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Transcript of BIMTECH SM2 Understanding Service
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The Service Concept
Two definitions to put the concept of service
and the service industry in the right
perspective:
There are no such things as Service industries.There are only industries whose service
components are greater or less than those of other
industries. Everybody is in Service.
Theodore Levitt
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The 4 Ps of Services Marketing
The 4 Ps of Services Marketing are :
People, People, People, People( Richard Dow)
Exaggerated ? Perhaps.
But the emphasis is rightly placed.
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Why the concern with Service?
The rapid growth of service sectors all over the
world and the deregulation of many serviceindustries have lead researchers with an interest
in quality issues to the importance of acquiring
more understanding about service quality.
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Reason for Interest
It is recognized that high quality service is essential
for firms that want to be successful in their business
It leads to
Customer loyalty
Higher profitability
and Lower Cost.
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The Service Challenge
However, the existing knowledge about product
quality is insufficient to deal with service quality
This is because of the intangibility, heterogeneity
perishability and inseparability characteristics of
service industry outputs. Service quality is
recognized by a number of authors as both
abstract and elusive
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Definition of Service
A service is any act or performance that one
party can offer to another that is essentiallyintangible and does not result in the
ownership of anything. Its production may
or may not be tied to a physical product.
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Kinds of service
A pure tangible good- eg Soap or Tobacco
A tangible good plus services eg Anautomobile with warranty and an instructions
manual. A major service with accompanying minor
goods and serviceseg Railways, Airlines
A pure service such as a psychiatrist provides
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Generalization not easy
Since there is such a wide variance in thegoods toservice mix no generalization iseasy. The difficulty is compounded by services
further varying according to:
Whether they are people or equipment based
Whether the clients presence is required ornot ( Brain surgery vs Car repair)
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Whether they meet a personal or a business
need Eg Physicians process personal and
company clients differently
Their objectives - Whether profit or non
profit oriented.
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All Service Marketing programmes
depend on 4 basic characteristics
Intangibilty
Inseparability
Variability ( Heterogeneity)
Perishability
These constitute the challenge to the Services
Marketer
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Intangibility
Services cannot be seen, smelled, tasted
heard or felt before they are brought. The
Service Marketers task is therefore to
manage the evidence or tangibilize the
intangible.Thus while a product marketer has
to put his product concept in words or give it
an abstract image a services ,marketer has todo the reverse ie, concretize the abstract.
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Inseparabilty
Unlike products,services are typicallyproduced and consumed at the same time.
They cannot be inventorized. Provider- client
interaction is a special feature of Services
Marketing.
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Variability
Services are highly variable. Thus they dependon who provides them and when and where
they are provided. Thus maintaining quality is
a perennial challenge.
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Perishabilty
A service cannot be stored. Service value
exists only at a particular time as in the case
of a newspaper.
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Elements of services marketing
Service marketing owing to its complex naturerequires not only the 4 Ps of traditional
external marketing but also two other
marketing thrusts, namely internal marketing
and interactive marketing.
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Thus while external marketing addressesitself to the task of the normal work of the
company such as pricing distribution and
promoting the services of the company
Internal marketing consists of training and
motivating its internal customers, namelyits customer contact and supporting
service personnel to work as a team
towards providing customer satisfaction
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Thus the most important contribution themarketing department can make is to be
exceptionally clever in getting everyone else in
the organization to practice marketing.
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Interactive marketing describes the employees
skill in handling customer contact. In services
marketing the service quality is inextricably
wound up with the service deliverer. ServiceQuality is judged not only by technical quality
but also by functional quality.
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Task before Service Companies
The primary tasks before Service Companies in
addition to managing the intrinsic service
characteristics described earlier is :
1) Increasing competitive differentiation
2) Service Quality
3) Productivity.
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Services Require An Expanded
Marketing Mix
Marketing can be viewed as:
A strategic and competitive thrust pursued by top management
A set of functional activities performed by line managers
A customer-driven orientation for the entire organization
Marketing is the only function to bring operating revenuesinto a business; all other functions are cost centers.
The 7 Ps of services marketing are needed to create viablestrategies for meeting customer needs profitably in acompetitive marketplace
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3 more Ps in the Service Industry Marketing Mix
Marketing has always being fond of Ps andcompetitive differentiation in service delivery is nodifferent. It can be achieved by adding 3 more Ps
to the traditional 4.
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People
All human actors who play a part in the
service delivery and thus influence the buyers
perspective :
The firms personnel
The customerOther customers in the service environment
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Physical Evidence
The environment in which the service isdelivered and where the firm and customer
interact, and any tangible components that
facilitate performance or communication of
the service.
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Process
The actual procedures, mechanisms and flowof activities by which the service is delivered -
the service delivery and operating systems
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(Productivity and Quality)
Productivity and quality are 2 sides of the
same coin.
The best strategies are those which improve
productivity and quality simultaneously
Advances in technology must be user friendly
and deliver benefits that customers will value
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People
Employees :
Recruiting
Training
Motivation Rewards
Teamwork
Customers :
Education
Training
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Physical Evidence
Facility design
Equipment
Signage
Employee dress
Other tangibles :
Reports
Business cards
Statements
Guarantees
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Process
Flow of activities :
Standardized
Customized
Number of steps:
Simple
Complex
Customer Involvement
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Services Pose Distinctive Marketing
Challenges
Marketing management tasks in the service sector differ from those in
the manufacturing sector.
The eight common differences are:
Most service products cannot be inventoried
Intangible elements usually dominate value creation
Services are often difficult to visualize and understand
Customers may be involved in co-production
People may be part of the service experience
Operational inputs and outputs tend to vary more widely
The time factor often assumes great importance
Distribution may take place through nonphysical channels
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Differences, Implications, and
Marketing-Related Tasks (1) (Table 1.1)
Difference
Most service products
cannot be inventoried
Intangible elementsusually dominate
value creation
Services are often
difficult to visualize &
understand
Customers may be
involved in co-
Production
Implications
Customers may be
turned away
Harder to evaluateservice & distinguish
from competitors
Greater risk &
uncertainty perceived
Interaction between
customer & provider;
but poor task execution
could affect satisfaction
Marketing-Related Tasks
Use pricing, promotion,reservations to smoothdemand; work with ops tomanage capacity
Emphasize physical clues,employ metaphors and vividimages in advertising
Educate customers on
making good choices; offer
guarantees
Develop user-friendly
equipment, facilities &
systems; train customers,
provide good support
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Implications
Behavior of service
personnel & customers
can affect satisfaction
Hard to maintain quality,consistency, reliability
Difficult to shieldcustomers from failures
Time is money;
customers want service
at convenient times
Electronic channels or
voice telecommunications
Difference
People may be part of
service experience
Operational inputs and
outputs tend to vary
more widely
Time factor often
assumes great
importance
Distribution may take
place through
nonphysical channels
Marketing-Related Tasks
Recruit, train employees toreinforce service concept
Shape customer behavior
Redesign for simplicity andfailure proofing
Institute good servicerecovery procedures
Find ways to compete onspeed of delivery; offer
extended hours
Create user-friendly,secure websites and freeaccess by telephone
Differences, Implications, and
Marketing-Related Tasks (2) (Table 1.1)
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Service Quality
Better service quality can be obtained through
a mix of improving access, communication,
competence, courtesy, credibility, reliability,
responsiveness, security, tangibles,
understanding the customer.
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Excellence in Service
With respect to Service Quality various studies
have shown that excellently managed service
companies share a number of common
practices
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1. A Strategic concept
2. A History of Top Management Commitmentto Quality
3. The Setting of High Standards
4. Systems for measuring Service Performance
5. Systems for Satisfying ComplainingCustomers.
6. Satisfying the Employees as well as the
Customers.
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Managing Productivity
1. Have Service providers work harder , failing which
work more skillfully or work smarter, through better
training and selection procedures.
2. Increase quantity of service through surrendering
some quality This needs a very careful balance.
3. Industrialize the service by adding equipment andstandardizing production.
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5. Design a more effective service.
6.Present customers with incentives to
substitute their own labour for company
labour, such as self-service counters
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The Service Edge
In todays world companies which succeed have
what is known as the service edge over thecompetition. Such companies have succeeded in
creating Distinctive Service. It is important to
understand that creating anything is a willful
management act- an act of leadership.
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What is it that successful companies do to
achieve customer delight ?
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According to psychiatrists Leonard and NatalieZunin there is a short moment in time, a 4
minute window of opportunity when
satisfying human contacts will be establishedor denied. This threshold exists in commercial
as well as private affairs. it is as critical to
customer satisfaction as it is to friendships oreven marital relations.
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Moment of truth
Jan Carlzon ,CEO of SAS exposited the concept of
managing the customers moments of truth- thetransactions the customer has with the organization.
A moment of truth occurs any time the customer
comes in contact with some aspect of theorganization and uses that opportunity to judge thequality of service the organization is providing.
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Application of Moment of Truth
The first 15 second encounter between a
passenger and the frontline people, from
ticket agent to flight attendant sets the tone
of the entire company in the mind of the
customer.
This for Carlzon is the moment of truth
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Moments of truth are not all createdequal . Some have more impact than others. In aparticular hotel a survey was conducted about thequality of service they had experienced with
reference to several previously identified momentsof truth.
The one moment of truth that cropped up as the
most important determinant for most as to whetheror not they would stay in the same hotel again wascustomer encounters at the front desk.
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To manage efficiently and effectively,therefore we must have a way of deciding thepecking order of the different identified
moments of truth.
This is critical for the resource allocationprocess , the trade-offs we make as we devisea service strategy and design the deliverysystems to implement it.
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The Service Encounter
is the moment of truth occurs any time the customer interacts with the firm
can potentially be critical in determining customersatisfaction and loyalty
types of encounters: remote encounters, phone encounters, face-to-face
encounters
is an opportunity to:
build trust reinforce quality
build brand identity
increase loyalty
A Service Encounter Cascade for a
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Check-In
Request Wake-Up Call
Checkout
Bellboy Takes to Room
Restaurant Meal
A Service Encounter Cascade for a
Hotel Visit
A S i E t C d f
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Sales Call
Ordering Supplies
Billing
Delivery and Installation
Servicing
A Service Encounter Cascade for an
Industrial Purchase
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Critical Service Encounters Research
GOAL: understanding actual events and behaviors that cause
customer dis/satisfaction in service encounters
METHOD:
Critical Incident Technique
DATA:
stories from customers and employees
OUTPUT: identification of themes underlying satisfaction and
dissatisfaction with service encounters
S l Q ti f C iti l I id t
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Sample Questions for Critical Incidents
Technique Study
Think of a time when, as a customer, you had aparticularly satisfying (dissatisfying) interaction with anemployee of ______________.
When did the incident happen?
What specific circumstances led up to this situation?
Exactly what was said and done?
What resulted that made you feel the interaction wassatisfying (dissatisfying)?
C Th i C i i l
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Common Themes in Critical
Service Encounters Research
Recovery: Adaptability:
Spontaneity:Coping:
employee responseto service delivery
system failure
employee responseto customer needs
and requests
employee responseto problem customers
unprompted andunsolicited employeeactions and attitudes
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Carlzons modus operandi
He arrived at SAS at a time of crisis. He
concluded that service and the frontline
people who delivered were the success levers.
He shifted focus from the plane as a physicalasset to the customer.
Carlzon and his team mounted 147 serviceimprovement projects at a cost of about USD
50 million.
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What he actually did
He gave the service people the opportunity to
provide the service that they had always
wanted to provide. He smartened their
uniforms, transferred autonomy to the field
and encouraged people not to take no for an
answer.
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Twin mantras adopted
Empowerment of frontline people
Leadership honouring intuition, emotion andshowmanship.
The leaders role being that of understanding
and effecting change. The leader to be alistener, communicator and educator creating
a secure working environment that fosters
flexibility and innovation
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Brass tacks employed
The leaders tools are a clear .concise vision
and consummate leadership skills with soul.
Loyalty to the vision, not the details of
execution, is a must. People shine only if thedemands are sky high.
Part and parcel is rigorous, honest
measurement. Tough, visible goals, aimed at serving the
customer and measured so as to engender
unit versus unit competition
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Jan Carlzon Sayings
Everyone needs to know and feel that he isneeded
Everyone wants to be treated as an individual
Giving someone the freedom to takeresponsibility releases resources that would
otherwise remain concealed
An individual without information cannot takeresponsibility ; an individual who is given
information cannot help but take
responsibility
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The Result
Jan Carlzon took over SAS in 1981 following
USD 30 million losses in 1979 and 1980
A year later a sick airlines punctuality becamethe best in Europe
SAS returned to profitability in just a year
while other international airlines tallied arecord USD 2 billion loss
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Five specific operating principles
Five specific operating principles for
building and managing extraordinarylevels of customer satisfaction andloyalty or what we call customer delightare :
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1. Listening, understanding and responding to Customers
often in unique and creative ways to the evolving needs
and constantly shifting expectations of their customers
2. Defining Superior Service and communicating that vision
to employees at every level and ensuring that service
quality strategy is personally and positively important to
all in the organization.
3. Setting concrete Standards of Service quality and
regularly measuring Performance against 100 %
performance goal.
4. Selecting, training extensively in areas of knowledge and
skills to achieve service standards and empoweringEmployees to work for the Customer
5. Recognizing and rewarding Service Accomplishment s, either
individually or of groups, in particular ,celebrating the success of
employees who go the extra mile for their customers
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The Servqal Model
The most eminent instrument in attempting tosystematize the service quality is The gap
model of service or Servqal developed by
Parshuraman et al (1985). This conceptual framework was developed
initially to measure customer perception of
service quality for the financial service sectors
but later extended to sectors such as
hospitality, , telecommunications and
healthcare.
Th B i f th S l M d l
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The Basis of the Servqual Model
The Gaps
The Key Service Dimensions
Causes & Solutions to Gaps
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Purposes of SERVQAL
To determine average gap score ( betweencustomers perceptions and expectations) for each
service attribute.
To assess a companys service quality along each of
the 5 SERVQAL dimensions
To track customers expectations and perceptions
over time
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To compare a companys SERVQAL scores
against competitors
To identify and examine customer segments
that differ significantly in their assessment of a
companys service performance
To assess internal service quality
(interdepartmental comparison)
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The Five Key Service Dimensions
ASSURANCE - a combination of the following :
Competence - having the requisite skills and knowledge
Courtesy - politeness, respect, consideration and
friendliness of contact staff
Credibility - trustworthiness, believability and honesty of staff
Security - freedom from danger, risk or doubt
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TANGIBLES - the appearance of physicalfacilities, equipment, personnel andinformation material
RELIABILITY - the ability to perform the serviceaccurately and dependably
RESPONSIVENESS - the willingness to helpcustomers and provide prompt service
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EMPATHY - a combination of the following:
Access (physical and social) - approachability and ease of contact
Communication - keeping customers informed in a language they
understand and really listening to them
Understanding the customer - making the effort to get to know customers
and their specific needs
EMPATHYSERVQUAL Att ib t
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n Providing service as promised
n Dependability in handling customersservice problems
n Performing services right the first time
n Providing services at the promised time
n Maintaining error-free records
n Keeping customers informed as towhen services will be performed
n Prompt service to customers
n Willingness to help customers
n Readiness to respond to customersrequests
RELIABILITY
RESPONSIVENESS
n Employees who instill confidence incustomers
n Making customers feel safe in theirtransactions
n Employees who are consistently courteous
n
Employees who have the knowledge toanswer customer questions
ASSURANCE
n Giving customers individual attention
n Employees who deal with customers in acaring fashion
n Having the customers best interest at heart
n Employees who understand the needs oftheir customers
n Convenient business hours
EMPATHY
n Modern equipment
n Visually appealing facilities
n Employees who have a neat,professional appearance
n Visually appealing materials associatedwith the service
TANGIBLES
SERVQUAL Attributes
G M d l f S i Q lit
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Perceived
Service
Expected Service
CUSTOMER
COMPANY
Customer
Gap
Gap 1
Gap 2
Gap 3
ExternalCommunications to
CustomersGap 4Service
Delivery
Customer-Driven ServiceDesigns and Standards
Company Perceptions ofConsumer Expectations
Gaps Model of Service Quality
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Gaps Model of Service Quality
Customer Gap: difference between customer expectations and perceptions
Provider Gap 1 (The Knowledge Gap):
not knowing what customers expect
Provider Gap 2 (The Service Design & Standards Gap): not having the right service designs and standards
Provider Gap 3 (The Service Performance Gap):
not delivering to service standards
Provider Gap 4 (The Communication Gap): not matching performance to promises
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The Customer Gap
Expectedservice
Perceivedservice
Customer Gap
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The Customer Gap
The difference between what customers
expect of a service and what they actually
receive
Customer Expectations are standards orreference points that the customers bring into
the service experience.
Customer perceptions are subjectiveassessments of actual service experiences
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The sources ofcustomer expectations are
Market controlled factors such as pricing,advertising, sales promises, as well as factors which
the marketer has limited ability to control such as
personal needs, word of mouth communications,
competitive offerings.
In a perfect world Expectations = Perceptions
Key Factors Leading
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Key Factors Leading
to the Customer Gap
Provider Gap 1: Not knowing what customers expect
Provider Gap 2: Not selecting the right service designs and standards
Provider Gap 3: Not delivering to service standards
Provider Gap 4: Not matching performance to promises
Customer
Expectations
CustomerPerceptions
Customer
Gap
Key Factors Leading to Provider Gap
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Customer-Driven Service Designsand Standards
Management Perceptions ofCustomer Expectations
Poor service designUnsystematic new service development processVague, undefined service designs
Failure to connect service design to service positioning Absence of customer-driven standards
Lack of customer-driven service standardsAbsence of formal process for setting service quality goals
Inappropriate physical evidence and servicescapeFailure to develop tangibles in line with customer expectationsServicescape design that does not meet customer and
employee needsInadequate maintenance and updating of the servicescape
y g p
2
Gap
2
Key Factors Leading to Provider Gap
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Service Delivery
Customer-Driven Service
Designs and Standards
Deficiencies in human resource policiesIneffective recruitmentRole ambiguity and role conflictInappropriate evaluation and compensation systemsLack of empowerment, perceived control, and teamwork
Customers who do not fulfill rolesCustomers who lack knowledge of their roles and responsibilitiesCustomers who negatively impact each other
Problems with service intermediariesChannel conflict over objectives and performanceDifficulty controlling quality and consistencyTension between empowerment and control
Failure to match supply and demand
Failure to smooth peaks and valleys of demand
y g p
3
Gap
3
Key Factors Leading to Provider Gap
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Service Delivery
Lack of integrated services marketing communicationsTendency to view each external communication as independentAbsence of strong internal marketing program
Ineffective management of customer expectationsAbsence of customer expectation management through all forms of
communicationLack of adequate education for customers
OverpromisingOverpromising in advertisingOverpromising in personal sellingOverpromising through physical evidence cues
Inadequate horizontal communicationsInsufficient communication between sales and operations
Insufficient communication between advertising and operationsDifferences in policies and procedures across branches or units
External Communications to
Customers
y g p
4
Gap
4
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Measurement
Measurement is on the basis of two sets of
statements in groups according to the five key
service dimensions
Gaps Model of Service Quality
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Perceived
Service
Expected Service
CUSTOMER
COMPANY
Customer
Gap
Gap 1
Gap 2
Gap 3
ExternalCommunications to
CustomersGap 4Service
Delivery
Customer-Driven ServiceDesigns and Standards
Company Perceptions ofConsumer Expectations
Gaps Model of Service Quality
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Measuring electronic service quality
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Measuring electronic service quality
on websites
Parshuram, Zeithaml and Malhotra created a
22 item scale called E- S-QUAL reflecting 4 key
dimensions :
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Efficiency ( Easy navigation, quick transactions,
website loads quickly)
System availability (site always available, it launches
right away, it is stable and doesnt crash)
Fulfilment ( orders are delivered as promised, and
offerings are described truthfully)
Privacy ( information privacy is respected and
personal information is not shared wth other sites.)
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Servqual Data - How Useful is it?
We can assess service quality from the customersperspective
We can track customer expectations and perceptionsover time and the discrepancies between them
We can compare a set ofServqual scores againstthose of competitors or best practice examples
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We can compare the expectations and perceptions of
different customer groups - this is particularly useful
in the public sector
We can assess the expectations and perceptions of
internal customers - eg other departments or services
we deal with.
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The Railway Scenario
Allen and DiCesare considered that quality of service forpublic transport industry contained two categories: user
and non-user categories. Under the user category, itconsists of speed, reliability, comfort, convenience, safety,special services and innovations.
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Traditionally, the performance indicators
for public transport industry are dividedinto two categories: efficiency andeffectiveness.
Under the efficiency category, themeasures are concerned with the processesthat produce the services while themeasures in the effectiveness category are
used to determine how well the servicesprovided are with respect to the objectivesthat are set for them (Pullen, 1993).
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Quality of service is one of the performanceindicators under the effectiveness category. It
is composed of accessibility, reliability,
comfort, convenience and safety (Silcock,1981).
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Relationship between Perceived Service Quality and
Overall Satisfaction Perceived quality and satisfaction are two different
constructs. Consumers will use the predictive level of
expected service in their comparison.
Customer satisfaction is affected by both non-quality
and quality factors. When we combine all the
elements of the above discussion, we derive the
extended SERVQUAL model shown in Figure 1 for this
study of service quality and customer satisfaction
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It combines the basic SERVQUAL dimensions with threeadditional dimensions, specific to the industry. It includes
the more recent measure of expectation, including desiredand adequate, and takes the view that quality factors areantecedents of satisfaction.
The survey includes questions in the style of otherSERVQUAL questions. For the convenience dimension, thequestion will read:A railwaycompanys ability to providesservices that are convenient to its customers (e.g. officehours at ticket office, ticket acquisition, adequate parking
facilities at railway stations, information acquisition, andavailability of seating) is not at all important..extremely important.
Conceptual Framework for Railway Passenger Service
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Conceptual Framework for Railway Passenger Service
Quality and Passenger Satisfaction
zone oftolerance
tangiblesreliability
responsivenessassurancesempathy
convenience
expected service
perceived
service quality
overall
passenger
satisfaction
desired service
adequate
comfort
speed
perceived
service
Fi di
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Findings
Assurance, Responsiveness and Empathy had
significant effects on overall service quality.
Assurance was the dominant predictor of
overall customer satisfaction.
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An important feature of the extended
SERVQUAL model is its diagnostic value in
terms of zone of tolerance and expectation
management. It helps managers to analysis
the effectiveness of the service quality and
identify those problem areas that are
needed to be improved.
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The perceived quality rating relative to the minimum and
desired level of expected services help the managers todevelop their long-term and short-term strategy planning.
The short term improvement plan may include thoseaspects that are below the zone of tolerance.
The long term improvement plan may be formulated byreferencing the relative position of the perceived qualitypointer within the zone of tolerance and by considering
the width of the zone of tolerance (Kettinger and Lee,1997). The narrower the zone, the more attention isneeded.
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In reality, it is unlikely to fulfil all theideal service quality requirements fromthe customers.
Therefore it is necessary for themanagers to manage customer
expectation by the adequacy level ofexpectation so as to widen the zone oftolerance (Kettinger and Lee, 1997).
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Finally, the zones of tolerance provideinformation about what areas and
attributes that are need to improve but not
how to improve them. Future research onfinding, examining and measuring the
determinants of expectation would add
value in monitoring service quality.
Companies with a Service Edge
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Companies with a Service Edge
Better understand and affect service customerbehavior
Create marketing messages that effectively
highlight service quality dimensions thatconsumers value
Achieve loyalty through greater attention to
customer feelings in service encounters
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Develop innovative and profitable loyalty programs
Benefit from yield management and capacityutilization techniques
Manage and motivate service marketers formaximum customer and employee satisfaction
Learn how to interpret customer satisfactionmeasures
Successfully recover and learn from service failures
Importance of a Service Strategy
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Importance of a Service Strategy
It functions as an internal focus of effort- a singlevision throughout the organization.
It is based on an understanding of a combination oforganizational values, customer expectations ofproducts and services,customer expectations of theprocess of doing business with the company, and anin-depth analysis of the strength and weakness ofthe organization as it confronts the threats andopportunities in the market place.
Service strategy
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Service strategy
Is a non trivial statement of intent
Noticeably differentiates you from others
Has value in your customers eyes
Is deliverable by the Organization
Must answer three questions
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Must answer three questions
What is our unique contribution?
To whom do we provide this service?
What key value do you want them to perceive
about us?
Service Strategy for BIMTECH
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Service Strategy for BIMTECH
You are a part of the BIMTECH Management team.Kindly give 15 minutes of thought and then writedown the service strategy you would like BIMTECH tofollow in the following format
Our Service Strategy framework :To provide ( Our uniquecontribution)..to . (customer).so that we are perceived by
them as( Key value).