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1
SM
Services MarketingServices Marketing
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2
SMSM
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Chapter 1
INTRODUCTION
TO
SERVICES
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SMObjectives for Chapter 1:Objectives for Chapter 1:Introduction to ServicesIntroduction to Services
• Explain what services are and identify service trends• Explain the need for special services marketing
concepts and practices• Outline the basic differences between goods and
services and the resulting challenges for service businesses
• Introduce the service marketing triangle• Introduce the expanded services marketing mix• Introduce the gaps model of service quality
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SM IntroductionIntroduction
• Services are deeds,processes and performance
• Intangible, but may have a tangible component
• Generally produced and consumed at the same time
• Need to distinguish between SERVICE and CUSTOMER SERVICE
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SM Challenges for ServicesChallenges for Services
• Defining and improving quality
• Communicating and testing new services
• Communicating and maintaining a consistent image
• Motivating and sustaining employee commitment
• Coordinating marketing, operations and human resource efforts
• Setting prices
• Standardization versus personalization
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SMExamples of Service Examples of Service
IndustriesIndustries
• Health Care– hospital, medical practice, dentistry, eye care
• Professional Services– accounting, legal, architectural
• Financial Services– banking, investment advising, insurance
• Hospitality– restaurant, hotel/motel, bed & breakfast, – ski resort, rafting
• Travel– airlines, travel agencies, theme park
• Others:– hair styling, pest control, plumbing, lawn maintenance, counseling
services, health club
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SMFigure 1-1Figure 1-1
Tangibility SpectrumTangibility Spectrum
TangibleDominant
IntangibleDominant
SaltSoft Drinks
DetergentsAutomobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teaching
Fast-foodOutlets
Fast-foodOutlets
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SMFigure 1-2 Figure 1-2
Percent of Percent of U.S. Labor Force by IndustryU.S. Labor Force by Industry
0
10
20
30
40
50
60
70
80
1929 1948 1969 1977 1984 1996
Per
cent
of
GD
P
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
Year
Services Manufacturing Mining & Agriculture
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SM
0
10
20
30
40
50
60
70
80
1948 1959 1967 1977 1987 1996
Figure 1-3 Figure 1-3
Percent of U.S. Gross Domestic Percent of U.S. Gross Domestic Product by IndustryProduct by Industry
Perc
ent o
f G
DP
Year
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.
Services Manufacturing Mining & Agriculture
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SMDifferences BetweenDifferences Between Goods and Services Goods and Services
Intangibility
PerishabilitySimultaneous
Productionand
Consumption
Heterogeneity
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SM Implications of IntangibilityImplications of Intangibility
Services cannot be inventoried Services cannot be patented Services cannot be readily displayed
or communicated Pricing is difficult
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SM Implications of HeterogeneityImplications of Heterogeneity
Service delivery and customer satisfaction depend on employee actions
Service quality depends on many uncontrollable factors
There is no sure knowledge that the service delivered matches what was planned and promoted
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SMImplications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and Consumption
Customers participate in and affect the transaction
Customers affect each otherEmployees affect the service outcomeDecentralization may be essentialMass production is difficult
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SM Implications of PerishabilityImplications of Perishability
It is difficult to synchronize supply and demand with services
Services cannot be returned or resold
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SM Table 1-2 Table 1-2
Services are DifferentServices are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.
Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.
Productionseparate fromconsumption
Simultaneousproduction andconsumption
Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.Decentralization may be essential.Mass production is difficult.
Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.
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SMFigure 1-5Figure 1-5
The Services Marketing TriangleThe Services Marketing Triangle
Internal Marketing
Interactive Marketing
External Marketing
Company(Management)
CustomersEmployees
“enabling thepromise”
“delivering the promise”
“setting thepromise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
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SMWays to Use the Ways to Use the
Services Marketing TriangleServices Marketing Triangle
Overall Strategic Assessment
• How is the service organization doing on all three sides of the triangle?
• Where are the weaknesses?
• What are the strengths?
Specific Service Implementation
• What is being promoted and by whom?
• How will it be delivered and by whom?
• Are the supporting systems in place to deliver the promised service?
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SM
Source: Adapted from A. Parasuraman
Company
CustomersProviders
Technology
Figure 1-6 Figure 1-6
The Services Triangle The Services Triangle and Technologyand Technology
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SMServices Marketing Mix:Services Marketing Mix:
7 Ps for Services7 Ps for Services
• Traditional Marketing Mix
• Expanded Mix for Services: 7 Ps
• Building Customer Relationships Through People, Processes, and Physical Evidence
• Ways to Use the 7 Ps
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SM Traditional Marketing MixTraditional Marketing Mix
• All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:
Product
Price
Place
Promotion
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SM Expanded Mix for Services --Expanded Mix for Services --the 7 Psthe 7 Ps
• Product• Price• Place• Promotion
• People• Process• Physical Evidence
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SMTable 1-3Table 1-3
Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices
PRODUCT PLACE PROMOTION PRICE
Physical goodfeatures
Channel type Promotionblend
Flexibility
Quality level Exposure Salespeople Price level
Accessories Intermediaries Advertising Terms
Packaging Outlet location Salespromotion
Differentiation
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
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SM
PEOPLE PHYSICALEVIDENCE
PROCESS
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicatingculture and values
Signage Level of customerinvolvement
Employee research Employee dress
Other tangibles
Table 1-3 (Continued)Table 1-3 (Continued)
Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices
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SM Ways to Use the 7 PsWays to Use the 7 Ps
Overall Strategic Assessment
• How effective is a firm’s services marketing mix?
• Is the mix well-aligned with overall vision and strategy?
• What are the strengths and weaknesses in terms of the 7 Ps?
Specific Service Implementation
• Who is the customer?• What is the service?• How effectively does the
services marketing mix for a service communicate its benefits and quality?
• What changes/improvements are needed?
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SMServices Marketing Triangle Services Marketing Triangle
Applications ExerciseApplications Exercise
• Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle?
• How is each type of marketing being carried out currently?
• Are the three sides of the triangle well aligned?• Are there specific challenges or barriers in any of
the three areas?
26
SMSMPart 1
FOCUS ON THE CUSTOMER
27
SM
PerceivedService
Expected Service
CUSTOMER
COMPANY
CustomerGap
GAP 1
GAP 2
Gaps Model of Service QualityGaps Model of Service Quality
GAP 3
External Communications
to CustomersGAP 4Service Delivery
Customer-Driven Service Designs and Standards
Company Perceptions of Consumer Expectations
Part 1 Opener
28
SMGaps Model of Service Gaps Model of Service
QualityQuality
• Customer Gap:• difference between expectations and
perceptions• Provider Gap 1:
• not knowing what customers expect• Provider Gap 2:
• not having the right service designs and standards
• Provider Gap 3:• not delivering to service standards
• Provider Gap 4:• not matching performance to promises
Part 1 Opener
29
SM The Customer GapThe Customer Gap
ExpectedService
PerceivedService
GAP
Part 1 Opener
30
SMSMChapter 2
CONSUMER BEHAVIOR IN SERVICES
31
SMObjectives for Chapter 2:Objectives for Chapter 2:
Consumer Behavior in Consumer Behavior in ServicesServices
• Overview the generic differences in consumer behavior between services and goods
• Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior:• Information search• Evaluation of service alternatives• Service purchase and consumption• Postpurchase evaluation• Role of culture
32
SM Consumer Evaluation Consumer Evaluation Processes for ServicesProcesses for Services
• Search Qualities– attributes a consumer can determine prior to
purchase of a product• Experience Qualities
– attributes a consumer can determine after purchase (or during consumption) of a product
• Credence Qualities– characteristics that may be impossible to evaluate
even after purchase and consumption
33
SMFigure 2-1Figure 2-1
Continuum of Evaluation for Continuum of Evaluation for Different Types of ProductsDifferent Types of Products
Clo
t hin
g
Jew
elry
Fur
n itu
re
Hou
ses
Aut
omob
iles
Res
tau
rant
mea
ls
Vac
a tio
ns
Ha i
r cut
s
Ch i
ld c
a re
Tel
evis
ion
repa
ir
Leg
a l s
ervi
ces
Roo
t c a
nals
Aut
o re
pair
Med
ical
dia
gno
sis
Difficult to evaluateEasy to evaluate
{High in search
qualitiesHigh in experience
qualitiesHigh in credence
qualities
{{Most
GoodsMost
Services
34
SM
Figure 2-2Figure 2-2
Categories in Consumer Categories in Consumer Decision-Making and Evaluation of Decision-Making and Evaluation of
ServicesServicesInformation Search
Evaluation of Alternatives
Purchase and Consumption
Post-Purchase Evaluation
Use of personal sources Perceived risk
Evoked set Emotion and mood
Service provision as drama Service roles and scripts Compatibility of customers
Attribution of dissatisfaction Innovation diffusion Brand loyalty
35
SMFigure 2-3Figure 2-3
Categories in Consumer Decision-Categories in Consumer Decision-Making and Evaluation of ServicesMaking and Evaluation of Services
Information Search
Evaluation of Alternatives
Purchase and Consumption
Post-Purchase Evaluation
Use of personal sources Perceived risk
Evoked set Emotion and mood
Service provision as drama Service roles and scripts Compatibility of customers
Attribution of dissatisfaction Innovation diffusion Brand loyalty
Culture Values and attitudes Manners and customs Material culture Aesthetics Educational and social
institutions
36
SM Information searchInformation search
• In buying services consumers rely more on personal sources. WHY? Refer p32
• Personal influence becomes pivotal as product complexity increases
• Word of mouth important in delivery of services
• With service most evaluation follows purchase
37
SM Perceived RiskPerceived Risk
• More risk would appear to be involved with purchase of services (no guarantees)
• Many services so specialised and difficult to evaluate (How do you know whether the plumber has done a good job?)
• Therefore a firm needs to develop strategies to reduce this risk, e.g, training of employees, standardisation of offerings
38
SM Evoked SetEvoked Set
• The evoked set of alternatives likely to be smaller with services than goods
• If you would go to a shopping centre you may only find one dry cleaner or “single brand”
• It is also difficult to obtain adequate prepurchase information about service
• The Internet may widen this potential• Consumer may choose to do it themselves, e.g.
garden services
39
SM Emotion and MoodEmotion and Mood
• Emotion and mood are feeling states that influence people’s perception and evaluation of their experiences
• Moods are transient
• Emotions more intense, stable and pervasive
• May have a negative or positive influence
40
SMService Provision as Service Provision as
DramaDrama
• Need to maintain a desirable impression
• Service “actors” need to perform certain routines
• Physical setting important, smell, music, use of space, temperature, cleanliness, etc.
41
SMGlobal Feature:Global Feature:
Differences in the Service Differences in the Service Experience in the U.S. and JapanExperience in the U.S. and Japan
Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness
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SMSMChapter 3
CUSTOMER EXPECTATIONS OF SERVICES
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SMObjectives for Chapter 3:Objectives for Chapter 3:Customer Expectations of Customer Expectations of
ServiceService
• Recognize that customers hold different types of expectations for service performance
• Discuss controllable and uncontrollable sources of customer expectations
• Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter
• Acknowledge that expectations are similar for many different types of customers
• Delineate the most important current issues surrounding customer expectations
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SM DEFINITIONSDEFINITIONS
• Customers have different expectations re services – or expected service
• Desired service – customer hopes to receive• Adequate service – the level of service the
customer may accept
• DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?
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SMFigure 3-1Figure 3-1
Dual Customer Dual Customer Expectation LevelsExpectation Levels
(Two levels of expectations)(Two levels of expectations)
Adequate Service
Desired Service
Zone ofTolerance
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SMFigure 3-2Figure 3-2
The Zone of ToleranceThe Zone of Tolerance
Adequate Service
Desired Service
Zone ofTolerance
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SM
Figure 3-3Figure 3-3
Zones of Tolerance Zones of Tolerance VARYVARY for forDifferent Service DimensionsDifferent Service Dimensions
Most Important Factors Least Important Factors
Level of
Expectation
Source: Berry, Parasuraman, and Zeithaml (1993)
Adequate Service
Desired Service
Zone ofTolerance
DesiredService
AdequateService
Zone of
Tolerance
Desired Service
Adequate Service
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SM
Figure 3-5Figure 3-5
Factors that InfluenceFactors that InfluenceDesired ServiceDesired Service
DesiredService
AdequateService
Zone of
Tolerance
Enduring ServiceIntensifiers
Personal Needs
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SM
• Personal needs include physical, social, psychological categories
• Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service
This can further divided into Derived Service Expectations and Personal service Philosophies
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SMFigure 3-6Figure 3-6
Factors that InfluenceFactors that InfluenceAdequate ServiceAdequate Service
DesiredService
AdequateService
Zone of
ToleranceSelf-PerceivedService Role
Situational Factors
Perceived ServiceAlternatives
Transitory ServiceIntensifiers
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SM
• Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends
• Perceived service alternatives
• Perceived service role of customer
• Situational factors
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SM
Figure 3-7Figure 3-7
Factors that InfluenceFactors that InfluenceDesired and Predicted ServiceDesired and Predicted Service
DesiredService
AdequateService
Zone of
Tolerance
Predicted Service
Explicit ServicePromises
Implicit ServicePromises
Word-of-Mouth
Past Experience
53
SMSMChapter 4
CUSTOMER PERCEPTIONS OF SERVICE
54
SMObjectives for Chapter 4:Objectives for Chapter 4:Customer Perceptions of Customer Perceptions of
ServiceService
• Provide you with definitions and understanding of customer satisfaction and service quality
• Show that service encounters or the “moments of truth” are the building blocks of customer perceptions
• Highlight strategies for managing customer perceptions of service
55
SM
Figure 4-1Figure 4-1
Customer Perceptions of Customer Perceptions of Service Quality and Service Quality and
Customer SatisfactionCustomer Satisfaction
ServiceQuality
Reliability
Responsiveness
Assurance
Empathy
Tangibles
ProductQuality
PricePersonalFactors
CustomerSatisfaction
SituationalFactors
56
SMFactors Influencing Factors Influencing
Customer SatisfactionCustomer Satisfaction
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or failure
• Equity or fairness evaluations
57
SMOutcomes of Outcomes of
Customer SatisfactionCustomer Satisfaction
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues
58
SM Service QualityService Quality
• The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected.
• Process and outcome quality are both important.
59
SM The Five Dimensions of The Five Dimensions of Service QualityService Quality
Ability to perform the promised service dependably and accurately.
Knowledge and courtesy of employees and their ability to convey trust and confidence.
Physical facilities, equipment, and appearance of personnel.
Caring, individualized attention the firm provides its customers.
Willingness to help customers and provide prompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy
60
SMSERVQUAL AttributesSERVQUAL Attributes
Providing service as promised Dependability in handling customers’
service problems Performing services right the first time Providing services at the promised time Maintaining error-free records
Keeping customers informed as to when services will be performed
Prompt service to customers Willingness to help customers Readiness to respond to customers’
requests
RELIABILITY
RESPONSIVENESS
Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous Employees who have the knowledge to
answer customer questions
ASSURANCE
Giving customers individual attention Employees who deal with customers in a
caring fashion Having the customer’s best interest at heart Employees who understand the needs of
their customers Convenient business hours
EMPATHY
Modern equipment Visually appealing facilities Employees who have a
neat, professional appearance
Visually appealing materials associated with the service
TANGIBLES
61
SM The Service EncounterThe Service Encounter
• is the “moment of truth”• occurs any time the customer interacts with the firm• can potentially be critical in determining customer satisfaction and
loyalty• types of encounters:
– remote encounters– phone encounters– face-to-face encounters
• is an opportunity to:– build trust– reinforce quality– build brand identity– increase loyalty
62
SM
Check-InCheck-In
Request Wake-Up CallRequest Wake-Up Call
CheckoutCheckout
Bellboy Takes to Room Bellboy Takes to Room
Restaurant MealRestaurant Meal
Figure 4-4Figure 4-4
A Service Encounter A Service Encounter Cascade for a Hotel VisitCascade for a Hotel Visit
63
SM Common Themes in CriticalCommon Themes in CriticalService Encounters Service Encounters
ResearchResearch
Recovery: Adaptability:
Spontaneity:Coping:
Employee Responseto Service Delivery
System Failure
Employee Responseto Customer Needs
and Requests
Employee Responseto Problem Customers
Unprompted andUnsolicited EmployeeActions and Attitudes
64
SMFigure 4-6 Figure 4-6
Evidence of Service from theEvidence of Service from theCustomer’s Point of ViewCustomer’s Point of View
People
Process PhysicalEvidence
Contact employees Customer him/herself Other customers
Operational flow of activities
Steps in process
Flexibility vs. standard
Technology vs. human
Tangible communication
Servicescape
Guarantees
Technology
65
SMSMPart 2
LISTENING TO CUSTOMER REQUIREMENTS
66
SM Provider GAP 1Provider GAP 1
Company Perceptions of
Consumer Expectations
Expected Service
CUSTOMER
COMPANY
GAP 1
Part 2 Opener
67
SMSMChapter 5
UNDERSTANDING CUSTOMER EXPECTATIONS AND PERCEPTIONS THROUGH MARKETING RESEARCH
68
SM Common Research ObjectivesCommon Research Objectives for Services for Services
• To identify dissatisfied customers• To discover customer requirements or expectations• To monitor and track service performance• To assess overall company performance compared to
competition• To assess gaps between customer expectations and perceptions• To gauge effectiveness of changes in service• To appraise service performance of individuals and teams for
rewards• To determine expectations for a new service• To monitor changing expectations in an industry• To forecast future expectations
69
SMFigure 5-1Figure 5-1
Criteria for An Effective Criteria for An Effective Services Research ProgramServices Research Program
ResearchObjectives
Includes
Qualitativ
e
Research
IncludesQuantitative
Research IncludesPerceptions
and Expectations
of Customers
IncludesMeasures
ofLoyalty orBehavioralIntentions
Balances Cost
and Value of
InformationIncludesStatisticalValidity
When Necessary
Measures Priorities
or Importance
Occurswith
AppropriateFrequency
70
SM Portfolio of Services Portfolio of Services ResearchResearch
Customer Complaint Solicitation
“Relationship” Surveys
Post-Transaction Surveys
Customer Focus Groups
“Mystery Shopping” of Service Providers
Employee Surveys
Lost Customer Research
Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action
Obtain customer feedback while service experience is still fresh; act on feedback quickly if negative patterns develop
Use as input for quantitative surveys; provide a forum for customers to suggest service-improvement ideas
Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time
Measure individual employee service behaviors for use in coaching, training, performance evaluation, recognition and rewards; identify systemic strengths and weaknesses in service
Measure internal service quality; identify employee-perceived obstacles to improve service; track employee morale and attitudes
Determine the reasons why customers defect
Research Objective Type of Research
Future Expectations ResearchTo forecast future expectations of customersTo develop and test new service ideas
71
SMStages in the Research Stages in the Research
ProcessProcess
• Stage 1 : Define Problem
• Stage 2 : Develop Measurement Strategy
• Stage 3 : Implement Research Program
• Stage 4 : Collect and Tabulate Data
• Stage 5 : Interpret and Analyze Findings
• Stage 6 : Report Findings
72
SMFigure 5-5Figure 5-5
Service Quality Perceptions Service Quality Perceptions Relative to Zones of Tolerance Relative to Zones of Tolerance
by Dimensionsby Dimensions
Retail Chain
9
8
7
6
5
4
3
2
1
0Reliability Responsiveness Assurance Empathy Tangibles
OO OO
Zone of Tolerance S.Q. PerceptionO
O
73
SMSMChapter 6
BUILDING
CUSTOMER
RELATIONSHIPS
74
SM Relationship MarketingRelationship Marketing
• is a philosophy of doing business that focuses on keeping and improving current customers
• does not necessarily emphasize acquiring new customers
• is usually cheaper (for the firm)--to keep a current customer costs less than to attract a new one
• goal = to build and maintain a base of committed customers who are profitable for the organization
• thus, the focus is on the attraction, retention, and enhancement of customer relationships
75
SM A Loyal Customer is One Who...A Loyal Customer is One Who...
• Shows Behavioral Commitment– buys from only one supplier, even though other options
exist
– increasingly buys more and more from a particular supplier
– provides constructive feedback/suggestions
• Exhibits Psychological Commitment– wouldn’t consider terminating the relationship--
psychological commitment
– has a positive attitude about the supplier
– says good things about the supplier
76
SMBenefits to the Organization Benefits to the Organization
of Customer Loyaltyof Customer Loyalty
• loyal customers tend to spend more with the organization over time
• on average costs of relationship maintenance are lower than new customer costs
• employee retention is more likely with a stable customer base
• lifetime value of a customer can be very high
77
SM Benefits to the CustomerBenefits to the Customer
• inherent benefits in getting good value• economic, social, and continuity benefits
– contribution to sense of well-being and quality of life and other psychological benefits
– avoidance of change– simplified decision making – social support and friendships– special deals
78
SMStrategies for Building Strategies for Building
RelationshipsRelationships
• Foundations: – Excellent Quality/Value– Careful Segmentation
• Bonding Strategies:– Financial Bonds– Social & Psychological Bonds– Structural Bonds– Customization Bonds
• Relationship Strategies Wheel
79
SM
Getting
Satisfying
Retaining
Enhancing
Figure 6-1Figure 6-1
Customer Goals of Customer Goals of Relationship MarketingRelationship Marketing
80
SM
Figure 6-3Figure 6-3
Underlying Logic of Customer Underlying Logic of Customer Retention Benefits to the Retention Benefits to the
OrganizationOrganization
Customer Retention &Increased Profits
Employee Loyalty
QualityService
Customer Satisfaction
81
SMFigure 6-5Figure 6-5
Steps in Market Segmentation Steps in Market Segmentation and and
Targeting for ServicesTargeting for Services
IdentifyBases forSegmentingthe Market
STEP 1:
DevelopProfiles ofResultingSegments
STEP 2: DevelopMeasuresof SegmentAttractive-ness
STEP 3: Select the
TargetSegments
STEP4:Ensure thatSegmentsAre Compatible
STEP 5:
82
SM
ExcellentQuality
andValue
Figure 6-6Figure 6-6 Levels of Retention StrategiesLevels of Retention Strategies
I. Financial Bonds
II. Social Bonds
IV. Structural
Bonds
III. CustomizationBonds
Volume and Frequency Rewards
Bundling and Cross Selling
Stable Pricing
Social Bonds Among Customers
Personal Relationships
Continuous Relationships
Customer Intimacy
Mass Customization
Anticipation/ Innovation
SharedProcesses and Equipment
Joint Investments
Integrated Information Systems
83
SMSMChapter 7
SERVICE RECOVERY
84
SMFigure 7-5Figure 7-5
Service Recovery StrategiesService Recovery Strategies
Learn fromRecovery Experiences
Treat C
ustomers
Fairly
Learn
from
Lo
st Cu
stom
ers
Welcome and
Encourage ComplaintsFail S
afe the S
ervice
Act Q
uickly
Service Recovery Strategies
85
SMFigure 7-6Figure 7-6
Causes Behind Service Causes Behind Service SwitchingSwitching
Service Switching Behavior
• High Price• Price Increases• Unfair Pricing• Deceptive Pricing
Pricing
• Location/Hours• Wait for Appointment• Wait for Service
Inconvenience
• Service Mistakes• Billing Errors• Service Catastrophe
Core Service Failure
• Uncaring• Impolite• Unresponsive• Unknowledgeable
Service Encounter Failures
• Negative Response• No Response• Reluctant Response
Response to Service Failure
• Found Better Service
Competition
• Cheat• Hard Sell• Unsafe• Conflict of Interest
Ethical Problems
• Customer Moved• Provider Closed
Involuntary SwitchingSource: Sue Keaveney
86
SMWhy a Good Guarantee Why a Good Guarantee
WorksWorks
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”
87
SMSMPart 3
ALIGNING STRATEGY, SERVICE DESIGN
AND STANDARDS
88
SM
CUSTOMER
COMPANY
GAP 2
Customer-Driven Service Designs and
Standards
Company Perceptions of
Consumer Expectations
Provider GAP 2Provider GAP 2
Part 3 Opener
89
SMSMChapter 8
SERVICE DEVELOPMENT AND DESIGN
90
SM
Figure 8-1Figure 8-1
Risks of Relying on Words Risks of Relying on Words Alone to Alone to
Describe ServicesDescribe Services
Oversimplification Incompleteness Subjectivity Biased Interpretation
Figure 8-4Figure 8-4
Service Mapping/BlueprintingService Mapping/Blueprinting
A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view.
ServiceMapping
Process
Points of Contact
Evidence
92
SM Service Blueprint ComponentsService Blueprint Components
CUSTOMER ACTIONS
line of interaction
“ONSTAGE” CONTACT EMPLOYEE ACTIONS
line of visibility
“BACKSTAGE” CONTACT EMPLOYEE ACTIONS
line of internal interaction
SUPPORT PROCESSES
93
SMApplication of Service Application of Service
BlueprintsBlueprints
• New Service Development• concept development
• market testing
• Supporting a “Zero Defects” Culture• managing reliability
• identifying empowerment issues
• Service Recovery Strategies• identifying service problems
• conducting root cause analysis
• modifying processes
94
SMSMChapter 10
PHYSICAL EVIDENCE AND THE SERVICESCAPE
95
SMTable 10-1Table 10-1
Elements of Physical Elements of Physical EvidenceEvidence
Servicescape Other tangibles
Facility exteriorExterior designSignageParkingLandscapeSurrounding environment
Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature
Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages
96
SM
Table 10-2 Table 10-2 Examples of Physical Evidence from the Examples of Physical Evidence from the
Customer’s Point of ViewCustomer’s Point of ViewService Physical evidence
Servicescape Other tangiblesInsurance Not applicable Policy itself
Billing statementsPeriodic updatesCompany brochureLetters/cards
Hospital Building exteriorParkingSignsWaiting areasAdmissions officePatient care roomMedical equipmentRecovery room
UniformsReports/stationeryBilling statements
Airline Airline gate areaAirplane exteriorAirplane interior (décor, seats, airquality)
TicketsFoodUniforms
Express mail Not applicable PackagingTrucksUniformsComputers
Sportingevent
Parking, Seating, RestroomsStadium exteriorTicketing area, Concession AreasEntrance, Playiing Field
SignsTicketsProgramUniforms
97
SMSMPart 4
DELIVERING AND PERFORMING SERVICE
98
SM
CUSTOMER
COMPANY
Provider GAP 3Provider GAP 3
Service DeliveryGAP 3
Customer-Driven Service Designs and
Standards
Part 4 Opener
99
SMSMChapter 11
EMPLOYEES’ ROLES IN SERVICE DELIVERY
100
SM Service EmployeesService Employees
• They are the service
• They are the firm in the customer’s eyes
• They are marketers
• Importance is evident in– The Services Marketing Mix (People)– The Service-Profit Chain– The Services Triangle
101
SM Service EmployeesService Employees
• Who are they?– “boundary spanners”
• What are these jobs like?– emotional labor– many sources of potential conflict
• person/role• organization/client• interclient• quality/productivity
102
SM
Figure 11-3Figure 11-3
Boundary Spanners Interact Boundary Spanners Interact with Both Internal with Both Internal
and External Constituentsand External Constituents
Internal Environment
External Environment
103
SMFigure 11-4Figure 11-4
Sources of Conflict for Sources of Conflict for Boundary-Spanning WorkersBoundary-Spanning Workers
• Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity
104
SM
Figure 11-5 Figure 11-5
Human Resource Strategies for Closing GAP 3Human Resource Strategies for Closing GAP 3
Customer-oriented Service Delivery
Hire theRight People
ProvideNeeded Support
Systems
Retain theBest
People
DevelopPeople to
DeliverServiceQuality
Compete
for
the B
est
People
Hire for Service
Competencies and Service Inclination
Provide Supportive Technology
and Equipment
Tre
at
Em
plo
ye
es
a
s
Cu
sto
me
rs
Em
po
we
r E
mp
loy
ee
s
Be the Preferred
Employer Train for
Technical and
Interactive
Skills
Prom
ote
Team
wor
k
Measure
Internal
Service
Quality
Develop Service-
oriented Internal
Processes
Mea
sure
and
R
ewar
d S
tron
g S
ervi
ce
Pro
vide
rs
Include
Em
ployees in
the
Com
pany’s
Vision
106
SM Service CultureService Culture
“A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”
107
SMSMChapter 12
CUSTOMERS’ ROLES IN SERVICE DELIVERY
108
SMImportance of Importance of OtherOther
Customers in Service Customers in Service DeliveryDelivery
• Other customers can detract from satisfaction• disruptive behaviors
• excessive crowding
• incompatible needs
• Other customers can enhance satisfaction• mere presence
• socialization/friendships
• roles: assistants, teachers, supporters
109
SM How Customers Widen Gap 3How Customers Widen Gap 3
• Lack of understanding of their roles• Not being willing or able to perform their roles• No rewards for “good performance”• Interfering with other customers• Incompatible market segments
110
SMCustomers as Contributors Customers as Contributors
to Service Quality and to Service Quality and SatisfactionSatisfaction
• Customers can contribute to– their own satisfaction with the service
• by performing their role effectively
• by working with the service provider
– the quality of the service they receive• by asking questions
• by taking responsibility for their own satisfaction
• by complaining when there is a service failure
111
SMStrategies for EnhancingStrategies for EnhancingCustomer ParticipationCustomer Participation
1. Define customers’ jobs- helping himself- helping others- promoting the company
2. Individual differences: not everyone wants to participate
112
SMSMChapter 14
MANAGING DEMAND AND CAPACITY
113
SM Understanding Capacity Understanding Capacity Constraints and Demand Constraints and Demand
PatternsPatterns
• Time, labor, equipment and facilities
• Optimal versus maximal use of capacity
• Charting demand patterns
• Predictable cycles
• Random demand fluctuations
• Demand patterns by market segment
Capacity Constraints Demand Patterns
114
SMSMPart 5
MANAGING SERVICE PROMISES
115
SM
CUSTOMER
COMPANYExternal
Communications to CustomersGAP 4
Service Delivery
Provider GAP 4Provider GAP 4
Part 5 Opener
116
SMSMChapter 15
INTEGRATED MARKETING COMMUNICATION
117
SMFigure 15-1Figure 15-1
Communications and the Communications and the Services Marketing TriangleServices Marketing Triangle
Internal MarketingInternal Marketing Vertical Communications
Horizontal Communications
Interactive Marketing Personal Selling
Customer Service Center Service Encounters
Servicescapes
External Marketing Communication Advertising Sales Promotion Public Relations Direct Marketing
Company
CustomersEmployees
Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler
118
SMApproaches forApproaches for
Integrating Services Marketing Integrating Services Marketing CommunicationCommunication
Goal:Delivery
greater than or equal to promises
Improve CustomerEducation
ManageService
Promises
ManageCustomer
Expectations
ManageInternal
MarketingCommunication
Figure 15-3Figure 15-3
119
SM
Goal:Delivery
greater than or equal to promises
OfferService
Guarantees
Create EffectiveServices
Communications
MANAGING SERVICE PROMISES
MakeRealisticPromises
Coordinate External
Communication
Figure 15-4Figure 15-4
Approaches forApproaches forManaging Service PromisesManaging Service Promises
120
SM
Communicate Criteria for Service Effectiveness
Create Tiered-ValueOfferings
Figure 15-8Figure 15-8
Approaches forApproaches forManaging Customer ExpectationsManaging Customer Expectations
NegotiateUnrealistic
Expectations
Goal:Delivery
greater than or equal to promises
Offer Choices
121
SM
Goal:Delivery
greater than or equal to promises
Prepare Customers
for the Service Process
Clarify Expectationsafter the Sale
Figure 15-9Figure 15-9
Approaches forApproaches forImproving Customer EducationImproving Customer Education
Teach Customers to Avoid
Peak Demand Periods
andSeek Slow
Periods
Confirm Performanceto Standards
122
SMGoal:
Delivery greater than or equal to promises
Figure 15-10Figure 15-10
Approaches for ManagingApproaches for Managing Internal Marketing CommunicationsInternal Marketing Communications
Create EffectiveVertical
Communications
Align Back Office Personnel
w/ External Customers
Create EffectiveHorizontal
Communications
CreateCross-Functional
Teams
Contact: +923006641921 Usman Waheed
123
SMSMChapter 17
THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY
Contact: +923006641921 Usman Waheed
124
SMObjectives for Chapter 17:Objectives for Chapter 17:
The Financial and Economic The Financial and Economic Impact of ServiceImpact of Service
• Examine the direct effects of service on profits• Consider the impact of service on getting new customers• Evaluate the role of service in keeping customers• Examine the link between perceptions of service and
purchase intentions• Emphasize the importance of selecting profitable
customers• Discuss what is know about the key service drivers of
overall service quality, customer retention and profitability
• Discuss the balanced performance scorecard to focus on strategic measurement other than financials
Contact: +923006641921 Usman Waheed
125
SMFigure 17-1Figure 17-1
The Direct Relationship between The Direct Relationship between Service and ProfitsService and Profits
Profits?ServiceQuality
Contact: +923006641921 Usman Waheed
126
SMFigure 17-2Figure 17-2
Offensive Marketing Effects of Offensive Marketing Effects of Service on ProfitsService on Profits
ProfitsMarketShare
Reputation Sales
PricePremium
ServiceQuality
Contact: +923006641921 Usman Waheed
127
SMFigure 17-3Figure 17-3
Defensive Marketing Effects of Defensive Marketing Effects of Service on ProfitService on Profit
Margins
Profits
CustomerRetention
Costs
PricePremium
Word ofMouth
Volume ofPurchasesService
Quality
Contact: +923006641921 Usman Waheed
128
SMFigure 17-5Figure 17-5
Perceptions of Service, Perceptions of Service, Behavioral Behavioral
Intentions and ProfitsIntentions and Profits
CustomerRetention
Costs
PricePremium
Word ofMouth
Margins
Profits
Volume ofPurchases
Service BehavioralIntentions
Sales
Contact: +923006641921 Usman Waheed
129
SMFigure 17-6Figure 17-6
The “80/20” Customer PyramidThe “80/20” Customer Pyramid
Most ProfitableCustomers
Least ProfitableCustomers
What segment spends more withus over time, costs less to maintain,spreads positive word of mouth?
What segment costs us intime, effort and money yetdoes not provide the returnwe want? What segment isdifficult to do business with?
OtherCustomers
BestCustomers
Contact: +923006641921 Usman Waheed
130
SMFigure 17-7Figure 17-7
The Expanded Customer PyramidThe Expanded Customer Pyramid
Most ProfitableCustomers
Least ProfitableCustomers
What segment spends more withus over time, costs less to maintain,spreads positive word of mouth?
What segment costs us intime, effort and money yetdoes not provide the returnwe want? What segment isdifficult to do business with?
Gold
Iron
Lead
Platinum
Contact: +923006641921 Usman Waheed
131
SMFigure 17-8Figure 17-8
The Key Drivers of Service Quality, The Key Drivers of Service Quality, Customer Retention, and ProfitsCustomer Retention, and Profits
Key Drivers
ServiceQuality
ServiceEncounter
ServiceEncounter
ServiceEncounter
Customer Retention
BehavioralIntentions Profits
ServiceEncounter
Service Encounters
Contact: +923006641921 Usman Waheed
132
SM
Figure 17-9Figure 17-9
Sample Measurements for the Sample Measurements for the Balanced ScorecardBalanced Scorecard
Adapted from Kaplan and Norton
Innovation andLearning Perspective
CustomerPerspective
Service Perceptions Service ExpectationsPerceived ValueBehavioral Intentions:
Operational Perspective:
Right first time (% hits)Right on time (% hits)Responsiveness (% on time)Transaction time (hours, days)Throughput timeReduction in wasteProcess quality
Financial Measures
Price PremiumVolume IncreasesValue of Customer ReferralsValue of Cross SalesLong-term Value of Customer
% Loyalty % Intent to Switch # Customer Referrals # Cross Sales # of Defections
Number of new productsReturn on innovationEmployee skillsTime to marketTime spent talking to customers
Contact: +923006641921 Usman Waheed
133
SM
Figure 17-10Figure 17-10
Service Quality Spells ProfitsService Quality Spells Profits
ServiceQuality
CustomerRetention
Costs
PricePremium
Word ofMouth
Margins
Profits
Defensive Marketing
Volume ofPurchases
MarketShare
Reputation
Sales
PricePremium
Offensive Marketing