A service level agreement is a part of the contract between the marketing organization and the client which stipulates the obligations of the parties and the exact issues of the deal. This agreement is important because the service elements are more readily altered than the product element. While the characteristics of the product are usually controlled by the producer, the service element can be altered more readily by other members of the channel, such as wholesalers and retailers. The price represents a single payment for all four components. Service level agreements are “forms of the contract agreed between the service supplier and the service purchaser or user” (Jhonston and Clark 2008, p. 170).
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Use services related to such services as installation and adjustment, which directly affect the use of the product. Acquisition services include location, information, delivery, credit, and leasing, which are of help in acquiring a product. Associated services include sales promotion devices such as contests, trading stamps, and premiums, which provide an additional inducement to buy, and are generally considered “free” services or extra services. The very perceptions and interpretations of service by consumers create opportunities. Consider the lifestyle factors influencing service development. Urbanization, leisure, competition, discretionary income, travel, styles, tastes, automobiles, informality, and convenience have led to the emphasis on product form, readiness, packaging, combination, and selection convenience. The service level agreements are important for both the sellers and buyers because the actual choice is difficult because the consequences of an act do not depend on conditions that can be predicted or estimated with complete accuracy. In indecision theory, these uncertain situations are dealt with as “states of nature.” The states of nature include the multiplicity of factors that determine the outcomes of any particular marketing strategy. Customer behavior and response, a competitor’s action, and the impact of socioeconomic forces, all fit this prescription.
Service level agreements can be based on performance metrics that stipulate service objectives. Most importantly, these agreements stipulate customers’ duties and responsibilities, time and cost of the service. In determining which alternative to choose, therefore, it is desirable to try to assess future states of nature. Complete assessment can never be attained, since it is difficult, if not impossible, to identify all these states. Thus, in most decisions, optimization is not usually possible, and less than optimal results accrue. Marketing decision-makers should think in terms of strategies they can select, events that might occur, the probability of occurrence, and the resulting payoff of the intersection of each strategy and event. To do so, they can apply conditional reasoning. “A major task for a partnership cannot be handled by semi-formal agreement” (Jhonston and Clark 2008, p. 160). Decision-makers can assume that they have selected a given strategy and that a given state of nature exists. Conditional on these factors, they can estimate the payoff likely to occur. Conformity is one of the significant characteristics of consumer behavior. It refers to the implicit agreement on common values or mass patterns of behavior. Several investigations of consumer reactions confirm the need of consumers to conform, particularly in their purchases, to societal norms.
In sum, a service level agreement ensures the high quality of the service and allows both parties to avoid conflicts and misunderstandings. At this stage, considerable service level agreement ensures fair trade. It is clear that it has been an effective piece of legislation and industry standards applied to different spheres of business.
Jhonston, R., Clark, G. 2008, Service Operations Management. Financial Times/ Prentice-Hall; 3 edition.