Full services marketing

Contact: +923006641921 Usman Waheed

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SM

Services MarketingServices Marketing


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SMSM


Chapter 1

INTRODUCTION

TO

SERVICES


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SMObjectives for Chapter 1:Objectives for Chapter 1:Introduction to ServicesIntroduction to Services

• Explain what services are and identify service trends• Explain the need for special services marketing

concepts and practices• Outline the basic differences between goods and

services and the resulting challenges for service businesses

• Introduce the service marketing triangle• Introduce the expanded services marketing mix• Introduce the gaps model of service quality


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SM IntroductionIntroduction

• Services are deeds,processes and performance

• Intangible, but may have a tangible component

• Generally produced and consumed at the same time

• Need to distinguish between SERVICE and CUSTOMER SERVICE


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SM Challenges for ServicesChallenges for Services

• Defining and improving quality

• Communicating and testing new services

• Communicating and maintaining a consistent image

• Motivating and sustaining employee commitment

• Coordinating marketing, operations and human resource efforts

• Setting prices

• Standardization versus personalization


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SMExamples of Service Examples of Service

IndustriesIndustries

• Health Care– hospital, medical practice, dentistry, eye care

• Professional Services– accounting, legal, architectural

• Financial Services– banking, investment advising, insurance

• Hospitality– restaurant, hotel/motel, bed & breakfast, – ski resort, rafting

• Travel– airlines, travel agencies, theme park

• Others:– hair styling, pest control, plumbing, lawn maintenance, counseling

services, health club


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SMFigure 1-1Figure 1-1

Tangibility SpectrumTangibility Spectrum

TangibleDominant

IntangibleDominant

SaltSoft Drinks

DetergentsAutomobiles

Cosmetics

AdvertisingAgencies

AirlinesInvestment

ManagementConsulting

Teaching

Fast-foodOutlets

Fast-foodOutlets


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SMFigure 1-2 Figure 1-2

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

0

10

20

30

40

50

60

70

80

1929 1948 1969 1977 1984 1996

Per

cent

of

GD

P

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

Year

Services Manufacturing Mining & Agriculture


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SM

0

10

20

30

40

50

60

70

80

1948 1959 1967 1977 1987 1996

Figure 1-3 Figure 1-3

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

Perc

ent o

f G

DP

Year

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

Services Manufacturing Mining & Agriculture


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SMDifferences BetweenDifferences Between Goods and Services Goods and Services

Intangibility

PerishabilitySimultaneous

Productionand

Consumption

Heterogeneity


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SM Implications of IntangibilityImplications of Intangibility

Services cannot be inventoried Services cannot be patented Services cannot be readily displayed

or communicated Pricing is difficult


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SM Implications of HeterogeneityImplications of Heterogeneity

Service delivery and customer satisfaction depend on employee actions

Service quality depends on many uncontrollable factors

There is no sure knowledge that the service delivered matches what was planned and promoted


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SMImplications of Simultaneous Implications of Simultaneous Production and ConsumptionProduction and Consumption

Customers participate in and affect the transaction

Customers affect each otherEmployees affect the service outcomeDecentralization may be essentialMass production is difficult


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SM Implications of PerishabilityImplications of Perishability

It is difficult to synchronize supply and demand with services

Services cannot be returned or resold


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SM Table 1-2 Table 1-2

Services are DifferentServices are DifferentGoods Services Resulting ImplicationsTangible Intangible Services cannot be inventoried.

Services cannot be patented.Services cannot be readily displayed or communicated.Pricing is difficult.

Standardized Heterogeneous Service delivery and customer satisfaction depend onemployee actions.Service quality depends on many uncontrollable factors.There is no sure knowledge that the service deliveredmatches what was planned and promoted.

Productionseparate fromconsumption

Simultaneousproduction andconsumption

Customers participate in and affect the transaction.Customers affect each other.Employees affect the service outcome.Decentralization may be essential.Mass production is difficult.

Nonperishable Perishable It is difficult to synchronize supply and demand withservices.Services cannot be returned or resold.

Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.


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The Services Marketing TriangleThe Services Marketing Triangle

Internal Marketing

Interactive Marketing

External Marketing

Company(Management)

CustomersEmployees

“enabling thepromise”

“delivering the promise”

“setting thepromise”

Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler


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SMWays to Use the Ways to Use the

Services Marketing TriangleServices Marketing Triangle

Overall Strategic Assessment

• How is the service organization doing on all three sides of the triangle?

• Where are the weaknesses?

• What are the strengths?

Specific Service Implementation

• What is being promoted and by whom?

• How will it be delivered and by whom?

• Are the supporting systems in place to deliver the promised service?


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SM

Source: Adapted from A. Parasuraman

Company

CustomersProviders

Technology


The Services Triangle The Services Triangle and Technologyand Technology


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SMServices Marketing Mix:Services Marketing Mix:

7 Ps for Services7 Ps for Services

• Traditional Marketing Mix

• Expanded Mix for Services: 7 Ps

• Building Customer Relationships Through People, Processes, and Physical Evidence

• Ways to Use the 7 Ps


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SM Traditional Marketing MixTraditional Marketing Mix

• All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services:

Product

Price

Place

Promotion


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

• Product• Price• Place• Promotion

• People• Process• Physical Evidence


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SMTable 1-3Table 1-3

Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices

PRODUCT PLACE PROMOTION PRICE

Physical goodfeatures

Channel type Promotionblend

Flexibility

Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms

Packaging Outlet location Salespromotion

Differentiation

Warranties Transportation Publicity Allowances

Product lines Storage

Branding


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SM

PEOPLE PHYSICALEVIDENCE

PROCESS

Employees Facility design Flow of activities

Customers Equipment Number of steps

Communicatingculture and values

Signage Level of customerinvolvement

Employee research Employee dress

Other tangibles

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

Expanded Marketing Mix for Expanded Marketing Mix for ServicesServices


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SM Ways to Use the 7 PsWays to Use the 7 Ps

Overall Strategic Assessment

• How effective is a firm’s services marketing mix?

• Is the mix well-aligned with overall vision and strategy?

• What are the strengths and weaknesses in terms of the 7 Ps?

Specific Service Implementation

• Who is the customer?• What is the service?• How effectively does the

services marketing mix for a service communicate its benefits and quality?

• What changes/improvements are needed?


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SMServices Marketing Triangle Services Marketing Triangle

Applications ExerciseApplications Exercise

• Focus on a service organization. In the context you are focusing on, who occupies each of the three points of the triangle?

• How is each type of marketing being carried out currently?

• Are the three sides of the triangle well aligned?• Are there specific challenges or barriers in any of

the three areas?

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SMSMPart 1

FOCUS ON THE CUSTOMER

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SM

PerceivedService

Expected Service

CUSTOMER

COMPANY

CustomerGap

GAP 1

GAP 2

Gaps Model of Service QualityGaps Model of Service Quality

GAP 3

External Communications

to CustomersGAP 4Service Delivery

Customer-Driven Service Designs and Standards

Company Perceptions of Consumer Expectations

Part 1 Opener

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

Clo

t hin

g

Jew

elry

Fur

n itu

re

Hou

ses

Aut

omob

iles

Res

tau

rant

mea

ls

Vac

a tio

ns

Ha i

r cut

s

Ch i

ld c

a re

Tel

evis

ion

repa

ir

Leg

a l s

ervi

ces

Roo

t c a

nals

Aut

o re

pair

Med

ical

dia

gno

sis

Difficult to evaluateEasy to evaluate

{High in search

qualitiesHigh in experience

qualitiesHigh in credence

qualities

{{Most

GoodsMost

Services

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SM

Figure 2-2Figure 2-2

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

ServicesServicesInformation Search

Evaluation of Alternatives

Purchase and Consumption

Post-Purchase Evaluation

Use of personal sources Perceived risk

Evoked set Emotion and mood

Service provision as drama Service roles and scripts Compatibility of customers

Attribution of dissatisfaction Innovation diffusion Brand loyalty

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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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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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The Zone of ToleranceThe Zone of Tolerance

Adequate Service

Desired Service

Zone ofTolerance


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SM


Zones of Tolerance Zones of Tolerance VARYVARY for forDifferent Service DimensionsDifferent Service Dimensions

Most Important Factors Least Important Factors

Level of

Expectation

Source: Berry, Parasuraman, and Zeithaml (1993)

Adequate Service

Desired Service

Zone ofTolerance

DesiredService

AdequateService

Zone of

Tolerance

Desired Service

Adequate Service


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SM


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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Factors that InfluenceFactors that InfluenceAdequate ServiceAdequate Service

DesiredService

AdequateService

Zone of

ToleranceSelf-PerceivedService Role

Situational Factors

Perceived ServiceAlternatives

Transitory ServiceIntensifiers


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SM

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

• Perceived service alternatives

• Perceived service role of customer

• Situational factors


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SM


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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SM


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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SMFactors Influencing Factors Influencing


• 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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SMOutcomes of Outcomes of


• Increased customer retention

• Positive word-of-mouth communications

• Increased revenues

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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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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-InCheck-In

Request Wake-Up CallRequest Wake-Up Call

CheckoutCheckout

Bellboy Takes to Room Bellboy Takes to Room

Restaurant MealRestaurant Meal


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

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

ResearchObjectives

Includes

Qualitativ

e

Research

IncludesQuantitative

Research IncludesPerceptions

and Expectations

of Customers

IncludesMeasures

ofLoyalty orBehavioralIntentions

Balances Cost

and Value of

InformationIncludesStatisticalValidity

When Necessary

Measures Priorities

or Importance

Occurswith

AppropriateFrequency

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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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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

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SMSMChapter 6

BUILDING

CUSTOMER

RELATIONSHIPS

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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 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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SMBenefits to the Organization Benefits to the Organization

of Customer Loyaltyof Customer Loyalty

• loyal customers tend to spend more with the organization over time

• on average costs of relationship maintenance are lower than new customer costs

• employee retention is more likely with a stable customer base

• lifetime value of a customer can be very high

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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

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SMStrategies for Building Strategies for Building

RelationshipsRelationships

• Foundations: – Excellent Quality/Value– Careful Segmentation

• Bonding Strategies:– Financial Bonds– Social & Psychological Bonds– Structural Bonds– Customization Bonds

• Relationship Strategies Wheel

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SM

Getting

Satisfying

Retaining

Enhancing


Customer Goals of Customer Goals of Relationship MarketingRelationship Marketing

80

SM


Underlying Logic of Customer Underlying Logic of Customer Retention Benefits to the Retention Benefits to the

OrganizationOrganization

Customer Retention &Increased Profits

Employee Loyalty

QualityService

Customer Satisfaction

81


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:

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SM

ExcellentQuality

andValue

Figure 6-6Figure 6-6 Levels of Retention StrategiesLevels of Retention Strategies

I. Financial Bonds

II. Social Bonds

IV. Structural

Bonds

III. CustomizationBonds

Volume and Frequency Rewards

Bundling and Cross Selling

Stable Pricing

Social Bonds Among Customers

Personal Relationships

Continuous Relationships

Customer Intimacy

Mass Customization

Anticipation/ Innovation

SharedProcesses and Equipment

Joint Investments

Integrated Information Systems

83

SMSMChapter 7

SERVICE RECOVERY

84


Service Recovery StrategiesService Recovery Strategies

Learn fromRecovery Experiences

Treat C

ustomers

Fairly

Learn

from

Lo

st Cu

stom

ers

Welcome and

Encourage ComplaintsFail S

afe the S

ervice

Act Q

uickly

Service Recovery Strategies

85


Causes Behind Service Causes Behind Service SwitchingSwitching

Service Switching Behavior

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

Pricing

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

Inconvenience

• Service Mistakes• Billing Errors• Service Catastrophe

Core Service Failure

• Uncaring• Impolite• Unresponsive• Unknowledgeable

Service Encounter Failures

• Negative Response• No Response• Reluctant Response

Response to Service Failure

• Found Better Service

Competition

• Cheat• Hard Sell• Unsafe• Conflict of Interest

Ethical Problems

• Customer Moved• Provider Closed

Involuntary SwitchingSource: Sue Keaveney

86

SMWhy a Good Guarantee Why a Good Guarantee

WorksWorks

• forces company to focus on customers

• sets clear standards

• generates feedback

• forces company to understand why it failed

• builds “marketing muscle”

87

SMSMPart 3

ALIGNING STRATEGY, SERVICE DESIGN

AND STANDARDS

88

SM

CUSTOMER

COMPANY

GAP 2

Customer-Driven Service Designs and

Standards

Company Perceptions of

Consumer Expectations

Provider GAP 2Provider GAP 2

Part 3 Opener

89

SMSMChapter 8

SERVICE DEVELOPMENT AND DESIGN

90

SM


Risks of Relying on Words Risks of Relying on Words Alone to Alone to

Describe ServicesDescribe Services

Oversimplification Incompleteness Subjectivity Biased Interpretation


Service Mapping/BlueprintingService Mapping/Blueprinting

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

ServiceMapping

Process

Points of Contact

Evidence

92

SM Service Blueprint ComponentsService Blueprint Components

CUSTOMER ACTIONS

line of interaction

“ONSTAGE” CONTACT EMPLOYEE ACTIONS

line of visibility

“BACKSTAGE” CONTACT EMPLOYEE ACTIONS

line of internal interaction

SUPPORT PROCESSES

93

SMApplication of Service Application of Service

BlueprintsBlueprints

• New Service Development• concept development

• market testing

• Supporting a “Zero Defects” Culture• managing reliability

• identifying empowerment issues

• Service Recovery Strategies• identifying service problems

• conducting root cause analysis

• modifying processes

94

SMSMChapter 10

PHYSICAL EVIDENCE AND THE SERVICESCAPE

95

SMTable 10-1Table 10-1

Elements of Physical Elements of Physical EvidenceEvidence

Servicescape Other tangibles

Facility exteriorExterior designSignageParkingLandscapeSurrounding environment

Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature

Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages

96

SM

Table 10-2 Table 10-2 Examples of Physical Evidence from the Examples of Physical Evidence from the

Customer’s Point of ViewCustomer’s Point of ViewService Physical evidence

Servicescape Other tangiblesInsurance Not applicable Policy itself

Billing statementsPeriodic updatesCompany brochureLetters/cards

Hospital Building exteriorParkingSignsWaiting areasAdmissions officePatient care roomMedical equipmentRecovery room

UniformsReports/stationeryBilling statements

Airline Airline gate areaAirplane exteriorAirplane interior (décor, seats, airquality)

TicketsFoodUniforms

Express mail Not applicable PackagingTrucksUniformsComputers

Sportingevent

Parking, Seating, RestroomsStadium exteriorTicketing area, Concession AreasEntrance, Playiing Field

SignsTicketsProgramUniforms

97

SMSMPart 4

DELIVERING AND PERFORMING SERVICE

98

SM

CUSTOMER

COMPANY


Service DeliveryGAP 3

Customer-Driven Service Designs and

Standards

Part 4 Opener

99

SMSMChapter 11

EMPLOYEES’ ROLES IN SERVICE DELIVERY

100

SM Service EmployeesService Employees

• They are the service

• They are the firm in the customer’s eyes

• They are marketers

• Importance is evident in– The Services Marketing Mix (People)– The Service-Profit Chain– The Services Triangle

101

SM Service EmployeesService Employees

• Who are they?– “boundary spanners”

• What are these jobs like?– emotional labor– many sources of potential conflict

• person/role• organization/client• interclient• quality/productivity

102

SM


Boundary Spanners Interact Boundary Spanners Interact with Both Internal with Both Internal

and External Constituentsand External Constituents

Internal Environment

External Environment

103


Sources of Conflict for Sources of Conflict for Boundary-Spanning WorkersBoundary-Spanning Workers

• Person vs. Role

• Organization vs. Client

• Client vs. Client

• Quality vs. Productivity

104

SM


Human Resource Strategies for Closing GAP 3Human Resource Strategies for Closing GAP 3

Customer-oriented Service Delivery

Hire theRight People

ProvideNeeded Support

Systems

Retain theBest

People

DevelopPeople to

DeliverServiceQuality

Compete

for

the B

est

People

Hire for Service

Competencies and Service Inclination

Provide Supportive Technology

and Equipment

Tre

at

Em

plo

ye

es

a

s

Cu

sto

me

rs

Em

po

we

r E

mp

loy

ee

s

Be the Preferred

Employer Train for

Technical and

Interactive

Skills

Prom

ote

Team

wor

k

Measure

Internal

Service

Quality

Develop Service-

oriented Internal

Processes

Mea

sure

and

R

ewar

d S

tron

g S

ervi

ce

Pro

vide

rs

Include

Em

ployees in

the

Com

pany’s

Vision

106

SM Service CultureService Culture

“A culture where an appreciation for good service exists, and where giving good service to internal as well as ultimate, external customers, is considered a natural way of life and one of the most important norms by everyone in the organization.”

107

SMSMChapter 12

CUSTOMERS’ ROLES IN SERVICE DELIVERY

108

SMImportance of Importance of OtherOther

Customers in Service Customers in Service DeliveryDelivery

• Other customers can detract from satisfaction• disruptive behaviors

• excessive crowding

• incompatible needs

• Other customers can enhance satisfaction• mere presence

• socialization/friendships

• roles: assistants, teachers, supporters

109

SM How Customers Widen Gap 3How Customers Widen Gap 3

• Lack of understanding of their roles• Not being willing or able to perform their roles• No rewards for “good performance”• Interfering with other customers• Incompatible market segments

110

SMCustomers as Contributors Customers as Contributors

to Service Quality and to Service Quality and SatisfactionSatisfaction

• Customers can contribute to– their own satisfaction with the service

• by performing their role effectively

• by working with the service provider

– the quality of the service they receive• by asking questions

• by taking responsibility for their own satisfaction

• by complaining when there is a service failure

111

SMStrategies for EnhancingStrategies for EnhancingCustomer ParticipationCustomer Participation

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

2. Individual differences: not everyone wants to participate

112

SMSMChapter 14

MANAGING DEMAND AND CAPACITY

113

SM Understanding Capacity Understanding Capacity Constraints and Demand Constraints and Demand

PatternsPatterns

• Time, labor, equipment and facilities

• Optimal versus maximal use of capacity

• Charting demand patterns

• Predictable cycles

• Random demand fluctuations

• Demand patterns by market segment

Capacity Constraints Demand Patterns

114

SMSMPart 5

MANAGING SERVICE PROMISES

115

SM

CUSTOMER

COMPANYExternal

Communications to CustomersGAP 4

Service Delivery


Part 5 Opener

116

SMSMChapter 15

INTEGRATED MARKETING COMMUNICATION

117


Communications and the Communications and the Services Marketing TriangleServices Marketing Triangle

Internal MarketingInternal Marketing Vertical Communications

Horizontal Communications

Interactive Marketing Personal Selling

Customer Service Center Service Encounters

Servicescapes

External Marketing Communication Advertising Sales Promotion Public Relations Direct Marketing

Company

CustomersEmployees

Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

118

SMApproaches forApproaches for

Integrating Services Marketing Integrating Services Marketing CommunicationCommunication

Goal:Delivery

greater than or equal to promises

Improve CustomerEducation

ManageService

Promises

ManageCustomer

Expectations

ManageInternal

MarketingCommunication


119

SM

Goal:Delivery


OfferService

Guarantees

Create EffectiveServices

Communications

MANAGING SERVICE PROMISES

MakeRealisticPromises

Coordinate External

Communication


Approaches forApproaches forManaging Service PromisesManaging Service Promises

120

SM

Communicate Criteria for Service Effectiveness

Create Tiered-ValueOfferings


Approaches forApproaches forManaging Customer ExpectationsManaging Customer Expectations

NegotiateUnrealistic

Expectations

Goal:Delivery


Offer Choices

121

SM

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

122

SMGoal:

Delivery greater than or equal to promises


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


123

SMSMChapter 17

THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY


124

SMObjectives for Chapter 17:Objectives for Chapter 17:

The Financial and Economic The Financial and Economic Impact of ServiceImpact of Service

• Examine the direct effects of service on profits• Consider the impact of service on getting new customers• Evaluate the role of service in keeping customers• Examine the link between perceptions of service and

purchase intentions• Emphasize the importance of selecting profitable

customers• Discuss what is know about the key service drivers of

overall service quality, customer retention and profitability

• Discuss the balanced performance scorecard to focus on strategic measurement other than financials


125


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

Profits?ServiceQuality


126


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

ProfitsMarketShare

Reputation Sales

PricePremium

ServiceQuality


127


Defensive Marketing Effects of Defensive Marketing Effects of Service on ProfitService on Profit

Margins

Profits

CustomerRetention

Costs

PricePremium

Word ofMouth

Volume ofPurchasesService

Quality


128


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


129


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


130


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


131


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


132

SM


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


133

SM


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