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1
PAN African eNetwork
ProjectMBA IB
Marketing of Services
Prof Pradeep Narwal
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Increasing importance of services ineconomies
All principles of marketing apply toservices
The nature and special characteristics
of services
Managing service quality, productivityand personnel
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How to position a service organizationand a brand
The service marketing mix
How businesses should manageservice encounters and service
recovery
Innovations in services
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Difficult to provide a single definition ofservice
Concept of service has to beunderstood either as an exclusiveoffering from a company that is primarily
intangible, or as a part of the service-product mix that a company offers
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SERVICE LEVELS Service is an intangible offering with little or no transfer of
physical products to the customer
Service is one part of product-service mix being offered tocustomers
The main offering is the product but the supplier alsoprovides some services
Every product or service or any combination of a mix ofthe two, ultimately is supposed to provide service forcustomers
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Advances in technology
Growth in per capita income
A trend towards outsourcing
Deregulation
Increasing growth in retailing due toincrease in propensity to consumer
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Services impact customers more directlythan products do
Marketing of services has to be more
deliberate and considered
Service provider has to carefully audithis resources and competencies
Positioning must be razor sharp
Services more intractable than products
All Principles of Marketing Apply to Services (Contd.)
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Service provider must define service
very precisely and also design theappropriate service-product mix
Promotion more challenging due tointangible nature of services
Same basic service can be provided in
vastly different service facilitiesproviding different levels of amenitiesand luxuries
All Principles of Marketing Apply to Services (Contd.)
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Same service can be delivered invarious ways
Marketing mix conveys the positioningof a service
All Principles of Marketing Apply to Services (Contd.)
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Intangibility
Inseparability
Presence of other consumers
Variability
Perishability
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Managing service quality
Companies rated higher on servicequality perform better in terms of marketshare growth
Big gap exists between theexpectations of the customers and the
level of the service they get Realbarriers while matching expected andperceived service levels of customers
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Does not understand customerrequirements: Misconception barriers arisewhen companies misunderstand customer
expectationsNo resources: A company may
understand customer expectations but isunwilling to provide resources to meet
them
Bad delivery: The company is not able todeliver the expected service
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Managements will: A managementeager to improve quality is able to do
it
Exaggerated expectations:Exaggerated promises may become a
problem
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Meeting customer expectations
Important to understand and meet customerexpectations
Consumers of services value not only theoutcome of the service encounter but alsothe experience of taking part in it
Access: Is the service provided atconvenient locations and at convenienttimes, with little waiting period in availingthe service?
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Reliability: Service provider shouldbe able to deliver the promisedservice each time the customerdecides to avail of it
Credibility: Can customers trust theservice company and its staff?
Security: Can the services be usedwithout risk?
Meeting Customer Expectations (Contd.)
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Understanding customer: If the
company understands theexpectations and also has thecapability to serve them, the
customer is satisfied with the service
outcome
Responsiveness: How quickly doservice staff respond to customerproblems, requests and questions?
Behavior of employees: Do service
staff act in a friendly and polite
Meeting Customer Expectations (Contd.)
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Competence: Performance of the
primary service will depend on theknowledge and competencies of theservice providers
Communication: Is the servicedescribed clearly and accurately?
Physical evidence: The companyshould provide physical evidence tocustomers which will assure customersthat they will be provided a good service
Meeting Customer Expectations (Contd.)
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Managing service productivity
Measure of relationship between thevarious types of inputs that are
required to produce the service andthe service output
Conflict between improving serviceproductivity and raising service
qualityTechnology can be used to improveproductivity and service quality
simultaneously
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Customer involvement in productioncan be increased
Important to balance supply and
demand
By smoothing demand or increasingflexibility of supply, both productivity
and service quality can be achieved
Managing Service Productivity (Contd.)
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Managing service staff
Quality of the service experience isheavily dependent on staff-customer
interpersonal relationshipCompanies need to treat their employeeswell if customers have to be served wellby their employees
Nature of the job needs and appropriatepersonality characteristics to be definedsharply while selecting service staff
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Socialization allows the newly recruited
service professionals to experience theculture and tasks of the organization
Maintaining a motivated workforce
Customer feedback essential tomaintain high standards of service
qualityEmployees of service organizations
must take pride in their jobs
Managing Service Staff (Contd.)
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Differentiate from competition onattributes that target customers highly
value
Entails two decisions:
Choice of target market (where tocompete)
Creation of differential advantage (howto compete)
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Determine important choice criteria ofcustomers carefully
Most important decision of a serviceorganization is selecting the factors on
which it will compete Select a few factors and provide
superlative performances in the chosen
factors
Target marketing
Differential advantage
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The service
Pure services are intangible
Higher perceived risk in decision making
processPeople, physical evidence and processesprovide cues about the quality of the service
Brand name affects perceptions of service
Provide service trials wherever possible
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Promotion
Intangible elements of service may bedifficult to communicate
Sales people should develop lists of
satisfied customers to be used in referenceselling
Word of mouth is critical to success
Acknowledge the dominant role of personalinfluence in the choice process and stimulateword of mouth communication
P ti (C td )
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Persuade satisfied customers to informothers of their satisfaction
Develop materials that customers can passon to others
Target opinion leaders in its advertisingcampaign
Encourage potential customers to talk tocurrent customers
Communication should also be targeted atemployees
Promotion (Contd.)
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PriceAn indicator of perceived quality
Important in matching demand andsupply
Price sensitivity key segmentation
variable
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Setting fees levels:Offset
Inducement
Divisionary
Guarantee
Predatory
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PlaceDistribution channels for services aremore direct
Production and consumption issimultaneous
New technologies permit servicecompanies to provide services withoutcustomers coming to their facility
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People
Service quality is inseparable fromquality of service providers
Set standards to improve quality ofservice provided by employees andmonitor their performance
Training of employees crucial
Adopt a customer-first attitude thanputting own convenience first
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Employees of service organizations
have to be adept in multiple roles
Have empathy to judge the service
requirement and mood of thecustomer
Examine the role played by customers
in service environment
Seek to eliminate harmful interactions
People (Contd.)
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Physical evidence
The environment in which the service isdelivered
Includes any tangible goods that facilitatethe performance and communication of theservice
Strengthen cues that customers search forto judge the quality of services
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Process
Procedures, mechanisms and flow ofactivities by which a service is delivered to
customers
Control variations in services by targetingsmaller segment of customers
Process and its visibility are both important
for customersProcess should be employed only when itis required to provide a service and notbecause customers have come to expect it
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A terrible ending usually dominates apersons recollection of an experience
Customers who are mentally engagedin a task do not notice how long it takes
Customers desperately want to makesense of unexpected events
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Study service encounters from customerspoint of view
Finish strong
Get the bad experience out of the way early
Segment the pleasure, combine the pain
Build commitment through choice
Give people rituals and stick to them
Service Encounters (Contd.)
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Well-intentioned, prompt, and aptrecovery can assuage angry customers
Everyone in the organization must havethe skill, motivation, and authority tomake service recovery an integral part ofservice operations
Production-oriented service-deliverysystems have helped in achievingconsistently high service standards
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Inevitable problems will still arise, by providingfor service recovery
Good service providers cover all the costs thata failure incurs
Customers problem is an opportunity
Companies must be responsive to customercomplaints, and encourage them to complain
Monitor areas of the organization which arelikely to throw up problems more frequently
Service Recovery (Contd.)
Service Recovery (Contd )
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Solve customers problems fast becauseservice problems quickly escalate
Train frontline employees and empower them
Give employees the authority, responsibility,and incentives to help customers in uniqueways
Let customers know about corrective measurestaken and the improvement achieved
Service Recovery (Contd.)
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Difficulties in applying traditional methodsof research and development to services
Experiments with new services are mostuseful when they are conducted live ,though cautiously
Improvements should be planned andexperimented incrementally
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Personnel conducting the experimentsmust be motivated
Successful experiment has to be
persisted with Experiment only when it can be finally
implemented
Conducting live experiments risky andcumbersome, but may be inevitable
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Defining services
Understanding the services economy
The service sector in Australia Mega-trends and the service sector:
Professional services
Characteristics of services Marketing implications
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Any act, performance or experience thatone party can offer another; one that is
essentially intangible, and does not resultin the ownership of anything. Itsproduction may or may not be tied to a
physical product Lovelock (2004)
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Intangibility
Perishability
Simultaneous
Productionand
Consumption
Heterogeneity
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Defining and improving quality
Designing and testing new services Communicating and maintaining aconsistent image
Accommodating fluctuating demand
Ensuring the delivery of consistent quality
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Motivating and sustaining employeecommitment
Coordinating marketing, operations, andhuman resource efforts
Setting prices
Finding a balance betweenstandardization versus personalization
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A d d k i i f i
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An expanded marketing mix for services
Customers PricePlace &
Time
Promotion
Product
(Service)People
Process
Physical
Evidence
Custome
rs
Pricecustomers
Place,
Cyber
-
space
&
Time
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Internal
marketi
ng
Traditional
marketing
Organisati
on
Employee
s
Customer
s
Satisfaction;
Quality; Brand
Loyalty
Relationship
management
A framework for analysing servicesmarketing
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Customers
Operations
ManagementMarketing
Management
Human Resources
Management
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Zeithaml, Bitner and Gremler (2006)
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AExpected
service
Perceivedservice
Customer Gap
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Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & StandardsGap):
not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):not delivering to service standards
Provider Gap 4 (The Communication Gap):
not matching performance to promises
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Provider Gap 1: Not knowing what customers expect
Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering to service standards
Provider Gap 4: Not matching performance to promises
Customer
Expectations
CustomerPerceptions
Customer
Gap
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Customer Expectations
Company Perceptions ofCustomer Expectations
Inadequate marketing research orientationInsufficient marketing researchResearch not focused on service qualityInadequate use of market research
Lack of upward communicationLack of interaction between management and customers
Insufficient communication between contact employees and managersToo many layers between contact personnel and top management
Insufficient relationship focusLack of market segmentationFocus on transactions rather than relationships
Focus on new customers rather than relationship customers Inadequate service recovery
Lack of encouragement to listen to customer complaintsFailure to make amends when things go wrongNo appropriate recovery mechanisms in place for service failures
Gap
1
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Customer-Driven ServiceDesigns and Standards
Management Perceptionsof Customer Expectations
Poor service designUnsystematic new service development processVague, undefined service designs
Failure to connect service design to service positioning Absence of customer-driven standards
Lack of customer-driven service standardsAbsence of process management to focus on customer
requirementsAbsence of formal process for setting service quality goals
Inappropriate physical evidence and servicescapeFailure to develop tangibles in line with customer expectationsServicescape design that does not meet customer and
employee needsInadequate maintenance and updating of the servicescape
Gap
2
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Service Delivery
Customer-DrivenService Designs and
Standards Deficiencies in human resource policies
Ineffective recruitmentRole ambiguity and role conflict
Poor employee-technology job fitInappropriate evaluation and compensation systemsLack of empowerment, perceived control, and teamwork
Customers who do not fulfill rolesCustomers who lack knowledge of their roles and responsibilitiesCustomers who negatively impact each other
Problems with service intermediaries
Channel conflict over objectives and performanceDifficulty controlling quality and consistencyTension between empowerment and control
Failure to match supply and demandFailure to smooth peaks and valleys of demandInappropriate customer mixOverreliance on price to smooth demand
Gap
3
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Service Delivery
Lack of integrated services marketing communicationsTendency to view each external communication as independentNot including interactive marketing in communications planAbsence of strong internal marketing program
Ineffective management of customer expectationsAbsence of customer expectation management through all forms of
communicationLack of adequate education for customers
OverpromisingOverpromising in advertisingOverpromising in personal selling
Overpromising through physical evidence cues Inadequate horizontal communications
Insufficient communication between sales and operationsInsufficient communication between advertising and operationsDifferences in policies and procedures across branches or units
External
Communications to
Gap
4
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Perceived
Service
Expected Service
CUSTOMER
COMPANY
Customer
Gap
Gap 1
Gap 2
Gap 3
ExternalCommunications to
CustomersGap 4Service
Delivery
Customer-DrivenService Designs and
Standards
Company Perceptions ofConsumer Expectations
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Examine how consumers choose andevaluate services
Identify the elements of consumer
behaviour that services marketers mustunderstand:
Choice behaviour
Consumer experiences
Post-purchase evaluation
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Search Qualities
attributes a consumer can determine prior topurchase of a product
Experience Qualities
attributes a consumer can determine afterpurchase (or during consumption) of a product
Credence Qualities
characteristics that may be impossible to
evaluate even after purchase and consumption
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Difficult to evaluateEasy to evaluate
High in search
qualities
High in experience
qualities
High in credence
qualities
Most
Goods
Most
Services
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Services as processes
Service provision as drama
Service roles and scripts
The compatibility of service customers
Customer coproduction
Emotion and mood
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Captured in measures of satisfaction,service quality, loyalty, emotionalengagement:
Word of mouth communication
Attribution of dissatisfaction
Positive or negative bias positivity bias for services
Brand loyalty
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Identify the different types of expectationscustomers hold for service performance
Sources of customer expectations
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Adequate
Service
DesiredService
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Adequate
Service
DesiredService
Zone ofToleran
ce
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Reliability Tangibles
Levelof
Expectation
Source: L. L. Berry, A. Parasuraman, and V. A. Zeithaml, Ten Lessons for Improving Service Quality,
Marketing Science Institute, Report No. 93-104 (May 1993).
Adequate Service
Desired Service
Desired Service
Adequate
Service
Zone
of
Tolerance
Zoneof
Tolerance
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Lasting Service
Intensifiers
Personal Needs Zone
of
Tolerance
Desired Service
Adequate
Service
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Self-Perceived
Service Role
Situational
Factors
Perceived ServiceAlternatives
Temporary Service
Intensifiers
Zone
of
Tolerance
Desired Service
AdequateService
Predicted
Service
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Predicted
Service
Explicit Service
Promises
Implicit Service
Promises
Word-of-Mouth
Past Experience
Zone
of
Tolerance
Desired Service
Adequate
Service
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What does a service marketer do ifcustomer expectations are unrealistic?
Should a company try to delight thecustomer?
How does a company exceed customer
service expectations?
Do customer service expectationscontinually escalate?
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Identify the factors which influenceconsumers perceptions
Examine the factors which influence
satisfaction
Develop an understanding of thedimensions of service quality
Examine the importance of serviceencounters
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Product/service quality
Specific product or service features
Consumer emotions
Attributions for service success or failure
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Perceptions of equity or fairness
Other consumers, family members, andcoworkers
Price
Personal factors
the customers mood or emotional state
situational factors
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Increased customer retention
Positive word-of-mouth communications
Increased revenues
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Source: C. Fornell Customer Satisfaction and Corporate Earnings, commentary appearing on ACSI website, May 1, 2001,
http://www.bus.umich.edu/research/nqre/Q1-01c.html.
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Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.
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The customers judgment of overallexcellence of the service provided inrelation to the quality that was expected.
Service quality assessments are formed onjudgments of:
outcome quality
interaction qualityphysical environment quality
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Disconfirmation of expectations
The Nordic model
The three component model
The Gaps model of service quality &SERVQUAL
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Represents the service experience on thebasis of functional and technical elements
Technical quality refers to what the
customer receives from the service Functional quality refers to service delivery
Model emphasises companies must be
careful what they promise
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Source: Rust & Oliver, 1994. p. 11
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Reliability (dependability, accurate performance)
Assurance (competence, courtesy, credibility &security)
Tangibles (appearance of physical elements)
Empathy (easy access, good communications &customer understanding)
Responsiveness (promptness & helpfulness)
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Ability to perform the promisedservice dependably andaccurately.
Knowledge and courtesy ofemployees and their ability toinspire trust and confidence.
Physical facilities, equipment,and appearance of personnel.
Caring, individualized attention
the firm provides its
Tangibles
Reliability
Responsiveness
Assurance
Empathy
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In groups of five, choose a services industry and spend 10 minutes brainstormingspecific requirements of customers in each of the five service quality dimensions.
Be certain the requirements reflect the customers point of view.
Reliability:
Assurance:
Tangibles:
Empathy:
Responsiveness:
RELIABILITY
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n Providing service as promised
n Dependability in handling customersservice problems
n Performing services right the first time
n Providing services at the promised time
n Maintaining error-free records
n Keeping customers informed as to whenservices will be performed
n Prompt service to customers
n Willingness to help customers
n Readiness to respond to customersrequests
RESPONSIVENESS
n Employees who instill confidence in customers
n Making customers feel safe in their transactions
n Employees who are consistently courteous
n Employees who have the knowledge to answercustomer questions
ASSURANCE
n Giving customers individual attention
n Employees who deal with customers in a caringfashion
n Having the customers best interest at heart
n Employees who understand the needs of theircustomers
n Convenient business hours
EMPATHY
n Modern equipment
n Visually appealing facilities
n Employees who have a neat, professionalappearance
n Visually appealing materials associated withthe service
TANGIBLES
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is the moment of truth occurs any time the customer interacts withthe firm
can potentially be critical in determiningcustomer satisfaction and loyalty
types of encounters:
remote encounters, phone encounters, face-to-face encounters
is an opportunity to:build trust
reinforce ualit
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Check-In
Request Wake-Up Call
Checkout
Bellboy Takes to Room
Restaurant Meal
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Sales Call
Ordering Supplies
Billing
Delivery and Installation
Servicing
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GOAL:understanding actual events and behaviors that
cause customer dis/satisfaction in service
encounters METHOD:
Critical Incident Technique
DATA:stories from customers and employees
OUTPUT:
identification of themes underlying satisfaction
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Think of a time when, as a customer, youhad a particularly satisfying (dissatisfying)interaction with an employee of______________.
When did the incident happen?
What specific circumstances led up to thissituation?
Exactly what was said and done?
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Recovery: Adaptability:
Spontaneity:Coping:
employee responseto service delivery
system failure
employee responseto customer needs
and requests
employee responseto problem customers
unprompted andunsolicited employeeactions and attitudes
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Acknowledge
problem Explain causes
Apologize
Compensate/upgrade
Lay out options
Take responsibility
Ignore customer
Blame customer Leave customer tofend for him/herself
Downgrade Act as if nothing iswrong
Pass the buck
DO DONT
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Recognize the
seriousness of theneed
Acknowledge
Anticipate Attempt toaccommodate
Adjust the system
Ignore
Promise, but fail tofollow through
Show unwillingness to
try Embarrass thecustomer
Laugh at the
DO DONT
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Take time
Be attentive Anticipate needs
Listen
Provide information Show empathy
Exhibit impatience
Ignore Yell/laugh/swear
Steal from customers
Discriminate
DO DONT
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Listen
Try to accommodate Explain
Let go of the
customer
Take customers
dissatisfactionpersonally
Let customers
dissatisfaction affectothers
DO DONT
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People
ProcessPhysical
Evidence
Contact employees
Customer him/herself
Other customersOperational flow of
activities
Steps in process
Flexibility vs.
standard
Technology vs.
human Tangible
communication
Servicescape
Guarantees
Technology
WebsiteSource: From Managing the Evidence of Service by M. J. Bitner from The Service Quality Handbook, eds. E. E.
Scheuing and W. F. Christopher (1993), pp. 358-70.
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