Services Marketing - Definition

and Characteristics
Introduction
The world economy nowadays is increasingly characterized as a service economy. This
is primarily due to the increasing importance and share of the service sector in the
economies of most developed and developing countries. In fact, the growth of the
service sector has long been considered as indicative of a countrys economic progress.
Economic history tells us that all developing nations have invariably experienced a shift
from agriculture to industry and then to the service sector as the main stay of the
economy.
This shift has also brought about a change in the definition of goods and services
themselves. No longer are goods considered separate from services. Rather, services
now increasingly represent an integral part of the product and this interconnectedness
of goods and services is represented on a goods-services continuum.

Definition and characteristics of Services

The American Marketing Association defines services as - Activities, benefits and
satisfactions which are offered for sale or are provided in connection with the sale of
goods.
The defining characteristics of a service are:
Intangibility: Services are intangible and do not have a physical existence. Hence
services cannot be touched, held, tasted or smelt. This is most defining feature of a
service and that which primarily differentiates it from a product. Also, it poses a unique
challenge to those engaged in marketing a service as they need to attach tangible
attributes to an otherwise intangible offering.
1. Heterogeneity/Variability: Given the very nature of services, each service
offering is unique and cannot be exactly repeated even by the same service
provider. While products can be mass produced and be homogenous the same is
not true of services. eg: All burgers of a particular flavor at McDonalds are almost
identical. However, the same is not true of the service rendered by the same
counter staff consecutively to two customers.

2. Perishability: Services cannot be stored, saved, returned or resold once they

have been used. Once rendered to a customer the service is completely
consumed and cannot be delivered to another customer. eg: A customer
dissatisfied with the services of a barber cannot return the service of the haircut
that was rendered to him. At the most he may decide not to visit that particular
barber in the future.
3. Inseparability/Simultaneity of production and consumption: This refers to
the fact that services are generated and consumed within the same time frame.
Eg: a haircut is delivered to and consumed by a customer simultaneously unlike,
say, a takeaway burger which the customer may consume even after a few hours
of purchase. Moreover, it is very difficult to separate a service from the service
provider. Eg: the barber is necessarily a part of the service of a haircut that he is
delivering to his customer.

Types of Services
1. Core Services: A service that is the primary purpose of the transaction. Eg: a
haircut or the services of lawyer or teacher.
2. Supplementary Services: Services that are rendered as a corollary to the sale
of a tangible product. Eg: Home delivery options offered by restaurants above a
minimum bill value.

Difference between Goods and Services

Given below are the fundamental differences between physical goods and services:
Goods

Services

A physical commodity

A process or activity

Tangible

Intangible

Homogenous

Heterogeneous

Production and distribution are

separation from their consumption

Production, distribution and consumption are

simultaneous processes

Can be stored

Cannot be stored

Transfer of ownership is possible

Transfer of ownership is not possible

Differences between service marketing and product marketing

1. When you are marketing a service, you are really marketing relationship
and value. This relationship and value needs to be marketed differently than
if you are marketing actual products.
2. Another major difference between marketing services and marketing
products is that when a buyer purchases a service, the buyer is purchasing
something that is intangible, instead of a tangible product, like a computer
or a sprinkler system or a web page.
3. Consumers' concept of a service is often times based on just the
reputation of only one single person. Instead of building a reputation based
on the quality of a number of different products, a service is built on how
well a particular person delivers on a service, such as how well a stock
advisor does with your stock portfolio.
4. It is pretty easy to compare the quality of different products. It's easy for
you to see if one computer works more quickly than another computer, or if
one TV has a better picture than another picture, or if your child can break a
toy more easily than another toy. However, it is much more difficult to
compare the quality of similar services that are provided.
5. Products are returnable. However, services are not returnable.

Importance of Service Marketing

by Leigh Richards, Demand Media

The U.S. economy has evolved into a service economy with services like health care, education
and consulting making up a larger part of the overall economy. Marketing such services is an
important skill--and a tough one--for businesses to have. Without a tangible product to show and

tell customers about, service marketers must be adept at pulling together all the pieces of the
marketing mix to create value for their intended consumers.

Relationships Are Key

In service marketing, because there is no tangible product, relationships are key. Service
marketers must listen to and understand the needs of customers and prospective customers to
build loyalty and trust. Ultimately, effective relationships in service marketing will lead to repeat
sales and positive word of mouth.

Multiple Touchpoints
Service marketing involves many touchpoints for the consumer. Interactions with multiple
people and experiences that are less tangible than when buying an actual product all impact the
consumer's perspective of the purchase process. These touchpoints work together to establish a
perception in the consumer's mind.

Services Proliferate
Consumers have many service options to choose from, and because the product is intangible, the
challenge for the service marketer is to somehow make her services stand out from the crowd.
Because service marketing is so prolific, marketers must think of ways to communicate the
benefits of the service they offer in language that reflects consumer need and value.

Feedback Improves Service

Unlike the marketing process for a tangible product, service marketing actually involves the
consumer in the marketing process. He is engaged in the process and contributes to a positive
outcome. For this reason, it is important to seek consumer feedback and to use that feedback to
improve service marketing effectiveness.

Technology Impacts
Technology is having a major impact on the service economy. You can use technology to
streamline service activities and provide do-it-yourself options for consumers. Internet-based
services, for instance, allow consumers to participate actively in the service marketing process,
often never involving contact with another human being. Having a website is important, because
people like to get information about service providers before deciding which one to use.
The Service Economy
The world economy is increasingly characterized as a service economy. This is
primarily due to the increasing importance and share of the service sector in the

economies of most developed and developing countries. In fact, the growth of the
service sector has long been considered as an indicator of a country's economic
progress. Economic history tells us that all developing nations have invariably
experienced a shift from agriculture to industry and then to the service sector as the
mainstay of the economy. This shift has also brought about a change in the definition of
goods and services themselves.
Service organizations vary widely in size. At one end of the scale are huge international
corporations operating in such industries as airlines, banking, insurance,
telecommunications, and hotels. At the other end of the scale are a vast array of locally
owned and operated small businesses, such as restaurants, laundries, optometrists,
beauty parlors, and numerous business-to-business services.
The service sector is going through revolutionary change, which dramatically affects the
way in which we live and work. New services are continually being launched to satisfy
our existing needs and to meet needs that we did not even know we had. Nearly fifty
years ago, when the first electronic file sharing system was created, few people likely
anticipated the future demand for online banking, website hosting, or email providers.
Today, many of us feel we can't do without them. Similar transformations are occurring
in business-to-business markets.
The Role Of the Service Economy In Development
As of 2008, services constituted over 50% of GDP in low income countries. As their
economies continue to develop, the importance of the service sector continues to grow.
For instance, services accounted for 47% of economic growth in sub-Saharan Africa
over the period 20002005, while industry only contributed 37% and agriculture only
16% in that same period. This means that recent economic growth in Africa relied as
much on services as on natural resources or textiles, despite many of those countries
benefiting from trade preferences in primary and secondary goods.
As a result of these changes, people are leaving the agricultural sector to find work in
the service economy. This job creation is particularly useful as often it provides
employment for unskilled workers in the tourism and retail sectors, which benefits the
poor and represents an overall net increase in employment. The service economy in
developing countries is most often made up of the following industries: financial
services, tourism, distribution, health, and education.
______________________________________________________________________________

Growth of service sector in indiaServices Sector Growth Rate in India GDP has been very rapid in the last few years. The Services
Sector contributes the most to the Indian GDP. The Growth Rate of the Services Sector in India GDP has
risen due to several reasons and it has also given a major boost to the Indian economy.
The Indian economy is the second fastest major growing economy in the whole world with the growing
rate of the GDP at 9.4% in 2006- 2007. The economy of India is the twelfth biggest in the world for it has
the GDP of US$ 1.09 trillion in 2007. The real reason for the growth of the service sector is due to the
increase in urbanization, privatization and more demand for intermediate and final consumer services.
Availability of quality services is vital for the well being of the economy. Along with the global trends,
Indian service sector has witnessed a major boom and is one of the major contributors to both
employment and national income in recent times. The activities under the purview of the service sector
are quite diverse. Trading, transportation and communication, financial, real estate and business
services, community, social and personal services come within the gambit of the service industry.

Information Technology Industry

The Information Technology industry has achieved phenomenal growth after liberalization. The industry
has performed exceedingly well amidst tough global competition. Being knowledge based industry; India
has been able to leverage the global markets, because of the huge pool of engineering talent available
and the proficiency in English language among the middle class.
Retailing
Before liberalization, India had one of the most underdeveloped retail sectors in the world. After
liberalization the scenario changed dramatically. Organized retailing with prominence on self service and
chain stores has changed the dynamics of retailing. In most of the tier I and tier II cities supermarket
chains mushroomed, catering to the needs of vibrant middle class. This indirectly contributed to the
growth of the packaged food industry and other consumer goods.
Banking
The three major changes in the banking sector after liberalization are:

Step to increase the cash outflow through reduction in the statutory liquidity andcash reserve ratio.

Nationalized banks including SBI were allowed to sell stakes to private sector and private investors
were allowed to enter the banking domain. Foreign banks were given greater access to the domestic
market, both as subsidiaries and branches, provided the foreign banks maintained a minimum assigned
capital and would be governed by the same rules and regulations governing domestic banks.

Banks were given greater freedom to leverage the capital markets and determine their asset portfolios.
The banks were allowed to provide advances against equity provided as collateral and provide bank
guarantees to the broking community.
Insurance Sector
The Insurance Regulatory and Development Authority Act 1999 (IRDA Act) allowed the participation of
private insurance companies in the insurance sector. The primary role of IRDA was to safeguard the
interest of insurance policy holders, to regulate, promote and ensure orderly growth of the insurance
industry. The insurance sector could invest in the capital markets and other than traditional insurance
products, various market link insurance products were available to the end customer to choose from.
Future Trends

Globally outsourcing industry would continue to grow.

Following the success of US and UK, more countries in the European Union would outsource their
business.

Technological power shift from the West to the East as India and China emerge as major players.

Political backlash over outsourcing would come down as companies reap the benefit of outsourcing.

Service Marketing Mix 7 Ps of marketing

The service marketing mix is also known as an extended
marketing mix and is an integral part of a service blueprint
design. The service marketing mix consists of 7 Ps as compared to
the 4 Ps of a product marketing mix. Simply said, the service
marketing mix assumes the service as a product itself. However it
adds 3 more Ps which are required for optimum service delivery.

The product marketing mix consists of the 4 Ps which are

Product, Pricing, Promotions and Placement. These are discussed
in my article on product marketing mix the 4 Ps.
The extended service marketing mix places 3 further Ps which
include People, Process and Physical evidence. All of these factors
are necessary for optimum service delivery. Let us discuss the
same in further detail.
Product The product in service marketing mix is intangible in
nature. Like physical products such as a soap or a detergent,
service products cannot be measured. Tourism industry or the
education industry can be an excellent example. At the same time
service
products
areheterogenous, perishable and
cannot
be owned. The service product thus has to be designed with care.
Generally service blue printing is done to define the service

product. For example a restaurant blue print will be prepared

before establishing a restaurant business. This service blue print
defines exactly how the product (in this case the restaurant) is
going to be.
Place Place in case of services determine where is the service
product going to be located. The best place to open up a petrol
pump is on the highway or in the city. A place where there is
minimum traffic is a wrong location to start a petrol pump.
Similarly a software company will be better placed in a business
hub with a lot of companies nearby rather than being placed in a
town or rural area.
Promotion Promotions have become a critical factor in the
service marketing mix. Services are easy to be duplicated and
hence it is generally the brand which sets a service apart from its
counterpart. You will find a lot of banks and telecom companies
promoting themselves rigorously. Why is that? It is because
competition in this service sector is generally high and
promotions is necessary to survive. Thus banks, IT companies,
and dotcoms place themselves above the rest by advertising or
promotions.
Pricing Pricing in case of services is rather more difficult than
in case of products. If you were a restaurant owner, you can price
people only for the food you are serving. But then who will pay for
the nice ambience you have built up for your customers? Who will
pay for the band you have for music? Thus these elements have to
be taken into consideration while costing. Generally service
pricing involves taking into consideration labor, material cost and

overhead costs. By adding a profit mark up you get your final

service pricing. You can also read about pricing strategies.
Related Marketing mix of Samsung - 4P of Samsung

Here on we start towards the extended service marketing mix.

People People is one of the elements of service marketing mix.
People define a service. If you have an IT company, your software
engineers define you. If you have a restaurant, your chef and
service staff defines you. If you are into banking, employees in
your branch and their behavior towards customers defines you. In
case of service marketing, people can make or break an
organization. Thus many companies nowadays are involved into
specially getting their staff trained in interpersonal skills and
customer service with a focus towards customer satisfaction. In
fact many companies have to undergo accreditation to show that
their staff is better than the rest. Definitely a USP in case of
services.
Process Service process is the way in which a service is
delivered to the end customer. Lets take the example of two very
good companies Mcdonalds and Fedex. Both the companies
thrive on their quick service and the reason they can do that is
their confidence on their processes. On top of it, the demand of
these services is such that they have to deliver optimally without a
loss in quality. Thus the process of a service company in delivering
its product is of utmost importance. It is also a critical component
in the service blueprint, wherein before establishing the service,

the company defines exactly what should be the process of the

service product reaching the end customer.
Physical Evidence The last element in the service marketing
mix is a very important element. As said before, services are
intangible in nature. However, to create a better customer
experience tangible elements are also delivered with the service.
Take an example of a restaurant which has only chairs and tables
and good food, or a restaurant which has ambient lighting, nice
music along with good seating arrangement and this also serves
good food. Which one will you prefer? The one with the nice
ambience. Thats physical evidence. Several times, physical
evidence is used as a differentiator in service marketing. Imagine
a private hospital and a government hospital. A private hospital
will have plush offices and well dressed staff. Same cannot be said
for a government hospital. Thus physical evidence acts as a
differentiator.
This is the service marketing mix (7p) which is also known as the
extended marketing mix.

Classification of services
In order to be able to make a clear and relevant classification of
services, we would first need to understand the concept of the
word itself. Services usually refer to processes and not physical
products. Some services may include people whereas other
services (like online services) may including objects which are
managed by people.
Examples of services which include people can be a hair salon,
education, theater, restaurants, public transportation. On the

other hand services that include objects include repairs and

maintenance, dry cleaning, banking, legal services, insurance, etc.
The service processes can be either manual or mechanized or
both.
It is possible to carry out a classification of services based on
two general dimensions such as what is being processed, whether
is it a person or an object, and how is it being processed? In other
words, what is the nature of the process (tangible or intangible
actions).
In terms of the people processing activities, the level of
involvement of the people can vary significantly. Managers must
think about processes/outputs in terms of what happens to
customers and what is being created. For pricing this category of
services, the non-financial costs, time mental effort as well as fear
and pain level must be identified.
Having your computer broken and taking it to a repair facility is
one example of service included in this category. Customers are
less physically involved in this category of services and usually
there is no real need for them to enter the service once he
requested the service, explained the problem and pays the
respective service.
Classification of services can be done on the basis of two points.
These two points or factors, are further sub divided into 2 further
variables. All in all, service classification considers four types of
people or objects.

1) Classification of service based on tangible action

Wherever people or products are involved directly, the service
classification can be done based on tangibility.
Related Setting up SMART objectives

a) Services for people Like Health care, restaurants and

saloons, where the service is delivered by people to people.
b) Services for goods Like transportation, repair and
maintenance and others. Where services are given by people for
objects or goods.

2) Classification of services based on intangibility There

are objects in this world which cannot be tangibly quantified. For
example the number of algorithms it takes to execute your
banking order correctly, or the value of your life which is
forecasted by insurance agents. These services are classified on
the basis of intangibility.
a) Services directed at peoples mind Services sold
through influencing the creativity of humans are classified on the
basis of intangibility.
b) Services directed at intangible assets Banking, legal
services, and insurance services are some of the services most
difficult to price and quantify.
The most intangible form of service output is represented by
information processing. The customers involvement in this type
is service is not required. Generally, customers have a personal
desire to meet face to face but there is no actual need in terms of
the operational process. Consultancy services can be an example
of this type of services where the relationship can be built or
sustained on trust or telephone contact. However, it is more

indicated to have a face-to-face relationship in order to fully

understand the needs of the customer.
A more general classification of services based on the type of
function that is provided through them can be as follows:
1. Business services.
2. Communication services.
3. Construction and related engineering services.
4. Distribution services.
5. Educational services.
6. Environmental services.
7. Financial services.
8. Health-related and social services.
9. Tourism and travel-related services.
10. Recreational, cultural, and sporting services.
11. Transport services.
12. Other services not included elsewhere.
CONSUMER BEHAVIOUR IN SERVICES
Consumer behavior includes the processes and motives that drive consumer buying activities.
Consumers typically make purchases in a systematic way, with the time frame and nature of the
process dependent on the type of purchase. The standard consumer buying process with a service
has some specific differences from a product-based purchase situation.
CONSUMER DECISION MAKING PROCESS:
Stage 1 Need recognition: Its sunday night. Youre hungry (internal physiological stimuli)
and there is nothing in the fridge. You will order food (statement of need).
Stage 2 Information search: You already have ordered to the Indian restaurant in your street
last month (internal information). A friend recommended a pizzeria in your neighbourhood
(external information from environment). And this morning youve found a flyer for a sushi
restaurant in your mailbox (external information from advertising).

Stage 3 Alternative evaluation: You have a bad opinion of the Indian restaurant since youve
been sick the last time (inept set). The pizzeria is both recommended by your friend and also
happens to be a well-known brand (positive perception evoked set). As for the sushi
restaurant, it got good reviews on Tripadvisor (positive perception evoked set).
Stage 4 Purchase decision: After evaluating the possibilities, youve decided to choose the
well-known pizza delivery chain. In addition, a new episode of your favorite TV show is
broadcasted tonight on TV.
Stage 5 Post-purchase behavior: The pizza was good (positive review). But you know there
was too many calories and you regret a little bit (mixed feelings about yourself). The next time
you will choose the sushi restaurant. There is less fat in sushi than pizza (next purchase
behavior)!

Customer Expectations: 7 Types all Exceptional Researchers Must Understand

Customer satisfaction reflects the expectations and experiences that the customer has
with a product or service. Expectations reflect both past and current product evaluation
and use experiences.
Think about any major purchases youve made recently. Did you research your
purchase? Did you collect information from advertising, salespersons, friends,
associates, or even test the product?

This information influences our expectations and gives us the ability to evaluate quality,
value, and the ability of the product or service to meet our needs.

Customers hold both explicit and implicit performance expectations for attributes,
features, and benefits of products and services. The nature of these expectations will
dictate the form and even the wording of customer satisfaction survey questions. Let me

repeat this: the nature of these expectations will dictate the form and even the wording
of your satisfaction questions.

Understanding the following 7 customer expectations is critical before you set out to
measure customer satisfaction.
1. Explicit Expectations

Explicit expectations are mental targets for product performance, such as well-identified
performance standards.

For example, if expectations for a color printer were for 17 pages per minute and high
quality color printing, but the product actually delivered 3 pages per minute and good
quality color printing, then the cognitive evaluation comparing product performance and
expectations would be 17 PPM 3 PPM + High Good, with each item weighted by the
associated importance.
2. Implicit Expectations

Implicit expectations reflect established norms of performance. Implicit expectations are

established by business in general, other companies, industries, and even cultures.
An implicit reference might include wording such as Compared with other
companies or Compared to the leading brand

3. Static Performance Expectations

Static performance expectations address how performance and quality are defined for a
specific application. Performance measures related to quality of outcome may include
the evaluation of accessibility, customization, dependability, timeliness, accuracy, and
user friendly interfaces.

Static performance expectations are the visible part of the iceberg; they are the
performance we see andoften erroneouslyare assumed to be the only dimensions
of performance that exist.
4. Dynamic Performance Expectations

Dynamic performance expectations are about how the product or service is expected to
evolve over time. Dynamic expectations may be about the changes in support, product,
or service needed to meet future business or use environments.
Dynamic performance expectations may help to produce static performance
expectations as new uses, integrations, or system requirements develop and become
more stable.
5. Technological Expectations

Technological expectations focus on the evolving state of the product category.

For example, mobile phones are continually evolving, leading to higher expectations of
new features.
Mobile service providers, in an effort to limit a consumers ability to switch to new
technology phones, have marketed rate plans with high cancellation penalties for
switching providers, but with liberal upgrade plans for the phones they offer.

The availability of low profile phones with email, camera, MP3, blue tooth technology,
and increased storage will change technology expectations as well as the static and
dynamic performance expectations of the product.

These highly involving products are not just feature based, but raise expectations that
enhance perceptions of status, ego, self-image, and can even evoke emotions of
isolation and fear when the product is not available.
6. Interpersonal Expectations

Interpersonal expectations reflect the relationship between the customer and the
product or service provider.

Person to person relationships are increasingly important, especially where products

require support for proper use and functioning.

Support expectations include interpersonal sharing of technical knowledge, ability to

solve a problem, ability to communicate, reduced time to problem resolution, courtesy,
patience, enthusiasm, helpfulness, assurance that they understood my problem and my
situation, communication skills, and customer perceptions regarding professionalism of
conduct, often including image and appearance.
7. Situational Expectations

In building a customer satisfaction survey, it is also helpful to evaluate why prepurchase expectations or post-purchase satisfaction may or may not be fulfilled or even
measurable.

The following conditions may be considered:

Expectations may not include unanticipated service attributes that are new to that
consumer.

Expectations may be based on vague images, thereby creating wide latitude of

acceptable performance and expected satisfaction.

Product performance expectations and evaluations may be sensory and not

cognitive, as in expectations of taste, style or image. Such expectations are not
only difficult to evaluate and understand, but may change over time and with
consumption.

The product use may attract so little attention as to produce no conscious affect
or cognition (evaluation). When measured, this results in meaningless
satisfaction or dissatisfaction information.

There may have been unanticipated benefits or consequences of purchasing or

using the product (such as a uses, usage situations, or features not anticipated
with purchase).

The original expectations may have been unrealistically high or low.

The product purchaser, influencer and user may have each been a different type
of individual, each having different expectations.

Your research study may also benefit from considering expectations related to
perceived quality and value.
Customer Expectations

Remember to keep these 7 customer expectations in mind before you set out to
measure customer satisfaction. Understanding these will ensure that your customer
satisfaction research will provide accurate insights. Having a top-notch online survey
software is one thing, using it correctly is another.
Factors that influence customer expectations of service

Sources of Desired Service Expectations:

1. Personal needs physical, social, psychological, and functional needs

2. Lasting service intensifiers individual factors that lead the customer to a heightened sensitivity to
service

a. Derived service expectations- customer expectations driven by another person or

group of people. Ex. Family, other people, managers or supervisors, or own
customers in B2B.
b. Personal service philosophy customers underlying generic attitude about the
meaning of service and proper conduct of service providers
Sources of Adequate Service Expectations:

1. Temporary Service Intensifiers short-term individual factors that make a customer

more aware of the need for service EX. Personal emergency like car accident, car repair.
2. Perceived service alternatives other providers from whom the customer can obtain
service, do it yourself or have many or few choices (airport in small versus big towns)
3. Self-perceived service role degree to which a customer exerts an influence on the level
of service they receive (if customer does not show up regularly for allergy shots,
customers more lenient with allergist)
4. Situational factors service conditions beyond control of service provider (Katrina)
5. Predicted service what customers think they are likely to get ( if predict good service,
the level of adequate service is high)
Sources of Both Desired and Predicted Service Expectations

1. Explicit personal and nonpersonal statements made by the organization to customers

2. Implicit service related cues other than explicit promises that lead to inferences about
what the service should and will be like (Price and tangibles)
3. Word of mouth
4. Past experiences

Services Marketing - Moment

of Truth
Every business knows that in order to thrive it needs to differentiate itself in the mind of
the consumer. Price has proved inadequate since there is a limit to how much a firm
can cut back on its margins. Product differentiation is also no longer enough to attract or
retain customers since technological advances have resulted in products becoming
almost identical with very few tangible differences from others in the same category.

Consequently, marketers have realized the importance of service differentiation as a

sustainable strategy for competing for a portion of the customers wallet.

Service Encounter / Moment of Truth

A moment of truth is usually defined as an instance wherein the customer and the
organization come into contact with one another in a manner that gives the
customer an opportunity to either form or change an impression about the firm.
Such an interaction could occur through the product of the firm, its service offering or
both. Various instances could constitute a moment of truth - such as greeting the
customer, handling customer queries or complaints, promoting special offers or giving
discounts and the closing of the interaction.

Importance
In todays increasingly service driven markets and with the proliferation of multiple
providers for every type of product or service, moments of truth have become an
important fact of customer interaction that marketers need to keep in mind. They are
critical as they determine a customers perception of, and reaction to, a brand. Moments
of truth can make or break an organizations relationship with its customers.
This is more so in the case of service providers since they are selling intangibles by
creating customer expectations. Services are often differentiated in the minds of the
customer by promises of what is to come. Managing these expectations constitutes a
critical component of creating favorable moments of truth which in turn are critical for
business success.

Moments of Magic and Moments of Misery

Moments of Magic: Favorable moments of truth have been termed as moments of
magic. These are instances where the customer has been served in a manner that
exceeds his expectations. Eg: An airline passenger being upgraded to from an economy
to a business class ticket or the 100th (or 1000th) customer of a new department store
being given a special discount on his purchase. Such gestures can go a long way in
creating a regular and loyal customer base. However, a moment of magic need not
necessarily involve such grand gestures. Even the efficient and timely service
consistently provided by the coffee shop assistant can create a moment of magic for the
customers.
Moment of Misery: These are instances where the customer interaction has a negative
outcome. A delayed flight, rude and inattentive shop assistants or poor quality of food
served at a restaurant all qualify as moments of misery for the customers. Though
lapses in service cannot be totally avoided, how such a lapse is handled can go a long

way in converting a moment of misery in to a moment of magic and creating a lasting

impact on the customer.

Service Failure and Recovery

Service Failures
Even with the best service organizations, failures can just happen they may be
due to the service not available when promised, it may be delivered late or too
slowly (some times too fast??), the outcome may be incorrect or poorly executed,
or employees may be rude or uncaring. All these types of service failures bring
about negative experiences. If left unfixed they can result in customers leaving,
telling others about the negative experiences or even challenging through
consumer courts. Research has shown that resolving the problems effectively has a
strong impact on the customer satisfaction, loyalty, and bottom-line performance.
Customers who experienceservice failures, but are ultimately satisfied based on
recovery efforts by the firm, will be more loyal.
The Recovery Paradox.
It is suggested that customers who are dissatisfied, but experience a high level of
excellent service recovery, may be more satisfied and more likely to repurchase
than are those who are satisfied at the first place. For example, a hotel customer
who arrives & finds there is no room available. In an effort to recover, the frontdesk person immediately upgrades this guest to a better room at the same price.
The customer is so thrilled with this compensation that he is extremely satisfied
with this experience, is even more impressed with the hotel than he was never
before, and vows to be loyal into future. The logical, but not very rational,
conclusion is that companies should plan to disappoint customers so they can
recover &gain even greater loyalty from them as a result. This idea is known to be
as Recovery Paradox. The recovery paradox is more complex than it seem. First
of all it is expensive to fix mistakes and would appear ridiculous to encourage
service failure-as reliability is the most important aspect of service quality.
According to a research it is observed that a customer weight their recent
experiences heavily in their decision to buy again. If the experience is negative,

overall feelings about the company will decrease and repurchase intentions will
also reduce. If the recovery effort is absolutely superlative then the negative
impression can be overcome.
There is a recent study which shows no support to recovery paradox. It shows the
overall satisfaction was consistently lower for those customers who had
experienced a service failure than for those who had experienced no failure, no
matter what the recovery effort is. The explanation for why no recovery paradox is
suggested by the magnitude of the service failure in this study it is-a three hour
airplane flight delay. This type of failure may be too much to be overcome by any
recovery effort. Considering mixed opinions on if recovery paradox exists it is safe
to say doing it right the first time is the best and safest strategy. When a failure
does occur then every effort at superior recovery should be made. In cases where
the failure can be fully overcome the failure is less critical, or the recovery effort is
clearly superlative, it may be possible to observe evidence of the recovery paradox.
How Customers Respond to Service Failure
If customers initiate action following service failure, the action can be various
types. A dissatisfied customer can choose complaint on the spot to the service
provider, giving the company the opportunity to respond immediately. This is often
the best-case scenario for the company it has the second chance right at that
movement to satisfy the customer, keep his or her business in the future, and
potentially avoids any negative word of mouth.
Some customer chooses not to complaint directly to the provider but rather spread
negative word of the mouth about the company to friend, relatives, and coworkers.
This negative word of mouth can be extremely detrimental because it can reinforce
the customers feeling of negativism and spread that negative impression to other
as well. Further, the company has no chance to recover unless the negative word of
mouth is accompanied by a complaint directly to the company.

When there is a failure, customer can respond in a variety of ways. It is assumed

that following are the failure, dissatisfaction at some levels will occur for the
customer. In fact, research suggest that variety of negative emotion can occur
following service failure, including such feeling as anger, discontent,
disappointment, self-pity and anxiety. Many customers are very passive about their
dissatisfaction, simply saying or doing nothing, take action or not, at some point
the customer will decide weather to stay with that provider or switch to a
competitor.
Service Recovery Strategy
When the company fails to stand for its promises made to the customer on the basis
they build expectation, its to be said that there is service failure. When the service
failure occurs, there can be again severe ramification. Customer is considered to be
the bread and butter, hence retaining them is the biggest challenge, and however
service failure acts as an obstacle to it. In such failures,

The customer wants what they were promised.

Customer wants personal attention

Customer wants a decent apology

Customers want that they should not be made to feel that they are the cause of
the problem. (Though in many cases they are responsible for nuisance)

There are again five steps involved in order to deal with service failure. They are
mentioned as below

1. Acknowledgement and apology for the fact.

2. Listening to the customers.

3. Avoid defending the company and offer a rational explanation.
4. Offer some extra benefits
5. Have a proper follow up and make sure no mistakes this time, so that he can
easily forget about the service failure and is retained.
A customer expects three shorts of fairness in case of service recovery. They are
mentioned as below.
1. Interaction fairness: when there is service failure, first the company is
supposed to acknowledge the customer. Due to this the customer might
dissatisfied, but he still expects fairness and courtesy in the language and tone
used by the addresser.
2. Procedure fairness: to know in detail about the incidence of service failure
or to avail the compensation. There should be simplicity in procedure, which is
involved. Service failure and complexity in procedure both together might
result in a disaster as far as customer is concern.
3. Outcome fairness: now when the company realizes that there is service
failure they should end up compensating, arranging for some alternative mode
of transporting or complies with the customer condition. The outcome should
be taken by considering the customer, his needs and the companys policy.
Operations

management is

an

overseeing,

designing,

controlling

and

area

of management concerned
the

process

with

ofproduction and

redesigning business operations in the production of goods or services. It

involves the responsibility of ensuring thatbusiness operations are efficient in
terms of using as few resources as needed and effective in terms of meeting
customer requirements. It is not concerned with managing the process that
converts inputs (in the forms of raw materials, labor, and energy) into outputs
(in the form of goods and/or services).[1] The relationship of operations
management

to senior

management in

commercial

contexts

can

be

compared to the relationship of line officers to highest-level senior officers

in military science. The highest-level officers shape the strategy and revise it
over time, while the line officers make tactical decisions in support of carrying
out the strategy. In business as in military affairs, the boundaries between
levels are not always distinct; tactical information dynamically informs
strategy, and individual people often move between roles over time.
What is service productivity? Explain strategies for improving it?
Ans.

The productivity of process is related to how effectively input resources are transformed

into value for customers.

According to Gronroos, for the needs of manufacturers of physical products, there are widely
used productivity concepts and measurements instruments. However, in service processes, the
underlying assumptions of these concepts and models do not hold. For example, manufacturingbased productivity models assume that any change of input in the production process does not
lead to quality changes in outputs. However, in a service context, changes in the production
resources and systems do affect the perceived quality of services. Therefore, using
manufacturing-oriented productivity models in service contexts are likely to mislead
organizations.
Since the service economy is now the largest portion of the industrialized worlds economy, its
development has significantly raised the importance of maximizing productivity excellence in
service organizations.
The quantity and quality of service sector cannot be treated in isolation, because it may be
impossible to separate the impact on the entire service experience. Hence, both the quantity and
quality aspects must be considered together to provide a joint impact on the total productivity of
the service organizations.
According to Kontaghiorghes, Service sector productivity can be defined as the ratio of:
= Service Sector productivity
Strategies for Improving Service Productivity:
1.

Increased use of technology: Service sector productivity is heavily dependent on fast

developing technologies and automation. For eg Customers not only interact with a contact

person, they also transact using an ATM or a computer (website). According Normann, there are
five main reasons for using information technologies:
(a)

Reducing costs by substituting service officers for information technologies.

(b)

Standardizing services.

(c)

Increasing availability (24-hour access to services using appropriate machines or

computers).
(d)

Linking customers into the service system.

(e)

Affecting customer and personnel relationships and behavior.

2.

Training and development: The importance of people dimension in the service

performance cannot be undermined. For e.g. it is the receptionist who first interacts with the
customer or the hairstylist who cuts the hair etc. To a large extent, it is on the basis of interaction
with this employee that the customer forms his perception. Therefore, employees and staff
must not only be trained in functional/technical skills but also in soft skills. Training should be
looked as an investment and not a cost.
3.

Universal beliefs: To improve the productivity of services, certain beliefs must be

understood, accepted and practiced by all. For e.g. quality and customer service must be seen as
an invaluable partner, not just for gatekeepers or receptionists but even managers and directors.
4.

Recruitment planning: Improving service productivity requires assistance from human

resources. It should understand what each department requires so it can find the best employees.
They can take inputs from each department and design job descriptions which help find the best
fit employee. Better suited employees lead to increased productivity
5.

Reducing service level: By allotting less time to a service offering, productivity can be

increased. For e.g., a doctor gives less time to his patients so he can see more patients in a given
day. However, care should be taken that quality does not suffer, otherwise it would lead to
customer dissatisfaction
6.

Increase or diversify service offerings: This is another way of increasing productivity.

For e.g. a doctor can start a pathology lab in his premises, or hotels can add event planners to
their list of service offerings etc.

7.

Changes in demand and supply: These forces play a role in determining the service

productivity. For e.g. to meet an increased demand, companies can hire part- time employees and
where capacity is restricted, companies can promote non peak times
To summarize, in the words of Paul Krugman, Productivity isnt everything, but in the long run
it is almost everything. A countrys ability to improve its standard of living over time depends
almost entirely on its ability to raise its output per worker.
Strategies to match demand and capacity
When an organization has a clear grasp of its capacity constraints and an understanding of
demand patterns. It is in a good position to develop strategies for matching supply and demand.
There are two general approaches for accomplishing demand and capacity.

The first is to smooth the demand fluctuations themselves by shifting demand to match
existing supply.
The second general strategy is to adjust capacity to match fluctuations in demand.

Shifting demand and capacity

By shifting demand and capacity an organization seeks to shift customers away from periods in
which demand exceeds capacity. Perhaps by convincing them to use the service during periods
of slow demand. This may be possible for some customers but not for others. For example, many
business travelers are not able to shift their needs for airline, car rental, and hotel services.
Pleasure travelers on the other hand can often shift the timing of their trips. Those who cant shift
and cant be accommodated will represent lost business for the firm.
Vary the service offering
One approach is to change the nature of the service offering, depending on the season of the
year, day of the week, or time of day. For example, Whistler Mountain, a ski re sort in
Vancouver, Canada, offers its facilities for executive development and training programs during
the summer when snow skiing is not possible.
A hospital in the Los Angeles area rents use of its facilities to film production crews who need
realistic hospital settings for movies or TV shows. Accounting firms focus on tax preparation

late in the year and until April 15. When federal taxes are due in the United States. During other
times of the year they can focus on audits and general consulting activities.
Air lines even change the configuration of their plane seating to match the demand from different
market segments. In some planes there may be no first-class section at all. On routes with a large
demand for first-class seating, a significant proportion of seats may be placed in first class..
Care should be exercised in implementing strategies to change the service offering. Because such
changes may easily imply and require alterations. Other marketing mix variables are promotion,
pricing and staffing to match the new offering. Unless these additional mix variables are altered
effectively to support the offering, the strategy may not work. Even when done well, the
downside of such changes can be a confusion in the organizations image from the customers
perspective or a loss of strategic focus for the organization and its employees.
Communicate with customers
Another approach for shifting demand and capacity is to communicate with the customers. It
helps them know the times of peak demand so that they can choose to use the service at
alternative times and avoid crowding or delays. E.g signs in banks and post offices let customers
know their busiest hours and busiest days of the week can serve as a warning. This allows
customers to shift their demand to another time if possible.
Forewarning customers about busy times and possible waits can have added benefits. Many
customer service phone lines provide a similar warning by informing waiting customers of
approximately how long it will be until they are served. Those who dont want to wait may
choose to call back later when the lines are less busy. Research in a bank context found that
customers who were forewarned about the banks busiest hours were more satisfied. Even when
they had to wait than were customers who were not forewarned.
In addition to signage communicating peak demand times to customers, advertising and other
forms of promotion can emphasize different service benefits during peak and slow periods.
Advertising and sales messages can also remind customers about peak demand times.

Modify timing and location of service delivery

Some firms adjust their hours and days of service delivery to more directly reflect customer
demand. Historically, U.S. banks were open only during bankers hours from 10 A.M. to 3
P.M. every weekday. Obviously these hours did not match the times when most people preferred
to do their personal banking. Now U.S. banks open early, stay open until 6 P.M. many days, and
are open on Saturdays, better reflecting customer demand patterns.
Theaters also accommodate customer schedules by offering matinees on weekends and holidays
when people are free during the day for entertainment. Movie theaters are sometimes rented
during weekdays by business groups. It is an example of varying the service offering during a
period of low demand.
Differentiate on price
A common response during slow demand is to discount the price of the service. This strategy
relies on basic economics of supply and demand. To be effective, however a price differentiation
strategy depends on solid understanding of customer price sensitivity and demand curves. For
example, business travelers are far less price sensitive than are families traveling for pleasure.
For any hotel, airline, restaurant or other service establishment all of the capacity could be filled
with customers if the price were low enough. But the goal is always to ensure the highest level of
capacity utilization without sacrificing profits.
Heavy use of price differentiation to smooth demand can be a risky strategy. Over reliance on
price can result in price wars in an industry where eventually all competitors suffer. Price wars
are well known in the airline industry. In this industry the total industry profits suffered as a
result of airlines simultaneously trying to attract customers through price discounting.
Another risk of relying oh price is that customers grow accustomed to the lower price and expect
to get the same deal the next time they use the service. If communications with customers are
unclear, customers may not understand the reasons for the discounts. And they will expect to pay
the same during peak demand periods. Overuse or exclusive use of price as a strategy for
smoothing demand is also risky due to potential impact on the organizations image and the
possibility of attracting undesired market segments.

Flexing capacity to meet demand

A second strategic approach to matching demand and capacity focuses on adjusting or flexing
capacity. The fundamental idea here is to adjust, stretch and align capacity to match customer
demand. During periods of peak demand the organization seeks to stretch or expand its capacity
as much as possible. During periods of slow demand it tries to shrink capacity so as not to waste
resources.
Stretch existing capacity
The existing capacity of service resources can often be expanded temporarily to match demand.
In such cases no new resources are added. Rather people, facilities, and equipment are asked to
work harder and longer to meet demand.

Stretch time: It may be possible to extend the hours of service temporarily to

accommodate demand. A health clinic might stay open longer during flu season. Retailers
are open longer hours during the Christmas shopping season. And accountants have
extended appointment hours (evenings and Saturdays) before tax deadlines.
Stretch labor: In many service organizations, employees are asked to work longer and
harder during periods of peak demand. For example, consulting organizations face
extensive peaks and valleys with respect to demand for their services. During peak
demand, associates are asked to take on additional projects and work longer hours. And
front-line service personnel in banks, tourist attractions, restaurants and
telecommunications companies are asked to serve more customers per hour during busy
times.
Stretch facilities: Theaters, restaurants, meeting facilities and classrooms can sometimes
be expanded temporarily by the addition of tables, chairs, or other equipment needed by
customers. Or as in the case of a commuter train, a car can hold a number of people
seated comfortably or can expand by accommodating standing passengers.
Stretch equipment: Computers, telephone lines and maintenance equipment can often
be stretched beyond what would be considered the maximum capacity for short periods
to accommodate peak demand. In using these types of stretch strategies, the
organization needs to recognize the wear and tear on resources. The potential for inferior
quality of service may go with the use. These strategies should thus be used for relatively
short periods in order to allow for later maintenance of the facilities and equipment.

As noted earlier, sometimes it is difficult to know in advance, particularly in the case of human
resources, when capacity has been stretched too far.
Align capacity with demand fluctuations
This basic strategy is sometimes known as a chase demand strategy. By adjusting service
resources creatively, organizations can in effect chase the demand curves to match capacity with
customer demand patterns. Time, labor, facilities, and equipment are again the focus, this time
with an eye toward adjusting the basic mix and use of these resources.
Specific actions might include the following:

Use part-time employees: In this case the organizations labor resource is being aligned
with demand. Retailers hire part-time employees during the holiday rush, tax accountants
engage temporary help during tax season, tourist resorts bring in extra workers during
peak season. Restaurants often ask employees to work split shifts (work the lunch shift,
leave for a few hours, and come back for the dinner rush) during peak mealtime hours.
Outsourcing: Firms that find they have a temporary peak in demand for a service that
they cannot perform themselves may choose to outsource the entire service. For
example, in recent years, many firms have found they dont have the capacity to fulfill
their own needs for technology support, Web design, and software-related services.
Rather than try to hire and train additional employees, these companies look to firms that
specialize in outsourcing these types of functions as a temporary (or sometimes longterm) solution.

Rent or share facilities or equipment

For some organizations it is best to rent additional equipment or facilities during periods of peak
demand. For example, ex press mail delivery services rent or lease trucks during the peak
holiday delivery sea son. It would not make sense to buy trucks that would sit idle during the rest
of the year. Sometimes organizations with complementary demand patterns can share facilities.
An example is a church that shares its facilities during the week with a Montes son preschool.
The school needs the facilities Monday through Friday during the day; the church needs the
facilities evenings and on the weekend.

Schedule downtime during periods of low demand

If people, equipment, and facilities are being used at maximum capacity during peak periods,
then it is imperative to schedule repair, maintenance, and renovations during off-peak periods.
This ensures that the resources are in top condition when they are most needed. With regard to
employees, this means that vacations and training are also scheduled during slow demand
periods.
Cross-train employees
If employees are cross-trained, they can shift among tasks, filling in where they are most needed.
This increases the efficiency of the whole system and avoids underutilizing employees in some
areas while others are being over taxed. Many airlines cross-train their employees to move from
ticketing to working the gate counters to assisting with baggage if needed. In some fast-food
restaurants, employees specialize in one task (like making french fries) during busy hours, and
the team of specialists may number 10 people. During slow hours the team may shrink to three,
with each person performing a variety of functions.
Grocery stores also use this strategy, with most employees able to move as needed from
cashiering to stocking shelves to bagging groceries.
Modify or move facilities and equipment
Sometimes it is possible to adjust, move, or creatively modify existing capacity to meet demand
fluctuations. Hotels accomplish this by reconfiguring roomstwo rooms with a locked door
between can be rented to two different parties in high demand times or turned into a suite during
slow demand. The airline industry offers dramatic examples of this type of strategy. Using an
approach known as demand-driven dispatch, airlines have begun to experiment with methods
that assign airplanes to flight schedules on the basis of fluctuating market needs. The method
depends on accurate knowledge of demand and the ability to quickly move airplanes with
different seating capacities to flight assignments that match their capacity The Boeing 777
aircraft is so flexible that it can be reconfigured within hours to vary the number of seats
allocated to one, two, or three classes. The plane can thus be quickly modified to match demand
from different market segments, essentially molding capacity to fit demand.

Another strategy may involve moving the service to a new location to meet customer demand or
even bringing the service to customers. Mobile training facilities, libraries, and blood donation
facilities are examples of services that physically follow customers.

DEMAND AND SUPPLY:

Service-Blueprinting is a service planning help tool. It can be used for developing new innovative
services as well as for improving existing services. The method is also appropriate for ensuring the
quality of service processes. It can also be used for new employee training or for showing clients a
service cycle overview. The Service-Blueprinting output consists of a graphically-presented
overview of the service process and its activities. Service-Blueprinting allows for visualization of the
service development process in its early stages. In each process step, contact points between client
and firm (and physical element, if a tangible service) become visible. It is possible to identify failure
points and discover areas for innovation as well. This technique eases the identification of cost
saving potentials and offers an excellent base for further Service-process management.

PHYSIVCAL EVIDENCE:
Physical evidence comprises of the elements which are incorporated into a service to to make it
tangible and somewhat measurable. At the same time, physical evidence also helps in the
positioning of the brand and for targeting the right kind of customers. The best example of
Physical evidence in use is the hospitality industry. Airlines offer premium travel as well as
economy classes. Similarly, restaurants are known to be 3 star, 4 star, 5 star. All such
differentiation, and the target customer that accompanies such differentiation, is because of
the use of physical evidence in marketing.
Role of physical evidence in marketing mix
The marketing mix is always made after segmentation, targeting and positioning. The objective
of the marketing mix is to incorporate the right elements which attract the desired customer
profile. Thus, in services, to attract the right segment and target, and to achieve the right
positioning, physical evidence is used. Off course, physical evidence in marketing is not used for
services only but also for products nowadays. This is because products are nowadays sold
through mainly retail and e commerce. Both these areas are services within themselves. And
hence retailers always focus on elements which can make their services better.
Tools of physical evidence

Ambiance The look and feel of a restaurant can be described as the ambiance. For example
the Sofa that the restaurant uses, the music that it plays, the lighting it has maintained etc.
Layout Especially applicable in retail, the layout of the showroom contributes to the role of
physical evidence in marketing. For example in Ikes, the store is laid out in such a manner that
the customer is able to get to his choice of furniture very fast.
Branding Although part of promotions, the packaging, branding and use of corporate
communications also plays an important role in physical evidence in the marketing mix.
For more tools of physical evidence, this site is an excellent resource.
How physical evidence effects other Ps in marketing mix
Incorporating physical evidence is not free of charge and has an inherent cost involved. Thus, if
you want to establish a premium restaurant, then you need to invest for plush furniture,
promote in premium areas, get the right people, so on and so forth. The pricing for a premium
restaurant will be higher also. Thus, physical evidence in marketing is dynamic in nature, and a
change in physical evidence factors will bring a change to all other Ps in the marketing mix.
Thus, if you want to succeed in your business endeavor, you need to plan all the Ps of
marketing mix. And if you are in the services sector, then physical evidence as well as people
are two of the most important Ps of the marketing mix.
Service-scape: 4 Important Roles of the Service-scape Explained!
by Smriti Chand Service Management
Advertisements:

The service-scape can play many roles simultaneously. An examination of the variety of roles
and how they interact makes clear how strategically important it is to provide appropriate
physical evidence of the service.

1. Package:
Similar to a tangible products package, the service-scape and other elements of physical
evidence essentially wrap the service and convey an external image of what is inside to
consumers. The service-scape is the outward appearance of the organization and thus can be
critical in forming initial impressions or setting up customer expectations it is a visual
metaphor for the intangible service.

This packaging role is particularly important in creating expectations for new customers and for
newly established service organizations that are trying to build a particular image. The physical
surroundings offer an organization the opportunity to convey an image in a way not unlike the
way an individual chooses to dress for success.
2. Facilitator:
The service-scape can also serve as a facilitator in aiding the performances of persons in the
environment. 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-designed, functional facility can make the service a pleasure to experience from the
customers point of view and a pleasure to perform from the employees. On the other hand,
poor and inefficient design may frustrate both customers and employees.

3. Socializer:
The design of the service-scape aids in the socialization of both employees and customers in the
sense that it helps to convey expected roles, behaviours, and relationships. For example, a new
employee in a professional services firm would come to understand her position in the
hierarchy partially through noting her office assignment, the quality of her office furnishings,
and her location relative to others in the organization.

The design of the facility can also suggest to customers what their role is relative to employees,
what parts of the service-scape they are welcome in and which are for employees only, how
they should behave while in the environment, and what types of interactions are encouraged.
4. Differentiator:
The design of the physical facility can differentiate a firm from its competitors and signal the
market segment the service is intended for. Given its power as a differentiator, changes in the
physical environment can be used to reposition a firm and/or to attract new market segments.

In shopping malls the colours used in decor and displays and type of music wafting from a store
signal the intended market segment. The design of a physical setting can also differentiate one
area of a service organization from another. This is commonly the case in the hotel industry
where one large hotel may have several levels of dining possibilities, each signed by differences
in design.

While it is useful from a strategic point of view to think about the multiple roles of the servicescape and how they interact, making actual decisions about service-scape design requires an
understanding of why the effects occur and how to manage them.

Service quality(SQ) is a comparison of expectations (E) with performance (P)

SQ=P-E.[1]
A business with high service quality will meet customer needs whilst remaining
economically competitive.[2] Improved service quality may increase economic
competitiveness.
This aim may be achieved by understanding and improving operational
processes; identifying problems quickly and systematically; establishing valid and
reliable service performance measures and measuring customer satisfaction and
other performance outcomes.

The GAP Model

The Service Quality Model, also known as the GAP Model, was developed in 1985. It
highlights the main requirements for delivering a high level of service quality by
identifying five gaps' that can lead to unsuccessful delivery of service.

The Gap Model

The diagram shows the different gaps in the model, including the
Knowledge Gap discussed here.

Customers generally have a tendency to compare the service they 'experience' with the
service they 'expect' to receive; thus, when the experience does not match the
expectation, a gap arises.
GAP 1:
Gap between consumer expectation and management perception: This gap arises
when the management or service provider does not correctly perceive what the
customer wants or needs. For instance hotel administrators may think guests want
better food or in-house restaurant facilities, but guests may be more concerned with the
responsiveness of the staff or the cleanliness of their rooms.

Consumer Expectations
Hotel administrators may think guests want better food or in-house
restaurant facilities, but guests may be more concerned with the
responsiveness of the staff.

Factors that affect the size of the knowledge gap include:

Market research

Before introducing a new product or service into the market, a company must conduct market research to
understand whether there would be any demand for the product, and what features should be
incorporated. The better this process is conducted, the smaller the knowledge gap will be.
There are methods of ensuring that customer desires are taken on board. These include: comprehensive
studies, gauging satisfaction after individual transactions (surveys immediately after a purchase is made),
customer panels and interviews, and through customer complaints.

Communication channels

The fewer the layers between management and customer contact personnel, the more likely that customer
preferences will be incorporated into higher-level decision making on the product.

GAP 2 :
Gap between management perception and service quality specification: This is when
the management or service provider might correctly perceive what the customer wants,
but may not set a performance standard. An example here would be that hospital
administrators may tell the nurse to respond to a request fast', but may not specify how
fast'.
GAP 3:
Gap between service quality specification and service delivery: This gap may arise in
situations pertaining to the service personnel. It could happen due to poor training,
incapability or unwillingness to meet the set service standard. An example would be
when a doctor's office has very specific standards of hygiene communicated but the
hired staff may have been poorly trained on the need to follow these strict protocols.
GAP 4 :
Gap between service delivery and external communication: Consumer expectations are
highly influenced by statements made by company representatives and advertisements.
The gap arises when these assumed expectations are not fulfilled at the time of delivery
of the service. For example a hospital printed on its brochure may have clean and
furnished rooms but in reality, it may be poorly maintained in this case the patient's
expectations are not met.
GAP 5:
Gap between expected service and experienced service: This gap arises when the
consumer misinterprets the service quality. The physician may keep visiting the patient

to show and ensure care, but the patient may interpret this as an indication that
something is really wrong.

How To Measure Service Quality

Many researchers have struggled with the issue of how to measure service quality.
Perhaps the most widely used measure is based on a set of five dimensions which have
been consistently ranked by customers to be most important for service quality,
regardless of service industry. These dimensions defined by the SERVQUAL
measurement instrument are as follows:

Tangibles: appearance of physical facilities, equipment, personnel, and communication

materials;

Reliability: ability to perform the promised service dependably and accurately;

Responsiveness: willingness to help customers and provide prompt service;

Assurance: knowledge and courtesy of employees and their ability to convey trust and
confidence; and

Empathy: the caring, individualized attention the firm provides its customers.

Improving service quality:

Quality service is a key element of a successful business. But many businesses
struggle to improve service and retain their customers. A bad experience can drive a
customer away for years.[1] But dont despair! There are several methods to improve
quality service at your business, from having clearly defined and measured service
goals and motivating your employees, to using customer feedback and updating your
service tools to better serve your customers. No matter your approach, improving
quality service at your business does not have to be a struggle.

Motivating Your Employees

Invest in service training, rather than a quality control department.

Set up a new-employee initiation program.
Teach the 30/30 rule.
Tie your employees actions to the businesss overall performance.
Encourage employees to think of customer service as a "story" about your
business.
Give your employees service quality goals.
Recognize and reward improvements in employee performance.
Let your employees know there is room for growth.
Emphasize problem-solving.
Teach your employees to overcompensate for any issues or complaints.
Listen to feedback from your employees.

Measuring Customer Service Performance

Determine how quickly you are able to solve problems.

Ask for personalized feedback from customers.
Create a customer service survey.
Track any issues or complaints.
Put processes in place to prevent issues from occurring again.
Talk to customers face-to-face.

Defining Your Service Goals

Consider your business type.
Create a clear vision statement.
Examine the public face of your business.
Make sure your employees know what quality service means to your business.

Updating Your Quality Service Tools

Implement customer friendly technology.

Hire a web designer to create a professional website.
Dont neglect your social media.

These five SERVQUAL dimensions are used to measure the gap between customers
expectation for excellence and their perception of actual service delivered. The
SERVQUAL instrument, when applied over time, helps service providers understand
both customer expectations, perceptions of specific services, and areas of needed
quality improvements.

SERVQUAL has been used in many ways, such as identifying specific service elements
requiring improvement, and targeting training opportunities for service staff.

Proper development of items used in the SERVQUAL instrument provides rich itemlevel information that leads to practical implications for a service manager.

The service quality dimensions evaluated by SERVQUAL should be adjusted for optimal
performance in different industry, public and private sector applications.

SERVQUAL scores are highly reliable, but when used in different industries may fail to
produce a clear delineation of the five basic dimensions.Other measures, such as the
Six Sigma model should be considered for applicability in quantifying the gap between
service expectations and perceptions.

SERVQUAL SYSTEM

Concept[edit]
The SERVQUAL service quality model was developed by a group of American authors, 'Parsu'
Parasuraman, Valarie Zeithaml and Len Berry, in 1988. It highlights the main components of high

quality service. The SERVQUAL authors originally identified ten elements of service quality, but in
later work, these were collapsed into five factors - reliability, assurance, tangibles, empathy and
responsiveness - that create the acronym RATER.
Businesses using SERVQUAL to measure and manage service quality deploy a questionnaire that
measures both the customer expectations of service quality in terms of these five dimensions, and
their perceptions of the service they receive. When customer expectations are greater than their
perceptions of received delivery, service quality is deemed low.
In addition to being a measurement model, SERVQUAL is also a management model. The
SERVQUAL authors identified five Gaps that may cause customers to experience poor service
quality.

Gap 3: between service quality specification and service

delivery[edit]
This gap may arise through service personnel being poorly trained, incapable or unwilling to meet
the set service standard. The possible major reasons for this gap are:

Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role
conflict, improper evaluation and compensation system

Ineffective internal marketing

Failure to match demand and supply

Lack of proper customer education and training

Gap 4: between service delivery and external communication[edit]

Consumer expectations are highly influenced by statements made by company representatives and
advertisements. The gap arises when these assumed expectations are not fulfilled at the time of
delivery of the service. For example, the hospital printed on the brochure may have clean and
furnished rooms, but in reality it may be poorly maintained, in which case the patients' expectations
are not met. The discrepancy between actual service and the promised one may occur due to the
following reasons:

Over-promising in external communication campaign

Failure to manage customer expectations
Failure to perform according to specifications

Gap 5: between expected service and experienced service[edit]

This gap arises when the consumer misinterprets the service quality. For example, a physician may
keep visiting the patient to show and ensure care, but the patient may interpret this as an indication
that something is really wrong.

What is CRM, and why is it so important to

Service Businesses?
Ok so we know the term CRM means Customer Relationship Management. It
is also used to describe software that helps a business organize and manage
customer data.
The concept of Customer Relationship Management has been around since the
start of business. Only over the last few years has CRM started to be used as a
buzz word defined by software manufactures. Some CRM tools manage sales &
leads, some are used for customer service, most are do not fully encompass the
idea of Customer Relationship Management. I urge companies to make full use
of the tools available, but don't be limited by them. Keep the focus on your goals.
Goals of a Customer Relationship Management Plan
- Increase customer retention
- Increase company profits
- Better serve the customer / increasing competitive advantage
- Build and maintain a relationship with your customers, so that you know their
current and future needs and can incorporate trends into your strategy.
- Manage leads through the sales pipeline by creating a relationship
The ROI of CRM?
Studies consistently show that it costs 8 times more to cultivate a new customer
than to keep an existing one. A good CRM plan that includes, but is not limited to
software tools, will make your business more profitableGuaranteed!
Most companies find that using a good software tool (such as SMP) as part of
their CRM plan will create a ROI within 3 months of implementation. This is do to
increased efficiency, more repeat business, increased referrals, and faster
invoicing.

CRM for Service Businesses

Managing your customer relationship is important for all businesses, but is critical
for Service Businesses who rely on repeat customers, ongoing contracts and
referrals. Here is a list of some of the incredible amount of data that must be
managed and accessible in order to maintain a high quality relationship with your
customer:
- Customer Contact Information
- Multiple contacts per account: with contact info for each
- Multiple addresses per account
- Track & Manage Current Service Requests
- Record Service History
- Equipment Records
- Access records of inventory used & service preformed
- Notes / Details about any contacts with the customer
- Notes / Details about the Account, Service Orders, Equipment Installed
- Reminders about next service due
- Reminders for follow up calls, appointments
- Track leads, proposals. Transfer info correctly once they become a customer
- Ability to Schedule Service and dispatch techs / Maps to site
- Account balance, payments due
- A way to notify customers or changes, updates and new products (email?)
- And much more
The Most Important Point: Find a useful way to manage all the customer data
gathered/needed, and then commit to using the information to better serve your
customer

Six Sigma
From Wikipedia, the free encyclopedia
For other uses, see Sigma 6.

The common Six Sigma symbol

Part of a series of articles on

Industry

Manufacturing methods
Batch production Job production
Flow production

Improvement methods
RCM TPM VDM
QRM TOC
Lean Six Sigma TQM ZD

Information and communication

ISA-88 ISA-95 ERP
SAP IEC 62264 B2MML

Process control
PLC DCS

Six Sigma is a set of techniques and tools for process improvement. It was introduced by engineer
Bill Smith while working at Motorola in 1986.[1][2] Jack Welch made it central to his business strategy
at General Electric in 1995.[3] Today, it is used in many industrial sectors.[4]
Six Sigma seeks to improve the quality of the output of a process by identifying and removing the
causes of defects and minimizing variabilityin manufacturing and business processes. It uses a set
of quality management methods, mainly empirical, statistical methods, and creates a special
infrastructure of people within the organization, who are experts in these methods. Each Six Sigma

project carried out within an organization follows a defined sequence of steps and has specific value
targets, for example: reduce process cycle time, reduce pollution, reduce costs, increase customer
satisfaction, and increase profits.
The term Six Sigma originated from terminology associated with statistical modeling of
manufacturing processes. The maturity of a manufacturing process can be described by
a sigma rating indicating its yield or the percentage of defect-free products it creates. A six sigma
process is one in which 99.99966% of all opportunities to produce some feature of a part are
statistically expected to be free of defects (3.4 defective features per million opportunities), although
this defect level corresponds to only a 4.5 sigma level. Motorola set a goal of "six sigma" for all of its
manufacturing operations, and this goal became a by-word for the management and engineering
practices used to achieve it.