CHOOSE AN EXAMPLE OF AN IDEAL

SERVICE ENCOUNTER THAT YOU

HAVE EXPERIENCED:
•What was the source of satisfaction?
•Why was the encounter so special? What
did the employee do?
•What were your expectations?
•What could the company do to ensure that
this kind of encounter "is the rule" rather
than "the exception" (if you think the
company should ensure this) ?
CHOOSE AN EXAMPLE OF A VERY BAD
SERVICE ENCOUNTER THAT YOU
HAVE EXPERIENCED:

•What was the source of dissatisfaction?

•What did the employee do to make this such
a bad encounter?
•What were your expectations?
•What should the employee have done?
• “Service Defined”
• Reasons for growth in services
• Service Continuum
• “Unique” characteristics of
services
• Resultant marketing implications
& strategies
• Service Marketing Triangle
 What are services?

“Services are performances.

They are not manufactured
products.”
 Service Definitions
James Fitzsimmons:
“A Service is a Time-perishable,
Intangible Experience Performed
for a Customer Acting in the Role
of a Co- producer.”

Valarie Zeithaml & Mary Jo Bitner:

“Services are deeds, processes,
and performances.”
 Service Defined
 Instrumental
activity
 For consumption

 Consumer

participation
 No ownership
 WHY GROWTH IN SERVICES?
REASON DEMAND FOR

1. AFFLUENCE PEST CONTROL,

PERSONAL SECURITY,
INTERIOR DESIGN.
2. LEISURE TIME VACATION TRAVEL
RESORTS,
ENTERTAINMENT.
3. LIFE EXPECTANCY NURSING HOMES,
HEALTH CARE
 WHY GROWTH IN SERVICES?
REASON DEMAND FOR
4. PRODUCT PROMPT & EFFICIENT
COMPLEXITY SERVICE FOR HOME
COMPUTERS
5. LIFE'S TAX CONSULTANT,
COMPLEXITY LEGAL ADVISORS,
MARRIAGE COUNSELORS

6.
RESOURCE CAR POOL, WATER
SCARCITY & MANAGEMENT,
ECOLOGY POLLUTION
CONTROL.
7. NEW PRODUCTS?
Expanding the Concept of Service Marketing
•Person Marketing
example: Sachin Tendulkar
•Entertainment and Event Marketing
example: Dahler Mhendi
•Place Marketing
example: Black Thunder
•Political Marketing
example: Electronic Media
•Cause Marketing
example: Anti-drunk Driving Campaigns
•Internal Marketing
 Six Distinctions between
Goods & Services

1.Marketing Intangibles
2.Relationship of Provider to
Customer
3.“Service Encounter” connection
4.Simultaneous Production
&Consumption
5.No Storage or Inventory
6.Quality Control
The Continuum
of goods and services

Almost Goods Half Services Almost

Pure with Goods with Pure
Goods Services Half Goods Services
Services

Groceries Autos Rental Health

Rest’ants Movies Clubs
 Tangibility Spectrum
Salt
 Soft Drinks
 Detergents
 Automobiles
 Cosmetics
 Fast-food
Intangible
Outlets
 Dominant

Tangible 
Fast-food
Dominant 
Outlets Advertising

Airlines 
Agencies
Investment 
Management 
Consulting
Teaching
 Intangibility

Inseparability The Service Heterogeneity

Perishability
 Service Characteristics & Strategies:
Intangibility
• Cannot see or feel • Stress symbolic
• Cannot smell, hear, clues
or taste • Associate tangible
symbol with service
• Tangible cues like
“You’re in good hands membership cards
with Our Company.”
 Implications of Intangibility

Services cannot be inventoried

Services cannot be patented
Services cannot be readily
displayed or communicated
Pricing is difficult
Intangibility
 Intangibility
Marketing Strategies
Implications
Cannot be stored TANGIBLE CUES: Mobile alerts, Fax

No Patents
Banking, Credit Cards, ATM cards, Brochures,
Leaflets, Scheme Catalogues.
No ready
WoM: Friends, Relatives, Existing Account
Display holders, Employees
Communication ORGANISATIONAL IMAGE: Recent

Problem collaborations with Air Sahara and Bharat

Petroleum. Part of UN Global Compact, World
Pricing
Economic Forum, Equator Principles.
Difficulties POST-PURCHASE COMMUNICATION:
Fax Banking which helps the customers to keep
a record of the daily transactions
Intangibility: Strategy adopted
Image building services
- A strong association
(TAJ brand a symbol of luxury )
-Communication mix
WoM
Attractive displays within the hotel
Conveying the vision statement
 Service Characteristics & Strategies:
Perishability
• Cannot be stored • Demand
• Lost sale = lost management
income
– Forecasting
– Supply
management
• Pricing
adjustments
 Implications of Perishability

It is difficult to synchronize

supply and demand with
services
Services cannot be returned or
resold
 PERISHABILITY

No Inventorisation
Cope with Better Match
Fluctuating Thru
Demand Process
PERISHABILTY: Strategy adopted
The company offers to its potential
customers off-seasonal offers and
discounts
They also arrange tour packages in
the “TAJ” name
 Service Characteristics & Strategies:
Inseparability

Time
Tangible products
Production Sale Consumption

Intangible products  Production

Sale orientation
Production  Personnel
Consumption management
 Implications of Simultaneous
Production & Consumption

Customers participate in and

affect the transaction
Customers affect each other
Employees affect the service
outcome
Decentralization may be
essential
Mass production is difficult
Inseparability M
Im

-C
In
Inseparability: Strategy adopted

•GSTS (Guest Satisfaction Tracking System)

•Executive staff of room series, constantly in
touch with the customers during stay
•Selection & training of persons knowing
French, German etc.
 Inseparabilit
y
Marketing Strategies
Implications
No mass Training of contact person:
production Talent Mgmt Process for
Supply Demand
under performance, Online
learning system for employees
match globally, Development
programs.
Multi-site locations: ATM’s
Managing consumers:
Electronic system
 Service Characteristics &
Strategies: Variability
• Provided by people • Standardizatio
• Inherent variance n
– Personnel
selection
– Training
– Automation
• Customization
 Implications of Heterogeneity

Service delivery and customer

satisfaction depend on employee
actions
Service quality depends on
many uncontrollable factors
There is no sure knowledge that
the service delivered matches
what was planned and promoted
Heterogeneity M
Im

-S
Heterogene
ty
Marketing Strategies
Implications

Standardization INDUSTRIALISE:
difficult Voice Messages, Internet
Quality control
Banking, ATM
CUSTOMISE: Fax
difficult
Banking, T- Banking,
Mobile messages
Unique Characteristics of Services
 Intangibility: Creative
advertising, no patent protection,
importance of reputation
 Perishability: Cannot carry

inventory, opportunity loss of idle

capacity, need to match supply
with demand
 Unique Characteristics of
Services
• Heterogeneity: (contd.)
Customer
participation in delivery process
results in variability
• Inseparability: Opportunities for
personal selling, interaction creates
customer perceptions of quality.
Customer Participation in the
Service Process
 The Services Marketing
Triangle
Company
(Management)
Internal External
Marketing Marketing
“enabling the “setting the
promise” promise”

Employees Interactive Marketing Customers

“delivering the promise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
 Services Marketing Triangle:
Applications Exercise
• Focus on a service organization. In
the context you are focusing on,
who occupies each of the three
points of the triangle?
• How is each type of marketing
being carried out currently?
• Are the three sides of the triangle
well aligned?
• Are there specific challenges or
barriers in any of the three areas?
 Ways to Use the
Services Marketing Triangle
Overall Strategic Specific Service
Assessment
Implementation
• How is the service • What is being promoted
organization doing and by whom?
on all three sides • How will it be delivered
of the triangle? and by whom?
• Where are the • Are the supporting
weaknesses? systems in place to
• What are the deliver the promised
strengths? service?
The Services Triangle & Technology
Company

Technology

Providers Customers

Source: Adapted from A. Parasuraman

Classification of services by:
• Complexity
• Ownership
• Method of Delivery
• Type of Relationship, and
• Nature of Service Act
 Classification of Services
• Why classify?

– Marketing within one service sector

may be able to learn best practice
from another similar sector

– Classification should be driven by

similarity of marketing needs rather
than similarities of technology etc.
 Considering Functional Elements in
Service Development
Divergence        
                           

Standardization)

Complexity  (Degree of Intricacy)
(Degree of 

Low Low         High 

Barber Dentistr
y
House  Litigation
High
Cleaning
 METHOD OF DELIVERY

NATURE OF CUS
INTER- GOE
ACTION
SR.
BY OWNERSHIP & BUSINESS
OBJECTIVE

FOR G
 RELATIONSHIP WITH
CUSTOMERS
NATURE OF Type of relationship
SERVICE DELIVERY
MEMBERSHIP NONFORMAL
RELATIONSHIP RELATIONSHIP

CONTINUOUS • TEL/CEL • RADIO

DELIVERY OF PHONE SERVICE
• BANKING/C.C. • TV
SERVICE • •
CLUB POLICE
• INTERNET • CAR
• GYMS RENTAL
RESTAURAN
DISCRETE • HOSPITAL ·• PUBLIC
T
(SEPARATE) CHECK-UP s TRANSPORT
TRANSACTIONS • THEATRE(SPEC
IAL)
 Who or What is the
Recipient of Service?

What is Nature
of Service Act? People Possessions

People Processing Possession processing

Tangible (service directed at (service directed at
Actions people’s bodies) physical possessions)

Mental stimulus Information processing

Intangible
processing (service directed at
Actions (service directed at intangible assets)
people’s minds)
NATURE OF THE SERVICE ACT

E OF SERVICE ACT
W
PEOPLE

SERVICESDIRE

E TANGIBLE
ACTIONS
ATPEOPLE'SBO
• HAIRCUT
• BEAUTY
TREATME
• SURGERY
KTDC: By ownership & business objective
(Acknowledgments: Ramakrishnan.M , Preetha Shankar,
Sathyaseelan.M Kharthik.V.N MBA 2002-2004)
Government Non-
Government
For profit Non-
Government
for Profit
Government for
Profit

Non-Profit Govt. for Non-Profit Non-

Government-
Non Profit
BY NATURE OF SERVICE
Involves tangible actions involving people.
• Also known as people processing where
services are directed at peoples bodies
such as
• Passenger Transportation
• Health Care
• Lodging
• Beauty Salons
• Physical Therapy (Ayurveda)
• Fitness Centers (Steam bath, Oil
massaging)
• Restaurant/ bars
Apart from these services some of the services
are also directed at physical possessions:
– Laundry and Dry Cleaning

There are services which are intangible in

nature
and are directed at people’s minds:
– Arts and Entertainment
– Information services
Consumer Behaviour in Buying
Process

Information Search

Evaluation of Alternatives

Purchase & Consumption

Post-purchase Evaluation
 Qualities that Affect
Consumer Evaluation of Services

Search
Qualities

Experience
Qualities

Credence
Qualities
Search, Experience and Credence:
qualities of goods and services

Almost Almost
Pure Pure
Goods Services

Auto Repair
Jewelry
Furniture

Child Care
Automobiles

Root Canal
Television Repair
Clothing

Rest. Meals

Haircuts

Legal Service
Houses

Vacation

Diagnosis
Medical
High in High in High in
Search Experience Credence
Qualities Qualities Qualities
 Perceived Risks in
Purchasing & Using Services
Functional risk Examples of Customer Concerns
(Unsatisfactory •Will this training course give me
Performance the skill I need to get a better job?
Outcomes) •Will this credit card be accepted
wherever and whenever I want to
make a purchase?
Financial risk •Will I lose money if I make the
(monetary loss, investmentrecommended by my
unexpected stockbroker? Will repairing my car
costs) cost more than the original estimate?
Temporal risk Examples of Customer Concerns
(wasting time,
•Will I have to wait in a long line
consequence of
before I complete the transaction?
delays)
•Will service at this restaurant be
so slow that I will be late for my
meeting?

Physical risk •Will the contents of this package

(personal injury get damaged in the mail?
or damage to
•Will I become sick eating at this
possessions)
restaurant?)
Psychological risk Examples of Customer
(personal fears & Concerns
emotions) •How can I be sure this
aircraft won't crash?
•Will the doctor's diagnosis
upset me?

•What will my friends think of me

Social risk if they learned that I stayed at this
(how others think and cheap hotel?
react) •What will my relatives think of
me if they knew that my child is
studying at this institution
 Perceived Risks in
Purchasing & Using Services (end)

Sensory risk Examples of Customer

(Impact on the Concerns
senses)
• Will the bed be uncomfortable?
•Will the coffee at breakfast taste
disgusting?
Temporal Risk Network busy, Delay in Connections

Functional Risk Voice Clarity, Spectrum problems,

Customer Switching over
Financial Risk Hidden Costs ,Tariff plans

Physical Risk Damaged SIM cards, Radiation

problems
Psychological Fear of High Bills, Services offered
Risk without intimation
S.NO RISKS STRATEGIES ADOPTED TO
AVOID RISK

1 PSYCHOLOGICAL Loss of money Credit Rating for the bank, Control of the
RBI

2 SOCIAL status symbol… Collaborations, Advertisements, Periodical

announcements of the schemes

3 TEMPORAL Long queues, transaction Internet banking, Computerized Working,

delay, technical failure, frequent updation and evaluation.
Online Transactions.

4 PHYSICAL Theft Proper safety precautions like alarms,

safety locks, security

5 FUNCTIONAL Lack of response during Customer care service, firewalls

calls, software failure Routine virus checks, S/w consultants
employed

6 FINANCIAL Higher interest charges Credible Schemes, Good Interest rates

,devaluation of share prices,
loss of money due to
improper investments
Service Buying:
Proposition 1:
Consumers seek and rely more on information
from personal sources than from non - personal
sources when evaluating services before
purchase. Because:
•There is more of “experience” in services.
•Personal influence becomes more important as
the complexity of the service product
increases.
•Fewer attributes can be discovered before
purchase.
Proposition 2:
Consumers engage in greater information
seeking with services than with goods.
Proposition 3:
Consumers engage in more post-purchase
evaluation than pre-purchase evaluation
when selecting and consuming services.
Because:
•Virtually indistinguishable alternatives
•Through experience, the consumer develops
an attitude towards the service.
•Post-purchase, customer looks for messages
supporting choice
Proposition 4:
Consumers perceive greater risks when
buying services than when buying goods.
Because:
•Services are intangible, non-standardised
and have high experience qualities.
•Services are not accompanied by guarantees
or warranties.
•Services can rarely be 'returned' by a
consumer
•Many services are technical or specialized.
Proposition 5:
The consumer's evoked set of alternatives
(group of products considered acceptable
options within a product category) is smaller
with services than goods.
•Goods are displayed in a retail store. On the
other hand, generally single or few "brands" of
service is only offered.
Proposition 6:
Positive (negative) moods & emotions enhance
( decrease) the likelihood of service being
perceived as good.
•Moods and emotions bias the way consumers
judge service encounters & providers.
•Moods and emotions enhance and amplify
experience, making them more positive or more
negative than in the absence of moods and
emotions.
•The greater the human interaction in the service
encounter, more the influencing of evaluation by
moods and emotions.
 Proposition 7:
The delivery of service can be conceived as
drama where: service personnel are "actors,"
service customers are the "audience", physical
evidence of the service is the "setting," and the
process of the service assembly is the
"performance.”
•Selection of personnel ( auditioning)
•Training of personnel (rehearsing)
•Clearly defining the role (script)
•Should the performance be in the presence of
the customer (onstage) or in the back room
(backstage)?
 Proposition 8:
Customer compatibility is a factor that influences
consumer satisfaction, particularly in high contact
services.
•Customers are in close proximity to each other.
•Verbal interaction likely among customers.
•Customers are engaged in varied activities.
•Heterogeneous customer mix .
•Customers must occasionally wait for the service.
•Customers are expected to share time, space or
service utensils
Proposition 9:
Customers may complain less frequently
about services than about goods due to
their belief that they themselves are partly
responsibly for their dissatisfaction.

Proposition 10:
Customer adopt innovations in services
more slowly than they adopt innovations
in goods.
 Service Encounters

Recovery Delivery System Failures

Adaptability Customer Requirements

Spontaneity Unprompted Actions

Coping Problem Customers

Service Encounters: Do’s & Don'ts
Theme: Recovery
Do’s Don’ts
• Acknowledge • Ignore customer
problem • Blame Customer
• Explain causes • Leave customer to
fend for
• Apologize him/herself
• Compensate/upgr • Downgrade
ade • Act as if nothing is
wrong
• Lay out options • Pass the buck
• Take responsibility
Theme: Adaptability
Do’s Don'ts
 Recognize seriousness  Ignore
of the need  Promise but fail to
 Acknowledge follow through
 Anticipate  Show unwillingness
 Attempt to to try
accommodate  Embarrass the
 Adjust the system customer
 Explain rules/policies  Laugh at customer
 Take responsibility  Avoid responsibility
 Pass the buck
Theme: Spontaneity
Do’s Don'ts
 Take time  Exhibit impatience
 Be attentive  Ignore
 Anticipate needs  Yell/1augh/swear
 Listen  Steal from customers
 Provide information  Discriminate
 Show empathy
Theme: Coping

Do’s Don'ts
 Listen  Take customer's
 Try to accommodate dissatisfaction
 Explain personally
 Let customer's
 Let go of the customer
dissatisfaction affect
others
 Service Perception
Explicit service promises
Expected
Service
Implicit service promises
Desired
Service Word-of-mouth
Zone
of
Tolerance Past experience
Adequate
Service Predicted Service
 Moment of Truth

• Each customer contact is called a moment

of truth.

• You have the ability to either satisfy or

dissatisfy them when you contact them.

• A service recovery is satisfying a

previously dissatisfied customer and
making them a loyal customer.
 Customer Satisfaction
• All customers want to be satisfied.

• Customer loyalty is only due to the

lack of a better alternative

• Giving customers some extra value

will delight them by exceeding their
expectations and insure their return
 Perceived Service Quality
Word of Personal Past
mouth needs experience
Service Quality Assessment
Service Quality 1. Expectations exceeded
Expected
Dimensions ES<PS
service
Reliability (Quality surprise)
2. Expectations met
Responsiveness Perceived ES~PS
Assurance service (Satisfactory quality)
Empathy 3. Expectations not met
ES>PS
Tangibles (Unacceptable Quality)
Determinants of Customer
Satisfaction
Reliability

Responsiveness
Consumer
Assurance
Satisfaction
Empathy

Tangibles
 Determinants of Customer
Satisfaction
Reliability
Car repair Problem fixed the first time
(consumer) & ready when promised
Airline Flights to promised destinations
(consumer) depart & arrive on schedule
Medical care Appointments are on schedule;
(consumer) diagnoses prove to be accurate
Information Provides needed information
processing when requested
(internal)
 Determinants of Customer
Satisfaction
Responsiveness
Car repair Accessible; no waiting;
(consumer) responds to requests
Airline Prompt and speedy system for
(consumer) ticketing, baggage handling
Medical care Accessible; no waiting;
(consumer) willingness to listen
Information Prompt response to requests;
processing not "bureaucratic”; deals with
(internal) problems promptly
 Determinants of Customer
Satisfaction
Assurance
Car repair Knowledgeable mechanics
(consumer)
Airline Trusted name; good safety record;
(consumer) competent employees
Medical care Knowledge, skills,
(consumer) credentials, reputation
Information Knowledgeable staff;
processing well-trained; credentials
(internal)
 Determinants of Customer
Satisfaction
Empathy
Car repair Acknowledge customer by name;
(consumer) remembers previous problems &
preferences
Airline Understanding special individual
(consumer) needs; anticipates customer needs
Medical care Acknowledges patient as a person;
(consumer) remembers previous problems;
good listening; patience
Information Knows internal Customers as
processing individuals; understands
Determinants of Customer Satisfaction
Tangibles
Car repair Repair facility; waiting area;
(consumer) Uniforms; equipment
Airline Aircraft; ticketing counters;
(consumer) baggage area; uniforms
Medical care Waiting room; exam room;
(consumer) equipment; written materials
Information Internal reports; office area;
processing dress of employees
(internal)
 Expressing Dissatisfaction

Public Action
Seek redress directly from
the firm
Action
Take legal action
Dissatisfaction
occurs Complaint to
governmental agencies
Private Action
Boycott the product
No Action or seller
Warn about product
or seller
 Customer Feedback & Word-of-
Mouth
• The average business only hears from 4% of their
customers who are dissatisfied with their products or
services. Of the 96% who do not bother to complain,
25% of them have serious problems.
• The 4% complainers are more likely to stay with the
supplier than are the 96% non-complainers.
• About 60% of the complainers would stay as customers
if problems was resolved and 95% would stay if the
problem was resolved quickly.
• A dissatisfied customer will tell between 10 and 20 other
persons about their problem.
• A customer whose problem was resolved will only tell
about 5 persons about their situation.
Number of People Told Based
on Level of Dissatisfaction
Average No. of people
30 told
25
20
15
10
5
0
Slight Annoyed Very Ext Abs
diss annoyed annoyed furious
 Action Taken Based on
Level of Dissatisfaction

100
Tell friends
80
Complain
60 Make a fuses
40 Not use again
Dissuade others
20
Complain against
0
Slightly Annoyed Very Ext Abs
diss annoyed annoyed furlous
 Approaches to Service Recovery
• Case-by-case: Addresses each customer’s
complaint individually but could lead to
perception of unfairness.
• Systematic response: Uses protocol to handle
complaints but needs prior identification of critical
failure points & continuous updating.
• Early intervention: Attempts to fix problem before
the customer is affected.
• Substitute service: Allows rival firm to provide
service but could lead to loss of customer.
 Making Customers into
Champions
Easy
Walking wounded Champions
How easy customers feel it is to

Could complain but don’t; Active in providing

not happy but repurchase provider with
information on quality
of its services; loyal
Remain Loyal
contact

Defect
Missing in action Detractors
Defected; Defected;
non-complaining vocally critical

Not easy
Don’t complain Complain
Propensity to contact
 Classification of Service
Failures
Server Errors Customer Errors
Task: Preparation:
Doing work incorrectly Failure to bring
Treatment: necessary materials
Failure to listen to Encounter:
customer Failure to follow
Tangible: instructions
Failure to clean facilities Resolution:
Failure to learn from
experience
 Service Process Control
Customer
input Service
concept

Service Customer
Resources output
process

Take Monitor Establish

corrective conformance to measure of
action requirements performance

Identify reason
for
nonconformance
 Unconditional Service
Guarantee: Customer View

• Unconditional
• Easy to understand and
communicate
• Meaningful
• Easy to invoke
• Easy to collect
 Unconditional Service
Guarantee: Management View
• Focuses on customers
• Sets clear standards
• Guarantees feedback
• Promotes an understanding of
the service delivery system
• Builds customer loyalty
Buyer Learning Process

Buyer
Goal
Competitive
Strategy
Buyer
Learning
Consumption
Experience
 Traditional Marketing Mix
All elements within the control of
the firm that communicate the
firm’s capabilities and image to
customers or that influence
customer satisfaction with the
firm’s product and services:
 Product
 Price
 Place
 Promotion
 Expanded Mix for Services --
the 7 Ps
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence
 FIVE PRODUCT LEVELS
1 CORE BENEFIT The fundamental benefit or service - the
  customer is buying (Hotel : Rest / Sleep)
 
2 BASIC Basic, Functional Attributes (Room; Bed;
PRODUCT Bath…)
 
3 EXPECTED Set of attributes / Conditions the buyer
PRODUCT normally expects
(clean room, large towel, quietness)
 
4 AUGMENTED That meets the customers desires
PRODUCT beyond expectations (Prompt Room
Services, and Check in / out, Music,
Aroma)
5 POTENTIAL The
  possible evolution to distinguish the
PRODUCT offer (all-suite hotel)
Core Benefit Communication mobility

Basic Pre-paid and Post-paid mobile

Product connections with various
schemes and offers
Expected Good Connectivity, Voice Clarity,
Product Billing accuracy, Network
coverage, Suitable Tariff plans
Augmented Value added services like MMS,
Product GPRS, GPS, Mobile Banking etc.,
Potential 3G Mobiles with Internet services,
Product Providing Streaming Videos, Data
Services
 Types of product offers
• Pure tangibles

• Tangibles with accompanying

services

• Major services with accompanying

minor goods and services

• Pure services
 Service Product
Level 1: Consumer Benefit Concept
Q. What benefits do consumers seek?
A._____________________________________
Level 2: Service Concept
Q. What business are we in?
A._____________________________________
Level 3: Service Offer
Q. What tangible & intangible elements are
needed to implement Service Concept?
A. ______________________________________
Level 4: Service Forms
Q. In what form should the service be made available?
A._______________________________________
 Analysis of the service offer

• Core service
• Facilitating service
• Supplementary service
• Supporting Service
Core service Banking

Facilitating Transaction records, asset

service liability management,
credit rating of borrowers

Auxillary service Internet banking, mobile

alerts, credit cards,
ATM’s
 Core and Supplementary Service Elements:
An Example: Federal Express
Advice &
Information
Problem
Order Taking
Solving
Overnight
Billing Transportation & Supplies
Statements Delivery of Packages

Tracing Pickup

Documentation
 The core service
• The substantive service

• The underlying service concept

• Essentially defined in terms of

consumers’ benefits
FACILITATIN
(MANDATOR
WHICH THE
MIGHT COLL
 The Service Product
Terminology used to Describe Service Product
Core Substantive Elementary Core
Product Service Services Service
What is The essential Core Services Consists of
the buyer function of the 1. Main reason general
buying? service why customer service
concepts &
buys specific
2. Main output service
that company concepts
provides
Tangible Peripheral 2.Peripheral Core
product Service Service Service

Making the Service that Offered Service used

core product surrounds the around as a means of
tangible to substantive competition
core service
the buyer service ‘Extras'. Not
through: and adds to it
essential but
Quality Some value can become
Features an integral
Styling
part of the
offer
Brand

Name
Packaging
Augmented Product Global Service
Additional benefits Set of core and
and services offered peripheral services
with the tangible which constitute the
products service offering
 The Service Concept

The Core Service

Accessibility Facilitating Supporting

of the Service Services c Services Interaction

Consumer Participation
 Servicescapes
Designing Physical Surroundings to Affect
Employee and Customer Behavior
• Ambient Conditions: Background factors such as
noise level, music, lighting, temperature, and
scent.
• Spatial Layout and Functionality: reception
area, circulation paths of employee and
customers and focal points.
• Signs, Symbols, and Artifacts: selection,
orientation, location, and size of objects.
Typology of Servicescapes

Who Performs in Ph
Servicescape
Self-service G
(customer only) W
Facility Design Considerations
• Nature and Objectives of Service
Organization
• Land Availability and Space
Requirements
• Flexibility
• Aesthetic Factors
• The Community and Environment
 Environmental Orientation
Considerations
• Need for spatial cues to orient visitors
• Formula facilities draw on previous experience
• Entrance atrium allows visitors to gain a quick
orientation and observe others for behavioral
cues
• Orientation aids and signage such as “You Are
Here” maps reduce anxiety
 Shaping First
Impression
Facilitating Managing
Service Trust
Role of
Quality
Evidence
Changing Socialising
the Image Employees
Providing Sensory
Stimuli
 Classification of Service
Automation
• Fixed-sequence (F) - parking lot gate
• Variable-sequence (V) - ATM
• Playback (P) - answering machine
• Numerical controlled (N) - animation
• Intelligent (I) - autopilot
• Expert system (E) - medical diagnosis
• Totally automated system (T) – Coin
Dispenser
 Adoption of New Technology in
Services

• Challenges of Adopting New

Technology
The Process is the Product
Back Office vs Front Office Changes
Need for Standardization

• Managing the New Technology

Adoption Process
 Strategic Positioning
Through Process Structure
• Degree of Complexity: Measured by the
number of steps in the service blueprint. For
example a clinic is less complex than a
general hospital.
• Degree of Divergence: Amount of discretion
permitted the server to customize the service.
For example the activities of an eye doctor
contrasted with those of an optometrist.
 Structural Alternatives for a
Restaurant
LOWER COMPLEXITY/DIVERGENCE CURRENT PROCESS
No Reservations TAKE RESERVATION
Self-seating. Menu on Blackboard SEAT GUESTS, GIVE MENUS
Eliminate SERVE WATER AND BREAD
Customer Fills Out Form TAKE ORDERS
Pre-prepared: No Choice
PREPARE ORDERS
Limit to Four Choices
Salad (4 choices)
Sundae Bar: Self-service
Entree (15 choices)
Coffee, Tea, Milk only Dessert (6 choices)
Serve Salad & Entree Together:
Beverage (6 choices)
Bill and Beverage Together SERVE ORDERS
Cash only: Pay when Leaving
COLLECT PAYMENT
HIGHER COMPLEXITY/DIVERGENCE
Specific Table Selection
Recite Menu: Describe Entrees & Specials
Assortment of Hot Breads and
Hors D’oeuvres At table.
Taken Personally by Maltre d’
Individually Prepared at table
Expand to 20 Choices: Add Flaming
Dishes; Bone Fish at Table; Prepare
Sauces at Table
Expand to 12 Choices
Add Exotic Coffees; Sherbet between
Courses; Hand Grind Pepper
Choice of Payment. Including House
Accounts:
Serve Mints
Taxonomy of Service Processes
Low divergence High divergence
(standardized service) (customized service)
Processing Processing Processing Processing Processing Processing
of goods Information of people of goods Information of people
Dry Check Auto repair Computer
No Cleaning processing Tailoring a programming
Customer Restocking Billing for a suit Designing a
Contact a vending credit card building
machine
Ordering Supervision
Indirect groceries of a landing
customer from a home by an air
contact computer controller

No Operating Withdrawing Operating Sampling Documenting Driving a

customer- a vending cash from an elevator food at a medical rental car
service machine, an ATM Riding an buffet dinner history Using a
worker Assembling escalator Bagging of health club
interaction premade groceries Searching for facility
(self- furniture information
Direct service) in a library

Customer Customer Food Giving a Providing Home Portrait Haircutting

Contact service service in a lecture public carpet painting Performing
worker restaurant Handling transport, cleaning Counseling a surgical
interaction Hand car routine bank mass Landscaping operation
washing transactions vaccination service
Internet Banking: Process
• 66 Branches
• 24 Cities
• Network - VSAT
Customer Preference
Standard Chartered Online
•Easy to use and navigate
•All services available in just 2 clicks
•Access to customers accounts at one place
•Customers can do banking themselves
anywhere, anytime
•Sites can be personalized according to
customers preferences
Stanchart Online Success
 DECISIONS IN
SERVICE PROCESS PLANNING
Decision Explanation
Primary Resolve issues about technology
Technological availability and development
necessary to make and deliver the service product.
Conversion Choosing material conversion
Process process among the available alternatives e.g.,
info to consumer can be transferred by courier, fax,
e-mail. Regard must be given to cost, timeliness of
delivery, quality of service, ease of using
technology & customer preference.
Decision Explanation
Specific Appropriate equipment should
Equipment selected after evaluated for its
usefulness, operating cost,
compatibility, operators’
requirements, spare parts,
maintenance etc.
Process Flow It combines above two decisions.
It is sequencing of performance
by men and machines. Generally,
flow charts are used in developing
process flow.
Decision Explanation
People Man power requirements should
be assessed realistically & people
with right experience and skill
should be placed in the right jobs.

Service Delivery of a good service

Location product calls for a good location
& it becomes important to select
an appropriate site for the service
outlet.
Decision Explanation
Facility It requires arranging physical
Layout component of the service
system in a manner that space
is utilised maximally, movement
is reduced, and it provides for
customer convenience and good
work environment. It includes
product process & office layout
Organisation Decide on standardisation,
Structure formalisation, specialisation,
centralisation etc.
 Production-line Approach
to Service Design
• Limit Discretion of Personnel

• Division of Labor

• Substitute Technology for People

• Standardize the Service

 Contact Personnel

• Selection
1. Abstract Questioning
2. Situational Vignette
3. Role Playing
• Training
Unrealistic customer
expectations
Unexpected service failure
 Difficult Interactions with
Customers
Unrealistic customer Unexpected service
expectations failure

1. Unreasonable demands 1. Unavailable

service
2. Demands against policies 2. Slow
performance
3. Unacceptable treatment of 3. Unacceptable
employees service
4. Drunkenness
5. Breaking of societal norms
6. Special-needs customers

Use scripts to train for proper response

 Customer Participation

• Encourage Co-production by
Customer
Free air miles for Internet
ticketing

• Promote Demand Smoothing

Half-price drinks before 6:00pm
 Information Empowerment
• Employees
Relational Databases

• Customers
Internet Web Site
INFORMATION FLOW

'For Employees
'For Customers
 For Employees
Management Information:
– SAS a Server software which gives the
bank a multidimensional view of its
data through OLAP(online Analytical
processing). The managers in the bank
can perform analyses at their desktops
using this browser. It allows them to
create their own basic reports and drill
down into the data required from the
data marts available
For Customers

Management Information:

• A huge amount of data comes through new

channels, which are through Mobile
banking, T- banking, and Internet Banking.
Information is also available in the form of
advertisements, which give the outline of
the products and services being offered.
Brochures, pamphlets are also a source of
information.
Customer Contact View of Services

• Degree of Customer Contact Influences

Potential Efficiency of Service

• Separate High- and Low-Contact

Operations

• Consider Sales Opportunity and

Production Efficiency Tradeoff
 Expanded Marketing Mix for
Services
PEOPLE PHYSICAL PROCESS
EVIDENCE
Employees Facility design Flow of
Activities
Customers Equipment Number of
steps
Communicating Signage Level of
culture customer
involvement
Employee Employee dress
research Other tangibles
 Expanded Marketing Mix for
Services
PRODUCT PLACE PROMOTION PRICE

Physical good Channel type Promotion blend Flexibility

Features

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet Sales promotion Difference
location

Warranties Transportation Publicity Allowances

 Ways to Use the 7 Ps

Overall Strategic Specific Service

Assessment Implementation
• Who is the customer?
• How effective is a
• What is the service?
firm’s services
marketing mix? • How effectively does
the services marketing
• Is the mix well-aligned mix for a service
with overall vision and communicate its
strategy? benefits and quality?
• What are the strengths • What changes
and weaknesses in /improvements are
terms of the 7 Ps? needed?
Service Mapping/Blueprinting
A tool for simultaneously depicting
the service process, the points of
customer contact, and the evidence
of service from the customer’s point
of view.
Process
Service
Mapping Points of Contact

Evidence
 Service Blueprinting
(Bank Lending Operation)
Loan application Branch Officer Telephone Pay book
30min--1hr.
---
--- ===== $ 0 $ ==== =====

w
w

Line of visibility
Receive Final
Decline Notify Payment payment
customer
Issue
F Confirm
check F
Verify Deny
Print
income Credit Close
Accept payment Delinquent
data check account
book
Initial F
screening 1 day 2 days 3 days
Confirm

Verify
payer
Employer Credit
F Branch
bureau
records
Bank F
accounts F
Accounting
Data base
records

F
Fail point Customer wait
W
Employee decision
 New Service Development
Cycle
• Full-scale launch
• Post-launch review

Full Launch Enablers Development

• Formulation

l
nte na
Co iz atio of new services
objective / strategy
People
xt

Te
• Idea generation
• Service design
n

am
ga

and screening
and testing

s
Or

• Concept
• Process and system
development and
design and testing Product
• Marketing program testing
design and testing
• Personnel training Technology Systems
• Service testing and
pilot run
• Test marketing Tools

Design Analysis
• Business analysis
• Project authorization
 USING THE MARKETING MIX TO MATCH
DEMAND AND CAPACITY
When demand too high When demand too low
PRICE
•Raise prices, in general, •Lower prices, in
or to certain segments use general, or to certain
price promotions to shift segments offer price
demand to off-peak times promotions

Promotion
•Encourage off-peak usage •Encourage trial
 USING THE MARKETING MIX TO MATCH
DEMAND AND CAPACITY
When demand too high When demand too low
Product/Process
•Schedule reservations •Add new services to
•Alter process for more use slack capacity and
customer involvement attract new users
•Standardize or simplify
to increase productivity
& production capacity
•Use waiting lines
 USING THE MARKETING MIX TO MATCH
DEMAND AND CAPACITY
When demand too high When demand too low

Distribution
•Extend hours •Make hours more
•Add additional sites, convenient
•if possible •Offer more convenient
locations
 USING THE MARKETING MIX TO MATCH
DEMAND AND CAPACITY
When demand too high When demand too low
People
•Train more people to •Keep inappropriate
perform parts of process segments from mixing
•Keep part-timers available together
•Segment customers by
time-sensitivity ,and
encourage less time-
sensitive consumers to
come at off-peak times
 Strategies for Matching Supply
and Demand for Services

DEMAND SUPPLY
STRATEGIES STRATEGIES

Partitioning Increasing
demand customer
Developing participation
Sharing
complementary
capacity
services
Establishing
Scheduling
price
Developing Cross- work shifts
incentives
reservation training
systems employees
Promoting Creating
off-peak adjustable
Using
demand capacity
part-time
employees

Yield
management
Stag CONSUMER
e BENEFIT CONCE
I
•Segmentation, Targeting, Positioning
•Pre-conditions for market segmentation
•Seven positioning strategies
•Service companies’ positioning
 SEGMENTATION

• Groups of consumers with quite

detailed characteristics in common
are called “market segments” and
the process of identifying them is
called “Market segmentation”.
 CONDITIONS NECESSARY FOR
MARKET SEGMENTATION:
The segment should lead themselves to
some form of measurement or estimation.

The segment should be within reach

(through distribution & communication).

The segment should be substantial in extent

i.e., it should be worthwhile cultivating and
exploring them.
 Characteristics of Segment Viability:
• Size: Must be large enough to generate
volume for adequate profit.
• Identity: Should have unique characteristics
that can be identified.
• Relevance: Must be relevant to the
important characteristics of the product.
• Access: Must be reachable.
 Requirements for Effective
Segmentation
MEASURABLE Size, purchasing power, profile.

SUBSTANTIAL Large & Profitable

ACCESSIBLE Reached & Served

DIFFERENTIABLE Conceptually distinguishable &

respond differently to different Mktg.
Mix elements & programmes

ACTIONABLE Effective programmes can be

formulated for attracting & serving the
segments
SELECTION OF SEGMENTS
Geographic location
Geographic scale
Size
Stage of industry life
cycle
Buying history
Profitability
Risk
Aspirations
Rate of growth
Sensitivity/vulnerability
Capitalization/ROI
SELECTION OF SEGMENTS
• COMPANY Thrust
• Size & Growth Potential
• Investment needs
• Profitability
• Risk
• Competition
• Segment Durability
• Segment Mobility
• Segment Visibility
• Segment Reachability
Psychographic Social class life style personality
 Purchase occasion (regular/special)
 Benefit sought (quality service/ economy)
 User status (nonuser , ex-user, potential,
regular)
Behavioristic
 Usage rate (light, medium, heavy)
product usage
 Loyalty status (non, medium, strong,
absolute)
 Readiness status
 Attitude toward product
 Unaware, aware, informed, interested,
desirous, intending to buy
 Enthusiastic, positive, indifferent, negative,
hostile.
 Choosing Market
Segments

• Distinguishing/stab
le characteristic We need a YES
• Significant size
• Accessible with response to each
distribution &
promotion of these!
• Responsive (similar
needs)
• Measurable
potential
 Targeting

One or more segments of a

market selected for special
attention by a company.
Or also “potential customers”
 TARGETING
• SEGMENT SIZE & GROWTH
• SEGMENT STRUCTURAL
ATTRACTIVENESS
(INDUSTRY COMPETITORS,
POTENTIAL ENTRANTS,
SUBSTITUTTES, BUYERS,
SUPPLIERS)
• COMPANY’S OWN OBJECTIVES
AND RESOURCES
 Positioning
Positioning is concerned with
identification, development and
communication of a differentiated
advantage which makes the brand
perceived as superior and distinctive to
those of its competitors in the mind
of the target segments.
 Positioning
Segmentation:
grouping of people
by needs or wants.

Positioning:
how a product is
geared to attract
this market segment.
 Positioning
• The way consumers perceive
the brand relative to its
competition
– Identify competitive
advantage
– Stress salient characteristics
– Differentiate
 SEVEN POSITIONING
STRATEGIES
Attribute positioning
Benefit positioning
use/applications positioning
User positioning
Competitor positioning
Product category positioning

Quality/price positioning
PGDM BENEFIT SEGMENTATION
Quality Seeker
Specialty Seeker
Career Seeker
Knowledge Seeker
Status Seeker
Degree Seeker
Professional Advancement
Seeker
Avoiders Seeker
Convenience Seeker
Most People think I must drink at least 10 cups of
coffee to be so perky in the morning. But the truth
is, I like skim milk first thing. It has all the same
nutrients as whole milk without all the fat. And
besides, my husband got the coffee maker.
MILK: What a Surprise
Selection of Position

• Importance
• Distinctiveness
• Communicability
• Superiority
• Affordability
• Profitability
Positioning Errors

• Underpositioning
• Overpositioning
• Confused Positioning
• Doubtful positioning
 POSITIONING STRATEGIES
CONSUMER FOCUS COMPETITION FOCUS

BOTH ASSOCIATE PRODUCT BENEFITS WITH

CONSUMER NEEDS
BY LINKING THE BY COMPARING THE
PRODUCT WITH THE PRODUCT AND THE
BENEFITS THE BENEFITS IT OFFERS,
CONSUMER WILL TO THE COMPETITIION
DERIVE
 CORPORATE POSITIONING

•IN THE MIND

(BASED ON "SUBSTANTIVE" REASON
FOR DIFFERENTIATION)
•OF KEY DECISION MAKERS & PUBLIC
OPINION LEADERS

PROBLEMS:
• IRRELEVANT DIFFERENCES
•UNBELIEVABLE CLAIMS
•ME-TOO POSITIONING
CORPORATE POSITIONING: OPTIONS
MARKET SHARE THE BIGGEST
LEADER

QUALITY LEADER BEST, MOST RELIABLE

SERVICE LEADER MOST RESPONSIVE TO

CUSTOMER PROBLEMS

TECHNOLOGY IS TO DEVELOP NEW

LEADER TECHNOLOGY

INNOVATION MOST CREATIVE IN APPLYING

LEADER NEW TECH.

FLEXIBILITY MOST ADAPTABLE

LEADER
 CORPORATE POSITIONING: OPTIONS
RELATIONSHIP MOST COMMITTED TO
LEADER CUSTOMER'S SUCCESS

PRESTIGE LEADER MOST EXCLUSIVE

KNOWLEDGE BEST EXPERTISE

LEADER (INDUSTRY/TECH/FUNCTIONAL

GLOBAL LEADER BEST FOR SERVING THE WORLD

MARKET

VALUE LEADER BEST PRICE PERFORMANCE

BARGAIN LEADER THE LOWEST PRICE

 CORPORATE POSITIONING:ISSUES

1. WHOSE MINDS REALLY MATTER?

2. HOW VISIBLE & CREDIBLE ARE WE IN

COMPARISON TO COMPETITION?

3. WHAT ARE THE FACTORS WITHIN OUR

CONTROL OFFERING THE GREATEST
POTENTIAL FOR SHAPING OUR CORPORATE
POSITIONING
 CORPORATE POSITIONING:ISSUES

4. HOW DOES OUR COMPANY OFFER

MEANINGFUL, BELIEVABLE, UNIQUE
ADVANTAGES OVER OTHERS?

5. ARE OUR "PRODUCTS“ AND ACTIVITIES

MUTUALLY REINFORCING?

6. SHOULD WE SEEK A SINGLE GLOBAL

IMAGE?

7. HOW TO INCREASE VISIBILITY &

CREDIBILITY?
Factors influencing corporate positioning
(controllable)?

HR PRACTICES THAT DETERMINE

PERSONALITY OF TOP MGMT
HOW THE FIRM
RECRUITS
SELECTS
DEVELOPS
REWARDS
TERMINATES
FACTORS INFLUENCING CORPORATE
POSITIONING (CONTROLLABLE)?

THE NON-WORK ACTIVITIES (CO+EMPL.)

PLAY
COMMUNITY SERVICE
THE "COMPANY" IT KEEPS
BUSINESS PARTNERS, ASSOCIATING
FIRMS, BANKERS, INVESTORS,
CONSULTANTS, LAW FIRMS, AD AGENCY,
SUPPLIERS, CUSTOMERS.
VISIBILITY V/S CREDIBILITY
MATRIX & IMPLICATIONS

VISIBILITY
LOW HIGH

CREDIBILITY
LOW
UNKNOWN UNDESIRABLE

HIGH
UNDISCOVEREDUNPARALLELED
 POSITIONING
1940’s USP (Product feature)

1960 IMAGE ERA (David Ogilvy)

(Arising out of Dilution of USP due to competitive Irritation)

1970’s POSITIONING ERA (R&T)

“… Not what you do to a product but what you do to the mind of the
prospect.”
“YOU POSITION THE PRODUCT IN THE MIND OF THE
PROSPECT”
i.e., you communicate positioning but
IT CAN BE AFFECTED BY OTHER M. MIX ELEMENTS

G. LYNN PROCESSES HAVE CHARACTERISTICS WHICH AFFECT

SHOSTACK POSITIONING & CAN BE STRATEGICALLY MANAGED FOR
POSITIONING PURPOSES.
 ALTERNATIVE BASIS FOR POSITIONING
1. Positioning on specific product feature
*Gas Mileage
2. Positioning on benefits, problem solution
*Cotton:Cool
or needs in
summer
3. Positioning for specific usage occasions
*Office Wear
4. Positioning for user category *Pepsi

Generation
5. Positioning against another product
*The Pepsi
Challenge
 Market Segmentation:
Other Types of Segmentation

• Benefit
segmentation
• Segmentation by
consumption profile
• Segmentation by
national boundaries
 Market Segmentation:
By Consumer Behavior (cont.)
• Consumer
responses:
• Occasions
• Benefits
• Usage frequency
• Attitudes
Segmentation
Targeting
Positioning
STP Examples……………….
Company Profiles

Segmentation: Quality specific

Target audience: Mainly leather and
garments exporters and Govt. of India
Positioning: People associate them with
leather exhibitions and trade fairs.
Segmentation: Commodity specific
Target audience: Exporters of Lubricants,
chemicals, Tea, and other agricultural
products.
Positioning: A safe government
company handling commodities in bulk
quantities
Segmentation: Price and time specific
Targeting Audience: Corporate and business
houses who want very quick delivery
Positioning: An overnight delivery company
Segmentation: Price specific

Target audience: Exporters of engineering

goods and industrial goods

Positioning: Best courier services company

Segmentation: Price and transit time

Targeting audience: Medium and small -

sized exporters in Chennai (They have
plans to go for commodity specific-
engineering goods)

Positioning : anything anywhere

Positioning: (From survey)
•Moderately priced agent with average
transit time
•Does safe handling but slow in speed
• A reliable company but not advanced
technical Services
•Good credit facilities but no customization
of services
………... (Using Perceptual maps)
 Defining service quality
• ‘Conforming to requirements’
• ‘Fitness for use’ - Customer
• perceived quality – quality can
only be defined by customers
and occurs where an
organisation supplies goods or
services to a specification that
satisfies their needs.
 Constructs for understanding
Service Quality
Dimensions Consumer Factors Quality Perception
•Tangibles •Word of Mouth •Expected Service

•Reliability •Personal Needs •Perceived Service

•Perceived Service
•Responsiv •Past Experience Quality
-eness
•External
•Assurance Communication
•Empathy
Consumers’ evaluation of service
attributes
• Based on considerations of:
– security
– consistency
– attitude
– completeness
– condition
– availability
– timing
 Technical and functional
quality
• Technical quality:
– essentially measurable objective
(e.g. time spent waiting)

• Functional quality:
– how the technical quality is
subjectively perceived (e.g. perceived
fairness in handling a queue)
 Expected Perceived Service Perceived
Service Quality Service

Traditional Marketing
activities like IMAGE
advertising, WoM or PR

Technical Functional
Quality Quality

What
How
 The service-profit chain
• Idea that improvements in service quality throughout value
chain lead to higher profitability
• But not always Internal service quality
true (the working
• Better to talk about environment, workplace)
a ‘return on quality’
Employee satisfaction

Employee productivity Employee retention

External service value

Customer satisfaction

Customer loyalty
Revenue growth

Improved profitability
 Insulates Customers Encourages Repeat
from Competition Patronage & Loyalty

Can Create Customer Satisfaction Promotes

Sustainable (and Service Quality) Positive
Advantage WoM

Reduces Lowers Spends for

Failure Costs Attracting New
Customers
 Costs of Service Quality
Failure costs Detection costs Prevention costs
External failure: Process control Quality planning
Customer complaints Peer review Training program
Warranty charges Supervision Quality audits
Liability insurance Customer comment card Data acquisition analysis
Legal judgments Inspection Preventive maintenance
Loss of repeat service Supplier evaluation
Recruitment and selection
Internal failure:
Scrap
Rework

Recovery:
Expedite
Labor and materials
Researching service quality
• Services organisations need
methods which are:

– varied

– ongoing

– undertaken with employees

– results shared with employees

Methods of researching service
quality
• Regular customer surveys
• Customer panels
• Transaction analysis
• Perception surveys
• ‘Mystery’ customers
• Analysis of complaints
• Employee/intermediary studies
 Benchmarking
• Setting your quality standards by
reference to best practice elsewhere
• A five stage continuous process:
– plan the study
– form the benchmarking team
– identify potential benchmarking partners
– collect and analyse the information
– adapt and improve
 SERVQUAL methodology
• Service quality defined as the
difference between the standard
of service that customers expect,
and what they actually receive
• Service quality =
Perceptions - Expectations
 Criticisms of SERVQUAL
• Unrealistic to measure expectations
retrospectively
• Paradox that ‘greasy spoon’ café
may achieve a higher quality rating
than a gourmet restaurant
• Perceptions scores only may be a
more reliable indicator of quality
• Alternative methodology of
SERVPERF, based only on perception
scores has been suggested
 Gaps in service delivery
• SERVQUAL identifies 5 gaps where service quality
can fail:
Gap 1:Between consumer expectations and
management perception
Gap 2:Between management perception
and service quality specification
Gap 3:Between service quality
specifications and service delivery
Gap 4:Between service delivery and
external communications
Gap 5:Between perceived service and
expected service
 Gap Analysis
Word-of-mouth
communications Personal needs Past experience
Expected service
Consumer

Gap 5
Perceived service

Gap 1 External
Service delivery (including communi-
pre- and post-contacts) Gap 4 cations to
consumers
Gap 3 Translation of perceptions
Marketer

to service-quality specifications
Gap 2
Management perceptions
of consumer expectations
 Key Factors Leading to
the Customer Gap

Customer
Expectations

Customer
Gap
 Provider Gap 1: No

 Provider Gap 2: No
Customer
 Provider Gap 3: No
Perceptions
 Key Factors Leading to Provider Gap 1
Customer
Expectations
GAP
1  Inadequate Marketin
Insufficient marketin
Research not focus
Inadequate use of m
 Lack of Upward Com
Lack of interaction b
Company Perceptions of
Insufficient
Customer Expectationscommun
 Key Factors Leading to Provider Gap 2
Customer-Driven Service
Designs and Standards
GAP
2  aPoor Service Des
Unsystematic ne
Vague, undefined
Failure ot connec
positioning
Management Perceptions
of Customer Expectations
 Key Factors Leading to Provider GAP 3
Customer-Driven
Customer-DrivenService
Service
Designs
Designsand
andStandards
Standards

GAP  Deficiencies in Hum

3 Ineffective recruitme
Role ambiguity and r
Poor employee-techn
Inappropriate evalua
Lack of empowermen
 Failure
Service to Match Su
Service Delivery
Delivery
 Key Factors Leading to Provider GAP 4
Service
Service Delivery
Delivery

 Lack of Integrated Se
GAP Tendency to view ea
4
independent
Not including intera
Absence of strong i
 Ineffective Manageme
External Communications to
NotCustomers
External managing
Communications
Customers
to custo
 Determinants of Service
Quality
• Access
• Communicatio
n Service
• Competence Award
• Courtesy
• Reliability
• Credibility
Service Determinants of Service
Award
Quality

Parsuraman has identified, ten

such qualities which may
influence the consumers
evaluation of services.
 Service
Award
 Consistency:

It involves consistency and reliability of

performance and dependability.
It means that the firm performs the service right
the first time.
It also means that the firm honors its promises
specifically, in terms of accuracy in billing;
record keeping and performing the service at the
designated time.
 Service
Concern: Award

The willingness or responsiveness of

employees to provide service.
It involves timeliness of service or giving
prompt service.
e.g. setting up appointments quickly, calling
the customer back quickly; or Mailing a
transaction slip immediately
 Service
Award
Competence:
It means having the required skills and
knowledge to perform the service.
It involves knowledge and skill of the contact
personnel; knowledge and skill of operational
support personnel and research capability of
the organization.
e.g., securities brokerage firm
 Service
Award
Contact:
It involves approachability, access and ease of
contact. It means the service is easily
accessible by telephone
(lines are not busy and customers are not put on
hold)
Waiting time to receive service
e.g.,Bank: convenient hours
Convenient location of service facility.
 Service
Award
Courtesy:
It involves politeness, respect, consideration,
and friendliness of contact personnel
including receptionists, telephone operators, etc.
It includes consideration for the consumer's
property, clean and neat appearance of public
contact personnel.
 Service
Award
Communication:
Communicating in language they can
understand and listening to them.
increasing the level of sophistication and
speaking simply and plainly with a novice.
It involves explaining the service:
•how much the service will cost
• trade-offs between service and cost;
• assuring that a problem will be handled.
 Service
Award
Credibility:
It involves trustworthiness,
believability, honesty.
It involves having the customer's best
interests at heart contributing to
credibility are company name and
reputation; personal characteristics of
the contact personnel and degree of
hard sell involved in interactions with
the customer.
 Service
Award
Confidentiality:
The Security and the freedom from risk
or doubt, involving physical safety
(will I get mugged at the automatic teller
machine?);

financial security
(does the company know where my stock
certificate is?)

or confidentiality
(Are my dealings with the company private?).
 Service
Award
Customer Knowledge:
It involves making the effort to
understand the customer's needs,
i.e., learning the customer's specific
requirements;
providing individualized attention and
recognizing the regular customer.
 
 Service
  Award
Tangibles:
Include the physical evidence of the
service, physical facilities; appearance of
personnel; tools or equipment used to
provide the service,
physical representations of the service,
such as a plastic credit card or a bank
statement and other customers in the
service facility.
 Setting quality standards
• A standard communicates to customers and
employees what level of quality is expected
• Standards can be specified in terms of:
– basic booking conditions
– customer charters
– specific service guarantees
– industry association standards
– ISO 9000 series
 Implementing service quality
• Service quality does not come about by
accident – it needs to be managed
• Total Quality Management – a
continuous effort at improving service
delivery at lower cost
• Quality circles – forum for discussing
quality issues
• Development of a quality culture
• Need to assess return on quality
improvements
 Distribution

P C
R O
O N
D S
U U
C DISTRIBUTION
M
E E
R R
 Service Provider
Participants
• Service principal (originator)
– creates the service concept
• (like a manufacturer)

• Service deliverer (intermediary)

– entity that interacts with the
customer in the execution of the
service (like a
distributor/wholesaler)
DISTRIBUTION ISSUES
Distribution means 'PLACE' decisions
Place Decisions For Physical Items concerning
Location, Delivery, Coverage

 It is easy to understand these concepts for

'physical items'.
Service Characteristics:
a) Intangibility : Physical distribution
problem
b) Inseparability : From the person
performing it
c) Inseparability : Production, Distribution
and consumption are not
separate activities.
d) Perishability : In the sense that the
inventory cannot be
carried. But still inventory
problems do exist
Airlines : Unsold or Spare Seats
Hotel : Unsold rooms
Car Rental : Unsold Vehicles
Management : Unsold MBA Seats
From ‘Inseparability' and ‘Perishability'
we infer that in service organizations,
the Distribution House is also the
production house (Inseparability), and
this Production/Distribution house has
some capacity (Inventory) of service
which is perishable.
Channel Implications arising out of the
characteristics of services:
Because services are intangible and production
occurs simultaneously with consumption, there is
little need for logistics functions for many
services.
The service provider can't build inventories of
intangible acts, which can remain in a warehouse
or on retail shelves awaiting customer's demand.
Inventory, storage, transportation are,
therefore, typically ignored in the design of
service channels.
Lack of logistics lead to lack of channel members.
To the extent the middlemen exist in a service
channel, they are typically sales agents and brokers
since there are no inventories to be purchased or
distributed.
Service Channel tends to be direct.
Therefore, this Production/Distribution house
should be located, to 'sell' whatever you have in the
inventory where it is possible.
A Distribution Channel for a service
organisation is, therefore, a sequence of firms
(or units) involved in moving a service from
producer to consumer.
Two Methods:

Direct Sales

Sales via Intermediaries

 Services Intermediaries

• Franchisees e.g., McDonald’s/NIIT

• Agents & brokers e.g., travel /

insurance agents

• Electronic channels e.g., ATMs,

Online courses
Direct Sales
Specific Marketing Advantages
- Maintaining better control over how the
service is provided or performed.
- Obtaining direct feedback from customers.
Problems
- Problems of expanding the business & coping
with high workloads
- Sometimes direct sale means limited
geographic market coverage.
 Benefits and Challenges in Electronic
Distribution
Benefits Challenges
• Consistent delivery for • Customers are active, not
standardized services
passive
• Low cost
• Customer convenience
• Lack of control of electronic
• Wide distribution environment
• Customer choice and ability• Price competition
to customize
• Quick customer feedback • Inability to customize with
standardized services
• Lack of consistency with
customer involvement
• Security concerns
• Competition from widening
Sale via intermediary
- Agents common in tourism, travel,
hotels, transport, insurance, Credit
employment
- Institutional middlemen; stock
market advertising
- Wholesalers, merchant banks
- Retailers
 
Key Issues Involving Intermediaries
• Conflict over objectives and
performance

• Conflict over costs and rewards

• Control of service quality

• Empowerment versus control

• Channel ambiguity
 Channel Design is to decide:
· No of Intermediaries
· Type of Intermediaries
· Allocation of value adding functions among
the channel participants
· Kind of material & technological supports
that the participants use.
·      The service itself-its elements &
dimensions of those elements.
 Channel Relationships
• Cooperation

 Conflict

 Power
 Coercive
 Expert

 Legitimate
 DISTRIBUTION CHANNEL CONFLICTS

SELLER'S CHANNEL OBJECTIVES

-Market Share
-Profit objective By Market Segment
-Consumer brand loyalty
-Channel Member involvement
Ultimate Consumer Needs-
Satisfaction Required by
Ultimate consumer
-Price/Value
-Convenience
-Availability
Sellers Channel requirements and
support required.
- High Penetration factor
- High Service Levels
- Wide range
- Promotion
- Market intelligence
- Market Development
Distribution requirements
- Compensation expected by resellers for
providing support to seller
- Gross Margin
- Promotional Allowances Distribution
exclusivity
- Continuity in Supply
- Market Development
- Credit
 

Distributor:
An independent trader, buys &
sells in a specific territory

- Many may not have exclusive

sales rights.
 

Manufactures Representative:

A person or unrelated firm, similar to

broker, is paid a commission when
he arranges a sale.
 

Franchisee:
A person or the legal entity that is
granted the right in a specified territory
to conduct business under the trade
name, trade mark, and other property
for which the franchisee pay a fee or
royalties.
- There are usually training materials
already developed, for both franchisees and
their workers.
- Expansion of the franchise can proceed
quickly.
- The franchiser need apply only minimal
controls; it does not have to develop as large
a bureaucracy to govern the business.
- A franchiser's overhead is lower
because the franchisee does hiring, collections,
local promotions, etc.
- There are economies of scale to
advertising and promotion.
- The franchisee is responsible for
most of the cost control.
- There is often less risk attached to
franchise expansion than to the creation
of new service ventures that may not have
been tested as well. Franchises usually have
a better record for staying viable business
than the typical service business
startup.
 Benefits and Challenges for
Benefits
Franchisors Challenges
• Leverages the • Difficulty in maintaining
business format to and motivating
gain expansion franchisees
and revenues
• Highly publicized
• Maintains
consistency in disputes and conflict
outlets • Possibility of inconsistent
• Gains knowledge quality that can
of local markets undermine company name
• Shares financial • Control of customer
risk and frees up
capital relationship by
intermediary
Benefits and Challenges for Franchisees
Benefits Challenges
• Obtaining an established • Disappointing profits and
business format on
which to base a
revenues
business • Encroachment and
• Receiving national or franchise saturation
regional brand
marketing • High failure rates and
• Minimizing the risks of unfair terminations
starting a business
• Lack of perceived control
• High fees and rigid
contracts
• Unrealistic expectations
Good points to franchising:
- Local operators are committed because
they have their own capital at risk.
- The service tasks, service standards, and
service delivery systems are usually well
defined and structured, and thus they work
well. They have been prototyped, and
many of the potential problems with the
operations have already been identified and
ironed out.
Agent:

An independent intermediary, who may act in the

name of, or for a principal.

His contract will define these provisions along with

territorial rights, exclusivity & Sales Commissions.
Brokers:

An independent intermediary between buyer and

seller who bring parties together to facilitate the
conclusion of sales contract.
-Not necessarily have continuing relationship- a
contract period;
-Charges fee for assistance.
 Benefits and Challenges
in Distributing Services through
Agents and Brokers
Benefits Challenges
• Reduced selling and • Loss of control over
distribution costs
pricing and other
• Intermediary’s
possession of special aspects of marketing
skills and knowledge • Representation of
• Wide representation
multiple service
• Knowledge of local
markets principals
• Customer choice
 Strategies for Effective Service
Delivery through Intermediaries
Control Strategies Empowerment Strategies
• Measurement • Help the intermediary
• Review develop customer-based
service processes
• Provide needed support
Partnering Strategies
• Alignment of goals• Develop the intermediary
• Consultation and to deliver service quality
cooperation • Change to a cooperative
management structure
  LOCATION AND SITE SELECTION EVALUATION
Prepare a business Profile Prepare (or review) a strategic
plan
Type of service Product/market scope
Type of service Competitive edge
Number of sites required Special competencies
Types of market Level of risks to take
Location of Market Development and allocation
of resources.
Dominant location factor
 Search for Feasible location
Evaluate locations in terms of
1. Objective, subjective criteria
2. Necessary, weighted, or blocking
criteria
3. Potentially feasible sites within the
locations
4. Select some locations
5. Evaluate sites within the feasible locations
6. Select a location and site
1. Labor availability and costs
2. Labor history and culture
3. Educational centers
4. Recreational and cultural centers
5. Electric power
6. Transportation and road networks
7. Health and welfare system
8. Climate and weather
9. Geography & environmental
protection management
10. State business climate and incentives
11. State taxes
12. Health care system
13. Suppliers and supporting service companies
14. Population and population trends
15. Communication systems
16. Preference of management
17. Cost of living
18. Community attitudes
19. Cost of land and construction
20. Potential for expansion
Common Mistakes in Location Decisions
- Failure to forecast trends
- Failure to develop a company profile
- Paying too much attention to land costs
- Failure to understand the costs of moving people
- Loss of key people who do not favor the new location
- Failure to take into account the culture of the workers
at the location
- Paying too much attention to wage rates rather than
productivity
Location Factors
1. Customer based
2. Cost based
3. Competitor based
4. Support systems
5. Geographic/environmental factors
6. Business climate
7. Communication based
8. Transportation based
9. Personal desires of the CEO
 Terms used to refer to price in services
Sector Term
Advertising Commission
Consultancy Fee
Financial services Interest/charge/commission
Health care Fee
Transport Fare
Insurance Premium
Property Rent
Road use Toll
 Sector Term
Education Fee
Share services Brokerage/Commission
Legal Service Fee
Recreation Ticket/Admission charge
Office services Salary
Guest speaker Honorarium
 Price Regimens in Services
Govt. Controlled Self Controlled Market Controlled
Electricity Advertising Auto servicing
Posts Hospitals Repairs
Telephone Lawyers Property dealing
Insurance Stock Brokers Tailoring
Rail-road Personal care
Higher Education Hotels
Public Transport Recreation
Taxi/Auto charges Domestic services
Banking Retailing
 Service Pricing Strategies
1) Flexible Pricing: Customer's ability to pay
differential pricing (management consultants,
lawyers). Price time differentials (hotels,
airlines, telephones)
2) Discount Pricing: Commission or discount
offered to intermediaries such as advertising
agencies or stock brokers.
3) Guaranteed Pricing: Pricing strategy in which
payment is to be made only after the results are
achieved. (Employment agencies, Property
dealer)
4) High Price Maintenance Pricing:
Pricing strategy when the high price is
associated with the quality of service
(doctors, lawyers and other professionals)

5) Offset/Diversionary Pricing:
Pricing strategy of a basic low price but
extra services are highly priced.
 CRITICAL SUCCESS FACTORS
The CSFs relate to limited strategic
areas where results, as expected,
would insure a successful competitive
performance of the organization.
There are some key areas where things
must go in strategically right direction
for the business to flourish.
 
 
CSFs are those variables which management
can influence through its decisions and can
affect significantly the overall competitive
positions.
These variables, which prove determinants
of organizations success or failure, are
subject to change, over time, as they are
affected by competition.
Each situation has its own specific
requirements.
Lovelock suggested the following key factors
to be considered for success in service
organizations :
•Clear positioning strategy
•Outlining the elements of product package
•Emphasis on quality
•Customer retention
•Capturing and using customer data
•Close interaction among marketing,
operations and human resources
•Soliciting feedback from customers and
employees
•Top management commitment
 New service strategy matrix:
for identifying growth opportunities
Markets
Current Customers New Customers
Offerings
Existing SHARE BUILDING MARKET
Services DEVELOPMENT

New Services SERVICE DIVERSIFICATION

DEVELOPEMENT
 Services Marketing: the
Challenge
•How can the service quality be defined &
improved when the product is intangible
and non-standardised?

•How can the organisation be certain it is

communicating a consistent and relevant
image keeping in view the expanded
marketing mix?
 Services Marketing: the
Challenge
•How can the service quality best motivate and
select service employees who become a critical
part of the product itself?

•How can the balance between standardisation

and personalisation be determined to maximise
both the efficiency of the organisation and the
satisfaction of its consumers?
 Services Marketing: the
Challenge
•How can the firm communicate quality and value
to consumers when the offering is intangible and
cannot be readily tried or displayed?

•How can the organisation ensure consistent service

quality when both the employees and the customers
themselves can affect the service outcome?
Educational Media Present &
Authorities Past students

Professional College Prospective

Organisations students

Employing Local/Central Students’

Organizations Govt. Families
THANK YOU