Resit Coursework Services Strategy [MT0936A]

This coursework have been made mainly with the support of the Application Summary for the Malcolm Baldrige Award 1999 of the Ritz-Carlton hotels Company and well-known methods and models in Service Strategy.
Jennifer DAUM (1004640) University of Abertay Dundee Business School / 2010-2011

Introduction
Society tends to become more technologically advanced as the demands of our consumers are rising and processes became more complex. The Ritz-Carlton, strong from its knowledge and practice of leadership, accommodate themselves to these changes. The well-known hotel has integrated multiple systems to evaluate business projections and determinate contributing factors that help them reach the success and growth and participate in winning the Malcolm Baldrige award in the Service Sector Category in 1992 and 1999. The Ritz-Carlton constantly integrates strategic plans to reinforce the customer service focus and philosophy of the organization. In this way, the company has invested over 25 years of service to ensure the organization offered the best service quality. This assessment will cover Ritz-Carltons service strategy, explaining how leadership management and strategic planning allow the organization to reach all their objectives. The market analysis will show how the RitzCarlton hotel manages its market focus approach and how it uses metrics and measurement to keep high quality standard services. Finally, the Human Resources approach will talk about the internal and external customer focus of the organization.

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Contents Coursework in 3000 words.

Introduction ........................................................................................................................................ 2 Ia. b. 1. 2. 3. IIa. b. 1. 2. 3. 4. IIIa. b. Service Strategy ........................................................................................................................ 4 Leadership ........................................................................................................................... 4 Strategic planning ............................................................................................................ 5 Vision ................................................................................................................................. 5 Retention .......................................................................................................................... 5 Value added strategy .................................................................................................. 6 Market analysis ...................................................................................................................... 7 Market focus ....................................................................................................................... 7 Quality ................................................................................................................................... 8 The Perceived Service Quality Model .................................................................... 9 4Q Model of offering quality ..................................................................................... 9 SERVQUAL ..................................................................................................................... 10 Servicescape ................................................................................................................. 10 Human Resources focus ............................................................................................... 11 Internal customer focus ............................................................................................... 11 External customer focus .............................................................................................. 12

Conclusion ......................................................................................................................................... 13 Index ................................................................................................................................................... 14 References ......................................................................................................................................... 15

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I-

Service Strategy
a. Leadership

The Ritz-Carlton hotels chose to privilege seniors leadership. Seniors have knowledge and sense of Ritz-Carltons values, philosophy and use a strong excellence driven leadership in continuously improve processes and make sure everything is fitting with the companys Gold standards. The Gold standards or commonly named basic standards that Ritz-Carlton hotels respect to perfection implicate some in-house standards as the Credo, the Basics and the three steps of service, the motto and the employee promise. All together, these standards allow the Ritz-Carltons employee to be involved, make decisions, help initiative and improvement. This way to classify and execute all kind of processes and methods is use in the service blueprint (Lynn Shostack, 1984 ) which provides a way to divide a service into logical elements and to picture the tasks or steps in the process : 1. 2. 3. 4. 5. Customer Actions Onstage / Visible Contact Employee Actions Backstage / Invisible Contact Employee Actions Support Processes Physical Evidence1

The service blueprint can also be associated to the theatre metaphor. Performance is the dynamic result of the interaction of the actors, audience, and setting or with the company point of view: the employee, the customers and the service environment. The services as theater framework work well in analyzing existing services and in designing new services. (Grnroos, 1985) The Ritz-Carlton leadership is mainly focus on managing the key production and support processes. These procedures always incorporate changing customer requirements to always meet customer needs. All procedures are controlled and measured and placed in the Greenbook, in order to overcome cultural resistance to change. When a company can change, it allows flexibility and awareness about market needs. In this way, process owners modify processes to increment Day-to-day Improvements.

Avishek Jain (2011) Service Blueprint at the restaurant, *Available online] http://www.scribd.com/doc/54058745/Service-Blueprint-of-a-Restaurant RE-ASSESSMENT 2011 / SERVICE STRATEGY - 4

b. Strategic planning 1. Vision The Ritz-Carlton strategy is to focus mainly on customers (internal and external) and the market with action plans. The company use Fact-based strategic objectives to define long-term targets and fact-based key process identification to set annual targets. These targets can be reaching thanks to their leadership and standard performance measurement2. In order to measure and elaborate the main objectives, the actual versus planned performance is compared by senior leaders at the corporate and hotel level while daily operations reviews are made by the work force every day. Then all information are put together in order to visualize and act on the differences evaluate. It allows improving performance and making sure to meet the annual objectives. Nevertheless, the Ritz-Carlton hotels use a well-know methods: the score card. It is used to structure and achieve quality service performance. The organization followed this process as well to expose their characteristics for the Malcolm Baldrige Award.

Scorecard3

2. Retention Customers are more selective and many companies are losing customers at a rapid rate. However, most businesses can only guess why the
2 3

AS Malcolm Baldrige Application Summary (1999) - Figure 3 & 4 p.5-6. Score card. [Information available online] http://kamraan.com/talks/balance-scorecard-a-holesticframework-to-improve-corporate-performance/

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customers leave. It is essential to develop a formal strategy to retain customers until after they leave. The Ritz-Carlton use customer Surveys to find out what customers want and what causes them to stay or leave. Collecting and promoting customer feedback is really important but the real problem is to manage and analyze them and solve them in time as it constitutes an amount of time and resources. From recent service industry studies, TARP results showed that among customers who register a complaint, 54-70% will buy again if their complaints are resolved. This stat improves to 95% if the customer feels the complaint was resolved quickly.4 The Ritz-Carlton hotels understood this strategy and keep asking feedback from their customer in order to use them to make improvements, and measure the impact of the changes (customer retention rate, revenue per customer, customers saved due to feedback, etc.). Customer needs, wants and concerns are constantly changing and these are the occasion for the company to create new products, services, and programs tailored to their needs. Ritz-Carlton hotels use the CLASS database to classify their feedback and make the employee respond perfectly to the demand.

3. Value added strategy Business executives have long described the process of creating value as links in a value chain. The Ritz-Carlton service provides value through a sequence of events leading to the delivery, consumption and maintenance of that particular service. By analyzing each stage in the chain, the senior leaders find opportunities for improvements.

SaleseNews Sales Mentoring Solutions, LLCs Newsletter (2006), Customer Service Excellence. Pub. Third Quarter.[Available online]. http://www.salesmentoringsolutions.com/v2/elements/uploads/news/pdfs/CustomerServiceExcellence.pdf

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Fig.2 Example value network5

Service recovery strategy can be also an issue to add value to a service, as it participates to promote customers satisfaction and retention (Repair and maintenance service). The senior leaders are responsible to solve the problem quickly, and go back to the customer with an answer or /and guarantee. Hart, Schlesinger, and Maher (1992) defined a service guarantee as a statement explaining the service customers can expect and what the company will do if it fails to deliver the payout. Guarantees are important to integrate in a company strategy as it allows another way to give satisfaction to the customer and value-added to the service. An outcome-based definition of services ensures that managers plan and execute all aspects of service management entirely from the perspective of what is valuable to the customer. Such an approach ensures that services not only create value for customers but also capture value for the service provider.6

II-

Market analysis
a. Market focus

As in all marketing analysis, the company must know where the company is? .The SWOT Analysis is a common method to answer the question. This analysis shows the Strength (Ritz-Carlton is one of the luxury hotel
5

Fig 2 : Figure 3.19 Example value network, ITIL V3 p.81 The Business Relationship Management Handbook: The Business Guide to Relationship Management

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chains in the world, providing Quality service to customers, In-deph shared database of customers for record keeping and other important touch points), the Weaknesses (High employees turnover rate), the Opportunities (Asian market has potential, sponsor events) and the Threats (new entrants with new innovative ideas are attracting people, recession may impact the revenues and profit) of the organization. The Ritz-Carlton chose to have a service-oriented strategy and to perform excellence. In order to achieve the highest quality of services, all organizations that want to expend and/or improve their services, have to compare themselves to another company with close/better characteristics. The Ritz-Carlton hotels follow a benchmarking process which is now a common method in selecting and improving performance measurements. Individual process owners select performance measurements that need to be improved and then replicate the best practice performance found to improve the organization performance and the employees satisfaction. According to the Application Summary for the Baldrige Award, in 1997 the company reached only 68% for customer satisfaction (6% under its main competitor). After these statistics were taken, they improved their methods and achieved 81% for customer satisfactory for the following year7. Benchmarking is a really efficient weapon to improve the company and reach the best standards. They use the 6Ps concept as well and the CLASS database to perform and record every task achieved and improved thanks to some indicators as SQI (Service Quality Indicator) and RevPAR (revenue per available room) by segment market and performance.8 Some monthly measurements are done to supply strategic planning such as advance bookings, customer satisfaction, P&L statement etc.

b. Quality Quality need to be understood through actual Model used by most of the organizations and the Ritz-Carlton itself.

7 8

AS Malcolm Baldrige Application Summary (1999) Business Results Figure 7.1a, & Figure 7.1b p.17 AS Malcolm Baldrige Application Summary (1999) - Figure 3 & 4 p.5-6.

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1. The Perceived Service Quality Model

Perceived Quality Service

EXPECTATIONS

EXPERIENCES

Market communication Image Word of Mouth Customer Needs Customer Learning

Image Outcome/ Technical Quality : What Process / Functional Quality : How

The Perceived Service Quality Model (Grnroos,1984)9

In the Grnroos' Perceived Service Quality model, the expectations are a function of market communications as image, word of mouth, and consumer needs and learning, whereas experience is a product of a technical and functional quality, which is filtered through the image. By building on his theory, Grnroos states that customers compare the service they expect with the perception of service they receive when evaluating the service quality (Parasuraman et al., 1985). The RitzCarlton hotels always used its image to broadcast worldwide, the word of mouth is really important for them and that is why they want to reach 100% customer satisfaction to spread its brand more easily with 100% effectiveness. 2. 4Q Model of offering quality After Grnroos, Gummesson evolved with the 4Q model of offering quality (Gummesson, 1993, 228). In this model, the quality dimensions now fit to every context (goods or services).

The Perceived Service Quality Model (Grnross, 1985) issued from the Total Service Quality gap Model (Parasuraman et al., 1985). Refer to table 1 p.14.

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4Q Model of offering quality (Gummesson, 1993)

We can see the features which have been already described such as image expectations and experiences are represented. It shows a third dimension represented by image and branding. The Ritz-Carlton hotel use indicators such as PQI (Product Quality Indicators) and SQI (Service Quality Indicators) in order to perform Process Audits and improve their service quality performance. 3. SERVQUAL The SERVQUAL Model (L Barry, A Parasuraman and V Zeithmal) is a contemporary method well used by organizations and students to analyze accurately how customer perceived quality service via technical, image and process. Nevertheless, SERVQUAL can be also applied internally in order to assess employees perceptions of service quality, again as a means to improve service quality performance. 4. Servicescape As it was said above, image is a major part of quality, especially in customers eyes. Image means also environment. Servicescape is a common name to talk about the use of physical evidence to design service environments (Booms and Bitner, 1982). Indeed, customers rely on physical evidence that surrounds the core benefits (service) to assist in forming service evaluation. The Ritz-Carlton hotels dont hesitate to change the way they designed a hotel to fit to customer expectation and his well-being. The organization wants to create appealing atmosphere so the customer feel comfortable and give positive feedback.
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III- Human Resources focus

a. Internal customer focus The Ritz-Carlton hotels use a support process called Excellence roadmap. Indeed, this roadmap shows with a quick look, what the organization wants, how to succeed, how to plan it and how to measure it in order to improve; it gives the main Ritz-Carltons principles for any employee. This roadmap still need to be efficient and that is why the employee beneficiate of in-house training and development (80%). Employee satisfaction lead to positive feedback and employee surveys but efficiency and quality service performance as well. Well-being and satisfaction is measured through The Employee Satisfaction Data and can be seen in the Application Summary for the Baldrige Award which shows an average of 77.3% of employee satisfaction against 54.3% for a Service Company Norms10. The Ritz-Carlton hotels chose to follow the cycle of failure: they invest in people and create high-skilled team to increase quality service and satisfaction and on a long-term: loyalty. Indeed, they started to decrease their employee turnover to retain knowledge and efficiency of their employees on a long-term which mean improved selection and training processes as well as drivers of employee satisfaction 11. We can also think that the organization want to fit to a homeostatic model and focus on the motivation to maintain subjective well-being of their employees. In this way, the company makes sure to involve employee in planning for example to empower and motivate them12. The employees are just asked to follow the Credo and all the others Gold Standards but they can always propose new ideas, new alternatives or improvement in the processes they use. The fact that an organization stays open to modification is always an advantage to not be left behind and improve employees initiative and recognition from senior leader. The recognition can be seen through individual reward or/and in increasing revenue for the overall employee.13 To involve employee the Ritz-Carlton hotels put in place the QSP (Quality Selection Process) that measure spontaneous behavior. This indicator is analyzed for Audits as the PQI or the SQI. Moreover the hotels give training certification to employees to make sure the employee is doing his job, the best way to do it, the SPC (Statistical Process Control) is well used to measure process performance.

10 11

AS Malcolm Baldrige Application Summary (1999) Business Results Figure 7.3a, p.19. AS Malcolm Baldrige Application Summary (1999) Business Results Figure 7.3b, p.19. 12 AS Malcolm Baldrige Application Summary (1999) Business Results Figure 7.3c, p.19. 13 AS Malcolm Baldrige Application Summary (1999) Business Results Figure 7.5b, p.20.

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b. External customer focus

As we already explained above that the SERVQUAL is useful for organization to understanding the customers and tangibles. The best way to understand a customer is to plan his journey as is showing the Customer Relationship Life Cycle:

Typical customer relationship lifecycle14

This scheme is the link between satisfaction, commitment and customer loyalty. The Ritz-Carlton hotels are well focused on the customers. In order to reach and keep a high level of satisfaction, product and services have to meet customer expectation and product promise, keep a trust relationship with the customer and keep constant touch. In terms of customer service and support they need to have certain knowledge of the product, identify their customer and branding. They also need to leave a great sales experience because it may retain a customer. The Ritz-Carlton hotels have strong experiences in customer satisfaction thanks to their CLASS database where any customer information are classified and stocked. At any moment they can know everything they want to know how to satisfy a particular customer (as every satisfaction and dissatisfaction is stated in this database). It is a major advantage that cannot enjoy every organization. This method can be associated to supermarket strategy in term of customer. Indeed supermarket use loyalty card as a marketing weapon. In the customer side they have voucher and privileges, and in the organization side, they keep and analyze sales trend and habits. With the Ritz-Carlton point of view, the hotels give the best quality products and services that customers expect and track any information at the same time. The customer is satisfy and the hotel can keep satisfy them. .

14

Typical customer relationship lifecycle. [Information available online] : http://kamraan.com/marketingsrategies/customer-experience-what-is-it/

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Conclusion
Ritz-Carlton Hotels, the award-winning Ritzs perspective on service show how service can achieve the highest quality service on the market for hospitality organization. Service is approached as the total guest experience staged before, during, and after a guest stays at a RitzCarlton hotels in order to brand customer experience. The company creates a customer-centered culture that identifies and improves service as a primary value. The Ritz-Carlton hotels select process, highskilled personnel to enforce high standard and reinforce expectation. Their employees are constantly retrained to perpetuate organizational values and to help them attain greater mastery of products and procedures. For each performance, there is measure and reward. Thanks to a perfect balanced scorecard, The Ritz-Carlton Hotels have reach their final target of 100% employee pride and joy, zero customer difficulties and 100% customer loyalty. Finally it is not only strategy that matters but also execution in the Ritz-Carlton philosophy.

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Index
Table 1 : The Total Service Quality Gap Model ( Parasuraman et al.,1985)

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References

Hollins, G., and B. Hollins (1991), Total Design: Managing the Design Process in the Service Sector.Philadelphia: Trans Atlantic Publications. Bitner, Mary Jo (1992), Servicescapes : The impact of physical surroundings on customers and Employees. Journal of Marketing, Vol.56, No2 (April.,1992), pp.57-71. AS Malcolm Baldrige (1999), Application summary: The Ritz-Carlton hotel Company. [Available online] http://www.baldrige.nist.gov/PDF_files/RCHC_Application_Summary.pdf SaleseNews Sales Mentoring Solutions, LLCs Newsletter (2006), Customer Service Excellence. Pub. Third Quarter.[Available online]. http://www.salesmentoringsolutions.com/v2/elements/uploads/news/pdfs /CustomerServiceExcellence.pdf
Kamran (2009), Balance Scorecard A holestic framework to improve corporate performance. [Information available online] http://kamraan.com/talks/balancescorecard-a-holestic-framework-to-improve-corporate-performance/

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