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MANAGEMENT OF SERVICES

Interdependence of Marketing, Operations,


and Human Resources

O p e r a t i o n s M a r k e t in g
M a n a g e m e n t M a n a g e m e n t

C u s t o m e r s

H u
a n m
R e s o u r c e
M a n a g e m e n t
MANAGEMENT OF SERVICES
• Three important components Marketing, Service
Operations, Human Resource Management
• Operational systems should run smoothly and
efficiently to deliver good service
• HR in coordination with Operations assumes
greater importance
• Success depends upon integration of marketing
or human resources
• If there are problems in any one of these three
areas, then it may signal financial problems
ahead
MANAGEMENT OF SERVICES
• Strategies to market manufactured goods
• Four basic strategic elements: product, price,
place (or distribution), and promotion (or
communication). Collectively referred to as the 4
Ps of the marketing mix
• Distinctive nature of service performances,
customer involvement in production
importance of the time factor
needs other strategic elements
• 8 Ps model of integrated service management,
highlights the strategic decision variables facing
managers of service organizations
MANAGEMENT OF SERVICES
• Synergy and integration between each of
the 8 Ps is required for success

P r o d u c t P r o c e s s
E le m e n ts
P r o d u c tiv it y
P la c e a n d T im e a n d Q u a lit y

P r o m o t io n a n d P e o p le
E d u c a t io n

P r ic e a n d O th e r P h y s ic a l
U s e r C o s ts E v id e n c e
MANAGEMENT OF SERVICES

Product Elements
• Combination of features of both the core product
(either a good or service) and the bundle of
supplementary service elements surrounding it
• Reference to the benefits desired by customers
with reference to the competition
• Attention to all aspects of the service
performance that have the potential to create
value for customers
MANAGEMENT OF SERVICES

Place and Time


• Delivery Methods have and are undergoing rapid
change
• Delivering product elements to customers is
gaining importance
• Decisions on the place and time of delivery as
well as on the methods and channels employed
is critical
• Delivery may involve physical or electronic
distribution channels (or both), depending on the
nature of the service being provided
MANAGEMENT OF SERVICES
Place and Time
SMS and the Internet allows information-based
services to be delivered in cyberspace for
retrieval by telephone or computer wherever and
whenever it suits the customer
Service delivery - directly to customers or through
intermediary organizations, that may perform
certain tasks associated with sales, service and
customer contact
Speed, convenience of place and time for the
customer are becoming important determinants
in service delivery strategy
MANAGEMENT OF SERVICES
Process
• Creating and delivering product elements to
customers requires the design and
implementation of effective processes
• Process should describe the method, sequence of
actions in which service operating systems work
• Badly designed processes can annoy customers
being slow, bureaucratic and ineffective service
delivery
• Poor processes affect frontline staff that results in
low productivity and can increase service failures
MANAGEMENT OF SERVICES
Productivity and Quality
• These elements are interrelated
• No service firm can afford to address either
element in isolation
• Productivity relates to how inputs are transformed
into outputs that are valued by customers
• Quality refers to the degree to which a service
satisfies customers by meeting their needs,
wants, and expectations
• Improving productivity is essential to keep costs
under control
MANAGEMENT OF SERVICES
Productivity and Quality
• Inappropriate cuts in service levels are
resented by customers and may be
employees
• Service quality is essential for product
differentiation and building customer loyalty
• Quality improvement investments needs
understanding the tradeoff between
incremental costs and incremental
revenues for profitability
MANAGEMENT OF SERVICES
People
• Services depend on direct, personal interaction
between customers and a firm's employees
(such as getting a haircut or eating at a
restaurant)
• The nature of these interactions strongly
influences the customer's perceptions of service
quality
• Customers often judge the quality of the service
they receive based on their assessment of the
people providing that service
MANAGEMENT OF SERVICES
People
• Customers may also make judgments about
other customers they encounter
• Successful service firms devote significant effort
to recruiting, training, and motivating their
personnel
• Customer training may also be needed in some
services (Physiotherapy, Technology)
• Firms often seek to manage through it’s
employees the customer behavior (Counseling,
Motivation, Dispute Resolution)
MANAGEMENT OF SERVICES

Promotion and Education


• No marketing program can succeed without
effective communications
• Communication plays three vital roles:
Providing needed information and advice
Persuading target customers of the merits of
a specific product (service)
Encouraging customers to take action at
specific times
MANAGEMENT OF SERVICES

Promotion and Education


• In services marketing, much communication is
educational in nature, especially for new
customers
• Companies may need to teach these customers
about the benefits of the service, as well as
where and when to obtain it
• Provide instructions on how to participate in
service processes
MANAGEMENT OF SERVICES

Promotion and Education


Communications can be delivered by
• Individuals, such as salespeople and trainers
• Through media such as TV, radio, newspapers,
magazines, posters, brochures and Web sites
• Promotional activities may serve to organize
arguments in favour of selecting a particular
brand
Use incentives to catch customer’s attention and
motivate them to act
MANAGEMENT OF SERVICES
Physical Evidence
• Appearance of buildings, landscaping, vehicles,
interior furnishing, equipment, staff members,
signs, printed materials and other visible cues
provide tangible evidence of a firm's service
quality
• Service firms need to manage physical evidence
for a profound impact on customers' impressions
• In services with few tangible elements, such as
insurance, advertising is often employed to create
meaningful symbols like LIC logo
MANAGEMENT OF SERVICES

Price and other User Costs


• This component addresses management of the
expenditures and other outlays incurred by
customers in obtaining benefits from the service
product
• Traditional pricing tasks
Selling price to customers
Setting trade margins
Establishing payment terms
MANAGEMENT OF SERVICES

Price and other User Costs


• Service providers should recognize and minimize
other burdens that customers may bear in
purchasing and using a service
• These include
Time
Mental and Physical Effort
Unpleasant sensory experiences like noises
feel / touch and smells
MANAGEMENT OF SERVICES

Services Marketing, Operations and


Human Resources
• These functions play central and interrelated roles
components of integrated service management
• Customer needs with focus on marketing,
operations & HR can operate successfully
• Develop effective strategies by incorporating eight
P’s to succeed for surviving and prospering
• Those fail to grasp these implications are likely to
be outmaneuvered by competitors who are more
skilled at responding to the changes of the industry
MANAGEMENT OF SERVICES

Marketing Services versus Marketing


Goods through Service
• Due to growth of the service economy and
emphasis on adding value-enhancing services to
manufactured goods, the lines between services
and manufacturing sometimes become a bit
blurred
• "There are not 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"
MANAGEMENT OF SERVICES
Marketing Services versus Marketing
Goods through Service
• “Most goods businesses now view
themselves primarily as services”
Roland Rust

• The difference is between situations in which


a service itself is the core product and those
in which manufacturers are adopting service
like strategies to help them market the
physical goods that they produce
MANAGEMENT OF SERVICES
Marketing of Services - service is the core
product
Marketing Goods Through Service –
physical good is the core product

Creating Value in a Context of Values


• Value can be defined as the worth of a
specific action or object relative to an
individual's (or organization's) needs at a
particular point in time, less the costs
involved in obtaining those benefits
MANAGEMENT OF SERVICES

Creating Value in a Context of Values


• Value is created by offering the types of
services that customers need, accurately
presenting their capabilities and delivering
them in a pleasing and convenient fashion
at an acceptable price
• Firms also receive value from their
customers, primarily in the form of the
money paid by the latter to purchase and
use the services
MANAGEMENT OF SERVICES
Creating Value in a Context of Values
• Such transfers of value illustrate one of the
most fundamental concepts in marketing,
the exchange, which takes place when one
party obtains value from another in return
for something else of value
• These exchanges aren't limited to just
buying and selling and but can be
extended to any real life situation including
employer/ employee
MANAGEMENT OF SERVICES
Creating Value in a Context of Values
• Customer makes decisions to invest time,
money and effort to obtain a service that
promises the specific benefits
• Immediate need - a haircut, eating a pizza,
repairing your car, watching movie theater
• Distant need - getting an education, insurance.
• Customer takes a long-term perspective before
the payoff is realized for long-term need
• If paid more than expected or received fewer
benefits than anticipated, customers feel
cheated talks about poor value
• If customer feels bad treatment during service
delivery, although product is good, customer
may conclude that this poor treatment
MANAGEMENT OF SERVICES
Creating Value in a Context of Values
• Customer takes a long-term perspective
before the payoff is realized for long-term
need
• If paid more than expected or received
fewer benefits than anticipated, customers
feel cheated talks about poor value
• If customer feels bad treatment during
service delivery, although product is good,
customer may conclude that this poor
treatment diminished the value received
STRATEGIC MANAGEMENT OF
SERVICES
Creating Value in a Context of Values
• Firms seeks long-term relationships with either
customers or employees
• Firms can not afford to mistreat them or to provide poor
value on an ongoing basis
• At a minimum, it's bad business; at worst, it's unethical
• Mistreating customers and employees is likely to
rebound to the firm's disadvantage
• The potential for abusive behavior is perhaps higher in
services than in manufacturing, reflecting the difficulty
of evaluating many services in advance
• Greater need to involve customers in service
production and the face-to-face encounters with
service personnel and other customers
STRATEGIC MANAGEMENT OF
SERVICES
Creating Value in a Context of Values
• Companies need a set of morally and legally defensible
values to guide their actions and to shape their
dealings with both employees and customers
• Values is as underlying beliefs about how life should be
lived, how people should be treated (and behave), and
how business should be conducted
• Use the firm's values as a reference point when
recruiting and motivating employees
• Clarify the firm's values and expectations in dealing
with prospective customers
• Firms should make efforts to attract and retain
customers who share and appreciate same values
• Company's reputation for integrity, generosity and
service is its most important asset
STRATEGIC MANAGEMENT OF
SERVICES
DISTINCTIVE MANAGEMENT CHALLENGES
OF DIFFERENT PROCESSES
• The challenges and tasks of the process
classification scheme is fundamental for
understanding the differences in four service
categories and for developing effective service
strategies for different service products
• The understanding offers insights into the
nature of service benefits and understanding of
the behavior that is required of the customer
• It helps for developing channel strategy,
designing and locating the service delivery
system and using IT to best advantage
STRATEGIC MANAGEMENT OF
SERVICES
Identifying Service Benefits
• Operational processes are basically just a
means to an end
• The key is to understand the specific benefits
that customers hope to obtain from the service
provider
• Innovation in service delivery requires that a
constant spot-light be maintained on the
processes underlying delivery of the core
product to provide desired benefit to the
customer
• Technology often allows service organizations to
deliver the same (or improved) benefits to
customers via distinctly different processes
STRATEGIC MANAGEMENT OF
SERVICES
Identifying Service Benefits
• Sometimes customers are delighted to receive service
through faster, simpler, more convenient procedures
• Imposing new processes, in the name of efficiency, for
customers who prefer the existing approach
(particularly when the new approach relies on
technology and equipment to replace personal service
by employees), may not work
• Coordination of marketing personnel and operations
specialists will improve chances of designing new
processes that deliver the benefits desired by
customers in user-friendly ways
STRATEGIC MANAGEMENT OF
SERVICES
Identifying Service Benefits
• The timing and duration of the benefits derived
from the service may differ markedly
• Renting a motel room is a real-time service in
which the customer is an active participant
• By contrast, the customer does not participate
in the actual repair of the VCR; moreover, the
benefits of this repair are not realized until the
machine returns home and is put to use again,
repaired, machine may continue to offer the
benefits of a better quality picture for years
STRATEGIC MANAGEMENT OF
SERVICES
Identifying Service Benefits
• The customer is mentally but not physically
involved in watching the weather forecast on
television, transmitted in real time from a studio
but created in advance of the program; it
provides the customer with the immediate
benefit of information to make a quick decision
• The customer's involvement in health care
insurance is limited to filling out an application
and paying the policy fee; however, the
benefits - in the form of peace of mind - will be
felt as long as the policy remains in effect
H i g h The Degree of Tangibility or
Intangibility of Service Processes
S a lt
S o f t D r in k s
•Pure
V C R
tangible good (such as soap or
T esalt)
n n is R a c q u e t
• Tangible
N e w C a good
r with accompanying
M a services
d e - t o - M e a(for
s u r e Cexample,
l o t h in g cars or
F u r n i t u r e R e n t a l
computers)
F a s t - F o o d R e s t a u r a n t
• Hybrid (e.g., a restaurant)
P lu m
combining
b i n g R e p a i r
roughly equal parts of good L a w andn C services
a r e

• Major service with Oaccompanying i l C h a n g e o n C a r

minor goods and services (e.g., C air


H o u s e le a n in g
A i r l i n e F l ig h t
travel) T e a c h i n g
• Pure service (such as babysitting I n v e or
s t m e n t M

L o w
psychotherapy)I n t a n g i b l e E l e m e n t s H i g h
FOUR CATEGORIES OF SERVICE PROCESS

People processing
involves tangible
actions to people's
bodies
Possession
processing includes
tangible actions to
goods and other
physical possessions
belonging to the
customer
FOUR CATEGORIES OF SERVICE PROCESS

Mental stimulus
processing refers to
intangible actions
directed at people's
minds
Information
processing describes
intangible actions
directed at a
customer's assets
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• Every service has customers but not every
service interacts with them in the same way
• Customer involvement in the core activity may
vary sharply for each of the four categories of
service process
• Nothing can alter the fact that people-
processing services require the customer to be
physically present within the service factory
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• When customers visit a service factory, their
satisfaction will be influenced by such factors
as:
• Encounters with service personnel
• Appearance and features of service
facilities - both exterior and interior
• Interactions with self-service equipment
• Characteristics and behavior of other
customers
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• Where customers are required to be
physically present throughout service
delivery, the process must be designed
around them from the moment they arrive
at the service factory
• Customers may initially need parking (or
other assistance in travelling to and from
the service facility)
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• The longer they remain on site, the more
they are likely to need other services,
including hospitality basics such as food,
beverages and toilets
• In many instances, they will have to play
active roles in creation and delivery of the
service. Well-managed service firms
teach their customers how to participate
effectively in service operations
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• Service delivery sites that customers need
to visit must be located and designed with
their convenience in mind. If the service
factory is noisy, smelly, confusingly laid
out and situated in an inconvenient
location, then customers are likely to be
turned off
• Marketing needs to work closely with their
counterparts in operations to design
facilities that are both pleasing to
customers and efficient to operate
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• The exterior of a building creates
important first impressions, whereas the
interior can be thought of as the stage on
which the service performance is
delivered. The longer customers remain
in the factory and the more they expect to
spend, the more important it is to offer
facilities that are comfortable and
attractive
STRATEGIC MANAGEMENT OF
SERVICES
Design of the Service Factory
• Marketers need to work with human
resource managers
• The task is to ensure that those
employees who are in contact with
customers present an acceptable
appearance and have both the personal
and technical skills needed to perform
well
STRATEGIC MANAGEMENT OF
SERVICES

Design of the Service Factory


• Unfortunately, service staff often lack the
skills needed to provide satisfactory
service for their customers. At the same
time, customers may need some basic
training or guidance on how to work
cooperatively with service personnel to
achieve the best results
STRATEGIC MANAGEMENT OF
SERVICES

Design of the Service Factory


• In situations where customers are
expected to do some of the work
themselves - as in self-service - then
facilities and equipment must be
designed for ease of use
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service
Delivery
• Unlike the situation in people - processing
services, managers responsible for
possession-processing, mental stimulus-
processing and information-processing
services need not oblige their customers
to visit a service factory
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service
Delivery
• They may be able to offer a choice
between one of several alternative
delivery channels
Letting customers come to a user-
friendly factory
Limiting contact to a small retail office
that is separate from the main
factory (or back office)
Coming to the customer's home or
office
Conducting business from a distance
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service Delivery
• Let's take cleaning and pressing of clothes - a
possession-processing service - as an example
One approach is to do your laundry at home
If you lack the necessary machines, then you
can pay to use a laundromat, which is
essentially a self-service cleaning factory
If you prefer to leave the task of laundry and dry
cleaning to professionals, then you can go to a
retail store
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service Delivery
Sometimes, cleaning is conducted in a space
behind the store; at other times, the clothing is
transported to an industrial site some distance
away
Home pickup and delivery is available in some
cities, but this service tends to be expensive
because of the extra costs involved
Some people can afford to pay a housekeeper
or maid to come to their home and do their
laundry and ironing for them
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service Delivery
• Both physical and electronic channels allow
customers and suppliers to conduct service
transactions at arm's length
• Instead of shopping at a shopping center, you
can study a printed catalog and order by
telephone for parcel delivery or you can try
shopping on the Internet, entering your orders
electronically after reviewing your choices on a
Web site display. Information-based items,
such as software or research reports, can even
be downloaded immediately to your own
computer
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service Delivery
• Today's managers need to be creative because the
combination of information technology and modern
package transportation services such as DHL Courier
Services offers many opportunities to rethink the place
and time of service delivery
• Some manufacturers of small pieces of equipment allow
customers to bypass retail dealers when a product
needs repair. Instead, a courier will come to pick up the
defective item (even supplying appropriate packaging if
necessary), ship it to a repair site and return the item a
few days later when the problem has been fixed
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service Delivery
• Electronic distribution channels offer even more
convenience, because transportation time can be
eliminated. For instance, by using telecommunication
links, engineers in a central facility (which could be
located on the other side of the world) may be able to
diagnose problems in defective computers and software
at distant customer locations and transmit electronic
signals to correct the defects
• Rethinking service delivery procedures may allow a firm
to get customers out of the factory and transform a
high-contact service into a low-contact one
STRATEGIC MANAGEMENT OF
SERVICES
Alternative Channels for Service Delivery
• When the nature of the process makes it possible to
deliver service from afar, then the design and location
of the factory can focus on purely operational priorities
• Some industry observers are predicting that within the
next two decades, the traditional bank branch will cease
to exist and we will be conducting most of our banking
transactions via ATMs, telephones or personal
computers
• The chances of success in such an endeavor are
enhanced when the new procedures are user-friendly,
less expensive, and offer customers greater
convenience
STRATEGIC MANAGEMENT OF
SERVICES
Making the Most of Information Technology
• It's clear that information-based services (a term that
covers both mental stimulus-processing and
information-processing services) have the most to gain
from advances in information technology because
telecommunications and the Internet allow the operation
to be physically separated from its customers, without
even the need for physical shipments
• A growing number of banks are now adding Internet
capability so that customers can access their accounts
and conduct certain transactions from their home or
office computers. One of the challenges, however, is to
persuade customers to switch their banking behavior to
the Web from more traditional channels
STRATEGIC MANAGEMENT OF
SERVICES
Making the Most of Information
Technology
• Examples of using technology to transform
the nature of the core product and its
delivery system are based on radio and
television
• From studio symphony performances to
call-in gardening advice programs,
broadcasting have created new ways to
bring advice, entertainment, culture and
spiritual enlightenment to widely scattered
audiences
STRATEGIC MANAGEMENT OF SERVICES

Making the Most of Information


Technology
• In many countries, education is offered through
electronic channels as an alternative to the
traditional mode. Virtual universities are
springing up. The OU are offering degree
programs to students nationwide through the
electronic campus, television and radio
• Anyone can watch or hear the programs, of
course, but registered students also receive
printed course material through the mail and
communicate with tutors by mail, e-mail or
telephone
MANAGEMENT OF SERVICES

BALANCING SUPPLY AND DEMAND


• Sharp fluctuations in demand are a bane
in the lives of many managers

• Manufacturing firms can stock supplies of


their product to counter against
fluctuations in demand

• This strategy enables them to enjoy the


economies derived from operating
factories at steady production levels
MANAGEMENT OF SERVICES
BALANCING SUPPLY AND DEMAND
• Few service businesses can do this
easily. The potential income from an
empty seat on an airliner is lost forever
once that flight takes off, airline do over
bookings
• When demand for service exceeds
supply, the excess business may be lost.
If someone can't get a seat on one flight,
another carrier gets the business.
Customers may be forced to wait in a
queue until sufficient productive capacity
is available to serve them
MANAGEMENT OF SERVICES

BALANCING SUPPLY AND DEMAND


• Services that process people and
physical objects are more likely to face
capacity limitations than those that are
information based
• Technology has not found ways to
increase the capacity of service
operations that process people and their
physical possessions with minimum cost
increase
MANAGEMENT OF SERVICES
BALANCING SUPPLY AND DEMAND
• Managing demand becomes essential to
improving productivity in services that
involve tangible actions
• Customers must be given incentives to
use the service off-peak periods or
through advance reservations
• The problem for people-processing
services is that customers will wait in line
only so long they have other things to do
and may soon become bored, tired, and
impatient or till no options are available
MANAGEMENT OF SERVICES
BALANCING SUPPLY AND DEMAND
• One strategy for reducing or eliminating
the need for waiting is to institute a
reservation system, but the times offered
should be honored if this course of action
is chosen
• By contrast, physical possessions rarely
suffer if they have to wait (unless they are
highly perishable)
MANAGEMENT OF SERVICES

BALANCING SUPPLY AND DEMAND


• More relevant to customers is the cost
and inconvenience associated with
delays in waiting to recover the item
being serviced
• The issue of demand and capacity
management is important to productive
use of assets (and thus profitability)
MANAGEMENT OF SERVICES

PEOPLE AS PART OF THE PRODUCT


• The more involved customers become in
the service delivery process, the more
they tend to see service personnel
• In many people-processing services,
customers meet lots of employees, often
interact with them for extended periods of
time and are more likely to run into other
customers
MANAGEMENT OF SERVICES

PEOPLE AS PART OF THE PRODUCT

• Many service facilities achieve their


operating economies by serving large
numbers of customers simultaneously

• When other people become a part of the


service experience, they can enhance it
or detract from it
MANAGEMENT OF SERVICES
PEOPLE AS PART OF THE PRODUCT
• Direct involvement in service production
means that customers evaluate the
quality of employee's appearance and
social skills as well as their technical
skills. Customers also make judgments
about other customers
• Managers have to manage customer
behavior
• Service businesses of this type are
harder to manage due to involvement of
human element
MANAGEMENT OF SERVICES
HOW SERVICES DIFFER FROM GOODS
• Customers do not obtain ownership of
services
• Service products are intangible
performances
• Greater involvement of customers in the
production process
• Other people may form part of the
product
• More variability in operational inputs
outputs
MANAGEMENT OF SERVICES

HOW SERVICES DIFFER FROM GOODS


• Many services are difficult for customers
to evaluate
• Absence of inventories after production
• Time factor is relatively more important
• Delivery systems may involve both
electronic and physical channels
MANAGEMENT OF SERVICES

AVOIDING OVERGENERALIZATION
• All the characteristics cannot be applied to
all services

• In the past many characteristics could be


applied to many services in the
possession-processing and information-
based categories due to the traditional
delivery model
MANAGEMENT OF SERVICES
AVOIDING OVERGENERALIZATION
• Technology driven delivery systems
located anywhere can deliver through
physical channels or through
electronic channels
• New information based service
configurations present distinctive
marketing challenges and
opportunities
MANAGEMENT OF SERVICES
SERVICE AS A SYSTEM
• The level of contact that a service business
intends to have with its customers is a major
factor in defining the total service system
Subsystems
• Service operations, where inputs are processed
and the elements of the service product are
created
• Service delivery, where final assembly of these
elements takes place and the product is
delivered to the customer
• Service marketing, which embraces all points of
contact with customers, including advertising,
billing and market research
MANAGEMENT OF SERVICES
THE SERVICE BUSINESS AS A SYSTEM

P h y s i c a l S u p p o r t

T e c h n i c a l O t h e r
C u s t o m e r
C o r e C u s t o m e

C o n t a c t P e r s o n n e l

B a c k s t F a rg o e n t S t a g e
( I n v i s ( iV b i l s e i ) b l e t o C u s t o m e r )
MANAGEMENT OF SERVICES
SERVICE OPERATIONS SYSTEM
Like a play in a theater, the visible
components of service operations can be
divided into
• Those relating to the actors (or service
personnel)
• Those relating to the stage set (or physical
facilities, equipment and other tangibles)
MANAGEMENT OF SERVICES
SERVICE OPERATIONS SYSTEM
• Backstage is of little interest to audience
(customers)
• Evaluation on actually experience during
service delivery and on the perceived
service outcome
• If the back-stage personnel and systems
fail to perform their support tasks properly
in ways that affect the quality of front-
stage activities, results in dissatisfaction
MANAGEMENT OF SERVICES
SERVICE OPERATIONS SYSTEM
• The proportion of the overall service operation
that is visible to customers varies according to
the level of customer contact
• High-contact services directly involve the
physical person of the customer, either
customers must enter the service factory
(although there may still be many backstage
activities that they don't see) or service workers
and their tools must leave their backstage and
come to the customer's chosen location
MANAGEMENT OF SERVICES
SERVICE OPERATIONS SYSTEM
• Medium-contact services, by contrast, require a
less substantial involvement of the customer in
service delivery. Consequently, the visible
component of the service operations system is
smaller
• Low-contact services usually have a strategy of
minimizing customer contact with the service
provider, so most of the service operations
system is confined to a remotely located
backstage; front-stage elements are normally
limited to post and telecommunications contacts
MANAGEMENT OF SERVICES
SERVICE DELIVERY SYSTEM
• Service delivery is concerned with where, when,
and how the service product is delivered to the
customer
• Subsystem embraces not only the visible
elements of the service operating system -
buildings, equipment and personnel - but may
also entail exposure to other customers
• The visible component of the service operations
system is shrinking in many industries as
electronic technology or redesigned physical
flows are used to drive service delivery from
higher to lower levels of contact
MANAGEMENT OF SERVICES
SERVICE DELIVERY SYSTEM
• Self-service delivery often offers customers
greater convenience than face-to-face contact
• Machines such as automated gasoline pumps,
ATMs, or vending machines can be installed at
numerous locations and are open 24X7X365
• Potential disadvantages - shift from personal
service to self-service can disturbs customers
• Strategy of replacing employees by machines or
self-service procedures needs campaign to
educate customers and promote the benefits of
the new approach
MANAGEMENT OF SERVICES
SERVICE DELIVERY SYSTEM
• Distinction between high contact and low contact
is like the differences between live theater
theatre performance and a drama on radio
• Customers of low-contact services normally
never see the factory they may talk with a
service provider by telephone. They make
judgments about service quality based on ease
of telephone access, the voice and
responsiveness of telephone based customer
service representative
• For service delivered through impersonal
electronic channels, self-service machines,
automated telephone calls, there is very little
traditional theater left to the performance
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• Theater is a good metaphor for services
• Service delivery consists of a series of
processes that customers experience as a
performance
• Useful approach for high-contact service
providers (such as physicians, educators,
restaurants and hotels) and for businesses
that serve many people simultaneously
rather than providing individualized service
(hospitals, sports)
MANAGEMENT OF SERVICES

The Dramaturgy of Service Delivery


• Relative importance of theatrical
dimensions for different types of service
businesses
• Watch repair services have very few front-
stage theatrical components compared
with services such as airlines and
spectator sports
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• Service facilities contain the stage on
which the drama unfolds
• Sometimes the setting changes from one
act to another
• When airline passengers move from the
entrance to the terminal to the check-in
stations and then on to the boarding
lounge and finally step inside the aircraft
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• The stage may have minimal props
In a typical post office, which tends to
be rather utilitarian
• Elaborate scenery
In some modern resort hotels
• Many service dramas are tightly scripted
In the way that service is delivered in a
formal restaurant setting
MANAGEMENT OF SERVICES

The Dramaturgy of Service Delivery


• Some services are more ritualized than
others
• Highly structured environments, like
hospital, how the actors (in this case,
receptionists, ward boys, nurse and
doctors) move relative to the stage
(hospital), items of scenery (furniture and
equipment) and other actors may be
defined in a manner analogous to theatre
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• Not all service providers require
customers to attend performances at the
company's theater
• In many instances, the customer's own
facilities provide the stage where actors
perform with their props (External
Auditors)
MANAGEMENT OF SERVICES

The Dramaturgy of Service Delivery


• Telecommunication linkages offer an
alternative performance environment,
allowing customers to be involved in the
drama from a remote location like CA
would prefer to work for their clients from
the comfort of their own offices via
modems and computers
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• Front-stage personnel are members of a
cast, playing roles as actors in a drama
and supported by a backstage production
team
• In some instances, actors are expected to
wear special costumes when on stage.
When service employees wear distinctive
dress, they stand out from personnel at
other firms
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• Uniform designs can be seen as a form of
packaging that provides physical evidence
of brand identity
• Choice of uniform design and colors is
carefully integrated with other corporate
design elements
• Many front-stage employees must
conform to both a dress code and
grooming standards
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
• Depending on the nature of their work,
employees may be required to learn and
repeat specific lines ranging from
announcements in several languages to a
predesigned sales talk
• Just as in theater, companies often use
scripting to define actor’s behavior as well
as their lines. Eye contact, smiles and
handshakes may be required in addition to
a spoken greeting. Other rules of conduct
may include bans on smoking, eating and
drinking or gum chewing while on duty
MANAGEMENT OF SERVICES
Relative Importance of Theatrical Dimensions
C o n t a c t

L o w H ig h

( 1 ) ( 2 )
C a r R e p a ir P h y s ic ia n
L o w W a t c h R e p a ir B a r b e r
S h o e R e p a ir L a w y e r

( 3 ) ( 4 )
U t ilit y A ir lin e s
H ig h I n s u r a n c e S p e c t a t o r S p o r t s
D i s c o u n t R e t a i l Re re s t a u r a n t s

A u d ie n c e S iz e = N u m b e r o f p e o p le r e c e
C o n t a c t = A m o u n t o f t im e f r o n t s t a g e / a
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Role and script theories offer some
interesting insights for service providers
• If we view service delivery as a theatrical
experience, then both employees and
customers act out their parts in the
performance according to predetermined
roles
MANAGEMENT OF SERVICES

The Dramaturgy of Service Delivery


Role and Script Theories
• Role can be defined as "a set of behavior
patterns learned through experience and
communication, to be performed by an
individual in a certain social interaction in
order to attain maximum effectiveness in
goal accomplishment"
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Roles have also been defined as combinations
of social cues or expectations of society, that
guide behavior in a specific setting or context
• In service encounters, employees and
customers each have roles to play
• Satisfaction of both parties depends on role
congruence or the extent to which each person
acts out his or her prescribed role during a
service encounter
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Employees must perform their roles to
customer expectations or risk dissatisfying
or losing customers altogether
• Customers, too, must play by the rules or
they risk causing problems for the firm, its
employees and even other customers
• Scripts are sequences of behavior that
both employees and customers are
expected to learn and follow during
service delivery
MANAGEMENT OF SERVICES

The Dramaturgy of Service Delivery


Role and Script Theories
• Scripts are learned through experience,
education and communication with others
• Service script provides detailed actions
that customers and employees are
expected to perform
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• The more experience a customer has with
a service company, the more familiar the
script becomes
• Any deviations from this known script may
frustrate both customers and employees
and can lead to high levels of
dissatisfaction
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• If a company decides to change a
service script (for example, by using
technology to turn a high-contact service
into a low-contact one), service
personnel and customers should be
educated about the new script and the
benefits it provides
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Some scripts are highly routinized and
allow service employees to move through
their duties quickly and efficiently
• This reduces variability and ensure
uniform quality
• The risk is that frequent repetition may
lead to mindless service delivery that
ignores customers' needs
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Not all services involve tightly scripted
performances
• Highly customized services - such as
doctors, educators, hairstylists or
consultants - the service script is flexible
and may vary by situation and by
customer
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• When customers are new to a service,
they may not know what to expect and be
fearful of behaving incorrectly
• Organizations should be ready to educate
new customers about their roles in service
delivery because inappropriate behaviors
can disrupt service delivery and make
other customers feel embarrassed and
uncomfortable
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Routinized scripts allow service employees
to move through their duties quickly and
efficiently
• Defining customer & employee scripts is a
good start for flowcharting process to
provide full description of service encounter
and help identify potential or existing
problems in a service process
MANAGEMENT OF SERVICES
The Dramaturgy of Service Delivery
Role and Script Theories
• Examining existing scripts may suggest
ways to modify the nature of customer and
employee roles
• This can improve service delivery,
increase productivity and enhance the
nature of the customer's experience
• Service delivery procedures need to
respond to new technology as revised
scripts may have to be developed
MANAGEMENT OF SERVICES
Service Marketing System
Other elements that impact customer's overall
view of a service business include
• Communication efforts by the advertising
and sales departments
• Telephone calls and letters from service
personnel
• Billings from the accounting department
MANAGEMENT OF SERVICES
Service Marketing System
• Random exposures to service personnel
and facilities
• News stories and editorials in the mass
media
• Word-of-mouth comments from current or
former customers
• Participation in market research studies
MANAGEMENT OF SERVICES
Service Marketing System
• The various components add up to what
we term the service marketing system
• This represents all the different ways in
which the customer may encounter or
learn about the organization that provides
service
MANAGEMENT OF SERVICES
Service Marketing System
• Services are experiential, each of these
elements offers clues about the nature
and quality of the service product
• Inconsistency between different elements
may weaken the organization's credibility
in the customers' eyes
MANAGEMENT OF SERVICES
Service Marketing System
• The scope and structure of the service marketing system
often vary sharply from one type of organization to another
The Service Marketing System for a High-Contact Service

S e r v i c e D e liv e r y S y s Ot e t mh e r C o n t a c t P o i n

S e r v ic e O p e r a t io n s S y s t e m A d v e r t is in g
O t h e r
C u s t o m e r s S a le s C a lls
I n t e r io r &
M a r k e t R e s e a r c h
E x t e r i o r
S u r v e y s
F a c ilit ie s
B il lin g / S t a t e m e n t s
T e c h n ic a l T h e M is c e lla n e o u s M a il
C o r e E q u ip m e n t
C u s t o m e r P h o n e C a ll s , F a x e s ,
R a n d o m E x p o s u r e s
S e r v i c e F a c i lit ie s / V e h ic le s
P e o p le
C h a n c e E n c o u n t e r s
t h e r O w i t h S e r v ic e P e r s o n n
B a c k s t a g e F r o n t S t a g Ce u s t o m e r s W o r d - f o - M o n t h
( I n v is i b le ) ( v i s ib l e )
MANAGEMENT OF SERVICES
Service Marketing System
• The scope and structure of the service marketing system
often vary sharply from one type of organization to another
The Service Marketing System for a Low-Contact Service
S e r v i c e O p e r a t i o n s
S y s t e m S e r v i c e D e l i v e r y S y s t eO m t h e r C o n t a c t P

A d v e r t is i n g

M a i l S a l e s C a ll s

M a r k e t R e s e a r c
S u r v e y s

T e c h n ic a l
S e l f S e r v i c eT h e B i l li n g / S t a t e m e
C o r e E q u i p m e nC t u s t o m e r s
R a n d o
m Ex p o s
F a c i li t ie s / V e h i c
P h o n e F , a x ,
W e b s i t e , e t c .
W o r d - f o - M o n t
B a c k s t a g e
( I n v i s i b l e )
F r o n t S t a g e
( v i s ib le )
STRATEGIC MANAGEMENT OF SERVICES
Tangible Elements and Communication
Components in the Service Marketing System
1. Service personnel. Contacts with customers may
be face-to-face, by telecommunications or by mail
These personnel may include
• Sales representatives
• Customer service staff
• Accounting/billing staff
• Operations staff who do not normally provide direct
service to customers (e.g., engineers, janitors)
• Designated intermediaries whom customers
perceive as directly representing the service firm
STRATEGIC MANAGEMENT OF SERVICES
Tangible Elements and Communication
Components in the Service Marketing System

2. Service facilities and equipment


• Building exteriors, parking areas, landscaping
• Building interiors and furnishings
• Vehicles
• Self-service equipment operated by customers
• Other equipment
STRATEGIC MANAGEMENT OF SERVICES
Tangible Elements and Communication
Components in the Service Marketing System
3. Non-personal communications
• Form letters
• Brochures/catalogs/instruction manuals/Web
sites
• Advertising
• Signage
• News stories/editorials in the mass media
4. Other people
• Fellow customers encountered during service
delivery
• Word-of-mouth comments from friends,
acquaintances or even strangers
STRATEGIC MANAGEMENT OF SERVICES
Elements of Physical Evidence
Service Scape Other Tangibles
Facility exterior Business cards
Exterior design Stationery
Signage Billing statements
Parking Reports
Landscape Employee dress
Surrounding environment Uniforms
Facility interior Brochures
Interior design Web pages
Equipment Virtual service scape
Signage
Layout
Air quality/ temperature
STRATEGIC MANAGEMENT OF SERVICES
Examples of Physical Evidence from the Customer's Point of View
Physical Evidence
Service Servicescape Other Tangibles
Insurance Not applicable Policy itself Billing statements
Periodic updates Company
brochure Letters/cards
Website
Hospitals Building exterior Parking SignsUniforms Reports/stationery
Waiting areas Admissions officeBilling statements Website
Patient care room Medical equipment
Recovery room
Airline Airline gate area Airplane exteriorTickets Food Uniforms
Airplane interior (decor, seats, airWebsite
quality)
Express mall Not applicable Packaging Trucks Uniforms
Computers Website
Sporting event Parking Stadium exterior TicketingSigns Tickets Program
area Entrance Seating RestroomsUniforms Website
Concession areas Playing field
STRATEGIC MANAGEMENT OF SERVICES
A F r a m e w o r k f o r U n d e r s t a n d i n g E n v i r o n m e n t - U s e r R e l a t i o
H O L I S T I C I N T E R N A L B E H A V I O R
E N V I R O N M E N T R E S P O N S E S

C o g n i t i v eE m o t i o n a P l h y s i o l o g i c a I nl d i v i d u a l B e h a
B e l i e f s M o o d P a i n A f f i l i a t i o n
C a t e g o r -A t t i t u d e C o m f o r t E x p l o r a t i o n
i z a t i o n M o v e m e n t S t a y l o n g e r
S y m b o l i c P h y s i c a l C o m m i t m e n t
m e a n i n g f i t C a r r y o u t p l a n
A m b i e n t C o n d i t i o n s
T e m p e r a t u r e
A i r q u a l i t y
N o i s e
E m p l o y e e
M u s i c
R e s p o n s e s
O d o r
E t c .

S o c i a l I n t e r a c t
S p a c e / F u n c t i o n
P e r c e i v e d B e t w e e n a n d
L a y o u t S e r v i c e s c a p e a m o n g c u s t o m
W q u i p m e n t
a n d e m p l o y e e s
F u r n i s h i n g s
E t c .
C u s t o m e r
I n d i v i d u a l B e h a
R e s p o n s e s
S i g n s , S y m b o l s , A t t r a c t i o n
a n d A r t i f a c t s S t a y / e x p l o r e
S i g n a g e S p e n d m o n e y
P e r s o n a l a r t i f a c t s R e t u r n
S t y l e o f d e c o r C o g n i t i v eE m o t i o n a P l h y s i o l o g i c a lC a r r y o u t p l a n
E t c . M o o d P a i n
B e l i e f s
C a t e g o r -A t t i t u d e C o m f o r t
z a t i o n M o v e m e n t
S y m b o l i c P h y s i c a l
m e a n i n g f i t
STRATEGIC MANAGEMENT OF SERVICES
The Services Marketing Triangle

C o m p a n y

I n t e r n a l M a r k e t i n g E x t e r n a l M a r k
E n a b l i n g M a k i n g
p r o m i s e s p r o m i s e s

P r o v i d e r s C u s t o m e r
I n t e r a c t i v e M a r k e t i n g
K e e p i n g p r o m i s e s
STRATEGIC MANAGEMENT OF SERVICES
Levels of Customer Contact with Service Organizations

E m p h a s i z e s
H ig h E n c o u n t e r s
N u r s i n g H o m e w it h S e r v ic e P e r s
H a ir c u t
F o u r - S t a r H o t e l
G o o d R e s t a u r a n t
M a n a g e m e n t C o n s u l t i n g
A ir l i n e T r a v e l

R e t a il B a n k in g
T e l e p h o n e B a n k in g
M o t e l
C a r R e p a ir
D r y C l e a n i n g
F a s t F o o d
I n s u r a n c e
M o v i e T h e a t e r

C it y B u s

C a b le T V
H o m e B a n k in g
E m p h a s i z e s M a i l- B a s e d R e p a i r s
E n c o u n t e r s
w it h E q u i p m e n t I n t e r n e t - B a s e d S e r v i c e s
L o w
STRATEGIC MANAGEMENT OF SERVICES
CUSTOMER – AS COPRODUCER Levels of Customer Contact
Low (Customer Presence Moderate (Customer Inputs High (Customer Co-produces
Required during Service Delivery) Required for Service Creation) the Service Product)

Products are standardized Client inputs customize a Active client participation


standard service guides the customized service

Service is provided Provision of service requires Service cannot be created apart from
regardless of any individual customer purchase the customer's purchase and
purchase active participation

Payment may be the only Customer inputs (information, Customer inputs are mandatory
required customer input materials) are necessary for an and co-produces the outcome
adequate outcome, but the
service firm provides the service

Examples:
End consumer

Bus travel Haircut Marriage counseling


Motel stay Annual physical exam Personal training
Movie theater Full-service restaurant Weight-reduction program
Business-to-business customer
Uniform cleaning service Agency-created advertising campaign Management consulting
Pest control Payroll service Executive management seminar
Interior greenery maintenance Independent freight transportation Install wide area network (WAN)
MANAGEMENT OF SERVICES
Management of Service Quality
Customer Expectations

E x p e c t e d
s e r v i c e

C u s t o m e r
g a p

P e r c e i v e d
s e r v i c e
MANAGEMENT OF SERVICES
Management of Service Quality
GAP ANALYSIS
C u s t o m e r
E
x p e c t e d
s e r v i c e
C u s t o m e r
g a p P e r c e i v e d
s e r v ic e

S e r v ic e d e li v e r y E x t e r n a l
C o m p a n y G a p 4c o m m u n ic a t io n s
g a p G 1 a p 3 t o c u s t o m e r s
C u s t o m e r - d r i v e n
s e r v i c e d e s ig n s a n d
s t a n d a r d s Gap 1— Not knowing what customers expect
Gap 2— Not selecting the right service design
G a p 2 and standards
C o m p a n y p e Gap
r c 3—e Not
p t delivering
io n s to
o service
f standards
c o n s u m e r e Gapx p 4— e cNot
t amatching
t i o n performance
s to
promises
MANAGEMENT OF SERVICES
Management of Service Quality
Possible Levels of Customer Expectations
H ig h
" E v e r y o n e s a y s t h is r e s ta u r a
I d e a l
is a s g o o d a s o n e in F r a n c e
e x p e c ta t io n s
a n d I w a n t t o g o s o m e w h e r e v
o r d e s ir e s
s p e c ia l f o r m y a n n iv e r s a r y . "

N o r m a t iv e " A s e x p e n s iv e a s t h is
" s h o u ld " r e s ta u r a n t is , it o u g h t t o h a v e
e x p e c ta t io n s e x c e lle n t f o o d a n d s e r v ic e . "

E x p e r ie n c e - " M o s t t im e s t h is r e s ta u r a n t
b a s e d is v e r y g o o d , b u t w h e n it g e ts
n o r m s b u s y t h e s e r v ic e is s lo w . "

" I e x p e c t t h is r e s ta u r a n t
A c c e p ta b le
t o s e r v e m e in a n
e x p e c ta tio n s
a d e q u a t e m a n n e r."

M in im u m " I e x p e c t t e r r ib le s e r v ic e
t o le r a b le f r o m t h is r e s ta u r a n t b u t c o m e
e x p e c ta t io n s b e c a u s e t h e p r ic e is lo w . "
L o w
MANAGEMENT OF SERVICES
Management of Service Quality
Customer Expectations
Beliefs about service delivery that functions as standards
or reference points against which performance is judged

D e s ir e d S e r v
E x p e c t e d
s e r v i c e

C u s t o m e r Z o n e o f
g a p T o le r a n c e

P e r c e iv e d
s e r v ic e A d e q u a t e S e
MANAGEMENT OF SERVICES
Management of Service Quality
Expectations
Culture Dependent – Japanese and
English
Experience Dependent - Japanese and
Russian
Zone of Tolerance
Range or window in which customers do
not particularly notice service performance
Can be large be narrow or large
depending types of service
MANAGEMENT OF SERVICES
Management of Service Quality
Different Customers - Possess
Different Zones of Tolerance
Narrow Zone – Tighter Service
Wider Zone – Tolerable Service
Individual customer's zone of tolerance
increases or decreases depending on a
number of factors, including company
-controlled factors such as price
MANAGEMENT OF SERVICES
Management of Service Quality

Zones of Tolerance Vary for Service


Dimensions

In addition to higher expectations for the


most important service attributes, customers
are not willing to relax these expectations for
less important factors for the zone of
tolerance
MANAGEMENT OF SERVICES

FACTORS THAT INFLUENCE CUSTOMER


EXPECTATIONS OF SERVICE

Sources of Desired Service Expectations


Personal Needs
Personal needs can fall into many
categories, including physical, social,
psychological and functional
MANAGEMENT OF SERVICES
Some customers are more demanding
than others, having greater sensitivity to,
and higher expectations of service
E X P E C T E D
E n d u r in g S e r v ic e
S E R V IC E
in t e n s if ie r s
D e s ir e d
S e r v ic e
P e r s o n a l n e e d s
Z o n e
o f
T o le r a n c e

A d e q u a t e
S e r v ic e
MANAGEMENT OF SERVICES
FACTORS THAT INFLUENCE CUSTOMER
EXPECTATIONS OF SERVICE
Enduring service intensifiers are
individual, stable factors that lead the
customer to a heightened sensitivity to
service
One of the most important of these
factors can be called derived service
expectations, which occur when
customer expectations are driven by
another person or group of people
MANAGEMENT OF SERVICES
Another enduring service intensifier is
personal service philosophy—the
customer's underlying generic attitude about
the meaning of service and the proper con
duct of service providers
If you have ever been a waitress or a waiter
in a restaurant, you are likely to have
standards for restaurant service that were
shaped by your training and experience in
that role
MANAGEMENT OF SERVICES
Another enduring service intensifier is personal
service philosophy—the customer's underlying
generic attitude about the meaning of service
and the proper conduct of service providers
If you have ever been a waitress or a waiter in
a restaurant, you are likely to have standards
for restaurant service that were shaped by
your training and experience in that role
Service philosophies and derived service
expectations elevate the level of desired
service
MANAGEMENT OF SERVICES
Factors That Influence Adequate Service

T r a n s i t o r y s e r v i c e
i n t e n s i f i e r s
D e s i r e d
S e r v i c e
P e r c e i v e d s e r v i c e
a l t e r n a t i v e s Z o n e
o f
T o l e r a n c e
S e l f - p e r c e i v e d
s e r v i c e r o l e
A d e q u a t e P r e d i c t e
S e r v i c e s e r v i c e
S i t u a t i o n a l
f a c t o r s
MANAGEMENT OF SERVICES
Transitory service intensifiers, consists of
temporary, usually short-term, individual
factors that make a customer more aware of
the need for service
Personal emergency situations in which
service is urgently needed (such as an
accident) raise the level of adequate service
expectation, particularly the level of
responsiveness required and considered
acceptable
MANAGEMENT OF SERVICES

Perceived service alternatives are other


providers from whom the customer can
obtain service
If customers have multiple service providers
to choose from or if they can provide the
service for themselves (such as lawn care),
their levels of adequate service are higher
than those of customers who believe it is not
possible to get better service elsewhere
MANAGEMENT OF SERVICES

Self-perceived service role is defined as


customer perceptions of the degree to which
customers exert an influence on the level of
service they receive
In other words, customer’s expectations are
partly shaped by how well they believe they
are performing their own roles in service
delivery
MANAGEMENT OF SERVICES
Situational factors is defined as service
performance conditions that customers view
as beyond the control of the service provide
For example personal emergencies such as
serious automobile accidents would intensify
customer service expectations of insurance
companies, catastrophes that affect a large
number of people at one time (tornadoes or
earthquakes) may lower service expectations
because customers recognize that insurers
are inundated with demands for their
services
MANAGEMENT OF SERVICES
Management of Service Quality
FACTORS THAT INFLUENCE CUSTOMER
EXPECTATIONS OF SERVICE
Sources of Desired and Predicted Service Expectations
E x p lic it s e r v ic e
p r o m is e s

E X P E C T E D Im p lic it s e r v ic e
S E R V IC E p r o m is e s

D e s ir e d
S e r v ic e W o r d o f m o u t h

Z o n e
o f
P a s t e x p e r ie n c e
T o le r a n c e

A d e q u a t e P r e d ic t e d
S e r v ic e S e r v ic e

Factors That Influence Desired and Predicted Service


MANAGEMENT OF SERVICES
Management of Service Quality

Perception

Outcome

Interaction

Physical Environment Quality


MANAGEMENT OF SERVICES
Management of Service Quality
Service Quality Dimensions
• Reliability - Ability to perform the promised
service dependably and accurately
• Responsiveness - Willingness to help
customers and provide prompt service
• Assurance - Employee’s knowledge and
courtesy and their ability to inspire trust and
confidence
• Empathy - Caring, individualized attention
given to customers
• Tangibles - Appearance of physical facilities,
equipment, personnel & written materials
MANAGEMENT OF SERVICES
Management of Service Quality
How Customers Judge the Five Dimensions of Service Quality
Reliability Responsiveness Assurance Empathy Tangibles
Car repair Problem fixed the Accessible; no Knowledgeable Acknowledges Repair facility;
(consumer) first time and ready waiting; responds to mechanics customer by waiting area;
when promised requests name; uniforms;
remembers equipment
previous
problems and

Airline (consumer) Flights to promised Prompt and speedy Trusted name; preferences i Aircraft;
destinations depart system for ticketing, good safety Understanding of ticketing
and arrive on in-flight baggage record; competent special individual counters;
schedule handling employees needs; baggage area;
anticipates uniforms
customer needs

Medical care Appointments are Accessible; no Knowledge, skills, Acknowledges Waiting room;
(consumer) kept on schedule; waiting; willingness credentials, patient as a exam room;
diagnoses prove to listen reputation person; equipment;
accurate remembers written materials
previous
problems; good
listening;
patience
MANAGEMENT OF SERVICES
Management of Service Quality
How Customers Judge the Five Dimensions of Service Quality
Reliability Responsiveness Assurance Empathy Tangibles
Architecture Delivers plans when Returns phone calls; Credentials; Understands Office area;
(business) promised and within adapts to changes reputation; name client's industry; reports; plans
budget in the community;' acknowledges themselves;
knowledge and and adapts to billing
skills specific client statements;
needs; gets to dress of
know the client employees

Information Provides needed Prompt response to Knowledgeable Knows internal Internal reports;
processing information when requests; not staff; customers as office area; dress
(internal) requested "bureaucratic"; deals well-trained; individuals; of employees
with problems credentials understands
promptly individual and
departmental
needs

Internet brokerage Provides correct Quick website with Credible Ability to respond Appearance of
(consumer and information and easy access and no information with human the website and
business) executes customer down time sources on the interaction as collateral
requests accurately site; brand needed
recognition;
credentials
apparent on site
STRATEGIC MANAGEMENT OF SERVICES
Management of Service Quality
STRATEGIES FOR INFLUENCING CUSTOMER
PERCEPTIONS
• Measure and Manage Customer Satisfaction and
Service Quality
• Aim for Customer Quality and Satisfaction in Every
Service Encounter
Plan for Effective Recovery
Facilitate Adaptability and Flexibility
Encourage
Help Employees Cope with Problem Customers
Manage the Dimensions of Quality at the Encounter
Level
STRATEGIC MANAGEMENT OF SERVICES
SERVICE GUARANTEES
Benefits of Service Guarantees
• A good guarantee forces the company to focus on its
customers
• An effective guarantee sets clear standards for the
organization
•A good guarantee generates immediate and relevant
feedback from customers
•When the guarantee is invoked there is an instant
opportunity to recover
•Information generated through the guarantee can be
tracked and integrated into continuous improvement efforts
•Studies of the impact of service guarantees suggest that
employee morale and loyalty can be enhanced as a result
•For customers, the guarantee reduces their sense of risk
and builds confidence
STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services
• The fundamental issue underlying supply and demand
management in services is the lack of inventory capability
• Lack of inventory capability is due to the perishability of
services and their simultaneous production and
consumption

Factors
Excess demand
Demand exceeds optimum capacity
Demand and supply are balanced at the level of optimum
capacity
Excess capacity
STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services

V a l u m e D e m a n d e d E x c e s s d e m a n d
( b u s i n e s s i s l o s t )

M a x i m u m c a p a c i t y
D e m a n d e x c e e d s
o p t i m u m c a p a c i t y
( s e r v i c e q u a l i t y d e c l i n e s )
O p
t i m u m c a p a c i t y
( d e m a n d a n d s u p p l y a r e w e l l I d e a l u s e
b a l a n c e d )
E x c e s s c a p a c i t y
( w a s t e d
r e s o u r c e s )

L o w u t i l i z a t i o n
( m a y s e n d b a d s i g n a l s )

Variations in Demand Relative to Capacity T i m e


STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services
UNDERSTANDING CAPACITY CONSTRAINTS
• Time, Labor, Equipment, Facilities
• Optimal versus Maximal Use of Capacity

UNDERSTANDING DEMAND PATTERNS


• Charting Demand Patterns
• Predictable Cycles
• Random Demand Fluctuations
• Demand Patterns by Market Segment

STRATEGIES FOR MATCHING CAPACITY AND


DEMAND
STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services
STRATEGIES FOR MATCHING CAPACITY AND DEMAND
Shifting Demand to Match Capacity

D E M A N D D E M A
S H I F T D E M A N D
T O O H I G H T O O L

U s e s i g n a g e t o c o mU s m e u s n a c l ea st e a b n ud
t i m e s . b u s i n e s s f r o m
O f f e r i n c e n t i v e s t o s ce ug sm t oe mn t es r. s f o
d u r i n g n o n p e a k t i mM eo s d . i f y t h e s e r
T a k e c a r e o f l o y a l to o r n" re e w g u m l a a r r " k ec t
A d v e r t i s e p e a k u s aO g f fe e tr i md i es sc o a u n nd
n o n p e a k u s e . M o d i f y h o u r s
C h a r g e f u l l p r i c e f oB r r i t n h g e t s h e e r v s i ec re v -
d i s c o u n t s .
STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services
WAITING LINE STRATEGIES: WHEN DEMAND AND CAPACITY CANNOT
BE ALIGNED
Waiting Line Strategies

E m p lo y o p e r a t io n a l M a k e w a it in g f u n ,
lo g ic t o r e d u c e w a it o r a t le a s t t o le r a b le

E s ta b lis h
D if f e r e n t ia t e
a r e s e r v a t io n
w a it in g c u s t o m e r s
p r o c e s s
STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services
WAITING LINE STRATEGIES: WHEN DEMAND AND CAPACITY CANNOT
BE ALIGNED
Waiting Line Strategies
M u l t i p l e Q u e u e S i n g l e Q u e u e T a k e a N u m

3 4 2

8 6 1 0

1 2 7
( a ) 1 1
9
5

( C )

E n t e r
( b )
STRATEGIC MANAGEMENT OF SERVICES
Demand and Supply Management in Services

Make Waiting Fun, or at Least Tolerable


• Unoccupied Time Feels Longer Than Occupied Time
• Preprocess Waits Feel Longer Than In-Process Waits
• Anxiety Makes Waits Seem Longer
• Uncertain Waits Are Longer Than Known, Finite Waits
• Unexplained Waits Are Longer Than Explained Waits
• Unfair Waits Are Longer Than Equitable Waits
• The More Valuable the Service, the Longer the
• Customer Will Wait
• Solo Waits Feel Longer Than Group Waits
STRATEGIC MANAGEMENT OF SERVICES

PLANNING AND CREATING SERVICES


Corporate Objectives and Resources
• Market and competitive analysis
• Resource allocation analysis
• SWOT analysis
• Identifying SWOT factors on both the
marketing and operational / human
resources fronts
STRATEGIC MANAGEMENT OF SERVICES
C o r p o r a t e O b je c t iv e s
a n d R e s o u r c e s

M a r k e t a n d R e s o u r c e
C o m p e t it iv e A llo c a t io n
A n a ly s is A n a ly s is

M
a r k e t in g A s s e t s O p e r a t in g A s s e t s
S t a t e m e n t S t a t e m e n t
C u s t o m e r p o r t f o lio P h y s ic a l f a c ilit ie s
M a r k e t k n o w le d g e E q u ip m e n t
M a r k e t in g im p le m e n t a t io n s k ill I n f o r m a t io n t e c h n o l o g y
P r o d u c t lin e H u m a n r e s o u r c e s ( n u m b e r s a n d
P o s it io n in g s t r a t e g y ( ie s ) A llia n c e s a n d p a r t n e r s h ip s
R e p u t a t io n o f b r a n d ( s ) C o s t s t r u c t u r e

Planning and Creating Services


S e r v ic e M a r k e t in g C o n c e p t S e r v ic e O p e r a t io n s C o n c e p t
B e n e f it s t o C u s t o m e r N a t u r e o f p r o c e s s e s
C o r
e p r o d u c t P e o p le p r o c e s s in g
S u p p le m e n t a r y s e r v ic e s P o s s e s s io n p r o c e s s in g
S e rv ic e le v e ls a n d s t y le M e n t a l s t im u lu s p r o c e s s in g
A c c e s s ib ilit y ( w h e r e a n d w h e n ) I n f o r m a t io n p r o c e s s in g
U s e r c o s t s G e o g r a p h ic s c o p e o f o p e r a t io n s
P r ic e a n d o t h e r m o n e t a r y c o s t s A r e a ( s ) s e r v e d
T im e S in g le s it e v e r s u s m u lt is it e
M e n t a l e f f o r t F a c ilit ie s lo c a t io n
P h y s ic a l e f f o r t T e le c o m m u n ic a t io n s lin k a g e s
N e g a t iv e s e n s o r y e x p e r ie n c e s S c h e d u lin g
H o u r s / d a y s / s e a s o n s o f s e r v ic e
C o n t in u o u s v e r s u s in t e r m it t e n t
I f in t e r m it t e n t , w h a t f r e q u e n c y
F a c ilit ie s d e s ig n a n d la y o u t
H u m a n r e s o u r c e s ( n u m b e r s a n d
L e v e r a g e t h r o u g h p a r t n e r s h ip s a
s e lf s e r v ic e
S p e c if ic t a s k s a s ig n e d t o f r o n t s t
a n d b a c k s t a g e o p e r a t io n s

S e r v ic e D e liv e r y P r o c e s s
STRATEGIC MANAGEMENT OF SERVICES
THE NATURE OF SERVICE OFFERING
Augmented Product

S e r v ic e V e h ic le
F r e q u e n c y

T r a n s p o r t I n - F lig h t
S e r v ic e
P r e - &
P o s t f lig h t
S e r v ic e F o o d
&
D r in k

M a r k e t in g P o s it io n in g K e y
( w e ig h t e d t o w a r d e v i d e n Tc ae n) g i b l e E le m e n
I n t a n g ib le E le m e

Shostack's Molecular Model: Passenger Airline Service


STRATEGIC MANAGEMENT OF SERVICES
SERVICE BLUEPRINTING
Developing a Blueprint
• Distinguish between what the customer
experiences front-stage and the activities
of employees and support processes at
backstage, which the customer cannot see.
Between the two lies what is called the
line of visibility
• Blueprinting should identify potential fail
points in the process that pose a significant
risk of things going wrong and diminishing
service quality
STRATEGIC MANAGEMENT OF SERVICES
SERVICE BLUEPRINTING
Developing a Blueprint
• Knowledge of such fail points helps to design
procedures to avoid their occurrence or to
prepare contingency plans (or both)
• Points in the process where customers
commonly have to wait can also be
pinpointed. Standards can be developed for
execution of each activity, including times for
completion of a task, maximum wait times in
between tasks, and scripts to guide
interactions between staff members and
customers
STRATEGIC MANAGEMENT OF SERVICES
SERVICE BLUEPRINTING
Developing a Blueprint
• Identifying Fail Points and Setting Service Standards

I n f o r m a t i o n

P a y m e n t C o n s u lt a t io n

The Flower of
Service:
Core Product
Surrounded by
Clusters of B i l li n g C O R E O r d e r T a k

Supplementary
Services

E x c e p t io n s H o s p i t a li t y

C a r e t a k i n g

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