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Process in Services

 In many services, customer takes an active role in the


service creation process.

 Service production and consumption are inseparable,


and therefore the customer acts as a co-producer of
many services.

 The processes by which the service is produced and


delivered is critical to the success of service
operations.
Process in Services…
 The services are essentially processes by which are
marketed.

 Eg: a restaurant’s product is the process of meal


preparation and presentation.

 The service delivery is the outcome of the service


process.

 The service failures often are the result of


inadequately and inappropriately designed service
process.
Service Delivery Process at a
Fast food Restaurant
Service System
Mapping the Service System
 Sometimes the customer gets annoyed with the
frontline process with which he or she interacts and
 often the poor service experience is caused by
process that takes place in the back room.

 Internally, delivery at the front end is an outcome of a


complex process that happens hidden from the
customer.

 This process needs to be mapped and blueprinted so


that flows of information, materials and people are
precisely identified and standardized.
Mapping Process Vertically
 The importance of mapping the process vertically is
precise identification of steps or operations that
would take place internally in the system hidden from
the customer.

 Once the operations are known, then the


responsibility of each of these points can be fixed as
the responsibility centre assigned to an employee or
group.
Mapping Process Vertically…
 Further at every stage, precise set of operations can
be identified with resource requirements and
expectations.

 This series of processes act like an assembly line


where one workstation acts as an input to the other.

 The mutual interdependence and the chain of


relationships are the hallmark of any system which
depends upon subsystems.
Mapping Process Vertically…
 Excellent service marketer maps the time required for
an operation against the standard time to identify the
deviations and
 establish their root cause, so that corrective measures
can be undertaken.
 Deviations in the performance signify some gap in the
system which acts to obstruct the functioning of the
process as per the adopted standards.
 Poor service at the front end sometimes is not the
cause rather a symptom of some weakness that exists
inside the system which needs to be found and
corrected.
Customer Contact in Frontline and
Back room Process Implications
Mapping Process Horizontally
 The importance of horizontal mapping service
emanates from the fact that with this exercise, any
excess or missing act from the process can be
identified.

 Ideally, the service delivery process must be in sync


with the customer’s expectations.

 This means identifying the acts necessary for delivering


the service optimally.

 Many situations demand that this sequence of service


delivery need to be reengineered to achieve an
alignment with the new realities.
Generic Horizontal Service Delivery
Process for Air Travel
System Blueprint – Horizontal and
Vertical Process Combined
 System blueprint is a complete blow up of entire
service system wherein horizontal and vertical
processes are presented in detail.

 It gives a holistic picture of what happens in a service


system.

 By studying the blueprint, one can get an idea as to


how a service is actualized and created by a complex
puzzle of process and flows.
Benefits of Service Blueprinting
 Service blueprinting offers a number of useful benefits
that could be exploited to increase the efficiency and
effectiveness of the service system.

 Employees in service may be limited by their vision of


what they do and miss out the collective reality.

 Blueprint offers them with a holistic view of the


service and thereby enables them to understand the
collective reality.
Benefits of Service Blueprinting…
 The horizontal and vertical expression of the chain of
processes that make up the service allows managers
to identify potential strong and weak points.

 For instance, some points in the chain may act as a


bottleneck leading to slow service delivery.

 This can be identified and may become the subject of


corrective action.
Benefits of Service Blueprinting…
 Which part of the system should customer come in
contact with and which should be kept away from
such an interface?

 This could be an important decision because some


uncontrolled contacts can potentially reduce the
value of service.

 Blueprinting allows managers to control this


exposure issue in a strategic manner.
Benefits of Service Blueprinting…
 The boxes in the blueprint signify various centres of
activities, and

 these are not isolated islands of activity independent


of each other.

 The interdependencies between various work centres


can be brought to the front with the help of
blueprinting.

 These linkages once established and clarified can


enhance the smooth functioning of service system.
Benefits of Service Blueprinting…
 Each of the activity centre mapped on the blue print
acts as a responsibility centre with its own cost and
revenue implications.

 The specificity so achieved by blueprinting each


centre attracts its own efforts for cost cutting and
quality improvement.
Blueprint of the process involved in the Issuance of
Credit Card
People in Services
 It is the person who opens the door every time when
a customer enters in the service system.

 The visual exchange, facial expression, warmth and


courtesy create the initial benchmark in the
customer’s mind.

 To customers these constitute initial opening


moments which set mood and form impressions.

 The importance of people or participants cannot be


undermined in services.
People in Services…
 In service businesses, the personnel are the carriers
of organizational realities.

 Through interactions with them, the customer forms


an opinion about the organization.

 If service personnel are cold or rude, they can


undermine all the marketing work done to attract
customers.

 If they are friendly and warm, they increase customer


satisfaction and loyalty.
Dimensions in Service Encounter
Importance of People
 The importance of service employees emanates from
the role they play in a service encounter.

Service Encounters:

 ATM service: customer encounter involves an


inanimate (not alive) object / machine.

 Hair stylist: customer encounters predominantly a


person.

 Fine dining: customer encounters both animate (live)


people and inanimate objects.
Importance of People…
 These encounters constitute the core of the service.

 The kind of experience that a customer gets in a


service entirely depends on the nature of these
encounters.

 Encounters can lead to frustration and dissatisfaction;


these could also generate satisfactory outcomes.

 Service encounters assume critical importance in


human interaction oriented services like teaching and
hospitality.
Importance of People…
 The total perceived value of a service is an aggregation
of the value outcomes created at each of these
encounters.

 The service personnel especially the ones who come in


direct face to face contact with customer play a crucial
role in affecting quality perceptions.

 The manner in which service is created influences the


perception of value.

 Therefore, the soft skills involving, empathy, body


language and emotional connectivity must also be
cultivated among the frontline employees.
Importance of People…
Customer Side of an Encounter:

 Customer interaction with the service system is


integral to the creation of a service experience.

 It is essential that the customer perception of


associated risks is assessed during the encounter and
strategies are developed to help them cope with the
same.

 The service firm may assess the customer’s level of


competence and comfort in handling the service
encounters.
Importance of People…
Encounter Types:

 Direct face to face: the physical proximity between


the provider and customer makes the service
exchange complex because of the interaction and
addition of interpersonal dimension.

 The personality, attitude, skills, manners, and


appearance have to be cultivated, monitored and
controlled for a service to develop as intended.
Importance of People…
 Indirect encounters: these encounters are
technology centric, and the human element in these
cases is either eliminated altogether or kept to
minimum.

 The use of technology helps in automated delivery,


but at the same time it may dehumanize the service.

 The absence of human element in these encounters


makes the customer evaluation primarily technology
oriented.
Types of Service Personnel
 Professional Service Employees: includes service
providers like lawyers, doctors, management
consultants, engineering consultants, marketing
consultants, business consultants etc.

 These people possess high level educational


qualifications, have high status and occupy desirable
positions with a very high earning potential.
Types of Service Personnel…
 Consumer Service Employees: are found in
grocery, clothing and other retail services, restaurants
and delivery services.

 These service providers are low on mechanical skills


and education, but higher on task based skills.

 The other bases on which service employees can be


classified included salaried and hourly based, blue
collar and white collar, and skilled, semi skilled and
unskilled.
Types of Service Personnel…
 Each group of employees possess unique form of
human resource management challenges in terms of
recruitment, training, compensation and motivation.

 Customer contact employees come into contact with


customers in the process of service provision include:

 waiters, bearers, receptionists, bank tellers, airhostess


and sales personnel in retail.

 The employees who contribute to service production


but do not come into contact with customers
include: backend employees.
High Contact and Low Contact
Services
 The extent of contact refers to the percentage of
time a customer ought to be in the system out of the
total time it takes to serve him or her.

 In high contact services, the customer interacts for a


longer period of time with the system compared to
low contact services.

 High contact services include: hotels, airlines,


educational institutions, full service restaurants,
hospitals and counseling services.
High Contact and Low Contact
Services…
 Low contact services include: banks, post offices,
retailing, fast food restaurants and courier services.

 Services with high contact are more difficult to


control and manage because a longer customer
contact is more likely to affect the time of demand
and the nature of service and quality.

 Therefore, the services that involve high customer


contact tend to be driven by human resource
component, and offers opportunities to differentiate
and add value.
Extent of Contact and Importance of
Interpersonal Dimension
Frontline and Back room Employees
 The service system typically divided into two parts: the
front end and back end.
 The front end is where the customer comes into
contact with the service system.

 The part of the system that usually is hidden from both


access and view of the customer is called back end.

 The back end plays the enabling function by which the


front line is able to create service for the customers.
 Altogether, the back end and front end employees both
contributes to the service outcome.
Frontline and Back room
Employees…
 But the respective competencies for the front end
and back end employees may differ.

 Technical skills are likely to be more important for


back end staff,

 but for the front end, both technical and


interpersonal competencies are vital.

 The appearance and behaviours of the back end staff


are of little importance for customers, however, they
are critical with respect to the front line staff.
Competence for Frontline and
Back end Employees
Service Personnel Issues
 The human dimension in a service business needs to
be managed purposefully to extract the right kind of
performance that fits with the service positioning.

The Right Person for the Right Job:

 When job requirements and personnel competencies


do not match with each other, the overall efficiency
and effectiveness is likely to suffer.

 Service jobs require two types of capabilities in the


people, service competencies and service inclination.
Service Personnel Issues…
 The service competencies refer to the technical skills
and knowledge that are required to perform the job.
 These competencies equip the worker to perform
the core of the service.
 These competencies are validated by technical
qualifications of the universities and institutes.
 The service inclination refers to an individual’s
interest in doing service related job.
 Service inclination is very important in those services
that are interaction dominated.
Service Personnel Issues…
Skill Set:

 The interpersonal nature or interaction element


requires that employees who deal with customers are
not only equipped with technical skills, rather they
must be good in social skills.

 Here skills like social graces, communication, language,


expression, and

 personality traits like friendliness, extroversion,


enthusiasm, energy, politeness, empathy, willingness to
help and respect for others assume significance.
Service Personnel Issues…
 The soft aspects of human behaviour are as
important as the hard aspect of performance.

 In this context, a service person’s ability to relate


emotionally with the customer is important.

 Therefore, the employee’s hard skill set, which by and


large is a function of intelligence, must be
complemented with the soft skills.
Service Personnel Issues…
Employee Training:

 Training is required to upgrade skill sets necessary to


perform service related tasks.

 Firms that compromise on employee training


experience decline in service levels.

 In order to beat the competitive heat, all the major


firms put their employees to regular training
programmes to sharpen their technical and soft skills.
Service Personnel Issues…
Sell Jobs Within:

 Like the outside customers, the needs of internal


customers, that is, employees must be taken care of.

 If the employees are doubtful about the jobs they


perform, or find them unacceptable for some reasons,

 they would be reluctant to sell service to end


customers.

 The route to external satisfaction lies in internal


satisfaction.
Service Personnel Issues…
Service Scripts:

 Scripts are usually used in services which follow


standardization model.

 With scripts, employees perform a set of pre scripted


functions or steps and thereby are able to achieve
high consistency and efficiency in operations.

 Services which involve customization are generally


unsuitable for script based performance.
Service Personnel Issues…
 Eg: a doorman who stands at the main entrance of a
hotel chronologically performs a set of acts to enact
his role, that is,

 making an eye contact, smile, greeting, opening the


door, bidding bye and closing the door.
The Cycle of Mediocrity
 Organizations which offer job security but little scope
for personal initiative, may suffer from cycle of
mediocrity.

 These often are characterized by state monopolies,


industrial cartels, or regulated oligopolies in which
there’s little market pressure from more agile
competitors to improve performance and

 in which fear of well established unions may


discourage management from adopting more
innovative labor practices.
The Cycle of Mediocrity…
 In such environments, service delivery standards tend
to be prescribed by rigid rulebooks and oriented
toward standardized service, operational efficiencies,
and
 prevention of both employee fraud and favoritism
toward specific customers.
 Job responsibilities tend to be narrowly and
unimaginatively defined, tightly categorized by grade
and
 scope of responsibilities, and further rigidified by
union work rules.
The Cycle of Mediocrity…
 Salary increases and promotions are largely based on
longevity.

 Successful performance in a job often is measured by


absence of mistakes, rather than by high productivity
or outstanding customer service.

 Training focuses on learning the rules and the


technical aspects of the job,

 not on improving human interactions with customers


and coworkers.
The Cycle of Mediocrity…
 Because there are minimal allowances for flexibility
or employee initiative, jobs tend to be boring and
repetitive.

 But most positions provide adequate pay and often


good benefits combined with high security.

 Thus, employees are reluctant to leave.

 This lack of mobility is compounded by an absence of


marketable skills that would be valued by
organizations in other fields.
The Cycle of Mediocrity…
 Customers find such organizations frustrating to deal
with.
 Faced with bureaucratic hassles, lack of service
flexibility, and unwillingness of employees to make an
effort to serve them well.
 However, customers often continue to be “held
hostage” by the organization because there is
nowhere else for them to go,
 either because the service provider holds a
monopoly, or because all other available players are
perceived as equally bad or worse.
The Cycle of Mediocrity

Source: Christopher Lovelock,“Managing Services:The Human Factor” in Understanding


Service Management, ed.W.J. Glynn and J.G. Barnes (Chichester, UK John Wiley, 1995), 228.
The Cycle of Mediocrity…
 The net result is a terrible cycle of mediocrity in
which unhappy customers continually complain to
irritated employees (and to other customers) about
poor service and

 bad attitudes, generating greater defensiveness and


lack of caring on the part of the staff.

 Under such circumstances, there’s little incentive for


customers to cooperate with the organization to
achieve better service.
The Cycle of Success
 Some organizations take a longer term view of
financial performance, seeking to prosper by investing
in their people in order to create a cycle of success.

 Success applies to both employees and customers.

 Attractive compensation packages are used to attract


good quality staff.

 Broadened job designs are accompanied by training


and empowerment practices that allow frontline staff
to control quality.
The Cycle of Success…
 With more focused recruitment, intensive training,
and better wages, employees are likely to be happier
in their work and to provide higher quality, customer
pleasing service.

 Regular customers also appreciate the continuity in


service relationships resulting from lower turnover
and so are more likely to remain loyal.

 Profit margins tend to be higher, and the organization


is free to focus its marketing efforts on reinforcing
customer loyalty through customer retention
strategies.
The Cycle of Success

Source: Leonard L. Schlesinger and James L. Heskett "Breaking the Cycle of Failure in Services"
Sloan Management Review 31 (Spring1991): 17-28.
The Cycle of Failure
 The Cycle of Failure is a situation in a service
organisation where employee turnover is high and

 the level of employee morale is low due to


uncompetitive compensation they receive,

 inefficiencies associated with workplace and job


design and

 a range of other reasons.


The Cycle of Failure…
 It is referred to as a cycle because no proactive
approach is taken by managers in such organisations
to improve the situation, and

 therefore the scenario tends to repeat for new


employees.

 The customer cycle of failure begins with repeated


emphasis on attracting new customers who become
dissatisfied with employee performance and
The Cycle of Failure…
 the lack of continuity implicit in continually changing
faces.

 These customers fail to develop any loyalty to the


supplier and

 turn over as rapidly as the staff thus requiring an


endless search for new customers to maintain sales
volume.
The Cycle of Failure

Source: Schlesinger and Heskett (1991)


Physical Evidence/Environment
 A service is usually surrounded by physical elements
that acts as evidence to service which is to follow for
a potential buyer.

 Each of these elements if employed strategically, can


convey the fundamental essence of service.

 On the other hand lack of strategic approach to


managing these elements can cause confusion and
convey unintended meaning.
Physical Evidence as Potential
Carrier of Meaning
Physical Evidence Types
 The physical evidence associated in a service firm can
be broken down into two categories: dominant and
peripheral.

 The dominant evidences are the ones that constitute


a dominant part of service facilities like,

 aircraft in an airline, building exterior and interiors in


a hotel, etc.

 The peripheral evidences include letterheads, cheque


books, cinema tickets, pens, note pads etc.
Physical Evidence Types…
 Another framework divides the physical evidence into
three categories: facility exterior, facility interior and
other tangibles.

 Facility exterior: is obviously the external part of


service facility that is visible from the outside.

 It includes exterior design, signage, parking


landscaping and surrounding environment.

 Facility interior: refers to the internal part of the


service facility.
Physical Evidence Types…
 It includes interior design, equipment, inside signage,
layout, air quality and temperature.

 The other evidence: it includes business cards,


stationery, billing statements, reports, employee
appearance, dress, uniforms, brochures, and their
websites.

 The evidence that is associated with the firm’s


physical facility is called servicescape, and it includes
the facility interior and exterior.
Physical Evidence Types…
 The services that depend heavily on customer
contact and the contact lasts for longer period, and
the evidence assumes an important role.

 Eg: hospitals, airlines, holiday resorts and hotels.

 The services where customer contact is limited or


service delivery is intermediated by a channel, the
physical evidence may be of lesser importance.

 Eg: drycleaners, insurance, branchless banking and


courier services.
Role of Physical Evidence
Service Packaging:

 Are the physical elements that surround the service


add tangibility dimension to something that is
essentially intangible.

 The elements like building, parking area, signs, layout,


people uniforms, interior décor provide cues to
customers as to what kind of service is to expect.

 The service marketer can rightly convey the same by


carefully assorting the consistent physical evidence
elements.
Role of Physical Evidence…
Service Facilitation:

 The service layout and design can both facilitate and


obstruct smooth functioning of the system.

 Many services sometimes do not pay adequate


attention to small evidence elements like sign boards
and instructions, which leads to major frustrations for
both employees and the customers.

 Similarly service layout at times tends to be so


dysfunctional that it requires more time and efforts
on the customer’s part.
Role of Physical Evidence…
Socialization:

 The process by which an individual adapts to and


comes to appreciate the organizational norms, values,
required behaviour patterns is known as socialization.

 The environment elements can facilitate employee


and customer socialization by conveying expected
roles, behaviours and relationships.

 The elements like office chamber, décor and location


can effectively suggest the status and role, the
employee has to play in the system.
Role of Physical Evidence…
Differentiation:
 The physical evidence that surrounds the service can be
utilized to build and convey service differentiation.
 Firms manipulate facility design and other tangible
elements to set their services apart from other
competitors.
 The evidence that signalled the change included clean
toilets, modern ticket counters, new well dressed
employees,
 sparkling floors, state of the art sound system,
comfortable seats and excellent canteen services.
Service Environment and
Stimulus Response Model
Servicescapes
 The design of service environment or atmosphere by
purposive manipulation of physical features is referred
to as servicescapes.

 Therefore, design and management of servicescapes


must attend to the needs of both the employees and
customers.

The Service Type:

 The services can be differentiated on the basis of


who performs the actions within the servicescape.
Servicescapes…
 Three types of services can be identified:
 Remote services: these services are used by
customers from a distance, and only employees
perform actions in the servicescapes.
 The employees tend to be physically present in the
facility and customer’s involvement tends to be
remote.
 Eg: telephone, insurance, mail order etc.
 Since employees performs actions in the servicescape,
the servicescape must pay attention to their needs,
efficiency, motivation and satisfaction.
Servicescapes…
 Self service: these services are dominated by
customer presence in the servicescape and their
actions.
 Eg: self service environment like ATM, vending
machines, etc.
 Since customer performs actions in the servicescape,
the creation of physical environment must focus on
customer needs.
 The customer must find the facility attractive, easy to
use and emotionally satisfying.
Servicescapes…
 Interpersonal services: in these services both the
customer and providers share the service facility and
perform actions within the servicescape.

 Eg: restaurant, hotel, health clinics, banks, airlines etc.

 The service environment in these services must pay


attention to the needs of both employees and
customers.

 The design must consider the effect of physical


environment on the nature and quality of social
interaction between the two.
Servicescapes…
 Services can also be classified on the basis of two
dimensions: the length of time of service use and the
reason for the service use.

 The consumption purpose of a service can range from


utilitarian to hedonistic.
 That is, whether the service is used for reason or
emotion.
 Services like drycleaners and banking are reason
dominated and

 beauty salon and coffee parlour are primarily hedonic.


Servicescapes…
 In some services the time spend by the customer
tends to be short, for example bank or dry cleaner,

 while in other it is longer as in hospitals or resort.

 By combining these two dimensions, it appears that in


services that require customer to be present in the
service facility for longer duration and are driven by
hedonic motives,

 the physical characteristics of the service


environment is more important to service experience
than the others.
Importance of Servicescape or
Service Environment (Purchase Motive and
Service Duration)
Environment Dimensions
 Ambient Conditions: refer to the atmospheric or
environmental conditions prevailing in a place.

 It include dimensions like temperature, air quality,


noise, music, and odor (scents and aroma).

 Space: this aspect of the environment refers to how


the area of the service facility is organized.

 That is layout, equipment, furnishings, and how it is


arranged and the space utilization.
Environment Dimensions…
 Signs, symbols and artifacts: the name and the
way it appears on the signboard convey meaning at
two levels: one at the literal level and the other at
more subtle symbolic level.

 Artifact in a service system is a facility created by


man by assembling various parts to serve a particular
purpose or function.

 Style and décor to signify a particular style or form


like Italian style,Arabian style etc.
Environment and Cognitive Responses
Relationships in Services
 The possibilities to build relationships are greater in
services than goods.

 Services are often delivered through interactions


between the provider and customer.

 Proximity between the provider and customer is


inevitable.
Relationships in Services…
People Factor:

 People factor can be very critical to successful


marketing of services.

 The personal relationship if cultivated properly can


become a powerful motivator being repeat purchase.

 The people performing services not only create


economic satisfaction or value rather,

 they are critical ingredients in the creation of social


and psychological satisfactions.
Relationships in Services…
Social Encounters:

 Service encounters are the first and foremost social


encounters.

 How providers socially handle the customers can


define and position service product in a distinct
manner.

 Customers may willing to forgo physical efforts and


monetary benefits for the sake of getting service
from a known provider.
Relationships in Services…
Emotional Connection:

 The front staff who get to interact with customers


directly face to face must be trained and encouraged
to connect emotionally with customers.

 The emotional content that provides psychological


satisfaction is difficult to replicate.

 Services can be powerfully differentiated along


emotional dimensions.
Relationships in Services…
Importance of Frontline:

 To a customer service firm is represented by the one


with whom interactions take place.

 The performance of frontline staff can make or break


the service firm.

 The service quality is often perceived through the


quality of interaction.

 It can be easily broken by little mistakes committed


by workers at the time of encounters.
Relationship Building
 Customer satisfaction is essential but not sufficient
condition for relationship building.

 Marketing efforts must aim to create two types of


customers:

 Loyalist: is customer who is completely satisfied


with the services of the firm and keeps coming back
to the firm.
Relationship Building…
 Apostle: these are subset of loyalists whose
expectations are far exceeded by the service
experience.

 These customers not only feel highly satisfied rather


they feel so delighted that they share feelings with
others.

 According to Berry, the key elements of relationship


marketing are:
Relationship Building…
 Core service: the core service or product serves as
the starting point for relationship building.

 That is, the relationship is built around the core


product.

 Customization: relationship is customized


according to individual customer.

 Augmentation: core product or service is


augmented with extras or additional product.
Relationship Building…
 Price: the price of the product or service is fixed
that encourages customer loyalty.

 The idea is not to maximize profit from a transaction.

 Internal marketing: the key to external satisfaction


is internal satisfaction.

 The marketing concept is used inward to create


satisfied employees so that they give the best
performance to satisfy external customers.
Key Differences Between Relationship
Marketing and Transaction Marketing
Concept Relationship Transactional
Marketing Marketing
Objective Relationship Single transaction
Time orientation Long term Short term
orientation orientation
Focus on customer Pre and post sales Focus on pre sale
process process
Contact intensity High Low
Dependence level Generally high Generally low
Dominant quality Quality of Quality of output
dimension interaction
Key Differences Between Relationship
Marketing and Transaction Marketing…
Concept Relationship Transactional
Marketing Marketing
Quality concern Quality concern of Basically concerns
all in the system production
department
Internal marketing Strategic role No or limited role

Production focus Mass customization Mass production

Focus Customer value Product features


Customer service High emphasis on Little or no
customer service emphasis on
customer service
Relationship Customers
 Targeting customers for relationship building is not
the same as targeting in general.

 Customers could be classified into four groups based


on their profitability:

 Platinum Customers: are most profitable


customers, and are heavy users of product or service
and are not overly price sensitive.
Relationship Customers…
 They exhibit commitment to firm’s offerings and
show openness in trying new offerings by the firm.

 Gold customers: these customers stack below the


platinum tier in terms of profitability.

 They are heavy users and expect price discounts that


affect the margins to the firm.

 They are loyal customers but not totally loyal.


Relationship Customers…
 Iron customers: further go down on the
profitability scale and are good source of business
for keeping the capacity utilization high.

 Their spending, loyalty and profitability is not high


enough to deserve special treatment.

 Lead customers: are unprofitable and cost to


company customers.
Relationship Customers…
 They demand more than what is actually deserved.

 They are often source of negative word of mouth.

 It is better to free business from these customers

because the resources used on them can bring better

results from elsewhere.


Relationship Tools and Strategies
 The importance of lifetime product and services and
loyal employees crucial to relationship development.

Lifetime Products and Services:

 Central to marketing concept is the identification of


target customer and developing need satisfying
product and services.

 Customer relationship building on the other hand


requires adding new products and services to
evolving customer needs.
Relationship Tools and Strategies…
 It makes more sense to cater to the changing needs
of existing customers with whom the firm has had a
relationship,
 rather than trying out new battlefields with new
weapons.
Loyal Employees:
 Role of employees is particularly important in the
interaction of intensive services.
 Employees can make a service encounter socially and
emotionally satisfying.
Relationship Tools and Strategies…
 Employee retention over a period of time is
associated with superior service delivery.

 The longer staying employees become more familiar


with the nuances of business.

 A repeated interaction with one employee makes


them more knowledgeable about unique customer
needs and preferences.

 This understanding helps them serve customer


better.
Customer Retention
 According to Berry and Parasuraman there are three
strategies to build customer retention: adding
financial benefits, adding social benefits and adding
structural ties.

Financial Benefits:
 The key idea governing this strategy is to motivate
customers to maintain relationship because of some
financial incentive.
 Firms create various kinds of clubs and programs to
reward heavy or frequent buying customers.
Customer Retention…
Social Benefits:
 Customers desire several benefits from relationships
with service firm or service employees.
 People serving the customers may be perceived like a
surrogate family.
 Customers feels happy when employees recognize
him or her as an individual and more so when they
know names and preferences.
 Customers want to bond with people socially
because they seek long for customized treatment.
Customer Retention…
Structural Bonds:

 Now companies come closer and develop linkages


especially driven by information technology such that
buyer is able to perform better and the benefit of
which is shared with the seller.

 Earlier approach to marketing used to focus the


maximization of self interests even at the cost of the
other party to an exchange.

 Nowadays formation of relationships that aim to


maximize mutual gain.
Customer Satisfaction
 Satisfaction is probably the driver of customer’s
intention to repurchase,

 stay with the firm for future purchases and do not


share purchase with other suppliers.

 Therefore marketer must work out strategies as to


best satisfy customers both in the short term and
long term such that they are motivated to maintain
relationship on a long term basis.
Customer Satisfaction…
 The satisfaction framework literature proposes:

 Met expectations: when delivery is according to


expectations this results in moderate satisfaction or
when expectations are met.

 Unmet expectations: results in dissatisfaction


when the expectations are not met and there is
under delivery.
Customer Satisfaction Involves a Comparison
Between Service Expectation and
Service Perception
Total Customer Satisfaction and
Delight
 Perceived quality is customer’s perception of
delivered service as against the expected service.

 Satisfaction is customer’s emotional response or


feelings of pleasure or displeasure to the perceived
quality.

 Perceived quality influences satisfaction.

 If satisfaction is defined as consumer’s fulfillment


response then how the customer is likely to feel in
the situations of,
Total Customer Satisfaction and
Delight…
 (i) Negative disconfirmation (performance short of
expectations) – dissatisfaction,

 (ii) Positive disconfirmation (performance more than


expectations) – satisfaction,

 (iii) Confirmation (met expectations) – absence of


dissatisfaction,

 (iv) Positive surprise (unexpected delivery) – delight.


Link Between Satisfaction and
Loyalty
 Business must strive to create totally satisfied
customers then only rewards of loyalty are achievable
in competitive market conditions.

 The gains are sharpest or more than proportionate


when satisfaction level is increased beyond
satisfaction to complete satisfaction.

 That is loyalty gains are achieved substantially when


customer satisfaction is increased beyond the point of
satisfaction.
Satisfaction and Loyalty
The Wheel of Loyalty
The Wheel of Loyalty…
 Wheel of loyalty is a services marking model that is
used in order to increase number of loyal customers
and keep them.

 The Wheel of loyalty is a spinning model where one


tasks moves to other and create a circle.

 It comprises three sequential strategies.

 First, the firm needs a solid foundation for creating


customer loyalty that includes targeting the right
portfolio of customer segments,
The Wheel of Loyalty…
 attracting the right customers,

 tiering the service, and delivering high levels of


satisfaction.

 Second, to truly build loyalty, a firm needs to develop


close bonds with its customers that either deepen
the relationship through cross selling and bundling

 or add value to the customer through loyalty rewards


and higher level bonds.
The Wheel of Loyalty…
 Third, the firm needs to identify and eliminate the factors
that result in churn,

 that is the loss of existing customers and the need to


replace them with new ones.

Build a Foundation for Loyalty:

 Loyalty management starts with segmenting the market


to match customer needs and firm capabilities, that is,
identify and target the right customers
The Wheel of Loyalty…
 Companies need to be selective about the segments
they target if they want to build successful customer
relationships.

 Attracting the wrong customers typically results in


costly churn, a diminished company reputation, and
disappointed employees.

 According to Valarie Zeithaml, Roland Rust, and


Katharine Lemon,
The Wheel of Loyalty…
 it’s critical for service firms to understand the needs of
customers within different profitability tiers and adjust
their service levels accordingly.

 Platinum: these customers constitute a very small


percentage of a firm’s customer base, but they are
heavy users and contribute a large share of the firm’s
profits.

 This segment typically is less price sensitive but expects


highest service levels, and it is likely to be willing to
invest in and try new services.
The Wheel of Loyalty…
 Gold: includes a larger percentage of customers than
the platinum, but individual customers contribute less
profit than platinum customers.

 They tend to be slightly more price sensitive and less


committed to the firm.

 Iron: These customers provide the bulk of the


customer base and their numbers give the firm
economies of scale.
The Wheel of Loyalty…
 Hence, they often are important so that a firm can
build and maintain a certain capacity level and
infrastructure,

 which often is needed for serving gold and platinum


customers well.

 However, iron customers often are only marginally


profitable.

 Their level of business is not sufficient to warrant


special treatment.
The Wheel of Loyalty…
 Lead: Customers in this tier tend to generate low
revenues for a firm but often require the same level
of service as iron customers,

 turning them into a loss-making segment from a firm’s


perspective.

 The precise characteristics of customer tiers vary, of


course, from one type of business to another and
even from one firm to another.
The Wheel of Loyalty…
 The foundation for true loyalty lies in customer
satisfaction, for which service quality is a key input.

 Highly satisfied or even delighted customers are more


likely to become loyal apostles of a firm.

 Dissatisfaction, in contrast, drives customers away and


is a key factor in switching behavior.
The Wheel of Loyalty…
Create Loyalty Bonds:

 To tie customers closer to the firm, deepening the


relationship through bundling and/or cross-selling services
is an effective strategy.

 Eg: banks like to sell as many financial products as possible


into an account or household.That is,

 savings account, credit card, safe deposit box, car loan,


housing loan, and so on with the same bank.

 Customers can benefit from consolidating their


purchasing of various services from the same provider.
The Wheel of Loyalty…
 Incentives that offer rewards based on the frequency
of purchase, value of purchase, or a combination of
both represent a basic level of customer bonding.

 Rewards can be financial or nonfinancial in nature.

 Financial rewards are customer incentives that have a


financial value, such as discounts on purchases and
loyalty program rewards,

 coupon redemption, cash back programs provided by


some credit card issuers, etc.
The Wheel of Loyalty…
 Nonfinancial rewards provide benefits that cannot be
translated directly into monetary terms.

 Eg: airlines provide benefits such as higher baggage


allowances, priority upgrading, access to airport
lounges, etc.

 Eg: in a Hotel getting priority for reservations, early


check-in, late check-out, upgrades, and receiving
special attention and appreciation make the
customers stay more pleasant.
The Wheel of Loyalty…
 Social bonds typically are based on personal
relationships between providers and customers.

 Alternatively, they may reflect pride or satisfaction in


holding membership in an organization (a prestigious
university alumni club).

 Eg: hairdresser addresses you by name when you go


for a haircut or how he/she asks why he/she hasn’t
seen you for a long time, etc.
The Wheel of Loyalty…
 Customization bonds are built when the service
provider succeeds in providing customized service to
its loyal customers.

 Eg: Starbucks’ employees are encouraged to learn


their regular customers’ preferences and customize
their service accordingly.

 In general, bonds will not work well unless they also


generate value for the customer.
The Wheel of Loyalty…
Reduce Churn Drivers:

 It is an approach is to understand the drivers for


customer defections, or customer churn, and

 work on eliminating or reducing those drivers.

 Majority of the service firms regularly conduct churn


diagnostics,

 that is it includes the analysis of data on churned and


declining customers, exit interviews.
The Wheel of Loyalty…
 Major studies shows that the importance of
addressing some generic churn drivers by delivering
quality service, like,

 minimizing inconvenience and other nonmonetary


costs, and offering fair and transparent pricing.

 Effective complaint handling and excellent service


recovery are crucial to keeping unhappy customers
from switching providers.
The Wheel of Loyalty…
 Another way to reduce churn is to increase switching
barriers/costs.

 Switching costs can also be created by instituting


contractual penalties for switching, such as,

 the transfer fees levied by some brokerage firms for


moving shares and bonds to another financial
institution.

 Also a firm with high switching barriers and poor


service quality is likely to generate negative attitudes
and bad word of mouth.
Customer Delight
 Customer delight is the reaction of customer when
they receive a service or product that not only
satisfies, but provides unexpected value or
unanticipated satisfaction.

 Customer satisfaction is largely a static process that


deals with today and known circumstances and
known variables.

 Providing customer delight is dynamic, forward


looking process that takes primarily in the unknown
environment.
Service Quality
 Quality is the extent to which the service process
and the service organizations can satisfy the
expectations of the user.

 Quality can be defined as an important competitive


weapon to gain superiority.

 In order to lend clarity to the phenomenon of service


quality, Gummensson proposed a holistic view of
service quality.
Holistic View of Service Quality
Quality is integrator of two aspects of business:

 These are two important perspectives on quality,

 first is the technology and production centric, which


focuses on setting up the requirement specifications,

 and then quality goal is to seek conformance to these


specifications, that is do things right approach.

 The second perspective looks at quality from the


perspective of fitness for use.
Holistic View of Service Quality…
 This is a customer oriented approach as customer
satisfaction is put in the focus, that is doing the right
things.

 These two approaches are combined to form


customer perceived quality.

 Quality in fact is a concept that integrates different


orientations like marketing, production, technology
and ultimately customer satisfaction.
Holistic View of Service Quality…
Companies must pay attention to synergy
between goods and services quality:

 A goods marketer has to pay attention to the quality


of parts and services.

 Likewise, a service provider who primarily markets a


service must duly attend to the quality of both goods
used in the creation of service and service itself.
Holistic View of Service Quality…
Quality, productivity and profits are inseparable
triplets:

 Quality can influence revenue positively through


image improvement, increased sales, reduction in
price competition and economy of scale effects.

 Quality can also decrease cost by reduced reworking


costs, scrap, and expenditure on warranty and
product liability claims.
Service Quality…
 Quality is especially difficult to define, describe, and
measure in services.

 Quality is essentially conceptualized as the


discrepancy/difference between customer
expectations and perceptions of what is delivered.

 A product or service is considered of quality when it


fulfills customer’s expectations.

 The nature of quality differs in goods and services.


Service Quality…
 Customers evaluate quality based on their perception
of what has been received as against their
expectations.

 Quality in services is held in the eyes of the customer,


is therefore called perceived quality.

 It is customer’s personal judgment about a product’s


excellence or superiority on a set of criteria that
forms their expectations.
Nature of Quality in Goods and
Services
Quality Dimensions
 According to Parasuraman and colleagues, the ten
general concerns/dimensions that represent the
evaluative criteria used by the customers to asses
service quality,

 Reliability: is customer’s concern whether the


service firm would deliver the promised service
dependably and accurately.

 Eg: This bank promises to clear an outstation cheque


in two days, will it really?
Quality Dimensions…
 Responsiveness: is customer’s concern whether
employees of the company would be willing and ready
to provide service promptly.
 Eg: If I develop some problems up in the air, will the
employees of this airline help me?
 Competence: it is a concern whether service
providers have necessary knowledge and skill to
perform the service.
 Eg: are the doctors in this hospital really qualified and
have appropriate experience to perform this kind of
surgery?
Quality Dimensions…
 Credibility: it is concerned with service provider’s
trustworthiness, honesty and believability.

 Eg: the insurance company has made a claim that in


case of accident they would settle the claim without
any delay and paper work.

 Can I believe them without any doubt?


Quality Dimensions…
 Courtesy: it is reflected in customers concern about
how politely, respectfully, and friendly he or she would
be treated during the course of dealings with the
service system.

 Eg: I have booked this hotel to host a party to honour


my parents.

 Will the staff here serve my guests respectfully and in


friendly fashion.
Quality Dimensions…
 Access: it refers to expectations surrounding the
issue of ease with which the staff or service can be
approached.

 Eg: The service offered by this mobile communication


service provider is fine, but how easy is to contact
the customer care department when something goes
wrong?
Quality Dimensions…
 Communication: it is customer’s concern whether
he would be given a patient listening when required
and would be kept informed.

 Eg: will this bank keep me informed about the status


of my accounts on a regular basis and be able to
explain charges they deduct from time to time.

 Security: customers expect the service to be free


from danger, risk and doubt.

 Eg: how safe is to park the car in this parking lot?


Quality Dimensions…
 Understanding customer: it is customer’s concern
whether service providers will make genuine efforts
to understand customer needs.

 Tangibles: it is customer’s sensitivity about the


physical evidence present in the service firm like
personnel, equipments, facilitating goods.

 Eg: will my car be repaired in modern workshop


equipped with state of the art machines and
equipments?
Total Perceived Quality Model

Gronroos, C. Service Marketing Management: A Customer Relationship Management Approach, New York,
John Wiley, 2014, p.67.
SERVQUAL
 It is a multi dimensional research instrument,
designed to capture consumer expectations and
perceptions of a service along the five dimensions
that are believed to represent service quality.

 The model of service quality, popularly known as


the gaps model was developed by a group of
American authors, A. Parasuraman, Valarie A.
Zeithaml and Len Berry, in a systematic research
program carried out between 1983 and 1988.
SERVQUAL…
 The model identifies the principal dimensions (or
components) of service quality; proposes a scale for
measuring service quality (SERVQUAL) and

 suggests possible causes of service quality problems.

 The model's developers originally identified ten


dimensions of service quality,

 but after testing and retesting, some of the


dimensions were found to be auto correlated and the
total number of dimensions was reduced to five,
namely:
SERVQUAL…
 Reliability,

 Assurance,

 Tangibles,

 Empathy and

 Responsiveness.

 These five dimensions are thought to represent the


dimensions of service quality across a range of
industries and settings.
SERVQUAL…
 Reliability: perceptions about the ability of the firm
to perform the promised service dependably and
accurately.

 Assurance: perceptions about the knowledge and


courtesy of employees and their ability to convey
trust and confidence.

 Tangibles: the appearance of physical facilities,


equipment, personnel and communication materials.
SERVQUAL…
 Empathy: the provision of caring, individualized
attention to customer.

 Responsiveness: the willingness to help customers


and to provide prompt service.

 Businesses use the SERVQUAL instrument (i.e.


questionnaire) to measure potential service quality
problems and
SERVQUAL…
 the model of service quality to help diagnose possible
causes of the problem.

 The model of service quality is built on


the expectancy confirmation paradigm/model,

 which suggests that consumers perceive quality in


terms of their perceptions of how well a given
service delivery meets their expectations of that
delivery.
SERVQUAL…
 Thus, service quality can be conceptualized as a
simple equation:

 SQ = P - E

 Where, SQ is service quality

 P is the individual's perceptions of given service


delivery

 E is the individual's expectations of a given service


delivery.
SERVQUAL…
 When customer expectations are greater than their
perceptions of received delivery, service quality is
deemed low.

 When perceptions exceed expectations, then service


quality is high.

 The model of service quality identifies five gaps that


may cause customers to experience poor service
quality.
SERVQUAL…
 In this model, gap five is the service quality gap and is
the only gap that can be directly measured.

 In other words, the SERVQUAL instrument was


specifically designed to capture gap five (the
discrepancy between expected service and perceived
service)

 That is, the discrepancy between the expected


service and perceived service (gap 5 – the service
quality gap) is caused by the presence of other gaps
within the organization.
Gap1: The Understanding Gap
Discrepancy between consumer expectations and
management perception of consumer expectations:

 This is largely attributed to lack of customer


knowledge.

 The following may contribute to the presence of the


knowledge gap:

 Lack of marketing research: even when


customers needs and wants are researched, the
management may not be willing to use these findings
in developing a service product.
Gap1: The Understanding Gap…
 Inadequate upward communication: this
happens when customer complaints, feedback and
informal suggestions do not move upwards to the
top.

 Too many layers of management: a hierarchical


structure with multiple layers contributes to
knowledge gap,

 by creating a long distance between customer and


management responsible for designing service.
Strategies to Improve Gap1
 Correct understanding of the customer needs and
wants is the basis of achieving marketing success.

 Customer expectations not only must met rather


must be exceeded.

 Use marketing research strategically to develop


accurate knowledge of customer needs and wants.

 In this respect, the firm can elicit customer


complaints regularly and use them strategically.
Strategies to Improve Gap1 …
 Customer interactions could be used as a platform to
learn about them.

 Management must make sure that this information


reaches right people who are able to pick out insights
and turn it into action.

 Upward communication can be achieved by learning


by walking around, direct interactions with front
liners, formal and informal feedback and discussions
with contact staffs.
Gap 2: Service Standards
Specification Gap
 Discrepancy between management’s perception of
consumer expectations and service quality
specifications:
 This may happen because of the following:
 Lack of Management commitment to service
quality: service quality may not be the priority,
instead other objectives may be perceived as more
important like short term sales or profit gains.
 In many cases firms did not even have quality
departments given to the defining quality standards
and measuring actual quality.
Gap 2: Service Standards
Specification Gap…
 Employee Perception of infeasibility: managers
may develop perception that meeting customer
expectations is not feasible for a variety of reasons.
 Inadequate Goal setting: for delivery of quality
services, goals must be set to guide employee
performance.
 Good service organizations are known for setting
specific and understandable goals that reflect
customer expectations.
 Absence of goal setting contributes to specification
gap.
Gap 2: Service Standards
Specification Gap…
 Inadequate Task standardization: conversion of
management perception of customer expectations
into standards depends on the degree to which the
tasks involved in service creation can be standardized.

 When managers feel standardization is counter to


quality service, they may not set standards.
Strategies to Improve Gap 2
 Commitment of top management is the first essential
condition for developing customer expectations
based service quality standards.

 Top management must signal its commitment to


customer by verbal and non verbal support through
mission and vision.

 Middle management’s support and commitment is key


to initiating and sustaining quality efforts.
Strategies to Improve Gap 2…
 On the issue of inadequate task standardization, tasks
involved in the service creation can be standardized
by the use of technology like,
 computerization (computerized reservation system)
and automation (use of automatic tellers to disburse
cash).
 Absence of goal setting can be countered by the
development of goal setting process and routines.
 Goals measured and reviewed must be done on a
regular basis for maintaining strategic fit with the
customer requirements.
Gap 3: Service Standards Delivery Gap
 Discrepancy between the service quality
specifications and actually delivered service:

 A firm may not be able to deliver actual service


performance according to set standards because of
internal factors influencing employee willingness and
ability.

 Role ambiguity: is a situation when employees are


uncertain about what is expected of them and what
they are suppose to do to satisfy their managers.
Gap 3: Service Standards Delivery Gap…
 Lack of role clarity may drive human performance
into unintended directions and thereby create gap
between standard and delivery.

 Role conflict: it is situation of friction that, when


employees experience a tension between what
managers expect them to do and what customers
want them to do.
Gap 3: Service Standards Delivery Gap…
 Eg: in many retail situations, the customer wants
them to take personal interest in solving their
purchase problems and therefore they should go
through the process slowly.

 The manager, on the other hand, desires faster


customer turnaround to maximize numbers.

 Employee job fit: when employees lack required


qualifications and skills, their performances are likely
to deviate from the standards.
Gap 3: Service Standards Delivery Gap…
 Poor employee job fit can be a cause of frustration
for both the customer and the employee.

 Technology job fit: when tools, equipment and


technology are inadequate or ill suited, the employee
performance suffers seriously.

 Perceived control: employees may feel stressed out


when managing a situation that requires urgent
extension of right response but they have to consult
or seek approvals from bosses above them.
Gap 3: Service Standards Delivery Gap…
 In the process the effectiveness handling the situation
suffers and they feel the brunt of poor service.

 Teamwork: when people working in the firm do not


work as a team and coordinate their efforts,
performance suffers.

 Performance at the point of delivery is likely to meet


standards when frontline staff are supported and
enabled by the team working behind them.
Gap 3: Service Standards Delivery Gap…
 Supervisory control system: most firms employ
control systems to measure and reward employee
performance.

 Problems arise when the focus of measurement of


these systems is on something that is not related to
provision of service quality.

 Eg: employee quantitative output may get measured


and rewarded, not the quality of execution.
Strategies to Improve Gap 3
 Role ambiguity can be countered by the use of tools
that enhance role clarity.

 Whether performances are inline with the


expectations can be communicated by formal
feedback system so that necessary corrections are
carried out.

 Role conflict is experienced when a person is pulled


in two different directions as employee of the firm
and the server of customers.
Strategies to Improve Gap 3…
 The stress emanating from this pull could be
minimized when employees are involved in standard
setting process.

 The gap caused by poor employee and technology’s


fit with the demands of the job can be minimized by
sound human resources management practices.

 Right people cultivated for the jobs may give


satisfactory performances in the absence of
appropriate reward and compensation system.
Strategies to Improve Gap 3…
 Customer and employee considerations must be
incorporated in choice of technology rather than
leaving these decisions entirely on the technology
experts.

 Decision making instead of being confined to the top


in fewer hands is pushed down to the level of contact
employees.

 Empowered employees are able to fix problem


situations faster.
Gap 4: Service Promotion Gap
 Discrepancy between delivered service and what is
communicated about the service to consumers:

 In the process of demand stimulation, over promising


is made or service is misrepresented (something not
being conveyed).

 Service delivery and promotion gap occurs when


such over promising is made.
Gap 4: Service Promotion Gap…
 Lack of horizontal communication: problem of
over promising is likely to occur in those situations
when the people engaged in making promises are
different from the ones who actually deliver services.

 Propensity to over promise: competitive


pressures often drive firms to start over promising in
order to attract customers.

 This entraps firms into making high promise without


much regard for actual delivery.
Strategies to Improve Gap 4
 A firm can minimize this gap by undertaking strategic
initiatives that curtail tendency of over promising or
making wrong promises.
 The people responsible for external communication
must be sensitized of the actual service delivery
process and its realities.
 When a service company operates through multiple
outlets either through company owned or franchise
model,
 the policies and procedures affecting service delivery
need to be standardized.
Gap 5: The Service Quality Gap
 Discrepancy between expected service and perceived
service (by consumer):
 This gap occurs when customer’s perception of
delivered service is at variance from the expected
service.
 Sometimes, service provided may actually be of good
quality, but customer may perceive it to be the other
way.
 This may happen because of lack of competence in
the part of customer to correctly assess service
quality.
Gap 5: The Service Quality Gap…
 Eg: a physician may not prescribe many medicines to
patient because they do not need.

 But patient/customer may misperceive the physician


to be of poor quality.

 Such indirect measures are employed because patient


is not qualified to rightly judge the competence of the
doctor.
Strategies to Improve
Service Quality
 The task of meeting and exceeding customer
expectations is not simple.

 With the potential for so many gaps, mastering


service quality requires organization wide acceptance
and commitment to this goal.

 The firms that have mastered the art and science of


service quality have taken the abstraction out of the
quality construct and are able to measure and
manage quality quantitatively.
References
 Harsh V. Varma – Services Marketing – Text & Cases – 2nd Ed. –
Pearson
 K. Rama Mohana Rao. Services Marketing, 2013. – 2nd Ed. – Pearson
 Ramaswamy, Namakumari. Marketing Management – Indian Context.
Global Perspective. 2018. – 6th Ed. – SAGE
 Christopher Lovelock, JochenWirtz, Jayanta Chatterjee – Services
Marketing: People,Technology, Strategy – 8th Ed. – Pearson
 Marie J. Bitner, Valarie A. Zeithaml – Services Marketing – Tata
McGraw Hill
 Helen Woodruffe – Services Marketing – Longmen Group
 Adrian Payne – The Essence of Services Marketing – Prentice Hall
India.
MACFAST

Thank You…
Dr. Ajai Krishnan G

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