elatedmusteringSoftware and s/w Development

Feb 21, 2014 (4 years and 4 months ago)





Services include all economic activities whose output is not a physical product or construction,
is generally consumed at the time it is produced and provides added value in forms (such as
convenience, timeliness
, comfort or health).

That is essentially intangible concerns of its first purchaser.


A company like IBM offers repair and maintenance service of equipment, consultancy, training
services etc. These servi
ces may include a tangible product like a report or train manual.

Customer Services , however is the service provided in support of a company’s core product

ike answering question , taking orders ,dealing with billing issue , handling complaints etc

ically there is no charge for customer service is essential for building customer relationship .

Customer services are hence different from services provided for sale by a company.

Express market and delivers services. It also provides a high level

of customer services.

services are overnight package delivery, and logistics services. Its customer services include well

staff who can answer all question on telephone, on line tracking of parcels etc.


The per
ception of service marketing focuses on selling the services in the best interest of
users/customers. Marketing a service is meant marketing something intangible. It is marketing
a promise. It is more selling yourself. In the marketing of services, we go t
hrough a number of
problems directly or indirectly influencing the business index. The problems like market
segmentation, marketing information system, behavioural management are studied minutely
which simplify the task of formulating a sound mix for marke
ting, such as Product mix,
Promotion mix, Price mix and the Place mix. It is important to mention that we find

important mix of marketing services. If we market the services in a right direction, the available
opportunities can be capitalized o
n optimally and also it contributes substantially to the process
of development. In view of the above, we observe the following key points regarding the
concept or perception of services marketing:

It is a managerial process of managing the services.

It is an organized effort for providing a sound foundation for the development of an

It is a social process helping an organization to understand the emerging social problem and
to take part in the social transformation process to justify
its existence in the society.


Service Management is :

1) To understand the utility the customers rceicve by consuming or using the service offering of
the organization


2) To understand how the organization (personnel, technology, physi
cal resources, systems and

customers)will b able to produce and deliver this utility

3) To understand how the organization should be developed and managed so that the intended
quality can be achieved

4) To make the organization function so that this qualit
y can be delivered on a continuous basis


As per Theodore Levit “There is no such things as service industries. There are some service
industries whose service component are greater (or less) than those of other industries”.
dy is in service. The point that Leavitt was trying to put across is that with almost every
tangible physical product an intangible servicecomponent is associated. Therefore every body is
in service.He has further put that goods can be put into two catego

Philip kotler suggests 4 categories

1) Pure tangible (salt)

2) Major tangible with minor intangibles (soap)

3) Minor tangible with major intangibles (consultancy)

4) Pure service (teaching)


The above diagram shows the Service

goods continuu

some goods being tangible
dominant others being service dominant. The fast food outlets has almost 50/50 of tangible and
intangible parts i.e. in this case both tangible factors such (food) and intangible such as
(services) is important. That is the re
ason it come in the middle.

In case of other products like salt there services won’t play any important role so it is more
towards tangible and in case of teaching profession it is purely service dominated. We never
known about service with out experiencin
g and in this manner various goods fall in place
according to its category i.e. less service oriented or more service oriented.



** American Marketing association has defined services as “activities, benefits or satisfactions,
which are

offered for sale
or provided in connection with sale o goods”. This definition took a
limited view of services

as it proposed that services are offered only in connection with sale of

** Robert Judd defined services as “ a market transaction by an enterprise or entr
where the object of

market transaction is other than the transfer of ownership of a tangible

This recognised three broad areas of services

The right to possess and use a product (rented goods service)

The customs creation, repair, or improvement of a product (owned goods service)

No product elements but rather experience or what might be termed as experiential
possession (nongoods


** Blois defines services, as “a service is an activity offered for sale which yields benefits and

without leading to physical change in the form of a good”

** Kotler and Bloom defines services as “an activity or benefit that one party ca
n offer to
another that is

essentially intangible and dos not result in the ownership of any thing. Its
production may not my not be tied

up to a physical product”.

** Gummesson says, “ Services is something which can be bought and sold but which you
t drop on

your foot”.

** According Gronross “a service is an activity or series of activities of more or less intangible in
nature that

normally, not necessarily, take place in interactions between the customer and the
service employees and/or

physical res
ources or goods and/or system of the service provider,

hich are provided as solution to customer


From this it follows that

Services are by and large activities, or a series of activities rather than things

As a result they are intangible

They take place in interaction between the customer and service provider

which means
that services

are produced and consumed simultan

Customer has a role to play in the production process as services are provided in response to

problems of customers as a solution.

1.8 Characteristics of Services and its Marketing Implications

The main Characteristics of Services are :






Services are actions and hence they are intangible. Due to this it is not possible to stock services
and hence

fluctuations in demand becomes difficult to manage. Hotels have same n
umber of
rooms all through the year

but the customers requiring the room are always varying with some
months seeing very few customers while

other months seeing a rush of customers. Further

services cannot be patented and any new concept can be

easily copi
ed by competitors. These
cannot be readily displayed or easily communicated, and hence it will be

difficult for the
consumers to assess the quality. This also creates a problem for what to include in

advertisements and promotional materials. Further the ac
tual cost of “unit service” is difficult
to determine

and hence pricing becomes difficult.


Services are generally created or supplied simultaneously. They are inseparable. For e.g., the

industry, health experts and other profe
ssionals create and offer their service at
the same given time. Services

and their providers are associated closely and thus
separable. Donald Cowell states
‘Goods are produced,

sold and then consumed whereas the
services are sold and then produced an
d then consumed.’

A service is produced when it is
consumed eg. a dinning experience. Thus the customers are present when the

service is
produced thus other customer play an important role in satisfaction. The service producer also

an important role
in quality. Thus mass production is impossible, it is not possible to get
economy of scale by

centralisation, operations has to be decentralised to deliver to the
consumer directly at convenient locations. A

“problem customer” can result in disruption of
ervice production process creating a dissatisfaction forhimself, other customers and also to the
service producer.


As services are produced by humans, hence no two services can be identical. Further no two
customers are

precisely alike and h
ence their experiences of the same service are different.
Even the same customer can be

with different frame of mind at different times

which results
in differing satisfactions from the same service

at different times.

Eg. A tax consultant may provide di
fferent a service experience to two different customers on
the same day

depending upon their needs and on whether the consultant is meeting the
customer when he is fresh in the

morning or tired at the end of the day. Because of this
ensuring a consistent q
uality becomes a challenging

job. The quality depends upon a number of
factors like the customer, service provides, other customers (their

presence or even absence)
etc., hence the service provider cannot know if the service is delivered in a manner

been originally planned and promoted. Sometimes services are provided by a third party

increasing the heterogeneity.


Services cannot be stored, saved, resold or returned. A bad haircut cannot be returned or
resold to another

omer. Hence demand forecasting and creative planning to meet the
demand is a problem. Further one has

to be right the first time or if things go wrong one should
have strong recovery strategies to retain the

customer goodwill.

Due to these characteristics
services the marketeers face a major challenge in marketing of Services.



It is obvious that the growth in the services sector has been substantive. The reasons for

growth are quite a few, some of whi
ch are summarized as follows.


The increase in per capita income from Rupees 238.8 in 1950 to Rupees
11,934.5 in 1998 is an indicator of he increase in general affluence has given rise to
service like pest
control, personal security, interior designer, etc.

Leisure time

People do get some time to travel and holiday and therefore there is a
need for travel agencies, resorts, hotels, and entertainment. There are other’s who
would like to utilize this time to improve their career prospects and therefore there is a
need f
or adult education/distance learning/part time courses.

Life expectancy:

The health programmed have significantly contributed to an
increase in life

expectancy given rise to services like old age homes, nursing homes, health care, etc.

Working wives:

As more and more women have started working, the need

for day
care for children has increased, and so is the care with packed food and home delivery.

Product complexity:

A large no. of products are now being purchased in households
which can be serviced only by specialized persons like water purifies, mi
cro wave ovens,
home computers, etc. giving rise to the need for services like after sales service agents
for durables, maintenance service providers, etc.

Life complexity:

As the daily routine gets busier, individuals find it difficult to
manage thing
s on their own. Their leads to an obvious need for tax consultants, legal
advisors, property advisers, etc.

Resource scarcity and ecology:

As the natural resources are depleting and need for
conservation is increasing, we have seen the coming up of ser
vice providers like
pollution control agencies, car, pools, water management, etc.

New products:

the development in information technology has given rise to
services like PCOs, Pager service providers, Web Shoppe, etc



as economy shifts from developing to developed stage, they will show more and
more shift toward services

today, the fastest growing segments of the US economy is services

in 1948 54% of the GDP of

US was generated by services which is 80% now

employment in this sector which was 55% in 1950 is now 83%

the US balance of trade in goods has remained in the red for many years, but there
has been a trade surplus in services

today service sector dom
inates the economics of many developed nations. As
countries develop the role of agriculture in the economy declines and that of services
increase.(china has 50% GDP from service, 35% from industry, and 15%from agriculture)


during recession it has been s
een that service output declines less than industrial

the service employment is less sensitive to business cycle fluctuation

globalisation as strategy for service firm is becoming more important


The service sector now accounts

for more than half of India's GDP: 51.16 per cent in
99. This sector has gained at the expense of both the agricultural and industrial
sectors through the 1990s. The rise in the service sector's share in GDP marks a
structural shift in the Indian eco
nomy and takes it closer to the fundamentals of a
developed economy (in the developed economies, the industrial and service sectors
contribute a major share in GDP while agriculture accounts for a relatively lower share).

The service sector's share has grown from 43.69 per cent in 1990
91 to 51.16 per
cent in 1998
99. In contrast, the industrial sector's share in GDP has declined from 25.38
per cent to 22.01 per cent in 1990
91 and 1998
99 respectively. The agricultural s
share has fallen from 30.93 per cent to 26.83 per cent in the respective years.

Some economists caution that if the service sector bypasses the industrial sector,
economic growth can be distorted. They say that service sector growth must be
rted by proportionate growth of the industrial sector, otherwise the service sector
grown will not be sustainable. It is true that, in India, the service sector's contribution in
GDP has sharply risen and that of industry has fallen (as shown above). But,
it is equally
true that the industrial sector too has grown, and grown quite impressively through the
1990s (except in 1998
99). Three times between 1993
94 and 1998
99, industry
surpassed the growth rate of GDP. Thus, the service sector has grown at a hig
her rate
than industry which too has grown more or less in tandem. The rise of the service sector
therefore does not distort the economy.

the share of agriculture sector to GDP has come down from 50% in 1960 to 24%

service sector contribution to GDP is

around 54% with an annual growth of 8%

employment in this sector is around 50%

the response to liberation has been more in service sector, partly because lower
fixed investment requirements, example:

today’s concept of banking

technological advance
s have made it possible for India to compete on global basis in
areas like


in addition lower wage structure has helped to develop CALL CENTRE’s, MEDICAL


from 1996 BSE has given a prominent pla
ce to service industry in it’s 30 share index

since no tax is imposed on agriculture sector, most of the tax came from
manufacturing sector. now services are being taxed

service tax collection is to the tune of 5000 crore. 83% of this is contributed by

service sectors. 51%

Telecom, others are Insurance, AD agencies, Courier and stock

many export benefits like EPCG is now extended to the service sector.


in last 25 years the increase in employment in the organized sector is 57% while if
y service sector is considered it is 70%(other than service sector it 41%)

India’s service exports in1997 were 9.3 billion $ against its merchandized exports of
$32.2 billion. It is expected that service exports could a third of merchandize exports
now t
his will be well above the global average of ¼. It implies that India which has failed
to catch the bus in the exports of manufactures is among the early leaders of the
developing world in the race for service exports.

Within the services sector, the sha
re of trade, hotels and restaurants increased from
12.52 per cent in 1990
91 to 15.68 per cent in 1998
99. The share of transport, storage
and communications has grown from 5.26 per cent to 7.61 per cent in the years under
reference. The share of construct
ion has remained nearly the same during the period
while that of financing, insurance, real estate and business services has risen from 10.22
per cent to 11.44 per cent.

The fact that the service sector now accounts for more than half the GDP probably
marks a watershed in the evolution of the Indian economy.



In buying decisions many times other people also influenc
e the decision. In services these roles
are played by many persons. In purchase of any service six distinct roles are played

Initiator : The person who has a specific need and proposes to buy a service

Influencer : The person or group of persons whom
the decision maker refers to or
who advice the decision maker.

Gate Keeper : The person or organization or promotional material, which act as filter
on the range of services which enter the decision choice

Decider : The person who makes the buying deci

Buyer : The person makes the actual purchaser

User : The actual user.


For example if a sales executive wants to do a market tour …….

His boss may be the initiator

The travel agency may act as a Gatekeeper

The finance department may be the influen

The administrative department the buyer

The executive the user. In this case the user may have no role in the buying process.
Hence while targeting a customer the service provider may have to influence other


The cons
umer’s decision to purchase or reject a product or service is the moment of final truth
for the marketer. It signifies the marketing strategy has been wise, insightful and effective,
whether it was poorly planned and missed the mark. Marketer are, therefor
e, interested in the
consumer decision
making process by which a consumer selects an alternative amongst the lot
available. The decision not to buy is also an alternative.

A simple consumer decision
making model, ties together the psychological, social and

concepts into an easily understood framework. The decision model has three distinct sets of

1. Input Variables,

2. Process Variables,

Output Variables.

Input Variables:

Input variables are those variables which affect the decisi
on making process and include
commercial marketing efforts as well as non
commercial influences from the consumer’s socio
cultural environment.

Decision Variables:

The decision process variables are influenced by consumer’s own psychological fields, whi
affect their recognition of a need, their pre
purchase search for information and their
evaluation of alternatives.

Output Variables:

The output phase of the model includes the actual purchase (either trial or repeat purchase)
and post purchase evalu
ation. Both pre
purchase and post
purchase evaluation feed back in
the form of experience into the consumer’s psychological field and serves to influence future
decision processing. (On a holiday a customer may change hotels in between his stay).

Influencing The Buying Behaviour

Situational Factors : Time, Store’s atmosphere, Marketing Stimuli (the occasion)

Personal Factors : Personality, life style, Other demographic factors like age, gender,
occupation etc.


Social Factors : Culture, reference gr
oup, family

Psychological Factors : Perception, attitude, motivation


SERVICES (Quality Dimensions of Services)


it involves consistency and reliability of performances and

dependability. It
means that the firm performs the service right the first time. It also means that the firm
honours its promises especially in terms of accuracy in billing, record keeping and performing
the service at the designated time.

is the willingness or responsiveness of employees to provide the service. It
involves timeliness of service or giving prompt service, calling the customer back quickly or
mailing the transaction slip immediately.


it means having the require
d skills and knowledge to perform the service. It
involves knowledge and skill of the contact personnel, knowledge and skill of operating support
personnel and research capability of the organization. E.g. securities brokerage firm.


it involves

approachability, access and ease of contact. It means that the service is
easily accessible by telephone; waiting time to receive the services is not extensive, convenient
hours of operation and convenient location of service facility.


it inv
olves politeness, report, consideration and friendliness of contact personnel.
It includes consideration for the consumer’s property. Clean and neat appearance of public
contact personnel. E.g. no muddy shoes on the carpet, proper telephone operators etc.


it means keeping consumers informed in a language that they can
understand and listen to them. It may mean that the company has to adjust its language for
different consumers

increasing the level of sophistication with a well educated c
onsumer and
speaking simply and plainly with a novice. It involves explaining the service itself and how much
the service will cost explaining

the trade
off between service and cost and assuring the customer that a problem will be


it involves trustworthiness, believability, honesty. It involves having the
customer’s best interest at heart thus contributing to credibility, company name and
reputation, personal characteristics of the contact personnel and degree of hard sell involved

interaction with the customer.


the security and the freedom from risk or doubt, involving physical safety,
financial security or confidentiality.

Customer knowledge:

it involves making the effort to understand the customer’s needs,
i.e. learning the customer’s s
pecific requirements, providing individualized attention and
recognizing the regular customer.


it includes physical evidence of the service, physical facilities, and appearance of


personnel tools or equipments used to provide the service, ph
ysical representations of the
service such as a plastic credit card or a bank statement and other customers in the service



From the customer’s point of view, the most vivid impression

of service occurs in the
or “
Moment Of Truth
,” when the customer interacts with the service firm. This is
the foundation to “Satisfaction of Service Quality”

it is where the promises are kept or
broken. This concept was put forth by Ri
chard Norman, taking the metaphor from Bull Fighting.
Most services are results of social acts, which take place in direct contact between the
customer and the service provider. At this stage the Customer realises the perceived service


Every Moment of Truth is Important

according to Scandinavian Airlines, each one of their 10
million customers come in contact with 5 employees. Thus the airlines say there 50 million
moments of truth

each one is managed well and “They prove the
y are the BEST”.

However some encounters are more critical. The encounter cascade refers to a series of
encounters right from the time a customer comes to take the service. The encounter cascade
can be important as any encounter can be critical, as it dete
rmines customer satisfaction and
loyalty. If it’s the first interaction of the customer then the initial interaction will be the first
impression. So, these interactions have to be given importance, as they are critical and
influences customer’s perception

of the organization.


A customer calling for the repair service may switch to some other company if he is put on hold
for a long time or even treated rudely. Even if the technical quality of that firm is superior, the
firm may not get a chance to
prove themselves in front of the customer. When the customer
has had many interactions with firm, each encounter will be important as it will create a
combined image of that firm. Many positive experiences will give an image of High Quality and

ve experiences will represent a bad image. Combination of positive and negative
interactions will leave the customer confused about the Quality.

It is suggested that not all encounters are equally important in building long
term relations. For
every organi
zation, certain encounters can act as a key to customer satisfaction
. For example:
for MARRIOT hotels, it is the early encounters that are important. In a hospital context, a study
of patients revealed that encounters with the nursing staff were more impor
tant in predicting
the customer satisfaction. As it is rightly said “one bad apple can ruin the whole basket of
apples.” The same applies in this too; one negative encounter can drive the customer away, no
matter how many encounters had taken place in the
past. So a firm has to give a lot of
importance to such encounters. “A customer who has been using a bank for nearly 15 years is
quite happy with the service. He has a huge deposit and many accounts. One fine morning,
when he comes out of the bank the watc
h man asks Rs. 10 for parking charges of his car. He
goes inside the bank and informs the clerk at the counter, who directs him to the officer. The

officer directs him to the Manager, who says he is helpless as this is a new policy of the bank.
The custome
r who was so happy with the bank services decides to close all his accounts

“Some encounters can be very Critical”.

Among the service encounters a hotel customer experiences are checking in, being taken to the
room by a bell person, eating a restau
rant meal etc as shown in the figure. It is in these
encounters that the customer receives an overall view of the organizations service quality and
encounter contributes to customer satisfaction and willingness to do business with the
organization again. A
s for the company, each encounter represents an opportunity to prove its
potential as a quality service provider and to increase customer loyalty.

Some services have few service encounters and others have many. Mistakes or problems that
occur in the early

levels of the service cascade can e critical because failure at one point results
in greater risk of dissatisfaction in the long run. MARRIOT Hotels learned this through their
extensive customer survey to determine what service element contributes to cust
omer loyalty.
They found that 4 out of 5 factors came into play in the first 10 minutes of the guest’s stay.


A service encounter occurs every time a customer interacts with the service organization. There
are three general types of enco

remote encounters, phone encounters, and face


face encounters.
A customer may experience any of these types of encounters, or a
combination of all three in his or her relations with a service firm.


Remote Encounter:

Encounter can occur
without any direct human contact is called as Remote Encounters. Such as,
when a

customer interacts with a bank through the ATM system, or with Ticketron through an
automated ticketing

machine, or with a mail
order service through automated dial
in orderin
Remote encounters also occur when

the firm sends its billing statements or communicates
others types of information to customers by mail.

Although there is no direct human contact in
these remote encounters, each represents an opportunity for a

firm to

reinforce or establish
perceptions in the customer.

In remote encounter the tangible evidence of the service and the
quality of the technical process and system

become the primary bases for judging quality.


Services are being delivered through t
echnology, particularly with the advent of Internet
applications. Retail

purchases, airline ticketing, repair and maintenance troubleshooting, and
package and shipment tracking are

just a few examples of services available via the Internet. All
of these ty
pes of service encounters can be

considered remote encounters.

Phone Encounters:

In many organizations, the most frequent type of encounter between a customer and the firm
occurs over the

telephone is called as phone encounter. Almost all firms (whether g
manufacturers or service businesses)

rely on phone encounters in the form of customer
service, general inquiry, or order
taking functions.

The judgment of quality in phone encounters
is different from remote encounters because there is greater

al variability in the
interaction. Tone of voice, employee knowledge, and effectiveness/efficiency inhandling
customer issues become important criteria for judging quality in these encounters.


Face Encounters:

A third type of encounter is the one

that occurs between an employee and a customer in direct
contact is

called as Face
Face Encounter.

In a hotel, face


face encounters occurs
between customers and maintenance personnel, receptionist,

bellboy, food and beverage
servers and others.
Determining and understanding service equality issues in face


context is the most complex of all. Both verbal and non
verbal behaviours are important

determinants of quality, as are tangible cues such as employee dress and other symbols of

(equipments, informational brochures, physical settings). In face


face encounters
the customer also play

an important role in creating quality service for herself through her own
behaviour during the interaction. At

Disney theme parks, face
ce encounters occur
between customer and ticket
takers, maintenance

personnel, actors in Disney character
costumes, ride personnel, food and beverage servers, and others. For a

company such as, IBM,

in a business
business setting direct encounters occur

between the business

customers and
salespeople, delivery personnel, maintenance representatives, and professional consultants. Of

all determining and understanding service quality issues in face
face context is the most
complex. Both

verbal and non
bal behaviours are important determinants of quality, as are
tangible cues such as employee

dress and other symbols of service (e.g., equipment,
informational brochures, and physical settings). In face


face encounters the customer also
plays a role in
creating quality service for herself through her own

behaviour during the



Even with the Best organizations failures can just happen

they may be due to the service not
available when

promised, i
t may be delivered late or too slowly (some times too fast ??), the
outcome may be incorrect or

poorly executed, or employees may be rude or uncaring. All these
types of failures bring about negative

experiences. If left unfixed they can result in customer
leaving, telling others about the negative experiences

or even challenging through consumer

Research has shown that resolving the problems effectively has a strong impact on the
customer satisfaction,

loyalty, and bottom
line performance. Custome
rs who experience service failures, but are
ultimately satisfied

based on recovery efforts by the firm, will be more loyal.


It is suggested that customers who are dissatisfied, but experience a high level of excellent
service recover

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
desk person

immediately upgrades
this guest to a better room at the same price. The
customer is so thrilled with this

compensation that he is extremely satisfied with this
experience, is even more impressed with the hotel than

he was never before, and vows to be
loyal into future. The log
ical, 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
First of all it is expensive to fix mistakes and would

appear ridiculous to encourage service
as reliability is the most important aspect of service quality.

According to a research it is
observed that a customer weight their recent experienc
es 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


Then there is a recent study which shows no support to recovery paradox. It shows the overall
satisfaction was

consistently lower for those customers who had experienced a service failure
than for those who had

experienced no failure, no matter what
the recovery effort is. The
explanation for why no recovery paradox is

suggested by the magnitude of the service failure in
this study it is
a three hour airplane flight delay. This type

of failure may be too much to be

overcome by any recovery effort.

sidering 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
y overcome the failure is less critical, or the recovery effort is clearly

superlative, it may be
possible to observe evidence of the recovery paradox.


If customers initiate action following service failure, the ac
tion can be various types. A
dissatisfied customer

can choose complaint on the spot to the service provider, giving the
company the opportunity to respond

immediately. Thos is often the best
case scenario for the
company it has the second chance right at t

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 customer’s feeling of
negativism and spread that negative impression

to other as well. Further, the company has no
chance to recover
unless the negative word of mouth is

accompanied by a complaint directly to
the company.

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

that following are the failure, dissatisfaction at some
levels will occur for the
customer. In fact, research

suggest that variety of negative emotion can occur following service
failure, including such feeling as anger,

discontent, disappointment, self

pity and anxiety.

customers are very passive about t
heir 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.


When the company fails to stand for its promises made to the customer on the
basis they build
expectation, it’s 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 howe
ver 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 th
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


step: Acknowledgement and apology for the fact.


step: Listening to the custo


step: Avoid defending the company and offer a rational explanation.


step: Offer some extra benefits


step: Have a proper follow up and make sure no mistakes this time, so that he can easily
forget about the service failure and is retained.

A customer expects 3 shorts of fairness in case of service recovery. They are mentioned as

1. Interaction fairness

when there is service failure, first the company is supposed to
acknowledge the customer. Due to this the customer might turn era
te, 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 fo
r some alternative mode of
complies with the customer condition. The outcome should be taken by considering the
customer, his needs and the company’s policy.


Handling complaints is a big challenge for eve
ry company today. Before understanding how to
handle, let us see what are the factors, which can result in customer’s complaints.

There are ten steps involved in handling such airline flights delayed departure complaints
effectively. They are mentioned bel



The frontline employee handling complaints should stay calm under any


Let the customer get the story off their chest

do not interrupt, this will only cause
irritation. In this case listening skills comes into picture.


Avoid admitting an
y liability at this stage. The officer just need to show concern like,
“I’m sorry for the inconvenience, let me see what I can do”. Give attention to the
customer, make him feel important.


Get facts by using question and try to find out the real and whole
story behind it.


After listening and collecting data, just identify appropriate action considering
company’s policy and customer’s expectation.


Take action if you have authority or involve manager or concerned person.


If corrective action cannot be taken i
mmediately, tell the customer. It’s better to
give bad news rather giving false news.


Record the action to be taken and inform anyone else in the organization involved.


Look into the matter, provide a proper follow

This ten approaches if followed effec
tively, complaints can be handled properly and
possibly a customer can be retained. (Solution is only for the taken example. i.e. delayed
departures of flights).


Control costs, reduce waste

Set productive capacity to match average demand

utomate labor tasks

Upgrade equipment and systems

Train employees

Leverage less
skilled employees through expert systems

Change timing of customer demand

Develop customer trust

Understand customers’ habits and expectations

Pretest new procedures and equipm

Publicize the benefits

Teach customers to use innovations and promote trial

Monitor performance, continue to seek improvements



In order for your

business to sell its products and services as successfully as possible, you need
to look at what

products you are selling in detail to ensure they will be attractive and needed;
the price to ensure it is not too

cheap or too expensive; where you are best
distributing your
product; and finally, how you can create interest

and awareness for your products. All these
elements need to be targeted at the right people at the right time.

In order for your business to
tackle this correctly, you need to get the righ
t type of mix (marketing mix), the

mix should

include four main elements: Product, Price, Place and Promotion, by examining each and

and adapting them to your customer's needs, you will continue to produce and
needed products and services

1) Pro
duct element:
Managers must select the feature of both the core product (either a good
or service) and

the bundle of supplementary service elements surrounding it, with reference to
the benefit desired by

customers and how well competing products perform.

In short, they
must be attentive to all aspects of the

service performance that have the potential to create
value for customers

2) Price and other user costs:

This components addresses management of the expenditures
and other

outlays incurred by custom
ers in obtaining benefits from the service product. It is not
only related to

traditional pricing tasks of establishing selling price to customers, setting trade
margins and getting credit

terms but also, how to minimize other burdens of customers while
rchasing such as time, mental and

physical efforts and unpleasant sensory experiences such
as noises and smells.

3) Place , cyberspace and Time:

Delivering product elements to customers involves decisions
on the place

and time of delivery as well as on th
e methods and channels employed. Delivery
may involve physical or

electronics distribution channels or both),depending on the nature of
the service being provided.

4) Promotion and education:

No marketing program can succeed without effective

This component plays three vital roles:

a)Providing needed information and advice (awareness).

b)Persuading target customers of the merits of a specific product. (Concentrating on a
particular segment

of the market).

c)Encouraging to take action at a

specific time (purchase).

Communication is educational in nature for new customers.

Communication can be delivered by individuals such as sales people and trainers, media such as
TV, radio,

newspaper, magazines, postures, websites

This promotion is u
sually used as incentives to catch customer’s attention and to motivate
them to act.

The above four are the traditional marketing mix. The EXTENDED marketing mix
for services marketing isas follows :

5) People:

Many services depend on the direct, persona
l interaction between customers and a

employees (such as getting a haircut or eating at a restaurant). This interaction strongly
influences the

customer perception of service quality. So, successful service firm devote
significant effort to recruitm

training and motivating their personnel.

Physical evidence:

The appearance of buildings, landscaping, vehicle, interior furnishing,

staff members, signs, printed materials, and other visible cues all provide tangible
evidence of the fir

service quality. The service firms need to manage physical evidence
carefully because it can have a profound

impact on customers’ impression as the service itself is

A tangible element such as insurance and advertising is often employed to c
meaningful symbols.


umbrella may symbolize protection and a fortress, security.

7) Process:

It is the method and sequence of actions in which service operating system works.

Badly designed process

annoys customers which leads to likelih
ood of service Failures.


8) Productivity and quality:

relates to how inputs are transformed into outputs
that are

valued by customers. Improving productivity keeps costs under control

refers to the degree to which a service satisfie
s customers by meeting their needs,
wants and

expectations. Service quality helps in product differentiation and building customer
loyalty. Invest in quality

profitably i.e. by considering incremental cost and incremental

Thus, these are the 8ps o
f service management, which are the essence of it. The
integration of each p’s is

necessary for the successful service management

Collectively these
are the tools organizations uses to develop offerings to satisfy their target market(s) ... the

at their disposal. Remember: If your marketing mix doesn't meet their needs they will not


and if they aren't satisfied you are unlikely to meet your objectives.

The marketing mix should be viewed as an integrated and
package of b
enefits that
reflect the

characteristics of customers and various targeted publics and satisfy their needs,
wants, and expectations. Note

that the elements of the marketing mix should be integrated
because each element of the mix usually has some

impact, d
irect or indirect, on the other

For example, if you improve the product or service you probably

have to change the price
because it costs more to produce. Although you may not have to change where the

product is
delivered to the customer, you will
almost certainly have to change the promotion or

communication with the customer because you need to tell the customer about the changes
you have made in

the product and how the changes will make it more desirable and satisfying.
One problem in many

zations is that different divisions may be responsible for different
elements of the marketing mix. This

happens even in well
managed organizations. The result is
that the offering is confusing to the target market.

Lack of communication among divisions
akes this problem worse. And if they don't share the same view of

organizational objectives,
the problem is worse still.



‘Product’ includes name, design, features, quality, operational case, packaging, warranties,
appearance, rang

and size. It also includes pre
sale and post
sale services like training, repairs,
maintenance and replacements.

According to Philip Kotler “a product is anything that can be
offered to market for attention, acquisition use

or consumption that satisfy a
want or need. It
includes physical objects (TV), service (banking), person

(political person), place (holiday resort),
organization (red cross) and idea (aid awareness).”

Conventionally, a product is an object,
which is delivered and consumed. However, in

services there is no or

very little tangible
elements. Hence, what is offered for sale is benefits. Service is a bundle of benefits and has

relevance for a specific target market. Hence, the package of benefits should have a customer’s

s of product:

Kotler has identified 5 levels of a product

1) Core product

2) Basic product


3) Expected product

4) Augmented product

5) Potential product

Kotler suggested that a product should be viewed in three levels.


Level 1: Core Product. What is the co
re benefit your product offers? This is the
fundamental benefit or service

that the customer is buying. For eg. A customer going to
a Hotel is buying rest, sleep etc.


Level 2 Basic Product: Basic functional attributes. All Hotels provide rest and sleep. T
aim is to ensure that

your potential customers purchase your one service. Thus the
functional attributes like Room, Bed, Bath are



Level 3 : Expected product : Set of attributes that the buyer expects (Clean room, large
towels, quietness)


l 4: Augmented product: What additional non
tangible benefits can you offer? This
meets the customer’s

desires beyond his expectations

(Prompt room service, music,
aroma etc)


Level 5 : Potential product : The possible evolutions that can be made to make
product a distinguishedoffer (all suite room)

In a Bank these can be

Core Product (Safety of deposits, Interest, Easy loans

Basic product : Savings deposit, FD, Recurring deposit

Expected product : Correct transaction records, timely service, convenien
t timing

Augmented product : Congenial waiting room, Water cooler

Potential product : Greetings for New Year, 24 hour banking

The PACKAGE CONCEPT of Service product

suggests that what you offer to the market si a
bundle of

different services

and intangible. There is a core service and around it are
built the auxiliary or

facilitator service. Without this the service would collapse (a bell boy in a
Hotel). Yet another service is the

supporting service

it is used to increase the product value
car rental in a hotel).

The basic product is not equivalent to the service product which the
customer perceives, which is in fact based

on customer’s experience and evaluation. Therefore
there is a need for an augmented product


Accessibility (num
ber and skills of personnel,
convenient timing, location, infrastructure etc.,)

Interaction with service organization (Between
employees and customer, with physical and technical

resources, with other customers)

Consumer participation.(how well the custom
er is aware about the process of service delivery,
his willingness

to share information and use service equipments)

The package should also include the management of service image through encouraged word
of mouth and

market communication.

Product Decisio

When placing a product within a market many factors and decisions have to be taken into

These include:


Consumer benefits

assess what benefits the consumer looks for

Service concept

To translate it to suitable service offer

Develop au
gmented offer


One of the most important decisions a marketing manager can make is about branding. The
value of brands in

oday’s environment is phenomenal. Brands have the power of instant sales;
they convey a message of

confidence, quality and
reliability to their target market.

Brands have
to be managed well, as some brands can be cash cows for organizations. In many organizations

they are represented by brand managers, who have huge resources to ensure their success
within the market.

A brand
is a tool, which is used by an organization to differentiate itself from
competitors. Ask yourself what

is the value of a pair of Nike trainers without the brand or the
logo? How does your perception change?

Increasingly brand managers are becoming annoyed

by ‘copycat’ strategies being employed by supermarket

food retail stores particular within the
UK. Coca
Cola threatened legal action against UK retailer Simsbury

after introducing their
Classic Cola, which displayed similar designs and fonts on their cans

Internet branding is now
becoming an essential part of the branding strategy game. Generic names like and have been sold for £m’s. (Recently within the UK banking industry we have

the introduction of Internet banks such as
the task by brand
managers is to

insure that consumers understand that these brands are banks!

Branding of Services and its Importance

Philip Kotlar defines a brand as “a name, a term, a symbol, or a designed or a combination of

which is intended to identify the goods and services of one seller or a group of sellers and
to differentiate

them from those of competitors”.

Brand decision is important for tangible goods. But in the case of service offering branding is
still in its

nfancy, there importance is expected to rise due to the following reason.

1. Service market is getting more competitive and there is as increasing proliferation of brands
in the

service sector.

2. It is five times cheaper to retain customer than to attrac
t new ones.

3. As a new service development assumes greater importance, the risk of product launch is
reducing in

the context of umbrella branding.

4. As service itself does not offer unique tangible benefits, brand development tangibilises the

ustomer gives more significance to the service provider than the individual service
products that the provideroffers. Therefore, this leads to branding the service providers
cooperate image. Banks especially have

recognized the importance of corporate imag
e and
identity and have used slogans, logos and other means to

brand themselves. Ones the
corporate brand is developed it is found that service firms move with relative easy

to other
service product categories. Primarily companies resorts to corporate bran
d building with a goal

maximizing market capitalization and creating shareholders wealth. In case of service firms

branding reflects the service itself. Airlines, fast
food restaurants, banks, professional
firm are usually

differentiated on th
e basis of their corporate name and reputation rather than
the specific service they offer.

The service organization brand name is reinforce by courteous
employees, professional looking uniform,

advertising etc. However no matter how good the

corporate bra
nds may be the quality of service determines

the success of the image. There are
instance where the service itself is branded. Example Suvidha Account of

Citibank, the various
schemes of LIC like Jeevan Kishore, Jeevan Mitra etc.

Advantages of branding s

1. To tangibilise the intangible.

2. To support the positioning strategy.

3. Offers a powerful tool for relationship building.

4. To create an image of quality and consistency.

5. To reduce price comparison.

6. Keeps current customers satisfied by
developing and sustaining a unique service advantage.

7. Encourages repeat usage using sales promotions.



This element of the marketing mix is related to the decision influencing the fee structure, rate
of interest,

commission charg
ed and paid by the service generating organizations. It is
considered to be the most critical

component of the marketing mix. Both from economic and
social standpoint, the management of pricing is

important but at the same time more critical
and challengin
g. We find pricing decisions important because the

pricing decisions are to
influence the maintenance, development and expansion plans of an organization.

Guidelines for service pricing:

1) Pricing strategy should enable handling demand fluctuations succ
essfully. As services cannot

inventoried, pricing should encourage customers to use the service during period of low

2) As services need to have some tangible element attached to it, service pricing should be
based on

costs so as to take into a
ccount the tangible clues.

3) Service price as an indicator of quality: Services not having specific brand names to indicate

quality, customers use price as an indicator of quality. This in particular in some cases, where

price variation is too much wi
th in a particular class of service (e.g. Tour operators). Also,

the risk associated with the service is high (e.g. Heart surgery). Price is taken as an
indicator of

quality. Thus pricing too low can give wrong signals and pricing too high can set
pectations that

the firm may find it difficult to match in service delivery. Because goods are
dominated by search

qualities. Price is normally not used to judge quality.

4) Pricing strategy should cope
up with the degree of competition operation with in c

and time zone. E.g. Bus operators will have to consider prices of train. It also
includes the stage ofstrategic low pricing to attract first time customers.

Approaches to pricing services:

The 3 approaches to pricing services are:

1) Cost
based pricing

2) Competition
based pricing.

3) Demand

based pricing.

1) Cost
based pricing:


In cost
based pricing, a company determines expenses from raw materials and labor, adds
amounts or

percentages for overhead and profit, and thereby arrives at the
price. This method
is widely used by industries

such as utilities, contracting, wholesaling and advertising. The basic
formula for cost
based pricing is

Price = Direct costs + Overhead costs + Profit margin

Direct costs involve materials and labor that are

associated with the service, overhead costs are
a share of

fixed costs, and the profit margin is a percentage of full costs (direct + overhead)

Problems in cost
based pricing services:

a) It is difficult to define the units in which a service is purchased
. Thus the concept of price or

unit is vague. Thus many services are sold in terms of input units rather than units of measured

output. E.g. consultant, teacher etc.

b) Where a firm provides multiple services. The costs being a major component of employee

are difficult to allocate.

c) Service cost may not represent true value. For e.g. a darner charging same price for a

suit and an ordinary pant.

2) Competition
based pricing:

This approach focuses on the prices charged by other firms in the s
ame industry or market.

pricing does not always imply charging the identical rate others charge but
rather using others prices as an

anchor for the firm’s price. This approach is used predominantly
in two situations:

(a) When services are

standard across providers, such as in the dry cleaning

(b) In oligopolies where there are a few large service providers, such as in the airline.

Problems in competition
based pricing:

(a) Small firms may charge too little and not make margins hi
gh enough to remain in business.

(b) Heterogeneity of services across and within providers makes this approach complicated. E.g.

charge different rates of commission for drafts and other services.

3) Demand
based pricing:

The first two approaches of
pricing are based on the company and its competitors rather than
on customers.

Neither approach takes into consideration that customers may lack reference
price, may be sensitive to nonmonetary

prices and may judge quality on the basis of price. All of
se factors can and should be accounted

for in a company’s pricing decisions. The third major
approach to pricing, demand
based pricing, involves

setting prices consistent with customer
perceptions of value: prices are based on what customers will pay for

he services provided.

Problems in demand
based pricing:

(a) There is an element of non
monetary costs and benefits which must be considered while

perceived value. E.g. services requiring time, inconvenience, psychological and
search costs shoul
d be

riced lower. It is difficult to convert this non
monetary cost into
monetary cost.

(b) Information on service may be less available to customer, making it difficult
to assess the price.



Another important element of the mar
keting mix is place mix, which focuses our attention on
the offering of

services by the providers to the ultimate users and the place of location for the
service generating

organizations. In some of the cases we find that providers have no option
but to lo
cate the units/branches as

per the instructions of the apex body. Some of the essential

features are taken into consideration such as easy

and convenient accessibility, safety or
protection availability of the infrastructural facilities, attractive and

lthy surroundings or so.

Due to the intangibility, services cannot be stored, transported and inventoried. Hence the
traditional channels

of product marketing like wholesalers cannot be used. Eevn retailing
cannot be an independent activity.

Similarly beca
use of inseparability they have t be produced
and sold simultaneously.

Due to this tehe channels of distribution are made very short. At the
most there can be one agent like in the

case of insurance, travel agency, courier

The better
thing is direct s

Agents when employed can have two types of functions

either they
market the services lke travel agents,

insurance agents etc, who market the tangible part of the
service offering OR there can be agents who are

trained to provide the service Like
a Shahnaz
Hussain Beauty parlour.

Further as there is no actual transfer of ownership, the creation of time
and place utility is very important.

Hence proper location to cover maximum cuxtomers
becomes important. Banks often have extension counters

or use
money collectors.

Capacity Planning.

It is not sufficient that we are interested only in managing our present. It is much more
significant that we

keep our eyes open, minds active to know about the future and continue to
enrich our potentials to manage t

future. The organizations not managing the future fail in
managing the demand and supply position, make it

difficult to optimize the development of
marketing resources to cope with the changing requirements, make

possible a contraction in
their resistan
ce power and both on quantitative and qualitative fronts, we find them

backward. By capacity planning, our emphasis is on the management of strength.

planning is known as planning the capacity in the face of future. This throws light on bot
h the

first, the organizations are supposed to know the demand position so that the
potentials are enriched to

increase the quantity or capacity of generating the services and
second, the organizations are also required to

know about the likes and
dislikes, preferences,
expectations, attitudes which make an advocacy in favor of technologies to fulfill their
expectations and this is not possible unless we think in favor capacity planning.

The strategic
plan would make the ways for the mobilization of

financial resources to cater to their increasing

requirements. We can’t deny the fact that if an organization succeeds in maintaining the
process of profit

generation, the financial health of that organization becomes so sound that
the task of satisfying

employees and investors is simplified considerably. If an organization
is strong, the task of facing the

challenges and threats in the markets is simplified considerably.
It is against this background that strategic

planning assumes a place of outstand
ing significance.
When we talk about capacity planning, our prime focus

is on strategic planning since the
process of enriching strength can’t be made possible within a couple of days.

Capacity Scheduling.

How much of what (service) will be needed to achie
ve its pre
determined goals is an important

that makes an advocacy in favor of capacity planning and scheduling. There are a
number of critical variables

requiring due consideration in the process such as, goals of the
service firm, availabil
ity of capital and the

quality of human resources, market segments served

and the level of service quality aimed at. A detailed

scheduling of man, materials, money and
machines (four M’s) is essential for each element of the service mix.



The promotion mix is found instrumental in informing, sensing and persuading the prospects or

The marketers bear the responsibility of using the different components of
promotion in such a way that the

measures adopted for promoting th
e goods or services are
found productive. The promotion communicates to

customer’s information on the other
elements of marketing mix, such as product, pricing and place. The

advantage of product itself,
details on the place through which it is sold and de
tails on the pricing are

transmitted through


1) Advertising:

Advertising is paid form of persuasive promotion since it plays an effective role in informing and

sensing the customers. The creativity is found to be

an essential aspect of advertising, which
increases the

importance of professional excellence in making the advertising processes

2) Publicity/public relations:

All the organizations need to develop and strengthen the public relation activitie
s to promote
their business.

This component of promotion is found effective though the organization don’t
make any payment for

publicity. The most important thing in the context of public relations is
the instrumentality of executives in

projecting a posit
ive image of the services offered. They
should have the potentials to throw a positive imprint

on the prospects. It is also significant that
they know the art of developing rapport with the media people.

3) Personal selling:

The personal selling is found i
nstrumental in promoting the business of service generating

Personal selling is a process of informing the customers besides persuading them
to purchase products being

influenced by personal communication. It is just a process of
on in which an individual exercises

his or her personal potentials, tact, skill and
ability to influence the impulse of prospects and to transform them into customers. Personal
selling is basically a method of communication. It involves not only individual

but the social
behavior too; each of the person in face
face contact, salesman and prospect influence the

other. Thus we find personal selling a personal communication, seller
buyer interaction, inter

communication and more so direct selling.
The following facts are observed regarding
the personal selling:

a) It is a direct personal relation between the buyer and seller.

b) It is an oral presentation in conservation.

c) It is two
way communication.

d) It is personal and social behavior.

e) It i
s an exercise for selling the goods and services.

f) It is found more effective in the service generating organizations.

g) It is based on the professional excellence of an individual.

h) It is an important element of the promotion mix.

4) Sales promotion:


Marketing activities other than personal selling, advertising and publicity that stimulate
customers and dealers

effectively, such as display shows, exhibitions, demonstrations and
various non
recurrent selling efforts not in

the ordinary routine are the
sales promotion
measures. Sales promotional activities are devices aimed at

reaching the consumer at home or
in his business establishment. The tools are generally in the form of

samples, contest,
demonstrations and coupons. Sales promotion directed at con
sumers may be done with a

to increase the products rate of use among existing customers or to attract new customers to

company’s product.

Tools of sales promotion:

a) Gift

b) Contest

c) Discount and commission

d) Entertainment

e) Travel and tours

f) Additional allowance

g) Fairs and shows

These are some of the tools of sales promotion offered to both, the providers as well as the
users. The motivesare increasing the selling activities, touching the target, excelling the
competition, increasing the
market share,

clearing the old products to be declared absolute in
the near future.

5) Word
mouth promotion:

Much communication about the performance of the service generating organizations actually
takes place by

mouth information, which is als
o as word
mouth promotion. The

recommendations the hidden sales force make the process of communication
effective. The growing

sensitivity of the words and experiences of hidden sales force simplify
the task of promoting the business. The

advertisements, sales promotion measures, the
personal selling may of course be effective but the word


recommendations are found
acceptable in all the conditions by almost all the prospects.

6) Telemarketing:

Telemarketing is found instrumental i
n promoting the business. The telemarketing helps in
activating the

process of advertisement in addition to its instrumentality in increasing the sale.
The service generating

organizations in general and the banking, insurance, transport, hotel,
tourism or
ganizations in particular have

been found using telemarketing with the two
objectives of selling and advertising. The instrumentality of

telephones and televisions are
found effective in the process of promoting the business. The instrumentality of

in persuading the users is substantially influenced by the quality of personnel supposed to

discharge the responsibility. The telemarketing minimizes the dependence of service generating

on the sales people since just a counter or

a center listed in the call numbers
serves multi



1) Develop personal relation with client

2) Make a strong impression of competency, honesty and sincerity


3) Should be able to use indirect selling techniques (cr
eate a derived demand

companies give

free sim card)

4) Manage to maintain a fine image by positive word of mouth

5) Packing and customization of service offering


1) Buyer (or user/influencer/gatekeeper)

2) Employees (discussed in d
etail under people)


1) Advertisement should have positive effects on contact personnel

2) It should be able to capitalise on word of mouth

3) It should provide tangible clues to the customers

4) It should make the service offeri
ng easily understandable

5) It should promise only what is possible to deliver

6) It should contribute to the continuity


1) Sampling is less frequently used compared to Goods (Sampling gives consumer a free trial


now becoming popular)

2) Gift premiums are frequently used to give an element of tangibility

3) Price/quantity promotions can be used to get long term commitments from consumer
(frequent flyer

programme or group booking in Hotels)

4) Use of coupons a
re less frequent (coupon with straight price cut OR discount or fees waiver
for one or

more purchases with original purchase OR Discounts on augmented products

like a
free wax polish

with car wash)

5) Future discounts are less frequent

6) Prize promotion
s are frequently used (prize for mobile bank use etc)


1) It is personal relationship rather than the service itself that results in satisfaction

2) Buyer’s confidence in the seller’s ability to deliver the results is import

hence make a

impression of competency, sincerity, and honesty.

3) As what is sold is intangible

indirect selling techniques have to be adopted (Hotels selling


4) As word of mouth is important

building up a favourable is im
age is essential.

5) A service provider sells “services” and not just a single service

hence ability to customise
the service

offering is important (Jain food in Air
lines Hotels etc)

6) Public relations becomes important

particularly in industries whe
re advertisement cannot
be used as a

promotional tool like Hospital industry.



The employees of an organization represent the organization in the eyes of the customers. If
they are not give

proper training in representing the organi
zation and its goals the service
efforts will fail. Hence the most

important marketing strategy is to market the service first to

the organization’s employees.

There are two types of contact personnel



.in a hospital a nurse is a high contact
personnel and ward boy may be a low contact

personnel) In addition there can be a NON


When company makes efforts to do external marketing, it should have strategies of Interna

External marketing is nothing but promises made,which needs to be fulfilled

needs internal marketing

enabling the comapany to keep up the promises made. Unless the
employees are able and willing to deliver,

the servicepromises will fai
l. This will result in proper
interaction of thecustomers with the service providers

which helps the organization to keep the
promises (Interactive marketing)


There is concrete evidence that satisfi
ed employees make more satisfied customers (and
satisfied customers

can, in turn, reinforce employees’ sense of satisfaction in their jobs). Some
have even gone so far as to

suggest that unless service employees are happy in their jobs,
customer satisfacti
on will be difficult to


The underlying logic connecting employee
satisfaction and loyalty to customer satisfaction and loyalty and

ultimately profits is illustrated
by the service profit chain shown in the figure.

The service profit chain suggest
that there are
critical linkages among internal service quality; employee

satisfaction; productivity; the value of
services provided to the customers; and ultimately customer

satisfaction; retention and profits.

Service profit chain researchers are careful

to point out that the model does not
customer satisfaction;

rather the two are interrelated and feed ff each other. The model does
imply that companies that exhibit high

levels of success on the elements of the model will be
more successful and prof
itable than those who do not.



Human resources decisions and strategies primary goal is to motivate and enable employees to

oriented promises successfully. The strategies presented here are organized
around f
our basic

themes. To build a customer
oriented, service
minded workforce, an
organization must:

1) Hire the right people

2) Develop people to deliver service quality

3) Provide the needed support systems

4) Retain the best people

1) Hire the right people:

One of the best ways to close gap 3 is to start with the right service delivery people from the
beginning. This

implies that considerable attention should be focused on hiring and recruiting
service personnel.

a) Compete for the best people:

To get the bes
t people, an organization needs to identify them and compete with other
organizations to hire

them. The firm act as marketers in their pursuit of the best employees,
just as they use their marketing

expertise to compete for customers. Thinking of recruitin
g as a
marketing activity results in addressing issues

of market (employee) segmentation, product
(job) design, and promotion of job availability in ways that

attract potential long

b) Hire for service competencies and service inclination:

Once potential have been identified, organizations need to be conscientious in interviewing and

screening to truly identify the best people from the pool of candidates. It has been suggested
that service

employees need two complementary capacities: they ne
ed both service
competencies and service inclination.

Service competencies are the skills and knowledge
necessary to do the job. Achieving particular degrees and

certifications validates competencies,
such as attaining a doctor of law degree and passing th
e relevant state

bar examinations for
lawyers. Service competencies may not be degree related, but may instead relate to basic

intelligence or physical requirements.

c) Be the preferred employer:


One way to attract the best people is to be known as the pr
eferred employer in a particular
industry or

in a particular location. Other strategies that support a goal of being the preferred
employer include providing

extensive training, career and advancement opportunities,
excellent internal support and attractiv
e incentives

and offering quality goods and services that
employees a proud to be associated with.

2) Develop people to deliver service quality:

To grow and maintain a workforce that is customer oriented and focused on delivering quality,

must develop its employees to deliver service quality. That is, once it has hired
the right

employees, the organization must train and work with these individuals to ensure
service performance.

a)Train for technical and interactive skills:

To provide quali
ty service, employees need ongoing training in the necessary technical skills
and knowledge

and in process or interactive skills. Examples of technical skills and knowledge
are working with accountingsystems in hotels, cash machine procedures in a retail s
underwriting procedures in an insurance

company, and any operational rules the company has
for running its business. Most service organizations are

quite conscious of and relatively
effective at training employees in technical skills. Companies are i

their use of
information technology to train employees in the technical skills and knowledge needed on the

job. Service employees also need training in interactive skills that allow them to provide
courteous, caring,

responsive, and empathetic se

b) Empower employees:

Empowerment means giving employees the desire, skills, tools, and authority to serve the
customer. While the

key to empowerment is giving employees authority to make decisions on
the customer’s behalf, authority

alone is not en
ough. Employees need the knowledge and tools
to be able to make these decisions and theyneed incentives that encourage them to make the
right decisions. Organizations are well suited to

empowerment strategies to ones in which (1)
the business strategy is o
ne of differentiation and customization,

2) customers are long
relationship customers, (3) technology is nonroutine or complex, (4) the business

is unpredictable, and (5) managers and employees have high growth and social needs and

interpersonal skills.

c) Promote teamwork:

The nature of many service jobs suggests that customer satisfaction will be enhanced when
employees work

as teams. Because service jobs are frequently frustrating, demanding and
challenging, a teamwork


will help to alleviate some of the stresses and strains.
Employees who supported and that they

have a team backing them up will be better able to
maintain enthusiasm and provide quality service. By

promoting teamwork an organization can
enhance the employ
ee’s abilities to deliver excellent service while

the camaraderie and support
enhance their inclination to be excellent service providers.

3) Provide need support systems:

To be efficient and effective in their jobs, service workers require internal suppo
rt systems that
are aligned

with their need to be customer focused. Without customer
focused internal
support and customer

systems, it is nearly impossible for employees to deliver quality
service no matter how much they want to. In

examining cust
omer service outcomes

researchers found that internal support from supervisors, teammates,

and other departments
as well as evaluations of technology used on the job were all strongly related to

satisfaction and ability to serve customers.

a) Meas
ure internal service quality:

One way to encourage supportive internal service relationships is to measure and reward
internal service. By

first acknowledging that everyone in the organization has a customer and
then measuring customer

perceptions of inter
nal service quality, an organization can begin to
develop an internal quality culture.

Internal customer service audits and internal service
guarantees are two strategies used to implement a culture

of internal service quality. Through
the audit, internal
organizations identify their customers, determine their

needs, measure how
well they are doing, and make improvements.

b) Provide supportive technology and equipment:

When employees don’t have the right equipment, or their equipment fails, they can be easi
frustrated in their

desire to deliver quality service. To do their jobs effectively and efficiently,
service employees need the right

equipment and technology. having the right technology and
equipment can extend into strategies regarding

workplace and
workstation design.

c) Develop service
oriented internal processes:

To best support service personnel in their delivery of quality service on the front line, an

internal processes should be designed with customer value and customer
ion in mind. In other words,

internal procedures must support quality service
performance. In many companies internal processes are

driven by bureaucratic rules, tradition,
cost efficiencies, or the needs of internal employees. Providing service

and custom
er oriented
internal processes can therefore imply a need for total redesign of systems. This kind of

wholesale redesign of systems and processes has become known as “process reengineering.”

4) Retain the best people:

An organization that hires the right p
eople, trains and develops them to deliver service quality,
and provides

the needed support must also work to retain the best ones. Employee turnover,
especially when the best

service employees are the ones leaving, can be very detrimental to
customer sati
sfaction, employee morale,

and overall service quality. Some firms spend lot of
time attracting employees but then tend to take them for

granted, causing these good
employees to search for job alternatives.

a) Include employees in the company vision:

For e
mployees to remain motivated and interested in sticking with the organization and
supporting its goals,

they need to share an understanding of the organization’s vision. People
who deliver service day in and day

out need to understand how their work fits i
nto the big
picture of the organization and its goals.

b) Treat employees as customers:

If employees feel valued and their needs are taken care of, they are more likely to stay with the

Many companies have adopted the idea that employees are
also customers of the
organization, and thus basic

marketing strategies can be directed at them. The products that
the organization has to offer its employees are

a job and quality of work life. To determine
whether the job and work life needs of employees

are being met,

organizations conduct
periodic internal marketing research to assess employee satisfaction and needs.

c) Measure and reward strong service performers:


If a company wants the strongest service performers to stay with the organization, it mus
reward and promote

them. Often the reward systems in organizations are not set up to reward
service excellence. Reward systems

may value productivity, sales or some other dimension that
can potentially work against good service. Reward

systems need to be

linked to the
organization’s vision and to outcomes that are truly important.


An organization that emphasizes customer service needs people at the frontline to do the
service, to use

discretions be concern
ed about the customer, to take initiative to provide
satisfaction through exceptional

service. The person at the front must fell empowered to do in
the circumstances. Empowering cannot be done

through a formal delegation of authority. A
person with authori
ty may not exercise that authority, if he does

not feel empowered.


A peon who takes responsibility to direct the fireman in a burning office to areas housing the
most important

documents is acting without formal authority. He feels empowered to do
meaning that feels a sense of

dedication to the organization, that he feels it is his duty to save
the organization as much as possible , that he

is doing the right thing .

Following are the importance of empowering the people in services:

1) An empow
ered employee focuses on results. He is not inhabitant by formalities of position ,
authorityor function .

2) He does not consider himself bound by rules and procedure.

3) He believes that the organization expects him to be aware of the ends to be achieved

and to
act in

furtherance thereof. He “sees” constraints but not does not feel prevented thereby , from
what is to be

done , instead he tries to overcome the constraints.

4) He believes that the organization will not find fault with him for having one som
ething new

nusual. On the contrary, he believes that the organisation will applaud him for having done

something that had to be done.

5) He believes that he is expected to take the initiative and ensure that the customer needs are
met and

thereby maint
ain and enhance the reputation of the organization.

6) He feels that he is dedicating to satisfy the customer to upgrade organization reputation

7) An empowered employee may be willing to challenge company policies at meetings with



As services are intangible, the customers are searching for evidence of service in every
interaction they have

with an organization. The figure depicts the three major categories of
evidence as experienced by the

customer: p
eople, process, and physical evidence. These
categories together represent the service and provide

the evidence that tangibilizes the
offering. The new mix elements essentially are evidence of service in each

moment of truth.


All of these evidence eleme
nts, or a subset of them are present in every service encounter a
customer has with

a service firm and are critically important in managing service encounter
quality and creating customer


When a guest enters the hotel for a stay the first enc
ounter of the guest is the door attendant
and frequently

with receptionists at the reception. The quality of that encounter will be judged
by how the registration

works (How long is to wait? Is the registration system
computerized and accurate?) Th
e actions and

attitudes of the
(Is the receptionist
courteous, helpful, knowledgeable? Does she handle the enquiries

fairly and efficiently?) and
physical evidence
of the service (is the awaiting area clean and comfortable).

The three
types of e
vidence may be differentially important depending on the type of service encounter

(remote, phone, face


face). All these types will operate in face


face service
encounters as in the

one just described.


It is the environment
in which the service is delivered and where the firm and customer
interact, and any

tangible components that facilitate performance or communication of service.

It includes all tangible representations of the service
such as brouchers, letter head, equipme
etc. in somecases the physical facilities where service is offered is important e.g., in a hotel the
parking lot, surroundings

are important. In other services such as telecommunication the
physical facilities may be irrelevant. In this

case other tangi
bles like billing statements become

Physical evidence includes

(A) Physical facilities (essentials and peripherals)


(B) Physical setting (appearance of premises)

(C) Social setting (appearance of staff)

The decision on the physical evidence will

differ in terms of customer
employee interaction. At
one end is

service of customer without any interaction with employee (ATM) where
physical facilities must be to

attract customer and user friendly.

At other end employee performs without any intera
ction (mail order business) here physical
evidence is

designed to promote operational efficiency. Between the two extremes is a
situation where both customer and

employee interact. In this case physical evidence must be
planned to facilitate the activities

of both. (E.g.,

Banks, Airlines). Certain service environments
are simple requiring very little space or equipment (ATM,

Vending machine). They are called
lean environment. Others like hospitals, hotels are elaborate environment

where proper
planning is

(a) Physical facilities: The potential customers form impression about the service organization
on the basis of

physical evidence like building, furniture etc.,

Essential Evidence:

They are dominant features like building area, parking space, signb

Peripheral Evidence:

They are less dominant like admission card, medical reports, etc.

(b) Consist of service environment

Ambient factors (light, colour, temperature)

Space (spatial layout and functionality

i.e., ability of equipment and furnit
ure to


Decor and artefacts

(c) Social setting: Employee uniform, appearance etc. of service scape can influence customer
expectation,satisfaction and other behavior. In shopping mall soft music is played/crossroads
had hired sepa
rate parking


Bitner identifies Physical Facilities and Environment as

However too much decor may make customers feel that they are paying for the expensive
décor. Employees

however feel that an investment in environments is an indica
tion of
management’s concern for their job

satisfaction. Hence the challenge is to strike a balance.


To compete successfully a firm must define how the customers perceive the service quality and
in what way

the service quality is

influenced. The quality can be of seen from two angles (1)
Technical quality (What is

delivered) (2) Functional quality (How it is delivered). When a
customer comes to the service provider he

comes with some expected quality. When he takes
the service he
experiences a service quality

this is his

perceived quality.


Customer service is about perception. Perceptions are judgment of the consumers about the
actual service

performance or delivery by a company. Since service are intan
gible, customers
search for the evidence of

quality in every interaction they have with a service firm.

evidence of service that are experience by the customer are people, process and physical



contact employees, other customers or th
e customer himself.


reliability, assurance, empathy and responsiveness.


operational flow of activities.


reliability and promptness of service.

Physical evidence

tangible aspect of service.

Apart from these the corporat
e image of the service provider as well as the service can also
influence the

perceived quality.

While comparing the expected and perceived service quality the following may be the outcome.

1). Perceive quality > expected quality.

Result = delighted custom

2). Perceive quality = expected quality.

Result = satisfied customer.

3). Perceive quality < expected quality.

Dissatisfied customer.

A very important factor in important service quality is to always keep promises and not
guarantee which the

firm canno
t deliver


The services provided are varying between organizations, between employees and even with in
employees at

different times. The extent to which the customers recognize and are willing to
accept this variation is called

as zone
of tolerance. If the service levels fall below this level,
customers will be frustrated.

Different customers possess different zones of tolerance

Zones of tolerance vary for different dimensions fo service


Zones of tolerance vary for first time and recovery service


To manage the perceived quality of a service one has to mat
ch the expected service and
perceived service to

each other so that consumer satisfaction is achieved. To keep the gap
between expected service minimal, two

things are critical:

The promises about how the service will perform given by traditional marke
activities and

communicated by word
mouth, must not be unrealistic when
compared to service received by the


Managers have to understand how the technical and functional quality of a service is
influenced and

how the customers perceive t
hese quality dimensions.

In order to
develop greater understanding of the nature of service quality and how it is achieved in

organization, ‘A Gap Model Of Service Quality’ was developed. The model clearly
indicated that the

consumer’s quality perceptio
ns are influenced by a series of five
distinct gaps occurring in the organizations,

which are as follows:

Gap1 (Marketing Information Gap) :
Difference between consumer expectations and

perceptions of consumer expectations arising due to inade
quate or inaccurate
management understanding of

customers’ service expectations

Gap2 (Standard gaps) :
Difference between management perceptions of consumer
expectations and service

quality specifications arising due to Management’s failure to develop
ormance specifications reflecting

customer’s expectations.

Gap3 (Service Performance Gap) :
Difference between service quality specifications and the

actually delivered.

Gap4 (Communication Gap) :
Difference between service delivery and what is com
about the

service to consumers resulting in discrepancy between communications to customers
describing the service

and the service actually delivered.

Difference between the perceived service and expected service. This gap depends on the
ze and

direction of the first four gaps associated with the delivery of service quality.

These Gaps develop due to the following reasons

GAP 1 :

Lack of adequate market research

Lack of upward communication between front line staff and Management

Lack of interaction with the customers

Lack of segmentation to identify specific needs of the customers

GAP 2 :

Lack of commitment from Manage
ment (they may perceive that customer
expectations are unreasonable)

Lack of Goal setting

Lack of resources

GAP 3 :

Ineffective recruitment


Role ambiguity

Lack of training/incentives to perform to the staff

Lack of training to customer on use o
f service and their roles

Lack of pre
testing when new procedures are introduced

Lack of understanding of customer habits

how they prefer to consume a service (a
customer may

prefer a slow delivery of food in an exclusive restaurant compared to an
ipi restaurant)

GAP 4 :

Exaggerated promises

Ineffective communication

Lack of Horizontal communications with in the organization


Too much of Gaps (1 to 4)

To close the gaps the following things should be implemented:

Develop customer tr
ust through long
term strategy rather than a snip
shot superficial

Understand customers’ habits on how they prefer to consume a service. eg., a customer
wouldprefer extended hours for a meal in a exclusive restaurant.

test new procedur
es and equipments before introducing them. The failure of a

improvement programme is more damaging than otherwise, e.g., when Indian
Airlines introduced

computerized reservation system to improve its service, it found that at
most places the s

remained down most of the time. It created more confusion, both
among customers and employees,

and proved to be countered productive.

Understand the determinants of consumer behaviour in terms of their choice; by force or by

other external for
ces, e.g., shopping behaviour is not even throughout the month. It

between the first weeks to the fourth week of the month; it changes between
weekdays and


Teach consumers how to use service innovations

most people don’t know how to go


treatment in government hospitals

there is a need to make people aware of how to go about

registration to appointment to check

up and treatment, in the same way as traffic
routes at India

Gate or Connaught Place are notified through press and
television before
introducing them.

Promote the benefits and stimulate trial. The success in innovation lies in encouraging trial by

making the benefit obvious.

Monitor and evaluate performance. One can learn from experience

good or bad. As one

along introducing changes, corrective measures should also be taken simultaneously.

measures should be restricted to redesign of facilities and procedures or extending to

communicating and promoting the efforts.



The Service Quality

means the ability to perform the promised service dependably and accurately. In
other words

reliability means that the company delivers on its promises

promises about
delivery, service provisions,

problem resolution, and pricing. For examp
le, FedEx, this company
effectively communicates and

delivers on the reliability dimension.

is the willingness to help customers and provide prompt service. This

emphasizes on attentiveness and promptness in dealing with custome
r’s request,
questions, complaints and

problems. Responsiveness also captures the notion of flexibility and
ability to customize the service to the

customers needs.

is defined as employee’s knowledge and courtesy and the ability of the firm an

employees to inspire trust and confidence. This dimension is likely to be particularly
important for service

for services that the customer perceives as involving high risk and / or
about which they feel uncertain

about their ability to evaluate outc
omes. For examples,
banking, insurance, brokerage, etc.

is defined as carrying individualized attention the firm provides its customers. The
essence of

empathy is conveying through personalized or customized service, the customers
are unique and special.

Customers want to feel understood by and impor
tant to that provide
service to them. For example,

personnel at small firm know customers by name and build
relationships that reflect their personal

knowledge of customer’s requirements and
preferences. When such a small firm competes with large

firms, th
e ability to be empathetic
may give the small firm a clear advantage.


tangibles are defined as the appearance of physical facilities, equipment’s,
personnel and

communication materials. All of these provide physical representations or
images of the service that

customers particularly new customers, will use to ev
aluate quality.

Although tangibles are used by Service Company’s to enhance their image, provide continuity,
and signal

quality to consumers, most company combine tangibles with another dimension to
create a service quality

strategy for the firm.

of how customers judge the 5 dimensions of service quality

Car repair (consumers):

Reliability: problem fixed the 1st time and ready when


Responsiveness: accessible, no waiting, respond to request.

Assurance: knowledgeable mechanics.

Empathy: acknowledges customers by name, remembers previo
us problem and preferences.

Tangibles: repair facility, waiting areas, uniform, and equipment’s.

Airlines (consumers):

Reliability: flights to promise destination, depart and arrives on time.

Responsiveness: prompt and speedy system of ticketing
, in flight baggage handling.

Assurance: trusted name, good safety records & competent employees.

Empathy: understanding of special individual needs, anticipates consumer needs.

Tangibles: aircraft, ticketing counters, uniforms, and baggage areas.

Medical care (consumer):

Reliability: appointments are kept on schedule diagnoses prove accurate.

Responsiveness: accessible, no waiting, willingness to listen.

Assurance: knowledge, skills, credentials, and reputation.

Empathy: acknowledges
patients as a person, remembers previous problems, good listening,
and patients.

Tangibles: waiting room, exam rooms, and equipment, written materials.

Architecture (business):

1. Reliability: delivers plans when promised and within budget.

2. Respons
iveness: returns, phone calls, adapt to change.

3. Assurance: credential, reputation, and name of the community, knowledge and skills.

4. Empathy: understanding clients industry acknowledges and adapts to specific clients needs,
gets to know

the client.


Tangibles: office areas, report, plan themselves, billing statement, dress of the employees.

Information processing (internal):

Reliability: provides needed information whenever requested.

Responsiveness: prompt response to request not “bureaucratic’ deals with problems

Assurance: knowledgeable staff, well trained, credentials

Empathy: knows internal customers as individuals and departmental needs.

Tangibles: internal reports, office areas, and dress of employees.

Internal brokerage (consumer and business):

Reliability: provides correct information and executes cust
omer’s requests accurately.

Responsiveness: quick website with easy access and no down time.


Assurance: credible information sources on the site, brand recognition credential apparent
on site.

Empathy: ability to respond with human interaction as

Tangibles: appearance of the website and collateral.


Benchmarking means measuring the performance of a business against that of the competitors
in order to

establish ‘
best practice’
. Benchmarking is a part of process of continuous
improvement. Benchmarking can

be applied at three levels:

1. Internal Benchmarking.

2. Competitive Benchmarking.

3. Functional or Generic Benchmarking.

Internal Benchmarking:

Internal Benchmarking is normal
ly carried by large organization by way of comparison between

units. For e.g.. Super market chain might benchmark operations across stores,
financial across branches,

different colleges under the same authority.

But important thing is
how perform
ance is measured &this is clear link to the strategy of organization.

Competitive Benchmarking:

At a second level competitive Benchmarking can be used. This is probably the most frequently
use where

comparisons are made with directly competitive organizati
on. Customer
participation is necessary because of

which it will be easy to achieve in some service

For e.g: As a hotel owner, it is possible to ‘sample’ the service to competitor
simply by ‘posing’ the guest.

Often however, this is done in i
nformal manner. A comparative
impression gained of the service without

examining the different facets in a structured way &
attempting to measure them.

Functional or Generic Benchmarking:

The third approach is Functional or Generic Benchmarking, which comp
ares specific functions
such as

distribution and after sale service. The advantage here is that information is sometime
easier to obtain than

when comparison are being made with competitors.

Care has to be taken in selecting the dimension & sales to be use
d for performance measuring
and ensuring

that due account is taken of all relevant factors.