MKT 2106 RETAIL

MARKETING MANAGEMENT

CHAPTER 3 THE
MANAGEMENT OF SERVICE
AND QUALITY IN
RETAILING

CONTENTS/LEARNING OBJECTIVES

WHAT CONSTITUTE RETAILING ?

THE SERVICE PRODUCT CONCEPT
DEFINITION OF SERVICE
THE CHARACTERISTICS OF THE RETAIL AND SERVICE
PRODUCT
CLASSIFICATION OF SERVICE AND QUALITY
RETAIL SERVICE CHALLENGES
STRATEGIES TO OVERCOME CHALLENGES
SERVICE QUALITY MODEL
CHARACTERISTICS OF QUALITY
QUALITY AUDITING SYSTEMS
BENCHMARKING
SERVICE RECOVERY

WHAT CONSTITUTES
RETAILING ?

1. TANGIBLE
FEATURES

2.
INTANGIBLE
+
SERVICES

1. TANGIBLE FEATURES
Retailing is a combination of
goods/services.
A channel service but may also involve a
mix of physical surroundings, signage,
uniforms, changing rooms, display
and tangible features the merchandise.
Retailing provides the beneficial utility of
a place for purchase.
Tangibles merchandises (product lines,
staffs, layout)
What else look tangible in a retail
store ?????

2. INTANGIBLE SERVICES

Retailing is also largely intangible in nature.

Similar with pure services operational process such as
banking, insurance, investment services etc.
Retailing combines both goods and services as one
package.
Retailing can be pure service insurance & banking,
education, etc.
Others are combination of service + goods
Laundries, hairdressers,shoe repairers, health club and
centres,cinemas, catering outlets, travel agents etc
With many of these service dominant retail
businesses there is little or no movement of
physical goods through a distribution channel.

SERVICE PRODUCT
CONCEPT

TRANSACTION
WITH
MERCHANDISE

TRANSACTION
WITHOUT
MERCHANDISE

TRANSACTION WITH
MERCHANDISE
In retailing there are three (3) type of
services with goods;
1.OWNED-GOOD SERVICE
2. RENTAL GOOD SERVICE
3. SERVICE WITH BOUGHT GOODS
Give examples of the above
goods. ?????

TRANSACTION WITHOUT
MERCHANDISE

In retailing there is also service without

goods-pure services without goods.
Pure services- provided by a wide
range of retailers who are involved in
arranging or organizing travel,
financial transaction and services, or
providing personal services such as
dry cleaning, haircut, etc.
What else ????????

What is a Service?
A Service is a form of product that
consist of activities, benefits, or
satisfactions offered for sale that are
essentially intangible and do not result
in the ownership of anything.
Examples include:
Banking
Hotels
Tax Preparation
Home Repair Services

Retail Products, Services,

and Experiences
Tangible
Pure
Good With Hybrid
Tangible Accompanyi Offer
Good
ng Services

Soa
p

Service
With
Accompanyi
ng Minor
Goods

Pure
Service

Auto With
Airline Trip
Accompanyi Restauran
With
Doctors
ng Repair
Accompanyi Exam
t
Services
ng Snacks

Retail Products & Services

Pure
Tangible
Good
Soap,
toys,
etc
TANGIBLE
STORABLE
STANDARD

Hybrid
Offer

Restauran
t,
Fast food/
Traditiona
l retail

Pure
Service
Hairdressin
g,
Banking,
Insurance
INTANGIBILITY
PERISHABILITY
INSEPARABILIT
Y

Nature and Characteristic

of a Retail Service
Intangibility
Intangibility
Inseparability
Inseparability

Cant be seen, tasted, felt,

heard, or smelled before
purchase.
Cant be separated from
service
providers.

Variability
Variability

Perishability
Perishability

Quality depends on who

provides them and when,
where and how.
Cant be stored for later sale

RETAIL SERVICE
CHALLENGES/PROBLEMS ?

INTANGIBILITY
Customers cant see the benefits of
the retail product and services
STRATEGIES
Use effective selling techniques
Improvise the store physical layout
What else ????????

RETAIL SERVICE
CHALLENGES/PROBLEMS ?

PERISHABILITY ?
Retail business/store would lose sales
if there are no customers.
STRATEGIES
To create demand by having special
promotion.
What else ?????

RETAIL SERVICE
CHALLENGES/PROBLEMS ?

INSEPARABILITY
Absence of service providers and
insufficient
merchandise (product lines)
STRATEGIES
Stores to employ part-time/stand in
workers
What else ????

RETAIL SERVICE
CHALLENGES/PROBLEMS ?

VARIABILITY ?
Quality depends on who provides
them and when, where and how.
Problems inconsistent employees
performance
STRATEGIES ?
Provide effective product knowledge
and customer service training
What else ????

The Retail Service-Profit

Chain
Healthy
Healthy
Service
Service Profits
Profits
and
and Growth
Growth

Internal
Internal
Service
Service Quality
Quality

Satisfied
Satisfied and
and
Productive
Productive Service
Service
Employees
Employees

Satisfied
Satisfied and
and
Loyal
Loyal
Customers
Customers
Greater
Greater Service
Service
Value
Value

Marketing Strategies for

Retail Service Firms
Managing Service Differentiation
Develop differentiated offer, delivery and image.

Managing Service Quality

Empower front-line employees,

Become Customer obsessed,
Develop high service quality standards,
Watch service performance closely.

Managing Service Productivity

Train current or new employees better,
Work on quality as well as quantity,
Utilize technology.

SERVICE QUALITY
Service quality is described as the ability of
the organization to meet or exceed
customer expectation.
Customer satisfaction with a service can be
defined by comparing perceptions of service
received with expectation of service desired.
When expectations are exceeded, service is
perceived to be one of exceptional quality
and also to be a pleasant surprise.

When expectations are not met, service

quality is deemed unacceptable. When
expectations are confirmed by perceived
service, quality is satisfactory).

CUSTOMERS EXPECTATIONS
VERSUS PERCEPTIONS
1. EXPECTATION

Refer to customers
desires or wants that
are influenced by past
experience,personal
needs,word of
mouth,market
communication,image
and price.

These expectations can

be shaped by service
providers through their
marketing and external
communication efforts.

1. PERCEPTION
The process by
which
people
select ,organize,
and
interpret
information
to
form a meaningful
picture
of
the
world (Kotler ).

SERVICE QUALITY MODEL

The following 5 variables ; Tangibles,
Assurance. Reliability, Responsiveness
and Empathy are the dimensions in the
SERVICEQUAL model( developed by
Parasuraman, Zeitham and Berry 1990).
These variables are expected to
influence peoples perception and
expectation on the service quality by
organizations.

SERVICE QUALITY
VARIABLES

A RETAIL
SERVICE
QUALITY

TANGIBLES
ASSURANCE
RELIABILITY
RESPONSIVENESS
EMPATHY

TANGIBLES
Tangibles include the physical
evidence of the service such as
`physical facilities,appearance of
service
providers,
tools
or
equipment used to provide the
service, physical presentation of
the service, and other customers
in the service facility.

ASSURANCE

This dimension relates to the knowledge,

competence,
and
courtesy
of
service
employees and their ability to convey trust and
confidence.
Competence means possessions of the
required skills and knowledge to perform the
service.
Courtesy
involve
politeness,respect,
consideration, and friendliness of contact
personnel.
This dimensions includes trustworthiness,
believability and honesty of service employees.

RELIABILITY
Reliability in services is defined as the
ability to perform the promised service
dependably and accurately.
It means that the service organization
perform the service right the first time
and also means that the organizations
honors all of its promises.
Some examples include accuracy in
billing,keeping records accurately, and
completing the service at the promised
time.

RESPONSIVENESS
This concerns the willingness or
readiness of employees to provide
service.

It Includes the timeliness of

service such as giving prompt
service, mailing a transaction slip
immediately,
and
returning
customer call quickly.

EMPATHY

Empathy is defined as the caring

and
individualized
attention
provided to customers.
It included the approachability and
ease of contact with the service
providers and making the effort to
understand the customers and
their needs.

QUALITY IN RETAILING ?
Is the totalilty of relationship
between service providers
(functional aspects) and the
features of retailing (technical
aspect) which are related to
the delivery of satisfaction.

QUALITY IN RETAILING ?

FUNCTIONAL
QUALITY

TECHNICAL
QUALITY

FUNCTIONAL QUALITY
Refers to how the technical elements of
the service are transferred or perceived.
EXAMPLES
Appearance
Behaviour
Attitudes
Customer contacts
Service mindedness
Accessibility
Internal relations

TECHNICAL QUALITY
Refer to what customers is actually
receiving from the service.
EXAMPLES
Technical solution
Know-how
Machines
Computerized systems

Importance of Productivity and

Quality for Retail Service Marketers
Productivity

Helps to keep costs down

lower prices to develop market, compete better

increase margins to permit larger marketing budgets
raise profits to invest in service innovation
May impact service experience (must avoid negatives)
May require customer involvement, cooperation

Quality

Gain competitive advantage, maintain loyalty

Increase value (may permit higher margins)
Improve profits

THE SERVICE QUALITY

DELIVERY MODEL
Developed by Parasuraman, Zeithaml &
Berry (1985).
The model claims that the consumer
evaluates the quality of a service
experience as the outcome of the
difference(GAP) between expected and
unexpected service.
The model highlights the main requirements
for a service providers delivering the
expected service quality.
There are 5 gaps in the model.

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION
Customer needs
and expectations

CUSTOMER

1. Knowledge Gap
Management definition
of these needs

MARKETER

2. Standards Gap
Translation into
design/delivery specs

4. External
Communications Gap

3. Delivery Gap
.
Execution of
design/delivery specs
Customer perceptions
of product execution

Advertising and
sales promises

Customer interpretation
of communications

5. Service Gap
Customer experience
relative to expectations

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION

This model helps retail marketers to

provide greater management control
over retail customer service
relationship.
Can lead to better customers
satisfaction by reducing or closing
the gaps

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION
GAPS 1 KNOWLEDGE GAP
Ignorance of the customers expectation
Is the gap between consumer expectation
and management perception.
May result from the lack of understanding
of what consumers expects from a service.
E.g a newly established restaurant owner
thinks that customer want delicious rice
and routine food cuisines but in reality
customers want a variety of food cuisines.

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION
GAP 2 SERVICE STANDARD
Requirement for service standard
The gap between management perception and service
quality expectations.
Results when there is a discrepancy/difference
between what management perceives to be consumer
expectations and actual service quality specification
extablished..
E.g- the management may not set quality standards or
the quality standards set may be clear but unrealistic.
E.g a sea food restaurant perceives that customers
want fastfood delivery but the management do not
set the actual delivery standard.

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION
GAP 3 NOT DELIVERING TO SERVICE STANDARDS
Is the gap between service quality specifications and
service delivery.
The guidelines may exist to perform a service well but
service delivery is of poor quality due to poor employee
performance.
Eg a bank claim of fast banking service but the
employees provide slow service due to their
inefficiency and incompetency.
Other examples ???
An outstation cheque deposited in Penang Bank would
take 3 days to clear but the cheque is not cleared on
the 3rd day.

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION
GAP 4-EXTERNAL COMMUNICATION GAP
Inconsistency between performance and promises.
The gap between service delivery and external
communication.
Consumer expectations are affected by the
promises
made by the service providers promotional message.
Examples
A private college claims that business programs
have been accredited by LAN/MQA only to be
discovered by students not yet
approved by Ministry of Education.
Other examples ???

THE SERVICE QUALITY MODEL- 5 GAPS

THAT LEAD TO SATISFACTION
GAP 5 SERVICE GAP
The service shortfalls.
Results when one or more of other gaps described occurs.
EXAMPLES
A hotel guest complains that the rate quoted is higher
than the rate advertised.
He further complains that the room is smelly with durian
smell and full of mosquito.
Private college students complain that they need to pay
additional tuition fee ++++.
They further complain that the air-conditioning is hot and
humid
plus smelly, and hostels water look yellowish.
If these shortfall arises, management have to ensure they
reduce or close the gaps.

ZONE OF TOLERANCE
In retail service encounter, consumers will
have different levels of tolerance as what
may be judged adequate or expected service.
zone of tolerance consumers are willing to
accept different level of service which fall
within a zone between the desired and
adequate levels of performance.
Examples my tolerance level for waiting
food delivery is 20 minutes. If within 10 20
minues still O.K. If more than 20 minutes not
O.K

RETAIL SERVICE CONTROL OF

QUALITY
WHY THERE IS GROWING CONCERN ON
RETAILSERVICE CONTROL OF QUALITY ?
Due to strong competition and rivals need to
provide better service levels.
Due to customers demand on quality service
and quality of life.
Due to consumers time limitation, need for fast
service.
Due to the globalization era, the presence of
giant competitors who could offer better services
Due to the advancement of technology, rivals are
competing for
latest technologies and award ISO 2000s

CHARACTERISTICS OF QUALITY
IN RETAILING

MERCHANDISE
(PRODUCTS)

SERVICES

MERCHANDISE-QUALITY
(products)

Performance
Features
Reliability
Conformance to standards
Durability
Serviceability
image

SERVICES - QUALITY
1.TANGIBLES
2.ASSURANCE
3.RELIABILITY
4. RESPONSIVENESS
5. EMPATHY

QUALITY AUDITING SYSTEM

Buttle (1994) compiled a list of 18o
service variables that shoppers
normally used to assess a stores
service performance.
He shortlisted to 26 key critical
atributes that retailers need to focus
on -

26 RETAIL SERVICE ATTRIBUTES

External appearance of the outlet
Merchandise pricing in window display
Greeting upon entry
Staff approachability
Staff availability to help
Manager availability
Whether the manager is recognizable
The number of customer served simultaneously by one
staff member
Promptness of enquiry handling
Outlet stock level
Staff awareness of fashion trends
Product depth and width
Staff awareness of advertised lines
Helpfulness of staff advice

26 RETAIL SERVICE ATTRIBUTES

Honesty of staff advice

Standard of fitting rooms
Availability of advertised stock
Color/size availability
Selection within size
Availability of alteration device
Eye- catching window diplay
Quality of interior display
Speed of the purchase transaction
Number of counter service
The availability of seats

BENCHMARKING ?
Is a continuous process of selecting the
best practice and services against
which to judge
Based upon the Japanese concept dan
totsu, meaning the best.
Using the best competitor as the
benchmark for retailers to improve.
Maybank using Citibank as a
benchmark to improve

4 TYPES OF
BENCHMARKING
1.INTERNAL
Where the best internal company examples are
utilized;
2.COMPETITIVE
Based upon external directly competing retailers
and their merchandise
3.FUNCTIONAL
Which measures against the best external
market leaders or functional operations
4.GENERIC
Which is to measure the best practice regardless
of what sector or industry is represented.

IS A QUALITY OR COST OR A LONGTERM BENEFITS ?

Generally the notion/idea that improvement in
quality is associated with increased costs.
Heskett (1990) came up with the model that
indicates in the long term, true quality
improvement leads to an improved trading
position.
Claims that a continuous improvement in service
is not a cost but an investment in a customer who
will return more profit in the long-term.
DO IT RIGHT FOR THE FIRST TIME, MAKE
CUSTOMERS SATISFIED AND DELIGHTED,IN THE
LONG-RUN QUALITY WILL BE FREE

HESKETTS QUALITY
MODEL
Indicates that quality improvement leads to an
improved trading position.
Claims that the cost of acquiring a new customer
is much higher than that of retaining an existing
customer through providing quality service.
Satisfied customers are willing to pay higher prices
due to the good service quality experienced plus
free advertising through word of mouth
advertisement.
Keeping customers over long-term provides
important savings.
On a cost benefit basis, good service quality will
increase service quality and reduce long-run costs.

Building a Service Quality

Information System
Complaint analysis
Post-transaction surveys
Ongoing customer
surveys
Customer advisory
panels
Employee surveys/panels
Focus groups
Mystery shopping
Total market surveys
Capture of service
operating data

SERVICE RECOVERY ?
Is a broad term that relates to the
planned systems and effort that a
firm provides to correct a problem
following a service failure with the
specific objective of retaining a
customers goodwill.
Service recovery efforts play a
crucial role in achieving (or)
restoring customer satisfaction.

Fig. 3.1: Courses of Action Open to

a Dissatisfied Customer

Escalate
Complaint

Decide to
Complain

Problem
Arises

Take No
Action

Complain to Firm
at Local Level
Complain to
Head Office
Complain to
Outside Organization
Seek Legal
Action

Problem Now
Resolved
Problem Still
Unresolved

Tell Friends of
Bad Experience
Switch
Suppliers

Problem Still
Unresolved

Negative WOM
Defection

Entry Points for

Complaints
Employees serving customers face-to-face or by phone
Intermediaries acting for original supplier
Managers contacted by customers at head/regional
office
Complaint cards mailed or placed in special box
Complaints passed to company by third-party
recipients

trade organizations
consumer advocates
legislative agencies
other customers

Fig. 3.2: Components of an

Effective
Retail Service Recovery System
Do the Job Right
the First Time

Effective Complaint
Handling

Identify Service
Complaints

-Conduct Research
-Monitor Complaints
-Develop Complaints as
Opportunity Culture

Resolve Complaints
Effectively

Develop Effective
Systems and Training
in Complaints Handling

Learn from
Recovery

Feedback

Increased Satisfaction
and Loyalty

Conduct Root Cause

Analysis

Guidelines for Effective

Retail Service Problem
Resolution
Act fast
Admit mistakes but
dont be defensive
Understand
problem from
customers
viewpoint
Dont argue
Acknowledge
customers feelings

Give benefit of
doubt
Clarify steps to
solve problem
Keep customers
informed of progress
Consider
compensation
Persevere to regain
goodwill

INDIVIDUAL SERVICE
RECOVERY STRATEGIES
WATCHING FOR SIGN LANGUAGE
Look for customer non-verbal cues- boring, waiting too
long etc.
In restaurant, give free coffee or e reduction in the bill
PRE-PLANNING
Ensure enough staffs during peak time/demand.
TRAINING
Either provide specialised or multi-tasks training.
EMPOWERMENT
Front-line staff need to react quickly to solve service
problem situations.
Delegate authority & responsibility to solve problems
without the need to refer to the supervisor and manager.

A SUMMARY OF THE KEY

COMPONENTS OF A SERVICE
QUALITY-LED APPROACH

1. An unending quest for excellence in all things.

2.A system which offers continuous improvement &
reduces failure repetition.
3. An orientation which focuses on the customer
and stakeholder satsifaction outcomes.
4.A feeling of total involvement of everyvbody
towards quality attainment.
5. Regular measurement, monitoring,evaluation and
adjustment to changing circumstances.