Marketing Regulation and Consumer Behavior

Marketing Regulation and Consumer Behavior Rylander & Provost (2006) suggest the services sector is failing because the services provided to consumers are less than optimal. The service sector is simply not providing high quality customer service. There are many reasons for this. Not only is the service sector not providing the quality one would expect from a company in the services industry, the service sector has also for some time now, continued to become less productive, which increases the rate of poor consumer satisfaction reported in market research (Rylander & Provost, 2006).

When consumers are not happy with the service they receive, they are more likely to shop around, increasing the competition any one service provider faces as consumers search for the best possible service. Given this information, one would assume that the problem in the services sector must relate to products or some factor other than the service provided. However, market research shows that the main problem in the services sector is "service" meaning customer service that comes from employees working for a company in the services sector.

This paper will address the problem of customer service in the services sector. Introduction The services sector has been growing for some time, yet despite this there are many problems one can identify within the services sector. This paper will provide an analysis of the poor customer service offered by many companies including retail establishments in the services sector.

Nelson (1994) is one of the earlier researchers to note the trend toward problems in the service sector, suggesting that many of the customer service related problems in service industries including in offline shops and online have to do with the low pay for the employees working behind the scenes, and lack of opportunities for advancement among employees working for the services sector. Nelson makes a solid point. Human Resources Management has long concerned itself with identifying problems and developing solutions for people working in the service sector.

Human Resources teams often have trouble retaining and recruiting good employees to work in the service industry. This is due to many factors, including the competition for skilled workers and the low pay that many companies have to offer their workforce. However, what many do not realize is that it isn't just a matter of pay for employees. As Nelson (1994) points out, service workers are "more likely to have fewer opportunities and realize greater inequality in earnings" (p. 241).

This can lead to decreased motivation, which can tempt employees to leave and work for other companies that offer better benefits or even marginally higher pay rates. Problems in the services sector are not limited to the United States. Gandhi & Ganesan (2002) note that many countries have service sector problems including those related to poor employee retention and customer service issues.

The researchers focus on service sector problems in India, noting the excessive growth of technology and "radical changes in the capital market segment" have led to lower pay for common employees or those that do not hold jobs with "special skills" in up and coming fields like technology (p.32). Customers are also becoming more technology savvy.

Consumers are now buying online rather than going to retail store centers, so many employees that work in the service sector in major consumer centers have concerns over their job status, because the odds that a computer may replace a person in a job are realistic (Gandhi & Ganesan, 2002). If consumers can buy online without the need for human interaction, then super retail centers can save money, and if they can save money by laying off employees, then they will.

Retail service centers that work offline rather than online often hire employees that are less skilled because they can, and often pay them minimum wage rates or less in other countries, which for many employees is barely enough to compensate them for drive time to work much less raise a family (Gandhi & Ganesan, 2002). If retail centers continue to provide employees with little income and little incentive to work, they will continue to have high turnover rates.

The employees that do work for companies will harbor resentment or bad feelings toward the company because they will feel as though they are not paid equitably for the time they do put into their work (Nelson, 1994; Gandhi & Ganesan, 2002). According to a report prepared for a trade union seminar in the late 1960s, manpower problems were a huge concern in the service sector among international companies. This trend has continued in the present.

This early report, printed in 1967, shockingly describes in detail how troubling the manpower problem in the services sector is. The report notes that there was an information gap at the time among companies with regard to why manpower in the services sector was lacking. The services sector economy as noted by the report "consists of those diverse activities which are not embraced within the primary sector or natural resource or "manufacturing" sector (OECD Publication, p. 50).

The highlights of this lengthy report detailing problems in the service sector regarding manpower states that four key elements contribute to manpower problems, including (1) a demand for "increasing services" which often can't be met because consumers are not willing to "pay for an increase in price" which would help compensate employees better; (2) the lack of government support and funding to the services sector; (3) the "ever-changing pattern of services" that required a "mobile" and "fluid" labor force with "wider and more flexible skills" and (4) needs including more training, better recruitment and "educational standards for entry workers" (OCED Publishing Center, p.

29). The question that arises from this historical background is "How do problems with manpower in the services sector today compare with those experienced during the early to late 1960s?" The answer is simple. The services sector today is facing many of the same problems it faced four decades ago, and for that reason, customer service is lacking. Customer service is lacking because there are not enough employees to work for companies given the low wages and poor benefits packages available to employees.

While many service sector employees do not need extensive technical training, they DO need training, because companies are so technology oriented. However, retail sector employees are often not paid for their time or the time they have to invest in training. While the skills they need to know may be less extensive than one might expect in other industries, the skills are still worthy of proper compensation. The government isn't likely to support retail outlets because they have their own financial woes to commiserate about.

The retail market is still requesting employees have knowledge and come on board with "flexible" skills, however again, employees often do not feel compensated for their talent. Even in cases where they are compensated well, because there is so much competition in the industry, employees are constantly tempted to work for other companies that offer even a miniscule increase in pay or benefits. Customer service problems affect companies in many ways.

From a purchaser and user perspective, companies are likely to loose their status and their place of "grandeur" if they do not constantly work to please the selective consumer. The purchaser is the individual that buys something from a company. They are important to companies because if there were no purchaser then a company would sell no product. The user of a product however, is a client the company must also consider very carefully, because the user of products is the "target market" or audience for a product.

and, if the user doesn't feel a product or service meets their need they will go elsewhere. The purchaser may not be as selective as the user; however, if they experience poor customer service, they may influence the user to try a different service or retail outlet, regardless of the brand name of the company they work for. Therefore, from a marketing perspective, the user and purchaser should be an important consideration to Human Resources Management teams as they contemplate problems of service especially customer service in the services industry.

Triplett & Bosworth (2000) explore problems in the services sector related to productivity. The authors cite the U.S. Bureau of Labor Statistics or BL, noting that productivity had been growing in the services sector until the early 1970s, where it began to drop off. The reasons for this are varied, but they include as cited by the authors low morale and motivation among employees. This in turn can result in poor customer service, which can discourage the user from using products.

The purchaser then no longer buys products because of the poor customer service received, which decreases the profits a company makes, which then results in increasingly poor pay. It is a domino effect of sorts (Triplett & Bosworth, 2000) that leads to increasing problems and headaches for human resources agents trying to remedy labor problems.

Triplett & Bosworth (2000) also note that in the services sector where a company offers a valuable service, it is often harder to boost productivity than in a "goods producing industry" so one would expect service industry agents to work even harder to motivate employees by whatever means possible.

The authors also note however that poor statistics serve as a de-motivating force, and that service companies should try harder to emphasize the positives rather than the negatives associated with working in the services industry if they want to continue to capture quality employee's interest.

Yet another problem with "service" in the service sector is "outsourcing." "Contracting out" (Postner, 1990) has long been noted as a primary problem in the service sector and related to service sector analysis because it is difficult to gather statistics on service when so many services are contracted out to agents abroad that may be willing to provide services for less money than it would cost a company to hire a traditional employee.

John (2003) proposes a simple solution to the "most obvious" problem in the services sector, which many describe as "customer service." The author suggests service institutions offer what he calls "customer-focused management" where the service sector attempts to take advantage of customer input to manage service better. An organization can reward consumers for participating in surveys for example; that help companies pinpoint problems with the services they provide, so they can improve them (McClure, 2003).

Companies can also survey customers to find out what they would be willing to do to improve service, even if this means paying more money for a service to guarantee better quality (John, 2003; McClure, 2003). Smith (2004) also comments on the problem of "service" in the service sector. Smith suggests companies adopt more formal approaches to improving service including use of the six sigma factor analysis. Rylander & Provost (2006) also note the six sigma factor may be useful for online market research to improve customer service.

The authors suggest that lack of "human contact" is a "major reason for customer dissatisfaction" and poor customer service makes companies have to fight and compete to "regain customers they should have taken care of" to begin with (Rylander & Provost, p. 13). The authors suggest that technology and quality management techniques when combined can improve service in the service sector industry.

This is accomplished through market research that leads to a collection of surveys that help managers develop a customer service management philosophy which they refer to as "six sigma" (p. 13). The idea is that companies need to get back in touch with the consumer. If they do, they will find the purchaser and the user both want to have a better buying experience. For this to happen, the company must improve the service it offers.

For the service to improve, the employees providing the service to customers must feel valuable and appreciated. They must feel their skills and abilities are put to good use. So, managers have an obligation to their employees to commit to better quality service "in house" before they can provide better service externally, or to external consumers. In house customer service is the service a company provides to its employees (Rylander & Provost, 2006).

A company has an obligation to survey consumers to find out how far they can stretch a dollar, and inform consumers of why they need to increase prices. If consumers understand how much skill and talent is necessary to provide them with the ideal service they demand and desire, they are more likely to pay for it (Rylander & Provost, 2006). When consumers pay for better service, the company then has to realize they are doing so because they expect better service.

The management philosophy then should be directed toward giving employees what they need to motivate them to perform their best for consumers, so they can retain their customers (both internally and externally). Discussion & Conclusions Clements (2002) said it best when he commented the world today is "choice-driven" and the profitability of the "customer for life" should be the primary motivator for service sector companies to promote what they offer as the "best" or "world class" when offering guarantees to the consumer, including the purchaser and the end user (p. 35).

If a service sector company wants to make a difference, then they have to impress customers with quality service regardless of the type of service they offer. Managers can help improve service by adopting a philosophy that tells internal customers (employees) how valuable they are and external customers (consumers) how valuable they are. The answer to the service problem in the service sector is then simple.

Using online market research (Hogg, 2001) and other types of consumer surveys, service sector companies can find out what drives consumers to buy and use their services. Once they know this, they must then determine what consumers are willing to pay for services. Companies then must deliver what they claim to external customers, so productivity increases and service sector companies can pay their employees what they are worth.

Employees that are well-compensated for their time and VALUED by a company are more likely to remain motivated and productive than employees that are paid consistently low wages. If a service sector company wants to improve the service they provide they should first pay attention to how they serve their internal customers. If a service sector company does not have the financial resources to pay employees higher wages, they can look to alternate ways and methods to enhance motivation and productivity.

Not all employees are motivated by wages and financial incentives alone. Many employees for example, are motivated by benefits like personal days off (Clement 2002). Other employees may be motivated by their title, or by a manager's recognition of their talent, skill or effort at quality customer service (Gandhi & Ganesan, 2002; John, 2003; Hogg, 2001). It is important that companies survey their.