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Page 1: Services Marketing

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Services MarketingServices Marketing

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If You want these slides then send me at E-mail at [email protected] or call me at +923006641921

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SMSM

Contact: +923006641921 Usman Waheed

Chapter 1

INTRODUCTION

TO

SERVICES

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SM Objectives 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

01020304050607080

1929 1948 1969 1977 1984 1996

Perc

ent o

f 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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01020304050607080

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 GD

P

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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SM Differences 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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SM Implications 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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SM Ways 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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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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SM Services 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 PRICEPhysical 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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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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SM Services 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?

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SMSMPart 1

FOCUS ON THE CUSTOMER

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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

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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

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SM The Customer GapThe Customer Gap

ExpectedService

PerceivedService

GAP

Part 1 Opener

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SMSMChapter 2

CONSUMER BEHAVIOR IN SERVICES

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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

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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

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SMFigure 2-1Figure 2-1

Continuum of Evaluation for Continuum of Evaluation for Different Types of ProductsDifferent Types of Products

Cl o

t hi n

g

Jew

elry

Furn

it ur e

Ho u

ses

Au t

omob

i les

Re s

taur

ant m

eals

Vac

atio

ns

Ha i

r cu t

s

Ch i

l d c

a re

Tele

visi

on r e

pair

Leg a

l se r

vic e

s

Roo

t ca n

a ls

Au t

o r e

p air

Med

ical

dia

gno s

i s

Difficult to evaluateEasy to evaluate

{High in search

qualitiesHigh in experience

qualitiesHigh in credence

qualities

{{Most

GoodsMost

Services

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SMFigure 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

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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

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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

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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

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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

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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

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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.

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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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SM Figure 3-2Figure 3-2

The Zone of ToleranceThe Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance

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SMFigure 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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SMFigure 3-4Figure 3-4

Zones of Tolerance Zones of Tolerance VARY VARY forforFirst-Time and Recovery ServiceFirst-Time and Recovery Service

First-Time Service

Outcome

Process

Outcome

Process

Recovery Service

ExpectationsLOW HIGH

Source: Parasuraman, Berry and Zeithaml (1991)

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SMFigure 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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SMFigure 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

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SMSMChapter 4

CUSTOMER PERCEPTIONS OF SERVICE

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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

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SMFigure 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

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SM Factors 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

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SM Outcomes of Outcomes of Customer SatisfactionCustomer Satisfaction

• Increased customer retention• Positive word-of-mouth communications• Increased revenues

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SMFigure 4-3 Figure 4-3

Relationship between Customer Relationship between Customer Satisfaction and Loyalty in Satisfaction and Loyalty in

Competitive IndustriesCompetitive Industries

0%

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neithersatisfied nordissatisfied

Satisfied Verysatisfied

Satisfaction measure

Loya

lty (r

eten

tion)

Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

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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.

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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

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SM Exercise to Exercise to Identify Service AttributesIdentify Service Attributes

In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view.Reliability:

Assurance:

Tangibles:

Empathy:

Responsiveness:

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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

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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

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SM

Check-In

Request Wake-Up Call

Checkout

Bellboy Takes to Room

Restaurant Meal

Figure 4-4Figure 4-4

A Service Encounter A Service Encounter Cascade for a Hotel VisitCascade for a Hotel Visit

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SM

Sales Call

Ordering Supplies

Billing

Delivery and Installation

Servicing

Figure 4-5Figure 4-5

A Service Encounter A Service Encounter Cascade for an Industrial Cascade for an Industrial

PurchasePurchase

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SM Critical Service Encounters Critical Service Encounters ResearchResearch

• 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

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SM Sample Questions for Critical Sample Questions for Critical Incidents Technique StudyIncidents 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)?

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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

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SM RecoverRecoveryy

• 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

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SM AdaptabilityAdaptability

• 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

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SM SpontaneitySpontaneity

• 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

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SM CopingCoping

• Listen• Try to accommodate• Explain• Let go of the

customer

• Take customer’s dissatisfaction personally

• Let customer’s dissatisfaction affect others

DO DON’T

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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

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SMSM Part 2

LISTENING TO CUSTOMER REQUIREMENTS

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SM Provider GAP 1Provider GAP 1

Company Perceptions of

Consumer Expectations

Expected Service

CUSTOMER

COMPANY

GAP 1

Part 2 Opener

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SMSMChapter 5

UNDERSTANDING CUSTOMER EXPECTATIONS AND PERCEPTIONS THROUGH MARKETING RESEARCH

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SMObjectives for Chapter 5:Objectives for Chapter 5:

Understanding Customer Expectations Understanding Customer Expectations and Perceptions throughand Perceptions through

Marketing Research Marketing Research• Present the types of and guidelines for marketing

research in services• Show the ways that marketing research information

can and should be used for services• Describe the strategies by which companies can

facilitate interaction and communication between management and customers

• Present ways that companies can and do facilitate interaction between contact people and management

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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

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SMFigure 5-1Figure 5-1

Criteria for An Effective Criteria for An Effective Services Research ProgramServices Research Program

ResearchObjectives

Includes

Qualitative

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

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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

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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

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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 0 Reliability Responsiveness Assurance Empathy Tangibles

OO OO

Zone of Tolerance S.Q. PerceptionO

O

Page 85: Services Marketing

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SMService Quality Perceptions Service Quality Perceptions

Relative to Zones of Tolerance by Relative to Zones of Tolerance by DimensionsDimensions

Computer Manufacturer

10

8

6

4

2

0Reliability Responsiveness Assurance Empathy Tangibles

OO O OO

Zone of Tolerance S.Q. PerceptionO

Page 86: Services Marketing

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SMFigure 5-6 Figure 5-6

Importance/Performance MatrixImportance/Performance Matrix

HIGH

HIGHLOWPerformance

Impo

rtan

ce

Attributes to Improve Attributes to Maintain

HighLeverage

Attributes to De-emphasizeAttributes to Maintain

LowLeverage

Page 87: Services Marketing

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SMSMChapter 6

BUILDING

CUSTOMER

RELATIONSHIPS

Page 88: Services Marketing

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SMObjectives for Chapter 6:Objectives for Chapter 6:

Building Customer Building Customer RelationshipsRelationships

• Explain relationship marketing, its goals, and the benefits of long-term relationships for firms and customers

• Explain why and how to estimate customer lifetime value• Specify the foundations for successful relationship

marketing--quality core services and careful market segmentation

• Provide you with examples of successful customer retention strategies

• Introduce the idea that “the customer isn’t always right”

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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

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SM Lifetime Value of a CustomerLifetime 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??

Page 91: Services Marketing

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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

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SM Customer Loyalty ExerciseCustomer Loyalty Exercise

• Think of a service provider you are loyal to.• What do you do (your behaviors, actions, feelings)

that indicates you are loyal?• Why are you loyal to this provider?

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SM Benefits 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

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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

Page 95: Services Marketing

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SM ““The Customer Isn’t Always The Customer Isn’t Always Right”Right”

• Not all customers are good relationship customers:

– wrong segment

– not profitable in the long term

– difficult customers

Page 96: Services Marketing

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SM Strategies 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

Page 97: Services Marketing

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SM

Getting

Satisfying

Retaining

Enhancing

Figure 6-1Figure 6-1

Customer Goals of Customer Goals of Relationship MarketingRelationship Marketing

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98

SMFigure 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

Page 99: Services Marketing

99

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:

Page 100: Services Marketing

100

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

Page 101: Services Marketing

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SMSMChapter 7

SERVICE RECOVERY

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SMObjectives for Chapter 7:Objectives for Chapter 7:

Service RecoveryService Recovery

• Illustrate the importance of recovery from service failures in building loyalty

• Discuss the nature of consumer complaints and why people do and do not complain

• Provide evidence of what customers expect and the kind of responses they want when they complain

• Provide strategies for effective service recovery• Discuss service guarantees

Page 103: Services Marketing

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SMFigure 7-1Figure 7-1

Unhappy Customers’ Unhappy Customers’ Repurchase IntentionsRepurchase 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

Source: Adapted from data reported by the Technical Assistance Research Program.

Page 104: Services Marketing

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SMFigure 7-3Figure 7-3

Customer Response Customer Response Following Service FailureFollowing 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

Page 105: Services Marketing

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SMFigure 7-5Figure 7-5

Service Recovery StrategiesService Recovery Strategies

Learn fromRecovery Experiences

Treat Customers Fairly

Learn fromLost C

ustomers

Welcome and

Encourage ComplaintsFail S

afe the Service

Act Q

uickly

Service Recovery Strategies

Page 106: Services Marketing

106

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 ServiceCompetition

• Cheat• Hard Sell• Unsafe• Conflict of Interest

Ethical Problems

• Customer Moved• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

Page 107: Services Marketing

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SM Service GuaranteesService 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?)

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SMTable 7-7Table 7-7

Characteristics of an Characteristics of an Effective Service GuaranteeEffective Service Guarantee

Unconditional The guarantee should make its promise unconditionally -

no strings attached.Meaningful

It should guarantee elements of the service that areimportant to the customer.

The payout should cover fully the customer'sdissatisfaction.

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.

Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.

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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”

Page 110: Services Marketing

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SM Service GuaranteesService 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

Page 111: Services Marketing

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SM Service GuaranteesService 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”

Page 112: Services Marketing

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SMSMPart 3

ALIGNING STRATEGY, SERVICE DESIGN

AND STANDARDS

Page 113: Services Marketing

113

SM

CUSTOMER

COMPANY

GAP 2

Customer-Driven Service Designs and

Standards

Company Perceptions of

Consumer Expectations

Provider GAP 2Provider GAP 2

Part 3 Opener

Page 114: Services Marketing

114

SMSMChapter 8

SERVICE DEVELOPMENT AND DESIGN

Page 115: Services Marketing

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SMObjectives for Chapter 8:Objectives for Chapter 8:Service Development and Service Development and

DesignDesign

• Describe the challenges inherent in service design• Present steps in the new service development

process• Show the value of service blueprinting and quality

function deployment (QFD) in new service design and service improvement

• Present lessons learned in choosing and implementing high-performance service innovations

Page 116: Services Marketing

116

SMFigure 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

Page 117: Services Marketing

117

SMFigure 8-2 Figure 8-2

New Service Development ProcessNew Service Development Process

Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

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

Page 118: Services Marketing

118

SMFigure 8-3Figure 8-3

New Service Strategy Matrix New Service Strategy Matrix for Identifying Growth for Identifying Growth

OpportunitiesOpportunitiesMarkets

Offerings

ExistingServices

NewServices

Current Customers New Customers

SHARE BUILDING

DIVERSIFICATION

MARKETDEVELOPMENT

SERVICEDEVELOPMENT

Page 119: Services Marketing

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

ProcessPoints of ContactEvidence

Page 120: Services Marketing

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SM Service Blueprint ComponentsService Blueprint ComponentsCUSTOMER ACTIONS

line of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONSline of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONSline of internal interaction

SUPPORT PROCESSES

Page 121: Services Marketing

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SM

DriverPicksUp Pkg.

DispatchDriver

AirportReceives& Loads

SortPackages

Load onAirplane

Fly toDestinati

on

Unload&

Sort

LoadOn

Truck

Express Mail Delivery ServiceExpress Mail Delivery ServiceSU

PPOR

T PR

OCES

SCO

NTAC

T P

ERSO

N(B

ack

Stag

e)(O

n St

age)

CUST

OME

RPH

YSIC

ALEV

IDEN

CE

CustomerCalls

CustomerGives

Package

TruckPackagingFormsHand-held ComputerUniform

ReceivePackage

TruckPackagingFormsHand-held ComputerUniform

DeliverPackage

CustomerServiceOrder

Fly toSort

Center

Page 122: Services Marketing

122

SM Overnight Hotel StayOvernight Hotel StaySU

PPOR

T PR

OCES

SCO

NTAC

T PE

RSON

(Bac

k St

age)

(On

Stag

e)CU

STOM

ER

HotelExteriorParking

Cart for Bags

DeskRegistrationPapersLobbyKey

ElevatorsHallwaysRoom

Cart for Bags

RoomAmenitiesBath

Menu DeliveryTrayFoodAppearance

FoodBillDeskLobbyHotelExteriorParking

Arriveat

Hotel

Give Bagsto

BellpersonCheck in Go to

RoomReceive

BagsSleep

Shower

CallRoom

Service

ReceiveFood

EatCheck out

andLeave

Greet andTakeBags

ProcessRegistration

DeliverBags

DeliverFood

ProcessCheck Out

Take Bagsto Room

TakeFoodOrder

RegistrationSystem

PrepareFood

RegistrationSystem

PHYS

ICAL

EVID

ENCE

Page 123: Services Marketing

123

SM Figure 8-8Figure 8-8

Building a Service BlueprintBuilding a Service Blueprint

Step 1

Identify the process to be blue-printed.

Step 2

Identify the customer or customer segment.

Step 3

Map the process from the customer’s point of view.

Step 4

Map contact employee actions, onstage and back-stage.

Step 5

Link customerand contact person activities to needed support functions.

Step 6

Add evidence of service at each customer action step.

Page 124: Services Marketing

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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

Page 125: Services Marketing

125

SMBlueprints Can Be Used By:Blueprints Can Be Used By:

• Service Marketers– creating realistic customer

expectations• service system design• promotion

• Operations Management– rendering the service as promised

• managing fail points• training systems• quality control

• Human Resources– empowering the human element

• job descriptions• selection criteria• appraisal systems

• System Technology– providing necessary tools:

• system specifications• personal preference databases

Page 126: Services Marketing

126

SMSM Chapter 9

CUSTOMER-DEFINED SERVICE STANDARDS

Page 127: Services Marketing

127

SMObjectives for Chapter 9:Objectives for Chapter 9:Customer-defined Service Customer-defined Service

StandardsStandards• Differentiate between company-defined and

customer-defined service standards• Distinguish among one-time service fixes and

“hard” and “soft” customer-defined standards• Explain the critical role of the service encounter

sequence in developing customer-defined standards• Illustrate how to translate customer expectations

into behaviors and actions that are definable, repeatable, and actionable

Page 128: Services Marketing

128

SMFigure 9-1Figure 9-1

AT&T’s Process Map for MeasurementsAT&T’s Process Map for Measurements

Reliability

(40%)Easy To Use

(20%)Features / Functions

(40%)

Knowledge

(30%)Responsive

(25%)Follow-Up

(10%)

Delivery Interval Meets Needs

(30%)Does Not Break

(25%)Installed When Promised

(10%)

No Repeat Trouble

(30%)Fixed Fast

(25%)Kept Informed

(10%)

Accuracy, No Surprise

(45%)Resolve On First Call

(35%)Easy To Understand

(10%)

Business Process Customer Need Internal Metric

30% Product

30% Sales

10% Installation

15% Repair

15% Billing

% Repair Call% Calls for HelpFunctional Performance Test

Supervisor Observations% Proposal Made on Time% Follow Up Made

Average Order Interval% Repair Reports% Installed On Due Date

% Repeat ReportsAverage Speed Of Repair% Customers Informed

% Billing Inquiries% Resolved First Call% Billing Inquiries

TotalQuality

Source: AT&T General Business Systems

Page 129: Services Marketing

129

SMExercise for Creating Exercise for Creating

Customer-Defined Service Customer-Defined Service StandardsStandards

• Form a group of four people• Use your school’s undergraduate or graduate

program, or an approved alternative• Complete the customer-driven service standards

importance chart• Establish standards for the most important and

lowest-performed behaviors and actions• Be prepared to present your findings to the class

Page 130: Services Marketing

130

SMService Encounter Customer Requirements Measurements

ServiceQuality

Customer-Driven Standards and Customer-Driven Standards and Measurements ExerciseMeasurements Exercise

Page 131: Services Marketing

131

SMFigure 9-2Figure 9-2

Getting to Actionable StepsGetting to Actionable Steps

Satisfaction ValueRelationship Solution Provider

Reliability EmpathyAssurance Tangibles Responsiveness Price

Delivers on TimeReturns Calls QuicklyKnows My Industry

Delivers by Weds 11/4Returns Calls in 2 HrsKnows Strengths of My Competitors

Requirements:

Abstract

Concrete

Dig Deeper

Dig Deeper

Dig Deeper

Diagnosticity:

Low

High

General Concepts

Dimensions

Behaviors and Actions

Attributes

Page 132: Services Marketing

132

SMFigure 9-3Figure 9-3

Process for Setting Process for Setting Customer-Defined StandardsCustomer-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 FeedbackMechanisms

7. Track Measures Against Standards

Measure byAudits or

Operating DataHard Soft

Measure byTransaction-

Based Surveys

3. Select Behaviors/Actions for Standards

6. Establish Measures and Target Levels

8. Update Target Levels and Measures

Page 133: Services Marketing

133

SM Importance/Performance MatrixImportance/Performance MatrixHIGH

HIGH

Performance

10.0

8.0

7.0

9.0

LOW

8.0 9.0 10.0

Importance

Improve MaintainDelivers on promises specified in proposal/contract (9.49, 8.51)

Gets project within budget, on time (9.31, 7.84)Completes projects correctly, on time (9.29, 7.68)

Does whatever it takes to correct problems (9.26, 7.96)

Provides equipment that operates as vendor said it would (9.24, 8.14)

Gets price we originally agreed upon (9.21, 8.64)

Takes responsibility for their mistakes (9.18, 8.01)Delivers or installs on promised date (9.02, 7.84)

Tells me cost ahead of time (9.06, 8.46)

Gets back to me whenpromised (9.04, 7.63)

Page 134: Services Marketing

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SMFigure 9-5Figure 9-5

Linkage between Soft Measures and Linkage between Soft Measures and Hard Measures for Speed of Hard Measures for Speed of

Complaint HandlingComplaint HandlingSATISFACTION

2 4 6 8 12 16 20 24 W O R K I N G H O U R S

Large Customers

Small Customers

109876543210

Page 135: Services Marketing

135

SMFigure 9-6Figure 9-6 Aligning Company Processes Aligning Company Processes

with Customer Expectationswith Customer Expectations

Customer Expectations

Customer Process Blueprint

Company Process Blueprint Company Sequential Processes

A B C D E F G H40 Days

New Card Mailed

Lost Card Reported

Report Lost Card

Receive New Card

48 Hours

Page 136: Services Marketing

136

SMSMChapter 10

PHYSICAL EVIDENCE AND THE SERVICESCAPE

Page 137: Services Marketing

137

SMObjectives for Chapter 10:Objectives for Chapter 10:Physical Evidence and the Physical Evidence and the

ServicescapeServicescape

• Explain the impact on customer perceptions of physical evidence, particularly the servicescape

• Illustrate differences in types and roles of servicescapes and their implications for strategy

• Explain why the servicescape affects employee and customer behavior

• Analyze four different approaches for understanding the effects of physical environment

• Present elements of an effective physical evidence strategy

Page 138: Services Marketing

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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

Page 139: Services Marketing

139

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

Page 140: Services Marketing

140

SMTable 10-3 Table 10-3

Typology of Service Organizations Typology of Service Organizations Based on Variations in Form Based on Variations in Form and Use of the Servicescapeand Use of the Servicescape

Complexity of the servicescape evidenceServicescapeusage

Elaborate Lean

Self-service(customer only)

Golf LandSurf 'n' Splash

ATMTicketronPost office kioskInternet servicesExpress mail drop-off

Interpersonalservices(both customer andemployeee)

HotelRestaurantsHealth clinicHospitalBankAirlineSchool

Dry cleanerHot dog standHair salon

Remote service(employee only)

Telephone companyInsurance companyUtilityMany professional services

Telephone mail-order deskAutomated voice-messaging-based services

Page 141: Services Marketing

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SMFigure 10-3Figure 10-3

A Framework for UnderstandingA Framework for UnderstandingEnvironment-user Relationships Environment-user Relationships

in Service Organizationsin Service Organizations

Source: Adapted from Mary Jo Bitner, “Servicescapes.”

PHYSICALENVIRONMENTAL

DIMENSIONS

HOLISTICENVIRONMENT

INTERNALRESPONSES

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

Page 142: Services Marketing

142

SMSMPart 4

DELIVERING AND PERFORMING SERVICE

Page 143: Services Marketing

143

SM

CUSTOMER

COMPANY

Provider GAP 3Provider GAP 3

Service DeliveryGAP 3

Customer-Driven Service Designs and

Standards

Part 4 Opener

Page 144: Services Marketing

144

SMSMChapter 11

EMPLOYEES’ ROLES IN SERVICE DELIVERY

Page 145: Services Marketing

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SMObjectives for Chapter 11:Objectives for Chapter 11:

Employees’ Roles in Employees’ Roles in Service DeliveryService Delivery

• Illustrate the critical importance of service employees in creating customer satisfaction and service quality

• Demonstrate the challenges inherent in boundary-spanning roles

• Provide examples of strategies for creating customer-oriented service delivery

• Show how the strategies can support a service culture where providing excellent service is a way of life

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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

Page 147: Services Marketing

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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

Page 148: Services Marketing

148

SMFigure 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

Page 149: Services Marketing

149

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

Page 150: Services Marketing

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SMFigure 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 Best

People

Hire for Service

Competencies and Service Inclination

Provide Supportive Technology

and Equipment

Trea

t Em

ploy

ees

as

Cus

tom

ers

Empow

er Em

ployees

Be the Preferred

Employer Train for

Technical and

Interactive

Skills

Prom

ote

Team

work

Measure

Internal

Service

Quality

Develop Service-

oriented Internal

Processes

Mea

sure

and

Re

ward

St

rong

Se

rvic

e Pr

ovid

ers

Include

Employees in

the

Company’s

Vision

Page 151: Services Marketing

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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.”

Page 152: Services Marketing

153

SMSM Chapter 12

CUSTOMERS’ ROLES IN SERVICE DELIVERY

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SMObjectives for Chapter 12:Objectives for Chapter 12:

Customers’ Roles in Service Customers’ Roles in Service DeliveryDelivery

• Illustrate the importance of customers in successful service delivery

• Enumerate the variety of roles that service customers play• Productive resources• Contributors to quality and satisfaction• Competitors

• Explain strategies for involving service customers effectively to increase both quality and productivity

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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

Page 155: Services Marketing

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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

Page 156: Services Marketing

157

SMFigure 12-2Figure 12-2

Customer Roles in Service Customer Roles in Service DeliveryDelivery

Productive Resources

Contributors to Quality and Satisfaction

Competitors

Page 157: Services Marketing

158

SM Customers as Productive Customers as Productive ResourcesResources

• “partial employees”– contributing effort, time, or other resources to

the production process• customer inputs can affect organization’s

productivity• key issue:

– should customers’ roles be expanded? reduced?

Page 158: Services Marketing

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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

Page 159: Services Marketing

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SM Customers as CompetitorsCustomers as Competitors

• customers may “compete” with the service provider• “internal exchange” vs. “external exchange”• internal/external decision often based on:

– expertise– resources– time– economic rewards– psychic rewards– trust– control

Page 160: Services Marketing

161

SMTechnology Spotlight:Technology Spotlight:

Services Production ContinuumServices Production Continuum

1 2 3 4 5 6Gas Station Illustration1. Customer pumps gas and pays at the pump with automation2. Customer pumps gas and goes inside to pay attendant3. Customer pumps gas and attendant takes payment at the pump4. Attendant pumps gas and customer pays at the pump with automation5. Attendant pumps gas and customer goes inside to pay attendant6. Attendant pumps gas and attendant takes payment at the pump

Customer Production Joint Production Firm Production

Page 161: Services Marketing

162

SMFigure 12-3Figure 12-3

Strategies for Enhancing Strategies for Enhancing Customer ParticipationCustomer Participation

EffectiveCustomer

ParticipationRecruit, Educate,

and Reward Customers

Define CustomerJobs

Manage theCustomer

Mix

Page 162: Services Marketing

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SM Strategies 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

Page 163: Services Marketing

164

SMStrategies for Recruiting,Strategies for Recruiting,Educating and Rewarding Educating and Rewarding

CustomersCustomers

1. Recruit the right customers2. Educate and train customers to perform effectively3. Reward customers for their contribution4. Avoid negative outcomes of inappropriate customer participation

Manage the Customer Mix

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SMSM Chapter 14

MANAGING DEMAND AND CAPACITY

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SMObjectives for Chapter 14:Objectives for Chapter 14:

Managing Demand and Managing Demand and CapacityCapacity

• Explain:• the underlying issue for capacity-constrained services• the implications of capacity constraints • the implications of different types of demand patterns on

matching supply and demand• Lay out strategies for matching supply and demand through:

• shifting demand to match capacity or• flexing capacity to meet demand

• Demonstrate the benefits and risks of yield management strategies• Provide strategies for managing waiting lines

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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

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SM Figure 14-3Figure 14-3

Strategies for Shifting Demand Strategies for Shifting Demand to Match Capacityto Match Capacity

• Use signage to communicate busy days and times

• Offer incentives to customers for usage during non-peak times

• Take care of loyal or regular customers first• Advertise peak usage times and benefits of

non-peak use• Charge full price for the service--no discounts

• Use sales and advertising to increase business from current market segments

• Modify the service offering to appeal to new market segments

• Offer discounts or price reductions

• Modify hours of operation• Bring the service to the

customer

Demand Too High Demand Too LowShift Demand

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SM

Figure 14-4Figure 14-4

Strategies for Flexing Capacity Strategies for Flexing Capacity

to Match Demandto Match Demand

• Stretch time, labor, facilities and equipment• Cross-train employees• Hire part-time employees• Request overtime work from employees• Rent or share facilities• Rent or share equipment• Subcontract or outsource activities

• Perform maintenance renovations

• Schedule vacations• Schedule employee training• Lay off employees

Demand Too High Demand Too LowFlex Capacity

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SMTable 14-1 Table 14-1

What is the Nature of Demand What is the Nature of Demand Relative to Supply?Relative to Supply?Extent of demand fluctuations over time

Extent to whichsupply isconstrained

Wide Narrow

Peak demand canusually be metwithout a majordelay

1ElectricityNatural gasTelephoneHospital maternity unitPolice and fireemergencies

2InsuranceLegal servicesBankingLaundry and dry cleaning

Peak demandregularly exceedscapacity

4Accounting and taxpreparationPassenger transportationHotels and motelsRestaurantsTheaters

3Services similar to those in2 but which haveinsufficient capacity fortheir base level of business

Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.

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SMTable 14-2 Table 14-2

What is the Constraint on Capacity?What is the Constraint on Capacity?

Nature of the constraint Type of serviceTime Legal

ConsultingAccountingMedical

Labor Law firmAccounting firmConsulting firmHealth clinic

Equipment Delivery servicesTelecommunicationUtilitiesHealth club

Facilities HotelsRestaurantsHospitalsAirlinesSchoolsTheatersChurches

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SM Waiting Line Issues Waiting Line Issues and Strategiesand Strategies

• unoccupied time feels longer• preprocess waits feel longer• anxiety makes waits seem longer• uncertain waits seem longer than finite waits• unexplained waits seem longer• unfair waits feel longer• longer waits are more acceptable for “valuable”

services• solo waits feel longer

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SMSMPart 5

MANAGING SERVICE PROMISES

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SM

CUSTOMER

COMPANYExternal

Communications to CustomersGAP 4

Service Delivery

Provider GAP 4Provider GAP 4

Part 5 Opener

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SMSMChapter 15

INTEGRATED MARKETING COMMUNICATION

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SMObjectives for Chapter 15:Objectives for Chapter 15:

Integrated Services Integrated Services Marketing CommunicationsMarketing Communications

• Introduce the concept of Integrated Services Marketing Communication

• Discuss the key reasons for service communication problems• Present four key ways to integrate marketing communication

in service organizations• Present specific strategies for managing promises, managing

customer expectations, educating customers, and managing internal communications

• Provide perspective on the popular service objective of exceeding customer expectations

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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

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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

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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

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SM

Communicate Criteria for Service Effectiveness

Create Tiered-ValueOfferings

Figure 15-8Figure 15-8Approaches forApproaches for

Managing Customer ExpectationsManaging Customer Expectations

NegotiateUnrealistic

Expectations

Goal:Delivery

greater than or equal to promises

Offer Choices

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SM

Goal:Delivery

greater than or equal to promises

Prepare Customers

for the Service Process

Clarify Expectationsafter the Sale

Figure 15-9Figure 15-9Approaches forApproaches for

Improving Customer EducationImproving Customer Education

Teach Customers to Avoid

Peak Demand Periods

andSeek Slow

Periods

Confirm Performanceto Standards

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SMGoal:

Delivery greater than or equal to promises

Figure 15-10Figure 15-10Approaches 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

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SMSM Chapter 17

THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY

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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

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SMFigure 17-1Figure 17-1

The Direct Relationship between The Direct Relationship between Service and ProfitsService and Profits

Profits?ServiceQuality

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SMFigure 17-2Figure 17-2

Offensive Marketing Effects of Offensive Marketing Effects of Service on ProfitsService on Profits

ProfitsMarketShare

Reputation Sales

PricePremium

ServiceQuality

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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

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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

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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

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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

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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

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SMFigure 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

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SMFigure 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


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