Understanding Services

The Service Concept

Two definitions to put the concept of service
and the service industry in the right
perspective:

“There are no such things as Service industries.

There are only industries whose service
components are greater or less than those of
other industries. Everybody is in Service.”

Theodore Levitt
The 4 Ps of Services Marketing

The 4 Ps of Services Marketing are :

“ People, People, People, People”

( Richard Dow)

Exaggerated ? Perhaps….

But the emphasis is rightly placed.

Why the concern with Service?

The rapid growth of service sectors all over the

world and the deregulation of many service
industries have lead researchers with an interest in
quality issues to the importance of acquiring more
understanding about service quality.
Reason for Interest

It is recognized that high quality service is

essential for firms that want to be successful in
their business.

It leads to :

 Customer loyalty
 Higher profitability
 Lower Cost.
 The Service Challenge

However, the existing knowledge about product

quality is insufficient to deal with service quality

This is because of the intangibility, heterogeneity

perishability and inseparability characteristics of
service industry outputs. Service quality is
recognized by a number of authors as both abstract
and elusive
Definition of Service

A service is any act or performance that one party can

offer to another that is essentially intangible and does
not result in the ownership of anything. Its production
may or may not be tied to a physical product.
Kinds of service
A pure tangible good- eg Soap or Tobacco

A tangible good plus services eg An automobile

with warranty and an instructions manual.

A major service with accompanying minor goods and

services –eg Railways, Airlines

A pure service such as a psychiatrist provides

Generalization not easy
Since there is such a wide variance in the goods – to –
service mix no generalization is easy. The difficulty is
compounded by services further varying according to:

Whether they are people or equipment based

Whether the client’s presence is required or not

( Brain surgery vs Car repair)
Whether they meet a personal or a business need – Eg
Physicians process personal and company clients
differently

Their objectives - Whether profit or non – profit

oriented.
All Service Marketing programmes
depend on 4 basic characteristics

Intangibility
Inseparability
Variability ( Heterogeneity)
Perishability

These constitute the challenge to the Services

Marketer
Intangibility
Services cannot be seen, smelled, tasted heard or felt
before they are brought. The Service Marketer’s task is
therefore to :

“Manage the evidence” or “tangibilize the intangible”.

Thus while a product marketer has to put his product

concept in words or give it an abstract image,a services
marketer has to do the reverse ie, concretize the
abstract.
Inseparabilty

Unlike products, services are typically produced and

consumed at the same time. They cannot be
inventorized.Provider- client interaction is a special
feature of Services Marketing.
Variability

Services are highly variable. Thus they depend on who

provides them and when and where they are provided.
Thus maintaining quality is a perennial challenge.
Perishability

A service cannot be stored. Service value exists only at

a particular time as in the case of a newspaper.
 
Elements of Services marketing

Service marketing owing to its complex nature

requires not only the 4 Ps of traditional external
marketing but also two other marketing thrusts,
namely internal marketing and interactive marketing.
Thus while external marketing addresses itself to the
task of the normal work of the company such as
pricing distribution and promoting the services of the
company

Internal marketing consists of training and motivating

its internal customers, namely its customer – contact
and supporting service personnel to work as a team
towards providing customer satisfaction
Thus the most important contribution the marketing
department can make is to be exceptionally clever in
getting everyone else in the organization to practice
marketing.
 Interactive marketing describes the employee’s skill in
handling customer contact. In services marketing the
service quality is inextricably wound up with the
service deliverer. Service Quality is judged not only
by technical quality but also by functional quality.
 
The Services Triangle
Task before Service Companies
The primary tasks before Service Companies in
addition to managing the intrinsic service
characteristics described earlier is :

1) Increasing competitive differentiation

2) Service Quality
3) Productivity.
 Services Require An Expanded
Marketing Mix

● Marketing can be viewed as:

A strategic and competitive thrust pursued by top management
A set of functional activities performed by line managers
A customer-driven orientation for the entire organization

● Marketing is the only function to bring operating revenues

into a business; all other functions are cost centers.
● The “7 Ps” of services marketing are needed to create viable
strategies for meeting customer needs profitably in a
competitive marketplace
 3 more Ps in the Service Industry Marketing Mix

Marketing has always being fond of Ps and

competitive differentiation in service delivery is no
different. It can be achieved by adding 3 more Ps to
the traditional 4.

 
People
All human actors who play a part in the
service delivery and thus influence the buyer’s
perspective :

The firm’s personnel

The customer
Other customers in the service environment
Physical Evidence

The environment in which the service is delivered and

where the firm and customer interact, and any tangible
components that facilitate performance or
communication of the service.
Process

The actual procedures, mechanisms and flow of

activities by which the service is delivered - the service
delivery and operating systems
 (Productivity and Quality)

Productivity and quality are 2 sides of the same coin.

The best strategies are those which improve productivity

and quality simultaneously

Advances in technology must be user friendly and deliver

benefits that customers will value
People
 Employees :

 Recruiting
 Training
 Motivation
 Rewards
 Teamwork

 Customers :

 Education
 Training
Physical Evidence
 Facility design
 Equipment
 Signage
 Employee dress

Other tangibles :
Reports
Business cards
Statements
Guarantees
Process
 Flow of activities :
 Standardized
 Customized

 Number of steps:
 Simple
 Complex

 Customer Involvement
 Services Pose Distinctive Marketing
Challenges

Marketing management tasks in the service sector differ from those in

the manufacturing sector.
The eight common differences are:
 Most service products cannot be inventoried
 Intangible elements usually dominate value creation
 Services are often difficult to visualize and understand
 Customers may be involved in co-production
 People may be part of the service experience
 Operational inputs and outputs tend to vary more widely
 The time factor often assumes great importance
 Distribution may take place through nonphysical channels
 Differences, Implications, and
Marketing-Related Tasks (1) (Table 1.1)
Difference Implications Marketing-Related Tasks

Most service products Customers may be Use pricing, promotion,

cannot be inventoried turned away reservations to smooth
demand; work with ops to
manage capacity
Intangible elements Harder to evaluate
Emphasize physical clues,
usually dominate service & distinguish employ metaphors and vivid
value creation from competitors images in advertising

Services are often Greater risk & Educate customers on

difficult to visualize & uncertainty perceived making good choices; offer
understand guarantees

Customers may be Interaction between Develop user-friendly

involved in co- customer & provider; equipment, facilities &
Production but poor task execution systems; train customers,
could affect satisfaction provide good support
 Differences, Implications, and
Marketing-Related Tasks (2) (Table 1.1)
Difference Implications Marketing-Related Tasks

People may be part of Behavior of service Recruit, train employees to

service experience personnel & customers reinforce service concept
can affect satisfaction Shape customer behavior

Operational inputs and Hard to maintain quality,

outputs tend to vary consistency, reliability

more widely Difficult to shield
customers from failures
Institute good service
Time factor often Time is money; recovery procedures
assumes great customers want service
importance at convenient times Find ways to compete on
speed of delivery; offer
Distribution may take Electronic channels or extended hours
place through voice telecommunications
nonphysical channels Create user-friendly,
secure websites and free
access by telephone
Service Quality

Better service quality can be obtained through a mix of

improving access, communication, competence,
courtesy, credibility, reliability, responsiveness,
security, tangibles, understanding the customer.
Excellence in Service

With respect to Service Quality various studies have

shown that excellently managed service companies
share a number of common practices
 1.     A Strategic concept

 2.     A History of Top Management Commitment

to Quality

 3.     The Setting of High Standards

 4.     Systems for measuring Service Performance

 5.     Systems for Satisfying Complaining

Customers.

 6.     Satisfying the Employees as well as the

Customers.
 Managing Productivity

1.   Have Service providers work harder , failing which

work more skillfully or work smarter, through better
training and selection procedures.

 2.     Increase quantity of service through surrendering

some quality This needs a very careful balance.

 3.     Industrialize the service by adding equipment and

standardizing production.
   
5. Design a more effective service.

6.Present customers with incentives to substitute their

own labour for company labour, such as self-service
counters
The Service Edge

In today’s world companies which succeed have

what is known as the service edge over the
competition. Such companies have succeeded in
creating Distinctive Service. It is important to
understand that creating anything is a willful
management act- an act of leadership.
What is it that successful companies do to achieve
customer delight ?
Window of Opportunity

According to psychiatrists Leonard and Natalie Zunin

“ there is a short moment in time, a 4 minute window
of opportunity” when satisfying human contacts will
be established or denied.

This threshold exists in commercial as well as private

affairs. it is as critical to customer satisfaction as it is
to friendships.
 Moment of truth

Jan Carlzon ,CEO of SAS exposited the concept of

managing the customer’s moments of truth- the
transactions the customer has with the organization.

“A moment of truth occurs any time the customer

comes in contact with some aspect of the
organization and uses that opportunity to judge the
quality of service the organization is providing.”
 Application of Moment of Truth

The first 15 second encounter between a passenger and

the frontline people, from ticket agent to flight attendant
sets the tone of the entire company in the mind of the
customer.

This for Carlzon is the moment of truth

Moments of truth are not all created
equal . Some have more impact than others. In a
particular hotel a survey was conducted about the
quality of service they had experienced with
reference to several previously identified moments
of truth.

The one moment of truth that cropped up as the

most important determinant for most as to whether
or not they would stay in the same hotel again was
customer encounters at the front desk.
To manage efficiently and effectively, therefore we
must have a way of deciding the pecking order of the
different identified moments of truth.

This is critical for the resource allocation process , the

trade-offs we make as we devise a service strategy and
design the delivery systems to implement it.
The Service Encounter
is the “moment of truth”
occurs any time the customer interacts with the firm
can potentially be critical in determining customer
satisfaction and loyalty
types of encounters:
remote encounters, phone encounters, face-to-face encounters
is an opportunity to:
build trust
reinforce quality
build brand identity
increase loyalty
A Service Encounter Cascade for a Hotel
Visit

Check-In

Bellboy Takes to Room

Restaurant Meal

Request Wake-Up Call

Checkout
A Service Encounter Cascade for an Industrial
Purchase

Sales Call

Delivery and Installation

Servicing

Ordering Supplies

Billing
Critical Service Encounters Research
GOAL:
understanding actual events and behaviors that cause
customer dis/satisfaction in service encounters
METHOD:
Critical Incident Technique
DATA:
stories from customers and employees
OUTPUT:
identification of themes underlying satisfaction and
dissatisfaction with service encounters
Sample Questions for Critical Incidents
Technique Study
Think of a time when, as a customer, you had a
particularly satisfying (dissatisfying) interaction with an
employee of ______________.

When did the incident happen?

What specific circumstances led up to this situation?

Exactly what was said and done?

What resulted that made you feel the interaction was

satisfying (dissatisfying)?
Common Themes in Critical
Service Encounters Research

Recovery: Adaptability:
employee response employee response
to service delivery to customer needs
system failure and requests

Coping: Spontaneity:
employee response unprompted and
to problem customers unsolicited employee
actions and attitudes
 Carlzon’s modus operandi
Carlzon arrived at SAS at a time of crisis. Jan Carlzon
took over at the the helm of SAS in 1981 following USD
30 million losses in 1979 and 1980.The Airline had an
international reputation for always being late.

A 1981 survey showed that SAS was ranked no. 14 of 17

airlines in Europe when it came to punctuality.
Furthermore, the company had a reputation for being a
very centralized organization, where decisions were hard
to come by to the detriment of the customers, the
shareholders and the staff.

He concluded that service and the frontline people who
delivered were the success levers. He shifted focus
from the plane as a physical asset to the customer.

Carlzon and his team mounted 147 service

improvement projects at a cost of about USD 50
million.
 What he actually did

He gave the service people the opportunity to provide the

service that they had always wanted to provide. He
smartened their uniforms, transferred autonomy to the
field and encouraged people not to take no for an answer.
 Twin mantras adopted
Empowerment of frontline people

Leadership honouring intuition, emotion and

showmanship.

The leader’s role being that of understanding and effecting

change. The leader to be a listener, communicator and
educator creating a secure working environment that
fosters flexibility and innovation
 Brass tacks employed
The leader’s tools are a clear .concise vision and
consummate leadership skills – with soul.

Loyalty to the vision, not the details of execution, is a

must. People shine only if the demands are sky high.

Part and parcel is rigorous, honest measurement.

Tough, visible goals, aimed at serving the customer and

measured so as to engender unit versus unit competition
 Jan Carlzon Sayings

Everyone needs to know and feel that he is needed

Everyone wants to be treated as an individual

Giving someone the freedom to take responsibility

releases resources that would otherwise remain concealed

An individual without information cannot take

responsibility ; an individual who is given information
cannot help but take responsibility
 The Result

After one year of Jan Carlzon’s taking took over SAS the
sick airline’s punctuality became the best in Europe

SAS returned to profitability in just a year while other

international airlines tallied a record USD 2 billion loss
 Five specific operating principles

Five specific operating principles for

building and managing extraordinary
levels of customer satisfaction and
loyalty or what we call customer
delight are :
   
 1. Listening, understanding and responding to Customers –
often in unique and creative ways – to the evolving needs
and constantly shifting expectations of their customers

 2.    Defining Superior Service and communicating that vision

to employees at every level and ensuring that service
quality strategy is personally and positively important to
all in the organization.

 3.     Setting concrete Standards of Service quality and

regularly measuring Performance against 100 %
performance goal.

 4.     Selecting, training extensively in areas of knowledge and

skills to achieve service standards and empowering
Employees to work for the Customer

 5.     Recognizing and rewarding Service Accomplishment s, either

individually or of groups, in particular ,celebrating the success
of employees who go the extra mile for their customers
 The Servqual Model
The most eminent instrument in attempting to systematize
the service quality is“ The gap model ”of service or
Servqual developed by Parshuraman et al (1985).

This conceptual framework was developed initially to

measure customer perception of service quality for the
financial service sectors but later extended to sectors such
as hospitality, , telecommunications and healthcare.
The Basis of the Servqual Model 

The Gaps
The Key Service Dimensions
Causes & Solutions to Gaps
Purposes of SERVQUAL

To determine average gap score ( between customer’s

perceptions and expectations) for each service attribute.

To assess a company’s service quality along each of the

5 SERVQUAL dimensions

To track customer’s expectations and perceptions over

time
To compare a company’s SERVQUAL scores against
competitors

To identify and examine customer segments that differ

significantly in their assessment of a company’s service
performance

To assess internal service quality (interdepartmental

comparison)
 
The Five Key Service Dimensions 

ASSURANCE - a combination of the following :

Competence - having the requisite skills and knowledge

Courtesy - politeness, respect, consideration and

friendliness of contact staff

Credibility - trustworthiness, believability and honesty of staff

Security - freedom from danger, risk or doubt

 
 
TANGIBLES - the appearance of physical

facilities, equipment, personnel and

information material

RELIABILITY - the ability to perform the

service accurately and dependably

RESPONSIVENESS - the willingness to help

customers and provide prompt service

 
 
 
 
 
 
 
 EMPATHY - a combination of the following:

Access (physical and social) - approachability and ease

contact

Communication - keeping customers informed in a

language they understand and really listening to them

Understanding the customer - making the effort to get to

know customers and their specific needs

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

ASSURANCE
 Employees who instill confidence in
customers
 Making customers feel safe in their
transactions
 Employees who are consistently courteous
 Employees who have the knowledge to
answer customer questions
The Gaps Model of Service Quality

“Service Marketing”, Valerie A.

Zeithaml & Mary Jo Bitner
 Gaps Model of Service Quality
 Customer Gap:

 difference between customer expectations and perceptions

CONTRIBUTED TOWARDS BY

 Provider Gap 1 (The Knowledge Gap):

 not knowing what customers expect

 Provider Gap 2 (The Service Design & Standards Gap):

 not having the right service designs and standards

 Provider Gap 3 (The Service Performance Gap):

 not delivering to service standards

 Provider Gap 4 (The Communication Gap):

 not matching performance to promises

Customer Gap
The Difference between Customer Perceptions &
Expectations

Customer
Expectations
Customer GAP

Perceived
Service

“Service Marketing”, Valerie A. Zeithaml & Mary Jo Bitner

The Customer Gap

The difference between what customers expect of a

service and what they actually receive

Customer Expectations are standards or reference

points that the customers bring into the service
experience.

Customer perceptions are subjective assessments of

actual service experiences
The sources of customer expectations are

Market – controlled factors such as pricing,

advertising, sales promises, as well as factors which
the marketer has limited ability to control such as
personal needs, word of mouth communications,
competitive offerings.

In a perfect world Expectations = Perceptions

Provider Gap 1
Not Knowing What Customers Expect
Expected
CUSTOMER Service

GAP 1

Company
Perceptions of
COMPANY Customer
Expectations
“Service Marketing”, Valerie A. Zeithaml & Mary Jo Bitner
Provider Gap 2
Not Selecting the Right Service Designs & Standards

CUSTOMER

Customer-Driven
COMPANY Service Designs &
Standards
GAP 2
Company
Perceptions of
Consumer
Expectations
“Service Marketing”, Valerie A. Zeithaml & Mary Jo Bitner
Provider Gap 3
Not Delivering to Service Standards
CUSTOMER

Service Delivery
COMPANY
GAP 3
Customer-Driven
Service Designs &
Standards

“Service Marketing”, Valerie A. Zeithaml & Mary Jo Bitner

Provider Gap 4
Not Matching Performance to Promises

CUSTOMER

GAP 4 External
Service Delivery Communications
COMPANY to Customers

“Service Marketing”, Valerie A. Zeithaml & Mary Jo Bitner

Gaps Model of Service Delivery
Expected
Customer Service
GAP Perceived
CUSTOMER
Service

GAP 4
COMPANY
Service Delivery External
GAP 3 Communications
Customer-Driven to Customers
GAP 1
Service Designs and
Standards
GAP 2
Company Perceptions of
Consumer Expectations
“Service Marketing”, Valerie A. Zeithaml & Mary Jo Bitner
Reasons for
gaps
 Reasons for gaps
GAP 1 - not knowing what customers expect

Lack of a marketing orientation

Inadequate upward communication (from contact staff to

management)

Too many levels of management

GAP 2 - the wrong service quality standards

Inadequate commitment to service quality

Lack of perception of feasibility - ‘it cannot be

done’

Inadequate task standardization

The absence of goal setting

 GAP 3 - the service performance gap

role ambiguity and role conflict - unsure of what your

responsibility is and how it fits with others
poor employee or technology fit - the wrong person or
system for the job
inappropriate supervisory control or lack of perceived
control - too much or too little control
lack of teamwork
GAP 4 - when promises made do not match actual
delivery  

inadequate horizontal communication - between

departments or services

a propensity to overpromise
 Servqual Data – How Useful is it ?

We can assess service quality from the customer’s

perspective

We can track customer expectations and perceptions

over time and the discrepancies between them

We can compare a set of Servqual scores against

those of competitors or best practice examples
 
 How useful is it ?

 We can compare the expectations and perceptions of

different customer groups - this is particularly useful
in the public sector

 We can assess the expectations and perceptions of

internal customers - eg other departments or services
we deal with.

 
 The Railway Scenario

 Allen and DiCesare considered that quality of service for

public transport industry contained two categories: user and
non-user categories. Under the user category, it consists of
speed, reliability, comfort, convenience, safety, special
services and innovations.
Passenger Service Quality & Passenger
Satisfaction
tangibles

reliability
expected service
responsiveness desired service
zone of
assurances tolerance
perceived
adequate
empathy service quality
service
perceived
convenience service
overall
passenger
comfort satisfaction

speed
Findings

Assurance, Responsiveness and Empathy had

significant effects on overall service quality.
Assurance was the dominant predictor of overall
customer satisfaction.
An important feature of the extended SERVQUAL
model is its diagnostic value in terms of zone of
tolerance and expectation management. It helps
managers to analysis the effectiveness of the service
quality and identify those problem areas that are
needed to be improved.
 The perceived quality rating relative to the minimum and
desired level of expected services help the managers to
develop their long-term and short-term strategy planning.

 The short term improvement plan may include those

aspects that are below the zone of tolerance.

 The long term improvement plan may be formulated by

referencing the relative position of the perceived quality
pointer within the zone of tolerance and by considering the
width of the zone of tolerance (Kettinger and Lee, 1997).
The narrower the zone, the more attention is needed.
In reality, it is unlikely to fulfil all the ideal
service quality requirements from the customers.

 Therefore it is necessary for the managers to

manage customer expectation by the adequacy
level of expectation so as to widen the zone of
tolerance (Kettinger and Lee, 1997).
 Finally, the zones of tolerance provide information
about what areas and attributes that are need to
improve but not how to improve them. Future research
on finding, examining and measuring the determinants
of expectation would add value in monitoring service
quality.
 
 Measuring electronic service quality on
websites

Parshuram, Zeithaml and Malhotra created a 22 item scale

called E- S-QUAL reflecting 4 key dimensions :
Efficiency ( Easy navigation, quick transactions,
website loads quickly)

System availability (site always available, it launches

right away, it is stable and doesn’t crash)

Fulfilment ( orders are delivered as promised, and

offerings are described truthfully)

Privacy ( information privacy is respected and

personal information is not shared wth other sites.)
Companies with a Service Edge

Better understand and affect service customer behavior

Create marketing messages that effectively highlight
service quality dimensions that consumers value
Achieve loyalty through greater attention to customer
feelings in service encounters
Develop innovative and profitable loyalty programs

Benefit from yield management and capacity

utilization techniques

Manage and motivate service marketers for maximum

customer and employee satisfaction

Learn how to interpret customer satisfaction measures

Successfully recover and learn from service failures

Importance of a Service Strategy
It functions as an internal focus of effort- a single
vision throughout the organization.

It is based on an understanding of a combination

of organizational values, customer expectations of
products and services, customer expectations of
the process of doing business with the company,
and an in-depth analysis of the strength and
weakness of the organization as it confronts the
threats and opportunities in the market place.
Service strategy

Is a non trivial statement of intent

Noticeably differentiates you from others
Has value in your customer’s eyes
Is deliverable by the Organization
Must answer three questions

What is our unique contribution?

To whom do we provide this service?
What key value do you want them to perceive about
us?
Service Strategy for BIMTECH
You are a part of the BIMTECH Management team.

Task A)

Present the service strategy you would like BIMTECH to

follow in the following format :

Our Service Strategy framework :

To provide ……( Our unique contribution ) to… …..

(customer/s) so that we are perceived by them as………

( Key value)
Task B)

On one slide broadly outline :

Your action plan for making this strategy a reality.