CHAPTER 2 INTRODUCTION TO SERVICES MARKETING

Transcription

1 CHAPTER 2 INTRODUCTION TO SERVICES MARKETING 2.1 Introduction The turn of the century has seen profound changes in the global economy. Services have played a crucial part in these changes, because services are becoming the way organizations meet with their markets (Irons, 1997:4) Already organizations have discovered that their survival no longer exclusively depends on the products they offer, but also on the additional offerings they make to their customers that differentiate them from their competitors. Innovative organizations, offering new services as well as unique customer services, are now succeeding in markets where established organizations have failed (Lovelock and Patterson, 1998:4). Services marketing is not a self-enclosed task but is integral to service organizations as a whole and the object of the activity is people, who are reactive, not passive as compared with a product (Irons, 1997:18). Services marketing concepts, frameworks and strategies were developed as the result of interlinked the forces of many industries, organizations, and individuals who have realized the increasingly important role services are playing in the current world economy. Initially the development of services marketing focused on service industries. However,

2 19 manufacturing and technology industries recognized services as a prerequisite to compliment their products, in order to compete successfully in the market place. Therefore it can be argued that, in most industries, providing a service is no longer an option but a necessity. Providing a service is a people business. The interaction between customers and service employees is vital for the actual success of service delivery. Rendering excellent quality service depends very much on the way service employees behave. In this regard, service competencies and service inclination contribute towards the success of services (Kasper, van Helsdingen, de Vries, 1999:513). Customers are becoming more educated and demand not only quality products but also high levels of services to accompany them. Service organizations therefore need to adapt to customers views on services in order to assess whether the services they provide are perceived by customers as better than those provided by other service providers (Kasper et al., 1999:139). The objective of this chapter is to address the issues surrounding services, services marketing challenges and the human element of service processes. The chapter is divided into three parts. Part one defines services and discusses the unique characteristics that differentiate services from goods. These characteristics of services present service marketers with unique marketing challenges. The second part investigates the roles that the services marketing triangle and the service mix play in addressing these challenges. Services are about people and for that reason,

3 20 part three concentrates on the roles which customers and service employees play in services. 2.2 Service definition A wide variety of activities labelled as services are practised by both profit-orientated organizations and non-profit orientated organizations. The success of these organizations depends on delivering excellent service quality and creating value to customers (Kasper et al., 1999:13). Defining services is therefore not a simplistic task. Over the years service marketing literature has provided readers with an assortment of service definitions. According to Irons, (1997:12) pure services are intangible but they do usually add value to, or make available, a tangible product. They do not result in transfer of ownership and may leave only memories. Zeithaml and Bitner (1996) claim that in the simplest terms services are deeds, processes, and performances. Their broader definition states that services include all economic activities whose output is not a physical product, is generally consumed at the time it is produced, and provides added value in forms that are essentially intangible concerns of the purchaser.

4 21 Kotler (1996) defines service as an activity that one party offers another that is essential intangible and does not result in the ownership of anything. Its production may or may not be tied to a physical product. Grönroos (1990) identifies a service as an activity or series of activities of a more or less intangible nature that normally, but not necessarily, takes place in interaction between the customer and service employees and/or physical resources or goods and/or systems of the service provider, which are provided as solutions to customer problems. The conclusion derived from the above definition is that services deal with intangible components. The purchase of services does not necessarily result in physical transfer or ownership but still creates a bundle of benefits during or after the service interaction or experience. Distinguishing between the tangible and intangible components of a service is extremely difficult. Therefore, separating the core service from the augmented service helps to simplify this task. The core service represents the fundamental benefits the service provide to satisfy customers needs. The augmented service incorporates the core service in addition to the tangible elements and all additional benefits of the service employed to satisfy customers needs. The core services are mostly intangible because of their lack of physical attributes, while augmented services provide the customer with the impression of the services tangibility component, because it can be seen, touched, and transferred to the customer.

5 22 Mostly the result of the service interaction is a product of a tangible nature (Kasper et al., 1999:139; Palmer, 1994:127). The bundle of benefits is the customers expectations from the service. Customers experience positive consequences of service processes as benefits, while negative consequences are experienced as perceived risks. The bundle of benefits and the way the services are delivered is aimed at creating customer satisfaction. In most service processes, consumption and production of services take place at the same time. This procedure requires interaction between the service provider and the customer to complete the service process. The success of the service process is subsequently dependent on the success of the interaction. From the above discussion Kasper et al., (1999:13) have constructed a broad definition of service in which the relevant topics will be recognized: Services are originally intangible and activities which are relatively quickly perishable activities whose purchase takes place in an interaction process aimed at creating customer satisfaction, but this interactive consumption does not always lead to material possession. Over time, services and the service sector have been defined in many different ways, which add to confusion and disagreement when discussing services and service marketing. For the purpose of this study, the above-mentioned broad definition of services will apply and it will be acknowledged that there are very few pure services, in other words totally intangible offerings.

6 Characteristics of services The inherent differences that exist between goods and services result in unique management challenges for service organizations (Zeithaml and Bitner, 1996:18). Services possess five unique characteristics; namely intangibility, perishability, inseparability, variability, and lack of ownership, that differentiate them from goods. These characteristics create distinctive challenges for service marketers in attracting new customers, and keeping existing customers. These characteristics are explained in the ensuing sections Intangibility Intangibility is the dominant characteristic of services (Clemes, Mollenkopf and Burn, 2000:online) and is defined as the lack of tangible assets which can be seen, touched or smelled prior to purchase (Kurtz and Clow, 1998:10). However, services vary in the degree to which they are intangible and most services include some kind of tangible element. The tangibility spectrum (Figure 2.1) places highly tangible offerings at one end of the continuum and intangible services on the opposite end of the continuum. It is clear that very few offerings are totally tangible or intangible (Bebko, 2000: online). The intangible characteristic of services present service marketers with several problems. The lack of physical attributes of services makes it difficult to display or

7 24 communicate services readily and easily to customers (Hill and Ghandi, 1992:online). Customers often find it mentally difficult to grasp the service performance or experience without tangible evidence, which makes it difficult to diffuse (Zeithaml, 1991: online). Services that rely intensely on customer involvement, present cost calculation difficulties that lead to price setting inadequacies for service marketers (Dearden, 1978:online). FIGURE 2.1: THE TANGIBILITY SPECTRUM Salt Soft Drinks Detergents Automobiles Cosmetics Fast-food Outlets Intangible Dominant Tangible Dominant Fast-food Outlets Advertising Agencies Airlines Investment Management Consulting Teaching Source: Zeithaml, V.A. and Bitner, M.J Services Marketing: integrating customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p 23. Kurtz and Clow, (1998:11) indicate that these problems can, to a certain extent, be successfully resolved by reducing the intangibility of service offerings through stressing the tangibility components of offerings, stimulating word of mouth communication, creating a strong corporate image, encouraging employees to

8 25 communicate with customers, and using unique attributable cost and perceived value pricing. Service providers must always take into account the fact that customers use the tangible elements, such as the people who provide the service, the environment in which the service encounter takes place, the equipment used, and the price of the offering, to make assumptions about the quality of the service and to compare it to the offerings of other service providers Variability Variability refers to the unwanted or random variable levels of service quality customers receive when they support an organization (Kurtz and Clow, 1998:10). The primary reason for variability is the human element present in the service process, accordingly sustaining the statement of Kotler (1991:608) that the quality of service depends on the service provider. Because humans normally perform services, the chance of two service performances being the same is highly unlikely. Different service employees will perform the same service process differently and the same service employee will provide a varying service under different circumstances or at different times. Nevertheless, the recipients of the service are also human, with their own unique demands and expectations of the service performance. Service marketers find it difficult to control the quality of the service performances because it is dependant on fallible employees as one of the main inputs (Bitner and Zeithaml, 1997: online). The reliance on people s performances causes standardisation service processes to be almost impossible. The intentional or

9 26 unintentional customisation of service processes and output performances by service employees for individual customers makes promotion of services very difficult (Clemes, Molenkopf and Burn,2000:online). Customers in general perceive the person who delivers the service as the service. As a result, service providers have the ability to alter the outcome and level of customer satisfaction. Service marketers are confronted with the challenge of controlling service quality because consistent quality service performances play a vital role in the survival of organizations. Service quality is profoundly dependent on the ability of customers to articulate their needs and level of service demands. Equally, service quality depends on the ability, and willingness of the service provider to satisfy customers needs and demands. Organizations can put into practice service quality control and measurements by recruiting service-orientated employees and training them to provide a service that will meet or exceed customers expectations Inseparability Inseparability refers to the simultaneous production and consumption of a service (Kurtz and Clow, 1998:10), thus it is often difficult to separate the service provider from the service performance. Customers are normally present at and during the service performance and play an active role in the service production process. The quality of the service performance is dependent on the interaction between the service provider and the customer.

10 27 The customer s involvement in the production process of the service can influence the outcome of the service positively or negatively (Hill and Ghandi, 1992:online). Service marketers must recognize that the roles customers play in the service production process influence the service outcome, not only for themselves but also for other customers. The inter-client interaction between customers also plays an integral part in the outcome of service experiences (Grönroos, 1978, Grove and Fisk, 1997: online). Service organizations must acknowledge the influential role that service employees play in service processes. The service employees or the service providers are often seen as the service itself (Wirtz and Bateson, 1995: online). The inseparability of production and consumption means that very few service offerings can be mass-produced, but almost every service offering can be customised to customers needs and demands. Customisation is to the advantage of service organizations, because customers use the degree of customisation of service offerings to measure the quality of services Perishability Perishability is the inability of a service to be inventoried or stored (Kurtz and Clow, 1998:10). This characteristic is of major concern to service marketers because it inevitably leads to supply and demand problems. The capacity lost in services can never be regained and to equalise supply and demand is a difficult task. These distinct service problems present service marketers with the challenge of setting up good recovery strategies for service process failures. Research has shown that

11 28 resolving customer problems effectively has a powerful impact on customer satisfaction and loyalty. The perishability characteristic of services creates the opportunity for the organization to develop creative planning for capacity utilisation and management of future demand (Zeithaml and Bitner, 1996:21) Ownership Ownership is the last characteristic of services that distinguish it from goods. Customers receive only the right to a service process when they purchase it. Subsequently it is assumed that payment for services buys only the right of access to a service and not physical transfer of ownership to customers. Customers view the lack of ownership of a service as a perceived risk. Firstly they are presented with the uncertainty as to whether the right service has been obtained and secondly with the uncertainty about the consequences of the service purchase. Since services are produced and consumed simultaneously, the option of returning a service does not exist. The inability to own a service also has direct implications on the distribution of services. Service customers usually only have use or access to a facility where a service is performed. Kotler (1991:609) suggests that services call for special marketing solutions. The characteristics of services create problems for service marketers that are not experienced by product marketers. If these problems are not carefully managed, organizations may experience negative influences on service quality that will

12 29 ultimately reduce customer retention and organization profits (Wirtz and Bateson, 1995: online). In this regard, Zeithaml and Bitner (1996) have proposed a services marketing triangle which will be discussed in the next section. 2.4 The services marketing triangle Service marketers face marketing challenges which revolve around issues such as: understanding customers needs and expectations of services, making services tangible to customers and keeping and dealing with promises made to the customers (Zeithaml and Bitner, 1996:14). The services marketing triangle shown in Figure 2.2 helps service marketers to address these challenges. The three points of the service triangle represent the organization, the customers, and the employees. Between each of the three points of the triangle different marketing processes such as external marketing, interactive marketing and internal marketing must be successfully carried out for service processes to succeed and to build and maintain relationships with the internal and external customers.

13 30 FIGURE 2.2: THE SERVICE MARKETING TRIANGLE Management Internal Marketing enabling promises External Marketing setting promises Employees Interactive Marketing keeping promises Customers Source: Zeithaml, V.A. and Bitner, M.J Services Marketing: integrating customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p External marketing The link between an organization and its customers is the external marketing process. External marketing represents the promises which organizations make to their customers with reference to products or services they offer. Organizations make promises to customers concerning their offerings and how delivery of the offerings will be conducted. The external communication activities of the service provider play a key role in the formation of customers expectations, because their expectations are affected by the service provider s direct and indirect marketing messages (Kasper et al., 1999:216).

14 31 In goods as well as services, the traditional marketing activities facilitate external marketing processes. Promises made in advertisements and through promotions are used by customers to form service expectations. These can also positively or negatively influence the customers initial expectations of the desired level of service compared to the adequate level of service. Customers use price as an indication of the quality of the offering, while the promise of availability and accessibility of an offering has an impact on the customers service expectations (Kurtz and Clow, 1998:76). However, for service organizations, factors such as service employees, organization image and visible structures, and the actual service process itself, form the basis for customers expectations of the offering and the delivery thereof. Customers expectations and experiences fuse, therefore much of their final belief is drawn from the environment in which they receive the service and the personalities and behaviour of the people they encounter during service processes (Irons, 1997:14). The organization s projected values and integrity must be the priorities that govern the promises made to the customers during the external marketing process. Customers expect consistent and realistic promises that will at all times be honoured by the organization. Creating unrealistic customer expectations create dissatisfied customers (Piercy, 1998:48). Misleading customers or over-promising to them can negatively influence the relationship between the organization and the customer.

15 Interactive marketing The interactive marketing process is about keeping the promises made by the organization to the customer along with delivering a quality service to the customer. Interactive marketing is the actual contact between the service employees and the customers and is called the "moment of truth" or service encounter. It is the decisive moment in the service process where organizations actually show what they can do and how they meet the set expectations (Kasper et al., 1999:11). At these decisive moments, everything about the service process can succeed or fail. The success or failure can be temporary, complete, or final but the interaction can never be restaged or controlled (Irons, 1997:46). The marketing focus of service organizations has shifted from the offering to the customers, to the interaction that takes place between the service employees and the customers. Through their interactions with employees, customers form a perception of the integrity of an organization s service promises. They furthermore use the interaction to assess the value of the offering, and to make the decision to purchase or repeat the purchase of an offering. From a customer s point of view, this is the most important stage of the service delivery process as it is during this process that they receive the value they actually desire. Interactive marketing performs a vital function in the establishment of a relationship between the organization and the customer. The customer s perception of the service is derived from the delivery of the service, and cannot be separated from the contact

16 33 they experience with service employees. Therefore, it can be argued that relationships are an inevitable outcome of service delivery. However, it is important for organizations to acknowledge the fact that relationships do not necessarily exist between the organization and the customer, but to a greater extent between the service employees and customers. The success of these relationships depends profoundly on the attitude service employees have towards their employment and their loyalty towards the organization. It is the responsibility of the organization to recruit service-orientated employees very carefully, involve them in organization activities, and motivate them to follow the examples set by the leaders of the organization (Irons, 1997:53). During interaction, employees and customers meet face to face and the actions of service employees will be a major factor in influencing the customers expectations of the service. Customers evaluation of services is based on their interaction with service employees, therefore it is of the utmost importance that service organizations continuously strive to improve the quality of interactions (Sundaram, 2000:online). Newton (1992) states that people forget how fast you performed a service but they remember how well you did it. Service organizations must therefore ensure that their service employees have the skills and ability to perform the service to meet the customers expectations (Kurtz and Clow, 1998:117). The reliability of services is tested every time a customer interacts with the employees and the service provider whom they represent.

17 Internal marketing The marketing process that enables service marketers to deliver promises to customers is called internal marketing. Through internal marketing, the organization reveals that it consists of individuals and departments who are considered to be each other s customers (Kasper et al., 1999:371). Employees do not only provide a service to the external customers but also to each other within the organization. Promises are easy to make, but unless organizations have internal systems in place to ensure the delivery thereof, service processes cannot succeed. The success of internal service systems is dependent on the relationship between the organization and the employees (Kasper et al., 1999:371). Internal marketing hinges on the assumption that employee satisfaction and customer satisfaction are interlinked, thus internal marketing must precede external marketing. Organizations whose objective is to deliver constant high service quality have to enable all employees to practice customer orientation and marketing. Service organizations must recognize that achieving objectives and creating change can only be achieved through employees. Service providers need to recruit, train, and provide tools to employees to perform superior service. Kasper et al., (1999:480) state that people are valuable assets to an organization. They should therefore be fully equipped to provide the best service to the external and internal customers. Employees who understand their functions within the organization are more likely to create a harmonious work environment that will pave the way for less role ambiguity, less conflict, and more satisfied employees in the workplace.

18 35 The examples set by management for their employees are critical factors for the success of the internal marketing process. There is a direct link between internal marketing and the actual delivery of the service, because customers believe that what you are is what matters not what you say. The success of services relies on the three marketing activities to be carried out successfully and to be aligned with each other. Each of the activities presents a challenge and it is important to find strategies that support them all. Successful external relationships will be repeated internally (Irons, 1997:98) Technology and the service triangle The impact of technology on all the dimensions of service delivery has brought about the expansion of the service triangle to include technology. This expansion will turn the triangle into a pyramid, as shown in Figure 2.3. This pyramid suggests that interactive marketing can be the result of interactive relationships between employees, customers, and technology to produce the desired services. Changes in information technology offer opportunities to organizations to perform services in such ways that the customers physical presence is not always compulsory. However, when customers interact only with technology, they will need the skills, abilities, and motivation to receive the service in this manner. The success of this will depend entirely on the willingness of the customers to participate in a service process without human interaction. Technology driven services may hinge upon introducing more technology in service delivery processes that can either extend the service

19 36 process or shorten the actual delivery process. Technology can be used to create new services, which enable organization to serve customers better and distinguish themselves from their competitors (Zeithaml and Bitner, 2000:23). FIGURE 2.3: THE SERVICE MARKETING TRIANGLE AND TECHNOLOGY Management Internal Marketing enabling promises Technology External Marketing setting promises Employees Interactive Marketing keeping promises Customers Source: Zeithaml, V.A. and Bitner, M.J Services Marketing: integrating customer focus across the firm. 2nd Edition. New York: McGraw-Hill, p 23. A multitude of new service concepts has exploded onto the market because of the advances of information-based technology. Fax, cellular phones, and electronic mail are but a few of the technology-based services which have replaced traditional services. The Internet has made it possible for customers to access services via their computers and to some extent replace, and enhance the services of traditional sellers. In all the above, marketing of the service has played an essential role in

20 37 educating customers about service concepts (Zeithaml and Bitner, 1996:9). Educating customers and communicating the benefits of a service both present continuing challenge for service marketers. 2.5 Services marketing mix The traditional marketing mix is the most basic concept in marketing and is defined as elements which organizations control and use to satisfy or communicate with customers (Zeithaml and Bitner, 1996:23). The components of the traditional marketing mix are the four P s: product, price, place, and promotion. Careful management of these components is essential for the successful marketing of goods and services in both long-term and short-term marketing strategies of organizations. Conversely, the traditional marketing mix components have been found to be too limited in their application of services. The intangibility of service offerings is not taken into consideration because the focus is on the tangibility of products. The price component overlooks the fact that many services are produced without a price being charged to the final customers, and customers frequently use price as an indication of service quality. Equally, the simultaneous production and consumption of service offerings make the distribution component difficult to implement and control. While the promotion component of the traditional marketing mix concerns itself with advertising, sales promotions and publicity, services marketing involves service employees and customers in the real time marketing of services during the

21 38 interaction process. The limitations of the traditional marketing mix have lead to exploitation by service marketers of additional components which services can utilise to satisfy and communicate with customers, resulting in the adoption of the service mix. The elements off this new concept are: service offerings (product), price, distribution (place), promotions, people, physical evidence, and processes. The three new components address the uniqueness of three of the service characteristics. They focus, firstly, on the inseparability of service marketers from customers, secondly, on the inability to hold service in inventory which makes it critical for the service process to flow smoothly and lastly, on the fact that a highly intangible service offering must appear tangible (Goncalves, 1998:37). The additional components of the service mix can be fully controlled by the service organization and play a vital role in ensuring that marketing is customer focused, not product focused (Irons, 1997:24). The ensuing sections will provide a detailed description of the service mix Service offerings (Product) A product is anything that an organization offers to customers that might satisfy a need, whether it is tangible or intangible (Palmer and Cole, 1995:15). In contrast, the decisions that face service marketers concerning service offerings are very different from those related to goods. An analysis of service offerings shows that it can be divided it into two distinct components namely, a core service offering that represents the intangible core benefits of services and a secondary service offering that

22 39 represents the tangible and augmented elements of the service offerings. The core service offerings are developed with customers benefit in mind and place the emphasis on the customers perception of services. The secondary service offerings illustrate the additional benefits that the service offers to meet customers additional needs, and serve to differentiate the offerings from those of competitors. These benefits can combine both the tangible and intangible elements of service offerings that facilitate the customer to comprehend the core service. Because of its intangibility, services are difficult to control and display to customers. Consequently, service marketers often emphasise the tangible elements of service offerings. The more intangible a service, the greater is the need for tangible evidence. Tangible evidence includes packaging, brand name, corporate image, service delivery, and service employees Price In the determination of price, service marketers deals very much with the same price issues as goods marketers. Subsequently, the differences presents itself when the intangible characteristic of services specifies that price becomes a quality indicator. The art of successful pricing is to establish a price level that is low enough for the exchange to represent good value to customers, but high enough to allow service providers to achieve their financial objectives (Palmer and Cole, 1995:222). The perishable nature of services makes it important to control the demand and supply of the service offerings. The price component is the easiest to change and normally

23 40 provides the quickest results. Manipulation of the price can influence and control quantity demand. An increase in price will reduce the demand and/or cause a shift to lower usage periods. Equally, a decrease in price will cause an increase in demand and stimulate new demand for the service (Kurtz and Clow, 1998:240). The price of service offerings is often used by customers as an input into their expectations, purchase decisions, and evaluation of service quality. It is seen as a tangible cue in services with a high risk and experience properties, to form expectations of the service. Price is used as an indicator of quality by customers. Thus, the assumption is formed that the higher the price of service offerings, the more is expected of it by customers Distribution (Place) The distribution decision refers to the availability and accessibility of service offerings to customers. Availability from the customers point of view signifies that services are on hand when they want them, while accessibility is the relative ease with which customers can conduct service processes with the service providers (Palmer, 1994:33). For pure services, the distribution decision is of little relevance, though most services involve a tangible component. As a result, the distribution decision involves physical locations and decisions which intermediaries use to provide the services.

24 Promotions The promotion mix for the traditional marketing mix is usually broken down into four components namely advertising, sales promotions, public relations, and personal selling. However, with the promotion of services, there is a greater need to emphasise the tangible elements of services such as packaging, brand name, corporate image, service delivery, and service employees (Palmer and Cole, 1995:16). The distinctive promotional needs of services stem directly from some of the unique characteristics of services. The intangibility characteristic of services results in customers perceiving them as high-risk purchases, with a need for tangible components as evidence of the service. The inseparability characteristic of services emphasises the fact that the promotion of service offerings cannot be isolated from service providers. Therefore, the visible production process, especially the part played by service employees during interaction, is a critical element in the promotion process. Berry (1989) states that the service promotion challenge is to transform invisibility into visibility, vagueness into sharpness, uncertainty into evidence and risk into benefit (Fugate, 1998: online). The development of a promotional mix for services relies on the detailed specification of promotion objectives to ensure that that appropriate messages are chosen and effectively channelled in a cost effective manner to reach the target market. Typical service promotional objectives are:

25 42 to develop an awareness or interest in the organization and its services to communicate the benefits of purchasing a service to build a positive image of the organization to differentiate the organization from its competitors to remind customers of the existence of the service and the service organization (Palmer and Cole, 1995:260). The services promotion mix uses a combination of channels to convey messages to the target market. These messages are received from sources within the organization and externally. External sources include word of mouth communications or press editorials, while internal communications originate from the traditional marketing mix and from the frontline employees. The combination of communication channels depends on the characteristics of the target market, the size of the service, the nature of the service and the cost of the various channels (Palmer and Cole, 1995:260). The promotional mix of a service organization involves the transmission of messages to past, present and future customers. The ultimate aim is to make future customers aware of the service and influence them towards purchase People People as an element in the service mix include all the human actors - the firm s employees (internal customers), the buyers (external customers), and other customers - who play a part in service delivery and accordingly influence the buyers

26 43 perception of choice in the service environment (Zeithaml and Bitner, 1996:26). Service employees interact with customers during service delivery processes and provide cues to external customers concerning the services. Hence, it can be said that service employees competence, attitude, and appearance influence customers perception of services. Customers often experience service employees as synonymous with the service and no matter how small or large a part they play in the actual delivery of the service, they are still the focal point of the service for customers. It is crucial that service organizations stipulate very specifically to their employees what is expected of them during interactions with customers. To achieve the desired standards of service, service organizations recruitment and training cannot be left to the human resources department only, but should form an integral part of the service mix decisions. Kheller believes that the heart of the organization is the people and hiring the right people means hiring people with a service attitude (Irons, 1997:139). Within successful service organizations, the human resources department, and the marketing department work together to establish hiring criteria, training needs, and promotion activities to attract and retain employees who can deliver the quality service expected by the organizations target market. The marketing department plays an important role in influencing the experience that both internal customers and external customers will have. External customers choose to visit a service organization because of the messages relayed through the service mix, or word of mouth messages communicated by other customers. External customers who encounter an unacceptable level of service from internal customers, convey negative word of mouth messages about the service received to other

27 44 customers. Consequently, it is crucial that marketing departments and human resources departments work together to ensure that the quality of service delivery by internal customers leads to positive word of mouth messages to external customers (Gonçalves, 1998:38). Every employee in an organization must serve other employees in some way or another. Therefore, just as external customers are needed, so are quality employees (internal customers) needed. The responsibility lies with service marketers to involve all employees in the marketing process of an organization. A high level of employee involvement and motivation is directly linked to an improvement in sales, profitability and customer loyalty Processes Processes are the actual procedures, mechanisms, and flow of activities by which services are delivered (Zeithaml and Bitner, 1996, 21). Customers judge services on the operational flow or on the actual delivery thereof. The inseparability characteristic of services requires customers to follow a series of extensive or complicated actions to complete the process. Often the logic of these actions escapes the customers. Whether the service process is standardised or customised, it is used as evidence by customers to judge service quality. Standardised services will follow a production-line approach, while customised services command a greater degree of empowerment. Nonetheless, the moment of truth where customers experience the evidence, is not a once-off event but an ongoing process.

28 45 The main ingredients of services processes are the people who participate in it. Services are of an integrated nature and the organization s employees continuously fuse with the external customers. The production and consumption usually takes place at the same time and research into customers attitudes towards service organizations suggests that customers see a service as an integral process in which they are intensely involved (Irons, 1997:37). The difference between service processes and manufacturing processes are that: the customers are participants in the service processes, service processes are difficult to structure, the outcome of services is dependent on internal and external factors, the output of service processes leaves only promises and memories and service processes play an integral part in customer satisfaction (Gonçalves, 1998:39). As a rule, services cannot be fixed to a definite time span, because depending on the nature of the service, it can take anything from a moment to months to complete. A service can be a well-defined process, where all participants are aware of the process but a service can also be ill-defined or not obvious to the participant in the process. Services that offer high degrees of customisation are usually ill-defined. When service processes progress smoothly, they are hardly noticed by the customers, who are under the assumption that the process will occur without any problems every time it is performed. However, when the service process is not completed successfully, both the internal and external customers are frustrated and distrustful of the service organization. The success of service processes depends on

29 46 the loyalty and trust- relationships organizations can build with customers. Marketing and the other organizational functions should work together to determine the needs of the internal and external customers and satisfy those needs by designing and refining effective and efficient customer-friendly service delivery processes (Gonçalves, 1997:41). The actual service delivery process can be performed in three locations namely, the customer s environment, at a store or an office or electronically or via telecommunications. Management have a great deal of control over the last two service delivery processes. A service can also be performed on customers, objects, and technological equipment. Knowing this helps to understand the perceived risk for customers attached to the service purchase. Service organizations must consider the importance of communication strategies, appearance, skills, and attitude of service employees. The physical evidence of delivery processes, such as the delivery vehicles, print matter and delivery employees must also support a service organizations image. The perishability characteristic of services influences the service delivery process through the difficulty it presents in managing supply and demand. Supply and demand cannot be readily adjusted but techniques such as flexible service hours, price advantages for customers who buy during low demand

30 47 periods, special offers that can only be redeemed during slack time, and refinement of delivery processes, can provide solutions to service organizations Physical evidence The environment in which the service provider delivers the service and where the customers and the organization interact, as well as any tangible component that facilitates performance or communication of the service, is referred to as physical evidence (Zeithaml and Bitner, 1996, 26). Service organizations need to provide tangible evidence of the service to develop an image in the mind of current and prospective customers. Often physical evidence overlaps with the promotion and distribution mix of the service mix. All tangible representations of services, such as brochures, letterheads, business cards, report formats, signage, equipment, and physical facilities where service are rendered, represent the physical evidence of services. Physical evidence provides service organizations with excellent opportunities to send strong, consistent, and positive messages regarding the nature of service offerings to customers. Physical evidence is most successful if it is integrated throughout the organization, meaning that it should be included in an organizations strategic planning. Once it has been accepted by management, it is the responsibility of the marketing department to implement it throughout the entire organization.

31 48 The more intangible a service is, the more it relies on physical evidence to convey an appropriate message to customers. Physical evidence elements are employed to reduce the level of perceived risk experienced by customers. Due to the intangibility characteristic of services, it is hard to evaluate services in advance or to know the outcome of service experiences. Customers are forever looking for tangible cues by which to judge service quality. They tend to reduce the risk attached to the service offering by comparing the physical evidence of services to the offerings of competitors, use their previous experience as a framework, or rely on the opinion of others. Extremely intangible services do not necessarily provide the greatest risk to the customers. Only when a price is attached to service offerings, can customers truly evaluate the risk attached to it. The unique characteristics of services cause customers to search for evidence of the service in each of their interactions with the organization. The new elements of the service mix, namely people, process, and physical evidence, provide customers with that evidence and allow them to form their own judgement. 2.6 Customers perception of services Services are characterised by the interaction between service providers and customers, therefore the quality and the capability of service providers have a direct and significant effect on the delivery processes and customer satisfaction (Lau, 2000:online). Customers perceive services in terms of service quality, customer

32 49 satisfaction, and value (Zeithaml and Bitner, 1996:116). Dynamic service organizations realize that these three components help to differentiate them from their competitors and guarantee that they compete more effectively in the marketplace Service quality Service quality is a major factor contributing to customer satisfaction, however, excellent service quality is a prerequisite to satisfy customers completely and create customer loyalty (Kasper et al., 1999:139). Service quality is defined as the delivery of excellent or superior service relative to customers expectations (Zeithaml and Bitner, 1998:116). The basic principles that underlie the concept of service quality indicate certain factors. It is more difficult for customers to evaluate the quality of services than the quality of goods. Service quality is based on customers perception of the outcome of the service and their evaluation of the process by which the service was performed. Service quality perceptions result from a comparison of what the customer expected before the service and the perceived level of service received (Kurtz and Clow, 1998:98). Consequently, it can be said that service quality is used by customers to evaluate service organizations, service processes and to differentiate between competing

33 50 services. Customers expectations play an essential role in the judgement of service quality, therefore, a service that fails to meet the expectations of one customer might satisfy another customer whose expectation level of the service was not as high. As a result, it is important that service providers develop meaningful ways by which customers can judge the quality of the service offerings Components of service quality Grönroos (1984a) identified technical quality, functional quality, and corporate image as significant components of service quality (Palmer, 1994:174). Technical quality, or what is delivered to customers, refers to the relative quantifiable aspect of services. It is an essential basis for judging quality because both the customer and the service provider can determine whether or not the service was performed correctly, on time and as promised. The inseparability characteristic of services indicates that the outcome of service processes is dependent on the interaction between service providers and customers. Functional quality, or how a service is performed, is not objectively measurable, but provides a clear indication of customers thoughts and feelings concerning the service performance. The attitude of the employees, the appearance of the employees and the atmosphere of the service environment will influence customers perception of the service delivery. As a result, functional quality signifies the influence which technical quality had on customers (Palmer, 1994:175).

34 51 Corporate image is based on both the technical quality and the functional quality of services. It focuses on the actual service performance, the surroundings in which the service was provided and the image conveyed by service providers. The focal point of service organizations is to influence customers to remember the corporate image, as organizations intend them to remember it (Palmer, 1994:175) Dimensions of quality Research has indicated that customers consider reliability, responsiveness, assurance, empathy and tangibles as the five quality dimensions that apply specifically to service organizations (Walker, Boyd and Larréché, 1995:263). These dimensions reflect customers subjective judgement on the value they received from services. Reliability refers to the ability to perform the promised service dependably and accurately. Organizations which honour their promises on service delivery, service provision, problem resolution, and pricing are the preferred organization to do business with, in the eyes of customers. According to Zeithaml and Bitner,(1999:31) organizations need to be very aware of customers expectations of reliability, since this is regarded as the most vital determinant of the perception of service quality. Responsiveness signifies the willingness of service providers to help customers and provide them with prompt service. The dimension of

35 52 responsiveness requires organizations to handle complaints and problems that result from a lack of enforcement of this dimension. Responsiveness is communicated to customers by the length of time they have to wait for assistance form the service employees, answers to questions and/or attention to their problems. This dimension accentuates the necessity of flexibility and ability within the organization to customise service delivery to customers needs. Organizations which wish to excel in this dimension need to view service delivery from the customers point of view and not that of the organization. Standards for responsiveness need to be set according to customers requirements because their notion of what constitutes speed and promptness might be different from the organization s. The structuring of service employees jobs, clear job descriptions and training form a firm basis for responsiveness success (Zeithaml and Bitner, 1999:31). Assurance is experienced in the employees knowledge, courtesy, and ability to inspire trust and confidence. This dimension of quality is critical to customers, especially if the service presents them with a high degree of risk. Customers uncertainty about the outcome of services and their inability to evaluate services increases the perceived risk. Service employees who perform the actual services are responsible for instilling trust and loyalty in the customer through the quality of the interaction. Recruiting and employing personnel with a positive attitude towards quality is of the utmost importance to service organizations. Their degree of friendliness, credibility, trustworthiness, and competence will be reflected in customers' perception of