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SERVICE MARKETING
ByArijit Datta
Aim and Objective
• Foundation of Service Marketing
• Evaluation of Service Alternative
• Service Marketing Mix
• Service Product & Process
• Place & Promotion
• Pricing
• Role of People
• Physical Evidence
• Service Recovery, Complaint Handling, Service Guarantees
• Closing the Gaps
Services Marketing
“Services are going to
move in this decade
to being the front edge
of the industry.”
Services
• A Service is the action of doing something for someone or
something.
• “A service is an activity or benefit that one party can offer to
another that is essentially intangible and does not result in the
ownership of anything. Its production may or may not be tied
to a physical product” – Kotler and Armstrong (1991)
• “A Service as any primary or complimentary activity that does
not directly produce a physical product, i.e., the non goods part
of transaction between buyer (customer) and seller (provider)”
– Service Industries Journal
NATURE OF SERVICES
GOODS
• Tangible in Nature
• Separability of production
and Consumption
• Uniformity in Specifications
and Delivery
• Non-perishable in nature
• Ownership
SERVICES
• Intangible in Nature
• Inseparability of production
and consumption
• Variability in Specifications
and Delivery
• Perishable in Nature
• Lack of Ownership
GOODS AND SERVICE CONTINUUM
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tangible
Goods
Goods with
Some Services
Goods and
Services Equal
Service with
minor Goods
Pure Service
Service Based
Product Based
SERVICE SECTOR TO INDIAN ECONOMY
YEAR PRIMARY
SECTOR
SECONDARY
SECTOR
TERTIARY
SECTOR
GROWTH OVER
PERIOD (% in
services)
1950-51 55.4 16.1 28.5 -
1960-61 50.9 20.0 29.1 +2.1
1970-71 44.5 23.6 31.9 +9.6
1980-81 38.1 25.9 36.0 +12.9
1990-91 30.9 30.0 39.1 +8.6
1999-2000 27.5 24.6 47.9 +22.5
• Intangibility
• Inseparability
– Self Services
– Co-production
– Isolated production
• Inconsistency (Variability)
• Inventory (Perishability)
• Ownership
CHARACTERISTICS OF SERVICES
Characteristics Of Services
Compared To GoodsGoods Services Resulting Implications
Tangible Intangible •Services cannot be inventorised
•Services cannot be readily displayed
•Services cannot be patented
Standardized Heterogeneity Service quality depends on many
uncontrollable factors
Production
seperate from
consumption
Simultaneous production
and consumption
Customer participate in and affect the
transcations
Decentralization may be requied
Nonperishable Perishable Services cannot be resold or returned
Service Strategy to Counter Problems
for Characteristics Of ServicesCharacteristics Services Resulting Implications
Intangibility •Cannot be easily displayed
•Cannot be patented
•Provide tangible clues
•Stimulate word of mouth
•Use personnel sources
•Use post purchase communication
Inconsistency •Standardisation hard to achieve
•Hard to set up quality control
•Can only predict quality or determine it
after the service is performed
•Stress on standardisation & performance
•Focus on employee training
•Programmes, performance evaluation
•Licensing & other forms of credential
requirements
Inseparability •Harder to mass produce
•Less efficient than production goods
•Need strong training programmes,
incentives
•Focus on personal attention
Inventory •Customers must be present •Focus on convenience, saving time, faster
service
•Extended hours
•Focus on competence & expertise
•Predict fluctuating demand
•Manage capacity to balance supply &
demand
Examples of Service Industries
• Health Care
– hospital, medical practice, dentistry, eye care
• Professional Services
– accounting, legal, architectural
• Financial Services
– banking, investment advising, insurance
• Hospitality
– restaurant, hotel/motel, bed & breakfast,
– ski resort, rafting
• Travel
– airlines, travel agencies, theme park
• Others
– hair styling, pest control, plumbing, lawn maintenance, counseling services, health club
SERVICE MARKETING TRIANGLE
Ways to Use the Services Marketing Triangle
Overall Strategic Assessment
• How is the service
organization doing on all
three sides of the triangle?
• Where are the weaknesses?
• What are the strengths?
Specific Service Implementation
• What is being promoted and by whom?
• How will it be delivered and by whom?
• Are the supporting systems in place to deliver the promised service?
Marketing Analysis Framework
3 C’s
Customers Competitors Company
S(Segment)
T(Target)
P(Position)
Mark
et I
nte
llig
ence
4 P’sProduct
Price Place
Promotion
4 Ps OF MARKETING
Product
Place
Price
Promotion
7 Ps OF SERVICE MARKETING
Product
Place
Price
Promotion
People
Process
Physical Evidence
Customers PricePlace &
Time
Promotion
Product
(service)PeopleProcess
Physical evidence
Customers PriceCustomers
Place, c
yber-
space &
time
Expanded Marketing Mix for Services
Expanded Marketing Mix for Services
PEOPLE PHYSICAL EVIDENCE
PROCESS
Employees
Facility design Flow of activities
Customers Equipment Number of steps
Communicating culture and values
Signage Level of customer involvement
Employee research Employee dress
Other tangibles
Expanded Marketing Mix
for Services
People
– All human actors who play a part in service
delivery and thus influence the buyer’s
perceptions: namely, the firm’s personnel, the
customer, and other customers in the service
environment.
customer
service employees
other customers
Physical Evidence
– The environment in which the service is
delivered and where the firm and customer
interact, and any tangible components that
facilitate performance or communication of the
service.
•atmosphere
décor, music etc.
•equipment
•facilities
•uniforms
Process
– The actual procedures, mechanisms, and flow
of activities by which the service is delivered -
the service delivery and operating systems.
service delivery systems
•back stage
•front stage
procedures
policies
Challenges in Service Marketing
• Giving a feel for the “product”
• Managing Demand Fluctuations
• Maintaining Quality
• Cost Containment
• Attitudinal block in using proven marketing
principles in service marketing
The Customer Gap
Expected Services
Perceived Services
Customer
Gaps
Customer Expectation of Services
• Levels of Expectations
– Desired Services
– Adequate Services
– Zone of Tolerance
Zone Of Tolerance
Desired Service
Adequate Service
Zone of
Tolerance
Factors That Influence Customer
Expectations of Services
• Sources of Desired Service Expectations– Personal Needs.
– Lasting Service Intensifiers.
• Sources of Adequate Service Expectation• Temporary Service Intensifier
• Percieved Service Alternatives
• Situational Factors
• Predicted Services
• Difficult to provide a single definition of
service
• Concept of service has to be understood
either as an exclusive offering from a
company that is primarily intangible, or as a
part of the service-product mix that a
company offers
Learning Objectives (Contd.)
SERVICE LEVELS
• Service is an intangible offering with little or no
transfer of physical products to the customer
• Service is one part of product-service mix being
offered to customers
• The main offering is the product but the supplier also
provides some services
• Every product or service or any combination of a mix
of the two, ultimately is supposed to provide service
for customers
INCREASING IMPORTANCE OF
SERVICES
• Advances in technology
• Growth in per capita income
• A trend towards outsourcing
• Deregulation
• Increasing growth in retailing due to
increase in propensity to consumer
PRODUCT
Core Benefit
Basic Service
Expected Service
Augmented Service
Potential Service
The role of
brand in
services
marketing
--- Brand helps to create a unique position in the minds
of the customer (e.g. Talwalkar‟s Gym. ,Kaya Skin
Clinic)
--- Brands help customers distinguish between
products from different companies
--- Brand superiority leads to high sales, ability to
charge premium price.
---Branding reduces time and effort in DMP
BRANDING
SERVICE DIFFERENTIATION
--- A Company‟s offer should be distinct from its
customers and should fulfill the requirements of the
customers of its target markets.
--- Service differentiation results from added
features which gives customers benefits, and the
company a competitive advantage.
---Building an image and maintaining quality are the
ways of creating such differentiation.
PRICE
PRICING STRATEGY
“Discount price”
“Competition based
price”
“Penetration price”
“Skimming price”
PLACE
PLACE
• 3 ways to render service:
• Customer Service provider e.g.Hospitals
• Service provider Customer e.g. Pizza Hut
• Customer Service provider e.g. ATM machine
WHAT IS FRANCHISEE??
Granting of certain rights by one party (the
franchisor) to another (the franchisee) in return for
a sum of money.
Business method that involves licensing of
trademarks and methods of doing business
EXAMPLES OF FRANCHISEE IN
INDIA
FACTORS AFFECTING
LOCATION
Proximty
Population
Infrastructure
Law & Tax
Environmental & Government regulations
Climatic conditions
Convenience
LATEST TRENDS
• Call centres
• Service delivery
timings
• Mini stores
PROMOTION
Promotion is the communication of the service to the target
customers – to make promises as well as to position themselves in
their minds “Promotion consists of the following major areas of
marketing”
PROMOTION
Advertising
Public relations
Sales promotionDirect mailing
Word of
mouth
Personal selling
Personal Selling - PERSUASION
Sales Promotion
PEOPLE
PEOPLE
• “HAPPY EMPLOYEE = HAPPY CUSTOMER”
• Internal customers
• It’s the human element that creates and sustains the
right kind of climate within the organization that
extend satisfaction to the customers.
SERVICE TRIANGLE
Strategies to Handle Internal
Customers• Training
• Include them in company’s vision
• Empowerment
• Position your company as the best employer
• Employee retention
PROCESS
What is Process?
•Processes are a sequence of activities arranged into
logical step .
•A process invariably is a sequence of value-adding
activities.
EXAMPLES OF SOME SERVICE PROCESSES
Restaurant Education Health Care
Arrive
Seat
Rec. Order
Prep. Food
Consume
Serve Bill
Settle Bill
Admission
Registration
Teach
Train
Examine
Evaluate
Award Monitor
Medication
Emergency
Diagnose
Examine
Ambulation
Admission
Money
Men
MachineMaterial
Methods
The service process includes all the
traditional „M‟s‟
Objectives behind managing a
service process
1. To ensure that service is carried fast.
2. To create and place benchmarks.
3. To facilitate employee learning.
4. To reduce variance through work force planning.
MANAGING DEMAND
Using reservations & bookings
Using appointments
Promoting off-peaks using price incentives
Using fixed schedules
Extending product lines
Seeking customer participation
Using work shift scheduling
MANAGING SUPPLY
Gap Model
PHYSICAL
EVIDENCE
PHYSICAL EVIDENCE
ELEMENTS OF PHYSICAL
EVIDENCE
ELEM
ENTS
SERVICE
SCAPE
TANGIBLES
Elements of Servicescape
Ambient
Conditions
Space &
Function
Condition
Signs &
Symbols &
Artifacts
AMBIENT
CONDITIONS
SIGNS , SYMBOLS &
ARTIFACTS
SPACE & FUNCTION
CONDITIONS
TEMPERATURE
QUALITY OF AIR
NOISE
MUSIC
LAYOUT DESIGN
EQUIPMENT & FIRM
RULES & REGULATIONS
PROCESS EXPLAINED
SERVICESCAPE
OTHER TANGIBLES
• Business cards
• Stationery
• Billing statements
• Reports
• Employee dress
• Uniforms
• Brochures
• Web pages
SERVICESCAPE & BEHAVIOUR
STIMULUS ORGANISM RESPONSE
AMBIENT CONDITIONS
SPATIAL LAYOUT/ FUNCTION
SIGNS, SYMBOLS &
ARTIFACTS
CONSUMERS
EMPLOYEES
COGNITIVE RESPONSE
EMOTIONAL
RESPONSE
PHYSIOLOGICAL
RESPONSE
ALL PRINCIPLES OF
MARKETING APPLY TO
SERVICES
• Services impact customers more directly
than products do
• Marketing of services has to be more
deliberate and considered
• Service provider has to carefully audit his
resources and competencies
• Positioning must be razor sharp
• Services more intractable than products
All Principles of Marketing Apply to Services (Contd.)
• Service provider must define service very
precisely and also design the appropriate
service-product mix
• Promotion more challenging due to
intangible nature of services
• Same basic service can be provided in
vastly different service facilities providing
different levels of amenities and luxuries
All Principles of Marketing Apply to Services (Contd.)
• Same service can be delivered in various
ways
• Marketing mix conveys the positioning of a
service
All Principles of Marketing Apply to Services (Contd.)
MANAGING SERVICES• Managing service quality
Companies rated higher on service quality perform better
in terms of market share growth
Big gap exists between the expectations of the customers and the level of the service they get Real barriers while matching expected and perceived service levels of customers
• Does not understand customer requirements: Misconception barriers arise when companies misunderstand customer expectations
• No resources: A company may understand customer expectations but is unwilling to provide resources to meet them
• Bad delivery: The company is not able to deliver the expected service
• Management’s will: A management eager to improve quality is able to do it
• Exaggerated expectations: Exaggerated promises may become a problem
Managing Services (Contd.)
• Meeting customer expectations
Important to understand and meet customer expectations
Consumers of services value not only the outcome of the
service encounter but also the experience of taking part in it
Access: Is the service provided at convenient locations
and at convenient times, with little waiting period in availing
the service?
Reliability: Service provider should be able to deliver the promised service each time the customer decides to avail of it
Credibility: Can customers trust the service company and its staff?
Security: Can the services be used without risk?
Understanding customer: If the company understands the expectations and also has the capability to serve them, the customer is satisfied with the service outcome
Responsiveness: How quickly do service staff respond to customer problems, requests and questions?
Behavior of employees: Do service staff act in a friendly and polite manner?
Competence: Performance of the primary service will depend
on the knowledge and competencies of the service providers
Communication: Is the service described clearly and accurately?
Physical evidence: The company should provide physical
evidence to customers which will assure customers that they will be
provided a good service
Meeting Customer Expectations (Contd.)
• Managing service productivity
Measure of relationship between the various types of inputs
that are required to produce the service and the service output
Conflict between improving service productivity and raising
service quality
Technology can be used to improve productivity and
service quality simultaneously
Customer involvement in production can be increased
Important to balance supply and demand
By smoothing demand or increasing flexibility of supply,
both productivity and service quality can be achieved
• Managing service staff
Quality of the service experience is heavily dependent on staff-
customer interpersonal relationship
Companies need to treat their employees well if customers have to
be served well by their employees
Nature of the job needs and appropriate personality characteristics
to be defined sharply while selecting service staff
Socialization allows the newly recruited service professionals to
experience the culture and tasks of the organization
Maintaining a motivated workforce
Customer feedback essential to maintain high standards of service quality
Employees of service organizations must take pride in their jobs
POSITIONING SERVICES
• Differentiate from competition on attributes that target customers
highly value
• Entails two decisions:
Choice of target market (where to compete)
Creation of differential advantage (how to compete)
• Determine important choice criteria of customers carefully
• Most important decision of a service organization is selecting the
factors on which it will compete
• Select a few factors and provide superlative performances in the
chosen factors
• Target marketing
• Differential advantage
CUSTOMER
PERCEPTION
OF SERVICE
Customer Perceptions of
Service Quality and
Customer Satisfaction
Service
Quality
Reliability
Responsiveness
Assurance
Empathy
Tangibles
Product
Quality
PricePersonal
Factors
Customer
Satisfaction
Situational
Factors
Factors Influencing
Customer Satisfaction
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or
failure
• Equity or fairness evaluations
Outcomes of Customer Satisfaction
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues
Relationship between Customer Satisfaction
and Loyalty in Competitive Industries
0%
20%
40%
60%
80%
100%
Very
dissatisfied
Dissatisfied Neither
satisfied nor
dissatisfied
Satisfied Very
satisfied
Loy
alt
y (
rete
nti
on
)
Satisfaction measure
Service Quality
• The customer’s judgment of overall
excellence of the service provided in
relation to the quality that was expected.
• Process and outcome quality are both
important.
The Five Dimensions of
Service Quality
Ability to perform the promised service dependably and accurately.
Knowledge and courtesy of employees and their ability to convey trust and confidence.
Physical facilities, equipment, and appearance of personnel.
Caring, individualized attention the firm provides its customers.
Willingness to help customers and provide prompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy
SERVQUAL Attributes
Providing service as promised
Dependability in handling customers‟ service problems
Performing services right the first time
Providing services at the promised time
Maintaining error-free records
Keeping customers informed as to when services will be performed
Prompt service to customers
Willingness to help customers
Readiness to respond to customers‟ requests
RELIABILITY
RESPONSIVENESS
Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous
Employees who have the knowledge to answer customer questions
ASSURANCE
Giving customers individual attention
Employees who deal with customers in a caring fashion
Having the customer‟s best interest at heart
Employees who understand the needs of their customers
Convenient business hours
EMPATHY
Modern equipment
Visually appealing facilities
Employees who have a neat, professional appearance
Visually appealing materials associated with the service
TANGIBLES
The Service Encounter
• is the “moment of truth”
• occurs any time the customer interacts with the firm
• can potentially be critical in determining customer satisfaction and
loyalty
• types of encounters:
– remote encounters
– phone encounters
– face-to-face encounters
• is an opportunity to:– build trust– reinforce quality– build brand identity– increase loyalty
Check-In
Request Wake-Up Call
Checkout
Bellboy Takes to Room
Restaurant Meal
Figure 4-4
A Service Encounter
Cascade for a Hotel Visit
Sales Call
Ordering Supplies
Billing
Delivery and Installation
Servicing
Figure 4-5
A Service Encounter Cascade for an Industrial Purchase
Critical Service Encounters Research
• GOAL - understanding actual events and behaviors
that cause customer dis/satisfaction in service
encounters
• METHOD - Critical Incident Technique
• DATA - stories from customers and employees
• OUTPUT - identification of themes underlying
satisfaction and dissatisfaction with service
encounters
Sample Questions for Critical
Incidents Technique Study
• Think of a time when, as a customer, you had a
particularly satisfying (dissatisfying) interaction with
an employee of .
• When did the incident happen?
• What specific circumstances led up to this situation?
• Exactly what was said and done?
• What resulted that made you feel the interaction was
satisfying (dissatisfying)?
Common Themes in Critical Service
Encounters Research
Recovery: Adaptability:
Spontaneity:Coping:
Employee Responseto Service Delivery
System Failure
Employee Responseto Customer Needs
and Requests
Employee Responseto Problem Customers
Unprompted andUnsolicited EmployeeActions and Attitudes
Recovery
• Acknowledge
problem
• Explain causes
• Apologize
• Compensate/upgrade
• Lay out options
• Take responsibility
• Ignore customer
• Blame customer
• Leave customer to
fend for him/herself
• Downgrade
• Act as if nothing is
wrong
DO DON‟T
Adaptability
• Recognize the
seriousness of the need
• Acknowledge
• Anticipate
• Attempt to
accommodate
• Explain rules/policies
• Take responsibility
• Exert effort to
accommodate
• Promise, then fail to
follow through
• Ignore
• Show unwillingness to
try
• Embarrass the customer
• Laugh at the customer
• Avoid responsibility
DO DON‟T
Spontaneity
• Take time
• Be attentive
• Anticipate needs
• Listen
• Provide information
(even if not asked)
• Treat customers fairly
• Show empathy
• Acknowledge by name
• Exhibit impatience
• Ignore
• Yell/laugh/swear
• Steal from or cheat a
customer
• Discriminate
• Treat impersonally
DO DON‟T
Coping
• Listen
• Try to accommodate
• Explain
• Let go of the
customer
• Take customer’s
dissatisfaction
personally
• Let customer’s
dissatisfaction affect
others
DO DON‟T
Common Research Objectives
for Services
• To identify dissatisfied customers
• To discover customer requirements or expectations
• To monitor and track service performance
• To assess overall company performance compared to competition
• To assess gaps between customer expectations and perceptions
• To gauge effectiveness of changes in service
• To appraise service performance of individuals and teams for rewards
• To determine expectations for a new service
• To monitor changing expectations in an industry
• To forecast future expectations
Criteria for An Effective Services
Research Program
Research
Objectives
Includes
Perceptions
and
Expectationsof
Customers
Includes
Measures
of
Loyalty or
Behavioral
Intentions
IncludesStatisticalValidity
When Necessary
MeasuresPriorities
or Importance
Occurs
with
Appropriate
Frequency
Stages in the Research Process
• Stage 1 : Define Problem
• Stage 2 : Develop Measurement Strategy
• Stage 3 : Implement Research Program
• Stage 4 : Collect and Tabulate Data
• Stage 5 : Interpret and Analyze Findings
• Stage 6 : Report Findings
BUILDING
CUSTOMER
RELATIONSHIPS
Relationship Marketing
• is a philosophy of doing business that focuses on keeping
and improving current customers
• does not necessarily emphasize acquiring new customers
• is usually cheaper (for the firm)--to keep a current
customer costs less than to attract a new one
• goal = to build and maintain a base of committed
customers who are profitable for the organization
• thus, the focus is on the attraction, retention, and
enhancement of customer relationships
Lifetime Value of a Customer
• Assumptions
• Income
– Expected Customer Lifetime
– Average Revenue (month/year)
– Other Customers convinced via WOM
– Employee Loyalty??
• Expenses
– Costs of Serving Customer Increase??
A Loyal Customer is One Who...
• Shows Behavioral Commitment
– buys from only one supplier, even though other options
exist
– increasingly buys more and more from a particular
supplier
– provides constructive feedback/suggestions
• Exhibits Psychological Commitment
– wouldn’t consider terminating the relationship--
psychological commitment
– has a positive attitude about the supplier
– says good things about the supplier
Benefits to the Organization of
Customer Loyalty
• loyal customers tend to spend more with the
organization over time
• on average costs of relationship maintenance are
lower than new customer costs
• employee retention is more likely with a stable
customer base
• lifetime value of a customer can be very high
Benefits to the Customer
• inherent benefits in getting good value
• economic, social, and continuity benefits
– contribution to sense of well-being and quality
of life and other psychological benefits
– avoidance of change
– simplified decision making
– social support and friendships
– special deals
“The Customer Isn‟t Always Right”
• Not all customers are good relationship
customers:
– wrong segment
– not profitable in the long term
– difficult customers
Strategies for Building Relationships
• Foundations:
– Excellent Quality/Value
– Careful Segmentation
• Bonding Strategies:
– Financial Bonds
– Social & Psychological Bonds
– Structural Bonds
– Customization Bonds
• Relationship Strategies Wheel
Getting
Satisfying
Retaining
Enhancing
Customer Goals of
Relationship Marketing
Underlying Logic of Customer
Retention Benefits to the Organization
Customer Retention &
Increased Profits
Employee Loyalty
Quality
Service
Customer Satisfaction
SERVICE
RECOVERY
Unhappy Customers‟
Repurchase Intentions
95%
70%
46%
37%
82%
54%
19%
9%
Complaints Resolved Quickly
Complaints Resolved
Complaints Not Resolved
Minor complaints ($1-$5 losses) Major complaints (over $100 losses)
Unhappy Customers Who Don‟t Complain
Unhappy Customers Who Do Complain
Percent of Customers Who Will Buy Again
Customer Response Following
Service Failure
Service Failure
Do NothingTake Action
Stay with ProviderSwitch Providers
Complain to
Provider
Complain to
Family & Friends
Complain to
Third Party
Stay with ProviderSwitch Providers
Service Recovery Strategies
Service
Recovery
Strategies
Causes Behind Service
Switching
Service
Switching
Behavior
• High Price
• Price Increases
• Unfair Pricing
• Deceptive Pricing
Pricing
• Location/Hours
• Wait for Appointment
• Wait for Service
Inconvenience
• Service Mistakes
• Billing Errors
• Service Catastrophe
Core Service Failure
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable
Service Encounter Failures
• Negative Response
• No Response
• Reluctant Response
Response to Service Failure
• Found Better Service
Competition
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Ethical Problems
• Customer Moved
• Provider Closed
Involuntary Switching
Service Guarantees
• guarantee = an assurance of the fulfillment of a
condition (Webster’s Dictionary)
• for products, guarantee often done in the form of a
warranty
• services are often not guaranteed
– cannot return the service
– service experience is intangible
–(so what do you guarantee?)
Characteristics of an Effective Service
Guarantee
Unconditional The guarantee should make its promise unconditionally -
no strings attached.
Meaningful It should guarantee elements of the service that are
important to the customer.
The payout should cover fully the customer's dissatisfaction.
Easy to Understand and Communicate For customers - they need to understand what to expect.
For employees - they need to understand what to do.
Easy to Invoke and Collect There should not be a lot of hoops or red tape in the way
of accessing or collecting on the guarantee.
Why a Good Guarantee Works
• forces company to focus on customers
• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”
Service Guarantees
• Does everyone need a guarantee?
• Reasons companies do NOT offer guarantees:
– guarantee would be at odds with company’s
image
– too many uncontrollable external variables
– fears of cheating by customers
– costs of the guarantee are too high
Service Guarantees
• service guarantees work for companies who are
already customer-focused
• effective guarantees can be BIG deals - they put the
company at risk in the eyes of the customer
• customers should be involved in the design of
service guarantees
• the guarantee should be so stunning that it comes as
a surprise -- a WOW!! factor
• “it’s the icing on the cake, not the cake”
Risks of Relying on Words Alone to
Describe Services
Oversimplification
Incompleteness
Subjectivity
Biased Interpretation
New Service Development Process
Business Strategy Development or Review
New Service Strategy Development
Idea Generation
Concept Development and Evaluation
Business Analysis
Service Development and Testing
Postintroduction Evaluation
Commercialization
Market Testing
Screen ideas against new service strategy
Test concept with customers and employees
Test for profitability and feasibility
Conduct service prototype test
Test service and other marketing-mix elements
Front End
Planning
Implementation
New Service Strategy Matrix for
Identifying Growth Opportunities
Markets
Offerings
Existing
Services
New
Services
Current Customers New Customers
SHARE BUILDING
DIVERSIFICATION
MARKET
DEVELOPMENT
SERVICE
DEVELOPMENT
CUSTOMER-
DEFINED
SERVICE
STANDARDS
Process for Setting
Customer-Defined Standards
1. Identify Existing or Desired Service Encounter Sequence
2. Translate Customer Expectations Into Behaviors/Actions
4. Set Hard or Soft Standards
5. Develop Feedback
Mechanisms
7. Track Measures Against Standards
Measure by
Audits or
Operating Data
Hard Soft
Measure by
Transaction-
Based Surveys
3. Select Behaviors/Actions for Standards
6. Establish Measures and Target Levels
8. Update Target Levels and Measures
PHYSICAL
EVIDENCE
AND THE
SERVICESCAPE
Elements of Physical Evidence
Servicescape Other tangibles
Facility exteriorExterior designSignageParkingLandscapeSurrounding environment
Facility interiorInterior designEquipmentSignageLayoutAir quality/temperature
Business cardsStationeryBilling statementsReportsEmployee dressUniformsBrochuresInternet/Web pages
Examples of Physical Evidence from the Customer‟s Point of View
Service Physical evidence Servicescape Other tangibles Insurance Not applicable Policy itself
Billing statements Periodic updates Company brochure Letters/cards
Hospital Building exterior Parking Signs Waiting areas Admissions office Patient care room Medical equipment Recovery room
Uniforms Reports/stationery Billing statements
Airline Airline gate area Airplane exterior Airplane interior (décor, seats, air quality)
Tickets Food Uniforms
Express mail Not applicable Packaging Trucks Uniforms Computers
Sporting event
Parking, Seating, Restrooms Stadium exterior Ticketing area, Concession Areas Entrance, Playiing Field
Signs Tickets Program Uniforms
Typology of Service Organizations
Based on Variations in Form
and Use of the Servicescape
Complexity of the servicescape evidence
Servicescape usage
Elaborate Lean
Self-service (customer only)
Golf Land Surf 'n' Splash
ATM Ticketron Post office kiosk Internet services Express mail drop-off
Interpersonal services (both customer and employeee)
Hotel Restaurants Health clinic Hospital Bank Airline School
Dry cleaner Hot dog stand Hair salon
Remote service (employee only)
Telephone company Insurance company Utility Many professional services
Telephone mail-order desk Automated voice-messaging-based services
A Framework for Understanding Environment-user
Relationships in Service Organizations
PHYSICAL
ENVIRONMENTAL
DIMENSIONS
HOLISTIC
ENVIRONMENT
INTERNAL
RESPONSES
BEHAVIOR
Ambient Conditions
Space/Function
Signs, Symbols, and Artifacts
PerceivedServicescape
Cognitive
Emotional
Physiological
Cognitive
Emotional
Physiological
Employee Responses
Customer Responses
Individual Behaviors
Social Interactions between and
among customer and
employees
Individual Behaviors
INTEGRATED
MARKETING
COMMUNICATION
Communications and the
Services Marketing Triangle
Internal Marketing
Vertical Communications
Horizontal Communications
Interactive Marketing
Personal Selling Customer Service Center
Service Encounters Servicescapes
External Marketing Communication
Advertising Sales Promotion Public Relations Direct Marketing
Company
CustomersEmployees
Approaches for
Integrating Services Marketing Communication
Goal:Delivery
greater than or equal to
promises
Improve CustomerEducation
ManageService Promises
ManageCustomer
Expectations
ManageInternal
MarketingCommunication
Goal:Delivery
greater than or equal to
promises
OfferService
Guarantees
Create EffectiveServices
Communications
MANAGING SERVICE PROMISES
MakeRealisticPromises
Coordinate External
Communication
Approaches for Managing Service Promises
Communicate Criteria for Service Effectiveness
Create Tiered-ValueOfferings
Approaches for Managing Customer Expectations
NegotiateUnrealistic
Expectations
Goal:Delivery
greater than or equal to
promises
Offer Choices
Goal:Delivery
greater than or equal to
promises
Prepare Customers
for the Service Process
Clarify Expectationsafter the Sale
Approaches for Improving Customer Education
Teach Customers
to Avoid Peak
Demand Periods andSeek Slow
Periods
Confirm Performanceto Standards
Goal:Delivery
greater than or equal to
promises
Approaches for Managing
Internal Marketing Communications
Create EffectiveVertical
Communications
Align Back Office Personnel
w/ External Customers
Create EffectiveHorizontal
Communications
CreateCross-Functional
Teams
