trade customer

Ultimate customer

A type of economic activity that is intangible, is not
stored and does not result in ownership.

A service is consumed at the point of sale.


Healthcare - Hospital,, medical practice, dentistry,

Professional Services - Accounting,, legal, architectural

Financial Services - Banking,, investment advising, insurance

Hospitality - Restaurant,, hotel/motel, bed & breakfast

Travel - Airline, travel agency, theme park

Others - Hair styling, pest control, plumbing, lawn maintenance,

counseling services, health club, interior design
Sector 1980-81 1990
1990-91 2000-2001 2009- 2013-
2010 2014
Agriculture 33.07 29.23 25.03 20.29 17.20

Manufacturing 17.13 21.04 26.20 29.93 28.90

Service 49.62 49.73 48.77 49.78 53.90

NOTE: Some Services are embedded within Agriculture & Manufacturing

Source: BBS & WB


Service encounters are termed as the building blocks
for customers’ preception
preception. This is also known as
moments of truth.

1

Each customer contact is called a moment of truth.

You have the ability to either satisfy or dissatisfy them

when you contact them.

A service recovery is satisfying a previously dissatisfied
customer and making them a loyal customer.

1
1
1
1
1
More Contact .. More threat….

More contact…. More opportunity….

1
1
1
1

Specifications
 Company: Standard operating procedures
 Customer: Personal expectations
 Misalignment of company and customer specifications can
lead to dissatisfaction, even if the service is delivered as
designed
▪ Effective communication is key in eliminating misalignment

2

Measuring and improving quality is more difficult for services
than for products
 Unsatisfactory service cannot be replaced or repaired
 Intangible and temporary nature

2

Reliability:: Perform promised service dependably and
accurately. Example:: receive mail at same time each day.

Responsiveness:: Willingness to help customers promptly.

Example:: avoid keeping customers waiting for no apparent
reason.

2

Assurance:: Ability to convey trust and confidence. Example:
Showing confidence to the customer.

Empathy:: Ability to be approachable. Example: being a good

listener.

Tangibles:: Physical facilities and facilitating goods.

2
 Word of Personal Past
mouth needs experience

Service Quality Expected Service Quality Assessment

Dimensions service 1. Expectations exceeded
Reliability ES<PS (Quality surprise)
Responsiveness 2. Expectations met
Assurance Perceived ES~PS (Satisfactory quality)
Empathy service 3. Expectations not met
Tangibles ES>PS (Unacceptable quality)

2
2
2
 Word -of-mouth
Personal needs Past experience
communications

Customer

Expected service

GAP 5
Perceived service

Service delivery (including External communications

pre- and post-contacts)
contacts) to consumers

GAP 1 GAP 3 GAP 4

Translation of perceptions into
service quality specifications
GAP 2
Provider
Management perceptions of
consumer expectations

Gap1: Market research gap
 Management may not understand how customers formulate
their expectations from past experience, advertising,
communication with friends
Improve market research
Foster
Foster better communication between employees and its
frontline employees
Reduce
Reduce the number of levels of management that distance
the customer

2

Gap 2: Design gap
 Management unable to formulate target level of service to
meet customer expectations and translate them to
specifications
Setting
Setting goals and standardizing service delivery tasks can
close the gap

2

Gap 3: Conformance gap
 Actual delivery of service cannot meet the specifications set
by management
Lack of teamwork
Poor employee selection
Inadequate training
Inappropriate job design

3

Gap 4: Communication gap
 Discrepancy between service delivery and external
communication
Exaggerated
Exaggerated promises in advertising
Lack
Lack of information provided to contact personnel to give
customers

3

Gap 5: Customer expectations and perceptions gap
 Customer satisfaction depends on minimizing the four gaps
that are associated with service delivery
 Companies try to measure the gap between expected service
and perceived service through the use of surveys
 SERVQUAL – measures the five dimensions

3

Quality in the Service Package

Taguchi Methods (Robustness)

Poka-yoke (fail-safing)
Budget Hotel example

Supporting facility

Design of the building

Facilitating goods

Room furnishings like: bedside tables, carpet cleaning


Explicit services

Maids are trained to clean and make up rooms

Implicit services

Pleasant appearances of individuals at front office


Robust designs to serve under adverse conditions

Robustness concept also applied to the manufacturing

process – for example using online computer to notify the
cleaning staff when the room has been vacated

Taguchi emphasized that quality was achieved by
consistently meeting the design specifications

Cost to society of poor quality was measured by the square
of the deviation from the target

Shigeo Shingo observed that errors occurred, not because
employees were incompetent, but because of interruptions in
routines or lapses in attention.

He advocated adoption of Poka-Yoke
Poka methods – foolproof
devices to prevent employee mistakes.
 Example, hotel reservation employee is expected to make
eye-contact
contact with customer. So Poka-Yoke is to ask the
employee to enter the eye-color
color of the customer.

Since customers also play an active role in service
service-delivery so
you need Poka-Yoke
Yoke for them to prevent them from making
errors.
 Example, frames at airport check-in
check counters to help
customers determine if their bag can go in overhead bin as
hand luggage

Compare your performance with other companies
known for being ‘the best in class’

For every quality dimension, some firm has earned the
reputation for being the best in class

Learn how the management has achieved to be the
best in class to correct your process
4
4

Impressions about service quality are determined by both the
outcome and the process (because customers are a part of
service delivery)

Walk through audit is a customer-focused
customer survey to find the
areas for improvement

Entire customer experience is traced from beginning to end,
and a flow chart of customer interaction with service system
is made

Customer is asked for his/her impressions on each of these
interactions

Customers can provide anew perspective to service – they can
notice things easily as they are new in the system

Service managers and employees can get de-sensitize
de to their
surroundings and also may not notice marginal decreases in
service levels.

Cost of Quality

Service Process Control


Both!

Improving quality does require a company to incur costs

Return on quality storyline:

Improved Improved Improved Increased Increased

Service Customer Customer Market Profitability
Performance Satisfaction Retention Share

4
$1 in invested in prevention
= $100 in detection
= $10,000 in failure cost
“Winning back a lost customer can cost up to 50-100
100 times as much as keeping a current one
satisfied.”

Understanding your customer is key to retention.. 4


The control of service quality can be viewed as a feedback
control system – where output is compared with a
standard.

The deviation from the standard is communicated back to
the input, and adjustments are made to the process to
keep the output within the defined range.

Difficult to implement an effective control cycle for service
due to the intangible nature of service, which makes direct
measurement difficult – so we proxy or surrogate
measures.

Simultaneous nature of production and consumption –
prevents any direct intervention in the service process to
observe conformance to requirements.
Consequently, we ask customers to express their impression
of service quality after the consumption – by which time we
are too late to avoid service failure.
Instead, we try to focus on delivery process by employing
SPC
 Customer
input Service
concept

Service Customer
Resources output
process

Take Monitor Establish

corrective conformance to measure of
action requirements performance

Identify reason
for
nonconformance

Opinion surveys - about quality of service

100 percent inspection - every unit is checked; fatigue

error unless automated

Destructive testing

Acceptance sampling - based on statistical sampling table,

the associate checks a random or stratified sample from a
larger lot. If the sample is within the acceptable quality
level, the lot passes inspection.

All customers want to be satisfied.

Customer loyalty is only due to the lack of a better

alternative

Giving customers some extra value will delight them by

exceeding their expectations and insure their return

The average business only hears from 4% of their customers who are dissatisfied
with their products or services. Of the 96% who do not bother to complain, 25%
of them have serious problems.

The 4% complainers are more likely to stay with the supplier than are the 96%
non-complainers.

About 60% of the complainers would stay as customers if their problems was
resolved and 95% would stay if the problem was resolved quickly.

A dissatisfied customer will tell between 10 and 20 other people about their
problem.

A customer who has had a problem resolved by a company will tell about 5
people about their situation.
 Public Action

Seek redress directly from

Action the firm

Take legal action

Dissatisfaction
Complaint to business, private,
occurs or governmental agencies

Private Action
Stop buying the product or
boycott the seller
No Action Warn friends about the product
and /or seller

Disasters can be turned into loyal customers by proper and
rapid service recovery

Frontline workers, therefore, need to be properly trained and
given the discretion to make things right.
5
5
 Arousing

Distressing
Exciting

Unpleasant Pleasant

Boring Relaxing

Sleepy

5
Restaurant Fast-beat Music Slow-beat
beat Music Difference between
Patron Environment Environment Slow and Fast-beat
Behavior Environments
Absolute %
Difference Difference
Consumer time 45min 56min +11min +24%
spent at table

Spending on food $55.12 $55.81 +$0.69 +1%

Spending on $21.62 $30.47 +$8.85 +41%

beverages
Total spending $76.74 $86.28 +$9.54 +12%

Estimated gross $48.62 $55.82 +$7.20 +15%

margin
Evaluation Unscented Scented Difference
Environment Environment Mean
Mean Ratings Ratings
Store Evaluation
Negative/positive 4.65 5.24 +0.59

Outdated/modern 3.76 4.72 +0.96

Store Environment
Unattractive/attractive 4.12 4.98 +0.86

Drab/colorful 3.63 4.72 +1.09

Boring/Stimulating 3.75 4.40 +0.65
Evaluation Unscented Scented Difference
Environment Environment
Mean Ratings Mean Ratings

Merchandise

Outdated/up- to-date style 4.71 5.43 +0.72

Inadequate/adequate 3.80 4.65 +0.85

Low/high quality 4.81 5.48 +0.67

Low/high price 5.20 4.93 -0.27

Fragrance Aromathe Aromatherap Traditiona Potential Psychological
rapy y Class l Use Impact on People

Orange Citrus Calming Soothing Calming and relaxing effect

agent, esp. for nervous people
astringent

Lavender Herbaceou Calming, Muscle Relaxing and calming, helps

s balancing, relaxant, create a homey and
soothing soothing comfortable feel
agent
asmine Floral Uplifting, Emollients Helps makes people feel
balancing oothing refreshed, joyful, comfortable
agent
Peppermint Minty Energizing, Skin Increase attention level and
stimulating cleanser boosts energy
Color Degree of Nature Common Association and Human
Warmth Symbol Responses to Color

Red Warm Earth High energy and passion; can excite,

stimulate, and increase arousal and
blood pressures
Orange Warmest Sunset Emotions, expressions, and warmth

Green Cool Grass Nurturing, healing and unconditional

and Trees love

Blue Coolest Sky and Relaxation, serenity and loyalty

Ocean
6

Frontline is an important source of differentiation and
competitive advantage. It is:
 a core part of the product
 the service firm
 the brand

Frontline also drives customer loyalty, with employees

playing key role in anticipating customer needs,
customizing service delivery and building personalized
relationships

6

Too many managers make short-sighted
sighted assumptions about financial
implications of:
 Low pay
 Low investment (recruitment, training)
 High turnover human resource strategies

Often costs of short-sighted

sighted policies are ignored:
 Costs of constant recruiting, hiring & training
 Lower productivity & lower sales of new workers
 Costs of disruptions to a service while a job remains unfilled
 Loss of departing person’s knowledge of business and customers
 Cost of dissatisfied customers

6
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Staff performance is a function of both ability and
motivation. How can we get able service employees
who are motivated to productively deliver service
excellence?

1.Hire the right people

2.Enable your people

3.Motivate and energize your people
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7

Control concentrates 4 key features at top of organization;
Involvement pushes them down:

Information about operating results and measures of competitive

performance

Rewards based on organizational performance (e.g. profit
sharing, stock ownership)

Knowledge/skills enabling employees to understand and
contribute to organizational performance

Power to influence work procedures and organizational direction
(e.g. quality circles, self-managing
managing teams)

7
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CRM= Customer Relationship Management

7
 CRM is the timely delivery of excellent service “customer
relationship management”
 CRM is a combination of business process and technology that
seeks to understand a company’s customers from a number of
perspectives including:

Who they are?

What they do?

What do they like?

7
 It costs 6 times more to sell to a new customer than to sell
to an existing one
 A typically dissatisfied customer will tell 8 to 10 people
about his/her experience (mainly related to poor customer
service)
 The odds of selling to a new customer is 15% versus 50%
to an existing customer
 70% of the customers complaining will do business again
with the company if the complaints are quickly addressed
 90% of existing companies do not have integrated CRM
tools and platforms
7
 Retention focused on service adaptability
 Delivering not what the market wants but what the customer
wants
 Providing a value proposition that offers a proactive
relationship that works on the best interest of the customer

Example: customer retention is becoming a key competitive strategy
for many companies

7

No complaint is small or insignificant.

8
8

Deal with Person’s feelings

Apologize that the situation occurred

Listen to the whole story without INTERRUPTION…

Maintain eye contact

Nod your head and show that you are really listening until
they are calm

The customer is angry at the situation, not you…

Ask questions and get information to solve the problem

Reflect customer’s feelings

Summarize the facts

Ask what customer wants

Give alternatives, if you cannot comply with the customer
8

Please don’t smile always….

Angry customers might think you are not taking the issue seriously.

They want to feel that you are giving utmost importance to the
situation…

But, moderate smile works… judge the situation and decide…

Never ever get angry….. It is between the customer and the company,
Not you.

You are a guardian angel to make the marriage between customer and
the company.

8
SIMPLICITY
8
8

Don’t make a promise that you cannot keep….

Create RIGHT expectation….

Don’t mislead….

Hire the right people…

Plan accordingly…. Plan ahead…

8
Plan your business for good and for good.
good