Prolems and Strategics Marketing Service Zeithmal_1985

7/27/2019 Prolems and Strategics Marketing Service Zeithmal_1985

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Valarie A. Ze itham l, A. Parasuraman, & Leonard L Berry

Problems and Strategies inServices Marketinghis article compares problems and strategies cited in the services marketing literature with those re-ported by actual service suppliers in a study conducted by the authors. Discussion centers on severalbroad themes that emerge from this comparison and on guidelines for future work in services marketing.

basic assumptions pervade the growing bodyI of literature on services marketing. The first holdshat a number of unique characteristicsnotably in-angibility, inseparability of production and consump-ion, heterogeneity, and perishabilityseparate ser-ices from tangible goods. The second assumptionaintains that these characteristics pose vexing prob-ems for services marketers that are not faced by goodsarketers. The third and final assumption holds thatservices marketing problems require services market-ng solutionsthat strategies developed from expe-n goods marketing are often insufficient.The purposes of this article are: (1) to offer a con-eristics of services, the problems stemmingfrom ieseharacteristics, and the strategies suggested as appro-

gs of a national survey of managers of serviceirms concerning the problems they face and the mar-eting strategies they use to overcome them; (3) to

a t a r ie . Z e i t h a m l i s A s s i s ta n t P r o fe s s o r o f M a r k e t i n g , A . P a r a s u r a m a nis A s s o c i a te P r o f e s s o r of M a r k e t in g , a n d L e o n a r d L B e r r y i s P r o f e s s o ro f M a r k e t i n g , T e x a s A & M U n i v e r s i t y . T h e a u t h o r s g r a t e f u l l y a c k n o w l -d g e t h e n t r l b u t i o n s m a d e by G r e g o r y U p a h a n d f o u r a n o n y m o u sr e v i e w e r s .

compare the problems and strategies cited in the lit-erature with those reported by managers of servicesfirms; and (4) to offer recommendations for the de-velopment of services marketing thought.Literature on Services Marketing

The rationale for a separate treatment of services mar-keting centers on the existence of a number of char-acteristics of services which are consistently cited inthe literature: intangibility, inseparability of produc-tion and consumption, heterogeneity, and perishabil-ity. Figure 1 presents a summary of the referencesdocumenting these differences.The fundamental difference universally cited byauthors (e.g., Bateson 1977; Berry 1980; Lovelock1981; Rathmell 1966, 1974; Shostack 1977a) is in-tangibility. Because services are performances, ratherthan objects, they cannot be seen, felt, tasted, ortouched in the same manner in which goods can besensed. Intangibility, according to Bateson (1979) isthe critical goods-services distinction from which allother differences emerge.Inseparability of production and consumption ivolves the simultaneous production and consumptionwhich characterizes m ost services. W hereas goods arefirst produced, then sold and then consumed, servicesare first sold, then produced and consumed simulta-


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FIGURE 1References Listing Unique Characteristics of Services*

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.9 ?JoenTL Oen5 *: C3) co x : O(0 o co eu co o -CJ j _J ce OC W CO W

COc olox:H- .NIntangibilityHeterogeneity(Nonstandardization)

ofCited Production andConsumptionPerishability (Cannot

be invento ried)

y

yy

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yyyythe need for a separate treatmen t of services in nnarketing. These authors include Bonoma an

andWyckha m, F itzroy, and Mandry (1975).

1%3). Since thecustomer must betheproduction of many services (hair-airplane trips), inseparability "forces the buyerthe production process"and Langeard 1980, p. 8). Inseparability alsothe producer and the seller are the samein most1980) and causing marketing and pro-to be highly interactive (Gronroos 1978).Heterogeneity concems the potential for high vari-in the performance of services. The quality andof a service (a medical examination, car rental,can vary firom producer to producer,customer to customer, and from day to day. Het-is aparticular problem forraisingof consistency of behavior" (Langeard et1981, p. 16). Service performance from the samedual may also differ: ''Peop le's performance day

consistency that you can count on and try to communicate to the consumer is not a certain thing(Knisely 1979a, p. 58).Perishability means that services cannot be save(Bessom and Jackson 1975, Thomas 1978). Moterooms not occupied, airline seats not purchased, antelephone line capacity not used cannot be reclaimedBecause services are performances that cannot bstored, service businesses frequently find it difficuto synchronize supply and demand. Sometimes tomuch demand exists (a popular restaurant on a Saurday night) and sometimes too little demand exis(an income tax service in the summer).The literature suggests that each unique characteristic of services leads tospecific problems for sevice marketers and necessitates special strategies fodealing with them. Figure 2 summarizes the problemwhich frequently stem from each of the four serviccharacteristics. Figure 3 lists themariceting strategiesuggested in the literature to overcoii these


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Unique Service FaaturgsFIGURE 2Unique Service Features and Resulting Marketing Problems

Intangibility

Resulting Marketing ProMetns1 . Services cannot be stored.2 . Cannot protect services throughpatents.3. Cannot readily display or

communicate services.4 . Prices are difficult to set.

Selected Beferencw Citing ProblemBateson (1977), Berry H 980), Langeardet al. (1981), Sasser (1976)Eiglier and Langeard (1975, 1976), Judd(1968)Rathmell (1974)Dearden (1978), Lovelock (1981), Thomas(1978)

nseparability1 . Consumer involved in product ion.2. Other consunfiers involved inproduct ion.3. Centralized mass production ofservices diff icult .

Boonns and Nyquist (1981)Bateson (1977), George (1977),Gronroos (1978)Sasser et al. (1978), Upah (1980)

eterogeneity 1 . Standardization and quality controldiff icult to achieve. Berry (1980), Booms and Bitner (1981)1 . Services cannot be inventoried. Bateson (1977), Sasser (1976)

FIGURE 3Suggested Marketing Strategies for Problems Stemming from Unique Service FeaturesUnique Service Features Marketing Strategies to Solve Problems References Citing Strategies

ntangibil ity

1 . Stress tangible cues.

2. Use personal sources more thannonpersonal sources.3. Simulate or st imulate word-of-mouthcommunicat ions .4 . Create strong organizational image.5. Use cost accounting to help setprices.6. Engage in post-purchasecommunicat ions .

Berry (1980), Booms and Bitner (1982),George and Berry (1981), Shostack(1977a)Donnel ly (1 980), Johns on (1969)Davis, Guilt inan, and Jones (1979),George and Berry (1981)Judd (1968), Knisely (1979a), Thomas(1978), Uhl and Upah (1980)Beard and Hoyie (1976), Dearden (1978)Bessom and Jackson (1975), Fisk (1981),ZeithamI (1981)

Inseparability1 . Emphasize selection and training ofpublic contact personnel.2 . Manage consumers.3. Use multisite locations.

Berry (1981), Davidson (1978), George(1977), Gronroos (1978)Lovelock (1981)Carman and Langeard (1980), Langeardet a l . (1981), Upah (1980)

Heterogeneity1 . Industrialize service.*2 . Customize service.

Levitt (1972, 1976)Bel l (1981), Berry (1980), Johnson (1981),Regan (1963), Sasser and Arbeit (1978)

Perishability1 . Use strategies to cope withf luctuat ing demand.2. Make simultaneous adjustments indemand and capacity to achieve acloser match between the two.

Lovelock (1981)Sasser (1976)

"Levitt suggests specific techniques to substitute organized preplanned systems for individual service operations (e.g., a travelagency could offer prepackaged vacation tours to obviate the need for the selling, tailoring, and haggling involved in custonni-zation). This st ra t^ y is the opposite of customization.


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The Studyterature review (Figures 2 and 3) provided a ba-

strategies to overcome the problems.h e Sample

Dun a nd Bradstreet's M illion Dollar Directory

000 questionnaires, 323 (32.3%) were returned and

firms in terms of distribution of SIC codes, sales

th e three dimensions, suggesting thatAlmost 70% of the respondents filling out the

President, and Vice President, while the restd titles such as Marketing M anager, M arketing D i-he Questionnaire

need for customer's physic^ presence (Love-

res]X)ndentswere5 (major problem) the extent to which they believed

ategies (see Figure 3) which are freq uently cited inerature as solutions to service related prob lems.s indicated the extent to which each state-

ment applied to their firm on a scale ranging from 1(does not apply to our firm) to 5 (definitely applies toour firm).Results

For the sample as a whole, mean scores (on a 1 to 5scale) were calculated for each problem area, businespractice, and strategy.^ In addition, mean scores acroscategories under each of the four service classificationvariables (e.g., geographic scope of operations) werexamined using a one-way ANOVA model. The general linear model (GLM) procedure of the SAS statistical package w as employed for this purpose (SAS Institute 1983). Significant ANOVA results were furtheinvestigated using Duncan's multiple range test tidentify the categories of firms that differed significantly in terms of their mean scores.Problem AreasTable 2 reports the means of the respondents' perceptions concerning the extent to which service characteristics presented problems in their firms. The tablalso isolates significant differences in perceptions oproblem areas among different types of service firmsJudging from the average responses of all firms, service suppliers did not consider the eight problems tbe of major concern to them. Only one problem are("The demand for servicesfluctuates")received a meascore exceeding the midpoint on the 5-point scale. Twproblem areas ("Services cannot be stored" and "Services cannot be protected by patents") received extremely low average responses, indicating that mosmanagers felt them to be of little or no problem itheir firms. The remaining problem areas received average scores below the midpoint of the scales. Thlow average scores were further supported by low percentages of respondents reporting that the problemapply to their firms (indicated by respondents' checking a 4 or 5 on the problem items). While 47% of threspondents viewed demand fluctuation as a problemless than one-quarter perceived any of the remaininseven problems as relevant to their firms (see finacolumn of Table 2). O ne possible explanation for lowscores on these problem areas is that service firms mabe dealing with them effectively and therefore do noperceive them to be troublesome.

A few significant differences in perceptions oproblem areas surfaced among the types of servicfirms. However, only some of these differences oc

'All of these scales were anchored at their end points (i.e., 1 anS) wii the descriptive phrases nntioned earlier. Other points alonthe scales weie not labeled. Subfects were singly instructed to circlthe number along the continuum mi each scale that came closest ir percei^on of the statement's relevance to their firm.


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TABLE 1Profile of Respondents andNonrespondents

Fewer than 2525-4950-99100-199200-499500 and overNot available

Per(iitege ofRespondents

1814151313207100(base == 323)

= 10.96; df = 6. No significant difference between respondents and nonrespondents.

Less than $1 million$1 million-less than $5 million$5 million-less than $10 million$10 million-less than $50 million$50 million and overnot available

Percentage ofRespondents

91310231134100(base = 323)

^ = 9.81; df = 5. No significant difference between respondents and nonrespondents.

15, 16, 17 Construction42 , 44, 45 Transportation48,49 Utilities60 Banking: State banks60 Banking: National banks61 Savings and loans61 Nonbank credit agencies62 , 65, 67 Brokerage firms70 Hotels & lodging places72 Personal services73 Business services75 , 76 Repair services78,79 Recreationmiscellaneous

PercentageRespondents

6541674398317567100(base = 323)

^ = 15.38; df = 13. No significant difference between respondents and nonrespondents.

Nonrespoiiftoiitt2713171212136100(base = 677)

Nonrespondente1417915936100(base = 677)

ofNonrespondents

85413633158116495100(base = 677)

in the table are collapsed categories to ensure adequate ceil sizes for the chi-square analysis. However, toat least two firms responded are further detailed below: Contractors: generalTransportation: motor freight, air transport; Utilities: telephone, electric, gas; Brokerage FIrrps:& investment companies, real estate agencies, insurance carriers; Personal Setvices: power laundries,& cleaning services, beauty salons & barber shops, photographic services; Business Services: advert ising'agencies,services, janitorial & cleaning services, computer programming/data processing services, equipment rental & leas-Recreation: amusement parks, public golf courses, audio/video enter-and recreation clubs.

on items that had large enough overall meanto warrant discussion of tie differences. The

to mass produce services appeared to affectserving individual customers. Costs of ^rvicesr to be more difcult to calculate as the duration

of benefits increases. Associating direct and indirectcosts with the provision of a service evidently be-comes less precise and more difficult as the serviceextends over a longer time period. Quality control dif-culties were more salient to nonlocal than to localfirms, possibly because nonlocal firms generally op-


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TABLE 2Significant Differences in Perceptions of Problem Areas among Types of Service Brms*Primary Custonner Group

individual Institutional/ ^e a s (kwtomers Customers Bothstored.t ransported.dif f icu lt to contro lcann ot be 2.0 1" 2.41= 1.83""mass pro-duced . "cann ot be 1.64" 2.09= 2.08"=protected by pat-ents.se rv ice a re dif f i -cult to calculate.selves are in-volved during theproduction ofservices.services fluc-tuates.

ple Size 125 129 52

Local

2.22"

1.78"

100

GeographicStatewMe-Regional

2.60=

1.66"

76

SpreadNati. Intl.

2.92= 2.53" =

2.07" 2.27=

74 49

IHiration rf BenefilsImme- Stiort-diate term2.15" 1.55=

2.33" 2.44" =

87 47

Long-term1.85"=

2.76=

173

Need forPresence

M e- AllHigh cttum Low Rrms1.87(1.36)1.65(1.17)2.52(1.07)2.13(1.32)1.89(1.35)2.59(1.25)2.13(1.15)

3.27(1.29)73 125 114 323

Percwage oFirmChecing ao r 5

169

20191623

12

47

mean values on a 5-point scale, on which the higher the value, the more a characteristic applies to a f i rm ; numbers within parentheses in the second standard deviations; numbers in the last column are percentages.with the sante superscripts are not significantly different. Means with different superscripts are significantly different.

er number of units that are more dispersed

An important finding is the absence of significanterences across different types of firms on the prob -m area that had the highest mean score (3.2 7) "thefluctuates." Perception of demand

ractices/Strategies

Pricing. Average responses across all firms showthat cost-oriented pricing strategies are used more thancompetition- and demand-oriented pricing strategies.Basing prices on what it costs to provide the servicehad a higher mean (3.78) than either basing prices onwhat competition charges (mean of 2.99) or on whatthe market is willing to pay (mean of 2.90). Consis-tent with these averages are the percentages of re-spondents checking a 4 or 5 on the scales (indicatingthat the strategy applies to their firm): 63% base p rices

on competition (36%) and market willingness to pa(36%). Although service costs may be difficult to caculate (according to tie literature and, to some extenthe findings of this study), service companies are aparently making estimates of costs to be sure that theare covered. Competition-oriented pricing, althougsimpler, may not provide assurance of covering co stDemand-oriented pricing may be as difficult to implement as cost-oriented pricing and does not guaantee that costs will be covered.Consistent with the relative popularity of cost orented pricing, the use of cost accounting systems apears to be moderately widespread (mean of 3.28The only significant difference in pricing strategiamong types of firms involves the use of cost acounting systems: local firms use the systems signicantly less than do statewide-regional firms, probabbecause these firms tend to be smaller and less sphisticated.

Advertising. Tlie data pertaining to advertising idicate significant differences in usage of advertisinamong types of service firms. As is usually the cawith goods firm s, service firms with institutional cutomers reported that advertising is not as imjwrtant their marketing programs as firms marketing to cosumis. Moreover, institutional firms report signicantly lower usage of television and newspaper avertising, wMch tend to ht consumer nti^ia. Firm


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TABLE 3Stgiiificant Differences in usage of Business Strategic among Types off Senrii^ Rmis"o.- Custtmiw 'tPnroary Customer Group Geographic Spread Duration of Ben oits Prmmtm

'"""'""'" I"II-1 I I ^ ^ ^ ^ I . iiiip iiiwiiiii m i l , ^ m ^ m m , , , , , , , ^ ^^ ^ I . . l _ _ _ _ _ ^ _ _ _ l _ _ IMMBCKIndtviduai Institaitional Statewide- Imme- Short- Um g- Me - /W ing a 4Businet Practices Cuatemers Customers Both Local Regional Nati. Intl. diate term term High dhim Low firm or 5PricingBase prices on 3 78 63wh at it costs (1 27)usBase prices on 2. % 36what compet i - ( i ]22)t ion chargesBase prices on 2.90 36wh at mar ket is (1.37)wil l ing to payUse a co st ac- 3.02 " 3.65'= 3.19"'= 3.48"'= 3.28 51counting sys- (1.49)te mAdvert is ing andWord of MouthAd ve rtis ing is an 3.55" 2.69'= 3.59" 3.57" 3.08"'= 3.02^ 3.66 " 3.29 " 2.60'' 3.20 45impor tant part (1.45)of marketingprogramTelev ision adver- 1.90" 1.42*= 1.59"*= 1.95" 1.59"-'= 1.48'= 1.88" 1.74" 1.38" 1.65 12t ising is impo r- (1.20)tant partNewspaper ad- 3.23" 1.75= 3.2 0" 3. 31 " 2.47'= 2.05'= 2.02*= 3.0 7" 2.69"*= 2.31*= 3 .0 1" 2.84" 2.06'= 2.61 35vertising is im - (1.57)portant partDirect mail adver- 2.82 34tising is impor- (1.43)tant partSpecif ic effort to 3.99" 4.00" 2.60* 3.86 68encourage cus- (1.%)tomers to tellothers aboutservicePersonal Sell ingDo a lot of per- 3.84 67sonal sell ing of (1.44)servicesConta ct cus- 2.8 1" 3.93'= 3.17" 2.72" 3.38'= 3.81'='* 4.32 " 3.35 50tome rs after (I. 'f)purchaseCar efully cho ose 3.98" 4.31'= 3.89" 3.94" 4.06 " 4.12 " 4.52'= 4.11 76personnel wh o (1-01)interact withconsumersTrain personnel 4.08 73to interact we ll (1.03)Institut ional ImageMuch of market- 3.78 67ing geared to (1.29)projecting spe-cif ic companyimageHave custome r 3.53" 3.23"-' 2.98^ 3.24 50contact em- (1.46)ployeesdressed in acertain way toachieve imageDesign facilities 3.63" 3.01'= 3.64" 3.78" 3.04'= 3.15'= 3.29* 3.66" 3.02* 3.30" '' 3.74" 3 . 4 ^ 2 . ^ 3.37 53to achieve spe- (1.44)cif ic marketingor image objec-t ivesQuality ControlForm al system 3.34" 3.80^ 3.37" 3.17 3.57" 3.88" 3.87" 3.54 55for contro ll ing (1.25)qualityarketingrientationRe gula rly coll ect 3.23" 3 .9 r 3.36" 3.20" 3.70'= 3.72'= 4.2T^ 3.80 58in format ion .about customerneeds


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TABLE 3 (continued)Primary Customer Group

indhfiduai institutionalusiness Practices Customers C us tom Bo t f iMark eting activ i- 3.45" 3.89= 3.36"ties are basedon knowledgeabout cus-tomersFirm activities arecoordinated toensure cus-tomer satisfac-t ionChief marketingexecutive par-ticipates in topmanagementdecisionsW illin g to pro- 3.23" 4.01= 3.40"duce customer-designed ser-vices for clientsWhen a customeris dissatisfied,redo service

Geograph:Statewide-Lm! Regional

3.32" 3.70=

3.70" 4.22=

3.29 3.49" =

^ e a

Documents

Prolems and Strategics Marketing Service Zeithmal_1985