Service Marketing Management - Term Paper Example

Introduction Services are perishable in nature therefore it is often really critical for the firms to tailor their offering in such a manner that keeps the loyalty of their customers intact. Financial services industry is so competitive in nature that most of the firms working in the industry offer almost identical products and services and as such it is difficult for the firms to maintain the same level of service quality. As a result of this consumers are becoming continuously non-satisfied with the overall services offered by the large banks. Smaller banks, due to their size, however, can offer better and efficient services to fill that gap. Smaller firms and retailers therefore manage the relative expectations and perceptions of the customers manage in a manner that provides consistent competitive advantage in terms of efficiency. The current financial crisis that has engulfed the financial sector industry may have further dampened the spirit of large banks to offer sustainable level of services without compromising on their cost and profitability. This process therefore is leaving an strong post purchase dissonance for the personal consumers of large financial institutions due to the failure of large banks to offer them consistent and high quality services to their consumers. This paper will discuss and deliberate on the issue of whether the personal consumers of big banks are dissatisfied with the services offered by the large banks besides discussing as to how smaller banks and retailers can fill that gap by using the servqual 5 gap model Services Marketing- a general introduction Services are different than the products offered by the firms and as such they require a different mindset and unique strategic outlook in order to provide consistent services standards to the customers. Thus one of the basic principles of offering to the customers what they want is to first understand the internal dynamics and strengths of the firm itself. Once a firm identifies its core strengths and capabilities than it will be in a better position to (Hartman&Lindgren, 1993). Traditional focus of the services marketing has been the development of systems, procedures as well as techniques that can be implemented to control the certain level of services delivery. The efficacy of the services however was measured through the measuring customer preferences and expectations about the services delivered (Gilmore & Carson, 1996). Historically, companies relied on the development of standards that were meant to follow the tactics applied in the manufacturing sector. Similarly, the performance against the services delivered included the measuring of the customer perception as well as expectations against the actual delivery of services. This also required that the firms must have achieved a certain level of services which can be matched with the expectations and perceptions formulated by the customers.(Gilmore & Carson,1996) This however, heavily depended upon the competencies of the management in achieving the required level of competence. Without achieving a desired degree of competence, delivery of services was considered as something which may not fulfill the customer expectations as well as the perceptions held against a desired level of performance.(Frayer,1991). Since service is considered essentially as an act therefore performance of the service is extremely important in meeting the expectations of the customers. As such competence therefore plays significant role in deciding how the services are delivered to meet the expectations of the customers. These competences therefore can be either the technical competence or managerial competence in dealing with the customers and managing their expectations. In financial services industry, both technical as well as managerial competence play significant role in overall offerings made by the firm. It is also therefore critical that the organization must develop the required competence in the personnel who are delivering such services. The identification of the competences required to perform the services require the focus and attention of the senior management of the firm as individual focus must be attributed to the desired quality of services to be delivered to the target market of the firm. This also means that strategic approach must be taken by the firms marketing their services.(Brown,1990). In financial services industry, the norms of delivering the services depend upon how the financial institution interacts with its customers. With the advent in technology, the level of services offered as well as overall quality has improved a lot. Consumers are now no longer required to visit the branch physically and can conduct the transactions over internet banking. Such ease and efficiency in conducting the financial transactions therefore has made radical changes in the overall quality of services offered by the banks and other financial institutions.(Brooks,1989). Understanding Internal Competences Before critically discussing as to why the personal customers are dissatisfied with the services they receive from the large banks, it is critical to understand as to what are the internal competences which play their part in deciding what to offer to the customers. This is critical due to the fact that dissatisfaction from the services received also means that the firm has probably failed to understand its own internal competences before promising any sort of desired level of services to its customers. Failure to discount firm’s own competences into account before deciding upon the kind of services to be offered to the customer, often leads to the post purchase dissatisfaction for customers. Understanding the internal competences of the firm therefore require that the firm must understand their customers and evaluate the barriers in understanding the customers. The organizational barriers that may result into the poor services delivery therefore may include reluctance to change, poor communication between the various departments of the organization, lack of information as well as coordination. (Smith, 2003). Apart from this, the poor understanding of the customer needs may also lead to the poor service delivery which ultimately may create customer dissatisfaction. UK Banks typically lack this ability because many customers complained about not getting what they really wanted. Data published by the Financial Ombudsman of the country indicate that the customers are particularly not satisfied with the quality of responsiveness of the large banks to their particular needs. In order to overcome the lack of internal competencies, it is therefore important that the banks must impart training and development for their customers in order to upgrade their level of skills to better rationalize and understand the peculiar needs of the customers and offer them customized and unique solutions which can make the customers delighted. The internal competences therefore may include a clear understanding of what an organization can offer to its customers considering the overall needs of the customers. If a firm lack the ability to offer what is promised owing to some of the barriers mentioned above, than customer dissatisfaction may occur. Services Marketing in Big Banks in UK The recent credit crunch has witnessed an increase in the number of complaints leveled against big banks and other institutions offering financial services. During first half of 2009, more than 700,000 complaints were lodged with the Financial Ombudsman Service against the big banks indicating the fact that bigger banks may be letting their customers down. (moneywise.com, 2009). What is also significant to note that most of the complaints are against the top five banks of the country reflecting the overall situation of the quality of services offered by the big banks in the country? It is critical to note that customers are often complaining about every aspect of the services offered by the banks including current account facilities, insurance as well as ATM Frauds that are being committed against the customers. Such failure of the banks therefore indicates that the customers are continuously becoming dissatisfied with the services they are being offered by the large banks. One important trend that emerged during recent past is the fact that many large UK banks started to closed down their branches in a bid to compete with the internet banks. (BBC, 2000). Internet banks offered more flexibility and better services quality as compared to the traditional banks and as such customers preferred to have them as their banks rather than using conventional banking channels. Large UK banks therefore have to look for alternative strategic options to overcome this complacency in order to become responsive to the external change. It is critical to note that UK Banking industry witnessed a systematic consolidation due to mergers and acquisitions that took place during last two decades of 20th century. The de-regulation of the sector allowed many banks to expand into areas that were previously not considered as viable by the conventional banks. The degree of financial innovation in the market was simply unprecedented as banks started to become universal in nature. This universalisation of the banks therefore gave more dominance to the large banks in the market. However, this universalisation of the banks also allowed inefficiencies to creep into the large banks as customers, over the period of time, started to complain about the various services offered by the large banks. This was also because of the fact that large banks traditionally became more complacent and the overall standards of services declined.(Alexander & Colgate,2000). Gap Analysis Considering the above situation that the large UK banks are letting their customers down, it is critical that a more formal analysis of the problem must be undertaken in order to get a deeper insight into why this is happening and how the space left by the large banks can be filled up by the large retailers as well as small banks. Gaps are basically the identifiers or indicators of the correction measures that an organization need to take. In simple and plain methodology, gaps identify the difference between what needs to done and what is actually being done. A proper gap analysis therefore allow an organization to either analyze particular processes, department or even the whole organization to understand as to what ought to be done in order to correct the situation.(Balm,1996). What is so critically important about the gap analysis is the fact that it indicates or rather points towards what needs to be changed and what needs to be corrected. It is therefore critical to note that the gap analysis for UK banks must be performed at the strategic level and as such the outcome must identify some critical strategic alternatives that need to be looked at in order to correct the situation and maintain the existing market share. UK Banks therefore have to consider the exercise of this option at strategic level and then trickle it down to the tactical and operational level in order to materialize the strategic alternatives identified during gap analysis. SERVQUAL 5 Gaps Model SERVQUAL is a methodology (“methodology”) outlining five important dimensions of services quality that an organization need to deliver. This model is critical due to the fact that it helps to identify the customer perceptions about the quality of services delivered. The five dimensions are: 1. Reliability: Organization should deliver what it promises to deliver and must deliver it on time and according to the specification. 2. Assurance indicates about the possession of relevant skills that are basically required to deliver the service with confidence as well as of desired quality. 3. Tangibles include the physical appearance of the people who basically interact with the customers on behalf of the organization. 4. Empathy is showing the ability as well as understanding of the unique needs of the customers and how to fulfill them. 5. Responsiveness basically deals with the actual willingness of the organization to deliver what is required by the customers. The above five parameters therefore indicate that an organization must take care of the five significant dimensions and customer perceptions shall always be measured against the above five defined criteria or parameters. What is also significant to note that a firm offering financial services need to understand its own limitations before committing on delivering services to their customers? As discussed above that the customers of large banks in UK are complaining about everything it is therefore critical that a more detailed analysis shall be performed considering the above factors into account. Customer Dissatisfaction and SERVQUAL 5 Gaps Model This section will provide a detailed analysis of the given situation by using SERVQUA 5 gaps model. The basis of this analysis will be the Financial Ombudsman Reports and data. Reliability Reliability indicates that the customers perceive that the firm is able to deliver what it promises to deliver. According to the data, there are 7% complaints as of March 2009 which are basically related with the sales and advice.1 Whereas complaints about the charges are over 40% indicating that the big banks may not be offering what they promise during their sales and advice sessions. Complaints about charges mostly include the complaints regarding the over-charging by the banks which means that the banks may be advising some other rates but the actual rates charged may be different. This therefore can translate itself into the reliability issues because what is being promised to be offered to the customer is not actually offered and customers are charged higher for the banks and credit services offered by the large banks. This further translates itself into the gap resulting from the potential differences between what is offered and what is promised. Reliability is critical also due to the fact that it requires that the services are rendered in the same manner and without any error. The issue of over-charging therefore falls in the domain of not rendering the services as per the expectations of the customers. Assurance Assurance is basically the perceptions of the customers about the ability of the firms to deliver the required services through skills which are basically required to perform the services. Data indicate that the issues regarding the administration of the investment and pension advice comprises of 20% of the complaints received by the authorities whereas this same number is 35% in terms of offering banking and credit facilities. Similarly, complaints about the actual transactions are 9% which may be a smaller number however, it still indicates that the relative gap between the perceptions about the services. Since administration of services basically indicate that the financial institute has the required level of skills to deliver the services actually. Such high number of complaints about the administration of the services therefore indicates that the banks have potentially failed to provide the required services with the level of skills that may be required to deliver them at highest quality. Tangibles Tangibles basically counts towards the physical appearance of the personnel as well as the overall environment offered by the banks to deliver the services. As such there is no data of complaints which can potentially indicate that the personnel offering the services are not proper in their appearances etc. large five banks in the country therefore seems to lay more emphasis on the presentation of their employees to the customers and the gaps in this area may seem to be lower between the actual delivery of this dimension and the customer perception. Empathy As discussed, Empathy is basically the ability of the organization to understand the needs of the customers. The uniqueness of the needs of the customers requires that the banks must develop in-built mechanisms to have comprehensive understanding of their customers. The data indicates wider gaps between the customer perceptions of what their needs and how banks basically understand their needs. The product development process in most of the large five banks is based on the standard generic products that are offered to almost every customer regardless of their actual needs according to the circumstances. It has been reported that the customers are actually not happy with the goods that they purchase through the consumer credit offered to them by the banks. According to the Consumer Credit Act 1974, a lender is also held responsible along with the supplier of the goods for any type of breach of contract or the misrepresentation made. This also therefore means that the banks have probably failed to correctly anticipate the needs of their customers and than form strategic alliances with the firms offering the goods that consumers want to purchase through credit extended by the banks. Responsiveness Most of the banks are willing to offer what they promise to their customers however, due to other dimensions, they may not be actually delivering what they promise to do. Large Banks however, seems to be too occupied with offering the services that are more profit oriented and do not take into consideration what is actually required by the customers Can Smaller Banks and larger retailers fill that gap? The above discussion indicates that there are two major gaps in the services offered by the large banks. These include reliability as well as the assurance and as such consumers seem to be most dissatisfied in these two areas. Reliability is often an issue in retail consumer credit wherein banks often tend to levy charges which are not either explicitly explained to the customers or presented in ambiguous and technical language. Since this is often done in order to make more out of unsecured relationships, many banks often engage themselves into such type of activities and result into the significant perceptions issues for the customers. Assurance is another critical gap because many consumers believe that the banks fail to deliver the required services with a given level of services. The issues related with the administration of the services clearly indicate towards the lack of required skills to basically administer the service and may indicate that the large banks are lacking behind in training and development of their employees. Lack of skills coupled with the reliability issues therefore can prove significant dissatisfies for the customers. Issue than arises as to whether the smaller banks or larger retailers can fill that gap? Can they offer the services that consumers are basically expecting to receive from their banks but have failed to receive owing to relative inefficiency of the large banks to offer such services according to the expectations? It has been argued that the smaller banks may be more efficient in delivering such services given their overall control over the cost as well as relative efficiency with which they can deliver the services. It is however, critical to note that smaller banks may not be able to deliver all the services under one roof and consumers resultantly have to look for more banks and financial institutions to avail services that were typically provided by the large banks. This will ultimately increase the transaction costs for the consumers and as such consumers may refer back to the large banks to conduct their business transactions. However, internet banks offering online banking services may be a suitable alternative for the conventional banking services as online banks offer the convenience and ease with which the consumers can conduct their transactions. Online banks are efficient on delivering the services at relatively high speed and with much accuracy however, online banks have their own limitations too and as such consumers may find them relatively inefficient to offer more customized solutions to their needs. Similarly, the scope of large retailers may be limited in terms of providing financing services because large retailers can only provide consumer credit for purchasing and for facilities such as checking accounts, deposits, investment and pension plans, consumers again have to look forward to the large banks to offer them such services. The issue therefore needs to be viewed in much larger perspective in order to draw logical conclusions regarding the ability of smaller banks to fill the gap. Conclusion Consumers are increasingly becoming dissatisfied with the quality of services offered by the large UK Banks. The common causes of dissatisfaction include over-charging on the credit limits, poor sales and services advices as well as poor administration of the services. This trend has increased specially after the financial crisis wherein consumers complain regarding the services offered by the banks is increasing. There can be numerous reasons for this decline in the level of quality of services offered by the large banks in US however, critical reasons for this include the sheer size and technical inefficiency of the banks offering such services. Banks have probably promised too much without assessing their own internal competencies and as such the customers are not served the way they were supposed to be treated. This gap in perception as well as what is actually delivered by the banks is one of the critical services marketing issue to further explore based on the empirical studies. Can smaller banks and larger retailers fill that gap is a question that is also needs to be further explored because smaller banks do not offer all the required services under one roof and customer may have to look for other alternatives to get other services and as such the overall transaction costs for the consumers can significantly increase. Thus the quality of services for consumers may improve but that will be at the expense of extra cost that consumers have to bear in case they prefer smaller banks over large banks. Bibliography 1. Alexander, A, Colgate, M. (2000). Retail financial services: transaction to relationship marketing. European Journal of Marketing. 34 (8), p938 - 953. 2. Balm,G. (1996). Benchmarking and gap analysis: what is the next milestone?. 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Retrieved March 17, 2010, from Moneywise.com: http://www.moneywise.co.uk/everyday-money/article/2009/11/12/are-british-banks-letting-their-customers-down 10. Smith, I. (2003). Meeting customer needs. London: Butterworth-Heinemann. Read More