CREATING A LEADING SERVICE ORGANIZATION - Principles of service marketing management

In your own life as a consumer, you have probably encountered an assortment of service performances ranging from extremely satisfying to infuriatingly bad. There may be some organizations that you know you can always trust to deliver good service, whereas others are rather unpredictable offering good service one day and indifferent the next. Perhaps you even know of a few businesses that consistently deliver bad service and mistreat their customers.

Why would anybody remain a customer in these types of organizations? Sometimes there is no choice. Perhaps the company enjoys a monopoly position and there are no competitors to which unhappy customers can transfer their patronage. In fact, some of the worst service delivery takes place within larger organizations, where internal customers are held hostage to the dictates of an internal department whose services they are obliged to use.

From Losers to Leaders: Four Levels of Service Performance

Service leadership is not based on outstanding performance within a single dimension. Rather, it reflects excellence across multiple dimensions. In an effort to capture this performance spectrum, we need to evaluate the organization within each of the three functional areas described earlier marketing, operations, and human resources. Table modifies and extends an operations-oriented framework proposed by Chase and Hayes.

It categorizes service performers into four levels: loser, nonentity, professional, and leader. At each level, there is a brief description of a typical organization across 12 Dimensions.

Under the marketing function, we look at the role of marketing, competitive appeal, customer profile, and service quality. Under the operations function, we consider the role of operations, service delivery (front stage), backstage operations, productivity, and introduction of new technology.

Finally, under the human resources function, we consider the role of HRM, the workforce, and frontline management. Obviously, there are overlaps between these dimensions and across functions. Additionally, there may be variations in the relative importance of some dimensions between industries. However, the goal is to obtain some insights into what needs to be changed in organizations that are not performing as well as they might.

Service Losers These are organizations 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 organizations see service delivery as a necessary evil. New technology is only introduced under duress, and the uncaring workforce is a negative constraint on performance.

Service Nonentities Although their performance still leaves much to be desired, nonentities have eliminated the worst features of losers. As shown in Table they are dominated by a traditional operations mindset, typically based on achieving cost savings through standardization. They employ unsophisticated marketing strategies, and the roles of human resources and operations might be summed up, respectively, by the philosophies "adequate is good enough" and "if it isn't broken, don't fix it."

Consumers neither seek out nor avoid such organizations. There are often several such firms competing in lackluster fashion within a given marketplace, and each one may be almost indistinguishable from the others. Periodic price discounts tend to be the primary means of trying to attract new customers.

Service Professionals These organizations are in a different league from nonentities and have a clear market positioning strategy. Customers within the target segments seek out these firms based on their sustained reputation for meeting expectations. Marketing is more sophisticated, using targeted communications, and pricing strategies are likely to reflect the value of the service to the customer. Research is used to measure customer satisfaction and obtain ideas for service enhancement.

Operations and marketing work together to introduce new delivery systems and recognize the trade-off between productivity and customer-defined quality. There are explicit links between backstage and front stage activities and a much more proactive, investment-oriented approach to human resource management than is found among nonentities.

Service Professionals

Operations Function

Levels of Service Performance

Levels of Service Performance

Service Leaders These organizations are the creme de la creme of their respective industries. While service professionals are good, service leaders are outstanding. Their company names are synonymous with service excellence and an ability to delight customers. They are recognized for their innovation in each functional area of management as well as for their excellent internal communications and coordination between these three functions often the result of a relatively flat organizational structure and extensive use of teams. As a result, service delivery is a seamless process organized around the customer.

Marketing efforts by service leaders make extensive use of relational databases that offer strategic insights about customers, who are often addressed on a one-to-one basis. Concept testing, observation, and contacts with lead customers are employed in the development of new, breakthrough services that respond to previously unrecognized needs. Operations specialists work with technology leaders around the world to develop new applications that will create a first mover advantage and enable the firm to perform at levels that competitors cannot hope to reach for a long period of time. Senior executives see quality of employees as a strategic advantage.

H R M works with them to develop and maintain a service-oriented culture and to create an outstanding working environment that simplifies the task of attracting and retaining the best people. The employees themselves are committed to the firm's values and goals. Since they are empowered and quick to embrace change, they are an ongoing source of new ideas.

Moving to a Higher Level of Performance

Firms can move either up or down the performance ladder on any given dimension. Once-stellar performers can become complacent and sluggish. Organizations that are devoted to satisfying their current customers may miss important shifts in the marketplace and find themselves turning into has-beens. These businesses may continue to serve a loyal but dwindling band of conservative customers, but they are unable to attract demanding new consumers with different expectations.

Companies whose original success was based on mastery of a specific technological process may find that, in defending their control of that process, they have encouraged competitors to find higher-performing alternatives. And organizations whose management has worked for years to build up a loyal workforce with a strong service ethic may find that such a culture can be quickly destroyed as a result of a merger or acquisition that brings in new leaders who emphasize short-term profits.

Unfortunately, senior managers sometimes delude themselves into thinking that their company has achieved a superior level of performance when, in fact, the foundations of that success are actually crumbling.

In most markets, we can also find companies who are moving up the performance ladder through conscious efforts to coordinate their marketing, operations, and human resource management functions in order to establish more favorable competitive positions and better satisfy their customers. The box "Building Marketing Competence in a Ferry Company" describes how a Scandinavian firm successfully enhanced the performance level of a newly acquired subsidiary. As you read it, note the many different areas in which improvements had to be made.

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