ddm 2006-services management

Introduction to Services

ByDr. Nripendra Singh

Jaypee Business School, Noida

Agenda

• Introduction

• Characteristics

• Difference between Goods & Services

• Services Marketing Mix

What are Services?

Adam Smith: productive-unproductive labour…did not contribute to wealth.

Jean Baptiste: Immaterial products…simultaneous prod. & consumption.

Lovelock et. al.: performances, offering desired results (expected value) to customers in exchange for their money, time and efforts. The value comes from access to a variety of value-creating elements rather than from transfer of ownership.

Examples of Service IndustriesExamples of Service Industries• 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

Why Study Services?India’s services sector has matured considerably during the last few years and has been globally recognized for its high growth and development. India ranks 15th in Services output and provides 23% of total workforce.

There has been rapid growth in the services exports, up from US $ 19.1 billion to US $ 73 billion in 2006-07.

Services sector account for about 56% of India’s GDP. India’s share in worldwide service exports is expected to almost triple itself from current 2.3 % to 6 % by 2012, if the present annual growth rate of 28% has been maintained.

Tangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Marketing Challenges: due to following characteristics

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity

Services are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.Decentralization may be essential.Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

Expanded Marketing Mix for Services

PRODUCT PLACE PROMOTION PRICE Physical good features

Channel type Promotion blend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Sales promotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding

Expanded Marketing Mix for Services (contd.)

PEOPLE PHYSICAL EVIDENCE

PROCESS

Employees

Facility design Flow of activities

Customers Equipment Number of steps

Communicating culture and values

Signage Level of customer involvement

Employee research Employee dress

Other tangibles

PRODUCTIVITY & QUALITYNo org. can offer one in isolation of another

Reducing Cost

Customer satisfaction & Loyalty

Thank You!Discussions:

• Explain what services are and identify service trends.

• Explain the need for special services marketing concepts and practices.

• Outline the basic differences between goods and services and the resulting challenges for service businesses.

• Introduce the service marketing triangle.

Consumer Evaluation Processes for Services

• Search Qualities– attributes a consumer can determine prior to purchase

of a product• Experience Qualities

– attributes a consumer can determine after purchase (or during consumption) of a product

• Credence Qualities– characteristics that may be impossible to evaluate

even after purchase and consumption

Continuum of Evaluation for Different Types of Products

Cl o

t hi n

g

Jew

elry

Furn

it ur e

Ho u

ses

Au t

omob

i les

Re s

taur

ant m

eals

Vac

atio

ns

Ha i

r cu t

s

Ch i

l d c

a re

Tele

visi

on r e

pair

Leg a

l se r

vic e

s

Roo

t ca n

a ls

Au t

o r e

p air

Med

ical

dia

gno s

i s

Difficult to evaluateEasy to evaluate

{High in search

qualitiesHigh in experience

qualitiesHigh in credence

qualities

{{Most

GoodsMost

Services

Stages in Consumer Decision Making and Evaluation of Services

Categories in Consumer Decision-Making and Evaluation of Services

Information Search

Evaluation of Alternatives

Purchase and Consumption Post-Purchase

Evaluation

Use of personal sources Perceived risk

Evoked set Emotion and mood

Service provision as drama Service roles and scripts Compatibility of customers

Attribution of dissatisfaction Innovation diffusion Brand loyalty

Categories in Consumer Decision-Making and Evaluation of Services

Information Search

Evaluation of Alternatives

Purchase and Consumption Post-Purchase

Evaluation

Use of personal sources Perceived risk

Evoked set Emotion and mood

Service provision as drama Service roles and scripts Compatibility of customers

Attribution of dissatisfaction Innovation diffusion Brand loyalty

Culture Values and attitudes Manners and customs Material culture Aesthetics Educational and social

institutions


• Services: Search versus Experience versus Credence Properties?

• Services: Categories in the Decision-making Process and Framework of the Chapter

• The Role of Culture in Services

Possible Levels of Customer Expectations

Adequate Service

Desired Service

Dual Customer Expectation Levels

Adequate Service

Desired Service

Zone ofTolerance

The Zone of Tolerance

Most Important Factors Least Important Factors

Level of

Expectation

Source: Berry, Parasuraman, and Zeithaml (1993)

Adequate Service

Desired Service

Zone ofTolerance

Zone of

Tolerance

Desired Service

Adequate Service

Zones of Tolerance forDifferent Service Dimensions

First-Time Service

Outcome

Process

Outcome

Process

Recovery Service

ExpectationsLOW HIGH

Source: Parasuraman, Berry and Zeithaml (1991)

Zones of Tolerance forFirst-Time and Recovery Service

Enduring ServiceIntensifiers

Personal Needs Zone of

Tolerance

Desired Service

Adequate Service

Factors That Influence Desired Service

Self-PerceivedService Role

Situational Factors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers

Zone of

Tolerance

Desired Service

Adequate Service

Factors That Influence Adequate Service

Predicted Service

Explicit ServicePromises

Implicit ServicePromises

Word-of-Mouth

Past ExperienceZone of

Tolerance

Desired Service

Adequate Service

Factors That InfluenceDesired and Predicted Service

Thank You!Discussions:• Discuss controllable and uncontrollable sources

of customer expectations.• Distinguish between customers’ global

expectations of their relationships and their expectations of the service encounter.

• Acknowledge that expectations are similar for many different types of customers.

Customer Perceptions of Service

• Provide you with definitions and understanding of customer satisfaction and service quality.

• Show that service encounters or the “moments of truth” are the building blocks of customer perceptions.

• Highlight strategies for managing customer perceptions of service.

Customer Perceptions of Service Quality and Customer Satisfaction

Factors Influencing Customer Satisfaction

• Product/service quality• Product/service attributes or features• Consumer Emotions• Attributions for product/service success or

failure• Equity or fairness evaluations

Outcomes of Customer Satisfaction

• Increased customer retention• Positive word-of-mouth communications• Increased revenues

ASCI and Annual Percentage Growthin S&P 500 Earnings

Source: C. Fornell “Customer Satisfaction and Corporate Earnings,“ commentary appearing on ACSI website, May 1, 2001,http://www.bus.umich.edu/research/nqre/Q1-01c.html.

Relationship between Customer Satisfaction and Loyalty in Competitive Industries

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

Service Quality

• The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.

• Service quality assessments are formed on judgments of:– Outcome quality– Process quality– Physical environment quality

The Five Dimensions of Service Quality

Ability to perform the promised service dependably and accurately. Knowledge and courtesy of employees and their ability to convey trust and confidence.Physical facilities, equipment, and appearance of personnel.

Caring, individualized attention the firm provides its customers.

Willingness to help customers and provide prompt service.

Tangibles

Reliability

Responsiveness

Assurance

Empathy

Exercise to Identify Service Attributes

In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view.

Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

Providing service as promised Dependability in handling customers’

service problems Performing services right the first time Providing services at the promised time Maintaining error-free records

Keeping customers informed as to when services will be performed

Prompt service to customers Willingness to help customers Readiness to respond to customers’

requests

RELIABILITY

RESPONSIVENESS

Employees who instill confidence in customers

Making customers feel safe in their transactions

Employees who are consistently courteous Employees who have the knowledge to

answer customer questions

ASSURANCE

Giving customers individual attention Employees who deal with customers in a

caring fashion Having the customer’s best interest at heart Employees who understand the needs of

their customers Convenient business hours

EMPATHY

Modern equipment Visually appealing facilities Employees who have a

neat, professional appearance

Visually appealing materials associated with the service

TANGIBLES

SERVQUAL Attributes

The Service Encounter• is the “moment of truth”• occurs any time the customer interacts with the firm• can potentially be critical in determining customer

satisfaction and loyalty• types of encounters:

– remote encounters, phone encounters, face-to-face encounters

• is an opportunity to:– build trust– reinforce quality– build brand identity– increase loyalty

Check-In

Request Wake-Up Call

Checkout

Bellboy Takes to Room

Restaurant Meal

Service Encounter Cascade for a Hotel Visit

Sales Call

Ordering Supplies

Billing

Delivery and Installation

Servicing

A Service Encounter Cascade for an Industrial Purchase

Critical Service Encounters Research

• GOAL - understanding actual events and behaviors that cause customer dis/satisfaction in service encounters

• METHOD - Critical Incident Technique• DATA - stories from customers and

employees• OUTPUT - identification of themes underlying

satisfaction and dissatisfaction with service encounters

Sample Questions for Critical Incidents Technique Study

• Think of a time when, as a customer, you had a particularly satisfying (dissatisfying) interaction with an employee of .

• When did the incident happen?• What specific circumstances led up to this

situation?• Exactly what was said and done?• What resulted that made you feel the

interaction was satisfying (dissatisfying)?

Common Themes in CriticalService Encounters Research

Recovery: Adaptability:

Spontaneity:Coping:

Employee Responseto Service Delivery

System Failure

Employee Responseto Customer Needs

and Requests

Employee Responseto Problem Customers

Unprompted andUnsolicited EmployeeActions and Attitudes

Recovery

• Acknowledge problem

• Explain causes• Apologize• Compensate/

upgrade• Lay out options• Take responsibility

• Ignore customer• Blame customer• Leave customer to

fend for him/herself• Downgrade• Act as if nothing is

wrong

DO DON’T

Adaptability

• Recognize the seriousness of the need

• Acknowledge• Anticipate• Attempt to

accommodate• Explain rules/policies• Take responsibility• Exert effort to

accommodate

• Promise, then fail to follow through

• Ignore• Show unwillingness

to try• Embarrass the

customer• Laugh at the

customer• Avoid responsibility

DO DON’T

Spontaneity

• Take time• Be attentive• Anticipate needs• Listen• Provide information

(even if not asked)• Treat customers fairly• Show empathy• Acknowledge by name

• Exhibit impatience• Ignore• Yell/laugh/swear• Steal from or cheat a

customer• Discriminate• Treat impersonally

DO DON’T

Coping

• Listen• Try to

accommodate• Explain• Let go of the

customer

• Take customer’s dissatisfaction personally

• Let customer’s dissatisfaction affect others

DO DON’T

Evidence of Service from theCustomer’s Point of View

People

Process PhysicalEvidence

Contact employees Customer him/herself Other customers

Operational flow of activities Steps in process Flexibility vs. standard Technology vs. human

Tangible communication Servicescape Guarantees Technology Website

PerceivedService

Expected Service

CUSTOMER

COMPANY

CustomerGap

GAP 1

GAP 2

GAP 3

External Communications

to CustomersGAP 4Service Delivery

Customer-Driven Service Designs and Standards

Company Perceptions of Consumer Expectations

Gaps Model of Service Quality

Gaps Model of Service Quality• Customer Gap:

– difference between expectations and perceptions

• Provider Gap 1: Between customer expectations & company perceptions of customer expectations– not knowing what customers expect- Inadequate mktg research orientation- Lack of upward communication- Insufficient relationship focus- Inadequate service recovery

Gaps Model of Service Quality• Provider Gap 2:

Between cust-driven service designs and standards & Mgmt. perceptions of cust. expectations– not having the right service designs and

standards- Poor service design- Absence of customer-driven standards- Inappropriate physical evidence and

servicescape.


Between cust-driven service designs and standards & service delivery – not delivering to service standards- Deficiencies in human resource policies- Customers who do not fulfill roles- Problems with service intermediaries- Failure to match supply and demand


Between service delivery & external communications to customers– not matching performance to promises- Lack of integrated services marketing

communications- Ineffective management of customer expectations- Over-promising- Inadequate horizontal communications

ExpectedService

PerceivedService

GAP

The Customer Gap


• Difference between customer expectations and perceptions.

• How to minimize the 4-GAP’s in Entertainment Sector like Movie Theater.

• Can Provider gap 4 be closed before closing rest three provider gaps.

Service Processes



Agenda

• Nature and Importance

• Engineering Service Processes

• Controlling Service Processes

• Case Studies

INPUTSInformation

SERVICE OPERATION

SERVICE PRODUCT

Customer

Operation

StaffMaterialsCustomers

OUTCOMESValue

Emotions Judgements

Intentions

Back office processes

Front office processes

The customer also has a role in front office

processes

Simplified service processes

INPUTSMaterialsEquipmentCustomersStaffTechnologyFacilities

PROCESS

SERVICE OPERATION

EXPERIENCE

OUTCOMESValue

EmotionsJudgements

Intentions

SERVICE PRODUCT

Customer

Operation

Moving more tasks to the customer

Customer as an operational resource

Moving more tasks to the back

office

Moving more tasks to the front

office

Changing front office and back office activities

Perceived riskLow High

High

Low

Social interaction

Adventure holiday

Used-car purchase

International flight

Personal development programme

Family restaurant meal

Supermarket visit

Customer perceived risk and social interaction

Low High

High

Low

Capability

Commodity

Complexity

Simplicity

PROCESS VARIETY

VOLUME PER UNIT

Increasing process definition

Decreasing unit costs

Many processes lie close to this

capability-commodity spectrum

Volume–variety matrix

High process variety

Low volume of customer transactions

Focus on capability, flexibility and providing customer solutions

Customer transactions are lengthy and unpredictable in length and volume

Process flows are unpredictable – designed to meet individual customer

requirements

Process capability primarily based on individual's skill and knowledge

Flexible people and control systems

Customer-facing employee is designer and deliverer

Customer is often a key member of the service ‘team’ and a significant

resource

Low process variety

High volume of customer transactions

Focus on quality, consistency, availability and efficiency

Customer transactions are short, standard in content and predictable

Rigid processes, with opportunity for automation to reduce cost and variability

Process capability primarily based on careful design of processes and resources, minimising reliance on individuals

People and systems dedicated to a narrow range of tasks

Customer-facing employee is part deliverer, order taker and complaint handler

Customer is primarily order giver. May be a resource for the final delivery process

Capability processes Commodity processesBroker

operationsDirect operations

Motor insurance process profile

Low High

High

Low

Capability

Commodity

PROCESS VARIETY

VOLUME PER UNIT



Hernia operations

Pioneer surgery (first heart surgery)

Heart surgery today complex but routine

Learning from pioneers translated

into medical procedures to

facilitate increases in volume and consistency

Depicting different surgery processes

Low High

High

Low

Capability

Commodity

Complexity

Simplicity

PROCESS VARIETY

VOLUME PER UNIT



Effective area

Cost of flexibility

Cost of low volumeCan also be an incubator for innovation

Off-diagonal processes

Strangers/ repeaters

Runners/ repeaters

Customer involvement

Low High

SERVICE FACTORY

SERVICE PROJECTS

DIY SERVICE

SERVICE PARTNERSHIP

C – F – B

C – F – B

C – F – B

C – F – B

Key decision area matrix (KDAM)

Strangers/ repeaters

Runners/ repeaters

Customer involvement

Low High

SERVICE FACTORY

SERVICE PROJECTS

DIY SERVICE

SERVICE PARTNERSHIP

Reinsurance firm

Retailer

Systems supplier

C – F – B C – F – B

C – F – BC – F – B

Changing task allocation

An operation, task or activity

A movement of information, people or materials

A check, examination or inspection

A delay in the process

A queue of people or inventory of materials

Traditional operations process mapping symbols

CUSTOMER CSA COMPUTERRing loan company

Provide status information

Provide credit information

Size of loan required

Assess offer

Accept or reject offer

Answer call

Initial screening

Credit assessment

Size of borrowing

Explain costs and terms

Agree release/ payment details

Screening questions

Online credit check

Assess risk, calculate rate

Set up payment instructions

Assess call queue length

Simplified process map for a loan application

1. How easy was it to park the car?

2. How did the store look?

3. How attractive were the displays?

4. How soon were you assisted?

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

1 2 3 4 5

No spaces Plenty of spaces

Disgraceful Very clean/tidy

Very attractiveUninviting

15 mins+ 10 –15 mins 0 – 5 mins

Walk-through audit of an electrical store

x

2σ

3σ

2σ

3σ

x

x

x

x

x

x

x

xx

x

Time

Action limit

Warning limit

Warning limit

Action limit

Statistical process control chart

Low High

High

Low

Capability

Commodity

PROCESS VARIETY

VOLUME PER UNIT



Drive for increase in volume and cost reduction

Drive for flexibility and customisation

Pressures to change

Low High

High

Low

Capability

Commodity

PROCESS VARIETY

VOLUME PER UNIT



3

4

2

1 Invest in systems and training

Constrain flexible resources

Invest in process

capability

Develop incremental

capability

Strategies for change

Low High

High

Low

Capability

Commodity

PROCESS VARIETY

VOLUME PER UNIT



1a2

1

43

5

Start-up to starburst

Low High

High

Low

PROCESS VARIETY

VOLUME PER UNIT



Market flexibility and personalised solutions

Operate efficiently and consistently

Gap

The market–operations gap

Low High

High

Low

Capability

Commodity

PROCESS VARIETY

VOLUME PER UNIT



1a1

2

3

?3a

Thank You!

Discussions:

• What examples can you give of capability and commodity operations? What are the operations management challenges of each type?

• Undertake a service transaction analysis of a service operation, identifying the critical points for management attention.

• Analyse the servicescape of your favourite restaurant/eating place. What aspects encourage the ‘right’ behaviours in the customers and employees? Are there any aspects of the servicescape that you would change?

Service People



Agenda

• Pressures on Service Providers

• Managing Service Providers

• Motivating Service Providers

• Case Studies

Organisational pressures• Nature of the task• Service design, processes and resources• Performance objectives and targets• Reward and appraisal systems

Customer pressures• Customer expectations• Intensity of contact• Mood and anxiety• Customer competence

Pressures on service providers

Organisational pressures• Nature of the task• Service design, processes and resources• Performance objectives and targets• Reward and appraisal systems


Issues• Motivation• Role clarity and fit• Relationships• Risk• Stress

Potential outcomes• Increased costs• Poor industrial

relationships• Low morale• Ill health• Psychological damage• Learned helplessness• Poor service

Effects of organisational and customer pressure

Organisational pressures• Nature of the task• Service design, processes and

resources• Performance objectives and targets• Reward and appraisal systems


Potential results• Inspired and involved

employees• Responsive and

responsible employees• Process and customer

ownership• Employee commitment

and retention• Enjoyable work• Effective and efficient

delivery systems• Business improvement

Managing providers• Providing inspirational

leadership• Harnessing the power of

teams and teamwork across the organisation

• Clarifying the roles of service providers

• The appropriate use of scripts

• Defining and enabling appropriate levels of employee discretion

• Establishing effective communication to employees

• Involving employees in performance improvement

• Encouraging service employees to ‘own’ processes and customers

Protecting providers from the pressures

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

150

100

50

Adults in cell groupsNumber of cell

groups

10

20

Adults in cell groupsNumber of cell groups

200

0 0

Growth in membership

Thank You!

Discussions:

• Provide an example of a ‘scripted’ response. Describe and discuss theadvantages in using this script.

• What are the advantages and disadvantages of using teamwork in student assignments?

• Evaluate and assess your role as a customer in a supermarket, internetbased travel agency, and university/college course.

• From your observation of managers in shops and restaurants, what• behaviours assist their staff in dealing more effectively with the

pressures they experience, and what actions increase this pressure?

Resource Utilisation



Agenda

• Capacity Management

• Planning & Control

• Bottlenecks and Queues

• Case Studies

Proposal input (25/hr)

Risk analysis – actuary (15/hr)

Inform customer of decision (30/hr)

Original flow

Proposal input and credit score (22/hr)

Risk analysis – actuary (15/hr)

Inform customer of decision (30/hr)

Definite yes/no (50%)

Needs analysis (50%)

Revised flow

00.00 01.00 02.00 03.00 04.00 05.00 06.00 07.00 08.00 09.00 10.00 11.00 12.00

600

500

400

300

200

100

Time on phones

Administration time

CapacityLoad(minutes)

• Proactive customer management

• Build employee flexibility

• Communicate to staff and customers

• Understand the difference between ‘Must do’s’ and ‘Nice to do’s’

• Recruit ‘resilient’ staff for high-stress situations

Managing the Coping Zone

Beyond the Coping Zone!• Short-term ‘Coping’ is usually

survivable – ‘Coping’ that seems to have no hope of ending is potentially disastrous

• ‘Coping’ provides a trade-off of short-term survival against longer-term success

• Many managers report that ‘Coping’ is now the norm – and that they spend too much time Beyond the ‘Coping Zone’

Thank You!

Discussions:

• Select four service organisations and suggest how they might measure capacity and the problems in so doing.

• What capacity strategies might be used by an insurance broker, an internet retailer, and cruise ship company? Explain why they are appropriate.

• Describe the last time you were in a queue. Apply the principles of queuing to assess the waiting experience.

• What is meant by the coping zone? What are the implications for staff and customers of a supermarket when the supermarket enters this zone?

Networks, Technology & Information



Agenda

•Transforming Service

• Physical and Virtual Networks

• Integration

• Case Studies

Hub and spoke network

Ring network

Hierarchical network

1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

1996 1997 1998 1999 2000

20,000

15,000

10,000

5,000

0

Pass

enge

rs c

arrie

d pe

r qua

rter

Total passengers

Southwest passengers

Passenger numbers: Baltimore Providence market

Strategic asset-seeking motives

Efficiency-seeking motives

Resources-seeking motives

Market-seeking motives

Role of operations

task in locality

and configuration

of network

Operations organisational

structure

Transfer of technology

Location of operations

facilities

Selection of partners/

subcontractors

CulturalInfluencesof differentlocalities

GLOBAL NETWORK STRATEGY

Monitor/review performance of operations

Potential opportunity benefits of extending global reach of the business

Set in strategic context

Global network strategy

Networks

Technology

Information

People

Materials

Supplier Retailer

Design Manufacture Sales Service Logistics Customer support

Production staff Sales staff

DriversWarehouse staff

SchedulesRoutes

Support diagnostics

DrawingsRaw materials

Work-in-progress

Product in store

ProductSpares

Customer and competitor information

CAD systemMachinesCAM system

Diagnostic equipment

Component manufacture in China

National store network

Regional engineering territories

National distribution centre

Strong links Missing links Missing resource

SchedulesQuality systems

Designers

Spares

Customer database

Call monitor

PDAs

Service history

Call racking

Engineers Engineers Support staff

Website

Resource activity map for a domestic appliance retailer

Thank You!

Discussions:

• Describe the network structure of two organisations of your choice and discuss the differences between the two.

• Assess the physical and virtual networks of the university/college in terms of its location, capacity, capability and flexibility.

• Select an e-service provider and assess its website and service.• Select a major service provider in your locality, such as an airport or supermarket. Explain the reasons for the location and assess its

capability.

ddm 2006-services management

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