3Risks of Relying on Words Alone to Describe Services OversimplificationIncompletenessSubjectivityBiased Interpretation
4Types of Service Innovations major or radical innovationsstart-up businessesnew services for the currently served marketservice line extensionsservice improvementsstyle changes
5New Service Development Process Business strategy development or reviewNew service strategy developmentIdea generationConcept development & evaluationBusiness analysisService development & testingMarket testingCommercialization
6New Service Strategy Matrix for Identifying Growth Opportunities (Fig MarketsOfferings Current Customers New CustomersExisting Services Share Building Mkt. DevelopmentNew Services Service Development Diversification
10Application of Service Blueprints New Service Developmentconcept developmentmarket testingSupporting a “Zero Defects” Culturemanaging reliabilityidentifying empowerment issuesService Recovery Strategiesidentifying service problemsconducting root cause analysismodifying processes
11Uses of Blueprints Service Marketers Human Resources Management creating realistic customer expectations:service system designpromotionOperations Managementrendering the service as promised:managing fail pointstraining systemsquality controlHuman Resources Managementempowering the human element:job descriptionsselection criteriaappraisal systemsSystem Technologyproviding necessary tools:system specificationspersonal preference databases
12Benefits of Service Blueprinting Provides a platform for innovation.Recognizes roles and interdependencies among functions, people, and organizations.Facilitates both strategic and tactical innovations.Transfers and stores innovation and service knowledge.Designs moments of truth from the customer’s point of view.Suggests critical points for measurement and feedback in the service process.Clarifies competitive positioning.Provides understanding of the ideal customer experience.
13Common Issues in Blueprinting (Exhibit 9.4) Clearly defining the process to be blueprintedClearly defining the customer or customer segment that is the focus of the blueprintWho should “draw” the blueprint?Should the actual or desired service process be blueprinted?Should exceptions/recovery processes be incorporated?What is the appropriate level of detail?Whether to include time & cost on the blueprintNOTES:
14Tangible Cues or Indicators of Quality Exterior and Interior DesignPresentation of Food/DrinksAppearance of StaffCleanliness of Tables, UtensilsCleanliness of RestroomsLocation of RestaurantAppearance of Surrounding Customers
15Possibility of Standardization Hostess GreetingPre-Prepared Sauces (Mild, Medium and Hot)Time StandardsFood and Drink Quality StandardsBill Standards
16Potential Fail Points and Fixability Bartrain to make drinks; create ample seating space for wait area overflowFoodrevise food presentation; create quality control checks to ensure order is correct before delivering to customerStafftraining; set number of times to check-in on customers; behavioral and attitude guidelines; dress codeBillingstandards for when to bring bill, how to deliver, when to pick-up, how quickly to process transaction; ensure one fortune cookie per customerCleanlinessstandards for amount of time it takes to clear and clean tables; regular restroom checks
18Service Standards Customer-Defined Standards Company-Defined Standards Standards are based on the most important customerexpectations and reflect the customer’s view of these expectations.Customer-Defined StandardsSOURCESCustomer ExpectationsCustomer Process BlueprintCustomer Experience ObservationsSOURCESProductivity ImplicationsCost ImplicationsCompany Process BlueprintCompany View of QualityCompany-Defined Standards
19Hard vs. Soft Standard HARD STANDARDS AND MEASURES Things that can be counted, timed,or observed through audits (time,numbers of events)SOFT STANDARDS AND MEASURESOpinion-based measures that cannotbe observed and must be collected bytalking to customers (perceptions, beliefs)
20What Customers Expect: Getting to Actionable Steps
22Hard (Mostly) Service Standards at Ford Appointment available within one day of customer’s requested service dayWrite-up begins within four minutesService needs are courteously identified, accurately recorded on repair order and verified with customerService status provided within one minute of inquiryVehicle serviced right on first visitVehicle ready at agreed-upon timeThorough explanation given of work done, coverage and charges
24Elements of Physical Evidence Facility exterior: design, signage, parking, landscape …Facility interior: design, equipment, layout, atmospherics, ...Other tangibles: business cards, stationery, billing statements, reports, web pages, …
25Roles of the Servicescape Packageconveys expectationsinfluences perceptionsFacilitatorfacilitates the flow of the service delivery processprovides information (how am I to act?)facilitates the ordering process (how does this work?)facilitates service deliverySocializerfacilitates interaction between:customers and employeescustomers and fellow customersDifferentiatorsets provider apart from competition in the mind of the consumerDental laser “drill”
26Guidelines for Physical Evidence Strategy Recognize the strategic impact of physical evidence.Blueprint the physical evidence of service.Clarify strategic roles of the servicescape.Assess and identify physical evidence opportunities.Be prepared to update and modernize the evidence.
27DELIVERING AND PERFORMING SERVICE Part 5DELIVERING AND PERFORMING SERVICE
30Service Culture“A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”- Christian Grönroos (1990)
31The Critical Importance of Service Employees Every encounter countsEmployees are the service.Every employee can make a differenceThey are the organization in the customer’s eyes.They are the brand.They are marketers.Through their actions, all employees shape the brandTheir importance is evident in:the services marketing mix (people)the service-profit chainthe services triangleThey are the service.in many cases, the contact employee is the service- we often DO NOT DISTINGUISH between the person and the firm(haircutting, child care, counseling, legal services)in these cases, the offering is the employee- other examples?They are the organization in the customer’s eyes.employees represent the firm to the clientmay be the ONLY contact they have with the firme.g., Dixon Pest Controleverything they say and do can influence perceptions of the organizationeven “off-duty” employees can influence perceptionsThey are marketers.they are walking “billboards”they represent the company and influence customer satisfactionthey are salespersons(waiters selling dessert; AT&T operators cross-selling)
33Aligning the TriangleOrganizations that seek to provide consistently high levels of service excellence will continuously work to align the three sides of the triangle.Aligning the sides of the triangle is an ongoing process.
34Making Promises Understanding customer needs Managing expectations Traditional marketing communicationsSales and promotionAdvertisingInternet and web site communication
35Keeping Promises Service delivery Reliability, responsiveness, empathy, assurance, tangibles, recovery, flexibilityFace-to-face, telephone & online interactionsThe Customer ExperienceCustomer interactions with sub-contractors or business partnersThe “moment of truth”
36Enabling Promise Keeping Hiring the right peopleTraining and developing people to deliver serviceEmployee empowermentSupport systemsAppropriate technology and equipmentRewards and incentives
37Ways to Use the Services Marketing Triangle Overall Strategic AssessmentHow is the service organization doing on all three sides of the triangle?Where are the weaknesses?What are the strengths?Specific Service ImplementationWhat is being promoted and by whom?How will it be delivered and by whom?Are the supporting systems in place to deliver the promised service?
38Service Employees Who are they? What are these jobs like? “boundary spanners”What are these jobs like?emotional labormany sources of potential conflictperson/roleorganization/clientinterclientquality/productivity tradeoffsBoundary Spanners Interact with Both Internal and External Constituents
39Human Resource Strategies for Delivering Service Quality through People
40How can this be justified? How Employee Satisfaction Drives Productivity and Customer Satisfaction at WegmansThe grocery chain paid over $54 million for college scholarships for 17,500+ employees over the past 20 years.Wegmans did not hesitate to send cheese manager Terri Zodarecky on a ten-day sojourn to cheese makers in Europe.The firm gives employees flexibility to deliver great customer satisfaction.How can this be justified?140
41How does this affect performance? Wegmans’ labor costs are 15-17% of sales, compared with 12% for industry.But annual turnover is just 6% (19% for similar grocery chains).20% of employees have 10+ years of service.This in an industry where turnover costs can exceed annual profits by more than 40%.Wegmans’ operating margins are 7.5%, double what the big grocers earn.Sales per square foot are 50% higher than industry average.141
42Empowerment Benefits: Drawbacks: quicker responses to customer needs during service deliveryquicker responses to dissatisfied customers during service recoveryemployees feel better about their jobs and themselvesemployees tend to interact with warmth/enthusiasmempowered employees are a great source of ideasgreat word-of-mouth advertising from customersDrawbacks:potentially greater dollar investment in selection and traininghigher labor costspotentially slower or inconsistent service deliverymay violate customers’ perceptions of fair playemployees may “give away the store” or make bad decisions
46How Customers Widen the Service Performance Gap Lack of understanding of their rolesNot being willing or able to perform their rolesNo rewards for “good performance”Interfering with other customersIncompatible market segments
47Importance of Other (“Fellow”) Customers in Service Delivery Other customers can detract from satisfaction:disruptive behaviorsoverly demanding behaviorsexcessive crowdingincompatible needsOther customers can enhance satisfaction:mere presencesocialization/friendshipsroles: assistants, teachers, supporters, mentors
48Customer Roles in Service Delivery Productive ResourcesContributors to Service Quality and SatisfactionCompetitors
49Customers as Productive Resources customers can be thought of as “partial employees”contributing effort, time, or other resources to the production processcustomer inputs can affect organization’s productivitykey issue:should customers’ roles be expanded? reduced?
50Customers as Contributors to Service Quality and Satisfaction Customers can contribute to:their own satisfaction with the serviceby performing their role effectivelyby working with the service providerthe quality of the service they receiveby asking questionsby taking responsibility for their own satisfactionby complaining when there is a service failure
51Customers as Competitors customers may “compete” with the service provider“internal exchange” vs. “external exchange”internal/external decision often based on:expertise capacityresources capacitytime capacityeconomic rewardspsychic rewardstrustcontrol
52Strategies for Enhancing customer Participation Define customers’ jobshelping oneselfhelping otherspromoting the companyRecruit, educate, and reward customersrecruit the right customerseducate and train customers to perform effectivelyreward customers for their contributionsavoid negative outcomes of inappropriate customer participationManage the customer mix
54Service 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)
55Services Intermediaries Franchiseesservice outlets licensed by a principal to deliver a unique service concept it has createde.g., Jiffy Lube, Blockbuster, Holiday Inns, McDonald’sAgents and Brokersrepresentatives who distribute and sell the services of one or more service supplierse.g., travel agents, independent insurance agentsElectronic Channelsall forms of service provision through electronic meanse.g., ATMs, university video courses, Tax Prep software
56Benefits and Challenges for Franchisors of Service Leveraged business format for greater expansion & revenuesConsistency in outletsKnowledge of local marketsShared financial risk & more working capitalChallengesDifficult to maintain & motivate franchiseesHighly publicized disputes & conflictsIntermediaries control customer relationship
57Benefits and Challenges for Franchisees of Service An established business formatInternational, national, or regional brand marketingMinimized risk of starting a businessPoorly capitalized or managed franchisorChallengesEncroachment of other outlets into franchised territoriesDisappointing profits & revenuesLack of perceived control over operationsHigh fees
58Benefits and Challenges in Distributing Services through Agents and Brokers Reduced selling & distribution costsIntermediary’s possession of skills & knowledgeWide representationKnowledge of local marketsCustomer choiceChallengesLoss of control over pricingRepresentation of multiple service principals
59Benefits and Challenges in Electronic Distribution of Services Consistent delivery of standardized servicesCustomer convenienceWide distributionCustomer choice & ability to customizeQuick customer feedbackChallengesPrice competitionInability to customizeLack of consistence due to customer involvementChanges in customer behaviorSecurity concernsCompetition from widening geographics
60Common Issues Involving Intermediaries conflict over objectives and performancedifficulty controlling quality and consistency across outletstension between empowerment and controlchannel ambiguity
61Strategies for Effective Service Delivery Through Intermediaries Control Strategies:MeasurementReviewPartnering Strategies:Alignment of goalsConsultation and cooperationEmpowerment Strategies:Help the intermediary develop customer-oriented service processesProvide needed support systemsDevelop intermediaries to deliver service qualityChange to a cooperative management structure
63Causes of Failure to Deliver Service Inventory and demand don’t matchCapacity is often fixedService characteristics: perishability, simultaneous production and consumptionDemand often can’t be controlled or predictedResult: Lost business or wasted capacityCan’t ever be regained or resold
64Results of Mismatch Demand is either above or below capacity Excess demand – turn customers awayDemand above optimal capacity - resources are stretched in the short termExcess capacity - resources underutilized, often sends the wrong message
65Variations in Demand Relative to Capacity Source: C. Lovelock, “Getting the Most Out of Your Productive Capacity,” in Product Plus (Boston: McGraw Hill, 1994), chap. 16, p. 241.
66Understanding Capacity Constraints and Demand Patterns Time (accounting, medical, consulting…)Labor (law firm, post office…)Equipment (telecom, utilities, delivery service…)Facilities (hotels, hospitals, schools…)Optimal versus maximum use of capacityDemand PatternsPredictable cyclesRandom demand fluctuationsDemand patterns by market segment
67Demand versus SupplySource: C. H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing 47, (Summer 1983): 17.
68Strategies for Shifting Demand to Match Capacity Demand Too HighDemand Too LowShift DemandUse signage to communicate busy days and times.Offer incentives to customers for usage during non-peak times.Take care of loyal or “regular” customers first.Advertise peak usage times and benefits of non-peak use.Charge full price -- no discounts.Use advertising to increase business from current market segments.Modify service offering to appeal to new market segments.Offer discounts or price reductions.Modify hours of operation.Bring the service to the customer.
69More Strategies for Adjusting Capacity to Match Demand
70Challenges and Risks in Using Yield Management Yield Management: Maximizing profit from available capacity by manipulating pricing to gain business at different times, and from differing market segments. Yield = Actual Revenue (capacity used x average price)/Potential Revenue (total capacity x maximum price)Revenue Management: Maximizing profits from the sale of all goods and services offered by the service firmProblems:Customer alienationEmployee morale problemsIncompatible incentive and reward systemsLack of employee trainingInappropriate organization of the yield management function
71Waiting Line Strategies Employ operational logicmodify operationsadjust queuing systemEstablish a reservation processDifferentiate waiting customersimportance of the customerurgency of the jobduration of the service transactionpayment of a premium priceMake waiting fun, or at least tolerable
72The Psychology of Waiting Lines Unoccupied time feels longer than occupied time.Preprocess waits feel longer than in-process waits.Anxiety makes waits seem longer.Uncertain waits seem longer than known, finite waits.Unexplained waits seem longer than explained waits.Unfair waits feel longer than equitable waits.The more valuable the service, the longer the customer will wait.Solo waits feel longer than group waits.
73MANAGING SERVICE PROMISES Part 6MANAGING SERVICE PROMISES
75Some Issues in Service Prices Customers often lack reference prices for serviceService variability limits knowledgeProviders are unwilling to estimate pricesIndividual customer needs varyCollection of price information by customers is difficultPrices are not visible
76The Role of Non-monetary Price Time costsSearch costsConvenience costsPsychological costs
77Three Basic Marketing Price Structures and Challenges for Services