Internationalization of service businesses is being facilitated by free trade agreements –such as those between Canada, Mexico and the United States (NAFTA), between the South American countries comprising Mercosur or Pacto Andino, and, of course, between the 27 current member states of the European Union. However, there are fears that barriers will be erected to impede trade in services between free trade blocs and other nations, as well as between the blocs themselves. Developing a strategy for competing effectively across numerous different countries is becoming a major marketing priority for many service firms. Pressures to Improve ProductivityWith increasing competition, often price-based, has come greater pressure to improve productivity. Demands by investors for better returns on their investments have also fueled the search for new ways to increase profits by reducing the costs of service delivery. Historically, the service sector has lagged behind the manufacturing sector in productivity improvement, although there are encouraging signs that some services are beginning to catch up, especially when allowance is made for simultaneous improvements in quality. Using technology to replace labor (or to permit customer self-service) is one cost-cutting route that has been followed in many industries. Re-engineering of processes often results in speeding up operations by cutting out unnecessary steps. However, managers need to be aware of the risk that cost-cutting measures driven by finance and operations personnel without regard for customer needs may lead to a perceived deterioration in quality and convenience. The Service Quality MovementThe 1980s were marked by growing customer discontent with the quality of both goods and services. Many of the problems with manufactured products concerned poor service at the retail point-of-purchase and with difficulties in solving problems, obtaining refunds or getting repairs made after the sale. Service industries such as banks, hotels, car hire firms, restaurants and telephone companies were as much criticized for human failings on the part of their employees as for failures on the technical aspects of service. With the growing realization that improving quality was good for business and necessary for effective competition, a radical change in thinking took place.
35 | P a g eTraditional notions of quality (based on conformance to standards defined by operations managers) were replaced by the new imperative of letting quality be customer driven, which had enormous implications for the importance of service marketing and the role of customer research in both the service and manufacturing sectors.10 Numerous firms have invested in research to determine what their customers want on every dimension of service, in quality improvement programs designed to deliver what customers want, and in regular measurement of how satisfied their customers are with the quality of service received.