2013 course in services

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 !)

1. 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?
2. 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?
3. Were the trainers happy? Was there a system for the trainers to rate how well the sessions went? 
4. 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

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.

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

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”.
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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

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

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.

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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".