18421261 services marketing ab

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SERVICES MARKETING

PROF.R.MATHUR



TEXT BOOKS

SERVICES MARKETING BY: Christopher Lovelock



INTRODUCTION• Services Are Deeds (perishable), Processes And

Performances that creates value and benefits for thecustomer. Facilities, equipment, labour can be held inreadiness to create the Services, the elementsrepresent the Productive Capacity.

• Services are all Economic Activities:- Intangible output,- Generally consumed at the time it is produced- Adds value to, say, Convenience, Timeliness,Comfort, Health

• Intangibles: Repair & Maintenance Services,Consulting services, Training, Software Programs –Problem Analysis and Solution.



SERVICES’ DEFINITION• Services Provided by Hospitals, Hotels, Banks,

Insurance, to result in Customer satisfaction.• Services by companies and also manufacturers and

Technology companies e.g. IBM – IT services• Services Sector:

Transportation, Communication, Electricity, Gas, Trade, Finance, Insurance, Hospitality, Health,Amusement, Recreation, Educational, Legal,Management, Household, Private, Government

• Customer Services:Services provided to support Company’s CoreProducts.



5

Services Dominates Most of theServices Dominates Most of theEconomiesEconomies

Source: Bureau of Economic Analysis, November 20

Finance,Insurance, RealEstate 20%

Wholesale andRetail Trade

16%

Transport, Utilities,Communications

8%Health

6%Business

Services

OtherServices 11%

Government(mostlyservices)

13%

Manufacturing 14%

Agriculture, Forestry,Mining, Construction 8%

SERVICES



6

Changing Structure of Employmentas Economic Development Evolves

Time, per Capita Income

Share o f Em ployme n t

Industry

Services

Agriculture

Source: IMF, 1997



7

% of GDP in INDIA

31

36

40

48

61

24

26

28

26

20

45

38

32

26

19

0 20 40 60 80 100 120

1970

1980

1995

2001

2005

Services Industry Agriculture



TANGIBILITY

• Services more Intangible than ManufacturedProducts and Manufactured Products more

Tangible than Services. Fast-food Industry is“Services” but has tangible components asfood and Packaging.

• Intangibles are produced by Service sector aswell as by Manufacturing sector – Boeing

provides Consulting and Forecasting servicesManufacturers often have “associates” whichprovide allied Services – HUL + Lintas



VALUE ADDED BY TANGIBLE VS.INTANGIBLEELEMENTS IN GOODS AND SERVICES

Tangible ElementsCoffee powderSoft DrinksCD playerNew car

Tailored ClothingFurniture Rental

Fast-Food RestaurantPlumbing Repair

Health ClubAirline FlightRetail BankingWeather forecast

Intangible

Elements



GOODS vs. SERVICES MARKETING

• The most basic difference is Intangibility –Related Marketing Implications – Servicescannot be Inventoried – Fluctuation inDemand. Services cannot be: - EasilyPatented

- Readily displayed or be easilyCommunicated to customers – Quality?- Assessed in Quality of Services

• New Services concepts can be easily copiedby Competitors’

• Decisions about Advertising content arechallenging, as is Pricing

• Price Quality relationship complex• Cost of unit of service difficult to determine



SERVICES MARKETINGIMPORTANCE

• Services sector is 80% of Employment and

78% of GDP. Absolute and Fastest rate of growth is in Services sector.• Export of Information, Knowledge, Creativity,

Technology are growing in economiesworldwide.

• Lead in development of Service Industry wastaken by Banking & Health Care services.

These Service Industries continue to evolveand become more competitive.

• The need for effective Services Managementand Marketing Strategies as manufacturingand technology industries also need to providequality Services to compete worldwide.



12

Differences Between Goods & ServicesDifferences Between Goods & Services

Intangible

PerishableSimultaneous

Productionand

Consumption

Heterogeneous



13

Differences between Goods and Services

GOODS SERVICES RESULTING IMPLICATION

Tangible Intangible Services cannot beinventoried

Cannot readily bedisplayed or communicated

Pricing is difficult



14


GOODS SERVICES RESULTING IMPLICATIONProductionseparatefromconsumption

Simultaneous Customers participate inand affect the transaction

Customers affect eachother

Employees affect serviceoutcome

Decentralization may beessential

Mass production isdifficult



16


GOODS SERVICES RESULTING IMPLICATION

Non Perishable Perishable It is difficult to synchronizesupply and demand with

servicesServices cannot be returned

or resold



HETEROGENEITY IN SERVICES• No two human Services Performances are

alike• Services delivery at different times andby different employees differ

• Different Customers’ demands of Servicesin Content and quality differ

• Services are heterogeneous across time,organizations and people ensuringconsistent service quality is challenging

• Quality depends upon factors that cannotbe fully controlled by Service suppliers –consumer’s articulation of needs, level of demand for the service

• Organization may Sub-contract certainservice elements of its total offering



SERVICES PRODUCED & CONSUMED• Products – Produced Sold Consumed

• Services – Sold Produced & ConsumedRestaurant Services Sold first, diningexperience Produced and Consumed.Customer present while Service Produced,can participate in the production process

• Mass production of services difficult.Customer satisfaction dependent uponhappenings in “Real Time”

• Centralization does not Produce economiesof Scale – operations need to be relativelydecentralized.• Customers may affect the outcome of Services Production due simultaneousproduction and Consumption



SERVICES PERISHABLE• Services Are Perishable : Cannot be Saved,

Stored, Resold or returned.• Services cannot be inventoried• Demand forecasting, Planning and Capacity

utilization are challenging decision areas

• Strong recovery Strategies when things gowrong to regain customer goodwill.SERVICES OPERATIONS

• Variability: Services can be evaluated forquality before reaching the customers, e.g.car repairs. Services consumed as produced,final services must be performed in real-timeconditions.



CATEGORISING SERVICEPROCESSESMarketing-relevant differences among Services:

Traditional way of Grouping Services by Industry

–Transportation, Hospitality, Banking. Groupingsdefine Core products, customer needs andsatisfaction. However innovative managers mustlook outside their own industries for effectiveStrategies to adapt for their own organization.

• One categorization on nature of Processes by whichservices are created and delivered. Unlike goods,Services Marketing may involve customers in serviceproduction. A Process is a method or series of actioninvolving multiple steps in a defined sequence – takingan input and transforming them into Output. .......



CATEGORIZING ….…. Two categories get processed People

Customers are the Principal Inputs: Objectse.g., Passenger Transportation, Education.In case of Objects as Inputs: automobile repair,

processing of financial data. In some services,processes are tangible. In others it could beIntangible, e.g., Education, Information.

Service Processes on Operational perspective,can be categorized into four broad Groups.These are based on:

- tangible action to people’s physical bodies or customers’ physical possessions (Products)- Intangible actions to people’s minds or their

intangible assets ……



CATEGORIZING ….….. These four categories are referred to as:• People Processing• Product Processing• Mental Stimulus processing• Information processingIndustries within each category share

important Process related characteristics.Managers can create valued innovationsby studying other industries of the samecategory.

PEOPLE PROCESSINGServices directed at themselves – Transportation, Health, Lodging, Feeding.Customers must physically enter theservice system by spending time and

actively interact with Service Providers



POSSESSION PROCESSING• Customers want Services for treatment of

Physical possession, e.g., House, Pets,Computer: Customers not personally involved.Customers drop the possession at the ServiceProvider’s centre, explain the problem,instruct for services and pick up the servicedproduct. If the possession cannot be moved,the service is provided at the site.

MENTAL STIMULUS PROCESSING .• Services that interact with people’s minds –

News, education, Information, Consultancy,

Entertainment, Discourses. Services aimed atChanging people’s attitude and influencebehaviour. Strong ethical standards andcareful monitoring, else manipulation possible….



MENTAL STIMULUS….Customers have to be mentally in

communication with information beingprocessed. Services like education andentertainment are often created in oneplace and transmitted to distantcustomers. (Live concert directly to group

of customers?). Core content of all servicesin this category is Information based. SuchServices can be recorded and madeavailable subsequently or converted into adisc like a manufactured product.

In People Processing, a customer can sleepthrough a journey and still arrive at thedestination in time. In contrast a studentsleeping through a lecture will not be any

wiser at the end of the lecture.



INFORMATION PROCESSING• Information is the most Intangible form of

Service output. Information transformedinto Reports, Books, Letters, Discs aretangible.

• Financial and professional services asAccounting, Law, Market Research,Management Services, Medical diagnosisare highly dependent on effectivecollection and processing of Information.

• Extent of customer involvement in MentalStimulus processing and informationServices are to learn about each other’sNeeds, Capabilities and Personalities.Habits and tradition define the existingservice delivery system and service usepatterns. Increasing use of telephones, e-mails and internet will shift these Servicesto arm’s-length.



28

The Services Marketing Triangle

InternalMarketing

Interactive Marketing

ExternalMarketing

Company(Management)

CustomersEmployees

“enabling the promise”

“delivering the promise”

“ setting the promise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler



29Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology

The Services Triangle &Technology

mp ca ons o erv ce rocesses



30

mp ca ons o erv ce rocesses(1) Seeking Efficiency May Lower

Satisfaction

Processes determine how services are created/delivered— process change may affect customerSatisfactionImposing new processes on customers, especiallyreplacing people by machines, may cause dissatisfaction• New processes that improve efficiency by cutting costs

may hurt service quality• Best new processes deliver benefits desired by customers

– Faster – Simpler – More conveniently

• Customers may need to be educated about new proceduresand how to use them

I li i f S i P



31

People-processing services requirecustomers to visit the “service

factory,”so:

• Think of facility as a “stage” for serviceperformance

• Design process around customer

• Choose convenient location• Create pleasing appearance, avoid

unwanted noises, smells

• Consider customer needs--info, parking,food, toilets, etc.

Implications of Service Processes:(2) Designing the Service Factory

Implications of Service Processes:



32

Implications of Service Processes:(3) Evaluating Alternative Delivery

ChannelsFor possession-processing, mental-stimulusprocessing, or information processing services,alternatives include:

1. Customers come to the service factory2. Customers come to a retail office3. Service employees visit customer’s home or

workplace

4. Business is conducted at arm’s length through- physical channels (e.g., mail, courier service)- electronic channels (e.g., phone, fax, email,

Web site)



33

Capacity Implications of Service Processes:(4) Balancing Demand and Capacity

When capacity to serve is limited and demand varies widely, problems ariseBecause service output can’t be stored:

1. If demand is high and exceeds supply,

business may be lost2. If demand is low, productive capacity is

wasted

Potential solutions:

- Manage demand- Manage capacity

I li i f S i P



34

Implications of Service Processes:(5) Applying Information Technology

All services can benefit from IT,but mental-stimulus processingand information-processingservices have the most to gain:• Remote delivery of information-

based services “anywhere,anytime”• New service features through

websites, email, and internet(e.g., information, reservations)

• More opportunities for self-service• New types of services

I li ti f S i P



35

Implications of Service Processes:(6) Including People as Part of the

ProductInvolvement in servicedelivery often entailscontact with other people

• Managers should beconcerned aboutemployees’ appearance,social skills, technical skills

• Other customers mayenhance or detract fromservice experience--need to

manage customer behavior



SERVICES MARKETING MIXStrategic elements of marketing manufacturedgoods are: Product, Price, Place & Promotion. ForServices Performance, 3 elements added:Physical Environment, Process & People. 7 P’s areinterrelated decision variables.

• PRODUCT: Select features of Core Product – aProduct or Service plus other Service elements inreference to customer requirements and othercompeting products. Service performance withpotential to create value for customers.

• PLACE: Place, Time of Delivery and Methods,Channels (Physical, Electronic) used. Messaging,Internet Services delivers Information in cyberspace.Physical delivery directly to customers. Speed andconvenience determine Strategy. …..



7 Ps ….• PROMOTION: Effective Communication

Strategy: Provide Information, Features andAdvantages, Persuading for action. Servicespromotion more in nature of Education –Benefits of service, Where and When toobtain it, How to avail the Services.Communication delivered through DirectSales or through Media. Promotions influenceBrand choice. Incentives attract customers tobuy.

• PRICE: Price to pay for benefits of Services.

Service marketers must Minimize other Expensesa customer might incur in Purchasing and UsingServices, e.g., travel to service location, time,physical and mental efforts, exposure tonegative sensory experiences. ……



7 Ps ….• PHYSICAL ENVIRONMENT: Provide Tangible evidence of

a firm’s Service quality. Customers impressions getimpacted by Building appearance, landscaping, Interiorfurnishing, Equipment, Printed material, Signs andother Visuals.

• PROCESS: Delivery of Product Elements require Designand Implementation of Effective Processes- A method and sequence of actions in Service performance. Badprocesses lead to Slow, Bureaucratic, IneffectiveService delivery, dissatisfied customers. Poor

Processes make front-line staff jobs difficult, results inlow Productivity and more chances of service failures.



7 Ps ….• PEOPLE: Services Quality is often assessed based

on customer’s interactions with front -line staff.Successful Service firms devote a lot of effort toRecruit, Train and Motivate these employees.

• In the 7 Ps of Services Strategy, Marketing mustoperate with other functions in Services business.

Three management functions have Central andInterrelated Roles: Marketing, Operations andHuman Resources.

• Marketing expert T.Levitt has remarked, “Thereare Industries whose Service Components are

greater or lesser than other Industries. EveryIndustry is in Service”. R.Rust suggests “Mostgoods businesses now view themselves primarilyas Services”.



CONSUMER BEHAVIOR IN SERVICESPURCHASE PROCESS FOR SERVICES

PREPURCHASE STAGE

NEED INFORMATION SEARCH EVALUATION OFSERVICE SUPPLIERSSERVICE ENCOUNTER STAGE

INITIATE SERVICE FROM SUPPLIER SERVICE DELIVERY POSTPURCHASE STAGE

EVALUATION OF SERVICE PERFORMANCE FUTURE REFERENCE

PRE-PURCHASE STAGEDecision to buy and use a service. Needs andexpectations of customer will influence alternativesconsidered. Purchase routine and low risk,customers select Service provider quickly. First time

Service requirement, of a high risk, customersspend more time to select service provider.



CONSUMER BEHAVIOR IN SERVICESPERCEIVED RISKS1. Functional – Will this service deliver desired result.2. Financial – Will I lose money3. Temporal – Time Loss, Delays4. Physical – Injury or Damage to Possession5. Psychological – Fears ( flying), Emotions (feel upset)6. Social – Others’ thinking, Reaction7. Sensory – Unwanted sensory feelings. (comfort, smell)SERVICE ENCOUNTER STAGE Begins with starting the service process: placing

an order, submitting an application. In highcontact services, customers involved inservice process. In low contact, impersonalinteractions with instruments, computers.Customers experience a variety of elementsduring service delivery providing clues toservice quality.



POST PURCHASE SERVICES EVALUATION• Search Attributes: Physical goods can be

evaluated before purchase. Style, colour,texture, taste, machi ne output are tangiblesthat can be tested before purchase. Apparel,automobiles, electronics, food are goodshigh in search attributes.

• Experience Attributes: To evaluate someservices, customers must experience them:Can be evaluated only after purchase-entertai nment, restaurants fall in theExperience Category. Information onWebsites, reviews, by friends etc. may not

help in evaluation.• Credence Attributes: Product characteristicsextremely difficult for customers to evaluateeven after purchase and consumption.Customer forced to trust that benefits have

been delivered.



SERVICE POSITIONING STRATEGY• How do businesses compete?“On Service”

….“Value for money”, “Service

quality”, “People”, “Convenience”Speed, Quality, Extras to core service

Convenient Location, Time or Ease of use

• Which product feature interests acustomer? Will help develop CompetitiveStrategy. Else customers will not perceiveany real difference between competitivealternatives and choose basis price.

• Positioning Strategy is to create andmaintain distinctive differences that will benoticed and valued by Potential TargetCustomers for a long

term relationship.



SERVICE POSITIONING ….• Service firms to provide a narrow product mix for

a particular market segment – a group of buyers

with common characteristics, needs, purchasingbehavior or consumption pattern.• Concentrate resources on strategically important

elements of service operations. A firm’s focuscan be described in two dimensions - Marketfocus and Service focus. Market focus is extent towhich a firm serves few or many markets.Service focus is extent to which a firm offers fewor many services.

• These two dimensions describe four Basic focusStrategies. A fully focused firm provides limitedrange of services (maybe one core product) to anarrow and specific market segment. A Marketfocused firm concentrates on narrow marketsegment but wide range of Services.



SERVICE POSITIONING …..BREADTH OF SERVICE

OFFERING

NARROW WIDENUMBER OF

MARKETSSERVED

MANY SERVICEFOCUSED

UNFOCUSED(EVERYTHING

FOR EVERYONE)

FEW FULLY FOCUSED(S

ERVICE &MARKET

FOCUSED)

MARKETFOCUSED

Service focused firms offer narrow range of services to a fairly broad market. ManyService providers fall into unfocusedcategory because they try to serve broadmarkets and provide a wide range of



SELECTION OF FOCUS ……Offering broad product lines to narrow target segmenthas potential of selling multiple services to customers.Firms must have operational capability. To cross-selladditional services to btob, client companies may havedifferent purchase groups.

MARKET SEGMENTATIONFirms offer services to segmented markets to identifysegments it can serve best. Need-based segments havecustomers valuing specific attributes.Mass customization to serve specific market segment byoffering Standardized Core product with tailor-madesupplementary service elements.Creation of customer Database and Analytical softwareenables firms Micro segment Strategies target micro-groups with similar characteristics.



CUSTOMER EXPECTATONS ……Situational factors: Service Expectations affectedBy temporary reasons for purchase – Consumer’smood, the Weather, Time Constraints and UrgencyReasons for purchase: Use of a Hotel Services –Breaking journey, Spending week-end, Using forCorporate Training, Shift of residence, HoldingSocial programmes.Consumer’s mood: Good mood means higherZOT and level of adequate service lower. Reverseis also true. Improve mood with music, décor,aromatics, friendly service personnel.

The Weather: Bad weather for airlines, desiredLevel remains but predicted level reduce as also ZOT.



MEASURING SERVICE QUALITY• Consumers evaluate 5 dimensions of service quality:• Tangibles – physical facilities, (Soap, Heating, Room

safe malfunctioned and light flashed and beeped at3 AM)• Reliability – perform service promised dependably

and accurately (Service not in line with Broch.),• Responsiveness – firm’s staff help customers with

prompt service (Hotel staff ignored the presence,Room service reminded to remove tray)• Assurance – Inspire trust and confidence through

knowledge competence and courtesy and• Empathy – Caring, Individualized attention (canned

apology letter in response to complaint)

THE GAP MODEL



THE GAP MODELA MODEL OF SERVICE QUALIY

Service Quality means consistently meeting orexceeding Customer Expectations. TheManager’s task is to balance CustomerExpectations with Perceptions of servicedelivery and to close any gaps between thetwo. P- E will give Service Quality.A Model Of Service Quality is given by GapModel. The figure Identifies 5 Potential Gaps.

The Horizontal dash line divides ServiceQuality

Gaps that are SP related and ConsumerOriented.

THE GAP MODEL



THE GAP MODEL

THE GAP MODEL



THE GAP MODEL The Knowledge Gap 1 :Difference betweenCustomers’ Needs & Expectation and SP’sPerceived Customer Expectation. A contractorwants to use the best grade electrical wire.Sub-contractor perceives contractor wants tokeep costs down and uses low grade wire. Theconverse happening is also true. Extra servicesprovided raise Expectations and also add to thecost.Cause Of Gap Strategies to ReduceFailure of Service Customer Communication,Provider to identify Market Research,Consumer Expectation Encourage Upward Communication,

Reduce Hierarchy

THE GAP MODEL



THE GAP MODEL The Standards Gap 2: Difference between firm’sperceived Customer Expectation and itstranslation to Service Quality Specifications.Reasons: 1.Resource Constraint ( Seasonal

Service demand), 2. Market Conditions, 3.Indifference to Customers’ NeedsCause Of Gap Strategies to Reduce GapResource Constraint Firm’s CommitmentMarket Conditions Develop Service Quality GoalsIndifference Standardize tasks & Address feasibility of

Customer ExpectationEmphasis on high commitment to level of ServiceQuality. Competitive parity is to provide ServiceQuality at least as good as competition – “Competitive Parity”



THE GAP MODEL The Delivery Gap 3: Difference between firm’s

Service Quality Specifications and Delivery of Specifications. This could be due: ServiceProvider’s employees’ Performance

Cause Of Gap Strategies to Reduce GapEmployee unaware Enhance Teamwork

of Specifications.Skills to Perform Employee, technologySpecifications job-fitUnwilling to Perform Supervisory Control,Specifications Reduce Role Conflict/ Ambiguity Conflict



THE GAP MODELCommunication Gap 4 :The difference betweenthe External communication about service(Advertising, Sales Promise) and Servicedelivered.

To increase patronage, firms are tempted tomake promises which may be difficult orimpossible to deliver.Cause Of Gap Strategies to Reduce GapPoor Communication Improve lateralCommunicationOver Promising Avoid propensity to over promiseEmphasis on High Transparency on ServiceQuality and Reduce or Prevent Surprises forCustomers



THE GAP MODEL The Perception Gap 5: The difference between what ConsumersReceive and what they Expected. This is thesum of Gaps 1 to 4, both in direction andmagnitude.Suppose a Consumer Survey gives scores toGaps 1 to 4 on a scale of -3 to +3 as:+1, -3, +1 and 0,

The score for Gap 5 would be +1 +(-3)+1+0 =-1 This indicates the Service Performance fellShort of Customer Expectations. The SP shouldanalyze Gap 2 Closely to Rectify the Differencein their Standards of Quality Specifications.

BUILDING CUSTOMER



U G CUS ORELATIONSHIP

Relationship Marketing represents a Paradigmshift in Marketing – away from Acquisitions

toward a retention/ relationship focus.A Strategic orientation – focus on keeping andimproving current customers rather thanacquiring new customers.

The customers prefer an ongoing relationship,

not switch continually in search for value. Targeting, acquiring and retaining the rightcustomers is at the CORE of successful firms. Thefact is it is usually much cheaper to keep acurrent customer than to attract new one. Firms

frequently focus on attracting customers but donot pay attention to keeping them. Sales,Advertising, Promotions attracts business. Bucket

Theory ….

BUILDING CUSTOMER



BUILDING CUSTOMER ….• Customer Loyalty is described as: Willingness

to using Products/ Services on a long term,Repeated purchase preferably on exclusivebasis, Recommend firm’s Products/ Servicesto friends and associates.

• Customers changing Brands give adequatesignals by reducing purchase and shifting toanother Service provider.• Researches have found that the longercustomers stayed with a firm, the moreprofitable they became. Four factors whichcreate incremental profits are: 1. Profitderived from increased purchases. 2. Profitsfrom Reduced Operating Costs. 3. Profits fromreferrals to other customers. 4. Profits fromPrice Premium.

BUILDING CUSTOMER



BUILDING CUSTOMER ….Impact on profits also depend upon Product Lifecycle of Services – more impact of referrals inearly stages of PLC.Customer Lifetime Value – Customers potential togenerate ongoing Stream of profits and are firm’simportant financial asset. Marketing Servicesprograms should be seen as investments ratherthan just operating expenses.

The discounted value of each customer overexpected lifetime with the firm gives CLV.Customer Equity is the sum of discounted LifetimeValues of firm’s current customers. EnhancingCustomer Equity should be the key driver of Marketing Strategy.

BUILDING CUSTOMER



BUILDING CUSTOMER …. Analyzing & Managing Customer Base: Firmsshould adopt a Strategic approach to retaining,upgrading and even terminating service tounprofitable customers. Firms need not makeefforts to treat all customers with the same levelof intensity. Most firms have several layers of customers basis profitability and these layershave different needs and service expectations.Customer layers form 4 layers of a pyramid basedon profit contribution and personal profiles.

Platinum GoldIron

Lead

BUILDING CUSTOMER



BUILDING CUSTOMER ….Platinum : A small %age, Heavy user,Contribute large profit, Less Price sensitive andexpect large level of serviceGold : Larger customer base heavy users withindividuals contribute less to profits. Slightlysensitive to price, less committed to firm.Iron: Provide bulk of customer base. Firm buildsand maintains certain capacity level of Infrastructure needed for servicing Gold andPlatinum customers. Gives the firm the economiesof scale. Iron customers are marginally profitable.Lead: Customers generate low revenue, requirethe same level of service as with iron customers.

SERVICE RECOVERY



SERVICE RECOVERYService Recovery refers to the action taken by anorganization response to a service failure.Failure occurs for many reasons:• The service may be unavailable when promised• Delivered late slow• The outcome may be incorrect or poorly executed• Employees may be rude or uncaring

These failures bring about negative feelings andresponses for the customers. Result in customersLeaving and sharing negative experiences. Mayeven challenge the organization through customersrights organizations or legal channelsResearch has shown resolving customer problemseffectively has a strong impact on CustomerSatisfaction, Loyalty and Bottom line performance.

SERVICE RECOVERY



SERVICE RECOVERYRepeated Service Failures without an effectiveRecovery Strategy in place can aggravate even the

best employees. The costs in Employee Morale and even lost employeecan be huge

THE RECOVERY PARADOXIt is suggested that dissatisfied customers whoexperience a high level of excellent service recovery,may ultimately be even more satisfied and more likelyto repurchase than are those who were satisfied I thefirst place. The logical but not very rational conclusion is thatcompanies should plan to disappoint customers sothat they can recover and gain even greater loyaltyfrom them as a result. This idea is known as theRECOVERY PARADOX.

SERVICE RECOVERY



SERVICE RECOVERYRecovery Paradox is more complex than it may seemon the surface. It is expensive to fix mistakes.Empirical Research suggests that only under the veryhighest levels of customers’ Service Recovery ratingswill we observe increased satisfaction and loyalty.It is safe to say that “ Doing it right the first time “ isstill the best and safest strategy.However, when a failure does occur, then every effortat a superior Recovery should be made to mitigate itsnegative effects. In cases where the failure can befully overcome, the failure is less critical, or theRecovery Effort is clearly superlative, it may bepossible to observe evidence of the RecoveryParadox.

CUSTOMER COMPLAINTS & ACTIONS



CUSTOMER COMPLAINTS & ACTIONSIf customers initiate actions following service failure,the action can be of various types as shown in theFig. From company’s point of view any customer whocomplains on the spot is the best case scenario.Company has the chance to respond immediately.If they don’t complain immediately, customers maychoose to complain later to the provider by phone orin writing, or even write or call the corporate officesof the company. In all the above cases, the companyhas a chance to recover. These Proactive types of complaining behavior is preferred as voice responses

or Seeking Redress. TYPES OF COMPLAINANTSFour Types of customers response to failures havebeen identified:(1) Passive (2) Vocal (3) Irate (4)Activist





(1) Passive: This group of customers is least likely to take any

Action. Less likely to spread negative Word of Mouth. They often doubt the effectiveness of complaining, thinking the consequences will notmerit the time and effort spent.(2) Vocal:

These customers actively complain to the serviceProvider, Less likely to spread negative word of mouth, switch patronage, or go to a third party withtheir complaints. These customers viewed as theService providers friend. Actively complain and givecompany a second chance. They believe complaininghas social benefits and therefore don’t hesitate tovoice their opinion .





Irate: These customers more likely to engage in negativeword of mouth to friends and relatives and switchproviders. They are angry with the service provideralthough they do believe that complaining to theservice provider can have social benefits. They areless likely to give the service provider a secondchance.Activists:

These consumers have high propensity to complain. They will complain to the provider, they will tellothers, and they are more likely to complain to thirdparties. They feel that all types of complaining willhave positive consequences.




CUSTOMER COMPLAINTS & ACTIONSWHEN CUSTOMERS COMPLAIN, WHAT DO THEYEXPECT?Customers want justice and fairness in the handling

of their complaints.Customers are looking for: OUTCAME FAIRNESSPROCEDURAL FAIRNESS

INTERACTIONAL FAIRNESSOutcome Fairness : They expect equity in theexchange- i.e. they want to feel that the companyhas “Paid” for its mistakes in a manner at least equalto what the customer has suffered. The company’s“ punishment should fit the crime”. They alsoappreciate it when a company gives them choices interms of compensation. E.g. A hotel guest should beoffered the choice of a refund or free upgrade to abetter room in compensation for a room not beingavailable on arrival.




CUSTOMER COMPLAINTS & ACTIONSOn the other hand, customers can be comfortable if they are overly compensated. E.g. Domino’s Pizzaoffered not to charge if the delivery was after 30minutes of ordering. Many customers were notcomfortable asking for this level of compensation,especially if the driver was only few minutes late.Procedural Fairness : In addition to fair compensation,customers expect fairness in policies, rule andtimeliness of complaint redress. They want easyaccess to the complaint process. Fair procedures arecharacterized by clarity, speed and absence of complexities. Unfair procedures are those thatcustomers perceive as slow, prolonged andinconvenient. Customers also feel it is unfair if theyhave to prove their case- when the assumptionseems to be they are wrong or lying until they canprove otherwise.




Interactive Fairness : Customers expect to betreated politely, with care and honesty. This formof fairness can dominate the others if customersfeel the company and its employees haveuncaring attitude and have done little to try toresolve the problem. Often rude and uncaringbehavior of employees is due to lack of trainingand empowerment- a frustrated, frontlineemployee who has no authority to compensatethe customer may easily respond in an aloof anduncaring manner, especially if the customer isangry and/or rude.SWITCHING VERSUS STAYING - SERVICE RECOVERYUltimately, customer’s reaction to a ServiceRecovery failure handling will influence futuredecisions to remain loyal to the service provider orto switch to another provider.

Service Marketing System:



g y(1) High Contact Service-e.g., Hotel

TheCustomer

TechnicalCore

Interior & ExteriorFacilities

Equipment

Service People

OtherCustomers

OtherCustomers

Advertising

Sales CallsMarket Research Surveys

Billing / Statements

Miscellaneous Mail,Phone Calls, Faxes, etc .Random Exposure to

Facilities / VehiclesChance Encounters

with Service PersonnelWord of Mouth

Service Operations System

Backstage(invisible)

Front Stage(visible)

Service Delivery System Other Contact PointsService Marketing System

Service Marketing System:



g y(2) Low Contact Service-e.g., Credit Card(2) Low Contact Service-e.g., Credit Card

TechnicalCore

Mail

Self ServiceEquipment

Phone,Fax,Web site

etc.

TheCustomer

Service OperationsSystem

Service Delivery System Other Contact Points

Backstage(invisible)

Front Stage(visible)

Advertising

Market Research Surveys

Random ExposuresFacilities, Personnel

Word of Mouth

Service Marketing System



SERVICE MAPPING/BLUEPRINTING• A tool for simultaneously depicting

the service process, the points of customer contact, and theevidence of service from thecustomer’s point of view.

ServiceMapping

Process

Points of ContactEvidence



SERVICE BLUEPRINT COMPONENTS

CUSTOMER ACTIONSline of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONline of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONSline of internal interaction

SUPPORT PROCESSES



SERVICE BLUEPRINT COMPONENTS

SERVICE BLUEPRINTING: KEY



COMPONENTS1. Define standards for front stage activities

2. Specify physical evidence3. Identify principal customer actions

4. ------------ line of interaction (customers and front stage personnel)--------

5. Front stage actions by customer-contact personnel

6. ------------ line of visibility (between front stage and backstage)--------------

7. Backstage actions by customer contact personnel

8. Support processes involving other service personnel9. Support processes involving IT

Where appropriate, show fail points

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Documents