IT AND THE AUGMENTED SERVICE PRODUCT - Principles of service marketing management

What do advances in IT mean for the augmented service product? As shown in Chapter, the supplementary services that surround the core, facilitating its use and enhancing its value, can be divided into eight categories: information, consultation, order taking, hospitality, safekeeping, exceptions, billing, and payment. We used the metaphor of a flower to depict the augmented service product as a core that is encircled by eight petals.

In Chapter, we noted that a majority of the supplementary services represented by these petals are information dependent and can therefore be delivered electronically through such media as telephone, fax, electronic kiosks, or the Internet, rather than physically. When the core product itself is information based, then it, too, can be delivered through electronic channels.

As a result, there are many opportunities to employ IT when designing service strategy. And even though hospitality and safekeeping involve physical processes, there's still a need to record information about customer preferences and behavior relating to these supplementary elements.

Figure illustrates ways in which a Web site can be used to deliver or enhance service for each of the petals of the Flower of Service. In most instances, there's an opportunity to improve productivity by encouraging customers to perform self-service. Let's now examine in more detail some of the ways in which IT can be used to deliver different types of supplementary services.

Information and Consultation

Customers need information about the goods and services that they buy, including confirmation of orders and documentation of account activity. The Internet can enhance such service features. Well-designed sites provide the information that customers need about the firm and its services. Many sites include a section labeled FAQ (for "frequently asked questions") and an e-mail connection for additional follow-up to a customer service rep or specialist. Some even offer company-sponsored chat rooms where customers can talk with each other.

Employees can be transformed into instant experts by giving them easy access to relevant information. When a customer in Boston telephoned FedEx late one afternoon to request a pickup, the agent told him it was too late. However, there was still time, she added, to deposit his package in a FedEx drop box would he like street directions to the nearest one? When he said yes, she gave him easily understood instructions on how to find the box, including references to local landmarks.

The customer was impressed, complimented her on the clear directions, and said "You really know Boston well, you must come from around here!" "No," she replied, "I work in the Chicago area and I've never even been to Massachusetts. I'm just reading this information off my computer screen!" FedEx had used the knowledge of local employees in Boston to create and record directions that any employee could subsequently access and provide with confidence. However, because even landmarks can change, such information needs to be periodically reviewed for accuracy.

Information and Consultation

Order Taking

How can technology make it easier for customers to place orders and for suppliers to take them? The key to improving productivity and quality in order-entry processes lies in minimizing the time and effort required of both parties, while also ensuring completeness and accuracy. Placing orders in person, by voice telephone, or by mail and fax are still widespread practices, but the Internet offers a cheaper option for such transactions.

Airlines, for example, encourage customers to check flight schedules on the Web and make their own reservations (Southwest Airlines notes that the cost per booking via Internet is about $1 as compared to $10 via a travel agent—and "somewhere in between" via a Southwest reservations agent7). Hotel chains enable customers to research different offerings in each city served, review maps of hotel locations, and then make room bookings.

And, of course, there has been a tremendous growth in ordering merchandise from Web sites, with participation by traditional retailers such as Sears and Wal-Mart, catalog merchants such as Lands' End, and new Internet only providers such Online ordering has also surged in business-to business marketing and its sales volume greatly exceeds that of online consumer sales.

Large customers may be given access to customized and password-protected Web pages on restricted sites. There, corporate purchasers will find all the items that their firm normally orders at the prices previously negotiated, plus such useful information as ordering history and typical order quantities. The Web site may also prompt the buyer to consider additional products that complement those just ordered. Another customer's pages will probably contain a different mix of merchandise at somewhat different prices.

Whether customers order physical goods by mail, telephone, fax, Internet, or another medium, a vital challenge is to manage an effective order-entry process. Prompt execution of each order involves tasks such as order picking in the warehouse, packaging, and shipment. More and more firms are contracting out the shipping task to specialized intermediaries such as UPS, FedEx, and postal services.

McKesson, a San Francisco-based distributor of drugs, pioneered new methods of filling orders from retail druggists. Electronic orders are entered into the central computer at McKesson's warehouse. From there, each order is transmitted wirelessly to an order filler in the warehouse who wears a two-way radio and computer on the forearm and a laser scanner strapped to the back of the hand. The order is displayed on the three-square- inch computer screen, telling the worker where the items are and laying out the most efficient route through the 22,000-item warehouse to get them. As Fortune described this innovation when it first appeared:

Dick Tracy would gasp with astonishment. As the employee chooses each item, he points a finger, like some lethal space invader, at the bar-coded shelf label beneath it, shooting a laser beam that scans the label and confirms that he has picked the right product. When the order is complete, his arm-borne computer radios the warehouse's main computer, updating inventory numbers and the bill. The result: a 10% reduction in order errors and a hefty rise in the productivity of order takers^

The McKesson example illustrates the need to change work methods to take Advantage of new IT developments. In this instance, employees were actively involved in a pretest of the new technology, offering suggestions for design refinements. Now, the way they work has changed and the machine prompts them on how best to proceed.

Hospitality, Safekeeping, and Exceptions

Hospitality and safekeeping elements, which usually involve tangible actions in physical settings, help to make customers' visits more pleasant by treating them as welcome guests and taking care of a variety of needs. The category known as exceptions includes both special requests (often presented at the time of reservation) and problem solving when things go wrong.

Special requests, especially medical and dietary needs, are common in the travel and lodging industries. The basic challenge is to ensure that each request is passed on to those employees who will be responsible for fulfilling it. The role of IT consists of storing such requests, passing them on to the relevant department or person, and documenting execution.

Technology speeds problem solving, too. USAA, a Texas-based firm specializing in insurance for military families and their dependents around the world, scans all documents electronically and stores them on optical disks. It also digitizes recordings of telephone calls reporting accidents, and stores them with scans of photos and reports from lawyers, doctors, and appraisers concerning the same claim. The space required to store claim dossiers has already been enormously reduced (the company used to have a large warehouse), and the time wasted searching for missing dossiers which were often on somebody's desk has been eliminated.

Billing and Payment

Bills and account statements are important documents, whether displayed in paper or electronic form. Customers like them to be clear and informative, and itemized in ways that make plain how the total was computed. Forward-looking companies use market research to determine what customers expect from financial statements in terms of structure and detail, and then program their computers to organize and highlight the information in useful ways.

When a Boston-based bank surveyed customers' preferences for bank statement formats, it found that people's opinions varied. Rather than trying to design a new statement that incorporated something for everybody but would have delighted nobody, the bank created three different formats offering varying degrees of detail and emphasis and let customers select the one they preferred.

Merrill Lynch continues to enhance the way it documents information on its award-winning monthly CMA (cash management account) statements, which have to integrate data on investment activity including purchases, sales, dividend and interest receipts, and investment value with details of checking and Visa card transactions.

The first page provides boxed summaries, with comparative data for the previous month and year to date, plus charts showing asset distribution and trends in total account value during recent months. Clients can also review their account data on password-protected Web sites. At year-end, clients also receive an annual summary of checking and Visa card activity, organized by expense category, both monthly and for the year. Many clients find this information useful when preparing their taxes.

Wireless networks allow firms to take the checkout to the customer, rather than vice versa. At many rental car return lots, attendants take details of the fuel level, odometer reading, and driver's contract, then use a handheld device to print out a bill on the spot.

In France, restaurant servers bring a wireless card reader to the table when it's time to pay. The amount is entered, the user's card is verified, and then the machine (about the size of a handheld video game) prints out the bill for the customer to sign. Machines such as these save time for customer and supplier alike, as well as reducing paperwork and minimizing the potential for errors that comes from manual transfer of data.

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