Services Marketing - Definition and Characteristics Introduction

The world economy nowadays is increasingly characterized as a service economy. This is primarily due to the increasing importance and share of the service sector in the economies of most developed and developing countries. In fact, the growth of the service sector has long been considered as indicative of a country’s economic progress.

Economic history tells us that all developing nations have invariably experienced a shift from agriculture to industry and then to the service sector as the main stay of the economy.

This shift has also brought about a change in the definition of goods and services themselves. No longer are goods considered separate from services. Rather, services now increasingly represent an integral part of the product and this interconnectedness of goods and services is represented on a goods-services continuum.

Definition and characteristics of Services

The American Marketing Association defines services as - “Activities, benefits and satisfactions which are offered for sale or are provided in connection with the sale of goods.”

The defining characteristics of a service are:

Intangibility: Services are intangible and do not have a physical existence. Hence services cannot be touched, held, tasted or smelt. This is most defining feature of a service and that which primarily differentiates it from a product. Also, it poses a unique challenge to those engaged in marketing a service as they need to attach tangible attributes to an otherwise intangible offering.

1. Heterogeneity/Variability: Given the very nature of services, each service

offering is unique and cannot be exactly repeated even by the same service

provider. While products can be mass produced and be homogenous the same is

not true of services. eg: All burgers of a particular flavor at McDonalds are almost

identical. However, the same is not true of the service rendered by the same

counter staff consecutively to two customers.

2. Perishability: Services cannot be stored, saved, returned or resold once they

have been used. Once rendered to a customer the service is completely

consumed and cannot be delivered to another customer. eg: A customer

dissatisfied with the services of a barber cannot return the service of the haircut

that was rendered to him. At the most he may decide not to visit that particular

barber in the future.

3. Inseparability/Simultaneity of production and consumption: This refers to

the fact that services are generated and consumed within the same time frame.

Eg: a haircut is delivered to and consumed by a customer simultaneously unlike,

say, a takeaway burger which the customer may consume even after a few hours

of purchase. Moreover, it is very difficult to separate a service from the service

provider. Eg: the barber is necessarily a part of the service of a haircut that he is

delivering to his customer.

Types of Services

1. Core Services: A service that is the primary purpose of the transaction. Eg: a

haircut or the services of lawyer or teacher.

2. Supplementary Services: Services that are rendered as a corollary to the sale

of a tangible product. Eg: Home delivery options offered by restaurants above a

minimum bill value.

Difference between Goods and Services

Given below are the fundamental differences between physical goods and services:

Goods Services

A physical commodity A process or activity

Tangible Intangible

Homogenous Heterogeneous

Production and distribution are

separation from their consumption

Production, distribution and consumption are

simultaneous processes

Can be stored Cannot be stored

Transfer of ownership is possible Transfer of ownership is not possible

Differences between service marketing and product marketing

1. When you are marketing a service, you are really marketing relationship

and value. This relationship and value needs to be marketed differently than

if you are marketing actual products.

2. Another major difference between marketing services and marketing

products is that when a buyer purchases a service, the buyer is purchasing

something that is intangible, instead of a tangible product, like a computer

or a sprinkler system or a web page.

3. Consumers' concept of a service is often times based on just the

reputation of only one single person. Instead of building a reputation based

on the quality of a number of different products, a service is built on how

well a particular person delivers on a service, such as how well a stock

advisor does with your stock portfolio.

4. It is pretty easy to compare the quality of different products. It's easy for

you to see if one computer works more quickly than another computer, or if

one TV has a better picture than another picture, or if your child can break a

toy more easily than another toy. However, it is much more difficult to

compare the quality of similar services that are provided.

5. Products are returnable. However, services are not returnable.

Importance of Service Marketing by Leigh Richards, Demand Media

The U.S. economy has evolved into a service economy with services like health care, education

and consulting making up a larger part of the overall economy. Marketing such services is an

important skill--and a tough one--for businesses to have. Without a tangible product to show and

tell customers about, service marketers must be adept at pulling together all the pieces of the

marketing mix to create value for their intended consumers.

Relationships Are Key

In service marketing, because there is no tangible product, relationships are key. Service

marketers must listen to and understand the needs of customers and prospective customers to

build loyalty and trust. Ultimately, effective relationships in service marketing will lead to repeat

sales and positive word of mouth.

Multiple Touchpoints

Service marketing involves many touchpoints for the consumer. Interactions with multiple

people and experiences that are less tangible than when buying an actual product all impact the

consumer's perspective of the purchase process. These touchpoints work together to establish a

perception in the consumer's mind.

Services Proliferate

Consumers have many service options to choose from, and because the product is intangible, the

challenge for the service marketer is to somehow make her services stand out from the crowd.

Because service marketing is so prolific, marketers must think of ways to communicate the

benefits of the service they offer in language that reflects consumer need and value.

Feedback Improves Service

Unlike the marketing process for a tangible product, service marketing actually involves the

consumer in the marketing process. He is engaged in the process and contributes to a positive

outcome. For this reason, it is important to seek consumer feedback and to use that feedback to

improve service marketing effectiveness.

Technology Impacts

Technology is having a major impact on the service economy. You can use technology to

streamline service activities and provide do-it-yourself options for consumers. Internet-based

services, for instance, allow consumers to participate actively in the service marketing process,

often never involving contact with another human being. Having a website is important, because

people like to get information about service providers before deciding which one to use.

The Service Economy

The world economy is increasingly characterized as a service economy. This is primarily due to the increasing importance and share of the service sector in the

economies of most developed and developing countries. In fact, the growth of the service sector has long been considered as an indicator of a country's economic progress. Economic history tells us that all developing nations have invariably experienced a shift from agriculture to industry and then to the service sector as the mainstay of the economy. This shift has also brought about a change in the definition of goods and services themselves. Service organizations vary widely in size. At one end of the scale are huge international corporations operating in such industries as airlines, banking, insurance, telecommunications, and hotels. At the other end of the scale are a vast array of locally owned and operated small businesses, such as restaurants, laundries, optometrists, beauty parlors, and numerous business-to-business services.

The service sector is going through revolutionary change, which dramatically affects the way in which we live and work. New services are continually being launched to satisfy our existing needs and to meet needs that we did not even know we had. Nearly fifty years ago, when the first electronic file sharing system was created, few people likely anticipated the future demand for online banking, website hosting, or email providers. Today, many of us feel we can't do without them. Similar transformations are occurring in business-to-business markets.

The Role Of the Service Economy In Development As of 2008, services constituted over 50% of GDP in low income countries. As their economies continue to develop, the importance of the service sector continues to grow. For instance, services accounted for 47% of economic growth in sub-Saharan Africa over the period 2000–2005, while industry only contributed 37% and agriculture only 16% in that same period. This means that recent economic growth in Africa relied as much on services as on natural resources or textiles, despite many of those countries benefiting from trade preferences in primary and secondary goods.

As a result of these changes, people are leaving the agricultural sector to find work in the service economy. This job creation is particularly useful as often it provides employment for unskilled workers in the tourism and retail sectors, which benefits the poor and represents an overall net increase in employment. The service economy in developing countries is most often made up of the following industries: financial services, tourism, distribution, health, and education. ______________________________________________________________________________

Growth of service sector in india-

Services Sector Growth Rate in India GDP has been very rapid in the last few years. The Services Sector contributes the most to the Indian GDP. The Growth Rate of the Services Sector in India GDP has risen due to several reasons and it has also given a major boost to the Indian economy.

The Indian economy is the second fastest major growing economy in the whole world with the growing rate of the GDP at 9.4% in 2006- 2007. The economy of India is the twelfth biggest in the world for it has the GDP of US$ 1.09 trillion in 2007. The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the economy. Along with the global trends, Indian service sector has witnessed a major boom and is one of the major contributors to both employment and national income in recent times. The activities under the purview of the service sector are quite diverse. Trading, transportation and communication, financial, real estate and business services, community, social and personal services come within the gambit of the service industry.

Information Technology Industry

The Information Technology industry has achieved phenomenal growth after liberalization. The industry has performed exceedingly well amidst tough global competition. Being knowledge based industry; India has been able to leverage the global markets, because of the huge pool of engineering talent available and the proficiency in English language among the middle class.

Retailing

Before liberalization, India had one of the most underdeveloped retail sectors in the world. After liberalization the scenario changed dramatically. Organized retailing with prominence on self service and chain stores has changed the dynamics of retailing. In most of the tier I and tier II cities supermarket chains mushroomed, catering to the needs of vibrant middle class. This indirectly contributed to the growth of the packaged food industry and other consumer goods.

Banking

The three major changes in the banking sector after liberalization are:

Step to increase the cash outflow through reduction in the statutory liquidity andcash reserve ratio.

Nationalized banks including SBI were allowed to sell stakes to private sector and private investors

were allowed to enter the banking domain. Foreign banks were given greater access to the domestic

market, both as subsidiaries and branches, provided the foreign banks maintained a minimum assigned

capital and would be governed by the same rules and regulations governing domestic banks.

Banks were given greater freedom to leverage the capital markets and determine their asset portfolios.

The banks were allowed to provide advances against equity provided as collateral and provide bank

guarantees to the broking community.

Insurance Sector

The Insurance Regulatory and Development Authority Act 1999 (IRDA Act) allowed the participation of private insurance companies in the insurance sector. The primary role of IRDA was to safeguard the interest of insurance policy holders, to regulate, promote and ensure orderly growth of the insurance industry. The insurance sector could invest in the capital markets and other than traditional insurance products, various market link insurance products were available to the end customer to choose from.

Future Trends

Globally outsourcing industry would continue to grow.

Following the success of US and UK, more countries in the European Union would outsource their

business.

Technological power shift from the West to the East as India and China emerge as major players.

Political backlash over outsourcing would come down as companies reap the benefit of outsourcing.

Service Marketing Mix – 7 P’s of marketing

The service marketing mix is also known as an extended

marketing mix and is an integral part of a service blueprint

design. The service marketing mix consists of 7 P’s as compared to

the 4 P’s of a product marketing mix. Simply said, the service

marketing mix assumes the service as a product itself. However it

adds 3 more P’s which are required for optimum service delivery.

The product marketing mix consists of the 4 P’s which are

Product, Pricing, Promotions and Placement. These are discussed

in my article on product marketing mix – the 4 P’s.

The extended service marketing mix places 3 further P’s which

include People, Process and Physical evidence. All of these factors

are necessary for optimum service delivery. Let us discuss the

same in further detail.

Product – The product in service marketing mix is intangible in

nature. Like physical products such as a soap or a detergent,

service products cannot be measured. Tourism industry or the

education industry can be an excellent example. At the same time

service products areheterogenous, perishable and cannot

be owned. The service product thus has to be designed with care.

Generally service blue printing is done to define the service

product. For example – a restaurant blue print will be prepared

before establishing a restaurant business. This service blue print

defines exactly how the product (in this case the restaurant) is

going to be.

Place – Place in case of services determine where is the service

product going to be located. The best place to open up a petrol

pump is on the highway or in the city. A place where there is

minimum traffic is a wrong location to start a petrol pump.

Similarly a software company will be better placed in a business

hub with a lot of companies nearby rather than being placed in a

town or rural area.

Promotion – Promotions have become a critical factor in the

service marketing mix. Services are easy to be duplicated and

hence it is generally the brand which sets a service apart from its

counterpart. You will find a lot of banks and telecom companies

promoting themselves rigorously. Why is that? It is because

competition in this service sector is generally high and

promotions is necessary to survive. Thus banks, IT companies,

and dotcoms place themselves above the rest by advertising or

promotions.

Pricing – Pricing in case of services is rather more difficult than

in case of products. If you were a restaurant owner, you can price

people only for the food you are serving. But then who will pay for

the nice ambience you have built up for your customers? Who will

pay for the band you have for music? Thus these elements have to

be taken into consideration while costing. Generally service

pricing involves taking into consideration labor, material cost and

overhead costs. By adding a profit mark up you get your final

service pricing. You can also read about pricing strategies.

Related Marketing mix of Samsung - 4P of Samsung

Here on we start towards the extended service marketing mix.

People – People is one of the elements of service marketing mix.

People define a service. If you have an IT company, your software

engineers define you. If you have a restaurant, your chef and

service staff defines you. If you are into banking, employees in

your branch and their behavior towards customers defines you. In

case of service marketing, people can make or break an

organization. Thus many companies nowadays are involved into

specially getting their staff trained in interpersonal skills and

customer service with a focus towards customer satisfaction. In

fact many companies have to undergo accreditation to show that

their staff is better than the rest. Definitely a USP in case of

services.

Process – Service process is the way in which a service is

delivered to the end customer. Lets take the example of two very

good companies – Mcdonalds and Fedex. Both the companies

thrive on their quick service and the reason they can do that is

their confidence on their processes. On top of it, the demand of

these services is such that they have to deliver optimally without a

loss in quality. Thus the process of a service company in delivering

its product is of utmost importance. It is also a critical component

in the service blueprint, wherein before establishing the service,

the company defines exactly what should be the process of the

service product reaching the end customer.

Physical Evidence – The last element in the service marketing

mix is a very important element. As said before, services are

intangible in nature. However, to create a better customer

experience tangible elements are also delivered with the service.

Take an example of a restaurant which has only chairs and tables

and good food, or a restaurant which has ambient lighting, nice

music along with good seating arrangement and this also serves

good food. Which one will you prefer? The one with the nice

ambience. That’s physical evidence. Several times, physical

evidence is used as a differentiator in service marketing. Imagine

a private hospital and a government hospital. A private hospital

will have plush offices and well dressed staff. Same cannot be said

for a government hospital. Thus physical evidence acts as a

differentiator.

This is the service marketing mix (7p) which is also known as the

extended marketing mix.

Classification of services

In order to be able to make a clear and relevant classification of

services, we would first need to understand the concept of the

word itself. Services usually refer to processes and not physical

products. Some services may include people whereas other

services (like online services) may including objects which are

managed by people.

Examples of services which include people can be a hair salon,

education, theater, restaurants, public transportation. On the

other hand services that include objects include repairs and

maintenance, dry cleaning, banking, legal services, insurance, etc.

The service processes can be either manual or mechanized or

both.

It is possible to carry out a classification of services based on

two general dimensions such as what is being processed, whether

is it a person or an object, and how is it being processed? In other

words, what is the nature of the process (tangible or intangible

actions).

In terms of the people processing activities, the level of

involvement of the people can vary significantly. Managers must

think about processes/outputs in terms of what happens to

customers and what is being created. For pricing this category of

services, the non-financial costs, time mental effort as well as fear

and pain level must be identified.

Having your computer broken and taking it to a repair facility is

one example of service included in this category. Customers’ are

less physically involved in this category of services and usually

there is no real need for them to enter the service once he

requested the service, explained the problem and pays the

respective service.

Classification of services can be done on the basis of two points.

These two points or factors, are further sub divided into 2 further

variables. All in all, service classification considers four types of

people or objects.

1) Classification of service based on tangible action –

Wherever people or products are involved directly, the service

classification can be done based on tangibility.

Related Setting up SMART objectives

a) Services for people – Like Health care, restaurants and

saloons, where the service is delivered by people to people.

b) Services for goods – Like transportation, repair and

maintenance and others. Where services are given by people for

objects or goods.

2) Classification of services based on intangibility – There

are objects in this world which cannot be tangibly quantified. For

example – the number of algorithms it takes to execute your

banking order correctly, or the value of your life which is

forecasted by insurance agents. These services are classified on

the basis of intangibility.

a) Services directed at people’s mind – Services sold

through influencing the creativity of humans are classified on the

basis of intangibility.

b) Services directed at intangible assets – Banking, legal

services, and insurance services are some of the services most

difficult to price and quantify.

The most intangible form of service output is represented by

information processing. The customer’s involvement in this type

is service is not required. Generally, customers have a personal

desire to meet face to face but there is no actual need in terms of

the operational process. Consultancy services can be an example

of this type of services where the relationship can be built or

sustained on trust or telephone contact. However, it is more

indicated to have a face-to-face relationship in order to fully

understand the needs of the customer.

A more general classification of services based on the type of

function that is provided through them can be as follows:

1. Business services.

2. Communication services.

3. Construction and related engineering services.

4. Distribution services.

5. Educational services.

6. Environmental services.

7. Financial services.

8. Health-related and social services.

9. Tourism and travel-related services.

10. Recreational, cultural, and sporting services.

11. Transport services.

12. Other services not included elsewhere.

CONSUMER BEHAVIOUR IN SERVICES

Consumer behavior includes the processes and motives that drive consumer buying activities.

Consumers typically make purchases in a systematic way, with the time frame and nature of the

process dependent on the type of purchase. The standard consumer buying process with a service

has some specific differences from a product-based purchase situation.

CONSUMER DECISION MAKING PROCESS:

Stage 1 – Need recognition: It’s sunday night. You’re hungry (internal physiological stimuli)

and there is nothing in the fridge. You will order food (statement of need).

Stage 2 – Information search: You already have ordered to the Indian restaurant in your street

last month (internal information). A friend recommended a pizzeria in your neighbourhood

(external information from environment). And this morning you’ve found a flyer for a sushi

restaurant in your mailbox (external information from advertising).

Stage 3 – Alternative evaluation: You have a bad opinion of the Indian restaurant since you’ve

been sick the last time (inept set). The pizzeria is both recommended by your friend and also

happens to be a well-known brand (positive perception – evoked set). As for the sushi

restaurant, it got good reviews on Tripadvisor (positive perception – evoked set).

Stage 4 – Purchase decision: After evaluating the possibilities, you’ve decided to choose the

well-known pizza delivery chain. In addition, a new episode of your favorite TV show is

broadcasted tonight on TV.

Stage 5 – Post-purchase behavior: The pizza was good (positive review). But you know there

was too many calories and you regret a little bit (mixed feelings about yourself). The next time

you will choose the sushi restaurant. There is less fat in sushi than pizza (next purchase

behavior)!

Customer Expectations: 7 Types all Exceptional Researchers Must Understand

Customer satisfaction reflects the expectations and experiences that the customer has

with a product or service. Expectations reflect both past and current product evaluation

and use experiences.

Think about any major purchases you’ve made recently. Did you research your

purchase? Did you collect information from advertising, salespersons, friends,

associates, or even test the product?

This information influences our expectations and gives us the ability to evaluate quality,

value, and the ability of the product or service to meet our needs.

Customers hold both explicit and implicit performance expectations for attributes,

features, and benefits of products and services. The nature of these expectations will

dictate the form and even the wording of customer satisfaction survey questions. Let me

repeat this: the nature of these expectations will dictate the form and even the wording

of your satisfaction questions.

Understanding the following 7 customer expectations is critical before you set out to

measure customer satisfaction.

1. Explicit Expectations

Explicit expectations are mental targets for product performance, such as well-identified

performance standards.

For example, if expectations for a color printer were for 17 pages per minute and high

quality color printing, but the product actually delivered 3 pages per minute and good

quality color printing, then the cognitive evaluation comparing product performance and

expectations would be 17 PPM – 3 PPM + High – Good, with each item weighted by the

associated importance.

2. Implicit Expectations

Implicit expectations reflect established norms of performance. Implicit expectations are

established by business in general, other companies, industries, and even cultures.

An implicit reference might include wording such as “Compared with other

companies…” or “Compared to the leading brand…”

3. Static Performance Expectations

Static performance expectations address how performance and quality are defined for a

specific application. Performance measures related to quality of outcome may include

the evaluation of accessibility, customization, dependability, timeliness, accuracy, and

user friendly interfaces.

Static performance expectations are the visible part of the iceberg; they are the

performance we see and—often erroneously—are assumed to be the only dimensions

of performance that exist.

4. Dynamic Performance Expectations

Dynamic performance expectations are about how the product or service is expected to

evolve over time. Dynamic expectations may be about the changes in support, product,

or service needed to meet future business or use environments.

Dynamic performance expectations may help to produce “static” performance

expectations as new uses, integrations, or system requirements develop and become

more stable.

5. Technological Expectations

Technological expectations focus on the evolving state of the product category.

For example, mobile phones are continually evolving, leading to higher expectations of

new features.

Mobile service providers, in an effort to limit a consumer’s ability to switch to new

technology phones, have marketed rate plans with high cancellation penalties for

switching providers, but with liberal upgrade plans for the phones they offer.

The availability of low profile phones with email, camera, MP3, blue tooth technology,

and increased storage will change technology expectations as well as the static and

dynamic performance expectations of the product.

These highly involving products are not just feature based, but raise expectations that

enhance perceptions of status, ego, self-image, and can even evoke emotions of

isolation and fear when the product is not available.

6. Interpersonal Expectations

Interpersonal expectations reflect the relationship between the customer and the

product or service provider.

Person to person relationships are increasingly important, especially where products

require support for proper use and functioning.

Support expectations include interpersonal sharing of technical knowledge, ability to

solve a problem, ability to communicate, reduced time to problem resolution, courtesy,

patience, enthusiasm, helpfulness, assurance that they understood my problem and my

situation, communication skills, and customer perceptions regarding professionalism of

conduct, often including image and appearance.

7. Situational Expectations

In building a customer satisfaction survey, it is also helpful to evaluate why pre-

purchase expectations or post-purchase satisfaction may or may not be fulfilled or even

measurable.

The following conditions may be considered:

Expectations may not include unanticipated service attributes that are new to that

consumer.

Expectations may be based on vague images, thereby creating wide latitude of

acceptable performance and expected satisfaction.

Product performance expectations and evaluations may be sensory and not

cognitive, as in expectations of taste, style or image. Such expectations are not

only difficult to evaluate and understand, but may change over time and with

consumption.

The product use may attract so little attention as to produce no conscious affect

or cognition (evaluation). When measured, this results in meaningless

satisfaction or dissatisfaction information.

There may have been unanticipated benefits or consequences of purchasing or

using the product (such as a uses, usage situations, or features not anticipated

with purchase).

The original expectations may have been unrealistically high or low.

The product purchaser, influencer and user may have each been a different type

of individual, each having different expectations.

Your research study may also benefit from considering expectations related to

perceived quality and value.

Customer Expectations

Remember to keep these 7 customer expectations in mind before you set out to

measure customer satisfaction. Understanding these will ensure that your customer

satisfaction research will provide accurate insights. Having a top-notch online survey

software is one thing, using it correctly is another.

Factors that influence customer expectations of service

Sources of Desired Service Expectations:

1. Personal needs – physical, social, psychological, and functional needs

2. Lasting service intensifiers – individual factors that lead the customer to a heightened sensitivity to

service

a. Derived service expectations- customer expectations driven by another person or group of people. Ex. Family, other people, managers or supervisors, or own customers in B2B.

b. Personal service philosophy – customer’s underlying generic attitude about the meaning of service and proper conduct of service providers

Sources of Adequate Service Expectations:

1. Temporary Service Intensifiers – short-term individual factors that make a customer more aware of the need for service EX. Personal emergency like car accident, car repair.

2. Perceived service alternatives – other providers from whom the customer can obtain service, do it yourself or have many or few choices (airport in small versus big towns)

3. Self-perceived service role – degree to which a customer exerts an influence on the level of service they receive (if customer does not show up regularly for allergy shots, customers more lenient with allergist)

4. Situational factors – service conditions beyond control of service provider (Katrina) 5. Predicted service – what customers think they are likely to get ( if predict good service,

the level of adequate service is high)

Sources of Both Desired and Predicted Service Expectations

1. Explicit – personal and nonpersonal statements made by the organization to customers 2. Implicit – service related cues other than explicit promises that lead to inferences about

what the service should and will be like (Price and tangibles) 3. Word of mouth 4. Past experiences

Services Marketing - Moment of Truth Every business knows that in order to thrive it needs to differentiate itself in the mind of the consumer. Price has proved inadequate since there is a limit to how much a firm can cut back on its margins. Product differentiation is also no longer enough to attract or retain customers since technological advances have resulted in products becoming almost identical with very few tangible differences from others in the same category.

Consequently, marketers have realized the importance of service differentiation as a sustainable strategy for competing for a portion of the customer’s wallet.

Service Encounter / Moment of Truth

A moment of truth is usually defined as an instance wherein the customer and the organization come into contact with one another in a manner that gives the customer an opportunity to either form or change an impression about the firm. Such an interaction could occur through the product of the firm, its service offering or both. Various instances could constitute a moment of truth - such as greeting the customer, handling customer queries or complaints, promoting special offers or giving discounts and the closing of the interaction.

Importance

In today’s increasingly service driven markets and with the proliferation of multiple providers for every type of product or service, moments of truth have become an important fact of customer interaction that marketers need to keep in mind. They are critical as they determine a customer’s perception of, and reaction to, a brand. Moments of truth can make or break an organization’s relationship with its customers.

This is more so in the case of service providers since they are selling intangibles by creating customer expectations. Services are often differentiated in the minds of the customer by promises of what is to come. Managing these expectations constitutes a critical component of creating favorable moments of truth which in turn are critical for business success.

Moments of Magic and Moments of Misery

Moments of Magic: Favorable moments of truth have been termed as ’moments of magic’. These are instances where the customer has been served in a manner that exceeds his expectations. Eg: An airline passenger being upgraded to from an economy to a business class ticket or the 100th (or 1000th) customer of a new department store being given a special discount on his purchase. Such gestures can go a long way in creating a regular and loyal customer base. However, a moment of magic need not necessarily involve such grand gestures. Even the efficient and timely service consistently provided by the coffee shop assistant can create a moment of magic for the customers.

Moment of Misery: These are instances where the customer interaction has a negative outcome. A delayed flight, rude and inattentive shop assistants or poor quality of food served at a restaurant all qualify as moments of misery for the customers. Though lapses in service cannot be totally avoided, how such a lapse is handled can go a long

way in converting a moment of misery in to a moment of magic and creating a lasting impact on the customer.

Service Failure and Recovery

Service Failures

Even with the best service organizations, failures can just happen – they may be

due to the service not available when promised, it may be delivered late or too

slowly (some times too fast??), the outcome may be incorrect or poorly executed,

or employees may be rude or uncaring. All these types of service failures bring

about negative experiences. If left unfixed they can result in customers leaving,

telling others about the negative experiences or even challenging through

consumer courts. Research has shown that resolving the problems effectively has a

strong impact on the customer satisfaction, loyalty, and bottom-line performance.

Customers who experienceservice failures, but are ultimately satisfied based on

recovery efforts by the firm, will be more loyal.

The Recovery Paradox.

It is suggested that customers who are dissatisfied, but experience a high level of

excellent service recovery, may be more satisfied and more likely to repurchase

than are those who are satisfied at the first place. For example, a hotel customer

who arrives & finds there is no room available. In an effort to recover, the front-

desk person immediately upgrades this guest to a better room at the same price.

The customer is so thrilled with this compensation that he is extremely satisfied

with this experience, is even more impressed with the hotel than he was never

before, and vows to be loyal into future. The logical, but not very rational,

conclusion is that companies should plan to disappoint customers so they can

recover &gain even greater loyalty from them as a result. This idea is known to be

as Recovery Paradox. The recovery paradox is more complex than it seem. First

of all it is expensive to fix mistakes and would appear ridiculous to encourage

service failure-as reliability is the most important aspect of service quality.

According to a research it is observed that a customer weight their recent

experiences heavily in their decision to buy again. If the experience is negative,

overall feelings about the company will decrease and repurchase intentions will

also reduce. If the recovery effort is absolutely superlative then the negative

impression can be overcome.

There is a recent study which shows no support to recovery paradox. It shows the

overall satisfaction was consistently lower for those customers who had

experienced a service failure than for those who had experienced no failure, no

matter what the recovery effort is. The explanation for why no recovery paradox is

suggested by the magnitude of the service failure in this study it is-a three hour

airplane flight delay. This type of failure may be too much to be overcome by any

recovery effort. Considering mixed opinions on if recovery paradox exists it is safe

to say “doing it right the first time” is the best and safest strategy. When a failure

does occur then every effort at superior recovery should be made. In cases where

the failure can be fully overcome the failure is less critical, or the recovery effort is

clearly superlative, it may be possible to observe evidence of the recovery paradox.

How Customers Respond to Service Failure

If customers initiate action following service failure, the action can be various

types. A dissatisfied customer can choose complaint on the spot to the service

provider, giving the company the opportunity to respond immediately. This is often

the best-case scenario for the company it has the second chance right at that

movement to satisfy the customer, keep his or her business in the future, and

potentially avoids any negative word of mouth.

Some customer chooses not to complaint directly to the provider but rather spread

negative word of the mouth about the company to friend, relatives, and coworkers.

This negative word of mouth can be extremely detrimental because it can reinforce

the customer’s feeling of negativism and spread that negative impression to other

as well. Further, the company has no chance to recover unless the negative word of

mouth is accompanied by a complaint directly to the company.

When there is a failure, customer can respond in a variety of ways. It is assumed

that following are the failure, dissatisfaction at some levels will occur for the

customer. In fact, research suggest that variety of negative emotion can occur

following service failure, including such feeling as anger, discontent,

disappointment, self-pity and anxiety. Many customers are very passive about their

dissatisfaction, simply saying or doing nothing, take action or not, at some point

the customer will decide weather to stay with that provider or switch to a

competitor.

Service Recovery Strategy

When the company fails to stand for its promises made to the customer on the basis

they build expectation, it’s to be said that there is service failure. When the service

failure occurs, there can be again severe ramification. Customer is considered to be

the bread and butter, hence retaining them is the biggest challenge, and however

service failure acts as an obstacle to it. In such failures,

The customer wants what they were promised.

Customer wants personal attention

Customer wants a decent apology

Customers want that they should not be made to feel that they are the cause of

the problem. (Though in many cases they are responsible for nuisance)

There are again five steps involved in order to deal with service failure. They are

mentioned as below

1. Acknowledgement and apology for the fact.

2. Listening to the customers.

3. Avoid defending the company and offer a rational explanation.

4. Offer some extra benefits

5. Have a proper follow up and make sure no mistakes this time, so that he can

easily forget about the service failure and is retained.

A customer expects three shorts of fairness in case of service recovery. They are

mentioned as below.

1. Interaction fairness: when there is service failure, first the company is

supposed to acknowledge the customer. Due to this the customer might

dissatisfied, but he still expects fairness and courtesy in the language and tone

used by the addresser.

2. Procedure fairness: to know in detail about the incidence of service failure

or to avail the compensation. There should be simplicity in procedure, which is

involved. Service failure and complexity in procedure both together might

result in a disaster as far as customer is concern.

3. Outcome fairness: now when the company realizes that there is service

failure they should end up compensating, arranging for some alternative mode

of transporting or complies with the customer condition. The outcome should

be taken by considering the customer, his needs and the company’s policy.

Operations management is an area of management concerned with

overseeing, designing, and controlling the process ofproduction and

redesigning business operations in the production of goods or services. It

involves the responsibility of ensuring thatbusiness operations are efficient in

terms of using as few resources as needed and effective in terms of meeting

customer requirements. It is not concerned with managing the process that

converts inputs (in the forms of raw materials, labor, and energy) into outputs

(in the form of goods and/or services).[1] The relationship of operations

management to senior management in commercial contexts can be

compared to the relationship of line officers to highest-level senior officers

in military science. The highest-level officers shape the strategy and revise it

over time, while the line officers make tactical decisions in support of carrying

out the strategy. In business as in military affairs, the boundaries between

levels are not always distinct; tactical information dynamically informs

strategy, and individual people often move between roles over time.

What is service productivity? Explain strategies for improving it?

Ans. The productivity of process is related to how effectively input resources are transformed

into value for customers.

According to Gronroos, for the needs of manufacturers of physical products, there are widely

used productivity concepts and measurements instruments. However, in service processes, the

underlying assumptions of these concepts and models do not hold. For example, manufacturing-

based productivity models assume that any change of input in the production process does not

lead to quality changes in outputs. However, in a service context, changes in the production

resources and systems do affect the perceived quality of services. Therefore, using

manufacturing-oriented productivity models in service contexts are likely to mislead

organizations.

Since the service economy is now the largest portion of the industrialized world’s economy, its

development has significantly raised the importance of maximizing productivity excellence in

service organizations.

The quantity and quality of service sector cannot be treated in isolation, because it may be

impossible to separate the impact on the entire service experience. Hence, both the quantity and

quality aspects must be considered together to provide a joint impact on the total productivity of

the service organizations.

According to Kontaghiorghes, Service sector productivity can be defined as the ratio of:

= Service Sector productivity

Strategies for Improving Service Productivity:

1. Increased use of technology: Service sector productivity is heavily dependent on fast

developing technologies and automation. For eg Customers not only interact with a contact

person, they also transact using an ATM or a computer (website). According Normann, there are

five main reasons for using information technologies:

(a) Reducing costs by substituting service officers for information technologies.

(b) Standardizing services.

(c) Increasing availability (24-hour access to services using appropriate machines or

computers).

(d) Linking customers into the service system.

(e) Affecting customer and personnel relationships and behavior.

2. Training and development: The importance of ‘people dimension’ in the service

performance cannot be undermined. For e.g. it is the receptionist who first interacts with the

customer or the hairstylist who cuts the hair etc. To a large extent, it is on the basis of interaction

with this ’employee’ that the customer forms his perception. Therefore, employees and staff

must not only be trained in functional/technical skills but also in soft skills. Training should be

looked as an investment and not a cost.

3. Universal beliefs: To improve the productivity of services, certain beliefs must be

understood, accepted and practiced by all. For e.g. quality and customer service must be seen as

an invaluable partner, not just for gatekeepers or receptionists but even managers and directors.

4. Recruitment planning: Improving service productivity requires assistance from human

resources. It should understand what each department requires so it can find the best employees.

They can take inputs from each department and design job descriptions which help find the best

fit employee. Better suited employees lead to increased productivity

5. Reducing service level: By allotting less time to a service offering, productivity can be

increased. For e.g., a doctor gives less time to his patients so he can see more patients in a given

day. However, care should be taken that quality does not suffer, otherwise it would lead to

customer dissatisfaction

6. Increase or diversify service offerings: This is another way of increasing productivity.

For e.g. a doctor can start a pathology lab in his premises, or hotels can add event planners to

their list of service offerings etc.

7. Changes in demand and supply: These forces play a role in determining the service

productivity. For e.g. to meet an increased demand, companies can hire part- time employees and

where capacity is restricted, companies can promote non peak times

To summarize, in the words of Paul Krugman, ‘Productivity isn’t everything, but in the long run

it is almost everything. A country’s ability to improve its standard of living over time depends

almost entirely on its ability to raise its output per worker.’

Strategies to match demand and capacity

When an organization has a clear grasp of its capacity constraints and an understanding of

demand patterns. It is in a good position to develop strategies for matching supply and demand.

There are two general approaches for accomplishing demand and capacity.

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

existing supply.

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

Shifting demand and capacity

By shifting demand and capacity an organization seeks to shift customers away from periods in

which demand exceeds capacity. Perhaps by convincing them to use the service during periods

of slow demand. This may be possible for some customers but not for others. For example, many

business travelers are not able to shift their needs for airline, car rental, and hotel services.

Pleasure travelers on the other hand can often shift the timing of their trips. Those who can’t shift

and can’t be accommodated will represent lost business for the firm.

Vary the service offering

One approach is to change the nature of the service offering, depending on the season of the

year, day of the week, or time of day. For example, Whistler Mountain, a ski re sort in

Vancouver, Canada, offers its facilities for executive development and training programs during

the summer when snow skiing is not possible.

A hospital in the Los Angeles area rents use of its facilities to film production crews who need

realistic hospital settings for movies or TV shows. Accounting firms focus on tax preparation

late in the year and until April 15. When federal taxes are due in the United States. During other

times of the year they can focus on audits and general consulting activities.

Air lines even change the configuration of their plane seating to match the demand from different

market segments. In some planes there may be no first-class section at all. On routes with a large

demand for first-class seating, a significant proportion of seats may be placed in first class..

Care should be exercised in implementing strategies to change the service offering. Because such

changes may easily imply and require alterations. Other marketing mix variables are promotion,

pricing and staffing to match the new offering. Unless these additional mix variables are altered

effectively to support the offering, the strategy may not work. Even when done well, the

downside of such changes can be a confusion in the organization’s image from the customers’

perspective or a loss of strategic focus for the organization and its employees.

Communicate with customers

Another approach for shifting demand and capacity is to communicate with the customers. It

helps them know the times of peak demand so that they can choose to use the service at

alternative times and avoid crowding or delays. E.g signs in banks and post offices let customers

know their busiest hours and busiest days of the week can serve as a warning. This allows

customers to shift their demand to another time if possible.

Forewarning customers about busy times and possible waits can have added benefits. Many

customer service phone lines provide a similar warning by informing waiting customers of

approximately how long it will be until they are served. Those who don’t want to wait may

choose to call back later when the lines are less busy. Research in a bank context found that

customers who were forewarned about the bank’s busiest hours were more satisfied. Even when

they had to wait than were customers who were not forewarned.

In addition to signage communicating peak demand times to customers, advertising and other

forms of promotion can emphasize different service benefits during peak and slow periods.

Advertising and sales messages can also remind customers about peak demand times.

Modify timing and location of service delivery

Some firms adjust their hours and days of service delivery to more directly reflect customer

demand. Historically, U.S. banks were open only during “bankers’ hours” from 10 A.M. to 3

P.M. every weekday. Obviously these hours did not match the times when most people preferred

to do their personal banking. Now U.S. banks open early, stay open until 6 P.M. many days, and

are open on Saturdays, better reflecting customer demand patterns.

Theaters also accommodate customer schedules by offering matinees on weekends and holidays

when people are free during the day for entertainment. Movie theaters are sometimes rented

during weekdays by business groups. It is an example of varying the service offering during a

period of low demand.

Differentiate on price

A common response during slow demand is to discount the price of the service. This strategy

relies on basic economics of supply and demand. To be effective, however a price differentiation

strategy depends on solid understanding of customer price sensitivity and demand curves. For

example, business travelers are far less price sensitive than are families traveling for pleasure.

For any hotel, airline, restaurant or other service establishment all of the capacity could be filled

with customers if the price were low enough. But the goal is always to ensure the highest level of

capacity utilization without sacrificing profits.

Heavy use of price differentiation to smooth demand can be a risky strategy. Over reliance on

price can result in price wars in an industry where eventually all competitors suffer. Price wars

are well known in the airline industry. In this industry the total industry profits suffered as a

result of airlines simultaneously trying to attract customers through price discounting.

Another risk of relying oh price is that customers grow accustomed to the lower price and expect

to get the same deal the next time they use the service. If communications with customers are

unclear, customers may not understand the reasons for the discounts. And they will expect to pay

the same during peak demand periods. Overuse or exclusive use of price as a strategy for

smoothing demand is also risky due to potential impact on the organization’s image and the

possibility of attracting undesired market segments.

Flexing capacity to meet demand

A second strategic approach to matching demand and capacity focuses on adjusting or flexing

capacity. The fundamental idea here is to adjust, stretch and align capacity to match customer

demand. During periods of peak demand the organization seeks to stretch or expand its capacity

as much as possible. During periods of slow demand it tries to shrink capacity so as not to waste

resources.

Stretch existing capacity

The existing capacity of service resources can often be expanded temporarily to match demand.

In such cases no new resources are added. Rather people, facilities, and equipment are asked to

work harder and longer to meet demand.

Stretch time: It may be possible to extend the hours of service temporarily to

accommodate demand. A health clinic might stay open longer during flu season. Retailers

are open longer hours during the Christmas shopping season. And accountants have

extended appointment hours (evenings and Saturdays) before tax deadlines.

Stretch labor: In many service organizations, employees are asked to work longer and

harder during periods of peak demand. For example, consulting organizations face

extensive peaks and valleys with respect to demand for their services. During peak

demand, associates are asked to take on additional projects and work longer hours. And

front-line service personnel in banks, tourist attractions, restaurants and

telecommunications companies are asked to serve more customers per hour during busy

times.

Stretch facilities: Theaters, restaurants, meeting facilities and classrooms can sometimes

be expanded temporarily by the addition of tables, chairs, or other equipment needed by

customers. Or as in the case of a commuter train, a car can hold a number of people

seated comfortably or can “expand” by accommodating standing passengers.

Stretch equipment: Computers, telephone lines and maintenance equipment can often

be stretched beyond what would be considered the maximum capacity for short periods

to accommodate peak demand. In using these types of “stretch” strategies, the

organization needs to recognize the wear and tear on resources. The potential for inferior

quality of service may go with the use. These strategies should thus be used for relatively

short periods in order to allow for later maintenance of the facilities and equipment.

As noted earlier, sometimes it is difficult to know in advance, particularly in the case of human

resources, when capacity has been stretched too far.

Align capacity with demand fluctuations

This basic strategy is sometimes known as a “chase demand” strategy. By adjusting service

resources creatively, organizations can in effect chase the demand curves to match capacity with

customer demand patterns. Time, labor, facilities, and equipment are again the focus, this time

with an eye toward adjusting the basic mix and use of these resources.

Specific actions might include the following:

Use part-time employees: In this case the organization’s labor resource is being aligned

with demand. Retailers hire part-time employees during the holiday rush, tax accountants

engage temporary help during tax season, tourist resorts bring in extra workers during

peak season. Restaurants often ask employees to work split shifts (work the lunch shift,

leave for a few hours, and come back for the dinner rush) during peak mealtime hours.

Outsourcing: Firms that find they have a temporary peak in demand for a service that

they cannot perform themselves may choose to outsource the entire service. For

example, in recent years, many firms have found they don’t have the capacity to fulfill

their own needs for technology support, Web design, and software-related services.

Rather than try to hire and train additional employees, these companies look to firms that

specialize in outsourcing these types of functions as a temporary (or sometimes long-

term) solution.

Rent or share facilities or equipment

For some organizations it is best to rent additional equipment or facilities during periods of peak

demand. For example, ex press mail delivery services rent or lease trucks during the peak

holiday delivery sea son. It would not make sense to buy trucks that would sit idle during the rest

of the year. Sometimes organizations with complementary demand patterns can share facilities.

An example is a church that shares its facilities during the week with a Montes son preschool.

The school needs the facilities Monday through Friday during the day; the church needs the

facilities evenings and on the weekend.

Schedule downtime during periods of low demand

If people, equipment, and facilities are being used at maximum capacity during peak periods,

then it is imperative to schedule repair, maintenance, and renovations during off-peak periods.

This ensures that the resources are in top condition when they are most needed. With regard to

employees, this means that vacations and training are also scheduled during slow demand

periods.

Cross-train employees

If employees are cross-trained, they can shift among tasks, filling in where they are most needed.

This increases the efficiency of the whole system and avoids underutilizing employees in some

areas while others are being over taxed. Many airlines cross-train their employees to move from

ticketing to working the gate counters to assisting with baggage if needed. In some fast-food

restaurants, employees specialize in one task (like making french fries) during busy hours, and

the team of specialists may number 10 people. During slow hours the team may shrink to three,

with each person performing a variety of functions.

Grocery stores also use this strategy, with most employees able to move as needed from

cashiering to stocking shelves to bagging groceries.

Modify or move facilities and equipment

Sometimes it is possible to adjust, move, or creatively modify existing capacity to meet demand

fluctuations. Hotels accomplish this by reconfiguring rooms—two rooms with a locked door

between can be rented to two different parties in high demand times or turned into a suite during

slow demand. The airline industry offers dramatic examples of this type of strategy. Using an

approach known as “demand-driven dispatch,” airlines have begun to experiment with methods

that assign airplanes to flight schedules on the basis of fluctuating market needs.’ The method

depends on accurate knowledge of demand and the ability to quickly move airplanes with

different seating capacities to flight assignments that match their capacity The Boeing 777

aircraft is so flexible that it can be reconfigured within hours to vary the number of seats

allocated to one, two, or three classes.’ The plane can thus be quickly modified to match demand

from different market segments, essentially molding capacity to fit demand.

Another strategy may involve moving the service to a new location to meet customer demand or

even bringing the service to customers. Mobile training facilities, libraries, and blood donation

facilities are examples of services that physically follow customers.

DEMAND AND SUPPLY:

Service-Blueprinting is a service planning help tool. It can be used for developing new innovative

services as well as for improving existing services. The method is also appropriate for ensuring the

quality of service processes. It can also be used for new employee training or for showing clients a

service cycle overview. The Service-Blueprinting output consists of a graphically-presented

overview of the service process and its activities. Service-Blueprinting allows for visualization of the

service development process in its early stages. In each process step, contact points between client

and firm (and physical element, if a tangible service) become visible. It is possible to identify failure

points and discover areas for innovation as well. This technique eases the identification of cost

saving potentials and offers an excellent base for further Service-process management.

PHYSIVCAL EVIDENCE:

Physical evidence comprises of the elements which are incorporated into a service to to make it

tangible and somewhat measurable. At the same time, physical evidence also helps in the

positioning of the brand and for targeting the right kind of customers. The best example of

Physical evidence in use is the hospitality industry. Airlines offer premium travel as well as

economy classes. Similarly, restaurants are known to be 3 star, 4 star, 5 star. All such

differentiation, and the target customer that accompanies such differentiation, is because of

the use of physical evidence in marketing.

Role of physical evidence in marketing mix

The marketing mix is always made after segmentation, targeting and positioning. The objective

of the marketing mix is to incorporate the right elements which attract the desired customer

profile. Thus, in services, to attract the right segment and target, and to achieve the right

positioning, physical evidence is used. Off course, physical evidence in marketing is not used for

services only but also for products nowadays. This is because products are nowadays sold

through mainly retail and e commerce. Both these areas are services within themselves. And

hence retailers always focus on elements which can make their services better.

Tools of physical evidence

Ambiance – The look and feel of a restaurant can be described as the ambiance. For example –

the Sofa that the restaurant uses, the music that it plays, the lighting it has maintained etc.

Layout – Especially applicable in retail, the layout of the showroom contributes to the role of

physical evidence in marketing. For example – in Ikes, the store is laid out in such a manner that

the customer is able to get to his choice of furniture very fast.

Branding – Although part of promotions, the packaging, branding and use of corporate

communications also plays an important role in physical evidence in the marketing mix.

For more tools of physical evidence, this site is an excellent resource.

How physical evidence effects other P’s in marketing mix

Incorporating physical evidence is not free of charge and has an inherent cost involved. Thus, if

you want to establish a premium restaurant, then you need to invest for plush furniture,

promote in premium areas, get the right people, so on and so forth. The pricing for a premium

restaurant will be higher also. Thus, physical evidence in marketing is dynamic in nature, and a

change in physical evidence factors will bring a change to all other P’s in the marketing mix.

Thus, if you want to succeed in your business endeavor, you need to plan all the P’s of

marketing mix. And if you are in the services sector, then physical evidence as well as people

are two of the most important P’s of the marketing mix.

Service-scape: 4 Important Roles of the Service-scape – Explained!

by Smriti Chand Service Management

Advertisements:

The service-scape can play many roles simultaneously. An examination of the variety of roles

and how they interact makes clear how strategically important it is to provide appropriate

physical evidence of the service.

1. Package:

Similar to a tangible product’s package, the service-scape and other elements of physical

evidence essentially “wrap” the service and convey an external image of what is “inside” to

consumers. The service-scape is the outward appearance of the organization and thus can be

critical in forming initial impressions or setting up customer expectations – it is a visual

metaphor for the intangible service.

This packaging role is particularly important in creating expectations for new customers and for

newly established service organizations that are trying to build a particular image. The physical

surroundings offer an organization the opportunity to convey an image in a way not unlike the

way an individual chooses to “dress for success”.

2. Facilitator:

The service-scape can also serve as a facilitator in aiding the performances of persons in the

environment. How the setting is designed can enhance or inhibit the efficient flow of activities

in the service setting, making it easier or harder for customers and employees to accomplish

their goals.

A well-designed, functional facility can make the service a pleasure to experience from the

customer’s point of view and a pleasure to perform from the employee’s. On the other hand,

poor and inefficient design may frustrate both customers and employees.

3. Socializer:

The design of the service-scape aids in the socialization of both employees and customers in the

sense that it helps to convey expected roles, behaviours, and relationships. For example, a new

employee in a professional services firm would come to understand her position in the

hierarchy partially through noting her office assignment, the quality of her office furnishings,

and her location relative to others in the organization.

The design of the facility can also suggest to customers what their role is relative to employees,

what parts of the service-scape they are welcome in and which are for employees only, how

they should behave while in the environment, and what types of interactions are encouraged.

4. Differentiator:

The design of the physical facility can differentiate a firm from its competitors and signal the

market segment the service is intended for. Given its power as a differentiator, changes in the

physical environment can be used to reposition a firm and/or to attract new market segments.

In shopping malls the colours used in decor and displays and type of music wafting from a store

signal the intended market segment. The design of a physical setting can also differentiate one

area of a service organization from another. This is commonly the case in the hotel industry

where one large hotel may have several levels of dining possibilities, each signed by differences

in design.

While it is useful from a strategic point of view to think about the multiple roles of the service-

scape and how they interact, making actual decisions about service-scape design requires an

understanding of why the effects occur and how to manage them.

Service quality(SQ) is a comparison of expectations (E) with performance (P)

SQ=P-E.[1]

A business with high service quality will meet customer needs whilst remaining

economically competitive.[2] Improved service quality may increase economic

competitiveness.

This aim may be achieved by understanding and improving operational

processes; identifying problems quickly and systematically; establishing valid and

reliable service performance measures and measuring customer satisfaction and

other performance outcomes.

The GAP Model

The Service Quality Model, also known as the GAP Model, was developed in 1985. It highlights the main requirements for delivering a high level of service quality by identifying five ‘gaps' that can lead to unsuccessful delivery of service.

The Gap Model

The diagram shows the different gaps in the model, including the

Knowledge Gap discussed here.

Customers generally have a tendency to compare the service they 'experience' with the service they 'expect' to receive; thus, when the experience does not match the expectation, a gap arises.

GAP 1:

Gap between consumer expectation and management perception: This gap arises when the management or service provider does not correctly perceive what the customer wants or needs. For instance – hotel administrators may think guests want better food or in-house restaurant facilities, but guests may be more concerned with the responsiveness of the staff or the cleanliness of their rooms.

Consumer Expectations

Hotel administrators may think guests want better food or in-house

restaurant facilities, but guests may be more concerned with the

responsiveness of the staff.

Factors that affect the size of the knowledge gap include:

Market research Before introducing a new product or service into the market, a company must conduct market research to

understand whether there would be any demand for the product, and what features should be

incorporated. The better this process is conducted, the smaller the knowledge gap will be. There are methods of ensuring that customer desires are taken on board. These include: comprehensive

studies, gauging satisfaction after individual transactions (surveys immediately after a purchase is made),

customer panels and interviews, and through customer complaints.

Communication channels The fewer the layers between management and customer contact personnel, the more likely that customer

preferences will be incorporated into higher-level decision making on the product.

GAP 2 :

Gap between management perception and service quality specification: This is when the management or service provider might correctly perceive what the customer wants, but may not set a performance standard. An example here would be that hospital administrators may tell the nurse to respond to a request ‘fast', but may not specify ‘how fast'.

GAP 3:

Gap between service quality specification and service delivery: This gap may arise in situations pertaining to the service personnel. It could happen due to poor training, incapability or unwillingness to meet the set service standard. An example would be when a doctor's office has very specific standards of hygiene communicated but the hired staff may have been poorly trained on the need to follow these strict protocols.

GAP 4 :

Gap between service delivery and external communication: Consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of delivery of the service. For example – a hospital printed on its brochure may have clean and furnished rooms but in reality, it may be poorly maintained – in this case the patient's expectations are not met.

GAP 5:

Gap between expected service and experienced service: This gap arises when the consumer misinterprets the service quality. The physician may keep visiting the patient

to show and ensure care, but the patient may interpret this as an indication that something is really wrong.

How To Measure Service Quality

Many researchers have struggled with the issue of how to measure service quality.Â

Perhaps the most widely used measure is based on a set of five dimensions which have

been consistently ranked by customers to be most important for service quality,

regardless of service industry. These dimensions defined by the SERVQUAL

measurement instrument are as follows:

Tangibles: appearance of physical facilities, equipment, personnel, and communication

materials;

Reliability: ability to perform the promised service dependably and accurately;

Responsiveness: willingness to help customers and provide prompt service;

Assurance: knowledge and courtesy of employees and their ability to convey trust and

confidence; and

Empathy: the caring, individualized attention the firm provides its customers.

Improving service quality:

Quality service is a key element of a successful business. But many businesses

struggle to improve service and retain their customers. A bad experience can drive a

customer away for years.[1] But don’t despair! There are several methods to improve

quality service at your business, from having clearly defined and measured service

goals and motivating your employees, to using customer feedback and updating your

service tools to better serve your customers. No matter your approach, improving

quality service at your business does not have to be a struggle.

Motivating Your Employees

Invest in service training, rather than a quality control department.

Set up a new-employee initiation program.

Teach the 30/30 rule.

Tie your employee’s actions to the business’s overall performance.

Encourage employees to think of customer service as a "story" about your

business.

Give your employees service quality goals.

Recognize and reward improvements in employee performance.

Let your employees know there is room for growth.

Emphasize problem-solving.

Teach your employees to overcompensate for any issues or complaints.

Listen to feedback from your employees.

Measuring Customer Service Performance

Determine how quickly you are able to solve problems.

Ask for personalized feedback from customers.

Create a customer service survey.

Track any issues or complaints.

Put processes in place to prevent issues from occurring again.

Talk to customers face-to-face.

Defining Your Service Goals

Consider your business type.

Create a clear vision statement.

Examine the public “face” of your business.

Make sure your employees know what “quality service” means to your business.

Updating Your Quality Service Tools

Implement customer friendly technology.

Hire a web designer to create a professional website.

Don’t neglect your social media.

These five SERVQUAL dimensions are used to measure the gap between customers’

expectation for excellence and their perception of actual service delivered. The

SERVQUAL instrument, when applied over time, helps service providers understand

both customer expectations, perceptions of specific services, and areas of needed

quality improvements.

SERVQUAL has been used in many ways, such as identifying specific service elements

requiring improvement, and targeting training opportunities for service staff.

Proper development of items used in the SERVQUAL instrument provides rich item-

level information that leads to practical implications for a service manager.

The service quality dimensions evaluated by SERVQUAL should be adjusted for optimal

performance in different industry, public and private sector applications.

SERVQUAL scores are highly reliable, but when used in different industries may fail to

produce a clear delineation of the five basic dimensions.Other measures, such as the

Six Sigma model should be considered for applicability in quantifying the gap between

service expectations and perceptions.

SERVQUAL SYSTEM

Concept[edit]

The SERVQUAL service quality model was developed by a group of American authors, 'Parsu'

Parasuraman, Valarie Zeithaml and Len Berry, in 1988. It highlights the main components of high

quality service. The SERVQUAL authors originally identified ten elements of service quality, but in

later work, these were collapsed into five factors - reliability, assurance, tangibles, empathy and

responsiveness - that create the acronym RATER.

Businesses using SERVQUAL to measure and manage service quality deploy a questionnaire that

measures both the customer expectations of service quality in terms of these five dimensions, and

their perceptions of the service they receive. When customer expectations are greater than their

perceptions of received delivery, service quality is deemed low.

In addition to being a measurement model, SERVQUAL is also a management model. The

SERVQUAL authors identified five Gaps that may cause customers to experience poor service

quality.

Gap 3: between service quality specification and service delivery[edit]

This gap may arise through service personnel being poorly trained, incapable or unwilling to meet

the set service standard. The possible major reasons for this gap are:

Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role

conflict, improper evaluation and compensation system

Ineffective internal marketing

Failure to match demand and supply

Lack of proper customer education and training

Gap 4: between service delivery and external communication[edit]

Consumer expectations are highly influenced by statements made by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time of delivery of the service. For example, the hospital printed on the brochure may have clean and furnished rooms, but in reality it may be poorly maintained, in which case the patients' expectations are not met. The discrepancy between actual service and the promised one may occur due to the following reasons:

Over-promising in external communication campaign

Failure to manage customer expectations

Failure to perform according to specifications

Gap 5: between expected service and experienced service[edit]

This gap arises when the consumer misinterprets the service quality. For example, a physician may

keep visiting the patient to show and ensure care, but the patient may interpret this as an indication

that something is really wrong.

What is CRM, and why is it so important to

Service Businesses?

Ok… so we know the term CRM means Customer Relationship Management. It

is also used to describe software that helps a business organize and manage

customer data.

The concept of Customer Relationship Management has been around since the

start of business. Only over the last few years has CRM started to be used as a

buzz word defined by software manufactures. Some CRM tools manage sales &

leads, some are used for customer service, most are do not fully encompass the

idea of Customer Relationship Management. I urge companies to make full use

of the tools available, but don't be limited by them. Keep the focus on your goals.

Goals of a Customer Relationship Management Plan

- Increase customer retention

- Increase company profits

- Better serve the customer / increasing competitive advantage

- Build and maintain a relationship with your customers, so that you know their

current and future needs and can incorporate trends into your strategy.

- Manage leads through the sales pipeline by creating a relationship

The ROI of CRM?

Studies consistently show that it costs 8 times more to cultivate a new customer

than to keep an existing one. A good CRM plan that includes, but is not limited to

software tools, will make your business more profitable…Guaranteed!

Most companies find that using a good software tool (such as SMP) as part of

their CRM plan will create a ROI within 3 months of implementation. This is do to

increased efficiency, more repeat business, increased referrals, and faster

invoicing.

CRM for Service Businesses

Managing your customer relationship is important for all businesses, but is critical

for Service Businesses who rely on repeat customers, ongoing contracts and

referrals. Here is a list of some of the incredible amount of data that must be

managed and accessible in order to maintain a high quality relationship with your

customer:

- Customer Contact Information

- Multiple contacts per account: with contact info for each

- Multiple addresses per account

- Track & Manage Current Service Requests

- Record Service History

- Equipment Records

- Access records of inventory used & service preformed

- Notes / Details about any contacts with the customer

- Notes / Details about the Account, Service Orders, Equipment Installed …

- Reminders about next service due

- Reminders for follow up calls, appointments…

- Track leads, proposals…. Transfer info correctly once they become a customer

- Ability to Schedule Service and dispatch techs / Maps to site

- Account balance, payments due…

- A way to notify customers or changes, updates and new products (email?)

- And much more

The Most Important Point: Find a useful way to manage all the customer data

gathered/needed, and then commit to using the information to better serve your

customer

Six Sigma From Wikipedia, the free encyclopedia For other uses, see Sigma 6.

The common Six Sigma symbol

Part of a series of articles on

Industry

Manufacturing methods

Batch production • Job production

Flow production

Improvement methods

RCM • TPM • VDM

QRM • TOC

Lean • Six Sigma • TQM • ZD

Information and communication

ISA-88 • ISA-95 • ERP

SAP • IEC 62264 • B2MML

Process control

PLC • DCS

Six Sigma is a set of techniques and tools for process improvement. It was introduced by engineer Bill Smith while working at Motorola in 1986.

[1][2] Jack Welch made it central to his business strategy

at General Electric in 1995.[3]

Today, it is used in many industrial sectors.[4]

Six Sigma seeks to improve the quality of the output of a process by identifying and removing the causes of defects and minimizing variabilityin manufacturing and business processes. It uses a set of quality management methods, mainly empirical, statistical methods, and creates a special infrastructure of people within the organization, who are experts in these methods. Each Six Sigma

project carried out within an organization follows a defined sequence of steps and has specific value targets, for example: reduce process cycle time, reduce pollution, reduce costs, increase customer satisfaction, and increase profits.

The term Six Sigma originated from terminology associated with statistical modeling of manufacturing processes. The maturity of a manufacturing process can be described by a sigma rating indicating its yield or the percentage of defect-free products it creates. A six sigma process is one in which 99.99966% of all opportunities to produce some feature of a part are statistically expected to be free of defects (3.4 defective features per million opportunities), although this defect level corresponds to only a 4.5 sigma level. Motorola set a goal of "six sigma" for all of its manufacturing operations, and this goal became a by-word for the management and engineering practices used to achieve it.