service marketing
TRANSCRIPT
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Unit-1
Service Marketing
Services marketing is a sub field of marketing which covers the marketing of both goods and services. Goods
marketing includes the marketing of fast moving consumer goods (FMCG) and durables. Services marketing typically
refers to the marketing of both business to consumer (B2C) and business to business (B2B) services. Common
examples of service marketing are found in telecommunications, air travel, health care, financial services, all types of
hospitality services, car rental services, and professional services.
Services are economic activities, rather than tangible products, offered by one party to another. Rendering a service
to recipients, objects, or other assets depends on a time-sensitive performance to bring about the desired result. In
exchange for money, time, and effort, service customers expect value from access to goods, labor, professional skills,
facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved
Service marketing involves 3 types of marketing:
1. EXTERNAL MARKETING
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2. INTERNAL MARKETING
3. INTERACTIVE MARKETING
External Marketing : "Setting the Promise"
· Marketing to END-USERS.
· Involves pricing strategy, promotional activities, and all communication with
customers.
· Performed to capture the attention of the market, and arouse interest in the service.
Internal Marketing : "Enabling the Promise"
· Marketing to EMPLOYEES.
· Involves training, motivational, and teamwork programs, and all communication with employees.
· Performed to enable employees to perform the service effectively, and keep up the
promise made to the customer.
Interactive Marketing : (Moment of Truth, Service Encounter)
· This refers to the decisive moment of interaction between the front-office employees and customers, i.e.
delivery of service.
· This step is of utmost importance, because if the employee falters at this level, all prior efforts made
towards establishing a relationship with the customer, would be wasted.
Ex. Health Care
hospital, medical practice, dentistry, eye care
Professional Services
accounting, legal, architectural
Financial Services
banking, investment advising, insurance
Hospitality
restaurant, hotel/motel, bed & breakfast,
ski resort, rafting
Travel
airlines, travel agencies, theme park
Others:
hair styling, pest control, plumbing, lawn maintenance, counseling services, health club
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The Growing Importance of Services
The services sector makes a direct and significant contribution to gross domestic product (GDP) and job creation. It
makes an important contribution to employment growth, productivity, and innovation in most economies, and has
become the most dynamic sector in the PRC as well.
Classification of Services
Classifications can be done on following basis:
Classification by end user
• Individual consumer – services consumed by individual.
• Business to business end-user
• Industrial end user
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Classification by Industry
a. Entertainment industry
b. Education
c. Telecommunications
d. Finance & Insurance
e. Transportation
f. f. Government services
g. g. Health
h. h. Hospitality Industry
Classification by Target Effect
Based on Degree Of Customer Involvement:
1. People Processing: Services aimed at physical care e.g. Healthcare, clinics, restaurant, hospitals, hair stylists,
fitness centers
2. Mental Stimulus Processing: Services aimed at mind of customer e.g. Education, information,
entertainment, consulting
3. Possession Processing: Services aimed at physical possession & tangible assets e.g. repair & maintenance,
laundry, repair services, house cleaning services
4. Information Processing : Services for intangible assets e.g. Banking, legal consultation, brokerage, financial
services.
Skill level of service provider (Professional/ Nonprofessional)
Labor intensiveness (People-based/Equipment-based)
Degree of customer contact (High / Low)
High Degree (Every day) – TV channels, mobile etc.
Moderate Degree (Regular) – Teacher, Barber, etc.
Low Degree ( Occasional ) – ATMs, etc.
Goal of the service provider (Profit /Nonprofit)
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Expertise
• Highly professional services –, doctors, etc.
• Non- professional services – cobblers, tailors, etc.
Factor Influencing the Growth of the Service Sector.
Demographic Changes.
Social Changes
Economic Changes.
Technological Changes.
Political & Legal Changes.
Policy Changes
Marketing Implications
• No ownership
– Customers obtain temporary rentals, hiring of personnel, or access to facilities and systems
– Pricing often based on time
– Customer choice criteria may differ for renting vs. purchase--may include convenience, quality of
personnel
– Can’t own people (no slavery!) but can hire expertise and labor
• Services cannot be inventoried after production
– Service performances are ephemeral—transitory, perishable
Exception: some information-based output can be recorded
in electronic/printed form and re-used many times
– Balancing demand and supply may be vital marketing strategy
– Key to profits: target right segments at right times at right price
– Need to determine whether benefits are perishable or durable
– Customers may be involved in production process
– Customer involvement includes self-service and cooperation with service personnel
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– Think of customers in these settings as “partial employees”
– Customer behavior and competence can help or hinder productivity, so marketers need to
educate/train customers
– Changing the delivery process may affect role played by customers
– Design service facilities, equipment, and systems with customers in mind: user-friendly, convenient
locations/schedules
– Intangible elements dominate value creation
– Understand value added by labor and expertise of personnel
– Effective HR management is critical to achieve service quality
– Make highly intangible services more “concrete” by creating and communicating physical images or
metaphors and tangible clues
– Other people are often part of the service product
– Achieve competitive edge through perceived quality of employees
– Ensure job specs and standards for frontline service personnel reflect both marketing and
operational criteria
– Recognize that appearance and behavior of other customers can influence service experience
positively or negatively
– Avoid inappropriate mix of customer segments at same time
– Manage customer behavior (the customer is not always right!)
– Greater variability in operational inputs and outputs
– Must work hard to control quality and achieve consistency
– Seek to improve productivity through standardization, and by training both employees and
customers
– Need to have effective service recovery policies in place because it is more difficult to shield
customers from service failures
– Often difficult for customers to evaluate services
– Educate customers to help them make good choices, avoid risk
– Tell customers what to expect, what to look for
– Create trusted brand with reputation for considerate, ethical behavior
– Encourage positive word-of-mouth from satisfied customers
– Time factor assumes great importance
– Offer convenience of extended service hours up to 24/7
– Understand customers’ time constraints and priorities
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– Minimize waiting time
– Look for ways to compete on speed
– Distribution channels take different forms
– Tangible activities must be delivered through physical channels
– Use electronic channels to deliver intangible, information-based elements instantly and expand
geographic reach
Implications
Several marketing challenges
• Services cannot be inventoried .
• Cannot be pateneted.
• demand fluctuations.
• New concepts can be easily
• Difficult to display or communicate.
• What to include and not in ads is diificult copied.
• Quality is difficult to be judged.
• Price diificult to fix etc.
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Unit-2
Consumer decision making for services Consumer decision making consists of …
Need arousal Information search
Evaluation of alternatives
Purchase and consumption
Post –purchase evaluation
A. Information search = use of personal sources and perceived risk. (P1-P4)
1. Consumers seek and rely more on information from personal sources than from non-personal
sources when evaluating a service before purchase. 2. Consumers engage in greater post-purchase evaluation and information seeking with services than with goods. 3.Consumers perceive greater risk when buying services than when buying goods.
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B. Evaluation of alternatives (P 5 – P10)
5. The consumer’s evoked set of alternatives is smaller with services than with goods.
Retail establishment versus service establishment that only offers a single brand.
May not be more than 2 businesses providing the service in a geographic area. Difficulty in obtaining information prior to purchase. So consumers may select the first acceptable alternative.
6. For many non-professional services the consumer’s evoked set frequently includes self-provision
of the service.
Consumers consider themselves as a source of supply for the service.
7. Positive (negative) moods and emotions enhance (decrease) the likelihood of performance of behaviours with positive expected outcomes.
Any service characterised by human interaction is strongly dependent on the moods and emotions of customers and providers. Positive moods make customers more obliging and willing to participate to help the service outcome be achieved and vice-versa.
8. Mood and emotion bias the customer’s evaluation of service encounters in “mood-congruent” directions.
Mood and emotions enhance experiences, making them either more positive or negative than the way they might seem. The direction of the bias of evaluation is consistent with the polarity of the mood or emotion. e.g. Sales man losing a big order gets incensed at delays of a flight.
9. The mood of the customer influences the way impressions of a service are encoded, retained and retrieved by the customer.
Feelings associated with the service become an inseparable part of memory. (falling in love on a holiday = positive association with the location)
Marketers need to cultivate positive moods and emotions.
10. The greater the human interaction in the service encounter, the more likely the consumer’s evaluation of the service will be influenced by moods and emotion.
C. Service purchase and consumption (P11 – P 15)
11. The delivery of a service can be seen as a drama, where the service personnel are the “actors”, service customers are the “audience”, physical evidence of the service is the “setting” and the process of service assembly is the “performance”.
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Dramaturgy of service. Creating a desirable impression before an audience by managing actors, their behaviour and the physical setting. E.g. Disney world – “cast member”, “on-stage”, “show”. As direct personal contact with the customer increases, the importance of the actors increases.
Physical evidence – scenery, props and other inanimate environments used to create desired impressions. Visual – colours and light. Aural/oral – volume and pitch of sounds
Scent – smells, freshness, temperature of the air
Design and cleanliness. Selection of personnel = auditioning. Training = rehearsal Defining the role = scripting
Creation of the environment = setting the stage
Delivery in presence of customer = on stage
Performance in back office = back stage
12. Service encounters can be viewed as role performances.
Role = combination of social cues that guide and direct behaviour in a given setting. Success of the service depends on how well roles are acted out – both customers and employees. A script is very important = “ a coherent sequence of events expected by the individual, involving her either as a participant or observer”. Experiencing a script that is not similar to what is expected can cause confusion and dissatisfaction.
13. Negative departures from the customers expected script will detract from service performance.
14. Departures from the customers expected script, including provision of more of an attribute than
expected, may detract from or add to the service experience.
Mutual understanding is required to appreciate customer’s expectations and the role of the service provider and organisation.
15. Customer compatibility is a factor that influences customer satisfaction, particularly in high contact services.
The mere presence of other customers can impact the perception of the service. Customer compatibility is important where…
a. Customers are in close physical proximity
b. Verbal interaction is likely
c. Customers are engaged in numerous and varied activities
d. Service environment attracts a heterogeneous customer mix
e. Customers must occasionally wait for a service
f. Customers are expected to share time, space or service utensils.
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It is important that the service marketer have compatible/homogeneous groups of customers and to try to build and solidify relationships between them to increase the cost of switching to another provider.
D. Post-purchase evaluation (P16 – P19)
16. Consumers attribute some of their dissatisfaction with services to their own inability to specify or
perform their part of the service.
They feel responsible because they participate in the definition and production of a service.
The quality of many services depends on the information the customer gives – “process consumption”. 17. Consumers may complain less frequently about services than about goods due to their belief that
they themselves are partly responsible for their satisfaction.
18. Consumers adopt innovations in services more slowly than they adopt innovations in goods.
Rate of diffusion of an innovation depends on – relative advantage, compatibility, communicability, divisibility and complexity. Services are less communicable, less divisible, more complex and less compatible than products.
19. Brand switching is less frequent with services than with products.
Brand loyalty is based on – switching costs, availability of substitutes, perceived risk and past satisfactions. Monetary fees may accompany brand switching, it is difficult to obtain information on alternative services and satisfaction is based on experience, as a service cannot be tested before purchase.
Brand loyalty is based on habit and reduces the time and involvement required to make a decision. Customers may feel that the best way to obtain satisfaction is to become a regular customer.
Consumer Expectations of Services
Customers evaluate service quality by comparing what they expect against what they perceive
Situational and personal factors also considered
Expectations of good service vary from one business to another, and among differently positioned service
providers in the same industry
Expectations change over time
Media coverage, education, the Internet has made this possible
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Components of Customer Expectations
Desired Service Level:
Wished-for level of service quality that customer believes can and should be delivered
Adequate Service Level:
Minimum acceptable level of service
Predicted Service Level:
Service level that customer believes firm will actually deliver
Zone of Tolerance:
Range within which customers are willing to accept variations in service delivery
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Factors that Influence Desired and Predicted Service
• Explicit Service Promises
• Implicit Service Promises
• Word of Mouth
• Past Experience
• Explicit
• personal and non-personal statements from the organization
• Advertising, personal selling, contracts, other communications
• usually increases desired level and narrows zone of tolerance
• Implicit
• service related cues
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• Tangibles
• Price
• Distribution
Defining and measuring service quality and customer satisfaction
Service quality is a comparison of expectations with performance.[1]
A business with high service quality will meet customer needs whilst remaining economically competitive.[2]
Improved service
quality may increase economic competitiveness.
The Ten Determinants of Service Quality
1. Access - convenient opening times; alternative methods to accessing services: e.g. telephone and internet/email.
2. Communication - “plain English” signs & pamphlets/guides; suggestions and complaints procedures.
3. Competence - all staff knowing, and able to do, their job.
4. Courtesy - staff behaving politely and pleasantly.
5. Credibility - the reputation of the service in the wider community; staff generating a feeling of trust with users.
6. Reliability - standards defined in local service charters; accuracy of information provided; doing jobs right first time;
keeping promises and deadlines.
7. Responsiveness - resolving problems quickly; allowing users to book an “appointment” for help (e.g. in literature
searching, reference management etc.)
8. Security - ensuring service meets health and safety requirements, for staff and users.
9. Tangibles - up to date equipment and resources.
10. Understanding the customer - tailoring services where practical to meet individual needs.
This aim may be achieved by understanding and improving operational processes; identifying problems quickly and
systematically; establishing valid and reliable service performance measures and measuring customer satisfaction and other
performance outcomes
For example, in the case of TAJ Hotels, Resorts and Palaces, wherein TAJ remaining the old world, luxury brand in the five-star
category, the umbrella branding was diluting the image of the TAJ brand because although the different hotels such as Vivanta
by Taj- the four star category, Gateway in the three star category and Ginger the two star economy brand, were positioned and
categorised differently, customers still expected the high quality of Taj from all their properties.
Measuring service quality[edit]
Measuring service quality may involve both subjective and objective processes. In both cases, it is often some aspect of customer
satisfaction which is being assessed. However, customer satisfaction is an indirect measure of service quality.
How do I measure it?
Generally organisations use a mixture of qualitative and quantitative methods:
• Qualitative Methods: interviews, focus groups, observation (including mystery shopping!).
• Quantitative Methods: surveys (questionnaires, customer comments cards), statistics (routine data
collection).
• There are also specific tools that can be used to measure service quality in organisations. For example:
• ISO Standards
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• SERVQUAL
• LibQUAL+ (specially for use in library and information services)
• RATER scale.
Customer Satisfaction
Satisfaction is defined as . . .
“a person’s feelings of pleasure or disappointment resulting from comparing a product’s perceived performance (or
outcome) in relation to his or her expectations.”
i.e., Performance - Expectation
Satisfaction results when expectations are equaled or surpassed.
To maximize satisfaction . . .
Don’t exaggerate the product / service’s capabilities in advertising or other communications
Dissatisfaction will result
FTC may become involved
Don’t set expectations too low
Market size will be limited
Servqual and gap model
SERVQUAL or RATER is a service quality framework. SERVQUAL was developed in the mid-1980s by Zeithaml, Parasuraman &
Berry. SERVQUAL means to measure the scale of Quality in the service sectors.
The service quality model or the ‘GAP model’ developed by a group of authors- Parasuraman, Zeithaml and Berry at Texas and
North Carolina in 1985, highlights the main requirements for delivering high service quality. It identifies five ‘gaps’ that cause
unsuccessful delivery.
By the early 1990s, the authors had refined the model to the useful acronym RATER:
Reliability
Assurance
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Tangibles
Empathy, and
Responsiveness
Customers generally have a tendency to compare the service they 'experience' with the service they 'expect' . If the experience
does not match the expectation, there arises a gap.
GAP 1:
Gap between consumer expectation and management perception : This gap arises when the management does not correctly
perceive what the customers want. For instance – hospital administrators may think patients want better food, but patients may
be more concerned with the responsiveness of the nurse. Key factors leading to this gap are:
Insufficient marketing research
Poorly interpreted information about the audience's expectations
Research not focused on demand quality
Too many layers between the front line personnel and the top level management
GAP 2 :
Gap between management perception and service quality specification : Here the management might correctly perceive what
the customer wants, but may not set a performance standard. An example here would be that hospital administrators may tell
the nurse to respond to a request ‘fast’, but may not specify ‘how fast’.Gap 2 may occur due the following reasons:
Insufficient planning procedures
Lack of management commitment
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Unclear or ambiguous service design
Unsystematic new service development process
GAP 3:
Gap between service quality specification and service delivery : This gap may arise owing to the service personnel. The reasons
being poor training, incapability or unwillingness to meet the set service standard. The possible major reasons for this gap are:
Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role conflict, improper evaluation
and compensation system
Ineffective internal marketing
Failure to match demand and supply
Lack of proper customer education and training
GAP 4 :
Gap between service delivery and external communication : Consumer expectations are highly influenced by statements made
by company representatives and advertisements. The gap arises when these assumed expectations are not fulfilled at the time
of delivery of the service. For example – The hospital printed on the brochure may have clean and furnished rooms, but in reality
it may be poorly maintained – in this case the patient’s expectations are not met. The discrepancy between actual service and
the promised one may occur due to the following reasons:
Over-promising in external communication campaign
Failure to manage customer expectations
Failure to perform according to specifications
GAP 5:
Gap between expected service and experienced service : This gap arises when the consumer misinterprets the service quality.
The physician may keep visiting the patient to show and ensure care, but the patient may interpret this as an indication that
something is really wrong.
House of Quality
House of Quality is a diagram, resembling a house,[1] used for defining the relationship between customer desires and the
firm/product capabilities.[2]
It is a part of the Quality Function Deployment (QFD) and it utilizes a planning matrix to relate what
the customer wants to how a firm (that produces the products) is going to meet those wants. It looks like a House with a
"correlation matrix" as its roof, customer wants versus product features as the main part, competitor evaluation as the porch
etc. It is based on "the belief that products should be designed to reflect customers' desires and tastes".[3]
It also is reported to
increase cross functional integration within organizations using it, especially between marketing, engineering and
manufacturing.
The basic structure is a table with "Whats" as the labels on the left and "Hows" across the top. The roof is a diagonal matrix of
"Hows vs. Hows" and the body of the house is a matrix of "Whats vs. Hows". Both of these matrices are filled with indicators of
whether the interaction of the specific item is a strong positive, a strong negative, or somewhere in between. Additional annexes
on the right side and bottom hold the "Whys" (market research, etc.) and the "How Muches". Rankings based on the Whys and
the correlations can be used to calculate priorities for the Hows.
House of Quality analysis can also be cascaded, with "Hows" from one level becoming the "Whats" of a lower level; as this
progresses the decisions get closer to the engineering/manufacturing details.
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SERVICE RECOVERY
• Service recovery refers to the actions taken by an organizations in response to a service failure
• Service failures bring about negative feelings and responses from customers
• Left unfixed, failures can result in customers leaving, spreading bad word-of-mouth and even challenging the
organization through consumer rights organizations
• Failure occur for all kinds of reasons –
• The service may be unavailable when promised
• It may be delivered late or too slowly
• The outcome may be incorrect or poorly executed
• Employee may be rude or uncaring
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Service Recovery Effects
• Has a strong impact on customers satisfaction, loyalty, word-of-mouth communication
• Customers who experience service failures but who are ultimately satisfied based on recovery efforts by the
firm, tend to be more loyal than those whose problems are not resolved
• Recovery Paradox – rare instances when an initially dissatisfied customer experiences an excellent service
recovery. Eg: hotel front desk person upgrades his guest to a better room at the original price on non
availability of room
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Why Do (and Don’t) People Complain?
• People complain because:
– They believe that positive consequences may occur
– They believe they will and should be provided compensation for the service failure
– They feel a social obligation to complain – to help others avoid similar situations
• People don’t complain because:
– Waste of their time and effort
– They don’t believe anything positive will occur
– Engage in “emotion focused coping” to deal with their negative experiences like denial, social
support, self blame
Types of complainers
• Passives
– This group of customers are least likely to take any action.
– They are unlikely to say anything to the provider, less likely than others to spread negative word of
mouth, and unlikely to complain to a third party.
• Voicers
– These customers actively complain to the service provider, but they are less likely to spread negative
word of mouth or go to third parties with their complaints.
• Irates
– These consumers are more likely to engage in negative word-of-mouth communication with friends
and relatives and to switch providers.
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• Activists
– These consumers are characterized by above average propensity to complain on all dimensions
When They Complain, What Do Customers Expect?
• Outcome Fairness
– Customers expect outcomes or compensation, that match the level of their dissatisfaction
– Compensation in form of money, an apology, future free services, reduced charges repairs or/ and
replacements
– Equity in exchange – they want to feel that the company has “paid” for its mistakes
• Interaction Fairness
– Customers expect to be treated politely, with car and honesty
– This form of fairness can dominate the others
Service Guarantees
• guarantee = an assurance of the fulfillment of a condition
• for products, guarantee often done in the form of a warranty
• service guarantees work for companies who are already customer-focused
• effective guarantees can be BIG deals - they put the company at risk in the eyes of the customer
• customers should be involved in the design of service guarantees
• the guarantee should be so stunning that it comes as a surprise -- a WOW!! factor
• “it’s the icing on the cake, not the cake”
Unit-3
Service positioning
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Fully focused. A fully focused organization provides a limited range of services (perhaps just a single core product) to a narrow and specific
market segment. For example, private jet charter services may focus on high-net-worth individuals or corporations (Figure 3.6). Developing
recognized expertise in a well-defined niche may provide protection against would-be competitors and allows a firm to charge premium prices.
An example of a fully focused firm is Shouldice Hospital, featured in Case 12. The hospital performs only a single surgery (hernia) on otherwise
healthy patients (mostly men in their 40s to 60s). Because of their focus, their surgery and service quality are superb.
There are key risks associated with pursuing the fully focused strategy. The market may be too small to get the volume of business needed for financial success, and the firm is vulnerable to decreasing demand because of new alternative products or new technologies.
• Market focused. In a market-focused strategy, a company offers a wide range of services to a narrowly defined target segment.Service Insights 3.3 features the example of Rentokil Initial, a provider of business-to-business (B2B) services. Rentokil has profited from the growing trend in outsourcing of services related to facility maintenance, which has enabled it to develop a large range of services for its clients.
Following a market-focused strategy often looks attractive because the firm can sell multiple services to a single buyer. However, before choosing a market-focused strategy, managers need to be sure that their firms are capable of doing an excellent job of delivering each of the different services selected. They also need to understand customers’ purchasing practices and preferences. In a B2B context, when trying to cross-sell additional services to the same client, many firms have been disappointed to find that decisions on purchasing the new service are made by an entirely different group within the client company.
• Service focused. Service-focused firms offer a narrow range of services to a fairly broad market (Figure 3.7). Lasik eye surgery clinics and Starbucks coffee shops follow this strategy, serving a broad customer base with a largely standardized product. However, as new segments are added, firms need to develop expertise in serving each segment. In addition, this strategy is likely to require a broader sales effort and greater investment in marketing communication, particularly in B2B markets.
Unfocused. Finally, many service providers fall into the unfocused category because they try to serve broad markets and provide a wide range
of services. The danger with this strategy is that unfocused firms are often “jacks of all trades and masters of none,” and are unable to excel in
providing any single service. In general, that’s not a good idea, although public utilities and government agencies may feel the need to do so. A
few department stores followed this strategy and, as a result, have been struggling against more focused competitors (e.g., hypermarkets and
specialty stores)
Developing an Effective Positioning Strategy
Must establish position for firm or product in minds of target customers
Position should provide one simple, consistent message
Position must set firm/product apart from competitors
A company cannot be all things to all people - must focus its efforts
Positioning links market analysis and competitive analysis to internal corporate analysis
Market Analysis
Focus on overall level and trend of demand and geographic locations of demand
Look into size and potential of different market segments
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Understand customer needs and preferences and how they perceive the competition
Internal Corporate Analysis
Identify organization’s resources, limitations, goals, and values
Select limited number of target segments to serve
Competitor Analysis
Understand competitors’ strengths and weaknesses
Anticipate responses to potential positioning strategies
Service design Service design is the activity of planning and organizing people, infrastructure, communication and material components of a
service in order to improve its quality and the interaction between service provider and customers. The purpose of service
design methodologies is to design according to the needs of customers or participants, so that the service is user-friendly,
competitive and relevant to the customers. The backbone of this process is to understand the behavior of the customers, their
needs and motivations. Service design can be both tangible and intangible. It can involve artifacts and other things including
communication, environment and behaviours.
Ideal Service design methodology[edit]
• Identification of the actors involved in the definition of the service, using appropriate analytical tools
• Definition of possible service scenarios, verifying use cases, sequences of actions and actors’ role, in order to define the
requirements for the service and its logical and organizational structure
Representation of the service, using techniques that illustrate all the components of the service, including physical
elements, interactions, logical links and temporal sequences
The Structure of Service Production
Interactive Part
customer contact with
contact personnel
systems
physical components
--------------------LINE OF VISIBILITY----------------------------
Support
Management Support
Support Functions
Technological/Knowledge Support
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Service Mapping/Blueprinting.
The service blueprint is a technique used for service innovation
The service blueprint defines:
Customer Actions: The steps that customers take as part of the service delivery process.
Frontstage (Visible Contact Employee) Actions: This element is separated from the customer actions by a ‘line of
interaction’. These actions are face-to-face actions between employees and customers.
Backstage (Invisible Contact Employee) Actions: The ‘line of visibility’ separates the onstage from the Backstage actions.
Everything that appears above the line of visibility can be seen by the customers, while everything under the line of visibility
is invisible for the customers. A very good example of an action in this element, is a telephone call; this is an action between
an employee and a customer, but they don’t see each other.
Support Processes: The ‘internal line of interaction’ separates the contact employees from the support processes. These are
all the activities carried out by individuals and units within the company who are not contact employees. These activities
need to happen in order for the service to be delivered.
Physical Evidence: For each customer action, and every moment of truth, the physical evidence that customers come in
contact with is described at the very top of the service blueprint. These are all the tangibles that customers are exposed to
that can influence their quality perceptions.
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Building a blueprint[edit]
The process of structuring a blueprint involves six steps:[1]
1. The identification of the service process, that is supposed to be blueprinted
2. The identification of the customer segment or the customers that are supposed to experience the service
3. Picturing the service from the customer’s perspective
4. Picturing the actions of the contact employee (onstage and backstage), and/or technology actions
5. Linking the contact activities to the needed support functions
6. Adding the evidence of service for every customer action step
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Benefits of Blueprinting
Clarifies elements of the service.
Shows the sequence of delivery.
Separates onstage from backstage
customer contact from support component.
Identifies likely fail points.
Identifies capacity bottlenecks.
Allows management of the whole rather than the pieces.
Pricing of services
What Makes Service Pricing Strategy Different (and Difficult)?
• No ownership of services--hard for firms to calculate financial costs of creating an intangible performance
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• Variability of inputs and outputs--how can firms define a “unit of service” and establish basis for pricing?
• Many services hard for customers to evaluate--what are they getting in return for their money?
• Importance of time factor--same service may have more value to customers when delivered faster
• Price is key signal of quality
Why Pricing of Services is Critical?
• Customer knowledge of service price – a reference price is a price point in memory for a good or a service
• High degree of variability often exists across providers of services – not every physician defines a checkup the
same way
• Providers are unwilling to estimate prices in advance – legal service providers; fundamental reason being
they do not know themselves what the service will involve until the process of service delivery unfolds
• Individual customer needs vary
• Comparison of prices becomes difficult unlike goods where the product range is displayed for comparison
• Price invisibility – particularly in financial services, most customers know about only the rate of return and
not the costs they pay in form of fund and insurance fees
Role of Non-monetary Costs
• Demand is not just a function of monetary price but is influenced by other costs as well. Like:
– Time cost since most services require direct participation of the consumer and thus their real time
– Search costs - the effort invested to identify and select among services you desire since prices for
services are rarely displayed in shelves
– Convenience costs – like customers have to travel to the service, if service hours do not coincide
with customer’s available time
– Psychological costs – fear of not understanding (education), fear of rejection (bank loan), fear of
results (surgery)
Price as an Indicator of Service Quality
• Customers prefer cues like company reputation, level of advertising to access the quality
• In other situations when quality is hard to detect or price varies a great deal within a class of services,
consumers may believe that price is the best indicator of quality
• In case of high risk services like medical treatment, customer looks price as a surrogate for quality
• Thus in addition to cover the cost and match competitors price, prices must be set with care to convey the
appropriate service quality
– Too low prices- inaccurate inferences
– Too high prices- difficult to match in service delivery
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• The tripod explains the foundation underlying the pricing strategy
• The cost that a firm needs to recover usually impose a minimum price, or floor, for a specific service offering
• Customer’s perceived value of the offering sets a ceiling on the price
• The price charged by competitors determines where, within the floor-to-ceiling range, the price can be set
Cost -Based Pricing
• Price = Direct costs + Overhead costs + Profit Margin
• Challenges:
– Costs are difficult to trace as cost based pricing involves defining the units in which a service is
purchased
– Thus services are sold in terms of input units (like hours) rather units of measured output
– Labor is more difficult to price than material
– Actual service costs may misrepresent the value of the service to the customer
Competition-Based Pricing
Monitor competitors’ pricing strategy (especially if service lacks differentiation like dry cleaning and
its an oligopoly like airline)
• Challenges:
– Small firms may charge too and not make margins high enough to remain in business
– Heterogeneity of services across and within providers makes it difficult to compare
Value/ Demand-Based Pricing
Relate price to value perceived by customer i.e. prices are based on what customers will pay for the
services provided
Challenges:
Monetary price must be adjusted to reflected the value of non-monetary costs
Information on service costs may be less available to customers, making monetary price not
as salient indicator to quality
Value has 4 meanings:
Value is low price – equate value with low price like, a carpet on sale
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Value is everything I want in a service – emphasize the benefits rather price like, best education for
a MBA
Value is the quality I get for the price I pay – trade off between the money they give up and the
quality they receive like, for a business travel, lowest price for a quality brand
Value is all that I get for all that I give – consider all benefits and sacrifice components (money,
time, effort)
SERVICES DISTRIBUTION MANAGEMENT
Direct Delivery of Service
– Channels for services are often direct- from creator of the service directly to the customer
– Services cannot be owned, there are no titles or rights to most services that can passed along a
delivery channel
– Inventories cannot exist, making warehousing a dispensable function
Delivery of Service through Intermediaries
– Intermediaries may co-produce service, fulfilling service principals’ promises to customers.
eg: Franchise Services
– They make service locally available
– Provide time and place convenience for the customers
– Provide retailing function for customers because they represent multiple service principals. eg: travel
agents
– Primary types of intermediaries – Franchisees, Agents & Brokers, Electronic Channel
COMMON ISSUES INVOLVING INTERMEDIARIES
• conflict over objectives and performance
• conflict over costs and rewards
• control of service quality
• empowerment versus control
• channel ambiguity – lack of role clarity
DIRECT/ COMPANY OWNED CHANNELS
Benefits
• Company has control over the outlets thus owner can maintain consistency in service provision
• Control over hiring, firing, and motivating employees
• Allow expansion or contraction of sites without being bounded by contractual agreements
• Owns the customer relationship
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FRANCHISING
Benefits for Franchisor
• Leveraged business format for greater expansion and revenues- increased revenues, market share, brand
name recognition and economies of scale for Franchisors
• Can maintain consistency in outlets across cultures and countries
• Company can obtain connection to the (knowledge about) local markets
• Franchisees must contribute their own capital for equipment and personnel, thereby bearing part of the
financial risk of doing business.
• They receive benefit of national or regional brand marketing expertise as well as established reputation
• Minimized risk of starting a business
AGENTS & BROKERS
Benefits
• Reduced selling and distribution costs – eg: if an airline need to contact every potential traveler to promote
its offerings, cost would be exorbitant
• Intermediary’s possess special skills and knowledge in their areas – eg: Passport Agent
• Wide representation – they act as company representative in different areas
• Knowledge of local markets – knowing the culture and taboos of a country is critical for successful selling
• Customer choice – agents provide retailing service (assorted services of multiple service providers) for
customers
ELECTRONIC CHANNELS
Benefits
• Consistent delivery for standardized services
• Low cost
• Customer convenience
• Wide distribution
• Customer choice and ability to customize
• Quick customer feedback
STRATEGIES FOR EFFECTIVE SERVICE DELIVERY THROUGH INTERMEDIARIES
Control Strategies
• create standards both for revenues and service performance, measures results, and compensates or rewards
on basis of performance level
Empowerment Strategies
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• Service principal allows greater flexibility to intermediaries
• Help intermediary develop customer oriented service processes
• Provide needed support systems
• Develop intermediaries to deliver service quality
• Change to a cooperative management structure
Service Communication Mix
Nd packaging
Special Challenges Associated with the Service Communication Strategy
• Mistargeted Communications
• Managing Expectations & Perceptions
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– Technical service quality
• Advertising to Employees
• Selling/Operations Conflicts
Specific Guidelines for Developing Service Communications
• Develop a word-of-mouth communications network
• Promise what is possible
• Tangibilize the intangible
• Feature working relationships between customer and provider
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Physical evidence and service scape
Servicescape is a concept that was developed by Booms and Bitner to emphasize the impact of the physical
environment in which a service process takes place.
Roles of the Servicescape
Package
conveys expectations
influences perceptions
Facilitator
facilitates the flow of the service delivery process
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provides information (how am I to act?)
facilitates the ordering process (how does this work?)
facilitates service delivery
Socializer
facilitates interaction between:
customers and employees
customers and fellow customers
Differentiator
sets provider apart from competition in the mind of the consumer
Guidelines for Physical Evidence Strategy
Recognize the strategic impact of physical evidence.
Blueprint the physical evidence of service.
Clarify strategic roles of the servicescape.
Assess and identify physical evidence opportunities.
Be prepared to update and modernize the evidence.
Managing Service personnel
Service Personnel: Source of Customer Loyalty and Competitive Advantage
• Customer’s perspective: Encounter with service staff is most important aspect of a service
• Firm’s perspective: Frontline is an important source of differentiation and competitive advantage. It is:
– A core part of the product
– the service firm
– The brand
• Frontline is an important driver of customer loyalty
– Anticipating customer needs
– Customizing service delivery
– Building personalized relationships
Frontline in Low-Contact Services
• Many routine transactions are now conducted without involving frontline staff, e.g.,
– ATMs (Automated Teller Machines)
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– IVR (Interactive Voice Response) systems
– Websites for reservations/ordering, payment, etc.
• Though technology and self-service interface is becoming a key engine for service delivery, frontline
employees remain crucially important
• “Moments of truth” drive customer’s perception of the service firm
Role Stress in Frontline Employees
Three main causes of role stress:
• Person versus Role: Conflicts between what jobs require and employee’s own personality and beliefs
– Organizations must instill “professionalism” in frontline staff
• Organization versus Client: Dilemma whether to follow company rules or to satisfy customer demands
– This conflict is especially acute in organizations that are not customer oriented
• Client versus Client: Conflicts between customers that demand service staff intervention
How to Manage People for Service Advantage?
– Hire the right people
– Enable these people
– Motivate and energize your people
Select and Hire the Right People:
(1) Be the Preferred Employer
• Create a large pool: “Compete for Talent Market Share”
• What determines a firm’s applicant pool?
– Positive image in the community as place to work
– Quality of its services
– The firm’s perceived status
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• There is no perfect employee
– Different jobs are best filled by people with different skills, styles, or personalities
– Hire candidates that fit firm’s core values and culture
– Focus on recruiting naturally warm personalities for customer-contact jobs
(2) How to Identify Best Candidates
• Observe behavior
– Hire based on observed behavior, not words you hear
– Best predictor of future behavior is past behavior
– Consider group hiring sessions where candidates are given group tasks
• Conduct personality tests
– Willingness to treat co-workers and customers with courtesy, consideration, and tact
– Perceptiveness regarding customer needs
– Ability to communicate accurately and pleasantly
(3) Identifying Best Candidates
• Employ multiple, structured interviews
– Use structured interviews built around job requirements
• Give applicants a realistic preview of the job
– Chance for candidates to “try on the job”
– Assess how candidates respond to job realities
– Allow candidates to self select themselves out of the job
– Manage new employees’ expectation of job
Train Service Employees
Service employees need to learn:
• Organizational culture, purpose, and strategy
– Promote core values, get emotional commitment to strategy
– Get managers to teach “why,” “what,” and “how” of job
• Interpersonal and technical skills
– Both are necessary but neither alone is sufficient for optimal job performance
• Product/service knowledge
– Staff’s product knowledge is a key aspect of service quality
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– Staff must explain product features and position products correctly
Levels of Employee Involvement
• Suggestion involvement
– Employee make recommendation through formalized programs
• Job involvement
– Jobs redesigned
– Employees retrained, supervisors reoriented to facilitate performance
• High involvement
– Information is shared
– Employees skilled in teamwork, problem solving etc.
– Participate in management decisions
– Profit sharing and stock ownership
Service Leadership and Culture
• Service culture can be defined as:
– Shared perceptions of what is important
– Shared values and beliefs of why they are important
• Charismatic/transformational leadership:
– Change frontline’s values, goals to be consistent with firm
– Motivate staff to perform their best
• Internal Marketing:
– Play a vital role in maintaining and nurturing a corporate culture
– Help ensure service delivery, working relationships, employee trust, respect, and loyalty
ROLE OF CUSTOMERS IN SERVICE DELIVERY
Service delivery for customers can be seen in a factory. The place the service is produced and is consumed interacting with the employees and other customers. E.g in a classroom or in a training situation, students (customers) are sitting in the factory interacting with the instructor and other students as they consume the educational services.
Since these customers are present during the service production, customers can contribute to or detract from the successful delivery of the service and to their own satisfaction.
Participation in service delivery
The level of participation – low, medium, high – varies across different services. In some cases, all that is required is the customers physical presence (low level of participation), with the employees of the firm doing all of the service production work, as in case of a Ghazal/ musical concert. The listeners must be present to receive the entertainment service. In other cases, consumer inputs are required to aid the service organization in creating the service delivery (moderate level of participation).
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Inputs can include information, effort or physical possessions. All three of these are required in case of accounting services who prepares a client’s income tax return effectively. Information in the form of tax history, marital status, and number of dependents. Effort in putting the information together in a useful fashion. Physical Possessions such as receipts and past tax returns. In case of long term consulting engagements involvement of the customers high as they co create the service.
Customer’s roles
Customers as a productive process
Service customers are referred to as “partial employees” of the organization. They are human resources who contribute to the organization’s productive capacity. In other words, if customers contribute effort, time or other resources to the service production process, they should be considered as part of the organization.
Customer inputs can affect the organization’s productivity through both quality and quantity of output. E.g. research suggest that in an IT consulting context:
Clients who clearly articulate the solution they desire.
Provide needed information in a timely manner.
Communicate openly.
Gain the commitment of key internal stakeholders.
And raise the issues during the process before it is too late will get better service.
Customers as quality contributors to service delivery and satisfaction
Another role customers play in service delivery is that of the contributor to their own satisfaction and the ultimate quality of the services they receive. Customers may care little that they have increased the productivity of the organization through their participation. But they likely care a great deal about whether their needs are fulfilled. Effective customer participation can increase the likelihood of service delivery that their needs are met and that benefits the customer seeks are attained. Services such as health care, education, personal fitness, and weight loss, where the service outcome is highly dependent on the customers participation. In such services unless the customers perform their roles effectively, the desired service outcomes cannot be achieved.
Research has shown that in education, active participation by students – as opposed to passive listening – increases learning the desired service output significantly.
Customers as competitors
A final role played by service customers is that of a potential competitor. If self-service customers can be viewed as resources of the firm, or as “partial employees,” self-service customers in some cases. They can partially perform the service or the entire service for themselves and may not need the provider at all.
Customers thus in that sense are competitors of the companies that supply the service. Whether to produce a service for themselves (internal exchange). E.g. child care, home maintenance i.e. have someone else provide home services for them (external exchange) is a common dilemma for consumers.
Similar internal versus external exchange decisions are made by organizations. Firms frequently choose to outsource service activities such as payroll, data processing, research, accounting, maintenance, and facilities management. They find that it is advantageous to focus on their core businesses and leave these essential support services to others with greater expertise. Alternatively, a firm may decide to stop purchasing services externally and bring the service production process in-house.
EMPLOYEES ROLES IN SERVICE DELIVERY
• The focus is on service employees because • are the service, • they are the organization in the customer’s eyes, • they are the marketers.
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• In many cases the contact employee is the service there is nothing else. The offering is the employee.
• Thus investment in the employee to improve the service parallels making a direct investment in the improvement of a manufactured product.
• Even if the contact employee doesn’t perform the service entirely, they may still personify the firm in the customers eyes.
• Because contact employees represent the firm and can directly influence customer satisfaction they form the role of marketers. They personally embody the product and are walking billboards from a promotional standpoint. Some may also perform more traditional selling roles.
• There is concrete evidence that satisfied employees make for satisfied customers and satisfied customers in turn can in turn reinforce employees sense of satisfaction in their jobs.
• Some have even gone so far as to suggest that unless service employees are happy in their jobs, customer satisfaction will be difficult to achieve.
• Employee satisfaction, customer satisfaction and customer loyalty reinforce each other over time.
STRATEGIES
• A complex combination of strategies is needed to ensure that service employees are willing and able to deliver quality services and that they stay motivated to perform in customer oriented, service minded ways.
• To build such a work force an organization must--hire the right people, develop people to deliver service quality, provide the needed support systems and retain the best people.
• HIRE THE RIGHT PEOPLE: this implies that considerable attention should be focussed on hiring and recruiting service personnel.
• Compete for the best people-- competing for talent market share. Firms should act like marketers in their pursuit of the best employees. This means using a variety of methods to recruit employees.
• Hire for service competencies and service inclination--service competencies are the skills • Be the preferred employee--involves many strategies many of which revolve around
treating employees as whole people and addressing their personal as well as work needs.
• DEVELOP PEOPLE TO DELIVER SERVICE QUALITY: once the firm has hired the right people, the organization must train and work with these individuals to ensure service performance.
• Train for technical and interactive skills--this training is not just for the frontline employees but also for support staff, supervisors, and managers. It is important that this training be ongoing. It has to be viewed as an important investment for future success.
• DEVELOP PEOPLE TO DELIVER SERVICE QUALITY: • Empower employees--this means giving employees the desire, skills, tools, and authority
to serve the customer. An empowered organization is characterized by flexibility, quick decisions, and authority given to frontline people. Empowerment has pros and cons.
• DEVELOP PEOPLE TO DELIVER SERVICE QUALITY:
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• Promote teamwork--this will help alleviate the stresses and strains. Employees who feel supported and have a team backing them up will be better able to maintain their enthusiasm and provide quality service. One way of doing so is to encourage the attitude that everyone has a customer. Teams should be organized around market based groupings rather than functional line
• DEVELOP PEOPLE TO DELIVER SERVICE QUALITY: • Provide needed support systems--service workers require internal support systems that
are aligned with their need to be customer focussed. To do so, one needs to measure internal service quality, provide supportive technology and equipment, develop service oriented internal processes.
• DEVELOP PEOPLE TO DELIVER SERVICE QUALITY: • Retain the best people--employee turnover can be very detrimental to customer
satisfaction. To do so one needs to include employees in the company’s vision, treat employees as customers, measure and reward strong service performers.
• Service culture--a good service is a way of life.
Unit-4