An Assignment on Service MarketingChapter Summary & Discussion questions

(Chapter 9-17)

Prepared ForDr. Razia Begum

Professor and ChairpersonDepartment of Marketing

University of DhakaPrepared byWajahat Noor

Roll: 159; Sec: ABatch: 16th

Department of MarketingUniversity of Dhaka

Date of Submission29th September, 2014

Chapter 9

ServiceInnovation &

Designs

Why is it challenging to innovative, design, and develop services?

Service innovation is a new or significantly improved serviceconcept that is taken into practice. It can be for example a newcustomer interaction channel, a distribution system or atechnological concept or a combination of them. A serviceinnovation always includes replicable elements that can beidentified and systematically reproduced in other cases orenvironments. The replicable element can be the service outcomeor the service process as such or a part of them. A serviceinnovation benefits both the service producer and customers andit improves its developer’s competitive edge. A serviceinnovation is a service product or service process that is basedon some technology or systematic method. In services however, theinnovation does not necessarily relate to the novelty of thetechnology itself but the innovation often lies in the non-technological areas. Service innovations can for instance be newsolutions in the customer interface, new distribution methods,novel application of technology in the service process, new formsof operation with the supply chain or new ways to organize andmanage services.

Challenges of service design

Difficult to describe and communicate

variable cannot be touched examines or tried out

4 risks of attempting to describe services in words alone –

oversimplification incompleteness subjectivity

biased interpretation

Oversimplification- inadequate to describe complex service system

Incompleteness- omit details/elements

Subjectivity- biased from personal experiences/degree of exposure

Biased interpretation- 2 people equals to 2 interpretations ofthe same word

What are the risks of attempting to describe services in words alone?There are a number of risks inherent in attempting to describeservices in words alone. They are-

oversimplification incompleteness subjectivity biased interpretation

Oversimplification- to say that portfolio management means buying &selling stocks is like describing buying & selling stocks is likedescribing the space shuttle as something that flies. In ourmodern day global economy service systems have significantlyincreased in complexity often involving networks of servicesfirms, customers, and evaluation of offering over time.

Incompleteness- A performance measurement system is complete whenit provides a full description of service delivery, and it isconsistent when it does not contain internal contradictions.Consistent measurement systems based on only one paradigm will beincomplete because each paradigm can be contested and replacedwith another paradigm. A measurement system based on an objectiveunderstanding of quality excludes the customer’s perception,while a system based on an interactionism approach fails torecognize intrinsic quality. Conversely, complete systems for themeasurement of service quality will contain competing paradigms,

which leads to inconsistencies. Using both an objective andsubjective understanding of quality leads to an inconsistentunderstanding of what it is the system measures.

Subjectivity- Creating a competitive advantage often requireslooking at something (which is right in front of us) from adifferent perspective…the customer’s. Business owners / managerswho spend more than 40 hours a week at their operation oftendon’t see glaring issues that are obvious to the end-user.

In the case of dirty bathrooms, subjectivity has set in for boththe business owner and the customer. Travelers have beenconditioned to accept poorly-maintained bathrooms becausesubjective business owners have forgotten the importance ofkeeping them clean. Travelers are more surprised whenencountering a spotless facility than they are an unsanitary one.

Biased interpretation- no two people will define responsive, quick,or flexible in exactly the same manner. For example, a supervisormay suggest a frontline service employee that the employee shouldtry to be more flexible or responsive in providing service to thecustomers. Unless the term flexibility is further defined theemployee is likely to interpret the word differently from themanager.

Compare & contrast the blueprints figure 9.5 & 9.6Service blueprint is a picture or map that accurately portraysthe service system so that different people involved in providingit can understand and deal with it objectively regardless oftheir individual point of view.

Particularly useful at design and redesign stages of servicedevelopment. It provides a way to break the service into logicalcomponents and to depict the steps or tasks in the processes, the

means by which they are executed and evidence of the service asconsumer experiences it.

Service Mapping/Blueprinting

It is a tool for simultaneously depicting the service process,the points of customer contact, and the evidence of service fromthe customer’s point of view.

Process Service Mapping Points of Contact Evidence

Blueprint components

Basic components of Service Blueprint are:

Customer actions “Onstage” contact employee actions “Backstage” contact employee actions Support processes

In case of figure 9.5

It is clear in this delivery mail service that customer’s pointof view there are only three steps in the service process theyare- The phone call, the packaging pickup and the packagedelivery. The process is relatively standardized and the peoplewho perform the service are the phone order taker and thedelivery person and the physical evidence includes the documentpackage the transmittal forms the truck and the handheldcomputer. External customers are apparent in the blueprint.

In the case of figure 9.6

The customers are more actively involved in the service than heor she is in the express mail service. The guest first checks inthen goes to the hotel room here a variety of steps take placeand finally checks out. Imagine how much more complex the processis. Each step in the customer’s action area is also associatedwith various forms of physical evidence, from the hotel parkingarea and hotel exterior and interior to the forms of lobby, roomand food.

How might a service blueprint be used for marketing, human resource & operation decision?Human Resources

empowering the human element

job descriptions selection criteria appraisal systems

System Technology providing necessary tools for marketing:

system specifications personal preference databases Service Marketers creating realistic customer expectations service system design promotion

Operations Management

rendering the service as promised managing fail points training systems quality control

Describe a logical process you might use to introduce a new service to the marketplace. What steps in the process might be most difficult and why?Developing new services of any type should not be a hit or missprocess, such innovation should be built into the fabric of thefirm whereby compensation is linked to development of new ideasand the overall firm culture supports the necessary processes andactivities for successful new service development (NSD). The PSFmust consider the rationale for NSD in terms of meeting bothinternal (staff) and external customer needs as well as fit withthe overall strategy of the firm and its objectives as well ascapabilities. The PSF competes in two markets, one is for clientsand the other is for talent. Whilst a firm maybe happy providingstandardized services for the same clients in the same industriesover a long period of time, this may lead to stagnation amongstprofessionals within the firm which could eventually lead to a

lack of intellectual stimulation and higher staff turnover. Onthe other hand, developing services in areas that the firm lacksexpertise may give professionals the chance to learn new skillsbut will require the firm to import those competencies eitherthrough additional hiring or joint ventures. This can disrupt theculture of the firm and create other types of problems. It istherefore crucial for the professional firm leaders to considercarefully the NSD process and the impact it will have on the firmoverall. These types of considerations tend to be unique to theprofessional service industry.

Essentially, there are two growth strategies that are related tonew services:

Service development – offering new services to clientmarkets currently served. For example, a CPA firm may wishto start offering management consultancy services to clientmarkets that it already serves for tax and audit services.

Service diversification– offering new services to new clientmarkets. For example, a law firm decides to target thecommercial real estate market when it previously onlyfocused on family law.

Front End Planning

Initially, the firm must determine its strategic direction withinwhich its new service strategy will fit. If the organizationdevelops aggressive growth plans that involve entering newmarkets then that will predicate its need to engage in some typeof diversification. This in turn will make the firm consider howit will acquire the competencies to serve those markets.

Idea generation is the first step in developing a new service.Ideas can come from many sources including staff, changes in theoperating environment, competitors and internal brainstorming.However, probably the most powerful source of ideas will be thebusiness problems and issues that target clients face. Having adeep understanding of your client industries and the challengesthey face will provide a lens with which to view the ideageneration process. Once ideas have been screened and initially

accepted, they can refine in order to be tested. The service canbe tested with key clients but will require input from multiplestakeholders in order for something concrete and specific to bedeveloped. The intangible nature of services makes them muchharder for customers to visualize hence the benefits, valueproposition, and how it works will take a number of iterationsbefore it is viable as a concept to be tested properly. Once aservice concept passes this stage then its feasibility and profitpotential needs to be examined. This will include costs ofdevelopment and managing the service as well as demand potentialand overall revenue forecasts.

Implementation

Now the fully developed service can be tested on a larger marketand further refinements can be made based feedback received.Again, the difficulty involved in implementing new servicessuggests that multiple stakeholders should be involved in orderto assess and critique the service from both a delivery and usageperspective. You can also gauge the demand to some degree fromthe response of clients who were included in the test and seewhether your financial estimates are accurate. If response ispoor you may have to go back several steps in the process orabandon altogether. At the launch and commercialization stage youare basically going live and can examine all aspects of theservice process including the interaction with other servicesalready offered by the firm as well as the degree of acceptanceby the market place. One can still make changes here based onfeedback if the overall response is positive but requires somechanges to the design of the service, its benefits or theprocess. Many firms create service blueprints that depict insubstantial detail the service process, interaction with clientsand the evidence of service as the client experiences it.Launching takes careful consideration of timing and markets as

well as extent. In other words you can launch a service with muchfanfare and at many markets or you can take a low key approachand steadily increase the activity associated with the service asacceptance grows and success seems more likely. Whatever ischosen, it is crucial that the firm has the resources ready tocapitalize on the opportunity it has created.

Conclusion – measuring success

In manufacturing firms the use of financial measure such as ROIdominate the landscape when measuring success of new products. Inthe professional services sector there is a strong case for awider criteria when measuring success. Firstly, using ROI as themajor indicator of success may be inappropriate for the PSF for anumber of reasons such as the need of the firm to developcritical competencies as well as the fact that the major assetsof the PSF are human, intellectual and social. Hence otherfactors should be considered such as the impact of new projectsand services on the competencies of the firm, its image, and itsrelationship with clients. Peter Drucker called measuringorganizational performance only by financials a fallacy. For thePSF, this may be particularly so.

Chapter 10

Customer DefinedService

Standards

How does the service measurement that we describe in this chapter differ from the service measurement in chap 6?

Superior customer service can help your business to grow by increasing:

The number of customers attracted by favorable word-of-mouthadvertising

The dollars spent by each customer per transaction

The frequency and number of times your customers shop with you.

Other benefits of high-quality service include:

improved customer satisfaction

stronger customer loyalty

consistency of work-flow practices

reduced marketing costs

competitive advantage

improved market position

Staff pride and satisfaction.

In what types of service industries are standards most difficult to develop?

Company Customer priorities Customer defined standard

FedEx On time delivery Number of packages right day late

Number of packages wrong day late

Number of missed packages

Dell computer On time delivery

Computers work properly

Ship to target

Initial field incident rate

Service delivery on

time first timefix

Southeast airlines Reliability

Responsiveness to complains

On time arrival

Two week reply to letters

Does the firm need company defined standards at all? Could all the standards in a company be customer defined?

Customer Defined: Requirements that is visible and assessed by consumers.

Defined Service Standards- The type of standard that close provider gap 2:

Hard Customer - Defined Standards- things that can be counted, timed, or observed through audits. FedEx packages on right day, packages on wrong day, missed pickups

Soft Customer - Defined Standards- things that cannot be counted, timed, or observed through audits and are Opinion-based measures .General Electric Phone operators- understanding customers question, following through on promises, Being Courteous, Being Knowledgeable.

One-Time Fixes - A Type of Company-Defined standards that are Technology, Policy, or procedure changes that, when instituted, address customer requirement.

A service standard should be linked to an operational performancetarget or the frequency to which the organization expects to meetthe service standard. The target takes into account the risks associated with process delays and uncertainties arising from

factors such as workload fluctuations, staff movements, and seasonal variations.

The purpose of the target is to help manage operations and track progress against overall delivery objectives. The target is typically designed for management use but can also be made available to the public.

What is the difference between hard and soft standards?

Hard Customer- Defined Standards- things that can be counted, timed, or observed through audits. FedEx packages on right day, packages on wrong day, missed pickups

Soft Customer - Defined Standards- things that cannot be counted, timed, or observed through audits and are opinion-based measures .General Electric Phone operators- understanding customers question, Following through on promises, Being Courteous, Being Knowledgeable

Which of the service performance indexes described at the end of the chapter do you think is the most effective? Why?

Having defined the ideal set of standards, management is then faced with the challenge of working out how to measure performance against the standard.

The standard is of no use if performance against it cannot be measured. Technology often has a role to play in monitoring performance against timeliness standards – particularly in–comingtelephone calls.

Correspondence management systems also help monitor the timely answering of written communications. Use of technology as part of

the process may allow performance results to be based on 100% of all transactions, rather than on a sample.

Feedback forms or follow-up calls/questionnaires can be used to check customer feedback. It is important to get expert advice on sampling.

At this stage, all ambiguity must be eliminated from the wording of standards so that the whole organization understands the measure.

Suppose that ‘95% of calls to be answered in three rings’ is a draft standard. It leads to the following questions:

What happens to the other 5% of calls?

Do we care how long the customer has to wait?

Do we mean answered by a computerized voice or by a real human being?

Does the standard apply 24 hours/day, 7 days/week?

Development of the final wording and the associated data gathering process is likely to require a couple of iterations. Some compromises may be required as the cost of data collection is balanced against the ideal service definition.

Accuracy and responsiveness standards are more challenging to monitor. Listening to calls, speaking to customers and independent assessment of written/ email communications against the original enquiry on a sample basis usually provide reliable results.

Statisticians should be asked to give advice on sample sizes and data gathering techniques.

Chapter 11

Physicalevidence & the

Servicescape

What is physical evidence? And why have we devoted an entirechapter to it in a marketing text?

Physical evidence is about where the service is being deliveredfrom. It is particularly relevant to retailers operating out ofshops. This element of the marketing mix will distinguish acompany from its competitors. Physical evidence can be used tocharge a premium price for a service and establish a positiveexperience. For example all hotels provide a bed to sleep on butone of the things affecting the price charged, is the conditionof the room (physical evidence) holding the bed. Customers willmake judgments about the organization based on the physicalevidence. For example if we walk into a restaurant we expect aclean and friendly environment, if the restaurant is smelly ordirty, customers are likely to walk out. This is before they haveeven received the service. Servicescape means actual physicalfacility in which the service is performed, delivered, andconsumed.

Some organizations depend heavily upon physical evidence as ameans of marketing communications, for example tourismattractions and resorts, parcel and mail services, and largebanks and insurance companies. This is important to theircorporate image. Of course there are other examples with aslightly more tangible offering such as Rolls-Royce motor carsand P&O cruises.

The Service Marketing Mix involves Product, Price, Place,Promotion, People, Process and Physical Evidence. Firms marketinga service need to get each of these elements correct. The

marketing mix for physical evidence has additional elementsbecause the characteristics of a service are different to thecharacteristics of a product. To certain extent managing physicalevidences are more complicated then managing products, productscan be standardized, to standardize a physical evidence is moredifficult as it can be affected by factors outside the serviceprovider’s control.

How can an effective physical evidence strategy help close provider gap 2?

The strategy that closes gap 2 involves the use of physical evidence in service design and in meeting customer expectations. Even when a company has a thorough and ongoing understanding of its customers’ expectations, it is still very possible, in fact, quite easy, to fail to deliver quality service. This might happendue to Gap 2- the design and standards gap. This gap is concernedwith translating customer expectations into actual service designs and developing standards to measure service operations against customer expectations.

This includes everything tangible in the service-delivery process, such as business cards, reports, signage, Internet presence, equipment, and facilities used to deliver the service. The servicescape, the physical setting where the service is delivered, is a particular focus of physical evidence and is critical in industries such as restaurants and hotels to communicate about the service and make the entire experience pleasurable. In these cases, the servicescape plays a variety of roles, from serving as a visual metaphor for what the company stands for to actually facilitating the activities of both consumers and employees.

Given the importance of physical evidence and its potentially powerful in uence on both customers and employees, it is flimportant for rms to think strategically about the design and fimanagement of the tangible evidence of service

What are the guidelines for physical evidence strategy?

The guidelines for physical evidence strategy are as follows:

1. Recognize strategic impact of physical evidence.

2. Blueprint physical evidence of service.

3. Clarify strategic roles of servicescape.

4. Assess/identify physical evidence opportunities.

5. Be prepared to update and modernize evidence.

6. Work cross-functionally

Why is everyone not affected in exactly the same way by the servicescape?

Everyone is not affected in exactly the same way because of the following reasons:

i. Internal response moderators are different for each individual. This compels them to respond to the same servicescape differently from others.

ii. Personality differences form framework for affection. Suchas: someone can be attention seeker or an attention avoider.

iii. Individual’s mood formulates perception and reaction towards servicescape.

iv. The purpose of the customer is very important a factor. A person seeking business meeting environment might be less sensitive towards hotel environment than someone staying there for two weeks.

v. Other than these factors physical environment dimensions also play role in effect of servicescape.

Describe how servicescape play each of the following strategic roles: package, facilitator, socializer and differentiator.

1. Package:

The servicescape and other elements of physical evidence essentially wrap the service and convey to consumers an external image of what is inside.

Designed to portray a particular image as well as to evoke a particular sensory or emotional reaction. the physical setting of a service does the same thing through the interaction of many complex stimuli.

The outward appearance of the organization and thus canbe critical in forming initial impressions or setting up customer expectations-it is a visual metaphor for the intangible service.

Particularly important in creating expectations for newcustomers and for newly established service

organizations that are trying to build a particular image.

The packaging role extended to the appearance of contact personnel through their uniforms.

The same care and resource expenditures given to package design in product marketing are not often provided for services

2. Facilitator:

How the setting is designed can enhance or inhibit the efficient flow of activities in the service setting, making it easier or harder for customers and employees to accomplish their goals. a well deisgned, functional facility can make the service a pleasure to experience from the customers point of view and a pleasure to perform the employees. poor and inefficient design may frustrate both customers and employees.

Airlines trying to make their seats more comfortable tosleep in

Hotels trying to make rooms more homelike.

3. Socializer:

Socializer -the design of the servicescape aids in the socialization of both employees and customers in the sense that it helps convey expected roles, behaviors, and relationships.

A new employee would come to understand her position inthe hierarchy through noting her office assignment, the

quality of her office furnishings, and her location relative to others in the organization

The goal is to be the customers third place that is a place where customers think of spending time when not at work or at home

4. Differentiator:

The design of the physical facility can differentiate afirm from its competitors and signal the market segmentthat the service is intended for.

Given its power, changes in the physical environment can be used to reposition a firm and or to attract new market segment.

Signage, colors used in decor, displays, music are are all for the intended market segment

Design of a physical setting can also differentiate oneare of a service organization from another. Seats with more leg room cost most, bigger hotel rooms cost more.

Chapter 12

Employees’ roles

In

Service delivery

Define service culture. Why is service culture so important?Corporate culture of an organization is the pattern of sharedvalues, beliefs, and rules or patterns of common behavior in theorganization. A service culture implies type of organizationalculture that promotes kinds of behavior in its employees thatleads to high concern for serving its customers.

Service culture is a Culture where an appreciation for goodservice exists, and where giving good service to internal as wellas ultimate, external customers is considered a natural way oflife and one of the most important norms by everyone.

Service culture can be built in an organization only by asustained and consistent effort over and extended period. Itcannot be introduced by top management diktats only. Serviceculture is important because it has direct impact on:

Hiring right people Retaining the best people Developing the people to deliver service quality Providing needed support system to people

Why are service employees critical to the success of any service organization?Importance of service employees are as follows:

They are the service: We often do not distinguishbetween the person and the firm (haircutting, childcare, counseling, legal services)

They are the organization in the customer’s eyes:Employees represent the firm to the client and maybe the ONLY contact they have with the firm.

Everything they say and do can influenceperceptions of the organization even off-duty.

They are the brand. They are marketers: They are walking billboards.

They represent the company and influence customersatisfaction.

They are salespersons (waiters selling dessert) Their importance is evident in: Services marketing

mix- (people), service-profit chain, servicestriangle

Discuss 5 links of the service profit chain?5 links of the service profit chain are as follows:

Internal Service Quality: employee selection and training, quality work environment, strong support for those dealing with customers.

Satisfied/productive service employees: satisfied,loyal, and hard-working employees.

Greater Service Value: More effective/efficient customer value creation and service delivery.

Satisfied and loyal customers: Satisfied customers who remain loyal, repeat purchases, and refer others.

Healthy service profits and growth: Superior service firm performance

What is meant by service marketing triangle?The service marketing triangle visually reinforces the importanceof people in the ability of firms to keep their promises andsucceed in building customer relationships.

The triangle shows the three interlinked groups that worktogether to develop, promote, and delivery services: the company,customers and the providers. Between these three points on thetriangle, three types of marketing must be successfully carriedout for a service to succeed: external marketing. interactivemarketing, internal marketing.

What is emotional labor? Emotional labor or emotion work is a requirement of a job thatemployees display required emotions toward customers or others.As particular economies move from a manufacturing to a service-based economy, many more workers in a variety of occupationalfields are expected to manage their emotions according toemployer demands when compared to sixty years ago. So emotionallabor is about:

The labor that goes beyond the physical or mental skillsneeded to deliver service quality.

Boundary spanning employees are expected to align theirdisplayed emotions with organizationally desired emotionsvia their use of emotional labor. (smiling, making eyecontact, friendly)

Even if having a bad day employees are expected to be in agood mood for customers.

Chapter 13

Customers’ roles

In

Service delivery

Chapter 14

DeliveringService throughIntermediaries &

ElectronicChannels

Chapter 15

Managing Demand

& Capacity

Chapter 16

IntegratedServicesMarketing

Communication

Chapter 17

Pricing ofServices

This chapter began with three key differences between customerevaluations of price for service and goods:

1) Customer often have inaccurate or limited reference pricefor services.

2) Price is a key signal of quality in services, and

3) Monetary price is not the only relevant price to servicecustomers.

These three differences can have profound effects on thestrategies that companies use to set and administer prices forservices. The chapter next discussed common pricing structures,including

1) Cost based,

2) Competition based,

3) Demand based pricing.

Central to the discussion were the specific challenges in each ofthese structures and the services pricing structures that haveemerged in practice.

Finally, the chapter defined customer perception of value andsuggested appropriate pricing strategies that matched eachcustomer definition. The four value definition includes:

1) Value is a quality I get for the price I pay

2) Value is low price

3) Value is all that I get for all that I give and

4) Value is whatever I want in a product or service

5)

Which approach to pricing is the most fair to customers? Why?

There are three approaches to pricing. They are:

1) Cost based,

2) Competition based,

3) Demand based pricing

Among them first two approaches are described based on thecompany and its competitors rather than customers. Neitherapproach takes into consideration that customers may lackreference prices, may be sensitive to nonmonetary prices, and mayjudge quality on the basis of prices. The third major approachesto pricing, demand based pricing, involves setting pricesconsistent with customer perceptions of value. That is why demandbased pricing is most fair to customers.

For what customer services do you have reference prices? What makes these services different from others for which you lack reference price?

Reference price is a price in memory for a good or service thatcan consist of price last paid, price most frequently paid or

average of all prices customers have paid for similar offering.I have reference prices for the service of Lab Aid Hospital.

What make different: There are five elements of reference pricewhich can make different from others. They are given below:

1) Service variability limits knowledge

2) Providers are unwilling to estimate price

3) Individual customer needs vary

4) Collection for price information is overwhelming in servicesand

5) Prices are not visible.

Is it possible to use all three approaches simultaneously when pricing services? If your answer yes, describe a service that is priced this way.

Yes, it is possible to use all three approaches simultaneouslywhen pricing services. For example in hotel service there aredifferent packages for different customers where the hotelmanagement can offer cost based pricing where they determineexpenses from labor, adds amounts or percentages for overhead andprofits, and there by arrives at the prices.

Again they can have a package based on competition based pricingwhere through pricing differences they compete with other hotelservices.

And of course a hotel service pricing can be based on demandbased pricing where they offer service based on customer’sdemand.