services marketing

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

IntroductionServices are deeds,processes and

performanceIntangible, but may have a tangible

componentGenerally produced and consumed at the

same timeNeed to distinguish between SERVICE and

CUSTOMER SERVICE

Challenges for ServicesChallenges for ServicesDefining and improving qualityCommunicating and testing new servicesCommunicating and maintaining a

consistent imageMotivating and sustaining employee

commitmentCoordinating marketing, operations and

human resource effortsSetting pricesStandardization versus personalization

Examples 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

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets

Figure 1-2 Figure 1-2

Percent of Percent of U.S. Labor Force by IndustryU.S. Labor Force by Industry

0

10

20

30

40

50

60

70

80

1929 1948 1969 1977 1984 1996

Per

cent

of

GD

P

Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.

Year

Services Manufacturing Mining & Agriculture

0

10

20

30

40

50

60

70

80

1948 1959 1967 1977 1987 1996


Percent of U.S. Gross Domestic Percent of U.S. Gross Domestic Product by IndustryProduct by Industry

Perc

ent o

f G

DP

Year

Source: Survey of Current Business, August 1996, Table 11, April 1998, Table B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S. Economy,” Scientific American, 244,3 (1981): 31-39.

Services Manufacturing Mining & Agriculture

Differences BetweenDifferences Between Goods and Services Goods and Services

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity

Implications of IntangibilityImplications of Intangibility Services cannot be inventoried Services cannot be patented Services cannot be readily

displayed or communicated Pricing is difficult

Implications of HeterogeneityImplications of HeterogeneityService delivery and customer satisfaction

depend on employee actionsService quality depends on many

uncontrollable factorsThere is no sure knowledge that the service

delivered matches what was planned and promoted

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

Implications of PerishabilityImplications of Perishability It is difficult to synchronize supply

and demand with services Services cannot be returned or resold

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.

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

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?

Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology


The Services Triangle The Services Triangle and Technologyand Technology

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

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

Expanded Mix for Services --Expanded Mix for Services --the 7 Psthe 7 Ps

Product Price Place Promotion

People Process Physical Evidence

Table 1-3Table 1-3

Expanded Marketing Mix Expanded Marketing Mix for Servicesfor Services

PRODUCT PLACE PROMOTION PRICE

Physical goodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding

Table 1-3 (Continued)Table 1-3 (Continued)

Expanded Marketing Mix Expanded Marketing Mix for Servicesfor ServicesPEOPLE PHYSICAL

EVIDENCEPROCESS

Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicatingculture and values

Signage Level of customerinvolvement

Employee research Employee dress

Other tangibles

Ways to Use the 7 PsWays to Use the 7 PsOverall Strategic

AssessmentHow 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?

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?

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

Gaps Model of Service QualityGaps Model of Service Quality

Customer Gap:difference between expectations and

perceptionsProvider Gap 1:

not knowing what customers expectProvider 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

promisesPart 1 Opener

The Customer GapThe Customer Gap

ExpectedService

PerceivedService

GAP

Part 1 Opener

Objectives 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

Consumer Evaluation Consumer Evaluation Processes for ServicesProcesses for Services

Search Qualitiesattributes a consumer can determine prior to

purchase of a productExperience Qualities

attributes a consumer can determine after purchase (or during consumption) of a product

Credence Qualitiescharacteristics that may be impossible to

evaluate even after purchase and consumption

Clo

t hin

g

Jew

elry

Fur

n itu

re

Hou

ses

Aut

omob

iles

Res

tau

rant

mea

ls

Vac

a tio

ns

Ha i

r cut

s

Ch i

ld c

a re

Tel

evis

ion

repa

ir

Leg

a l s

ervi

ces

Roo

t c a

nals

Aut

o re

pair

Med

ical

dia

gno

sis

Difficult to evaluateEasy to evaluate

{High in search

qualitiesHigh in experience

qualitiesHigh in credence

qualities

{{Most

GoodsMost

Services

Figure 2-2Figure 2-2

Categories in Consumer Categories in Consumer Decision-Making and Evaluation of ServicesDecision-Making 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

Figure 2-3Figure 2-3 Categories in Consumer Decision-Making and Categories in Consumer Decision-Making and Evaluation of ServicesEvaluation 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

Information searchIn buying services consumers rely more on

personal sources. WHY? Refer p32Personal influence becomes pivotal as

product complexity increasesWord of mouth important in delivery of

servicesWith service most evaluation follows

purchase

Perceived RiskMore 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

Evoked SetThe evoked set of alternatives likely to be

smaller with services than goodsIf 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 potentialConsumer may choose to do it themselves,

e.g. garden services

Emotion and MoodEmotion and mood are feeling states that

influence people’s perception and evaluation of their experiences

Moods are transientEmotions more intense, stable and pervasiveMay have a negative or positive influence

Service Provision as DramaNeed to maintain a desirable impressionService “actors” need to perform certain

routinesPhysical setting important, smell, music, use

of space, temperature, cleanliness, etc.

Global Feature:Global Feature:Differences in the Service Experience in the U.S. and Differences in the Service Experience in the U.S. and JapanJapan

Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness

Objectives for Chapter 3:Customer Expectations of Service

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

DEFINITIONSCustomers have different expectations re

services – or expected serviceDesired service – customer hopes to receiveAdequate service – the level of service the

customer may accept

DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?


Dual Customer Dual Customer Expectation LevelsExpectation Levels

(Two levels of expectations)(Two levels of expectations)

Adequate Service

Desired Service

Zone ofTolerance


The Zone of ToleranceThe Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance


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


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)


Factors that InfluenceFactors that InfluenceDesired ServiceDesired Service

DesiredService

AdequateService

Zone of

Tolerance

Enduring ServiceIntensifiers

Personal Needs

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


Factors that InfluenceFactors that InfluenceAdequate ServiceAdequate Service

DesiredService

AdequateService

Zone of

ToleranceSelf-PerceivedService Role

Situational Factors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers

Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends

Perceived service alternativesPerceived service role of customerSituational factors


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

Objectives for Chapter 4:Customer Perceptions of Service

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

ServiceQuality

Reliability

Responsiveness

Assurance

Empathy

Tangibles

ProductQuality

PricePersonalFactors

CustomerSatisfaction

SituationalFactors

Factors Influencing Customer Satisfaction

Product/service qualityProduct/service attributes or featuresConsumer EmotionsAttributions for product/service success or

failureEquity or fairness evaluations

Outcomes of Customer Satisfaction

Increased customer retentionPositive word-of-mouth communicationsIncreased revenues

0%

20%

40%

60%

80%

100%

Verydissatisfied

Dissatisfied Neithersatisfied nordissatisfied

Satisfied Verysatisfied

Satisfaction measure

Lo

yalt

y (r

eten

tio

n)

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.

Service QualityThe 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

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:

SERVQUAL 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

The Service Encounter

is the “moment of truth”occurs any time the customer interacts with the firmcan potentially be critical in determining customer

satisfaction and loyalty types of encounters:

remote encountersphone encounters face-to-face encounters

is an opportunity to:build trustreinforce qualitybuild brand identity increase loyalty

Check-InCheck-In

Request Wake-Up CallRequest Wake-Up Call

CheckoutCheckout

Bellboy Takes to Room Bellboy Takes to Room

Restaurant MealRestaurant Meal

Figure 4-4

A Service Encounter Cascade for a Hotel Visit

Sales CallSales Call

Ordering SuppliesOrdering Supplies

BillingBilling

Delivery and Installation Delivery and Installation

ServicingServicing


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

PurchasePurchase

Critical Service Encounters Research

GOAL - understanding actual events and behaviors that cause customer dis/satisfaction in service encounters

METHOD - Critical Incident TechniqueDATA - stories from customers and

employeesOUTPUT - 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)?

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 causesApologizeCompensate/

upgradeLay out optionsTake responsibility

Ignore customerBlame customerLeave customer to

fend for him/herself

DowngradeAct as if nothing is

wrong

DO DON’T

Adaptability

Recognize the seriousness of the need

AcknowledgeAnticipateAttempt to

accommodateExplain rules/policiesTake responsibilityExert effort to

accommodate

Promise, then fail to follow through

IgnoreShow unwillingness

to tryEmbarrass the

customerLaugh at the

customerAvoid responsibility

DO DON’T

Spontaneity

Take timeBe attentiveAnticipate needsListenProvide information

(even if not asked)Treat customers

fairlyShow empathyAcknowledge by

name

Exhibit impatienceIgnoreYell/laugh/swearSteal from or

cheat a customerDiscriminateTreat impersonally

DO DON’T

Coping

ListenTry to

accommodateExplainLet go of the

customer

Take customer’s dissatisfaction personally

Let customer’s dissatisfaction affect others

DO DON’T

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

Provider GAP 1Provider GAP 1

Company Perceptions of

Consumer Expectations

Expected Service

CUSTOMER

COMPANY

GAP 1

Part 2 Opener

Objectives for Chapter 5:Understanding Customer Expectations and Perceptions through 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

Common Research Objectives for Services

To identify dissatisfied customersTo discover customer requirements or

expectationsTo monitor and track service performanceTo assess overall company performance

compared to competitionTo assess gaps between customer expectations

and perceptionsTo gauge effectiveness of changes in serviceTo appraise service performance of individuals

and teams for rewardsTo determine expectations for a new serviceTo monitor changing expectations in an industryTo forecast future expectations

ResearchObjectives

Includes

Qualitativ

e

Research

IncludesQuantitative

Research IncludesPerceptions

and Expectations

of Customers

IncludesMeasures

ofLoyalty orBehavioralIntentions

Balances Cost

and Value of

InformationIncludesStatisticalValidity

When Necessary

Measures Priorities

or Importance

Occurswith

AppropriateFrequency

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

Stages in the Research Process

Stage 1 : Define ProblemStage 2 : Develop Measurement StrategyStage 3 : Implement Research ProgramStage 4 : Collect and Tabulate DataStage 5 : Interpret and Analyze FindingsStage 6 : Report Findings


Service Quality Perceptions Service Quality Perceptions Relative to Zones of Tolerance Relative to Zones of Tolerance

by Dimensionsby Dimensions

Retail Chain

9

8

7

6

5

4

3

2

1

0Reliability Responsiveness Assurance Empathy Tangibles

OO OO

Zone of Tolerance S.Q. PerceptionO

O

Service 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

0

Reliability Responsiveness Assurance Empathy Tangibles

OO O OO

Zone of Tolerance S.Q. PerceptionO

Figure 5-6

Importance/Performance Matrix

HIGH

HIGHLOW

Performance

Imp

ort

an

ce

Attributes to Improve Attributes to Maintain

HighLeverage

Attributes to De-emphasizeAttributes to Maintain

LowLeverage

Objectives for Chapter 6:Building Customer Relationships

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”

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

AssumptionsIncome

Expected Customer LifetimeAverage Revenue (month/year)Other Customers convinced via WOMEmployee Loyalty??

ExpensesCosts 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/suggestionsExhibits Psychological Commitment

wouldn’t consider terminating the relationship--psychological commitment

has a positive attitude about the suppliersays good things about the supplier

Customer 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?

Benefits to the Organization of Customer Loyaltyloyal customers tend to spend more

with the organization over timeon 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 Customerinherent benefits in getting good valueeconomic, social, and continuity benefits

contribution to sense of well-being and quality of life and other psychological benefits

avoidance of changesimplified decision making social support and friendshipsspecial 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 RelationshipsFoundations:

Excellent Quality/ValueCareful Segmentation

Bonding Strategies:Financial BondsSocial & Psychological BondsStructural BondsCustomization Bonds

Relationship Strategies Wheel

Getting

Satisfying

Retaining

Enhancing

Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

IdentifyBases forSegmentingthe Market

STEP 1:

DevelopProfiles ofResultingSegments

STEP 2: DevelopMeasuresof SegmentAttractive-ness

STEP 3: Select the

TargetSegments

STEP4:Ensure thatSegmentsAre Compatible

STEP 5:

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

Objectives for Chapter 7:Service 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

Figure 7-1

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

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

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 StrategiesService Recovery Strategies

Learn fromRecovery Experiences

Treat C

ustomers

Fairly

Learn

from

Lo

st Cu

stom

ers

Welcome and

Encourage ComplaintsFail S

afe the S

ervice

Act Q

uickly

Service Recovery Strategies

Service Switching Behavior

• High Price• Price Increases• Unfair Pricing• Deceptive Pricing

Pricing

• Location/Hours• Wait for Appointment• Wait for Service

Inconvenience

• Service Mistakes• Billing Errors• Service Catastrophe

Core Service Failure

• Uncaring• Impolite• Unresponsive• Unknowledgeable

Service Encounter Failures

• Negative Response• No Response• Reluctant Response

Response to Service Failure

• Found Better Service

Competition

• Cheat• Hard Sell• Unsafe• Conflict of Interest

Ethical Problems

• Customer Moved• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

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 guaranteedcannot return the serviceservice experience is intangible

(so what do you guarantee?)

Table 7-7 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 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.

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 GuaranteesDoes everyone need a guarantee?

Reasons companies do NOT offer guarantees:guarantee would be at odds with company’s

imagetoo many uncontrollable external variablesfears of cheating by customerscosts 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”

CUSTOMER

COMPANY

GAP 2

Customer-Driven Service Designs and

Standards

Company Perceptions of

Consumer Expectations


Part 3 Opener

Objectives for Chapter 8:Objectives for Chapter 8:Service Development and DesignService Development and Design

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

Oversimplification Incompleteness Subjectivity Biased Interpretation


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

Markets

Offerings

ExistingServices

NewServices

Current Customers New Customers

SHARE BUILDING

DIVERSIFICATION

MARKETDEVELOPMENT

SERVICEDEVELOPMENT


Service Mapping/BlueprintingService Mapping/Blueprinting

A tool for simultaneously depicting the service process, the points of customer contact, and the evidence of service from the customer’s point of view.

ServiceMapping

Process

Points of Contact

Evidence

CUSTOMER ACTIONS

line of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONS

line of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONS

line of internal interaction

SUPPORT PROCESSES

DriverPicksUp Pkg.

DispatchDriver

AirportReceives& Loads

SortPackages

Load onAirplane

Fly toDestinati

on

Unload&

Sort

LoadOn

Truck

SU

PPO

RT

PR

OC

ESS

CO

NTA

CT

PER

SO

N(B

ack

Sta

ge)(O

n S

tage)C

USTO

ME

RPH

YSIC

AL

EV

IDEN

CE

CustomerCalls

CustomerGives

Package

TruckPackagingFormsHand-held ComputerUniform

ReceivePackage

TruckPackagingFormsHand-held ComputerUniform

DeliverPackage

CustomerServiceOrder

Fly toSort

Center

SU

PPO

RT P

RO

CESS

CO

NTA

CT P

ER

SO

N

(Back

Sta

ge)(

On S

tage)

CU

STO

MER

HotelExteriorParking

Cart for Bags

DeskRegistrationPapersLobbyKey

ElevatorsHallwaysRoom

Cart for Bags

RoomAmenitiesBath

Menu DeliveryTrayFoodAppearance

Food

BillDeskLobbyHotelExteriorParking

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

PH

YSIC

AL

EV

IDEN

CE


Building a Service BlueprintBuilding a Service Blueprint

Step 1

Identify the process to be blue-printed.

Step 1

Identify the process to be blue-printed.

Step 2

Identify the customer or customer segment.

Step 2

Identify the customer or customer segment.

Step 3

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

Step 3

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

Step 4

Map contact employee actions, onstage and back-stage.

Step 4

Map contact employee actions, onstage and back-stage.

Step 5

Link customerand contact person activities to needed support functions.

Step 5

Link customerand contact person activities to needed support functions.

Step 6

Add evidence of service at each customer action step.

Step 6

Add evidence of service at each customer action step.

Application of Service BlueprintsApplication of Service Blueprints

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

Blueprints 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

Objectives for Chapter 9:Customer-defined Service Standards

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


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 Help

Functional Performance Test

Supervisor Observations

% Proposal Made on Time

% Follow Up Made

Average Order Interval

% Repair Reports

% Installed On Due Date

% Repeat Reports

Average Speed Of Repair

% Customers Informed

% Billing Inquiries

% Resolved First Call

% Billing Inquiries

TotalQuality

Source: AT&T General Business Systems

Exercise for Creating Customer-Defined Service StandardsForm a group of four peopleUse 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

Service Encounter Customer Requirements Measurements

ServiceQuality

Customer-Driven Standards and Measurements Exercise


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


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/Actions2. Translate Customer Expectations Into Behaviors/Actions

4. Set Hard or Soft Standards

5. Develop FeedbackMechanisms

5. Develop FeedbackMechanisms

7. Track Measures Against Standards

Measure byAudits or

Operating DataHard Soft

Measure byTransaction-

Based Surveys

3. Select Behaviors/Actions for Standards 3. Select Behaviors/Actions for Standards

6. Establish Measures and Target Levels 6. Establish Measures and Target Levels

8. Update Target Levels and Measures 8. Update Target Levels and Measures

Importance/Performance MatrixHIGH

HIGH

Performance

10.0

8.0

7.0

9.0

LOW

8.0 9.0 10.0

Importance

Improve Maintain

Delivers 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)


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

Complaint HandlingComplaint HandlingS

A

T

I

S

F

A

C

T

I

O

N2 4 6 8 12 16 20 24

W O R K I N G H O U R S

Large Customers

Small Customers

10

9

8

7

6

5

4

3

2

1

0

Figure 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

AA BB CC DD EE FF GG HH

40 DaysNew Card

MailedLost Card Reported

Report Lost Card

Receive New Card

48 Hours

Objectives for Chapter 10:Physical Evidence and the Servicescape

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

Table 10-1

Elements of Physical Evidence

Servicescape Other tangibles

Facility exteriorExterior designSignageParkingLandscapeSurrounding environment

Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature

Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages

Service Physical evidenceServicescape Other tangibles

Insurance Not applicable Policy itselfBilling 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

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

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

CUSTOMER

COMPANY


Service DeliveryGAP 3

Customer-Driven Service Designs and

Standards

Part 4 Opener

Objectives for Chapter 11:Employees’ Roles in Service 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

Service EmployeesThey are the serviceThey are the firm in the customer’s eyesThey are marketersImportance is evident in

The Services Marketing Mix (People)The Service-Profit ChainThe Services Triangle

Service EmployeesWho are they?

“boundary spanners”What are these jobs like?

emotional labormany sources of potential conflict

person/role organization/client interclient quality/productivity

Internal Environment

External Environment

• Person vs. Role

• Organization vs. Client

• Client vs. Client

• Quality vs. Productivity

Customer-oriented Service Delivery

Hire theRight People

ProvideNeeded Support

Systems

Retain theBest

People

DevelopPeople to

DeliverServiceQuality

Compete

for

the B

est

People

Hire for Service

Competencies and Service Inclination

Provide Supportive Technology

and Equipment

Tre

at

Em

plo

ye

es

a

s

Cu

sto

me

rs

Em

po

we

r E

mp

loy

ee

s

Be the Preferred

Employer Train for

Technical and

Interactive

Skills

Prom

ote

Team

wor

k

Measure

Internal

Service

Quality

Develop Service-

oriented Internal

Processes

Mea

sure

and

R

ewar

d S

tron

g S

ervi

ce

Pro

vide

rs

Include

Em

ployees in

the

Com

pany’s

Vision

Service 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.”

Objectives for Chapter 12:Customers’ Roles in Service Delivery

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

Importance of Other Customers in Service Delivery

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

How Customers Widen Gap 3Lack of understanding of their rolesNot being willing or able to perform their

rolesNo rewards for “good performance”Interfering with other customersIncompatible market segments

Productive Resources

Contributors to Quality and Satisfaction

Competitors

Customers as Productive Resources

“partial employees”contributing effort, time, or other resources

to the production processcustomer inputs can affect organization’s

productivitykey issue:

should customers’ roles be expanded? reduced?

Customers as Contributors to Service Quality and Satisfaction

Customers can contribute totheir 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

Customers as Competitors

customers may “compete” with the service provider

“internal exchange” vs. “external exchange”internal/external decision often based on:

expertiseresourcestimeeconomic rewardspsychic rewardstrustcontrol

1 2 3 4 5 6

Gas 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

EffectiveCustomer

ParticipationRecruit, Educate,

and Reward Customers

Define CustomerJobs

Manage theCustomer

Mix

1. Define customers’ jobs- helping himself- helping others- promoting the company

2. Individual differences: not everyone wants to participate

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

Objectives for Chapter 14:Managing Demand and Capacity

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 demandLay 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

Understanding Capacity Constraints and Demand Patterns

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

Figure 14-3

Strategies for Shifting Demand to 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

Figure 14-4

Strategies for Flexing Capacity to 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

Extent of demand fluctuations over timeExtent 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.

Table 14-2

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

Waiting Line Issues and Strategies

unoccupied time feels longerpreprocess waits feel longeranxiety makes waits seem longeruncertain waits seem longer than

finite waitsunexplained waits seem longerunfair waits feel longerlonger waits are more acceptable for

“valuable” servicessolo waits feel longer

CUSTOMER

COMPANYExternal

Communications to CustomersGAP 4

Service Delivery


Part 5 Opener

Objectives for Chapter 15:Integrated Services Marketing 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

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

Goal:Delivery

greater than or equal to promises

Improve CustomerEducation

ManageService

Promises

ManageCustomer

Expectations

ManageInternal

MarketingCommunication


Goal:Delivery


OfferService

Guarantees

Create EffectiveServices

Communications

MANAGING SERVICE PROMISES

MakeRealisticPromises

Coordinate External

Communication


Approaches forApproaches forManaging Service PromisesManaging Service Promises

Communicate Criteria for Service Effectiveness

Create Tiered-ValueOfferings


Approaches forApproaches forManaging Customer ExpectationsManaging Customer Expectations

NegotiateUnrealistic

Expectations

Goal:Delivery


Offer Choices

Goal:Delivery


Prepare Customers

for the Service Process

Clarify Expectationsafter the Sale


Approaches forApproaches forImproving Customer EducationImproving Customer Education

Teach Customers to Avoid

Peak Demand Periods

andSeek Slow

Periods

Confirm Performanceto Standards

Goal:Delivery



Approaches for ManagingApproaches for Managing Internal Marketing CommunicationsInternal Marketing Communications

Create EffectiveVertical

Communications

Align Back Office Personnel

w/ External Customers

Create EffectiveHorizontal

Communications

CreateCross-Functional

Teams

Objectives for Chapter 17:The Financial and Economic Impact of Service

Examine the direct effects of service on profitsConsider the impact of service on getting new

customersEvaluate the role of service in keeping

customersExamine the link between perceptions of

service and purchase intentionsEmphasize the importance of selecting

profitable customersDiscuss 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

Profits?ServiceQuality

ProfitsMarketShare

Reputation Sales

PricePremium

ServiceQuality

Margins

Profits

CustomerRetention

Costs

PricePremium

Word ofMouth

Volume ofPurchasesService

Quality

CustomerRetention

Costs

PricePremium

Word ofMouth

Margins

Profits

Volume ofPurchases

Service BehavioralIntentions

Sales


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


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

Key Drivers

ServiceQuality

ServiceEncounter

ServiceEncounter

ServiceEncounter

Customer Retention

BehavioralIntentions Profits

ServiceEncounter

Service Encounters


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


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

services marketing

Business

services services

inventoried services

patented services

counseling services

customer service

service sector

service marketing triangle

service deliveredmatches