Service Primer

Service Primer For Executives
Covered in B34C5

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 :

1. Collect market information (5Cs) : Customers, Competitors, Collaborators, Company, Context
2. Strategy formulation ( MVG ) :Chosen market, chosen value proposition, chosen channel (go-to-market)
3. Customer Acquisition Contacting customers and bringing business
4. Customer FulfillmentSatisfying acquired customers
5. 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   

 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.

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

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 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

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

1. Knowledge Gap : is between what the customer really wants vis-a-vis what the service provider thinks he wants
2. Planning Gap : is between what the service provider knows he must deliver
   vis-a-vis what he has planned to deliver
3. Delivery Gap is between what the service provider has planned to deliver
   vis-a-vis what he lands up delivering
4. 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

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.   

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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.

1. 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.  
2.  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

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 )

In service : machines assist employees to serve customers

In products : workers assist machines to make products

3 qualities that customers want

1. “Search Qualities” can be pre-inspected before buying : “Product Qualities”
     Example : shirt, shoe, TV set
2. “Experience Qualities” can be felt during buying / use : “Service Qualities”
     Example : restaurant service, how well a singer sings, how well a teacher teaches
3. “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)