The New Services Realities

Service firms once lagged behind manufacturers in their understanding and use of marketing because they were small or they faced large demand or little competition. This has certainly changed. Some of the most skilled mar­keters now are service firms. One that wins consistent praise for its brand-building success is Singapore Airlines.23

SINGAPORE AIRLINES Singapore Airlines (SIA) has been consistently recognized as the world’s “best” airline, in large part due to its stellar marketing. The carrier wins so many awards, it has to update its Web site monthly to keep up to date. Famous for pampering passengers, it continually strives to create a “wow effect” and surpass customers’ expectations. SIA was the first to launch on-demand entertainment systems in all classes, Dolby sound systems, and a book-the-cook service that allows business- and first-class passengers to order meals before boarding. Thanks to a first-of-its-kind $1 million simulator the airline built to mimic the air pressure and humidity inside a plane, it found that taste buds change in the air and that, among other things, it needed to cut back on spices in its food. New SIA recruits receive four months of training, twice the industry average, and existing staff get nearly three weeks of refresher training a year (costing $70 million). With its stellar reputation, the carrier attracts some of the best local graduates and staffs each flight with more attendants and other cabin crew members than other airlines. SIA applies a 40-30-30 rule: 40 percent of resources go to training and motivating staff, 30 percent to reviewing process and procedures, and 30 percent to creating new product and service ideas.


Because U.S. consumers generally have high expectations about service delivery, they often feel their needs are not being adequately met. A 2013 Forrester study asked consumers to rate 154 companies on how well they met their needs and how easy and enjoyable they were to do business with. Almost two-thirds of the companies were rated only “OK” “poor” or “very poor” Retail and hotel companies were rated the highest on average, and Internet, health service, and television service providers were rated the worst. The highest-ranking companies were Marshalls, USAA (bank),, Kohl’s, Target, Courtyard by Marriott, Sam’s Club, Rite Aid, Costco, Lowe’s, TJ Maxx, JCPenney, and Marriott Hotels & Resorts.24

Service providers receive low marks for many reasons. Customers complain about inaccurate information; unresponsive, rude, or poorly trained workers; and long waits. Even worse, many find their complaints never reach a human ear because of slow or faulty phone or online reporting systems. They say companies mishandle online complaints by responding selectively or inconsistently (or not at all) and by “cutting and running,” appearing insin­cere, or attempting to just “bribe” the consumer.25

It doesn’t have to be that way. Fifty-five operators on Butterball Turkey’s 800 number handle 100,000 calls a year about how to prepare, cook, and serve turkeys; 12,000 people call on Thanksgiving Day alone. Trained at Butterball University, the operators have all cooked turkeys dozens of different ways and can handle any queries that come their way, including why you shouldn’t stash turkeys in snow banks and how to tell when the turkey is done.26

Savvy services marketers are recognizing the new services realities, such as the importance of the newly em­powered customer, customer coproduction, and the need to engage employees as well as customers.

CUSTOMER EMPOWERMENT The digital era has clearly altered customer relationships. Customers are becoming more sophisticated about buying product-support services and are pressing for “unbundled services” and the right to select the elements they want. They increasingly dislike having to deal with a multitude of service providers handling different types of products or equipment. With that in mind, some third-party service organizations now service a greater range of equipment. A plumbing business may also service air conditioners, furnaces, and other components of a household infrastructure.

Most importantly, the Internet has empowered customers by letting them send their comments around the world with a mouse click. A person who has a good customer experience is more likely to talk about it, but some­one who has a bad experience will talk to more people.27 Ninety percent of angry customers reported sharing their story with a friend; now, they can share it with strangers too. At shoppers can send a com­plaint, compliment, suggestion, or question directly to a company, with the option to post comments publicly on the site as well. Online sites such as Angie’s List, Yelp, Google Places, and Urbanspoon are other popular means to spread the word on customer service adventures.

Even more challenging for firms, unhappy customers may choose to download a damaging video to share their customer service miseries with others. “Marketing Memo: Lights! Camera! Customer Service Disasters!” describes some notable customer service disasters brought to light with online videos.

When a customer complains, most companies now respond quickly. Comcast allows contact 24/7 by phone and e-chat but also reaches out to customers and monitors blogs, Web sites, and social media. If employees see a customer report a problem on a blog, they get in touch and offer help. Clear, helpful e-mail replies to customers’ que­ries can be effective too.28 Delta Airlines introduced Delta Assist to monitor customer Twitter tweets and Facebook posts around the clock with a 10-person team and to provide real-time replies to any queries or problems.29

More important than simply responding to a disgruntled customer, however, is preventing dissatisfaction from occurring in the future. That may mean simply taking the time to nurture customer relationships with attention from a real person. Solving a customer’s problem quickly and easily goes a long way toward winning long-term loyal customers.30

CUSTOMER COPRODUCTION The reality is that customers do not merely purchase and use a service; they play an active role in its delivery. Their words and actions affect the quality of their service experiences and those of others as well as the productivity of frontline employees.31

Customers often feel they derive more value, and feel a stronger connection to the service provider, if they are actively engaged in the service process. This coproduction can put stress on employees, however, and reduce their satisfaction, especially if they differ from customers culturally or in other ways.32 Moreover, one study estimated that one-third of all service problems are caused by the customer.33 The growing shift to self-service technologies will likely increase this percentage.

Preventing service failures is crucial because recovery is always challenging. One of the biggest problems is attribution—customers often feel the firm is at fault or, even if not, that it is still responsible for righting any wrongs. Unfortunately, although many firms have well-designed and executed procedures to deal with their own failures, they find managing customer failures—when a service problem arises from a customer’s mistake or lack of understanding—much more difficult. Solutions come in all forms, as these examples show:34

  1. Redesign processes and redefine customer roles to simplify service encounters. Staples transformed its business with its “Easy” program to take the hassle out of ordering office supplies.
  2. Incorporate the right technology to aid employees and customers. Comcast, the largest U.S. cable operator, introduced software to identify network glitches before they affected service and to better inform call-center operators about customer problems. Repeat service calls dropped 30 percent as a result.
  3. Create high-performance customers by enhancing their role clarity, motivation, and ability. USAA reminds enlisted policyholders to suspend their car insurance when they are stationed overseas.
  4. Encourage “customer citizenship” so customers help each other. At golf courses, players can not only follow the rules by playing and behaving appropriately, they can encourage others to do so.

SATISFYING EMPLOYEES AS WELL AS CUSTOMERS Excellent service companies know that positive employee attitudes will strengthen customer loyalty.35 Instilling a strong customer orientation in employees can also increase their job satisfaction and commitment, especially if they have high customer contact. Employees thrive in customer-contact positions when they have an internal drive to (1) pamper customers, (2) accurately read their needs, (3) develop a personal relationship with them, and (4) deliver high-quality service to solve customers’ problems.36

Consistent with this reasoning, Sears found a high correlation be­tween customer satisfaction, employee satisfaction, and store profitability. The downside of not treating employees right is significant. A survey of 10,000 employees from the largest 1,000 companies found that 40 percent of workers cited “lack of recognition” as a key reason for leaving a job.37

Given the importance of positive employee attitudes to customer satisfaction, service companies must attract the best employees they can find. They need to market a career rather than just a job. They must design a sound training program and provide support and rewards for good performance. They can use an intranet, internal newsletters, daily reminders, and employee roundtables to reinforce customer-centered attitudes. Finally, they must audit employee job satisfaction regularly.

The Panda Express restaurant chain has management turnover that’s half the industry average, due in part to a combination of ample bonuses and health benefits with a strong emphasis on worker self-improvement through meditation, education, and hobbies. Special wellness seminars and get-to-know-you events outside work help create a caring, nurtur­ing atmosphere.38

Zappos has built a customer-focused organization admired by many.39

ZAPPOS Online retailer Zappos was cofounded by Tony Hsieh in 1999 with superior customer service at the core of its culture. With free shipping and returns, 24/7 customer service, and fast turnaround on the numerous products offered on the site from thousands of brands, the company works hard to create repeat customers. Unlike many other companies, it has not outsourced its call centers, and half the interview process is devoted to finding out whether job candidates are sufficiently outgoing, open-minded, and creative to be a good cultural fit.

Zappos empowers its customer service reps to solve problems. When a customer called to complain that a pair of boots was leaking after a year of use, the rep sent a new pair even though the company’s policy is that only unworn shoes are returnable. Every employee has a chance each year to contribute to the company’s Culture Book, about life at Zappos and how each department implements superior customer service from selling to warehousing, delivery, pricing, and billing. Bought by Amazon. Com in 2009 for a reported $850 million but still run separately, the company now also sells clothing, handbags, and accessories. Thanks to its success, it even offers two-day seminars to business executives eager to learn the secrets behind Zappos’s unique corporate culture and approach to customer service.

Source: Kotler Philip T., Keller Kevin Lane (2015), Marketing Management, Pearson; 15th Edition.

1 thoughts on “The New Services Realities

  1. graliontorile says:

    An fascinating discussion is value comment. I think that you need to write more on this subject, it may not be a taboo subject however typically persons are not enough to talk on such topics. To the next. Cheers

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