Service

Syllabus ppt from 6-12
The Service Encounter
Services
To Kotler service is any activity or benefit that one
party can offer to another that is essentially intangible

and doesnt result in the ownership of anything. Its production may or may not be tied to a physical product
Examples of Services
Utilities: Electricity, Water Supply
Insurance, Banking, Finance :Banks, Shares and Stock Brokers

Law Enforcing, Civil, Administrative and Defense Services: Police, Army ,Air Force ,Navy, Judiciary ,Civil Administration
(sewage disposal, maintenance of roads, parks and public

buildings) Business, Professionals and Scientific Activities : Advertising ,
Marketing Research ,Legal, Medical Consultancy , Accounting

Educational Research ,Maintenance and Repairs ,Leasing , Computer Programming ,Employment Agencies
Services
Transport and Communication: Railways (Passenger and
Freight), Air Transport (Passenger and Freight), Post and

Telegraph, Telephone and Telecommunication Broadcasting, Telecasting (Doordarshan) Leisure and Recreation: Cinema Theatres , Clubs, Gymnasium, Restaurants, Hotels, Video Game Partners, Casinos, Self
Improvement Courses,
Services
Distributive Trades: Wholesale Distribution, Retail
Distribution, Dealers, Agents

Miscellaneous: Beauty Parlours Health Clubs
Dry Cleaning , Matrimonial Services, Property Consultancy
Services
A type of economic activity that is intangible, is not stored
and does not result in ownership

There are no such thing as service industries. There are
only industries whose service components are greater or

less than those of other industries. Everybody is in service.
-Theodore Levitt-
The service sector

The services sector has been growing at a rate of 8%
per annum in recent years

More than half of our GDP is accounted for from the
services sector
This sector dominates with the best jobs, best talent
and best incomes
In services, the last experience remains uppermost in your mind. Therefore, it is not enough to be good, you have to be consistently good
The Service Encounter Triad

Service Organization
Efficiency versus autonomy Efficiency versus satisfaction
Contact Personnel
Perceived control
Customer
Role of Customer in service organisation

Consumers rarely involved in manufacture of goods but often
participate in service creation and delivery

Challenge for service marketers is to understand how customers
interact with service operations

Customer involvement in service encounters varies with type of
process
People processing (e.g., motel stay): customer is physically
involved throughout entire process
Arrive
Check In
Spend Night In Room
Break Fast
Check Out

Customer involvement in service encounters varies with type of process
Possession processing (e.g., TV repair): involvement may be
limited to drop off of physical item/description of problem and subsequent pick up
Travel to Store
Technician examines TV, Diagnose Problem
Leave Store
Return Three Days Later
Pick up TV and pay
Switch on TV at home
Technician Repairs TV

Customer involvement in service encounters varies with type of
process
Mental stimulus processing (e.g., weather forecast):
involvement is mental, not physical; here customer simply
receives output and acts on it

Turn on TV, Select Channel View presentation of Weather Forecast Make Plans for Picnic , Knowing Weather Should Be Good
Collect Weather Data
Meteorology Input Data to Models & Create Forecast from Output
TV weatherperson Prepares Local Forecast

Customer involvement in service encounters varies with type of process
Information processing (e.g., health insurance): involvement is mental - specify information upfront and later receive documentation of coverage
Learn about options Select
Plan, Complete Form
Pay
Insurance Coverage Begins on Specified Date
Printed Policy Documents Arrive
Employer & Insurance company Agree on Terms of Coverage
Customer Information Entered in Database
Types Of Service Encounter

High Contact Services
Customers visit service facility and remain throughout service delivery
Active contact between customers and service personnel Includes most people-processing services
Low Contact Services

Little or no physical contact with service personnel Contact usually at arms length through electronic or physical distribution
channels
New technologies (e.g. Web) help reduce contact levels
Levels of Customer Contact with Service Organizations

High
N u r si n g H o m e
Emphasizes encounters with service personnel

M a n a g e m e n t Co n su l t i n g
H a i r Cu t
4 - St a r H o t e l
G o o d Re st a u r a n t A i r l i n e Tr a v e l (Eco n .)
Tel ep h o n e Ba n k i n g
Re t a i l Ba n k i n g M o t el
Ca r Rep a i r I n su r a n ce
Dr y Cl ea n i n g
Fa st Fo o d Movie Theater
Ca b l e TV
Subway Internet Banking Mail Based Repairs
Emphasizes encounters with equipment
Internet-based Services
Low
Managing Service Encounters--1

Service encounter: A period of time during which customers
interact directly with a service

Moments of truth: Defining points in service delivery where
customers interact with employees or equipment

Critical incidents: specific encounters that result in
especially satisfying/dissatisfying outcomes for either customers or service employees
Managing Service Encounters--2

Service success often rests on performance of junior
contact personnel
Must train, coach, role model desired behavior
Thoughtless or badly behaved customers can cause
problems for service personnel (and other customers)

Must educate customers, clarify what is expected, manage
behavior
The Purchase Process for Services

Prepurchase Stage
Awareness of need Information search Evaluation of alternative service suppliers
Service Encounter Stage

Request service from chosen supplier Service delivery
Postpurchase Stage
Evaluation of service performance Future intentions
Perceived Risks in Purchasing and Using Services

Functional unsatisfactory performance
outcomes Financial monetary loss, unexpected extra costs Temporal wasted time, delays lead to problems Physical personal injury, damage to possessions Psychological fears and negative emotions Social how others may think and react Sensory unwanted impacts to any of five senses
Factors that Influence Customer Expectations of Services

Personal Needs Desired Service Beliefs about What Is Possible Explicit & Implicit Service Promises Word-of-Mouth Past Experience
ZONE OF TOLERANCE
Perceived Service Alterations Adequate Service Situational Factors Predicted Service
Source: Adapted from Zeithaml, Parasuraman & Berry
Components of Customer Expectations

Desired Service Level: wished-for level of service quality
that customer believes can and should be delivered

Adequate Service Level: minimum acceptable level of service
Predicted Service Level: service level that customer believes
firm will actually deliver

Zone of Tolerance: range within which customers are willing
to accept variations in service delivery
Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate
Search attributes Tangible characteristics that allow customers to evaluate a
product before purchase

Experience attributes Characteristics that can be experienced when actually
using the service

Credence attributes Characteristics that are difficult to evaluate confidently
even after consumption

Goods tend to be higher in search attributes, services tend to be higher in
experience and credence attributes

Credence attributes force customers to trust that desired benefits have been
delivered
How Product Attributes Affect Ease of Evaluation

Most Goods Most Services
Clothing
Chair
Foods
Restaurant meals
Haircut
Easy to evaluate
Difficult to evaluate
Computer repair Legal services Complex surgery
Source: Adapted from Zeithaml
Motor vehicle
High in search attributes
High in experience attributes
Entertainment
Lawn fertilizer
High in credence attributes
Service Marketing System: (1) High Contact Service--e.g., Hotel

Service Marketing System
Service Delivery System Service Operations System
Interior & Exterior Facilities Other Customers
Other Contact Points

Advertising Sales Calls Market Research Surveys Billing / Statements Miscellaneous Mail, Phone Calls, Faxes, etc. Random Exposure to Facilities / Vehicles
Technical Core
Equipment
The Customer
Service People
Backstage (invisible)
Front Stage (visible)
Other Customers
Chance Encounters with Service Personnel Word of Mouth
Service Marketing System: (2) Low Contact Service--e.g., Credit Card

Service Marketing System
Service Delivery System Service Operations System Other Contact Points
Advertising Mail Technical Core Self Service Equipment
The Customer
Market Research Surveys

Random Exposures Facilities, Personnel
Backstage (invisible)
Phone, Web site Fax, etc.Front Stage

(visible)
Word of Mouth
Customer Delight: Going Beyond Satisfaction

Research shows that delight is a function of 3 components
Unexpectedly high levels of performance

Arousal (e.g., surprise, excitement) Positive affect (e.g., pleasure, joy, or happiness) Is it possible for customers to be delighted by every services? There is need to explore ways to positively surprise customers
with customer-friendly innovations and extraordinary customer

service
A Service Business is a System Comprising Three Overlapping Subsystems

Service Operations (front stage and backstage)
Where inputs are processed and service elements created. Includes facilities, equipment, and personnel
Service Delivery (front stage)

Where final assembly of service elements takes place
and service is delivered to customers Includes customer interactions with operations and other customers
Service Marketing (front stage)

Includes service delivery (as above) and all other contacts
between service firm and customers
Role and Script Theories

Role: A set of behavior patterns learned through experience and
communication
Role congruence: In service encounters, employees and customers
must act out defined roles for good outcomes

Script: A sequence of behavior to be followed by employees and
customers during service delivery

Some scripts (e.g. teeth cleaning) are routinized, others flexible Technology change may require a revised script
Managers should reexamine existing scripts to find ways to
improve delivery, increase productivity, enhance experiences
Improving Service Quality and Productivity
Reason for Improvement in Quality
The global market is becoming more competitive every day Companies continually search for new ways to gain an edge over their competitors around the globe Global competition and deregulation in a number of industries is forcing companies to turn to quality in order to survive Quality is our best assurance of customer loyalty, our strongest defense against foreign competition, and the only path to sustained growth and earnings (Welch). Perhaps the most important reason for pursuing quality is that quality pays (Deming). Research shows a relationship between quality, market share, and return on investment
Relationship between Quality, Market Share, and ROI
Higher quality yields a higher return-on-investment (ROI) for

any given market share
Quality also pays in the form of customer retention -- customer defections represent a significant cost to companies
Adopting quality principles strongly correlates to corporate
stock and earnings appreciation
Factors Influencing Change in Quality Perceptions

Modern communications permit and in some cases encourage customers to shift their patronage from one producer to another Global competition has resulted in increased choice and has raised customer expectations of what constitutes acceptable quality Technology - marketing is a contest for consumers attention and the Internet is now competing for that attention as the number of Internet users worldwide continues to rise
What is Quality?
"The totality of features and characteristics of a product or service
that bear on its ability to satisfy stated or implied needs." (Kotler)
Quality must provide goods and services that completely satisfy the needs of both internal and external customers. Quality serves as the "bridge" between the producer of goods or services and its customer. (Johnson & Weinstein)
'Quality is the ongoing process of building and sustaining relationships by assessing, anticipating, and fulfilling stated and implied needs.'
Improving Quality for Service Marketers
Gain competitive advantage, maintain loyalty
Increase value (may permit higher margins)

Improve profits
Improving Service Quality and Productivity

Productivity is working faster and more efficiently in order to reduce the cost
Service quality and productivity have historically been seen as
issue for operation managers . When improvement in these

areas required better employee selection , selection and supervision then HR manger get involved
But now service quality link with customer satisfaction ,and

the role of marketers have an important part to play
Importance of Productivity for Service Marketers

Improving productivity is important for marketer for several reasons 1. Helps to keep costs down .Lower cost either means higher profits or the ability to hold down the prices . The company with a lowest cost in an Industry has the option to position itself at lower price leader which a significant advantage among price sensitive market segments. 2. Firm with lower cost also generate higher margin giving those firms the option of spending more than the competition in marketing budgets, improve customer service and supplementary service. Such firms may also be able to offer higher margins to attract and reward the best distributor and intermediaries 3. The opportunities to secure the firms long term future through investment in new service technologies and in research to create superior new services , improved features and improved delivery systems. 4. Efforts to improve productivity often have an impact on customers. Marketers are responsible for ensuring that negative impacts are avoided or minimized and that new procedures are carefully presented to customers. Positive impact can be promoted as a new advantage
Importance of Productivity for Service Marketers

Quality and productivity create value for both customer and companies Quality focuses on the benefits created for the customers side equation and productivity is the final costs incurred by the firm which may subsequently be passed on to customers, in the form of price
Integration of quality and productivity improvement programs

will improve the long term profitability of the firm
Perspectives on Service Quality

The word quality means different things to people according to context
Transcendental: Product-Based: User-Based: ManufacturingBased:
Quality = excellence. Recognized only through experience , uncompromised std. and high achievement
Quality is precise and measurable

Quality lies in the eyes of the beholder Quality is conformance to the firms developed specifications Quality is a trade-off between price and value
Value-Based:
Dimensions of Service Quality
Reliability: Perform promised service dependably and accurately. Example: receive mail at same time each day. Monthly bank account statement
Responsiveness: Willingness to help customers promptly. Example: avoid
keeping customers waiting for no apparent reason.
Assurance: Ability to convey trust and confidence. Example: being polite and showing respect for customer.
Empathy: Ability to be approachable. Example: being a good listener. Tangibles: Physical facilities and facilitating goods. Example: cleanliness
Perceived Service Quality

Word of mouth Personal needs Past experience
Service Quality Dimensions Reliability Responsiveness Assurance Empathy Tangibles
Expected service
Perceived service
Service Quality Assessment 1. Expectations exceeded ES<PS (Quality surprise) 2. Expectations met ES~PS (Satisfactory quality) 3. Expectations not met ES>PS (Unacceptable quality)
Seven Service Quality Gaps

Customer needs and expectations
CUSTOMER
1. Knowledge Gap
Management definition of these needs
MANAGEMENT
2. Standards Gap
Translation into design/delivery specs
3. Delivery Gap
Execution of design/delivery specs Advertising and sales promises
5. Perceptions Gap
Customer perceptions of product execution
6. Interpretation Gap
Customer interpretation of communications
7.
Service Gap
Customer experience relative to expectations
The Customer Gap

The Gap between Customer Expectations and Customer Perceptions
The customer gap is the difference between customer expectations and customer perceptions. Customer expectation is what the customer expects according to available resources and is influenced by cultural background, family lifestyle, personality, demographics, advertising, experience with similar products and information available online. Customer perception is totally subjective and is based on the customers interaction with the product or service. Perception is derived from the customers satisfaction of the specific product or service and the quality of service delivery. In a customer orientated strategy, delivering a quality service for a specific product should be based on a clear understanding of the target market. Understanding customer needs and knowing customer expectations could be the best way to close the gap.
The Knowledge Gap

The Gap between Consumer Expectation and Management Perception The knowledge gap is the difference between the customers expectations of
the service provided and the companys provision of the service.
In this case, managers are not aware or have not correctly interpreted the customers expectation in relation to the companys services or products. If a
knowledge gap exists, it may mean companies are trying to meet wrong or
non-existing consumer needs. In a customer-orientated business, it is important to have a clear understanding of the consumers need for service.
To close the gap between the consumers expectations for service and
managements perception of service delivery will require comprehensive market research.
The Policy Gap

The Gap between Management Perception and Service Quality Specification
According to Kasper et al, this gap reflects managements incorrect

translation of the service policy into rules and guidelines for employees. Some companies experience difficulties translating consumer expectation
into specific service quality delivery. This can include poor service design,
failure to maintain and continually update their provision of good customer service or simply a lack of standardisation. This gap may see consumers
seek a similar product with better service elsewhere.
The Delivery Gap

The Gap between Service Quality Specification and Service Delivery
This gap exposes the weakness in employee performance.
Organisations with a Delivery Gap may specify the service required to

support consumers but have subsequently failed to train their employees, put good processes and guidelines in action. As a result,
employees are ill equipped to manage consumers needs. Some of the

problems experienced if there is a delivery gap are:
Employees lack of product knowledge and have difficulty managing
customer questions and issues

Organisations have poor human resource policies Lack of cohesive teams and the inability to deliver
The Communication Gap

The Gap between Service Delivery and External Communications
In some cases, promises made by companies through advertising media and communication raise customer expectations. When over-promising in advertising does not match the actual service delivery, it creates a communication gap. Consumers are disappointed because the promised service does not match the expected service and consequently
may seek alternative product sources.
Prescriptions for Closing Service Quality Gaps
Knowledge: Learn what customers expect--conduct research, dialogue, feedback

Standards: Specify SQ standards that reflect expectations
Delivery: Ensure service performance matches specs--consider roles of employees, equipment, customers
Internal communications: Ensure performance levels match marketing promises Perceptions: Educate customers to see reality of service delivery Interpretation: Pretest communications to make sure message is clear and unambiguous.
Hard and Soft Measures of Service Quality
Hard measures refer to standards and measures that can be counted, timed or measured through audits

typically operational processes or outcomes e.g. how many trains arrived late?
Soft measures refer to standards and measures that cannot easily be observed and must be collected by talking to customers, employees or others
e.g. SERVQUAL, surveys, and customer advisory panels.
Control charts are useful for displaying performance over time against specific quality standards.
Tools for analyzing and addressing Service Quality Problems
Fishbone Diagrams
(Cause and Effect or Ishikawa)
Named after Kaoru Ishikawa
Japanese Quality pioneer
Resembles skeleton of a fish Focus on causes rather than symptoms of a problem Emphasizes group communication and brainstorming Stimulates discussion
Creating Fishbone Diagrams
As a group:
1. Establish problem (effect)

-state in clear terms -agreed upon by entire group
2. Problem becomes the head of the fish

-draw line to head (backbone)
(backbone)
Poor Service (head)
Creating a Fishbone Diagram

Decide major causes of the problem - by brainstorming - if the effect or problem is part of a process the major steps in the process can be used 4. Connect major causes to backbone of the fish with slanting arrows
3.
Appearance
Responsivene
Poor Service
Attention
Reliability

5. Brainstorm secondary causes for each of the major causes 6. Connect these secondary causes to their respective major causes 7. Repeat steps 5 & 6 for sub-causes dividing with increased specificity
Step 5, 6, & 7:
Responsivene Appearance ss time equipment personnel facility Poor Service accuracy One on one service dependability Reliability
courtesy
Attention
Creating a Fishbone Diagram (4 of 4)

8. Use tools to analyze and evaluate causes

Pareto diagrams, charts, and graphs Statistical analysis for causes in processes
9. Decide and take action
Use fishbone diagram, analysis and evaluations to find causes that can be fixed
Take action to eliminate and fix problem causes
Lack of sales in retail stores
Exhibit 15.6
Cause-and-Effect Diagram for Hospital Emergency Admission
Service Quality Questions

Service Quality situations:

Auto repair Hospital visit Theme park Hair cut Supermarket Fast food restaurant Air travel
Answer these questions: How unique/standardized is product and/or service? Type of service search, experience, or credence.? Pure service or product-service blend? What factor most affects service quality? After service is delivered, is corrective action possible?
Productivity in a Service Context
Productivity measures amount of output produced relative to the amount of inputs.
Improvement in productivity means an improvement in the

ratio of outputs to inputs.
Intangible nature of many service elements makes it hard to measure the productivity of service firms, especially for information based services.
Efficiency, Effectiveness, and Productivity
Efficiency: comparison to a standard--usually timebased (e.g., how long employee takes to perform specific task)
Effectiveness: degree to which firm is meeting its goals

Cannot divorce productivity from quality/customer satisfaction
Productivity: financial valuation of outputs to inputs
Consistent delivery of outcomes desired by customers should command higher prices
Measuring Service Productivity
Traditional measures of service output tend to ignore
variations in quality or value of service
That is, they focus on outputs rather than outcomes, and
stress efficiency but not effectiveness.
Firms that are more effective in consistently delivering outcomes desired by customers can command higher prices. Furthermore, loyal customers are more profitable.
Operations-driven vs. Customer-driven Actions to Improve Service Productivity

Operations-driven strategies Customer-driven strategies Control costs, reduce waste Change timing of customer demand Set productive capacity to match average demand Involve customers more in production Automate labor tasks Ask customers to use third Upgrade equipment and parties systems Train employees
Leverage less-skilled employees through expert systems
Overcoming Customers Reluctance to Accept Changes in Environment and Behavior

Develop customer trust Understand customers habits and expectations Pretest new procedures and equipment Publicize the benefits
Teach customers to use innovations and promote trial

Monitor performance, continue to seek improvements
Six Sigma Methodology to Improve and Redesign Customer Service Processes

Process Improvement
Define Measure Analyze
Improve
Identify the problem Define requirements Set goals Validate problem/process Refine problem/goal Measure key steps/inputs Develop causal hypothesis Identify root causes Validate hypothesis Develop ideas to measure root causes Test solutions Measure results Establish measures to maintain performance Correct problems if needed
Control
Customer Complaints and Service Recovery
Case Study On Service Recovery & Retention

British Airways customer-relations department can now
claim to be a true champion of the customer. The

retention rate among those who complain to customer relations has more than doubled, while the departments return on investment (the value of business saved plus increased loyalty and new business
from referrals relative to the departments total costs)

has risen 200 percent.

In training its employees, British Airways tried to help staff understand several things: If the company replies to a customer and claims that events did not happen as the customer suggested, then the customer perceives the company to be calling him or her a liar. If, after investigating, the company reports back to the customer that events indeed took place as the customer claimed, then the customer can become even more agitated, inferring that the company did not believe him or her at first. If the company relays information to the customer that he or she did not know, the customer may think that the company is trying to make excuses for poor service.
To deal with these issues, British Airways customer-relations department developed a four-step process that it incorporated into all its technical and human systems. Apologize and take up the problem. Customers do not care whose fault the problem was; they want an apology and they want someone to champion their cause. Do it quickly. Aim to reply to the customer the same day, and if that is not possible, certainly within 72 hours. British Airways research showed that 40 to 50 percent of customers who contacted it with complaints defected if it took company staff longer than five days to respond. A speedy reply demonstrates a sense of urgency; it shows that the company really cares about the customers feelings and situation. Assure the customer that the problem is being fixed. Customers can be retained if they are confident that the operational problem they encountered will truly be addressed. Do it by phone. British Airways found that customers with problems were delighted to have a customer-relations person call them.
Key Questions for Managers to Ask about Customer Complaining Behavior
Why do customers complain?
What proportion of unhappy customers complain?

Why dont unhappy customers complain?
Who is most likely to complain?

Where do customers complain?
Courses of Action Open to a Dissatisfied Customer

Complain to the service firm Take some form of public action Take some form of private action Complain to a third party Take legal action to seek redress Defect (switch provider) Negative word-ofmouth
Service Encounter is Dissatisfactory
Take no action
Any one or a combination of these responses is possible
Customer Response to Service Failure

Why do customer complain? 1. Obtained restitution or compensation : complaint to recover some economic loss Ex Restaurant, Laundry 2. Vent their anger : complain to rebuild self esteem when service processes are bureaucratic and unreasonable ,or when employees are rude Ex. Govt offices 3. Help to improve the service : complain for improvement in service because he is highly involved in service Ex. College , Bank , parlour 4. For altruistic reason: complain for selfless reasons . Want to spare other customers from experiencing g the same problem and they might feel bad if a problem is not highlighted
Customer Response to Service Failure Cont...
What proportion of unhappy customer complain?
5or less than 5 as per research

Ex. In one research only 3complain out of every million passenger trips. This shows that customer are becoming more inform , more self confident and more assertive about seeking
satisfactory outcomes for their complaints
Why dont unhappy customer complain?
TARP ,( The Troubled Asset Relief Program) a customer satisfaction and measurement firm has identified a number of reason why customers dont complain 1. Dont wish to take the time to write a letter , fill out a form or make a phone call 2. Customer see the payoff as uncertain and believe that no one would be concern about their problem or willing to resolve it 3. Some time ,customer simply do not know where to go or what to do 4. Some time feel unpleasant to complain , may be employee is in knowing person or he has to deal with him again 5. Some time Customer have low power when the problem involves professional service provider , doctor , lawyer Firms are able to minimize some of these barrier by offering customers the opportunity to complain through internet . However some argue that we are change the consumer behaviour if service provider attempt to solve it

Who is most likely complain? People with higher socioeconomic levels are more likely to complain than those in lower level Their better education , higher education , higher income , and greater social involvement give them the confidence , knowledge, and motivation to speak up when they encounter problems Person who complain also tend to be more knowledgeable about the product in question Where do customer complain? Majority of Complain are face to face or on phone calls at service place to the employees and not complained to the carporate headquarter . Very few app. 1 % is complained only through internet , letter , fax etc.
Complaining Customers: The Tip of the Iceberg
Customer Expectation about their Complain When service failure occurs, people expect to be adequately compensated in a fair manner . However many studies have shown that many customer feel that they were not treated fairly and did not receive adequate justice Service recovery was determine by 3 dimension of fairness 1. Procedural justice has to do with the policies and rules any customer will have to go through in order to seek fairness 2. Interactional justice involves the firms employees who provides the service recovery and their behaviour towards the customer 3. Outcome justice pertains the compensation that customer receives as a result of losses and in convinience
Unhappy Customers Repurchase Intentions
Dissatisfied Consumers Behavior
The Retail Customer Dissatisfaction Study 2006 by the Verde Group found:
48% of respondents reported that they avoided a store because of someone elses negative experience for those who encountered problems, 33% said they would definitely not or probably not return
The exponential power of storytelling:

as people tell the story, the negativity is embellished and grows
Customer Response to Effective Service Recovery
In all service contexts, service failure is inevitable. Service failure occurs when service performance that falls below a customers expectations in such a way that leads to customer dissatisfaction. Service recovery refers to the actions taken by a firm in response to service failure.
Service failure and Recovery

Notions - Service failure may or may not lead to service recovery - Service recovery results in outcomes - Outcomes result in consequences for a service organization
Service Failure
predictable Dissatisfied customers Categories of service failures 1) Failure in advice, process, interactions, documents, information, conditions, systems and third parties.
2) Service provider error, customer error, and associated organization error.
Components of an Effective Service Recovery System

Do the Job Right the Do the Job Right the First Time First Time
Effective Complaint Effective Complaint Handling Handling
Increased Satisfaction Increased Satisfaction and Loyalty and Loyalty Conduct Research Conduct Research Monitor Complaints Monitor Complaints Develop Complaints Develop Complaints as Opportunity as Opportunity Culture Culture Develop Effective Develop Effective System and Training in System and Training in Complaints Handling Complaints Handling Conduct Root Cause Conduct Root Cause Analysis Analysis
Identify Service Identify Service Complaints Complaints
Resolve Complaints Resolve Complaints Effectively Effectively
Learn from the Learn from the Recovery Experience Recovery Experience
Close the Loop via Feedback
Outcomes of Service Recovery

( Distributive Justice Procedural Justice Interactional Justice
Consequences for a service organization

Negative Consequences - Lost Customers - Negative word of mouth - Employee Dissatisfaction - Lack of loyalty - Complaints - Exit from the organization
Impact of Effective Service Recovery on Retention

No Problem
Problem, but effectively resolved Problem Unresolved
0%
84%
92%
46%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
Customer Retention
Source: IBM-Rochester study
Service Recovery Strategies
How to Enable Effective Service Recovery
Be proactiveon the spot, before customers complain

Plan recovery procedures
Teach recovery skills to relevant personnel

Empower personnel to use judgment and skills to develop
recovery solutions
Guidelines for Effective Problem Resolution

Act fast Admit mistakes but dont be defensive
Give benefit of doubt

Clarify steps to solve problem
Understand problem from Keep customers informed of
customers viewpoint
Dont argue
progress Consider compensation
Acknowledge customers Persevere to regain goodwill feelings
Service Guarantees Help Promote and Achieve Service Loyalty

Force firms to focus on what
customers want Set clear standards
Highlights cost of service

failures Require systems to get & act on, customer feedback Reduce risks of purchase and
build loyalty
The Hampton Inn 100 Percent Satisfaction Guarantee
The Hampton Inn 100% Satisfaction Guarantee
What are the benefits of such a guarantee?
Are there any downsides?
Characteristics of an Effective Service Guarantee
Unconditional
the guarantee should make its promise unconditionally no strings attached
Meaningful
the firm should guarantee elements of the service that are important to the customer the payout should cover fully the customers dissatisfaction
Easy to Understand and Communicate

customers need to understand what to expect employees need to understand what to do
Easy to Invoke and Collect

the firm should eliminate hoops or red tape in the way of accessing or collecting on the guarantee
Benefits of Service Guarantees

A good guarantee forces the company to focus on its customers. An effective guarantee sets clear standards for the organization. A good guarantee generates immediate and relevant feedback from customers. When the guarantee is invoked there is an instant opportunity to recover, thus satisfying the customer and helping retain loyalty. Information generated through the guarantee can be tracked and integrated into continuous improvement efforts. Employee morale and loyalty can be enhanced as a result of having a service guarantee in place. A service guarantee reduces customers sense of risk and builds confidence in the organization.
British Airways Guarantee
Why a Good Guarantee Works

forces company to focus on customers sets clear standards generates feedback forces company to understand why it failed builds marketing muscle
Assignment
Write five service recovery experiences What happened ,
and what did you expect the firm to do? Where you
treated fairly based on the definition of service recovery fairness ?Will you return to the company in future?
Choose a firm you are familiar with . Describe how would you design an ideal service recovery strategy for
that organisation.
Managing Price and Profits
Terms for price in service organisation

Universities Tuition Professional firms-- fees Banks Interest and service charge
Brokers Commission
Insurance companies---premium
Roadways---toll
What Makes Service Pricing Strategy Different?

No ownership of services--hard for firms to calculate financial
costs of creating an intangible performance

Variability of inputs and outputs--how can firms define a unit of
service and establish basis for pricing?

Many services hard for customers to evaluate--what are they
getting in return for their money?

Importance of time factor--same service may have more value to
customers when delivered faster

Delivery through physical or electronic channels--may create
differences in perceived value
Objectives of Pricing Strategies

Revenue and profit objectives
A. Seek profit 1. 2.
Make the largest possible contribution or profit Achieve a specific target level, but did not seek the
maximum profit
3.
Maximum revenue from a fixed capacity by varying prices and target segment overtime, typically using yield or revenue management system

B. Cover costs
1. Cover fully allocated cost , including institutional
overhead
2. Cover cost of providing one particular service excluding
overhead
3. Cover incremental cost of selling one extra unit of one
extra customer

Patronage and user base-related objectives
A. Build demand
1.
Maximize demand (when capacity is not a constraint ), subject
to achieving a certain minimum level of revenues

2.
Achieve full capacity utilization , especially when high capacity utilization adds to the value created for all customers . Ex. Full
house adds excitement to theater play or basket ball games

B. Build a user base
1.
Stimulate trial and adoption of service . This is specially important

for new services with high infrastructure cost and for membership type services that generate significant revenues from their continued use after adoption ( e.g. mobile phone service subscription and life insurance plans)
2.
Build market share and / or a large user base , especially if there are significant economies of scale that can lead to a competitive cost advantage ( ex. If development of fixed cost are high)
The Pricing Tripod

Pricing Strategy
Competition
Costs
Value to customer
Three Main Approaches to Pricing

Cost-Based Pricing Set prices relative to financial costs (problem: defining costs) Competition-Based Pricing Monitor competitors pricing strategy (especially if service
lacks differentiation)
Who is the price leader? (one firm sets the pace) Value-Based Relate price to value perceived by customer
Cost Based Pricing

Its usually more difficult to establish the costs involved in producing
an intangible performance than it is associated with producing
physical good
Labour and infrastructure needed to create performance , many
service organizations have much higher ratio of fixed cost to
variable cost than it is found in manufacturing firm.

The traditional cost based approach is use in service organisation in
which cost must be estimated in advance

ex. Construction , engineering advertising , many professional
services etc.
Cost Based Pricing

Major difficulty in cost based approach involves defining
the units in which a service is purchased

For this reason many services are sold in terms of input
rather than units of measured output

Ex professional services such as consulting , engineering
, architecture, tutorials are sold by an hour

For complex product line with shared infrastructure ( ex. Retail
banking products) it may be worthwhile to use ABC approach
Cost Based Pricing

Cost= Fixed Cost + semi variable cost+ variable cost Fixed Cost: are those economic costs that supplier would continue to incur, even if no service sold. Ex. Rent ,depreciation, utilities , taxes insurance salaries and wages , securities and interest payment Variable cost : the economic costs associated with serving an additional customer. Selling an additional seat on a flight, making an additional bank transaction In may sercices such cost are very low . For instance , very little labour or fuel cost is involved in transporting an extra passenger and higher cost in case of parts to repairs. Semi variable costs: fall in fixed and variable and represent expenses that rise or fall in a stepwise fashion as the volume of business increase or decrease. Ex. Adding an extra flight to meet increase demand
Cost Based Pricing

Contribution = difference between the variable cost of selling an extra unit of service and money received from the buyer of that service Determining and allocating economic cost Difficult to assign fixed costs in a multiservice facility Ex. In hospital fixed cost is allocated to emergency share of overhead on one of the way i.e. , Percentage of floor area occupied, employee hours, or to the percentage of total patient contact one of this approach may show profit making other loss making operation Break-Even Point : sales volume will be profitable
Activity-Based Costing: Relating Activities to the Resources They Consume

Managers need to see costs as an integral part of a firms effort to create value for
customers
When looking at prices, customers care about value to themselves, not what
production costs the firm

Traditional cost accounting emphasizes expense categories, with arbitrary allocation
of overheads
ABC management systems examine activities needed to create and deliver service
(do they add value?)

Must link resource expenses to: variety of products produced complexity of products demands made by individual customers
Activity-Based Costing: Relating Activities to the Resources They Consume

ABC analysis begins with the identification of various
activities being performed and then determine the cost of each activity as it relates to each expense category.
Unit level activities Batch level activities
Competition based pricing

This approach focus on pricing charge by the
other firms in the same industry or market as an anchor for the firms price This approach use in two situations: 1. When services are standard across providers Ex. Dry cleaning industry 2. In oligopoly with a few large service providers Ex. Airline industry
Increase in Price Competition

1. 2. 3. 4.
Increase in number of competitors Increasing number of substituting offers Increasing surplus capacity in Industry Wider distribution of competitor
Reduce in Price Competition

1.
Non price related costs of using alternatives are high (Save time or effort are more important to customer )
2.
Personalization , customization and switching cost matters ( hair Styling , family medical care discouraging them from competitive offer )
3.
Time and location specificity reduce choice( Ex Bank near to your home )
Value Based Pricing

No customer will pay more for a service than he or she
thinks it is worth. To set an appropriate price , marketer needs to understand how customer perceive service value
Understanding Net Value
When customers purchase a service , they are weighing the
perceived benefits obtained from the service against the perceived cost they will incur. People are willing to pay higher price to reduce the nonmonetary cost of service
Four meaning of perceived value

Customer define value in four ways 1. Value is low price
Dry cleaning value means the lowest price Discounting, Odd pricing, Penetration pricing 2. Value is whatever I want in product or service MBA : Value is best education I can get Prestige pricing, Skimming pricing 3. Value is the quality I get for the quality I pay Hotel for vacation: Value is the price first and quality second Value pricing, Market Segmentation pricing 4. Value is what I get for what I give For a hairstyle : value is what I pay in cost and time for the look I get Price framing , Price bundling
Net Value = (Benefits Outlays)
Effort Time
Perceive d Benefits
Perceived Outlays
Enhancing Gross Value

Pricing Strategies to Reduce Uncertainty
service guarantees benefit-driven (pricing that aspect of service that creates value) flat rate (quoting a fixed price in advance)
Relationship Pricing
non-price incentives discounts for volume purchases discounts for purchasing multiple services
Low-cost Leadership
Convince customers not to equate price with quality Must keep economic costs low to ensure profitability at low
price
Paying for Service: The Customers Perspective

Customer expenditures on service comprise both financial and non-financial outlays
Financial costs:
price of purchasing service expenses associated with search, purchase activity,
usage
Time expenditures Physical effort (e.g., fatigue, discomfort) Psychological burdens (mental effort, negative feelings) Negative sensory burdens (unpleasant sensations affecting any
of the five senses)
Trading off Monetary and NonMonetary Costs (Fig. 6.5)

Which clinic would you patronize if you needed a chest xray (assuming all three clinics offer good quality) ? Clinic A
Price Rs 45 Located 1 hour away by car or transit Next available appointment is in 3 weeks Hours: Monday Friday, 9am 5pm Estimated wait at clinic is about 2 hours
Clinic B
Price Rs 85 Located 15 min away by car or transit Next available appointment is in 1 week Hours: Monday Friday, 8am 10pm Estimated wait at clinic is about 30 - 45 minutes
Clinic C
Price Rs 125 Located next to your office or college Next appointment is in 1 day Hours: Mo Sat, 8am 10pm By appointment estimated wait at clinic is about 0 to 15 minutes
Increasing Net Value by Reducing Non-financial Costs of Service

Reduce time costs of service at each stage
Minimize unwanted psychological costs of service

Eliminate unwanted physical costs of service Decrease unpleasant sensory costs of service
Revenue Management: Maximizing Revenue from Available Capacity at a Given Time

Based on price customization - charging different
customers (value segments) different prices for same product

Useful in dynamic markets where demand can be
divided into different price buckets according to price sensitivity

Requires rate fences to prevent customers in one value
segment from purchasing more cheaply than willing to pay
Price Elasticity
Price per unit of service
Di De
De Di
Quantity of Units Demanded

De : Demand is price elastic. Small changes in price lead to big changes in demand. Di : Demand for service is price inelastic. Big changes have little impact on demand.
Service Profit Chain Theory

Direct and Strong Correlations Between: ! Profit ! Growth ! Customer Loyalty ! Customer Satisfaction ! Value of Goods and Services delivered to customers And: ! Employee Capability ! Employee Satisfaction ! Employee Loyalty ! Employee Productivity Cycle of Capability ! Satisfied employees are loyal and productive employees ! Leads to loyal customers
Pricing Issues: Putting Strategy into Practice

How much to charge?
What basis for pricing?

Who should collect payment? Where should payment be made? When should payment be made? How should payment be made? How to communicate prices?
Comparative study of any four mobile service provider pricing schedule on the following dimensions Air time , Subscription fees Free minutes Per second/ minute bills Usage profile of customer
From a customer perception , what serves to
define value in the following services: A hairdressing salon A legal firm specializing in business and taxation law A nightclub
Managing Relationships and Building Loyalty
Slide 2004 by Christopher Lovelock and Jochen Wirtz
Services Marketing 5/E
Customer Relationship
Customer relationship management (CRM) is a widely

implemented strategy for managing a companys interactions with customers, clients and sales prospects.
Benefits of Customer Relationship Management Quality and efficiency Decrease in overall costs Decision support Customer Attention Increase profitability
Reasons of CRM
Three key phases: 1. Customer Acquisition. 2. Customer Retention. 3. Customer Extension.
Customer Acquisition - This is the process of attracting our customer for the first their first purchase. We have acquired our customer. Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase from us for the first time. 2. Customer Retention - Our customer returns to us and buys for a second time. We keep them as a customer. This is most likely to be the purchase of a similar product or service, or the next level of product or service. Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase from us regularly. 3. Customer Extension - Our customers are regularly returning to purchase from us. We introduce products and services to our loyal customers that may not wholly relate to their original purchase. These are additional, supplementary purchases. Of course once our loyal customers have purchased them, our goal is to retain them as customers for the extended products or services. Growth - Through market orientation, innovative Services Marketing 5/E Slide 2004 by Christopher Lovelock and Jochen Wirtz IT and value creation we aim to increase the number of
A hotel industry story

model of the service A seminar group was asked to create atheir trainer asked they wanted during coffee break. Then
hotel management and service employees what was important in setting up coffee service.
said coffee should be of highest quality and Hotel people served in polished urns with attractive china on well brewed, a well-arranged table. What did their customers want? of the above. They wanted fast service-no long lines.None they wanted phones And and restrooms nearby. single Not a serviceitem hotel people considered important for good was valued by their customers!
Slide 2004 by Christopher Lovelock and Jochen Wirtz Services Marketing 5/E
Customer Loyalty
Creating a service organization

Building customer loyalty means creating a customer-centered management and staff.
Customer Loyalty matters, because selling more to current customers is

easier and cheaper than finding and selling to new ones. Loyal customers tend to buy more, more regularly. And they will frequently recommend your business to others.
1. Understand the true purpose of marketing Effective marketing is in large part about building trust and developing
relationships. The purpose of marketing is to "create and maintain a strong feeling with customers so they are mentally predisposed to continually choose and recommend you," according to Tom Asacker, author of A Clear Eye for Branding. Successful marketing also requires being relevant and unique, which brings us to Tip 2.
Customer Loyalty
Identify and build your brand
Your brand is what your business is known for, how you engage with
customers, and what people can depend on you to consistently deliver. It's a compilation of your most-important strengths.
What should a customer who is referring someone to your business say

about you? "They go out of their way to find resources and solutions for me." "The staff is warm and caring; you can feel it the minute you walk through the door.
Identify your brand, and leverage it to see customer loyalty and referrals
increase. Don't be shy about showcasing your uniqueness and strengths.
Customer Loyalty
3. Tap into what customers want
To appeal to a customer's needs or desires, you must first

understand their motivations, values, and priorities. Each customer has unique needs and wants.
Being tuned in to what customers want and being sensitive

to their evolving needs will help you become more resourceful and innovative over time. That is an excellent way to set yourself apart from other businesses and help you build memorable, lasting customer relationships.
Four Stages of Brand Loyalty in a Consumer
Cognitive loyalty perception from brand attribute

information that one brand is preferable to its alternatives
Affective loyalty developing a liking for the brand based

on cumulatively satisfying usage occasions
Conative loyalty commitment to rebuying the same brand Action loyalty exhibiting consistent repurchase behavior
What Makes Loyal Customers More Profitable?
Tend to spend more as relationship develops

customers balances may grow may consolidate purchases to one supplier
Cost less to serve

less need for information and assistance make fewer mistakes
Recommend new customers to firm (act as unpaid sales

people)
Trust leads to willingness to pay regular prices vs. shopping

for discounts
Analyzing Why Customers Are More Profitable over Time (Fig. 12.2)
Profit from price premium
Profit from references

Profit from reduced op. costs Profit from increased usage Base Profit
7
Source: Reichheld and Sasser
Year
Customer equity management
Customer equity management is new approach to

marketing that is important strategically design to grow the value of each customer
Customer equity refers to the total sum of discounted

lifetime values of all the firms current customer
Measuring Customer Equity: Calculating Life Time Value of Each Customer
Value at Acquisition
revenues (application fee + initial purchase) Less costs (marketing +credit check + account set up)
Annual Value (project for each year of relationship)

revenues (annual fee + sales + service fees + value of referrals) Less costs (account management + cost of sales + write-offs)
Net Present Value

Determine anticipated customer relationship lifetime Select appropriate discount figure Sum anticipated annual values (future profits) at chosen discount
rate
Customer Equity is total sum of NPVs of all current customers

Customer-Firm Relationship
Todays marketers seek to develop long-term relationships with customers. Relationship marketing includes:
Database Marketing: Involves the use of technology by

delivering differentiated service levels to consumers and subsequently tracking the relationship.
Interaction Marketing: Usually in B2B context where people and

the social process also add mutually beneficial value.
Network Marketing: Common in B2B context where companies

commit resources to develop positions in a network of relationships with the stakeholders and relevant agencies.
Types of Relationships with Customers (Table 12.1)
Type of Relationship--Firm and Customer Nature of Service Delivery

Continuous Membership Cable TV Insurance College enrollment Subscriber phone Theater subscription Warranty repair No formal relationship Radio station Police Lighthouse Pay phone Movie theater Public transport
Discrete transactions
Basic Segmentation Issues: Building an Appropriate Customer Portfolio
Target customers whose needs match firms capabilities Focus on value of prospective customers within each
segment, not just numbers
Avoid targeting customers who might abuse:

our employees, facilities other customers
Create a mix of segments to reduce risks of volatility during

swings of economic cycles
Service-Relevant Segmentation Variables
Timing of service use (e.g., by hour, day, season) Level of skill and experience as co-producer/selfserver
Preferred language in face-to-face contact Access to electronic delivery systems (e.g., Internet) Attitudes toward use of new service technologies
Identifying and Selecting Target Segments

(Mgt Memo 12.2)
User characteristics

demographics psychographics geographic location benefits sought

when, where, how services used quantity/value of purchases frequency of use profitability of relationship sensitivity to marketing variables
User behavior

Portfolio of Professional Assignments (Fig. 12.4)

Major, State-of-the-art challenges for the firms principals that give the firm high visibility Demanding client assignments offering a learning experience for the firms most experienced associates Routine client projects shared among principals and associates
Pacesetters
Significant Projects
Bread and Butter Projects
Analytical Work on Project Data
Entry-level tasks for new associates or for research assistants & paraprofessionals
The Customer Pyramid (Fig. 12.5)

Good Relationship Customers
Platinum Gold Iron Lead

Poor Relationship Customers
Which segment sees high value in our offer, spends more with us over time, costs less to maintain, and spreads positive word-of-mouth?
Which segment costs us in time, effort and money, yet does not provide the return we want? Which segment is difficult to do business with?
How Customers See Relational Benefits in Service Industries (Research Insights 12.1)
Confidence benefits
less risk of something going wrong, less anxiety ability to trust provider know what to expect get firms best service level
Social benefits
mutual recognition, known by name friendship, enjoyment of social aspects
Special treatment benefits

better prices, discounts, special deals unavailable to others extra services higher priority with waits, faster service
The Customer Satisfaction-Loyalty Relationship

(Fig. 12.6)
Apostle
100
Zone of Affection Loyalty (Retention)

80
Near Apostle
60
Zone of Indifference Zone of Defection
40
20
Terrorist
1
Very dissatisfied
2
Dissatisfied
3
Neither satisfied nor dissatisfied
4
Satisfied
5
Very Satisfied
Satisfaction
The Wheel of Loyalty (Fig. 12.7)

3. Reduce Churn Drivers
Conduct churn diagnostic
1. Build a Foundation for Loyalty

Segment the market Be selective in acquisition Use effective tiering of service.
Address key churn drivers

Enabled through: Frontline staff Account managers Membership programs CRM Systems
Implement complaint handling & service recovery Increase switching costs
Customer Loyalty
2. Create Loyalty Bonds
Give loyalty rewards
Deliver quality service.
Build higher level bonds
Deepen the relationship
Rewarding Value of Use, Not Just Frequency at British Airways (Best Practice in Action 12.2)
Dedicated reservations Reservations assurance Priority waitlist and standby Advance notification of delays
exceeding 4 hours
Upgraded check-in
Preferred boarding Special services assistance
Bonus air miles

Upgrade for two
Drivers of Service Switching (Fig. 12.9)

Service Failure / Recovery
Core Service Failure
Service Mistakes Billing Errors Service Catastrophe
Value Proposition
Pricing
High Price Price Increases Unfair Pricing Deceptive Pricing
Service Encounter Failures

Uncaring Impolite Unresponsive Unknowledgeable
Service Switching
Inconvenience
Location/Hours Wait for Appointment Wait for Service
Response to Service Failure

Negative Response No Response Reluctant Response
Competition
Found Better Service
Others
Involuntary Switching
Customer Moved Provider Closed
Ethical Problems
Unsafe Cheat Hard Sell Conflict of Interest
Common CRM Applications (Mgt Memo 12.2)
Signifies the whole process by which relationships with

customers are built and maintained.
CRM as an enabler, offering a unified customer interface

and allow firms to better understand and segment the customers etc. Applications include:
Data collection Data analysis Sales force automation Marketing automation Call center automation
Customer Relationship Strategies with CRM Systems: Key Questions
How should our value proposition change to increase customer

loyalty?
How much customization or one-to-one marketing and service

delivery is appropriate and profitable?
What is the incremental profit potential of increasing share of

wallet with current customers? How much does this vary by customer tier and/or segment?
How much time and resource can we allocate to CRM right now? If we believe in CRM, why have we not taken steps in that
direction before? What can we do today to develop customer relationship without spending on technology?
Managing People for Service Organization
11 - 155
Service Staff are crucially important
For customer
By anticipating their needs and resolving problems in a
helpful and empathetic manner
For firm: o
They are the key determinant of customer loyalty ( or Defections ) and therefore play an important role in the service profit chain
11 - 156
Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage
Frontline is an important source of differentiation and competitive advantage.
It is:
a core part of the product : Service staff is the most visible element of the
service, delivers the service , and significantly determines the service quality
the service firm : frontline staff represents the service firm , from a customers
prospective , the frontline is the firm

Ex. In most of the personal and professional service the contact employee provides the entire service singlehandedly like haircut , physical trainer , child
care, cleaning and maintenance etc
11 - 157
Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage cont
the brand :The primary image that a customer has of the firm is formed by the
interactions the customer has with the employees of that firm. It is by the staff that determines whether the brand promise gets delivered Ex. An American Express financial advisor, a Nordstrom sales associate , a
Kingfisher airline flight attendant , in each case primary image that the
customer has of the firm is form by the interactions the customer has with the employees of that firm
Even in non personal organisation Audi look to hire employees who are not
afraid to develop a personal relationship with customer
11 - 158
Frontline Service Personnel: Source of Customer Loyalty and Competitive Advantage
Frontline also drives customer loyalty,

anticipating customer needs, customizing service delivery and building personalized relationships
11 - 159
Role Stress in the Frontline

Frontline Staff perform 3 main roles : Producing service quality, productivity and sales 3 main causes of role stress:
Person vs. Role: Conflicts between what jobs require and employees own
personality and beliefs

Ex. Job may require staff to smile and be friendly even to rude customers.
Quality service require an independent warm and friendly personality . However many frontline jobs often perceived as low level jobs requiring low education , offering low pay and often lacking future prospects . If an organisation is not able to personalize its frontline jobs and move away from such image , these jobs may be inconsistent with staff members and leads to role conflicts
11 - 160
Role Stress in the Frontline

Organization vs. Customer: Dilemma whether to follow company
rules or to satisfy customer demands . This conflicts also called two bosses dilemma , arises when customer request service extra or exceptions that violet organizational rules Ex. Call center staff cope with tension between productivity and quality
Customer vs. Customer: Conflicts between customers that
demand service staff intervention Ex. Speaking on mobile phone in a cinema, noisy guest in restaurant
11 - 161
Emotional Labor
The term emotional labour refer to the labour that goes beyond the
physical or mental skill needed to deliver quality services . It
means delivering smile making eye contact , showing sincere interest and engaging in friendly conversation with people who are essentially stranger and who may or may not ever be seen again. Friendliness, courtesy , empathy and responsiveness directed towards customers all require huge amount of emotional labour from the frontline employees who shoulder this responsibilities for the organisation. Emotional labour draws on peoples feeling to be effective in their job.
11 - 162
Emotional Labor
The act of expressing socially desired emotions during
service transactions (Hochschild, The Managed Heart)
Three approaches used by employees

surface acting deep acting spontaneous response
Performing emotional labor in response to societys or

managements display rules can be stressful
Good HR practice emphasizes selective recruitment,

training, counseling, strategies to alleviate stress
11 - 163
How to Manage People for Service Advantage?

Staff performance is a function of both ability and motivation. How can we get able service employees who are motivated to productively deliver service excellence?
1. Hire the right people
2. Enable your people

3. Motivate and energize your people
11 - 164
Recruitment
The right people are a firms most important asset: take a

focused, marketing-like approach to recruitment
Clarify what must be hired versus what can be taught Clarify nature of the working environment, corporate values and
style, in addition to job specs
Ensure candidates have/can obtain needed qualifications Evaluate candidates fit with firms culture and values Fit personalities, styles, energies to the appropriate jobs
11 - 165
1.Select And Hire the Right People: (1) Be the Preferred Employer
Create a large pool: Compete for Talent Market Share
What determines a firms applicant pool?

Positive Quality
image in the community as place to work
of its services
The
firms perceived status
There is no perfect employee

Different Hire
jobs are best filled by people with different skills, styles or personalities candidates that fit firms core values and culture on recruiting naturally warm personalities
Focus
11 - 166
Hiring at southwest airline

1.
Southwest hire people with the right attitude and with personality that matches its corporate personality and with humor. Their orientation is outgoing personality, hard work and have fun at the same time Steps of interview: Observation : After visiting company applicants gather in group . Recruiters watch how they interact with one another
2.
Series of Personal interview: Behavior type interview base on the input from supervisor and peer for given job category on the 8-10 dimensions Ex. For flight attendant dimension include initiative compassion , flexibility , sensitivity , sincerity , customer service orientation , team membership , sense of humor
First interview is little bit stiff , second is more comfortable and third is for knowing about him and compare the notes afterward to reduce the risk of bias
3.
11 - 167
Hiring at southwest airline
During selection they invites peer and supervisor to participate

which increases the sense of responsibility in them to help new recruiter to become successful in their job
For initial interviews of flight attendant they ask their frequent

flyers to tell the experiences of their customer and then tell to candidate to make presentation of 5 minutes on them. In presentation they judge how effectively the applicant use their time to work on presentation
The applicant who help selflessly to their teammate are in

preference list
the
11 - 168
Select and Hire the Right People: (2) How to Identify the Best Candidates
Observe Behavior
Hire
Best
based on observed behavior, not words you hear

predictor of future behavior is past behavior group hiring sessions where candidates given group tasks
Consider
Personality Testing
Willingness
to treat co-workers and customers with courtesy, consideration and tact regarding customer needs
Perceptiveness
Ability
to communicate accurately and pleasantly
11 - 169
Select and Hire the Right People: (3) How to Identify the Best Candidates
Employ Multiple, Structured Interviews

Use structured interviews built around job requirements Use more than one interviewer to reduce similar to me effects
Give Applicants a Realistic Preview of the Job

Chance to have hands-on with the job Assess how the candidates respond to job realities
Allow candidates to self select themselves out of the job
11 - 170
2. Train Service Employees
The Organizational Culture, Purpose and Strategy

Promote core values, get emotional commitment to strategy Get managers to teach why, what and how of job.
Interpersonal and Technical Skills

Interpersonal includes visual communication such as making eye
contact , alternative listening body language , technical skill encompass all required knowledge related to processes , machine etc. both are necessary but neither is sufficient for optimal job performance
Product/Service Knowledge
Staffs product knowledge is a key aspect of service quality Staff need to be able to explain product features and to position
products correctly
11 - 171
3. Factors Favoring Employee Empowerment
Firms strategy is based on competitive differentiation and on

personalized, customized service
Emphasis on long-term relationships vs. one-time transactions Use of complex and non-routine technologies Environment is unpredictable, contains surprises Managers are comfortable letting employees work independently
for benefit of firm and customers
Employees seek to deepen skills, like working with others, and

are good at group processes
11 - 172
Levels of Employee Involvement
Suggestion involvement
Employee recommendation through formalise program. Ex. McDonald
Job involvement
Jobs redesigned to allow employee to use their skill To cope with this Employees needs retrain Supervisors facilitate the employee group in supportive way
High involvement
Information is shared Employees skilled in teamwork, problem solving etc. Participate in decisions Profit sharing and stock ownership
11 - 173
Example of High Involvement
Southwest Airlines is an example of a high involvement company

, promoting common sense and flexibility . The company trust its
employees and give them latitude , discretion and authority they need to do their jobs. South west has eliminated inflexible work rules and rigid job description so its people can assume ownership for getting the job done and getting the planes on time
11 - 174
Motivate and Energize the Frontline

Use the full range of available rewards effectively, including:
Job content Feedback and recognition Goal accomplishment
11 - 175
The Inverted Organizational Pyramid (Fig. 11.5)

Customer Base Top Mgmt Middle Mgmt Frontline Staff Frontline Staff
Middle Mgmt & Top Mgmt Support Frontline Inverted Pyramid with a Customer & Frontline Focus
Traditional Organizational Pyramid

Legend:
= Service encounters, or Moments of Truth.

11 - 176
The Wheel of Successful HR in Service Firms

(Fig. 11.6) Leadership that:
Focuses the entire organization on supporting the frontline Fosters a strong service culture with passion for service and productivity Drives values that inspire, energize and guide service providers
1. Hire the Right People

Be the preferred employer & compete for talent market share Intensify the selection process
3. Motivate & Energize Your People

Utilize the full range of rewards
Service Excellence & Productivity 2. Enable Your People
Empower Frontline Build high performance service delivery teams Extensive Training
11 - 177

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Syllabus ppt from 6-12

The Service Encounter

party can offer to another that is essentially intangible

Insurance, Banking, Finance :Banks, Shares and Stock Brokers

(sewage disposal, maintenance of roads, parks and public

Marketing Research ,Legal, Medical Consultancy , Accounting

Freight), Air Transport (Passenger and Freight), Post and

Distribution, Dealers, Agents

Dry Cleaning , Matrimonial Services, Property Consultancy

and does not result in ownership

only industries whose service components are greater or

The service sector

per annum in recent years

and best incomes

The Service Encounter Triad

Role of Customer in service organisation

participate in service creation and delivery

interact with service operations

Role of Customer in service organisation

involved throughout entire process

Spend Night In Room

Role of Customer in service organisation

limited to drop off of physical item/description of problem and subsequent pick up

Technician examines TV, Diagnose Problem

Return Three Days Later

Pick up TV and pay

Role of Customer in service organisation

involvement is mental, not physical; here customer simply

receives output and acts on it

Collect Weather Data

Meteorology Input Data to Models & Create Forecast from Output

TV weatherperson Prepares Local Forecast

Role of Customer in service organisation

Insurance Coverage Begins on Specified Date

Printed Policy Documents Arrive

Employer & Insurance company Agree on Terms of Coverage

Customer Information Entered in Database

Types Of Service Encounter

Low Contact Services

Levels of Customer Contact with Service Organizations

Emphasizes encounters with service personnel

Subway Internet Banking Mail Based Repairs

Emphasizes encounters with equipment

Managing Service Encounters--1

interact directly with a service

customers interact with employees or equipment

especially satisfying/dissatisfying outcomes for either customers or service employees

Managing Service Encounters--2

Thoughtless or badly behaved customers can cause

problems for service personnel (and other customers)

The Purchase Process for Services

Service Encounter Stage

Perceived Risks in Purchasing and Using Services

Factors that Influence Customer Expectations of Services

Perceived Service Alterations Adequate Service Situational Factors Predicted Service

Source: Adapted from Zeithaml, Parasuraman & Berry

Components of Customer Expectations

that customer believes can and should be delivered

Predicted Service Level: service level that customer believes

firm will actually deliver

to accept variations in service delivery

product before purchase

using the service