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New Perspectives on Services Marketing

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Page 1: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

New Perspectives on Services Marketing

Page 2: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Overview of Session

Why Study Services?

What are Services?

The Marketing Challenges Posed by Services

The Expanded Marketing Mix Required for Services

Page 3: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Why Study Services?

Page 4: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Why Study Services? (1)

Services dominate economy in most nations

Understanding services offers you personal competitive advantages

Importance of service sector in economy is growing rapidly:

Services account for more than 60 percent of GDP worldwide Almost all economies have a substantial service sector Most new employment is provided by services Strongest growth area for marketing

Page 5: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Service Sector Contribution to Indian Economy

In the Year 2010 the contribution of different sectors was:

Services: 58.4%

Industry: 24.1%

Agriculture: 17.5%

Page 6: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

NAICS: A New Way to Classify and Analyze the Service Economy

NAICS—North American Industry Classification System—now used to compile and record economic data by national statistical agencies of the U.S., Canada, Mexico

New classification system replaces old SIC (Standard Industrial Classification) codes in U.S.

Captures huge array of new service industries, each with its own NAICS code

NAPCS—North American Product Classification System—assigns codes to thousands of service products Particularly useful for looking at rented goods services

U.S. and Canadian data easily accessible on the Web; information includes number of establishments and employment

Page 7: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Some Newer Service Industries Profiled by NAICS Codes But Not SIC

Casino HotelsContinuing Care Retirement

CommunitiesDiagnostic Imaging CentersDiet and Weight Reducing

CentersEnvironmental ConsultingGolf Courses, Country ClubsHazardous Waste Collection

HMO Medical Centers

Industrial Design Services

Investment Banking and Securities Dealing

Management Consulting Services

Satellite Telecommunications

Telemarketing Bureaus

Temporary Help Services

Page 8: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Why Study Services? (2)

Most new jobs are generated by services

Fastest growth expected in knowledge-based industries

Significant training and educational qualifications required, but employees will be more highly compensated

Will service jobs lost to lower-cost countries? Yes, some service jobs can be exported

Page 9: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Changing Structure of Employment as Economic Development Evolves

Industry

Services

Agriculture

Time, per Capita Income

Share of Employment

Source: IMF, 1997

Page 10: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Why Study Services?

Powerful forces are transforming service markets

Government policies, social changes, business trends, advances in IT, internationalization

These forces are reshaping

Demand Supply The competitive landscape Customers’ choices, power, and decision making

Page 11: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Transformation of the Service Economy

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Innovation in service products & delivery systems, stimulated by better technology

Customers have more choices and exercise more power

Success hinges on: Understanding customers and competitors Viable business models Creation of value for customers and firm

New markets and product categories Increase in demand for services More intense competition

Page 12: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Factors Stimulating Transformation of the Service Economy (1)

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Changes in regulations

Privatization

New rules to protect customers, employees, and the environment

New agreement on trade in services

Page 13: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Factors Stimulating Transformation of the Service Economy (2)

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Rising consumer expectations

More affluence

More people short of time

Increased desire for buying experiences versus things

Rising consumer ownership of high tech equipment

Easier access to information

Immigration

Growing but aging population

Page 14: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Factors Stimulating Transformation of the Service Economy (3)

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Push to increase shareholder value

Emphasis on productivity and cost savings

Manufacturers add value through service and sell services

More strategic alliances and outsourcing

Focus on quality and customer satisfaction

Growth of franchising

Marketing emphasis by nonprofits

Page 15: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Factors Stimulating Transformation of the Service Economy (4)

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

Growth of the Internet

Greater bandwidth

Compact mobile equipment

Wireless networking

Faster, more powerful software

Digitization of text, graphics, audio, video

Page 16: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Factors Stimulating Transformation of the Service Economy (5)

Government

Policies

Business

Trends

Social

Changes

Advances in

IT

Globalization

More companies operating on transnational basis

Increased international travel

International mergers and alliances

“Offshoring” of customer service

Foreign competitors invade domestic markets

Page 17: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

What Are Services?

Page 18: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

What Are Services? (1)

The historical view Goes back over 200 years to Adam Smith and Jean-Baptiste

Say Different from goods because they are perishable (Smith 1776) Consumption cannot be separated from production, services

are intangible (Say 1803)

A fresh perspective: Services involve a form of rental, offering benefits without transfer of ownership Include rental of goods Marketing tasks for services differ from those involved in

selling goods and transferring ownership

Page 19: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

What Are Services? (2)

Five broad categories within non-ownership framework:1. Rented goods services2. Defined space and place rentals3. Labor and expertise rentals4. Access to shared physical environments5. Systems and networks: access and usage

Implications of renting versus owning (Service Perspectives 1.1) Markets exist for renting durable goods rather than selling them Renting portions of larger physical entity (e.g., office space,

apartment) can form basis for service Customers more closely engaged with service suppliers Time plays central role in most services Customer choice criteria may differ between rentals and outright

purchases Services offer opportunities for resource sharing

Page 20: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Defining Services

Services

Are economic activities offered by one party to another Most commonly employ time-based performances to bring

about desired results in: ― recipients themselves― objects or other assets for which purchasers have

responsibility

In exchange for their money, time, and effort, service customers expect to obtain value from

Access to goods, labor, facilities, environments, professional skills, networks, and systems

But they do not normally take ownership of any of the physical elements involved

Page 21: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Service Products versus Customer Service and After-Sales Service

A firm’s market offerings are divided into core product elements and supplementary service elements

Is everyone in service? Need to distinguish between: Marketing of services Marketing goods through added-value service

Good service increases the value of a core physical good

After-sales service is as important as pre-sales service for many physical goods

Manufacturing firms are reformulating and enhancing existing added-value services to market them as stand-alone core products

Page 22: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Challenges Posed by Services

Page 23: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Services Pose Distinctive Marketing Challenges

Marketing management tasks in the service sector differ from those in the manufacturing sector

The eight common differences are:1. Most service products cannot be inventoried

2. Intangible elements usually dominate value creation

3. Services are often difficult to visualize and understand

4. Customers may be involved in co-production

5. People may be part of the service experience

6. Operational inputs and outputs tend to vary more widely

7. The time factor often assumes great importance

8. Distribution may take place through nonphysical channels

What are marketing implications?

Page 24: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Differences, Implications, and Marketing-Related Tasks

Difference

Most service products

cannot be inventoried

Intangible elementsusually dominatevalue creation

Services are oftendifficult to visualizeand understand

Customers may beinvolved in co-production

Implications

Customers may beturned away

Harder to evaluateservice and distinguishfrom competitors

Greater risk anduncertainty perceived

Interaction betweencustomer and provider; but poor task execution could affect satisfaction

Marketing-Related Tasks

Use pricing, promotion, and

reservations to smooth demand; work with ops to manage capacity

Emphasize physical clues, employ metaphors and vivid images in advertising

Educate customers onmaking good choices; offer guarantees

Develop user-friendlyequipment, facilities, and systems; train customers, provide good support

Page 25: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Implications

Behavior of servicepersonnel and customerscan affect satisfaction

Hard to maintain quality, consistency, reliability

Difficult to shield customers from failures

Time is money; customers want serviceat convenient times

Electronic channels or voice telecommunications

Difference

People may be part of

service experience

Operational inputs and

outputs tend to vary more widely

Time factor often assumes great importance

Distribution may take place through nonphysical channels

Marketing-Related Tasks

Recruit, train employees to

reinforce service conceptShape customer behavior

Redesign for simplicity andfailure proofing

Institute good service recovery procedures

Find ways to compete on speed of delivery; offer extended hours

Create user-friendly,secure websites and freeaccess by telephone

Differences, Implications, and Marketing-Related Tasks

Page 26: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Value Added by Physical, Intangible Elements Helps Distinguish Goods and Services

Physical Elements

High

Low Intangible Elements High

SaltDetergents

CD PlayerWine

Golf ClubsNew Car

Tailored clothingFast-Food Restaurant

Plumbing RepairHealth Club

Airline FlightLandscape Maintenance

ConsultingLife Insurance

Internet Banking

Source; Adapted from Lynn Shostack

Page 27: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Progressive and REI: Two Types of Website Reflecting Core Product

…REI’s camping gear must be delivered through physical channels to customers after they have used the website to make choices, order, and pay

Websites can deliver info-based services like Progressive’s car insurance but …

Page 28: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Expanded Marketing Mix for Services

Page 29: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Services Require An Expanded Marketing Mix

Marketing can be viewed as:

A strategic and competitive thrust pursued by top management

A set of functional activities performed by line managers A customer-driven orientation for the entire organization

Marketing is the only function to bring operating revenues into a business; all other functions are cost centers

The “8Ps” of services marketing are needed to create viable strategies for meeting customer needs profitably in a competitive marketplace

Page 30: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing

Product

Place and Time

Price and Other User Outlays

Promotion and Education

Process

Physical Environment

People

Productivity and QualityFig 1.9 Working in Unison: The 8Ps of Services Marketing

Page 31: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (1) Product Elements

Embrace all aspects of service performance that create value

Core product responds to customer’s primary need

Array of supplementary service elements

Help customer use core product effectively Add value through useful enhancements

Planning marketing mix begins with creating a service concept that:

Will offer value to target customers Satisfy their needs better than competing alternatives

Page 32: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (2) Place and Time

Delivery decisions: Where, When, How

Geographic locations served

Service schedules

Physical channels

Electronic channels

Customer control and convenience

Channel partners/intermediaries

Page 33: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (3) Price and Other User Outlays

Marketers must recognize that customer outlays involve more than price paid to seller

Traditional pricing tasks: Selling price, discounts, premiums Margins for intermediaries (if any) Credit terms

Identify and minimize other costs incurred by users: Additional monetary costs associated with service usage

(e.g., travel to service location, parking, phone, babysitting, etc.)

Time expenditures, especially waiting Unwanted mental and physical effort Negative sensory experiences

Page 34: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (4) Promotion and Education

Informing, educating, persuading, reminding customers

Marketing communication tools Media elements (print, broadcast, outdoor, retail, the Internet, etc.) Personal selling, customer service Sales promotion Publicity/PR

Imagery and recognition Branding Corporate design

Content Information, advice Persuasive messages Customer education/training

Page 35: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (5) Process

How firm does things may be as important as what it does

Customers often actively involved in processes, especially when acting as co-producers of service

Process involves choices of method and sequence in service creation and delivery Design of activity flows Number and sequence of actions for customers Nature of customer involvement Role of contact personnel Role of technology, degree of automation

Badly designed processes waste time, create poor experiences, and disappoint customers

Page 36: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (6) Physical Environment

Design servicescape and provide tangible evidence of service performances

Create and maintain physical appearances

Buildings/landscaping Interior design/furnishings Vehicles/equipment Staff grooming/clothing Sounds and smells Other tangibles

Manage physical cues carefully— can have profound impact on customer impressions

Page 37: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (7) People

Interactions between customers and contact personnel strongly influence customer perceptions of service quality

The right customer-contact employees performing tasks well Job design Recruiting Training Motivation

The right customers for firm’s mission Contribute positively to experience of

other customers Possess—or can be trained to have—

needed skills (co-production) Can shape customer roles and manage

customer behavior

Page 38: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The 8Ps of Services Marketing: (8) Productivity and Quality

Productivity and quality must work hand in hand

Improving productivity key to reducing costs

Improving and maintaining quality essential for building customer satisfaction and loyalty

Ideally, strategies should be sought to improve both productivity and quality simultaneously—technology often the key

Technology-based innovations have potential to create high payoffs

But, must be user friendly and deliver valued customer benefits

Page 39: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Marketing Must Be Integrated with

Other Management Functions

Page 40: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Three management functions play central and interrelated roles in meeting needs of service customers

Marketing Must Be Integrated with Other Management Functions

Customers

Operations Management

Marketing Management

Human Resources Management

Page 41: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

A Framework for Developing Effective Service Marketing

Strategies

Page 42: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

A Framework For Developing Effective Service Marketing Strategies: Overview

Understanding Customer Needs, Decision Making, and Behavior in Service Encounters

Building the Service Model

Managing the Customer Interface

Implementing Profitable Service Strategies

Page 43: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Framework for Developing EffectiveService Marketing Strategies: Part I

I: Understanding Customer Needs, Decision Making, and Behavior in Service Encounters

Differences among Services Affect Customer Behavior

Three-Stage Model of Service Consumption

Prepurchase Stage: Search, evaluation of alternatives, decision

Service Encounter Stage: Role in high-contact vs.

low-contact delivery

Post-Encounter Stage: Evaluation against

expectations, future intentions

Page 44: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Framework for Developing Effective Service Marketing Strategies: Part II

Building The Service Model

Part II: Chapters 3-7

Develop service concept: core & supplementary elements

Select physical & electronic channels for service delivery

Set prices with reference to costs, competition & value

Value Exchange

The Value Proposition

The Business Model

Educate customers & promote the value proposition

Position the value proposition against competing alternatives

Page 45: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Design and manage service processes

Balance demand against productivity capacity

Plan the service environment

Manage service employees for competitive advantage

Framework for Developing Effective Service Marketing Strategies: Part III

III: Managing the Customer Interface

Page 46: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Framework for Developing Effective Service Marketing Strategies: Part IV

IV: Implementing Profitable Service Strategies

Create customer relationship and build loyalty

Plan for service recovery and create customer feedback

systems

Continuously improve service quality and productivity

Organize for change management and service leadership

Page 47: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Improving Service Quality and Productivity

Page 48: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Overview of Session

Integrating service quality and productivity strategies

What is service quality?

The Gaps Model—a conceptual tool to identify and correct service quality problems

Measuring and improving service quality

Page 49: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Integrating Service Quality and Productivity Strategies

Page 50: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Integrating Service Quality and Productivity Strategies

Quality and productivity are twin paths to creating value for both customers and companies

Quality focuses on the benefits created for customers; productivity addresses financial costs incurred by firm

Importance of productivity:

Keeps costs down to improve profits and/or reduce prices Enables firms to spend more on improving customer service

and supplementary services Secures firm’s future through increased spending on R&D May impact service experience—marketers must work to

minimize negative effects, promote positive effects

Page 51: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

What Is Service Quality?

Page 52: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Different Perspectives of Service Quality

Transcendent:

Product-based:

User-based:

Manufacturing-based:

Value-based:

Quality = Excellence. Recognized only through experience

Quality is precise and measurable

Quality lies in the eyes of the beholder

Quality is in conformance to the firm’s developed specifications

Quality is a trade-off between price and value

Page 53: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Components of Quality: Service-based (SERVQUAL)

Tangibles: Appearance of physical elements

Reliability: Dependable and accurate performance

Responsiveness: Promptness; helpfulness

Assurance: Competence, courtesy, credibility, security

Empathy: Easy access, good communication, understanding of customer

Page 54: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Capturing the Customer’s Perspective of Service Quality: SERVQUAL (1)

Survey research instrument based on premise that customers evaluate firm’s service quality by comparing Their perceptions of service actually received Their prior expectations of companies in a particular industry

Poor quality Perceived performance ratings < expectations

Good quality Perceived performance ratings > expectations

Page 55: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Capturing the Customer’s Perspective of Service Quality: SERVQUAL (2)

Developed primarily in context of face-to-face encounters

Scale contains 22 items reflecting five dimensions of service quality

Subsequent research has highlighted some limitations of SERVQUAL

See Research Insights 14.1: Measuring E-Service Quality

Page 56: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

How Customers Might Evaluate Online Businesses: Seven Dimensions of E-S-QUAL

Accessibility : Is site easily found?

Navigation: How easy is it to move around the site?

Design and presentation: Image projected from site?

Content and purpose: Substance and richness of site

Currency and accuracy Responsiveness:Firm’s propensity to respond to

e-mails Interactivity, customization, and personalization Reputation and security

Source:Shohreh A. Kaynama (2000), “ A Conceptual Model to Measure Service Quality of Online Companies: E-qual, in Developments in Marketing Science,” Harlan E. Spotts and H. Lee Meadows, eds., Proceedings of the Academy of Marketing Science, Vol. 22, pp. 46–51. For more information pertaining to online service quality see A. Parasuraman, Vlerie A. Zeithaml, and Arvind Malhotra (2005), “E-S-QUAL: A Multiple-Item Scale for Assessing Electronic Service Quality.” Journal of Service Research, Vol. 7. issue 3. pp. 213–234.

Page 57: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Other Considerations in Service Quality Measurement

In uncompetitive markets or in situations where customers do not have a free choice, researchers should use needs or wants as comparison standards

Time constraints

Services high in credence characteristics may cause consumers to use process factors and tangible cues as proxies to evaluate quality—halo effect

Process factors: Customers’ feelings

Page 58: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

The Gaps Model—A Conceptual Tool to Identify and Correct

Service Quality Problems

Page 59: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Seven Service Quality Gaps(Fig 14.3)

Customer experience relative to expectations

1. Knowledge Gap

2. Standards Gap

3. Delivery Gap

5. Perceptions Gap

7. Service Gap

Customer needs and expectations

6. Interpretation Gap

4. Internal Communications Gap

MANAGEMENT

CUSTOMER

4.

Customer perceptions of service execution

Management definition of these needs

Translation into design/delivery specs

Execution of design/delivery specs

Advertising and sales promises

Customer interpretation of communications

Page 60: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Prescriptions for Closing theSeven Service Quality Gaps (1) (Table 14.3)

1. Knowledge gap: Learn what customers expect

Understand customer expectations Improve communication between frontline staff and

management Turn information and insights into action

2. Standards gap: Specify SQ standards that reflect expectations

Set, communicate, and reinforce customer-oriented service standards for all work units

Measure performance and provide regular feedback Reward managers and employees

Page 61: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Prescriptions for Closing theSeven Service Quality Gaps (2) (Table 14.3)

3. Delivery gap: Ensure service performance meets standards

Clarify employee roles Train employees in priority setting and time management Eliminate role conflict among employees Develop good reward system

4. Internal communications gap: Ensure that communications promises are realistic

Seek comments from frontline employees and operations personnel about proposed advertising campaigns

Get sales staff to involve operations staff in meetings with customers

Ensure that communications sets realistic customer expectations

Page 62: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Prescriptions for Closing theSeven Service Quality Gaps (3) (Table 14.3)

5. Perceptions gap: Educate customers to see reality of service quality delivered

Keep customers informed during service delivery and debrief after delivery

Provide physical evidence

6. Interpretation gap: Pretest communications to make sure message is clear and unambiguous

Present communication materials to a sample of customers in advance of publication

7. Service gap: Close gaps 1 to 6 to meet customer expectations consistently

Page 63: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Measuring and Improving Service Quality

Page 64: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Soft and Hard Measures of Service Quality

Soft measures—not easily observed, must be collected by talking to customers, employees, or others

Provide direction, guidance, and feedback to employees on ways to achieve customer satisfaction

Can be quantified by measuring customer perceptions and beliefs

―For example: SERVQUAL, surveys, and customer advisory panels

Hard measures—can be counted, timed, or measured through audits

Typically operational processes or outcomes Standards often set with reference to percentage of occasions on

which a particular measure is achieved Control charts are useful for displaying performance over time

against specific quality standards

Page 65: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Soft Measures of Service Quality

Key customer-centric SQ measures include: Total market surveys, annual surveys, transactional surveys Service feedback cards Mystery shopping Analysis of unsolicited feedback—complaints and

compliments, focus group discussions, and service reviews

Ongoing surveys of account holders to determine satisfaction in terms of broader relationship issues

Customer advisory panels offer feedback/advice on performance

Employee surveys and panels to determine: Perceptions of the quality of service delivered to customers on

specific dimensions Barriers to better service Suggestions for improvement

Page 66: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Hard Measures of Service Quality

Control charts to monitor a single variable

Offer a simple method of displaying performance over time against specific quality standards

Are only good if data on which they are based is accurate Enable easy identification of trends

Service quality indexes

Embrace key activities that have an impact on customers

Page 67: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Composition of FedEx’s Service Quality Index—SQI (Table 14.4)

Late delivery—right day Late Delivery—wrong dayTracing request unanswered Complaints reopened Missing proofs of delivery Invoice adjustments Missed pickups Lost packages Damaged packages Aircraft delays (minutes) Overcharged (packages missing label) Abandoned calls

151511

101010551

Failure Type

Total Failure Points (SQI) =

Weighting Factor

XXX,XXX

Daily Points

XNumber of Incidents

=

Page 68: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Control Chart for Departure Delays(Fig 14.4)

J F M A M J J A S O N D

60%

70%

80%

90%

100%

Month

% Flights Departing Within 15 Minutes of Schedule

Page 69: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Tools to Analyze and Address Service Quality Problems

Fishbone diagram

Cause-and-effect diagram to identify potential causes of problems

Pareto Chart

Separating the trivial from the important. Often, a majority of problems is caused by a minority of causes (i.e. the 80/20 rule)

Blueprinting

Visualization of service delivery, identifying points where failures are most likely to occur

Page 70: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Tools to Analyze and Address Service Quality Problems (Appendix)

Total Quality Management (TQM)

ISO 9000 Comprises requirements, definitions, guidelines, and related

standards to provide an independent assessment and certification of a firm’s quality management system

Malcolm Baldrige Model Applied to Services

To promote best practices in quality management, and recognizing, and publicizing quality achievements among U.S. firms

Six Sigma

Statistically, only 3.4 defects per million opportunities (1/294,000)

Has evolved from defect-reduction approach to an overall business-improvement approach

Page 71: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Cause-and-Effect Chart for Flight Departure Delays (Fig 14.5)

Aircraft late to gate

Late food service

Late fuel

Late cabin cleaners

Poor announcement of departures

Weight and balance sheet late

Delayed Departures

Delayed check-in procedure

Acceptance of late passengers

Facilities, Equipment

Customers

Gate agents cannot process

fast enough

Late/unavailable airline crew

Arrive lateOversized bags

Weather Air traffic

Frontstage Personnel

Procedures

Materials, Supplies

BackstagePersonnel

Information

Customers

Other Causes

MechanicalFailures

Late pushback

Late baggage

Page 72: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Late passengers

Waiting for pushbackWaiting for fuelling

Late weight and balance sheetLate cabin cleaning/supplies

Other

NewYork

All stations, excludingChicago-Midway Hub

Washington Natl.

23.1%23.1%

23.1%15.3%

15.4%

53.3%

15%

11.3%

8.7%

11.7%

33.3%

33.3%19%

9.5%

4.9 %

Case: Analysis of Causes of Flight Departure Delays

Page 73: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Blueprinting

Depicts sequence of front-stage interactions experienced by customers plus supporting backstage activities

Used to identify potential fall points—where failures are most likely to appear

Shows how failures at one point may have a ripple effect later

Managers can identify points which need urgent attention

Important first step in preventing service quality problems

Page 74: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

Six Sigma Methodology to Improve and Redesign Service Processes

Process Improvement

Process Design/Redesign

Define Identify the problem Define requirements Set goals

Identify specific or broad problems

Define goal/change vision Clarify scope and customer

requirements

Measure

Validate problem/process Refine problem/goal Measure key

steps/inputs

Measure performance to requirements

Gather process efficiency data

Analyze Develop causal hypothesis

Identify root causes Validate hypothesis

Identify best practices Assess process design Refine requirements

Improve

Develop ideas to measure root causes

Test solutions Measure results

Design new process Implement new process,

structures, and systems

Control Establish measures to maintain performance

Correct problems as needed

Establish measures and reviews to maintain performance

Correct problems as needed

Page 75: New Perspectives on Services Marketing. Overview of Session  Why Study Services?  What are Services?  The Marketing Challenges Posed by Services

TQM in a Service Context: Twelve Critical Dimensions for Implementation Top management commitment and visionary leadership

Human resource management

Technical system, including service process design and process management

Information and analysis system

Benchmarking

Continuous improvement

Customer focus

Employee satisfaction

Union intervention and employee relations

Social responsibility

Servicescapes

Service culture