In this article we will discuss about:- 1. Introduction to Electronic Channels 2. Role of Communications in Services 3. Factors Responsible for Service Communication Problems 4. Benefits 5. Barriers.
Contents:
- Introduction to Electronic Channels
- Role of Communications in Services
- Factors Responsible for Service Communication Problems
- Benefits of Electronic Channels
- Barriers in Distributing Services through Electronic Channels
1. Introduction to Electronic Channels:
We are all familiar with telephone and television channels and the internet and web, and may be aware of the other electronic vehicles that are currently at developmental stage. The consumer and business services that are made possible through these vehicles include movies on demand, interactive news and music, banking and financial services, multimedia libraries, and databases, distance learning, desktop video-conferencing, remote health services, and interactive, network-based games. The more a service relies on technology and/or equipment for service production and the less it relies on fact-to face contact with service providers, the less the service is characterised by inseparability and non-standardisation.
Electronic channels are the only service distributors that do not require direct human interaction. What they do require is some predesigned service (almost always information, education, or entertainment) and an electronic vehicle to deliver it. Electronic channels overcome some of the problems associated with service inseparability and allow a form of standardisation not previously possible in most services. Electronic Channels include all forms of service provision through television, telephone, interactive multimedia, and computers. Many financial and information services are currently distributed through electronic media – banking, bill paying, education.
2. Role of Communications in Services
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The purpose of communications is to inform, persuade, or influence consumer behaviour. Developing an effective communications program begins with an understanding of the role of communications within the service organisation. However, the specific role of communications will vary depending on the purchase phase.
Communications and the Purchase Process:
The purchase process consists of three phases – the pre-purchase phase, the consumption phase, and the post-purchase phase. Communication is a critical component of each phase. In the pre-purchase phase, consumers have not yet made the purchase. Some consumers may be brand or firm loyal and very little effort is expended in making the purchase decisions. In these situations, company-sponsored communications will have little impact on the purchase decision since consumers already know where they will buy the service.
However, communications may influence these customers to buy the service sooner. It may also influence individuals who had no immediate plans to buy a particular service to make the decision to buy. For consumers who are not brand loyal, communications can impact the choice of service firms.
(i) Pre-Purchase Phase:
Communications can be used to accomplish five different objectives in the pre-purchase phase. One objective can be to reduce purchase risk. Reducing risk will increase the probability of a purchase. Communications can be used to develop a specific corporate image, to build brand equity, or to increase awareness.
By developing a unique corporate image, service firms hope to appeal to a specific target market. The same is true for brand equity. Increasing brand equity conveys to consumers that the service will provide a more uniform service quality. Brand equity tends to reduce purchase risk and, as a result, increase the probability of purchase.
For some services, such as restaurants, being part of a consumer’s evoked set is important. Almost all purchase decisions are made from the evoked set. Firms not in the consumer’s evoked set are unlikely to be chosen. To get into consumers’ evoked sets, awareness communications is needed. Although a communication message may accomplish more than one function, it is best to design the message to fulfill only one specific objective. Direct mail or coupons would probably be more effective in increasing future sales than would national advertisements.
(ii) Consumption Phase:
In this phase, communications can be used to accomplish two objectives –
(a) enhances customer satisfaction and increase repeat purchase behaviour. Customer satisfaction can be heightened by communicating information that affects either customers’ expectations or their evaluation of the service performance. A sign at dental clinics may inform patients that nitrous oxide gas is available upon request. This information will help the patient form expectations. The same would occur at an automobile lube facility that posts a sign outlining a 21-step process followed by the service technicians,
(b) Communications can also enhance customer satisfaction during the consumption phase by providing information about the procedure. This information can be provided through service attendants, pamphlets, signs, or point-of-purchase displays. For example, a surgeon will explain the process he or she will use in the operation. Signs, attendants, and displays at Disneyland are designed to increase customer satisfaction at the theme park as guests make their way to different exhibits and rides.
(iii) Post-Purchase Phase:
These are designed to reduce cognitive dissonance, stimulate positive word-of-mouth communications, or increase repeat purchase behaviour. Cognitive dissonance can he reduced by reassuring customers they have made a good purchase. This reassurance can take the form of an advertisement, a point-of-purchase display, or a personal contact with a company representative. Reducing cognitive dissonance will increase the probability of positive word-of-mouth communications and repeat purchase behaviour.
Positive word-of-mouth communications are extremely important to services because of intangibility and the reliance of customers on word of mouth in making purchase decisions. A service firm can stimulate word-of-mouth communications by offering customers incentives.
(iv) Building Firm Image:
An important factor in the purchase process is the consumer’s image of a service provider. The image consumers have of a service firm is closely tied to the concept brand equity and the customer value package.
Firm’s image is based on how consumers view a firm and not on management’s opinion. In most cases, firm image is based on a consumer’s comparison of one firm with other firms in an industry or related industries.
Developing a specific firm image requires three steps –
(a) Conducting an image analysis,
(b) Deciding on an image position, and
(c) Promoting the desired image.
(v) Image Analysis:
The image analysis begins by determining the relevant criteria businesses and contractors use to evaluate a service such as landscaping. A focus group of buyers can be used to determine the relevant criteria. Suppose a company conducted a focus group and found that most buyers base their image of landscaping firms on five criteria – expertise, technical service quality, functional service quality, dependability, and price.
The next step in the image analysis would be for the company to find out how businesses and contractors evaluate company and other landscaping firms on these relevant criteria. In addition, the company will desire to measure the level of knowledge or awareness buyers have about the company and their overall attitude.
The second step in developing the company’s firm image is to decide what position the firm wishes to occupy in the buyers’ minds. It would be unreasonable to expect the company to be evaluated the highest in all five categories. Certainly, the company will desire to work on their low score for dependability. They need to ensure, from an operational standpoint, that schedules are met and that they are dependable.
Once this is done, the firm may desire to promote this aspect of their service. In choosing a desired firm image, the will desire to consider both the customer value package and Metro’s sustainable competitive advantage (SCA). For long-run impact, all three must be consistent. The firm image promoted by the company should match the customer’s view of the firm and be consistent with both the customer value package and the firm’s competitive advantage.
The third step in developing a specific firm image is the promotion of the desired image. Suppose the company decided to promote an image of high technical service and expertise. Results indicate, they are currently viewed as one of the best in both of these categories. Promoting these positive points about the company will be relatively easy and should increase overall attitude toward the firm. At this point, promoting the company as dependable would probably not be successful. This position may be desired, but the image analysis indicates trying to occupy such a position would be difficult.
3. Factors Responsible for Service Communication Problems
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The main factors that contribute problems to communication are as follows:
(1) Elevated Customer Expectations:
Appropriate and accurate communication about services is the responsibility of both marketing and operations. Marketing must accurately (if compellingly) reflect what happens in actual service encounters; operations must deliver what is promised in communications. For example – when a management consulting firm introduces a new offering such as return-on-quality analysis, the marketing and sales departments must make the offering appealing enough to be viewed as superior to competing services.
In promoting and differentiating the service, however, the company cannot afford to raise expectations above the level at which its consultants can consistently perform. If advertising, personal selling, or any other external communication sets up unrealistic expectations, actual encounters will disappoint customers. Because of increasing deregulation and intensifying competition in the services sector, many service firms feel more pressure than ever before to acquire new business and to meet or beat competition.
To accomplish these ends, service firms often over promise in selling, advertising, and other company communications. In the airline industry, advertising is a constant battlefield of competing offers and price reductions to gain the patronage of customers. The greater the extent to which a service firm feels pressurised to generate new customers, and perceives that the industry norm is to over-promise (“everyone else in our industry over promises”); the greater is the firm’s propensity to over-promise.
If advertising shows a smiling young worker at the counter in a McDonald’s commercial, the customer expects that, at least most of the time, there will be a smiling young worker in the local McDonald’s. If advertising claims that a customer’s wake-up call will always be on time at a Ramada Inn, the customer expects no mistakes. Raising expectations to unrealistic levels may lead to more initial business but invariably fosters customer disappointment and discourages repeat business.
(2) Inadequate Management of Service Promises:
A discrepancy between service delivery and promises occurs when companies fail to manage service promises — the vows made by salespeople, advertising, and service personnel. One of the primary reasons for this discrepancy is that the company lacks the information and integration needed to make fulfillable promises. Sales-people often sell services, particularly new business services, before their actual availability and without having an exact date when they will be ready for market.
Demand and supply variations also contribute to problems in fulfilling service promises. They make service provision possible at some times, improbable at others, and difficult to predict. The traditional functional structure in many companies obscures the end- to-end processes that allow the company to project when work will be accomplished or whether the service to be delivered will match what is promised.
(3) Inadequate Internal Marketing Communications:
Another major difficulty associated with providing service that matches promises is that multiple functions in the organisation, such as marketing and operations, must be coordinated to achieve the goal of service provision. Because service advertising and personal selling promise what people do, frequent and effective communication across functions—horizontal communication—is critical. If internal communication is poor, perceived service quality is at risk.
If company advertising and other promises are developed without input from operations, contact personnel may not be able to deliver service that matches the image portrayed in marketing efforts. Not all service organisations advertise, but all need coordination or integration across departments or functions to be able to deliver quality service. All need internal communication between the sales force and service providers. Horizontal communication also must occur between the human resource and marketing departments.
To deliver excellent customer service, firms must be certain to inform and motivate employees to deliver what their customers expect. If those who understand customer expectations (marketing and sales personnel) do not communicate this information to contact employees, their lack of knowledge will affect the quality of service that employees deliver. A final form of internal coordination central to providing service quality is consistency in policies and procedures across departments and branches.
If a service organisation operates many outlets under the same name, whether franchised or company owned, customers expect similar performance across those outlets. If managers of individual branches or outlets have significant autonomy in procedures and policies, customers may not receive the same level of service quality across the branches.
(4) Inadequate Customer Education:
Differences between service delivery and promises also occur when companies do not sufficiently educate their customers. If customers are not clear about how the service will be provided, what their role in delivery involves, and how to evaluate services they have never used before, they will be disappointed and often hold the service company, not themselves, responsible. Research by TARP, a service research firm, reveals that one-third of all customer complaints are related to problems caused by customers themselves.
These errors or problems in service—even when they are “caused” by the customer—still lead customers to defect. For this reason, the firm must assume responsibility for educating customers. Inexperienced customers, by definition, may not understand how to use services correctly. As an example – burgeoning online services have high visibility and publicity; hardly a day goes by without a story about a new service on the internet. Because this service industry is ever-changing, the services are beyond the understanding of many customers, and the churn rate (defection of customers) is high because customers are not accurately informed.
For services high in credence properties—expert services that are difficult for customers to evaluate even after they have received the services—many customers do not know the criteria by which they should judge the service. For high-involvement services, such as long- term medical treatment or purchase of a first home, customers are also unlikely to comprehend and anticipate the service process. First-time home buyers rarely understand the complex set of services (inspection, title services, insurance) and processes (securing a mortgage, offers and counteroffers, escrow) that will be involved in their purchases.
Professionals and other providers of high-involvement services often forget that customers are novices who must be educated about each step in the process. They assume that an overview at the beginning of the service, or a manual or set of instructions, will equip the customer.
Unfortunately, this is rarely sufficient, and customers defect because they can neither understand the process nor appreciate the value received from the service. A final condition under which customer education can be beneficial, involves services where demand and supply are not synchronised. If the customer is not informed about peaks and valleys in demand, service overloads and failures, not to mention underutilised capacity, are likely to result.
4. Benefits of Electronic Channels:
Electronic channels such as television and telecommunication do not alter the service, as channels with human interaction tend to do. Unlike delivery from a personal provider, electronic delivery does not interpret the service and execute it according to that interpretation. Its delivery is likely to be the same in all transmissions. Distribution of television programming from networks through affiliate television and radio stations illustrates standardised electronic distribution.
Networks create and finance programming including shows, news, and sports and distribute them through local stations in return for fees and advertising dollars. In most cases, the local stations deliver what is fed to them through the networks. Local stations can elect not to carry a particular show because of low ratings or lack of fit with the local market. They can also refuse to carry advertising spots that are judged in bad taste or too controversial. Except for these situations, which are uncommon, what is distributed through electronic channels is what the service creator sends.
(i) Customer Choice and Ability to Customise – Consider the options that will be available in movies and videos to customers who use video on demand services. Just as Dell computer, a physical product, allows customers to configure entire products to their own particular needs and desires, the internet will allow many companies to design services from the beginning. Suppose you want to renovate your kitchen, for example – It is now possible to go to many internet sites, specify your requirements, and order what you wish. Whether a large retailer such as, Home depot or a small start-up company is the supplier, you get exactly what you want.
(ii) Low Cost – Electronic media offer more efficient means of delivery than does interpersonal distribution.
(iii) Customer Convenience – With electronic channels, customers are able to access a firm’s services when and where they want. “Retailers still tell customers, you have to come to us. But online consumers are saying, no way-you have to come to us. My place, my time is the new mantra of consumers everywhere. Just as catalogue shopping freed working women from the perceived drudgeries of having to go to the mall— and flattened the purses of forward-thinking companies that recognised an underserved market—e-commerce is changing the way people shopping”.
Many mail-order companies still limit their hours of availability, a real mistake if they are going to match the customer convenience of being able to order online 24 hours a day, seven days a week. For the marketer, electronic channels allow access to a large group of customers who would otherwise be unavailable to them because of busy schedules that do not allow them to shop in other ways. One has only to witness the incredible success of Amazon(dot)com to realise the customer benefit and to see its potential for profitability for companies.
(iv) Wide Distribution – Electronic channels do more than allow the service provider to interact with a large number of end users. They also allow the service provider to interact (often simultaneously) with a large number of intermediaries. The costs and effort to inform, select, and motivate non-electronic channels are higher than the costs to accomplish the same activities with electronic channels.
Many franchisers are now finding that prospecting through the internet provides better- qualified franchisees than the traditional methods of mainstream advertising and trade shown. Seattle-based World Inspection Network, a franchiser of home inspection operators, increased its franchisee pool five-fold using evaluation and prequalification on the internet,
(v) Quick Customer Feedback – Rapid customer feedback is undoubtedly one of the major strengths of e-commerce. Companies can find out immediately, what customers think of services and of their transactions and can gain far higher participation from customers in surveys. With quick customer feedback, changes can be made rapidly to service assortments, problems can be addressed immediately, and the learning cycles of companies can speed up dramatically.
5. Barriers in Distributing Services through Electronic Channels
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(1) Lack of Consistency:
Because of customer involvement while, electronic channels are very effective in minimising the inconsistency from employees or providers of service, customer variability still presents a problem. Many times, the customer produces the service himself using the technology, leading to errors or frustration unless the technology is highly user-friendly. Manoeuvring on-line can sometimes be overwhelming, and not all websites are easy to use. Furthermore, a large percentage of customers do not have computers and, even if they do, may be reluctant to try or continue using the medium.
(2) Competition from Widening Geographies:
Many services were somewhat protected from competition because customers had limited choice among the providers they could physically drive to. Banks, for example, supply all local customers with checking accounts, savings accounts, and mortgages. In fact, it used to be said that since services could not be transported, they were limited in their scope. Not any longer—and not with electronic channels, virtually all financial services can be procured from institutions far from the local area.
(3) Change in Consumer Behaviour:
A consumer procuring a service through electronic channels engages in very different behaviour from a consumer entering a retail store and talking to a salesperson. Considerable changes — in the willingness to search for information, in the willingness to perform some aspects of the services themselves, in the acceptance of different levels of service — are necessary when customers use electronic channels. Behaviour change is difficult, even for a consumer wanting to make a change; therefore marketers wishing to motivate consumers to alter long-established patterns will be challenged.
(4) Price Competition:
One of the traditional differences between goods and services has been the difficulty of directly comparing features and prices of services with each other. Whereas goods can typically be compared in retail settings, few retail settings exist that offer services from multiple sources. The internet has changed all that. Services such as Travelocity(dot)com and Priceline(dot)com make it simple for customers to compare prices for a wide variety of services.
Priceline(dot)com allows customers to name their price for a service such as an airline ticket, wait until Priceline(dot)com finds an airline willing to accept it, then purchase the ticket. Never has the customer had such ability to bid on prices for services. If we describe another type of price competition spawned by the internet – the internet auction as presented by such companies as Bay, which sells millions of products and services in more than 1,000 categories.
(5) Lack of Control of the Electronic Environment:
It did not take long for the internet to face the challenges of unregulated media. As soon as the network became popular, pornographic and other controversial material started to appear. When a service’s advertising or information appears in proximity to such material, the result can be a negative spillover effect.
It is similar to the challenge advertisers face in using print media such as TV Guide — the advertiser has to be careful to separate its advertising for banking from the ever-present ads for balding concealment devices and quick weight loss programs. With the TV Guide, however, the advertiser could request or pay for the right positioning, something not possible on the internet at this time.
(6) Security Concerns:
One issue confronting marketers using electronic channels is the lack of security of information, particularly health and financial information. Many customers are still hesitant about giving credit-card numbers on the web and internet. These problems can undermine consumers’ trust in the internet as a safe place to do business. Companies have devised ways to keep hackers out and thereby protect the systems, but many of these are temporary solutions.
Among the specific problems are penetration, vandalism, eavesdropping, and impersonation. With penetration, intruders steal passwords and exploit unprotected modems and connections, actually taking over the sites. With vandalism, hackers crash corporate and other computers. To combat these problems, firewalls and other software scan for unusual activity. With eavesdropping, hackers snoop on information as it passes through multiple computers to the Internet.
The typical solution is encryption software that scrambles electronic mail and other data to make it unintelligible to eavesdroppers. Finally, with impersonation criminals could use phony identities to but goods and services or create bogus businesses. A form of encryption technology is used to deal with this problem and special service companies confirm signature holders.
(7) Customers are Active, not Passive, and Must be Enticed:
Traditional advertising media such as magazines and television consider the customer a passive receiver of their messages. A customer reading an article, watching a television program will most likely see the advertisement. We know that not all customers stay in the room for a television advertisement, but most of us see hundreds of ads daily and accept this as an inevitable by-product of consuming entertainment and informational media. The user of the web, however, is different.
It’s not that web users aren’t interested in learning about new products and services, or getting a great buy on an old stand-by, but they want to learn on their own terms. They want the choice to click or not, to view or not, and anything more than the gentlest form of persuasion from an advertiser is likely to be construed as an intrusion.
The idea of presenting to Web users the advertising information the service provider wants is not acceptable. “The Web is not about push; it’s about suck – On-line consumers can suck out of cyberspace whatever interests them and leave behind whatever doesn’t.” What does this mean to on-line service marketers? The advertising must educate, entertain, and draw the customer in.
There must be clear benefits for the customer to read the marketer’s information. One of the most promising approaches, called “permission-based marketing,” is a method of enticing customers to visit websites for the payback they receive. The company designs games, offers prices, creates contests, and in other ways sends customers to websites to help advertisers build relationships with customers.
(8) Inability to Customise with Highly Standardised Electronic Services:
Some of you have experienced learning college basics through large, video-transmitted courses. If you consider what you missed in learning that way compared with learning directly from a professor, you will understand this challenge. In mass sections, you cannot interact directly with the professor, ask questions, raise points for clarification, or experience the connection that you receive in person.
In electronic classes — as in video-conferences that are springing up in many businesses — the quality of the service can also be impeded procurement the way the audience reacts (or doesn’t react) in those situations. People talk among themselves, leave, laugh, and criticise, among other behaviours.