PROVIDER GAP 3

Objective of the session

To discuss “Managing People for
Service Advantage”

ToDiscuss “Relationship
Marketing Using Social Web”

To Discuss “Distributing Services

through Physical and Electronic
Channels”
Provider Gap 3
Discrepancy between
development of customer driven
service standards and actual
service delivery

Not delivering to service

standards
Custome
r

Compan Service Delivery

y

Gap 3
Customer driven
Service designs and
standards
Provider Gap 3
Even when guidelines exist for
performing services well and treating
customers correctly, high-quality
service performance is not a certainty.
Standards must be backed by
appropriate resources (people,
systems and technology)
And also must be supported to be
effective – that is, employees must be
trained, motivated, measured and
compensated on the basis of
performance along those standards.
Provider Gap 3
Thus, even when standards
accurately reflect customers’
expectations, if the company fails
to provide support for them – if it
does not facilitate and encourage –
standards do no good.
Narrowing Gap 3, by ensuring that
all the resources needed to
achieve the standards are in place.
Provider Gap 3
Research and company experience
have identified many of the critical
inhibitors to delivering and
performing service well.
Issues related with Gap 3 are
◦ Role of employees
◦ Role of customers
◦ Intermediaries and electronic channels
for delivering services
◦ Managing demand and capacity
Issues with employees
Employees who do not understand
their roles they are to play in the
company

Employees who feel conflict between

customers and company management

The wrong employees, inadequate

technology, inappropriate
compensation and recognition, lack of
empowerment and teamwork.
Issues with employees
Allfactors related to HR function,
recruitment, training, motivation,
feedback, job design, motivation
and organizational structure.

To close provider gap 3, the

issues must be addressed across
functions (like HR and Marketing
both).
Issues with employees
Employees are considered to be
internal customers

Unless the company acknowledges

the importance of internal
customers, these internal
intermediaries may have different
goals, incentives and motives than
department developing the service.
Issues related with
Customers
Even if contact employees and internal
intermediaries are 100% consistent in
their service delivery, the
uncontrollable variable of the customer
can introduce heterogeneity in service
delivery.

Ifcustomers do not perform their roles

appropriately – e.g. fail to provide all
the information necessary to the
provider or neglect to read and follow
instructions – service quality is
jeopardized.
Issues related with
Customers
Ex.: Nightclubs or Dance Club:
Some guests drinks too much, are
rowdy, and interfere with the
service experiences of other guests
Airline Passengers: If flight get
cancelled, may start demanding
and even abusive. The behavior
affects the performance of service
providers, may also start
confrontations and competitions for
seat in next available plane.
Issues related with
Customers
Effective service organizations
acknowledge the role of customer
variability and develop strategies
to teach customers to perform
their roles appropriately.
Some companies develop
customer education and
communication programs to teach
customers to be good customers.
Issues associated with
Intermediaries
Intermediaries such as retailers,
franchisees, agents, and brokers etc.
Quality in service occurs in the human
interaction between customers and
service providers, control over the
service encounter by the company is
crucial, yet it is rarely fully possible.
Task become more difficult in the
presence of intermediaries who
represent them, interact with their
customers and yet not under direct
control.
Therefore, quality of service is dependent
on intermediaries performance
Customer evaluates company service
quality based on the execution of
franchisee.
Ex.:
◦ When a McDonald’s franchisee serves poor
food, the customer’s perception of the
company and all other McDonald’s franchisee
gets tarnished.
◦ When one Holiday Inn franchisee has
unsanitary conditions, it reflects on all others
and on the company
In case of B2B, subcontractors (such as
software makers and network
providers) become essential but
potentially problematic.
Problems increases with the
intermediaries if they embrace goals
and values that do not directly align
with the service organization.
As the services are increasingly offered
through electronic channels, challenges
and strategies for delivering services
through this is also very important.
Synchronizing Demand and
Capacity
Because services are perishable
and cannot be inventoried, service
company frequently faces
situations of over and under
demand.
Most companies relies on
operations strategies such as cross
training or varying the size of
employee pool to synchronize
supply and demand.
EMPLOYEES’ ROLES IN
SERVICE DELIVERY
IMPORTANCE OF SERVICE
EMPLOYEES
Importance of people in the
marketing of services is captured in
the people element of services
marketing mix
People
◦ All human actors who play a part in
service delivery and thus influence the
buyer’s perceptions, namely,
 Firm’s personnel
 Customer
 Other customers in service environment
IMPORTANCE OF SERVICE
EMPLOYEES
Focus on employees because
◦ They are the service
 Haircutting, physical trainers, child care,
counseling, legal service
◦ They are the organization in the customer’s
eyes
◦ They are marketers
 Cross function, cross selling etc.
Thus investing in the employee to
improve the service parallels making a
direct investment in the improvement
of a manufactured product.
 EMPLOYEE SATISFACTION,
CUSTOMER SATISFACTION AND
PROFITS
It is evident that satisfied employees
make for satisfied customers.

Employe
e
Employe Retention Customer
Internal External
e
service Service
satisfacti Satisfacti
quality Employe Value
on on
e
Productiv
ity
Revenue
Growth
Customer
SERVICE PROFIT Loyalty
Internal
CHAIN
service
quality
IMPORTANCE OF SERVICE
EMPLOYEES
Servicequality dimensions are driven
by Employee Behaviors
◦ Reliability
 Even in cases delivery through machine, back-
office employees are important for making
reliable service
◦ Responsiveness
 Personal willingness to help and promptness
◦ Assurance
 Ability to communicate their credibility and to
inspire trust and confidence… Main Hoon Na!!
◦ Empathy
 Caring, individualized attention
Strategies for closing gap
3
We are focusing on strategies for
ensuring that service promises can
be kept.
Often referred as Internal Marketing
Primary goal is to motivate and
enable employees to deliver
customer-oriented promises
successfully,
…an organization will move towards
closing gap 3
Strategies for closing gap
3
To build up a customer oriented,
service-minded workforce, an
organization must
◦ Hire the right people
◦ Develop people to deliver service quality
◦ Provide the needed support systems, and
◦ Retain the best people
Within each of these basic strategies
are a number of specific sub-
strategies for accomplishing the goal.
This is also called Human Resource
strategies for closing gap 3
Hire the Right People
Compete for the best people
◦ “Compete for talent market share”
Hire for service competencies and
service inclination
◦ Service competencies and service
inclinations
◦ Service inclinations
 Related with service quality dimensions
Be the preferred employer
◦ Employee part of family,
◦ Communicating to each employee that
you are very important
Develop people to Deliver
Service Quality
Train for technical and
interactive skills
◦ Once hired, it is very important
◦ Successful companies, invest heavily
Empower employees
◦ Giving employees the desire, skills,
tools, and authority to serve the
customer
Promote Teamwork
Provide Needed Support
Systems
 Measure internal service quality
◦ Employee as customer and then measure the
perception of internal service quality.
◦ Caution: People can sometimes get wrapped up
in meeting the needs of internal customers that
they forget their business to serve ultimate
customer!
◦ Xerox extensively use internal service quality
process

 Provide supportive technology and equipment

 Develop service oriented internal processes

Retain Best People
Include employees in the company’s
vision
◦ Employees need to share an understanding of
the organization’s vision
Treat employees as customers
◦ If employees feel valued and their needs are
taken care of, more likely to stay in the
organization
Measure and Reward strong service
performers
◦ To retain best people, company must reward
and promote them.
Service Culture
Corporate Culture - Service
Culture
◦ A culture where an appreciation for
good service exists, and where
giving good service to internal as
well as ultimate, external customers
is considered a natural way of life
and one of the most important
norms for everyone.
Levels of customer
participation across different
services
LOW: presence required during
the services
◦ Products are standardized
◦ Regardless of any individual purchase
◦ Payment may be only required
customer input
◦ Ex:
 Airline, Fast-food restaurant, Motel stay
 B2B: Uniform cleaning service, Pest
Control, maintenance job
Levels of customer
participation across different
services
MODERATE: Consumer inputs
required for service creation
◦ Client inputs customize a standard
service
◦ Customer inputs are necessary for an
adequate outcome, but service firm
provides the service
◦ Ex.
 Annual physical examination
 Full service restaurant
 B2B: Agency created advertisement
Levels of customer
participation across different
services
HIGH: Customer co-creates the
service product
◦ Active client participation guides the
customized service
◦ Service cannot be created apart from the
customer’s purchase and active
participation
◦ Customer inputs are mandatory and co
create the outcome
◦ Ex.
 Marriage counseling
 Personal training
 Weight reduction Program
 B2B: Management Consulting
Customers’ Roles
Major roles played by customers in
service delivery
◦ Customers as Productive Resources –
Partial Employees
 Customers’ inputs, quality of information
 Self service, self operated vending
machines, ATMs etc
◦ Customer as contributors to service
quality and satisfaction
 Effective customer participation
 Health care, education, personal fitness &
weight loss etc. where service outcome is
heavily dependent on customer
participation
Strategies for enhancing
customer participation
Overall goals of a customer
participation strategy will typically
be to increase productivity and
customer satisfaction while
simultaneously decreasing
uncertainty due to unpredictable
customer actions
Ultimate form of customer
participation is self-service, often
facilitated by technology
Strategies for enhancing
customer participation
 Define Customers’ Job
Organization first determines what type of
participation it wants from customers, thus
beginning to define the customers’ job
Customers’ role may be predetermined by
level of involvement
Alternatively, organization may want to
increase or decrease the level of
participation.
◦ Ex. In healthcare, researchers and providers are
working on ways to gain more active customer
participation in treatment decisions
◦ Ex. Mail Order through internet: Customers are
in contact with organization only through phone
and mails.
Define Customers’ Job
Customers’ “job description” will vary
with the type of service and the
organization’s desired position within
its industry
Customers’ Job:
◦ Helping himself: Self service
◦ Helping Others: 2nd yr. students to 1st yr
students; Introduction for opening bank’s
accounts
◦ Promoting the company: WOM,
recommendation
Recruit, Educate and Reward
Customers
Recruit:
◦ Before the company begins the process
of educating and socializing customers
for their roles, it must attract right
customers to fill those roles.
◦ The organization should seek to attract
customers who will be comfortable with
the roles.
Educate and Train customers to
perform effectively
◦ Customer education program.
◦ Through literature and books
 Ex. Stock Exchanges on how to invest.
Recruit, Educate and Reward
Customers
Reward
◦ Customers are more likely to perform
their roles effectively if they are
rewarded for doing so.
◦ Rewards are likely to come in the form
of increased control over the delivery
process, time savings, monetary
savings, and psychological or physical
benefits.
 ATMs customers enjoys access to their
accounts 24x7 at various places
 Patients with better and faster recovery
Manage the Customer Mix
 Because customers frequently interact with
each other in the process of service delivery
and consumption, another important strategic
objective is the effective management of mix of
customers who simultaneously experience the
service.
◦ Ex. Restaurant: Smokers/ Non-smokers/ Veg./ Non-
Veg./ Bar/ Family

 Compatibility Management: A process of

attracting homogeneous consumers to the
service environment, then actively managing
both the physical environment and customer-to-
customer encounters in such a way as to
enhance satisfying encounters and minimize
dissatisfying encounters.
 DELIVERING SERVICE
THROUGH
INTERMEDIARIES AND
ELECTRONIC CHANNELS
Education - Expanding
Market
BA or MBA or any other type of degree,
you are probably doing it the traditional
way… in a classroom with a professor in
the premises.
But More than half of US colleges and
also various reputed institutions in India
are offering “virtual courses”.
Distance learning with rich interactive
environment with multimedia including
slides, video, text, e-mail, chat rooms,
and two-way communication.
Changing from place centered to
“education where you need it”!
Service Intermediaries
Two service marketers are involved in
delivering service through
intermediaries:
◦ The Service Principal or originator
 The entity that creates the service concept (whose
counterpart is the manufacturer of physical
goods).

◦ The Service Deliverer or Intermediary

 The entity that interacts with the customer in the
actual execution of the service (whose counterpart
is the distributor or wholesaler of physical goods).
Service Intermediaries
Channels for services are almost
always direct, if not to the customer
then to the intermediary that sells to
the customer.
Many services are distributed directly
from provider to customer.
Company owned channels:
◦ Bear all financial risk
◦ Large companies less experts in local
markets, unaware of local market
adjustments specially when expanding to
other cultures and other countries.
Key problems with
Intermediaries
Conflict over objectives and
performance
Conflict over costs and rewards
Difficulty controlling quality and
consistency across outlets
Tension between empowerment
and control
Role ambiguity
Key Intermediaries for
Service delivery
 Franchisees
◦ Service outlets licensed by a principal to deliver
a unique service concept it has created or
popularized.
◦ Ex. CCD, McDonald’s, Pizza Hut, Nokia Service
Center, Apollo Clinic etc.
 Agents and Brokers
◦ Representatives who distribute and sell the
services of one or more service suppliers.
◦ Ex. Financial services agents/ Insurance, Travel
Agents
 Electronic Channels
◦ All form of service provision through television,
telephone, interactive media, and computers
Benefits and challenges for
franchisee
Benefits:
◦ Leverages the business format to gain
expansion
◦ Maintains consistency in outlets
◦ Gains knowledge of local market
◦ Shares financial risk and frees up capital
Challenges:
◦ Difficulty in maintaining and motivating
◦ Disputes and conflicts
◦ Possibility of inconsistent quality,
undermining the company name
◦ Control of customer relationship by
intermediary
Benefits and Challenges :
Agents and Brokers
Benefits
◦ Reduced selling and distribution costs
◦ Intermediary’s possession of special
skills and knowledge
◦ Wide representation
◦ Knowledge of local markets
◦ Customer choice
Challenges
◦ Loss of control over pricing and other
aspects of marketing
◦ Representation of multiple service
principals
Electronic Channels: Benefits
& Challenges
 Benefits
◦ Consistent delivery for standardized service
◦ Low cost
◦ Customer convenience (24x7, anywhere-anytime
etc.)
◦ Wide distribution
◦ Customer choice and ability to customize
◦ Quick customer feedback
 Challenges
◦ Customers are active, not passive
◦ Lack of control of the electronic environment
◦ Price competition
◦ Requires changes in customer behavior
◦ Security concerns
◦ Inability to customize due to highly standardized
services
Strategies for effective
service through
intermediaries
 Control strategies
◦ Measurement
◦ Review
 Empowerment Strategies
◦ Help the Intermediary develop customer-
oriented service process
◦ Provide needed support systems
◦ Develop intermediaries to deliver service
quality
◦ Change to a cooperative management
structure
 Partnering strategies
◦ Alignment of goals
◦ Consultation and cooperation
Demand and Capacity
Management
Strategies for Matching
Capacity and Demand
There are two basic strategies:

◦ SHIFTING DEMAND TO MATCH

CAPACITY

◦ FLEXING CAPACITY TO MEET

DEMAND
Shifting Demand to Match
Capacity
When demand is too high
◦ Use signage to communicate busy days
and times
◦ Offer incentives to customers for usage
during nonpeak times
◦ Take care of loyal or “regular” customer
first
◦ Advertise peak usage times and benefits
of nonpeak use
◦ Charge full price for the service – no
discounts
Shifting Demand to Match
Capacity
When demand is too low
◦ Use sales and advertising to increase
business from current market
segments
◦ Modify the service offering to appeal
to new market segments
◦ Offer discounts or price reductions
◦ Modify hours of operation
◦ Bring the service to the customer
Flexing Capacity to Meet
Demand
When demand is too High
◦ Stretch time, labour, facilities and
equipment
◦ Cross-train employees
◦ Hire part-time employees
◦ Request overtime work from
employees
◦ Rent or share facilities
◦ Rent or share equipments
◦ Subcontract or outsource activities
Flexing Capacity to Meet
Demand
When demand too low
◦ Perform maintenance, renovations
◦ Schedule vacations
◦ Schedule employee training
◦ Lay off employees