Meaning of Service, Characteristics of services, Classification of Services.Marketing mix of services, Customer involvement in services, building customer loyalty. GAP Model, Balancing demand & supply.

1. BBA203A34: SERVICEBBA203A34: SERVICE
MANAGEMENTMANAGEMENT
MR.T.SOMASUNDARAM
ASSISTANT PROFESSOR
DEPARTMENT OF MANAGEMENT STUIDES
KRISTU JAYANTI COLLEGE (AUTONOMOUS)
BENGALURU
Unit 1 – Introduction 1

2. UNIT 1: INTRODUCTIONUNIT 1: INTRODUCTION
Meaning of Service; Characteristics of
Services; Classification of Services;
Marketing mix of services; Customer
involvement in services; Building
customer loyalty; GAP model; Balancing
demand & capacity.
Unit 1 – Introduction 2

3. WHAT IS SERVICE?WHAT IS SERVICE?
“It is the part of the product or the full
product for which the customer is
willing to see value and pay for it”.
Unit 1 – Introduction 3

4. DEFINITION OF SERVICEDEFINITION OF SERVICE
Definition:
“Services are activities, benefits or satisfaction which
are offered for sale or provided in connection with the sale
of goods”.
- American Marketing Association
“A Service is an act or performance that one party
offers to another that is essentially intangible and doesn’t
result in the ownership of anything. It production may or
may not be tied to the physical product”.
- Philip Kotler
(E.g.) Transportation, Electricity, Hospital, etc.
Unit 1 – Introduction 4

5.  It is intangible
 Its doesn’t results in ownership
 It may or may not be attached with a
physical product
“There are no such thing as service
industries. There are only industries whose
service components are greater or less than
those of other industries. Everybody is in
service.”
- Theodore Levitt
SERVICESERVICE
Unit 1 – Introduction 5

6. SERVICES COULDSERVICES COULD
MEETMEET
 Personal needs – haircuts, tution, massage
parlours.
Business needs – courier services, office
cleaning services, delivering fresh flowers
Most products have a service components
They could be
Equipment based
People based – varying skill levels
Unit 1 – Introduction 6

7. SERVICES ARE DIFFERENTSERVICES ARE DIFFERENT
Goods Services Resulting Implications
Tangible Intangible Services can’t be inventoried.
Services can’t be displayed,
communicated.
Standardized Heterogeneous Each time experience differs.
Service quality depends on
many uncontrollable factors
Production
separate from
consumption
Simultaneous
production and
consumption
Customer participate in and
effect the transaction.
Mass production is difficult.
Non perishable Perishable Services can’t be returned,
resold or stored.
Right of
ownership
No Ownership Can’t be owned
Unit 1 – Introduction 7

8. SIZE OF SERVICE SECTORSIZE OF SERVICE SECTOR
 The Services sector contributes over two-third of GDP in
developed countries while it contributes over 40% in most
developing countries.
 Service sector covers a major area of finance, insurance,
transportation, public utilities, health care, trade, personal
services and so on.
 The following are the service sectors of Indian economy
that grown fasters than the economy;
* IT * Telecommunication
* ITES * Hotels & Restaurants
* Financial Services * Community Services
Unit 1 – Introduction 8

9. Some of the important forces that shape the service market –
a) Government policies
(Changes in govt. policies and rules in services)
b) Social Change
(social changes like customer expectations, purchasing
power, interest rates, demand, etc.)
c) Business Trends
(trends like strategic alliance, quality, cost savings,
hiring practices, ability of manufacturers)
d) Advances in IT
(convergence of computers, wireless networking,
powerful software, growth of internet)
e) Internationalization
(transnational basis, international mergers & alliances)9

10. NATURE OF SERVICESNATURE OF SERVICES
 One of the most important aspect of services is intangibility.
Services unlike goods cannot be touched, Smelt, Seen and
tasted.
 Services cannot be separated from provider.
 Their Production and Consumption is often not separated in
time and place.
 Services output tends to be variable.
 Services suffer from lack of standardization.
 Services are perishable in nature.
 Services cannot be transported from one place to another.
Unit 1 – Introduction 10

11. SCOPE OF SERVICESSCOPE OF SERVICES
Some of the important scope of services are –
 Service as an Organization
(E.g.) Restaurant, charity.
 Service as core product
(E.g.) Insurance Policy, Bank Account.
 Service as Product Augmentation
(E.g.) Complimentary coffee at the hair dressers.
 Service as Product support
(E.g.) Repair services.
 Service as an Act
(E.g.) Individual mode of behavior like helping.
Unit 1 – Introduction 11

12. FUTURE OF SERVICE SECTORFUTURE OF SERVICE SECTOR
 Nowadays demand is fairly close to trend of output and
income in overall economy in different service sectors like
health, education, tourism, etc.
 Industry body CII projects the growth rate for Indian
insurance industry around 5% and non insurance industry
with 60% to record average growth.
 Indian Banking system has become modernized with
comprised of Information Technology (IT) products and
services.
 Indian banking and securities companies spends more on IT
products and services to ensure that IT services providers lay
on strong focus on financial services sector.
Unit 1 – Introduction 12

13. ECONOMIC ROLE OF SERVICEECONOMIC ROLE OF SERVICE
INDUSTRIESINDUSTRIES
1. Employment. (Knowledge based services)
- majority of world employment and provide greatest share
of new jobs.
2. Trade.
- increasing process of globalization has increased trade of
services.
Some of the factors that expands trade in services are –
- Globalization of service industry.
- International operations (export services).
- Technological advances & Service oriented products.
3. Urbanization.
Unit 1 – Introduction 13

14. BENEFITS OF SERVICESBENEFITS OF SERVICES
a) Profiting from the characteristics of
intangibility.
b) Profiting from the customer Co –
production.
c) Profiting from the pace – based services.
d) Profiting from the Cyber Services.
e) Profiting from the mass – customized
services.
Unit 1 – Introduction 14

15. SERVICE MANAGEMENTSERVICE MANAGEMENT
Capabilities Resources
* organization’s ability to * used to deliver IT services.
to coordinate, control. * easier to acquire than
and deploy resources to capabilities.
produce value. * IT infrastructure, people,
* take form of processes and financial capital, application
functions. and information.
* organization, process, people.
“Service Management is a set of specialized
organizational capabilities for providing
value to customers in the form of services.”
15

16. CHARACTERISTICS OF SERVICESCHARACTERISTICS OF SERVICES
1. Intangibility:
- services are performance deeds and action which can be
felt, touched or tasted.
- it is not physical objects, but mental connotations.
Marketing issues in Intangibility are –
i) services can’t stored as buffers against periods of
demands.
ii) fluctuations in demand for service are difficult to
manage.
iii) services can’t be patented.
iv) difficult to maintain different service over competitors.
v) benefits of service can’t realized in future time.
vi) determination of price for services becomes intangible.16

17. 2. Heterogeneity:
- services are always a variation from one services to
another, they are heterogeneous in nature.
- it is performed based on individual needs & personalities.
- it is in unique way.
Marketing issues in Heterogeneity are –
i) services offerings may be different to different customers
due to different interactions.
ii) services need to be customized.
iii) customized service may not be same at all time.
iv) quality of service may not be fully controlled by service
provider.
v) services can’t ensure that it is delivered in consistent
manner as per plan.Unit 1 – Introduction 17

18. 3. Inseparability:
- it reflects the interconnection among service provider.
- inseparability focuses on services are not separable in
nature.
(E.g.) Dentist, dancers and musicians, etc.
Marketing issues in Inseparability are –
i) it has to minimize or remove the gaps between service
promised & provided.
ii) services are sold, produced and then used.
iii) services provider must behave professionally.
iv) service provider need to be physically present to deliver
the service.
v) shared service experience could be positive or negative.
Unit 1 – Introduction 18

19. 4. Perishability:
- services can’t be saved, stored, resold or returned.
- it is cease to exist.
- unutilized or under utilized services are found to be waste.
Marketing issues in Perishability are –
i) services can’t be returned or resold implies need for
strong recovery strategies.
ii) unutilized services bring loss to service providers.
iii) creative pricing strategies can evolve demand
fluctuations.
iv) creative pricing strategies targeted on specific groups.
v) price incentive will persuade customers to place orders on
24x7 basis.
vi) complimentary services stimulate demand in off-seasons.19

20. CLASSIFICATION OF SERVICESCLASSIFICATION OF SERVICES
Types of
Services
Education
Service
Consultancy
Services
Financial
ServicesAdvertising
Services
MICE
Services
Healthcare
Services
Touris
m
Service
Distribution
Services
Communication
Services
IT
Services
Legal
Services
Real
estate
Services
Strategic
Business
Services
Unit 1 – Introduction 20

21. 1. Tourism Service industry:
- it is world largest industry & fastest
growing sector.
- it is highly labour intensive & provide
intangible services.
Tourism & Travel consists of following
Services:
a) Hotel & Restaurants, boarding and lodging services.
b) Travel agency and tour operator services.
c) Tourist guide services.
d) Transport, distribution, cultural & sporting services.
Unit 1 – Introduction 21

22. Tourism industry contributes following goals:
i) Employment generation.
ii) Income generation.
iii) Foreign Exchange earnings.
iv) Overall multiplier effect to the economy.
2. Education Industry:
- it is a public consumption and provided to public at free of
charge or at certain prices.
- government spending main source of education funding in
most countries.
- it include
i) Primary Education services.
ii) Secondary Education services.
iii) Higher Education services. 22

23. Education plays vital role in –
* economic growth.
* personal and social development,.
* reducing inequality among people.
* skill development.
* facing challenges.
3. Consultancy Services:
- it is transfer of knowledge.
- it provides guidance & advice to clients.
- it is in form of studies, advice & communications.
- it differs in size, geographic reach, degree of specialization,
level of technology.
- they are well educated & specialized in specific area.
Unit 1 – Introduction 23

24. 4. Financial Services:
- it has become one stop shopping
for customers of banking, insurance,
securities and asset management services.
- liberalization improved the quality of some services by
exposing local banks to foreign competition.
- indian insurance industry has improved services and local
administrative overheads.
- technological advances has more impacts on financial
services industries.
- some of the virtual financial services are Automatic Teller
machine (ATM), e-transfer, remote banking, smart cards,
etc.
Unit 1 – Introduction 24

25. 5. Advertising Services:
- companies commit additional funds to attract
customers, brand loyalty due to diversified markets.
- many MNCs tend to contract large advertising
agencies to go to international level.
- more advertisement through electronic channels
due to IT revolution.
Unit 1 – Introduction 25

26. 6. MICE Industry:
- it is another fastest up coming sector which stands for
Meetings, Incentives, Conferences and Exhibitions.
- it is available for convention facilities, conference hotels,
etc.
(E.g.) attractions like Taj Mahal, Royal palaces, historical
forts.
activities like horse riding, jeep safaries, etc.
- Indian Convention Promotion Bureau (ICPB) promote
India as a MICE destination.
Unit 1 – Introduction 26

27. 7. Healthcare Services:
- it was recognized as industry in mid 80’s
- greater contribution to this industry is due
to literacy rate, higher level of income,
increasing awareness through media channel.
Some of the importance of health care are:
i) aging populations in many countries (i.e.) health care
costs for person above 65 is four times more than lower age
person.
ii) emergence or discovery of new diseases.
iii) expanded reach for insurance scheme.
- WHO has given importance of cross – border medical
services.
Unit 1 – Introduction 27

28. 8. Distribution Services:
- it is crucial link between producers and consumers.
- it influence on consumer welfare.
- increased efficiency and competition in distribution system
led to lower price levels and greater convenience in
shopping.
It includes four major services like –
a) Commission agent services.
b) Wholesale trade services.
c) Retailing services.
d) Franchising.
Unit 1 – Introduction 28

29. 9. Communication Services:
It is divided into two groups:
a) Postal and Courier services (postal, telephone and fax,
electronic mail).
- physical mail is nearly 20% of world communications,
75% of communication is telephone and fax, only 5% of
communication is electronic mail.
- development of MNCs has
increased the growth of express
mail service or courier.
- private players offer more
affordable, dependable, faster
and cheaper service.
Unit 1 – Introduction 29

30. b) Telecommunication Services:
- it is the process of rapid structural change
and dramatic economic growth.
- it is facilitator of international trade,
economic development and enrichment of
citizens.
- modern means of telecommunication enable
all countries to take part fully in international
trade.
Unit 1 – Introduction 30

31. 10. IT Software and Related Services:
- it is a unique opportunity for whole stages of industrial
development.
- e-commerce, computing, accounting, personnel,
distribution, etc plays fundamental role in many industries.
Indian IT and ITES includes –
i) Customer interaction services.
ii) Back – office operations / data entry / HR services, etc.
iii) Transcription / translation services.
iv) Content development / animation / engineering design.
v) Other services like remote education, data search, etc.
Unit 1 – Introduction 31

32. 11. Legal Services:
- legal profession provides high quality services for firms
doing business cross-border (i.e.) internationalization.
- it provides employment of local lawyers to establish forms
of collaboration between foreign and local firms.
- the legal service has continuous growth due to growth in
international trade and emergence of new fields.
Some of the legal services in certain sectors are –
i) Corporate restructuring, privatization.
ii) Cross – border mergers and
acquisitions.
iii) IPR and new financial
instruments.
iv) Competition law. 32

33. 12. Real Estate Services:
- this industry is comprised of firms that do combination of
land assembly, development, financing, building and lease
or sale of residential.
- this real estate sector boost demand for goods in other
sectors like construction, engineering, architecture.
Real estate service includes –
i) Construction and related services.
ii) Architectural and Engineering
services.
- blueprints and design can
transmitted electronically due to
advance in technology.
Unit 1 – Introduction 33

34. 13. Strategic Business Services Sector:
- it include computer software, R & D, technical services,
advertising services, HRD services, etc.
Some of the factors that have growth in this sector are:
i) Outsourcing of many activities.
ii) External service to supply internal services for small firms.
iii) Greater flexibility within firm.
iv) Rise of knowledge will rely on expertise and specialized
service inputs.
v) Specialization &
increased division of
labour.
Unit 1 – Introduction 34

35. MARKETING MIX OF SERVICESMARKETING MIX OF SERVICES
Marketing in Service:
Marketing is generally viewed as:
a) a strategic and competitive thrust pursued by top
management to sell goods.
b) a set of functional activities including product,
policy, pricing, delivery and communications
performed by line managers.
c) a customer driven orientation for the entire
organization.
Unit 1 – Introduction 35

36. Some of the basic differences of services with respect to
goods are:
i) Customers don’t obtain ownership of services.
ii) Service products are not Inventorable.
iii) Intangible elements dominate value creation.
iv) Customers may be involved in the production process.
v) Variability in operational inputs and outputs of services.
vi) Many services are difficult for customers to evaluate.
vii) Time factor is relatively more important in services.
viii) Services require different distribution channels.
ix) Differences exist among services.
* people processing * possession processing
* mental stimulus
36

37. Marketing Mix of Service (Services Marketing Mix):
Services
Marketing
Mix
Product
Place
Promotion
Price
Physical
Environment
Process
People
Unit 1 – Introduction 37

38. 1. Product:
“A Service product can be defined as a mix of
intangibles and tangibles offered by a marketer at a
price.”
Decisions related to product include three levels:
a) Core product that delivers functional benefits.
b) Supplementary product.
c) Brand name and other features.
- design of service product depends on infrastructure
and availability of technology.
- service products may change depending on
feedback from customers and change in technology.
Unit 1 – Introduction 38

39. 2. Place:
- delivering service to customers involves place and time of
delivery and its methods.
- speed and convenience of place and time are important in
service delivery.
(E.g.) Beauty saloon, hotel / restaurant – customer physically
present this location to avail service, so they will choose
convenient location for service.
- some of the services may be single locations by design.
(e.g.) Exclusive restaurant, theme park or club.
Some of the common techniques in services are:
a) Franchised outlets.
b) Co – marketing (E.g.) Syndicate bank selling Bajaj Allianz
product.
c) Employing agents or distribution partners. 39

40. 3. Promotion:
This plays 3 vital roles:
a) Providing needed information and advice.
b) Persuading target customers of merits of a specific product.
c) Encouraging them to take action at specific times.
- it is important for service providers.
- promotional activities influence brand choice and
incentives to attract customers.
- promotion plan is regard to choice of media like TV,
newspaper, direct marketing, posters, etc.
- timing is important for promotions, sometimes wrong
timing of promotional activity leads to loss.
- message delivered in promotional activity also important
for customer retention.Unit 1 – Introduction 40

41. 4. Price:
- this is important component to understand the service
marketing strategy to determine selling price to customers
and selling margins.
- price requires whether it is feasible, make customers to
purchase and use the service available.
- it is the crucial “P” of marketing which determines revenue
for company.
Some of the criteria involved in pricing a service:
* Cost.
* Competition.
* Objectives – Strategic or tactical.
Unit 1 – Introduction 41

42. Pricing are known in different names in service
industries:
a) Interest rates in bank.
b) Fees in education, consultancy.
c) Premium in insurance.
d) Rent in property deals.
e) Fare for air or bus travel.
- price can be fixed based on segmentation,
expectation of customers and their income.
(E.g.) Cinema theatres, trains, buses, etc.
Unit 1 – Introduction 42

43. 5. Physical Environment:
- the appearance of buildings, vehicles, interior
furnishing, equipment, staff members, signs,
posters, etc are tangible evidence for service.
- well designed service scapes can attract customers
and induce positive feelings in them and increase the
satisfaction with service.
- apart from external appearance, internal
appearance like people, stationery, bills sent to
customers, visiting card are impression for creating
service brand.
(E.g.) pleasant decoration, air – conditioned
reception hall, greet with family, etc.Unit 1 – Introduction 43

44. 6. Process:
- it is the method and sequence of actions in service
performance.
- it is critical from customer point of view, because it
determines what he has to do to get a service.
(E.g.) Process in bank to get a draft.
Enter the BankEnter the Bank Collect ApplicationCollect Application
FormForm
Submit atSubmit at
Counter 2Counter 2
Wait till theWait till the
application isapplication is
processedprocessed
Collect draftCollect draft
when calledwhen called
Unit 1 – Introduction 44

45. - due to advancement of technology, process of service
delivery is fast.
(E.g.) Draft made through online.
Punch all details of DD in Online Collect draft
- internet based shopping also makes convenient for the
customers to get a thrilling experience.
(E.g.) Amazon.com, flipkart, shop clues, etc.
- nowadays single widow service is another one to improve
the service delivery system.
- this single point of contact increase the factor of
accountability.
- this reduce the costs of operation and motivate workforce
to get optimum capacity.
Unit 1 – Introduction 45

46. 7. People:
- it depends on direct interaction between customers and a
firm’s employees.
- it influence the customer’s perceptions of service quality.
- people is the more consequences among all ‘P’s, because it
is rare to deal with customers.
(E.g.) railway booking clerk handles long lines of customers
and sometime its difficult to manage.
Some special skills needed for recruiting for service jobs like -
- the ability to get along with the people.
- the ability to work in a team.
- the willingness to take responsibility beyond the duty.
Unit 1 – Introduction 46

47. SERVICE DELIVERY PROCESSSERVICE DELIVERY PROCESS
Service Distribution:
The distribution of services done through three elements:
1. Information and Promotion Flow.
2. Negotiation Flow.
3. Product Flow.
Determining type of contact with customer:
Option 1: The Customers visit service site physically.
Option 2: The Service providers go to customers themselves.
Option 3: The Service transaction is conducted remotely.
Another way to look at it –
- add or change the service outlet to increase the sales or add
convenience of service to the customer.Unit 1 – Introduction 47

48. Places of Service Delivery:
1. Location Constraints.
2. Geographic factor / constraints.
3. Need for economies of scale.
4. Mini stores.
5. Separating front and back stages of operation.
6. Locating in multipurpose facilities.
7. Time of service delivery.
Service Provider Participants:
a) Service Principal (originator of the service).
b) Service Intermediary or deliverer.
Unit 1 – Introduction 48

49. Different delivery channels:
1. Direct or Company owned channels.
2. Service delivery through Intermediaries.
i) Franchisee.
It is fast growth strategy, when –
- resources are limited.
- long term commitment of store managers.
- local knowledge is important.
ii) Agents and Brokers.
iii) Electronic Channels
Unit 1 – Introduction 49

50. Distribution of Supplementary Services in Cyberspace:
1. Information.
(E.g.) directions to service site, schedule / service hours, price,
conditions of sale, instructions, FAQ, etc.
2. Consultation.
(E.g.) customized advice, counseling, conduct e-mail, etc.
3. Order taking.
(E.g.) order entry, reservation, make in confirm, check status.
4. Hospitality.
(E.g.) Greeting, facilities, food and beverages, washrooms.
5. Safekeeping. (E.g.) caring of goods, track package, repair status, etc.
6. Exceptions. (E.g.) special requests, complaints or compliments.
7. Billing. (E.g.) periodic statement of account, receive bills.
8. Payments. (E.g.) Self service, direct to payee, automatic deduction
pay by credit or debit card.
Unit 1 – Introduction 50

51. CUSTOMERS ROLE IN SERVICECUSTOMERS ROLE IN SERVICE
DELIVERYDELIVERY
Introduction:
- the role of customers in effective and successful delivery
of service will determine to continue or discontinue the
service.
Sometime there will be gap in service performance due to –
- the customers lack of knowledge of their roles and
responsibilities. (E.g.) Visiting new tourists places need help
to enjoy the service.
- customer understand their roles but unwilling or unable to
perform for some reason. (E.g.) person joins a health club to
get into shape, but doesn’t follow diet schedule.
- behaviour of customer receiving the service can negatively
impact other customer’s behaviour. 51

52. Importance of Customers in Service Co creation and Delivery:
- customers who receive services will participate in service
delivery process and contribute to service performance gap
through their behaviour in effective manner.
- since the customers are participatory in the service delivery
they are also known as Co – creators of service.
* Customers are receiving the service:
- service performance gap can be plugged with customer
participation in service delivery process with difference depend
on following situation:
i) low level of customer participation is required in some
services.
ii) moderate level of customer participation is required in other
cases.
iii) high level of customer participation is required in still other
cases. 52

53. Importance of Other Customers in Service Delivery:
- many times the customers receive the services or consume
the services with other customers. (E.g.) watching movie,
visiting health club, gym, hotels, etc.
Some customers detract others from enjoying the services in
form of –
* disruptive behaviours of rude customers.
* excessive crowding at certain places during peak hours.
* incompatible needs of individual customers.
Sometimes the fellow customers can enhance the satisfaction
in services by –
* mere presence at the venue.
* socialization / friendships.
* playing the role of supporters, assistants, etc.Unit 1 – Introduction 53

54. Individual differences and Customer Participation:
- individual differences determines whether fellow
customers detracting or adding satisfaction to the services.
(E.g.) Classroom situation, Tourists place, cinema theatres,
etc.
- individual differences bound to have effect on levels of
customer participation.
- customer participation are determined by the low end and
high end customers.
Role of culture and nature of economy in customer
participation:
- it plays important role in level of customer participation in
some cases like hotels, restaurants, hospitals, etc.
Unit 1 – Introduction 54

55. Role of Customer in Service delivery:
1. Customers as productive resources:
- service customers are also called as ‘partial employees’ as
they are contribute organization’s productive capacity.
- sometimes customers input affect the organization’s
productivity in terms of quantity and quality.
(E.g.) In IT Sector, it is based on –
- clients who articulate solution what they want.
- information in timely manner.
- communicate openly and commitment.
2. Customers as Quality contributors:
- it is important role in deriving satisfaction from service
delivery.
- quality of services received through active participation. 55

56. - effective customer participation increases the customer
goals.
(E.g.) health care, education, personal fitness, etc.
3. Customers as Competitors:
- the co – creation of service is that of potential competitor
by performing service himself.
- customers choose to partially perform the service by
themselves or seek outside services.
- customer who produce a service for themselves is called
‘Internal exchange’.
- customer who seeks service from someone is called
‘External exchange’.
- organizations also faced this internal and external exchange
decision based on different factors.
Unit 1 – Introduction 56

57. Such decisions based on some factors given below:
* Availability of the requisite resources. (skilled
manpower, finances, infrastructure, materials,
etc.)
* Availability of time.
* Cost benefit analysis.
* Non monetary aspects. (feelings, happiness,
etc.)
* Trust in the organizations ability.
* Desire to control the process.
Unit 1 – Introduction 57

58. Customer Participation self – Service Technologies (SSTs):
Some of the most prominent and used self service are –
 ATMs and Internet banking
 Internet Shopping and Distance Education
 Bookings for airlines and railways, e – filing of tax returns
 Online payment of fees, telephone bills and electricity bills
 Online submission of registration and forms
Some of the challenges by using SST:
- based on usage of technology.
- SSTs more prominent as compared to developing countries.
- adaption of new technology.
- time effort and energy.
- written manual on guidelines for usage of technology.
- should be trained and feel comfortable in using this technologies.
Unit 1 – Introduction 58

59. Strategies for enhancing Customer Participation:
1. Define Customer’s Job:
a) Helping one self.
b) Helping others.
c) Promoting the company.
d) Individual differences.
2. Recruit, Educate and Reward Customers:
a) Recruit the right customers.
b) Educate and Train customers to perform effectively.
c) Patients should also be trained and rewarded.
d) Avoid negative outcomes of Inappropriate Customer participation.
e) Customer fails to understand the service and perform his role.
f) Absence of positive attitude and the customers.
3. Manage the Customer Mix. (service delivery based on different
segments of customers)
Unit 1 – Introduction 59

60. Guidelines to provide excellent Customer service:
1. Hiring for service.
2. Caring for customers.
a) Great customer service begins with you.
b) Culture of customer service must be codified.
c) Employees are customers too.
d) Emphasize the long term.
e) Build trust.
f) Listen.
g) Little things that matter.
h) Show you appreciation.
i) Treat your best customers better.
3. Resolving Customer Disputes.
- Five ‘A’ to solve dispute (Acknowledge, Apologize, Accept, Adjust
and Assure).
Unit 1 – Introduction 60

61. SERVICE QUALITYSERVICE QUALITY
Definition:
“Service Quality is defined as the service companies
which provides valuable service and that help in achieving
the higher levels of success at every point of service delivery
and increase customer satisfaction.”
Some of the components of Service Quality are:
a) Service quality is Transcendent.
b) Service quality is Product – based.
c) Service quality is User – based.
d) Service quality is Manufacturing – based.
e) Service quality is Value – based.
Unit 1 – Introduction 61

62. Components of Quality in Service Quality:
1. Manufacturing – based components of Quality:
- this is applicable to service products like mobiles,
electronics equipment, automobiles, FMCG, etc.
a) Performance b) Features
c) Reliability d) Conformance
e) Durability f) Serviceability
g) Esthetics h) Perceived quality
2. Service – based Components of Quality:
a) Tangibles b) Reliability
c) Responsiveness d) Assurance
e) Empathy
Unit 1 – Introduction 62

63. Instruments for measuring Service Quality:
- there are different research instruments which can
be used to measure customer perspectives on service
quality which is called “SERVQUAL”
1. Capturing the Customer’s Perspective of Service
Quality through SERVQUAL (1):
- perceptions of service quality received.
- prior expectations of companies in particular
industry.
If quality is poor, perceived performance ratings <
expectations.
If quality is good, perceived performance ratings >
expectations. 63

64. 2. Capturing the Customer’s Perspective of Service Quality
through SERVQUAL (2):
- it contains 22 items reflecting five dimensions of service
quality like Tangibility, Reliability, Responsiveness,
Assurance and Empathy.
3. Capturing the Customer’s Perspective of Service Quality
to evaluate online businesses through Seven dimensions of
SERVQUAL:
* Accessibility: Is it found easily?
* Navigation: How easy to move in and around?
* Design and presentation: Image projected.
* Content and Purpose: substance and accuracy.
* Responsiveness: firm’s respond strategy.
* Interactivity: customization and personalization.
Unit 1 – Introduction 64

65. GAPS Model:
Customer Needs and
Expectations
Management
definition of these
needs
Translation into
design / delivery
Execution of design /
delivery
Customer perception
of service execution
Customer experience
relative to
Advertising and sales
promises
Customer
interpretation of
communication
Customer
Management
1. Knowledge Gap
2. Standards Gap
3. Delivery Gap
4. Internal
Communications gap
5. Perceptions Gap 6. Interpretation Gap
7. Service Gap
Unit 1 – Introduction 65

66. Perceptions for closing the Seven Service Quality Gaps:
1. Knowledge Gap:
- it is important for firm to learn and identify what
customers expect.
- understand the customer expectations.
- improve communication between staff and management.
- turn information into actions.
2. Standards Gap:
- to specify the service quality standards.
- set, communicate and reinforce customer – oriented
service
- measure performance and provide regular feedback.
- reward managers and employees.
Unit 1 – Introduction 66

67. 3. Delivery Gap:
- it needs to ensure that the service performance meets
the standards set by customer.
- clarify employee role, train him in time management.
- eliminate conflict among employee, good reward
system.
4. Internal Communications Gap:
- it should be realistic.
- comments from frontline employees.
- make sales staff to involve operation staff in meetings
with the customer.
- communications sets realistic according to customer
expectations.
Unit 1 – Introduction 67

68. 5. Perceptions Gap:
- to educate customers to see reality of service quality
delivered.
- be informed to customers about service delivery.
- provide physical evidence.
6. Interpretation Gap:
- the message intended to be conveyed is clear.
- present communication materials to a sample of customers
in advance of publication.
7. Service Gap:
- it is responsibility of firm to close the gaps 1 to 6 to meet
customer expectations to survive in competitive market
environment.
Unit 1 – Introduction 68

69. Measures of Service Quality:
a) Soft measures:
 this is collected by talking to customers, not easily
observed.
 provide guidance, direction, feedback to employees to
achieve customer satisfaction.
 quantified by measuring customer perception and
beliefs.
Soft measures of service quality are –
- it include market surveys, service feedback, complaints
and compliments, service reviews.
- customer advisory panels offer feedback / advice.
- employee surveys and panels to determine perception of
quality of service delivered to customers.Unit 1 – Introduction 69

70. b) Hard Measures:
these can be counted, timed or measured through
adults.
these are typically operational processes or outcomes.
standards are often set with reference to percentage of
occasions.
control charts are useful for displaying performance
over time.
Hard measures of Service Quality are –
- control charts to monitor a single variable.
- enable easy identification of trends.
- embrace key activities that have an impact on
customers.Unit 1 – Introduction 70

71. Tools to Analyze and Address Service Quality Problems;
1. Fishbone diagram. (Cause and effect diagram to identify the causes
of problems)
2. Pareto Chart. (majority of problems is caused by a minority of
causes) (i.e.) 80/20 rule.
3. Blueprinting. (visualization of service delivery, identifying points
where failures are most likely to occur)
4. TQM. (top management commitment, HRM, technical system,
service, benchmarking, customer focus, continuous improvement,
employee satisfaction, TQM practices)
5. ISO 9000. (companies requirements, guidelines, and other standards
to provide assessment and certification for a firm)
6. Malcolm Baldrige model. (to promote best practices in quality
management and quality achievements among U.S. firms.
7. Six Sigma. (statistically, only 3.4 defects per million opportunities) (it
has ‘DMAIC’ methodology) (i.e.) Define, Measure, Analyze, Improve
and Control. 71

72. BALANCING DEMAND AND CAPACITYBALANCING DEMAND AND CAPACITY
Managing Demand and Capacity is a challenge because –
* no buffer for services from demand can be created.
* demand is volatile in nature and keep fluctuating during
peak seasons and different times of the day.
Changes in demand results in number of outcomes like:
a) Excess demand:
– it reflects demand that exceeds the capacity or maximum
level of firm’s supply.
- firm’s unable leads to loss of business opportunities.
- it consequently forces the customers to look for other
sources of services.
Unit 1 – Introduction 72

73. b) Demand exceeds optimum capacity:
- this is maximum level it can operate at without having to turn
customers away.
- due to excess pressure on resources, overcrowding, long queues leads
to less than good service quality.
c) Demand and Supply are balanced:
- this is optimum supply which represents a balance between supply
and demand.
- it enhances customer experience and also effective use of available
resources.
- the optimum utilization of resources and productivity leads to
satisfaction regarding service delivery.
d) Excess capacity:
- demand can sometimes be less than optimum supply.
- this leads to negative image of firm and services might not be good.
- the customers are served on individual basis.
73

74. Alternative Supply and Demand outcomes:
Supply Relationship to demand Issues
Greater than
maximum
Higher demand than
maximum available supply
•Customers turned away
• Lost business opportunities
• Resources under great pressure
• Service quality suffers
• Crowding
• Staff and facilities overtaxed
• Customers seek competitors
Maximum
supply
Higher demand then
optimal supply levels
•All customers serviced
• Excess pressure on staff
• Queuing and long waits
• Crowding, service quality suffers
Optimum supply Demand and supply are
well balanced
•Resource utilized at ideal rate
• Productivity ideal, no delays
• service quality delivered
Less than
optimum supply
Lower demand than
optimal supply levels
•Resources under utilized
• Productivity decreases
• Productivity suffers, no waiting
•Lack of customers create negative
imageUnit 1 – Introduction 74

75. Understanding Capacity Constraints and Demand
Patterns:
1. Capacity Constraints – services in form of time, labour,
resources, human capital, infrastructure on effective
functioning and servicing the customers.
a) Time Constraint (E.g.) time is short supply in medical.
Legal, doctors and lawyer’s service.
b) Labour Constraint (E.g.) doctor, nurses, engineers,
technicians, teaching and non teaching staff.
c) Equipment Constraint (E.g.) logistics and supply
chain, equipment and infrastructure.
d) Facilities Constraint (E.g.) it implies that they don’t
have requisite facilities to meet the demands of
customers at point of time. 75

76. 2. Demand Patterns – it is to better serve the customer.
a) Charting demand patterns – present the data on hourly,
weekly, monthly or seasonal basis to have knowledge on
past demand.
b) Predictable cycles – firms predict the future demand
and act accordingly based on previous data gathered.
c) Random demand fluctuations – demand may not
predictable based on weather conditions and changes in
weather affects the demand. (E.g.) surprise snowfall,
tourists, demand for hotels during season.
d) Demand patterns by market segment – to identify the
customers segments and serve effectively and efficiently.
Unit 1 – Introduction 76

77. Understanding Optimum Vs Maximum use of
capacity:
 optimum and maximum capacity may not be same.
 optimum capacity utilization means full utilization
of resources and serving the customers.
 maximum capacity utilization means absolute limit
of service availability with the firm.
 both are same in some cases like entertainment and
sports activities.
 Sometimes optimum use of capacity is less than
maximum use of capacity.
 the maximum use of capacity may result in
customer waiting time. 77

78. Strategies for matching capacity and demand:
1. Shifting demand to match capacity / supply managing
demand:
a) Decreasing demand during peak demand periods, when
demand is too high:
i) communicating with customers.
ii) offering incentives to customers.
iii) taking care of loyal or regular customers first.
iv) advertising peak usage times and benefits of non peak.
v) charge full price for service.
b) Stimulating demand during low demand periods:
i) using sales and advertising aggressively.
ii) modifying the service offering.
Unit 1 – Introduction 78

79. iii) offering attractive discounts.
iv) modifying the hours of operation of the services.
v) bringing the service to the customer doorsteps.
2. Strategies for Adjusting Capacity / Supply to Match
demand:
- the firm resort to stretching the existing capacity.
- by aligning capacity / supply with demand fluctuations.
Elements:
a) Facilities – actual location from which service offered.
b) Equipment – kitchen equipment crockery in restaurant.
c) Labour – staff, range from unskilled to professional, full
time or part time.
d) Time – the hours during the service is available. (E.g.) 9am
to 5 pm on working days, ATM for 24 hours. 79

80. Yield Management:
- it is used by service firms which faces problem of limited
capacity by balancing capacity utilization pricing market
segmentation and financial returns.
Objective – it is to produce the best possible revenues for the firm
from a limited available capacity.
- it allocates right type of capacity, right type of customer
segment, right place in order.
(E.g.) airlines sell their tickets at varying prices to different
customer segments to yield maximum profits and utilization
resources.
Actual revenue
Potential revenue
where Actual revenue = actual capacity used X average actual price
Potential revenue = total capacity X maximum price
Yield =
Unit 1 – Introduction 80

81. Challenges and Risks in Yield Management:
 Loss of competitive focus.
 Customer alienation.
 Employees morale may be affected.
 Incompatible incentive and reward systems.
 Lack of employee training.
Strategies:
1. Employ operational logic:
- it indicated the existing operational system of service firm.
- the queuing system makes more comfortable for the
customers.
- waiting line configuration can be introduced when queues
are inevitable.
- it refers to deciding no. of queues, location and spatial. 81

82. 2. Establishing a reservation:
- it is always a good idea to avoid necessary crowding of the
customers at service venue.
- this saves a lot of time energy and efforts of both customers and
clients.
3. Differentiating between the waiting customers:
o Depending upon the Importance of the customer.
o Urgency of the job.
o Duration of the service transaction.
o Payment of a premium price.
4. Make waiting fun or at least tolerable:
 unoccupied time feels longer than occupied time.
 preprocess waits feel longer then in-process waits.
 anxiety makes waits seen longer.
 when customer has to face uncertain waits. 82

83. Unit 1 – Introduction 83

84. Unit 1 – Introduction 84