Service Marketing Chapter Eight
CHAPTER - EIGHT
1. Delivering And Performing Service
8.1. Service Delivery System
Service delivery is concerned with where, "when, and how the service product is delivered to the
customer. Service providers traditionally had direct interactions with their customers. But to
achieve goals ranging from cost reduction and productivity improvement to greater customer
convenience, many services that don't need the customers to be physically present in the factory
now seek to reduce direct contact. As a result, the visible component of the service operations
system is shrinking in many industries as electronic technology or redesigned physical flows are
used to drive service delivery from higher to lower levels of contact. Self-service delivery often
offers customers greater convenience than face-to-face contact.
Machines such as automated petrol pumps, ATMs, or coin-operated food and drink dispensers
can be installed in numerous locations and made accessible 24 hours a day, 7 days a week.
Electronic food retailing sites like [Link] and [Link] provide extensive product
information and a greater selection of specialty items than most bricks and mortar outlets can
offer. Cafeteria service allows customers to see menu items before making their selection. Self-
guided museum tours allow visitors to enjoy an exhibition at their own pace. Online college
courses allow students to complete work at their own pace in an off-campus location.
But there are potential disadvantages to self-service delivery, too. The shift from personal service
(sometimes referred to as "high touch") to self-service ("high tech") sometimes disturbs
customers. So a strategy of replacing employees by machines or other self-service procedures
may require an information campaign to educate customers and promote the benefits of the new
approach. It also helps to design user friendly equipment, including free telephone or e-mail
access to an employee who can answer questions and solve problems. Of course, not all self-
service is installed in remote locations. Cafeterias and self-guided museum tours are examples of
customers taking on tasks that would otherwise have to be assigned to service personnel. Later in
this chapter, we'll discuss the role of the customer as a co-producer of service in collaboration
with the service provider.
8.2. Employee’s role in service delivery
Effective Service Delivery through Employees:
In a service organization, employees are essentially the contact personnel with the customer.
Therefore an employee plays an important role in the marketing operations of a service
organization. Although the discussion on significance of employees in the business activity
started in mid-seventies, the concept of internal marketing was introduced only afterwards. One
school of advocates of this concept initially suggested that the employer should apply market
research, market segmentation and traditional marketing activities like advertising in order to
attract employees and make them perform in the desired way.
Such traditional marketing efforts should be used internally.
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It was Gronroos who suggested that internal marketing should be broader than traditional
marketing. He also suggested that internal marketing should be viewed as a managerial
philosophy. According to him, "the internal marketing concept states that the internal market of
employees is best motivated for service-mindedness and customer-oriented performance by an
active marketing like approach where a variety of activities are used internally in an active,
marketing like and coordinated way."
The starting point in internal marketing is that the employees are the first internal market for the
organization. Gronroos clarified that the basic objective of internal marketing is to develop
motivated and customer conscious employees. If this is the case, then it has strategic as well
tactical implications. Parsuraman and Berry suggested that a service company can be only as
good as its people. A service is a performance and it is usually difficult to separate the
performance from the people. If the people don't meet customers' expectations, then neither does
the service. Investing in people quality in a service business means investing in product quality.
To realize its potential in services marketing, a firm must realize its potential in internal
marketing - the attraction, development, motivation and retention of qualified employee
customer through need-meeting job-products. Internal marketing paves the way for
External marketing of services.
The companies that practice internal marketing most effectively will (1) compete aggressively
for talent market share, (2) offer a vision that brings purpose and meaning to the workplace, (3)
equip people with the skills and knowledge to perform their service roles excellently, (4) bring
people together to benefit from the fruits of team play, (5) leverage the freedom factor, (6)
nurture achievement through measurement and rewards, and (7) base job-product design
decisions on research.
Although service providers attempt to design the ideal level of customer participation into the
service delivery system, in reality it is customers' actions that determine the actual amount of
participation. Under participation causes customers to experience a decrease in service benefits
(a student learning less or a dieter losing less weight). If customers over participate, they may
cause the firm to spend more resources customizing a service than was originally intended (a
request for customization of a hamburger at a fast-food restaurant). Service businesses must
teach their customers what roles to play to optimize participation levels during service
production and consumption.
The more work that customers are expected to do, the greater their need for information about
how to perform for best results. The necessary education can be provided in many different
ways. Brochures and posted instructions are two widely used approaches. Automated machines
often contain detailed operating instructions and diagrams
(Unfortunately, these are sometimes only intelligible to the engineers who wrote
them).Thoughtful banks place a telephone beside their ATMs so that customers can call a real
person for help and advice at any time if they are confused about the on-screen instructions.
Advertising for new services often contains significant educational content.
In many businesses, customers look to employees for advice and assistance and are frustrated if
they can't obtain it. Service providers, ranging from sales assistants and customer service
representatives to flight attendants and nurses, must be trained to help them improve their
teaching skills. As a last resort, people may turn to other customers for help. Schneider and
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Bowen suggest giving customers a realistic service preview in advance of service delivery to
provide them with a clear picture of the role they will play in service coproduction.
Service preview: a demonstration of how a service works to educate customers about the roles
they are expected to perform in service delivery. For example, a company might show a video
presentation to help customers understand their role in the service encounter. This technique is
used by some dentists to help patients understand the surgical processes they are about to
experience and indicate how they should cooperate to help make things go as smoothly as
possible.
8.3. Roles of customers in service delivery
The Customer As Co-producer:
In some service environments, customers play a relatively passive role, waiting to be served. So
long as they can state their needs clearly and pay promptly when billed, they play a minimal role
in the process of service delivery (think about leaving clothes at a laundry). But sometimes
customers are expected to actively participate in the production process—one of the distinctive
features of service management. Customer participation refers to the actions and resources
supplied by customers during service production and/or delivery; it includes customers' mental,
physical, and emotional inputs. The table below illustrates the differing levels of participation
required of customers across an array of service businesses.
Customers as Partial Employees
Some researchers argue that firms should view customers as "partial employees," who can
influence the productivity and quality of service processes and outputs. This perspective requires
a change in management mindset, as Schneider and Bowen make clear:
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If you think of customers as partial employees, you begin to think very differently about what
you hope customers will bring to the service encounter. Now they must bring not only
expectations and needs but also relevant service production competencies that will enable them
to fill the role of partial employees. The service management challenge deepens accordingly.
Schneider and Bowen suggest that customers who are offered an opportunity to participate at an
active level are more likely to be satisfied—regardless of whether or not they actually choose the
more active role—because they like to be offered a choice. Managing customers as partial
employees requires using the same human resource strategy as managing a firm's paid employees
and should follow these four steps:
1. Conduct “job analysis” of customers’ presents roles in the business and compare it against the
roles that the firm would like them to play.
2. Determine if customers are aware of how they are expected to perform and have the skills
needed to perform as required.
3. Motivate customers by ensuring that they will be rewarded for performing well (e.g.,
satisfaction from better quality and more customized output, enjoyment of participating in the
actual process, a belief that their own productivity speeds the process and keeps costs down).
4. Regularly appraise customers' performance. If it is unsatisfactory, seek to change their roles
and the procedures in which they are involved. Alternatively, consider "terminating" these
customers (nicely, of course!) and look for new ones.
Effective human resource management starts with recruitment and selection. The same approach
should hold true for "partial employees." So if coproduction requires specific skills, firms should
target their marketing efforts to recruit new customers who have the competency to perform the
necessary tasks.
[Link] for enhancing customer participation
Planning for effective and efficient service delivery would require consumer management in the
following areas:
managing consumer participation in the service delivery process;
Managing consumer waiting periods;
Dealing with difficult customers.
Managing Consumer Participation in the Service Delivery Process
By making the consumer participate in the service delivery process, the service firm harvests
both benefits and challenges. The firm benefits from shared cost effect, and is able to make do
with lesser service personnel. Additionally, customer participation makes him more responsible
to the importance of the transaction, generating empathy. Some examples of such services are
executive buffet lunch and shopping in superstores (self-service), e-shopping, entailing browsing
as well as payment procedures, ATM transactions
8.5. Concept of service intermediaries
A distribution channel consists of a set of people or firms who are intrinsically involved in the
transfer of goods or services from the producer to the end user. The end user could either be an
individual consumer or an industrial consumer. A channel of distribution includes the producer
of the goods and services, the consumer of the same and a series of middlemen like wholesalers,
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dealers, retailers, agents etc. Distributors representing manufacturers take responsibility not only
for sales but also for such supplementary services as information, advice, order taking, delivery,
installation, billing and payment, and some problem solving; in some cases, they may also
handle repairs and upgrades.
8.6. Concept of electronic channels and its challenges in services industry
Physical versus Electronic Delivery
As service managers consider the options for delivering their services, two key questions are,
what physical and electronic channels can we use? And is it feasible to switch from high-contact
to low-contact delivery? While goods require physical distribution, those services that are
information based can be delivered through either electronic or physical channels. Many of the
supplementary services surrounding both intangible and tangible core products can now be
delivered electronically. Even service businesses that involve physical core products—like
retailing and repair—are shifting delivery of many supplementary services to the Web, closing
some of their physical branches, and moving to low-contact strategies for interacting with
customers.
Consultation, order taking, billing, payment, and information can all be transmitted in the digital
code of computers. The growth of electronic channels is creating a fundamental change in the
nature of marketing. Customers are moving from face-to-face contacts with suppliers in fixed
locations that only operate during fixed hours to remote contacts in cyberspace, "anywhere,
anytime." More and more services now fall into the category of arm's length relationships rather
than face-to-face interactions.
Cyberspace: a term used to describe the absence of a definable physical location where
electronic transactions or communications occur.
The Marketplace Companies doing business in the marketplace need a physical environment
in which customers can get together with suppliers to inspect merchandise or conduct service-
related business. Marketplace: a physical location where suppliers and customers meet to do
business. We can't get rid of the marketplace for people-processing services, because these
services require customers to enter the physical environment of a service factory. In some
instances, customers don't want to get rid of the marketplace because it is the physical and social
environment that attracts them, like in destination resorts.
The Market space Companies doing business in the market space may be able to replace
contact with physical objects with information about those objects (as in a paper or electronic
catalog). Market space: a virtual location in cyberspace, made possible by telephone and
Internet linkages, where customers and suppliers conduct business electronically. For
information-based services the context in which the transaction occurs is also different, with on-
screen (or on-telephone) contact replacing physical contact; customers may also have the option
to replace service from contact personnel by self-service through intelligent interactive systems.
Arm's Length Transactions: Dealing with a service organization through arm's length
transactions may mean that a customer never sees the service facilities or meets service
personnel. Arm’s length transactions: interactions between customers and service suppliers in
which mail or telecommunications minimize the need to meet face-to-face. As a result, service
encounters tend to be fewer in number and involve telephone, mail, fax, Websites, or e-mail. The
outcome of using the service remains very important to the customer, but much of the service
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delivery process is hidden. Credit cards and insurance are examples of services that can be
requested and delivered by mail or telecommunications. Small equipment repair can often be
handled by shipping the item to a maintenance facility. Any information-based product can be
delivered almost instantaneously through telecommunication channels to any point in the globe
where a suitable reception terminal exists.
8.7. Strategies for effective service delivery through intermediaries
It is imperative for the service firm to control the intermediaries to attain their strategic goals - be
it in terms of image, profit, revenue, efficiency, effectiveness of performance, etc. But the
problem invariably lies in the perception of the role of the intermediary: as a customer, partner or
an extension of the service firm. SOTC/Kuoni would thus always be pondering over how it
should take on its intermediaries - as customers to its designs and services, extensions of itself
like franchisees or as partners in the marketing mix. Thus, accordingly, there are a variety of
intermediary management strategies: control strategies, empowerment strategies and partnering
strategies.
Control Strategies: This strategy can be implemented only when the service principal is
more powerful and assertive than the intermediary and dictates the terms of control,
compliance and conformance. The service principal derives its power from the
following:
It possesses intimate knowledge of customer preferences;
It is in possession of unique services and process know-how which has customer demand and
loyalty;
It has access to economic resources and wields other forms of economic power, like deciding
compensations, territorial over-rides, new promotional schemes, setting goals and targets, etc.
Thus it can ensure the best performance of the intermediary if it can set up standards for
revenues and service performance, measure results and accordingly administer compensation.
Empowerment Strategies: This strategy is mostly used when the service principal is new,
and the intermediary is a known player, financially strong and has local clout politically.
The service firm thus becomes non-assertive, lacking the power to govern the channel
through control strategies. A lot of autonomy and flexibility devolves on the intermediary
with the belief that participation instead of plain acquiescence would bring out its talents.
Empowerment of the intermediary is done by providing information, research and
processes that will help them to perform better.
The service principal then supports them in implementation through consulting, training, etc. The
intermediaries might require systems support to enable them to deliver their service properly.
The service principal then shares systems with the intermediaries. Airlines and also many hotels
give support to travel agencies for ticketing through Computerized Reservation Systems (CRS).
Partnering Strategies: This approach is used when the service principal and the
intermediary both are on an equal footing in the power equation. It seeks to synergies
their skills and strengths, stressing the importance of trust and relationships. This strategy
has the highest potential for being effective, and the stress is to learn as much as possible
about the customers, improve service delivery, communicate effectively and build
standards of excellence.
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