The entire process of creating such services deals with concepts rather than physical objects. The testing process varies depending on whether the service is equipment-based or people-based, but in either case it is difficult to do test marketing or other types of market research on the new service. Customers must be enticed into experiencing the service, and this often requires major marketing efforts.
Thus the cost of introducing a successful new service may be quite high because it is difficult to predict what service concepts will be understandable and attractive to the customer. An example of a new-service development that most observers agree has stalled—at least for the next several years—is that of electronic funds transfer.
Why has it faltered? The reasons are obviously complex and include political, legal, and economic factors. Perhaps most important, however, is consumer resistance rooted in fears about computer errors, invasion of privacy, and changes in lifestyles. It should be made clear that the failure is not one of technology.
The technology is available to create the so-called cashless society, but consumers do not want the service. A product can be shown to a customer who can make some crucial decisions about whether he or she is interested in trying the product.
But how do you test-market the concept of a cashless society? The difficulty of test marketing can, however, be turned into an advantage. Service concepts, especially in people-based service businesses, are malleable and can be changed even after they have been introduced in the marketplace, and the cost of such a change is often quite low. Any business must develop new services if it is to survive.
This task is quite different from new-product development. It is highly abstract, and the services that are developed require difficult and expensive testing in the marketplace. Thus there is little real innovation and a great deal of imitation of services. For example, airlines and banks are well known for their imitative practices.
What is bought when a service business is acquired? There are several answers to this question, depending on the type of service business that is under consideration. Many managers, particularly those with product-oriented experience, feel most comfortable when acquiring an equipment-based service business.
Then the acquisition includes physical assets that can be quite valuable if bought for less than comparable new assets, if there is a limited supply of the assets, or if the business is in strategic locations for example, a car rental business, or a string of self-service laundries. Unless one of these conditions exists, it is often less expensive to buy new assets than to buy those of an existing service business. In people-based service businesses, the acquisition is more risky because people and their skills are the major purchase item.
Regardless of the employment contracts and benefits that may be offered, there is always the risk that people will leave and take their skills with them. When physical assets are purchased, they are owned when the papers are signed. Decisions about their use and disposition can be made by the acquiring company.
The same is not true of people; they may decide to depart at any time after the purchase is completed. This lesson was learned by a well-known consulting firm. The firm had been quite successful in the northeastern United States. Being an astute observer of current trends, its president noted that business activity was increasing rapidly in the southern half of the country.
Rather than spend several years and a significant amount of money developing a field office, he decided to acquire a small consulting firm in Dallas that had an excellent client list. The acquisition was made, and the president and two vice presidents of the smaller firm were given employment contracts.
In other instances, the services provided have some proprietary characteristic that is valuable even without the people in the company. Often, however, the answer to the question is that all one is buying are people. When this is the case, it is usually less expensive simply to hire away the best of these people. Growth through acquisition in service businesses is a risky proposition, but the risk varies.
It is generally riskier as one moves down the spectrum toward people-based businesses, and within people-based businesses the risk increases when the service is provided by professionals or highly skilled persons.
Any company that wants to acquire service businesses must make sure that it can attract and keep skilled service-oriented managers to run them. Unfortunately, a large part of this experience is irrelevant to the management of many service businesses.
If managers talk about services instead of products, they also think about services and those characteristics that make services unique. See W. Robert R. Rothberg New York: Free Press, , p. You have 1 free article s left this month. You are reading your last free article for this month. Subscribe for unlimited access. Create an account to read 2 more. Strategy is Different in Service Businesses. A […] by Dan R. A version of this article appeared in the July issue of Harvard Business Review.
Natural instincts of employees: A large part of service relies on the employees as they are the one to provide service and interact with the customers. The behavior of leadership and management towards employees is often incongruent with the customer service initiative. Thus, employees must be well-skilled and trained to work efficiently and effectively. A quick note to Mary. Have you read the entire post? The writer answer your queries at the end. PL on March 19, at am. Very useful post.
Thanks for taking the time to share your view with us. Very helpful to understand service failure. Thank you Reply. Submit a Comment Cancel reply Your email address will not be published. Search for:. Make it easy by providing clear contact information including phone number, live chat, email address, social channel, etc.
This is especially important if all or part of your business is conducted online. If you want an example to follow, check out Zappos. Although it's an online-only retail business, a phone number is posted on virtually every page of its website. Smart companies see social media sites as a way to engage with customers — and not just the ones who complain.
And while you should respond to compliments as well as complaints, a timely response is most essential when a customer posts about a problem or issue. My father taught me long ago that being late is disrespectful.
Whether you are late for an appointment or with a response to a customer, it gives the impression that you believe you are more important, or that your time is more valuable. Acting with urgency gives the customer a feeling of confidence. Customers today want and expect self-service options. They find that self-service is often quicker and easier than a traditional call for support, so offering these options can be another way to show that you value their time.
Self-service solutions can include a Frequently Asked Questions FAQ page on your website, forums where customers can discuss your products and help answer questions, or a YouTube channel with instructional how-to videos about assembling or using a product.
Showing appreciation by at least saying thank you is so easy to do. Customers want and deserve to feel appreciated. Say thank you! As you read this list of customer service mistakes, perhaps something struck a chord.
Is your company guilty of a lapse in one or more of these customer service basics? Conversely, full refund restores justice.
Full refund plus discount is perceived as undeserved, and does not enhance justice perceptions. A moderately easy-to-invoke guarantee is perceived as fair, when it includes full refund. Future research could examine the interaction of guarantee scope with payout and ease of invocation, and how types of motives differentially impact justice perceptions. Full refund can enhance justice perceptions, whereas discount is perceived as unfair. Firms should offer full refund as guarantee payout, but refrain from offering a discount.
Flexibility should be embedded in guarantee invocation procedures. Crisafulli, B.
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