Professional Documents
Culture Documents
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Chapter
INTRODUCTION TO SERVICES
This chapter's objectives are to
1. 2. 3. 1. 1. Explain what services are and identify important trends in services. Explain the need for special services marketing concepts and practices and why the need has developed and is accelerating. Explore the profound impact of technology on service. Outline the basic differences between goods and services and the resulting challenges and opportunities for service businesses. Introduce the expanded marketing mix for services and the philosophy of customer focus, as powerful frameworks and themes that are fundamental to the rest of the text.
"Services are going to move in this decade to being the front edge of the industry."
Louis V. Gerstner, 2001
This quote from IBM's former CEO, Louis V. Gerstner, illustrates the changes sweeping across industry today. Many businesses that were once viewed as manufacturing giants are shifting their focus to services. IBM has led the pack in its industry. Mr. Gerstner predicts that in the IT industry over the next decade services will lead the market instead of hardware and software to the extent that "hardware and software will be sold inside a services wrapper." Actions of current IBM CEO, Sam Palmisano, have reinforced this view. In his tenure, Mr. Palmisano has led IBM in the expansion of its outsourcing businesses and accentuated its focus on client solutions. He also led IBM in its purchase of PriceWaterhouseCoopers in 2002 to gain broader strategic services consulting expertise.
5. 4.
In a company brochure IBM states that it is the largest service business in the world. Through ts Global Services division, IBM offers product support services, professional consulting services, and network computing services around the globe. Many businesses have outsourced entire service functions to IBM, counting on the company to provide the services better than anyone else. Currently the services side of IBM brings in $43 billion, over half the company's total revenue. "he services strategy has been very successful for IBM to date and promises to be the engine of growth into the future (see the "New Wave of Services" graphic). Going forward, IBM's strategy to focus on total solutions and to be a truly valued, trusted, and indispensable partner for its key clients. This strategy means providing clients with total service solutions in such wide-ranging areas as human resources, marketing, product design, and customer relationship management. No one in IBM would suggest that these positive results have been easily achieved. Switching +orn a manufacturing to a service and customer focus is indeed a challenge. It requires changes " management mind-set, changes in culture, changes in the ways people work and are rewarded, and new ways of implementing customer solutions. At IBM this change has evolved over decades. is suggested that Lou Gerstner's legacy at IBM may well be the definitive switch that the company has made from hardware to services and the strategic focus on customers. Many companies (such as Hewlett-Packard, Sun Microsystems, and Cisco) have viewed IBM's success and are attempting to make the same transition to services. It is not as easy as it looks. In '11oving into services, companies discover what service businesses such as hospitality, consulting, nealth care, financial services, and telecommunications have known for years: services marketing and management are different-not totally unique, but different. Selling and delivering a
Source: Inside Sam's $100 Billion Growth Machine." by David Kirkpatrick, Fortune, June
14, 2004, p. 86. FORTUNE 2004 TIme Inc. All Rights
Reserved.
03
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4 Part 1 Foundations for Services Marketing
computer is not the same as selling and delivering a service that solves a customer's problem.' As the opening vignette suggests, services are not limited to service industries, services can be very profitable, and services are challenging to manage and market. Services represent a huge and growing percentage of the world economy; yet particularly in the United States, customer perceptions of service are not good.' In fact, the University of Michigan's American Customer Satisfaction Index has shown consistently lower scores for services when compared to other products.' Given the economic growth in services, their profit and competitive advantage potential, and the overall decline in customer satisfaction with services, it seems that the potential and opportunities for companies who can excel in services marketing, management, and delivery have never been greater. This text will give you a lens with which to approach the marketing and management of services. What you learn can be applied in a company like IBM with a traditional manufacturing history or in pure service businesses. You will learn tools, strategies, and approaches for developing and delivering profitable services that can provide competitive advantage to firms. At the base of services marketing and management you will find a strong customer focus that extends across all functions of the firmthus the subtitle of this book, "integrating customer focus across the firm."
9. 8. 7.
rld
14%
Manufacturing
16%
from PIB, Government of India, Press ote dated May 31, 2007. [http.. rnospi.nic.in/pressnote I
Description
Technology can facilitate regulation or order, and technology can lead to upheaval or disorder. Technology can facilitate independence or fewer restrictions, and technology can lead to dependence or more restrictions. New technologies provide the user with the most recently developed benefits of scientific knowledge, and new technologies are already or soon to be outmoded as they reach the marketplace. Technology can facilitate feelings of intelligence or efficacy, and technology can lead to feelings of ignorance or ineptitude. Technology can facilitate less effort or time spent in certain activities, and technology can lead to more effort or time in certain activities. Technology can facilitate the fulfillment of needs or desires, and technology can lead to the development or awareness of needs or desires previously unrealized. Technology can facilitate human togetherness, and technology can lead to human separation. Technology can facilitate involvement, flow, or activity, and technology can lead to disconnection, disruption, or passivity .
Competence/incompetence Efficiency/inefficiency
Fulfills/creates needs
Assirnllatlon/isolatlon Engaging/disengaging
. D. G. Mick and S. Fournier, "Paradoxes of Technology: Consumer Cognizance, Emotions, and Coping Strategies," Journal of Consumer Research 25 ber 1998), pp. 123-47. Copyright 1998 University of Chicago Press. Reprinted by permission.
'ith technology infusion comes a loss of human contact, which many people believe is detrimental ly from a quality oflife and human relationships perspective. Parents may lament that their children d hours in front of computer screens, interacting with games, seeking information, and relating to ~ friends only through instant messaging without any face-to-face human contact. And workers in ganizations become more and more reliant on communicating through technology---even unicating via email with the person in the next office! inally, the payback in technology investments is often uncertain. It may take a long time for an e tment to result in productivity or customer satisfaction gains. Sometimes it never happens. For pIe, McKinsey & Company reports that a firm projected a $40 million savings from moving its ..mg and service calls to the Web. Instead it suffered a $16 billion loss as a result of lower usage by omers than projected, unanticipated follow-up calls and e-mails to the call center from those who used the Web application initially, and loss of revenue from lack of cross-selling opportunities.'?
15.
Nonperishable
Perishable
Source: A. Parasuraman, VA. Zeithaml, and L. L. Berry, "A Conceptual Model of Service Quality and It's Implications for Future Research." Journal of Marketing 49 (Fall 1985) pp. 41-50. Reprinted by permission of the American Marketing Association.
these characteristics, which, until the 1980s, had been largely ignored by marketers. Recently it has been suggested that these distinctive characteristics should not be viewed as unique to services but that they are also relevant to goods, that "all products are services," and that "economic exchange is fundamentally about service provision."33 Although this view is rather abstract, it does suggest that all types of organizations may be able to gain valuable insights from services marketing frameworks, tools, and strategies.
Intangibility
The most basic distinguishing characteristic of services is intangibility. Because services are performances or actions rather than objects, they cannot be seen, felt, tasted, or touched in the same manner that you can sense tangible goods. For example, health care services are actions (such as surgery, diagnosis, examination, and treatment) performed by providers and directed toward patients and their families. These services cannot actually be seen or touched'by the patient, although the patient may be able to see and touch certain tangible components of the service (like the equipment or hospital room). In fact, many services such as health care are difficult for the consumer to grasp even mentally. Even after a diagnosis or surgery has been completed the patient may not fully comprehend the service performed, although tangible evidence of the service (e.g., incision, bandaging, pain) may be quite apparent.
Resulting Marketing Implications Intangibility presents several marketing challenges. Services cannot be inventoried, and therefore fluctuations in demand are often difficult to manage. For example, there is tremendous demand for resort accommodations in Phoenix in February, but little demand in
et resort owners have the same number of rooms to sell year-round. Services cannot be easily d. and new service concepts can therefore easily be copied by competitors. Services cannot be _ displayed or easily communicated to customers, so quality may be difficult for consumers to Decisions about what to include in advertising and other promotional materials are challenging, ricing. The actual costs of a "unit of service" are hard to determine, and the price-quality ~ __ cnship is complex.
Heterogeneity
Services are performances, frequently produced by humans, no two services will be precisely -:be employees delivering the service frequently are the service in the customer's eyes, and people er in their performance from day to day or even hour to hour. Heterogeneity also results because u tomers are precisely alike; each will have unique demands or experience the service in a ay. Thus the heterogeneity connected with services is largely the result of human interaction n and among employees and customers) and all of the vagaries that accompany it. For example, ountant may provide a different service experience to two different customers on the same day --........i"ng on their individual needs and personalities and on whether the accountant is interviewing en he or she is fresh in the morning or tired at the end of a long day of meetings. Marketing Implications Because services are heterogeneous across time, organizations, and ~ ensuring consistent service quality is challenging. Quality actually depends on many factors ot be fully controlled by the service supplier, such as the ability of the consumer to articulate er needs, the ability and willingness of personnel to satisfy those needs, the presence (or of other customers, and the level of demand for the service. Because of these complicating the service manager cannot always know-for sure that the service is being delivered in a manner -==~tent with what was originally planned and promoted. Sometimes services may be provided by a further increasing the potential heterogeneity of the offering.
Resulting
21.
employees and customers. Clearly the real-time nature of services also results in advantages in terms of opportunities to customize offerings for individual consumers. Simultaneous production and consumption also means that it is not usually possible to gain significant economies of scale through centralization. Often, operations need to be relatively decentralized so that the service can be delivered directly to the consumer in convenient locations, although the growth of technology-delivered services is changing this requirement for many services. Also because of simultaneous production and consumption, the customer is involved in and observes the production process and thus may affect (positively or negatively) the outcome of the service transaction.
Perishability
Perishability refers to the fact that services cannot be saved, stored, resold, or returned. A seat on an airplane or in a restaurant, an hour of a lawyer's time, or telephone line capacity not used cannot be reclaimed and used or resold at a later time. Perishability is in contrast to goods that can be stored in inventory or resold another day, or even returned if the consumer is unhappy. Wouldn't it be nice if a bad haircut could be returned or resold to another consumer? Perishability makes this action an unlikely possibility for most services. Resulting Marketing Implications A primary issue that marketers face in relation to service perishability is the inability to inventory. Demand forecasting and creative planning for capacity utilization are therefore important and challenging decision areas. The fact that services cannot typically be returned or resold also implies a need for strong recovery strategies when things do go wrong. For example, although a bad haircut cannot be returned, the hairdresser can and should have strategies for recovering the customer's goodwill if and when such a problem occurs.
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, can the balance between standardization and personalization be determined to maximize h the efficiency of the organization and the satisfaction of its customers? can the organization protect new service concepts from competitors when service processes ot be readily patented? does the firm communicate quality and value to consumers when the offering is intangible annot be readily tried or displayed? can the organization ensure the delivery of consistent quality service when both the =:mization's employees and the customers themselves can affect the service outcome?
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TABLE 1.3
Expanded Marketing Mix for Services
Product Physical good features Quality level Accessor ies Packaging Warranties Product lines Branding
Place Channel type Expcsure Intermediaries Outlet locations Transportation Storage Managing channels
Promotion Promotion blend Salespeople Selection Training Incentives Advertising Media types Types of ads Sales promotion Publicity Internet/Web strategy Process Flow of activities Standardized Customized Number of steps Simple Complex Customer involvement
People Employees Recruiting Training Motivation Rewards Teamwork Customers Education Training
Physical Evidence Facility design Equipment Signage Employee dress Other tangibles Reports Business cards Statements Guarantees
Acknowledgment of the importance of these additional variables has led services marketers to adopt the concept of an expanded marketing mix for services shown in the three remaining columns in Table 1.3.35 In addition to the traditional four Ps, the services marketing mix includes people, physical evidence, and process.
People All human actors who playa part in service delivery and thus influence the buyer's perceptions: namely, the firm's personnel, the customer, and other customers in the service environment.
All the human actors participating in the delivery of a service provide cues to the customer regarding the nature of the service itself. How these people are dressed, their personal appearance, and their attitudes and behaviors all influence the customer's perceptions of the service. The service provider or contact person can be very important. In fact, for some services, such as consulting, counseling, teaching, and other professional relationship-based services, the provider is the service. In other cases the contact person may play what appears to be a relatively small part in service delivery-for instance, a telephone installer, an airline baggage handler, or an equipment delivery dispatcher. Yet research suggests that even these providers may be the focal point of service encounters that can prove critical for the organization. In many service situations, customers themselves can also influence service delivery, thus affecting service quality and their own satisfaction. For example, a client of a consulting company can influence
uality of service received by providing needed and timely information and by implementing mmendations provided by the consultant. Similarly, health care patients greatly affect the quality of e they receive when they either comply or don't comply with health regimens prescribed by the er. tomers not only influence their own service outcomes, but they can influence other customers as .n a theater, at a ball game, or in a classroom, customers can influence the quality of service ed by others-either enhancing or detracting from other customers' experiences.
ical evidence The environment in which the service is delivered and where the firm and customer ct, and any tangible components that facilitate performance or communication of the service.
physical evidence of service includes all the tangible representations of the service such as es, letterhead, business cards, report formats, signage, and equipment. In some cases it includes . ical facility where the service is offered-the "servicescape"-for example, the retail bank facility. In other cases, such as telecommunication services, the physical facility may be :=;;f'!'\;ant. In this case other tangibles such as billing statements and appearance of the repair truck may rtant indicators of quality. Especially when consumers have little on which to judge the actual _ of service they will rely on these cues, just as they rely on the cues provided by the people and Ice process. Physical evidence cues provide excellent opportunities for the firm to send ent and strong messages regarding the organization's purpose, the intended market segments, and e of the service.
The actual procedures, mechanisms, and flow of activities by which the service is delivered-the delivery and operating systems.
tual delivery steps that the customer experiences, or the operational flow of the service, also omers evidence on which to judge the service. Some services are very complex, requiring the =:::::::::::er to follow a complicated and extensive series of actions to complete the process. Highly =:::z.::cratized services frequently follow this pattern, and the logic of the steps involved often escapes orner. Another distinguishing characteristic of the process that can provide evidence to the _====::ter is whether the service follows a production-line/standardized approach or whether the process powered/customized one. None of these characteristics of the service is inherently better or another. Rather, the point is that these process characteristics are another form of evidence - e consumer to judge service. For example, two successful airline companies, Southwest and -=;:;:;;xn-e Airlines, follow extremely different process models. Southwest is a no-frills (no food, no eats), low-priced airline that offers frequent, relatively short domestic flights. All the evidence .~~"' ... " is consistent with its vision and market position, as illustrated in Exhibit 1.2. Singapore ~ _____ on the other hand, focuses on the business traveler and is concerned with meeting individualeeds. Thus, its process is highly customized to the individual, and employees are empowered nonstandard service when needed. Both airlines have been very successful. ee new marketing mix elements (people, physical evidence, and process) are included in the ~"""'.5:> mix as separate elements because they are within the control of the firm and because any or may influence the customer's initial decision to purchase a service as well as the customer's tisfaction and repurchase decisions. The traditional elements as well as the new marketing ents will be explored in depth in future chapters.
THE SERVICE ENCOUNTER STAGE Your experience of purchasing and consuming a service typically takes the form series of encounters. A service encounter is a period of time during which you, as a c tomer, interact directly with a service provider.l'i Although some of these encoun are very brief and consist of just a few steps-consider what is involved in a taxi or a phone call-others may extend over longer time frame and involve multip actions of varying degrees of complexity. A leisurely restaurant meal might str over a couple of hours; a visit to a theme park might last all day. If you use a sen-that requires advance reservation, that first step might have been taken days or ev weeks before arriving at the service facility.
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High-Contact Services Using a high-contact service entails interactions throughout service delivery between customers and the organization. The customer's exposure to the service provider takes on a physical and tangible nature. When customers visit the facility where service is delivered, they enter a service "factory" -something that rarely happens in a manufacturing environment. Viewed from this perspective, a budget hotel is a lodging factory, a hospital is a health treatment factory, an airliner is a flying transportation factory, and a restaurant is a food service factory. Because each of these industries focuses on "processing" people rather than inanimate objects, the marketing challenge is to make the experience an appealing one for customers in terms of both the physical environment and their interactions with service personnel During the course of servicedelivery, customers are usually exposed to many physical clues about the organizationthe exterior and interior of its buildings, equipment and furnishings, appearance and behavior of service personnel, and even other customers.
Low-Contact Services At the opposite end of the spectrum, low-contact services involve little, if any, physical contact between customers and service providers. Instead, contact takes place at arm's length through the medium of electronic or physical distribution channels-a fastgrowing trend in today's convenience-oriented society. Many high-contact and medium-contact services are being transformed into low-contact services as customers undertake more self-service; conduct their insurance and banking transactions by mail, telephone, and the Internet; or research and purchase a host of information-based services by visiting web sites rather than bricks-and-mortar facilities. As highlighted in Figure 2.6, some service industries offer customers a choice of delivery systems featuring different levels of contact.
re 2.6
,-,-.....c<-t
- izations
Motel
.:
Retail Banking Telephone Banking Car Repair Dry Cleaning Insurance Movie Theater
/
Fast Food
Subway Cable TV Emphasizes encounters with equipment Internet Banking Mail-Based Repairs Internet-Based Services Low
49
34. 33.
4. Why should service firms create separate brand names for their different products? 5. What are the main approaches to designing new services?
e 3.1
s Molecular - Passenger = ervice
~ .. ynn Shostack, --------- Free from _ Iarketing,"
Aarketing,44
-- .~-~: 73-80, pub eAmerican --':";;0:;:;Association. d with permis-
,, ' , Service \
'
,,
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35.
marketers visualize and manage what she termed a "total market entity,"! Her m can be applied to either goods or services. At the center is the core benefit, addressrr _ the basic customer need, which is linked to a series of other service characteristics. argues that, as in chemical formulations, a change in one element may completely ale the nature of the entity. Surrounding the molecules are a series of bands representi- _ rice, distribution, and market positioning (communication messages). The molecular model can help you to identify the tangible and intangible e.ments involved in service delivery. For an airline, for example, the intangible e _ ments include transportation itself; service frequency; and preflight, in-flig. ' and postflight service. However, the aircraft and the food and drinks that azserved are all tangible. The greater the roportio. ntaJl.gible elements; t-. more necessary it is to rovide tan ible clues about-the t< n ualit the service. Pierre Eiglier and Eric Langeard proposed a model in which the core service surrounded by an array of supplementary services that are specific to that partie, lar product.f their approach, like Shostack's, emphasizes the interdependence the various components. They distinguish between those elements needed to fa itate use of the core service (such as the reception desk at a hotel) and those t enhance the appeal of the core service (such as a fitness center and business s vices at a hotel). Both models offer useful insights. Shostack wants us to determine which ser elements are tangible and which are intangible in order to help formulate produ policy and communication programs. Eiglier and Langeard ask us to think abo two issues: first, whether supplementary services are needed to facilitate use of core service or simply to add extra appeal; and second, whether customers sho be charged separately for each service element or whether all elements should bundled under a single price tag. Further insight is provided by Christian Gram _ who clarifies the different roles ascribed to supplementary services by describir them as either facilitating services (or goods), which facilitate use of the core pr uct, and supporting services (or goods), which increase the value of the servi and/or help to differentiate it.3 (For greater clarity, we will refer to the latter enhancing services.)
Core Product The core product is the central component that" supplies the principal, problerr solving benefits customers seek. Thus, transport solves the need to move a person physical object from one location to another; management consulting should yie expert advice on what actions a client should take; and repair services restore a darr aged or malfunctioning machine to good working order.
Supplementary Services Supplementary services augment the core product, both facilitating its use an enhancing its value and appeal. The extent and level of supplementary services oft playa role in differentiating and positioning the core product against competing vices. Adding 'more supplementary elements or increasing the level of performan should be done in ways that enhance the perceived value of the core product ' prospective customers and enable the service provider to charge a higher price.
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Delivery Processes The third component concerns the processes used to deliver both the core product and each of the supplementary services. The design of the service offering must address the following issues: How the different service components are delivered to the customer The nature of the customer's role in those processes How long delivery lasts The prescribed level and style of service to be offered.
Each of the four categories of processes introduced in Chapter 2-people processing, possessing processing, mental stimulus processing, and information processing-has different implications for operational procedures, the degree of customer contact with service personnel and facilities, and requirements for supplementary services. As you might anticipate, people processing services typically involve more supplementary elements than the other categories, because customers must come to the service factory and spend time there during service delivery. The integration of the core product, supplementary services, and delivery processes is captured in Figure 3.2, which illustrates the components of the service offering for an overnight stay at a luxury hotel-which not only offers more services than a motel, but also a delivers higher level of performance on those tangible and intangible elements that are common to both types of accommodation. The core product-overnight rental of a bedroom-is dimensioned by service level, scheduling (how long the room may be used before another payment becomes due), the nature of the process (in this instance, people processing), and the role of
Reservation
Room Service
Check-in I Check-out
Pay TV
-,
Supplementary Services
""
\ \ \
"
""
/ / /
Me3J.
\
7
/ / / / /
""
-, Delivery Processes
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38. 37.
In Figure 3.6, these eight clusters are displayed as petals surrounding the ce of a flower-which we call the flower of seroice.' We've shown them clockwise in sequence in which they are often likely to be encountered by customers (altho this sequence may vary-for instance, payment may have to be made before sen is delivered rather than afterwards). In a well-designed and well-managed sen organization, the petals and core are fresh and well formed. A badly designed poorly executed service is a like a flower with missing, wilted, or discolored pe Even if the core is perfect, the overall impression of the flower is unattractive. Thir about your own experiences as a customer (or when purchasing on behalf of an a nization). When you were dissatisfied with a particular purchase, was it the core th was at fault, or was it a problem with one or more of the petals? Not every core product is surrounded by supplementary elements from all ei~ clusters. As we'll see, the nature of the product helps to determine which supp mentary services must be offered and which might usefully be added to enhan value and make the organization easy to do business with. In general, people pr cessing services tend to be accompanied by more supplementary services than do
Billing
Order Taking
Safekeeping
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Table 3.1
Examples of Information Elements
Directions to service site Schedules/ service hours Prices Instructions on using core product/supplementary services Reminders Warnings Conditions of sale / service Notification of changes Documentation Confirmation of reservations Summaries of account activity Receipts and tickets
other three categories; similarly, high-contact services usually have more than lowcontact services. A company's market positioning strategy helps to determine which supplementary services should be included (see Chapter 7). A strategy of adding benefits to increase customers' perceptions of quality will probably require more supplementary services (and also a higher level of performance on all such elements) than a strategy of competing on low prices. Firms that offer different grades of servicesuch as first class, business class, and economy class in an airline context-often differentiate them by adding extra supplementary services for each upgrade in service.
Information
To obtain full value from any good or service, customers need relevant information (Table 3.1). New customers and prospects are especially information-hungry. Customer's needs may include directions to the site where the product is sold (or details of how to order it), service hours, prices, and instructions for use. Further information, sometimes required by law, might include conditions of sale and use, warnings, reminders, and notification of changes. Customers also appreciate advice on how to get the most value from a service and how to avoid problems (Figure 3.7). Finally, customers may want documentation of what has already taken place, such as confirmation of reservations, receipts and tickets, or monthly summaries of account activity. Companies should make sure the information they provide is both timely and accurate, because inaccurate information can annoy or inconvenience customers. Traditional ways of providing information include using front-line employees (who are not always as well informed as customers might like), printed notices, brochures, and instruction books. Other information media include videotapes or softwaredriven tutorials, touch-screen video displays, and menu-driven recorded telephone messages. The most significant recent innovation has been corporate use of web sites. Examples of useful applications range from train and airline schedules to hotel details, assistance in locating specific retail outlets such as restaurants and stores, and information on the services of professional firms. Many business logistics companies offer shippers the opportunity to track the movements of their packageseach of which is assigned a unique identification number.
Order Taking
Once customers are ready to buy, a key supplementary element comes into playaccepting applications, orders, and reservations (Table 3.2). The process of order taking should be polite, fast, and accurate, so that customers do not waste time and endure unnecessary mental or physical effort. Technology can be used to make order taking easier and faster for both customers and suppliers. The key lies in minimizing the time and effort required of both parties, while also ensuring completeness and accuracy.
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39.
40.
Guan:i your trash from theft by shredding documents and receipts. Thieves can build an altemate identity using the mail you throw 3war.
Don't leave credit cards in gtove cO/Tl)3rtments. (Glove COf1ll3l1ments acCOUnt for thousivlds of credit card thefts.)
AJways check your monthly statements. (Cn","naIs will sometimes make a small purchase fin;t, to see If it goes undetected. before making a big one.)
No<;/Y tho post offoce immedi3tely if you chanp yOUf'" address. Man going to your Did address can end up In the wrong hands.
crt .
Courtesy of Your Credit Card Companies.
Banks, insurance companies, and utilities require prospective customers to _ through an application process designed to gather relevant information and screen out those who do not meet basic enrollment criteria (such as a bad cre record or serious health problems). Universities also require prospective students apply for admission. Reservations (including appointments and check-in) repres a special type of order taking that entitles customers to a specified unit of servicefor example, an airline seat, a restaurant table, a hotel room, time with a qualifi professional, or admission to a facility such as a theater or sports arena with desiznated seating. Accuracy in scheduling is vital-reserving seats for the wrong day likely to be unpopular with customers. Ticketless systems, based on telephone or web-site reservations, provide eno _ mous cost savings for airlines, because there are no travel agent commissions ~ paycustomers book directly-and administrative effort is drastically reduc A paper ticket at an airline may be handled 15 times, whereas an electronic tick
80 Part II Building the Service Model
e 3.2
es of Order=
Elements
Applications Membership in clubs or programs Subscription services (e.g., utilities) Prerequisite-based services (e.g., financial credit, college enrollment) Order Entry On-site order fullillrnent Mail/ telephone order placement email/web site order placement Reservations and Check-in Seats/tables/rooms Vehicles or equipment rental Professional appointments
requires just one step. Customers receive a confirmation number when they make the reservation and need only show identification at the airport to claim their seats and receive a boarding pass.
Billing
Billing is common to almost all services (unless the service is provided free of charge). Inaccurate, illegible, or incomplete bills risk disappointing customers who may, up to that point, have been quite satisfied with their experience. Such failures add insult to injury if the customer is already dissatisfied. Billing should also be timely, because it stimulates faster payment. Procedures range from verbal statements to a machine-displayed price, and from handwritten invoices to elaborate monthly statements of account activity and fees (Table 3.3). Perhaps the simplest approach is self-billing, by which the customer tallies up the amount of an order and authorizes a card payment or writes a check. In such instances, billing and payment are combined into a single act, although the seller may still need to check for accuracy. Customers usually expect bills to be clear and informative, and itemized in ways that make it clear how the total was computed. Unexplained, arcane symbols that have all the meaning of hieroglyphics on an Egyptian monument (and are decipherable only by the high priests of accounting and data processing) do not create a favorable impression of the supplier. Nor does fuzzy printing or illegible handwriting. Laser printers, with their ability to switch fonts and typefaces, to box and to highlight, can produce statements that are not only more legible but also organize information in more useful ways. Marketing research can help here, by asking customers what information they want and how they would like it to be organized. Busy customers hate to be kept waiting for a bill to be prepared in a hotel, or restaurant. Many hotels have now created express check-out options, taking customers' credit card details in advance and documenting charges later by mail. However, accuracy is essential. Customers use the express check-outs to save time; they certainly don't want to waste time later seeking corrections and refunds.
Table 3.3
Examples of Billing Elements
Periodic statements of account activity Invoices for individual transactions Verbal statements of amount due Machine display of amount due Self-billing (computed by customer)
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Table 3.4
Examples of Payment Elements
Self-Service Insert card, cash, or token in machine Electronic funds transfer Mail a check Enter credit card number online Direct to Payee or Intermediary Cash handling and change giving Check handling Credit/charge/debit card handling Coupon redemption Tokens, vouchers, etc. Automatic Deduction from Financial Deposits (e.g., bank charges) Control and Verificati Automated systems (e.g., machine-readable tickets that operate entry gates) Human systems (e.g., toll collectors, ticket inspectors)
Many hotels push bills under guestroom doors on the morning of departure sh ing charges to date; others offer customers the option of previewing their bills bef checkout on the TV monitor in their room.
Payment
In most cases, a bill requires the customer to take action on payment (and such ac may be very slow in coming!). One exception is bank statements, which d charges that have already been deducted from the customer's account. Increasinz customers expect ease and convenience of payment, including credit, when make purchases in their own countries and while traveling abroad. A variety of options exist for customers to make payment. (Table 3.4). Self-serpayment systems, for instance, require insertion of coins, banknotes, tokens, or car in machines. Equipment breakdowns will destroy the whole purpose of such a tern, so good maintenance and rapid-response troubleshooting are essential. payment still takes place through hand-to-hand transfers of cash and checks, credit and debit cards are growing in importance as more and more establishm accept them. Other alternatives include vouchers, coupons, or prepaid tick Firms benefit from prompt payment, because that reduces the amount of accou:: receivable. To ensure that people actually pay what is due, some service businesses ha instituted control systems, such as ticket checks before entering a movie theater or board a train. However, inspectors and security officers must be trained to com politeness with firmness in performing their jobs, so that honest customers do feel harassed.
Consultation
Now we move to enhancing supplementary services, led by consultation. In con to information, which suggests a simple response to customers' questions (or prin; information that anticipates their needs), consultation involves a dialog to probe a tomer requirements and then develop a tailored solution. Table 3.5 provides e ples of several supplementary services in the consultation category. At its simp consultation consists of immediate advice from a knowledgeable service perso response to the request, "What do you suggest?" (For example, you might ask person who cuts your hair for advice on hairstyles and hair products.) Effective sultation requires an understanding of each customer's current situation, bef suggesting a suitable course of action. Good customer records can be a great hel this respect, particularly if relevant data can be retrieved easily from a remote termin
82 Part II Building the Service Model
Customized
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Counseling represents a more subtle approach to consultation because it involves helping customers better understand their situations so that they can come up with their "own" solutions and action programs. This approach can be a particularly valuable supplement to services such as health treatment, in which part of the challenge is to get customers to take a long-term view of their personal situation and to adopt more healthful behaviors, often involving significant lifestyle changes. For example, diet centers use counseling to help customers change behaviors so that weight loss can be sustained after the initial diet is completed. More formalized efforts to provide management and technical consulting for corporate customers include the "solution selling" associated with expensive industrial equipment and services. The sales engineer researches the customer's situation and then offers objective advice about what particular package of equipment and systems will yield the best results for the customer. Some consulting services are offered free of charge, in the hope of making a sale. In other instances, however, the service is "unbundled" and customers are expected to pay for it. Advice can also be offered through tutorials, group training programs, and public demonstrations.
Hospitality
Hospitality-related services should, ideally, reflect pleasure at meeting new customers and greeting old ones when they return. Well-managed businesses try, at least in small ways, to ensure that their employees treat customers as guests. Courtesy and consideration for customers' needs apply to both face-to-face encounters and telephone interactions (Table 3.6). Hospitality finds its fullest expression in face-to-face encounters. In some cases, it starts (and ends) with an offer of transport to and from the service site, as with courtesy shuttle buses. If customers must wait outdoors before the service can be delivered, then a thoughtful service provider will offer weather protection; if customers wait indoors, then a waiting area with seating and even entertainment (TV, newspapers or magazines) to pass the time may be provided. Recruiting employees who are naturally warm, welcoming, and considerate for customer-contact jobs helps to create a hospitable atmosphere. The quality of the hospitality services offered by a firm plays an important role in determining your satisfaction (or dissatisfaction) with the core product. This is especially true for people processing services, because you cannot easily leave the service
Table 3.6
Examples of Hospitality Elements
Greeting Food and beverages Toilets and washrooms Waiting facilities and amenities Lounges, waiting areas, seating Weather protection Magazines, entertainment, newspapers Transport Security
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facility until delivery of the core service is completed. Strategies for improving tomer satisfaction often center on looking for ways to add or improve supplentary services. For instance, a hospital may seek to enhance its appeal by provi the level of room service, including meals, that might be expected in a good h Some airlines seek to differentiate themselves from their competitors with b meals and more attentive cabin crew; Singapore Airlines is well recognized on counts." Although preflight and in-flight hospitality is important, an airline JOUIT' doesn't really end until passengers reach their final destination. Air travelers come to expect departure lounges, but British Airways (BA) came up with novel idea of an arrivals lounge for its terminals at London's Heathrow Gatwick airports, to serve passengers arriving early in the morning after 10 overnight flights from the Americas, Asia, Africa, and Australia. It offers holders first and business class tickets or a BA Executive Club gold card (awarded to airline's most frequent flyers) the opportunity to use a special lounge where can take a shower, change, use a spa, have breakfast, and make phone calls a: check their email before continuing to their final destination feeling a lot fres It's a nice competitive advantage, which BA actively promotes. Other airlines ha felt obliged to copy this innovation.
Safekeeping
When customers are visiting a service site, they often want assistance with their sonal possessions. In fact, unless certain safekeeping services are provided (such safe and convenient parking for their cars), some customers may not come at Onsite safekeeping services includes baggage transport, handling, and stora . safekeeping of valuables; and even child care and pet care (Table 3.7) Responsi . businesses pay close attention to safety and security issues for customers who visiting the firm's premises. Many banks mail brochures with its bank statem containing information about using its ATM machines safely, educating its custom about how to protect both their ATM cards and themselves from theft and perso injury. And the bank makes sure that its machines are in brightly lit, highly visi locations.
Table 3.7
Examples of Safekeeping Elements
Caring for Possessions Customers Bring with Them Child care Pet care Parking facilities for vehicles Valet parking Baggage handling Storage space Safe deposit boxes Security personnel Caring for Goods Purchased (or Rented) by Customers Packaging Pickup Transportation and delivery Installation Inspection and diagnosis Cleaning Refueling Preventive maintenance Repairs and renovation Upgrade
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Additional safekeeping services may involve physical products that customers buy or rent. They may include packaging, pickup and delivery, assembly, installation, cleaning, and inspection. These services may be offered free or for an additional fee.
Exceptions
Exceptions involve supplementary services that fall outside the routine of normal service delivery (Table 3.8). Astute businesses anticipate exceptions and develop contingency plans and guidelines in advance. That way, employees will not appear helpless and surprised when customers ask for special assistance. Well-defined procedures make it easier for employees to respond promptly and effectively. There are several types of exceptions:
1. Special requests. A customer may request service that requires a departure from normal operating procedures. Advance requests often relate to personal needs, including care of children, dietary requirements, medical needs, religious observance, and personal disabilities. Such requests are particularly common in the travel and hospitality industries. 2. Problem solving. Sometimes, normal service delivery (or product performance) fails to run smoothly as a result of an accident, delay, equipment failure, or a customer having difficulty using a product. 3. Handling of complaints/suggestions/compliments. This activity requires welldefined procedures. It should be easy for customers to express dissatisfaction, offer suggestions for improvement, or pass on compliments; and service providers should be able to make an appropriate response quickly. 4. Restitution. Many customers expect to be compensated for serious performance failures. Compensation may take the form of repairs under warranty, legal settlements, refunds, an offer of free service, or another form of payment-in-kind. Managers need to keep an eye on the level of exception requests. Too many requests may indicate that standard procedures need revamping. For instance, if a restaurant frequently receives requests for special vegetarian meals because there are none on the menu, it may be time to revise the menu to include at least one such
Special Requests in Advance of Service Delivery Children's needs Dietary requirements Medical or disability needs Religious observances Deviations from standard operating procedures Handling Special Communications Complaints Compliments Suggestions Problem Solving Warranties and guarantees against product malfunction Resolving difficulties that arise from using the product Resolving difficulties caused by accidents, service failures, and problems with staff or other customers Assisting customers who have suffered an accident or medical emergency Restitution Refunds Compensation in kind for unsatisfactory goods and services Free repair of defective goods
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