Services Management

8- Service Recovery

Dr Amit Rangnekar
www.dramitrangnekar.com

Unhappy Customers Repurchase

Intentions
Unhappy Customers Who Dont Complain

9%

Unhappy Customers Who Do Complain

Complaints Not Resolved

Complaints Resolved

19%
54%

82%

Complaints Resolved Quickly

Percent of customers who will buy again

after a major complaint (over $100 in
losses)
Source: Adapted from data reported by the Technical Assistance Research Program.

Customer Complaint Actions

Following Service Failure

c
En
ac
Tr
d
an ints
ge la
ra p
ou Com

Act
Quickly

Service Recovery Strategies

Fail-safe
the Service

Service
Recovery
Strategies

Treat Customers
Fairly

Learn from
Recovery
Experiences

st
o
L
s
m
rf o mer
n o
ar ust
e
L C

e
at
u
eq ns
d
A tio
a
e
id lan
v
o p
Pr Ex

el C
at u
C ion ltiva
us s h t e
to i p
m s
er wi
s th

Benefits of Service Guarantees

Forces company to focus on its customers

Sets clear standards for the organization
Helps firm understand why & where it failed
Generates prompt, relevant customer feedback
Opportunity to recover, satisfy and retain customer
Info generated can be integrated into improving standards
Enhanced employee morale and loyalty
Customer comfort level & confidence increases

Services Management
9-

Aligning Service Design & Standard

Dr Amit Rangnekar
www.dramitrangnekar.com

Service Development and Design

Challenges inherent in service design
Stages & unique elements of new-service development
Service blueprinting
High-performance service innovations

Types of New Services

major or radical innovations
start-up businesses
new services for the currently served market
service line extensions
service improvements
style changes

New Service Development Process

Business strategy development or review
New service strategy development

Front-end
Planning

Idea generation
Screen ideas against new service strategy

Concept development and evaluation

Test concept with customers and employees

Business analysis
Test for profitability and feasibility

Service development and testing

Conduct service prototype test

Implementation
Sources: Booz-Allen & Hamilton, 1982;
Bowers, 1985; Cooper, 1993; Khurana &
Rosenthal 1997.

Market testing
Test service and other marketing-mix elements

Commercialization
Postintroduction evaluation

New Service Strategy Matrix for

Identifying Growth Opportunities
Markets
Offerings

Current Customers

New Customers

Existing
Services

Share
building

Market
development

New
Services

Service
development

Diversification

Service Blueprinting
A tool to simultaneously depict the service process, the
points of customer contact, and the evidence of service
from the customers point of view
Process

Service
Blueprint

Points of contact

Evidence

Service Blueprint Components

Customer Actions
line of interaction
Onstage Contact Employee Actions
line of visibility
Backstage Contact Employee Actions
line of internal interaction
Support Processes

Service Blueprint Components

CONTACT PERSON
(On Stage)
(Back Stage)

PHYSICAL
CUSTOMER EVIDENCE

Blueprint for Express Mail Delivery Service

Truck
Packaging
Forms
Hand-held Computer
Uniform
Customer
Calls

Truck
Packaging
Forms
Hand-held Computer
Uniform

Customer
Gives
Package

Receive
Package

Line of interaction
Driver
Picks Up
Package

Deliver
Package

Line of visibility
Customer
Service
Order

SUPPORT PROCESS

Line of internal interaction

Dispatch
Driver

Airport
Receives
& Loads

Fly to
Sort
Center

Fly to
Destination
Load on
Airplane

Sort
Packages

Unload
&
Sort

Load
On
Truck

Hotel Exterior Cart for

Parking
Bags

SUPPORT PROCESS

CUSTOMER
CONTACT PERSON
(Back Stage) (On Stage)

PHYSICAL
EVIDENCE

Blueprint for Overnight Hotel Stay Service

Arrive
at
Hotel

Give Bags
to
Bellperson

Desk
Registration
Papers
Lobby
Key

Check in

Elevators
Hallways
Room

Go to
Room

Cart for
Bags

Receive
Bags

Room
Amenities
Bath

Sleep
Shower

Menu

Call
Room
Service

Delivery
Tray
Food
Appearance

Food

Receive
Food

Eat

Bill
Desk
Lobby
Hotel Exterior
Parking
Check out
and
Leave

Line of Interaction
Greet and
Take
Bags

Deliver
Bags

Process
Registration

Deliver
Food

Process
Check Out

Line of Visibility
Take Bags
to Room

Take
Food
Order

Line of Internal Interaction

Registration
System

Prepare
Food

Registration
System

Building a Service Blueprint

Step
Step11

Step
Step22

Step
Step33

Step
Step44

Step
Step55

Step
Step66

Identify
Identify
process
processtoto
blue-print
blue-print

Identify
Identify
customer
customer/ /
segment
segment

Map
Map
process
process
from
from
customers
customers
point
pointofof
view
view

Map
Mapcontact
contact
employee
employee
actions,
actions,on/
on/
back-stage,
back-stage,
&/or
&/ortech
tech

Link
Linkcontact
contact
activities
activitiestoto
needed
needed
support
support
functions
functions

Add
Add
evidence
evidenceofof
service
serviceatat
each
each
customer
customer
action
actionstep
step

In New Service Development, marketers, HR,

operations
Managing reliability
Service Recovery Strategies

House of Service Quality for Village

Volvo

Source: J. A. Fitzsimmons and M. J. Fitzsimmons, Service Management, 3rd ed. (New York: Irwin McGraw-Hill, 2000), p. 58.

Services Management

10- Customer Defined Service Standard

Dr Amit Rangnekar
www.dramitrangnekar.com

Customer-Defined Service Standards

Company-defined and customer-defined service standards.

One-time service fixes and hard and soft customer-defined standards.

Service encounter sequence in developing customer-defined standards.

Translate customer expectations into behaviors and actions that are

definable, repeatable, and actionable.

Service performance indexes in implementing strategy for service delivery.

Hard Customer-Defined Standards

Soft Customer-Defined Standards

AT&Ts Process Map for Measurements

Source: R. E. Kordupleski, R. T. Rust, and A. J. Zaharik, Why Improving Quality Doesnt Improve Quality (or Whatever Happened to Marketing?),
California Management Review 35, no. 3 (Spring 1993).

Customer-Driven Standards & Measurements

Exercise
Service Encounter

Service
Quality

Customer Requirements

Measurements

What Customers Expect:

Getting to Actionable Steps
Satisfaction
Relationship
Dig
deeper

Value
Solution
Provider

Reliability
Assurance
Responsiveness

Requirements: Diagnosticity:
Abstract
Low
General
concepts

Empathy
Tangibles
Price

Dimensions

Delivers on time
Returns calls quickly
Knows my industry

Dig
deeper

Dig
deeper

Attributes

Delivers by Wednesday
Returns calls in two hours
Knows strengths of my
competitors

Behaviors
and actions

Concrete

High

Process for Setting Customer-Defined Standards

1. Identify existing or desired service encounter sequence
2.
2. Translate
Translate customer
customer expectations
expectations into
into
behaviors/actions
behaviors/actions
3.
3. Select
Select behaviors/actions
behaviors/actions for
for standards
standards
4. Set hard or soft standards
Measure by
audits or
operating
data

Hard

5.
5. Develop
Develop feedback
feedback mechanisms
mechanisms

Soft

6.
6. Establish
Establish measures
measures and
and target
target levels
levels
7.
7. Track
Track measures
measures against
against standards
standards
8.
8. Provide
Provide feedback
feedback about
about performance
performance to
to employees
employees
9.
9. Update
Update target
target levels
levels and
and measures
measures

Measure by
transactionbased surveys

Importance/Performance Matrix

Services Management
11- Service Delivery & Performance

Dr Amit Rangnekar
www.dramitrangnekar.com

The Service Profit Chain

Source: An exhibit from J. L. Heskett, T. O. Jones, W. E. Sasser, Jr., and L. A. Schlesinger, Putting the Service-Profit Chain to Work,
Harvard Business Review, March-April 1994, p. 166.

Human Resource Strategies for Delivering Service

Quality through People

Compete for
the best
people

Hire for service

competencies and
service
inclination

Measure and
reward strong
service
performers

Treat
employees
as
customers

Be the
preferred
employer
Train for
technical and
interactive
skills

Hire the
right people

Retain the
best
people

Include
employees in
the
companys
vision
Develop
service-oriented
internal
processes

CustomerOriented
Service
Delivery
Provide
needed support
systems

Provide
supportive
technology
and
equipment

Develop
people to
deliver
service
quality

Empower
employees

Promote
teamwork

Measure
internal service
quality

Services Management

12- Delivering Services thro Intermediaries

Dr Amit Rangnekar
www.dramitrangnekar.com

Services Intermediaries
Franchisees
service outlets licensed by a principal to deliver a unique service
concept it has created
e.g., Jiffy Lube, Blockbuster, McDonalds

Agents and Brokers

representatives who distribute and sell the services of one or
more service suppliers
e.g., travel agents, independent insurance agents

Electronic Channels
all forms of service provision through electronic means
e.g., ATMs, university video courses, TaxCut software

Benefits and Challenges in Electronic

Distribution of Services
Benefits:
Consistent delivery for
standardized services
Low cost
Customer convenience
Wide distribution
Customer choice and
ability to customize
Quick customer feedback

Challenges:
Price competition
Inability to customize with
highly standardized
services
Lack of consistency due
to customer involvement
Changes in consumer
behavior
Security concerns
Competition from
widening geographies

Services Management
13- Pricing of Services

Dr Amit Rangnekar
www.dramitrangnekar.com

Pricing of Services
3 ways that service prices are perceived differently from
goods prices by customers.
Pricing of services differs from pricing of goods.
Value to customers and the role of price in value.
Strategies to price services.

Three Basic Marketing Price Structures and

Challenges Associated with Their Use for Services
Co

Challenges:
firms may
charge too
little to be viable.
2. Heterogeneity of
services
limits
comparability.
3. Prices may not
reflect customer
value.

Co
mp
ba etitio
se
d n-

1. Small

De

st
-b
as
ed

sed
a
b
d
man

Challenges:
Costs difficult
to trace.
2. Labor is more
difficult to
price than
materials.
3. Costs may not
equal the value
that customers
perceive the
services are
worth.

1.

Challenges:
1.

Monetary price must be adjusted to reflect value of non-monetary costs.

2. Information on service costs not available to customers; price not a central factor.

Four Customer Definitions of Value

Value is low price.

Value is everything
I want in a service.

Value is the
quality I get for
the price I pay.

Value is all that

I get for all
that I give.

Service Pricing Strategies for 4 Customer Definitions of

Value
Value is everything
I want in a service.

Value is low price.

Discounting
Odd pricing
Synchro-pricing
Penetration pricing

Prestige pricing
Skimming pricing

Value is the quality

I get for the price I pay.
Value pricing
Market segmentation
pricing

Value is all that I get

for all that I give.

Price framing
Price bundling
Complementary pricing
Results-based pricing