service marketing

SERVICE MARKETING

ByArijit Datta

Aim and Objective

• Foundation of Service Marketing

• Evaluation of Service Alternative

• Service Marketing Mix

• Service Product & Process

• Place & Promotion

• Pricing

• Role of People

• Physical Evidence

• Service Recovery, Complaint Handling, Service Guarantees

• Closing the Gaps

Services Marketing

“Services are going to

move in this decade

to being the front edge

of the industry.”

Services

• A Service is the action of doing something for someone or

something.

• “A service is an activity or benefit that one party can offer to

another that is essentially intangible and does not result in the

ownership of anything. Its production may or may not be tied

to a physical product” – Kotler and Armstrong (1991)

• “A Service as any primary or complimentary activity that does

not directly produce a physical product, i.e., the non goods part

of transaction between buyer (customer) and seller (provider)”

– Service Industries Journal

NATURE OF SERVICES

GOODS

• Tangible in Nature

• Separability of production

and Consumption

• Uniformity in Specifications

and Delivery

• Non-perishable in nature

• Ownership

SERVICES

• Intangible in Nature

• Inseparability of production

and consumption

• Variability in Specifications

and Delivery

• Perishable in Nature

• Lack of Ownership

GOODS AND SERVICE CONTINUUM

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Tangible

Goods

Goods with

Some Services

Goods and

Services Equal

Service with

minor Goods

Pure Service

Service Based

Product Based

SERVICE SECTOR TO INDIAN ECONOMY

YEAR PRIMARY

SECTOR

SECONDARY

SECTOR

TERTIARY

SECTOR

GROWTH OVER

PERIOD (% in

services)

1950-51 55.4 16.1 28.5 -

1960-61 50.9 20.0 29.1 +2.1

1970-71 44.5 23.6 31.9 +9.6

1980-81 38.1 25.9 36.0 +12.9

1990-91 30.9 30.0 39.1 +8.6

1999-2000 27.5 24.6 47.9 +22.5

• Intangibility

• Inseparability

– Self Services

– Co-production

– Isolated production

• Inconsistency (Variability)

• Inventory (Perishability)

• Ownership

CHARACTERISTICS OF SERVICES

Characteristics Of Services

Compared To GoodsGoods Services Resulting Implications

Tangible Intangible •Services cannot be inventorised

•Services cannot be readily displayed

•Services cannot be patented

Standardized Heterogeneity Service quality depends on many

uncontrollable factors

Production

seperate from

consumption

Simultaneous production

and consumption

Customer participate in and affect the

transcations

Decentralization may be requied

Nonperishable Perishable Services cannot be resold or returned

Service Strategy to Counter Problems

for Characteristics Of ServicesCharacteristics Services Resulting Implications

Intangibility •Cannot be easily displayed

•Cannot be patented

•Provide tangible clues

•Stimulate word of mouth

•Use personnel sources

•Use post purchase communication

Inconsistency •Standardisation hard to achieve

•Hard to set up quality control

•Can only predict quality or determine it

after the service is performed

•Stress on standardisation & performance

•Focus on employee training

•Programmes, performance evaluation

•Licensing & other forms of credential

requirements

Inseparability •Harder to mass produce

•Less efficient than production goods

•Need strong training programmes,

incentives

•Focus on personal attention

Inventory •Customers must be present •Focus on convenience, saving time, faster

service

•Extended hours

•Focus on competence & expertise

•Predict fluctuating demand

•Manage capacity to balance supply &

demand

Examples of Service Industries

• 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

SERVICE MARKETING TRIANGLE

Ways to Use the Services 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?

Marketing Analysis Framework

3 C’s

Customers Competitors Company

S(Segment)

T(Target)

P(Position)

Mark

et I

nte

llig

ence

4 P’sProduct

Price Place

Promotion

4 Ps OF MARKETING

Product

Place

Price

Promotion

7 Ps OF SERVICE MARKETING

Product

Place

Price

Promotion

People

Process

Physical Evidence

Customers PricePlace &

Time

Promotion

Product

(service)PeopleProcess

Physical evidence

Customers PriceCustomers

Place, c

yber-

space &

time

Expanded Marketing Mix for Services

Expanded Marketing Mix for Services

PEOPLE PHYSICAL EVIDENCE

PROCESS

Employees

Facility design Flow of activities

Customers Equipment Number of steps

Communicating culture and values

Signage Level of customer involvement

Employee research Employee dress

Other tangibles

Expanded Marketing Mix

for Services

People

– All human actors who play a part in service

delivery and thus influence the buyer’s

perceptions: namely, the firm’s personnel, the

customer, and other customers in the service

environment.

customer

service employees

other customers

Physical Evidence

– The environment in which the service is

delivered and where the firm and customer

interact, and any tangible components that

facilitate performance or communication of the

service.

•atmosphere

décor, music etc.

•equipment

•facilities

•uniforms

Process

– The actual procedures, mechanisms, and flow

of activities by which the service is delivered -

the service delivery and operating systems.

service delivery systems

•back stage

•front stage

procedures

policies

Challenges in Service Marketing

• Giving a feel for the “product”

• Managing Demand Fluctuations

• Maintaining Quality

• Cost Containment

• Attitudinal block in using proven marketing

principles in service marketing

The Customer Gap

Expected Services

Perceived Services

Customer

Gaps

Customer Expectation of Services

• Levels of Expectations

– Desired Services

– Adequate Services

– Zone of Tolerance

Zone Of Tolerance

Desired Service

Adequate Service

Zone of

Tolerance

Factors That Influence Customer

Expectations of Services

• Sources of Desired Service Expectations– Personal Needs.

– Lasting Service Intensifiers.

• Sources of Adequate Service Expectation• Temporary Service Intensifier

• Percieved Service Alternatives

• Situational Factors

• Predicted Services

• Difficult to provide a single definition of

service

• Concept of service has to be understood

either as an exclusive offering from a

company that is primarily intangible, or as a

part of the service-product mix that a

company offers

Learning Objectives (Contd.)

SERVICE LEVELS

• Service is an intangible offering with little or no

transfer of physical products to the customer

• Service is one part of product-service mix being

offered to customers

• The main offering is the product but the supplier also

provides some services

• Every product or service or any combination of a mix

of the two, ultimately is supposed to provide service

for customers

INCREASING IMPORTANCE OF

SERVICES

• Advances in technology

• Growth in per capita income

• A trend towards outsourcing

• Deregulation

• Increasing growth in retailing due to

increase in propensity to consumer

PRODUCT

Core Benefit

Basic Service

Expected Service

Augmented Service

Potential Service

The role of

brand in

services

marketing

--- Brand helps to create a unique position in the minds

of the customer (e.g. Talwalkar‟s Gym. ,Kaya Skin

Clinic)

--- Brands help customers distinguish between

products from different companies

--- Brand superiority leads to high sales, ability to

charge premium price.

---Branding reduces time and effort in DMP

BRANDING

SERVICE DIFFERENTIATION

--- A Company‟s offer should be distinct from its

customers and should fulfill the requirements of the

customers of its target markets.

--- Service differentiation results from added

features which gives customers benefits, and the

company a competitive advantage.

---Building an image and maintaining quality are the

ways of creating such differentiation.

PRICE

PRICING STRATEGY

“Discount price”

“Competition based

price”

“Penetration price”

“Skimming price”

PLACE

PLACE

• 3 ways to render service:

• Customer Service provider e.g.Hospitals

• Service provider Customer e.g. Pizza Hut

• Customer Service provider e.g. ATM machine

WHAT IS FRANCHISEE??

Granting of certain rights by one party (the

franchisor) to another (the franchisee) in return for

a sum of money.

Business method that involves licensing of

trademarks and methods of doing business

EXAMPLES OF FRANCHISEE IN

INDIA

FACTORS AFFECTING

LOCATION

Proximty

Population

Infrastructure

Law & Tax

Environmental & Government regulations

Climatic conditions

Convenience

LATEST TRENDS

• Call centres

• Service delivery

timings

• Mini stores

PROMOTION

Promotion is the communication of the service to the target

customers – to make promises as well as to position themselves in

their minds “Promotion consists of the following major areas of

marketing”

PROMOTION

Advertising

Public relations

Sales promotionDirect mailing

Word of

mouth

Personal selling

Personal Selling - PERSUASION

Sales Promotion

PEOPLE

PEOPLE

• “HAPPY EMPLOYEE = HAPPY CUSTOMER”

• Internal customers

• It’s the human element that creates and sustains the

right kind of climate within the organization that

extend satisfaction to the customers.

SERVICE TRIANGLE

Strategies to Handle Internal

Customers• Training

• Include them in company’s vision

• Empowerment

• Position your company as the best employer

• Employee retention

PROCESS

What is Process?

•Processes are a sequence of activities arranged into

logical step .

•A process invariably is a sequence of value-adding

activities.

EXAMPLES OF SOME SERVICE PROCESSES

Restaurant Education Health Care

Arrive

Seat

Rec. Order

Prep. Food

Consume

Serve Bill

Settle Bill

Admission

Registration

Teach

Train

Examine

Evaluate

Award Monitor

Medication

Emergency

Diagnose

Examine

Ambulation

Admission

Money

Men

MachineMaterial

Methods

The service process includes all the

traditional „M‟s‟

Objectives behind managing a

service process

1. To ensure that service is carried fast.

2. To create and place benchmarks.

3. To facilitate employee learning.

4. To reduce variance through work force planning.

MANAGING DEMAND

Using reservations & bookings

Using appointments

Promoting off-peaks using price incentives

Using fixed schedules

Extending product lines

Seeking customer participation

Using work shift scheduling

MANAGING SUPPLY

Gap Model

PHYSICAL

EVIDENCE

PHYSICAL EVIDENCE

ELEMENTS OF PHYSICAL

EVIDENCE

ELEM

ENTS

SERVICE

SCAPE

TANGIBLES

Elements of Servicescape

Ambient

Conditions

Space &

Function

Condition

Signs &

Symbols &

Artifacts

AMBIENT

CONDITIONS

SIGNS , SYMBOLS &

ARTIFACTS

SPACE & FUNCTION

CONDITIONS

TEMPERATURE

QUALITY OF AIR

NOISE

MUSIC

LAYOUT DESIGN

EQUIPMENT & FIRM

RULES & REGULATIONS

PROCESS EXPLAINED

SERVICESCAPE

OTHER TANGIBLES

• Business cards

• Stationery

• Billing statements

• Reports

• Employee dress

• Uniforms

• Brochures

• Web pages

SERVICESCAPE & BEHAVIOUR

STIMULUS ORGANISM RESPONSE

AMBIENT CONDITIONS

SPATIAL LAYOUT/ FUNCTION

SIGNS, SYMBOLS &

ARTIFACTS

CONSUMERS

EMPLOYEES

COGNITIVE RESPONSE

EMOTIONAL

RESPONSE

PHYSIOLOGICAL

RESPONSE

ALL PRINCIPLES OF

MARKETING APPLY TO

SERVICES

• Services impact customers more directly

than products do

• Marketing of services has to be more

deliberate and considered

• Service provider has to carefully audit his

resources and competencies

• Positioning must be razor sharp

• Services more intractable than products

All Principles of Marketing Apply to Services (Contd.)

• Service provider must define service very

precisely and also design the appropriate

service-product mix

• Promotion more challenging due to

intangible nature of services

• Same basic service can be provided in

vastly different service facilities providing

different levels of amenities and luxuries

All Principles of Marketing Apply to Services (Contd.)

• Same service can be delivered in various

ways

• Marketing mix conveys the positioning of a

service

All Principles of Marketing Apply to Services (Contd.)

MANAGING SERVICES• Managing service quality

Companies rated higher on service quality perform better

in terms of market share growth

Big gap exists between the expectations of the customers and the level of the service they get Real barriers while matching expected and perceived service levels of customers

• Does not understand customer requirements: Misconception barriers arise when companies misunderstand customer expectations

• No resources: A company may understand customer expectations but is unwilling to provide resources to meet them

• Bad delivery: The company is not able to deliver the expected service

• Management’s will: A management eager to improve quality is able to do it

• Exaggerated expectations: Exaggerated promises may become a problem

Managing Services (Contd.)

• Meeting customer expectations

Important to understand and meet customer expectations

Consumers of services value not only the outcome of the

service encounter but also the experience of taking part in it

Access: Is the service provided at convenient locations

and at convenient times, with little waiting period in availing

the service?

Reliability: Service provider should be able to deliver the promised service each time the customer decides to avail of it

Credibility: Can customers trust the service company and its staff?

Security: Can the services be used without risk?

Understanding customer: If the company understands the expectations and also has the capability to serve them, the customer is satisfied with the service outcome

Responsiveness: How quickly do service staff respond to customer problems, requests and questions?

Behavior of employees: Do service staff act in a friendly and polite manner?

Competence: Performance of the primary service will depend

on the knowledge and competencies of the service providers

Communication: Is the service described clearly and accurately?

Physical evidence: The company should provide physical

evidence to customers which will assure customers that they will be

provided a good service

Meeting Customer Expectations (Contd.)

• Managing service productivity

Measure of relationship between the various types of inputs

that are required to produce the service and the service output

Conflict between improving service productivity and raising

service quality

Technology can be used to improve productivity and

service quality simultaneously

Customer involvement in production can be increased

Important to balance supply and demand

By smoothing demand or increasing flexibility of supply,

both productivity and service quality can be achieved

• Managing service staff

Quality of the service experience is heavily dependent on staff-

customer interpersonal relationship

Companies need to treat their employees well if customers have to

be served well by their employees

Nature of the job needs and appropriate personality characteristics

to be defined sharply while selecting service staff

Socialization allows the newly recruited service professionals to

experience the culture and tasks of the organization

Maintaining a motivated workforce

Customer feedback essential to maintain high standards of service quality

Employees of service organizations must take pride in their jobs

POSITIONING SERVICES

• Differentiate from competition on attributes that target customers

highly value

• Entails two decisions:

Choice of target market (where to compete)

Creation of differential advantage (how to compete)

• Determine important choice criteria of customers carefully

• Most important decision of a service organization is selecting the

factors on which it will compete

• Select a few factors and provide superlative performances in the

chosen factors

• Target marketing

• Differential advantage

CUSTOMER

PERCEPTION

OF SERVICE

Customer Perceptions of

Service Quality and

Customer Satisfaction

Service

Quality

Reliability

Responsiveness

Assurance

Empathy

Tangibles

Product

Quality

PricePersonal

Factors

Customer

Satisfaction

Situational

Factors

Factors Influencing

Customer Satisfaction

• Product/service quality

• Product/service attributes or features

• Consumer Emotions

• Attributions for product/service success or

failure

• Equity or fairness evaluations

Outcomes of Customer Satisfaction

• Increased customer retention

• Positive word-of-mouth communications

• Increased revenues

Relationship between Customer Satisfaction

and Loyalty in Competitive Industries

0%

20%

40%

60%

80%

100%

Very

dissatisfied

Dissatisfied Neither

satisfied nor

dissatisfied

Satisfied Very

satisfied

Loy

alt

y (

rete

nti

on

)

Satisfaction measure

Service 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.

The Five Dimensions of

Service 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

SERVQUAL 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

The 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

Check-In

Request Wake-Up Call

Checkout

Bellboy Takes to Room

Restaurant Meal

Figure 4-4

A Service Encounter

Cascade for a Hotel Visit

Sales Call

Ordering Supplies

Billing

Delivery and Installation

Servicing

Figure 4-5

A Service Encounter Cascade for an Industrial Purchase

Critical Service Encounters Research

• GOAL - understanding actual events and behaviors

that cause customer dis/satisfaction in service

encounters

• METHOD - Critical Incident Technique

• DATA - stories from customers and employees

• OUTPUT - identification of themes underlying

satisfaction and dissatisfaction with service

encounters

Sample Questions for Critical

Incidents Technique Study

• Think of a time when, as a customer, you had a

particularly satisfying (dissatisfying) interaction with

an employee of .

• When did the incident happen?

• What specific circumstances led up to this situation?

• Exactly what was said and done?

• What resulted that made you feel the interaction was

satisfying (dissatisfying)?

Common Themes in Critical Service

Encounters Research

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

Recovery

• Acknowledge

problem

• Explain causes

• Apologize

• Compensate/upgrade

• Lay out options

• Take responsibility

• Ignore customer

• Blame customer

• Leave customer to

fend for him/herself

• Downgrade

• Act as if nothing is

wrong

DO DON‟T

Adaptability

• Recognize the

seriousness of the need

• Acknowledge

• Anticipate

• Attempt to

accommodate

• Explain rules/policies

• Take responsibility

• Exert effort to

accommodate

• Promise, then fail to

follow through

• Ignore

• Show unwillingness to

try

• Embarrass the customer

• Laugh at the customer

• Avoid responsibility

DO DON‟T

Spontaneity

• Take time

• Be attentive

• Anticipate needs

• Listen

• Provide information

(even if not asked)

• Treat customers fairly

• Show empathy

• Acknowledge by name

• Exhibit impatience

• Ignore

• Yell/laugh/swear

• Steal from or cheat a

customer

• Discriminate

• Treat impersonally

DO DON‟T

Coping

• Listen

• Try to accommodate

• Explain

• Let go of the

customer

• Take customer’s

dissatisfaction

personally

• Let customer’s

dissatisfaction affect

others

DO DON‟T

Common Research Objectives

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

Criteria for An Effective Services

Research Program

Research

Objectives

Includes

Perceptions

and

Expectationsof

Customers

Includes

Measures

of

Loyalty or

Behavioral

Intentions

IncludesStatisticalValidity

When Necessary

MeasuresPriorities

or Importance

Occurs

with

Appropriate

Frequency

Stages in the Research Process

• 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

BUILDING

CUSTOMER

RELATIONSHIPS

Relationship 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

Lifetime Value of a Customer

• Assumptions

• Income

– Expected Customer Lifetime

– Average Revenue (month/year)

– Other Customers convinced via WOM

– Employee Loyalty??

• Expenses

– Costs of Serving Customer Increase??

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

Benefits to the Organization of

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

Benefits 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

“The Customer Isn‟t Always Right”

• Not all customers are good relationship

customers:

– wrong segment

– not profitable in the long term

– difficult customers

Strategies for Building Relationships

• Foundations:

– Excellent Quality/Value

– Careful Segmentation

• Bonding Strategies:

– Financial Bonds

– Social & Psychological Bonds

– Structural Bonds

– Customization Bonds

• Relationship Strategies Wheel

Getting

Satisfying

Retaining

Enhancing

Customer Goals of

Relationship Marketing

Underlying Logic of Customer

Retention Benefits to the Organization

Customer Retention &

Increased Profits

Employee Loyalty

Quality

Service

Customer Satisfaction

SERVICE

RECOVERY

Unhappy Customers‟

Repurchase Intentions

95%

70%

46%

37%

82%

54%

19%

9%

Complaints Resolved Quickly

Complaints Resolved

Complaints Not Resolved

Minor complaints ($1-$5 losses) Major complaints (over $100 losses)

Unhappy Customers Who Don‟t Complain

Unhappy Customers Who Do Complain

Percent of Customers Who Will Buy Again

Customer Response Following

Service Failure

Service Failure

Do NothingTake Action

Stay with ProviderSwitch Providers

Complain to

Provider

Complain to

Family & Friends

Complain to

Third Party

Stay with ProviderSwitch Providers

Service Recovery Strategies

Service

Recovery

Strategies

Causes Behind Service

Switching

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 Switching

Service Guarantees

• guarantee = an assurance of the fulfillment of a

condition (Webster’s Dictionary)

• for products, guarantee often done in the form of a

warranty

• services are often not guaranteed

– cannot return the service

– service experience is intangible

–(so what do you guarantee?)

Characteristics of an Effective Service

Guarantee

Unconditional The guarantee should make its promise unconditionally -

no strings attached.

Meaningful It should guarantee elements of the service that are

important to the customer.

The payout should cover fully the customer's dissatisfaction.

Easy to Understand and Communicate For customers - they need to understand what to expect.

For employees - they need to understand what to do.

Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way

of accessing or collecting on the guarantee.

Why a Good Guarantee Works

• forces company to focus on customers

• sets clear standards

• generates feedback

• forces company to understand why it failed

• builds “marketing muscle”

Service Guarantees

• Does everyone need a guarantee?

• Reasons companies do NOT offer guarantees:

– guarantee would be at odds with company’s

image

– too many uncontrollable external variables

– fears of cheating by customers

– costs of the guarantee are too high

Service Guarantees

• service guarantees work for companies who are

already customer-focused

• effective guarantees can be BIG deals - they put the

company at risk in the eyes of the customer

• customers should be involved in the design of

service guarantees

• the guarantee should be so stunning that it comes as

a surprise -- a WOW!! factor

• “it’s the icing on the cake, not the cake”

Risks of Relying on Words Alone to

Describe Services

Oversimplification

Incompleteness

Subjectivity

Biased Interpretation

New Service Development Process

Business Strategy Development or Review

New Service Strategy Development

Idea Generation

Concept Development and Evaluation

Business Analysis

Service Development and Testing

Postintroduction Evaluation

Commercialization

Market Testing

Screen ideas against new service strategy

Test concept with customers and employees

Test for profitability and feasibility

Conduct service prototype test

Test service and other marketing-mix elements

Front End

Planning

Implementation

New Service Strategy Matrix for

Identifying Growth Opportunities

Markets

Offerings

Existing

Services

New

Services

Current Customers New Customers

SHARE BUILDING

DIVERSIFICATION

MARKET

DEVELOPMENT

SERVICE

DEVELOPMENT

CUSTOMER-

DEFINED

SERVICE

STANDARDS

Process for Setting

Customer-Defined Standards

1. Identify Existing or Desired Service Encounter Sequence

2. Translate Customer Expectations Into Behaviors/Actions

4. Set Hard or Soft Standards

5. Develop Feedback

Mechanisms

7. Track Measures Against Standards

Measure by

Audits or

Operating Data

Hard Soft

Measure by

Transaction-

Based Surveys

3. Select Behaviors/Actions for Standards

6. Establish Measures and Target Levels

8. Update Target Levels and Measures

PHYSICAL

EVIDENCE

AND THE

SERVICESCAPE

Elements of Physical Evidence

Servicescape Other tangibles

Facility exteriorExterior designSignageParkingLandscapeSurrounding environment

Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature

Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages

Examples of Physical Evidence from the Customer‟s Point of View

Service Physical evidence Servicescape Other tangibles Insurance Not applicable Policy itself

Billing statements Periodic updates Company brochure Letters/cards

Hospital Building exterior Parking Signs Waiting areas Admissions office Patient care room Medical equipment Recovery room

Uniforms Reports/stationery Billing statements

Airline Airline gate area Airplane exterior Airplane interior (décor, seats, air quality)

Tickets Food Uniforms

Express mail Not applicable Packaging Trucks Uniforms Computers

Sporting event

Parking, Seating, Restrooms Stadium exterior Ticketing area, Concession Areas Entrance, Playiing Field

Signs Tickets Program Uniforms

Typology of Service Organizations

Based on Variations in Form

and Use of the Servicescape

Complexity of the servicescape evidence

Servicescape usage

Elaborate Lean

Self-service (customer only)

Golf Land Surf 'n' Splash

ATM Ticketron Post office kiosk Internet services Express mail drop-off

Interpersonal services (both customer and employeee)

Hotel Restaurants Health clinic Hospital Bank Airline School

Dry cleaner Hot dog stand Hair salon

Remote service (employee only)

Telephone company Insurance company Utility Many professional services

Telephone mail-order desk Automated voice-messaging-based services

A Framework for Understanding Environment-user

Relationships in Service Organizations

PHYSICAL

ENVIRONMENTAL

DIMENSIONS

HOLISTIC

ENVIRONMENT

INTERNAL

RESPONSES

BEHAVIOR

Ambient Conditions

Space/Function

Signs, Symbols, and Artifacts

PerceivedServicescape

Cognitive

Emotional

Physiological

Cognitive

Emotional

Physiological

Employee Responses

Customer Responses

Individual Behaviors

Social Interactions between and

among customer and

employees

Individual Behaviors

INTEGRATED

MARKETING

COMMUNICATION

Communications and the

Services Marketing Triangle

Internal 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

Approaches for

Integrating Services Marketing Communication

Goal:Delivery

greater than or equal to

promises

Improve CustomerEducation

ManageService Promises

ManageCustomer

Expectations

ManageInternal

MarketingCommunication

Goal:Delivery

greater than or equal to

promises

OfferService

Guarantees

Create EffectiveServices

Communications

MANAGING SERVICE PROMISES

MakeRealisticPromises

Coordinate External

Communication

Approaches for Managing Service Promises

Communicate Criteria for Service Effectiveness

Create Tiered-ValueOfferings

Approaches for Managing Customer Expectations

NegotiateUnrealistic

Expectations

Goal:Delivery

greater than or equal to

promises

Offer Choices

Goal:Delivery

greater than or equal to

promises

Prepare Customers

for the Service Process

Clarify Expectationsafter the Sale

Approaches for Improving Customer Education

Teach Customers

to Avoid Peak

Demand Periods andSeek Slow

Periods

Confirm Performanceto Standards

Goal:Delivery

greater than or equal to

promises

Approaches for Managing

Internal Marketing Communications

Create EffectiveVertical

Communications

Align Back Office Personnel

w/ External Customers

Create EffectiveHorizontal

Communications

CreateCross-Functional

Teams