MKTC1255 – SERVICE QUALITY
A3 – Semester 2/2011
Lecturer: Tjong, Budisantoso
Group: 2
Members:
Tran Thi My Dung - S3231518
Nguyen Ngoc Tuong Vi – S3256225
Do Nhat Minh Quan – S3230280
Vo Thuy Minh Thuy – S3230240
Pham Minh Quang – S 3175490
RMIT International University Vietnam
Bachelor of Commerce Program
ASSIGNMENT COVER PAGE
Your assessment will not be accepted unless all fields below are completed
Subject Code: MKTG1255
Subject Name: Service Quality
Location where you study: RMIT Vietnam – Saigon South Campus
Title of Assignment: Group Service Audit Firm
File(s) Submitted MKTG1255_G2_A3_Service Firm Audit_Star Fitness.doc
Student name:
Tran Thi My Dung
Nguyen Ngoc Tuong vi
Do Nhat Minh Quan
Vo Thuy Ming Thuy
Pham Minh Quang
Student Number: S3231518
S3256225
S3230280
S3230240
S3175490
Student Email Address: S3231518@rmit.edu.vn
S3256225@rmit.edu.vn
S3230280@rmit.edu.vn
S3230240@rmit.edu.vn
S3175490@rmit.edu.vn
Learning Facilitator in charge: Mr. Budi
Assignment due date: 26th August 2011
Date of Submission: 26th August 2011
Late Submission Approval NA
Number of pages including this one:
(Please number your pages like this:
page 1 of 7, page 2 of 7, etc)
Word Count: 3,453
(Main Content)
EXECUTIVE SUMMARY
In this report, Star Fitness center and all its services aspect will be analyzed. Builed on
November 2006, Star Fitness is a famous fitness center invested by Bitexco CorporationIt is
located at The manor Ho Chi Minh city, 91 Nguyen HuuCanh street, BinhThanh District.With
the increasing of high class Vietnamese population, Star Fitness has a great amount of market
share in the fitness industry which is 20%, second place after California Wow, 53%. As a result,
California Wow is the main competitor of Star Fitness. Thus, in this part, Star Fitness ‘s target
market and positioning map will be discussed in detail as well. This research has examined that
Star Fitness is belonged to Fully focus in service organization. Furthermore, in the positioning
map, Star fitness has been set as high service quality and expensive fee.
The next part of the research is about how Star Fitness managing its customer interfaces.
In this part, there are three extra Ps of 7Ps in service. Before getting into analyzing, a detailed
script of processing services to customers is presented, including 3 stages: introductory stage,
core service and closing stage. Next, the balancing between capacity and demand will be
discussed. SF has an excess of capacity due to long opening hours (operate during holiday and
weekend) and cross-train employees. In managing of demand, SF intends to increase demand by
using cost-efficient strategy and “Off-peak member”. Additionally, reservation system is also
used by SF to inventory demand. The second P is Physical evidence. Following The Russel
model of Affect, the report shows that SF offers a ‘pleasant and professional’ fitness
environment for staffs and customers. Currently, SF is at the moderate pleasant and few
arousing, which needs to improve and change to high arousing and increase the pleasant given in
the environment. The last P stands for People. Based on the cycle of success, SF has developed
its hiring, recruiting and maintaining its service personnel as well as satisfied its customers.
Although Star Fitness spend a lot money and effort on building
a good physical
surrounding to create an exciting fitness environment, the center still find difficult in how to
maintain the loyal customers and improve service recovery. It is suggested to apply the wheel of
loyalty and three dimensions of perceived fairness over service recovery processes. The center
needs to bring more value for the Platinum customers such as confident value and special
treatment.
INTRODUCTION
Company Overview
 invested by Bitexco Corporation
 2 Branches :
Star Fitness
Center (SF)
background
 in HCMC, 1st floor in The Manor Tower (belonged to Bitexco
Co.), established in 10/2006, now has more than 1,000 members
 in Hanoi, The Garden building (Belonged to Bitexco Co.),
established in 8/2010, about 400 members
 Target on upper middle and high income class
 Primary service is fitness programs such as Step aerobics, Yoga, Belly
Principal
service
Dance, Boxing, Circuit training, martial art (Karate) and Personal
Training.
 The main competitor of SF is California Wow which is analyzed as the
best Fitness Centre in HCM city. It has better location in Dist 1 and 5
which can attack more potential urban customers.
Major Rivals
 The centers located in Bitexco’s Building so it is mainly serve for people
live around the apartment. Hence, compare to its competitors, the
location is not highly visibility.
1.
Market share
According to Bao Vinh (2011), in 2010, the percentage of wealthy people in Vietnam is
about 1% of the total population, or is approximately 860,000 people. The consumer trend of the
rich Vietnamese consumers is similar to other Asian countries that they will tend to spend money
on houses, luxury cars, travel, health care, beauty centers and fitness centers. Therefore, there is
a significant growth for fitness industry in Vietnam. Specially, up to now, in Vietnamese fitness
industry, only three big, high-grade fitness centers target on the wealthy customers and gain most
of fitness market shares: California Wow, SF and the new comer BeYou.
When research some articles, we estimate the market share of SF center in Vietnam based on
the number of members.
Figure 1: estimated market share for Star Fitness Centers (Bao Vinh 2011)
2.
Primary Target Market& Positioning map
Target market
Figure 2: Star Fitness’s target strategy is
Fully Focused
SF center provides fitness services to narrow and specific market, target on upper middle and
high income class. Thus, in the basic focus strategies, it belongs to the Fully Focus and could
charge premium prices to generate higher profit margin.
Positioning
As can be seen on the map above, the company provides high quality service with premium
price. The price of SF ($70/month) is higher than BeYou fitness ($55/month) but less than
California Wow (about $100/ month) which charges the highest price within the industry.
Figure 3: Positioning Map for Star Fitness center
MANAGING THE CUSTOMER INTERFACE
Fail points
Possible root causes
 Staffs talk to customers
in a rude, impatient, and
Reservation
impolite manner.
 Reservation is wrongly
recorded.
Poka-yokes
 All conversations will be recorded.
 Staffs are asked to introduce their names to
customers at the beginning of the
conversation.
 Staffs are asked to fill in all blanks of a form
for each call and hand the form back to
supervisor at the end of the day.
Register
Information is not clear and
 Staffs are available for question and answer.
complete. Offers are not
 Old customers are highly appreciated to give
attractive.
new comers advice and share experience.
Staffs make mistake in
Bill
preparation
billing because of confusing
Use technology (computer software to prepare
between different types of
the bill etc.)
membership.
Consult with
personal
trainer
 Appearance of personal
trainers.
 Trainers are not well
prepared.
Join classes
 Trainers do not treat
customer politely.
Locker room
Lost belongings.
depart
 Trainers are asked to record the consultation
or classes for later reference.
 Announcements in big font telling customers
how to seek help from the center or give
comments.
Cameras are set up at locker room.
Security guards are asked to check on this area.
Parking ticket, along with member card, will be
Retrieve
vehicles,
 Place mirrors at the exits of staff area.
Customers lose their ticket.
kept by reception. Customers are recommended
to give those when coming to receptionists and
receive back when they leave.
Managing capacity and demand
SF has experienced the condition of excess capacity, that demand is below desired
capacity and resources are not fully used (Lovelock & Chew 2009).
Managing capacity
Firstly, SF stretches its capacity by using the facilities and equipment for longer periods.
In order to capture more customers, mostly businessman with busy schedule, SF has extended its
opening hours to 6am-10pm during weekdays and weekends. It even operates on holidays as
well.
Secondly, in order to adjust capacity, SF also cross-train its employees – its staff and
trainer are trained to perform a variety of tasks (Lovelock & Chew 2009). Most trainers at SF are
capable of teaching at least more than two courses simultaneously, for example, some trainers
are responsible for both swimming and Yoga classes. During the period that customers demand
more Yoga classes, those swimming trainers can switch to teaching Yoga classes and vice versa.
Even though cross-training employees can be a good strategy to manage capacity, it can
harm customers’ experience if the staffs are not well-trained in the courses that they undertake,
especially when sport coach training is much more complicated than cashier or security staff
training. Personal trainer service is one of superior value that SF can provide its customers;
therefore if the trainers’ knowledge cannot meet customer’s expectation, they can easily get
disappointed.
Managing demand
a. Increase demand
SF relies mostly in pricing system to manage demand, by making it more cost-efficient for
customers to come with group or increase service usage. Temporary membership is charged
higher subscription fee than regular membership, and corporate membership is also more
affordable than individual membership. In order to improve productivity in low-demand periods,
SF offer a low-fee type of membership called “Off-peak member”, which is only applicable
between 8am to 4pm every day.SF has also spent some efforts on promotion programs that aim
to boost demand. For instance, customers will get discount if they introduce their family member
or friend to register for “regular membership” at SF.
These options effectively assist SF on balancing the demand variations in the peak hours, which
eventually lead to higher productivity. Nonetheless, SF must be careful in applying these options
to avoid customer dissatisfaction – crowded fitness center is not what customer wants to get
when paying a large amount of money.
b. Inventory demand by reservation system
When customers call the company to make a reservation, SF accepts that request, but also clarify
that there is always space available and they do not need to reserve in the future. However, this
tactic is applied for both equipments and classes, regardless of the possibility that some classes
may be full in unusual cases.
Physical evidence
Figure 4: The Russel Model of Affect apply in Star Fitness center
In bassic, the Russel’s model of Affects help to better understand customers’ feelings in
“service enviroment”. In SF center, it offer a plaesant and professional fitness enviroment for
both the staff and its customers. The fitness center are trying to increase arousals level so could
create excitement fitness environment.
Furthermore, Bitner (1992) has developed the Servicescapes illustrating the impact of
physical surroundings on customers and employees. The Figure 5 below is represent the
Servicescape designed for SF environment
Figure 5: Servicescapes Model for Star Fitness (Bitner 1992)
SF tries to create a healthy and natural environment, brings dynamic and make them
concentrate on fitness classes without boring. Hence, the design factors are considered as a
important tools to drive customers to have a positive responses in fitness centers. The table
below represents an overview of all the design elements that might be encountered in SF center.
Dimensions
Design Elements
 Located in the luxury apartment- The
Exterior
facilities
Impact on Customer & Staff
Capture customers attention,
Manor so could attract the high
visibility symbols to
income people who live around
communicate SF brands and
 Clear logo and welcome banner which
bring value to customers
are easily identified
 reception booth at the entrance
 Clear, wooden floor and minor
surfaces to create warm and bright
Comfort
environment
No distraction, help to
 Good lighting system
General interior
Dynamic feeling
highly concentrate
 Strong beat-bass music
 spacious size, cool air quality
 Modern fitness equipment display
 Separate audios with different music
sound
 Cash register placed in front of the
centers
soft, red salons along the lobby for
waiting or relaxing
Store layout
 hot-cold water dirking provide inside
each audio
 mini bar with some computers and
magazines
feeling of professional
service environment
feel friendly and closely
contact to the coach and SF
employees
reduce or avoid customers
frustration in waiting time
 feedback box near the cash register
securities locker rooms
 bright, professional audio layout ( See
Figure 6 below)
 LCD Tivi advertising display in front
of the building
Interior
displays
Social
dimensions
 Display pictures of celebrity exercise
in SF along the lobby
enhance brand awareness
building strong image in
customer’s mind
increase reliability and
 SF logo
credibility
 sporty uniform with SF logo
feel confident and safety
 privacy and security locker rooms
Satisfaction with
provide one complimentary tower set
supplement service
for members
 Dry saunas and steam rooms
available
 friendly and whole-hearted coach
behaviors
enhance brand equity
People
Cycle Of Success
SF’s service employment can be seen and analyzed in the cycle of success. The company
has some hiring, recruiting strategies in order to maintain and improve the quality of service
personnel and SF also focuses on training, motivating and maintaining the loyalty of employees
to the company. This can make customers feel satisfied with the service quality and keep the
service relationship.
Low
customer
Trainers
control turnover
Customer
loyaltySelfmotivated
trainers
service
quality
Job
satisfaction
Good relationship
Trainer-Customer
High wage
and salary
Qualified
and
experienced
trainers
Customer
satisfaction
Figure 7: Cycle of Success of Star Fitness center
Customer
retention
SF offers a highly competitive, above-average salary to attract good staff. Trainers at SF
will receive an extremely good wage for each one-hour session, especially individual training, as
compared to other. In addition, they are promised to be rewarded by fun, family atmosphere,
prestigious locations, competitive pay, excellent leadership, and clean, safe environment.
Therefore, SF has applied highly intensified selection criteria in recruitment. It only hires trainers
who qualified and experienced in sport field, especially, in fitness industry. Instructor position
requires at least two-year experience in teaching sport. Candidates should have achievements in
professional career and ability to teaching many different kinds of sport in order to get hired.
This is the base for SF to broaden the job design and serve the customer in higher quality level.
The company keeps guide their frontline employees after the recruitment in order to
ensure the instructors know and understand their roles and scripts. SF’s trainers also have
opportunities to take part in advanced training to gain more knowledge in their specialized field
and to be certificate of “expert trainer”. Therefore, they are satisfied and motivated to achieve
higher level of profession. They already have satisfaction because of good wage and now, thanks
to the fulfillment of need for self-actualization need, referred to Maslow’s model, they create a
positive attitude and want to stay with the company. Hence, SF can decrease employee turnover
and build up the loyalty of its employees.
Not only continuously improving the professional skills in order to serve customers
better, the trainers also try to deliver customers fun and relaxed atmosphere with friendly talks
and start to create relationship with them. When customers realize the improvement of service
quality and commence a good relationship or even a friendship with the trainers, they will also
start to cultivate a loyalty towards SF. The longer customers stay with SF, the higher profit
margins the company can obtain and the more SF can invest in building customer loyalty and
retention.
In term of customer satisfaction, because of qualified and experienced trainers, customer
can satisfy with the service quality of Star Fitness. In additional, the employees are motivated
and have good attitude, so they improve the professional skills and try to serve customers better.
When customers realize the improvement of service quality, they will keep the relationship of
the familiar trainer and build up the loyalty to Star Fitness.
Cycle of talent
According to Lovelock (2009), there are 3 steps in how recruit and develop the human resource
in the company.
The first step is “hire the right people”. In the case of Star Fitness, the employer are “preferred
employers” because they ofer various advantages in term of competitive wage, professional
working environment and potential for growth. These advantages can help Star Fitness to attract
and capture the best instructors. There are many others benefits that Star Fitness can provide its
employees such as warm atmosphere, professional training, interesting customers and safety in
workplace.
Although Star Fitness’s instructors are encouraged to have knowledge about many kinds of sport,
they must be well-trained in specialized sports in which they are resonsible for training at Star
Fitness. For example, all of trainers must have the ability to speak both Vietnamese and English
and many years of experience teaching or professional playing in the specialized sports.
Therefore, Star Fitness is using appropriate policies to put right men to right place.
The second step in the cycle is training the employees. Star Fitness always trains the new
employees after recruiting, so that they can cope with workplace culture and etiquettes, and also
to effectively interact with other staffs and customers. Staff also learn how how to use
information system and modern training equipments in the center. Finally, they empower the
trained instructors – frontline employees. Lovelock stated that there are three levels of employee
involvement: suggestion, job, and high involvement. Star Fitness applies the job involvement for
their instructors. The instructors are free to make improvement in their courses and develop
specialized exercise program for their customers. There is also a frequent and continous
interaction kept between senior management level and employees so that they can easily adapt to
each other and together imrpove service quality.
The final step is motivation. Star Fitness motivates its employees by keeping its promises when
recruit them. High wage is not the only way Star Fitness energize its trainers because the center
also provide feedback and advice to its trainers. However, the most important motivation that
Star Fitness offer its employees is through give them chance to grow. Trainers at Star Fitness are
encourage to participate in advanced traning course in order to continously improve themselves
and also. The instructors are encouraged to take innovative teaching and problem-solving
approaches, as long as these methods align with the company’s objective and mission.
Nonetheless, the company still takes steps to monitor and control training activity in order to
help instructors to fulfil their roles and conduct corrective action whenerver needed.
Figure 8: Cycle of Talent of Star Fitness
IMPLEMENTING PROFITABLE SERVICE
STRATEGIES
Attaining and maintaining customer loyalty
Figure 9: The Wheel of Loyal
1.
Building a foundation for loyalty
Figure 10: the customer Pyramid (Zeithami et al 2001)
Strategies
Target the right Customers
Analysis above
design attractive pricing to retain the right customers, for
Searching for Value, Not just
example, the fee for “membership 6 months” is cheaper 10%
volume
than paying per month for 6 months and 1 year membership
card is much more cheaper.
for the Platinum customers, SF should offers Specialized
Managing the customer Base
Fitness Programs, which is provide safe and effective
through Effective Tiering of
exercise program based on customers goal and needs
Service
For God and Iron, who price sensitive, should launch group
discount or promotion to attract and retain them.
Since customers could become “terrorists” if they very
dissatisfied and may switch to another fitness centers if they
Deliver quality service
belong somewhere in “Zone of Indifference”. Hence, SF
should train its frontline staff to behave professionally, keep
in touch with the customers through email or phone.
2. Create Loyalty Bonds
After having the solid foundation for creating customer loyalty, now SF should get “closer
relationship” with its right customers by:
Strategies
- In order to tie customer closer, SF should introduce
Deeper the Relationship
through Cross-selling and
Bundling
different fitness classes for loyal customers, offer for 1
month free experience. For example, SF could offer Belly
Dance for customers who has taken the Yoga classes in
support to have a perfect, healthy body
- Fee discount for taking two or more fitness classes.
-Financial rewards such as: offer VIP card, and discount
Give Loyalty rewards
10% in the Fee
- Non-Financial reward: Birthday gift for VIP members,
priority to use swimming pool and dry sauna.
-Social bond : Training staff to remember loyalty
customers, frequency put mote focus on them, closer
Build higher level bonds
communicate to them and create personal relationship
- Customization Bonds: SF should provide special
treatment value to its loyal customers like create a goal
checklist for customers so that they will follow this
checklist and effectively gain healthy body as the result.
3. Reduce Churn Driver
Next, SF need to understand the divers for customer defections based on the Figure (Keaveney
1995) so it could effectively reduce those drivers.
Figure 11: what drivers customers to switch away from a service firm
( Keaveney 1995)
Strategies
-frontline staff like coach need to have attendance checklist so that
Conduct churn
diagnostic and monitor
declining/ churning
customers
they will know who leave SF
- Then the database would be send to the reception areas and they
will call or email them asking short set of questions to gain better
understanding of why customer defects.
- SF should offer feedback box in each fitness classes, feedback
form and pen are always available for convenience.
-Reduce inconvenience : offer free parking for SF’s customers
- conduct Save teams, specially trained call center staff to deal with
customers who want to defects.
Address key churn
- For customers who do not have enough time to frequently go to
drivers
SF, the center will offer personal Home trainers if requirement,
charge with reasonable price.
- upgrade mini bar and waiting rooms to reduce customer
frustration in the traffic time
Put effective complaint
Settings internal rules : - Staff could not argue with customer
handling and service
-seff – check the frontline system whether the service failure was
recovery processes in
cause by staff behaviors and have better improve.
place
Increase switching costs
Offer Loyalty programs so that customers they do not want to lose
their higher tier status or forfeit loyalty points already accumulated.
Complain handling and service recovery processes
Figure 12: Three dimensions of perceived fairness over service recovery
processes
Customers need to be treated fairly if the service failure occurs, hence according to Tax
and Brown (1998), there are three dimensions of fairness that could help SF to develop effective
service recovery procedures
Procedural Justice: if SF failures in providing its service, the center need to show that
they responsible for that failure because customers are strongly seeking for responsibility. SF
should offer hot-line phone or email and the Save Team will represent for the centers, take
seriously the comment and try to fix as soon as possible.
Interactional justice: it involves the employee’s behavior when deliver service, so SF
employees should honestly give customer feedback form, asking them to comment on this form.
Once again, do not argue with the customers.
Outcome Justice: concern on the compensation for not only the failure, but also time,
effort and energy spent from customers during the service failure. For example, give them
special treatment such as free fitness class in one month or money return and thank you feedback
for helping SF perform service better.
RECOMMENDATION
Firstly, SF currently deals the problems with “parking lot” in the Manor building in
HCMC. When researching, many customers say that the parking fee is quite high, 10,000 VND
for motorcycle and $30,000 for car. It is the real problems that SF must face otherwise this issue
will create incontinence for customers and lead to customer defection. It is suggest offering free
parking fee for ST fitness customers by providing the SF membership cards for customers
proven that they are SF’s customers.
Secondly, the service company can perform well or not depend on the performance of its
staff. Therefore, professional and whole-hearted trainers are highly focused. SF need to consider
the HR strategies that not only about hiring the talent people, but also understand how to
motivate them, retain the talent pool in the fitness centers. If they go for other competitors, they
will take customers to follow them. Since, SF is very good in provide professional working
condition for its staff, here are several recommendations for better improvement:
Although in the traffic time, the center needs to ask its coach to teach several fitness
programs to manage capacity well. However, each staffs has specialized knowledge in
specific areas so doing this way could dissatisfied the customers. It is suggested to invest
in selective recruiting, seeking for staff that could perform different tasks. Also, listening
to employees, see their quality so that could arrange proper working position for them.
Training programs need to be considering as the best way to keep closer to employee’s
talent.
Having performance checklist and provide monthly rewards for the best staff
performance.
Training Save Team to answer the phone call for service recovery. Also they could work
as the accountant department, with their communication and soft skills they could have
better interaction with customers and quickly response to customer’s queries.
Take seriously and professionally the customer’s feedback.
Lastly, it seem that SF has design attractive and effective physical evidence to brings exciting
environment to both its customers and staffs, SF should also consider safety and security factors.
For example, for the customers who bring value property, instead of using the locker rooms, they
could send it directly to the receptionists and pay reasonable fee for this private keeping.
Furthermore, in order to be competitive in Vietnam Fitness industry, SF should do more
advertising activities such as ads in Magazines and endorser for several fitness events to
introduce the modern equipment and professional, healthy environment to the customers.
Reference lists

Bao Vinh, 2011, “Dau tu Trung Tam The Duc The Hinh cao cap : Tiem nang, nhung rui
ro bac ti”, Nhip Cau dau tu, viewed 24th August 2011, <
http://nhipcaudautu.vn/article.aspx?page=1&id=7854> .

Johnston, R, 1996, ‘Achieving focus in service organizations’, The Service Industries
Journal, Vol 16, pp. 10-20

Lovelock, CH, Wirtz, J, & Chew,P, 2009, “Essentials of Services Marketing”, 1st edn,
Prentice Hall, Pearson Eduction, Singapore.

Russel, JA, 1980, ‘A circumflex model of affect’, Journal of Personality and Social
Psychology, vol 39(6), pp.1161-1178.

Bitner, MJ, 1992, ‘Servicescapes: The impact of physical surroundings on customers and
employess’, Journal of Marketing, Vol 56, pp. 57-71.

Keaveney, SM, 1995, “Customer switching behavior in service industries: An
exploratory study”, Journal of Marketing, Vol 59, pp. 71-82.

Tax, S & Brown, S, 1998, ‘Recovering and learning from service failure’, Sloan
Management Review, vol 49, pp. 75-88.

Star Fitness Center, 2011, Bitexco Co., viewed 24th August 2011, <
http://www.starfitnesssaigon.com>.