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Transcript of 39116824 Service Sector Management
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SERVICE SECTOR MANAGEMENT
WHAT IS SERVICES Services include all economic activities whose output is not a physical product or
construction, is generally consumed at the time it is produced and provides added value in forms (such
as convenience, timeliness, comfort or health). That is essentially intangible concerns of its first
purchaser. DIFFERENCES BETWEEN SERVICES AND CUSTOMER SERVICES A company like IBM offersrepair and maintenance service of equipment, consultancy, training services etc. These services may
include a tangible product like a report or train manual. Customer Services , however is the service
provided in support of a companys core product ike answering question , taking orders ,dealing with
billing issue , handling complaints etc Typically there is no charge for customer service is essential for
building customer relationship . Customer services are hence different from services provided for sale by
a company. Federal Express market and delivers services. It also provides a high level of customer
services. Its services are overnight package delivery, and logistics services. Its customer services include
well trained staff who can answer all question on telephone, on line tracking of parcels etc. CONCEPT OF
SERVICE MARKETING The perception of service marketing focuses on selling the services in the best
interest of users/customers. Marketing a service is meant marketing something intangible. It ismarketing a promise. It is more selling yourself. In the marketing of services, we go through a number of
problems directly or indirectly influencing the business index. The problems like market segmentation,
marketing information system, behavioural management are studied minutely which simplify the task of
formulating a sound mix for marketing, such as Product mix, Promotion mix, Price mix and the Place mix.
It is important to mention that we find People an important mix of marketing services. If we market
the services in a right direction, the available opportunities can be capitalized on optimally and also it
contributes substantially to the process of development. In view of the above, we observe the following
key points regarding the concept or perception of services marketing: It is a managerial process of
managing the services. It is an organized effort for providing a sound foundation for the development
of an organization.
It is a social process helping an organization to understand the emerging social problem and to take
part in the social transformation process to justify its existence in the society. SERVICE MANAGEMENT
Service Management is : 1) To understand the utility the customers rceicve by consuming or using the
service offering of the organization 2) To understand how the organization (personnel, technology,
physical resources, systems and customers)will b able to produce and deliver this utility 3) To
understand how the organization should be developed and managed so that the intended quality can be
achieved 4) To make the organization function so that this quality can be delivered on a continuous basis
GOODS SERVICE CONTINUUM As per Theodore Levit There is no such things as service industries. There
are some service industries whose service component are greater (or less) than those of other
industries. Everybody is in service. The point that Leavitt was trying to put across is that with almost
every tangible physical product an intangible service component is associated. Therefore everybody is in
service. He has further put that goods can be put into two categories
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Philip kotler suggests 4 categories 1) Pure tangible (salt) 2) Major tangible with minor intangibles (soap)
3) Minor tangible with major intangibles (consultancy) 4) Pure service (teaching)
The above diagram shows the Service goods continuum some goods being tangible dominant others
being service dominant. The fast food outlets has almost 50/50 of tangible and intangible parts i.e. in
this case both tangible factors such (food) and intangible such as (services) is important. That is thereason it come in the middle. In case of other products like salt there services wont play any important
role so it is more towards tangible and in case of teaching profession it is purely service dominated. We
never known about service with out experiencing and in this manner various goods fall in place
according to its category i.e. less service oriented or more service oriented.
** American Marketing association has defined services as activities, benefits or satisfactions, which
are offered for sale or provided in connection with sale o goods. This definition took a limited view of
services as it proposed that services are offered only in connection with sale of goods. ** Robert Judd
defined services as a market transaction by an enterprise or entrepreneur, where the object of market
transaction is other than the transfer of ownership of a tangible commodity This recognised three
broad areas of services The right to possess and use a product (rented goods service) The customs
creation, repair, or improvement of a product (owned goods service) No product elements but rather
experience or what might be termed as experiential possession (nongoods service) ** Blois defines
services, as a service is an activity offered for sale which yields benefits and satisfactions without
leading to physical change in the form of a good ** Kotler and Bloom defines services as an activity or
benefit that one party can offer to another that is essentially intangible and dos not result in the
ownership of any thing. Its production may not my not be tied up to a physical product. ** Gummesson
says, Services is something which can be bought and sold but which you cannot drop on your foot. **
According Gronross a service is an activity or series of activities of more or less intangible in nature that
normally, not necessarily, take place in interactions between the customer and the service employeesand/or physical resources or goods and/or system of the service provider, hich are provided as solution
to customer problems. From this it follows that Services are by and large activities, or a series of
activities rather than things As a result they are intangible They take place in interaction between the
customer and service provider which means that services are produced and consumed simultaneously
Customer has a role to play in the production process as services are provided in response to the
problems of customers as a solution. 1.8 Characteristics of Services and its Marketing Implications The
main Characteristics of Services are : Intangibility Inseparability Heterogeneity Perishability
Intangibility
Services are actions and hence they are intangible. Due to this it is not possible to stock services and
hence fluctuations in demand becomes difficult to manage. Hotels have same number of rooms all
through the year but the customers requiring the room are always varying with some months seeing
very few customers while other months seeing a rush of customers. Further services cannot be patented
and any new concept can be easily copied by competitors. These cannot be readily displayed or easily
communicated, and hence it will be difficult for the consumers to assess the quality. This also creates a
problem for what to include in advertisements and promotional materials. Further the actual cost of
unit service is difficult to determine and hence pricing becomes difficult. Inseparability Services are
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generally created or supplied simultaneously. They are inseparable. For e.g., the entertainment industry,
health experts and other professionals create and offer their service at the same given time. Services
and their providers are associated closely and thus, not separable. Donald Cowell states Goods are
produced, sold and then consumed whereas the services are sold and then produced and then
consumed. A service is produced when it is consumed eg. a dinning experience. Thus the customers are
present when the service is produced thus other customer play an important role in satisfaction. The
service producer also plays an important role in quality. Thus mass production is impossible, it is not
possible to get economy of scale by centralisation, operations has to be decentralised to deliver to the
consumer directly at convenient locations. A problem customer can result in disruption of service
production process creating a dissatisfaction forhimself, other customers and also to the service
producer. Heterogeneity As services are produced by humans, hence no two services can be identical.
Further no two customers are precisely alike and hence their experiences of the same service are
different. Even the same customer can be with different frame of mind at different times which results
in differing satisfactions from the same service at different times. Eg. A tax consultant may provide
different a service experience to two different customers on the same day depending upon their needs
and on whether the consultant is meeting the customer when he is fresh in the morning or tired at the
end of the day. Because of this ensuring a consistent quality becomes a challenging job. The quality
depends upon a number of factors like the customer, service provides, other customers (their presence
or even absence) etc., hence the service provider cannot know if the service is delivered in a manner
which has been originally planned and promoted. Sometimes services are provided by a third party
further increasing the heterogeneity.
Perishability Services cannot be stored, saved, resold or returned. A bad haircut cannot be returned or
resold to another customer. Hence demand forecasting and creative planning to meet the demand is a
problem. Further one has to be right the first time or if things go wrong one should have strong recovery
strategies to retain the customer goodwill. Due to these characteristics of services the marketeers face amajor challenge in marketing of Services.
REASONS FOR THE GROWTH OF SERVICE INDUSTRY
It is obvious that the growth in the services sector has been substantive. The reasons for this growth
are quite a few, some of which are summarized as follows. Affluence: - The increase in per capita
income from Rupees 238.8 in 1950 to Rupees 11,934.5 in 1998 is an indicator of he increase in general
affluence has given rise to service like pest-control, personal security, interior designer, etc. Leisure
time: - People do get some time to travel and holiday and therefore there is a need for travel agencies,resorts, hotels, and entertainment. There are others who would like to utilize this time to improve their
career prospects and therefore there is a need for adult education/distance learning/part time courses.
Life expectancy: - The health programmed have significantly contributed to an increase in life
expectancy given rise to services like old age homes, nursing homes, health care, etc. Working wives: -
As more and more women have started working, the need for day care for children has increased, and
so is the care with packed food and home delivery. Product complexity: - A large no. of products are
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now being purchased in households which can be serviced only by specialized persons like water
purifies, micro wave ovens, home computers, etc. giving rise to the need for services like after sales
service agents for durables, maintenance service providers, etc. Life complexity: - As the daily routine
gets busier, individuals find it difficult to manage things on their own. Their leads to an obvious need for
tax consultants, legal advisors, property advisers, etc. Resource scarcity and ecology: - As the natural
resources are depleting and need for conservation is increasing, we have seen the coming up of service
providers like pollution control agencies, car, pools, water management, etc.
New products: - the development in information technology has given rise to services like PCOs, Pager
service providers, Web Shoppe, etc
CONTRIBUTION OF SERVICE INDUSTRY TO INDIAN ECONOMY AND WORLD ECONOMY WORLD SCENARIO
as economy shifts from developing to developed stage, they will show more and more shift toward
services today, the fastest growing segments of the US economy is services in 1948 54% of the
GDP of US was generated by services which is 80% now employment in this sector which was 55% in
1950 is now 83% the US balance of trade in goods has remained in the red for many years, but there
has been a trade surplus in services today service sector dominates the economics of many
developed nations. As countries develop the role of agriculture in the economy declines and that of
services increase.(china has 50% GDP from service, 35% from industry, and 15%from agriculture)
during recession it has been seen that service output declines less than industrial output the service
employment is less sensitive to business cycle fluctuation globalisation as strategy for service firm is
becoming more important INDIAN SCENARIO The service sector now accounts for more than half of
India's GDP: 51.16 per cent in 1998-99. This sector has gained at the expense of both the agricultural
and industrial sectors through the 1990s. The rise in the service sector's share in GDP marks a structural
shift in the Indian economy and takes it closer to the fundamentals of a developed economy (in the
developed economies, the industrial and service sectors contribute a major share in GDP while
agriculture accounts for a relatively lower share). The service sector's share has grown from 43.69 per
cent in 1990-91 to 51.16 per cent in 1998-99. In contrast, the industrial sector's share in GDP has
declined from 25.38 per cent to 22.01 per cent in 1990-91 and 1998-99 respectively. The agricultural
sector's share has fallen from 30.93 per cent to 26.83 per cent in the respective years. Some
economists caution that if the service sector bypasses the industrial sector, economic growth can be
distorted. They say that service sector growth must be supported by proportionate growth of the
industrial sector, otherwise the service sector grown will not be sustainable. It is true that, in India, the
service sector's contribution in GDP has sharply risen and that of industry has fallen (as shown above).
But, it is equally true that the industrial sector too has grown, and
grown quite impressively through the 1990s (except in 1998-99). Three times between 1993-94 and
1998-99, industry surpassed the growth rate of GDP. Thus, the service sector has grown at a higher rate
than industry which too has grown more or less in tandem. The rise of the service sector therefore does
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not distort the economy. the share of agriculture sector to GDP has come down from 50% in 1960 to
24% service sector contribution to GDP is around 54% with an annual growth of 8% employment in
this sector is around 50% the response to liberation has been more in service sector, partly because
lower fixed investment requirements, example:- todays concept of banking technological advances
have made it possible for India to compete on global basis in areas like SOFTWARE, IT, HEALTH,
EDUCATION, etc., in addition lower wage structure has helped to develop CALL CENTREs, MEDICAL
TRANSCRIPTION, etc., from 1996 BSE has given a prominent place to service industry in its 30 share
index since no tax is imposed on agriculture sector, most of the tax came from manufacturing sector.
now services are being taxed service tax collection is to the tune of 5000 crore. 83% of this is
contributed by service sectors. 51% - Telecom, others are Insurance, AD agencies, Courier and stock
brokers. many export benefits like EPCG is now extended to the service sector. in last 25 years the
increase in employment in the organized sector is 57% while if only service sector is considered it is
70%(other than service sector it 41%) Indias service exports in1997 were 9.3 billion $ against its
merchandized exports of $32.2 billion. It is expected that service exports could a third of merchandize
exports now this will be well above the global average of ¼. It implies that India which has failed to catch
the bus in the exports of manufactures is among the early leaders of the developing world in the race
for service exports. Within the services sector, the share of trade, hotels and restaurants increased
from 12.52 per cent in 1990-91 to 15.68 per cent in 1998-99. The share of transport, storage and
communications has grown from 5.26 per cent to 7.61 per cent in the years under reference. The share
of construction has remained nearly the same during the period while that of financing, insurance, real
estate and business services has risen from 10.22 per cent to 11.44 per cent.
The fact that the service sector now accounts for more than half the GDP probably marks a watershed
in the evolution of the Indian economy.
UNDERSTANDING THE CONSUMER 1 KNOWLEDGE OF THE BUYER In buying decisions many times other
people also influence the decision. In services these roles are played by many persons. In purchase of
any service six distinct roles are played Initiator : The person who has a specific need and proposes to
buy a service Influencer : The person or group of persons whom the decision maker refers to or who
advice the decision maker. Gate Keeper : The person or organization or promotional material, which
act as filter on the range of services which enter the decision choice Decider : The person who makes
the buying decision Buyer : The person makes the actual purchaser User : The actual user. For
example if a sales executive wants to do a market tour .
His boss may be the initiator The travel agency may act as a Gatekeeper The finance department
may be the influencer The administrative department the buyer The executive the user. In this case
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the user may have no role in the buying process. Hence while targeting a customer the service provider
may have to influence other persons.
CONSUMER DECISION MAKING. The consumers decision to purchase or reject a product or service is
the moment of final truth for the marketer. It signifies the marketing strategy has been wise, insightful
and effective, whether it was poorly planned and missed the mark. Marketer are, therefore, interested
in the consumer decision-making process by which a consumer selects an alternative amongst the lot
available. The decision not to buy is also an alternative. A simple consumer decision-making model, ties
together the psychological, social and cultural concepts into an easily understood framework. The
decision model has three distinct sets of variables: 1. Input Variables, 2. Process Variables, 3. Output
Variables. Input Variables:Input variables are those variables which affect the decision making process
and include commercial marketing efforts as well as non-commercial influences from the consumers
socio-cultural environment. Decision Variables:The decision process variables are influenced by
consumers own psychological fields, which affect their recognition of a need, their prepurchase search
for information and their evaluation of alternatives. Output Variables:The output phase of the model
includes the actual purchase (either trial or repeat purchase) and post purchase evaluation. Both pre-
purchase and postpurchase evaluation feed back in the form of experience into the consumers
psychological field and serves to influence future decision processing. (On a holiday a customer may
change hotels in between his stay). Factors Influencing The Buying Behaviour Situational Factors :
Time, Stores atmosphere, Marketing Stimuli (the occasion) Personal Factors : Personality, life style,
Other demographic factors like age, gender, occupation etc. Social Factors : Culture, reference group,
family Psychological Factors : Perception, attitude, motivation
TEN SUCH QUALITIES EVALUATION OF WHICH INFLUENCE THE CONSUMERS SERVICES (Quality
Dimensions of Services) Consistency: - it involves consistency and reliability of performances and
dependability. It means that the firm performs the service right the first time. It also means that the firm
honours its promises especially in terms of accuracy in billing, record keeping and performing the service
at the designated time. Concern:-it is the willingness or responsiveness of employees to provide the
service. It involves timeliness of service or giving prompt service, calling the customer back quickly or
mailing the transaction slip immediately. Competence: - it means having the required skills and
knowledge to perform the service. It involves knowledge and skill of the contact personnel, knowledge
and skill of operating support personnel and research capability of the organization. E.g. securities
brokerage firm. Contact:- it involves approachability, access and ease of contact. It means that theservice is easily accessible by telephone; waiting time to receive the services is not extensive, convenient
hours of operation and convenient location of service facility. Courtesy:- it involves politeness, report,
consideration and friendliness of contact personnel. It includes consideration for the consumers
property. Clean and neat appearance of public contact personnel. E.g. no muddy shoes on the carpet,
proper telephone operators etc. Communication:- it means keeping consumers informed in a language
that they can understand and listen to them. It may mean that the company has to adjust its language
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for different consumers increasing the level of sophistication with a well educated consumer and
speaking simply and plainly with a novice. It involves explaining the service itself and how much the
service will cost explaining the trade-off between service and cost and assuring the customer that a
problem will be handled. Credibility: - it involves trustworthiness, believability, honesty. It involves
having the customers best interest at heart thus contributing to credibility, company name and
reputation, personal characteristics of the contact personnel and degree of hard sell involved in
interaction with the customer. Confidentiality: - the security and the freedom from risk or doubt,
involving physical safety, financial security or confidentiality. Customer knowledge: - it involves making
the effort to understand the customers needs, i.e. learning the customers specific requirements,
providing individualized attention and recognizing the regular customer. Tangibles: - it includes physical
evidence of the service, physical facilities, and appearance of personnel tools or equipments used to
provide the service, physical representations of the service such as a plastic credit card or a bank
statement and other customers in the service facility. THE SERVICE ENCOUNTERS (MOMENT OF
TRUTH.)
MOMENTS OF TRUTH From the customers point of view, the most vivid impression of service occurs inthe service encounter or Moment Of Truth, when the customer interacts with the service firm. This is
the foundation to Satisfaction of Service Quality it is where the promises are kept or broken. This
concept was put forth by Richard Norman, taking the metaphor from Bull Fighting. Most services are
results of social acts, which take place in direct contact between the customer and the service provider.
At this stage the Customer realises the perceived service quality. ENCOUNTER CASCADE Every Moment
of Truth is Important according to Scandinavian Airlines, each one of their 10 million customers come
in contact with 5 employees. Thus the airlines say there 50 million moments of truth each one is
managed well and They prove they are the BEST. However some encounters are more critical. The
encounter cascade refers to a series of encounters right from the time a customer comes to take the
service. The encounter cascade can be important as any encounter can be critical, as it determinescustomer satisfaction and loyalty. If its the first interaction of the customer then the initial interaction
will be the first impression. So, these interactions have to be given importance, as they are critical and
influences customers perception of the organization. Example: A customer calling for the repair service
may switch to some other company if he is put on hold for a long time or even treated rudely. Even if
the technical quality of that firm is superior, the firm may not get a chance to prove themselves in front
of the customer. When the customer has had many interactions with firm, each encounter will be
important as it will create a combined image of that firm. Many positive experiences will give an image
of High Quality and many negative experiences will represent a bad image. Combination of positive and
negative interactions will leave the customer confused about the Quality. It is suggested that not all
encounters are equally important in building longterm relations. For every organization, certain
encounters can act as a key to customer satisfaction. For example: for MARRIOT hotels, it is the early
encounters that are important. In a hospital context, a study of patients revealed that encounters with
the nursing staff were more important in predicting the customer satisfaction. As it is rightly said one
bad apple can ruin the whole basket of apples. The same applies in this too; one negative encounter
can drive the customer away, no matter how many encounters had taken place in the past. So a firm has
to give a lot of importance to such encounters. A customer who has been using a bank for nearly 15
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years is quite happy with the service. He has a huge deposit and many accounts. One fine morning,
when he comes out of the bank the watch man asks Rs. 10 for
parking charges of his car. He goes inside the bank and informs the clerk at the counter, who directs him
to the officer. The officer directs him to the Manager, who says he is helpless as this is a new policy of
the bank. The customer who was so happy with the bank services decides to close all his accounts Some encounters can be very Critical.
Among the service encounters a hotel customer experiences are checking in, being taken to the room by
a bell person, eating a restaurant meal etc as shown in the figure. It is in these encounters that the
customer receives an overall view of the organizations service quality and encounter contributes to
customer satisfaction and willingness to do business with the organization again. As for the company,
each encounter represents an opportunity to prove its potential as a quality service provider and to
increase customer loyalty. Some services have few service encounters and others have many. Mistakes
or problems that occur in the early levels of the service cascade can e critical because failure at one
point results in greater risk of dissatisfaction in the long run. MARRIOT Hotels learned this through their
extensive customer survey to determine what service element contributes to customer loyalty. They
found that 4 out of 5 factors came into play in the first 10 minutes of the guests stay. TYPES OF
ENCOUNTERS A service encounter occurs every time a customer interacts with the service organization.
There are three general types of encounters - remote encounters, phone encounters, and face to
face encounters. A customer
may experience any of these types of encounters, or a combination of all three in his or her relations
with a service firm.
Remote Encounter:Encounter can occur without any direct human contact is called as Remote
Encounters. Such as, when a customer interacts with a bank through the ATM system, or with Ticketron
through an automated ticketing machine, or with a mail-order service through automated dial-in
ordering. Remote encounters also occur when the firm sends its billing statements or communicates
others types of information to customers by mail. Although there is no direct human contact in these
remote encounters, each represents an opportunity for a firm to reinforce or establish perceptions in
the customer. In remote encounter the tangible evidence of the service and the quality of the technical
process and system become the primary bases for judging quality. EXAMPLE:Services are being delivered
through technology, particularly with the advent of Internet applications. Retail purchases, airline
ticketing, repair and maintenance troubleshooting, and package and shipment tracking are just a few
examples of services available via the Internet. All of these types of service encounters can be
considered remote encounters. Phone Encounters:In many organizations, the most frequent type of
encounter between a customer and the firm occurs over the telephone is called as phone encounter.
Almost all firms (whether goods manufacturers or service businesses) rely on phone encounters in the
form of customer-service, general inquiry, or order-taking functions. The judgment of quality in phone
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encounters is different from remote encounters because there is greater potential variability in the
interaction. Tone of voice, employee knowledge, and effectiveness/efficiency inhandling customer
issues become important criteria for judging quality in these encounters. Face-to Face Encounters:A
third type of encounter is the one that occurs between an employee and a customer in direct contact is
called as Face-to-Face Encounter. In a hotel, face to face encounters occurs between customers and
maintenance personnel, receptionist, bellboy, food and beverage servers and others. Determining and
understanding service equality issues in face to face context is the most complex of all. Both verbal
and non-verbal behaviours
are important determinants of quality, as are tangible cues such as employee dress and other symbols of
service (equipments, informational brochures, physical settings). In face to face encounters the
customer also play an important role in creating quality service for herself through her own behaviour
during the interaction. At Disney theme parks, face-to-face encounters occur between customer and
ticket-takers, maintenance personnel, actors in Disney character costumes, ride personnel, food and
beverage servers, and others. For a company such as, IBM, in a business-tobusiness setting direct
encounters occur between the business customers and salespeople, delivery personnel, maintenancerepresentatives, and professional consultants. Of all determining and understanding service quality
issues in face-to-face context is the most complex. Both verbal and non-verbal behaviours are important
determinants of quality, as are tangible cues such as employee dress and other symbols of service (e.g.,
equipment, informational brochures, and physical settings). In face to- face encounters the customer
also plays a role in creating quality service for herself through her own behaviour during the interaction.
SERVICE FAILURES AND RECOVERY SERVICE FAILURES Even with the Best organizations failures can just
happen they may be due to the service not available when promised, it may be delivered late or too
slowly (some times too fast ??), the outcome may be incorrect or poorly executed, or employees may be
rude or uncaring. All these types of failures bring about negative experiences. If left unfixed they can
result in customers leaving, telling others about the negative experiences or even challenging throughconsumer courts. Research has shown that resolving the problems effectively has a strong impact on the
customer satisfaction, loyalty, and bottom-line performance. Customers who experience service failures,
but are ultimately satisfied based on recovery efforts by the firm, will be more loyal. THE RECOVERY
PARADOX. It is suggested that customers who are dissatisfied, but experience a high level of excellent
service recovery, may be more satisfied and more likely to repurchase than are those who are satisfied
at the first place. For example:A hotel customer who arrives & finds there is no room available. In an
effort to recover, the front-desk person immediately upgrades this guest to a better room at the same
price. The customer is so thrilled with this compensation that he is extremely satisfied with this
experience, is even more impressed with the hotel than he was never before, and vows to be loyal into
future. The logical, but not very rational, conclusion is that companies should plan to disappoint
customers so they can recover &gain
even greater loyalty from them as a result. This idea is known to be as Recovery Paradox. The recovery
paradox is more complex than it seem. First of all it is expensive to fix mistakes and would appear
ridiculous to encourage service failure-as reliability is the most important aspect of service quality.
According to a research it is observed that a customer weight their recent experiences heavily in their
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decision to buy again. If the experience is negative, overall feelings about the company will decrease and
repurchase intentions will also reduce. If the recovery effort is absolutely superlative then the negative
impression can be overcome. Then there is a recent study which shows no support to recovery paradox.
It shows the overall satisfaction was consistently lower for those customers who had experienced a
service failure than for those who had experienced no failure, no matter what the recovery effort is. The
explanation for why no recovery paradox is suggested by the magnitude of the service failure in this
study it is-a three hour airplane flight delay. This type of failure may be too much to be overcome by any
recovery effort. Considering mixed opinions on if recovery paradox exists it is safe to say doing it right
the first time is the best and safest strategy. When a failure does occur then every effort at superior
recovery should be made. In cases where the failure can be fully overcome the failure is less critical, or
the recovery effort is clearly superlative, it may be possible to observe evidence of the recovery
paradox. HOW CUSTOMERS RESPOND TO SERVICE FALIURE If customers initiate action following service
failure, the action can be various types. A dissatisfied customer can choose complaint on the spot to the
service provider, giving the company the opportunity to respond immediately. Thos is often the best-
case scenario for the company it has the second chance right at that movement to satisfy the customer,
keep his or her business in the future, and potentially avoids any negative word of mouth. Some
customer chooses not to complaint directly to the provider but rather spread negative word of the
mouth about the company to friend, relatives, and coworkers. This negative word of mouth can be
extremely detrimental because it can reinforce the customers feeling of negativism and spread that
negative impression to other as well. Further, the company has no chance to recover unless the negative
word of mouth is accompanied by a complaint directly to the company. When there is a failure,
customer can respond in a variety of ways as illustrated in the figure. It is assumed that following are the
failure, dissatisfaction at some levels will occur for the customer. In fact, research suggest that variety of
negative emotion can occur following service failure, including such feeling as anger, discontent,
disappointment, self- pity and anxiety. Many customers are very passive about their dissatisfaction,
simply
1saying or doing nothing, take action or not, at some point the customer will decide weather to stay
with that provider or switch to a competitor.
When the company fails to stand for its promises made to the customer on the basis they build
expectation, its to be said that there is service failure. When the service failure occurs, there can be
again severe ramification. Customer is considered to be the bread and butter, hence retaining them is
the biggest challenge, and however service failure acts as an obstacle to it. In such failures, 1) 2) 3) 4)
The customer wants what they were promised. Customer wants personal attention Customer wants a
decent apology Customers want that they should not be made to feel that they are the cause of the
problem. (Though in many cases they are responsible for nuisance)
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There are again five steps involved in order to deal with service failure. They are mentioned as below 1st
step: Acknowledgement and apology for the fact. 2nd step: Listening to the customers. 3rd step: Avoid
defending the company and offer a rational explanation. 4th step: Offer some extra benefits 5th step:
Have a proper follow up and make sure no mistakes this time, so that he can easily forget about the
service failure and is retained.
A customer expects 3 shorts of fairness in case of service recovery. They are mentioned as below. 1.
Interaction fairness: - when there is service failure, first the company is supposed to acknowledge the
customer. Due to this the customer might turn erate, but he still expects fairness and courtesy in the
language and tone used by the addresser 2. Procedure fairness: - to know in detail about the incidence
of service failure or to avail the compensation. There should be simplicity in procedure, which is
involved. Service failure and complexity in procedure both together might result in a disaster as far as
customer is concern. 3. Outcome fairness: - now when the company realizes that there is service failure
they should end up compensating, arranging for some alternative mode of transporting or complies with
the customer condition. The outcome should be taken by considering the customer, his needs and the
companys policy. ACTION PLAN TO SOLVE THE PROBLEM : Handling complaints is a big challenge forevery company today. Before understanding how to handle, let us see what are the factors, which can
result in customers complaints. There are ten steps involved in handling such airline flights delayed
departure complaints effectively. They are mentioned below. 1) The frontline employee handling
complaints should stay calm under any circumstances. 2) Let the customer get the story off their chest-
do not interrupt, this will only cause irritation. In this case listening skills comes into picture. 3) Avoid
admitting any liability at this stage. The officer just need to show concern like, Im sorry for the
inconvenience, let me see what I can do. Give attention to the customer, make him feel important. 4)
Get facts by using question and try to find out the real and whole story behind it. 5) After listening and
collecting data, just identify appropriate action considering companys policy and customers
expectation. 6) Take action if you have authority or involve manager or concerned person. 7) If corrective action cannot be taken immediately, tell the customer. Its better to give bad news rather
giving false news. 8) Record the action to be taken and inform anyone else in the organization involved.
9) Look into the matter, provide a proper follow-up.
This ten approaches if followed effectively, complaints can be handled properly and possibly a customer
can be retained. (Solution is only for the taken example. i.e. delayed departures of flights). OTHER
SOLUTIONS Control costs, reduce waste Set productive capacity to match average demand
Automate labor tasks Upgrade equipment and systems Train employees Leverage less-skilled
employees through expert systems Change timing of customer demand Develop customer trust
Understand customers habits and expectations Pretest new procedures and equipment Publicizethe benefits Teach customers to use innovations and promote trial Monitor performance, continue
to seek improvements EIGHT COMPONENTS OF INTEGRATED SERVICE MANAGEMENT The Marketing
Mix (THE 5 Ps OF SERVICES MARKETING) In order for your business to sell its products and services as
successfully as possible, you need to look at what products you are selling in detail to ensure they will be
attractive and needed; the price to ensure it is not too cheap or too expensive; where you are best
distributing your product; and finally, how you can create interest and awareness for your products. All
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these elements need to be targeted at the right people at the right time. In order for your business to
tackle this correctly, you need to get the right type of mix (marketing mix), the mix should include four
main elements: Product, Price, Place and Promotion, by examining each and carefully and adapting
them to your customer's needs, you will continue to produce and needed products and services 1)
Product element: Managers must select the feature of both the core product (either a good or service)
and the bundle of supplementary service elements surrounding it, with reference to the benefit desired
by customers and how well competing products perform. In short, they must be attentive to all aspects
of the service performance that have the potential to create value for customers 2) Price and other user
costs: - This components addresses management of the expenditures and other outlays incurred by
customers in obtaining benefits from the service product. It is not only related to traditional pricing
tasks of establishing selling price to customers, setting trade margins and
getting credit terms but also, how to minimize other burdens of customers while purchasing such as
time, mental and physical efforts and unpleasant sensory experiences such as noises and smells. 3) Place
, cyberspace and Time:- Delivering product elements to customers involves decisions on the place and
time of delivery as well as on the methods and channels employed. Delivery may involve physical orelectronics distribution channels or both),depending on the nature of the service being provided. 4)
Promotion and education:- No marketing program can succeed without effective communications. This
component plays three vital roles: a)Providing needed information and advice (awareness).
b)Persuading target customers of the merits of a specific product. (Concentrating on a particular
segment of the market). c)Encouraging to take action at a specific time (purchase). Communication is
educational in nature for new customers. Communication can be delivered by individuals such as sales
people and trainers, media such as TV, radio, newspaper, magazines, postures, websites etc. This
promotion is usually used as incentives to catch customers attention and to motivate them to act. The
above four are the traditional marketing mix. The EXTENDED marketing mix for services marketing isas
follows : 5) People: - Many services depend on the direct, personal interaction between customers and afirms employees (such as getting a haircut or eating at a restaurant). This interaction strongly influences
the customer perception of service quality. So, successful service firm devote significant effort to
recruitment, training and motivating their personnel. 6) Physical evidence:- The appearance of buildings,
landscaping, vehicle, interior furnishing, equipment, staff members, signs, printed materials, and other
visible cues all provide tangible evidence of the firms service quality. The service firms need to manage
physical evidence carefully because it can have a profound impact on customers impression as the
service itself is intangible. A tangible element such as insurance and advertising is often employed to
create meaningful symbols. E.g.: - umbrella may symbolize protection and a fortress, security. 7)
Process: - It is the method and sequence of actions in which service operating system works. Badly
designed process: - annoys customers which leads to likelihood of service Failures. 8) Productivity and
quality: - Productivity relates to how inputs are transformed into outputs that are valued by customers.
Improving productivity keeps costs under control Quality refers to the degree to which a service satisfies
customers by meeting their needs, wants and expectations. Service quality helps in product
differentiation and building customer loyalty. Invest in quality
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profitably i.e. by considering incremental cost and incremental revenue. Thus, these are the 8ps of
service management, which are the essence of it. The integration of each ps is necessary for the
successful service management Collectively these are the tools organizations uses to develop offerings
to satisfy their target market(s) ... the only tools at their disposal. Remember: If your marketing mix
doesn't meet their needs they will not be satisfied - and if they aren't satisfied you are unlikely to meet
your objectives. The marketing mix should be viewed as an integrated and coordinated package of
benefits that reflect the characteristics of customers and various targeted publics and satisfy their
needs, wants, and expectations. Note that the elements of the marketing mix should be integrated
because each element of the mix usually has some impact, direct or indirect, on the other three. For
example, if you improve the product or service you probably have to change the price because it costs
more to produce. Although you may not have to change where the product is delivered to the customer,
you will almost certainly have to change the promotion or communication with the customer because
you need to tell the customer about the changes you have made in the product and how the changes
will make it more desirable and satisfying. One problem in many organizations is that different divisions
may be responsible for different elements of the marketing mix. This happens even in well-managed
organizations. The result is that the offering is confusing to the target market. Lack of communication
among divisions makes this problem worse. And if they don't share the same view of organizational
objectives, the problem is worse still. PRODUCT MIX Introduction Product includes name, design,
features, quality, operational case, packaging, warranties, appearance, range and size. It also includes
pre-sale and post-sale services like training, repairs, maintenance and replacements. According to Philip
Kotler a product is anything that can be offered to market for attention, acquisition use or consumption
that satisfy a want or need. It includes physical objects (TV), service (banking), person (political person),
place (holiday resort), organization (red cross) and idea (aid awareness). Conventionally, a product is an
object, which is delivered and consumed. However, in services there is no or very little tangible
elements. Hence, what is offered for sale is benefits. Service is a bundle of benefits and has relevance
for a specific target market. Hence, the package of benefits should have a customers perspective. Levels
of product: Kotler has identified 5 levels of a product 1) Core product
2) Basic product 3) Expected product 4) Augmented product 5) Potential product Kotler suggested that a
product should be viewed in three levels. 1. Level 1: Core Product. What is the core benefit your product
offers? This is the fundamental benefit or service that the customer is buying. For eg. A customer going
to a Hotel is buying rest, sleep etc. 2. Level 2 Basic Product: Basic functional attributes. All Hotels provide
rest and sleep. The aim is to ensure that your potential customers purchase your one service. Thus the
functional attributes like Room, Bed, Bath are important. 3. Level 3 : Expected product : Set of attributesthat the buyer expects (Clean room, large towels, quietness) 4. Level 4: Augmented product: What
additional non-tangible benefits can you offer? This meets the customers desires beyond his
expectations (Prompt room service, music, aroma etc) 5. Level 5 : Potential product : The possible
evolutions that can be made to make the product a distinguishedoffer (all suite room) In a Bank these
can be Core Product (Safety of deposits, Interest, Easy loans Basic product : Savings deposit, FD,
Recurring deposit Expected product : Correct transaction records, timely service, convenient timing
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Augmented product : Congenial waiting room, Water cooler Potential product : Greetings for New
Year, 24 hour banking The PACKAGE CONCEPT of Service product suggests that what you offer to the
market si a bundle of different services tangible and intangible. There is a core service and around it
are built the auxiliary or facilitator service. Without this the service would collapse (a bell boy in a Hotel).
Yet another service is the supporting service it is used to increase the product value (a car rental in a
hotel). The basic product is not equivalent to the service product which the customer perceives, which is
in fact based on customers experience and evaluation. Therefore there is a need for an augmented
product like Accessibility (number and skills of personnel, convenient timing, location, infrastructure
etc.,) Interaction with service organization (Between employees and customer, with physical and
technical resources, with other customers) Consumer participation.(how well the customer is aware
about the process of service delivery, his willingness to share information and use service equipments)
The package should also include the management of service image through encouraged word of mouth
and market communication.
Product Decisions When placing a product within a market many factors and decisions have to be taken
into consideration. These include: Consumer benefits assess what benefits the consumer looks for Service concept To translate it to suitable service offer Develop augmented offer BRANDING: One of
the most important decisions a marketing manager can make is about branding. The value of brands in
odays environment is phenomenal. Brands have the power of instant sales; they convey a message of
confidence, quality and reliability to their target market. Brands have to be managed well, as some
brands can be cash cows for organizations. In many organizations they are represented by brand
managers, who have huge resources to ensure their success within the market. A brand is a tool, which
is used by an organization to differentiate itself from competitors. Ask yourself what is the value of a
pair of Nike trainers without the brand or the logo? How does your perception change? Increasingly
brand managers are becoming annoyed by copycat strategies being employed by supermarket food
retail stores particular within the UK. Coca-Cola threatened legal action against UK retailer Simsburyafter introducing their Classic Cola, which displayed similar designs and fonts on their cans. Internet
branding is now becoming an essential part of the branding strategy game. Generic names like
Bank.com and Business.com have been sold for £ms. (Recently within the UK banking industry we have
seen the introduction of Internet banks such as cahoot.com and marbles.com the task by brand
managers is to insure that consumers understand that these brands are banks! Branding of Services and
its Importance Philip Kotlar defines a brand as a name, a term, a symbol, or a designed or a
combination of them which is intended to identify the goods and services of one seller or a group of
sellers and to differentiate them from those of competitors. Brand decision is important for tangible
goods. But in the case of service offering branding is still in its infancy, there importance is expected to
rise due to the following reason. 1. Service market is getting more competitive and there is as increasing
proliferation of brands in the service sector. 2. It is five times cheaper to retain customer than to attract
new ones. 3. As a new service development assumes greater importance, the risk of product launch is
reducing in the context of umbrella branding.
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4. As service itself does not offer unique tangible benefits, brand development tangibilises the service.
Customer gives more significance to the service provider than the individual service products that the
provideroffers. Therefore, this leads to branding the service providers cooperate image. Banks especially
have recognized the importance of corporate image and identity and have used slogans, logos and other
means to brand themselves. Ones the corporate brand is developed it is found that service firms move
with relative easy to other service product categories. Primarily companies resorts to corporate brand
building with a goal of maximizing market capitalization and creating shareholders wealth. In case of
service firms corporate branding reflects the service itself. Airlines, fastfood restaurants, banks,
professional firm are usually differentiated on the basis of their corporate name and reputation rather
than the specific service they offer. The service organization brand name is reinforce by courteous
employees, professional looking uniform, advertising etc. However no matter how good the corporate
brands may be the quality of service determines the success of the image. There are instance where the
service itself is branded. Example Suvidha Account of Citibank, the various schemes of LIC like Jeevan
Kishore, Jeevan Mitra etc. Advantages of branding services 1. To tangibilise the intangible. 2. To support
the positioning strategy. 3. Offers a powerful tool for relationship building. 4. To create an image of
quality and consistency. 5. To reduce price comparison. 6. Keeps current customers satisfied by
developing and sustaining a unique service advantage. 7. Encourages repeat usage using sales
promotions. PRICE MIX Introduction: This element of the marketing mix is related to the decision
influencing the fee structure, rate of interest, commission charged and paid by the service generating
organizations. It is considered to be the most critical component of the marketing mix. Both from
economic and social standpoint, the management of pricing is important but at the same time more
critical and challenging. We find pricing decisions important because the pricing decisions are to
influence the maintenance, development and expansion plans of an organization. Guidelines for service
pricing: 1) Pricing strategy should enable handling demand fluctuations successfully. As services cannot
be inventoried, pricing should encourage customers to use the service during period of low demand.
2) As services need to have some tangible element attached to it, service pricing should be based on
costs so as to take into account the tangible clues. 3) Service price as an indicator of quality: Services not
having specific brand names to indicate quality, customers use price as an indicator of quality. This in
particular in some cases, where the price variation is too much with in a particular class of service (e.g.
Tour operators). Also, where the risk associated with the service is high (e.g. Heart surgery). Price is
taken as an indicator of quality. Thus pricing too low can give wrong signals and pricing too high can set
expectations that the firm may find it difficult to match in service delivery. Because goods are
dominated by search qualities. Price is normally not used to judge quality. 4) Pricing strategy shouldcope-up with the degree of competition operation with in certain geographic and time zone. E.g. Bus
operators will have to consider prices of train. It also includes the stage ofstrategic low pricing to attract
first time customers. Approaches to pricing services: The 3 approaches to pricing services are: 1) Cost-
based pricing 2) Competition-based pricing. 3) Demandbased pricing. 1) Cost-based pricing: In cost-
based pricing, a company determines expenses from raw materials and labor, adds amounts or
percentages for overhead and profit, and thereby arrives at the price. This method is widely used by
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industries such as utilities, contracting, wholesaling and advertising. The basic formula for cost-based
pricing is Price = Direct costs + Overhead costs + Profit margin Direct costs involve materials and labor
that are associated with the service, overhead costs are a share of fixed costs, and the profit margin is a
percentage of full costs (direct + overhead) Problems in cost-based pricing services: a) It is difficult to
define the units in which a service is purchased. Thus the concept of price or unit is vague. Thus many
services are sold in terms of input units rather than units of measured output. E.g. consultant, teacher
etc. b) Where a firm provides multiple services. The costs being a major component of employee time
are difficult to allocate. c) Service cost may not represent true value. For e.g. a darner charging same
price for a expensive suit and an ordinary pant. 2) Competition-based pricing: This approach focuses on
the prices charged by other firms in the same industry or market. Competition-based pricing does not
always imply charging the identical rate others charge but rather using others prices as an
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anchor for the firms price. This approach is used predominantly in two situations: (a) When services are
standard across providers, such as in the dry cleaning industry. (b) In oligopolies where there are a few
large service providers, such as in the airline. Problems in competition-based pricing: (a) Small firms may
charge too little and not make margins high enough to remain in business. (b) Heterogeneity of services
across and within providers makes this approach complicated. E.g. Banks charge different rates of
commission for drafts and other services. 3) Demand-based pricing: The first two approaches of pricing
are based on the company and its competitors rather than on customers. Neither approach takes into
consideration that customers may lack reference price, may be sensitive to nonmonetary prices and
may judge quality on the basis of price. All of these factors can and should be accounted for in a
companys pricing decisions. The third major approach to pricing, demand-based pricing, involves
setting prices consistent with customer perceptions of value: prices are based on what customers will
pay for the services provided. Problems in demand-based pricing: (a) There is an element of non-
monetary costs and benefits which must be considered while calculating perceived value. E.g. services
requiring time, inconvenience, psychological and search costs should be riced lower. It is difficult to
convert this non-monetary cost into monetary cost. (b) Information on service may be less available to
customer, making it difficult to assess the price. THE PLACE MIX. INTRODUCTION Another important
element of the marketing mix is place mix, which focuses our attention on the offering of services by the
providers to the ultimate users and the place of location for the service generating organizations. In
some of the cases we find that providers have no option but to locate the units/branches as per the
instructions of the apex body. Some of the essential features are taken into consideration such as easy
and convenient accessibility, safety or protection availability of the infrastructural facilities, attractive
and healthy surroundings or so. Due to the intangibility, services cannot be stored, transported and
inventoried. Hence the traditional channels of product marketing like wholesalers cannot be used. Eevn
retailing cannot be an independent activity. Similarly because of inseparability they have t be produced
and sold simultaneously. Due to this tehe channels of distribution are made very short. At the most
there can be one agent like in the case of insurance, travel agency, courier eye. The better thing is direct
selling. Agents when employed can have two types of functions either they market the services lke
travel
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agents, insurance agents etc, who market the tangible part of the service offering OR there can be
agents who are trained to provide the service Like a Shahnaz Hussain Beauty parlour. Further as there is
no actual transfer of ownership, the creation of time and place utility is very important. Hence proper
location to cover maximum cuxtomers becomes important. Banks often have extension counters or use
money collectors. Capacity Planning. It is not sufficient that we are interested only in managing our
present. It is much more significant that we keep our eyes open, minds active to know about the future
and continue to enrich our potentials to manage the future. The organizations not managing the future
fail in managing the demand and supply position, make it difficult to optimize the development of
marketing resources to cope with the changing requirements, make possible a contraction in their
resistance power and both on quantitative and qualitative fronts, we find them moving backward. By
capacity planning, our emphasis is on the management of strength. Capacity planning is known as
planning the capacity in the face of future. This throws light on both the aspects-first, the organizations
are supposed to know the demand position so that the potentials are enriched to increase the quantity
or capacity of generating the services and second, the organizations are also required to know about the
likes and dislikes, preferences, expectations, attitudes which make an advocacy in favor of technologies
to fulfill their expectations and this is not possible unless we think in favor capacity planning. The
strategic plan would make the ways for the mobilization of financial resources to cater to their
increasing requirements. We cant deny the fact that if an organization succeeds in maintaining the
process of profit generation, the financial health of that organization becomes so sound that the task of
satisfying the employees and investors is simplified considerably. If an organization is strong, the task of
facing the challenges and threats in the markets is simplified considerably. It is against this background
that strategic planning assumes a place of outstanding significance. When we talk about capacity
planning, our prime focus is on strategic planning since the process of enriching strength cant be made
possible within a couple of days. Capacity Scheduling. How much of what (service) will be needed to
achieve its pre-determined goals is an important consideration that makes an advocacy in favor of
capacity planning and scheduling. There are a number of critical variables requiring due consideration in
the process such as, goals of the service firm, availability of capital and the quality of human resources,
market segments served and the level of service quality aimed at. A detailed scheduling of
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man, materials, money and machines (four Ms) is essential for each element of the service mix.
PROMOTION MIX INTRODUCTION: The promotion mix is found instrumental in informing, sensing and
persuading the prospects or customers. The marketers bear the responsibility of using the different
components of promotion in such a way that the measures adopted for promoting the goods or services
are found productive. The promotion communicates to customers information on the other elements
of marketing mix, such as product, pricing and place. The advantage of product itself, details on the
place through which it is sold and details on the pricing are transmitted through promotion.
COMPONENTS OF THE PROMOTION MIX: 1) Advertising: Advertising is paid form of persuasive
promotion since it plays an effective role in informing and sensing the customers. The creativity is found
to be an essential aspect of advertising, which increases the importance of professional excellence in
making the advertising processes productive. 2) Publicity/public relations: All the organizations need to
develop and strengthen the public relation activities to promote their business. This component of
promotion is found effective though the organization dont make any payment for publicity. The most
important thing in the context of public relations is the instrumentality of executives in projecting a
positive image of the services offered. They should have the potentials to throw a positive imprint on
the prospects. It is also significant that they know the art of developing rapport with the media people.
3) Personal selling: The personal selling is found instrumental in promoting the business of service
generating organizations. Personal selling is a process of informing the customers besides persuading
them to purchase products being influenced by personal communication. It is just a process of
communication in which an individual exercises his or her personal potentials, tact, skill and ability to
influence the impulse of prospects and to transform them into customers. Personal selling is basically a
method of communication. It involves not only individual but the social behavior too; each of the person
in face-to-face contact, salesman and prospect influence the other. Thus we find personal selling a
personal communication, seller-buyer interaction, inter-personal communication and more so direct
selling. The following facts are observed regarding the personal selling: a) It is a direct personal relation
between the buyer and seller. b) It is an oral presentation in conservation. c) It is two-way
communication. d) It is personal and social behavior.
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e) It is an exercise for selling the goods and services. f) It is found more effective in the service
generating organizations. g) It is based on the professional excellence of an individual. h) It is an
important element of the promotion mix. 4) Sales promotion: Marketing activities other than personal
selling, advertising and publicity that stimulate customers and dealers effectively, such as display shows,
exhibitions, demonstrations and various non-recurrent selling efforts not in the ordinary routine are the
sales promotion measures. Sales promotional activities are devices aimed at reaching the consumer at
home or in his business establishment. The tools are generally in the form of samples, contest,
demonstrations and coupons. Sales promotion directed at consumers may be done with a view to
increase the products rate of use among existing customers or to attract new customers to the
companys product. Tools of sales promotion: a) Gift b) Contest c) Discount and commission d)
Entertainment e) Travel and tours f) Additional allowance g) Fairs and shows These are some of the tools
of sales promotion offered to both, the providers as well as the users. The motivesare increasing the
selling activities, touching the target, excelling the competition, increasing the market share, clearing the
old products to be declared absolute in the near future. 5) Word-of-mouth promotion: Much
communication about the performance of the service generating organizations actually takes place by
word-of-mouth information, which is also as word-of-mouth promotion. The word-of-mouth
recommendations the hidden sales force make the process of communication effective. The growing
sensitivity of the words and experiences of hidden sales force simplify the task of promoting the
business. The advertisements, sales promotion measures, the personal selling may of course be effective
but the word-of mouth recommendations are found acceptable in all the conditions by almost all the
prospects. 6) Telemarketing: Telemarketing is found instrumental in promoting the business. The
telemarketing helps in activating the process of advertisement in addition to its instrumentality in
increasing the sale. The service generating organizations in general and the banking, insurance,
transport, hotel, tourism organizations in particular have been found using telemarketing with the two-
fold objectives of selling and advertising. The instrumentality of telephones and televisions are found
effective in the process of promoting
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the business. The instrumentality of telemarketing in persuading the users is substantially influenced by
the quality of personnel supposed to discharge the responsibility. The telemarketing minimizes the
dependence of service generating organizations on the sales people since just a counter or a center
listed in the call numbers serves multi-dimensional purposes. PROMOTION OBJECTIVES 1) Develop
personal relation with client 2) Make a strong impression of competency, honesty and sincerity 3)
Should be able to use indirect selling techniques (create a derived demand mobile companies give free
sim card) 4) Manage to maintain a fine image by positive word of mouth 5) Packing and customization of
service offering TARGET AUDIENCE 1) Buyer (or user/influencer/gatekeeper) 2) Employees (discussed in
detail under people) PLANNING THE PROMOTION MIX 1) Advertisement should have positive effects on
contact personnel 2) It should be able to capitalise on word of mouth 3) It should provide tangible clues
to the customers 4) It should make the service offering easily understandable 5) It should promise only
what is possible to deliver 6) It should contribute to the continuity CONSUMER PROMOTION IN SERVICE
MARKETING 1) Sampling is less frequently used compared to Goods (Sampling gives consumer a free
trial though now becoming popular) 2) Gift premiums are frequently used to give an element of
tangibility 3) Price/quantity promotions can be used to get long term commitments from consumer
(frequent flyer programme or group booking in Hotels) 4) Use of coupons are less frequent (coupon with
straight price cut OR discount or fees waiver for one or more purchases with original purchase OR
Discounts on augmented products like a free wax polish with car wash) 5) Future discounts are less
frequent 6) Prize promotions are frequently used (prize for mobile bank use etc) GUIDELINES FOR
SELLING SERVICES 1) It is personal relationship rather than the service itself that results in satisfaction 2)
Buyers confidence in the sellers ability to deliver the results is important hence make a strong
impression of competency, sincerity, and honesty. 3) As what is sold is intangible indirect selling
techniques have to be adopted (Hotels selling tour programmes) 4) As word of mouth is important
building up a favourable is image is essential.
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5) A service provider sells services and not just a single service hence ability to customise the service
offering is important (Jain food in Air-lines Hotels etc) 6) Public relations becomes important
particularly in industries where advertisement cannot be used as a promotional tool like Hospital
industry. PEOPLE MIX INTRODUCTION The employees of an organization represent the organization in
the eyes of the customers. If they are not give proper training in representing the organization and its
goals the service efforts will fail. Hence the most important marketing strategy is to market the service
first to the organizations employees. There are two types of contact personnel HIGH CONTACT
PERSONNEL and LOW CONTACT PERSONNEL (eg .in a hospital a nurse is a high contact personnel and
ward boy may be a low contact personnel) In addition there can be a NON CONTACT PERSONNEL
SERVICE TRIANGLE
When company makes efforts to do external marketing, it should have strategies of Internal marketing.
External marketing is nothing but promises made,which needs to be fulfilled this needs internal
marketing enabling the comapany to keep up the promises made. Unless the employees are able and
willing to deliver, the servicepromises will fail. This will result in proper interaction of thecustomers with
the service providers which helps the organization to keep the promises (Interactive marketing)
EMPLOYEE SATISFACTION, CUSTOMER SATISFACTION, AND PROFITS There is concrete evidence thatsatisfied employees make more satisfied customers (and satisfied customers can, in turn, reinforce
employees sense of satisfaction in their jobs). Some have even gone so far as to suggest that unless
service employees are happy in their jobs, customer satisfaction will be difficult to achieve. The
underlying logic connecting employee satisfaction
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and loyalty to customer satisfaction and loyalty and ultimately profits is illustrated by the service profit
chain shown in the figure. The service profit chain suggest that there are critical linkages among internal
service quality; employee satisfaction; productivity; the value of services provided to the customers; and
ultimately customer satisfaction; retention and profits. Service profit chain researchers are careful to
point out that the model does not cause customer satisfaction; rather the two are interrelated and feed
ff each other. The model does imply that companies that exhibit high levels of success on the elements
of the model will be more successful and profitable than those who do not.
HUMAN RESOURCE STRATEGIES: Human resources decisions and strategies primary goal is to motivate
and enable employees to deliver customer-oriented promises successfully. The strategies presented
here are organized around four basic themes. To build a customer-oriented, service-minded workforce,
an organization must: 1) Hire the right people 2) Develop people to deliver service quality 3) Provide the
needed support systems 4) Retain the best people 1) Hire the right people: One of the best ways to
close gap 3 is to start with the right service delivery people from the beginning. This implies that
considerable attention should be focused on hiring and recruiting service personnel. a) Compete for the
best people: To get the best people, an organization needs to identify them and compete with other
organizations to hire them. The firm act as marketers in their pursuit of the best employees, just as they
use their marketing expertise to compete for customers. Thinking of recruiting as a marketing activity
results in addressing issues of market (employee) segmentation, product (job) design, and promotion of job availability in ways that attract potential longterm employees.
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b) Hire for service competencies and service inclination: Once potential have been identified,
organizations need to be conscientious in interviewing and screening to truly identify the best people
from the pool of candidates. It has been suggested that service employees need two complementary
capacities: they need both service competencies and service inclination. Service competencies are the
skills and knowledge necessary to do the job. Achieving particular degrees and certifications validates
competencies, such as attaining a doctor of law degree and passing the relevant state bar examinations
for lawyers. Service competencies may not be degree related, but may instead relate to basic
intelligence or physical requirements. c) Be the preferred employer: One way to attract the best people
is to be known as the preferred employer in a particular industry or in a particular location. Other
strategies that support a goal of being the preferred employer include providing extensive training,
career and advancement opportunities, excellent internal support and attractive incentives and offering
quality goods and services that employees a proud to be associated with. 2) Develop people to deliver
service quality: To grow and maintain a workforce that is customer oriented and focused on delivering
quality, an organization must develop its employees to deliver service quality. That is, once it has hired
the right employees, the organization must train and work with these individuals to ensure service
performance. a)Train for technical and interactive skills: To provide quality service, employees need
ongoing training in the necessary technical skills and knowledge and in process or interactive skills.
Examples of technical skills and knowledge are working with accountingsystems in hotels, cash machine
procedures in a retail store, underwriting procedures in an insurance company, and any operational
rules the company has for running its business. Most service organizations are quite conscious of and
relatively effective at training employees in technical skills. Companies are increasing their use of
information technology to train employees in the technical skills and knowledge needed on the job.
Service employees also need training in interactive skills that allow them to provide courteous, caring,
responsive, and empathetic service. b) Empower employees: Empowerment means giving employees
the desire, skills, tools, and authority to serve the customer. While the key to empowerment is giving
employees authority to make decisions on the customers behalf, authority alone is not enough.
Employees need the knowledge and tools to be able to make these decisions and theyneed incentives
that encourage them to make the right decisions. Organizations are well suited to empowerment
strategies to ones in which (1) the business strategy is one of differentiation and customization,
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2) customers are long-term relationship customers, (3) technology is nonroutine or complex, (4) the
business environment is unpredictable, and (5) managers and employees have high growth and social
needs and strong interpersonal skills. c) Promote teamwork: The nature of many service jobs suggests
that customer satisfaction will be enhanced when employees work as teams. Because service jobs are
frequently frustrating, demanding and challenging, a teamwork environment will help to alleviate some
of the stresses and strains. Employees who supported and that they have a team backing them up will
be better able to maintain enthusiasm and provide quality service. By promoting teamwork an
organization can enhance the employees abilities to deliver excellent service while the camaraderie and
support enhance their inclination to be excellent service providers. 3) Provide need support systems: To
be efficient and effective in their jobs, service workers require internal support systems that are aligned
with their need to be customer focused. Without customer-focused internal support and customer-
oriented systems, it is nearly impossible for employees to deliver quality service no matter how much
they want to. In examining customer service outcomes researchers found that internal support from
supervisors, teammates, and other departments as well as evaluations of technology used on the job
were all strongly related to employee satisfaction and ability to serve customers. a) Measure internal
service quality: One way to encourage supportive internal service relationships is to measure and
reward internal service. By first acknowledging that everyone in the organization has a customer and
then measuring customer perceptions of internal service quality, an organization can begin to develop
an internal quality culture. Internal customer service audits and internal service guarantees are two
strategies used to implement a culture of internal service quality. Through the audit, internal
organizations identify their customers, determine their needs, measure how well they are doing, and
make improvements. b) Provide supportive technology and equipment: When employees dont have the
right equipment, or their equipment fails, they can be easily frustrated in their desire to deliver quality
service. To do their jobs effectively and efficiently, service employees need the right equipment and
technology. having the right technology and equipment can extend into strategies regarding workplace
and workstation design. c) Develop service-oriented internal processes: To best support service
personnel in their delivery of quality service on the front line, an organizations internal processes
should be designed with customer value and customer satisfaction in mind. In other words, internal
procedures must support quality service performance. In many companies internal processes are driven
by bureaucratic rules, tradition, cost
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efficiencies, or the needs of internal employees. Providing service and customer oriented internal
processes can therefore imply a need for total redesign of systems. This kind of wholesale redesign of
systems and processes has become known as process reengineering. 4) Retain the best people: An
organization that hires the right people, trains and develops them to deliver service quality, and
provides the needed support must also work to retain the best ones. Employee turnover, especially
when the best service employees are the ones leaving, can be very detrimental to customer satisfaction,
employee morale, and overall service quality. Some firms spend lot of time attracting employees but
then tend to take them for granted, causing these good employees to search for job alternatives. a)
Include employees in the company vision: For employees to remain motivated and interested in sticking
with the organization and supporting its goals, they need to share an understanding of the
organizations vision. People who deliver service day in and day out need to understand how their work
fits into the big picture of the organization and its goals. b) Treat employees as customers: If employees
feel valued and their needs are taken care of, they are more likely to stay with the organization. Many
companies have adopted the idea that employees are also customers of the organization, and thus basic
marketing strategies can be directed at them. The products that the organization has to offer its
employees are a job and quality of work life. To determine whether the job and work life needs of
employees are being met, organizations conduct periodic internal marketing research to assess
employee satisfaction and needs. c) Measure and reward strong service performers: If a company wants
the strongest service performers to stay with the organization, it must reward and promote them. Often
the reward systems in organizations are not set up to reward service excellence. Reward systems may
value productivity, sales or some other dimension that can potentially work against good service.
Reward systems need to be linked to the organizations vision and to outcomes that are truly important.
6.6.5 IMPORTANCE OF EMPOWERING PEOPLE IN SERVICES An organization that emphasizes customer
service needs people at the frontline to do the service, to use discretions be concerned about the
customer, to take initiative to provide satisfaction through exceptional service. The person at the front
must fell empowered to do in the circumstances. Empowering cannot be done through a formal
delegation of authority. A person with authority may not exercise that authority, if he does not feel
empowered. Example A peon who takes responsibility to direct the fireman in a burning office to areas
housing the most important documents is acting without formal
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authority. He feels empowered to do so, meaning that feels a sense of dedication to the organization,
that he feels it is his duty to save the organization as much as possible , that he is doing the right thing .
Following are the importance of empowering the people in services:1) An empowered employee focuses
on results. He is not inhabitant by formalities of position , authorityor function . 2) He does not consider
himself bound by rules and procedure. 3) He believes that the organization expects him to be aware of
the ends to be achieved and to act in furtherance thereof. He sees constraints but not does not feel
prevented thereby , from what is to be done , instead he tries to overcome the constraints. 4) He
believes that the organization will not find fault with him for having one something new and nusual. On
the contrary, he believes that the organisation will applaud him for having done something that had to
be done. 5) He believes that he is expected to take the initiative and ensure that the customer needs are
met and thereby maintain and enhance the reputation of the organization. 6) He feels that he is
dedicating to satisfy the customer to upgrade organization reputation 7) An empowered employee may
be willing to challenge company policies at meetings with sensors. PHYSICAL EVIDENCE MIX THE
EVIDENCE OF SERVICE As services are intangible, the customers are searching for evidence of service in
every interaction they have with an organization. The figure depicts the three major categories of
evidence as experienced by the customer: people, process, and physical evidence. These categories
together represent the service and provide the evidence that tangibilizes the offering. The new mix
elements essentially are evidence of service in each moment of truth.
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All of these evidence elements, or a subset of them are present in every service encounter a customer
has with a service firm and are critically important in managing service encounter quality and creating
customer satisfaction. When a guest enters the hotel for a stay the first encounter of the guest is the
door attendant and frequently with receptionists at the reception. The quality of that encounter will be
judged by how the registration process works (How long is to wait? Is the registration system
computerized and accurate?) The actions and attitudes of the people (Is the receptionist courteous,
helpful, knowledgeable? Does she handle the enquiries fairly and efficiently?) and the physical evidence
of the service (is the awaiting area clean and comfortable). The three types of evidence may be
differentially important depending on the type of service encounter (remote, phone, face to face).
All these types will operate in face toface service encounters as in the one just described. PHYSICAL
EVIDENCE It is 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 service. It
includes all tangible representations of the service-such as brouchers, letter head, equipment etc. in
somecases the physical facilities where service
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is offered is important e.g., in a hotel the parking lot, surroundings are important. In other services such
as telecommunication the physical facilities may be irrelevant. In this case other tangibles like billing
statements become important. Physical evidence includes (A) Physical facilities (essentials and
peripherals) (B) Physical setting (appearance of premises) (C) Social setting (appearance of staff) The
decision on the physical evidence will differ in terms of customeremployee interaction. At one end is
self-service of customer without any interaction with employee (ATM) where physical facilities must be
to attract customer and user friendly. At other end employee performs without any interaction (mail
order business) here physical evidence is designed to promote operational efficiency. Between the two
extremes is a situation where both customer and employee interact. In this case physical evidence must
be planned to facilitate the activities of both. (E.g., Banks, Airlines). Certain service environments are
simple requiring very little space or equipment (ATM, Vending machine). They are called lean
environment. Others like hospitals, hotels are elaborate environment where proper planning is needed.
(a) Physical facilities: The potential customers form impression about the service organization on the
basis of physical evidence like building, furniture etc., Essential Evidence: They are dominant features
like building area, parking space, signboards. Peripheral Evidence: They are less dominant like admission
card, medical reports, etc. (b) Consist of service environment Ambient factors (light, colour,
temperature) Space (spatial layout and functionality- i.e., ability of equipment and furniture to
accomplish interactions) Decor and artefacts (c) Social setting: Employee uniform, appearance etc. of
service scape can influence customer expectation,satisfaction and other behavior. In shopping mall soft
music is played/crossroads had hired separate parking space. Bitner identifies Physical Facilities and
Environment as SERVICE SCAPES However too much decor may make customers feel that they are
paying for the expensive décor. Employees however feel that an investment in environments is an
indication of managements concern for their job satisfaction. Hence the challenge is to strike a balance.
MANAGING SERVICE QUALITY To compete successfully a firm must define how the customers perceive
the service quality and in what way the service quality is influenced. The quality
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can be of seen from two angles (1) Technical quality (What is delivered) (2) Functional quality (How it is
delivered). When a customer comes to the service provider he comes with some expected quality. When
he takes the service he experiences a service quality this is his perceived quality. PERCEIVED SERVICE
QUALITY Customer service is about perception. Perceptions are judgment of the consumers about the
actual service performance or delivery by a company. Since service are intangible, customers search for
the evidence of quality in every interaction they have with a service firm. The evidence of service that
are experience by the customer are people, process and physical evidence. People contact
employees, other customers or the customer himself. Dimensions reliability, assurance, empathy
and responsiveness. Process operational flow of activities. Dimensions reliability and promptness
of service. Physical evidence tangible aspect of service. Apart from these the corporate image of the
service provider as well as the service can also influence the perceived quality. While comparing the
expected and perceived service quality the following may be the outcome. 1). Perceive quality >
expected quality. Result = delighted customer. 2). Perceive quality = expected quality. Result = satisfied
customer. 3). Perceive quality < expected quality. Dissatisfied customer. A very important factor in
important service quality is to always keep promises and not guarantee which the firm cannot deliver
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ZONE OF TOLERANCE The services provided are varying between organizations, between employees and
even with in employees at different times. The extent to which the customers recognize and are willing
to accept this variation is called as zone of tolerance. If the service levels fall below this level, customers
will be frustrated. Different customers possess different zones of tolerance Zones of tolerance
vary for different dimensions fo service Zones of tolerance vary for first time and recovery service
QUALITY GAPS To manage the perceived quality of a service one has to match the expected service and
perceived service to each other so that consumer satisfaction is achieved. To keep the gap between
expected service minimal, two things are critical: The promises about how the service will perform
given by traditional marketing activities and communicated by word-of-mouth, must not be unrealistic
when compared to service received by the customer. Managers have to understand how the
technical and functional quality of a service is influenced and how the customers perceive these quality
dimensions. In order to develop greater understanding of the nature of service quality and how it is
achieved in an organization, A Gap Model Of Service Quality was developed. The model clearly
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indicated that the consumers quality perceptions are influenced by a series of five distinct gaps
occurring in the organizations, which are as follows: Gap1 (Marketing Information Gap) : Difference
between consumer expectations and management perceptions of consumer expectations arising due to
inadequate or inaccurate management understanding of customers service expectations Gap2
(Standard gaps) : Difference between management perceptions of consumer expectations and service
quality specifications arising due to Managements failure to develop performance specifications
reflecting customers expectations. Gap3 (Service Performance Gap) : Difference between service
quality specifications and the service actually delivered. Gap4 (Communication Gap) : Difference
between service delivery and what is communicated about the service to consumers resulting in
discrepancy between communications to customers describing the service and the service actually
delivered. Gap5: Difference between the perceived service and expected service. This gap depends on
the size and direction of the first four gaps associated with the delivery of service quality. These Gaps
develop due to the following reasons GAP 1 : Lack of adequate market research Lack of upward
communication between front line staff and Management Lack of interaction with the customers
Lack of segmentation to identify specific needs of the customers GAP 2 : Lack of commitment from
Management (they may perceive that customer expectations are unreasonable) Lack of Goal setting
Lack of resources GAP 3 : Ineffective recruitment Role ambiguity Lack of training/incentives
to perform to the staff Lack of training to customer on use of service and their roles Lack of pre-
testing when new procedures are introduced Lack of understanding of customer habits how they
prefer to consume a service (a customer may prefer a slow delivery of food in an exclusive restaurant
compared to an Udipi restaurant) GAP 4 : Exaggerated promises
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Ineffective communication Lack of Horizontal communications with in the organization
GAP 5 Too much of Gaps (1 to 4) To close the gaps the following things should be implemented: 1.
Develop customer trust through long-term strategy rather than a snipshot superficial programme. 2.
Understand customers habits on how they prefer to consume a service. eg., a customer wouldprefer
extended hours for a meal in a exclusive restaurant. 3. Pre-test new procedures and equipments before
introducing them. The failure of a productivity improvement programme is more damaging than
otherwise, e.g., when Indian Airlines introduced computerized reservation system to improve its service,
it found that at most places the system remained down most of the time. It created more confusion,
both among customers and employees, and proved to be countered productive. 4. Understand the
determinants of consumer behaviour in terms of their choice; by force or by any other external forces,
e.g., shopping behaviour is not even throughout the month. It changes between the first weeks to the
fourth week of the month; it changes between weekdays and weekends. 5. Teach consumers how to use
service innovationsmost people dont know how to go about treatment in government hospitals
there is a need to make people aware of how to go about from registration to appointment to check
up and treatment, in the same way as traffic routes at India Gate or Connaught Place are notified
through press and television before introducing them. 6. Promote the benefits and stimulate trial. The
success in innovation lies in encouraging trial by making the benefit obvious. 7. Monitor and evaluate
performance. One can learn from experiencegood or bad. As one goes along introducing changes,
corrective measures should also be taken simultaneously. These measures should be restricted to
redesign of facilities and procedures or extending to educating, communicating and promoting the
efforts.
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THE 5 DIMENSIONS OF SERVICE QUALITY ARE AS FOLLOWS On Which Customers Judge The Service
Quality Reliability: means the ability to perform the promised service dependably and accurately. In
other words reliability means that the company delivers on its promises promises about delivery,
service provisions, problem resolution, and pricing. For example, FedEx, this company effectively
communicates and delivers on the reliability dimension. Responsiveness: is the willingness to help
customers and provide prompt service. This dimension emphasizes on attentiveness and promptness in
dealing with customers request, questions, complaints and problems. Responsiveness also captures the
notion of flexibility and ability to customize the service to the customers needs. Assurance: is defined as
employees knowledge and courtesy and the ability of the firm and its employees to inspire trust and
confidence. This dimension is likely to be particularly important for service for services that the
customer perceives as involving high risk and / or about which they feel uncertain about their ability to
evaluate outcomes. For examples, banking, insurance, brokerage, etc. Empathy: is defined as carrying
individualized attention the firm provides its customers. The essence of empathy is conveying through
personalized or customized service, the customers are unique and special. Customers want to feel
understood by and important to that provide service to them. For example, personnel at small firm
know customers by name and build
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relationships that reflect their personal knowledge of customers requirements and preferences. When
such a small firm competes with large firms, the ability to be empathetic may give the small firm a clear
advantage. Tangible: tangibles are defined as the appearance of physical facilities, equipments,
personnel and communication materials. All of these provide physical representations or images of the
service that customers particularly new customers, will use to evaluate quality. Although tangibles are
used by Service Companys to enhance their image, provide continuity, and signal quality to consumers,
most company combine tangibles with another dimension to create a service quality strategy for the
firm. Examples of how customers judge the 5 dimensions of service quality: Car repair (consumers): 1.
Reliability: problem fixed the 1st time and ready when promised. 2. Responsiveness: accessible, no
waiting, respond to request. 3. Assurance: knowledgeable mechanics. 4. Empathy: acknowledges
customers by name, remembers previous problem and preferences. 5. Tangibles: repair facility, waiting
areas, uniform, and equipments. Airlines (consumers): 1. Reliability: flights to promise destination,
depart and arrives on time. 2. Responsiveness: prompt and speedy system of ticketing, in flight baggage
handling. 3. Assurance: trusted name, good safety records & competent employees. 4. Empathy:
understanding of special individual needs, anticipates consumer needs. 5. Tangibles: aircraft, ticketing
counters, uniforms, and baggage areas. Medical care (consumer): 1. Reliability: appointments are kept
on schedule diagnoses prove accurate. 2. Responsiveness: accessible, no waiting, willingness to listen. 3.
Assurance: knowledge, skills, credentials, and reputation. 4. Empathy: acknowledges patients as a
person, remembers previous problems, good listening, and patients. 5. Tangibles: waiting room, exam
rooms, and equipment, written materials. Architecture (business): 1. Reliability: delivers plans when
promised and within budget. 2. Responsiveness: returns, phone calls, adapt to change. 3. Assurance:
credential, reputation, and name of the community, knowledge and skills. 4. Empathy: understanding
clients industry acknowledges and adapts to specific clients needs, gets to know the client. 5. Tangibles:
office areas, report, plan themselves, billing statement, dress of the employees. Information processing
(internal):
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1. Reliability: provides needed information whenever requested. 2. Responsiveness: prompt response to
request not bureaucratic deals with problems promptly. 3. Assurance: knowledgeable staff, well
trained, credentials. 4. Empathy: knows internal customers as individuals and departmental needs. 5.
Tangibles: internal reports, office areas, and dress of employees. Internal brokerage (consumer and
business): 1. Reliability: provides correct information and executes customers requests accurately. 2.
Responsiveness: quick website with easy access and no down time. 3. Assurance: credible information
sources on the site, brand recognition credential apparent on site. 4. Empathy: ability to respond with
human interaction as needed. 5. Tangibles: appearance of the website and collateral.
BENCHMARKING OF SERVICES Benchmarking means measuring the performance of a business against
that of the competitors in order to establish best practice. Benchmarking is a part of process of
continuous improvement. Benchmarking can be applied at three levels: 1. Internal Benchmarking. 2.
Competitive Benchmarking. 3. Functional or Generic Benchmarking. Internal Benchmarking: Internal
Benchmarking is normally carried by large organization by way of comparison between operation units.
For e.g.. Super market chain might benchmark operations across stores, financial across branches,
different colleges under the same authority. But important thing is how performance is measured &this
is clear link to the strategy of organization. Competitive Benchmarking: At a second level competitive
Benchmarking can be used. This is probably the most frequently use where comparisons are made with
directly competitive organization. Customer participation is necessary because of which it will be easy toachieve in some service environments. For e.g: As a hotel owner, it is possible to sample the service to
competitor simply by posing the guest. Often however, this is done in informal manner. A comparative
impression gained of the service without examining the different facets in a structured way &
attempting to measure them. Functional or Generic Benchmarking: The third approach is Functional or
Generic Benchmarking, which compares specific functions such as distribution and after sale service. The
advantage
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here is that information is sometime easier to obtain than when comparison are being made with
competitors. Care has to be taken in selecting the dimension & sales to be used for performance
measuring and ensuring that due account is taken of all relevant factors.
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