#SERVICE STRATEGY-Service is provided by seller to buyer in exchange of money (economic activity) but

it does not provide the ownership of the services provided to the buyer, only values are exchanged This
is the feature that distinguishes services from physical goods. Generally, it is regarded as a process which
is responsible for bringing change in the intangible as well as physical belongings of the customers so as
to benefit them. As per the marketing experts, the term service' is not limited to personal services like
dentists' services, hair-cut, legal consult, auto repairing, etc. According to Philip Kotler, "A service is an
act or performance that one party can offer to another that is essentially intangible and does not result
in the ownership of anything. Its production may or may not be tied to a physical product" #Designing a
Service Strategy - 1) Define the Market: Understanding the opportunities available to the service
provider is at the heart of defining the market. The service provider gets to understand the opportunities
by first understanding the customer required outcomes and then providing a service to enable that
outcome A service will Develop the Offerings increase performance and improve outcomes; but real
value comes from reduction in customer asset performance variation. 2) Develop the Offerings : The
market space is the main concepts raised under develop the offerings. The market space is a set of
opportunities for service providers to provide value to a customer through the provision of one of more
services. Service providers focus on outcomes to ensure they deliver value, through utility and backed by
warranty. 3) Develop Strategic Assets : Service management is a catalyst for higher achievements,
because it coordinates customer assets and service assets. This coordination in practice is the
adjustment of resources and capabilities that will enable a goal to be reached. Reaching goals is
inherently valuable and is reflection of increased service and potential performance.4) Prepare for
Execution : Success is not guaranteed even though a service strategy model exists. There is a
requirement to think and formulate - it is not a mechanical process. Understanding our current strategy
and what works and does not work is the first step. Following this analysis one can be able to determine
the strategy objectives. Objectives are presented as solutions, specifications, needs or benefits. # Service
Triangle: Service Marketing Model- The service triangle visually focuses upon the significance of people
in the organisations' ability to fulfil their commitments made with the customers and build long-term
relationships with them. The figure reveals three interconnected groups that work as a team for
developing, promoting, and delivering the services.The process through which companies can align,
encourage, empower and direct their employees (at all managerial levels) towards delivering a satisfying
customer experience is known as internal marketing.Recently, the internal marketing is being widely
integrated with employer brand management and employer branding so as to establish strong
connections between customer and employee brand experience.The efforts of external marketing
occupy the right portion of the service triangle. The service firms make such efforts for making
commitments with the customers and creating expectations among them regarding the delivery. #
Service-Oriented Organisation Structure- Organisational structure refers to the grouping of activities
and establishing patterns of relationships among the various parts of the organisation. Service-oriented
organisational structure is introduced as a flexible and adaptable structure that provides the opportunity
to explore competitive positions and to allocate the resources that shape the competitive advantages
needed by the firm. Capability sourcing takes place in the service- oriented organisational structure that
is introduced as a flexible structure to allocate the resources that shape the firms competitive
advantages. Service-oriented organisational structure introduces componentisation and service
orientation as two structural enablers for balancing two conflicting forces, differentiation and
integration. The main features of a service-oriented organisation structure include: 1) Establishes each
product (or group of products) as an integrated unit in the framework of the company, often structured
as profit centres. 2) Reporting lines and control are based on each product or service. 3) Primary/direct
activities (for each product/service) which convert raw materials to finished goods include: i) Inbound
logistics, ii) Operations, iii) Sales and marketing iv) Outbound logistics, and v) After-sales service and
support. 4) Support/indirect activities which assist primary activities are usually centralised and include:
i) Finance, ii) Personnel, iii) Research and development. iv) Administration, v) Corporate planning, and vi)
Information management. #Services Marketing Mix - Generally, marketing mix is a combined term for
marketing components used by the organisations so as to develop their overall marketing strategy. It is
also called as 4 P's of marketing, Le, product, price, place and promotion. It is also called traditional
marketing mix. But with the advancement of the service sector, the concept of services marketing mix
has emerged including 7 P's of marketing, ie, additional 3 P's (people, process and physical evidence).
Thus, marketing mix for services can be said to an extension of that for the goods, as it includes some
more factors According to Borden, "The Marketing mix refers to the appointment of efforts, the
combination, the designing and the integration of the elements of marketing into a program or mix
which, on the basis of an appraisal of the market forces will best achieve an enterprise at a given time". #
Expanded/Augmented Marketing Mix 1) Process: Process refers to the manner in which the activities
are originally performed and the steps that are undertaken to perform such activities. For last few years
the study of processes' is being given the due consideration, especially in the field of computer
programming, manufacturing, engineering, etc. 'Process as set up some innovative improvements, such
as, lean production" and "just-in-time in the field of reduction and manufacturing 2) People: In the field
of service marketing mix, 'people' are referred to as both the service personnel as well as the customers,
because in some cases not only the service personnel but the customers are also essential for delivering
the service successfully. For example, in the field of education, students (customers) should also
cooperate with the teachers (service personnel) in order to make it successful. 3) Physical Evidence:
Physical essence is one of the constituents of marketing mix for services. It permits the customer to
review his decision regarding the company for one more time. For example, if a customer sits a
restaurant he usually expects cleanliness and pleasant ambience. Similarly, if people travel in first Class
of an aeroplane then they expect extra space, comfort, and facilities. # Strategy Implementation and
Control During strategy implementation and control, each element of the marketing mix activities
proposed must be carefully priced and analysed for optimal use of organisational resources and to
ensure the most suitable Approaches are used so that marketing objectives can be met. Measurable
targets should be built into the plan to low for effective monitoring programs Clear areas of
responsibility for carrying out designated tasks must set down and understood by all concerned for
successful implementation. At the implementation stage, the key questions to be addressed are: 1) What
needs to be done?" (defining appropriate action) 2)"When will it be done?" (scheduling and timing) 3)
"Who will do it?" (designating clear areas of responsibility) 4) "How much will it cost?" (budget
planning). # Competitive Service Strategies Competitive strategy is the long-term approach firms use to
gain a competitive advantage in the eyes of their target audience. An effective competitive strategy will
help a firm develop, enhance and exploit one or more competitive advantages. A competitive advantage
is a point of difference between a firm and its competitors that is valued by potential clients. Having a
lower cost structure or greater specialised expertise are common examples of competitive advantages in
the professional services. 1) Overall Cost Leadership Strategies - In a cost advantage strategy
companies are attempting to be the lowest cost producer. In the services, this usually means lowering
the cost of talent by either using professionals from countries or regions with lower wages or employing
more automation in the firm's business process. In many industries, high capital costs limit competitors.
This is not true in professional services. Implementing low cost strategy requires high capital investment
in state-of-the-art equipment and aggressive pricing; can revolutionise an industry, e.g., McDonald's,
Wal-Mart i) Seeking out low-cost customers cost customers that are willing to buy in quantity, without
frills and serve themselves. ii) Standardising a customised service, routine professional services at low
cost. iii) Reducing personal element in service delivery, high-risk accepted by customers if increased
convenience results iv) Reducing network costs v) Taking service operations offline; "decouple" service
transaction from customer, eg drop-off/pick-up 2 )Differentiation -With a differentiation strategy,
you are attempting to establish and maintain meaningful differences between firm and competitors.
Given the nature of services, finding and maintaining differences between firms is notoriously
challenging. Creating a service that is perceived as being unique based on brand image, technology,
features, customer service, dealer network etc. primary thrust lies in creating customer loyalty, eg,
American Express, Mercedes-Benz, Apple. i) Making intangible services tangible, e.g.. by reminding
customers of their purchase ii) Customising the standard product; providing a personal touch. iii)
Reducing perceived risk. e.g., provide extra time to explain work to be done to avoid lack of information
about the purchase. iv) Giving attention to personnel training- enhanced service quality v) Controlling
quality-delivering consistent level of service quality. 3) Focus Approaches-The focus dimension of
competitive strategy recognises that either a cost advantage or a differentiation strategy can be applied
to a very broad (unfocused or general) market or a more narrow (niche) market. In other words, one can
pursue a cost advantage in a narrow (niche) market segment or a broad market. The same is true for a
differentiation strategy, Servicing a particular market very well by addressing customer's specific needs. #
SERVICE VISION - Successful service organisations pursue visions of service excellence that clearly
indicate to customers and employees the objectives of the firm and its position in the marketplace. This
vision of service (or service concept) provides the foundation upon which the firm designs its service
offerings such that they are always consistent with the overall image that the organisation has attempted
to create in the minds of customers. The service vision represents all that a service organisation stands
for the image of the organisation as the customers see it. From a theoretical point of view, it is the
service concept that explains to both employees and customers what the organisation stands for and
what it aims to offer. An analogy is an architect's drawing of a building-indicating how a building will look
when its construction is complete. # Features of Vision : 1) Mental Exercise: Forming a strategic vision is
not merely a word exercise designed to create a catchy slogan; rather it is an exercise in thinking
carefully about where a company needs to head to be successful. 2) Selects The Target Market: It
involves selecting the market arenas in which to participate, putting the company on a strategic path,
and making a commitment to follow that path. 3) Constitutes Organisations Objectives and Focus:
Management's views and conclusions about what the organisation's long-term direction should be, the
technology-product-customer focus it intends to pursue. and its future business scope constitute a
strategic vision for the company. 4) Reflects Future Plans: It reflects management's aspirations for the
organisation and its business, and gives specifics about its future business plans. 5) Dynamic and
Flexible: It is dynamic and can be changed according to change in environment; the appearance of
opportunities or threats is a common reason for change. 6) Comprehensive: Strategic vision is very
comprehensive, on the basis of which mission, objectives, goals and strategies are determined. 7) Time-
Bound: As a rule, strategic vision should have a time horizon of five years more unless the industry is
very new or market conditions are so volatile and uncertain that it is difficult to see that, far down the
road with any degree of confidence. 8) Anticipates Future: A well-chosen strategic vision prepares a
company for the future. It prepares and forces managers to thin both creatively and realistically,
regulatory, and societal conditions and about the company’s resources and capabilities. 9) Simple and
Concise: Ideally, executive should present their vision for the company in language that reaches out and
grabs people, creates a vivid image in their heads, and that provokes emotion and excitement. 10)
Effective: A crisp, clear, often repeated, inspiring strategic vision has the power to turn heads in the
intended direction and create a unified organisational march. 11) Pervasive: It charts a strategic path for
an organisation which it wants to follow in future. 12) Objective: It is the basic reason of existence and
legitimisation of an organisation. . # Creation of Service Vision- 1) Understanding the Organisation:
The fore most step of formulating a vision Understanding the Organisation statement is to understand
the organisation. To understand an organisation in a better way the management must identify following
details: i) Nature of the industry. ii) Mission and purpose of the organisation iii) Kind of value it is
providing to the society. iv) Structure of the organisation, v) Critical success factors of the organisation,
vi) Nature and type of stakeholders, and vii) Interests of the stakeholders. 2) Conduct an Audit : Once
the understanding of the organisation has been achieved by the strategic leader, the next step is to
conduct an audit to assess the current position of the organisation the pace at which it is progressing
Following aspects are to be analysed at this stage i) Current direction of the organisation. ii) Mutual
agreement by the key strategic managers on the direction of organisation, iii) Organisational structure,
iv) Organisational activities, v) Employees of the organisation at various levels. vi) Compensation and
remuneration plans, and vii) Information system and communication flow within the organisation. 3)
Narrow Down the Vision: After conducting the audit, the next thing to do is to narrow down the
Organisation perspectives of vision statement. Narrowing down here implies considering the factors that
are necessary to form a vision statement. Some of the important questions to be answered here are as
follows: i) What are the limitations of the vision statement? ii) What would be achieved by the vision
statement? iii) What issues are to be considered by the vision statement? 4) Set-up the Context for
Vision Statement- In this step, the strategic leaders should anticipate the future aspects of the
organisation. Anticipating the future does not mean to be predicting the future, but assessing the future
surrounding. Some of the aspects to be considered are: i) Anticipation and categorisation of future
developments which may affect the vision. ii) Enlist the expectations with each category. iii) Anticipate
the probability of fulfilling the expectations, and iv) Assigning the probability of occurrence to each
expectation. 5) Create New Future Scenarios: As soon as the expectations are anticipated and their
effect and fulfilment probabilities are understood, the next step is to associate those expectations to
form a new scenario which involves a variety of possibilities in future anticipated by the strategic leaders.
This will highlight the possible future scenarios that the organisation may have. 6) Formulate Alternative
Vision Statements: In this step the possible future alternatives are discovered and decided, on the basis
of which the strategic leaders determine the directions that lead to those alternative future courses. In
this step, alternative vision statements for each direction are formulated. 7) Select the Final Vision
Statement: This is the final stage where the strategic leaders would select the best among the
alternative vision statements. For this, it is necessary to closely analyse the vision statements. It is
important to know the characteristics that a good vision statement should possess. The essential factors
which are required in order for the vision statement to become successful should be considered.
# Strategic Service Vision/ Implementation of Service Vision 1) Target Market: It deals with identifying
the market segments or groups of people the organisation sets-out to serve. After segmenting the
market and pinpointing which customer segments are most likely to be profitable and applicable to its
services, the organisation must analyse the benefits or value created for the organisation's stakeholders
2) Definition of an Organisation's Primary Business: This definition should be broad enough to allow for
possible extensions to the definition because of such factors as technological advances or changes in
consumer needs or wants. If the definition is too narrow, the organisation may be at risk from
organisations in related industries. 3) Development of an Operational Strategy: It enhances the
efficiency of service delivery The purpose is to develop a set of strategies for important elements in the
organisation's day-to-day operations, such as marketing, human resources, finance, and operations.
Important steps include identifying where investments should be made, in which areas the most effort
should be spent, and the extent of changes that need to be carried-out with respect to the impact on
service quality and productivity. 4) Delivery of the Service: After analysing benefits for stakeholders,
defining the organisation's business, and developing the organisational strategy, the final basic element
concentrates on delivery of the service. The elements of the service delivery system its capacity and
important features, such as people, technology. # SERVICE ENVIRONMENT- Environment refers to the
surroundings, conditions and influences in which living organisms operate. In the similar way,
organisational environment is a sum total of events circumstances and objects that influence the
organisation. Therefore, it is imperative to understand the influences that the environment has over the
organisation. This is possible by going through the key features of the market environment. There are
various environmental factors which directly influence the marketing activities and decision-making
ability of the organisation. These factors combine to form the marketing environment. According to
Philip Kotler, Marketing environment refers to external factors and forces that affect the company's
ability to develop and maintain successful relationship with its target customers" # Types of Marketing
Environment – 1) Internal Marketing Environment - The internal marketing environment refers to the
factors prevailing inside the organisation. It also affects the marketing function of the organisation.
Commonly, the internal factors are known as controllable factors, as these factors can be controlled or
regulated by the organisation itself. They can be altered or transformed as per the changing situations, in
form of physical and personnel facility, functional and organisational means, similar to the marketing
mix. i) Top Management: One of the major factors present in internal environment is top management.
It includes organisational setup, level of professionalism in management, composition of Board of
Directors, etc., which affect the decision-making process of marketing. The organisational mission and
goals determine the philosophy, business areas, business policies, development plans, preferences, etc.,
of the organisation. ii) Finance and Accounting: Finance department of an organisation acts as a source
of funds to be used towards the fulfilment of marketing objectives. The factors influencing the
organisational decisions, policies and operations comprises of financial situation, capital structure,
financial policies, etc. Whereas, the accounting department determines the revenues and costs
associated, in order to evaluate the organisational performance. iii) Research and Development: The
R&D department within the organisation is responsible for the development of new and innovative
products with the help of available technology This factor defines the ability of an organisation to
compete, innovate and influence the marketing activities. iv) Manufacturing: It refers to the process of
producing preferred amount of goods and services of high quality. The manufacturing activity involves
physical assets, technology, production capacity, machinery and distribution channels, which affect the
functioning of the company. v) Purchasing: Purchasing is the activity of acquiring goods and services to
attain organisational goals. It is considered as the strategic function and varies according to the needs of
the organisation. Under this, availability of required raw materials, machines, parts, equipment, or
supplies, etc., at required place and time without compromising the quality and quantity, is very
important for the success of any business. vi) Company Image and Brand Equity: Company image refers
to the company's reputation or performance in view of the public. 2) External Marketing Environment -
The environment prevailing outside the organisation is known as external marketing environment. These
factors are beyond the control of the organisation Hence, they are referred to as uncontrollable factors
such as economic factor, government and legal factor, socio-cultural factor, geo-physical factor,
demographic factor, etc. Uncontrollable factors exist outside the organisation and influence the
marketing strategies and plans of the organisation designed by the marketing manager. The external
marketing environment can be categorised into two parts i) Micro environment. 1) Suppliers: Suppliers
are those factors which affect the marketing potential and competitiveness of the organisation. These
can be the suppliers of raw material, labour, capital and energy. Michael Porter states that there is a
stable and powerful relationship between the organisation and the suppliers. 2) Market Intermediaries:
Market intermediaries are individuals or business enterprises involved in selling and delivering of
organisational products and services to the target customers. Typically, it is the basic requirement of
every organisation. Various market intermediaries include distribution agencies, financial institutions and
middlemen such as wholesalers, retailers, agents, etc. 3) Customers: Customers are the central focus of
the organisation. They can be categorised into five types like: i) Ultimate Customers: They can be
individuals or groups of people who use or consume the goods and services of the company. ii) Industrial
Customers: These customers are mainly the small and large organisations which purchase goods and
services to produce other useful products. iii) Resellers: They buy goods and services from one place and
resell them at high prices to gain profit at some other places. iv) Government and Other Non-Profit
Customers: They buy goods and services, mostly for the consumption purpose of other people. These
people can be ultimate customers or end users. v) International Customers: They are the customers
across national borders, who purchase goods and services for industrial purpose or may be for their own
consumption. 4) Competitors: The firms producing and selling identical products and services in the
same market are known as competitors. The competition is mainly based on price and product variation.
In order to manage this situation, an effective marketing system is very necessary. The use of marketing
system enables improved results and self-reliance within the organisation. To become competent, the
identification and careful analysis of existing competitors is important. It is also crucial for a marketing
manager to study and note different basic aspects related to competitive atmosphere. Philip Kotler
suggests that a buyer's perspective is very useful in determining the level of competition for an
organisation. 5) Public : Public is also an important factor of micro environment. The satisfaction of
general public should be the utmost aim of organisation as competitors and customers are all part of
general public. The policies and activities of the organisations have a significant impact on other groups
of the general public. A public refers to "any group that has an actual or potential interest in or impact on
a company's ability to achieve its objectives". 2) Macro Environment- The factors which are not
immediate environment to the organisation constitute to form macro environment. These factors are
external to the organisation and uncontrollable in nature. They indirectly influence the marketing
decisions but do not affect the marketing strategies of the organisation. 1) Political Environment:
Political environment is defined as the governmental actions which influence the functioning of the
organisation. The environment is closely associated with the economic conditions surrounding the
organisation. The factors involved in this environment may be acts, policies, laws, rules and regulations,
related to business and economy. Different countries have different political environment. 2) Legal
Environment: Legal environment refers to those factors which are associated with the legal laws and
orders influencing the marketing environment. It is essential for the marketing environment to follow all
the rules and regulations of the Indian Penal Code. The legal factors may include laws, constitution, legal
rights, courts, penalties, and other legal practices, etc. These factors significantly influence the marketing
operations of different organisations. 3) Economic Environment: Economic environment refers to those
economic factors which largely influence the functioning of business organisation. These factors consist
of production process and wealth distribution system. The economic environment also affects the
marketing activities of the organisation. In addition to this, the market size and consumers' willingness to
spend also plays a vital role in determining the economic environment. 4) Socio-Cultural Environment:
Typically, the socio-cultural environment refers societal forces and institutions influencing the business or
marketing activities. These socio-cultural factors comprise of social preferences, values, behaviours,
education, ethical standards, social stratification, conflict, cohesiveness, etc. These factors determine the
nature of inter-relationship between society and the organisation, as well as the functioning of the
organisation. 5) Technological Environment: Technological environment is the macro environment,
which includes factors like machines, materials, and knowledge for producing various goods and
services. These factors significantly affect the functioning of the business organisations. The
advancements in the field of technology, which is used to make innovative products and enhance the
operational methods which influences the business is termed as technological environment. 6)
Demographic Environment: Demographic environment is a fundamental element of macro
environment. The most important thing which is taken into consideration by the marketers is population,
since people combine to form markets. The factors which influence the business organisation are
population growth rate, population size, ethnic mix, age distribution, household pattern, education level,
regional characteristics and movements. 7) Natural Environment: Natural environment is the group of
natural resources which is used by business. It covers everything from its existing location to weather
conditions that affect production and sales of a business. This natural environment is uncontrollable in
nature. # Competitive Environment of Services- There are many service firms compete in the
challenging environment, following are the reasons of such challenges 1) Relatively Low Barriers on
Entry: Innovations in services are not patentable. These are also not capital intensive in many cases
Because of these reasons, a same innovation in service can also be adopted by the competitors.
Nevertheless, there are some other types of barrier such as localising a hotel or a re-sort on the best
island beach (For example, the White pearl beach hotel on the island of Lakshadweep in India). 2)
Minimal Opportunities for Economies of Scale: The market area becomes limited with the requirement
of physical travel. This results in increase in outlets of small scale. The known franchised firms are taking
the advantage of economies of scale via sharing the costs incurred on purchase or on advertisement and
in many cases, the substitute of physical travel is electronic communications. For example, a person can
place an order form LL Bean just by dialling a number. 3) Erratic Sales Fluctuations: There is constant
fluctuation in service demand in a day, within a week or sometime seasonally on new arrivals. 4) No
Advantage of Size In Dealing with Buyers or Suppliers: Many small scale firms of service are not at
strong position while negotiating with the dominant suppliers or buyers because of this reason, many
exception or thoughts comes in mind like the mattresses purchased by Marott's and the beef purchased
by McDonald's. 5) Product Substitution: In present time, the innovative products are substituting the
services such as a kit of pregnancy test. Thus, the service firms must have to maintain constant watch on
innovative products that make their services out-dated. 6) Customer Loyalty: The loyal customer base
can be easily developed by the established firms through their personalised service. Thus, the entry of
new services is restricted in the presence of loyal customer. For example, a firm rendering a service of
hospital supply may install its own computer terminals for receiving the orders at customers' sites.7) Exit
Barriers: Medium scale service firms run with low or no profits. For example, private firm may have a
goal of giving employment to its family member rather than achieving profit. Other example such as
scuba diving stores or antique shops, have a hobby or romantic interest that gives their owners ample
job satisfaction to compensate for low financial compensation. # Trends in Marketing Environment - 1)
Applying Product Marketing Techniques to Services: This is a significant development that has taken
place and is likely to continue in the future. It is not a well thought out marketing strategy but rather the
outcome of a good marketing practice that involves devising effective communication to both customers
and employees. There are several product marketing techniques composing branded products and
services attractive packaging options and marketing literature, consistent pricing policies and effectively
positioning the product as well as information. All these techniques can be considered as good in
marketing Sales teams tend to understand services marketing better when the services are marketed
similar to the way products are done. 2) Branding Services: The branding of services has evolved into a
very important topic in the subject of services marketing. Organisations have been able to market their
services with appreciable outcomes. The best technique that is employed is to have an umbrella
branding (marketing practice which involves marketing of the related products under a single brand
name) for all the services of the company The company can also innovatively combine service and
product brand names in a very effective manner. 3) Internal Marketing of Services and Service
Organisations: It is very important to position services internally in the organisation. However, effective
internal marketing is unreached because of the paucity of good ideas on how to do this. The
management of companies and the service organisation itself is often responsible for the disjointed
effort. The development of a strategic plan for services remains a pipedream unless the service is first
repositioned effectively within the company. 4) Niching Service: Niche marketing is a very popular
technique these days. It is also increasingly used by the service providers especially in case of
professional services. Manufacturing services normally have an easy task as they have to service
something that the company sells. For others, however, this can be a complex task as it includes a variety
of options like having multi-vendors, asset management, 5) Direct Sales of Services Internationally:
Selling services is no longer an easy task but an excessively competitive and cut-throat task. The telesales
of services and support activities are increasingly at a rapid pace. This is inspite of the objections that
many people have raised. This trend of direct marketing started a few years back. However, this is one
activity that has been adopted aggressively by the marketing teams today. # Significance of Marketing
Environment Analysis - 1) Providing Marketing Environment Information: Marketing management
largely depends upon the information related to the marketing environment. Marketing environment
analysis is vital because it keeps an accurate balance between the organisation and the marketing
environment by using tools like marketing mix. This analysis provides the information about the
prevailing trends and changes associated with the environment. 2) Facilitating Strategic Response to
Environment: The basic purpose of environmental analysis is to aj the organisation's strategic response
to the ever-changing environmental factors. The company needs to remain updated with alternative
strategies and programs that are aligned with actual environment. This can be done by carrying out
accurate environmental analysis. This environment analysis enables the organisations to identify the
available opportunities in the marketing environment, which are relevant and fulfil the organisational
objectives. 3) Determining Opportunities and Threats: The key role of marketing environment analysis is
to identify the available opportunities and threats within the marketing environment. This helps the
organisation to exploit the favourable opportunities and meet out the prevailing threats. As a result, the
marketing objectives can be accomplished without any hurdles. 4) Handling the Tasks Related to
Marketing Environment Analysis.: The process of collecting, sorting and analysing the data related to
marketing environment is called 'marketing environment analysis'. It also involves the tasks like
observing environmental changes and finding out opportunities and threats. # WINNING CUSTOMERS IN
THE MARKETPLACE - Service strategy focuses on customers and on satisfying their needs, which will
result in a loyal customer base. Winning customers in the marketplace means competing on several
dimensions. Customers base their purchase decisions on many variables, including price, convenience,
reputation, and safety. The importance of a particular variable to a firm's success depends on the
competitive marketplace and the preferences of individual customers. Customers choose a service
provider by the criteria listed below, which are based on the personal needs and competition. 1)
Availability: Customer prefers those services which are available all the time. For example, 24 hours
availability of bank ATMs is one of the banking services. This service is available to the customers even
after the working hours of bank. After regular hours of operation, the use of 800 numbers by many
service providers provides service. 2) Convenience: The service is said to be convenient to those nearby
customer who avail that service. Fast food restaurants, drycleaners, gasoline stations are some service
provider that choose the location on busy places in order to achieve success. 3) Dependability:
The customers' dependency on services drives them to avail particular service further more. For
example, the customers are highly depends on Samsung products because the services of this company
is reliable and making their customers happy by fixing the problems only on the first visit. 4)
Personalisation: The customer avail those services where he/she is treated as an individual. For
example, it is very ordinary in hotels that repeated customers are greeted by their name. No matter how
limited, the degree of customisation permitted in the provision of service, it can be seen as a more
customised service. 5) Price: The price is less effective in service than in the case of products because it
is tough to compare service costs in objective manner. Comparing of service costs is easy in routine
services, as like the changing of oil. But, in professional services there is competition for prices. Price
competition is considered as counterproductive because price indicates the quality of services. 6)
Quality: Service quality depicts the relationship between the expectation of customer before
experiencing the service and about their expectation during or after the experience of service. Product
quality is different from the service quality as service quality is judged through delivery process and from
the outcomes of service. 7) Reputation: There is uncertainty while selecting the service provider but this
can be resolve by taking suggestion from one who has already experienced that service. Like product
service, we cannot replace or return the poor quality service. An effective farm of advertising is positive
words-of-mouth. 8) Safety: Safety and security is the other important concern in service. For example, in
medicine and in air travel, customer life is in hand of service provider. 9) Speed: Speed is also a factor of
effective service quality. The response time is a major issue in services such as police or fire protection.
But, sometime waiting for services is considered a trade-off in order to have personalised service, for
example, waiting for amazon deals etc.# Principles for Winning Customers in the Marketplace -
Principle 1: Streamline Internal Service Processes to improve their Efficiency and Effectiveness: This
principle requires analysing value-added activities and non-value-added activities within current
processes and eliminating most or all non-value-added activities. It also requires adding new value
added activities to increase overall value. Implement total quality management principles, quality tools,
poka-yoke (a Japanese term for mistake-proofing), fishbone diagrams, root cause analysis, and Kaizen
(continuous improvement) Principle 2: Create a True and Sustainable Value for Customers and Clients:
The value creation process must not be a one-time end temporary exercise; instead, it must be a
continuous and permanent process. Potential or existing customers or clients must be able to notice the
value and suggest ways to improve the value process so all parties can benefit. By involving customers in
the product/service design, development, testing, and implementation work can help in value creation.
Principle 3: Deliver the Promised Services on Time and Within Budget: This principle requires stopping
all the delays and obstacles in delivering services to customers or clients. It requires innovative ideas and
approaches to see how fast the service can be delivered to the promised customer or client. Delivery
cost is not the primary concern here; instead, customer satisfaction should be. Errors in the delivery
cycle should be eliminated or reduced to a minimum. Customer surveys and follow-up are needed by
implementing poka-yoke technique and other remedial actions. Principle 4: Correct Problems in the
Delivered Services to Increase Customer Satisfaction: Customers or clients do not like a rework of their
original product because the company promised to deliver the original product with built-in quality.
Rework cost is not the primary concern here; instead, customer satisfaction until the problem is
corrected should be. Principle 5: Convert one-time Customers into Repeat and Loyal Customers: It has
been said that it is easier and cheaper to keep an existing customer than to find a new one. Retaining
customers or clients is not an easy task for any service firm as it requires constant monitoring of what
went wrong or what went right during the entire-value creation cycle and fixing the wrong things in
timely manner so customers notice it explicitly and become repeat and loyal customers. # Factors to be
Considered by Service Providers – 1) Service Qualifiers- Service qualifiers are essentially competitive
advantages that organisations must effectively demonstrate in order to be recognised as a viable
competitor within a business setting. To be a service qualifier is to meet the minimum requirement to
complete in that service class or industry. There can be regulations around qualifying. For example, in
order to practice as a chartered accountant, one needs to be a qualified chartered accountant, and this
profession has various regulations and professional standards that are required before you can set up an
operation in this category of businesses. 2) Service Winners - Dimensions such as price, convenience, or
reputation that are used by a customer to make a choice among competitors can be considered at the
service winners. Depending on the needs of the customer at the time of the purchase, service winners
may vary. Moreover, this can also become an industry qualifier. A service winner is understood as the
best at service in a particular class of businesses. So, for instance, McDonald's is often seen as the service
winner in fast food. What McDonald's does is often copied by other fast-food restaurants (eg drive
through, self-service kiosks, cafes, etc.).3) Service Losers - These are organisations at the bottom of the
barrel from both customer and managerial perspectives. They get failing grades in marketing, operations,
and human resource management alike. Customers patronize them for reasons other than performance,
typically, because there is no viable alternative which is one reason why service losers continue to
survive. Such organisations see service delivery as a necessary evil. New technology is only introduced
under duress, and the uncaring workforce is a negative constraint on performance. #INFORMATION AND
Strategy - Marketing information systems is an integrated combination of information, information
processing and analysis, equipment and tools (ie., software and hardware) and information specialists
who analyse and interpret the collected information and provide it to decision-makers to serve their
analysis, planning and control needs. A marketing information system continuously gathers data, i.e.,
facts and figures from the internal and external sources of information. Then this information is sorted
out, classified, analysed and sorted for future reference. The stored information can be recalled or
restored immediately in the form required for decision-making by marketers. According to Cundiff, Still
and Govoni, "Marketing information system is an organised set of procedures, information handling
routines and reporting techniques designed to provide the information required for making marketing
decision" #The Competitive Role of Information in Services – 1) Creation of Barriers to Entry :
Organisations can use information technology as part of their competitive strategy to make it difficult for
competitors to enter their market. For example: i) Reservation Systems: On-line reservation systems
created by large airlines are installed in travel agencies to allow them direct access to the airline's
information and reservation systems. These systems make it difficult for smaller airlines to compete on
the same scale. 2) Frequent user Clubs: Technology has allowed the database capability for many
industries to track and reward customers for their loyalty. The airlines in particular have been very
successful at stifling competition by allowing passengers to accumulate points with every ticket purchase
that could be traded for free travel rewards. 3) Switching Costs: In some industries, organisations have
been successful In installing sophisticated technology links in customer locations. The links allow these
customers to control and replenish their inventories, and give them direct access to the supplier's on-line
distribution and order systems. Customers are able to install and have free use of the supplier's system if
they stay with that supplier. 2) Revenue Generation : Information technology can be used to increase
revenue by maximising existing opportunities. For example: i) Yield Management: Control of capacity
through technology. This is useful in any industry where unused capacity is perishable and revenues are
lost if the service or machine is unused. Manufacturers with machines that cost a lot of money to shut
down, such as pen manufacturers, may offer regular customers special short runs if a machine has space
capacity, so enabling the buyer to have limited editions at economic prices. ii) Point of Sale:
Technologies used in retailing to encourage customers to buy. On-line systems are used in-store to
display produce, and retailer and pricing information. At checkouts, technology is used to recognise
purchase behaviour and simultaneously create discount vouchers for similar products which can be used
by customers at a future date. iii) Expert Systems: Technicians in many industries are now equipped with
on-line technology to help them diagnose and repair problems in the field. For example, there are
systems that distinguish. between empty vending machines (which need restocking) and broken vending
machines (which need repair). This type of system not only provides additional expertise to the
technician but also captures information on a customer and the problem. 3) Database Asset - It has been
observed by James L. Heskett that database is a hidden asset of strategic importance. Maintaining and
assembling expenses on huge database is limiting competitors to be entering into the market. Also, the
database is used to know about the customer buying habits, which help in creating opportunity for new
service development. i) Selling Information: American Express has thorough information of their
customer's spending habits on their credit card and provides this information to their retail customers
for analysing the pattern of customers' spending. Similarly, Dun & Bradstreet sells their database
regarding the business credit information. American Home Shield, a service provider of contracts for
individual home plumbing. heating, and electrical system has also considered its database as valuable
asset, what it had attained after many years of experience. ii) Developing Services: The service firms
having customer data on their initial purchase have an opportunity to build long term relationship and
creating modified or new services in future. For example, Club Med, an extended resort company all
over the world has continuous growing membership. iii) Micromarketing: Now days, there is a service
strategy which focuses customer at micro level. The information of consumers' purchase can be
determined through the checkout scanner or through the bar coding technology. Such technologies are
widely used to precisely target the customers. 4) Productivity Enhancement - An ability of managing
multisite service operations has been enhanced with the new developments in analysis and collection of
information. The inventory of retail can be managed on regular basis on managing the display of shelf
space according to the sales. The collected information regarding multisite units helps in recognising the
effective producers. The productivity also increases when these successes is shared on the other sites.
Therefore, the basis of learning organisation is established. i) Inventory Status: The paper forms are
substituted with the hand-held computer by the sales representatives of Frito-Lay. The collected data is
downloaded by them via telephone to the headquarters, Texas, Plano, and the company. With the help
of this data, company track their product promotion, pricing, inventory levels, and out-dated or returned
merchandise. Daily updates of manufacturing, sales, and distribution helps in the movement of fresh
products according to the needs of consumer. For the success of Frito-Lay's, the company is focusing on
its perishable product (e.g. potato chips) and ensuring right product at right place and in proper amount.
One among the spokespersons of that company said that it saves around $40 million in its first year by
reducing the paperwork, loss from out-dated products and route consolidation. ii) Data Envelopment
Analysis: A linear programming method, DEA (Data Envelopment Analysis) is developed by E. Rhodes, W.
W. Cooper and A. Chames in order to evaluate the public sector and non- profit organisations.
Consequently, it was further applied for non-profit service organisation. This method is useful for
comparing all units of service delivery with all other service units in a multisite organisation. DEA also
calculates rating of efficiency on the basis of ratio of inputs to output resource. # The Virtual Value Chain
- A physical value chain consist procurement of raw materials, operations, delivery, sales and marketing
and service. Information technology has changed the way we look at the value chain. Information
technology has introduced concept of virtual value chain. The virtual value chain takes place in what is
called the marketspace. The term marketspace references to the internet and is used to differentiate
between the internet and the physical marketplace. The virtual value chain looks something like this:
Gather, Organize, Select, Synthesize, and Distribute. 1) Gather: Information age has helped digitisation of
information. Proliferation of information is higher than ever before. The internet provides data and
information about markets, economies, government policies, etc. Companies gather information
relevant to them as a first stage in the virtual value chain. 2) Organising: Information gathered in the first
stage of the virtual value chain is in form of text, data tables. video, etc. The challenge in the second
stage is to organise the gathered information in a way to retrieve easily for further analysis. 3) Selection:
this organisations analyse captured information to add value to customers. Organisations develop better
ways of dealing with customers, product delivery, etc. using information. 4) Synthesisation: In this,
organisations synthesise the available data. The data reaches the end user in the desired format. 5)
Distribution: It involves delivery of information to the end user. In a physical value chain, products are
delivered to customers, in the virtual value chain this is replaced by a digital product. For example, digital
movie streaming of movies compared to mail delivery of DVD. Therefore, today's businesses are also
known as information business. 1) First Stage (New Process): Visibility - The first stage is visibility, in
which enterprises use information systems to 'see' and understand the physical processes the physical
value chain with complete clarity. "Visibility" is where a company evaluates the business processes. At
this stage, managers use large-scale information technology systems to coordinate activities in their
physical value chains and in the process lay the foundation for a virtual value chain. Companies such as
FedEx, Wal-Mart, and Frito-Lay have transformed this kind of visibility into competitive advantage. The
successful use of world-class information systems by each of these companies is now common
knowledge. 2)Second Stage (New Knowledge): Mirroring - The second phase uses information to mirror
the physical activities in a digitised space. This process is "mirroring capability" where the physical value
chain gets replaced by the virtual value chain. In other words in this second stage, companies substitute
virtual activities for physical ones; they begin to create a parallel value chain in the market space.
Mirroring is "the ability to create information systems that provide a complete picture of the supply
chain at a given point in time". Like FedEx share information with the consumer of its supply chains
through the website and have been doing so since 1994. The last step is Enhancing Customer Value is
adding value to the website for customer. FedEx accomplishes this through allowing customers to
schedule shipments, print the shipment ticket so all individual have to do is tape the barcode on to the
package and drop in off at a local FedEx office, also FedEx has a mobile app to track packages and
schedule shipments. 3)Third and Fourth Stage (New Products and New Relationships): New Customer
Relationships - The third stage uses Information to develop new customer relationships and products
that provide value in new ways The third process is "delivering value to customers in new ways" This
process involves using the information from the virtual value chain to develop relationship with
customers. At this third stage, managers draw on the flow of information in their virtual value chain to
deliver value to customers in new ways. In this stage, businesses use information to establish new
customer relationships. The managers draw on the flow of information in their virtual value chain to
deliver value to customers in new ways. They apply the generic value-adding activities to their virtual
value chain and exploit the value matrix. Once companies can manage value-adding activities across
both chains, they can develop new customer relationships. Reinvention of new industries is done. #
Limits in the Use of Information - 1) Anticompetitive: As potential anticompetitive, frequent user
programs and reservation systems are identified to form restriction on the entry of firms. For example,
consider a free tip award of frequent flyers when a passenger travelling at corporate expense for
business purpose. The IRS considers taxing of free trip as an income. It is believed by corporations that a
free ticket belongs to company. 2) Fairness: On asking each airline passengers about their ticket cost on
a flight, all may have different cost; this is due to yield management. According to yield management, the
prices of ticket may change every hour. Thus, it can be conclude that price is a moving target and the
ticketing process a lottery 3) Invasion Privacy : Because of the alleged violation of privacy, the notion of
micromarketing has the potential to generate the most violent reaction from the consumers. The
purchase records of each person are shared to eager manufacturers at local supermarket. The result can
be manipulative sales practices for example, the buyers of soft drink of competitors may be lured to
acquire alternatives. Lotus Development Corporation allows database available to the market
participants to anyone on modem and PC. But, for this action more than 30,000 irate people requested
to erase their data. 4) Data Security: The problem for government agencies (such as IRS) is getting
information into the hands of other for unsuitable purpose. Releasing individual's medical records to
potential employers or insurance company is very common. Some organisations sell these lists of
persons who have filed worker compensation claims or medical malpractice suits. Thus database is use
to blackball prospective patients or workers. 5) Reliability: It is important to know whether the available
data is accurate or not. In people's lives. data stored on individuals can be corrupted and cause chaos.
For example, there is a new law that upgrade such problems by forcing credit-report companies to allow
individuals to check accuracy of their credit records.
Unit 2 - SERVICE QUALITY : # Meaning and Definition Service Quality : It is very vital to have a high
service quality for having the competitive advantage in service industry. There are number of service
quality models which can be used to determine the various problems related to the quality and the
improvement. The efficiency and profitability of overall performance can be ensured with the help of
these models. The evaluation of conformity to the expectation of a client with respect to the delivered
service is regarded as service quality. For improving the service level, to have better client satisfaction
and to determine the various problem areas, the assessment of service quality is conducted by the
service business operators. # Significance of Quality in Services 1) Reduced Costs: By having higher
level of quality, it is possible to have lesser mistakes for any repeat task refunds to dissatisfied customer
or service recovery exercises. The cost can be reduced with the help of various preventive and corrective
measures and thus improving the productivity. 2) Resistant or Less Affected to Price War: Some
additional differentiating traits are possessed by those firms which are considered to have higher quality
of their services and thus they are able to avoid service commodity trap. As greater benefits in
comparison to the competitors are provided, thus these firms can charge more prices for their services.
3) Greater Customer Loyalty: Greater customer satisfaction can be ensured by higher service quality
which results in greater customer loyalty and greater profits. 4) Higher Market Share: Positive word-of-
mouth publicity will be received from the loyal customers which will help the firm to increase their
customer base with minimum costs. 5) Loyal Internal Customers: There is a linear relationship which
exits along the profitability of the firm. loyal customer and happy employee. There can be a sense of
proud among the employees for the firm in which they are employed and higher level of inspiration and
delivery of higher quality service can be achieved from the employees having sense of belongingness
with the firm. 6) Higher ROI (Return on Investment): High quality service can be facilitated via service
profit chain which will result in higher profitability. # Categories of Service Quality- Service quality is a
term in management field which portrays the extent of accomplishment of an ordered service. The
objective and subjective aspects of service quality can be differentiated as follows: 1) Objective Service
Quality: It is a measure which determines how well the concept in practice measures against the define
objectives. 2) Subjective Service Quality: It is the way the consumers perceive the actual result with the
expected benefit that they seek. It is thus a process of matching the consumers imagined service with
the service provider's claim of offering a reasonable service. Sometimes, the defined result is
unreachable. In this scenario, the objective ideal result can be regarded as the best outcome though the
subjective assessment may yet be unsatisfactory.
# Improving Service Quality - 1) Assessing the Efficiency and Influence of Operating Practices:- In order
to upgrade the service quality. the organisations should mainly understand the employees' thoughts or
beliefs at various levels. The organisations should review the confidence and support of the service
personnel in their improvement activities. Such kind of analysis enables the service organisations to
recognise the steps required for service quality improvements. The feedback here acts as both the
source of information on customer expectations and as a driver for change. 2) Determining
Teamwork and Management Support:- Every quality initiative taken by an organisation, essentially
requires management support. The support should not be only for starting the initiative but it should
continuously support it for sustaining the effort. Continuous cooperation and improvement should be set
as priorities for employees by the top management. The managers' roles and duties should be
incorporated with continuous improvement as main motive. Determining and improving quality
standards, generating and executing feedback mechanisms, training. joining corrective actions teams,
etc., are the areas where the service managers are required to play a crucial role. 3) Addressing People
Effectively: Employees act as vital constituents in any long-term development initiative. In the presence
of right kind of support and leadership, these employees may become very fruitful. Dealing with the
"human side of quality in an orderly and coherent manner will help to attain the long-term
improvements in service quality. All employees should be provided necessary training to develop
effective communication skills; teamwork, conflict resolution skills and accomplish optimal performance.
4) Continuously Improving the Quality Efforts: Developing and growing together with the dynamics of
varying needs leads to better service quality by an organisation. Ways to achieve long-term quality
improvements must be reviewed from time to time. Through modifying corrective action measures and
assessing and evaluating feedback mechanisms, the quality standards can be continuously improved.
Service quality will decay if these alterations are not made, resulting in negative consequences. 5)
Leadership Commitment: Following are some of the key questions that need to be addressed by every
manager of service organisations because answers to these queries are crucial and indicate an
organisation's leadership adherence towards long-term sustained improvements: i) Do you focus on
quality improvement regularly? ii) Do you motivate your employees to do the same? iii) Do you offer
your leadership to tackle persistent quality problems? iv) Do you offer your leadership to improve the
current quality enhancement initiatives? v) Are the follow-ups and corrective action procedures are done
appropriately? # MEASURING SERVICE QUALITY - Introduction : There are number of researches which
are conducted in the field of service quality focusing on the complex nature of how the service quality is
judged by a customer. In order to explain the service quality evaluation, different models have been
developed. Some popular service quality models are Gaps model, SERVQUAL model, SERVPERF model,
Critical Incident Model, etc. Among these, Gaps model and SERVQUAL model are most commonly used
in measuring and enhancing service quality. # Gaps in Service Quality: Gap Model - In each situation, it
is not possible to define the high quality which is neither static nor similar. In a service organization, four
main service gaps were identified by Parasuraman Zeithaml, and Bitner which give birth to the final and
most vital gap. The gap in the service quality can be defined as the difference in the expected service
quality of a customer and the perception of service quality by the service provider. The different types of
gaps which can be seen in the service quality are stated below which were proposed by Parasuraman,
Zeithaml, and Bitner 1) Customer Expectation versus Perceived Service Gap 2) Quality Standard Gap 3)
Service Performance Gap 4) Promises Versus Performance Gap. Gap 1: Customer Expectation versus
Perceived Service Gap - Gap I is one of the fundamental reasons for not fulfilling the customer
expectations. The difference between customer expectations of certain service and the service
provider's understanding of those expectations is called as 'Gap 1'. Factors Responsible for Gap 1 - 1)
Absence of Direct Communication with the Customers: When there is no communication between the
service personnel and the customers, such kind of gap may generate. Perceptions of poor service quality
are established (through incidents like series of bad decisions and inefficient resource allocations) when
people holding important authority and responsibility for establishing priorities fail to properly interpret
customers' service expectations. 2) Absence of Willingness to Ask Customers about their Expectations:
Service organisations may believe that they know everything about their customers' requirements and
what is best for them. This seems to he un imperious attitude towards the customers. Present day
dynamic organisations have delegated the responsibility to make adjustments in service delivery to
accredited teams and frontline staff. Therefore, it generates Gap 1. 3) Unpreparedness to Address the
Expectations: Another factor responsible for Gap I is the unpreparedness of the service providers to
address the service expectations of the customer.. The service providers despite being aware of the issue
do not prepare themselves for addressing the same as they think the customers are tolerant or the issue
is not so significant that it may result in loss of customer backing. 4) Absence of Market Segmentation:
Merging of customers sharing identical requirements, needs expectations and demographic or
psychographic profiles is known as market segmentation. Nowadays. customers are not any more
satisfied with similar products and services for the mass market, all the more. they are looking for and
buying products and services that suit their unique configuration of requirements. Quality perception
will mostly be poor if the organisation is not able to exactly understand the customers needs in the
absence of segmentation. # Gap 2: Quality Standard Gap - Service organisations develop service
standards and designs on the basis of requirements of the customers. Customer-driven service standards
as established by most service providers are dependent on important customer requirements that are
evident and are estimated by customers. Sometimes these standards are different from traditional
quality standards of the service organisations. Hence, the service providers do not understand the
customer expectations properly and accordingly the development of customer-driven service standards
is affected. This difference between the company interpretation of customer expectations and creation
of customer-driven service standards and designs is known as Gap 2 or Quality standard gap. #Factors
Responsible for Gap 2 - 1) Absence of Pure Customer-Driven Standards: The first factor responsible for
the Gap is the absence et pure customer-driven service standards in the service organisation. The service
standards set in the service organisations are not based on the customer requirements but on the
service provider. Therefore, such kind of gap is generated. 2) Lack of Formal Quality Control Objectives:
Another factor responsible for such gap is lack of formal quality control objectives. Service providers
believe that it is not possible to establish formal quality control objectives for service delivery as
quantification is not possible. They ignore that subjective evaluation can be significant in establishing
standards. 3) Imprecise or Undefined Service Design: Gap 2 is also generated due to imprecise or
undefined service design. Failure to associate service design to service positioning can lead to bad
service design. Defining the service to be offered by the service provider will be successful in deciding
the standards of customer satisfaction.4) Resource Constraints: It is also a significant factor responsible
for causing Gap 2. Resource constraints or limitations may obstruct or hinder a service provider from
offering services as desired by the customers. Here, even if the service provider is aware and
understands the needs of the customers is unable to do so due to resource constraints. 5) Market
Conditions: competitive parity is one of the most competitive market conditions affecting the gap 2.
Under this condition, every competitor produces nearly similar quality products or services. Generally, a
company tends to match a competitor's offering with a view to restrict its competitor from taking
additional market share. Therefore, they ignore the customer expectations and design their own quality
standards. 6) Management Indifference: It is the ideology of the management that causes the Gap 2 to
occur. Service management despite claiming to offer high quality services actually provides the minimum
level service that is acceptable to the customers. The focus here is to prevent customer dissatisfaction
only and not to provide customer satisfaction.# Gap 3: Service Performance Gap - High quality service
performance is not a certainty even though there are directives (service standards) available for
performing services well and managing customers properly. Suitable resources like manpower,
technology. systems, etc., should ratify and support the standards to be effective and productive. It
means employees should be evaluated and compensated based on their performance along those
predetermined standards. Sometimes, service personnel do not act or perform as per the customer-
driven service standards of the organisation. The difference between actual service performance by
company employees and the customer-driven service standards of that organisation is known as Gap 3.
i.e.. Service performance gap.# Factors Responsible for Gap 3 - 1) Defective Recruitment: Recruitment
of suitable employees is very crucial for effective service delivery in any service organisation. The
frontline staff engaged in service delivery should have specific skills and qualities that empower to relate
to and manage the customers. Proper training and guidance are necessary to attain these required
qualities. Any defect in the recruitment of service employees may result in service performance gap. 2)
Role Ambiguity and Role Conflict: Another factor responsible for causing Gap 3 is the role ambiguity and
role conflict among employees. Sometimes, employees of the service organisation become unsure about
the role they have to play in the organisation (role ambiguity) or they become confused between
company management and the customers (role conflict). Such employees are not able to perform their
duties effectively and cause performance gap. 3) Maintaining Supply and Demand: Maintaining supply
and demand in the service organisations is also a cause of Gap 3. Sometimes in order to manage the
excess demand for a particular service, the service delivery component of the service process is
shortened to accelerate the process. In doing so, the performance of the service employees gets affected
causing the performance gap. 4) Non-participation from the Customer: Customer is also a factor
responsible for the occurrence of performance gap in service organisations. As the service delivery is not
possible without the involvement of the customers, sometimes due to their non-participation, the
service performance of the employees is distorted. 5) Lack of Training: When a franchisee is providing
the necessary services in the name of the main service provider, the front-line employees of the
franchisee may not perform as per the standards set, therefore, causing the performance gap. # Gap 4:
Promises Versus Performance Gap - The discrepancy between the service delivered to customers and
the external communications made about the service is defined us Gap 4, i.c., the Promises versus
performance gap. A firms sales staff, advertising and sales promotion make promises to the customers
about the services offered by the service provider. These promises may be directly stated or they may be
implicit. If the service provider is unable to deliver the promised service, such gap gets created.# Factors
Responsible for Gap 4 - 1) Poor Education to Customers: Sometimes sales staff tends to make promises
more than what they can actually ever deliver. This happens when they are more than eager to strike a
deal or market the service. They may use formal or informal communications to convey such promises.
Accordingly, the customers use such promises to set their service expectations. Finally, in case of the
expectations not being met, Gap 4 is created. 2) Poor Use of Communication to Manage Customer
Expectations: Another factor causing the Gap 4 is the poor use of communication means by the service
provider to manage customer expectations. Different formal and informal communication channels are
used by the service providers to identify and manage the customer expectations but sometimes they fail
to do so.3) Overpromising i), Overpromising in Advertising: It is also a factor responsible for the Gap 4 to
occur. Sometimes the advertising team, in order to fulfil the marketing objectives, overstates the ad
message. ii) Overpromising in personal selling: The sales team sometimes overpromises to the customers
about the quality of the services provided. There is a probability of losing customers to rival service
providers due to under-promising but even over-promising can lead to the same thing. 4) Inadequate
Communication between Sales and Operations: It is necessary to communicate the message to other
employees of the organisation if a commitment was made for striking a deal during the personal selling
phase. Predominantly, this message has to be conveyed to the production department who are
responsible to cope up with this additional allowed demand. In case of a failure, it can ruin the
company's image. # Strategies to Fill Service Quality Gaps 1) Creating a Shared Service Vision: The first
step towards filling service quality gaps is evolving a shared/common service vision, an operating
strategy and a service concept which is conveyed to every person in the organisation. Open
communication helps service organisations to better its service concept; this is possible by
comprehending the needs of their target customers and in what manner they perceive their
competitors. The organisation is able to attain its objective through strategy and system integration in
which service delivery points, HRD and improvement of technology have played a decisive role.
Convenience of top management contact personnel and customers, training, decentralisation and
decision-making facilitated service organisations to arise as number one in the financial service industry.
Having a service vision is not sufficient, planning and executing a service quality strategy is also equally
important. 2) Locating Service Point Near the Customer: One of the most helpful tools in enhancing
service quality is taking services to the doors of the customers. Through this approach, the customers
would not have to seek service providers; instead, the service providers would seek the customers.
Service is something that is done at hand and when the customer needs it.3) Making Delivery Point
User-friendly: Keeping the service point user-friendly is crucial for a service provider. Service delivery
points can be made customer friendly with the help of various factors namely, courteous staff,
cleanliness, warm hospitality verbally as well as non-verbally, friendly environment and usage of latest
technology. 4) Reducing the Time Gap between Services Sought and Delivered: A service provider
should focus on reducing the amount of time between the customer demanding for service and the
service being actually delivered. The organisation must target at offering any service to the customer in
minimum possible time. 5) Product Design: Service organisations should take a detailed and closer look
at its product design and scrutinise the ways in which technology can help upgrade the service product.
Latest technology provides opportunities to the service providers to deliver most dependable and zero-
defect products. 6) Unconditional Guarantee: Service organisations must decide to give an
unconditional guarantee to its customers. They should exhibit a commitment to customer service. This
act certainly increases the customer's confidence in the firm and its products. 7) Role Clarity and
Empowering People: Role clarity and inter-role association are the two important factors that help to
encourage service organisations to provide superior quality services to the customers. Role overlapping
is a frequent happening in an organisation this is because mostly role of an individual employee is not
distinctly defined, resulting in confusion and indecision. 8) Performance Measurement and Reward
Systems: Service organisations should focus on developing the positive service attitude among the
service personnel so as to maintain the quality of the services offered to customers. Individual
performances of different employees in developing quality services and making the customers satisfied
with it should be assessed. A proper reward system should be initiated so as to honour the talented and
dedicated employees. It will also motivate others to perform well. 9) Research and Training of People: A
service provider requires a customer feedback and intelligence system in place in order to constantly
observe customer satisfaction. It should also periodically conduct market research to interpret people,
their expectations and changing customer perceptions. # SERVQUAL Model - If anyone wants to
measure the quality of services provided by a service organisation, he/she will have to evaluate not only
the expectations of the customers, but also the actual service offered by the organisation on the basis of
the five service quality dimensions, ie, reliability, assurance, tangibles, empathy and responsiveness. The
deviation assessed between the two aforementioned factors will determine the quality of service
rendered. SERVQUAL model, designed and developed by Zeithaml, might prove very effective in this
regard. The SERVQUAL can be understood through the following formula: SERVQUAL #Dimensions of
Service Quality - Though there are numerous dimensions suggested by researchers to determine service
quality, the most accepted ones are suggested by Parasuraman and his colleagues. They identified ton
dimensions used by customers for evaluating service quality. 1) Reliability: Dependability and
consistent performance come under reliability. Reliability means when a service organisation starts
delivering the services in a proper way right from the beginning and puts value on its promises.
Reliability primarily includes accurate billing and timely service delivery. 2) Responsiveness: The
employees' prometness and willingness in providing the services come under responsiveness. A couple
of examples can be a prompt call-back to the customer, immediate dispatch of the receipt, etc. 3)
Competence: Proper know-how of service delivery and skills to perform them come under competence.
It also includes the skills and awareness of both operations personnel and contact personnel. 4) Access:
Through understanding the accessibility of the service organisation, the quality of the services can be
judged. The case with which a consumer can approach a service determines the access. For example,
accessibility through phone, minimal waiting time, etc. 5) Courtesy: The degree of compassion,
politeness, regard, and consideration shown by the front office staff. telecallers, and the contact
personnel displays courtesy. Proper appearance, cleanliness and showing consideration for the
customer's belongings are a few examples. 6) Communication: It includes not only regularly informing
the customers, but also paying due attention towards what they have to say. Also, the communication
must take place in a language which is easily understandable to the customers. It should also be
customised for different customers. 7) Credibility: The level of belief and trust a customer has on a
service organisation shows its credibility. Considering the interests of the customer and giving value to it
comes under credibility. The personal attributes of the contact person and the service provider's
reputation influence the credibility. 8) Security: It is also a dimension to judge the service quality of a
service organisation. Freedom from doubt. risk, or danger is termed as security, Physical as well as
financial safety comes under it. 9) Understanding: Making efforts to understand the needs of the
customer shows the level of understanding. This dimension can be judged by finding whether the
customers' specific needs are identified by the service providers and whether the individual attention is
given to the customers. 10) Tangibles: Another dimension to assess the quality of service offered by the
service organisations is the tangibles. These include equipment and tools utilised in providing the
service, appearance of contact personnel and other physical evidence of the services.# Process of
Measuring Service Quality - A five dimensional approach can be used in order to determine the service
quality which contains the following steps: 1) Select a specific service industry and the service
organization for which the measurement of quality has to be conducted. 2) Two sets of data will be
required order to determine the service quality with the help of SERVQUAL methodology. One set of
data is required to determine the expectations of the customer with reference to the service quality and
with reference to perceived service; the second set of data is collected. In order to make the context
more certain, the required adaptations to the SERVQUAL instrument is performed. 3) In order to obtain
the scores on the instrument for both perceptions and expectations, a survey of customer should be
conducted. 4) In order to determine the service quality gap, the scores of perceptions and expectations
should be compared. 5) For having a better understanding of quality dimensions of the firm, these gaps
can be plotted on a graph.6) For correlating the score gaps with future behaviour of customers, a
behavioural intention battery test can be conducted.7) In order to rectify these gaps, various managerial
interventions must be developed which can change the purchase intention and loyalty of the customer.
# Application of SERVQUAL SERVQUAL - 1) It estimates a firm's overall weighted SERVQUAL score that
considers the relative significance of the dimension as well as the service quality gap on each dimension
(as indicated by the number of points assigned to it). 2) SERVQUAL model differentiates a firm's
SERVQUAL scores against those of competitive firms. 3) It establishes the average gap score between
customers interpretations and presumptions for each and every service clement. 4) It evaluates
internal service quality. It compares the quality of service provided by one division or department of a
firm to others within the same firm 5) All the five SERVQUAL dimensions form the basis of evaluation of
a firm's service quality. 6) It locates and studs customer segments that vary considerably in their
assessments of a firm's service 7) This model tracks customers' perceptions and expectations on discrete
service traits and/or on the SERVQUAL dimensions over time. # Critical Incident Model - The
critical incident model is usually used for improving customer care. This technique is comparatively easy
and cost-effective for execution. A critical incident can be understood as a defining, unique, troublesome,
intricate, or even an exquisite incident that influences the customers' perception of the quality of a
service. The critical incident mechanism is a qualitative interview approach which enables the inspection
of critical events (occurrences, happenings, procedures or matters, etc., as recognised by the
respondent), the manner in which they are controlled and the consequences with respect to perceived
effects. The aim is to obtain an understanding of the incident from the individual viewpoint, being in
mind behavioural, affective and cognitive attributes. According to Bitner, Booms and Tetreault an
incident is an accomplished observable human activity enabling projections and conclusions to be made
about the person accomplishing the act. A happening that makes a major contribution, either
constructively or diversely to an event or activity is illustrated as a critical Incident. Different methods
help in collecting critical incidences but service research especially demands a story from the
respondents about their experience. # Significance of Critical Incident Model - The importance of critical
incident model can be outlined by the following: 1) Indicates the Service Perception to Customers: Both
the customers as well as the service providers are involved in the process as it reflects the service
perception to the customers. This is one of the greatest benefits of this particular method. In a general
service delivery situation, critical incidents can straddle both the high and low points of service delivery.
2) Produces Unequivocal and Concrete Information: Under the critical incident method, the respondent
has a chance to give an exhaustive explanation of their own experiences. This method provides well-
defined, explicit and definite information. 3) Allows for Interaction among Possible Components:
Critical incident method encourages interaction among all likely components in the service and does not
depend on few pre-determined components. This is the most powerful approach of examining events for
which it is difficult to define all variables theoretically. 4) Provides a Rich Source of Data: Under critical
incidence technique, the data is gathered from the interviewee's point of view in their very own words.
Hence, it acts as a rich and informative source of data as it enables the interviewee to decide which
incidents are the most pertinent to them for the occurrence being investigated. 5) Flexible Set of
Rules: This approach is especially productive when utilised in evolving the conceptual structure to be
used and tested in upcoming research. The critical incident approach is considered to have quite
adaptable or flexible set of rules that can be altered to fulfil the requirements of the topic being
examined. 6) Accesses Perceptions of Customers: The critical incident technique is especially befitting
for use in evaluating perceptions of customers belonging to different cultures and beliefs. 7) Reflects the
Normal Way Service Customers Think: Under the critical incident method, the context is developed
totally from the respondent's perspective and there is no place for any presumption or individualistic
determination of what will be significant to the respondent. 8) Used to Generate an Accurate Record of
Events: This technique is useful in generating precise, valid and comprehensive record of events. It is also
capable of rendering factual starting point for generating new research evidence about the happening of
interest and given its constant usage in a content analytic manner. # QUALITY SERVICE BY DESIGN -
Quality by design principles are changing by the managers think and conduct business. Loosely designs
quality by design is the practice of using a multidisciplinary team to conduct conceptual thinking,
product design and production planning all at one time. It is also known as concurrent engineering,
simultaneous engineering or parallel engineering. Quality by design has recently encouraged changes in
management structures. Quality can neither be inspected into a product nor somehow added on, and
this same observation applies to services. A concern for quality begins with the design of the service
delivery system. Quality in design ensures the safe as well as reliable operations of the service. If the
service provider is unable to include quality in service, or fails to provide a consistent service under all
conditions or fails to do justice to idea of mistake proof service or is unable to deploy quality function in
his service, he or she would lose customers and competitive advantage along with loss in revenues and
increase in costs. Service is largely a function of human rather than robotic resources, resources versus
robotics - at least to date -service quality may be affected by a range of factors including training,
aptitude, attitude and heath and cultural factors. #Incorporation of Quality in the Service Package - The
example of budget hotel competing on overall cost leadership can be used to understand the concept of
incorporating quality in the service package. 1) Supporting Facility: The designing of the building is such
that its constructions require materials that are maintenance free for example, concrete blocks. An
automatic underground sprinkler system is used to water the ground. The decentralisation air
conditioning and heating system is used so that fault in one room does not have any effect on other
room. 2) Facilitating goods: The rooms are built in a manner that their cleaning and furnishing can
become durable and easy for example; the bedside table are attached on the wall to simplify carpet
cleaning. In spite of glass cup, artificial plastic cups are used. The glass cups are expensive and needs
cleaning. 3) Explicit Services: Training is provided to maid to clean and prepare room in an organised or
uniform manner. The appearance of all the rooms is same including the way in which the drapes of the
room are opened. Implicit Services: The position of desk clerk is filled by an individual having decent
interpersonal skills and good appearance. Constant and predictable treatment for the entire guest is
ensured by training in standard operating procedures (SOPs). #Methods for Incorporating Quality in
Service Package 1) Poka-Yoke (Fail-Safe) 2) Quality Function Deployment (QFD) 1)Poka-Yoke (Fail-Safe) -
Shigeo Shingo introduced the concept of poka-yoke in 1961, when he was an industrial engineer at
Toyota Motor Corporation. The initial term was baka-yoke, which means 'fool-proofing'. In 1963, &
worker at Arakawa Body Company refused to use baka-yoke mechanisms in her work area, because of
the term's dishonourable and offensive connotation. Hence, the term was changed to Poka -yoke, which
means 'mistake-proofing'. Poka-yokes are mechanisms used to mistake-proof an entire process. Ideally,
poka-yokes ensure that proper conditions exist before actually executing a process step, preventing
defects from occurring in the first place. Where this is not possible, poka-yokes perform a detective
function, eliminating defects in the process as early as possible. # Steps in The Process of Poka
Yoke - 1) Identify problem: In this stage the complaints coming from the customers (Both internal and
external customer) are collected. The principle of standard is determined by considering various criteria's
like number of complaints from the customer, the quantity of defects detected by quality control,
materiality defects (their impact on the customer, costs, implemented process) and then data is
collected broadly. 2) Observation at work stations: In this step the actual on site study of the problem is
carried out. The causes behind the problem are sort out by using fishbone diagram (fishbone diagram is
cause and effect diagram given by Japans management guru Ishikawa). The causes may be related to
man, machine, material or method accordingly the complete sorting is carried out. 3) Brainstorming for
Idea: This is a technique to capture creativity and skills of employee's In brain storming session the
problem under study is put forward to committee. Then all members study problem and give various
solutions to avoid that defect. 4) Select best ideas: After getting various alternative solutions it is time to
select best one out of all collected solutions. Criteria for selection may be cost, time required, changes in
existing system, opportunity to develop new solutions, simplicity in operation etc. 5) Implementation
plan and implementation: This step is concerned with implementation planning. It deals with material
requirement, processing the material and finally manufactured mechanism it implemented at actual
working site. 6) Monitoring and sign off: The manufactured products are checked for defects under study
also the performance of poka yoke system is also monitored and project is shut downed. # Benefits of
Poka-Yoke - 1) Prevents The Occurrence of Mistake: Poka yoke is at its best when it prevents mistakes,
not when it merely catches them. Since hunian errors usually stem from people who get distracted,
tired, confused, or de-motivated, a good poka yoke solution is one that requires no attention from the
operator. 2) Eliminate Product Defects: Poka-yoke shows how finding mistakes at a glance which helps to
avoid defects A poka-yoke is any mechanism in a lean manufacturing process that helps an equipment
operator to avoid mistakes. 3) Improve the Employee relationship: Poka-Yoke should lend itself to
improvements in employee relationships by encourages more involvement and getting support teams
involved to improve processes which keep causing problems. 4) Improve Quality: Poka-yoke helps people
and processes work right the first time. Poka-yoke refers to techniques that make it impossible to make
mistakes. These techniques can drive defects out of products and processes and substantially improve
quality and reliability. 5) Improve Productivity: A presentation in Poka Yoke falls under the slant
production method, only a small amount of time is required to make sure that each product is without
any imperfections. Because of its time saving ability, it makes a business to be a lot more productive.
# Limitations of Poka-Yoke - 1) Lack of Experts: Expert advice is needed for new creative and challenging
tasks. It may happen that experts are not available with small scale industries and expert advice is not
economical for their financial health. So in this case it is difficult to implement Poka-yoke technique. 2)
Not Show All Results: Poka-yoke techniques cannot eliminate all errors and failures from a process. It
argues that multiple failures in complex, tightly-linked systems will lead to unexpected and often
incomprehensible events. 3) Lack of Cause and Effect Relationship: Poka-yoke will not work to block
events that cannot be anticipated. Usually, a good understanding of the cause-and-effect relationship is
required in order to design effective mistake-proofing devices.# Quality Function Deployment (QFD) -
The QFD theory was first proposed in 1966 by YojlAkao and it was implemented in the Kobe shipyard of
Mitsubishi for the first time in 1972. In this method, a matrix was used in which the vertical axis is used
to represent the customer demands while horizontal axis is used to represent the methods by which the
customer demands can be fulfilled. The simple basis which includes the wide range of activities which
are implemented in many manufacturing and service industry was the origin for the development of this
system; the following definition was given to define the comprehensive application of this method: "A
system which is used to transform the demands of the customers into suitable company requirements at
every step, from research through product design and development to production, installation,
distribution, sales and services and marketing". The QFD can also be treated as a method of identifying
the real voice of the customer at an initial stage and ensuring that it is used in all the steps ranging from
the design, production and delivery process so that greater level of customer satisfaction can be
attained. # Process of QFD - Step 1: Need Analysis and Customer Requirement Recognition: In the first
step, in order to have the better understanding of the perceived deficiency, the need of the customers
are identified and converted into more specific demands and requirements of the customers. The main
focus of this step is to capture the voice of the customer. The term customer is not only confined to the
end users but it also includes the various elements such as the intermediate distributors, retailers,
applicable regulations and standards, installers, the maintainers. Step 2: Significance of Customer
Requirements: There can be a negative relationship between the selected requirements. For example,
the ease in opening and closing the car door may be required by the customer but he may also look to
have the power windows. The ease of opening and closing the door is negatively connected with the
power window, as due to power windows the weight of the windows becomes quite heavy. The priorities
are assigned to different requirements in order to avoid such conflicts. It is very important that the
preference of the customers should be reflected in the priorities. Step 3: Identification of Design
Dependent Parameters (DDPs): The engineering characteristics under the designer's control include the
design dependent parameters or technical performance measures. The customer's requirements can be
influenced directly or indirectly by the manipulations of these parameters. Thus during designing phase,
the customer's requirements are commonly treated as the combination of "whats". The main features of
DDPs are that these should be tangible, can affect the customer's perceptions directly and explains the
products in the terms which can be easily measured. During the preliminary, detailed and conceptual
system design phase, various design concepts, artifacts, configurations are analysed and evaluated with
the help of DDPs. Step 4: Correlation of Customer Requirements and Design Dependent Parameters:
Populating the correlation matrix within the "house of quality" is the main activity which is performed in
this step of QFD process. The level by which the expectations of customers are influenced by the DDP is
evaluated. The correlation matrix represents the various level of this correlation. Three or five levels of
correlation can be used depending upon the level of required resolution. Step 5: Analyse Correlation
Matrix: It is quite significant to analyse the correlation grid at this stage before proceeding any further.
The following things are evaluated in this stage: 1) Empty Rows in the Correlation Matrix: The
unaddressed customer's requirements are depicted by the empty rows in the correlation matrix. In order
to avoid these circumstances, the set of design dependent parameters must be re-examined and
additional DDPs can be recognised if it is required 2) Empty Columns in the Correlation Matrix:
Redundant or unnecessary system-level design requirements are presented by the empty columns in the
correlation matrix. The customer requirements may not be connected to any design requirements which
are included by the design team and these can be dropped for any further consideration. Step 6:
Benchmarking Customer Requirements: Identification of available systems or products which are able to
respond to the operational requirement (to any extent) can be seen as an important activity. Depending
upon the level of fulfilling the initial set of requirements by these capabilities, the benchmarking of the
customer perception is done. Attaining the state of the art from customer perception can be seen as the
main objective. There should not be any interference in this activity from the members of the design and
development team. The results can be influenced by their technical knowledge. Step 7: Technical
Assessment of Design Dependent Parameters (DDPs): The assessment of the competition from a
technical point of view is initiated in this step. There should be an active participation of designers and
engineers during this step in QFD process. In order to effectively accomplish this step, the various
methods and techniques are developed by Cavanagh which are as below: 1) Product testing (baseline
the system or product, non-competitive, competitive systems or products but similar systems or
products). 2) Informal evaluations (renting out competitors' products). 3) Contract laboratories. Step 8:
QFD Matrix Inconsistency Analysis: Before defining the design requirements, various sources nature and
consequences of different types of inconsistencies which are present in QFD matrix need to be sorted
out. For example, the use of incorrect measures or misinterpretation of customer perception can be
identified if the results so obtained from the technical evaluation are opposite to the results obtained
from the customer benchmarking. Step 9: Definition of Design Dependent Parameter Target Values: As
the feasible design space and the subsequent design decisions are influenced by DDP target values, this
can be seen as the important system design activity. There must be an identification and utilisation of
relevant strategic opportunities. During this activity, for the effectiveness the experience and familiarity
with identical systems is quite significant. Step 10: Delineation of Design Dependent Parameter Relative
Importance: Priorities related to DDPs must be delineated in order to facilitate the design analysis and
evaluation activities. From the significance level which is assigned to the customer requirements and the
level of their correlation with DDPs, relative priorities of design dependent parameters are calculated for
maintaining traceability. # Tools for QFD - Conventional quality tools were created to
manage quantitative data. However, for handling the qualitative data associated with services, a new set
of tools were developed. 1) Matrix Data Analysis Charts: The results of multivariate analysis of data are
suggested by matrix data analysis charts. When a large amount of quantitative customer data is present,
various methods like cluster analysis, multiple regression analysis, conjoint analysis, factor analysis and
other methods are utilised especially for customer segmentation. 2) Relations Diagrams: Relation
diagrams also known as interrelationship diagrams. They can be used to find out priorities, implicit
customer needs and wants and original causes of service process problems. 3) Matrices and Tables:
These tools are used for analysing two or more facets in a deployment. Responsibility matrices,
prioritisation matrices and relationship matrix are some common types of matrices and tables. 4)
Analytic Hierarchy Process (AHP): This process is employed to prioritise the necessities and choose the
best suitable ways among the available alternatives to fulfil these necessities. This technique practices
pair- wise comparisons on hierarchically-organised constituents to build a very specific and correct set of
priorities. 5) Affinity Diagrams: For surfacing or understanding the "deep structure" in expressed
customer needs and demands, affinity diagrams are feasible. Affinity diagrams are right brained tool
which is developed by KJ Method initiated by cultural anthropologist Jiro Kawakita. Under this method,
team members can explicitly generate a natural environment for understanding the magnitude of
customers' needs and wants. 6) Blueprinting: All the processes included in a service are
reviewed and outlined by blueprinting. It is among the different types of diagrams employed in time-
motion studies.7) Hierarchy Diagrams: Hierarchy diagrams are also known as systematic diagrams or
tree diagrams. These diagrams are present right through all QFD deployments to examine if any
information is absent, to figure failure, to position levels of abstraction of data and to figure the why &
how nature of functions, 8) Process Decision Programme Diagrams (PDPC): This is another tool used in
QFD. Reviewing possible failures of new processes and services is the main aim of process decision
programme diagrams. # Deployments of QFD Service Quality - 1) Organisation
Deployment: The steps taken by QFD to the various organisational functions including the president,
development, training, customer service, marketing and planning, etc. are mapped by organisation
deployment. It helps in identifying who is accountable for what activities and the exact time during the
service planning and development process. Generally, it is combined with a responsibility matrix to
elucidate organisational roles. Usually, western countries ignore such type of deployment. However,
some countries like Japan proceeded with the matrix deployments. Tools Used by Organisation
Deployment: Matrix, Flow Chart.2) Customer Deployment: Customer deployment involves disposition of
organisational objectives (such as profit, utilisation rate, etc.) into core/fundamental competencies (like
location, expertise, etc.) into customer distinct qualities (such as impulse buyers, high disposable income
group of customers, etc.) into target audiences (like senior, Yuppies, Dinks, etc.) This aids customising
services to requirements of those customers who can best assist in accomplishing organisational targets
and objectives. Tools Used by Customer Deployment: Matrix Data Charts, Matrix, AHP. 3) Quality
Deployment: In order to convert customer demanded quality and priorities into measurable service
quality characteristics, Quality deployment is used. These characteristics include precision, atmosphere,
privacy, responsiveness, etc. They are given consideration while setting up the objectives in order to
promise total customer satisfaction.Tools Used by Quality Deployment: AHP, Hierarchy Tree, Affinity
Diagram, Prioritisation Matrix and Tables. 4) Task Deployment: This is employed to categorise critical
jobs into tasks and steps. Task deployment recognises what exactly are the different tasks and steps, who
is responsible for doing them, the location where they are undertaken, when and how are they should
be completed, how well are they should be accomplished considering the measurable standards, which
tools and equipment need to be deployed, personality and human relations and necessary training and
expertise required. Tools Used by Task Deployment: Table, Blueprinting. 5) Function Deployment: This
type of deployment is used to locate functional areas of the firm that are significant to carry out jobs
that should attain the quality attribute goals. Tools Used by Function Deployment: Relationships Marix,
Hierarchy Diagram (Function Tree), Affinity Diagram. 6) Process Deployment: Process deployment is
utilized to represent the existing and restructured or re-design processes. Tools Used by Process
Deployment: Blueprinting. 7) Voice of Customer Deployment: Tables indicating voice of customer
deployment are employed to note/register new customer data, utilize attributes and segregate the
various kinds of service features like reliability, demanded quality, protection, uniformity, etc. Tools Used
by Voice of Customer Deployment: VOC Tables. 8)New Concept Deployment: A combination of Quality
Improvement Stories (ie, an organised problem- solving method) and new concept deployment is used
to choose a new process which is best capable of fulfilling customer requirements. Tools Used by New
Concept Deployment: Q1 Story, Concept Selection Matrix, Blueprinting.9) Reliability Deployment: This is
employed to spot and prevent failures of important customer needs and wants. Tools Used by Reliability
Deployment: PDPC, Hierarchy Diagram (Fault Tree), Relationships Matrix. # WALK-THROUGH AUDIT -
The services that meet the expectations of the customers should be provided throughout. Many
observations influence the customer's impression of service quality as the customer is also involved in
service process. In order to systematically examine the view of customers towards the provided service,
the environmental audit can acts as proactive instrument. The areas for improvement can be discovered
by the walk- through audit which is a customer oriented survey. Many of the service providing
organisations examine customers in order to improve their quality of services and therefore, a walk-
through audit conducted by the managers, staffs or independent advisers can help in enhancing the
quality of service. The independent adviser over here acts as a surrogate customer. The audit should be
based on the multiple choice questions method. These questions should assess the customer's view on
the provided services. In this type of approach the basic requirement is in select the attributes of the
qualities to be assessed and the types of rating scales which will be suitably for the survey. #
Designing a Walk-Through Audit - Preparing a graph comprising the customer interaction with the
system is the first step in designing such audit. The figure describes the walk-through audit of Art and
Drawing Museum, Delhi. There were five sections in the questionnaire. Each section was prepared in
relation to the delivery of service. Ticket, information, facilities, satisfaction and experience were the five
sections in which the questionnaire was divided. Under each section there are many statements of
observation which the customer wake. The questionnaire should be declarative statements rather than
questions. Likert scale having five points (1= total disagreement and 5- total agreement) was used so as
to discover the perception of the client. In order to assess the effectiveness of the advertising the
questions for example, where have you heard about the event were also incorporated in the
questionnaire. For the "comment" the last part was left which was useful in providing vital information
that was not collected through the questions that has been asked.The length of the walk-through audit
should be of maximum two full pages so as to avoid excessive questioning. Email, phone interview or
personal interview are the several ways in which walk-through audit can be conducted. But the most
effective way is to administer the person immediately as soon as he experiences a certain service.
# COST OF QUALITY - Cost of quality' or 'Quality cost' is the amount of money a business loses because
its product or service was not done right in the first place. From fixing a warped piece on the assembly
line to having to deal with a lawsuit because of a malfunctioning machine or a badly performed service,
businesses lose money every day due to poor quality. For most businesses, this can run from 15 to 30
per cent of their total costs. A quality cost is considered to be any cost that the company would not have
incurred if the quality of the product or service were perfect Cost of quality, cost of achieving good
quality, and cost of poor quality are the terms used to describe the costs associated with providing a
quality product or service. The term "quality costs" has different meanings to different people. Some
equate "quality costs" with the costs of poor quality due to finding and correcting defective work. Others
equate the term with the costs to attain good quality. Others use the term to mean the costs of running
the quality department. But mostly the term "quality costs" means the cost of poor quality. The concept
of quality costs is a means to quantify the total cost of quality-related efforts and deficiencies. It was first
described by Armand V. Feigenbaum in a 1956 Harvard Business Review article. According to Legendary
Quality Guru Armand Feigenbaum, "Quality costs are the foundation for quality- systems economics".
# Categories and Elements of Quality Cost 1) Appraisal Costs: Appraisal costs are direct costs of
measuring quality. In this case, quality is defined as the conformance to customer expectations.
Appraisal costs relate to inspection, testing, and other activities intended to uncover defective products
or services, or to assure that there are none. They include the cost of inspectors, testing, test equipment
and materials, labs, quality audits, and field testing, costs associated with assessment for ISO 9000 or
other quality award assessments. Thus, they include the costs of the implementation of quality, and also
the costs of monitoring and control. 2) Prevention Costs: Prevention costs are associated with
preventing defects and imperfections from occurring. The focus of a prevention cost is to assure quality
and minimise or avoid the likelihood of an event with an adverse impact on the company goods,
services, or daily operations. This also includes the cost of establishing a quality system. They include
costs such as plauning and administration systems. working with vendors, training, quality control
procedures, and extra attention in both the design and production phases to decrease the probability of
defective workmanship. These are the costs of prevention of the production of bad quality output. A
quality system should include the following three elements training, process engineering, and quality
planning. 3) Internal Failures: Internal failures are those discovered during the production process;
internal failures occur for a variety of reasons, including defective material from vendors, incorrect
machine settings, faulty equipment, incorrect methods, incorrect processing, carelessness, and faulty or
improper material handling procedures. The costs of internal failures include lost production time, scrap
and rework investigation costs, possible equipment damage, and possible employee injury. Rework costs
involve the salaries of workers and the additional resources needed to perform the rework (e.g.,
equipment, energy, raw materials). Beyond those costs are items such as inspection of reworked parts,
disruption of schedules, the added costs of parts and materials in inventory waiting for reworked parts,
and the paperwork needed to keep track of the items until they can be reintegrated into the process.
4) External Failures: External failures are those discovered after delivery to the customer. External
failures are defective products or poor services that go-undetected by the producer. Resulting costs
include warranty work, handling of complaints, replacements, liability/ litigation, payments to customers
or discounts used to offset the inferior quality, loss of customer goodwill, and opportunity costs related
to lost sales. External failure costs are typically much greater than internal failure costs on a per unit
basis.Internal failure costs tend to be low for a service, whereas external failure costs can be quite high.
A service organisation has little opportunity to examine and correct a defective internal process, usually
an employee- customer interaction, before it actually happens. # Steps to Calculate Cost of
Quality - Stage 1: Define the Product, Products, Process or Processes being measured: This allows the
focus of measurements efforts to have a specific scope. The defined scope ensures the measures taken,
relate directly to the intended products or processes. Stage 2: Identify Components of Four
Measurement Areas: Internal, external, preventative, or assessment costs of quality may be used to
compile a total cost of quality. Each of the four areas of measurement may be individually identified or
they may all be addressed. For example, if a business or organisation is interested in the cost of quality
for internal process problems, the scope of the project is focused on understanding only that area. It is
not necessary to scope the cost of quality for all four measures. Stage 3: Identify the Costs which directly
affect the Selected Scopes: Measures can be divided into two basic areas. Direct costs affect actual
profits and indirect costs only indirectly affect profits. Direct costs are those associated with goods,
salaries, consumables, and materials and directly affect the dollar costs of running a business or the
profits gained. Indirect costs are those associated with productivity and typically do not directly affect
the accounting of an organisation. For example, if a salaried worker spends one hour a day waiting for
meetings to begin, the lost hour of time is considered an indirect cost. Stage 4: List all the Measures to
be Captured: Once a list of potential costs resulting from poor process or product quality is defined, the
data should be gathered. Each measurement should be as accurate as possible. and the actual cost of
the project may be included in the cost of quality measurement (as it is a direct result of ongoing quality
investigations). Stage 5: Compile the Measurements to Provide a Cost of Quality Metric: The cost of
quality metric compiled may be used to provide a benchmark or an ongoing measure from which all
future measurements will be garnered. While it is not essential to keep the measures completely static, if
the measures are sufficiently broad at original scoping, the cost of quality metric may become a valuable
tool by which an organisation gauges process or product quality control.
# Reduction of Quality Cost - Research and practical experience have established that each failure has a
root cause, causes are preventable, and prevention is cheaper. This is the basic concept that drives the
initiation of a "cost of quality' programme. The programme helps to identify the areas or problems that
need to be tackled on priority. Based on this concept the following strategies are deployed for cost
improvement: 1) Contain Failure Costs: The initial projects are mostly directed toward reducing failure
costs. Generally the external failures are frequently targeted first for improvement because they can give
the greatest return on the effort increased customer satisfaction and reduced operating costs. It is well
established that failures detected at the beginning of operations are less costly than failures detected at
the end of operations or by the customer. 2)Focus towards 'Prevention': Eliminate root causes and
introduce systems or activities for prevention. Often prevention is better achieved by concentrating on
purchasing, design or marketing. Care must be exercised to ensure that the root cause has been
identified and eliminated, and preventive action has been taken. 3) Ensure Reduction of Appraisal Costs
wherever Feasible: With the reduction of failure costs there is a fair chance of reducing appraisal
activities. This can have a significant impact on total costs. One must ensure that appraisal is not being
used as a substitute for prevention. Pertinent questions must be asked about existing appraisal systems,
such as: i) Is 100 per cent inspection necessary.ii) Are more efficient inspection methods not available?
iii) Can inspection activities be automated or can inspection stations be combined, relocated, or
eliminated? iv) Is there any scope for introducing SPC? v) Can data be more efficiently collected, reported
and analysed? 4) Continuously Re-Direct Prevention to Gain Further Quality Improvement: Like
Deming Cycle or PDCA Cycle this should continuously rotate to find new opportunities and optimisation
of costs related to quality. A reporting system should be developed incorporating monetary value to
increase the efficacy of the system. # UNCONDITIONAL SERVICE GUARANTEES -
Service guarantee is one method especially for customer-centric companies to systematise professional
complaint handling and efficient service recovery. Increasing number of firms extend a satisfaction
guarantee to their customers. The best service guarantee promises customer satisfaction
unconditionally, without exceptions. If a company cannot guarantee all elements of its service
unconditionally, it should unconditionally guarantee the elements that it can control. They assure the
customer that in case service delivery is unable to fulfil pre- determined norms, they are allowed to have
one or more kinds of compensations including credit, refund or easy-to-claim replacement. Some
companies provide these guarantees with no conditions whereas some place certain conditions on
them. Service organisations have been extensively making use of the marketing tool-service guarantee. It
is required to lower consumer risk perceptions, distinguish a service offering, standardise and alter or
professionalise their internal management of customer complaint and service recovery and signal
quality. # Characteristic of Service Guarantee - 1) Easy to Understand and Communicate: Service
guarantee should always be simple to comprehend and communicate to customers. This helps them to
have an evident vision about the benefits obtained from the guarantee. 2) Unconditional: An ideal
guarantee would be one that provides assurance without any conditions. There should not be any
surprising factor for the customers in the guarantee promised, it should be completely unconditional and
absolute. 3) Easy to Invoke: Service guarantee must be easily invoked, i.c., there must not be many
hoops or excessive complexities while retrieving or collecting on the guarantee. Service provider should
be primarily responsible for the guarantee and less must be dependent on the customer. 4) Easy to
Collect: In case of a service failure, i.e., the service provider is unable to offer the service; customers
should be easily able to collect on the guarantee without any hassles. 5) Meaningful to Customers:
Service guarantee should be one that promises constituents of the service that are crucial to the
customer. 6) Credible: The service guarantee extended must be believable or credible.
# Types of Service Guarantee 1) Single Attribute-Specific Guarantee: As the name suggests, only one
critical service attribute is covered under single attribute-specific guarantee. 2) Multi-Attribute-Specific
Guarantee: Some of the crucial attributes specific to the service are covered under multi-attribute-
specific guarantee. 3) Full-Satisfaction Guarantee: All of the service attributes are covered in this kind of
service guarantee, without any exceptions. 4) Combined Guarantee: Similar to full-satisfaction attribute,
this type of guarantee adds direct minimum performance standards on crucial attributes.
# Importance of Service Guarantee - 1) Creates Service Standards: Service guarantee helps develop
service standards. Such standards make the employees aware of what is important and can make them
feel good about their jobs and also lead enhanced customer loyalty. 2) Builds Loyalty: As stated above,
service guarantee helps establish loyalty and prevents switching behaviour of customers, i.e. shifting
from one brand to another. A service provider who guarantees quality service will make good in case of a
service failure, hence completely assuring the customer.3) Helps in Making Customer-Focused
Organisation: Service providers can become more customer-centric due to service guarantees. Instead of
thinking about itself, a service organisation before providing a guarantee should consider their
customer's requirements, wants and values. 4) Generates Feedback: Service guarantee acts as an
effective channel of obtaining feedback from customers. Therefore, it is one of the important benefits
derived from a service guarantee. Employees are empowered to scrutinise situations and to take
necessary actions to meet customer requirements owing to the feedback generated.
# SERVICE RECOVERY - The response of an organisation to a service failure through taking suitable
actions is known as Service recovery. It is a planned attempt made by a service organisation to convert a
dissatisfied or aggrieved customer into a satisfied one so that he/she continue to do business with the
organisation. It is regarded as a positive method to handle customer complaints. This is because
complaint handling holds significant negative underlying implications, while these are positive in the
case of service recovery. Complaint handling, however attempts to pacify or conciliate a customer,
thereby reducing its negative implications. On the other hand, service recovery tries to develop a
positive relationship with the customers and realises their latent potential and value for the organisation.
To find remedial solutions to current poor situations and convert the customer dissatisfaction into
satisfaction are the two main motives of service recovery. A hit-or-miss approach is usually avoided in
the service recovery process and instead, a planned and organised approach is adopted.
# Approaches to Service Recovery - The four basic approaches to service recovery are as follows: 1) The
Case-by-Case Approach: The complaints of the customers are addressed separately under case-by- case
approach. This approach is cost effective and unsystematic. The most aggressive or persistent
complainers can receive satisfactory response while more "reasonable" complainers do not. 2) The
Systematic-Response Approach: The customer complaints under this method are handled using a
systematic procedure. This method is more reliable than the case-by-case approach as the responses
made are planned previously. These responses are based on the critical failure identification modes and
earlier determined appropriate recovery criteria. 3) An Early Intervention Approach: This approach adds
additional elements to the systematic-response approach by trying to indulge and resolve service-
process problem before they have an effect on customer. In case where a shipper realises that a
shipment of a product will be held up because of truck breakdown then they can inform the customer
immediately so that alternative plaps can be developed by them if required. 4) An Alternate Approach:
Under this approach the customers of the rivals are attracted by offering them a substitute service
recovery. This approach takes advantage of the failure of the rival or competitor. Sometimes this
approach is supported by the rival firm. There are times where the desk person of a fully booked hotel
sends their customer to their competitor's hotel. The rival hotel can take advantage from this
opportunity if they are able to offer a quality and timely service. # Significance of Service Recovery -
The significance of service recovery is explained as follows: 1) Building Customer Loyalty: The probability
of establishing positive intentions of customer loyalty is increased with a 'bit extra' care provided after a
service failure. It is considered as an important factor in the development of customer loyalty. A second
goal can be providing value-added compensation. 2) Increasing Customer Satisfaction: The chances of
converting dissatisfied customers into satisfied customers increase with the help of an effective service
recovery. This is certainly important for maintaining a healthy and profitable business in the
marketplace.3) Greater Customer Retention: The customers that complain about service delivery and
obtain an effective service recovery usually have a positive attitude towards the service provider. Service
firms have now begun to include and integrate the policies of service recovery into their customer
retention policies. 4) Developing Higher Repurchase Intention: There are connections of service recovery
with word-of-mouth intentions and repurchased behaviour. A dissatisfied customer who has experienced
a service failure will share his/her bad experience with everyone else. Thus, service recovery linked with
satisfaction is a significant mediator between posts and traits of service recovery. 5) Positive Customer
Perception: The perception of customers regarding the service recovery is greatly influenced by
restitution, compensation and the manner in which it is delivered, i.e.. response of frontline staff to
customers. 6) Generate Positive Word of Mouth: Service recovery generates a positive word-of-mouth in
a similar way like a dissatisfied customer creates negative word-of-mouth.7) Increased Profits: The
superior traits of service delivery present in a service recovery make the customer more satisfied and
happy. This will create a bond between the customer and the firm and significantly help in maintaining
the long-term relationship. Happy customers are often ready to pay for premium services which are
profitable for the service organisations and create a win-win situation for both the parties. #
COMPLAINT HANDLING - One of the prime reasons for customer's complaints is customer
dissatisfaction. Such discontentment arises when the customer's expectations from a product or service
remain unfulfilled. An organisation's performance can be increased manifold by effectively handling
customer complaints and grievances. Communicating with customers in an effective manner is a delicate
matter and it has to be tackled thoughtfully. This is because the communication process involves
employees and customers who tend to make human errors. Basically, this magnifies the probability of
errors and misinterpretations between the two concerned parties. Generally, these errors and
misapprehensions sadly result in establishing a bad image and repute of the company. Hence, it is very
necessary for every service organisation to resolve every single customer complaint. A customers'
perception regarding the service orientation of a service organisation or producer is greatly influenced
by the way customer complaints are handled by the firm. Also, the technique used to handle customer
complaints and grievances is innately non-service oriented. Complaints handling routines manage
situations in an administrative way similar to service recovery - a service-oriented approach. #
Objectives of Complaint Handling - 1) Stabilising Customer Relation: The prime objective of
complaint handling is to secure customer relation at risk by retrieving customer satisfaction and
happiness and consequently bind the customer to the organisation. It also stimulates buying frequency
and intensity besides cross-buying behaviour. 2) Increasing Customer Satisfaction: Organisations with
complaint handling have a customer-centric corporate strategy which leads to increased customer
satisfaction levels correspondingly to avoid any discontentment. 3) Obtaining Information: Complaints
made by the customers include helpful and applicable information suggesting ways and means to refine
products and services. Customers unhappy with their services play the role of market researchers by
reporting market-related information, for example, customer may give information with respect to
market opportunities, new and innovative product ideas and customer viewpoints and behaviour.
4) Preventing Negative Word of Mouth: With a view to cause acquisition effects, a company develops a
successful complaint policy to avoid negative word of mouth propaganda. There is a possibility of
incurring the so-called costs of arguing if the unhappy customers instead of directly conveying their
complaints to the company present it to the third parties such as lawyer or media. 5) Preventing Loss of
Sales: An unsatisfied customer can probably switch over to a competitor apart from addressing their
complaints resulting in reduced profits and loss of sales and these can be regarded as costs of
competitor. This may lead to loss of sales and earnings and can be regarded as costs of movement. 6)
Preventing Opportunity Cost: One of the significant purposes of complaint handling is averting
opportunity costs because of various reactions received from discontented customers. A company can
incur opportunity costs by a negative advertisement or buy refusal.
# Steps for Handling Complaints Effectively - Step 1: Designate a Location to Receive Complaints: The
first step in complaint resolution is to designate a specific location for receiving complaints as the
customer should know the location and process of making enquiries or filing complaints. For designating
such a location, following steps are essential: 1) Identifying a place for receiving complaints which is
easily accessible and visible to the customers. 2) Motivate customers to share their dissatisfaction by
publicising the complaint system and highlighting the good intentions of the organisation. Step 2:
Develop a System for Record-Keeping: In this step, specific forms for the purpose of recording.
classifying and filing the complaints records are prepared. A system is developed for record-keeping
which serves the following functions: 1) Transferring complaint information to the top management. 2)
Quickly recognising and responding to the complaints as soon as they are required to be reported to
other functional units, distribution grid, or law governing parties. 3) Analysing complaint trends by
providing market research information.4) Helping the management in monitoring the effectiveness and
efficiency of complaint-management. Step 3: Process and Record Complaints system.1) Filing the
complaints alongwith the required information. 2) Classify the complaints into well-defined and exclusive
categories for record-keeping and resolution. 3) Assigning the complaints to the responsible person for
complaint handling. 4) If applicable, the complaint is forwarded to the next superior level. Step 4:
Acknowledge Complaint: Customers usually do not have a casual interest for filing complaints. In most
of the cases, inconvenience and expenses are attached with complaints. Loyal customers having strong
feelings file complaints. Thus, their complaints should be properly acknowledged by: 1) Personalising the
replies. 2) Talking with the customer in-person or via phone. 3) Letters can be used for communication.
4) If required, additional time can be taken for fulfilling the special needs of customers. Step 5:
Investigate and Analyse the Complaint: While investigating and analysing the complaint, one must: 1)
Be impartial and fair. 2) Listen to the stories of both sides. 3) Maintain records of the filed complaints of
every meeting, conversation or outcomes. Step 6: Resolve the Problem in a Manner Consistent with
Company Policy: This is done by: 1) Transferring the complaints to suitable managerial level. 2) Regularly
informing the customer about the progress, 3) Regularly notifying the customer about the anticipated
settlement. Step 7: Follow-Up 1) Analysing whether the remedial solution has satisfied the customer or
not. 2) If required, outsourcing the complaint resolution to a third-party conflict-resolution 3)
Cooperating with the involved parties. Step 8: Prepare a Report and Periodically Analyse Complaints 1)
Distributing the action proposals and complaint status to responsible functional units. 2) Forming an
action plan in order to prevent further complaints. 3) Ensuring that the standpoint of customer is
suitably considered while making any decision. # Complaint Handling Policy - The complaint of
the customer should be considered as a gift. The complaining customer cares therefore they invest their
precious time in making firm aware about their errors or shortcoming. The organisation should use this
opportunity for satisfying the customer and to establish a relationship with them. Complaint handling
policy is designed to provide guidance to both the customers and staff on the manner in which the
company receives and manages the complaints. The objective of the Policy is to assist the management
and public in general handling of complaints in an efficient, effective and professional manner wherein
every possible step is taken to ensure that instances of misconduct do not escape scrutiny and action,
while at the same time, the morale of the employees is not adversely affected by complaints of trivial
nature. The training programs of the customer-contact employees should also include complaint-
handling policy. A complaint-handling policy should 1) Reassure customers that the organisation in a fair,
timely and efficient manner. values their feedback and are committed to resolving their issues.2) Explain
how customers can make a formal complaint. 3) Identify the steps organisation will take in discussing,
addressing and resolving complaint. 4) Indicate some of the solutions to offer to resolve complaints. 5)
Inform customers about the organisation's commitment to continuous improvement.
# CONTROL CHARTS - A control chart is a statistical technique for controlling the quality of a product
being manufactured. It was first devised by Dr. Walter A. Shewart after whose name these charts are also
called Shewart charts. In a relatively short period, this technique of quality control has found wide
acceptance particularly in the USA and Europe. The main advantage of a control chart is that it can
predict the rejects when they are likely to occur. which enables corrective action to be taken before a
defective product is actually produced. It is based upon the fact that variability does exist in all the
repetitive processes. A control chart is a graphical representation of the collected information. The
information may pertain to measured quality characteristics or judged quality characteristics of samples.
It detects the variation in processing and wams if there is any departure from the specified tolerance
limits.The purpose of a control chart is to determine if the performance of a process is maintaining an
acceptable level of quality. It is expected, of course, that any process will experience natural variability,
that is, variability due to essentially unimportant and uncontrollable source of variation. These sources
of variability may arise from one of several types of non-random "assignable causes" such as operator
error etc. # Characteristics of Control Chart - 1) A nominal value, or centre line, the
average of several past simples 2) Two control limits used to judge whether action is required, an Upper
Control Limit (UCL) and a Lower Control Limit (LCL).3) Data points, each consisting of the average
measurement calculated from a sample taken from the process, ordered overtime. By the Central Limit
Theorem, regardless of the distribution of the underlying individual measurements, the distribution of
the sample means will follow a normal distribution. #
Purpose of Quality Control Chart - 1) It helps in determining the quality standard of the products while
in process. 2) It helps in detecting the chance and assignable variations in the quality standards of the
products by setting two control limits lines. 3) It reveals variations in the quality standards of the
products from the desired level. 4) It indicates whether the production process is in control or not so as
to take necessary steps for its correction. 5) Control charts are simple to construct and casy to interpret.
6) It ensures less inspection cost and time in the process control. 7) Control charts tell the production
manager at a glance whether or not the process is in control. # Overview on Numerical on
Control Charts for Variables - Control charts based upon measurements of quality characteristics are
called as control charts for variables. Control charts for variables are often found to be a more
economical means of controlling quality than control charts based on attributes. The variable control
charts that are most commonly used are average or X-charts, range or R-charts and o- or standard
deviation charts. The following situations can be encountered in practice: 1) The process may be in
control. 2) The mean of the characteristic is out of control but standard deviation is not. For this purpose,
control charts for means (X-chart) are prepared. 3) The standard deviation is out of control and not the
mean. This is studied by control chart for range (R- chart). Here, range is the measure of variability
because it can be easily determined.4) Both mean and standard deviations are out of control. This is
studied by X and R charts simultaneously. # Significance of Using Control Charts - Statistical process
control plays a very important role during the effort for process improvement. Some of the important
benefits that come from using control charts include: 1) Simple and Effective: Control charts are simple
and effective tools to achieve statistical control. They can be maintained at the job station by the
operator, and give the operator reliable information on when action should/should not be taken. 2)
Predictable: When a process is in statistical control, its performance to specification will be predictable,
In this way, both the producer and the customer can rely on consistent quality levels and stable costs of
achieving that quality level. 3) Process Improvement: After a process is in statistical control, its
performance can be further improved to reduce variation. The expected effect of proposed
improvements in the system can be anticipated, and the actual effect of even relatively subtle changes
can be identified through the control chart data. Such process, improvements will: i) Increase the
percentage of output that meets customer expectations (improve quality), ii) Decrease the percentage of
scrap or re-work (reduce cost per good unit produced), and iii) Increase the total yield of acceptable
output through the process (improve effective capacity). 4) Communicatas Performance: Control charts
provide a common language for communications about performance of a process between i) Two or
three shifts that operate a process, ii) Line production (operator, supervisor) and support activities
(maintenance, material control, process engineering, and quality control), iii) Different stations in the
process,iv) Supplier and user, or v) The manufacturing/assembly plant and the design engineering
activity.
Unit 3 # SUPPLY CHAIN MANAGEMENT: Introduction The interactive network of suppliers,
manufacturers, logistic service providers (involving assembling and distribution activities) involved in
various functions like procurement and transformation of materials into intermediate and finished
goods, followed by their distribution to customers is known as supply chain. According to Cooper and
Ellram, "Supply chain management is an integrative philosophy to manage the total flow of distribution
channel from the supplier to the ultimate user". # Features of SCM: 1) Integrated Behaviour: SCM tries
to bring about co-ordination between different stakeholders, i.e., from suppliers to customers. 2)
Mutually Sharing information: An effective SCM involves mutual sharing of information among its
channel members. Information is shared especially for the purpose of planning and monitoring. 3)
Mutually Sharing Channel Risks and Rewards: An effective SCM also involves sharing of channel risks and
rewards, which evidently leads towards the achievement of competitive advantage. 4) Co-operation:
Effective SCM requires appropriate co-operation among its supply channel members. It implies that
there should be coordination between various activities undertaken by business firms in order to gain
mutual outcomes in the form of superior-end product. 5) Focus on Serving Customers: Every member
involved in an effective supply chain shares a common goal and objective of catering the needs of end
users. For this purpose, policy integration is essential. 6) Integration of Processes: The SCM process can
be implemented successfully only if, there is integration between the various processes of SCM, namely
procurement, manufacturing and distribution of end products throughout the distribution channel. #
Objectives of SCM : 1) Service Orientation: To provide superior services to end users is one of the main
objectives of SCM. The overall superior value that a customer receives can be referred to as service. 2)
Systems Orientation: Systems orientation forms the core of supply chain. Due to co-operation and co-
ordination among channel members, a synergy is created, which is the main advantage of supply chain.
3)Competitiveness and Efficiency: An important aspect for healthy existence of a firm's supply chain is
competitiveness as it is essential for providing increasing value to the end users. 4) To Minimise Time:
The time involved in conversion of orders into cash is significantly reduced through an efficient supply
chain. This helps in reducing the overall time lag, which ultimately increases the organisation's
productivity. 5) To Minimise Work-in-Progress: SCM aims at minimising the overall work-in-progress
involved in the supply chain. 6) To Improve Visibility of Demand: With help of all its partners, SCM aims
to improve the visibility of demand. 7) To Improve Quality: Improving the quality of operations
undertaken at various stages of supply chain is another objective of SCM. 8) To Decrease Transportation
Cost: One of the most important objectives of SCM is to minimise the transportation costs involved in
the supply chain process. 9) To Decrease Warehousing Cost: An efficient supply chain aims at
reducing the amount of inventories held at warehouses. This significantly decreases the warehousing
costs. 10) To Improve Value: Value is the difference between the worth of final product to the
consumers, and the effort made to provide the product. #FunFunctions of SCM : 1) Strategic Functions:
Following are the strategic functions performed under supply chain management: i) Optimising the
strategic network which includes the size, number and location of the warehouses, distribution centres
and other facilities. ii) Developing and maintaining strategic partnership with important channel partners
like distributors, suppliers and customers, and establishing communication channels for information. iii)
Product design co-ordination which ensures that new products can be suitably integrated into the
organisation's supply chain and suitable load management can be implemented. iv) Involves decisions
like where products should be manufactured or whether the products should be manufactured or
bought. 2) Tactical Functions: The tactical functions associated with SCM are as follows: 1) Decisions
related to production such as planning, contracting and scheduling. ii) Sourcing contracts
and other purchase-related decisions. ii) Decisions related to inventory like deciding required quantity
and quality of inventory, warehousing, location, etc. iv) Transportation strategy which includes decisions
regarding routes, frequency, loads, etc. v) Benchmarking of all operations against competitors and
implementing best practices throughout the enterprise. 3) Operational Functions: Operational
functions associated with SCM include: i) Day-to-day planning of production and distribution activities
which involves all nodes of the supply chain. ii) Scheduling production for every manufacturing unit
present in the supply chain. This involves minute ii) Demand forecasting, planning, coordinating and
sharing of customer demands with suppliers. by minute scheduling. iv) Inbound logistics and operations
including transportation of materials from the suppliers, and receiving of inventories. v) Production
operations which include flow of finished goods and consumption of materials produced.
# Types of Supply Chain: 1) Raw Supply Chains: Raw supply chain is one of the basic types of supply
chain. It is very lightly organised, and most of the systems and processes are followed from the legacy.
Organisations adopting raw supply chains often suffer from various departmental silos. 2) Ripe Supply
Chains: This type of supply chain exists in the situations where organisations are satisfied with what they
have achieved and whatever needs to be achieved. 3) Internal Supply Chains: They are the most
common types of supply chains and can be easily found in organisations, where ERP (Enterprise
Resource Planning) packages and organisational internal operations are well-coordinated and managed.
4) Extended Supply Chains: Extended supply chains are an extension of the internal supply chain
concept. These are nothing, but well-established internal supply chains which extend beyond the
boundaries of the organisation to include external stakeholders like distributors and suppliers. 5) Self-
Monitored Supply Chains: In this type of supply chain, the manufacturing company becomes the centre,
and takes the lead in bringing all the partners and suppliers in its supply chain. 6) Outsourced Supply
Chains: Under these supply chains, outsource supply chains which are typically in the form of 3PL
logistics partners, take care of all the aspects of the supply chain. 7) Production-Oriented Supply Chains:
This type of supply chain has a single objective - to make maximum utilisation of capacity and labour. 9)
Market-Oriented Supply Chains: They are typical built-to-order type supply chains which are activated
when the customer places an order. They are also known as customer supply chains. 10) Value Chains:
Value chains are the highest form of supply chains which avoid optimisation in parts and focus upon total
optimisation. # Network Model/ Supply Chain Network
Design: The supply chain for physical products can be seen as a network of value-adding phases of
material production, each identified by supply input, material transition, and demand output. These
stages (suppliers, production, storage, retailing, and recycling) are connected, as in figure 3.2, to arrows
representing the movement of material between each stage with inventory stocks. The production stage
illustrates the phase in which raw material and products come from foreign suppliers; the material is
converted or assembled to add value. providing an inventory of finished products that is shipped
downstream to manufacturers and then to distributors where the item is purchased by customers.
# Managing Uncertainty: Uncertainties in supply, process and demand are recognised to have a major
impact on the manufacturing function. Uncertainty propagates throughout the network and leads to
inefficient processing and non-value adding activities. This uncertainty is expressed in questions such as:
what will my customers order? How many products should we have in stock? 1) Supplier Delivery
Performance: Variability of supplier on-time delivery can be caused by any number of events; storms
disrupting a shipment, quality concerns, equipment breakdown, or late arrival of raw material supply. 2)
Manufacturing Reliability: The same issues affecting manufacturers and, often, internal schedule
disruptions triggered by multiple goods vying for common capital impair production reliability (eg, an
overhead crane in a machine shop). A historical uncertain distribution of on-time result captures the
total volatility. 3) Customer Demand: The effect of uncertainty can be minimised by strategic measures,
thereby enhancing customer experience. Implementation of total quality management methods such as
statistical process control. for instance, will increase the efficiency of output.
# Factors Influencing SCM: 1) Consumer Demand: It is one of the major factors influencing SCM. An
organisation mainly aims to find an appropriate balance between the quality of final products and
manufacturing costs, and availability and customisation. 2) Globalisation: In today's scenario,
organisations have started giving importance to the profits gained through compentive advantages of
other countries. For example, many American companies have realised the benefit of outsourcing
manufacturing to Asian companies because of their cost advantages. 3) Competition: In the last few
years, the level of competition has increased for all businesses due to increasing globalisation,
technological advancements, innovative business designs, and easy access to information These factors
led to the displacement of many market leaders. For example, having a large market share in the mobile
industry did not helped Nokia as it ignored developments in its competitive arena, and very soon got
displaced against faster and better equipped competitors. 4) Information and Communication: The key
forces providing support for supply chain decisions are improvements in information flow and
communications systems The internet is redefining the way products and services are being distributed,
purchased, and sold. 5) Government Regulation: Government regulations and policies also play a major
role in the development of supply chain. The supply chain decisions are no longer restricted to individual
countries, as they take into account the policies and regulations followed in other countries. 6)
Environment: The planning and designing of supply chain is largely influenced by increasing concern for
the environment. For example, European nations have major restrictions on the usage of packing
materials. A majority of companies are now designing products which can be recycled when their
operational life is over. #Significance of Supply Chain Management: 1) Fosters Collaboration: Supply
chain management helps in establishing collaboration between businesses leading to the formation of a
business chain. This group of inter-linked businesses functions together towards the achievement of one
common goal, ie., to meet the demands of customers by providing them with value products/services..
2) Minimises Cycle Time: The total amount of time taken by a business to complete its entire business
process is known as cycle time. SCM helps in identifying the most efficient modes of operations that can
achieve the objective of minimising the cycle time of a business. 3) Precise Purchasing: Companies can
use SCM techniques to plan and manage their purchasing process in an efficient way. SCM helps in
bringing better synchriation Between production and their purchase. 4) Lowers Overhead Costs: SCM
helps in lowering the level of overhead costs of an organisation. With an effective SCM, production and
storage of raw materials and manufactured products is done at optimum levels that certainly help in
bringing down the unnecessary expenses. 5) Improved Alliances between Employees: SCM leads to
collaborative spirit in the team where all the team members work with the common goal of satisfying
customers. These team members can be employees, suppliers, distributors, or customers. 6) Minimised
Delays: SCM aims at reducing the lead time across the entire supply chain, Since, the quantity of raw
material required for further operations is known, 7) Increased Efficiency: SCM aims at reducing wastage
in the supply chain. Company which employs SCM brings about efficiency in the operations, and focuses
only on those activities which add value to the finished product/service. 8) Increased Output: Effective
SCM helps in establishing a sound relationship between suppliers and customers which leads to timely
completion of customer orders. Such timeliness and responsiveness attracts more customers.
#Limitations in SCM: 1) Minimising Uncertainty: Reasons like breakdown of machines, labour problems,
output problems, absenteeism, etc., are some of the reasons due to which uncertainty in the supply
chain process occurs These issues can be solved by developing appropriate policies, technology
upgradation, etc. 2) Reducing Lead Times: Lead times need to be reduced, as it directly decreases the
amount of inventory an organisation has to maintain. Lead times can be reduced by adopting various
techniques such as faster transportation, better planning and other technological initiatives. 3)
Minimising Number of Stages: The number of stages involved in the SCM process determines its
complexity. Higher number of stages often slows down the SCM process and results in delays. 4)
Improving Flexibility: Improving and maintaining flexibility is another key issue in SCM. Using flexible
manufacturing and assembly techniques, reducing set-up or changeover times, etc., helps in improving
profitability and ability to respond to changes. 5) Improving Process Quality: Doing things correctly in the
first attempt is the most important requisite for reducing inventories and wastage in SCM. This improves
the quality of the process. 6) Minimising Variety: In an attempt to provide variety of products/services,
the inventory levels have to increase in downstream centres. This can be reduce. by standardising the
number of products and services. # SERVICE SUPPLY RELATIONSHIPS: Introduction:
Service organisations also need supplies of materials. A hospital needs to procure surgical dressings,
medicines. disinfectants, chemicals for pathological testing, syringes and injection needles, bed linen,
soaps and detergents among several other items of daily consumption and use. A school may need
supplies of chalks, dusters, marker pens, pencils, and several materials to keep the premises clean and
hygienic. #Customer-Supplier Duality: With services, customers are suppliers of significant inputs to the
service production process. These input include customer minds and selves, customer belongings and/or
customer information. An example customer-supplier duality is seen in the television repair process.
Examples include: 1) Major portions of production cannot begin until customers have supplied their
inputs. This is a restatement of the concept of simultaneous production and consumption. (In our
television repair example, the main portion of the repair process cannot begin until the broken television
has been provided). 2) Service outputs tend to be heterogeneous, since customers present
heterogeneous inputs. This implies that services tend to have nonstandard production. #Supply Chain
Implications of Customer-Supplier Duality:. 1) Unidirectional Manufacturing Supply Chain : With
manufacturing, the supply chain proceeds from suppliers to customers. Physical goods flow from
supplier to customer, with payment and feedback information flowing from customers to suppliers. With
regard to production inputs and outputs, the supply chain is unidirectional, as depicted in Figure 3.3
where arrow represents the flow of production, including raw materials, work-in-process, and finished
goods. An integrated supply chain involves co-ordination and information sharing up and down the
process. The firm's supplier's supplier =The firm's supplier =The firm's = The firm's Customer = The firm's
Customer's customer. 2) Siagle-Level Bidirectional Supply Chain: With services, customer-supplier
duality implies that production flows not only from suppliers to customers, but also from customers to
suppliers. Therefore, production flow is bidirectional, which is a key factor in linking traditional supply-
chain concepts to service process realities. The simplest form of a bidirectional supply chain is for the
customers to provide their inputs to the service provider, who converts the input into an output which is
delivered back to the customer. Material or equipment suppliers = Service provider=Service customer
consuming output= Service customer supplying inputs. #Service Supply Relationships are Hubs, Not
Chains: For the most common supply relationship the concept of simultaneous production and
consumption applies. For example, when one visits the dentist for teeth cleaning, the supply relationship
is compressed to a single transaction between your teeth and the dental hygienist. As noted in Table 3.1,
the supply chain can be extended to include a supplier to the service provider, however, service supply
relationships extending beyond two levels are quite rare. #Service Capacity is Analogous to Inventory:
Inventory is used by supply chains of products to buffer the fluctuations in final consumer demand to
allow efficient resources to be completely used. The inputs supplied by the client are usually
unpredictable events with immediate processing expectations for services. For example. visitors to a fast-
food restaurant rarely queue for service for longer than a few minutes. Since facilities cannot be
inventoried. in order to meet demands, surplus capacity must be kept in stock. #Customers Supplied
Inputs: Inputs from consumers may be incomplete (eg. tax documente), unprepared (eg students) or
have unreasonable standards (eg, cancer patient). This lack of continuity in the nature of customer-
supplied inputs poses a problem where inputs are questionable for the service provider to deliver on
commitments. This condition puts an emphasis on successful encounters.
# MANAGING SERVICE RELATIONSHIP: Service supply relationship management is a systems approach
that recognises the customer-supplier duality found in the delivery of services. For services, customers
are suppliers of significant inputs (ie., minds, bodies, belongings, and information) to the process. Service
supply relationship management incorporates customers into the knowledge management strategy of
service companies to enhance the value and quality of the services provided. Value in service supply
relationship management arises from three sources: 1) Bidirectional Optimisation: Bi-directional
optimisation involves doing what is best from the viewpoint of both the client and the service
organisation. Customers also "co-produce" the service in service production. Direct customer
engagement enables bi-directional optimisation, maximising both the supply and demand for the
products at the same time, this provides the customer with individualised service and the service
company with cost-effective service. 2) Productive Capacity: For mobile workers, the amount of time
spent between jobs is a prime consideration of productive capacity. Because value is generated at the
customer site mostly by time, time spent traveling is lost in productive capacity. Service Chain
Management will dramatically minimise the company's travel time, which substantially improves the
efficiency of the workers by supplying staff with sufficient time to be with clients. I)Transfer
ii)replacement iii)embellishment 3) Perishability: It is difficult to capture service employee time to store
for potential service requests, unlike the industrial industry. A service worker's effective ability is limited
to the time he or she is at the customer location, with the necessary equipment and expertise, and
awareness of the conditions and desires of the customer. Perishability control is the technique used in
Service Chain Management to minimise the detrimental influence of idle time on the dispersed service
workforce's productive potential. #PROFESSIONAL SERVICE FIRMS: Introduction : Professional services
providers can be found in a number of public and private subsectors. For some providers, professional
services may be a primary line of business, while for others, professional services may be sold as an add-
on value driver to a core offering. Historically, professional services have been invoiced on a billable-
hours basis. # Types of professional service firm’s: 1) Classic PSFs (Eg, Law and Accounting
Firms): Classic professional service firms are characterised by a high knowledge intensity, a
professionalised workforce, and low capital intensity. 2) Professional Campuses (e.g. Hospitals):
Professional campuses are the professional service firms characterised by a high knowledge intensity, a
professionalised workforce, and high capital intensity. 3) Neo-PSFs (e.g. Management Consultants): Neo-
PSFs are characterised by high knowledge intensity and low capital intensity. 4) Technology Developers
(e.g. R&D firms, biotechs): Technology developers are the professional service firms characterised by a
high knowledge intensity and a high capital intensity. #Attributes of Professional Services: 1) People-
based: Suffice to say, if it were not already obvious to service provider, that professional services
businesses are fundamentally about people. They need to be managed to attract, develop and retain the
best staff, and associates, service provider can find in the market. 2) Management Quality: Closely linked
to the first point, the aspect of management quality is magnified in the professional services business.
Professionals - by their nature educated, intelligent self-starters – will not hang around for long if the
leaders are sub-standard. 3) The Marketing Challenge: Whilst a professional service might, at one level,
seem an easy proposition to message to those who have the requisite need, at another, competitive
level service provider will have a significant challenge. How do service provider organise his service
offerings? 4) The Selling Challenge: Similarly, selling professional services is very different to retail selling
or productised business-to-business (B2B) as, for example, with software licensing. A key feature of this
difference is a fundamental one that in the main - those that provide the service are best placed/able to
sell it. 5) Pricing: The pricing of professional services is also a science (and ant) of its own. Similar to any
business multiple factors will influence the pricing strategy - market needs competition, service model,
the brand premium command etc. #Operational Characteristics: Instead of businesses, profession
support companies are also organised as associations. The partners have shares in the business and
represent the controlling body, as a party. A tears of junior professionals on salary carry out the day-to-
day operation of the firm. 1) Margins: In assessing the performance of divisions within a professional
services company, margins are also the most used component. However, unfortunately, margins are also
unreliable and deceptive metrics. 2) Productivity: Productivity can be further broken down into two
variables impacting the company's short and long-term performance, realized fee-per-hour (value) and
technical personnel usage. 3) Leverage: Leverage is the percentage of the number of members of the
technical team to the number of partners, an important element in the profit-per-partner determination.
Partners benefit from two sources: the high premiums paid for services by a senior staff member and,
most significantly, the opportunity to recruit experienced staff and bill them at various percentages of
their salaries to clients. #Roles in the Professional Services Sector: 1) Accounting and Auditing
Services: Accounting and auditing services establish the basic activities of accountancy firms. 2)
Advertising Services: Advertising services in corporate purchase or leasing of advertising space or time;
planning, design and placement of advertising services outside advertising, and distribution of sampling
and other advertising materials. 3) Architectural and Engineering Services: Architectural and engineering
services incorporate work by engineering companies to provide master plans and layouts for buildings
and other systems, as well as work performed by engineering companies to obtain planning, design,
construction. 4) Computer Services: Computer services incorporate consultancy services related to the
installation of computer hardware, software application and data transformation services. 5) Legal
Services: Legal services in corporate counselling and representations services for host, home and/or third
country law, international law, legal authorisation and confirmation, other counselling and information
services. # OUSTSOURCING SERVICES.: Outsourcing is an agreement in which one company hires
another company to be responsible for a planned or existing activity that is or could be done internally,
and sometimes involves transferring employees and assets from one firm to another. A contract between
an outsourcing service provider and a client is referred to as a service level agreement (SLA). It states,
usually in measurable terms, what services the vendor will provide. At the beginning of any outsourcing
relationship, service levels are determined. #Benefits of Outsourcing Services: 1) It
allows the firm to focus on its core competence. The volunteer U.S. Army no longer has KP (kitchen
patrol) duty for its soldiers. 2) Service is cheaper to outsource than perform in house. Janitorial and food
services are good candidates for outsourcing to a specialist provider because both areas must remain
competitive in the marketplace. 3) It provides access to latest technology without investing in assets.
Local hospitals seldom invest in expensive diagnostic equipment such as an MRI, instead, they contract
with an outside source to provide the specialised source. 5) It allows the achievement of higher levels of
service and performance due to specialization of the service provider. 6) It potentiaily allows a reduction
of capital expenditure. Particularly in the sphere of information technology services, management and
general support systems 7) It allows sharing of new and improvements in older technology methods
from the service provider to the customer, gained from a combination of specialisation and economies of
scale and scope. 8) It potentially enables shorter times to market for a customer's services, due to a
more flexible and responsive process for the outsourced services. #Risks of Outsourcing Services: 1)
Loss of day-to to-day management control of outsourced services and excessive dependence on the
service provider for performance. 2) Dependence on the service provider for strategic information on
internal technology, operational and business options. 3) By transferring employees and assets to the
outsourcing service provider, the customer risks losing valuable knowledge and experience from
displaced workers. 4) Additional costs associated with managing the outsourcing service provider. 5)
Reassuming responsibility for the outsourced ice on termination of out-sourced services can be
inherently difficult and risky. #Classification of Business Services: 1) Banking Service: Commercial banks
are an important institution of the economy for providing institutional credit to its customers. A banking
company in India is the one which transacts the business of banking which means accepting, for the
purpose of lending and investment of deposits of money from the public. 2) Insurance Services:
insurance Services means any renewal, discontinuance or replacement of any insurance or reinsurance
by, or handling self-insurance programs, insurance claims or other insurance administrative functions. 3)
Communication Services: Communication services are helpful to the business for establishing links with
the outside world viz., suppliers, customers, competitors etc. Business does not exist in isolation, it has
to communicate with others for transmission of ideas and information 4) Transport Services:
Transportation comprises freight services together with supporting and auxiliary services by all modes of
transportation ie, rail, road air and sea for the movement of goods and international carriage of
passengers. 5) Warehousing Services: Storage has always been an important aspect of economic
development. The services include space to keep goods, loading/unloading and stacking of goods,
keeping inventory of goods security arrangement, providing insurance cover etc. #Managerial
Considerations with Outsourcing Services: 1) Facility Support Service (Property/Low Importance):
Services in the field of facilities support should be viewed as purchasing products. It is easy to plan tight
requirements and vendor selection is then based on a low bid. While the purchase of such services is
clear, it must be the duty of an involved party in the company to assess the efficiency of the service
rendered with specific regard to consistency and timeliness. 2) Equipment Support Service
(Property/High Importance): Equipment facilities for appliances present an extra challenge since the
provider can be situated close enough to provide emergency services. 3) Employee Support Service
(People/Low Importance): In determining the criteria for the program, user feedback is essential for
programs that support individuals. Employee support service requests typically come from a functioning
department 4) Employee Development (People/High Importance): Requests for workforce development
programs often arise within a functioning organisation and normally include the Recruitment
Department or a higher management rank. Employee growth is a major improvement in the intellectual
resources of the company that needs experience to direct the purchasing of the service. 5) Facilitator
Service (Process/Low Importance): The least tangible business service classification deals with
operations of an information processing type that serve the purpose or process of the enterprise. 6)
Professional Service (Process/High Importance):it is tremendous influence of an organisation financial
future top management must be active very beginning.
Unit no 4 : SERVICE DESIGN - Introduction Service design is an approach whereby the various
ingredients of the service like people, infrastructure, communication and the physical elements are
planned and organised in soch a manner that the quality and the interaction between the customer and
the service provider is enhanced. The basic objective of service design is to create a service which caters
to the needs of the customers and is also considered user-friendly by the customers The activity of
service design ainm at collecting the service needs and plotting wits the needs for integrated services. It
also creates the design specifications for service assets required in providing services. A great deal of
impertuce is given to the reuse of facilities in service design. # Elements of Service Design
Service design has following elements : 1) Structural Elements: It involves components like delivery
system, facility design, location, capacity planning, etc. i) Delivery System: The delivery system of services
is significantly different from that of products. In the case of services, they cannot be separated from the
service provider. Therefore the delivery channel for a service has to be short and easy ii) Facility Design:
Service provider needs to be alert in the way the service has bean designed especially in cases where the
customer is also taking part in the service process. The physical environment or the servicescape needs
to be understood carefully since it impacts the service a great deal. For example, infrastructure of
cinema halls, restaurants, hospitals etc. iii) Location: A service which is a Location-based service (LBS) is a
type of information which can easily be availed through mobile devices these days. It makes use of the
geographical position of the mobile device in identifying routes from the location of the customer to the
location of service facility. iv) Capacity Planning: Capacity planning refers to the capacity that the
organisation requires producing he necessary product or service as per the changing needs and demands
of customers. Capacity can also be defined as the maximum output that the organisation can deliver in a
given period of time. It can be explained as: Capacity (Number of Machines or Workers) x (Number of
Shifts) x (Utilisation) x (Efficiency). 2) Managerial Elements: Service encounter, quality, managing
capacity and demand, information, etc. comesunder managerial elements. i) Service Encounter: The
service encounter generally starts after the application is submitted, an order is placed or the request for
a reservation is made by the customer. The interactions can be between customers and the service
provider or can be between machines or computers. In many high contact services example restaurants,
hotels, hospitals, etc, the customers may also get engaged with the service process. ii) Quality: The term
quality is often very difficult to define since it depends to a great deal on customer perception. The term
quality is widely sought while evaluating standards; however, it does not have any specific definition. iii)
Managing Capacity and Demand: Lack of inventory is one of the major problems faced when analysing
the supply and demand of services. In case of manufacturing firms, it is possible to keep stock of
inventory in advance for meeting the contingent future demands. However, this is not possible in the
case of service firms as services cannot be kept as inventory. This is because, services are created and
consumed simultaneously iv) Information: Another managerial element in service design is information.
Appropriate information regarding the customer helps in establishing loyal customer base that further
benefits the organisation by acting as medium for word-of-mouth advertising. # Service Composition :-
Services can be designed, built, tested, deployed and managed well when at the components of the
service and their relationships and dependencies are established. Service composition is a collection of
services where, many smaller services are combined together to a larger service. Service Composition
involves the development of customised services often by discovering, integrating, and executing
existing services 1) Service Composition Performance While service composition may
look compelling on paper, just like component composition would, keep in mind that services typically
communicate with each other via the network. That means that inter-service communication is much
slower than typical inter-component communication, which typically takes place inside the same address
space (application/process). Decomposing the larger services into too many smaller services may hurt
performance. Especially if the services communicate internally via an enterprise service bus (ESB). #
Service Design Goals :- The main goals and objectives of Service Design are to: 1) Design services to
satisfy business objectives, based on the quality, compliance, risk and security requirements, delivering
more effective and efficient IT and business solutions and services aligned to busit needs uy coordinating
all design activities for IT services to ensure consistency and business focus 2) Design services that can be
easily and efficiently developed and enhanced within appropriate timescales and costs and, minimise or
constrain the long-term costs of service provision 3) Design efficient and effective processes for the
design, transition, operation and improvement of high- quality IT services, together with the supporting
tools to manage services through their lifecycle 4) Identify and manage risks so that they can be
removed or mitigated before services go live 5) Design secure and resilient IT infrastructures,
environments, applications and data/information resources and capability that meet the current and
future needs of the business and customers 6) Design measurement methods and metrics for assessing
the effectiveness and efficiency of the design processes and their deliverables 7) Produce and maintain IT
plans, processes, policies, architectures, frameworks and documents for the designof quality IT solutions,
to meet current and future agreed business needs 8) Assist in the development of policies and standards
in all areas of design and planning of IT services and processes, receiving and acting on feedback on
design processes from all other areas and incorporating the actions into a continual process of
improvement 9) Develop the skills and capability within IT by moving strategy and design activities into
operational tasks, making effective and efficient use of all IT service resources 10) Contribute to the
improvement of the overall quality of IT service, within the imposed design constraints, especially by
reducing the need for reworking and enhancing services once they have been implemented in the live
environment. # Balanced Design :- the designing of service ensures that all essentials utility and
warranty can be delivered. The balanced design of service for a new product is done in reference to the
available resources within the required costs and time Service design is thus a delicate three- elements
balancing act namely- Functionality, Resources and Schedule 1) Functionality: Normally, the element
functionality of service is considered as a service utility comprising of all components and its provisions.
All aspects associated to the service features, quality, management and operations are included in this
element. 2) Resources: The other element is resources depict people, technology and money present
with the service providers to deliver the desired services to the customers. 3) Schedule: The third
element of service design is schedule considered as the timescales for carrying out the execution of
service. in order to deliver the actual business solutions, it is important to hold complete understanding
of all drivers and needs of business after a suitable balance in these three elements. The concept of
balance design is significant for service design. It is also significant to balance the efforts involves in
service designing, delivery and development of services, as it is a requirements of business. Service
design is thus a delicate three-element balancing act, where these three elements are constantly
adjusted to meets the varying need of business. It is always observed that any change in a side of
triangle is impacting the other side or both sides of it. Thus to accomplish this, it is important for all
management to confirm about the following activities while designing: 1) There should be good
communication among several designing activities, and the other parties of business comprising of
strategist and planners. 2) All designers must have to be well versed with the latest version of all
appropriate business and IT plans and strategies. 3) All documents of architectural and design should be
reliable in reference to the business, policies and plans. 4) The design and architecture must be flexible
and assist IT to respond rapidly for the requirements of new business. 5) The design and architecture
should be integrated with all plans and strategies. 6) The design and architecture should facilitate the
requirements of all stages of Service Lifecycle. 7) It must support changed or new quality services and
solutions that are associated to business timescales andrequirements # Identifying Service
Requirements :- The service and its essential components and their interrelationships are considered in
this approach. This approach also ensures that the delivered service should meet the business
requirements in the areas given below: 1) Service scalability to meet potential needs in order to sustain
the long-term goals of the company. 2) Service supports business units and business processes. 3)
Agreed business requirements and IT services for functionality or utility. 4) The service and its addressing
warranty such as SLA or SLR. 5) The components of technology used for maintaining and delivering
service together environment, applications and data.with the infrastructure. 6) Supporting services that
internally delivered and their components including with their OLAS associated to them.7) Supporting
services that externally delivered and their components together with their underpinning contracts
associated to them. They may often have their own associated schedule or agreements. 8) For the
requirement of performance metrics and measurements. 9) For the required or legislated levels of
security, and 10) For meeting the requirements of sustainability. # Challenges of Service Design Service
design has following challenges: 1) Difficult to Describe and Communicate: The intangible nature of
services makes them very difficult to communicate and explain. For example, online video nitorials, post-
purchase services, services provided during stay in a hotel or resort, etc. . 2) Variation in Services: It is
also impossible to standardise the delivery of services. This is because employees normally deliver
services to customers and no two employees are the same. This is the essence of a service and that is
why designing a service becomes so difficult.3) Lack of Physical Form: Due to the intangible nature,
services canot be touched, examined or tested. This is why people often resort to words to describe a
service. When the service is not described in this manner then four kinds of risks can arise. These are the
risks of over-simplification, incompleteness, subjectivity and interpretation. 4) Difficult to Understand: It
is very important that all the levels in the organisation have the same or shared vision regarding the
services. It is only then that the expectations of the customers can be met and they can be delighted.
This is very difficult to achieve. # BASICS OF SERVICE DESIGN ;- Introduction :- The service design stage
of the lifecycle starts with a set of new or changed business requirements. It ends with the development
of a service solution designed to meet the documented needs of the business. The service solution,
documented within its service design package, is then passed to service transition to evaluate, build,
rest, and deploy the new or changed service, after which service operation is responsible for delivering
the service as designed. Service design has to take into consideration the environment in which the
service will operate while still ensuring that the design is flexible # Holistic Service Design
Service design is comprise of five aspects which are as follows: 1) Service solutions in respect of services
those are new or changed. 2) Instruments and Management information system, particularly the service
portfolio together with the catalogue of services. 3) Architectures associated to the technology and
management. 4) Required processes in designing. 5 ) Methods and metrics of measurement. Adopting a
holistic approach is important for all aspects of design. Consider all the aspects while making changes in
any individual design elements. Developing and designing of a new application should not be done in
isolation. Rather, the impact on all the five aspects as discussed above should be considered. This ensure
that design addresses functional requirements as well as operational and management requirements as
the importail parts. The above given five aspects of design are important for overall service management
system of service provider. This approach is used, if the change in service is in its retisement. If service
retirement is not carefully planned then it may lead to unexpected negative effects on business or
customers, otherwise such effects are avoidable. # The Four Ps :- It is required to consider 4Ps to make
service design successful: 1) People: Inadequate preparation of people (to avail a service) causes failure
even in a best technical service design. The element 'people' in service design makes sure that the
human aspect must not be overlooked. The people availing service may require training regarding the
use of service so that they can take full benefits of service 2) Processes: The second element is
processes. A process of service design requires additional process in designing such as procurement
process or authorisation. For example, some IT service providers ignore some of the processes to reduce
"speed to market" time. But, this is not a truc economy. Failure in considering the requirements in future
capacity of service can cause problems when service will not able to meet demand. This failure is
occurred because the design appears adequate, thus every process is required in designing 3) Products:
Product is that services that result from the stages of service design and from the tools and technology
that are selected to be used in design or to facilitate the service later. For example, the service designing
of online shopping service and the other product may include the processing application of a credit card
4) Partners: Partners are the specialist suppliers normally: this group is comprised of vendors,
manufacturers.or external third party suppliers that offer parts of entire service. The selection of
supplier must be correctbecause failure made by supplier cause hindrance in providing agreed level of
service. Management of external supplier should be done with the help of supplier management process
as this ensures necessary contracts at their place and monitors the delivery of contract by suppliers in
reference to the terms of the contract. # Value to the Business :- Service design is the shaping of
service experiences so that they really work for people. Removing the lumps and bumps that make them
frustrating, and then adding some magic to make them compelling. In other words: "Service design is all
about making the service you deliver, useful, usable, efficient, effective and desirable. Service design
focuses on the creation of well thought through experiences using a combination of intangible and
tangible mediums. It provides numerous benefits to the end user experience when applied to sectors
such as retail, banking, transportation and healthcare. Value to the business is as follows: 1) A Reduced
Total Cost of Ownership (MO): There are several options for designing service, choose those design
which able to meet requirements within necessary expenditure. Designing according to requirements of
business, is not required to align much for effectiveness as if there will be small or no changes. Analysing
the aspects of capacity and availability of resource help in minimising the incidents and reducing support
costs. 2) Improved Quality of Service: A service provider can render quality services to his customers, if
the services are well-designed and meeting the customers' needs. 3) Improved Consistency of Service:
The consistency in service is delivered when service is design within architectures, corporate strategy
and constraints 4) Easy-to-Implement New or Changed Services: The services are easy to transition. if
they are well-designed 5) Improved Service Alignment: Inclusion of service design right from the
beginning enables a service provider to assure about the new or changed services that are designed in
reference to the requirements of business. This is also important for maintaining the requisite levels of
service. 6) Improved Service Performance: The service should be designed to meet the particular criteria
of performance such as incorporating ability, availability, and continuity requirements in IT service in
design. # Comprehensive and Integrated Service Design :- It is important for business that IT services
and systems are planned, designed, managed and implemented in sccurate manner. Thus, there is a
need that the IT services include the following, 1) 1) They must be customer and business oriented,
driven and focused. 2) They must be cost effective 3) They must satisfy the conditions of customer's
security. 4) They must be adaptable and flexible, and aligns with the purpose of delivery. 5) They must
satisfy the rapid increase in demand in terms of volume or because of rapid changes. 6) They must meet
demand of business for continuous operation. 7 They must operate and manage at appropriate risk level.
8) They must be responsive with the appropriate capacity and availability that match with the needs of
business The temptation, and unfortunately the reality in some situations, with all these stresses on both
IT and the business, The following are the aspects of service designing that must consider for
satisfying the evolving or new business requirements: 1) Business Process: Tais is important to describe
the functional needs of services offered to the customers for example, invoicing, telesales, credit
checking, orders etc. 2) Service: Service firms themself delivering services to the businesses and
customers For example, billing. email etc. 3) Strategy, Policy, Compliance, Governance: Service firm is
describing these elements to a direct activity and assure that they aligned with the goals and objectives
of organisation. 4) SLAS/SLRs: These are the agreed documents with the customer that define scope,
quality and the levels of provided service. This is for existing services (SLAs) as well as for new services in
future (SLRs). 5) Infrastructure: In delivering services to the users and customers, IT equipment are
important such as network circuits, servers, telephones, switches, personal computer (PCs) 6)
Environment: For securing and operating the infrastructure, a suitable environment is required with all
necessary facilities such as air conditioning, data centres, power etc. 7) Data: The data is required to
provide essential information in business process and to support the service for example, accounts
ledger. customer records 8) Application: To meet the functional requirements in business processes and
to manipulate data, all software applications are required such as customer or financial relationship
management applications, or enterprise resource management etc. 9) Supporting Services: These
services are required to support the delivery operations of service. For example, managed network
service, shared service etc. 10) Operational level agreements (OLAs) and Underpinning Contracts: This
agreement is required to deliver those quality services that agreed within SLAS. # Setting Direction,
Policy and Strategy for IT Services For the synchronisation of IT services and business, many of the
companies are forming committee of senior management roles from IT organisations and the other
businesses. IT service is an important element of service management system of the service provider.
Thus, this committee has the responsibility of setting strategy. policy, direction and governance. This
committee is also referred as steering group (ISG) or IT strategy by many organisations. The role of ISG is
to act as a partnership between business and IT. There should be regular analysis of business and IT plan,
strategies, designs, architectures, policies and service portfolio to make sure that they are aligned with
one another. 1) Reviewing IT plans and Business: This helps in identifying the changes in the areas that
trigger the requirement to enhance, create or improve services 2) Demand Planning: This helps in
identifying the changes in long-term and short-term demand. Such changes may decrease or increase in
demand and concem with buds projects and business. 3) Project Prioritisation and Authorisation: This is
important to assure that projects are prioritised and authorised for the mutual satisfaction of IT and
business 4) Review of Projects: This is important to assure that the anticipated business benefits are
achieved in line with the cases of business projects and to assess whether the projects are scheduled or
not. 5) Potential Outsourcing: This helps in identifying the content and needs of sourcing strategies for
supporting the provision of IT service. 6) Business/ IT Strategy Review: This helps in discussing about the
important changes to the business strategy and about the prime changes of IT technology and strategy.
Besides this, it ensures their constant alignment. 7) Business Continuity and IT Service Continuity: A
group, or a working team from the group, is responsible for aligning plans of IT service continuity and
business continuity. # Optimising Design Performance :- organisations struggle to understand-what is
service design. While many principals of Service Design also apply to other methods including
Experience Design, Design Thinking, UX, etc. there are uniquely specific proponents within service design
that are exclusive to the practice. Another point of interest includes the varying definitions around
Service Design emergent due to the specific needs of certain organisations, industries, and departments.
There certainly is no "one size fits all" approach; instead a nuanced and specific refinement of the
common principals is often the recipe for success. Optimising design activities includes recorded
processes to be introduced, along with a prevailing quality management system for their continuous
improvement and measurement. While considering the optimisation and improvement of activities of
the service design, it is important to measure the impact of the activities on all stages of lifecycle rather
considering a design stage only. # SCOPE AND FLOW OF SERVICE DESIGN: ASPECTS OF SERVICE DESIGN :
Introduction :- In order to meet business requirement, stage of service design starts with changed or
new business requirements and ends with service solution development. Service solution along with its
SDP is passed through service transition in order to evaluate, test, build and deploy the changed or new
service, or to retire service. After the completion of these activities of transition, the control is
transferred to service operation stage of service lifecycle. There are five aspects of service design: 1)
Service Solutions for Changed or New Services: Changed or new services requirements are taken from
the portfolio of services. Each requirement is evaluated, reported and decided upon, and a solution
design is created that is then compared to the service strategy and constraints to ensure that it complies
with corporate and IT policies 2) Management Information Systems and Tools, Especially the Service
Portfolio: These systems and tools must be analysed to make sure that they are capable to support
changed or new service. 3) Management Architecture and Technology Architectures: These
architectures are analysed to make sure that they are consistent with changed or new services. Such
analysis is important for the maintenance and operation of new service.4) Processes Required: These are
revised for making sure that responsibilities, roles, skills and processes are Service Design Principles (Use
4) capable of supporting, maintaining and operating the clunged or new services. If not, capabilities of
existing process are required to be improved and new service design is required to be revised. 5)
Measurement Metrics and Methods: These are revised to make sure that existing methods of
measurement can offer essential metrics to align with changed or new services. If not, service metrics
are required to be revised and measurement methods are needed to be improved. # Service Solutions
for New or Changed Services :- Following things are included in the designing of service solutions 1)
Review the requirements of business which were decided. 2) Analyse existing infrastructure and IT
services in order to find potential alternative component or solution which could be reused for new
design 3) Solution is designed to provide both the necessary characteristics and functionality/utility
required, and the requirements of non-functional warranty 4) Ensuring that the design provides the
information needed to allow sufficient control, evaluation, and enhancement of the process or service.
5) While addressing the business processes requirement, one should ensure that design also considers
criticality, priorities, dependencies, and the service impact. 6) This to ensure that design able to meet
acceptance criteria including service level targets (warranty requirements) and service level
requirements. Also ensures that design will provide service metrics and measures requirement 7)
Understanding the appropriate timescales and how current services would be impacted by the new
services. 8) Plan the examination of service, together with any Users acceptance testing (UAT) 9)
Incorporation of new services into the general service management system. # Technology Architectures
and Management Architectures :- Architectural design is a blueprint for the deployment and
development of an IT infrastructure in order to fulfil future and current business needs. Architecture is a
fundamental organisation of a system. 1) Service Architecture: This translates infrastructure,
applications, support activities, and organisation into a set of services. These architectures may change
without any change in service itself. It involves services themselves, their integration and management.
2) Application Architecture: This plans for functional and business requirements and demonstrates the
relationship between the applications. 3) Data/ Information Architecture: This helps in discussing about
the physical and logical information of organisation or about the resources of data management. It also
represents the ways in which the information resources are shared and managed for the advantage of
enterprise. 4) IT Infrastructure Architecture: This defines geographical distribution, functionality, and
structure of the components that support technical standards and overall architecture associated to
them. 5) Environment Architecture: This defines all types, levels, and aspects of environment control and
its management. 6) Technology Architectures: This involves system and applications software, databases,
data, information, and infrastructure design. # Designing
Measurement Methods :- The design of measurement methods and metrics is the last and fifth aspect
of service design. Service providers must have to involve in examination and measurement for the
management and control of processes and services. While choosing metrics, measurements and the
methods, caution should be exercised. This is because the chosen measures and metrics 1) Net
Promoter Score (NPS): First KPI; the widely used Net Promoter Score (NPS in short), a loyalty metric
developed by Bain & Co. Net Promoter Score is a number in percentages, ranging from -100 to 100. that
represents the sentiment surrounding the services. Customers can fall into either one of the three
categories: detractors, passives or promoters. NPS is calculated by subtracting the percentage of
detractors from the percentage of promoters. The higher the NPS is, the more loyal the customers will
be. i) Detractors: Detractors are not satisfied with the service offering, grading the services with a 1-6,
and are unlikely to do business with service provider again. Even worse, they can be so unsatisfied that
they might impede the growth by spreading negative reviews. 1) Passives: Passives fall somewhere in the
middle, grading a 7 or 8. They are quite satisfied but not happy enough to actively recommend the
service to their peers. i) Promoters: Promoters are customers that will actively share how great your
services are with their peers and promote your service. They are more likely to adopt more of your
services or use them more frequently. Customers grading you with a 9 or 10 are considered Promoters.
2) Customer Satisfaction Score (CSAT): Where many people think NPS measures satisfaction (nope, it is
loyalty), the CSAT score is the one KP: to use for satisfaction. Another important difference is that NPS
uses general periodic measuring-where CSAT is used on an interaction level, meaning CSAT questions 3)
Customer Effort Score (CES): Where NPS and CSAT scores are focused on creating a more enjoyable
experience for customers, CES is focused on reducing the customer effort. Customer effort is defined as
the amount of effort a customer needs to make in order to get his customer job done 4) Customer
Lifetime Value (CLV): More financially focused measures can also be linked to service design efforts. The
key metric for financial value is the Customer Lifetime Value (CLV), which is a prediction of the net profit
attributed to the entire future relationship with a customer. 5) Cost to Serve (CtS): This metric is focused
on the costs that are being made to serve a specific customer. A typical client request that we often get
related to CIS is "service provider need to reduce the amount of calls to Customer Service". Expenses
might also include customer facing staff, sales reps or internal system costs. A simple service design
principle to reduce costs is co-creation. When co-creating, service providers put people from different
departments and expertises together in a room, and start thinking about the service as a whole. 6) Time
to Market (TIM): A KPI for design effect that is often overlooked is the Time to Market. With the pace of
new products and services increasing and competitors luring to copy the services, the pace in which
services can be brought to market is often an important differentiator. Service design can contribute to a
faster Time to Market in three different ways: i) Gaining Insight: A global management consultancy states
that 48% of R&D budget is wasted in part because of weak insights, meaning what is developed are not
what customers want. ii) Alignment: Using service design on a strategic level and looking at innovations
or service propositions from a customer perspective creates better alignment, between different
departments. iii) Early Validation: By creating quick prototypes, service provider can validate his biggest
assumptions with real customers in an early stage of the design process. # Measurement Metrics :- To
measure the processes capabilities and performance, there are four types of metrics that can be used: 1)
Progress: This metric depicts the deliverables and milestones in process capabilities. 2) Compliance: This
metric depicts the process compliance for the needs of governance and the people compliance for the
use of process. 3) Effectiveness: This metric depicts the process effectiveness and its capability to provide
accurate outcomes. 4) Efficiency: This metric depicts the process productivity including with its speed,
resource utilisation, and throughput. #CUSTOMERS INVOLVEMENT IN SERVICE PROCESSES -
Service delivery is an interactive and dynamic process which involves participation between the service
organisation, the service provider and the customer. Customer participation can raise organisational
productivity and efficiency and improve service performance. Service customers are often present in the
"factory" (the place where the service is produced and/or consumed) interacting with employees and
with other customers. For example, in a classroom or training situation, students (the customers) are
sitting in the factory interacting with the instructor and other students as they consume the educational
services. Because they are present during service production, customers can contribute to or detract
from the successful delivery of the service and to their own satisfaction. These roles are unique to
service situations. #Levels of Customer Participation Across Different Services - The level of customer
participation - low, medium, high-varies across services, as shown in table below. In some case, all that is
required is the customer's physical presence (low level of participation), with the employees of the firm
doing all of the service production work, as in the case of a symphony concert. In other cases, consumer
inputs are required to aid the service organisation in creating the service (moderate level of
participation). Inputs can include information, effort or physical possessions. #RELATIONSHIP
MMARKETING - In a general sense, harmony of love and affection is known as relationship. It can be the
common platform which is created among all. Different types of believes are included in the wide range
of synonyms and there can be a lot of variations. Being able to trust and believe a person with whom an
individual has the relationship is the most important element of the bonding and thus a need for a
uniform framework is identified. Having a constant interaction for a fairly long time is the fundamental of
relationship. The incidents in which there is only one time association, like buying a car from a dealer,
will not be considered as relationship. Frequent interactions between dyadic parties constitute to form
relationship. Identifying and retaining potential customers, making networks with them and
strengthening these networks through individualised interactive sessions over a long period, is known as
Relationship Marketing. According to Professor Philip Kotler, "Relationship marketing is the process of
building long term, trusting and win-win relationship with customers, distributors, dealers and suppliers.
#Evolution of Relationship Marketing - In the period of 1950s, consumer goods were the main focus of
marketing. Then in 1960s, the marketer's attention shifted towards industrial market. In 1970s, the focus
was then shifted towards the societal or non- profit marketing. In 1980s, the focus of marketing moved
towards service marketing, which is the area that had received less attention in the overall economy. In
1990s, it was believed that the relationship marketing will be dies much attention. Relationship
marketing is based on two important consideration i.e., macro level and micro level. At micro level, it
was perceived that the nature of inter relations with customers was changing. On e other hand, at macro
level the perception is that marketing efforts influence numerous areas such as employee market,
financial market, government market, supply market, referral market, internal market, and customer
market. #Enhancement of Internal & External Relationships - Relationship marketing not only focuses
on building good relation with customers but it also focuses on developing and improving the
relationship with recruitment, referral, internal, influence, and supplier market. These relationships have
been discussed below: 1) Relationships with Suppliers: The relationship with supplier states that the
relationships in organisations are now based on cooperation and mutual concern with the suppliers.
Organisations are moving away from traditionally adversarial relationship. Markets are increasingly
noticing the benefits gained from working in such coordination, it helps the organisation to meet the
needs of end consumers effectively. The term co- marketership has been used to define the relationship
between organisation and its suppliers. The buyer of the raw material realises that its delivery is very
important part in the manufacturing process and by coordinating with the supplier; advantages can be
availed in long-run by both the parties. 2) Relationships with Recruitment Markets: Relationship with
recruitment markets refers to maintaining good relationship with the people who supply manpower to
the organisation. The service provider organisation should build good relationship with those manpower
suppliers who provide right quality and quantity of manpower. 3) Relationships with Internal Markets:
Internal market here mainly refers to building strong relationship and understanding the employees
working in the organisation. Organisations are required to make their employees feel committed towards
establishing long-term relationship with them. The employees must feel associated with the mission and
goals set by their organisation. Setting a strong relationship with the internal market; namely, the
employees, should be the main focus of the human resource strategies. 4) Relationships with Referral
Markets: Referral market is formed by those sources which generate or bring more business to the
company. These referral sources are mainly the satisfied customers who do word-of- mouth marketing
for the organisation's products and services. Other sources could be the suppliers. employees, third
party involved with the organisation such as banks, agencies, etc. The organisation should formulate
efficient strategies for building strong relationship with them. 5) Relationships with Influence Markets:
Influence markets include the political groups, trade association. consumer association, and legislative
bodies. The relationship with influence markets can also give positive affect to the relationship of the
organisation with the customers. 6) Alignment between Marketing, Customer Service and Quality:
There are three important areas where the close alignment is required in relationship marketing
orientation, i.e., quality, customer service, and marketing. The quality initiatives are generally separated
from the measures aimed at enhancing the customer service levels. However, all three areas are
required to be integrated with each other for achieving the most beneficial relationship. # Relationship
Development Strategies - 1) Customer Satisfaction: The efforts from different activities and functions of
an organisation will be required in order to obtain the higher customer satisfaction level. Only
relationship managers are not responsible for relationship development. There are many significant
examples of those organisations which are successful in obtaining higher numbers of recommendations
from the customers despite not having any significant relationship marketing programme. The higher
number of repeat sales can be obtained even by the firms which have poor standards of service by
charging low price from the customers in a highly competitive market. 2) Trust: Another method used for
relationship marketing is getting trust of the customers. Many marketers have studied the concept of
trust deeply which can be considered as a trivial multi-dimensional concept. There are some specific
retailers, for example, Boots and John Lewis, who are able to gain the higher rankings consistently in the
different surveys which are conduced to analyse the customers' trust in the firms, and thus, it is quite
evident that the customer loyalty of these firms is quite high. 3) Value Addition to a Relationship: There
must be some value addition for the customers in order to have a sustainable relationship. The following
methods can be adopted in order to create some value: i) Making the Reordering Simple: The value in
customer relationship may be added by making the reordering or reacquiring of services simple and
convenient for the customers. ii) Providing Privileges to Customers: It includes offering various types of
privileges to those customers who want to have a long-term relationship with the firm. iii) Mutual
Cooperation to Solve the Problems: Organisations need to mutually cooperate with the customers so as
to help them identify their problems or requirements and then providing their solutions. 4) Developing
Barriers to Prevent Exit: The companies can make it really very hard for the customers to switch to the
competitors and thus, ensure the re-buying from them. When a continuous support is provided by the
supplier, the customers are forced to fall prey to these tactics of the marketers. In the situations where
the industrial suppliers are the sole providers of spare parts of consumable items, a long on-going
relationship with the customers is established so that the customers continuously buy their products.
#DETERMINING THE VALUE OF CUSTOMER - The introduction of new philosophies is essential for the
survival and success of companies. In the current scenario, companies have become customer-centric
and give full attention to their potential customers. Hence, the company should be competent enough to
build and retain its customers rather than just focussing on delivering of goods and services. Customer
value refers to the maximum level of satisfaction delivered by offering the acquisition, ownership. and
use of a product to the customer at the lowest possible cost. This is the only way by which companies
can implement their marketing concepts. Therefore, it can be observed in the prevailing business
environment that many companies are constantly increasing their customer value to attain customer
satisfaction. Thus, it can be said that creating and providing high customer value is the core marketing
principle. From the customer's viewpoint, value can be defined as a trade-off between the prices paid
versus the benefits received. In a specific value situation, when the product and the customer meet each
other, the value is created. Hence, the value can be evaluated in terms of high satisfaction, low
satisfaction or dissatisfaction. The services offered by the companies to the customers decide their long-
term relationships. # Characteristics of Customer Value - 1) Customer-Centric: The values should be
customer centric as the customers differentiate their requirements and the benefits they are seeking out
of a product. 2) Intangibility: Value is intangible in nature; therefore it can only be felt or experience are
cannot be set. 3) Contextual: There are three main dimensions of context such as the final consumer,
end-use and the environment. 4) Multi-Dimensional: Customer value is multi-dimensional, as it can
possess numerous dimensions 5) Trade-off: Customer value is the equilibrium between the benefits
received by the customers price, promotion, quality, service, etc. 6) Relative: It is the tendency of the
customers to relate their value with the available value like against the offerings in the total costs paid by
them. market. 7) Mindset: All the actions and strategies of company must also focus towards its
customers and not just towards its products. # Measurement of Customer Value - The idea to satisfy the
customers is the entire concept of customer value. This can measured by making an implied comparison
between: 1) The expected performance of the offering before its purchase or use, and 2) The actual
performance, i.e., perception regarding the offer after using it. After the comparison, there can be three
possibilities: 1) If the expectations of the customers exceed the perceived benefits and performance of
products or services, then dissatisfaction is experienced. This means that the customer has not perceived
good value. 2) If the perceived benefits or performance of products or services matches with the
customer's expectations, then satisfaction is experienced. Here, the customer receives what he has paid
for, and 3) When the perceived benefits or performance of products or services exceed the customer's
expectations, then the customers feel delighted. In such cases, customer is a hard-core loyal buyer of the
product. Customer Value = Perceived Benefits - Perceived Sacrifices # Customer Lifetime Value (CLV) -
Customer value is a very important factor which has a great impact on the buying process of the
consumer. It is intangible in nature and comprises many psychometric factors like the brand recall and
equity, the customer association in terms of loyalty, the customer referral, etc. The customer lifetime
value is not built in a day; it takes time and efforts by the company to influence buyer decisions. CLV
influences how consumers feel about a particular brand and the marketing efforts play an important part
in augmenting the value. (CRM). Customer Lifetime Value (CLV) is a significant component of Customer
Relationship Management Very few researches support the predictive modelling of CLV even though this
metric is very popular among marketing research scholars. # Importance of Customer Lifetime Value - 1)
Calculating the CLV allows the firm to estimate the sum that can be invested to retain the customer so as
to have positive rate of returns. With limited resources, every firm aims at maximising profits from its
investment and thus retain those customers who will bring it the maximum profits in future.2) The
organisation can make the most effective use of the resources at its disposal once the CLV of the
customers is known. The CLV approach is also very useful in selecting the organisation's customers,
deciding on the features of the product that are to be offered to customers and also finalising the
communication/advertising strategies. # MCKINSEY'S 7S FRAMEWORK: Introduction: The 75 are critical
to the successful implementation of strategy. McKinsey's 7-S framework proposes that there are number
of factors which influence the capability of organisations to change and achieve its objectives. In the
1970s, the 75 framework was developed by McKinsey Company which is a reputed management
consultancy firm of USA. The 75 framework is a diagnostic tool which measures the strategic degree of
fit between the organisation's current and intended strategies. It is a tool which can be used to bring
about changes in the organisation. #Elements of 7 S Framework: 1) Strategy: The strategy concept
includes the purpose, mission, goals, objectives, action plans and policies framed by the organisation.
The 75 framework recognises the fact that it is easier to frame a strategy than to execute it. 2) Structure:
The structure denotes the organisational chart. In other words, it signifies the whole business
organisation in a systemic way. It also allocates various roles and responsibilities to each unit. 3) System:
Systems determine the rules, regulations and procedures which govern the functioning of the
organisation. 4) Staff: Staff is very important element of the 75 framework. It is concerned with the
recruitment of individuals for different departments and evolves them as managers of tomorrow. It is a
comprehensive process of recruitment, selection, motivation, and reward-giving. 5) Skills: Skills are the
'unique competencies' which redirects the organisational abilities. These skills can be in form of
engineering skills, new product development, market research, analytics, customer care and delight,
quality, etc. 6) Style: Style is a variable which determines the effectiveness of the management to
successfully implement the organisational changes. #Utility of McKinsey's 7-S Framework to Strategist:
1) Serves as Diagnostic Tool: The internal operations of an organisation can be understood in a better
way with the help of this model. 2) Identify Strengths and Sources: The strengths as well as the reasons
behind the inefficiency of an organisation are identified with the help of the 7-S framework. It also helps
in determining the sources where the organisation can gain an advantage over its competitors. 3)
Implementing Organisational Change: The various organisational interconnections which play a
significant role in bringing about an effective organisational change are highlighted by this model. 4)
Bring Shift in Strategy: This model critically evaluates the action plans in all of its seven aspects. These
depict the capability of the organisation in effecting changes in the strategy. 5) Implementing Strategy:
With the help of 7-S framework, one can check if the requisite conditioning essential for strategy
implementation is present in the organisation or not. 6) Identify Cause of Shortfalls: If a situation arises
where the outcomes are not up to the mark, then the reasons behind such are identified by the 7-S
framework. # CUSTOMER RELATIONSHIP MANAGEMENT: The multi-dimensional
process through which the organisations gain knowledge about the needs, wants, desires and buying
patterns of their customers by establishing a two-way communication with them with the use of
information technologies, is known as Customer Relationship Management. CRM can be divided into
three main components: 1) Customer: It is important to recognise and manage customers for an
organisation as its profit and growth solely depends on customers. Information technologies play a very
important role here. 2) Relationship: Uninterrupted bi-directional communication between the
organisation and its customers builds the relationship between them. 3) Management: CRM is a
management function that should be considered not only in marketing department but in the whole
corporate culture, departments, and activities. #Role of CRM: 1) Handling the Customer Issue: CRM
facilitates the organisation and the customer service department in handling the customer issues and
problems. As CRM contains vast customer data, the departments dealing with customers are provided
with this data to enable the effective customer service transactions. 2) Knowing the Future Course of
Action: With the help of CRM systems, the management can easily forecast future course of actions of
the organisation. Customer name, address, order status, account details, transaction dates, status of
transaction (pending or complete). 3) Helping Top Management in Decision-Making: CRM systems help
the top managers in decision-making by providing updated data about the satisfied customers and the
level of service provided by the frontline staff. 4) Helping in the Expansion of Business: An organisation
can increase its business and market by adopting CRM systems. Large number of customers and the
relevant information can be stored and processed through such systems as these are capable of dealing
with large data. 5) Helping Organisation in Attracting and Retaining Customers: Customer acquisition and
retention is very essential for any organisation. Along with satisfying existing customers, the CRM system
is also focused towards new customer acquisition. 6) Helping in Reducing Cost: CRM systems reduce
unnecessary costs associated with organisational operations. Due to CRM systems, the necessity of
manual and paper work is reduced, thus lesser resources and number of staff are required to manage
the organisational operations. #Process of CRM: 1 ) Acquisition: Acquiring potential customers is the
most essential step of customer relationship management. The process of acquisition encompasses five
major stages, viz., enquiry, interaction, exchange, co- ordination, and adoption. Each stage performs an
important role in the process of acquisition. In the enquiry stage, different organisational aspects
including nature of organisation, product, transaction methods, etc.. are enquired by the potential
customers. 2) Customer Interaction Management (CIM): Building customer relationships is not possible
without focusing on the interaction between the customers and the organisation. CIM encompasses
combination of customer relationship technologies and technology-centric interactive solutions. CIM is
based on interactive communications related to potential customers enabled through available channels
of interaction. 3) Customer Retention: The main concern of the organisation is retention of acquired
customers for longer period. The process of effectively accomplishing the customer requirements, and
thus, going beyond their expectations, so as to keep them in the customer inventory of the organisation
for longer period, is called customer retention. 4) Attrition: The next phenomenon occurring in CRM after
the retention is attrition, which involves gradual destruction of the customer loyalty. This stage
encompasses the queries that customers have, about their returns and benefits from long-run
relationship with the organisation. Avoiding the early attrition arising from customers, may lead to
defection of customers. 5) Defection: Customer defection refers to the process of discontinuation of
purchase by an unhappy customer which ultimately means losing a business. In case, when the
organisation is not able to provide required products (services) to the customer as per his/her need, the
unhappy customer switches to another alternative and discontinues the purchases from earlier
organisation, resulting in defection. #Advantages of CRM: 1) Increased Sales Revenues and Reduced
Cost of Sales: CRM results in increased sales revenues from building relationship with customers that
provide the needed information without wasting any extra costs and time. 2) Increased Customer
Satisfaction: CRM leads to increase in number of satisfied customers as their needs and wants are
efficiently fulfilled. With the help of CRM, instead of understanding themselves as an object of sales and
marketing, customers feel themselves as a part of the organisation. 3) Lower Costs of Recruiting
Customers: By implementing CRM, lower costs of customer recruitment are incurred. The costs related
to various customer-related operations like contact, mailing, marketing, services, fulfilment, follow-up,
etc.,4) Increased Customer Retention and Loyalty: Implementation of CRM system results in increased
customer loyalty and retention. 5) Customer Knowledge: CRM systems provide customer information
through a common knowledge base which is easily accessible to all the departments of the organisation.
6) Customisation: Simple and customised solutions (particularly for SMEs) are developed with the help of
CRM. CRM helps in easy integration of different business processes within the organisation.
#Disadvantages of CRM: 1) Requires Top Management Support: Successful implementation of the CRM
is not possible in absence of top management support. For each and every activity in CRM, the approval
of the top management i is required, which inhibits the flow of business operations. 2) Complicated and
Confusing: CRM system is so complicated that sometimes organisations get confused about its features
and use. Some organisations link it with business strategy while others consider it a technology-related
aspect.3) Problem in Implementation: Incorrect implementation of CRM systems within an organisation
leads several business problems. If any of the organisational department is skipped from being involved
in CRM network, the information developed is not complete and reliable. 4) Fails to Serve Interested
Customers: In CRM, along with serving and satisfying regular customers, sometimes organisations fail to
focus the other interested customers. #Types of CRM Strategies: 1) Operational Excellence: Companies
that employ an operational excellence strategy attempt to find a combination of price, quality and ease
of purchase that none of their competitors are capable of matching. They do not spend a great deal of
time on innovation or one-to-one relationships with customers. 2) Product Leadership: Organisations
which aim for product leadership strategy constantly implement innovation and renewal. These
companies want to amaze customers, push limits and discover work hard to the unknown. Product
leaders surprise customers with the newest and best products. 3) Customer Intimacy: The customer
intimacy strategy is characterised by the fact that companies build up a relationship with customers. It is
not so much the market that becomes the centre of attention, but the individual wishes of customers
that count. A great deal of attention is focused on the development of the desired customer base.
#Essentials of CRM Strategy: 1) Clear Alignment: Clear alignment between the organisation's purpose
and the CRM strategy; a strong strategy is a direct reflection of the company's purpose and supports the
company vision in direct and easy to understand terms. 2) Customer Focused: CRM strategies must be
customer focused; they should articulate the positioning. evolvement, and objectives of the customer
relationship. 3) Senior Executive Sponsorship: CRM strategies must have senior executive sponsorship
and complete buy in from across the organisation. Both staff and management take their cues from the
executive team so it is imperative that the executives are visible, vocal, and active in their sponsorship of
the CRM strategy. 4) Use of Full Range Technology: Rapidly advancing technology means re-thinking how
business is conducted. An effective CRM strategy makes technology a base to be used in an iterative
process that considers what technology can do and what the organisation can do with the technology. 5)
Selling the Company as Well as the Wares: A principal CRM tenet is that users see all aspects of their
relationships with customers, the so-called 360-degree view. Customers know they buy a supplier as well
as product, and now sellers are awakening to find that they sell products, services, and their enterprise.
6) Putting Current Applications to Strategic Use: Most companies use data warehouses as repositories of
transactional data for tactical reporting. # CUSTOMER DELIGHT AND
CUSTOMER LOYALTY :- *Introduction*:- With the growing competition one should not just satisfy the
customers but to keep customers coming to them more frequently there is a need to make them feel
special by providing customers more than their expectation. This gives rise to the term called customer
delight. #Customer Delight: A customer feels delighted when he receives more than what he has
expected. It is a situation where the products and services offered to a customer not just satisfy his
needs and wants, but also provide an unanticipated value. For example, when a customer visits a grocery
store and finds all the products he/she was willing to buy. #Customer Delight Curve: Customer delight
curve consists of three zones, namely, zone of pain, zone of mere satisfaction, and zone of delight. When
an organisation applies some efforts to satisfy its customers, then the customers start moving from the
zone of dissatisfaction to the zone of merely satisfaction and finally to the zone of delight. #Principles of
Customer Delight: 1) Timeliness: In this competitive scenario, speed is considered as an important factor
to successfully operate a business. If a company fails to satisfy its customers and exploit the opportunity
at the right time. 2) Always Listen To Your Customers: When entrepreneurs start their business they must
analyse the needs and wants of the customers before developing products. The entrepreneurs must test
their products with real customers, listen to their feedback and then design their products effectively. 3)
Give them what they need (not always what they want): Henry Ford explained and claimed that, "If I had
asked people what they wanted, they would have said faster horses." It explains that customer feedback
is very essential but while designing a product. 4) Reward Customers with Unexpected Surprises:
Nowadays, many companies are providing extra benefits with the products or services they offer to
customers in order to outdo their competitors. Uber and Lyft are the examples of such companies. 5)
Give Customers A Point of Contact: Every company should have a department or a person to handle the
issues and grievances of the customers. A strong relationship is established between the company and a
customer when it is known that there is a point of contact. 6) Provide Space to Customers: Sufficient
space and privacy should be given to the customers. For example, companies should not send excessive
mails or messages to their customers because this may make customers furious and angry. 7) Have
Policies, But Always Be Flexible: A range of policies should be designed by the company to handle certain
customer issues. Since every issue is not simple and similar, the company should be flexible enough
while applying policies so as to resolve the issues of customers. #Tools for Keeping Customer Delight:
1) Complaint and Suggestion Systems: A system can be created by the company, with the help of which
the customers can analyse a product and then give the feedback about the same. Feedback can be both
positive as well as negative. 2) Customer Satisfaction Surveys: Companies should conduct surveys for
evaluating the standard and quality of their product or services. The companies adopt various
techniques for doing surveys such as questionnaires, face-to-face interviews, direct calling, e-mails, etc.
3) Ghost Shopping: Ghost shopping refers to a concept in which some hired purchasers are sent to stores
by the management in order to observe whether the staff members are dedicated towards customer
service or not. Such shoppers are known as ghost shoppers. 4) Lost Customer Analysis: When the
customers shift to some other company, the company should find out the appropriate reason behind
losing them. It is essential for a company to conduct an analysis of both satisfied and dissatisfied
customers consistently. #Customer Loyalty: Customer loyalty refers to the behaviour of customers
who are repeated buyers of a particular product and those who give good ratings, positive feedback, and
recommendations to the company. There are some customers who favour and provide benefits to a
specific company by giving them positive word of mouth for a particular product or services.
#Satisfied but Disloyal Customer-Reasons: 1) Entrepreneur Customers: A customer who creates several
options for a particular product in order to receive more benefits or value for money is known as an
entrepreneur customer. 2) Pressure from Competitors: Improved product or services offered by new
competitors or existing competitors provide better options to customers. 3) Out-dated Service Provider:
These types of customers are not dissatisfied with their old service provider. but may feel that an old
service provider will be unable to fulfil his new requirements. #Unsatisfied but Loyal Customer-
Reasons: 1) Lack of Options: When there is no other alternative than to consume the available product,
or the service provider has a monopoly over the market, or the existing competitors are worse than the
current service provider then a customer is forced to purchase the available product. 2) Improved
Service Provider: If a service provider develops and Lack of option Dissatisfied but a loyal customer
implements an action plan on the basis of feedbacks received then the Improved service provider
Customer inertia customers may feel overwhelmed and expect improved goods and services by the
company in future. 3) Customer Inertia: Some customers are hesitant and reluctant to change. Hence,
they do not switch to any other service provider regardless of their bad experience with the company.
#Drivers of Customer Loyalty: 1) Trust: Trust bestows confidence in any relationship. Trust is an
important ingredient in business relations and following points: i) No doubt, fair and truthful treatment
is expected by the customers. ii) A trusted environment makes customers feel more relaxed and secured.
2) Concern for the Customer: The next driver of customer loyalty is the concern of the organisation for
the customer's interest. It demands concerned communication with the customers while indicating and
executing the marketing plan of the service organisation. 3) Regularity of Contact: Frequent
communication and consistent interactions are very significant in case of new age customers as they are
demanding in nature. All the matters that arise between the parties involved in a transaction can be
sorted by enhanced interaction. #Importance of Customer Loyalty: 1) Price per Customer: The process
of retaining the existing customers is much more cost-effective and profitable than identifying and
acquiring new customers. The special offerings and loyalty programmes introduced by company for
retaining existing customer base are comparatively cheaper than the techniques used to attract the new
customers and engage new markets. 2) Insulation from Price Competition: The introduction of internet
has, given rise to a fierce price competition. Because of which, businesses are facing tough competition
regarding their prices. 3) Reduced Marketing Spend: If the company has developed a loyal customer base
then it can likely reduce its expenses on marketing activities. When the loyal customer base starts
expanding, the company requires less or no capital to acquire new markets. 4) Economic Benefits: High
level of customer loyalty can be measured by a company in terms of its economic benefits. When a
marketer offers high-end products or services and wins customer loyalty then the cost incurred to
acquire new customers is reduced and other benefits like profits, market share and revenues are
improved. 5) Increase the Frequency of Purchase: Companies provide complete knowledge about the
products and services to the customers with the help of perfectly planned customer orientation scheme.
6) Others: Customer loyalty plays a vital role in the development of an organisation because loyal
customers: i) Purchase the company's products and services repetitively time and again, ii) Buy products
of same brand and product line in large quantities,

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