17342649 service sector management theory wwwmanagementsourceblogspotcom

7/31/2019 17342649 Service Sector Management Theory Wwwmanagementsourceblogspotcom

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[SEMESTER 5] [SERVICE SECTOR MANAGEMENT]

SERVICE SECTOR MANAGEMENT

WHAT IS SERVICESServices include all economic activities whose output is not a physical

product or construction, is generally consumed at the time it is produced andprovides added value in forms (such as convenience, timeliness, comfort orhealth).That is essentially intangible concerns of its first purchaser.

DIFFERENCES BETWEEN SERVICES AND CUSTOMER SERVICESA company like IBM offers repair and maintenance service of equipment,consultancy, training services etc. These services may include a tangibleproduct like a report or train manual. Customer Services , however is theservice provided in support of a companys core product ike answeringquestion , taking orders ,dealing with billing issue , handling complaints etc

Typically there is no charge for customer service is essential for buildingcustomer relationship . Customer services are hence different from servicesprovided for sale by a company. Federal Express market and deliversservices. It also provides a high level of customer services. Its services areovernight package delivery, and logistics services. Its customer servicesinclude well trained staff who can answer all question on telephone, on linetracking of parcels etc.

CONCEPT OF SERVICE MARKETINGThe perception of service marketing focuses on selling the services in thebest interest of users/customers. Marketing a service is meant marketing

something intangible. It is marketing a promise. It is more selling yourself. Inthe marketing of services, we go through a number of problems directly orindirectly influencing the business index. The problems like marketsegmentation, marketing information system, behavioural management arestudied minutely which simplify the task of formulating a sound mix formarketing, such as Product mix, Promotion mix, Price mix and the Place mix.It is important to mention that we find People animportant mix of marketing services. If we market the services in a rightdirection, the available opportunities can be capitalized on optimally and alsoit contributes substantially to the process of development. In view of theabove, we observe the following key points regarding the concept orperception of services marketing:

It is a managerial process of managing the services.It is an organized effort for providing a sound foundation for thedevelopment of an organization.

1 ONLY FOR MANAGEMENTPARADISE.COM MEMBERS| [Complied ByVishal. B ]


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It is a social process helping an organization to understand the emergingsocial problem and to take part in the social transformation process to justifyits existence in the society.

SERVICE MANAGEMENT

Service Management is :1) To understand the utility the customers rceicve by consuming or using theservice offering of the organization2) To understand how the organization (personnel, technology, physicalresources, systems andcustomers)will b able to produce and deliver this utility3) To understand how the organization should be developed and managed sothat the intended quality can be achieved4) To make the organization function so that this quality can be delivered ona continuous basis

GOODS SERVICE CONTINUUMAs per Theodore Levit There is no such things as service industries. Thereare some service industries whose service component are greater (or less)than those of other industries. Everybody is in service. The point thatLeavitt was trying to put across is that with almost every tangible physicalproduct an intangible servicecomponent is associated. Therefore every bodyis in service.He has further put that goods can be put into two categories

Philip kotler suggests 4 categories1) Pure tangible (salt)2) Major tangible with minor intangibles (soap)3) Minor tangible with major intangibles (consultancy)4) Pure service (teaching)



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The above diagram shows the Service goods continuum some goodsbeing tangible dominant others being service dominant. The fast food outletshas almost 50/50 of tangible and intangible parts i.e. in this case bothtangible factors such (food) and intangible such as (services) is important.That is the reason it come in the middle.

In case of other products like salt there services wont play any importantrole so it is more towards tangible and in case of teaching profession it ispurely service dominated. We never known about service with outexperiencing and in this manner various goods fall in place according to itscategory i.e. less service oriented or more service oriented.



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** American Marketing association has defined services as activities,benefits or satisfactions, which are offered for sale or provided in connectionwith sale o goods. This definition took a limited view of services as itproposed that services are offered only in connection with sale of goods.** Robert Judd defined services as a market transaction by an enterprise or

entrepreneur, where the object of market transaction is other than thetransfer of ownership of a tangible commodityThis recognised three broad areas of servicesThe right to possess and use a product (rented goods service)The customs creation, repair, or improvement of a product (owned goodsservice)No product elements but rather experience or what might be termed asexperiential possession (nongoods service)** Blois defines services, as a service is an activity offered for sale whichyields benefits and satisfactions without leading to physical change in theform of a good

** Kotler and Bloom defines services as an activity or benefit that one partycan offer to another that is essentially intangible and dos not result in theownership of any thing. Its production may not my not be tied up to aphysical product.** Gummesson says, Services is something which can be bought and soldbut which you cannot drop on your foot.** According Gronross a service is an activity or series of activities of moreor less intangible in nature that normally, not necessarily, take place ininteractions between the customer and the service employees and/orphysical resources or goods and/or system of the service provider, hich areprovided as solution to customer problems.

From this it follows thatServices are by and large activities, or a series of activities rather thanthingsAs a result they are intangibleThey take place in interaction between the customer and service provider which means that services are produced and consumed simultaneouslyCustomer has a role to play in the production process as services areprovided in response to the problems of customers as a solution.

1.8 Characteristics of Services and its Marketing Implications

The main Characteristics of Services are :IntangibilityInseparabilityHeterogeneityPerishability

Intangibility



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Services are actions and hence they are intangible. Due to this it is notpossible to stock services and hence fluctuations in demand becomesdifficult to manage. Hotels have same number of rooms all through the yearbut the customers requiring the room are always varying with some monthsseeing very few customers while other months seeing a rush of customers.

Further services cannot be patented and any new concept can be easilycopied by competitors. These cannot be readily displayed or easilycommunicated, and hence it will be difficult for the consumers to assess thequality. This also creates a problem for what to include in advertisements andpromotional materials. Further the actual cost of unit service is difficult todetermine and hence pricing becomes difficult.

InseparabilityServices are generally created or supplied simultaneously. They areinseparable. For e.g., the entertainment industry, health experts and otherprofessionals create and offer their service at the same given time. Services

and their providers are associated closely and thus, not separable. DonaldCowell states Goods are produced, sold and then consumed whereas theservices are sold and then produced and then consumed. A service isproduced when it is consumed eg. a dinning experience. Thus the customersare present when the service is produced thus other customer play animportant role in satisfaction. The service producer also plays an importantrole in quality. Thus mass production is impossible, it is not possible to geteconomy of scale by centralisation, operations has to be decentralised todeliver to the consumer directly at convenient locations. A problemcustomer can result in disruption of service production process creating adissatisfaction forhimself, other customers and also to the service producer.

HeterogeneityAs services are produced by humans, hence no two services can be identical.Further no two customers are precisely alike and hence their experiences ofthe same service are different. Even the same customer can be with differentframe of mind at different times which results in differing satisfactions fromthe same service at different times.Eg. A tax consultant may provide different a service experience to twodifferent customers on the same day depending upon their needs and onwhether the consultant is meeting the customer when he is fresh in themorning or tired at the end of the day. Because of this ensuring a consistent

quality becomes a challenging job. The quality depends upon a number offactors like the customer, service provides, other customers (their presenceor even absence) etc., hence the service provider cannot know if the serviceis delivered in a manner which has been originally planned and promoted.Sometimes services are provided by a third party further increasing theheterogeneity.



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PerishabilityServices cannot be stored, saved, resold or returned. A bad haircut cannot bereturned or resold to another customer. Hence demand forecasting andcreative planning to meet the demand is a problem. Further one has to beright the first time or if things go wrong one should have strong recovery

strategies to retain the customer goodwill. Due to these characteristics ofservices the marketeers face a major challenge in marketing of Services.

REASONS FOR THE GROWTH OF SERVICE INDUSTRY

It is obvious that the growth in the services sector has beensubstantive. The reasons for this

growth are quite a few, some of which are summarized as follows. Affluence: - The increase in per capita income from Rupees 238.8 in

1950 to Rupees 11,934.5 in 1998 is an indicator of he increase ingeneral affluence has given rise to service like pest-control, personalsecurity, interior designer, etc.

Leisure time: - People do get some time to travel and holiday andtherefore there is a need for travel agencies, resorts, hotels, andentertainment. There are others who would like to utilize this time toimprove their career prospects and therefore there is a need for adulteducation/distance learning/part time courses.

Life expectancy: - The health programmed have significantlycontributed to an increase in life

expectancy given rise to services like old age homes, nursing homes,health care, etc.

Working wives: - As more and more women have started working, theneed for day care for children has increased, and so is the care withpacked food and home delivery.

Product complexity: - A large no. of products are now being purchasedin households which can be serviced only by specialized persons likewater purifies, micro wave ovens, home computers, etc. giving rise tothe need for services like after sales service agents for durables,maintenance service providers, etc.

Life complexity: - As the daily routine gets busier, individuals find it

difficult to manage things on their own. Their leads to an obvious needfor tax consultants, legal advisors, property advisers, etc. Resource scarcity and ecology: - As the natural resources are

depleting and need for conservation is increasing, we have seen thecoming up of service providers like pollution control agencies, car,pools, water management, etc.



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New products: - the development in information technology has givenrise to services like PCOs, Pager service providers, Web Shoppe, etc

CONTRIBUTION OF SERVICE INDUSTRY TO INDIAN ECONOMY ANDWORLD ECONOMY

WORLD SCENARIO as economy shifts from developing to developed stage, they will show

more and more shift toward services today, the fastest growing segments of the US economy is services in 1948 54% of the GDP of US was generated by services which is

80% now employment in this sector which was 55% in 1950 is now 83% the US balance of trade in goods has remained in the red for many

years, but there has been a trade surplus in services today service sector dominates the economics of many developed

nations. As countries develop the role of agriculture in the economydeclines and that of services increase.(china has 50% GDP fromservice, 35% from industry, and 15%from agriculture)

during recession it has been seen that service output declines lessthan industrial output the service employment is less sensitive tobusiness cycle fluctuation

globalisation as strategy for service firm is becoming more important

INDIAN SCENARIO The service sector now accounts for more than half of India's GDP:

51.16 per cent in 1998-99. This sector has gained at the expense of

both the agricultural and industrial sectors through the 1990s. The risein the service sector's share in GDP marks a structural shift in theIndian economy and takes it closer to the fundamentals of a developedeconomy (in the developed economies, the industrial and servicesectors contribute a major share in GDP while agriculture accounts fora relatively lower share).

The service sector's share has grown from 43.69 per cent in 1990-91to 51.16 per cent in 1998-99. In contrast, the industrial sector's sharein GDP has declined from 25.38 per cent to 22.01 per cent in 1990-91and 1998-99 respectively. The agricultural sector's share has fallenfrom 30.93 per cent to 26.83 per cent in the respective years.

Some economists caution that if the service sector bypasses theindustrial sector, economic growth can be distorted. They say thatservice sector growth must be supported by proportionate growth ofthe industrial sector, otherwise the service sector grown will not besustainable. It is true that, in India, the service sector's contribution inGDP has sharply risen and that of industry has fallen (as shown above).But, it is equally true that the industrial sector too has grown, and



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grown quite impressively through the 1990s (except in 1998-99). Threetimes between 1993-94 and 1998-99, industry surpassed the growthrate of GDP. Thus, the service sector has grown at a higher rate thanindustry which too has grown more or less in tandem. The rise of theservice sector therefore does not distort the economy.

the share of agriculture sector to GDP has come down from 50% in1960 to 24%

service sector contribution to GDP is around 54% with an annualgrowth of 8%

employment in this sector is around 50% the response to liberation has been more in service sector, partly

because lower fixed investment requirements, example:- todaysconcept of banking

technological advances have made it possible for India to compete onglobal basis in areas like

SOFTWARE, IT, HEALTH, EDUCATION, etc.,

in addition lower wage structure has helped to develop CALL

CENTREs, MEDICAL TRANSCRIPTION, etc., from 1996 BSE has given a prominent place to service industry in its

30 share index since no tax is imposed on agriculture sector, most of the tax came

from manufacturing sector. now services are being taxed service tax collection is to the tune of 5000 crore. 83% of this is

contributed by service sectors. 51% - Telecom, others are Insurance,AD agencies, Courier and stock brokers.

many export benefits like EPCG is now extended to the service sector. in last 25 years the increase in employment in the organized sector is

57% while if only service sector is considered it is 70%(other thanservice sector it 41%)

Indias service exports in1997 were 9.3 billion $ against itsmerchandized exports of $32.2 billion. It is expected that serviceexports could a third of merchandize exports now this will be wellabove the global average of . It implies that India which has failed tocatch the bus in the exports of manufactures is among the earlyleaders of the developing world in the race for service exports.

Within the services sector, the share of trade, hotels and restaurants

increased from 12.52 per cent in 1990-91 to 15.68 per cent in 1998-99.The share of transport, storage and communications has grown from5.26 per cent to 7.61 per cent in the years under reference. The shareof construction has remained nearly the same during the period whilethat of financing, insurance, real estate and business services has risenfrom 10.22 per cent to 11.44 per cent.



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The fact that the service sector now accounts for more than half theGDP probably marks a watershed in the evolution of the Indianeconomy.

UNDERSTANDING THE CONSUMER

1 KNOWLEDGE OF THE BUYERIn buying decisions many times other people also influence the decision. Inservices these roles are played by many persons. In purchase of any servicesix distinct roles are played

Initiator : The person who has a specific need and proposes to buy aservice

Influencer : The person or group of persons whom the decision makerrefers to or who advice the decision maker. Gate Keeper : The person or organization or promotional material,

which act as filter on the range of services which enter the decisionchoice

Decider : The person who makes the buying decision Buyer : The person makes the actual purchaser User : The actual user.

For example if a sales executive wants to do a market tour .

His boss may be the initiator

The travel agency may act as a Gatekeeper The finance department may be the influencer

The administrative department the buyer

The executive the user. In this case the user may have no role in thebuying process. Hence while targeting a customer the service providermay have to influence other persons.



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CONSUMER DECISION MAKING.The consumers decision to purchase or reject a product or service is themoment of final truth for the marketer. It signifies the marketing strategy hasbeen wise, insightful and effective, whether it was poorly planned andmissed the mark. Marketer are, therefore, interested in the consumer

decision-making process by which a consumer selects an alternativeamongst the lot available. The decision not to buy is also an alternative.A simple consumer decision-making model, ties together the psychological,social and cultural concepts into an easily understood framework. Thedecision model has three distinct sets of variables:

1. Input Variables,2. Process Variables,3. Output Variables.

Input Variables:-Input variables are those variables which affect the decision making processand include commercial marketing efforts as well as non-commercialinfluences from the consumers socio-cultural environment.Decision Variables:-The decision process variables are influenced by consumers ownpsychological fields, which affect their recognition of a need, their pre-purchase search for information and their evaluation of alternatives.Output Variables:-The output phase of the model includes the actual purchase (either trial orrepeat purchase) and post purchase evaluation. Both pre-purchase and post-

purchase evaluation feed back in the form of experience into the consumerspsychological field and serves to influence future decision processing. (On aholiday a customer may change hotels in between his stay).

Factors Influencing The Buying Behaviour

Situational Factors : Time, Stores atmosphere, Marketing Stimuli (theoccasion)

Personal Factors : Personality, life style, Other demographic factors likeage, gender, occupation etc.

Social Factors : Culture, reference group, family Psychological Factors : Perception, attitude, motivation

TEN SUCH QUALITIES WHICH INFLUENCE THE CONSUMERSEVALUATION OF



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SERVICES (Quality Dimensions of Services)Consistency: - it involves consistency and reliability of performances anddependability. It means that the firm performs the service right the firsttime. It also means that the firm honours its promises especially in terms ofaccuracy in billing, record keeping and performing the service at the

designated time.Concern:-it is the willingness or responsiveness of employees to providethe service. It involves timeliness of service or giving prompt service, callingthe customer back quickly or mailing the transaction slip immediately.Competence: - it means having the required skills and knowledge toperform the service. It involves knowledge and skill of the contact personnel,knowledge and skill of operating support personnel and research capabilityof the organization. E.g. securities brokerage firm.Contact:- it involves approachability, access and ease of contact. It meansthat the service is easily accessible by telephone; waiting time to receive theservices is not extensive, convenient hours of operation and convenient

location of service facility.Courtesy:- it involves politeness, report, consideration and friendliness ofcontact personnel. It includes consideration for the consumers property.Clean and neat appearance of public contact personnel. E.g. no muddy shoeson the carpet, proper telephone operators etc.Communication:- it means keeping consumers informed in a languagethat they can understand and listen to them. It may mean that the companyhas to adjust its language for different consumers increasing the level ofsophistication with a well educated consumer and speaking simply andplainly with a novice. It involves explaining the service itself and how muchthe service will cost explaining

the trade-off between service and cost and assuring the customer that aproblem will be handled.Credibility: - it involves trustworthiness, believability, honesty. It involveshaving the customers best interest at heart thus contributing to credibility,company name and reputation, personal characteristics of the contactpersonnel and degree of hard sell involved in interaction with the customer.Confidentiality: - the security and the freedom from risk or doubt,involving physical safety, financial security or confidentiality.Customer knowledge: - it involves making the effort to understand thecustomers needs, i.e. learning the customers specific requirements,providing individualized attention and recognizing the regular customer.

Tangibles: - it includes physical evidence of the service, physical facilities,and appearance ofpersonnel tools or equipments used to provide the service, physicalrepresentations of the service such as a plastic credit card or a bankstatement and other customers in the service facility.

THE SERVICE ENCOUNTERS (MOMENT OF TRUTH.)



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MOMENTS OF TRUTHFrom the customers point of view, the most vivid impression of serviceoccurs in the service encounter or Moment Of Truth, when thecustomer interacts with the service firm. This is the foundation to

Satisfaction of Service Quality it is where the promises are kept orbroken. This concept was put forth by Richard Norman, taking the metaphorfrom Bull Fighting. Most services are results of social acts, which take place indirect contact between the customer and the service provider. At this stagethe Customer realises the perceived service quality.

ENCOUNTER CASCADEEvery Moment of Truth is Important according to Scandinavian Airlines,each one of their 10 million customers come in contact with 5 employees.Thus the airlines say there 50 million moments of truth each one ismanaged well and They prove they are the BEST.

However some encounters are more critical. The encounter cascade refers toa series of encounters right from the time a customer comes to take theservice. The encounter cascade can be important as any encounter can becritical, as it determines customer satisfaction and loyalty. If its the firstinteraction of the customer then the initial interaction will be the firstimpression. So, these interactions have to be given importance, as they arecritical and influences customers perception of the organization.Example:A customer calling for the repair service may switch to some other companyif he is put on hold for a long time or even treated rudely. Even if thetechnical quality of that firm is superior, the firm may not get a chance to

prove themselves in front of the customer. When the customer has had manyinteractions with firm, each encounter will be important as it will create acombined image of that firm. Many positive experiences will give an image ofHigh Quality and many negative experiences will represent a bad image.Combination of positive and negative interactions will leave the customerconfused about the Quality.It is suggested that not all encounters are equally important in building long-term relations. For every organization, certain encounters can act as a key tocustomer satisfaction. For example: for MARRIOT hotels, it is the earlyencounters that are important. In a hospital context, a study of patientsrevealed that encounters with the nursing staff were more important in

predicting the customer satisfaction. As it is rightly said one bad apple canruin the whole basket of apples. The same applies in this too; one negativeencounter can drive the customer away, no matter how many encountershad taken place in the past. So a firm has to give a lot of importance to suchencounters. A customer who has been using a bank for nearly 15 years isquite happy with the service. He has a huge deposit and many accounts. Onefine morning, when he comes out of the bank the watch man asks Rs. 10 for



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parking charges of his car. He goes inside the bank and informs the clerk atthe counter, who directs him to the officer. The officer directs him to theManager, who says he is helpless as this is a new policy of the bank. Thecustomer who was so happy with the bank services decides to close all hisaccounts Some encounters can be very Critical.

Among the service encounters a hotel customer experiences are checking in,being taken to the room by a bell person, eating a restaurant meal etc as

shown in the figure. It is in these encounters that the customer receives anoverall view of the organizations service quality and encounter contributes tocustomer satisfaction and willingness to do business with the organizationagain. As for the company, each encounter represents an opportunity toprove its potential as a quality service provider and to increase customerloyalty.

Some services have few service encounters and others have many. Mistakesor problems that occur in the early levels of the service cascade can e criticalbecause failure at one point results in greater risk of dissatisfaction in thelong run. MARRIOT Hotels learned this through their extensive customer

survey to determine what service element contributes to customer loyalty.They found that 4 out of 5 factors came into play in the first 10 minutes ofthe guests stay.TYPES OF ENCOUNTERSA service encounter occurs every time a customer interacts with the serviceorganization. There are three general types of encounters - remoteencounters, phone encounters, and face to face encounters. A customer



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may experience any of these types of encounters, or a combination of allthree in his or her relations with a service firm.

Remote Encounter:-Encounter can occur without any direct human contact is called as RemoteEncounters. Such as, when a customer interacts with a bank through the ATMsystem, or with Ticketron through an automated ticketing machine, or with amail-order service through automated dial-in ordering. Remote encountersalso occur when the firm sends its billing statements or communicates otherstypes of information to customers by mail. Although there is no directhuman contact in these remote encounters, each represents an opportunityfor a firm to reinforce or establish perceptions in the customer. In remoteencounter the tangible evidence of the service and the quality of thetechnical process and system become the primary bases for judging quality.EXAMPLE:-Services are being delivered through technology, particularly with the adventof Internet applications. Retail purchases, airline ticketing, repair andmaintenance troubleshooting, and package and shipment tracking are just afew examples of services available via the Internet. All of these types of

service encounters can be considered remote encounters.Phone Encounters:-In many organizations, the most frequent type of encounter between acustomer and the firm occurs over the telephone is called as phoneencounter. Almost all firms (whether goods manufacturers or servicebusinesses) rely on phone encounters in the form of customer-service,general inquiry, or order-taking functions. The judgment of quality in phoneencounters is different from remote encounters because there is greaterpotential variability in the interaction. Tone of voice, employee knowledge,and effectiveness/efficiency inhandling customer issues become importantcriteria for judging quality in these encounters.

Face-to Face Encounters:-A third type of encounter is the one that occurs between an employee and acustomer in direct contact is called as Face-to-Face Encounter. In a hotel,face to face encounters occurs between customers and maintenancepersonnel, receptionist, bellboy, food and beverage servers and others.Determining and understanding service equality issues in face to facecontext is the most complex of all. Both verbal and non-verbal behaviours



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even greater loyalty from them as a result. This idea is known to be asRecovery Paradox. The recovery paradox is more complex than it seem.First of all it is expensive to fix mistakes and would appear ridiculous toencourage service failure-as reliability is the most important aspect ofservice quality. According to a research it is observed that a customer weight

their recent experiences heavily in their decision to buy again. If theexperience is negative, overall feelings about the company will decrease andrepurchaseintentions will also reduce. If the recovery effort is absolutely superlativethen the negative impression can be overcome.Then there is a recent study which shows no support to recovery paradox. Itshows the overall satisfaction was consistently lower for those customerswho had experienced a service failure than for those who had experiencedno failure, no matter what the recovery effort is. The explanation for why norecovery paradox is suggested by the magnitude of the service failure in thisstudy it is-a three hour airplane flight delay. This type of failure may be too

much to be overcome by any recovery effort. Considering mixed opinions onif recovery paradox exists it is safe to say doing it right the first time is thebest and safest strategy. When a failure does occur then every effort atsuperior recovery should be made. In cases where the failure can be fullyovercome the failure is less critical, or the recovery effort is clearlysuperlative, it may be possible to observe evidence of the recovery paradox.

HOW CUSTOMERS RESPOND TO SERVICE FALIUREIf customers initiate action following service failure, the action can be varioustypes. A dissatisfied customer can choose complaint on the spot to theservice provider, giving the company the opportunity to respond

immediately. Thos is often the best-case scenario for the company it has thesecond chance right at that movement to satisfy the customer, keep his orher business in the future, and potentially avoids any negative word ofmouth.Some customer chooses not to complaint directly to the provider but ratherspread negative word of the mouth about the company to friend, relatives,and coworkers. This negative word of mouth can be extremely detrimentalbecause it can reinforce the customers feeling of negativism and spread thatnegative impression to other as well. Further, the company has no chance torecover unless the negative word of mouth is accompanied by a complaintdirectly to the company.

When there is a failure, customer can respond in a variety of ways asillustrated in the figure. It is assumed that following are the failure,dissatisfaction at some levels will occur for the customer. In fact, researchsuggest that variety of negative emotion can occur following service failure,including such feeling as anger, discontent, disappointment, self- pity andanxiety. Many customers are very passive about their dissatisfaction, simply



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saying or doing nothing, take action or not, at some point the customer willdecide weather to stay with that provider or switch to a competitor.

When the company fails to stand for its promises made to the customer onthe basis they build expectation, its to be said that there is service failure.When the service failure occurs, there can be again severe ramification.Customer is considered to be the bread and butter, hence retaining them isthe biggest challenge, and however service failure acts as an obstacle to it.In such failures,

1) The customer wants what they were promised.2) Customer wants personal attention3) Customer wants a decent apology4) Customers want that they should not be made to feel that they are

the cause of the problem. (Though in many cases they areresponsible for nuisance)

There are again five steps involved in order to deal with service failure. Theyare mentioned as below

1st

step: Acknowledgement and apology for the fact.2nd step: Listening to the customers.

3rd step: Avoid defending the company and offer a rational explanation.

4th step: Offer some extra benefits

5th step: Have a proper follow up and make sure no mistakes this time, sothat he can easily forget about the service failure and is retained.



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A customer expects 3 shorts of fairness in case of service recovery. They arementioned as below.

1. Interaction fairness: - when there is service failure, first the companyis supposed to acknowledge the customer. Due to this the customer mightturn erate, but he still expects fairness and courtesy in the language and

tone used by the addresser

2. Procedure fairness: - to know in detail about the incidence of servicefailure or to avail the compensation. There should be simplicity inprocedure, which is involved. Service failure and complexity in procedureboth together might result in a disaster as far as customer is concern.

3. Outcome fairness: - now when the company realizes that there isservice failure they should end up compensating, arranging for somealternative mode of transporting or complies with the customer condition.The outcome should be taken by considering the customer, his needs andthe companys policy.

ACTION PLAN TO SOLVE THE PROBLEM :

Handling complaints is a big challenge for every company today. Beforeunderstanding how to handle, let us see what are the factors, which canresult in customers complaints.

There are ten steps involved in handling such airline flights delayeddeparture complaints effectively. They are mentioned below.

1) The frontline employee handling complaints should stay calm underany circumstances.

2) Let the customer get the story off their chest- do not interrupt, thiswill only cause irritation. In this case listening skills comes intopicture.

3) Avoid admitting any liability at this stage. The officer just need toshow concern like, Im sorry for the inconvenience, let me see whatI can do. Give attention to the customer, make him feel important.

4) Get facts by using question and try to find out the real and wholestory behind it.

5) After listening and collecting data, just identify appropriate actionconsidering companys policy and customers expectation.

6) Take action if you have authority or involve manager or concerned

person.7) If corrective action cannot be taken immediately, tell the customer.

Its better to give bad news rather giving false news.8) Record the action to be taken and inform anyone else in the

organization involved.9) Look into the matter, provide a proper follow-up.



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getting credit terms but also, how to minimize other burdens of customerswhile purchasing such as time, mental and physical efforts and unpleasantsensory experiences such as noises and smells.3) Place , cyberspace and Time:- Delivering product elements tocustomers involves decisions on the place and time of delivery as well as on

the methods and channels employed. Delivery may involve physical orelectronics distribution channels or both),depending on the nature of theservice being provided.4) Promotion and education:- No marketing program can succeed withouteffective communications. This component plays three vital roles: -a)Providing needed information and advice (awareness).b)Persuading target customers of the merits of a specific product.(Concentrating on a particular segment of the market).c)Encouraging to take action at a specific time (purchase).Communication is educational in nature for new customers.Communication can be delivered by individuals such as sales people and

trainers, media such as TV, radio, newspaper, magazines, postures,websites etc.This promotion is usually used as incentives to catch customers attentionand to motivate them to act. The above four are the traditional marketingmix. The EXTENDED marketing mix for services marketing isas follows :5) People: - Many services depend on the direct, personal interactionbetween customers and a firms employees (such as getting a haircut oreating at a restaurant). This interaction strongly influences the customerperception of service quality. So, successful service firm devote significanteffort to recruitment, training and motivating their personnel.6) Physical evidence:- The appearance of buildings, landscaping, vehicle,

interior furnishing, equipment, staff members, signs, printed materials, andother visible cues all provide tangible evidence of the firms service quality.The service firms need to manage physical evidence carefully because it canhave a profound impact on customers impression as the service itself isintangible. A tangible element such as insurance and advertising is oftenemployed to create meaningful symbols.E.g.: - umbrella may symbolize protection and a fortress, security.7) Process: - It is the method and sequence of actions in which serviceoperating system works.Badly designed process: - annoys customers which leads to likelihood ofservice Failures.

8) Productivity and quality: - Productivity relates to how inputs aretransformed into outputs that are valued by customers. Improvingproductivity keeps costs under control

Quality refers to the degree to which a service satisfies customers bymeeting their needs, wants and expectations. Service quality helps inproduct differentiation and building customer loyalty. Invest in quality



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profitably i.e. by considering incremental cost and incremental revenue.Thus, these are the 8ps of service management, which are the essence of it.The integration of each ps is necessary for the successful servicemanagement Collectively these are the tools organizations uses to developofferings to satisfy their target market(s) ... the only tools at their disposal.

Remember: If your marketing mix doesn't meet their needs they will not besatisfied - and if they aren't satisfied you are unlikely to meet yourobjectives.The marketing mix should be viewed as an integrated and coordinatedpackage of benefits that reflect the characteristics of customers and varioustargeted publics and satisfy their needs, wants, and expectations. Note thatthe elements of the marketing mix should be integrated because eachelement of the mix usually has some impact, direct or indirect, on the otherthree.For example, if you improve the product or service you probably have tochange the price because it costs more to produce. Although you may not

have to change where the product is delivered to the customer, you willalmost certainly have to change the promotion or communication with thecustomer because you need to tell the customer about the changes you havemade in the product and how the changes will make it more desirable andsatisfying. One problem in many organizations is that different divisions maybe responsible for different elements of the marketing mix. This happenseven in well-managed organizations. The result is that the offering isconfusing to the target market. Lack of communication among divisionsmakes this problem worse. And if they don't share the same view oforganizational objectives, the problem is worse still.

PRODUCT MIXIntroductionProduct includes name, design, features, quality, operational case,packaging, warranties, appearance, range and size. It also includes pre-saleand post-sale services like training, repairs, maintenance and replacements.According to Philip Kotler a product is anything that can be offered tomarket for attention, acquisition use or consumption that satisfy a want orneed. It includes physical objects (TV), service (banking), person (politicalperson), place (holiday resort), organization (red cross) and idea (aidawareness). Conventionally, a product is an object, which is delivered andconsumed. However, in services there is no or very little tangible elements.

Hence, what is offered for sale is benefits. Service is a bundle of benefits andhas relevance for a specific target market. Hence, the package of benefitsshould have a customers perspective.

Levels of product:Kotler has identified 5 levels of a product1) Core product



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2) Basic product3) Expected product4) Augmented product5) Potential productKotler suggested that a product should be viewed in three levels.

1. Level 1: Core Product. What is the core benefit your product offers?This is the fundamental benefit or service that the customer is buying.For eg. A customer going to a Hotel is buying rest, sleep etc.

2. Level 2 Basic Product: Basic functional attributes. All Hotels providerest and sleep. The aim is to ensure that your potential customerspurchase your one service. Thus the functional attributes like Room,Bed, Bath are important.

3. Level 3 : Expected product : Set of attributes that the buyer expects(Clean room, large towels, quietness)

4. Level 4: Augmented product: What additional non-tangible benefits canyou offer? This meets the customers desires beyond his expectations

(Prompt room service, music, aroma etc)5. Level 5 : Potential product : The possible evolutions that can be madeto make the product a distinguishedoffer (all suite room)

In a Bank these can be

Core Product (Safety of deposits, Interest, Easy loans

Basic product : Savings deposit, FD, Recurring deposit

Expected product : Correct transaction records, timely service,convenient timing

Augmented product : Congenial waiting room, Water cooler

Potential product : Greetings for New Year, 24 hour banking

The PACKAGE CONCEPT of Service product suggests that what you offer tothe market si a bundle of different services tangible and intangible. There isa core service and around it are built the auxiliary or facilitator service.Without this the service would collapse (a bell boy in a Hotel). Yet anotherservice is the supporting service it is used to increase the product value (acar rental in a hotel). The basic product is not equivalent to the serviceproduct which the customer perceives, which is in fact based on customersexperience and evaluation. Therefore there is a need for an augmentedproduct like Accessibility (number and skills of personnel, convenienttiming, location, infrastructure etc.,) Interaction with service organization

(Between employees and customer, with physical and technical resources,with other customers) Consumer participation.(how well the customer isaware about the process of service delivery, his willingness to shareinformation and use service equipments)

The package should also include the management of service image throughencouraged word of mouth and market communication.



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Product DecisionsWhen placing a product within a market many factors and decisions have tobe taken into consideration.These include:

Consumer benefits assess what benefits the consumer looks for Service concept To translate it to suitable service offer Develop augmented offer

BRANDING:One of the most important decisions a marketing manager can make is aboutbranding. The value of brands in odays environment is phenomenal. Brandshave the power of instant sales; they convey a message of confidence,quality and reliability to their target market. Brands have to be managedwell, as some brands can be cash cows for organizations. In manyorganizationsthey are represented by brand managers, who have huge resources to

ensure their success within the market. A brand is a tool, which is used by anorganization to differentiate itself from competitors. Ask yourself what is thevalue of a pair of Nike trainers without the brand or the logo? How does yourperception change? Increasingly brand managers are becoming annoyed bycopycat strategies being employed by supermarket food retail storesparticular within the UK. Coca-Cola threatened legal action against UKretailer Simsbury after introducing their Classic Cola, which displayed similardesigns and fonts on their cans. Internet branding is now becoming anessential part of the branding strategy game. Generic names like Bank.comand Business.com have been sold for ms. (Recently within the UK bankingindustry we have seen the introduction of Internet banks such as

cahoot.com and marbles.com the task by brand managers is to insurethat consumers understand that these brands are banks!

Branding of Services and its ImportancePhilip Kotlar defines a brand as a name, a term, a symbol, or a designed or acombination of them which is intended to identify the goods and services ofone seller or a group of sellers and to differentiate them from those ofcompetitors.Brand decision is important for tangible goods. But in the case of serviceoffering branding is still in its infancy, there importance is expected to risedue to the following reason.

1. Service market is getting more competitive and there is as increasingproliferation of brands in the service sector.2. It is five times cheaper to retain customer than to attract new ones.3. As a new service development assumes greater importance, the risk ofproduct launch is reducing in the context of umbrella branding.



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4. As service itself does not offer unique tangible benefits, branddevelopment tangibilises the service. Customer gives more significance tothe service provider than the individual service products that theprovideroffers. Therefore, this leads to branding the service providerscooperate image. Banks especially have recognized the importance of

corporate image and identity and have used slogans, logos and other meansto brand themselves. Ones the corporate brand is developed it is found thatservice firms move with relative easy to other service product categories.Primarily companies resorts to corporate brand building with a goal ofmaximizing market capitalization and creating shareholders wealth. In caseof service firms corporate branding reflects the service itself. Airlines, fast-food restaurants, banks, professional firm are usually differentiated on thebasis of their corporate name and reputation rather than the specific servicethey offer. The service organization brand name is reinforce by courteousemployees, professional looking uniform, advertising etc. However no matterhow good the corporate brands may be the quality of service determines the

success of the image. There are instance where the service itself is branded.Example Suvidha Account of Citibank, the various schemes of LIC like JeevanKishore, Jeevan Mitra etc.

Advantages of branding services1. To tangibilise the intangible.2. To support the positioning strategy.3. Offers a powerful tool for relationship building.4. To create an image of quality and consistency.5. To reduce price comparison.6. Keeps current customers satisfied by developing and sustaining a unique

service advantage.7. Encourages repeat usage using sales promotions.

PRICE MIXIntroduction:This element of the marketing mix is related to the decision influencing thefee structure, rate of interest, commission charged and paid by the servicegenerating organizations. It is considered to be the most critical componentof the marketing mix. Both from economic and social standpoint, themanagement of pricing is important but at the same time more critical andchallenging. We find pricing decisions important because the pricing

decisions are to influence the maintenance, development and expansionplans of an organization.

Guidelines for service pricing:1) Pricing strategy should enable handling demand fluctuations successfully.As services cannot be inventoried, pricing should encourage customers touse the service during period of low demand.



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2) As services need to have some tangible element attached to it, servicepricing should be based on costs so as to take into account the tangibleclues.3) Service price as an indicator of quality: Services not having specific brandnames to indicate

quality, customers use price as an indicator of quality. This in particular insome cases, where the price variation is too much with in a particular classof service (e.g. Tour operators). Also, where the risk associated with theservice is high (e.g. Heart surgery). Price is taken as an indicator of quality.Thus pricing too low can give wrong signals and pricing too high can setexpectations that the firm may find it difficult to match in service delivery.Because goods are dominated by search qualities. Price is normally not usedto judge quality.4) Pricing strategy should cope-up with the degree of competition operationwith in certain geographic and time zone. E.g. Bus operators will have toconsider prices of train. It also includes the stage ofstrategic low pricing to

attract first time customers.Approaches to pricing services:The 3 approaches to pricing services are:1) Cost-based pricing2) Competition-based pricing.3) Demandbased pricing.1) Cost-based pricing:In cost-based pricing, a company determines expenses from raw materialsand labor, adds amounts or percentages for overhead and profit, and therebyarrives at the price. This method is widely used by industries such as utilities,contracting, wholesaling and advertising. The basic formula for cost-based

pricing is Price = Direct costs + Overhead costs + Profit marginDirect costs involve materials and labor that are associated with the service,overhead costs are a share of fixed costs, and the profit margin is apercentage of full costs (direct + overhead)Problems in cost-based pricing services:a) It is difficult to define the units in which a service is purchased. Thus theconcept of price orunit is vague. Thus many services are sold in terms of input units rather thanunits of measuredoutput. E.g. consultant, teacher etc.b) Where a firm provides multiple services. The costs being a major

component of employee time are difficult to allocate.c) Service cost may not represent true value. For e.g. a darner chargingsame price for a expensive suit and an ordinary pant.2) Competition-based pricing:This approach focuses on the prices charged by other firms in the sameindustry or market. Competition-based pricing does not always implycharging the identical rate others charge but rather using others prices as an



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anchor for the firms price. This approach is used predominantly in twosituations: (a) When services are standard across providers, such as in thedry cleaning industry. (b) In oligopolies where there are a few large serviceproviders, such as in the airline.Problems in competition-based pricing:

(a) Small firms may charge too little and not make margins high enough toremain in business.(b) Heterogeneity of services across and within providers makes thisapproach complicated. E.g. Banks charge different rates of commission fordrafts and other services.3) Demand-based pricing:The first two approaches of pricing are based on the company and itscompetitors rather than on customers. Neither approach takes intoconsideration that customers may lack reference price, may be sensitive tononmonetary prices and may judge quality on the basis of price. All of thesefactors can and should be accounted for in a companys pricing decisions.

The third major approach to pricing, demand-based pricing, involves settingprices consistent with customer perceptions of value: prices are based onwhat customers will pay for the services provided.Problems in demand-based pricing:(a) There is an element of non-monetary costs and benefits which must beconsidered while calculating perceived value. E.g. services requiring time,inconvenience, psychological and search costs should be riced lower. It isdifficult to convert this non-monetary cost into monetary cost. (b)Information on service may be less available to customer, making it difficultto assess the price.

THE PLACE MIX.INTRODUCTIONAnother important element of the marketing mix is place mix, which focusesour attention on the offering of services by the providers to the ultimateusers and the place of location for the service generating organizations. Insome of the cases we find that providers have no option but to locate theunits/branches as per the instructions of the apex body. Some of theessential features are taken into consideration such as easy and convenientaccessibility, safety or protection availability of the infrastructural facilities,attractive and healthy surroundings or so.Due to the intangibility, services cannot be stored, transported and

inventoried. Hence the traditional channels of product marketing likewholesalers cannot be used. Eevn retailing cannot be an independentactivity. Similarly because of inseparability they have t be produced and soldsimultaneously. Due to this tehe channels of distribution are made veryshort. At the most there can be one agent like in the case of insurance, travelagency, courier eye. The better thing is direct selling. Agents when employedcan have two types of functions either they market the services lke travel



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agents, insurance agents etc, who market the tangible part of the serviceoffering OR there can be agents who are trained to provide the service Like aShahnaz Hussain Beauty parlour. Further as there is no actual transfer ofownership, the creation of time and place utility is very important. Henceproper location to cover maximum cuxtomers becomes important. Banks

often have extension countersor use money collectors.

Capacity Planning.It is not sufficient that we are interested only in managing our present. It ismuch more significant that we keep our eyes open, minds active to knowabout the future and continue to enrich our potentials to manage the future.The organizations not managing the future fail in managing the demand andsupply position, make it difficult to optimize the development of marketingresources to cope with the changing requirements, make possible a

contraction in their resistance power and both on quantitative and qualitativefronts, we find them moving backward. By capacity planning, our emphasis ison the management of strength. Capacity planning is known as planning thecapacity in the face of future. This throws light on both the aspects-first, theorganizations are supposed to know the demand position so that thepotentials are enriched to increase the quantity or capacity of generating theservices and second, the organizations are also required to know about thelikes and dislikes, preferences, expectations, attitudes which make anadvocacy in favor of technologies to fulfill their expectations and this is notpossible unless we think in favor capacity planning. The strategic plan wouldmake the ways for the mobilization of financial resources to cater to their

increasingrequirements. We cant deny the fact that if an organization succeeds inmaintaining the process of profit generation, the financial health of thatorganization becomes so sound that the task of satisfying the employees andinvestors is simplified considerably. If an organization is strong, the task offacing the challenges and threats in the markets is simplified considerably. Itis against this background that strategic planning assumes a place ofoutstanding significance. When we talk about capacity planning, our primefocus is on strategic planning since the process of enriching strength cant bemade possible within a couple of days.Capacity Scheduling.

How much of what (service) will be needed to achieve its pre-determinedgoals is an important consideration that makes an advocacy in favor ofcapacity planning and scheduling. There are a number of critical variablesrequiring due consideration in the process such as, goals of the service firm,availability of capital and the quality of human resources, market segmentsserved and the level of service quality aimed at. A detailed scheduling of



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e) It is an exercise for selling the goods and services.f) It is found more effective in the service generating organizations.g) It is based on the professional excellence of an individual.h) It is an important element of the promotion mix.4) Sales promotion:

Marketing activities other than personal selling, advertising and publicity thatstimulate customers and dealers effectively, such as display shows,exhibitions, demonstrations and various non-recurrent selling efforts not inthe ordinary routine are the sales promotion measures. Sales promotionalactivities are devices aimed at reaching the consumer at home or in hisbusiness establishment. The tools are generally in the form of samples,contest, demonstrations and coupons. Sales promotion directed atconsumers may be done with a view to increase the products rate of useamong existing customers or to attract new customers to the companysproduct.Tools of sales promotion:

a) Giftb) Contestc) Discount and commissiond) Entertainmente) Travel and toursf) Additional allowanceg) Fairs and showsThese are some of the tools of sales promotion offered to both, the providersas well as the users. The motivesare increasing the selling activities,touching the target, excelling the competition, increasing the market share,clearing the old products to be declared absolute in the near future.

5) Word-of-mouth promotion:Much communication about the performance of the service generatingorganizations actually takes place by word-of-mouth information, which isalso as word-of-mouth promotion. The word-of-mouth recommendations thehidden sales force make the process of communication effective. Thegrowing sensitivity of the words and experiences of hidden sales forcesimplify the task of promoting the business. The advertisements, salespromotion measures, the personal selling may of course be effective but theword-of mouth recommendations are found acceptable in all the conditionsby almost all the prospects.6) Telemarketing:

Telemarketing is found instrumental in promoting the business. Thetelemarketing helps in activating the process of advertisement in addition toits instrumentality in increasing the sale. The service generatingorganizations in general and the banking, insurance, transport, hotel, tourismorganizations in particular have been found using telemarketing with thetwo-fold objectives of selling and advertising. The instrumentality oftelephones and televisions are found effective in the process of promoting



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the business. The instrumentality of telemarketing in persuading the users issubstantially influenced by the quality of personnel supposed to dischargethe responsibility. The telemarketing minimizes the dependence of servicegenerating organizations on the sales people since just a counter or a centerlisted in the call numbers serves multi-dimensional purposes.

PROMOTION OBJECTIVES1) Develop personal relation with client2) Make a strong impression of competency, honesty and sincerity3) Should be able to use indirect selling techniques (create a deriveddemand mobile companies give free sim card)4) Manage to maintain a fine image by positive word of mouth5) Packing and customization of service offeringTARGET AUDIENCE1) Buyer (or user/influencer/gatekeeper)2) Employees (discussed in detail under people)

PLANNING THE PROMOTION MIX1) Advertisement should have positive effects on contact personnel2) It should be able to capitalise on word of mouth3) It should provide tangible clues to the customers4) It should make the service offering easily understandable5) It should promise only what is possible to deliver6) It should contribute to the continuityCONSUMER PROMOTION IN SERVICE MARKETING1) Sampling is less frequently used compared to Goods (Sampling givesconsumer a free trial though now becoming popular)

2) Gift premiums are frequently used to give an element of tangibility3) Price/quantity promotions can be used to get long term commitmentsfrom consumer (frequent flyer programme or group booking in Hotels)4) Use of coupons are less frequent (coupon with straight price cut ORdiscount or fees waiver for one or more purchases with original purchase ORDiscounts on augmented products like a free wax polish with car wash)5) Future discounts are less frequent6) Prize promotions are frequently used (prize for mobile bank use etc)

GUIDELINES FOR SELLING SERVICES1) It is personal relationship rather than the service itself that results in

satisfaction2) Buyers confidence in the sellers ability to deliver the results is important hence make a strong impression of competency, sincerity, and honesty.3) As what is sold is intangible indirect selling techniques have to beadopted (Hotels selling tour programmes)4) As word of mouth is important building up a favourable is image isessential.



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5) A service provider sells services and not just a single service henceability to customise the service offering is important (Jain food in Air-linesHotels etc)6) Public relations becomes important particularly in industries whereadvertisement cannot be used as a promotional tool like Hospital industry.

PEOPLE MIXINTRODUCTIONThe employees of an organization represent the organization in the eyes ofthe customers. If they are not give proper training in representing theorganization and its goals the service efforts will fail. Hence the mostimportant marketing strategy is to market the service first to theorganizations employees. There are two types of contact personnel HIGHCONTACT PERSONNEL and LOW CONTACT PERSONNEL (eg .in a hospital anurse is a high contact personnel and ward boy may be a low contactpersonnel) In addition there can be a NON CONTACT PERSONNEL

SERVICE TRIANGLE

When company makes efforts to do external marketing, it should havestrategies of Internal marketing. External marketing is nothing but promisesmade,which needs to be fulfilled this needs internal marketing enabling thecomapany to keep up the promises made. Unless the employees are ableand willing to deliver, the servicepromises will fail. This will result in properinteraction of thecustomers with the service providers which helps the

organization to keep the promises (Interactive marketing)EMPLOYEE SATISFACTION, CUSTOMER SATISFACTION, AND PROFITSThere is concrete evidence that satisfied employees make more satisfiedcustomers (and satisfied customers can, in turn, reinforce employees senseof satisfaction in their jobs). Some have even gone so far as to suggest thatunless service employees are happy in their jobs, customer satisfaction willbe difficult to achieve. The underlying logic connecting employee satisfaction



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and loyalty to customer satisfaction and loyalty and ultimately profits isillustrated by the service profit chain shown in the figure. The service profitchain suggest that there are critical linkages among internal service quality;employee satisfaction; productivity; the value of services provided to thecustomers; and ultimately customer satisfaction; retention and profits.

Service profit chain researchers are careful to point out that the model doesnot cause customer satisfaction; rather the two are interrelated and feed ffeach other. The model does imply that companies that exhibit high levels ofsuccess on the elements of the model will be more successful and profitablethan those who do not.

HUMAN RESOURCE STRATEGIES:Human resources decisions and strategies primary goal is to motivate andenable employees to deliver customer-oriented promises successfully. The

strategies presented here are organized around four basic themes. To build acustomer-oriented, service-minded workforce, an organization must:1) Hire the right people2) Develop people to deliver service quality3) Provide the needed support systems4) Retain the best people1) Hire the right people:One of the best ways to close gap 3 is to start with the right service deliverypeople from the beginning. This implies that considerable attention shouldbe focused on hiring and recruiting service personnel.a) Compete for the best people:

To get the best people, an organization needs to identify them and competewith other organizations to hire them. The firm act as marketers in theirpursuit of the best employees, just as they use their marketing expertise tocompete for customers. Thinking of recruiting as a marketing activity resultsin addressing issues of market (employee) segmentation, product (job)design, and promotion of job availability in ways that attract potential long-term employees.



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b) Hire for service competencies and service inclination:Once potential have been identified, organizations need to be conscientiousin interviewing andscreening to truly identify the best people from the pool of candidates. It hasbeen suggested that service employees need two complementary capacities:

they need both service competencies and service inclination. Servicecompetencies are the skills and knowledge necessary to do the job.Achieving particular degrees and certifications validates competencies, suchas attaining a doctor of law degree and passing the relevant state barexaminations for lawyers. Service competencies may not be degree related,but may instead relate to basic intelligence or physical requirements.c) Be the preferred employer:One way to attract the best people is to be known as the preferred employerin a particular industry or in a particular location. Other strategies thatsupport a goal of being the preferred employer include providing extensivetraining, career and advancement opportunities, excellent internal support

and attractive incentives and offering quality goods and services thatemployees a proud to be associated with.

2) Develop people to deliver service quality:To grow and maintain a workforce that is customer oriented and focused ondelivering quality, an organization must develop its employees to deliverservice quality. That is, once it has hired the right employees, theorganization must train and work with these individuals to ensure serviceperformance.a)Train for technical and interactive skills:To provide quality service, employees need ongoing training in the necessary

technical skills and knowledge and in process or interactive skills. Examplesof technical skills and knowledge are working with accountingsystems inhotels, cash machine procedures in a retail store, underwriting procedures inan insurance company, and any operational rules the company has forrunning its business. Most service organizations are quite conscious of andrelatively effective at training employees in technical skills. Companies areincreasing their use of information technology to train employees in thetechnical skills and knowledge needed on the job. Service employees alsoneed training in interactive skills that allow them to provide courteous,caring, responsive, and empathetic service.b) Empower employees:

Empowerment means giving employees the desire, skills, tools, and authorityto serve the customer. While the key to empowerment is giving employeesauthority to make decisions on the customers behalf, authority alone is notenough. Employees need the knowledge and tools to be able to make thesedecisions and theyneed incentives that encourage them to make the rightdecisions. Organizations are well suited to empowerment strategies to onesin which (1) the business strategy is one of differentiation and customization,



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2) customers are long-term relationship customers, (3) technology isnonroutine or complex, (4) the business environment is unpredictable, and(5) managers and employees have high growth and social needs and stronginterpersonal skills.c) Promote teamwork:

The nature of many service jobs suggests that customer satisfaction will beenhanced when employees work as teams. Because service jobs arefrequently frustrating, demanding and challenging, a teamwork environmentwill help to alleviate some of the stresses and strains. Employees whosupported and that they have a team backing them up will be better able tomaintain enthusiasm and provide quality service. By promoting teamwork anorganization can enhance the employees abilities to deliver excellentservice while the camaraderie and support enhance their inclination to beexcellent service providers.3) Provide need support systems:To be efficient and effective in their jobs, service workers require internal

support systems that are aligned with their need to be customer focused.Without customer-focused internal support and customer-oriented systems, itis nearly impossible for employees to deliver quality service no matter howmuch they want to. In examining customer service outcomes researchersfound that internal support from supervisors, teammates, and otherdepartments as well as evaluations of technology used on the job were allstrongly related to employee satisfaction and ability to serve customers.a) Measure internal service quality:One way to encourage supportive internal service relationships is to measureand reward internal service. By first acknowledging that everyone in theorganization has a customer and then measuring customer perceptions of

internal service quality, an organization can begin to develop an internalquality culture. Internal customer service audits and internal serviceguarantees are two strategies used to implement a culture of internal servicequality. Through the audit, internal organizations identify their customers,determine their needs, measure how well they are doing, and makeimprovements.b) Provide supportive technology and equipment:When employees dont have the right equipment, or their equipment fails,they can be easily frustrated in their desire to deliver quality service. To dotheir jobs effectively and efficiently, service employees need the rightequipment and technology. having the right technology and equipment can

extend into strategies regarding workplace and workstation design.c) Develop service-oriented internal processes:To best support service personnel in their delivery of quality service on thefront line, an organizations internal processes should be designed withcustomer value and customer satisfaction in mind. In other words, internalprocedures must support quality service performance. In many companiesinternal processes are driven by bureaucratic rules, tradition, cost



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efficiencies, or the needs of internal employees. Providing service andcustomer oriented internal processes can therefore imply a need for totalredesign of systems. This kind of wholesale redesign of systems andprocesses has become known as process reengineering.4) Retain the best people:

An organization that hires the right people, trains and develops them todeliver service quality, and provides the needed support must also work toretain the best ones. Employee turnover, especially when the best serviceemployees are the ones leaving, can be very detrimental to customersatisfaction, employee morale, and overall service quality. Some firms spendlot of time attracting employees but then tend to take them for granted,causing these good employees to search for job alternatives.a) Include employees in the company vision:For employees to remain motivated and interested in sticking with theorganization and supporting its goals, they need to share an understandingof the organizations vision. People who deliver service day in and day out

need to understand how their work fits into the big picture of theorganization and its goals.b) Treat employees as customers:If employees feel valued and their needs are taken care of, they are morelikely to stay with the organization. Many companies have adopted the ideathat employees are also customers of the organization, and thus basicmarketing strategies can be directed at them. The products that theorganization has to offer its employees are a job and quality of work life. Todetermine whether the job and work life needs of employees are being met,organizations conduct periodic internal marketing research to assessemployee satisfaction and needs.

c) Measure and reward strong service performers:If a company wants the strongest service performers to stay with theorganization, it must reward and promote them. Often the reward systems inorganizations are not set up to reward service excellence. Reward systemsmay value productivity, sales or some other dimension that can potentiallywork against good service. Reward systems need to be linked to theorganizations vision and to outcomes that are truly important.6.6.5 IMPORTANCE OF EMPOWERING PEOPLE IN SERVICESAn organization that emphasizes customer service needs people at thefrontline to do the service, to use discretions be concerned about thecustomer, to take initiative to provide satisfaction through exceptional

service. The person at the front must fell empowered to do in thecircumstances. Empowering cannot be done through a formal delegation ofauthority. A person with authority may not exercise that authority, if he doesnot feel empowered.ExampleA peon who takes responsibility to direct the fireman in a burning office toareas housing the most important documents is acting without formal



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All of these evidence elements, or a subset of them are present in everyservice encounter a customer has with a service firm and are criticallyimportant in managing service encounter quality and creating customersatisfaction.

When a guest enters the hotel for a stay the first encounter of the guest isthe door attendant and frequently with receptionists at the reception. Thequality of that encounter will be judged by how the registration processworks (How long is to wait? Is the registration system computerized andaccurate?) The actions and attitudes of the people (Is the receptionistcourteous, helpful, knowledgeable? Does she handle the enquiries fairly andefficiently?) and the physical evidence of the service (is the awaiting areaclean and comfortable). The three types of evidence may be differentiallyimportant depending on the type of service encounter(remote, phone, face to face). All these types will operate in face to-face service encounters as in the one just described.

PHYSICAL EVIDENCEIt is the environment in which the service is delivered and where the firm andcustomer interact, and any tangible components that facilitate performanceor communication of service.It includes all tangible representations of the service-such as brouchers,letter head, equipment etc. in somecases the physical facilities where service



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is offered is important e.g., in a hotel the parking lot, surroundings areimportant. In other services such as telecommunication the physical facilitiesmay be irrelevant. In this case other tangibles like billing statements becomeimportant. Physical evidence includes(A) Physical facilities (essentials and peripherals)

(B) Physical setting (appearance of premises)(C) Social setting (appearance of staff)The decision on the physical evidence will differ in terms of customer-employee interaction. At one end is self-service of customer without anyinteraction with employee (ATM) where physical facilities must be to attractcustomer and user friendly.At other end employee performs without any interaction (mail orderbusiness) here physical evidence is designed to promote operationalefficiency. Between the two extremes is a situation where both customer andemployee interact. In this case physical evidence must be planned tofacilitate the activities of both. (E.g., Banks, Airlines). Certain service

environments are simple requiring very little space or equipment (ATM,Vending machine). They are called lean environment. Others like hospitals,hotels are elaborate environment where proper planning is needed.(a) Physical facilities: The potential customers form impression about theservice organization on the basis of physical evidence like building, furnitureetc.,Essential Evidence: They are dominant features like building area, parkingspace, signboards.Peripheral Evidence: They are less dominant like admission card, medicalreports, etc.(b) Consist of service environment

Ambient factors (light, colour, temperature)

Space (spatial layout and functionality- i.e., ability of equipment andfurniture to accomplish interactions)

Decor and artefacts(c) Social setting: Employee uniform, appearance etc. of service scape caninfluence customer expectation,satisfaction and other behavior. In shoppingmall soft music is played/crossroads had hired separate parking space.

Bitner identifies Physical Facilities and Environment as SERVICE SCAPESHowever too much decor may make customers feel that they are paying forthe expensive dcor. Employees however feel that an investment in

environments is an indication of managements concern for their jobsatisfaction. Hence the challenge is to strike a balance.

MANAGING SERVICE QUALITYTo compete successfully a firm must define how the customers perceive theservice quality and in what way the service quality is influenced. The quality



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can be of seen from two angles (1) Technical quality (What is delivered) (2)Functional quality (How it is delivered). When a customer comes to theservice provider he comes with some expected quality. When he takes theservice he experiences a service quality this is his perceived quality.

PERCEIVED SERVICE QUALITYCustomer service is about perception. Perceptions are judgment of theconsumers about the actual service performance or delivery by a company.Since service are intangible, customers search for the evidence of quality inevery interaction they have with a service firm. The evidence of service thatare experience by the customer are people, process and physical evidence.

People contact employees, other customers or the customer himself.

Dimensions reliability, assurance, empathy and responsiveness.

Process operational flow of activities.

Dimensions reliability and promptness of service.

Physical evidence tangible aspect of service.Apart from these the corporate image of the service provider as well as theservice can also influence the perceived quality.While comparing the expected and perceived service quality the followingmay be the outcome.1). Perceive quality > expected quality.Result = delighted customer.2). Perceive quality = expected quality.Result = satisfied customer.3). Perceive quality < expected quality.Dissatisfied customer.A very important factor in important service quality is to always keeppromises and not guarantee which the firm cannot deliver



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ZONE OF TOLERANCEThe services provided are varying between organizations, betweenemployees and even with in employees at different times. The extent towhich the customers recognize and are willing to accept this variation iscalled as zone of tolerance. If the service levels fall below this level,

customers will be frustrated. Different customers possess different zones of tolerance Zones of tolerance vary for different dimensions fo service Zones of tolerance vary for first time and recovery service

QUALITY GAPSTo manage the perceived quality of

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