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TOPIC # 1 AN INTRODUCTION TO SERVICES Understanding the Concept of Service The Servuction System The Services Marketing Triangle The Services Marketing Mix The PBZ 5 Gap Model The Five Dimensions of Service Quality REQUIRED READING: Chapters 1 & 2 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler UNDERSTANDING THE CONCEPT OF SERVICE A service is an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially intangible and does not result in the ownership of any of the factors of production. Services are economic activities that create value and provide benefits for customers at specific times and places, as a result of bringing about a desired change in – or on behalf of – the recipient of the service. Services lie at the very heart of economic activity in any modern, industrialised economy. Economic activity flows between three principal sectors of an economy; Extractive (Mining and Farming), Manufacturing and Service. The service sector itself can be divided into five subgroups; i. Business Services – Consulting, Finance, Banking, Design etc. ii. Trade Services – Retailing, Maintenance, Construction, Repair etc. iii. Infrastructure Services – Communications, Transportation, Energy, Water etc. iv. Social / Personal Services – Restaurants, Hospitality, Health Care, Entertainment etc. v. Public Administration – Education, Government, Security etc. *Infrastructure Services are the essential links between the sectors of the economy and are a prerequisite for an economy to successfully industrialise. Inherent differences between goods and services exist and these differences result in unique, or at least different, management challenges for service businesses and for manufacturers that offer services as a core offering. These differences can be clustered under four main headings; Intangibility; Heterogeneity; Simultaneity; Perishability Because of these basic differences between goods and services, marketers of services face some very real and distinctive challenges. The challenges revolve around understanding customer needs and expectations of service, tangibilising the service offering, dealing with a myriad of people and delivery issues and keeping promises made to customers. Source: A. Parasuraman, V.A. Zeithaml, and L. L. Berry, “A Conceptual Model of Service Quality and Its Implications for Future Research,” Journal of Marketing 49 (Fall 1985), pp. 41–50. Answers to questions such as those that follow continue to challenge service marketers; How can service quality be defined and improved when the “product” is intangible and nonstandardised? How can new services be designed and tested effectively when the service is essentially an intangible process? How can the firm be certain it is communicating a consistent and relevant image when so many elements in the marketing mix communicate to customers and some of these elements are the service providers themselves? How does the firm accommodate fluctuating demand when capacity is fixed and the service itself is perishable? How can the firm best motivate and select service employees who, because the service is delivered in real time, become a critical part of the product itself? How should prices be set when it is difficult to determine actual costs of production and price may be inextricably intertwined with perceptions of quality? How should the firm be organised so that good strategic and tactical decisions are made when a decision in any one of the functional areas of marketing, operations and human resources may have significant impact on the other two areas? How can the organisation protect new service concepts from competitors when service processes cannot be legally patented? How does the firm communicate quality and value to consumers when the offering is intangible and cannot be readily tried or displayed? How can the organisation ensure the delivery of consistent quality service when both the organisation’s employees and customers themselves can affect the service outcome? The Service Package is defined as a bundle of goods and services provided in some service production and delivery environment. It consists of four features: i. Supporting Facility - the physical resources that must be in place before a service can be offered. ii. Facilitating Goods - the material purchased, consumed and / or items provided by the customer. iii. Explicit Services - the benefits that are readily observable by the senses and consist of the essential or intrinsic features of the service. iv. Implicit Services - psychological benefits that the customer may sense only vaguely/subconsciously. THE SERVUCTION SYSTEM MODEL What the consumer purchases when he or she purchases a service is an experience. The Servuction System is what creates the experience and it is the experience that creates the perceived benefit. The implications of the system are; In order to receive the benefit, the consumer must be part of the system. (remote services?) Service managers must manage a variety of disparate interactions and variables. The benefit bundle is a function of a variety of inputs, some less controllable than others. Back Stage Organisation and System The Servicescape / Physical Evidence Customer A Other Customers Contact Personnel [This component of the system is not visible to the customer] [Visible to the customer] Bundle of Service Benefits peceived by Customer A The Servicescape - the inanimate, non-living physical evidence used to create the service environment Ambient Conditions TemperatureAir Quality Music Noise Odors Signs, Symbols, Artifacts Layout Equipment Furnishings Space/Function Personal Artifacts Signage Style, Decor Boundary Spanning Personnel (BSPs) are the public face and “the permeable surface” of the service organisation Apathy: DILLIGAD (Do I look like I give a damn) Brush-off: Dismisses the customer completely Coldness: Doesn’t care what the customer wants Condescension:You are the customer, you must be stupid Robotism: Customers are inputs to be processed Rulebook: Adheres to rules which make no sense Runaround: Passes off to another service provider Other Customers – can enhance or detract from an individual’s service experience through Active Influence (e.g. unruly customers, crying children) Passive Influence (e.g. customers who show up late for appointments). Invisible Organization and Systems – People, Processes, Equipment, Procedures [Hard and Soft Technology] THE SERVICES MARKETING TRIANGLE The Services Marketing Triangle shows the three interlinked groups that work together to develop, promote and deliver services. Adapted from Bitner 1995 Management Internal Marketing (enabling promises) External Marketing (making promises) Service providers Interactive Marketing (keeping promises) Customers THE SERVICES MARKETING MIX Acknowledgement of the implications of the specific characteristics of services has led service marketers to adopt the concept of an expended marketing mix for services; Product, Price, Marketing Communications, Logistics, People, Physical Evidence, Process. People; All human actors who play a part in service delivery and thus influence the buyer’s perceptions; namely, the firm’s personnel, the customer, and other customers in the service environment. Physical Evidence; The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. Process; The actual procedures, mechanisms and flow of activities by which the service is delivered - the service delivery and operating systems. THE PBZ FIVE GAP MODEL Word of Mouth Communication Personal Needs Past Experience Expected Service Gap 5 Perceived Service Provider Service Delivery (including preand post- contacts) Gap 3 Gap 1 Translation of Perceptions into Service Quality Specs. Gap 2 Management Perceptions of Consumers Expectations Gap 4 External Communications to Consumers Expected service < performance = satisfied customer Expected service > performance = unsatisfied customer Expected service is a ƒ(past experiences, marketing communications, peers, etc.) Performance = ƒ(expected service, perceived service) Managing customer satisfaction; Perceived service, not actual service, is all that matters (Perception is Reality). Possible to manage expectations to produce satisfaction without altering the service. Importance of customer satisfaction; Without customers the firm does not exist. Service businesses must engage in proactive customer satisfaction observation. Waiting for complaints is simply too slow. Why do people switch (or defect)? 45 40 40% service 35 30 25 20 15 10 5 0 8% price 1 in 4 unhappy customers switch 1 in 27 unhappy customers complain Unhappy customers tell 20 people Happy customers tell 4 people It is easier and five to seven times cheaper to keep a customer than to gain a new one Three Common Mistakes: Customer service as cost rather than an investment. Customer service is a constantly rising bar. Failure to link customer satisfaction to the bottom lines. THE 5 DIMENSIONS OF SERVICE QUALITY TOPIC # 2 SERVICE CONSUMER BEHAVIOUR Introduction Service Consumer Decision-Making The Role of Culture in Services REQUIRED READING: Chapters 3, 4 & 5 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler INTRODUCTION Service organisations must follow and successfully deliver on the Marketing Concept. To achieve this, service marketers need to understand how consumers choose and evaluate their market offerings. The unique characteristics of services necessitate different consumer evaluation processes from those used in assessing tangible goods. Recognising these differences and thoroughly understanding consumer evaluation processes are critical for the customer focus on which effective services marketing is based. Search Qualities are attributes of a market offering that a consumer can determine before purchasing it. Experience Qualities are attributes that can only be discerned after purchase or during consumption. Credence Qualities are characteristics that the consumer may find impossible to evaluate even after purchase and consumption. Market offerings high in search qualities are easiest to evaluate prior to purchase. As we move to the right of the continuum, evaluation becomes more difficult. Most Goods Easy to evaluate Most Services Difficult to evaluate High in search qualities High in experience High in credence qualities qualities Because experience and credence qualities dominate in services, consumers deploy different evaluation processes than those they use with tangible goods, where search qualities dominate. Specific areas where the characteristics of services lead to divergent evaluation processes and altered consumer behaviours are; Information search, Evaluative criteria, Size and composition of the evoked set, Perceived risk, Adoption of innovations, Brand loyalty, Assessment of value, Attribution of dissatisfaction. SERVICE CONSUMER DECISION-MAKING Using an adaptation of the basic consumer decision-making process, we can investigate service consumer behaviour under four major headings; I. II. III. IV. Information Search. Evaluation of Alternatives. Purchase and Consumption. Post-purchase Evaluation. In the purchase and consumption of services, these steps do not occur in a linear sequence as they do in the purchase of tangible goods. Information Search Use of personal sources Perceived risk Purchase and Consumption Service provision as drama Service roles and scripts Compatibility of customers Evaluation of Alternatives Evoked set Emotion and mood Post-Purchase Evaluation Attribution of dissatisfaction Innovation diffusion Brand loyalty THE ROLE OF CULTURE IN SERVICES Culture is learned, shared, transmitted from one generation to the next, and is multidimensional. Culture is important in services marketing because of its effects on the ways customers evaluate and use service. Also influences the way companies & their service employees interact with customers. Culture is important when we consider international services marketing but it is also critical within countries. More and more, individual countries are becoming multicultural, making the need to understand how this factors affects evaluation, purchase, and use of services critical. Definitions of the elements of culture vary, but a simple list of the major areas would include; Language (both verbal and nonverbal), Values and Attitudes, Manners and Customs, Material Culture, Aesthetics, Education and Social Institutions. TOPIC # 3 CUSTOMER EXPECTATIONS OF SERVICE Introduction Factors that influence Customer Expectations of Service Current Issues involving Expectations of Service Customers REQUIRED READING: Chapter 3 (3/e) or Chapter 4 (4/e) of Services Marketing; Integrating Customer Focus Across the Firm by Valarie A. Zeithaml and Mary Jo Bitner INTRODUCTION Customer expectations are beliefs about service delivery that function as standards or reference points against which performance is judged. Because customers compare their perceptions of performance with these reference points when evaluating service quality, thorough knowledge about customer expectations is critical to service marketers. Zeithaml, Berry and Parasuraman (1993) have put forward a methodology for understanding customer service expectations which recognises that; [A] Customers hold different types of expectations about service (Desired & Adequate Service), [B] Customers are willing to accept a level of variation in service; a so-called Zone of Tolerance exists, [C] Zones of Tolerance vary for different service dimensions and [D] Zones of Tolerance vary for First-time and Recovery Service. [A] Dual Customer Expectation Levels [B] The Zone of Tolerance Desired Service Desired Service Zone of Tolerance Zone of Tolerance Adequate Service Adequate Service [C] Zones of Tolerance for Different Service Dimensions Desired Service Level of Expectation Zone of Tolerance Adequate Service Desired Desired Service Service Zone of Tolerance Adequate Adequate Service Service Most Important Factors Least Important Factors Source: Berry, Parasuraman, and Zeithaml (1993) [D] Zones of Tolerance for First-Time and Recovery Service First-Time Service Outcome Process Recovery Service Outcome Process LOW Source: Parasuraman, Berry and Zeithaml (1991) Expectations HIGH FACTORS THAT INFLUENCE CUSTOMER EXPECTATIONS OF SERVICE “Service expectations are formed by many uncontrollable factors, from the experience of customers with other companies and their advertising to a customer’s psychological state at the time of service delivery. Strictly speaking, what customers expect is as diverse as their education, values and experience. The same advertisement that shouts “personal service” to one person tells another that the advertiser has promised more than it can possibly deliver”. (Davidow and Uttal 2000) Factors that Influence Desired Service Enduring Service Intensifiers e.g. Personal Service Philosophy, Derived Service Expectations (family, peers) Desired Service Personal Needs; Physical, Social, Psychological, Functional. Zone of Tolerance Adequate Service Factors that Influence Adequate Service Transitory Service Intensifiers Perceived Service Alternatives Self-Perceived Service Role Situational Factors Desired Service Zone of Tolerance Adequate Service Predicted Service Enduring Service Intensifiers are long term individual factors that make a customer more aware of the need for good service and the quality of service received e.g. personal service philosophy, derived Service expectations (family, peers, experience, education) Transitory Service Intensifiers are temporary, usually short-term, individual factors that make a customer more aware of the need for service e.g. breakdown in office equipment during a busy period, auto insurance when car has been written off. Perceived Service Alternatives are other providers from whom the customer can obtain service. If customers have multiple service providers to choose from, or if they can provide the service for themselves, their levels of adequate service are higher than those of customers who believe it is not possible to get better service elsewhere. Customer’s Self-perceived Service Role is a customers perceptions of the degree to which customers exert an influence on the level of service they receive. In other words, customers’ expectations are partly shaped by how well they believe they are performing their own roles in service delivery i.e. in specifying the level of service expected, in assuming the responsibility for complaining when service is poor. Customers’ Zones of Tolerance expand when they sense they are not fulfilling their roles. Situational Factors are service performance conditions that customers view as beyond the control of the service provider. Customers who recognise that these contingencies are not the fault of the service company may accept lower levels of adequate service given the context. In general, situational factors temporarily lower the level of adequate service, widening the zone of tolerance. The final factor that influences adequate service is Predicted Service, the level of service customers believe they are likely to get. This type of service expectation can be viewed as predictions made by the customers about what is likely to happen during an impending transaction or exchange. If customers predict good service, their levels of adequate service are likely to be higher than if they predict poor service. When consumers are interested in purchasing services, they are likely to seek or take in information from several different sources. In addition to active and passive types of external search for information, consumers may conduct an internal search by reviewing the information held in memory about the service. Factors that Influence Predicted Service & Desired Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Desired Service Zone of Tolerance Adequate Service Past Experience Predicted Service Explicit Service Promises are personal and nonpersonal statements about the service made by the organisation to customers. The statements are personal when they are communicated by salespeople or service or repair personnel. They are non-personal when they come from advertising, brochures or other written publications. Explicit service promises are one of the few influences on expectations that are completely in the control of the service provider. Implicit Service Promises are service-related cues other than explicit promises that lead to inferences about what the service should and will be like. These quality cues are dominated by price and the tangibles associated with the service. In general, the higher the price and the more impressive the tangibles, the more a customer will expect from the service. The importance of Word-of-Mouth (WOM) Communication in shaping expectations of service is well documented. These personal and sometimes non-personal statements made by parties other than the organisation convey to customers what the service will be like and influence both predicted and desired service. WOM tends to be very important in services that are difficult to evaluate before purchase and direct experience of them. Development of WOW Past Experience, the customer’s previous exposure to service that is relevant to the focal service, is another force in shaping predictions and desires. In a general sense, past experience may incorporate previous experience with the focal brand, typical performance of a favourite brand, experience with the brand last purchased or the top-selling brand, as well as the average performance a customer believes represents a realistic level of service to expect. CURRENT ISSUES INVOLVING EXPECTATIONS OF SERVICE CUSTOMERS Four key questions are at the forefront of modern services marketing; i. What does a service marketer do if customer expectations are “unrealistic”? ii. How does a company exceed customer service expectations? iii. Do customer service expectations escalate? iv. How does a service company stay ahead of competition in meeting customer expectations? TOPIC # 4 CUSTOMER PERCEPTIONS OF SERVICE Introduction What is Customer Satisfaction? Service Quality Building Blocks of Satisfaction & Service Quality Critical Service Encounters Research; The Critical Incident Technique The Evidence of Service Influencing Customer Perceptions REQUIRED READING: Ch. 4 (3/e) or Ch. 5 (4/e) of Services Marketing; Integrating Customer Focus Across the Firm by Zeithaml and Bitner INTRODUCTION Understanding how customers perceive services, how they assess whether they have experienced quality service and whether they are satisfied is at the heart of successful services marketing. In gaining this understanding it is essential to remember that the entire issue of quality & satisfaction is based on perception of service – not some predetermined objective criteria of what service is and should be. A tendency exists to use the terms satisfaction and quality interchangeably but the two concepts are fundamentally different in terms of their underlying causes and outcomes. While they have things in common, satisfaction is generally viewed as a broader concept while service quality assessment focuses specifically on dimensions of service. In other words perceived service quality is a component of customer satisfaction as illustrated over page. Service Quality Dimensions Service Quality Product Quality Price Situational Factors Customer Satisfaction Personal Factors WHAT IS CUSTOMER SATISFACTION? “Satisfaction is the consumer’s fulfillment response. It is a judgement that a … service feature, or the … service itself, provides a pleasurable level of consumption-related fulfillment”. (Oliver 1997) In essence this means that satisfaction is the customers’ evaluation of a service in terms of whether that service has met their needs and expectations. Failure to meet needs and expectations is disconfirmation and thus assumed to result in dissatisfaction with the service. Service customer satisfaction will be influenced by specific service features and by perceptions of service quality as seen in the earlier diagram. Service customer satisfaction will also be influenced by; Customer emotions; mood state, life satisfaction. Attributions for Service Success or Failure; i.e. the perceived cause of the events leading to service failure or success. Perceptions of Equity or Fairness; treated equitably and fairly relative to other customers? Outcomes of service customer satisfaction are; Increased customer retention Positive word-of-mouth communications Increased revenues SERVICE QUALITY Technical and Functional (Process) Service Quality. Research suggests that customers do not perceive service quality as a uni-dimensional concept but rather that customers’ assessments of service quality include perceptions of multiple factors. Reliability; the ability to perform the promised service dependably and accurately. Assurance; knowledge and courtesy of employees and their ability to convey trust and confidence. Tangibles; physical facilities, equipment, and appearance of personnel. Empathy; caring, individualized attention the firm provides its customers. Responsiveness; willingness to help customers and provide prompt service. RELIABILITY Providing service as promised Dependability in handling customers’ service problems Performing services right the first time Providing services at the promised time Maintaining error-free records ASSURANCE RESPONSIVENESS Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests EMPATHY TANGIBLES Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their customers Convenient business hours BUILDING BLOCKS OF SATISFACTION AND SERVICE QUALITY; SERVICE ENCOUNTERS From the customer’s point of view, the most vivid impression of service occurs in the service encounter, at the Moment of Truth, when the customer interacts with the service firm. (Interactive Marketing) It is in these encounters that customers receive a snapshot of the organisation’s service quality, and each encounter contributes to the customer’s overall satisfaction and willingness to do business with the organisation again. Types of encounters: (1) remote encounters (2) phone encounters (3) face-to-face encounters Each service encounter is an opportunity for the service organisation to: build trust; reinforce quality; build brand identity; increase loyalty CRITICAL SERVICE ENCOUNTERS RESEARCH; THE CRITICAL INCIDENT TECHNIQUE GOAL - understanding actual events & behaviors that cause customer dis/satisfaction in service encounters METHOD - Critical Incident Technique (CIT) DATA - stories from customers and employees OUTPUT - identification of themes underlying satisfaction and dissatisfaction with service encounters Questions employed in CIT research:- Think of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of . When did the incident happen? What specific circumstances led up to this situation? Exactly what was said and done? What resulted that made you feel the interaction was satisfying (dissatisfying)? On the basis of thousands of service encounter stories, four common themes have been identified as the sources of customer satisfaction / dissatisfaction in memorable service encounters. The themes encompass service behaviours in encounters spanning a wide variety of industries. 1. Recovery: Employee Response to Service Delivery System Failure 2. Adaptability: Employee Response to Customer Needs and Requests 4. Coping: 3. Spontaneity: Employee Response to Problem Customers Unprompted and Unsolicited Employee Actions and Attitudes THEME #1 RECOVERY DO • • • • • • Acknowledge problem Explain causes Apologize Compensate/upgrade Lay out options Take responsibility DON’T • Ignore customer • Blame customer • Leave customer to fend for him/herself • Downgrade • Act as if nothing is wrong THEME #2 ADAPTABILITY DO • Recognize the seriousness of the need • Acknowledge • Anticipate • Attempt to accommodate • Explain rules/policies • Take responsibility • Exert effort to accommodate DON’T • Promise, then fail to follow through • Ignore • Show unwillingness to try • Embarrass the customer • Laugh at the customer • Avoid responsibility THEME #3 SPONTANEITY DO • • • • • Take time Be attentive Anticipate needs Listen Provide information (even if not asked) • Treat customers fairly • Show empathy. • Acknowledge by name DON’T • • • • Exhibit impatience Ignore Yell/laugh/swear Steal from or cheat a customer • Discriminate • Treat impersonally THEME #4 COPING DO • • • • Listen Try to accommodate Explain Let go of the customer DON’T • Take customer’s dissatisfaction personally • Let customer’s dissatisfaction affect others THE EVIDENCE OF SERVICE Because services are intangible, customers are searching for evidence of service in every interaction they have with an organisation. The diagram over page depicts the three major categories of evidence as experienced by the customer : People, Process and Physical Evidence. These categories together represent the service and provide the evidence that tangibilises the market offering. All of these evidence elements, or a subset of them, are present in every service encounter a customer has with a service firm and are critically important in managing service encounter quality and creating customer satisfaction. Evidence of Service from the Customer’s Point of View Contact employees Customer him/herself Other customers People Operational flow of activities Steps in process Flexibility vs. standard Technology vs. human Process Physical Evidence Tangible communication Servicescape Guarantees Technology INFLUENCING CUSTOMER PERCEPTIONS Measure and manage Customer Satisfaction and Service Quality. (Service Quality Information System - SQIS) Aim for Customer Quality and Satisfaction in every service encounter. (Zero defects) Plan for effective Service Recovery. (Theme #1) Facilitate Adaptability and Flexibility. (Theme #2) Encourage Spontaneity. (Theme #3) Help employees Cope with Problem Customers. (Theme #4) Manage the Evidence of Service to reinforce perceptions. TOPIC # 5 SERVICE MARKET RESEARCH REQUIRED READING: Chapter 6 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler The Services Marketing Information System/SQIS. In services, as with any offering, a firm that does no marketing research will suffer marketing myopia and will fail to fulfill the marketing concept. Marketing research must focus on service issues such as what features are most important to customers, what level of these features customers expect, and what customers think the company can and should do when problems occur in service delivery. COMMON SERVICE RESEARCH OBJECTIVES • • • • • • • • • • To identify dissatisfied customers. To discover customer requirements or expectations. To monitor and track service performance. To assess overall company performance compared to competition. To assess customer expectations/perceptions gaps. To gauge effectiveness of changes in service. To appraise service performance of individuals and teams for rewards. To determine expectations for a new service. To monitor changing expectations in an industry To forecast future expectations. CRITERIA FOR AN EFFECTIVE SERVICES RESEARCH PROGRAMME A Services Research Programme can be defined as the composite of separate studies and types needed to address research objectives and execute an overall measurement strategy. Myriad types of research could be considered in a research programme but certain criteria must be met if the programme is to be effective and efficient. Understanding these criteria will help a company evaluate different types of research and chose the ones most appropriate to its research objectives. CRITERIA FOR EFFECTIVE SERVICES RESEARCH Occurs with Appropriate Frequency Includes Perceptions and Expectations of Customers Research Objectives Measures Priorities or Importance Includes Statistical Validity When Necessary Includes Measures of Loyalty or Behavioral Intentions ELEMENTS IN AN EFFECTIVE SERVICES MARKETING RESEARCH PROGRAMME A good services marketing research programme includes multiple types of research studies. The composite of studies and types of research will differ by company, and the particular portfolio for any company will match company resources and the particular services marketing issues being addressed. All service organisations require a rich, multifaceted flow of information to operate successfully. A Selection of Services Research Techniques. Primary Research Objective Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time Obtain customer feedback while service experience is still fresh; act on feedback quickly if negative patterns develop Use as input for quantitative surveys; provide a forum for customers to suggest serviceimprovement ideas Type of Research Customer Complaint Solicitation “Relationship” Surveys Post-Transaction Surveys Customer Focus Groups Measure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; Identify systemic strengths and weaknesses in service Measure internal service quality; identify employeeperceived obstacles to improve service; Track employee morale and attitudes Determine the reasons why customers defect To forecast future expectations of customers To develop and test new service ideas “Mystery Shopping” of Service Providers. Employee Surveys. Lost Customer Research. Future Expectations Research TOPIC # 6 SERVICE RECOVERY Service failure is inevitable even for the best of firms, with the best of intentions and even for those with “world class” service systems. To fully understand and retain their customers, firms must understand what customers expect when service failures occur, and implement effective strategies for service recovery. Service Recovery refers to actions taken by an organisation in response to service failure. Service Failure occurs for all kinds of reasons. An effective service recovery strategy has multiple potential impacts. It can increase customer satisfaction and loyalty and generate positive wordof-mouth. A well-designed, well-documented service recovery strategy also provides information that can be used to improve service as part of a continuous improvement effort. By making adjustments to service processes, systems and outcomes based on learning points from service recovery experiences, companies increase the likelihood of “doing it right the first time” (zero defects). In turn this reduces costs of failures and increases initial customer satisfaction. There are tremendous downsides to having no service recovery or ineffective service recovery strategies. Poor recovery following a bad service experience can lead to customers who are so dissatisfied they become “ terrorists”, actively pursuing opportunities to openly criticise the company. Repeated service failures without an effective recovery strategy in place can aggravate the best employees. The costs in employee morale and lost employees can be huge, but are often overlooked. The Service Recovery Paradox. CUSTOMER RESPONSE FOLLOWING SERVICE FAILURE Service Failure Take Action Do Nothing Switch Providers Complain to Provider Complain to Family & Friends Switch Providers Complain to Third Party Stay with Provider Stay with Provider TYPES OF COMPLAINERS Research suggests that people can be grouped into categories based on how they respond to service failures. Four categories of response types have been identified by Singh (1990); Passives; least likely to take action, less likely to engage in WOM. Personal values are anticomplaining. Voicers; actively complain, less likely to engage in negative WOM or switching behaviour. S.O.’s “best friends”. Irates; above average in propensity to complain, prone to WOM and switching behaviour. Activists; above average propensity to complain and participate in WOM. Can become “terrorists”. CUSTOMER COMPLAINT EXPECTATIONS When they take the time and effort to complain, customers generally have high expectations. They expect to be helped quickly, to be compensated for the grief and hassle of being inconvenienced, and to be treated nicely in the process. Specifically, customers want justice and fairness in handling their complaints. Brown et al (1998) have documented three specific types of justice sought by complaining customers: Outcome Fairness; matched level of dissatisfaction. Procedural Fairness; fairness of rules and policies. Interaction Fairness; hassle free, speedy, honest. SERVICE RECOVERY STRATEGIES Service Recovery Strategies Pricing • • • • High Price Price Increases Unfair Pricing Deceptive Pricing Inconvenience • Location/Hours • Wait for Appointment • Wait for Service Core Service Failure CAUSES BEHIND SERVICE SWITCHING • Service Mistakes • Billing Errors • Service Catastrophe Service Encounter Failures • • • • Uncaring Impolite Unresponsive Unknowledgeable Response to Service Failure • Negative Response • No Response • Reluctant Response Competition • Found Better Service Ethical Problems • • • • Cheat Hard Sell Unsafe Conflict of Interest Involuntary Switching • Customer Moved • Provider Closed Service Switching Behavior SERVICE GUARANTEES Service organisations are beginning to recognise that guarantees serve not only as a marketing tool but as a means for defining, cultivating and maintaining quality throughout an organisation. guarantee = an assurance of the fulfillment of a condition (Webster’s Dictionary). for products, guarantee often done in the form of a warranty. services are often not guaranteed cannot return the service service experience is intangible, (so what do you guarantee?) Characteristics of an Effective Service Guarantee Unconditional The guarantee should make its promise unconditionally no strings attached. Meaningful It should guarantee elements of the service that are important to the customer. The payout should cover fully the customer's dissatisfaction. Easy to Understand and Communicate For customers - they need to understand what to expect. For employees - they need to understand what to do. Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way of accessing or collecting on the guarantee. Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62. Why a Good Guarantee Works: forces company to focus on customers. sets clear standards. generates feedback. forces company to understand why it failed. builds “marketing muscle”. Does everyone need a guarantee? Reasons companies do NOT offer guarantees: guarantee would be at odds with company’s image. too many uncontrollable external variables. fears of cheating by customers. costs of the guarantee are too high. Service guarantees work for companies who are already customer-focused. Effective guarantees can be BIG deals - they put the company at risk in the eyes of the customer. Customers should be involved in the design of service guarantees. The guarantee should be so stunning that it comes as a surprise -- a WOW!! Factor. “It’s the icing on the cake, not the cake” REQUIRED READING: Chapter 8 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler TOPIC # 7 SERVICE DEVELOPMENT & DESIGN Introduction Risks of Verbalisation Service Blueprinting Benefits of Service Blueprinting Building a Service Blueprint Components of a Service Blueprint Application of Service Blueprints Service Process Characteristics Service Positioning through Structural Change New Service Development Process REQUIRED READING: Chapter 9 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler GAP 2 CUSTOMER Customer-Driven Service Designs and Standards COMPANY GAP 2 Company Perceptions of Consumer Expectations INTRODUCTION Because services are intangible, they are difficult to describe and communicate. Because services are typically people-intensive they are heterogeneous. Because services cannot be touched, examined or tried out (due to lack of search qualities), people frequently resort to words in their efforts to describe them. “Verbal and/or written descriptions are inadequate for understanding service systems. Dependence on words leads to communication problems at every level in the service organisation, creating confusion, misunderstanding and poor decision-making. Blueprinting provides an objective, visual and quantitative method for describing service systems down to the lowest level of detail. Through Blueprinting, all parties involved in services marketing, management and planning, can gain greater awareness of the complexities of service systems, a common ground for communication, and a mechanism for capturing and sharing information across functional and organisational lines on an ongoing basis to help improve decisions & actions”. (Shostack 1992) RISKS OF VERBALISATION Oversimplification. Incompleteness. Subjectivity. Biased Interpretation. Service Blueprinting is a methodology for overcoming these problems. SERVICE BLUEPRINTING; WHAT IS IT? Service Blueprinting is a mapping technique designed to fully and accurately portray any service system in it’s entirety so that the system can be understood objectively and dealt with by all components of the service organisation on the same basis. It allows the service organisation to simultaneously depict the service process, the points of customer contact, and the evidence of service from the customer’s point of view. BENEFITS OF SERVICE BLUEPRINTING 1. 2. 3. Macro and micro-benefits – Kingman-Brundage & Gummesson (1991) from course text. One of the greatest benefits of Service Blueprinting is how educational it can be; It forces people to confront exactly how little they know about their service system. The effort to visualise the entire system makes one consider the system in a new and more comprehensive way. The difficulties and explorations that Blueprinting creates are, in their own right, an important contribution to the knowledge every service manager and marketer needs in order to effectively deal with the challenges of the job. 4. 5. Service Blueprints have an equally great benefit in managing and planning services on a day-to-day basis. They provide a means for a group of people to communicate and share knowledge, debate and refine their understanding, and prioritise and focus their efforts by having a visible map as a reference point. Service Blueprints also bring bias and interpretation issues out into the open where resolution on the basis of facts rather than subjective opinion is possible. BUILDING A SERVICE BLUEPRINT Creating a Service Blueprint begins with developing a picture of the entire service system at an overview level. Services are integrated systems that can be broken down into three basic components and all services can be understood in their entirety by understanding these three elements; First are the steps, tasks and activities necessary to the rendering of the service i.e. the service process. Next are the means by which the tasks are executed, typically some combination of people interactions and tangible goods. Finally, the evidence presented to the consumer which is everything he / she experiences sensorially that relates to the service. Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 Identify the process to be blueprinted. Identify the customer or customer segment. Map the process from the customer’ s point of view. Map contact employee actions, onstage and backstage. Link customer and contact person activities to needed support functions. Add evidence of service at each customer action step. COMPONENTS OF A SERVICE BLUEPRINT CUSTOMER ACTIONS line of interaction “ONSTAGE” CONTACT EMPLOYEE ACTIONS line of visibility “BACKSTAGE” CONTACT EMPLOYEE ACTIONS line of internal interaction SUPPORT PROCESSES CONTACT PERSON CUSTOME PHYSICAL EVIDENCE (Back Stage) (On Stage) R Express Mail Delivery Service Customer Calls Customer Gives Package Receive Package Driver Picks Up Pkg. Deliver Package Customer Service Order Dispatch Driver SUPPORT PROCESS Truck Packaging Forms Hand-held Computer Uniform Truck Packaging Forms Hand-held Computer Uniform Airport Receives & Loads Fly to Sort Center Load on Airplane Sort Packages Fly to Destinatio n Unload & Sort Load On Truck CONTACT PERSON SUPPORT PROCESS (Back Stage) (On Stage) CUSTOMER PHYSICAL EVIDENCE Overnight Hotel Stay Hotel Exterior Parking Arrive at Hotel Cart for Bags Desk Elevators Cart for Registration Hallways Bags Papers Room Lobby Key Give Bags Check in to Bellperson Go to Room Greet and Process Take Registration Bags Receive Bags Room Menu Amenities Bath Sleep Shower Call Room Service Deliver Bags Take Bags to Room Registration System Delivery Food Tray Food Appearance Receive Food Deliver Food Eat Bill Desk Lobby Hotel Exterior Parking Check out and Leave Process Check Out Take Food Order Prepare Food Registration System APPLICATION OF SERVICE BLUEPRINTS New Service Development; • concept development. • market testing. Supporting a “Zero Defects” Culture; • managing reliability. • identifying empowerment issues. Service Recovery Strategies; • identifying service problems. • conducting root cause analysis. • modifying processes. Blueprints Can Be Used By: Service Marketers; creating realistic customer expectations, service system design, promotion. Operations Management; rendering the service as promised, managing fail points, training systems, quality control. Human Resources; empowering the human element, job descriptions, selection criteria, appraisal systems. System Technology; providing necessary tools, system specifications, personal preference databases. SERVICE PROCESS CHARACTERISTICS i. ii. There are two complementary ways to describe service processes: According to the steps and sequences that constitute the process i.e. the complexity of the process. We can define a service’s complexity by analysing the number and intricacy of the steps required to perform it. According to the executional latitude or variability of those steps and sequences. The degree of freedom / choice allowed or inherent in a process step or sequence can be thought of as its divergence. High divergence – a largely customised service. Low divergence – largely standardised. Services therefore can be classified and analysed according to their overall complexity and divergence; Highly complex, highly divergent: Physician, Professions. High complexity, low divergence: Hotel, Telecoms company. Low complexity, high divergence: Entertainment. Low complexity, low divergence: Car wash, Fast food. SERVICE POSITIONING THRU STRUCTURAL CHANGE Once a service has been documented accurately it can be analysed for opportunities either to increase or decrease one or both variables. Four generic strategic restructuring alternatives; 1. Reduced divergence. 2. Increased divergence. 3. Reduced complexity. 4. Increased complexity. It is critically important to recognise that any shift in overall complexity or divergence, or the introduction of any new service design, must be implemented with a clear understanding of the potential impact on the people and facilitating goods dimension of the service process. TOPIC # 8 PHYSICAL EVIDENCE & THE SERVICESCAPE Introduction Elements of Physical Evidence The S-O-R Paradigm Types of Servicescapes Servicescapes – Mary Jo Bitner 1992 Roles of the Servicescape Framework for Understanding Servicescape Effects on Behaviour Guidelines for Physical Evidence Strategy REQUIRED READING: Chapter 11 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler INTRODUCTION Because services are intangible, customers often rely on tangible cues, or physical evidence, to evaluate the service before its purchase and to assess their satisfaction with the service during and after consumption. The heart of the service product is the experience of the consumer which takes place in real time and with the consumer’s involvement in production. This means that in many service situations the consumer is “in the factory”. For this reason, service marketers must pay consideration to the promotional and evaluative dimensions of “the factory” or servicescape. ELEMENTS OF PHYSICAL EVIDENCE Servicescape Other tangibles Facility exterior Business cards Stationery Billing statements Reports Employee dress Uniforms Brochures Internet/Web pages Exterior design Signage Parking Landscape Surrounding environment Facility interior Interior design Equipment Signage Layout Air quality/temperature THE S-O-R PARADIGM Environmental psychology has provided a valuable model for studying the effects of atmospherics on consumer behaviour. Using a stimulus-organism-response model Mehabrian, Russell and Pratt offer a description of environments, intervening variables and behaviours relevant to service settings. The S-O-R model has the following requisites: A stimulus taxonomy. A set of intervening or mediating variables. A taxonomy of responses. RESPONSE TAXONOMY: The model postulates that all responses to an environment can be considered as approach or avoidance behaviours; i. A desire to enter / stay in (approach) or to get out of (avoid) the environment. ii. A desire or willingness to look around and to explore the environment (approach) versus a tendency to avoid moving through or interacting with the environment or a tendency to remain inanimate in the environment (avoidance). iii. A desire or willingness to communicate with others in the environment (approach) as opposed to a tendency to avoid interacting with others or to ignore communication attempts from others (avoidance). iii. Satisfaction or dissatisfaction with the environmental experience and a desire to revisit (approach) or decision not to return (avoidance). EMOTIONAL STATES AS INTERVENING VARIABLES: The model posits that any environment will produce an emotional state in an individual that can be characterised in terms of three PAD dimensions which are “factorially orthogonal” i.e. Pleasure / displeasure (joyful, happy). Arousal / non-arousal (relaxed, stimulated etc.). Dominance / submissiveness (perceived control). STIMULUS FACTORS: Visual, Aural, Olfactory, Tactile. Stimulus. Organism State. Response. Exercise; Apply the above SOR Model in the context of your responsibilities as Market Development Manager for a large suburban retail mall. TYPES OF SERVICESCAPES Organisations differ in terms of who the servicescape will actually have an effect on i.e. who actually comes into the service facility and thus is potentially influenced by its design – customers, employees, or both groups. Three types of service differ on this dimension; selfservice, interpersonal services and remote services. The second factor that influences servicescape management is the complexity of the servicescape. Some service environments are very simple, with few elements, few spaces and few pieces of equipment. Such environments are termed lean. For lean servicescapes, design decisions are relatively straightforward. Other servicescapes are very complicated, with many elements and many forms. They are termed elaborate environments and require more considered and careful management. Complexity of the servicescape evidence Servicescape usage Elaborate Lean Self-service (customer only) Golf Land Surf 'n' Splash ATM Ticketron Post office kiosk Internet services Express mail drop-off Interpersonal services (both customer and employeee) Hotel Restaurants Health clinic Hospital Bank Airline School Dry cleaner Hot dog stand Hair salon Remote service (employee only) Telephone company Insurance company Utility Many professional services Telephone mail-order desk Automated voice-messagingbased services By locating itself in the appropriate cell of the typology, an organisation can start to answer the following questions: I. Who should be consulted in making servicescape and other evidence decisions? (customers primarily, employees primarily, both parties). II. What organisational goals might be targeted through servicescape design? (customer goals primarily, employee goals primarily, some mix of both) III. How complex is the set of decisions regarding the servicescape? (elaborate or lean servicescape) SERVICESCAPES – MARY JO BITNER 1992 “Because services generally are purchased and consumed simultaneously, and typically require direct human contact, customers and employees interact with each other within the organisation’s physical facility. Ideally therefore, the organisation’s environment should support the needs and preferences of both service employees and customers simultaneously”. A clear implication of this line of thinking is that the physical setting can aid or hinder the accomplishment of both internal organisational and external marketing goals and objectives. i. ii. Bitner’s research throws up some interesting propositions; For interpersonal services positive (negative) internal responses to the servicescape enhance (detract from) the nature and quality of social interactions between and among customers and employees. Optimal design for encouraging employee (customer) approach behaviour may be incompatible with the design required to meet customer (employees) needs and / or facilitate employee – customer interactions. iii. Perceptions of the servicescape and associated positive (negative) cognitions can lead to positive (negative) beliefs and attributions associated with the organisation, its people and its market offerings. iv. Perceptions of the servicescape influence how people categorise the organisation; thus, the service environment serves as a mnemonic in differentiating among service firms. v. The servicescape’s influence on beliefs, attributions and categorisation of the organisation is stronger for inexperienced customers, or new employees, and when few intrinsic cues are available on which to categorise or base beliefs. ROLES OF THE SERVICESCAPE An examination of the variety of roles the servicescape can play, and how they interact, makes clear how strategically important it is to provide appropriate physical evidence of the service; Package; physically wraps the service. Facilitator; efficiency from signage, traffic flow, ambient light and temperature. Socialiser; open-plan, comfortable. Differentiator; branding through colour etc. FRAMEWORK FOR UNDERSTANDING SERVICESCAPE EFFECTS ON BEHAVIOUR The framework overpage builds on the basic SOR model already covered. In the framework the multidimensional environment is the STIMULUS, consumers and employees are the ORGANISMS that respond to the stimuli, and behaviours directed at the environment are the RESPONSES. Dimensions of the servicescape will impact customers and employees and they will behave in certain ways depending on their internal reactions to the servicescape. PHYSICAL ENVIRONMENTAL DIMENSIONS HOLISTIC ENVIRONMENT INTERNAL RESPONSES BEHAVIOR Cognitive Emotional Physiological Employee Responses Ambient Conditions Space/Function Individual Behaviors Social Interactions between and among customer and employees Perceived Servicescape Signs, Symbols, and Artifacts Customer Responses Individual Behaviors Cognitive Emotional Source: Adapted from Mary Jo Bitner, “Servicescapes.” Physiological GUIDELINES FOR PHYSICAL EVIDENCE STRATEGY I. Recognise the Strategic Impact of Physical Evidence; It is an integral part of Strategic Services Marketing & the Services Marketing Mix. II. Map the Physical Evidence of Service; Blueprint. III. Clarify Roles of the Servicescape. IV. Assess and Identify Evidence Opportunities. V. Be Prepared to Update and Modernise the Evidence. VI. Work Cross-Functionally; H.R. Manager ( e.g. uniforms), Operations Manager., Architect, Marketing Communications Manager all involved. TOPIC # 9 MANAGING PEOPLE IN SERVICE ORGANISATIONS; AN INTRODUCTION TO SHRM IN SERVICE ORGANISATIONS Introduction Emotional Labour Service Human Resource Strategies Internal Marketing REQUIRED READING: Chapter 12 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler PBZ GAP 3 CUSTOMER Service Delivery COMPANY GAP 3 Customer-Driven Service Designs and Standards INTRODUCTION The old adage “People are your most important asset” is wrong. The right people are your most important asset. Among the most demanding jobs in service businesses are so-called boundary spanning positions, where employees are expected to be fast and efficient at executing operational tasks as well as courteous and helpful in dealing with customers. As a result, many service encounters have the potential to be a three-cornered fight among the needs of partially conflicting parties; the customer, the server, and the service firm. If the job is not designed carefully or the wrong people are picked to fill it, there is a real risk that employees may become stressed and unproductive. Most of the published research in service management tends to focus on employees in highcontact environments. This is not entirely surprising because the people in these jobs are so visible. But a growing number of service jobs are being created in telephone-based call centres and internet-based retail and information centres. And what of the numerous service employees who appear to have no customer contact at all, but instead fulfill an internal service role? Effective service performance is just as important in these remote and back-stage services as it is in face-to-face services and the people-management challenges and the human resource task are essentially the same. Findings from research on service quality have contributed to greater awareness among top management of the key role that service employees play in both creating customer satisfaction and working toward service recovery when things go wrong. There is also greater awareness in management circles of the competitive advantage inherent in a dedicated, enthusiastic, motivated set of employees who support the corporate mission, understand how their individual work activities contribute – directly and indirectly – to customer satisfaction, and have the tools and skills needed to be both productive and quality oriented. Service Employees are the essence of the service; Representation; the firm in the customer’s eyes. Information Transfer. Marketers (Interactive Marketing). Their importance is evident in; The Services Marketing Mix (People), The Servuction System, The Services Triangle. Who are they? Boundary Spanners, Back Stagers & Subordinate Service Roles. What are these jobs like? Many sources of potential conflict: Person vs. Role (Emotional Labour), Organisation vs. Client, Client vs. Client, Quality vs. Productivity. EMOTIONAL LABOUR Service encounters entail more than just correct execution of a task. They also involve such human elements as personal demeanor, courtesy and empathy. This brings us to the notion of emotional labour; the act of expressing socially desired emotions during service transactions e.g. friendliness, sincerity, compassion, self-effacing . The problem is the employee may not feel such emotions. Trying to conform to customer expectations on these dimensions can prove to be a psychological burden for some service workers when they perceive themselves as having to act out emotions they do not feel. At worst, policies that impose such requirements raise troubling ethical questions about how far it is appropriate for organisations to control & shape social aspects of work. Customer-contact employees comply with so-called Display Rules through both acting and the expression of spontaneous and genuine emotion. Display rules generally reflect the norms imposed by society – which may vary from one country to another – and by specific occupations and organisations. Customer expectations may also reflect the nature of a particular encounter. Surface Acting requires employees to simulate emotions that they do not actually feel, accomplished by careful presentation of verbal and non-verbal cues, such as facial expression, gestures and vocal tone. Within limits, such acting skills can be taught; some people are natural actors. Deep Acting goes further; it involves trying to psych oneself into actually experiencing the desired emotion. One way to do this in a service context is to try to imagine how the customer is currently feeling. HR managers in service organisations need to be aware that performing emotional labour, day after day, can be stressful for employees as they strive to display toward customers feelings that may be false. The challenge for HR managers is to determine what customers expect, recruit the most suitable employees and train them well. Investment in such HR strategies is most worthwhile for service situations in which exchanges between employees and customers take place in the context of longterm relationships. SERVICE HUMAN RESOURCE STRATEGIES Hire for Service Competencies and Service Inclination Retain the Best People Customeroriented Service Delivery Provide Needed Support Systems Provide Supportive Technology and Equipment Develop People to Deliver Service Quality Empower Employees Treat Employees as Customers Hire the Right People INTERNAL MARKETING The Internal Marketing Concept states that the internal market of employees is best motivated for service-mindedness and prepared for customeroriented performance by an active, goal-oriented approach where a variety of activities and processes is used internally in an active, marketing-like and coordinated way. In this way, internal relationships between people in various departments and processes (customer contact employees, internal support employees, team-leaders, supervisors and managers) can best be enhanced and geared towards service oriented management and implementation of external relationships with customers and other parties. Internal Marketing is the management philosophy of treating employees as customers. The objective of Internal Marketing is to create, maintain and enhance internal relationships between people in the organisation, regardless of their position, so that they first feel motivated to provide services to internal customers as well as to external customers in a customer-oriented and service-minded way, and second, have the skills and knowledge required as well as the support needed from managers and supervisors, internal service providers, systems and technology to be able to perform in such a manner. Such internal relationships can only be achieved if employees feel that they can trust each other, and above all, trust the firm and its management to continuously provide the physical and emotional support required to deliver service excellence. If internal marketing activities are implemented purely as a campaign, or, even worse, as separate activities without connections to other management factors / functions, the risk that nothing enduring will be achieved is overwhelming. The three pre-requisites for successful internal marketing are; Internal marketing has to be considered an integral part of strategic management. The internal marketing process must not be counteracted by the organisational structure of a firm or by a lack of management support. Top management must constantly demonstrate active support for the internal marketing activity. Typical internal marketing activities include; Training – functional and technical, developing and enhancing favourable attitudes towards service. Management support and internal dialogue – active encouragement, feedback, coaching. Internal communication and information support – brochures, memos, intranet, appropriate access to the MKTIS & SQIS. Proactive HRM – status of preferred employer, recruitment and selection of “service enthusiasts”. Development of systems and technology support – internal complaint and internal recovery systems, internal service quality monitoring systems. Internal market research and segmentation. EMPLOYEE EMPOWERMENT “It is necessary to “dehumiliate” work by eliminating the policies and procedures (almost always tiny) of the organisation that demean and belittle human dignity. It is impossible to get peoples best efforts, involvement and caring concern for things you believe important to your customers and the long term interests of your organisation, when we write policies and procedures that treat them like thieves and bandits”. (Tom Peters) “To free someone from rigorous control by instructions, policies and orders and to give that person freedom to take responsibility for his ideas, decisions and actions is to release hidden resources that would otherwise remain inaccessible to both the individual and the organisation.” (Jan Carlson) Under the right conditions, providing employees with greater discretion (and training in how to use their judgement) may enable them to provide superior service on the spot without referring to rule books or taking time to seek permission from higher authority. From a humanistic standpoint, the notion of encouraging employees to exercise initiative and discretion is an appealing one. Empowerment looks to the performer of the task to find solutions to service problems and to make appropriate decisions about customising service delivery. It depends for its success on what is sometimes called enablement – giving workers the tools and resources they need to take on these new responsibilities. TOPIC # 10 SERVICE MARKETING COMMUNICATIONS The Communication Process Tools of Marketing Communications The Marketing Communications Process REQUIRED READING: Chapter 16 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler THE COMMUNICATION PROCESS Message Encoding Source Channel Noise Receiver Decoding Feedback TOOLS OF MARKETING COMMUNICATIONS Advertising Personal Selling Publicity Integrated Marketing Communications Sales Promotion P-O-P Sponsorship THE MARKETING COMMUNICATIONS PROCESS Selecting Target Market Establishing Objectives Setting Budget Formulating and Implementing Message and Media Strategies Evaluating Program Effectiveness TOPIC # 11 SERVICE PRICING Introduction; Defining Price Setting Price Policy REQUIRED READING: Chapter 17 of Services Marketing; integrating Customer Focus Across the Firm 4/e by Zeithaml, Bitner & Gremler INTRODUCTION; DEFINING PRICE Price is the sacrifice that one party pays another to receive something in exchange. Price is a monetary value charged by an organization for the sales of its products. Pricing decisions are complex - not solely driven by cost, or demand, or public perception. A range of factors may influence the pricing decision: Competitive pressures. Buyer Power. Life Cycle Stage. Environmental factors (Economic, Legal etc.) Internal company factors (cost structure, servuction system capacity, market positioning strategy etc.) SETTING PRICE POLICY Setting Price can be viewed as a 6 step process; SELECTING THE PRICING OBJECTIVE; Skimming, Penetration, Survival DETERMINING DEMAND ESTIMATING COSTS ANALYSING COMPETITORS’ COSTS, PRICES AND OFFERS SELECTING A PRICING METHOD; Perceived Value, Mark-up, Target Return SELECTING THE FINAL PRICE TOPIC # 12 THE FIVE GAPS MODEL If one accepts the view that quality entails consistently meeting customers’ expectations, then the service manager’s task is to balance customer expectations and perceptions and to close any gaps between the two. Zeithaml, Berry and Parasuraman (1988) identify four potential shortfalls within the service organisation that may lead to a gap between what customers expect and what they receive; I. Not knowing what customers expect. II. Specifying service quality standards that do not reflect what management believes to be customers’ expectations. III. Service performance does not match specifications. IV. Not living up to the levels of service performance that are promised through the service organisation’s marketing communications activities. The Five Gaps Model, as subsequently developed by Parasuraman, Berry and Zeithaml, positions the key concepts, strategies and decisions in services management and marketing in a manner that begins with the customer and builds the organisation’s tasks around what is needed to close the gap between customer expectations and perceptions. The central focus of the gaps model is the customer gap, the difference between customer expectations and perceptions. Firms need to close this gap in order to satisfy their customers and build long-term, mutually beneficial, relationships with them. To close this all-important customer gap, the four provider gaps need to be closed. The PBZ Five Gap Model Word of Mouth Communication Personal Needs Past Experience Expected Service Gap 5 Perceived Service Customer Provider Gap 1 Service Delivery (including preand post- contacts) Gap 4 Gap 3 Translation of Perceptions into Service Quality Specs. Gap 2 Management Perceptions of Consumers Expectations External Communications to Consumers GAP # 1: NOT KNOWING WHAT CUSTOMERS EXPECT CUSTOMER EXPECTATIONS. COMPANY PERCEPTIONS OF CUSTOMER EXPECTATIONS. KEY FACTORS LEADING TO GAP #1; Inadequate Marketing Research Orientation: Insufficient marketing research. Research not focused on service quality. Inadequate use of market research. II. Lack of Upward Communication Lack of interaction between management and customers. Insufficient communication between contact employees (BSPs) and managers. Too many layers between contact personnel and top management. III. Insufficient Relationship Focus: IV. Lack of market segmentation. Focus on transactions rather than relationships. Focus on new customers rather than relationship customers. Inadequate Service Recovery. GAP # 1 PRESCRIPTION: LEARN WHAT CUSTOMERS EXPECT Get a better understanding of customer expectations through survey research, complaint analysis, customer panels, individual depth interviews etc. Increase direct interactions between service managers and customers to improve empathy and understanding. Improve upward communication from contact personnel (BSPs) to management and reduce the number of levels between the two. Turn information and insights into action (avoid paralysis by analysis). GAP # 2: NOT SELECTING THE RIGHT SERVICE DESIGNS AND STANDARDS CUSTOMER-DRIVEN SERVICE DESIGN & STANDARDS. MANAGEMENT PERCEPTIONS OF CUSTOMER EXPECTATIONS. KEY FACTORS LEADING TO GAP #2; Poor Service Design: Unsystematic newservice development process. Vague, undefined service designs. Failure to connect service design to service positioning. II. Absence of Customer-Defined Standards: Lack of customer-defined service standards. Absence of process management to focus on customer requirements. Absence of formal process for setting service quality goals. Inappropriate Physical Evidence and Servicescape. Visual. Aural. Olfactory. Tactile. GAP # 2 PRESCRIPTION: ESTABLISH THE RIGHT SERVICE QUALITY STANDARDS Ensure that top management displays continuing commitment to quality as defined from the customers’ point of view. Get middle management to set, communicate and reinforce customer-oriented service standards for their work units. Train managers in the skills needed to lead employees to deliver quality service. Become receptive to new ways of doing business that overcome barriers to delivering quality service. Standardise repetitive work tasks to ensure consistency and reliability by substituting hard technology for human contact and improving work methods (soft technology). Establish clear service quality goals that are challenging, realistic and explicitly designed to meet customer expectations. Clarify to employees which job tasks have the biggest impact on quality and thus should receive the highest priority. Ensure that employees understand and accept (have bought into) goals and priorities. Measure performance and provide regular feedback. Reward managers and employees for attaining quality goals. GAP # 3: NOT DELIVERING TO SERVICE STANDARDS SERVICE DELIVERY. KEY FACTORS LEADING TO GAP #3: CUSTOMERDRIVEN SERVICE DESIGN & STANDARDS. Deficiencies in Human Resource Policies; Ineffective recruitment. Role ambiguity and role conflict. Poor employee-technology job fit. Inappropriate evaluation and compensation systems. Lack of empowerment, perceived control and teamwork. II. Failure to Match Supply and Demand Failure to smooth peaks and valleys of demand. Inappropriate customer mix. Over-reliance on price to smooth demand. III. Customers not Fulfilling Roles IV. Customers lack knowledge of their roles and responsibilities. Customers negatively affect each other. Problems with Service Intermediaries Channel conflict over objectives and performance. Channel conflict over costs and rewards. Difficulty controlling quality and consistency. Tension between empowerment and control. GAP # 3 PRESCRIPTION: ENSURE THAT SERVICE PERFORMANCE MEETS STANDARDS Clarify employee roles. Ensure that all employees understand how their jobs contribute to customer satisfaction. Match employees to jobs by selecting on the basis of the abilities and skills needed to perform each job well. Provide employees with the technical training needed to perform their assigned tasks effectively. Develop innovative recruitment and retention methods to attract the best people and build loyalty. Enhance employee performance by selecting the most appropriate and reliable technology and equipment. Teach employees about customer expectations, perceptions and problems. Train employees in interpersonal skills, especially for dealing with customers under stressful conditions. Eliminate role conflict among employees by involving them in the process of setting service quality standards. Train employees in priority setting and time management. Measure employee performance and tie compensation and recognition to delivery of quality service. Develop reward systems that are meaningful, timely, simple, accurate and fair. Empower managers and employees in the field by pushing decision-making power down the organisation; allow them greater discretion in the methods they use to reach goals. Ensure that employees working at internal support jobs provide good service to customer contact / boundary spanning personnel. Build teamwork so that employees work well together, and use team rewards as incentives. Treat customers as “partial employees”; clarify their roles in service delivery, train and motivate them to perform well in their roles as coproducers. # 4: NOT MATCHING PERFORMANCE TO PROMISES SERVICE DELIVERY. EXTERNAL COMMUNICATIONS TO CUSTOMERS. KEY FACTORS LEADING TO GAP #4: I. Lack of Integrated Marketing Communications Tendency to view each external communication as independent. Not including interactive marketing communication in communications plan. Absence of strong internal marketing programme. II. Ineffective Management of Customer Expectations Not managing customer expectations through all forms of communication. Not adequately educating customers. III. Over-promising IV. Over-promising in advertising, personal selling and through physical evidence cues. Inadequate Horizontal Communications Insufficient communication between sales and operations. Insufficient communication between advertising and operations. Differences in policies and procedures across branches and units. GAP # 4 PRESCRIPTION: ENSURE THAT SERVICE DELIVERY MATCHES PROMISES Seek inputs from operations personnel when new marketing communications programmes are being created. Develop advertising that features real employees performing their jobs. Allow service providers to preview advertisements before customers are exposed to them. Get sales staff to involve operations staff in face-toface meetings with customers. Develop internal educational, motivational and advertising campaigns to strengthen links between marketing, operations and human resource departments / functions. Ensure that consistent standards of service are delivered across multiple locations. Ensure that advertising content accurately reflects those service characteristics that are most important to customers in their encounters with the organisation. Manage customers’ expectations by letting them know what is and is not possible – and the rationale behind such determinations. Identify and explain uncontrollable reasons for shortcomings in service performance. Offer customers different levels of service at different prices, explaining the differences between these levels and the logic underpinning the associated alternate prices.