growth of service industries

7/29/2019 Growth of Service Industries

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Service Management for III B.Com

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Module - 1

Meaning:

According to Philip kotler

Service:-any act or performance that one party offers to another that is essentially intangible and does not result inthe ownership of anything. Its production may or may not be tied to the physical product.

According to leonard l.berry

Goods can be defined as objects, devices or things, whereas services can be defined as deeds, efforts or

performances.

Characteristics of services:

Intangibility:

Cannot be seen like the physical products causing lack of confidence & uncertainty . To overcome this, consumer tend to tools for evidence (like people, place , equipment)

Eg: a woman who experiences a facial in beauty parlour cannot for see the exact result.

Inseparability:

Physical goods which are sold away from the place of manufacturing after some time gap(separated from creator&seller)

In service , the service provider becomes an integral part of the service itself . Eg: doctor has to perform theoperation.

Variability:

A service is always unique, it only exists once, and is never exactly repeated even by the same service provider.Eg: teacher can not reproduce the same lecture.

Perishability:

Service cannot be stored. Eg: a few seats remain empty on a train, that particular service opportunity is lostforever.

In ability to own services:

In physical goods, buyers generally acquire title to the goods When a service is performed , no ownership is transferred from seller to the buyer. The buyer is merely buying the right to a service process.


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Customer participation:

Eg: counselling & lawyers services. Service production is not a one sided activity Customers are co-producers of service. The production quality depends upon the ability , skill & performance of the employee as well as the ability &

performance of the customers.

Differences between physical goods and services.

Sl. No. Physical goods services

1. Tangible Intangible

2. homogeneous Heterogeneous

3. Production & distribution are

separated from consumption

Production , distribution & consumption are

simultaneous processes.

4. A thing An activity or process

5. Core value produced in factory Core value produced in buyer-seller interactions6. Customers do not participate in the

production process

Customers participate in the production

7. Can be kept in stock Cannot be kept in stock

8. Transfer of ownership No transfer of ownership

Classification of services

1. by market segment

Errand consumer: coaching, taxi, car wash, life insurance. Organizational consumers: management consulting, machinery repairs, legal services.2. by degree of tangibility

rental goods: car rental, hotel room rental owned goods: television repairs, plumbing repairs Non-goods: college education, tutoring.3. by skill of service provider

Professional: medical services, accounting services. Non-professional: lawn care services, shoe shining.4. by goal of service provider

Profit: insurance firms, airlines. Non-profit: Indian postal service, libraries, museums.


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5. by degree of regulation

Highly regulated: hospitals & insurance limited regulated: catering & fast food. Non-regulated: computer time & house painting.6. by degree of labour intentiveness

equipment basedAutomated: vending machine

Operated by relatively unskilled: dry cleaning Operated by unskilled

people basedo Professionals: lawyerso Skilled labour: appliances repairso Unskilled labour: guards.

7. by degree of customer contacts

o High contact: universities, air travel & hotelo Low contacts: lawn care & automated car wash.

Growth of Service Industries

Cause Effect Illustrations

Technologicial Advances Higher complexity of products

requiring skilled specialists

Design services; eg. Engineering

consultancy, maintenance

services; eg, annual maintenance

contacts for computer, autoservicing; Computerized

alignment and ignition setting

services, cellular phones

Globalisation More business

internationalization

Multinational courier companies,

international forwarding and

shipping services

Deregulation policies Privatization of regulated sectors Telecom services, internet

services, birth of private airlines;

eg., Sahara, Jet Airways.

Competition and need for higherproductivity

Specialization / expertknowledge

Market research, businessprocess engineering consultancy,

TQM programme

implementation, software

programming

Cost effectiveness drives Optimum man power use and Security services(Group 4


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sub-contracting less critical

functions

securities) Janitorial services

(Hospital/office cleaning)

Electronic Data Processing

Services (pay roll processing)

Subcontracting during project

Execution(Manpower

deployment By contracting

agencies at the Project sites).

Computer explosions Speed of work performance and

availability of sound motion and

picture at an affordable cost

Multimedia Advertising services

Data processing, Internet and

many others.

Overall increase in affluence Increased spending power and

wish for comforts resulting in

demand for those services which

the consumer himself does not

want to perform anymore

Carpet cleaning services, Laundry

services, lawn care services,

ticketing travel agents.

Increasing percentage of

working women

Work performed by women

earlier when at home now done

by somebody else

Crches Baby sitting

More leisure time Shift towards pleasure/

entertainment

Travel resorts Entertainment

(Disco) Education (adult

Education) Nature agencies/tour

Operations.

Greater life expectancy Desire to live long has resulted in

special care facilities

Nursing homes, Private hospitals

like Apollo Health Clubs

Increased complexity of life Need for services of specialistsbecause of complex issues

required to be handled

Labor law consultants, marriagecounseling, Recruitment services

Scarcity of resources and

concern about our ecology

Need for services which can

supplement and meet the

resource crunch

Leasing finance for buying

cars/household good car Rental

services time Sharing at internet

when You cannot afford interest

Demographic changes Dual career families where

parents have less time to

prepare meals and do house

keeping

Home delivery food services

Domestic help/Maid services

senior Citizen homes.

Urbanization Fast mechanical and self-

centered life, deterioration of

law & order

Security services private

detective services


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Module2

Marketing Mix In Service Industry:

Product:

Marketing mix in service marketing(7 ps of service marketing)

Product Price Place Promotion Physical evidence Process People

Product / service product

Core benefit: what the buyer is really buying.Eg: buying ticket for a movie, the core benefit you are buying is entertainment.

Basic service product: the intangible service through which the core benefit is received. Eg: in an aircraft,other infrastructures are there to implement their service.

Expected service: customers expect to get certain service quality or features when they purchase services. Eg:when one buys an airline ticket, the passenger expects good in-flight food , pleasant service from well-

trained crew. Most of the airlines try to meet these expected service.

Augmented service: measures taken to differentiate the service from competitors & provide service qualitybeyond their expectation. Eg: TVs in a hotel room.

Potential service: the service firm tries to find out better ways of delighting customers. Eg: in university thereare great placements, outline prog. , Can publish own journal & newsletters & provide satellite education.

Conceptualization of service concept

1. Customer benefit concept:

Customers are not only buying the goods or service they are only buying benefits. Eg: customer buy hope not

medicine; warmth not coal; risk cover not insurance; pleasure not tour.

2. Service concept:

core service expected service augmented service potential service.

3. Service offer & service package:

Service is the element that makes up the total service package including tangible & intangible components.

tangible elements: food in restaurant, ticket for movies & cheque or pass book for banks.


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intangible elements: contact with device personnel, ambience of the service environment & mood of thecustomers.

4. Service delivery system:

The delivery system represents the interaction between the service provider and the customers and between the

customers and the service facility.

The delivery system includes training the employees , organizing equipment & layout for the flow of work.

Step 1: customer benefit concept Concerned with what benefits customer seeks.

Step 2: service concept Concerned with what general benefits the service organization will offer.

Step 3: service offer Concerned with more detailed shaping of the service concepttangible and

intangible components and the forms of service.

Step 4: service delivery system Concerned with creation and delivery of the service offer with the help of

people, process and facilities.

Product level

Product level restaurant Bank

1.generic the basic

benefit

Serving space, food, kitchen,

staff.

Banking space, lonable funds, safety

of deposits.

2. expected the expected

benefit

Cleanliness, timely service,

polite & courteous behavior,

menu availability , music

Correct transaction recording, timely

service , designated banking hours,

minimum courtesy.

3.augmented in addition to

the expected

benefit

Sparkling floors , ambience,

smiling employees, music of

choice,.

Congenial waiting room, friendly

employees, may I help you

courtesy, welcome note, attitude,

relationship orientation, quicker

service than the normal , admission

of faults in the event of a mistake.

4. potential beyond the

usual,

pleasant

Welcome flowers ,

managers word of thanks,

readiness to go out of the

way

Occasional greetings at home. The

how are you mr.x culture, surprise

gifts, readiness to go.


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a

MANAGING SERVICE OFFERING

Development of new service

New product development is the most important component of product management growth-oriented firm always

looks beyond its existing product or service new services becomes necessary under the following circumstances:

1. When its current service reaches the maturity/saturation stage.

2. In order to utilize the spare capacity.

3. An opportunity in the form of unmet needs of the consumers.

4. In order to retain customers, the firm may be forced to introduce new services to its current customers.

Types of services

Due to the intangible characteristics of services, Lovelock indentifies 5 types of new services which may range from

minor style to major innovation.

1. Style change: These do not change the fundamental features of the product but alters only the tangibleelements. E.g., uniform of the employees or dcor of the service place. The changes in the service place are

mainly to add impact.

2. Service improvement: This involves changes in the features of the service already being offered in the existingmarket, through modifications and improvements. This enhances efficiency in operation. E.g., computerization of

passbook entries in banks.3. Service line extension: This represents augmentation of the existing service line such as an airline offering new

routes.

4. New service: In this case the service marketer attempts to offer new service to the existing customers.5. Major innovation: These products are totally new to the world; they are triggered often with technological

inventions or research and development.


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The traditional process for developing new product applies to service as well. But as services are intangible variable

and require customer-employee participation, the introduction of new service offering is more difficult and poses

challenge to service marketers.

Price:

What is pricing?

Pricing is the art of translating into quantitative terms the value of the product or unit of a service to customers.

OBJECTIVES OF PRICING

1. Survival

2. Maximize profits

3. Maximize market share

4. Service quality leadership: A firm may position its service offerings in the high price and high quality segment of

the market to build a quality leader image for itself. High price restaurants and personal care centers are examples of

high pricing to portray superior quality.

5. Stimulating patronage: Firms that wish to maximize their appeal to specific types of customers need to recognize

the differential ability to pay among various market segments. E.g., Railways offering discounted fare to senior

citizens.

FACTORS AFFECTING PRICING DECISIONS

Internal factors

1. Organizational factors.

2. Marketing mix elements.

3. Positioning.

4. Service cost.

External factors

1. Competition.

2. Demand.

3. Regulatory factors.

PRICING STRATEGIES:-

1. New Service Pricing Strategy:There are two alternative pricing strategy individuals while launching a new service

Price skimming strategy: this is the strategy in which new services are introduced at high prices. When theservice is positioned on a high quality, it is priced high, as high price supports the image of prestigious service. In

this approach it is assumed that customers are more concerned about obtaining quality service, rather than the

cost of the service. The price skimming strategy seeks to gain the highest possible price from the early adopters.

Mobile phones services, specialty restaurants follow skimming the price strategy.

Penetration pricing: In this strategy, prices are fixed low to stimulate trial and thereby ensure customer loyalty.This also keeps off competitors initially. Though penetration pricing begins with low price, they tend to increase

the price in the growth stage. But the increase In price usually associated with additional services offered .Some


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retail markets and fast food outlets adopt this strategy as more often they hold me to services and depend on

customer loyalty for their growth.

2) Differential Pricing/Market segmentation Pricing

When different market segments shows different price elasticity of demand, the strategy adopted to successfully

clear to these groups is called as discriminatory pricing on the basis of market segmentation.

Group of buyers: where different groups pay different prices.Eg. Children below ten are charged less inamusement parks.

Different points of consumption: where different rates are charged for the same service in different locations. Eg.Higher prices in cities than suburbs

Different time of consumption: Where different prices are charged to even out of peak and slack period ofdemand. Eg. Travel and hotel tariffs are low during off-season and are high on peak season

3) Service mix pricing

Optional additional service: When the service provider gives an option to the consumer to purchase the optionalservices along with the core service. Eg. Holiday resorts may keep their room tariff low to attract their tourist but

will charge more on optional services like swimming pool, restaurants, health club facilities etc.

Captive service: In this strategy the customers has to no choice but to get additional service from the serviceprovider along with the core service. Eg .Software developing firms also offer software maintenance contractswith an agreement to provide free upgrades of software to those customers who enter into maintenance

contracts with them

Competing services: The service provider may offer a new service offering to similar to the existing one but at alow price. In this strategy the service firm competes with its own offerings. Eg .An airline that offers a connecting

flight in a particular route may offer a direct flight in the same route at a lesser price.

4) Pricing Bundling

In this strategy, the service provider prices all his service offering as a package at a single price.

Eg. Health clubs may offer a range of facilities at a single price for the benefits of its customers

Place:

Services, often are inseparable from the provider and cannot be sorted or transported, nor can they be owned, their

ownership or title cannot be passed along the channel line. Due to these characteristics the placing of service should

not be treated in the same lines of tangible products. The service provider must be present to deliver the service or

find a representative to act on his behalf and deliver the services according to their specification like doctor, lawyers,

etc, at the same time certain orders like mail order and ATM do not require the presence of the service provider.

Location of service premises:-

The decision regarding the location is concerned with the selection of site from where the delivery of service takesplace. Location decisions have been based on intuition, with a considerable range of success.

1. Nature of service:- if the skill and experience of the service provider are required then, the degree ofinseparability is greater. In such cases, there is less flexibility and more cost involved in setting the location. But in

case of insurance and telecommunication services where the services delivered are without direct contact with

the customers there is flexibility in relation to setting the location according to the needs of the service provider.


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2. Perishability of the service:-Location must be accessible to the customer and made available to them when they need the service in order to

maximize their market opportunities.

3. Nature of Interaction:-In case interaction between the service firm and consumer is necessary the next factor to be considered is where

the service is delivered- is it in the place of the service provider or in the place of the customer.

4. Nature of Customers demand:-Some customers may rate convenience as a major criterion for a service while the others may want some special

feature of service and will be willing to go to any location to get his needs satisfied.

5. Competitive Position:-Multiple location can serve as a barrier to competition by building a firms competitive position and establishing

market awareness. Acquiring and holding prime locations before the market has developed can keep the

competition from gaining access to desirable locations.

6. Natural Geographical Location:-For Example holiday resorts in hill stations or on a beach are dependent on geographical locations rather than the

convenience of the customer of the service firm. In these cases as the location is predetermined the service

provider must manage the other elements of the marketing mix to attract the customers.

7. Technological Advancements:-With the increase in the level of automation there is a greater reduction in the choice of location decisions. In

some services e.g. banks, it is possible to separate the service provider from the customer through phone banking

or ATMs.

8. Dependency on Other Services:-Some services are required in cluster of associated services and products, therefore, the proximity of other

service offering can still play a major role.

E.g. need of chemists, diagnostic centers ,X-rays etc in the proximity of private clinics or doctors.

9.

Infrastructural facilities:-Some service activities like financial services require rapid communication facilities with the other companies.

This is one of the reasons why many banks are located in large, highly developed cities with excellent

communication.

10.Target Market Decisions:-Competitive advantage can be gained only if the service is more specific to the requirements of the target market

segment. The location must be closer to the target customer taking into account the infrastructural facilities

available to access the location, the number of competitors in the region.

Look of Premises

The factors which influence the look of the premises are:1. Nature and objective of service firm:The design and layout of the service location should take into consideration the nature of service organization. For

e.g. a solicitors office, hospitals must be designed with privacy as a major criterion.

2. Flexibility to accommodate future needs:The design and layout must be flexible to adapt to the future changes and growth of the service firm.


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3. Aesthetic factors:Look of the premises serve as explicit and implicit signals that communicate about the place to its users. Quality of

materials used in construction, art work, presence of certificates and photographs on the wall, floor covering, all

communicate symbolic meaning and create overall aesthetic impression.

4. Social environment:The design of the service facility may be of great importance where it has an impact on the society and its

environment. The premises of a shopping mall or hotel must include adequate space for parking, without hindering

the movement of the local public.

CHANNELS IN SERVICE DELIVERY

The second decision regarding the distribution of the service is to choose the channel of the service delivery. Like in

case of location, the channel choice must also enhance the accessibility of the service to the users. There is a limited

choice of channel design in case of services when compared to tangible goods. Conventionally, most of the service

firms uses direct selling to the consumers- this is more appropriate in the case of professional services. But many

firms are slowly drifting towards the use of intermediaries.

Designing a Distribution System

Direct distributionThe importance of the role of the service provider in the service delivery process and inseparable nature of service

make it desirable for the service provider to choose direct marketing. Personal care service consultancy services,

entertainment are examples of direct selling. Direct sale of service can be accomplished in two ways- the consumer

may go to service provider like in case of a restaurant, hospital, etc. or the service provider may come to the

consumer as in the case of the domestic services, interior design etc.

Indirect distributionThe intermediaries involved in the service channel are generally agents, brokers and franchisees. Though the major

task of these middlemen is to bring the service provider and the customer together to enable service delivery, thetask performed by the service middlemen tend to vary from service to service.

Agent: an agent is one who acts on behalf of the principal and has the authority to create a legal relationship

between the customer and the service principal. The agents receive a commission or a fixed fee for the service done

by him.

Eg: Insurance agent, travel agent, they normally have a longer relationship with the service principal.

Broker: they normally bring the service provider and the customer together for which they are paid a commission.

They have shorter relationship with the buyer and the seller, as their activities are transaction based.

Eg: stock broker, real estate broker, etc.

Franchising:

Thus franchising involves the sale of a successful business formula to an external buyer or franchisee who runs the

operation in a specified location. Franchising concept can be highlighted as follows:

1. It is a contractual relationship


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2. The franchiser has a responsibility of introducing the franchisee to all relevant areas in the operation of thebusiness.

3. The franchiser owns a trade name, format and procedure.4. The franchisee must own his own business

ROLES PLAYED BY THE CUSTOMER IN THE SERVICE DELIVERY

1. Customer as co-producer: as the customers contribute time, effort, and other resources like information to theservice production process, they are considered as partial employees or co-producers of the service firm.

E.g. A consultancy firm can be more productive if the business firm gives adequate information and resources to

the service firm to execute their service.

2. Customers as contributors to service quality, value and satisfaction: effective customer participation canincrease the chances that needs are met and the benefits the customers seek are actually attained. The best

examples are those where there is high customer involvement during the delivery process like in the case of

education, health, care etc. where the student / patient must actively participate or follow instructions to get

their desired benefit.

3. Customers as competitors: when the role of the customer as a co-producer is over emphasized, they may notneed the service provider to perform the service. In such cases, they become competitors of the service firm as

they can produce the service by themselves instead of getting the service from the firm. E.g. Child care, car repair

for domestic services

ROLE OF CUSTOMER IN THE DISTRIBUTION SYSTEM

Levels of Customer Participation

There are three levels of customer participation low, medium and high.


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Low level participation : In this case only the customers physical presence is required and the serviceprovider performs the service. Eg Airline travel, entertainment concert. The service products for low level

participation are standardized and the customer participates by paying for the service and being present

during the service delivery.

Medium level Participation: The customer here needs to give information about his requirements so that theservices are customized accordingly to his requirements. Eg Hair cut, Full service restaurant, and some

consultancy firms.

High level participation: In these cases the customer must definitely participate in the service productionprocess as otherwise the outcome of the service will not be fulfilled. The service can not be created without

the customers active participation. E.g. Personal training, weight loss programme etc.

Customer

Employees of the Service firm Other Customers

Fig: Interaction of customer with various elements during the service delivery

Promotion:

Objectives of consumer promotions for services:

1. Objectives Targeted at customers Increase awareness of new or existing service Encourage trial of a service Encourage non users to;

o Attend a demonstration of serviceo Make trial use of an existing serviceo Apply to join or subscribe to a service in which admission, acceptance; or installation of technical hookups

is a prerequisite to receiving the service

Persuade existing customers to:o Continue purchasing the service and not terminate use of the service or switch to a competing alternativeo Increase their purchase frequency of serviceo Commit to purchasing the service for an external time period(thus taking the consumer out of the

market for competing alternatives)

Change the timings of the customer demand for the services

Service

Delivery


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Communicate the distinctive benefits of the service Reinforce advertising for the service and draw audience attention to it Obtain market research information about how, when, and where the service is purchased and used Promote the service as part of a broader line(or link it to sales of a complementary service marketed by another

organization)

Encourage customers to change the way in which they interact with with the service delivery system, such as

o Performance tasks themselves(self-services)o Use a new technology. Eg. the web

2. Objectives Targeted at intermediaries Persuade intermediaries to deliver a new or relaunched service Persuade existing intermediaries to provide additional push for the service, including point-of-sale

merchandising.

Insulate intermediaries from consumer price negotiations at the point of purchase. Insulate intermediaries from any temporary sales reduction that might result from a price increase3. Objective Targeted at competitionMove offensively or defensively on a temporary basis against one or more competitors.

Promotion mix for services

Promotion mix is the combination of strategies that a company uses to communicate the service benefits to

customers and influence them to buy. The various promotional tools that constitute the promotional mix of an

organization are:

GUIDELINES FOR MANAGING SERVICE COMMUNICATION

1. Promise what is Possible:Two problems are associated with over promising. First, customers leave disappointed and a significant loss of

trust then occurs between the firm and its customers. Moreover, disappointed customers are sure to tell the

others of their experience, which increases the fallout from the experience. The second problem directly affects


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the service firm employees. Working for firms that make false promises places employees in compromising and

often confrontational positions.

2. Tangibilize The Intangible:Services are highly abstract, hence one of the principal guidelines for advertising a service is to make it more

concrete. This explains why insurance companies use tangible symbols to represent their companies. The product

of insurance is already abstract, so it becomes the advertisements objective to explain the service in simple and

concrete terms.

Eg: weve been in business since 1925 or 9 out of 10 customers would recommend us to a friend.

3. Communication Continuity:Because services are intangible, mass communication about services is difficult for the audience to grasp, there

has to be continuity in communication efforts over time.

4. Make the Service Understood:Because of the intangible nature of services, special attention has to be paid to making the benefits of a particular

service clearly understood.

5. Observe the Long Term Effects of Market Communication:A communication campaign which seems very effective may have unexpected, negative effects when viewed in a

longer time perspective. If promises that cannot be fulfilled are given, the short term effect on sales may be good,

but customers become dissatisfied as they perceive reality and do not return and create bad word of mouth. The

effects on the employees are similar. Hence, a long term perspective must always be taken when external market

communication is planned and executed.

6. Feature the Working Relationship between Customer and Provider:The advertising of services in particular must concentrate not only on encouraging customers to buy but also on

encouraging employees to perform. Clearly, advertising that illustrates the inseparability of the service delivery

process should target both the customer and the firms service providers.

7. Reduce Customers Fears About Variation in Performance:The firms advertising should provide some sort of documentation that reassures the customers. Typicalexamples include stating the firms performance record throughnumbers as opposed to qualitative testimonials.

8. Determine and Focus on Relevant Service Quality Dimensions:The reason customers chose among competing services are often closely related to the five dimensions of service

quality, reliability, responsibility, responsiveness, assurance, empathy and the quality of the tangibles associated

with the service.

WORD OF MOUTH COMMUNICATION

One of the most distinctive features of promotion in service businesses is the greater importance of referral and word

of mouth communications. This highlights the importance of the people factor in services promotion. Customers are

often closely involved in the delivery of a service and then talk to other potential customers about their experiences.They are glad to offer advice on such service providers.


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People:

Types of Service Personnel

Since customer contact is vital determinant of the quality of service experience, the classification of personnel from

marketing view point would be the customer contact and non contact employees.

1. Customer Contact Employees- these personnel come in contact with customers in the process of service delivery.

They are also called as frontline staff or boundary spanners. They include front office staff, airhostess,bank clerk,

waiters in hotels etc.

High contact personnel - When the physical presence and i9nteraction of the customer with the employee is for alonger time, like in the case of restaurant, hospitals and educational institutions, it is called high contact.

Low contact personnel - When the period of interaction of the customer and the employee is very small like inthe case of retailing, bank or post office, it is called low contact.

Skilled and professional personnel - Some contract personnel apart from possessing inter personal skills mayneed to be professionally qualified and possess the skill and expertise to deliver the service . eg. Doctors, lawyers,

consultants etc

Nonprofessional personnel - some contact personnel may not require special skill in delivering the service. Theyare low paid and just order takers, eg telephone operators , retail clerks, courier delivery personnel etc. They are

low on mechanical skills and education but high on task based skills.

2. Support Personnel or Non-contact employeeThe employee who contributes to the service delivery but do notcome into contact with the customer is called non-contact employee. Such employees include chefs in hotels,

cockpit crew in airlines, administrative staff. These employees possess high technical skill and must be highly

competent in their work.

The Management support personnelmake sure that the contact personnel get the right resources to do their job.They direct and motivate the frontline personnel.


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The technical support personneloperate at the back stage and are not visible to the customer.Helen Woodruffe describes the different roles of service personnel as follows:

Primary- where the service is actually carried out by the service provider. Eg doctor, lawyer etc Facilitating where the employees facilitate the service transaction and participate in it. Eg Bank counter staff,

waiter at a hotel, front office personnel.

Ancillary- where the employee helps to create the service exchange but is not a part of it.eg travel agent,insurance agent etc or even a supervisory staff of the service organization.

In a hospital for example, although the doctor performs the primary function, the frontline staff arrange the

appointments and the administrative staff provide the adequate support system. Thus, the overall service offering

will be made up of a combination of the service personnel.

Developing customer conscious employees

Bill Marriott of Marriott Hotels once asked job candidates, that the hotel chain wants to satisfy three groups-

customers, employees and shareholders. While all the three groups are important, he asked, in which order the

groups should be satisfied. Most candidates said that the customers must be satisfied first. Bill Marriott, however,

reasons differently. First the employee must be satisfied; if the employees love their jobs and feel a sense of pride in

the hotel, they will serve the customers well. Satisfied customers will return frequently, which in turn yields a level of

profit that will satisfy their shareholders.

Role of the frontline staff

The frontline staff who provide a link between the external customer and the internal operations of the organisation,

serve a critical function in understanding, filtering and interpreting information and resources to and from the

organisation and its external customers. In addition to mental and physical skills, the frontline staff require extra

ordinary levels of emotional labour, ability to handle interpersonal and inter organisational conflict and use their

discretion to trade off between quality and productivity on the job.


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Emotional labour draws on the feelings of the employee to be effective on the job without absorbing the bad mood

of the customer. Friendliness, courtesy, empathy and responsiveness directed towards customers all require large

amount of emotional labour from the front line staff of the service firm.

Frontline staff often face inter-personal and inter-organisational conflicts on the job. In some situations, they feel

conflicts between what they are asked to do and their own personalities and values, for eg, the role conflict may arise

when employees are required to change some aspect of their appearance to conform to job requirements.

According to Zeithaml and Bitner, a complex combination of strategies is needed to ensure that service employees

are willing and able to deliver quality service and theat they should stay motivated to perform in customer oriented

and service minded organisations. These involve

1) hire the right people

2)develop people to deliver service quality

3)Provide needed support system

4)retain best people

Step 1)Hire the right people

:Recruiting and selecting-the right employees have always been a challenge for managers. To get the right and best

people the organisation must compete with the other firms. In order to attract the talented prospects, the service

firm must market itself.

Apart from other personal traits of the applicant, the service employee need two special capabilities:

a) Competency to serve

b) inclination to serve

Service competencies are the skills and knowledge necessary to do the job. It ma relate to basic intelligence, physical

requirement or professional qualifications.

Service inclination indicates the interest of the employee in doing the service related jobs, which is reflected in their

attitude towards serving customers and others in their jobs.

Step 2) Develop People to deliver quality service

a) Training- the service firm must train and work with the new recruits to ensure quality service\. The employees

generally undergo training in both technical and interactive skills.

b) Empowerment-Essentially empowerment means that the management vests decision making or approval

authority in employees. Zeithaml and Bitner define empowerment as giving employees the desire, skill, tools and

authority to serve the customer.


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c) Promote teamwork

As service jobs are frequently frustrating, demanding and challenging, a teamwork environment will not only reduce

the stress and strain of the frontline staff, it also enhances customer satisfaction. Employees who feel supported with

the teamwork will be able to maintain enthusiasm and provide quality service.

Step 3) Provide support system

The types of support which are generally expected to boost quality service are-

: Emotional support- the decisions taken by the employees are backed by their manager.

: Communication support- information that explains complex transactions

: Technological support- the tools and equipment to do the jobs.

Thus is a service organisation everyone has a service role. The management needs to develop a customer driven

culture to excel in all aspects of service delivery.

Step 4) Retain the best people

It is not sufficient for the service firm to hire, train and develop employees to deliver quality service. They must also

strive to retain the best people in the business.

To retain its best people, the service organisation must appreciate and reward its employees.

Process:

Service Process

Introduction

The service process refers to how a service is provided or delivered to a customer. Designing a service delivery system

is a creative process. It begins with a service concept and strategy to provide a service with features to differentiate it

from the competition.

Designing Service Process

The factors to be considered in the service process design and implementation are:

1. The service Itself

It is necessary to understand whether the service itself is process dependent, most equipment based services (lawn

care, laundry) and services with highly intangible attributes (banking, legal, insurance) are process dependent.

2. Customer Participation

For most service systems the customer is present when the service is being performed. Instead of being a passive

bystander, the customer represents productive labour just at the moment it is needed. Further more, customerparticipation can increase the degree of customization. Involving the customer in the service process can support a

competitive strategy of cost leadership with limited customization, if focused on a self serve customer market.


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3. Degree of Customer Contact

Customer contact refers to the physical presence of the customer in the system. Degree of customer contact can be

measured by the percentage of time the customer is in the system relative to the total service time.

4. Degree of Divergence

The tasks are routine and require a workforce with relatively low levels of technical skills. Because of the repetitive

nature of the service, opportunities for the substitution of automation for labour abound, (e.g., use of vending

machines, automatic car wash) reducing the discretion of service workers.

5. Location of Service Delivery

Should the service delivery process be located at the service providers premises or should the process be carried out

at the customers place. For some services like painting, carpet cleaning, lawn care etc., the service has to be delivered

at home. Services that generally require the customer to come to the supplier have a greater opportunity to control

the delivery experience e.g. dry cleaning, legal, medical etc.

6. Complexity of Service

Complexity reflects the number of steps involved in delivering the service. Whether the service is high or low in

complexity and in divergence can be readily determined by looking at its blue print. For e.g. a physicians service is

high in both complexity and divergence. Hotel services are high in complexity but low is divergence.

SERVICE BLUEPRINT

A service blueprint is basically a flowchart of the service process. It is a map in which all the elements or activities,

their sequencing and interaction, can be visualized. In the simplest terms, a service system blueprint is a picture of a

service system.

USES OF SERVICE BLUEPRINTS

Service system blueprints simplify service complexities by displaying the operation of existing systems. When the

current operation is explicit, managers are enabled to make rational choices about how they will operate in the

future. Service system blue prints are task oriented that is they focus on observable actions or events (tasks).

TECHNOLOGY AND SERVICE PRODUCTIVITY

To what extent can the adoption of technology improve productivity? Hard technology means the computers and other equipment e.g. ATMs automatic car washes, airport X-ray

surveillance equipment. The soft technology involves the systems and processes in operation e.g. fast food

outlets, pre-packaged tours.

Service technologies can deliver lowest cost outputs and maximum personalization and customization forcustomers.

Production , efficiency and customer customization are achieved by seeking the smallest possible core unit atwhich production can be replicated and repeated. Precision, speed and accuracy are the hallmarks of the process

driven by technology.


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APPLICATION OF TECHNOLOGY TO SERVICE ACTIVITIES

Hard Technologies

1. The consumer credit card and bank balancing checking machine replace a time consuming manual check foreach purchase.

2. Airport X- ray surveillance equipment replaces a personal body search and a usually embarrassing personalsearch of luggage.

Soft Technologies

1. Fast Food restaurants such as McDonands, Wendys, Pizza Hut, or Kentucky Fried Chicken; rational systemsof division of labour and specialization are rigorously followed to generate high quality, to control costs, to

produce speed and efficiency and to assure cleanliness and low prices.

2. Prepackaged vacation tours which eliminate the need for time consuming and costly personal selling,extensive tailoring of the product to diverse kind of customers and extensive price haggling.

INTRODUCING A NEW TECHNOLOGY

Automation and new technology in particular information technology have great potential for making many

services more cost effective and for increasing their quality.

When a new technology is being introduced into a service management system, many, if not all of the other

components in the system will generally be affected. But if a holistic view is adopted and if the new technology is

skillfully employed to enhance and promote rather than to disturb the kind of social process that typifies effective

service organizations, then the potential will be very great.

PHYSICAL EVIDENCE

The service environment along with the tangible cues is termed as Physical Evidence. Zeithaml and Bitner define

physical evidence as the environment in which the service is delivered and where the firm and the customer interact;

and any tangible commodities that facilitate performance or communication of the service.

From the above definitions it is clear that physical evidence includes all the efforts taken by the service provider to

tangibilise their service. They are:

A. Physical Facilities (Essential and Peripheral Evidence)B. Physical Setting (Appearance of the premises- design and decor)C. Social Setting (Appearance of staff)A. Physical Facilities :The potential customers form impressions about the service organisation on the basis of physical evidence like

building, furniture, equipment, stationery and brochure.

It becomes imperative that the service provider manages the physical facilities in a manner that reinforces the

proposed image of the service organisation.

The elements of the physical evidence are:

1. Essential Evidence2. Peripheral Evidence


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1. Essential Evidence:

These constitute a dominant part of the service facility. These are the technical facilities without which the service delivery is impossible. E.g. hotel buildings, aircraft in

airlines, offica and furniture in a consultancy firm etc.

This evidence cannot be passed on to the consumer, except maybe on a temporary basis as in the case of carrental.

2. Peripheral Evidence:

These are not very visible in relation to dominant physical evidence. But, no matter how small and trivial theyare, they definitely have an impact on the consumer perception about the quality of service.

Peripheral evidences include business cards, stationery, brochures etc. This evidence is normally passed on tothe customer in the course of the transaction.

Though service can be performed without these items, yet they can be used to enhance the corporate image. The peripheral physical evidences are often ignored for their triviality, but in reality they are the real source of

competitive differentiation.

Essential Evidence Peripheral Evidence

Building area

Customer information

Sign boards

Parking area

Medical equipment

Waiting room

Consultation room

Pay phone

Hygiene and cleanliness

Decor

Lighting

Admission card

Medical reports

Billing statement

Brochures

The above are examples of physical evidence of Hospital service from the customers viewpoint

B. Physical Environment : The services cape (Bitner) is the place where the service is performed, delivered and consumed. The elements of services cape that affect customers perception of the service includes both exterior attributes

(parking area, front elevation of building, landscape) and interior attributes (design, layout, ambience etc).

These elements send messages about the service firm. For e.g. the interiors of an office may send signals about the prosperity, modernity and innovation. Both these elements not only communicate something about the service but also facilitate performance of the

service.

The important elements of physical setting are as follows:1. Ambience2. Space


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3. Decor and Artifacts1. Ambience:

The background characteristics of the environment such as temperature, lighting, noise music, scent, and colourare the elements included in the ambience of the physical setting.

All these factors affect the way the people think, feel and respond to a particular service setting. Ambience also affects the customers beliefs and feelings of a place. The aim of the service firm must be to elicit

the desired behaviour.

Natural light, colour, temperature and humidity, noise, smell are some of the factors that affect the comfort ofthe customer and employees.

2. Spatial Layout and Functionality:

The spatial layout refers to the way in which the equipment and furniture are arranged. Closely associated with spatial layout is the concept of personal space. People need space around them to

feel comfortable.

The service provider must recognise that expecting the customers to share their space with others will leadto increase in stress levels or make them feel uncomfortable.

This is likely to have a negative impact on their perception of the services received. The functionality refers to the ability of the equipment and furniture and fittings to facilitate the

accomplishment of the employee and customer goals.

3. Decor and Artifacts:

Signs, symbols and artifacts are the components of decor. They not only provide cues about the service beingprovided but also orient themselves within the service setting.

Signs often represent the first encounter the customer has with the service firm. It influences the firstimpressions which are so important.

In terms of orientation, signs can be used as labels (e.g. indicating the department- reception, billingcounter), for directional purposes (e.g. parking, entrance and exit), and to communicate rules of behaviour

(e.g. no smoking).

The effect on the customers perception of the service can be negatively affected by the lack of signs or byambiguous signs.

Symbols are important cues to judge the expertise of the service provider. Certificates on the walls are avisible cue or symbol of achievement and may provide reassurance to the customer

Similarly, quality materials used in construction, photographs on walls, personal objects displayed in theservice environment can all communicate symbolic meaning and create a good impression.

Artifacts like original oil painting may indicate success. But Inappropriate use of artifacts can create wrongimpressions.

For e.g. it would be inappropriate to display leopard skin in the office of a service firm, which projects animage of concern for wild life.

The style of the decor generally can create an impression of cheap, cheerful, serious and expensive. Servicedifferentiation can also be achieved with decor.

C. Social Setting :


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The aspects of the social setting which influences the customers evaluation of the service includes theappearance and attitude of the service staff.

The major aspect of social setting which influence the consumers evaluation of the attitude of service personnelis their appearance.

The concept of appearance indicates whether the employees appear to be friendly and approachable, empatheticand caring, professional and confident.

Although the employees will be trained on the technical aspect of the service, the most important tangible cuefor the customer which will reflect all these qualities is the- staff uniform.

The examples of service firms that use uniform of the staff as a strong tangible factor are- Hospitals, Airlines,Restaurant chains, Retail stores, Security Services, front office staff of travel agents, hotels etc.

Some of the benefits of staff uniforms are the need for evidence, reducing risk, ensuring consistency,approachability, socialization, class equalizer, promotion.

ROLE OF PHYSICAL EVIDENCE:

Facilitator: It enhances the performance level of the persons (employee, customers) in the environment. Socializer: It helps to convey expected roles, behaviour, and relationships in the interaction process. Differentiator: It can differentiate the service firm from its competitors and reflect its positioning strategy. Impressions: It helps in shaping first impression of the service encounter. Image and identity: It portrays the corporate image and builds corporate identity.

growth of service industries

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