Provide Top-Notch Service: Pitfalls & Successes of Service Quality By Dr. Azizah Omar Phd (Monash, Aust) MBA (USM) BSc (Curtin, Aust) Deputy Dean Industry & Community Network School of Management Universiti Sains Malaysia Pulau Pinang aziemar@usm.my

Why Services Matter? dominate U.S. and worldwide economies including Malaysia. are growing dramatically leads to customer retention and loyalty leads to profits help manufacturing companies differentiate themselves from competitors

Standing Apart from the Competition A business must set itself apart from its competition. To be successful it must identify and promote itself as the best provider of attributes that are important to target customers George S. Day

Percent of U.S. Gross Domestic Product by Industry

Contribution of Services Industries to global GDP Employability sectors in Malaysia Services 6.17 million 57.9% Manufacturing 1.94 million 18.2% Agriculture 1.49 million 14.0% Construction 1.0 million 9.4% Mining 0.05 million 0.5%

Forces Transforming the Service Economy Government Policies Business Trends Social Changes Advances in IT Globalization New markets and product categories Increase in demand for services More intense competition Innovation in service products & delivery systems, stimulated by better technology Customers have more choices and exercise more power Success hinges on: Understanding customers and competitors Viable business models Creation of value for customers and firm

What is Service? The New View Service includes every interaction between any customer and anyone representing the company, including: Dealers Salespeople Receptionists and Schedulers Management and Executives Service Employees Billing and Accounting Personnel Web site and any e-channel Interaction Customer 7

The customer is . . . Anyone who receives the company’s services, including: external customers (outside the organization, business customers, suppliers, partners, end consumers) internal customers (inside the organization, e.g., other departments, fellow employees)

The Services Marketing Triangle

Stages in Consumer Decision Making and Evaluation of Services

Comparing Goods and Services

Challenges for Services Defining and improving quality Ensuring the delivery of consistent quality Designing and testing new services Communicating and maintaining a consistent image Accommodating fluctuating demand Motivating and sustaining employee commitment Coordinating marketing, operations, and human resource efforts Setting prices Finding a balance between standardization versus customization

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 All human actors who play a part in service delivery and thus influence the buyer’s perceptions: namely, the firm’s personnel, the customer, and other customers in the service environment. Physical Evidence The environment in which the service is delivered and where the firm and customer interact, and any tangible components that facilitate performance or communication of the service. Process The actual procedures, mechanisms, and flow of activities by which the service is delivered—the service delivery and operating systems.

Expanded Marketing Mix for Services

Gaps Model of Service Quality difference between customer expectations and perceptions not delivering to service standards not knowing what customers expect not matching performance to promises not having the right service designs and standards

The Zone of Tolerance Delights Desirables Musts Desired Service Adequate Service Musts

Factors That Influence Desired and Predicted Service

Customer Perceptions of Quality and Customer Satisfaction

How Customers Judge the Five Dimensions of Service Quality

SERVQUAL Attributes RELIABILITY EMPATHY RESPONSIVENESS TANGIBLES Providing service as promised Dependability in handling customers’ service problems Performing services right the first time Providing services at the promised time Maintaining error-free records Giving customers individual attention Employees who deal with customers in a caring fashion Having the customer’s best interest at heart Employees who understand the needs of their customers Convenient business hours RESPONSIVENESS TANGIBLES Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service ASSURANCE Employees who instill confidence in customers Making customers feel safe in their transactions Employees who are consistently courteous Employees who have the knowledge to answer customer questions

Evidence of Service from the Customer’s Point of View

Relationship Marketing is a philosophy of doing business, a strategic orientation, that focuses on keeping current customers and improving relationships with them does not necessarily emphasize acquiring new customers is usually cheaper (for the firm) keeping a current customer costs less than attracting a new one thus, the focus is less on attraction, and more on retention and enhancement of customer relationships

The “Bucket Theory of Marketing”

Customer Goals of Relationship Marketing

Benefits of Relationship Marketing Benefits for Customers: Receipt of greater value Confidence benefits: trust confidence in provider reduced anxiety Social benefits: familiarity social support personal relationships Special treatment benefits: special deals price breaks Benefits for Firms: Economic benefits: increased revenues reduced marketing and administrative costs regular revenue stream Customer behavior benefits: strong word-of-mouth endorsements customer voluntary performance social benefits to other customers mentors to other customers Human resource management benefits: easier jobs for employees social benefits for employees employee retention

The Customer Pyramid

The Customer Pyramid Platinum Tier Gold Tier Iron Tier Lead Tier Company’s most profitable customers, typically heavy users of the product, not overly price sensitive, willing to invest in and try new offerings, and committed customers of the firm   Gold Tier Profitability levels are not as high, perhaps because customers want price discounts that limit margins or are simply not as loyal. May be heavy users who minimize risk by working with multiple vendors. Iron Tier Essential customers that provide the volume needed to utilize the firm'’ capacity but their spending levels, loyalty, and profitability are not substantial enough for special treatment Lead Tier Customers who are costing the firm money. They demand more attention than they are due given their spending and profitability and are sometimes problem customers—complaining about the firm to others and tying up firm resources.

Levels of Relationship Strategies

Causes Behind Service Switching

Service Recovery Strategies

Eight Most Common Remedies Customers Seek with Serious Problems Have the product repaired or service fixed Be reimbursed for the hassle of having experienced a problem Receive a free product or service in the future Explanation by the firm as to what happened Assurance that the problem will not be repeated A thank you for the customer’s business An apology from the firm An opportunity for the customer to vent his or her frustrations to the firm

Service 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.

Service Blueprint Components

Building a Service Blueprint

Benefits 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.

Common Issues in Blueprinting Clearly defining the process to be blueprinted Clearly defining the customer or customer segment that is the focus of the blueprint Who 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? Symbology Whether to include time on the blueprint NOTES:

Blueprint for Overnight Hotel Stay Service

The Critical Importance of Service Employees They are the service. They are the organization in the customer’s eyes. They are the brand. They are marketers. Their importance is evident in: the services marketing mix (people) the service-profit chain the services triangle They 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 client may be the ONLY contact they have with the firm e.g., Dixon Pest Control everything they say and do can influence perceptions of the organization even “off-duty” employees can influence perceptions They are marketers. they are walking “billboards” they represent the company and influence customer satisfaction they are salespersons (waiters selling dessert; AT&T operators cross-selling)

The “Power of One” Every encounter counts Employees are the service Every employee can make a difference Through their actions, all employees shape the brand

Traditional Organizational Chart Manager Supervisor Supervisor Front-line Employee Front-line Employee Front-line Employee Front-line Employee Front-line Employee Front-line Employee Front-line Employee Front-line Employee Customers

Customer-Focused Organizational Chart

Human Resource Strategies for Delivering Service Quality through People

Theater as a Metaphor for Service Delivery “All the world’s a stage and all the men and women merely players. They have their exits and their entrances and each man in his time plays many parts” William Shakespeare As You Like It

WOOING SHOPPERS: MAKING SHOPPING A JOY CASE STUDY DISCUSSION WOOING SHOPPERS: MAKING SHOPPING A JOY (Sunday 10 January2010, TheStar, pp.4-5)