management of services

MANAGEMENT OF SERVICESInterdependence of Marketing, Operations,

and Human Resources

O perationsM anagem ent

M arketing M anagem ent

H um anR esource

M anagem ent

C ustom ers

MANAGEMENT OF SERVICES

• Three important components Marketing, Service Operations, Human Resource Management

• Operational systems should run smoothly and efficiently to deliver good service

• HR in coordination with Operations assumes greater importance

• Success depends upon integration of marketing or human resources

• If there are problems in any one of these three areas, then it may signal financial problems ahead


• Strategies to market manufactured goods • Four basic strategic elements: product, price,

place (or distribution), and promotion (or communication). Collectively referred to as the 4 Ps of the marketing mix

• Distinctive nature of service performances, customer involvement in production importance of the time factor

needs other strategic elements • 8 Ps model of integrated service management,

highlights the strategic decision variables facing managers of service organizations

MANAGEMENT OF SERVICES• Synergy and integration between each of

the 8 Ps is required for success

ProductE lem ents

P lace and Tim e

Prom otion and Education

Price and O therU ser C osts

Process

Productiv ity and Q uality

People

PhysicalEvidence


Product Elements • Combination of features of both the core product

(either a good or service) and the bundle of supplementary service elements surrounding it

• Reference to the benefits desired by customers with reference to the competition

• Attention to all aspects of the service performance that have the potential to create value for customers


Place and Time• Delivery Methods have and are undergoing rapid

change• Delivering product elements to customers is

gaining importance• Decisions on the place and time of delivery as

well as on the methods and channels employed is critical

• Delivery may involve physical or electronic distribution channels (or both), depending on the nature of the service being provided


Place and TimeSMS and the Internet allows information-based

services to be delivered in cyberspace for retrieval by telephone or computer wherever and whenever it suits the customer

Service delivery - directly to customers or through intermediary organizations, that may perform certain tasks associated with sales, service and customer contact

Speed, convenience of place and time for the customer are becoming important determinants in service delivery strategy


Process• Creating and delivering product elements to

customers requires the design and implementation of effective processes

• Process should describe the method, sequence of actions in which service operating systems work

• Badly designed processes can annoy customers being slow, bureaucratic and ineffective service delivery

• Poor processes affect frontline staff that results in low productivity and can increase service failures


Productivity and Quality • These elements are interrelated • No service firm can afford to address either

element in isolation • Productivity relates to how inputs are transformed

into outputs that are valued by customers• Quality refers to the degree to which a service

satisfies customers by meeting their needs, wants, and expectations

• Improving productivity is essential to keep costs under control


Productivity and Quality

• Inappropriate cuts in service levels are resented by customers and may be employees

• Service quality is essential for product differentiation and building customer loyalty

• Quality improvement investments needs understanding the tradeoff between incremental costs and incremental revenues for profitability


People • Services depend on direct, personal interaction

between customers and a firm's employees (such as getting a haircut or eating at a restaurant)

• The nature of these interactions strongly influences the customer's perceptions of service quality

• Customers often judge the quality of the service they receive based on their assessment of the people providing that service


People • Customers may also make judgments about

other customers they encounter• Successful service firms devote significant effort

to recruiting, training, and motivating their personnel

• Customer training may also be needed in some services (Physiotherapy, Technology)

• Firms often seek to manage through it’s employees the customer behavior (Counseling, Motivation, Dispute Resolution)


Promotion and Education• No marketing program can succeed without

effective communications • Communication plays three vital roles:

Providing needed information and advice

Persuading target customers of the merits of a specific product (service)

Encouraging customers to take action at specific times


Promotion and Education• In services marketing, much communication is

educational in nature, especially for new customers

• Companies may need to teach these customers about the benefits of the service, as well as where and when to obtain it

• Provide instructions on how to participate in service processes


Promotion and EducationCommunications can be delivered by• Individuals, such as salespeople and trainers• Through media such as TV, radio, newspapers,

magazines, posters, brochures and Web sites• Promotional activities may serve to organize

arguments in favour of selecting a particular brand

Use incentives to catch customer’s attention and motivate them to act


Physical Evidence• Appearance of buildings, landscaping, vehicles,

interior furnishing, equipment, staff members, signs, printed materials and other visible cues provide tangible evidence of a firm's service quality

• Service firms need to manage physical evidence for a profound impact on customers' impressions

• In services with few tangible elements, such as insurance, advertising is often employed to create meaningful symbols like LIC logo


Price and other User Costs• This component addresses management of the

expenditures and other outlays incurred by customers in obtaining benefits from the service product

• Traditional pricing tasks

Selling price to customers

Setting trade margins

Establishing payment terms


Price and other User Costs• Service providers should recognize and minimize

other burdens that customers may bear in purchasing and using a service

• These include

Time

Mental and Physical Effort

Unpleasant sensory experiences like noises feel / touch and smells


Services Marketing, Operations and

Human Resources

• These functions play central and interrelated roles components of integrated service management

• Customer needs with focus on marketing, operations & HR can operate successfully

• Develop effective strategies by incorporating eight P’s to succeed for surviving and prospering

• Those fail to grasp these implications are likely to be outmaneuvered by competitors who are more skilled at responding to the changes of the industry


Marketing Services versus Marketing Goods through Service

• Due to growth of the service economy and emphasis on adding value-enhancing services to manufactured goods, the lines between services and manufacturing sometimes become a bit blurred

• "There are not such things as service industries. There are only industries whose service components are greater or less than those of other industries. Everybody is in service"

Theodore Levitt


Marketing Services versus Marketing Goods through Service

• “Most goods businesses now view themselves primarily as services”

Roland Rust

• The difference is between situations in which a service itself is the core product and those in which manufacturers are adopting service like strategies to help them market the physical goods that they produce


Marketing of Services - service is the core product

Marketing Goods Through Service – physical good is the core product

Creating Value in a Context of Values

• Value can be defined as the worth of a specific action or object relative to an individual's (or organization's) needs at a particular point in time, less the costs involved in obtaining those benefits



• Value is created by offering the types of services that customers need, accurately presenting their capabilities and delivering them in a pleasing and convenient fashion at an acceptable price

• Firms also receive value from their customers, primarily in the form of the money paid by the latter to purchase and use the services



• Such transfers of value illustrate one of the most fundamental concepts in marketing, the exchange, which takes place when one party obtains value from another in return for something else of value

• These exchanges aren't limited to just buying and selling and but can be extended to any real life situation including employer/ employee

MANAGEMENT OF SERVICESCreating Value in a Context of Values • Customer makes decisions to invest time,

money and effort to obtain a service that promises the specific benefits

• Immediate need - a haircut, eating a pizza, repairing your car, watching movie theater

• Distant need - getting an education, insurance. • Customer takes a long-term perspective before

the payoff is realized for long-term need• If paid more than expected or received fewer

benefits than anticipated, customers feel cheated talks about poor value

• If customer feels bad treatment during service delivery, although product is good, customer may conclude that this poor treatment diminished the value received



• Customer takes a long-term perspective before the payoff is realized for long-term need

• If paid more than expected or received fewer benefits than anticipated, customers feel cheated talks about poor value

• If customer feels bad treatment during service delivery, although product is good, customer may conclude that this poor treatment diminished the value received

STRATEGIC MANAGEMENT OF SERVICES

Creating Value in a Context of Values • Firms seeks long-term relationships with either

customers or employees • Firms can not afford to mistreat them or to provide poor

value on an ongoing basis • At a minimum, it's bad business; at worst, it's unethical• Mistreating customers and employees is likely to

rebound to the firm's disadvantage• The potential for abusive behavior is perhaps higher in

services than in manufacturing, reflecting the difficulty of evaluating many services in advance

• Greater need to involve customers in service production and the face-to-face encounters with service personnel and other customers


Creating Value in a Context of Values • Companies need a set of morally and legally defensible

values to guide their actions and to shape their dealings with both employees and customers

• Values is as underlying beliefs about how life should be lived, how people should be treated (and behave), and how business should be conducted

• Use the firm's values as a reference point when recruiting and motivating employees

• Clarify the firm's values and expectations in dealing with prospective customers

• Firms should make efforts to attract and retain customers who share and appreciate same values

• Company's reputation for integrity, generosity and service is its most important asset


DISTINCTIVE MANAGEMENT CHALLENGES OF DIFFERENT PROCESSES

• The challenges and tasks of the process classification scheme is fundamental for understanding the differences in four service categories and for developing effective service strategies for different service products

• The understanding offers insights into the nature of service benefits and understanding of the behavior that is required of the customer

• It helps for developing channel strategy, designing and locating the service delivery system and using IT to best advantage


Identifying Service Benefits • Operational processes are basically just a

means to an end • The key is to understand the specific benefits

that customers hope to obtain from the service provider

• Innovation in service delivery requires that a constant spot light be maintained on the processes underlying delivery of the core product to provide desired benefit to the customer

• Technology often allows service organizations to deliver the same (or improved) benefits to customers via distinctly different processes


Identifying Service Benefits • Sometimes customers are delighted to receive service

through faster, simpler, more convenient procedures • Imposing new processes, in the name of efficiency, for

customers who prefer the existing approach (particularly when the new approach relies on technology and equipment to replace personal service by employees), may not work

• Coordination of marketing personnel and operations specialists will improve chances of designing new processes that deliver the benefits desired by customers in user-friendly ways


Identifying Service Benefits

• The timing and duration of the benefits derived from the service may differ markedly

• Renting a motel room is a real-time service in which the customer is an active participant

• By contrast, the customer does not participate in the actual repair of the VCR; moreover, the benefits of this repair are not realized until the machine returns home and is put to use again, repaired, machine may continue to offer the benefits of a better quality picture for years before it requires further servicing


Identifying Service Benefits

• The customer is mentally but not physically involved in watching the weather forecast on television, transmitted in real time from a studio but created in advance of the program; it provides the customer with the immediate benefit of information to make a quick decision

• The customer's involvement in health care insurance is limited to filling out an application and paying the policy fee; however, the benefits - in the form of peace of mind - will be felt as long as the policy remains in effect

High

Salt

Soft D rinks

VC R

Tennis R acquet

N ew C ar

M ade-to-M easureC loth ing

Furn iture R enta l

Fast-Food R estaurant

P lum bing R epair

Law n C are

O il C hange on C ar

H ouse C leaning

A irline F light

Teaching

Investm ent M anagem ent

Intangible Elem ents HighLow

The Degree of Tangibility or Intangibility of Service Processes

•Pure tangible good (such as soap or salt)• Tangible good with accompanying services (for example, cars or computers) • Hybrid (e.g., a restaurant) combining roughly equal parts of good and services • Major service with accompanying minor goods and services (e.g., air travel) • Pure service (such as babysitting or psychotherapy)

FOUR CATEGORIES OF SERVICE PROCESS

People processing involves tangible actions to people's bodies Possession processing includes tangible actions to goods and other physical possessions belonging to the customer

FOUR CATEGORIES OF SERVICE PROCESS

Mental stimulus processing refers to intangible actions directed at people's minds

Information processing describes intangible actions directed at a customer's assets


Design of the Service Factory • Every service has customers but not every

service interacts with them in the same way• Customer involvement in the core activity may

vary sharply for each of the four categories of service process

• Nothing can alter the fact that people-processing services require the customer to be physically present within the service factory


Design of the Service Factory • When customers visit a service factory, their

satisfaction will be influenced by such factors as:

• Encounters with service personnel

• Appearance and features of service facilities - both exterior and interior

• Interactions with self-service equipment

• Characteristics and behavior of other customers


Design of the Service Factory

• Where customers are required to be physically present throughout service delivery, the process must be designed around them from the moment they arrive at the service factory

• Customers may initially need parking (or other assistance in travelling to and from the service facility)



• The longer they remain on site, the more they are likely to need other services, including hospitality basics such as food, beverages and toilets

• In many instances, they will have to play active roles in creation and delivery of the service. Well-managed service firms teach their customers how to participate effectively in service operations


Design of the Service Factory • Service delivery sites that customers need

to visit must be located and designed with their convenience in mind. If the service factory is noisy, smelly, confusingly laid out and situated in an inconvenient location, then customers are likely to be turned off

• Marketing needs to work closely with their counterparts in operations to design facilities that are both pleasing to customers and efficient to operate



• The exterior of a building creates important first impressions, whereas the interior can be thought of as the stage on which the service performance is delivered. The longer customers remain in the factory and the more they expect to spend, the more important it is to offer facilities that are comfortable and attractive



• Marketers need to work with human resource managers

• The task is to ensure that those employees who are in contact with customers present an acceptable appearance and have both the personal and technical skills needed to perform well



• Unfortunately, service staff often lack the skills needed to provide satisfactory service for their customers. At the same time, customers may need some basic training or guidance on how to work cooperatively with service personnel to achieve the best results



• In situations where customers are expected to do some of the work themselves - as in self-service - then facilities and equipment must be designed for ease of use


Alternative Channels for Service Delivery

• Unlike the situation in people - processing services, managers responsible for possession-processing, mental stimulus-processing and information-processing services need not oblige their customers to visit a service factory


Alternative Channels for Service Delivery • They may be able to offer a choice

between one of several alternative delivery channels

Letting customers come to a user-friendly factory

Limiting contact to a small retail office that is separate from the main

factory (or back office)Coming to the customer's home or

officeConducting business from a distance


Alternative Channels for Service Delivery • Let's take cleaning and pressing of clothes - a

possession-processing service - as an example

One approach is to do your laundry at home

If you lack the necessary machines, then you can pay to use a laundromat, which is essentially a self-service cleaning factory

If you prefer to leave the task of laundry and dry cleaning to professionals, then you can go to a retail store


Alternative Channels for Service Delivery

Sometimes, cleaning is conducted in a space behind the store; at other times, the clothing is transported to an industrial site some distance away

Home pickup and delivery is available in some cities, but this service tends to be expensive because of the extra costs involved

Some people can afford to pay a housekeeper or maid to come to their home and do their laundry and ironing for them


Alternative Channels for Service Delivery • Both physical and electronic channels allow

customers and suppliers to conduct service transactions at arm's length

• Instead of shopping at a shopping center, you can study a printed catalog and order by telephone for parcel delivery or you can try shopping on the Internet, entering your orders electronically after reviewing your choices on a Web site display. Information-based items, such as software or research reports, can even be downloaded immediately to your own computer


Alternative Channels for Service Delivery • Today's managers need to be creative because the

combination of information technology and modern package transportation services such as DHL Courier Services offers many opportunities to rethink the place and time of service delivery

• Some manufacturers of small pieces of equipment allow customers to bypass retail dealers when a product needs repair. Instead, a courier will come to pick up the defective item (even supplying appropriate packaging if necessary), ship it to a repair site and return the item a few days later when the problem has been fixed


Alternative Channels for Service Delivery • Electronic distribution channels offer even more

convenience, because transportation time can be eliminated. For instance, by using telecommunication links, engineers in a central facility (which could be located on the other side of the world) may be able to diagnose problems in defective computers and software at distant customer locations and transmit electronic signals to correct the defects

• Rethinking service delivery procedures may allow a firm to get customers out of the factory and transform a high-contact service into a low-contact one


Alternative Channels for Service Delivery • When the nature of the process makes it possible to

deliver service from afar, then the design and location of the factory can focus on purely operational priorities

• Some industry observers are predicting that within the next two decades, the traditional bank branch will cease to exist and we will be conducting most of our banking transactions via ATMs, telephones or personal computers

• The chances of success in such an endeavor are enhanced when the new procedures are user-friendly, less expensive, and offer customers greater convenience


Making the Most of Information Technology

• It's clear that information-based services (a term that covers both mental stimulus-processing and information-processing services) have the most to gain from advances in information technology because telecommunications and the Internet allow the operation to be physically separated from its customers, without even the need for physical shipments

• A growing number of banks are now adding Internet capability so that customers can access their accounts and conduct certain transactions from their home or office computers. One of the challenges, however, is to persuade customers to switch their banking behavior to the Web from more traditional channels



• Examples of using technology to transform the nature of the core product and its delivery system are based on radio and television

• From studio symphony performances to call-in gardening advice programs, broadcasting have created new ways to bring advice, entertainment, culture and spiritual enlightenment to widely scattered audiences



• In many countries, education is offered through electronic channels as an alternative to the traditional mode. Virtual universities are springing up. The OU are offering degree programs to students nationwide through the electronic campus, television and radio

• Anyone can watch or hear the programs, of course, but registered students also receive printed course material through the mail and communicate with tutors by mail, e-mail or telephone


BALANCING SUPPLY AND DEMAND

• Sharp fluctuations in demand are a bane in the lives of many managers

• Manufacturing firms can stock supplies of their product to counter against fluctuations in demand

• This strategy enables them to enjoy the economies derived from operating factories at steady production levels



• Few service businesses can do this easily. The potential income from an empty seat on an airliner is lost forever once that flight takes off, airline do over bookings

• When demand for service exceeds supply, the excess business may be lost. If someone can't get a seat on one flight, another carrier gets the business. Customers may be forced to wait in a queue until sufficient productive capacity is available to serve them



• Services that process people and physical objects are more likely to face capacity limitations than those that are information based

• Technology has not found ways to increase the capacity of service operations that process people and their physical possessions with minimum cost increase



• Managing demand becomes essential to improving productivity in services that involve tangible actions

• Customers must be given incentives to use the service off-peak periods or through advance reservations

• The problem for people-processing services is that customers will wait in line only so long they have other things to do and may soon become bored, tired, and impatient or till no options are available



• One strategy for reducing or eliminating the need for waiting is to institute a reservation system, but the times offered should be honored if this course of action is chosen

• By contrast, physical possessions rarely suffer if they have to wait (unless they are highly perishable)



• More relevant to customers is the cost and inconvenience associated with delays in waiting to recover the item being serviced

• The issue of demand and capacity management is important to productive use of assets (and thus profitability)


PEOPLE AS PART OF THE PRODUCT

• The more involved customers become in the service delivery process, the more they tend to see service personnel

• In many people-processing services, customers meet lots of employees, often interact with them for extended periods of time and are more likely to run into other customers



• Many service facilities achieve their operating economies by serving large numbers of customers simultaneously

• When other people become a part of the service experience, they can enhance it or detract from it



• Direct involvement in service production means that customers evaluate the quality of employee's appearance and social skills as well as their technical skills. Customers also make judgments about other customers

• Managers have to manage customer behavior

• Service businesses of this type are harder to manage due to involvement of human element


HOW SERVICES DIFFER FROM GOODS• Customers do not obtain ownership of

services• Service products are intangible performances• Greater involvement of customers in the

production process• Other people may form part of the product• More variability in operational inputs outputs


HOW SERVICES DIFFER FROM GOODS• Many services are difficult for customers

to evaluate• Absence of inventories after production• Time factor is relatively more important• Delivery systems may involve both electronic and physical channels


AVOIDING OVERGENERALIZATION

• All the characteristics cannot be applied to all services

• In the past many characteristics could be applied to many services in the possession-processing and information-based categories due to the traditional delivery model


AVOIDING OVERGENERALIZATION

• Technology driven delivery systems located anywhere can deliver through physical channels or through electronic channels

• New information based service configurations present distinctive marketing challenges and opportunities


SERVICE AS A SYSTEM• The level of contact that a service business

intends to have with its customers is a major factor in defining the total service system Subsystems

• Service operations, where inputs are processed and the elements of the service product are created

• Service delivery, where final assembly of these elements takes place and the product is delivered to the customer

• Service marketing, which embraces all points of contact with customers, including advertising, billing and market research


Backstage(Invisib le)

TechnicalCore

Physical Support

Contact Personnel

Custom er O therCustom er

Front Stage(Visib le to Custom er)

THE SERVICE BUSINESS AS A SYSTEM


SERVICE OPERATIONS SYSTEM

Like a play in a theater, the visible components of service operations can be divided into

• Those relating to the actors (or service personnel)

• Those relating to the stage set (or physical facilities, equipment and other tangibles)


SERVICE OPERATIONS SYSTEM

• Backstage is of little interest to audience (customers)

• Evaluation on actually experience during service delivery and on the perceived service outcome

• If the back stage personnel and systems fail to perform their support tasks properly in ways that affect the quality of front-stage activities, results in dissatisfaction


SERVICE OPERATIONS SYSTEM• The proportion of the overall service operation

that is visible to customers varies according to the level of customer contact

• High-contact services directly involve the physical person of the customer, either customers must enter the service factory (although there may still be many backstage activities that they don't see) or service workers and their tools must leave their backstage and come to the customer's chosen location


SERVICE OPERATIONS SYSTEM• Medium-contact services, by contrast, require a

less substantial involvement of the customer in service delivery. Consequently, the visible component of the service operations system is smaller

• Low-contact services usually have a strategy of minimizing customer contact with the service provider, so most of the service operations system is confined to a remotely located backstage; front-stage elements are normally limited to post and telecommunications contacts


SERVICE DELIVERY SYSTEM• Service delivery is concerned with where, when,

and how the service product is delivered to the customer

• Subsystem embraces not only the visible elements of the service operating system - buildings, equipment and personnel - but may also entail exposure to other customers

• The visible component of the service operations system is shrinking in many industries as electronic technology or redesigned physical flows are used to drive service delivery from higher to lower levels of contact


SERVICE DELIVERY SYSTEM• Self-service delivery often offers customers

greater convenience than face-to-face contact• Machines such as automated gasoline pumps,

ATMs, or vending machines can be installed at numerous locations and are open 24X7X365

• Potential disadvantages - shift from personal service to self-service can disturbs customers

• Strategy of replacing employees by machines or self-service procedures needs campaign to educate customers and promote the benefits of the new approach

MANAGEMENT OF SERVICESSERVICE DELIVERY SYSTEM• Distinction between high contact and low contact

is like the differences between live theater theatre performance and a drama on radio

• Customers of low-contact services normally never see the factory they may talk with a service provider by telephone. They make judgments about service quality based on ease of telephone access, the voice and responsiveness of telephone based customer service representative

• For service delivered through impersonal electronic channels, self-service machines, automated telephone calls, there is very little traditional theater left to the performance

MANAGEMENT OF SERVICESThe Dramaturgy of Service Delivery• Theater is a good metaphor for services

• Service delivery consists of a series of processes that customers experience as a performance

• Useful approach for high-contact service providers (such as physicians, educators, restaurants and hotels) and for businesses that serve many people simultaneously rather than providing individualized service (hospitals, sports)


The Dramaturgy of Service Delivery• Relative importance of theatrical

dimensions for different types of service businesses

• Watch repair services have very few front-stage theatrical components compared with services such as airlines and spectator sports


The Dramaturgy of Service Delivery• Service facilities contain the stage on

which the drama unfolds

• Sometimes the setting changes from one act to another

• When airline passengers move from the entrance to the terminal to the check-in stations and then on to the boarding lounge and finally step inside the aircraft


The Dramaturgy of Service Delivery• The stage may have minimal props

In a typical post office, which tends to be rather utilitarian

• Elaborate scenery

In some modern resort hotels

• Many service dramas are tightly scripted

In the way that service is delivered in a formal restaurant setting


The Dramaturgy of Service Delivery

• Some services are more ritualized than others

• Highly structured environments, like hospital, how the actors (in this case, receptionists, ward boys, nurse and doctors) move relative to the stage (hospital), items of scenery (furniture and equipment) and other actors may be defined in a manner analogous to theatre



• Not all service providers require customers to attend performances at the company's theater

• In many instances, the customer's own facilities provide the stage where actors perform with their props (External Auditors)



• Telecommunication linkages offer an alternative performance environment, allowing customers to be involved in the drama from a remote location like CA would prefer to work for their clients from the comfort of their own offices via modems and computers



• Front-stage personnel are members of a cast, playing roles as actors in a drama and supported by a backstage production team

• In some instances, actors are expected to wear special costumes when on stage. When service employees wear distinctive dress, they stand out from personnel at other firms



• Uniform designs can be seen as a form of packaging that provides physical evidence of brand identity

• Choice of uniform design and colors is carefully integrated with other corporate design elements

• Many front-stage employees must conform to both a dress code and grooming standards

MANAGEMENT OF SERVICESThe Dramaturgy of Service Delivery• Depending on the nature of their work,

employees may be required to learn and repeat specific lines ranging from announcements in several languages to a predesigned sales talk

• Just as in theater, companies often use scripting to define actor’s behavior as well as their lines. Eye contact, smiles and handshakes may be required in addition to a spoken greeting. Other rules of conduct may include bans on smoking, eating and drinking or gum chewing while on duty


(1)C ar R epair

W atch R epairShoe R epair

PhysicianBarberLaw yer

(2)

(3) (4)U tility

InsuranceD iscount R etailer

A irlinesSpectator Sports

R estaurants

Audience S ize = N um ber of people receiv ing the service sim ultaneouslyC ontact = Am ount of tim e frontstage/am ount of tim e backstage

Low

H igh

Low H igh

C ontact

Relative Importance of Theatrical Dimensions



Role and Script Theories

• Role and script theories offer some interesting insights for service providers

• If we view service delivery as a theatrical experience, then both employees and customers act out their parts in the performance according to predetermined roles




• Role can be defined as "a set of behavior patterns learned through experience and communication, to be performed by an individual in a certain social interaction in order to attain maximum effectiveness in goal accomplishment"

MANAGEMENT OF SERVICESThe Dramaturgy of Service Delivery

Role and Script Theories• Roles have also been defined as

combinations of social cues or expectations of society, that guide behavior in a specific setting or context

• In service encounters, employees and customers each have roles to play

• Satisfaction of both parties depends on role congruence or the extent to which each person acts out his or her prescribed role during a service encounter

MANAGEMENT OF SERVICESThe Dramaturgy of Service Delivery Role and Script Theories• Employees must perform their roles to

customer expectations or risk dissatisfying or losing customers altogether

• Customers, too, must play by the rules or they risk causing problems for the firm, its employees and even other customers

• Scripts are sequences of behavior that both employees and customers are expected to learn and follow during service delivery




• Scripts are learned through experience, education and communication with others

• Service script provides detailed actions that customers and employees are expected to perform




• The more experience a customer has with a service company, the more familiar the script becomes

• Any deviations from this known script may frustrate both customers and employees and can lead to high levels of dissatisfaction




• If a company decides to change a service script (for example, by using technology to turn a high-contact service into a low-contact one), service personnel and customers should be educated about the new script and the benefits it provides



• Some scripts are highly routinized and allow service employees to move through their duties quickly and efficiently

• This reduces variability and ensure uniform quality

• The risk is that frequent repetition may lead to mindless service delivery that ignores customers' needs




• Not all services involve tightly scripted performances

• Highly customized services - such as doctors, educators, hairstylists or consultants - the service script is flexible and may vary by situation and by customer



• When customers are new to a service, they may not know what to expect and be fearful of behaving incorrectly

• Organizations should be ready to educate new customers about their roles in service delivery because inappropriate behaviors can disrupt service delivery and make other customers feel embarrassed and uncomfortable




• Routinized scripts allow service employees to move through their duties quickly and efficiently

• Defining customer & employee scripts is a good start for flowcharting process to provide full description of service encounter and help identify potential or existing problems in a service process




• Examining existing scripts may suggest ways to modify the nature of customer and employee roles

• This can improve service delivery, increase productivity and enhance the nature of the customer's experience

• Service delivery procedures need to respond to new technology as revised scripts may have to be developed


Service Marketing System

Other elements that impact customer's overall view of a service business include

• Communication efforts by the advertising and sales departments

• Telephone calls and letters from service personnel

• Billings from the accounting department



• Random exposures to service personnel and facilities

• News stories and editorials in the mass media

• Word-of-mouth comments from current or former customers

• Participation in market research studies



• The various components add up to what we term the service marketing system

• This represents all the different ways in which the customer may encounter or learn about the organization that provides service



• Services are experiential, each of these elements offers clues about the nature and quality of the service product

• Inconsistency between different elements may weaken the organization's credibility in the customers' eyes

MANAGEMENT OF SERVICESService Marketing System• The scope and structure of the service marketing system

often vary sharply from one type of organization to another

Service O perations System

Service Delivery System O ther Contact Points


Front Stage(vis ible)

O therCustom ers

O ther Custom ers

Technical Core

Interior &ExteriorFacilities

Equipm ent

ServicePeople

Advertis ing

Sales Calls

M arket ResearchSurveys

B illing/Statem ents

M iscellaneous M ail,Phone Calls, Faxes, etc.

Random Exposures to Facilities/Vehicles

Chance Encounterswith Service Personnel

W ord-fo-M onth

TheC ustom er

The Service Marketing System for a High-Contact Service

MANAGEMENT OF SERVICESService Marketing System• The scope and structure of the service marketing system

often vary sharply from one type of organization to another

Service O perations System Service Delivery System O ther C ontact Points


Front Stage(vis ib le)

TheC ustom ers

Technica l C ore

M ail

Self Serv iceEquipm ent

Phone, Fax, W ebsite, e tc.

Advertis ing

Sales C alls

M arket R esearchSurveys

B illing/Statem ents

R andom Exposures to Facilities/Vehicles

W ord-fo-M onth

The Service Marketing System for a Low-Contact Service


Tangible Elements and Communication Components in the Service Marketing System

1. Service personnel. Contacts with customers may be face-to-face, by telecommunications or by mail These personnel may include

• Sales representatives • Customer service staff• Accounting/billing staff• Operations staff who do not normally provide

direct service to customers (e.g., engineers, janitors)

• Designated intermediaries whom customers perceive as directly representing the service firm


Tangible Elements and Communication Components in the Service Marketing System

2. Service facilities and equipment• Building exteriors, parking areas, landscaping• Building interiors and furnishings• Vehicles• Self-service equipment operated by customers • Other equipment

STRATEGIC MANAGEMENT OF SERVICESTangible Elements and Communication

Components in the Service Marketing System3. Non-personal communications • Form letters• Brochures/catalogs/instruction manuals/Web sites • Advertising• Signage• News stories/editorials in the mass media4. Other people• Fellow customers encountered during service delivery• Word-of-mouth comments from friends, acquaintances or even strangers


Service Scape Other Tangibles

Facility exterior Business cards

Exterior design Stationery

Signage Billing statements

Parking Reports

Landscape Employee dress

Surrounding environment Uniforms

Facility interior Brochures

Interior design Web pages

Equipment Virtual service scape

Signage

Layout

Air quality/ temperature

Elements of Physical Evidence

STRATEGIC MANAGEMENT OF SERVICESExamples of Physical Evidence from the Customer's Point of View

Physical Evidence

Service Servicescape Other Tangibles

Insurance Not applicable Policy itself Billing statements Periodic updates Company brochure Letters/cards Website

Hospitals Building exterior Parking Signs Waiting areas Admissions office Patient care room Medical equipment Recovery room

Uniforms Reports/stationery Billing statements Website

Airline Airline gate area Airplane exterior Airplane interior (decor, seats, air quality)

Tickets Food Uniforms Website

Express mall Not applicable Packaging Trucks Uniforms Computers Website

Sporting event Parking Stadium exterior Ticketing area Entrance Seating Restrooms Concession areas Playing field

Signs Tickets Program Uniforms Website


PerceivedServicescape

A Fram ework for Understanding Environm ent-User Relationships in Service Organizations

INTERNALRESPONSES

BEHAVIORHOLISTICENVIRONMENT

Am bient Conditions

TemperatureAir qualityNoiseMusicOdorEtc.

Space/Function

LayoutW quipm entFurnishingsEtc.

Signs, Symbols,and Artifacts

SignagePersonal artifactsStyle of decorEtc.

Cognitive Em otional Physiological

BeliefsCategor-izationSym bolicmeaning

MoodAttitude

PainCom fortMovementPhysicalfit

Individual Behaviors

AffiliationExplorationStay longerCom mitmentCarry out plan

Social Interactions

Between andam ong custom ersand employees

Individual Behaviors

AttractionStay/exploreSpend m oneyReturnCarry out planCognitive Em otional Physiological

PainCom fortMovementPhysicalfit

MoodAttitude

BeliefsCategor-zationSym bolicmeaning

CustomerResponses

Em ployeeResponses


Company

Internal Marketing External Marketing Making

prom isesEnablingprom ises

ProvidersInteractive Marketing

Keeping prom ises

Custom ers

The Services Marketing Triangle

STRATEGIC MANAGEMENT OF SERVICESLevels of Customer Contact with Service Organizations

N ursing H om e

H aircut

Four-Star H ote l

G ood R estaurant

A irline Trave l

R eta il Banking

M anagem ent C onsulting

Telephone Banking

C ar R epair

Insurance

M ote l

Fast FoodD ry C leaning

M ovie Theater

C ity Bus

H om e Banking

M ail-Based R epairs

In ternet-Based Services

C able TV

Em phasizesEncounters

w ith Service Personnel

Low

H igh

Em phasizesEncounters

w ith Equipm ent

STRATEGIC MANAGEMENT OF SERVICESCUSTOMER – AS COPRODUCER Levels of Customer Contact

Low (Customer PresenceRequired during Service Delivery)

Moderate (Customer InputsRequired for Service Creation)

High (Customer Co-producesthe Service Product)

Products are standardized

Client inputs customize a standard service

Active client participation guides the customized service

Service is provided regardless of any individual purchase

Provision of service requires customer purchase

Service cannot be created apart from the customer's purchase and active participation

Payment may be the only required customer input

Customer inputs (information, materials) are necessary for an adequate outcome, but the service firm provides the service

Customer inputs are mandatory and co-produces the outcome

Examples:

End consumer

Bus travel Haircut Marriage counseling

Motel stay Annual physical exam Personal training

Movie theater Full-service restaurant Weight-reduction program

Business-to-business customer

Uniform cleaning service Agency-created advertising campaign Management consulting

Pest control Payroll service Executive management seminar

Interior greenery maintenance Independent freight transportation Install wide area network (WAN)

MANAGEMENT OF SERVICESManagement of Service Quality

Customer Expectations

Expectedservice

C ustom ergap

Perceivedservice


GAP ANALYSIS

Externalcom m unications

to custom ers

C ustom er

Expectedservice

C ustom ergap Perceived

service

C om panygap 1 G ap 3

Service delivery

G ap 2

Custom er-drivenservice designs and

standards

Com pany perceptions ofconsum er expectations

G ap 4

Gap 1— Not knowing what customers expectGap 2— Not selecting the right service designs and standards Gap 3— Not delivering to service standardsGap 4— Not matching performance to promises


High

Low

Idealexpectations

or desires

N orm ative"should"

expectations

Experience-basednorm s

Acceptableexpectations

M inim umtolerable

expectations

"Everyone says th is restaurantis as good as one in France

and I want to go som ewhere veryspecial for m y anniversary."

"As expensive as th isrestaurant is, it ought to haveexcellent food and service."

"M ost tim es th is restaurantis very good, but when it gets

busy the service is slow."

"I expect th is restaurantto serve m e in an

adequate m anner."

"I expect terrib le servicefrom th is restaurant but com e

because the price is low."

Possible Levels of Customer Expectations


Customer Expectations Beliefs about service delivery that functions as standards or reference points against which performance is judged

Expectedservice

C ustom ergap

Perceivedservice

Desired Service

Adequate Service

Zone ofTolerance


Expectations Culture Dependent – Japanese and

EnglishExperience Dependent - Japanese and

Russian

Zone of ToleranceRange or window in which customers do

not particularly notice service performance

Can be large be narrow or large depending types of service


Different Customers - Possess Different Zones of Tolerance

Narrow Zone – Tighter Service Wider Zone – Tolerable Service

Individual customer's zone of tolerance increases or decreases depending on a number of factors, including company -controlled factors such as price


Management of Service Quality

Zones of Tolerance Vary for Service Dimensions

In addition to higher expectations for the most important service attributes, customers are not willing to relax these expectations for less important factors for the zone of tolerance


FACTORS THAT INFLUENCE CUSTOMER EXPECTATIONS OF SERVICE

Sources of Desired Service Expectations Personal Needs

Personal needs can fall into many categories, including physical, social, psychological and functional

MANAGEMENT OF SERVICESSome customers are more demanding than others, having greater sensitivity to, and higher expectations of service

Enduring Serviceintensifiers

Personal needs

EXPECTEDSERVICE

DesiredService

Zone of

Tolerance

Adequate Service



Enduring service intensifiers are individual, stable factors that lead the customer to a heightened sensitivity to service

One of the most important of these factors can be called derived service expectations, which occur when customer expectations are driven by another person or group of people


Another enduring service intensifier is personal service philosophy—the customer's underlying generic attitude about the meaning of service and the proper con duct of service providers

If you have ever been a waitress or a waiter in a restaurant, you are likely to have standards for restaurant service that were shaped by your training and experience in that role

MANAGEMENT OF SERVICESAnother enduring service intensifier is personal service philosophy—the customer's underlying generic attitude about the meaning of service and the proper conduct of service providers

If you have ever been a waitress or a waiter in a restaurant, you are likely to have standards for restaurant service that were shaped by your training and experience in that role

Service philosophies and derived service expectations elevate the level of desired service

MANAGEMENT OF SERVICESFactors That Influence Adequate Service

DesiredService

Zone of

Tolerance

Adequate Service

Transitory serviceintensifiers

Perceived servicealternatives

Self-perceivedservice role

Situationalfactors

Predictedservice


Transitory service intensifiers, consists of temporary, usually short-term, individual factors that make a customer more aware of the need for service Personal emergency situations in which service is urgently needed (such as an accident) raise the level of adequate service expectation, particularly the level of responsiveness required and considered acceptable


Perceived service alternatives are other providers from whom the customer can obtain serviceIf customers have multiple service providers to choose from or if they can provide the service for themselves (such as lawn care), their levels of adequate service are higher than those of customers who believe it is not possible to get better service elsewhere


Self-perceived service role is defined as customer perceptions of the degree to which customers exert an influence on the level of service they receiveIn other words, customer’s expectations are partly shaped by how well they believe they are performing their own roles in service delivery

MANAGEMENT OF SERVICESSituational factors is defined as service performance conditions that customers view as beyond the control of the service provide

For example personal emergencies such as serious automobile accidents would intensify customer service expectations of insurance companies, catastrophes that affect a large number of people at one time (tornadoes or earthquakes) may lower service expectations because customers recognize that insurers are inundated with demands for their services



Sources of Desired and Predicted Service Expectations

Factors That Influence Desired and Predicted Service

DesiredService

Zone of

Tolerance

Adequate Service

EXPECTEDSERVICE

Explicit serviceprom ises

Im plicit service prom ises

Word of m outh

Past experience

PredictedService


Management of Service Quality

Perception

Outcome

Interaction

Physical Environment Quality


Service Quality Dimensions• Reliability - Ability to perform the promised service dependably and accurately• Responsiveness - Willingness to help customers and provide prompt service• Assurance - Employee’s knowledge and courtesy and their ability to inspire trust and confidence• Empathy - Caring, individualized attention given to customers• Tangibles - Appearance of physical facilities,

equipment, personnel & written materials


Reliability Responsiveness Assurance Empathy Tangibles

Car repair (consumer)

Problem fixed the first time and ready when promised

Accessible; no waiting; responds to requests

Knowledgeable mechanics

Acknowledges customer by name; remembers previous problems and

Repair facility; waiting area; uniforms;equipment

Airline (consumer)

Flights to promised destinations depart and arrive on schedule

Prompt and speedy system for ticketing, in-flight baggage handling

Trusted name; good safety record; competent employees

preferences Understanding of special individual needs; anticipates customer needs

i Aircraft; ticketing counters; baggage area; uniforms

Medical care (consumer)

Appointments are kept on schedule; diagnoses prove accurate

Accessible; no waiting; willingness to listen

Knowledge, skills, credentials, reputation

Acknowledges patient as a person; remembers previous problems; goodlistening; patience

Waiting room; exam room; equipment; written materials

How Customers Judge the Five Dimensions of Service Quality


How Customers Judge the Five Dimensions of Service Quality

Reliability Responsiveness Assurance Empathy Tangibles

Architecture (business)

Delivers plans when promised and within budget

Returns phone calls; adapts to changes

Credentials; reputation; name in the community;' knowledge and skills

Understands client's industry; acknowledges and adapts to specific client needs; gets to know the client

Office area; reports; plans themselves; billing statements; dress of employees

Information processing(internal)

Provides needed information when requested

Prompt response to requests; not "bureaucratic"; deals with problems promptly

Knowledgeable staff;well-trained; credentials

Knows internal customers as individuals; understands individual and departmental needs

Internal reports; office area; dress of employees

Internet brokerage (consumer and business)

Provides correct information and executes customer requests accurately

Quick website with easy access and no down time

Credible information sources on the site; brand recognition; credentials apparent on site

Ability to respond with human interaction as needed

Appearance of the website and collateral

STRATEGIC MANAGEMENT OF SERVICESManagement of Service Quality

STRATEGIES FOR INFLUENCING CUSTOMER PERCEPTIONS

• Measure and Manage Customer Satisfaction and Service Quality

• Aim for Customer Quality and Satisfaction in Every Service Encounter

Plan for Effective Recovery Facilitate Adaptability and Flexibility Encourage Help Employees Cope with Problem Customers Manage the Dimensions of Quality at the Encounter Level


SERVICE GUARANTEES

Benefits of Service Guarantees• A good guarantee forces the company to focus on its customers• An effective guarantee sets clear standards for the organization•A good guarantee generates immediate and relevant feedback from customers •When the guarantee is invoked there is an instant opportunity to recover •Information generated through the guarantee can be tracked and integrated into continuous improvement efforts •Studies of the impact of service guarantees suggest that employee morale and loyalty can be enhanced as a result •For customers, the guarantee reduces their sense of risk and builds confidence


Demand and Supply Management in Services

• The fundamental issue underlying supply and demand management in services is the lack of inventory capability

• Lack of inventory capability is due to the perishability of services and their simultaneous production and consumption

Factors

Excess demand Demand exceeds optimum capacity Demand and supply are balanced at the level of optimum capacity Excess capacity



Valum e Dem anded

Maxim um capacity

Optim um capacity(dem and and supply are w ell

balanced)

Low utilization(m ay send bad signals)

Tim e

Excess dem and(business is lost)

Dem and exceedsoptim um capacity

(service quality declines)

Ideal use

Excess capacity(w asted

resources)

Variations in Demand Relative to Capacity

STRATEGIC MANAGEMENT OF SERVICESDemand and Supply Management in Services

UNDERSTANDING CAPACITY CONSTRAINTS• Time, Labor, Equipment, Facilities• Optimal versus Maximal Use of Capacity

UNDERSTANDING DEMAND PATTERNS• Charting Demand Patterns• Predictable Cycles• Random Demand Fluctuations• Demand Patterns by Market Segment

STRATEGIES FOR MATCHING CAPACITY AND DEMAND


Demand and Supply Management in ServicesSTRATEGIES FOR MATCHING CAPACITY AND DEMANDShifting Demand to Match Capacity

DEMANDTOO HIGH

SHIFT DEMANDDEMANDTOO LOW

Use signage to com muncate busy days andtimes.Offer incentives to customers for usageduring nonpeak tim es.Take care of loyal or "regular" customers first.Advertise peak usage times and benefits ofnonpeak use.Charge full price for the service--nodiscounts.

Use sales and advertising to increasebusiness from current marketsegments.Modify the service offering to appealto new market segments.Offer discounts or price reductions.Modify hours or operation.Bring the service to the customer.

STRATEGIC MANAGEMENT OF SERVICESDemand and Supply Management in ServicesWAITING LINE STRATEGIES: WHEN DEMAND AND CAPACITY CANNOT BE ALIGNEDWaiting Line Strategies

Em ploy operationallogic to reduce w ait

Make waiting fun,or at least tolerable

Establisha reservationprocess

Differentiatewaiting custom ers


Demand and Supply Management in ServicesWAITING LINE STRATEGIES: WHEN DEMAND AND CAPACITY CANNOT BE ALIGNEDWaiting Line Strategies

Multiple Queue Single Queue

(a)

(C)

3 4

5

6

7

8

9

10

11

12

2

Enter

(b)

Take a Number



Make Waiting Fun, or at Least Tolerable

• Unoccupied Time Feels Longer Than Occupied Time

• Preprocess Waits Feel Longer Than In-Process Waits

• Anxiety Makes Waits Seem Longer

• Uncertain Waits Are Longer Than Known, Finite Waits

• Unexplained Waits Are Longer Than Explained Waits

• Unfair Waits Are Longer Than Equitable Waits

• The More Valuable the Service, the Longer the

• Customer Will Wait

• Solo Waits Feel Longer Than Group Waits


PLANNING AND CREATING SERVICES

Corporate Objectives and Resources

• Market and competitive analysis

• Resource allocation analysis

• SWOT analysis

• Identifying SWOT factors on both the

marketing and operational / human resources

fronts


M arket andC om petitive

Analysis

C orporate O bjectivesand R esources

R esourceA llocationAnalysis

Service D elivery P rocess

M arketing AssetsStatem ent

C ustom er portfo lioM arket know ledgeM arketing im plem entation skillP roduct linePosition ing stra tegy (ies)R eputation of brand(s)

O perating AssetsStatem ent

Physica l facilitiesEquipm entIn form ation technologyH um an resources (num bers and skills)A lliances and partnersh ipsC ost structure

Service M arketing C onceptBenefits to C ustom er

C ore productSupplem entary servicesService leve ls and sty leAccessib ility (w here and w hen)

U ser costsPrice and other m onetary costsTim eM enta l e ffortPhysica l e ffortN egative sensory experiences

Service O perations C onceptN ature of processes

People processingPossession processingM enta l stim ulus processingInform ation processing

G eographic scope of operationsArea(s) servedS ingle s ite versus m ultis iteFacilities locationTelecom m unications linkages

SchedulingH ours/days/seasons of serviceC ontinuous versus in term ittentIf in term ittent, w hat frequency

Facilities design and layoutH um an resources (num bers and skills)Leverage through partnersh ips andself serviceSpecific tasks asigned to front stageand backstage operations

Planning and Creating Services

STRATEGIC MANAGEMENT OF SERVICESTHE NATURE OF SERVICE OFFERINGAugmented Product

Service Frequency

Vehicle

Transport In-F lightService

Food&

D rink

Pre- &PostflightService

M arketing Position ing(w eighted tow ard evidence) Tangib le E lem ents

Key

Intangib le E lem ents

Shostack's Molecular Model: Passenger Airline Service


SERVICE BLUEPRINTINGDeveloping a Blueprint• Distinguish between what the customer experiences front-stage and the activities of employees and support processes at backstage, which the customer cannot see. Between the two lies what is called the line of visibility • Blueprinting should identify potential fail points in the process that pose a significant risk of things going wrong and diminishing service quality

STRATEGIC MANAGEMENT OF SERVICESSERVICE BLUEPRINTINGDeveloping a Blueprint• Knowledge of such fail points helps to design procedures to avoid their occurrence or to

prepare contingency plans (or both)• Points in the process where customers commonly have to wait can also be pinpointed. Standards can be developed for execution of each activity, including times for completion of a task, maximum wait times in between tasks, and scripts to guide interactions between staff members and customers


SERVICE BLUEPRINTINGDeveloping a Blueprint• Identifying Fail Points and Setting Service Standards

C O R E

Inform ation

C onsulta tion

O rder Taking

H ospita lity

C aretaking

Exceptions

B illing

Paym ent

The Flower of Service: Core Product Surrounded by Clusters of Supplementary Services

management of services

Documents