20140930061810_Topic 5 Delivering and Performing Service

STUDY GUIDE BMSV5103 Service Marketing

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Topic 5: Delivering and Performing Service

Learning Outcomes

By the end of this topic, you should be able to: 1. Demonstrate the importance of creating a service culture;

2. Illustrate the pivotal role of service employees in creating customer satisfaction and service quality;

3. Identify the challenges inherent in boundary-spanning roles;

4. Illustrate the importance of customers in successful service delivery;

5. Discuss the variety of roles that service customers play;

6. Explain strategies for involving service customers effectively to increase satisfaction, quality and productivity;

7. Explain the underlying issue for capacity-constrained services;

8. Lay out strategies for matching supply and demand;

9. Demonstrate the benefits and risks of yield management strategies; and

10. Provide strategies for managing waiting lines for times when capacity and demand cannot be aligned.

Topic Overview

This topic is concerned with provider gap 3. It deals with all the ways in which companies ensure that services are performed according to customer-defined designs and standards.


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Focus Areas and Assigned Readings

Focus Areas Assigned Readings

Zeithaml, V. A., Bitner, M. J., & Gremler, D. D. (2013). Services marketing: Integrating customer focus across the firm (6th ed). Singapore: McGraw-Hill.

5.1 Service Culture

Chapter 11, pp 312-314.

5.2 The Critical Role of Service Employees

Chapter 11, pp 314-319.

5.3 Boundary-Spinning Roles

Chapter 11, pp 319-324.

5.4 Strategies for Delivering Service Quality Through People

Chapter 11, pp 324-336.

5.5 The Importance of Customers in Service Co-creation and Delivery

Chapter 12, pp 347–351.

5.6 Customers’ Roles

Chapter 12, pp 351-358.

5.7 Self-Service Technologies

Chapter 12, pp 358-360.

5.8 Strategies for Enhancing Customer Participation

Chapter 12, pp 360-370.

5.9 The Underlying Issue of Supply and Demand Management in Services

Chapter 13, pp 377-379.

5.10 Capacity Constrains and Demand Patterns

Chapter 13, pp 379-383.

5.11 Strategies for Matching Capacity and Demand

Chapter 13, pp 383-392.

5.12 Yield Management

Chapter 13, pp 392-397.

5.13 Waiting Line Strategies

Chapter 13, pp 397-404.


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Content Summary

5.1 Service Culture

Service culture is defined as “a culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers is considered a natural way of life and one of the most important norms by everyone”.

Some of the implications of this definition for employee behaviour are: (1) a service culture exists if there is an “appreciation for good service”; (2) good service is given to internal as well as external customers; and (3) in a service culture, good service is a “a way of life” and it comes naturally because it is an important norm of the organisation.

A strong service culture begins with leaders in the organisation who demonstrate a passion for service excellence.

It cannot be developed overnight, and there is no easy way to sustain a service culture.

5.2 The Critical Role of Service Employees

Frontline employees and those supporting them from behind the scenes are critical to the success of any service organisation.

Customer-contact service employees are vital to any service organisation because: (1) they are the service; (2) they are the organisation in the customer’s eyes; (3) they are the brand; and (4) they are marketers.

A strategic framework, known as the service triangle, shows the three interlinked groups: (1) company (management); (2) customers; and (3) providers that work together to develop, promote and deliver services.

Satisfied employees make for satisfied customers (and satisfied customers can, in turn, reinforce employees’ sense of satisfaction in their jobs).

The service profit chain suggests that there are critical linkages among internal service quality, employee satisfaction/productivity, the value of services provided to the customer and ultimately customer satisfaction, retention and profits.


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Since customers’ perceptions of service quality are affected by the customer-oriented behaviours of employees, the five dimensions of service quality (reliability, responsiveness, assurance, empathy and tangibles) can be influenced directly by service employees.

5.3 Boundary-Spanning Roles

The frontline service employees are referred to as boundary spanners because they operate at the organisation’s boundary.

Boundary spanners provide a link between the external customer and environment and the internal operations of the organisation.

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

In addition to mental and physical skills, these positions require extraordinary levels of emotional labour, frequently demand an ability to handle interpersonal and inter-organisational conflict, and they call on the employee to make real-time trade-offs between quality and productivity on the job.

These stresses and trade-offs can result in failure to deliver services as specified, which widens the service performance gap.

Frontline employees often face interpersonal and inter-organisational conflicts on the job, which include person/role conflicts, organisation/client conflicts and inter-client conflicts.

5.4 Strategies for Delivering Service Quality Through People

Internal marketing is referred as strategies for enabling service promises.

By approaching human resource decisions and strategies with the primary goal to motivate and enable employees to deliver customer-oriented promises successfully, an organisation will move towards delivering service quality through its people.

The strategies are organised around four basic themes: (1) hire the right people; (2) develop people to deliver service quality; (3) provide the needed support systems; and (4) retain the best people.


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5.5 The Importance of Customers in Service Co-creation and Delivery

In some situations, customers are truly co-creators of the service (high level of participation).

For these services, customers have important participation roles that affect the nature of the service outcome.

For example, in a weight reduction programme, the customer, working with a counsellor, may actively co-create a personalised nutritional and exercise programme.

In many service contexts, customers receive and/or co-create the service simultaneously with other customers or must wait their turn while other customers are being served.

In both cases, “fellow customers” are present in the service environment and can affect the nature of the service outcome or process.

They can enhance or detract from customer satisfaction and perception of quality.

Some of the ways fellow customers can negatively affect the service experience are by exhibiting disruptive behaviours causing delays, excessive crowding and manifesting incompatible needs.

For example, overly demanding customers (even customers with legitimate problems) can cause a delay for others while their needs are met (e.g. banks, customer service counters in retail stores).

Customers who are being served simultaneously but who have incompatible needs can also negatively affect each other (e.g. restaurants, hospitals, college classrooms).


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5.6 Customers’ Roles

The three major roles played by customers in service co-creation and delivery are as follows: (1) customers as productive resources; (2) customers as contributors to service quality and satisfaction; and (3) customers as competitors.

Service customers have been referred to as “partial employees” of the organisation – human resources who contribute to the organisation’s productive capacity.

Customers who play a role in service co-creation and delivery are contributors to their own satisfaction and the ultimate quality of the services they receive.

They contribute to quality service delivery when they ask questions, take responsibility for their own satisfaction and complain when there is service failure.

The third role played by service customers is that of potential competitor. For example, if self-service customers can be viewed as resources of the firm, or as “partial employees”, they can also partially or entirely perform the service for themselves and not need the provider at all.

5.7 Self-Service Technologies

Self-service technologies (SSTs) are services produced entirely by the customer without any direct involvement or interaction with the firm’s employees.

As such, SSTs represent the ultimate form of customer participation along a continuum from services produced entirely by the firm to those produced entirely by the customer.

Advances in technology, particularly the Internet, have allowed the introduction of a wide range of SSTs, such as ATMs, airline check-in, various vending machines, online insurance, Internet shopping, online training and education, etc that occupy the far left end of the customer participation continuum.


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Often, adopting a new SST requires customers to change their traditional behaviours significantly, and many are reluctant to make those changes.

Research looking at customer adoption of SSTs found that customer readiness is a major factor in determining whether customers will even try a new self-service option.

5.8 Strategies for Enhancing Customer Participation

Strategies for involving customers effectively in the service delivery and co-creation process are: (1) define customers’ roles; (2) recruit, educate and reward customers; and (3) manage the customer mix.

The organisation must first determine what type of participation is desirable from customers and how the customer wishes to participate.

Once the customer’s role is clearly defined, the organisation can think in terms of facilitating that role.

Customer participation in service production and delivery will be facilitated when: (1) customers understand their roles and how they are expected to perform; (2) customers are able to perform as expected; and (3) customers receive valued rewards for performing as expected.

Because customers frequently interact with each other in the process of service delivery and consumption, another important strategic objective is the effective management of the mix of customers who simultaneously experience the service.

5.9 The Underlying Issue of Supply and Demand Management in

Services

The fundamental issue underlying supply chain and management in services is the lack of inventory capability.

Unlike manufacturing firms, service firms cannot build up inventories during periods of slow demand to use later when demand increases.

The lack of inventory capability combined with fluctuating demand leads to a variety of potential outcomes.


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The four basic scenarios that can result from different combinations of capacity and demand are: (1) excess demand; (2) demand exceeds optimum capacity; (3) demand and supply are balanced at the level of optimal capacity; and (4) excess capacity.

To manage fluctuating demand in a service business, it is necessary to have a clear understanding of demand patterns, why they vary and the market segments that constitute demand at different points in time.

5.10 Capacity Constraints and Demand Patterns

For many firms, service capacity is fixed.

The critical fixed capacity factors for some service businesses depend on the type of service – time, labour, equipment, facilities or (in many cases) a combination of these.

Understanding the primary capacity constraint or the combination of factors that restricts capacity, is a first step in designing strategies to deal with supply and demand strategies.

To fully understand capacity issues, it is important to know the difference between optimal and maximum use of capacity.

Using capacity at an optimal level means that resources are fully employed but not overused and that customers are receiving quality service in a timely manner.

Maximum capacity, on the other hand, represents the absolute limit of service availability.

To manage fluctuating demand in a service business, it is necessary to have a clear understanding of demand patterns, why they vary and the market segments that constitute demand at different points in time.

To begin to understand demand patterns, the organisation needs to chart the level of demand over relevant time periods.

As service providers consider customer demand levels, predictable cycles may be detected, including daily, weekly, monthly and/or yearly.


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In some cases, predictable patterns occur at all periods. However, sometimes the patterns of demand appear to be random – there is no apparent predictable cycle.

5.11 Strategies for Matching Capacity and Demand

When an organisation has a clear grasp of its capacity constraints and an understanding of demand patterns, it is in good position to develop strategies for matching supply and demand.

There are two general approaches for accomplishing this match.

The first is to smooth the demand fluctuations themselves by shifting demand to match existing capacity.

This approach implies that the peaks and valleys of the demand curve will be flattened to match as closely as possible the horizontal optimal capacity line.

The second general strategy is to adjust capacity to match fluctuations in demand.

This implies moving the horizontal capacity lines to match the ups and downs of the demand curve.

5.12 Yield Management

Yield management, which is also referred to as revenue management, is a term that has become attached to a variety of methods, some very sophisticated, employed to match demand and supply in capacity-constrained services.

Using yield management models, organisations find the best balance at a particular point in time among the prices charged, the segments sold to and capacity used.

Its goal is to produce the best possible financial return from a limited available capacity.

Specifically, it attempts to allocate the fixed capacity of a service provider (e.g. seats on a flight, rooms in a hotel) to match the potential demand in various market segment (e.g. business traveller, tourist) so as to maximise revenue or yield.


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The equation, Yield = Actual revenue / Potential revenue (Actual revenue = Actual capacity used X Average actual price and Potential revenue = Total capacity X maximum price), indicates that yield is a function of price and capacity used.

Yield management allows organisations to decide on a monthly, weekly, daily or even hourly basis to whom they want to sell their service capacity and at what price.

5.13 Waiting Line Strategies

For most service organisations, waiting customers are a fact of life at some point.

Waiting can occur on the telephone and in person, or can occur even with service transactions through the mail – delays in mail-order delivery – or backlogs of correspondence on a manager’s desk.

Four general strategies that can deal effectively with the inevitability of waits are: (1) employing operational logic; (2) establishing a reservation process; (3) differentiating waiting customers; and (4) making waiting more pleasurable, or at least tolerable.

If customer waits are common, a first step is to analyse the operational processes to remove any inefficiencies – it may be possible to redesign the system to move customers along more quickly.

When waiting cannot be avoided, a reservation system can help to spread demand.

On the basis of need or customer priority, some organisations differentiate among customers, allowing some to experience shorter waits for service than others, such as importance of the customer, urgency of the job, duration of the service transaction and payment of a premium price.


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Several principles, each of which has implications for how organisations can make waiting more pleasurable for customers are: (1) unoccupied time feels longer than occupied time; (2) pre-process waits feel longer than in-process waits; (3) anxiety makes waits seem longer; (4) uncertain waits are longer that known, finite waits; (5) unexplained waits are longer than explained waits, (6) unfair waits are longer than equitable waits; (7) the more valuable the service, the longer the customer will wait; and (8) solo waits feel longer than group waits.

Study Questions

1. Frontline employees inevitably have to deal with conflicts because they often need to manage a number of customers simultaneously. With examples, elaborate types of conflicts frontline employees usually face when dealing with customers.

2. Without customer-focused internal support and customer-oriented systems, it is nearly impossible for employees to deliver quality service, no matter how much they want to.

(a) Do you agree with this statement? Explain your answer with an example.

(b) Suggest three strategies for ensuring customer-oriented internal support.

3. Today’s marketplace is proliferated with a wide range of self-service technologies (SSTs). Discuss the reasons of the proliferation of SSTs.

4. One of the strategies for matching capacity and demand is adjusting capacity to meet demand. Discuss a number of different strategies that are used simultaneously in adjusting capacity to meet demand.

5. What are the problems an organisation will encounter if it focuses on maximising financial returns through differential capacity allocation and pricing?

6. Based on the following case study, answer the questions.


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Case Study

Enhance Service Delivery Capabilities, Civil Servants Told PUTRAJAYA (June 8, 2012): The Deputy Prime Minister Tan Sri Muhyiddin Yassin has urged all civil servants to enhance their service delivery capabilities to satisfy the requirements and expectations of the people. Muhyiddin said that in the present modern and borderless world, such delivery systems are dependent on the use of information communication technology (ICT) to help enhance the quality of the services. “However, complete dependence on ICT in the delivery system will make the service impersonal and mechanistic. Therefore we should all work towards decreasing crisis communication by reintroducing the element of human touch to handle and solve certain cases”, said Muhyiddin at the Education Ministry's Excellence Service Awards ceremony today. Muhyiddin, who is also the Education Minister, said the use of automatic reply in email communications, for example, sometimes does not exemplify warmth or sensitivity towards the needs of the people. He added that it is only appropriate, in certain conditions, that explanations be provided with the touch of human values and empathy to the people to avoid confusion and misunderstanding. Muhyiddin, who presented the awards to 448 officers from his ministry, also said that civil servants should not merely depend on awards or recognition but must be sincere in working to strive for excellence. He said that a ministry's success is assessed by the quality of its service delivery as the people these days want outcomes that suit their needs. “This situation requires the need to develop a more effective, fast and accurate (delivery system). “In fact, the people's expectation of service quality is higher (these days), especially in solving problems and meeting their needs,” said Muhyiddin. He said that it is time for civil servants at all levels, especially those at the Education Ministry, to implement a radical paradigm shift so the service delivery will be able to satisfy stakeholders without compromising policies and basic principles of service. In addition, he also said that it should be etched in the hearts of the civil servants that public money spent should have a double return of investment. “Thus, all the planning and implementation of programmes or activities to be carried out must be examined so that the implementation can provide a good impact and manage to optimise the use of all resources without wastage”, he said. Source: http://www.malaysiandailynews.com/enhance-service-delivery-capabilities-civil-servants-told


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(a) Muhyiddin has urged all civil servants to enhance their service delivery capabilities. What are the effective strategies for civil servants to enhance their service delivery capabilities to satisfy the requirements and expectations of the people?

(b) Muhyiddin also said that a ministry's success is assessed by the quality

of its service delivery as the people these days want outcomes that suit their needs. This situation requires the need to develop a more effective, fast and accurate delivery system. Can our Education Ministry adopt a customer-oriented service delivery system to suit the needs of Malaysians? Why and how?

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20140930061810_Topic 5 Delivering and Performing Service