Chapter 2 SERVICE NOTES.pdf

CHAPTER 2: THE GAPS MODEL OF SERVICE QUALITY closed. These gaps occur within the organization providing the service (hence the term provider gaps) and include Effective service marketing...

CHAPTER 2: THE GAPS MODEL OF SERVICE QUALITY closed. These gaps occur within the organization providing the service (hence the term provider gaps) and include Effective service marketing is a complex undertaking that Gap 1: The listening gap involves many different strategies, skills, and tasks. Executives of Gap 2: The service design and standards gap service organizations have long been confused about how to Gap 3: The service performance gap approach this complicated topic in an organized manner. This text Gap 4: The communication gap book is designed around one approach: viewing services in a Provider Gap 1: the Listening Gap structured, integrated way called the gaps model of service quality. Provider gap 1, the listening gap, is the difference between This model positions the key concepts, strategies, and decisions in customer expectations of service and company understanding of services marketing and will be used to guide the structure of the rest those expectations. The primary reason that many firms do not meet of this book; sections of the book are tied to each of the gaps customers’ expectations is that the firms lack an accurate described in this chapter. understanding of exactly what those expectations are. Many reasons exist for managers not being aware of what customers expect: they THE CUSTOMER GAP may not interact directly with customers, they may be unwilling to The customer gap is the difference between customer ask about expectations, or they may be unprepared to address them. expectations and perceptions (see Figure 2.1). Customer When people with the authority to set priorities and the expectations are standards or reference points that customers bring responsibility to do so do not fully understand customers’ service into the service experience, whereas customer perceptions are expectations, they may trigger a chain of bad decisions and subjective assessments of actual service experiences. Customer suboptimal resource allocations that result in perceptions of poor expectations often consist of what a customer believes should or will service quality. In this text, we broaden the responsibility for the first happen. For example, when you visit an expensive restaurant, you provider gap from managers alone to any employee in the expect a high level of service, one that is considerably superior to the organization with the authority to change or influence service level you would expect in a fast-food restaurant. Closing the gap policies and procedures. In today’s changing organizations, the between what customers expect and what they perceive is critical to authority to make adjustments in service delivery is often delegated delivering quality service; it forms the basis for the gaps model. to empowered teams and frontline people. In business-to-business Because customer satisfaction and customer focus are so situations, in particular, account teams make their own decisions critical to the competitiveness of firms, any company interested in about how to address their clients’ unique expectations. delivering quality service must begin with a clear understanding of its customers. For this reason, we will devote the first part of the textbook to describing the relevant customer concepts, so that the focus of everything can relate back to these concepts. Considerable evidence exists that consumer evaluation processes differ for goods and services and that these differences affect the way service providers market their organizations. Unfortunately, much of what is known and written about consumer evaluation processes pertains specifically to goods. The sources of customer expectations are marketer- controlled factors (such as pricing, advertising, and sales promises) as well as factors that the marketer has limited ability to affect (innate personal needs, word-of-mouth communications, and competitive offerings). In a perfect world, expectations and perceptions would be identical: customers would perceive that they have received what they thought they would and should. In practice these concepts are often separated by some distance. Broadly, it is the goal of service marketing to bridge this distance. FIGURE 2.2 Key Factors Leading to Provider Gap 1: the Listening Gap Figure 2.2 shows the key factors responsible for provider gap 1, the listening gap. An inadequate customer research orientation is one of the critical factors. When management or empowered employees do not acquire accurate information about FIGURE 2.1 The Customer Gap customers’ expectations, this gap is large. Formal and informal methods to capture information about customer expectations must be developed through customer research. Techniques involving a THE PROVIDER GAPS variety of traditional research approaches—among them customer To close the all-important customer gap, the gaps model interviews, survey research, complaint systems, and customer suggests that four other gaps—the provider gaps—need to be panels—must be used to stay close to the customer. More innovative techniques, such as structured brainstorming and monitoring online comments, are often needed. Another key factor that is related to the listening gap is lack of upward communication. Frontline employees often know a great deal about customers; if management is not in contact with frontline employees and does not understand what they know, the gap widens. Also related to the listening gap is a lack of company strategies to retain customers and strengthen relationships with them, an approach called relationship marketing. When organizations have strong relationships with existing customers, provider gap 1 is less likely to occur. Relationship marketing is distinct from transactional marketing, which is a more conventional emphasis on acquiring new customers rather than on retaining them. Relationship marketing has always been a practice of wise business- to-business firms (such as IBM and General Electric) that recognize that clients have the potential to spend more with them if they FIGURE 2.3 Key Factors Leading to Provider Gap 2: the Service provide excellent service. Other business-to-business firms, and Design and Standards Gap many companies that sell to end customers, often take a short-term view and see each sale as a transaction. When companies focus too As shown in Figure 2.3, provider gap 2—which we call the much on attracting new customers, they may fail to understand the service design and standards gap—exists in service organizations for changing needs and expectations of their current customers. a variety of reasons. Those people responsible for setting standards, Technology affords companies the ability to acquire and integrate typically management, sometimes believe that customer vast quantities of customer data, which can be used to build expectations are unreasonable or unrealistic. They may also believe relationships. Frequent flyer travel programs conducted by airlines, that the degree of variability inherent in service defies car rental companies, credit card companies, and hotels are among standardization and therefore that setting standards will not achieve the most familiar programs of this type. the desired goal. Although some of these assumptions are valid in The final key factor associated with provider gap 1 is lack of some situations, they are often only rationalizations of service recovery. Even the strongest companies, with the best of management’s reluctance to tackle head-on the difficult challenges intentions and clear understanding of their customers’ expectations, of creating service standards to deliver excellent service. Technology sometimes fail. It is critical for an organization to understand the changes and improvements are particularly helpful in closing this gap, importance of service recovery—why people complain, what they as the Technology Spotlight in this chapter describes. expect when they complain, and how to develop effective service Because services are intangible, they are difficult to recovery strategies for dealing with inevitable service failures. Such describe and communicate. This difficulty becomes especially strategies might involve a well-defined complaint-handling evident when new services are being developed. It is critical that all procedure and an emphasis on empowering employees to react on people involved (managers, frontline employees, and behind-the- the spot, in real time, to fix the failure; other times it involves a scenes support staff) work with the same concepts of the new service guarantee or ways to compensate the customer for the service, based on customer needs and expectations. For a service unfulfilled promise. that already exists, any attempt to improve it will also suffer unless everyone has the same vision of the service and associated issues. Provider Gap 2: the Service Design and Standards Gap One of the most important ways to avoid provider gap 2 is to clearly Accurate perceptions of customers’ expectations are design services without oversimplification, incompleteness, necessary, but nor sufficient, for delivering superior service. Another subjectivity, and bias. To do so, tools are needed to ensure that new prerequisite is the presence of service designs and performance and existing services are developed and improved in as careful a standards that reflect those accurate perceptions. A recurring theme manner as possible. Chapter 8 describes the tools that are most in service companies is the difficulty experienced in translating effective in service development and design, including service customer expectations into service quality specifications that blueprinting, a unique tool for services. employees can understand and execute. These problems are The quality of service delivered by customer contact reflected in provider gap 2, the difference between company personnel is critically influenced by the standards against which they understanding of customer expectations and the development of are evaluated and compensated. Standards signal to contact customer-driven service designs and standards. Customer-driven personnel what management priorities are and which types of standards are different from the conventional performance performance really count. When service standards are absent or standards that companies establish for service in that they are based when the standards in place do not reflect customers’ expectations, on pivotal customer requirements that are visible to and measured quality of service as perceived by customers is likely to suffer. When by customers. They are operational standards set to correspond to standards do reflect what customers expect, perceptions of the customer expectations and priorities rather than to company quality of service they receive are likely to be enhanced. Chapter 9 concerns such as productivity or efficiency. discusses the topic of customer-defined service standards and shows that if they are developed appropriately they can have a powerful positive impact on closing both provider gap 2 and the customer gap.  By physical evidence, we mean everything from business Research has identified many of the critical inhibitors to cards to reports, signage, Internet presence, equipment, and closing the service performance gap (see Figure 2.4). These factors facilities used to deliver the service. The servicescape, the physical include employees who do not clearly understand the roles they are setting where the service is delivered, is a particular focus of Chapter to play in the company, employees who experience conflict between 10. Think of a restaurant, a hotel, a theme park, a health club, a customers and company management, poor employee selection, hospital, or a school. The servicescape—the physical facility—is inadequate technology, inappropriate compensation and recognition, critical in these industries in terms of communicating about the and lack of empowerment and teamwork. These factors all relate to service and making the entire experience pleasurable. In these cases the company’s human resource function and involve internal the servicescape plays a variety of roles, from serving as a visual practices such as recruitment, training, feedback, job design, metaphor of what the company stands for to actually facilitating the motivation, and organizational structure. To deliver better service activities of both consumers and employees. performance, these issues must be addressed across functions (such as marketing and human resources). Provider Gap 3: the Service Performance Gap Another important variable in provider gap 3 is the Once service designs and standards are in place, it would customer. Even if contact employees and intermediaries are 100 seem that the firm is well on its way to delivering high-quality percent consistent in their service delivery, the uncontrollable service. This assumption is true but is still not enough to deliver behaviors of the customer can introduce variability in service excellent service. The firm must have systems, processes, and people delivery. If customers do not perform their roles appropriately—if, in place to ensure that service delivery actually matches (or is even for example, they fail to provide all the information necessary to the better than) the designs and standards in place. provider or neglect to read and follow instructions—service quality is Provider gap 3—the service performance gap—is the jeopardized. Customers can also negatively influence the quality of discrepancy between the development of customer-driven service service received by others if they are disruptive or take more than standards and actual service performance by company employees. their share of a service provider’s time. Understanding customer Even when guidelines exist for performing services well and treating roles and how customers themselves can influence service delivery customers correctly, high-quality service performance is not a and outcomes is critical. certainty. Standards must be backed by appropriate resources A third difficulty associated with provider gap 3 involves the (people, systems, and technology) and must be enforced to be challenge in delivering service through such intermediaries as effective—that is, employees must be measured and compensated retailers, franchisees, agents, and brokers. Because quality in service on the basis of performance along those standards. Thus, even when occurs in the human interaction between customers and service standards accurately reflect customers’ expectations, if the company providers, company control over the service encounter is crucial, yet fails to provide support for those standards—if it does not facilitate, it rarely is fully possible. Most service (and many manufacturing) encourage, and require their achievement—standards do no good. companies face an even more formidable task: attaining service When the level of service delivery falls short of the standards, it falls excellence and consistency in the presence of intermediaries who short of what customers expect as well. Narrowing the performance represent them and interact with their customers yet are not under gap—by ensuring that all the resources needed to achieve the their direct control. Franchisers of services depend on their standards are in place—reduces the customer gap. franchisees to execute service delivery as they have specified it. And it is that execution by the franchisee which the customer uses to evaluate the service quality of the company. With franchisees and other types of intermediaries, someone other than the producer is responsible for the fulfillment of quality service. For this reason, a firm must develop ways to either control these intermediaries or motivate them to meet company goals. Another issue in the service performance gap is the need in service firms to synchronize demand and capacity. Because services are perishable and cannot be inventoried, service companies frequently face situations of over- or underdemand. Lacking inventories to handle overdemands, companies lose sales when capacity is inadequate to handle customer needs. On the other hand, capacity is frequently underutilized in slow periods. Most service companies rely on operations strategies such as cross-training employees or varying the size of the employee pool to synchronize supply and demand. Marketing strategies for managing demand— such as price changes, advertising, promotion, and alternative service offerings—can supplement approaches for managing supply. Provider Gap 4: the Communication Gap Provider gap 4, the communication gap, illustrates the difference between service delivery and the service provider’s external communications. Promises made by a service company through its media advertising, sales force, and other FIGURE 2.4 Key Factors Leading to Provider Gap 3: the Service communications may raise customer expectations, the standards Performance Gap against which customers assess service quality. The discrepancy between actual and promised services, therefore, can widen the customer gap. Broken promises can occur for many reasons: In summary, external communications—whether from overpromising in advertising or personal selling, inadequate marketing communications or pricing—can create a larger customer coordination between operations and marketing, and differences in gap by raising expectations about service delivery. In addition to policies and procedures across service outlets. Figure 2.5 shows the improving service delivery, companies must also manage all key factors that lead to the communication gap. communications to customers, so that inflated promises do not lead to higher expectations. PUTTING IT ALL TOGETHER: CLOSING THE GAPS The full conceptual model, shown in Figure 2.6, conveys a clear message to managers wishing to improve their quality of service: the key to closing the customer gap is to close provider gaps 1 through 4 and keep them closed. To the extent that one or more of provider gaps 1 through 4 exist, customers perceive service quality shortfalls. The gaps model of service quality serves as a framework for service organizations attempting to improve quality service and services marketing. The Strategy Insight provides a service quality gaps audit based on the model. In addition to unduly elevating expectations through exaggerated claims, there are other, less obvious ways in which external communications influence customers' service quality assessments. Service companies frequently fail to capitalize on opportunities to educate customers to use services appropriately. They also neglect to manage customer expectations of what will be delivered in service transactions and relationships. One of the major difficulties associated with provider gap 4 FIGURE 2.6 Gaps Model of Service Quality is that communications to consumers involve issues that cross organizational boundaries. Because service advertising promises The model begins where the process of improving service what people do, and because what people do cannot be controlled quality begins: with an understanding of the nature and extent of the way machines that produce physical goods can be controlled, the customer gap. Given the service organization’s need to focus on this type of communication involves functions other than the the customer and to use knowledge about the customer to drive marketing department. This type of marketing is what we call business strategy, this foundation of emphasis is warranted. interactive marketing—the marketing between contact people and customers—and it must be coordinated with the conventional types of external marketing used in product and service firms. When employees who promote the service do not fully understand the reality of service delivery, they are likely to make exaggerated promises or fail to communicate to customers aspects of the service intended to serve them well. The result is poor service quality perceptions. Effectively coordinating actual service delivery with external communications, therefore, narrows the communications gap and favorably affects the customer gap. Another issue in provider gap 4 is associated with the pricing of services. In packaged goods (and even in durable goods), customers possess enough price knowledge before purchase to be able to judge whether a price is fair or in line with competition. With services, customers often have no internal reference points for prices before purchase and consumption. Pricing strategies such as discounting, “everyday prices,” and couponing obviously need to be different in service situations in which the customer has no initial sense of prices. Techniques for developing prices for services are more complicated than those for pricing tangible goods.