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Relationships in Services

 The possibilities to build relationships are greater in


services than goods.

 Services are often delivered through interactions


between the provider and customer.

 Proximity between the provider and customer is


inevitable.
Relationships in Services…
People Factor:

 People factor can be very critical to successful


marketing of services.

 The personal relationship if cultivated properly can


become a powerful motivator being repeat purchase.

 The people performing services not only create


economic satisfaction or value rather,

 they are critical ingredients in the creation of social


and psychological satisfactions.
Relationships in Services…
Social Encounters:

 Service encounters are the first and foremost social


encounters.

 How providers socially handle the customers can


define and position service product in a distinct
manner.

 Customers may willing to forgo physical efforts and


monetary benefits for the sake of getting service
from a known provider.
Relationships in Services…
Emotional Connection:

 The front staff who get to interact with customers


directly face to face must be trained and encouraged
to connect emotionally with customers.

 The emotional content that provides psychological


satisfaction is difficult to replicate.

 Services can be powerfully differentiated along


emotional dimensions.
Relationships in Services…
Importance of Frontline:

 To a customer service firm is represented by the one


with whom interactions take place.

 The performance of frontline staff can make or break


the service firm.

 The service quality is often perceived through the


quality of interaction.

 It can be easily broken by little mistakes committed


by workers at the time of encounters.
Relationship Building
 Customer satisfaction is essential but not sufficient
condition for relationship building.

 Marketing efforts must aim to create two types of


customers:

 Loyalist: is customer who is completely satisfied


with the services of the firm and keeps coming back
to the firm.
Relationship Building…
 Apostle: these are subset of loyalists whose
expectations are far exceeded by the service
experience.

 These customers not only feel highly satisfied rather


they feel so delighted that they share feelings with
others.

 According to Berry, the key elements of relationship


marketing are:
Relationship Building…
 Core service: the core service or product serves as
the starting point for relationship building.

 That is, the relationship is built around the core


product.

 Customization: relationship is customized


according to individual customer.

 Augmentation: core product or service is


augmented with extras or additional product.
Relationship Building…
 Price: the price of the product or service is fixed
that encourages customer loyalty.

 The idea is not to maximize profit from a transaction.

 Internal marketing: the key to external satisfaction


is internal satisfaction.

 The marketing concept is used inward to create


satisfied employees so that they give the best
performance to satisfy external customers.
Key Differences Between Relationship
Marketing and Transaction Marketing
Concept Relationship Transactional
Marketing Marketing
Objective Relationship Single transaction
Time orientation Long term Short term
orientation orientation
Focus on customer Pre and post sales Focus on pre sale
process process
Contact intensity High Low
Dependence level Generally high Generally low
Dominant quality Quality of Quality of output
dimension interaction
Key Differences Between Relationship
Marketing and Transaction Marketing…
Concept Relationship Transactional
Marketing Marketing
Quality concern Quality concern of Basically concerns
all in the system production
department
Internal marketing Strategic role No or limited role

Production focus Mass customization Mass production

Focus Customer value Product features


Customer service High emphasis on Little or no
customer service emphasis on
customer service
Relationship Customers
 Targeting customers for relationship building is not
the same as targeting in general.

 Customers could be classified into four groups based


on their profitability:

 Platinum Customers: are most profitable


customers, and are heavy users of product or service
and are not overly price sensitive.
Relationship Customers…
 They exhibit commitment to firm’s offerings and
show openness in trying new offerings by the firm.

 Gold customers: these customers stack below the


platinum tier in terms of profitability.

 They are heavy users and expect price discounts that


affect the margins to the firm.

 They are loyal customers but not totally loyal.


Relationship Customers…
 Iron customers: further go down on the
profitability scale and are good source of business
for keeping the capacity utilization high.

 Their spending, loyalty and profitability is not high


enough to deserve special treatment.

 Lead customers: are unprofitable and cost to


company customers.
Relationship Customers…
 They demand more than what is actually deserved.

 They are often source of negative word of mouth.

 It is better to free business from these customers

because the resources used on them can bring better

results from elsewhere.


Relationship Tools and Strategies
 The importance of lifetime product and services and
loyal employees crucial to relationship development.

Lifetime Products and Services:

 Central to marketing concept is the identification of


target customer and developing need satisfying
product and services.

 Customer relationship building on the other hand


requires adding new products and services to
evolving customer needs.
Relationship Tools and Strategies…
 It makes more sense to cater to the changing needs
of existing customers with whom the firm has had a
relationship,
 rather than trying out new battlefields with new
weapons.
Loyal Employees:
 Role of employees is particularly important in the
interaction of intensive services.
 Employees can make a service encounter socially and
emotionally satisfying.
Relationship Tools and Strategies…
 Employee retention over a period of time is
associated with superior service delivery.

 The longer staying employees become more familiar


with the nuances of business.

 A repeated interaction with one employee makes


them more knowledgeable about unique customer
needs and preferences.

 This understanding helps them serve customer


better.
Customer Retention
 According to Berry and Parasuraman there are three
strategies to build customer retention: adding
financial benefits, adding social benefits and adding
structural ties.

Financial Benefits:
 The key idea governing this strategy is to motivate
customers to maintain relationship because of some
financial incentive.
 Firms create various kinds of clubs and programs to
reward heavy or frequent buying customers.
Customer Retention…
Social Benefits:
 Customers desire several benefits from relationships
with service firm or service employees.
 People serving the customers may be perceived like a
surrogate family.
 Customers feels happy when employees recognize
him or her as an individual and more so when they
know names and preferences.
 Customers want to bond with people socially
because they seek long for customized treatment.
Customer Retention…
Structural Bonds:

 Now companies come closer and develop linkages


especially driven by information technology such that
buyer is able to perform better and the benefit of
which is shared with the seller.

 Earlier approach to marketing used to focus the


maximization of self interests even at the cost of the
other party to an exchange.

 Nowadays formation of relationships that aim to


maximize mutual gain.
Customer Satisfaction
 Satisfaction is probably the driver of customer’s
intention to repurchase,

 stay with the firm for future purchases and do not


share purchase with other suppliers.

 Therefore marketer must work out strategies as to


best satisfy customers both in the short term and
long term such that they are motivated to maintain
relationship on a long term basis.
Customer Satisfaction…
 The satisfaction framework literature proposes:

 Met expectations: when delivery is according to


expectations this results in moderate satisfaction or
when expectations are met.

 Unmet expectations: results in dissatisfaction


when the expectations are not met and there is
under delivery.
Customer Satisfaction Involves a Comparison
Between Service Expectation and
Service Perception
Total Customer Satisfaction and
Delight
 Perceived quality is customer’s perception of
delivered service as against the expected service.

 Satisfaction is customer’s emotional response or


feelings of pleasure or displeasure to the perceived
quality.

 Perceived quality influences satisfaction.

 If satisfaction is defined as consumer’s fulfillment


response then how the customer is likely to feel in
the situations of,
Total Customer Satisfaction and
Delight…
 (i) Negative disconfirmation (performance short of
expectations) – dissatisfaction,

 (ii) Positive disconfirmation (performance more than


expectations) – satisfaction,

 (iii) Confirmation (met expectations) – absence of


dissatisfaction,

 (iv) Positive surprise (unexpected delivery) – delight.


Link Between Satisfaction and
Loyalty
 Business must strive to create totally satisfied
customers then only rewards of loyalty are achievable
in competitive market conditions.

 The gains are sharpest or more than proportionate


when satisfaction level is increased beyond
satisfaction to complete satisfaction.

 That is loyalty gains are achieved substantially when


customer satisfaction is increased beyond the point of
satisfaction.
Satisfaction and Loyalty
Customer Delight
 Customer delight is the reaction of customer when
they receive a service or product that not only
satisfies, but provides unexpected value or
unanticipated satisfaction.

 Customer satisfaction is largely a static process that


deals with today and known circumstances and
known variables.

 Providing customer delight is dynamic, forward


looking process that takes primarily in the unknown
environment.
Service Quality
 Quality is the extent to which the service process
and the service organizations can satisfy the
expectations of the user.

 Quality can be defined as an important competitive


weapon to gain superiority.

 In order to lend clarity to the phenomenon of service


quality, Gummensson proposed a holistic view of
service quality.
Holistic View of Service Quality
Quality is integrator of two aspects of business:

 These are two important perspectives on quality,

 first is the technology and production centric, which


focuses on setting up the requirement specifications,

 and then quality goal is to seek conformance to these


specifications, that is do things right approach.

 The second perspective looks at quality from the


perspective of fitness for use.
Holistic View of Service Quality…
 This is a customer oriented approach as customer
satisfaction is put in the focus, that is doing the right
things.

 These two approaches are combined to form


customer perceived quality.

 Quality in fact is a concept that integrates different


orientations like marketing, production, technology
and ultimately customer satisfaction.
Holistic View of Service Quality…
Companies must pay attention to synergy
between goods and services quality:

 A goods marketer has to pay attention to the quality


of parts and services.

 Likewise, a service provider who primarily markets a


service must duly attend to the quality of both goods
used in the creation of service and service itself.
Holistic View of Service Quality…
Quality, productivity and profits are inseparable
triplets:

 Quality can influence revenue positively through


image improvement, increased sales, reduction in
price competition and economy of scale effects.

 Quality can also decrease cost by reduced reworking


costs, scrap, and expenditure on warranty and
product liability claims.
Service Quality…
 Quality is especially difficult to define, describe, and
measure in services.

 Quality is essentially conceptualized as the


discrepancy between customer expectations and
perceptions of what is delivered.

 A product or service is considered of quality when it


fulfills customer’s expectations.

 The nature of quality differs in goods and services.


Service Quality…
 Customers evaluate quality based on their perception
of what has been received as against their
expectations.

 Quality in services is held in the eyes of the customer,


is therefore called perceived quality.

 It is customer’s personal judgment about a product’s


excellence or superiority on a set of criteria that
forms their expectations.
Nature of Quality in Goods and
Services
Quality Dimensions
 According to Parasuraman and colleagues, the ten
general concerns/dimensions that represent the
evaluative criteria used by the customers to asses
service quality,

 Reliability: is customer’s concern whether the


service firm would deliver the promised service
dependably and accurately.

 Eg: This bank promises to clear an outstation cheque


in two days, will it really?
Quality Dimensions…
 Responsiveness: is customer’s concern whether
employees of the company would be willing and ready
to provide service promptly.
 Eg: If I develop some problems up in the air, will the
employees of this airline help me?
 Competence: it is a concern whether service
providers have necessary knowledge and skill to
perform the service.
 Eg: are the doctors in this hospital really qualified and
have appropriate experience to perform this kind of
surgery?
Quality Dimensions…
 Credibility: it is concerned with service provider’s
trustworthiness, honesty and believability.

 Eg: the insurance company has made a claim that in


case of accident they would settle the claim without
any delay and paper work.

 Can I believe them without any doubt?


Quality Dimensions…
 Courtesy: it is reflected in customers concern about
how politely, respectfully, and friendly he or she would
be treated during the course of dealings with the
service system.

 Eg: I have booked this hotel to host a party to honour


my parents.

 Will the staff here serve my guests respectfully and in


friendly fashion.
Quality Dimensions…
 Access: it refers to expectations surrounding the
issue of ease with which the staff or service can be
approached.

 Eg: The service offered by this mobile communication


service provider is fine, but how easy is to contact
the customer care department when something goes
wrong?
Quality Dimensions…
 Communication: it is customer’s concern whether
he would be given a patient listening when required
and would be kept informed.

 Eg: will this bank keep me informed about the status


of my accounts on a regular basis and be able to
explain charges they deduct from time to time.

 Security: customers expect the service to be free


from danger, risk and doubt.

 Eg: how safe is to park the car in this parking lot?


Quality Dimensions…
 Understanding customer: it is customer’s concern
whether service providers will make genuine efforts
to understand customer needs.

 Tangibles: it is customer’s sensitivity about the


physical evidence present in the service firm like
personnel, equipments, facilitating goods.

 Eg: will my car be repaired in modern workshop


equipped with state of the art machines and
equipments?
Total Perceived Quality Model

Gronroos, C. Service Marketing Management: A Customer Relationship Management Approach, New York,
John Wiley, 2014, p.67.
SERVQUAL
 It is a multi dimensional research instrument,
designed to capture consumer expectations and
perceptions of a service along the five dimensions
that are believed to represent service quality.

 The model of service quality, popularly known as


the gaps model was developed by a group of
American authors, A. Parasuraman, Valarie A.
Zeithaml and Len Berry, in a systematic research
program carried out between 1983 and 1988.
SERVQUAL…
 The model identifies the principal dimensions (or
components) of service quality; proposes a scale for
measuring service quality (SERVQUAL) and

 suggests possible causes of service quality problems.

 The model's developers originally identified ten


dimensions of service quality,

 but after testing and retesting, some of the


dimensions were found to be auto correlated and the
total number of dimensions was reduced to five,
namely:
SERVQUAL…
 Reliability,

 Assurance,

 Tangibles,

 Empathy and

 Responsiveness.

 These five dimensions are thought to represent the


dimensions of service quality across a range of
industries and settings.
SERVQUAL…
 Reliability: perceptions about the ability of the firm
to perform the promised service dependably and
accurately.

 Assurance: perceptions about the knowledge and


courtesy of employees and their ability to convey
trust and confidence.

 Tangibles: the appearance of physical facilities,


equipment, personnel and communication materials.
SERVQUAL…
 Empathy: the provision of caring, individualized
attention to customer.

 Responsiveness: the willingness to help customers


and to provide prompt service.

 Businesses use the SERVQUAL instrument (i.e.


questionnaire) to measure potential service quality
problems and
SERVQUAL…
 the model of service quality to help diagnose possible
causes of the problem.

 The model of service quality is built on


the expectancy confirmation paradigm/model,

 which suggests that consumers perceive quality in


terms of their perceptions of how well a given
service delivery meets their expectations of that
delivery.
SERVQUAL…
 Thus, service quality can be conceptualized as a
simple equation:

 SQ = P - E

 Where, SQ is service quality

 P is the individual's perceptions of given service


delivery

 E is the individual's expectations of a given service


delivery.
SERVQUAL…
 When customer expectations are greater than their
perceptions of received delivery, service quality is
deemed low.

 When perceptions exceed expectations, then service


quality is high.

 The model of service quality identifies five gaps that


may cause customers to experience poor service
quality.
SERVQUAL…
 In this model, gap five is the service quality gap and is
the only gap that can be directly measured.

 In other words, the SERVQUAL instrument was


specifically designed to capture gap five (the
discrepancy between expected service and perceived
service)

 That is, the discrepancy between the expected


service and perceived service (gap 5 – the service
quality gap) is caused by the presence of other gaps
within the organization.
Gap1: The Understanding Gap
Discrepancy between consumer expectations and
management perception of consumer expectations:

 This is largely attributed to lack of customer


knowledge.

 The following may contribute to the presence of the


knowledge gap:

 Lack of marketing research: even when


customers needs and wants are researched, the
management may not be willing to use these findings
in developing a service product.
Gap1: The Understanding Gap…
 Inadequate upward communication: this
happens when customer complaints, feedback and
informal suggestions do not move upwards to the
top.

 Too many layers of management: a hierarchical


structure with multiple layers contributes to
knowledge gap,

 by creating a long distance between customer and


management responsible for designing service.
Strategies to Improve Gap1
 Correct understanding of the customer needs and
wants is the basis of achieving marketing success.

 Customer expectations not only must met rather


must be exceeded.

 Use marketing research strategically to develop


accurate knowledge of customer needs and wants.

 In this respect, the firm can elicit customer


complaints regularly and use them strategically.
Strategies to Improve Gap1 …
 Customer interactions could be used as a platform to
learn about them.

 Management must make sure that this information


reaches right people who are able to pick out insights
and turn it into action.

 Upward communication can be achieved by learning


by walking around, direct interactions with front
liners, formal and informal feedback and discussions
with contact staffs.
Gap 2: Service Standards
Specification Gap
 Discrepancy between management’s perception of
consumer expectations and service quality
specifications:
 This may happen because of the following:
 Lack of Management commitment to service
quality: service quality may not be the priority,
instead other objectives may be perceived as more
important like short term sales or profit gains.
 In many cases firms did not even have quality
departments given to the defining quality standards
and measuring actual quality.
Gap 2: Service Standards
Specification Gap…
 Employee Perception of infeasibility: managers
may develop perception that meeting customer
expectations is not feasible for a variety of reasons.
 Inadequate Goal setting: for delivery of quality
services, goals must be set to guide employee
performance.
 Good service organizations are known for setting
specific and understandable goals that reflect
customer expectations.
 Absence of goal setting contributes to specification
gap.
Gap 2: Service Standards
Specification Gap…
 Inadequate Task standardization: conversion of
management perception of customer expectations
into standards depends on the degree to which the
tasks involved in service creation can be standardized.

 When managers feel standardization is counter to


quality service, they may not set standards.
Strategies to Improve Gap 2
 Commitment of top management is the first essential
condition for developing customer expectations
based service quality standards.

 Top management must signal its commitment to


customer by verbal and non verbal support through
mission and vision.

 Middle management’s support and commitment is key


to initiating and sustaining quality efforts.
Strategies to Improve Gap 2…
 On the issue of inadequate task standardization, tasks
involved in the service creation can be standardized
by the use of technology like,
 computerization (computerized reservation system)
and automation (use of automatic tellers to disburse
cash).
 Absence of goal setting can be countered by the
development of goal setting process and routines.
 Goals measured and reviewed must be done on a
regular basis for maintaining strategic fit with the
customer requirements.
Gap 3: Service Standards Delivery Gap
 Discrepancy between the service quality
specifications and actually delivered service:

 A firm may not be able to deliver actual service


performance according to set standards because of
internal factors influencing employee willingness and
ability.

 Role ambiguity: is a situation when employees are


uncertain about what is expected of them and what
they are suppose to do to satisfy their managers.
Gap 3: Service Standards Delivery Gap…
 Lack of role clarity may drive human performance
into unintended directions and thereby create gap
between standard and delivery.

 Role conflict: it is situation of friction that, when


employees experience a tension between what
managers expect them to do and what customers
want them to do.
Gap 3: Service Standards Delivery Gap…
 Eg: in many retail situations, the customer wants
them to take personal interest in solving their
purchase problems and therefore they should go
through the process slowly.

 The manager, on the other hand, desires faster


customer turnaround to maximize numbers.

 Employee job fit: when employees lack required


qualifications and skills, their performances are likely
to deviate from the standards.
Gap 3: Service Standards Delivery Gap…
 Poor employee job fit can be a cause of frustration
for both the customer and the employee.

 Technology job fit: when tools, equipment and


technology are inadequate or ill suited, the employee
performance suffers seriously.

 Perceived control: employees may feel stressed out


when managing a situation that requires urgent
extension of right response but they have to consult
or seek approvals from bosses above them.
Gap 3: Service Standards Delivery Gap…
 In the process the effectiveness handling the situation
suffers and they feel the brunt of poor service.

 Teamwork: when people working in the firm do not


work as a team and coordinate their efforts,
performance suffers.

 Performance at the point of delivery is likely to meet


standards when frontline staff are supported and
enabled by the team working behind them.
Gap 3: Service Standards Delivery Gap…
 Supervisory control system: most firms employ
control systems to measure and reward employee
performance.

 Problems arise when the focus of measurement of


these systems is on something that is not related to
provision of service quality.

 Eg: employee quantitative output may get measured


and rewarded, not the quality of execution.
Strategies to Improve Gap 3
 Role ambiguity can be countered by the use of tools
that enhance role clarity.

 Whether performances are inline with the


expectations can be communicated by formal
feedback system so that necessary corrections are
carried out.

 Role conflict is experienced when a person is pulled


in two different directions as employee of the firm
and the server of customers.
Strategies to Improve Gap 3…
 The stress emanating from this pull could be
minimized when employees are involved in standard
setting process.

 The gap caused by poor employee and technology’s


fit with the demands of the job can be minimized by
sound human resources management practices.

 Right people cultivated for the jobs may give


satisfactory performances in the absence of
appropriate reward and compensation system.
Strategies to Improve Gap 3…
 Customer and employee considerations must be
incorporated in choice of technology rather than
leaving these decisions entirely on the technology
experts.

 Decision making instead of being confined to the top


in fewer hands is pushed down to the level of contact
employees.

 Empowered employees are able to fix problem


situations faster.
Gap 4: Service Promotion Gap
 Discrepancy between delivered service and what is
communicated about the service to consumers:

 In the process of demand stimulation, over promising


is made or service is misrepresented (something not
being conveyed).

 Service delivery and promotion gap occurs when


such over promising is made.
Gap 4: Service Promotion Gap…
 Lack of horizontal communication: problem of
over promising is likely to occur in those situations
when the people engaged in making promises are
different from the ones who actually deliver services.

 Propensity to over promise: competitive


pressures often drive firms to start over promising in
order to attract customers.

 This entraps firms into making high promise without


much regard for actual delivery.
Strategies to Improve Gap 4
 A firm can minimize this gap by undertaking strategic
initiatives that curtail tendency of over promising or
making wrong promises.
 The people responsible for external communication
must be sensitized of the actual service delivery
process and its realities.
 When a service company operates through multiple
outlets either through company owned or franchise
model,
 the policies and procedures affecting service delivery
need to be standardized.
Gap 5: The Service Quality Gap
 Discrepancy between expected service and perceived
service (by consumer):
 This gap occurs when customer’s perception of
delivered service is at variance from the expected
service.
 Sometimes, service provided may actually be of good
quality, but customer may perceive it to be the other
way.
 This may happen because of lack of competence in
the part of customer to correctly assess service
quality.
Gap 5: The Service Quality Gap…
 Eg: a physician may not prescribe many medicines to
patient because they do not need.

 But patient/customer may misperceive the physician


to be of poor quality.

 Such indirect measures are employed because patient


is not qualified to rightly judge the competence of the
doctor.
Strategies to Improve
Service Quality
 The task of meeting and exceeding customer
expectations is not simple.

 With the potential for so many gaps, mastering


service quality requires organization wide acceptance
and commitment to this goal.

 The firms that have mastered the art and science of


service quality have taken the abstraction out of the
quality construct and are able to measure and
manage quality quantitatively.
References
 Harsh V. Varma – Services Marketing – Text & Cases – 2nd Ed. –
Pearson
 K. Rama Mohana Rao. Services Marketing, 2013. – 2nd Ed. – Pearson
 Ramaswamy, Namakumari. Marketing Management – Indian Context.
Global Perspective. 2018. – 6th Ed. – SAGE
 Christopher Lovelock, JochenWirtz, Jayanta Chatterjee – Services
Marketing: People,Technology, Strategy – 8th Ed. – Pearson
 Marie J. Bitner, Valarie A. Zeithaml – Services Marketing – Tata
McGraw Hill
 Helen Woodruffe – Services Marketing – Longmen Group
 Adrian Payne – The Essence of Services Marketing – Prentice Hall
India.
MACFAST

Thank You…
Dr. Ajai Krishnan G

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