Managing the 7Ps Requires Collaboration between Marketing, Operations, and HR Functions

Customers

Operations Management

Marketing Management

Human Resources Management

Chapter 2

Consumer Behavior in Service Encounters

Managing Service Encounters--

• Service encounter: A period of time during which customers interact directly with a service

• Moments of truth: Defining points in service delivery where customers interact with employees or equipment

• Critical incidents: specific encounters that result in especially satisfying/dissatisfying outcomes for either customers or service employees

The Purchase Process for Services

Prepurchase Stage

• Awareness of need• Information search• Evaluation of alternative service suppliers

Service Encounter Stage

• Request service from chosen supplier• Service delivery

Postpurchase Stage

• Evaluation of service performance• Future intentions

Perceived Risks in Purchasing and Using Services

• Functional – unsatisfactory performance outcomes

• Financial – monetary loss, unexpected extra costs

• Temporal – wasted time, delays lead to problems• Physical – personal injury, damage to

possessions• Psychological – fears and negative emotions• Social – how others may think and react• Sensory – unwanted impacts to any of five

senses

Factors that Influence Customer Expectations of Services

Predicted Service

Explicit & Implicit Service Promises Word-of-Mouth Past ExperienceDesired Service

ZONE OF

TOLERANCE

Adequate Service

Personal Needs

Beliefs about What Is Possible

Perceived Service Alterations

Situational Factors

Source: Adapted from Zeithaml, Parasuraman & Berry

Components of Customer Expectations

• Desired Service Level: wished-for level of service quality that customer believes can and should be delivered

• Adequate Service Level: minimum acceptable level of service

• Predicted Service Level: service level that customer believes firm will actually deliver

• Zone of Tolerance: range within which customers are willing to accept variations in service delivery

Intangible Attributes, Variability, and Quality Control Problems Make Services Hard to Evaluate

• Search attributes – Tangible characteristics that allow customers to evaluate a product before purchase

• Experience attributes – Characteristics that can be experienced when actually using the service

• Credence attributes – Characteristics that are difficult to evaluate confidently even after consumption

• Goods tend to be higher in search attributes, services tend to be higher in experience and credence attributes

• Credence attributes force customers to trust that desired benefits have been delivered

How Product Attributes Affect Ease of Evaluation)

Source: Adapted from Zeithaml

Most Goods

High in search attributes

High in experience attributes

High in credence attributes

Difficult to evaluate

Easy to evaluate

Most Services

Clo

thin

g

Ch

air

Mo

tor

veh

icle

Fo

od

s

Res

tau

ran

t m

eals

Law

n f

ert

iliz

er

Hai

rcu

t

En

tert

ain

men

t

Co

mp

ute

r re

pai

r

Leg

al s

ervi

ces

Co

mp

lex

surg

ery

Ed

uc

atio

n

Service Marketing System: (1) High Contact Service--e.g., Hotel

TheCustomer

TechnicalCore

Interior & ExteriorFacilities

Equipment

Service People

OtherCustomers

OtherCustomers

Advertising

Sales Calls

Market Research Surveys

Billing / Statements

Miscellaneous Mail, Phone Calls, Faxes, etc.

Random Exposure toFacilities / Vehicles

Chance Encounters with Service Personnel

Word of Mouth

Service Operations System

Backstage(invisible)

Front Stage(visible)

Service Delivery System Other Contact Points

Service Marketing System

Service Marketing System: (2) Low Contact Service--e.g., Credit Card

TechnicalCore

Mail

Self ServiceEquipment

Phone, Fax, Web site etc.

TheCustomer

Service Operations SystemService Delivery System Other Contact Points

Backstage(invisible)

Front Stage(visible)

Advertising

Market Research Surveys

Random ExposuresFacilities, Personnel

Word of Mouth

Service Marketing System

The Dramaturgy of Service Delivery

• Service dramas unfold on a “stage”--settings may change as performance unfolds

• Many service dramas are tightly scripted, others improvised

• Front-stage personnel are like members of a cast

• Like actors, employees have roles, may wear special costumes, speak required lines, behave in specific ways

• Support comes from a backstage production team

• Customers are the audience—depending on type of performance, may be passive or active

Role and Script Theories

• Role: A set of behavior patterns learned through experience and communication

• Role congruence: In service encounters, employees and customers must act out defined roles for good outcomes

• Script: A sequence of behavior to be followed by employees and customers during service delivery– Some scripts (e.g. teeth cleaning) are routinized, others flexible

– Technology change may require a revised script

– Managers should reexamine existing scripts to find ways to improve delivery, increase productivity, enhance experiences

Chapter 3

Positioning Services in Competitive Markets

Search for Competitive Advantage in Services Requires Differentiation and

Focus

• Intensifying competition in service sector threatens firms with no distinctive competence and undifferentiated offerings

• Must decide how many service offerings with what distinctive (and desired) characteristics

Basic Focus Strategies for Services

BREADTH OF SERVICE OFFERINGS

NUMBER OF MARKETS SERVED

Narrow

Many

Few

Wide

Service Focused

Unfocused (Everything

for everyone)

Market Focused

Fully Focused (Service and

market focused)

Source: Robert Johnston

Four Principles of Positioning Strategy

1. Must establish position for firm or product in minds of customers

2. Position should be distinctive, providing one simple, consistent message

3. Position must set firm/product apart from competitors

4. Firm cannot be all things to all people--must focus

Jack Trout

Developing a

Market Positioning Strategy (- Size- Composition- Location- Trends

MarketingAction

Plan

MARKET ANALYSIS

INTERNAL ANALYSIS

- Resources- Reputation- Constraints - Values

COMPETITIVEANALYSIS

- Strengths- Weaknesses- Current Positioning

Define, AnalyzeMarket Segments

Select Target Segments

To Serve

ArticulateDesired Position

in Market

Select Benefitsto Emphasize to Customers

Analyze Possibilities forDifferentiation

Source: Adapted from Michael R. Pearce

Positioning of Hotels in Belleville:Price vs. Service Level

Expensive

Shangri-LaHigh

Service Moderate Service

Grand

Regency

Sheraton

Italia

CastleAlexander IV

Airport Plaza

PALACE

Atlantic

Less Expensive

Positioning Maps Help Managers to Visualize Strategy

• Positioning maps display relative performance of competing firms on key attributes

• Research provides inputs to development of positioning maps

• Challenge is to ensure that – attributes employed in maps are important to target segments – performance of individual firms on each attribute accurately reflects

perceptions of customers in target segments

• Predictions can be made of how positions may change in the light of new developments in the future

• Simple graphic representations are often easier for managers to grasp than Charts and maps can facilitate a “visual awakening” to threats and opportunities and suggest alternative strategic directions