Teaching you Service: PGDM Services Marketing 13-14 WIP

Class on Dec 7
What are the indicators of value that were expected from the CEO or the Chairman ?

For example, in the context of the case, the Chairman should have asked these 14 questions related to value creation planning
1. who are your target customers - how did you select them?
2. Is this "ideal customer profile" known to the business developer?
3. For a proposed training program, what is your mechanism to assess their needs?
4. How do you ensure that your trainers know what the trainees need?
5. How do you ensure that he trainees actually deliver what they are supposed to?
6. Do you have a mechanism for measuring trainee's satisfaction ?
7. What actions, if any, you have taken based on the satisfaction measurement ?
8. Do you have a mechanism for gathering complaints ?
9. Show me the ABC analysis of complaints ?
10. What actions, if any, you have taken based on the complaints collected ?
11. Do you ask the trainers for a feedback after the training ?
12. What do they suggest ? Has that been done ?
13. How do you select the students ? Is there any admission process?
14. How do you select the teachers ? Is there any matching process ?
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- Teaching Note : As an introduction to service marketing
1) The teacher should begin by asking and writing on the board what should be done . The class would automatically go into
a) cost reduction ideas like
i) trainers are being paid too much fee (40% is high)
ii) too much allowance ( Rs 1000 per day)
iii) CEO salary should be reduced
b) They may also go into corporate governance ideas like
i) CEO pay should be split into fixed and performance pay
ii) Archimedes should disinvest etc.
2) After the ideas stop flowing, create an actual board meeting setting in the class. Make one of the students as the CEO (Dushyant), the other as Chairman (Naresh) and the rest as independent directors.
a) Make the Chairman ask questions to the CEO
b) Make the independent directors (rest of the class) ask questions to the CEO / Chairperson
3) Why is profit not there ? As a marketing man I strongly recommend that you ask the first and a very basic question (CPV) *.
a) If value is getting created?
b) Is price in line with value creation ?
c) Are we incurring costs which create value ?
d) Have we defined the value clearly ? Means TA and “what matters”
4) Use this framework and ask relevant questions
a) Value : No indicators ! What could be indicators of value ?
b) Are appropriate costs getting incurred ? No indicators
c) Is there any link between value and costs ? No indicators
5) Introduce the concept of Marketing as a science of value creation
a) Common to P&S : General CPV analysis
i) concept of mfg surplus and customer surplus
ii) why price is not important
iii) total value creation and value capture
b) What is the marketing process model
i) Outcome à profit and satisfaction
ii) Right value proposition ( Linked to GTM and M)
iii) M ß Market assessment
6) Introduce how service is different ?
i) What is sold ? transactional, consultative and enterprise selling
ii) Service MOT model
7) Conclusion : Financial numbers are a dashboard of the business and NOT the business itself. Do not try to do the business by the numbers alone without understanding the business reality underneath those numbers : why are those numbers what they are. Was it not surprising for you to realize that, in the process of making profit, you kept your discussion restricted only to the numbers in P&L account? None of you actually even asked very basic questions that a good marketing man asks in a situation like this.
*
1) Evidence of customer satisfaction ? who is the customer ? is there satisfaction measurement ? is there a complaint and query process in place ? is there a system of collecting data about these things? If there was, we would know what is the real issue? Is repeat business coming ? Is there a demand the same teachers ? are the teachers just pulled out and asked to teach without testing? Without briefing ? without planning ? without feedback?
2) Evidence of trainer satisfaction ? Is there evidence of their satisfaction ? how do they evaluate learning of the trainees ? Does somebody ask them and act on their suggestions and complaints? Do they receive training and feedback and support ? How do we select the trainers or just anyone who is available?

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Class on Dec 28, 2013
1 session : Case presentations : Dushyant Corporate Trainers

I expected the class to realize that, whenever there is an issue of sale or profits not coming, the first point to see is if value is being created for the customer. Therefore, instead of lapsing into cost reductions, the class should have probed into whether value is being created. The chairman should have asked questions relating to repeat business, satisfaction, complaints, assessment, planning, expectation mapping etc. That would have told you something that is actionable.

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Class of August 2, 2013
MODULE 1 ( SESSIONS 1 AND 2 )

Module 1 : How Services are different from the Products

Sessions 1 and 2 :

Each group 1 & 2 will present the “Dushyant” case using PPT (Gradable)
Each group 3 & 4 will submit “class summaries” of the day (Gradable).

The “Dushyant Corporate Trainers” case will be discussed in order to learn how the value is created in service business. The concepts will be

The difference between products and services
7Ps Marketing Mix for service business
Classification of services and how the management approach differs

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LEARNING OBJECTIVES

Module Name : How services are different from the products ?

More specifically the learning objectives were (1) The differences between products and services (2) 7Ps marketing mix for service business (3) classification of services and how the management approach differs for each.

SERVICE BUSINESS

The service business is different in many ways than the product business.

PRE-CREATED VS CO-CREATED : Products are pre-created and hence the value embedded into the product can be pre-planned to a great extent. But the service is co-created in real time and many times the outcomes cannot be clearly foreseen because it depends on the the customer's expectations and behavior and the servicescape. Because it is in real time and happens in front of all the people, it can be positively or negatively impacted by others. For example : a teacher (service giver) teaching fresh MBA students (service customers) in a classroom (location) under circumstances of the LCD projector not working (servicescape).

DELIBERATE VS SPONTANEOUS : It is possible in product business to spend a lot of time in getting a product right before it is shipped but service has to be created and rendered in real time when demanded by the customer.

MACHINES VS PEOPLE : Product quality depends on materials and machines whereas service quality depends on men and methods. In products business the men help machines produce standardized products. In service business the machines help men produce customized service.

PEOPLE DEPENDENCE IS A DOUBLE EDGED SWORD : Machines are suited for repetitive work and men are suited for customized work. Customers pay more for personal attention and personalized products or services. On the other hand, dependence on men created its own problems. People have personal traits and likes and dislikes resulting into inconsistent outcomes. People have moods. Since the value is intangible and people dependent, every service business must expect a far higher level of misunderstandings, wrong expectations, complaints and dis-satisfactions. In fact a complaint handling / escalation / foreseeing process is a must in almost every service business.

ADMISSION / FENCING PROCESS TO DEAL WITH MULTIPLE CUSTOMERS / TASKS : Sometimes, for low end services like retail banking, training employees to do multi-tasking is possible in order to make a service giver cater to different customers /needs. But, for high end services like teaching, it is not possible to train the professor in multiple subjects. This problem is solved by creating a filtration / admission / selection / fencing process to segregate the customers as they come in. This enables a line/group of service specialists to be set up so that they deal only with those customers who are trained and equipped to cater to their needs.

YOU CAN OWN A PRODUCT BUT A SERVICE CAN ONLY BE LEASED. The products are priced "per material unit" but services are priced on "per rendering or per time period". For example, a book is a product and is priced per copy. But borrowing it for reading from a library is service because the library charges you "per book per week".

PRODUCT QUALITY IS IMPROVED THROUGH MATERIALS AND MACHINES PROCESSES WHEREAS SERVICE QUALITY IS IMPROVED THROUGH EMPLOYEE AND WORK PROCESSES.

LEARNING FROM DUSHYANT CORPORATE TRAINERS
FOCUS ON VALUE CREATION

When things go as bad as they were in this case, the primary focus should be on examining if value is getting created - because there is ultimately and end to how much cost you can reduce.

And in service business the value is created through service encounters. A service encounter is also called as the Moment of Truth. This is when a service giver meets a service customer at the service location.

Looking back you can see that the whole class went to financial numbers and got waylaid. Actually Dushyant or his boss should have asked the following questions which would have indicated "way ahead" to profitability. ( Note : By the way, there is ample research to show that the service business profitability is correlated with employee satisfaction !)

Was there a system for the students to rate the faculty / training? Was someone analyzing this and taking corrective actions? What were the last 3 corrective actions?
Was there a system to find out the needs of the trainees in advance and give this information to the trainers? Were the trainers told about the class profile?
Were the trainers happy? Was there a system for the trainers to rate how well the sessions went?
Was there a repeat business? Or the business lapsed wherever DCT trained?

This shows the kind of "People Related" questions that could have been asked but were not asked.

TYPES OF SERVICES

There are many ways by which classification of services can be done.

Based on the service giver qualities needed

Whether the customer is present full time or part time

Location : ours, customer's, elsewhere

Service scape / equipment / environment : ours, customer's, elsewhere

Customer condition : at the time of coming in and at the time of leaving

Employee role and condition

AUTOMATABLE SERVICES : Simple services which can be automated (shoe shine, vending packaged products, ticketing on the net, giving cash against cards)
LOW END SERVICES : Routine services that can be performed by almost anyone with little training. (cleaning, guard duty, door keeping)
MID-END SERVICES : Technical services based on knowledge of technology. (nursing, tailoring, repairing). Or Customer care services involving personality and social skills (air hostess, handling complaints, salespersons, reception)
HIGH-END SERVICES: Professional services needing high level of education and experience (architects, doctors, professors, lawyers, pilots)

CURRENT FOCUS : When we discussed above, we were mainly discussing mid and high end services only. It is clear that the most important part in delivering good services of this kind is having the right people in the first place. The "Service Providers" (employees) are to the service business what machines are to the product business. Unless you have the right machines, you cannot produce certain kinds of products. In the same way, unless you have the right kind of employees, you cannot provide the right kind of service. In fact the employees are more complex than the machines : they have moods, they behave differently with different people, they behave differently under different bosses, they respond differently to different working conditions. They have all the advantages and disadvantages of being human.

WHAT MAKES THE SERVICE BUSINESS WORK
As such, the leadership provided from the top is an extremely valuable input in the working of a service business. Some of the great service organizations have become so because of the way they

select employees
induct them on the job
train them
motivate them
provide social glue
recognize them
incentivize them
promote them
develop them

You may have noticed that most of these things that are listed are not easily amenable to measurement. Therefore, the leaders in a service business need a different approach to their business. In product business the leaders can be driven by systems, structure and numbers but in a service business they need to be also sensitive to the individuality of people, sensing their motivations and moods and be able to create a "service culture" in their organization.

PLANNING OF SERVICE MARKETING

In service business, the customers remember / perceive the quality of the service by the extent to which their expectations are met by the service provided. Therefore the main keys to ensure customer satisfaction are as follows and these are explained below in detail later:

1. Alignment of expectations

2. Service design

3. Service delivery mechanism

4. Dealing with dissatisfied customers

5. Reducing the service gap

Managing The Alignment of expectations

so that they can be exceeded during actual delivery creating customer delight which generates reputation and creates further business. This can be done by many practical ways

creating an admission / filtration process ensuring acceptance of only those customers whose expectations can be serviced properly against their expectation
communicating with the customers such that the expectations of the customers are brought in line with what can be delivered
rejecting the customers whose expectations cannot be met

Having a Good service design

in such a way that it meets or exceeds the expectations. The service design means having the right service-scape (Location, Layout, Equipment, Fittings, Furnishings, Signage, colors, Lighting, Temperature etc) which matches 3 types of expectations of (a) customers (b) employees (c) technical and legal demands.

Planning / executing good service delivery

means having the right marketing mix of 7Ps

standard 4 Ps of products

o Physical / Material product

o Price

o Place (location)

o Promotion ( communication to attract, manage expectations and inform at site)

3 Ps of services

o People ( front line service providers, front line supervisors, leaders up the line)

o Processes (of discovering needs, diagnosing what needs to be done, designing a solution and deploying the solution)

o Proofs (because service is intangible, customers need evidence and proof)

Dealing with dissatisfied customers

Service being intangible, there is an ample scope for interpretation and subjectivity on both sides - provider and receiver - and hence complaints is a normal phenomenon in the marketing of services. How complaints are handled is a very important part of service marketing. Complaints - if not handled well - can lead to loss of customers but if they are handled well, they can lead to customers who spread good word about the company. This is called service recovery.

Constantly trying to reduce the "service gap"

The customer's "gap" between expected service vis-a-vis actual service (dissatisfaction) can be explained on the service provider's side in terms of 4 gaps and the marketers need to constantly work on 4 fronts

Knowledge Gap : is between what the customer really wants vis-a-vis what the service provider thinks he wants
Planning Gap : is between what the service provider knows he must deliver
vis-a-vis what he has planned to deliver
Delivery Gap is between what the service provider has planned to deliver
vis-a-vis what he lands up delivering
Promise Gap is between what the service delivers vis-a-vis what he promises to deliver.

IMPORTANCE OF RIGHT PEOPLE IN SERVICE BUSINESS

An important point in service business is to recruit the right people in the first place who have a flair for the kind of service you are providing. In fact some argue that the people in service business be selected based on attitudes and not based on academic qualifications. Selecting the right people, inducting them, providing them leadership and motivation are important practices in improving productivity and efficiency.

Crucial dependence on human skill / judgement / talent

Any business that crucially depends on human skill / judgement / touch / process / talent is a service business. It cannot be scaled up quickly because it means developing / training many service providers who can be used in the business. On the other hand mfg businesses are easy to scale up because factories can be put up relatively faster and the production can be transported to different geographies. Service needs opening different locations and deploying trained staff in these locations. Examples of service businesses

1) Restaurants ( Depends crucially on trained chefs and waiters )

2) Schools ( Depends crucially on teachers )

3) Hospitals ( Depends crucially on doctors and nurses )

4) Ad agencies ( Depends crucially on copy writers and art directors )

5) Theatre groups ( Depends crucially on actors, directors, dialogue writers )

6) Army ( Depends crucially on brave soldiers and natural leaders )

3 qualities that customers want

“Search Qualities” can be pre-inspected before buying : “Product Qualities”
Example : shirt, shoe, TV set
“Experience Qualities” can be felt during buying / use : “Service Qualities”
Example : restaurant service, how well a singer sings, how well a teacher teaches
“Credence Qualities” : cannot be judged even after purchase : “Faith Qualities”
Example : Lawyer’s advice, surgical operation,

The “risk” of going wrong is the lowest in “1” and highest in “3”.
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Class of August 6th

MODULE 2 ( SESSIONS 3 AND 4 )

Module 2 : How Customers Behave in Service Business

Presentation of Forbes Facilities Case
The basic process of service marketing
Need for engaging with end-customers and also the employees
Service branding : “outside" as well as "Inside" branding
Making the intangible into tangible

LESSIONS FROM FORBES FACILITY SERVICES

IMPORTANCE OF FRONT LINE SERVICE EMPLOYEES : (Particularly High Contact) Services can only be partially pre-planned because the service will need to be given on the spot , in front of the customer, but the type of customer and the customer's expectations cannot be visualized in advance. What can be planned is (A) service-scape (location, appearance, layout, interiors and equipment) (B) The type of person chosen to be the service giver and her training; the most important part - the service encounter (Moment of Truth) - what actually happens - still depends a lot of the spontaneous interaction between the customer and the service employee.

Hence front line is far more important in service marketing than in product marketing. In fact the readiness and happiness of front line employees is an excellent predictor of profitability in service business. In fact the front line employees should be treated as the "first market" by servicing organizations.

I hope you noticed how the front line was treated as a market by the company. There was a better and clearly articulated value proposition for the front line janitors "Success through skill, service and smile". How a career path and growth was provided. How they were made to engage far more with their customers (report in every shift).

IMPORTANCE OF HOW A TANGIBLE IMPRESSION OF INTANGIBLE SERVICE IS CREATED : For customer used to asking only about "the number of people deployed on site" an attempt was made to convey to them that the quality of cleaning is not only from the number of people but also from their training, machines used by them and even the materials used. The standards of cleaning did not exist in the country - they were learnt from Singapore and deployed in India. All of this helped in the outcomes of "service encounters" being better.

The value was created through all 3 drivers of service (1) People (2) Process (3) Proof.

Forbes Facility people were better groomed, better dressed, better trained
The process of surveying before giving quotation
The proof was in "75% satisfaction or cut money"

PLATFORM OF ON-THE-JOB SKILL UP-GRADATION WAS CREATED : When new people were taken, they were put through a systematic induction in the class and then were deployed in malls where they learnt how to undertake mechanical cleaning. Thereafter they were put into factories where the cleaning was mission critical. There they learned how to use the right methods and right materials for the right cleaning jobs. Apart from this domain training, they were also given higher responsibilities every year which enabled some of them to become even site heads in 4 years' time which would see their salary increase four fold.

A MECHANISM (QUESTIONNAIRE) FOR ACCEPTING ONLY THE RIGHT CUSTOMERS : Service being intangible and co-created , a wide variation in customer satisfaction is possible and hence it is important to have an admission / fencing mechanism to select the right kind of customers - and bring them in front of rightly trained employees - under the right service scape. We saw how the people were recruited and trained, how the customers were selected, and how the expectations were managed through a SLA.

SERVICE IS INHERENTLY RISKY HENCE CUSTOMERS TEND TO RELY ON REFERRALS : We saw how the satisfied customers acted as our ambassadors and brought more business to us.

PLANNING OF SERVICE MARKETING

1. Alignment of expectations

2. Service design

3. Service delivery mechanism

4. Dealing with dissatisfied customers

5. Reducing the service gap

Class of August12TH

MODULE 3 ( SESSIONS 5 AND 6 )

SERVICE QUALITY

SERVICE QUALITY HAS A RELATIVE DEFINITION : Being an intangible – and hence difficult to decide objectively – service quality is defined in relative terms : how does a “perceived actual service” compare with “expected service”. This, funnily, means that the service quality can be improved not necessarily by improving the numerator (service quality) but also by reducing the denominator (i.e. by reducing expectations!).

PERCEPTION PLAYS A MAJOR ROLE IN CREATING SERVICE VALUE : perception of service is determined by the following 10 factors.

1. Competence is the possession of the required skills and knowledge to perform the service. For example, there may be competence in the knowledge and skill of contact personnel, knowledge and skill of operational support personnel and research capabilities of the organization.

2. Courtesy is the consideration for the customer's property and a clean and neat appearance of contact personnel, manifesting as politeness, respect, and friendliness.

3. Credibility is the factors such as trustworthiness, belief and honesty. It involves having the customer's best interests at prime position. It may be influenced by company name, company reputation and the personal characteristics of the contact personnel.

4. Security is the customer feeling free from danger, risk or doubt including physical safety, financial security and confidentiality.

5. Access is approachability and ease of contact. For example, convenient office operation hours and locations.

6. Communication means both informing customers in a language they are able to understand and also listening to customers. A company may need to adjust its language for the varying needs of its customers. Information might include for example, explanation of the service and its cost, the relationship between services and costs and assurances as to the way any problems are effectively managed.

7. Knowing the customer means making an effort to understand the customer's individual needs, providing individualized attention, recognizing the customer when they arrive and so on. This in turn helps in delighting the customers i.e. rising above the expectations of the customer.

8. Tangibles are the physical evidence of the service, for instance, the appearance of the physical facilities, tools and equipment used to provide the service; the appearance of personnel and communication materials and the presence of other customers in the service facility.

9. Reliability is the ability to perform the promised service in a dependable and accurate manner. The service is performed correctly on the first occasion, the accounting is correct, records are up to date and schedules are kept.

10. Responsiveness is to the readiness and willingness of employees to help customers in providing prompt timely services, for example, mailing a transaction slip immediately or setting up appointments quickly.

GAP 1:

Gap between consumer expectation and management perception : This gap arises when the management does not correctly perceive what the customers want. For instance – hospital administrators may think patients want better food , but patients may be more concerned with the responsiveness of the nurse. Key factors leading to this gap are:

Insufficient marketing research
Poorly interpreted information about the audience's expectations
Research not focused on demand quality
Too many layers between the front line personnel and the top level management

GAP 2 :

Gap between management perception and service quality specification : Here the management might correctly perceive what the customer wants, but may not set a performance standard. An example here would be that hospital administrators may tell the nurse to respond to a request ‘fast’ , but may not specify ‘how fast’.Gap 2 may occur due the following reasons:

Insufficient planning procedures
Lack of management commitment
Unclear or ambiguous service design
Unsystematic new service development process

GAP 3:

Gap between service quality specification and service delivery : This gap may arise owing to the service personnel. The reasons being poor training, incapability or unwillingness to meet the set service standard. The possible major reasons for this gap are:

Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role conflict, improper evaluation and compensation system
Ineffective internal marketing
Failure to match demand and supply
Lack of proper customer education and training

GAP 4 :

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

Over-promising in external communication campaign
Failure to manage customer expectations
Failure to perform according to specifications

GAP 5:

Gap between expected service and experienced service : This gap arises when the consumer misinterprets the service quality. The physician may keep visiting the patient to show and ensure care, but the patient may interpret this as an indication that something is really wrong.

Determinants

By the early 1990s, the authors had refined the model to the useful acronym RATER:

Reliability
Assurance
Tangibles
Empathy, and
Responsiveness

The simplified RATER model however is a simple and useful model for quantitatively exploring and assessing customers' service experiences and has been used widely by service delivery organizations.

Four Ways to Reinvent Service Delivery

Innovations that radically redefine how a service is delivered can create tremendous value for customers and for providers. But they require deep insight into clients’ needs and the revising of basic assumptions. It’s possible, for example, that a doctor can treat more than one patient at a time. Organizations can redefine service delivery along four dimensions. A change in one may unlock—or block—possibilities for innovation in the others.

1. The structure of the interaction. Sometimes the service becomes more valuable to clients if they share it with others or if multiple providers coordinate closely to deliver it. Does creating shared experience or shared information among clients add value for them? Do your clients need tight communication among multiple providers?

2. The service boundary. If a segment of clients uses the same complementary services and has trouble accessing them, a provider might consider integrating them into its offering. Does a segment of your clients use a very similar set of complementary services? Do problems with complementary services affect customers’ outcomes?

3. The allocation of tasks. Who actually delivers the service? Employees’ expertise might not match their assigned tasks. Does employees’ expertise match their tasks? What tacit social assumptions influence task assignments?

4. The delivery location. This should be defined by the client’s needs, not the provider’s. Does the location limit clients’ access or success? Have communication and information needs changed?

http://hbr.org/2012/12/four-ways-to-reinvent-service-delivery/ar/1

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Class of August 14th

MODULE 4 ( SESSIONS 7 AND 8 )

Module 4 : How managing people is the key

Presentations on Coimbtore Financial corporation

LESSIONS FROM COIMBTORE FINANCIAL CORPORATION

Profitability analysis involves finding out the unit of profit making which is generally based on the major costs involved.

PRODUCT BUSINESS : Unit : Product (Group) : Cost = Material
HIGH-END SERVICE BUSINESS : Unit : Person (Group) : Cost = Manpower
TRADING BUSINESS : Unit : square foot / working capital

In product business the unit is a product (if a standard product is sold) (or an account customer if the product is not standard) materials is the biggest cost and hence . Hence talking about focusing on more profitable products is common. In services, where major costs are people, the yardstick is productivity per employee. ( here we are not talking of productivity in factories ). Analysis of "Productivity Per Employee" depends on "Eliminating Waste" and "Enhancing motivation".

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Case of Dushyant Corporate Trainers

( Case of Dushyant Training Corporation was used - but it is not necessary to know the case to understand the following )

Financial numbers are a dashboard of the business and NOT the business itself.
Do not try to do the business by the numbers alone without understanding the business reality underneath those numbers : why are those numbers what they are.
Was it not surprising for you to realize that, in the process of making profit, you kept your discussion restricted only to the numbers in P&L account? None of you actually even asked very basic questions that a good marketing man asks in a situation like this.
These (obvious) questions are related to the fundamental fact - Is (and how do we know it is a fact that ) value getting created for the customers? What is the mechanism for value creation adopted by the company?

The process of marketing is focused essentially on the fundamental question raised above : Is value getting created for the customers and what is the mechanism for value creation adopted by the company? We saw that the "marketing process" is a standard template for a company to help it create value for its customers. The steps are :

Collect market information (5Cs) : Customers, Competitors, Collaborators, Company, Context
Strategy formulation ( MVG ) :Chosen market, chosen value proposition, chosen channel (go-to-market)
Customer Acquisition Contacting customers and bringing business
Customer FulfillmentSatisfying acquired customers
Outcome of marketing : Profit for the company and satisfaction of the customer

We saw clearly how Dushyant was not following any of these processes and no wonder, in the absence of the systematic marketing process, the company was making losses.

An exercise : how market oriented are you ?

is to ask yourself which of these marketing processes are

properly planned and implemented in your company?

How often do you collect market information? How well do you know about your Customers, Competitors, Collaborators, Company and the Context? Is this done periodically, systematically and discussed in open regarding how things are changing outside your business and how you should change?
Have you systematically analyzed which customers you want to serve ? And which customers you will not want to serve? Have you blindly assumed that you should serve the same customers just because your competitors are serving them?
Have you systematically analyzed and then decided what should be the positioning, fetures and prices of your offerings and products ? Or are you blindly copying the same product line of your competitors?
Are you using the same pricing, advertising and sales channels that your competitors are doing? Are these strategies consistent with your choice of markets, your choice of competitors and your products?
Do you measure only the sales or do you measure the satisfaction too? Do you know which customers are loyal and which are not.

TYPES OF SERVICES

AUTOMATABLE SERVICES : Simple services which can be automated (shoe shine, vending packaged products, ticketing on the net, giving cash against cards)
LOW END SERVICES : Routine services that can be performed by almost anyone with little training. (cleaning, guard duty, door keeping)
MID-END SERVICES : Technical services based on knowledge of technology. (nursing, tailoring, repairing). Or Customer care services involving personality and social skills (air hostess, handling complaints, salespersons, reception)
HIGH-END SERVICES: Professional services needing high level of education and experience (architects, doctors, professors, lawyers, pilots)

CURRENT FOCUS : we shall speak mainly about the last 3 types of “mid end” and "high end" services. It is clear that the most important part in delivering good services of this kind is having the right people in the first place. The "Service Providers" (employees) are to the service business what machines are to the product business. Unless you have the right machines, you cannot produce certain kinds of products. In the same way, unless you have the right kind of employees, you cannot provide the right kind of service. In fact the employees are more complex than the machines : they have moods, they behave differently with different people, they behave differently under different bosses, they respond differently to different working conditions. They have all the advantages and disadvantages of being human.

WHAT MAKES THE SERVICE BUSINESS WORK : As such, the leadership provided from the top is an extremely valuable input in the working of a service business. Some of the great service organizations have become so because of the way they

select employees
induct them on the job
train them
motivate them
provide social glue
recognize them
incentivize them
promote them
develop them

An exercise for you : how good are your people practices ?

is to ask yourself which of these people practices

your company is adopting?

Are your operations people involved in defining and selecting employees and training them - or is this left entirely to the HR department ? Do you select employees only based on their qualifications but do not check if they have the right attitude needed for service? Do you have good practices of identifying, motivating, recognising, incentivising, promoting and developing high potential employees?

PLANNING OF SERVICE MARKETING

1. Alignment of expectations

2. Service design

3. Service delivery mechanism

4. Dealing with dissatisfied customers

5. Reducing the service gap

Managing The Alignment of expectations

so that they can be exceeded during actual delivery creating customer delight which generates reputation and creates further business. This can be done by many practical ways

creating an admission / filtration process ensuring acceptance of only those customers whose expectations can be serviced properly against their expectation
communicating with the customers such that the expectations of the customers are brought in line with what can be delivered
rejecting the customers whose expectations cannot be met

Having a Good service design

Planning / executing good service delivery

means having the right marketing mix of 7Ps

standard 4 Ps of products

o Physical / Material product

o Price

o Place (location)

o Promotion ( communication to attract customers, manage expectations and inform at site)

3 Ps of services

o People ( front line service providers, front line supervisors, leaders up the line)

o Processes (of discovering needs, diagnosing what needs to be done, designing a solution and deploying the solution)

o Proofs (because service is intangible, customers need evidence and proof)

Dealing with dissatisfied customers

Constantly trying to reduce the "service gap"

Knowledge Gap : is between what the customer really wants vis-a-vis what the service provider thinks he wants
Planning Gap : is between what the service provider knows he must deliver
vis-a-vis what he has planned to deliver
Delivery Gap is between what the service provider has planned to deliver
vis-a-vis what he lands up delivering
Promise Gap is between what the service delivers vis-a-vis what he promises to deliver.

An exercise for you : How well are you marketing?

is to ask yourself which of these marketing practices

your company is adopting?

How well do you align the customer expectations to your ability to deliver through (a) an admission / filtration process (b) communicating with the customers (c) rejecting the customers.
How good is your service design and your service-scape? How will does it align with expectations of customers, employees and the technical and legal demands?
How well planned is your product, Price, location, communications aimed to attract customers, manage expectations and signage at site, front line service providers, front line supervisors, leaders up the line, Process of discovering needs, process of diagnosing what needs to be done, process of designing a solution and the process of deploying the solution.
Remember that the services in intangible. Do you provide a proof to the customers of having come to the right place, being in contact with the right people, having chosen the right product, and having got the right output?
Do you regularly monitor what are the “touch points” (positive encounters) and “Hot spots” (negative encounters)? How easy is it for your customers to complain and suggest? How well you undertake service recovery? Is there an effort to use customer feedback to improve your service?
Do you constantly strive to reduce your knowledge gap? planning gap? Doing gap? And promise gap?

IMPORTANCE OF RIGHT PEOPLE IN SERVICE BUSINESS

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SUMMARY OF WHAT YOU SHOULD KNOW

ABOUT SERVICES

How is service different from products?

Intangible : Products can be inspected before purchasing. Services cannot be inspected : they can be experienced or believed
Inseparable : Pproducts can be produced in one place and transported to the customers : services are produced when the customer too is present
Perishable : Products can be made at one location and time and sold in another location and time : Services are made only in response to customer demand and in her presence hence it is necessary for the customer to be present at the same location and time at the service location.

Is a tailored suit a product ? Is a vehicle loan a service ?

Service is crucially dependent on the service provider using his human skill / judgement / touch / process / talent in order to co-create / customize and result into a customer satisfaction. A product on the other hand is crucially dependent on using of right materials, processes and machines in order to efficiently manufacture a standard product that will lead to customer satisfaction. In most cases a real life product is a bundle of products and service.

The fabric is product but “tailoring” is a service : for many people the latter is more important : hence a tailored suit is largely a service : dependent on human skill / judgement / touch / process / talent.
The loan amount and interest rate is standard and does not depend on human skill / judgement/ touch / process / talent. The only service that matters is expediting of application and sanction. Hence a vehicle loan is largely a product.

Crucial dependence on human skill / judgement / touch / talent

1) Restaurants ( Depends crucially on trained chefs and waiters )

2) Schools ( Depends crucially on teachers )

3) Hospitals ( Depends crucially on doctors and nurses )

4) Ad agencies ( Depends crucially on copy writers and art directors )

5) Theatre groups ( Depends crucially on actors, directors, dialogue writers )

6) Army ( Depends crucially on brave soldiers and natural leaders )

In service : machines assist employees to serve customers

In products : workers assist machines to make products

3 qualities that customers want

“Search Qualities” can be pre-inspected before buying : “Product Qualities”
Example : shirt, shoe, TV set
“Experience Qualities” can be felt during buying / use : “Service Qualities”
Example : restaurant service, how well a singer sings, how well a teacher teaches
“Credence Qualities” : cannot be judged even after purchase : “Faith Qualities”
Example : Lawyer’s advice, surgical operation,

The “risk” of going wrong is the lowest in “1” and highest in “3”.

Products

Products are designed for standard tasks ( non standard tasks need “solutions”)
Products are pre-designed, pre-produced and transported.
Quality of products depends on materials, machines and processing.
Mfg science reduces variations, facilitates flow of materials through work centres.
Language : batch, assembly, specs, rework, downtime, moulds, packaging, price list
“Line of sight” with customers is poor

Service

Service is custom-designed-and-delivered designed for individual needs
Service is co-created - designed and produced – in consultation with the customer
Quality of service depends a lot on experiential and belief qualities
Service focuses on readying to serve customers so as to bring smiles on their face
“Line of sight” with customers is high among front liners

Language of service marketing : locations, parking, waiting, front office, back office, employee areas, collection, complaints, utilities, traffic, trained employees, difficult customers, recovery, intervention

Is Hindustan Lever a Product Company or a Service Company?

HUL makers products but its customers buy services along with them. HUL spends over 40% of its money on buying services for its customers ( advertising, transportation, distribution, retailing)

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SERVICE AS A BUSINESS IS DIFFERENT : Service is basically a different business as compared to the product business

The P&L structure is different
How the business expands is different
Core competencies are different
Ways of differentiation are different and ways of sustaining this differentiation is different
Levers of top line and bottom line improvements are different
Consumer behavior is different.
Marketing Process , Techniques, Mix are different
How service quality is measured
Classification and type of services
How service business grows

HIGH AND LOW CONTACT SERVICE MODELS

The value creation in "High contact" is highly subjective and happens during "service encounters" driven interactively by customers having complex needs and scripts. Thus "High Contact" services need service providers who need to respond to them in real time and undertake complex problem solving using DDDD loops. High contact business is crucially dependent on your being able to bring the right customers in front of right service providers within the right service scape - selecting the customers and managing their expectations is very important and so is training the service providers extensively and intensively. High contact business requires the presence of the customer who is a part of the process
The value creation in "Low contact" services is driven, only to a limited extent, by the customers whose needs have been "pre-productized" ( First 3 Ds already known) and built into the system and only the last D (Deployment and Delivery) remains. Low contact business is dependent on having a good supply of people and space and a layout which promotes the right process which can be carried out efficiently. In fact it helps if the customer is not on the premises to interfere.

IMPROVING EXISTING SERVICE BUSINESS : Customer satisfaction can be improved by

"The Gap Model" is essentially a way of developing operating procedures to increase customer satisfaction by "managing expectations" and then delivering according to those expectations by reducing the 4 gaps
"Service Profit Chain Model" is a way of focusing on employees and treating them as being "the first market" that should be addressed by the company and indicates the leadership practices of recruiting, training, motivating and building the service providers
"The service iceberg model" gives tips regarding how the front line supervisors can contribute to the service improvement.
A good "Service recovery" process adds a lot of value to improving the business

CREATING NEW SERVICE BUSINESS : This section focuses on

Positioning of a service business
Translating positioning into marketing mix
Creating a service-scape for the intended business using the "3 Logics" model
Creating a service blue print for planning and review and to identify touch points and hot spots

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8 Differences :
High & Low Contact Services

	HIGH CONTACT	LOW CONTACT
Location	CUSTOMER -CENTRIC LOCATION : Needs to be located close and convenient for the customers	WORK-CENTRIC LOCATION : Needs to be where factors of production like land, labor and materials are close and cheap. It should be close and convenient to the employees and suppliers.
Facility Layout	CUSTOMER -CENTRIC LAYOUT :It should be based on how the customers behave : how they like to approach, enter, wait, be served and leave. It should be also easy for the employees to serve the customers. It needs to presentable. The rhythm will be dictated by the customers' arrival and pace.	WORK-CENTRIC LAYOUT : This layout should enable the work to get done easily. Generally the customer will not be present when such work is done and hence the rhythm of work can be scheduled in batches.
Quality Control	CUSTOMER-DEFINED QUALITY METRICS : Since the customer is present, the quality cannot be measured against industry standards, but against customers' expectations. These standards are subjective and hence variable. Therefore the main standard is whether the customer is satisfied. This may mean you need to change the people and the processes as the customers change.	STANDARD METRICS : Because the customer is not present, the standards can be more objective, You can benchmark yourself against industry standards. You can correct defects and rework is possible.
Capacity	NEED MORE IDLE CAPACITY : Excess capacity is required to handle peaks in demand	NEED LESS IDLE CAPACITY : Can be planned for the average demand
Front Line Worker Skills	HUMAN AND DOMAIN SKILLS : Must be able to interact well with customers and use judgment in decision making	ONLY DOMAIN SKILLS : Technical Skills
Rhytham and Schedule	CUSTOMER PRESENCE MAKES SCHEDULING DIFFICULT : Essentially depends on the customer who is present on the premises and forces his pace and schedule on the service.	CUSTOMER ABSENCE MAKES SCHEDULING EASY : The customer is concerned mainly with the end date and is not present on the premises hence the rhythm can be set to a schedule.
Service Process	DRIVEN BY CUSTOMER :Driven by the customer and consists mainly of the front-end activity. Service may change during delivery in response to customer.	DRIVEN BY INTERNAL CRITERIA AND SCHEDULE : Driven by batching and internal criteria. Not much interference from the customer.
Service Offer	MORE RANGE : More variations may be needed	LESS RANGE : Fixed, less extensive

It is clear that the "cost to serve" per person is higher in high contact service.
High contact service is effective (satisfying) but not efficient
High contact service needs "broad band" providers and deft handlng
High contact service difficult to scale up

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Introduction to Services

We began with the case of a service company - Dushyant Corporate Trainers. The class tended to go into a cost-cutting mode but very few asked the basic question "whether value is being created". It turned out that there is no visibility of value creation anywhere in the case.Is it possible that since the company did not care about this question, it got paid only Rs 10000 per batch. No wonder the company is in a loss.

HIGH / LOW CONTACT SERVICE : We began learning about value creation in "high contact" service (Defined as where the customer and service provider co-create the service meeting face to face for interaction : examples : hair stylist, tutor, waiter in restaurant ). ( Note : Low-contact service can be performed even of the customer is not present. For example kitchen in the restaurant, repair shop in a garage). The service can be seen as an "encounter" - a series of transactional interactions - between a service provider and a service customer.

Teaching you Service

Wednesday, July 16, 2014

PGDM Services Marketing 13-14 WIP

TYPES OF SERVICES

TYPES OF SERVICES

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