1. Ashesi University COURSE TITLE : SERVICES MARKETING
SEMESTER : SECOND, 2009/2010
MODULE 8: Service Delivery II: Designing the Service Environment
Lecturer: Ebow Spio

2. Learning Outcomes Know what the purpose of the service environment is
Understand consumer responses to service environments
Understand the environmental dimensions of service
Understand what goes into designing the ideal servicescape
This module illustrates the issues that are relevant for designing service environments and brings to attention the importance of the service environment as part of the entire service delivery.

3. Purpose of Service Environments
Helps firm to create distinctive image and unique positioning
Service environment affects buyer behavior in three ways:
Message-creating medium: Symbolic cues to communicate the distinctive nature and quality of the service experience
Attention-creating medium: Make servicescape stand out from competition and attract customers from target segments
Effect-creating medium: Use colors, textures, sounds, scents and spatial design to enhance desired service experience
The purpose of the servicescape (Relates to the style and appearance of the physical surroundings and other experiential elements encountered by customers at service delivery sites)
Shapes customers’ experiences and behavior
Establishes the image, positioning, and differentiation for the service firm
Forms part of the value proposition
Facilitates the service encounter
Enhances productivity

4. Comparison of Hotel Lobbies (Fig 10.1)
Each servicescape clearly communicates and reinforces its hotel’s respective positioning and sets service expectations as guests arrive
Orbit Hotel and Hostel, Los Angeles
Four Seasons Hotel, New York

5. Servicescape as Part of Value Proposition
Physical surroundings help shape appropriate feelings and reactions in customers and employees
For example: Disneyland, Barnes & Noble, Starbucks
Servicescapes form a core part of the value proposition
For example: Club Med, Las Vegas, Florida-based Muvico
Las Vegas: Repositioned itself to a somewhat more wholesome fun resort, visually striking entertainment center
Florida-based Muvico: Builds extravagant movie theatres and offers plush amenities. “What sets you apart is how you package it..” (Muvico’s CEO, Hamid Hashemi)
The power of servicescapes is being discovered
Value Proposition : A specified package of benefits and solutions that a company intends to offer and how it proposes to deliver them to customers, emphasizing key points of difference relative to competing alternatives.

6. Understanding Consumer Response To Service Environments: The Mehrabian-Russell Stimulus-Response Model
Feelings Are a Key Driver of Customer Responses to Service Environments
Dimensions of Affect:
Pleasure and Arousal
Response/ Behavior:
Approach Avoidance and Cognitive Processes
Environmental Stimuli and Cognitive Processes
Environmental psychology studies how people respond to specific environments. We are going to go through some theories that will help us understand how customers respond to the environment.
Mehrabian-Russell Stimulus response model posits that feelings, rather than perceptions or thoughts drive behaviour .

7. Insights from Mehrabian-Russell Stimulus-Response Model
Simple yet fundamental model of how people respond to environments
The environment, its conscious and unconscious perceptions, and interpretation influence how people feel in that environment
Feelings, rather than perceptions/thoughts drive behavior
Typical outcome variable is “approach” or “avoidance” of an environment, but other possible outcomes can be added to model
Approach is where customers’ feelings lead to a positive behaviour and Avoidance is where unfavourable feelings lead to negative behaviour or withdrawal.

8. The Russell Model of Affect Fig 10.3
Arousing
Pleasant
Sleepy
Unpleasant
Exciting
Relaxing
Boring
Distressing
Russell Model suggests that emotional responses to environments can be described along 2 main dimensions: pleasure and arousal . Pleasure is a direct, subjective response to the environment, depending on how much the individual likes or dislikes the environment. Arousal refers to how stimulated the individual feels, ranging from deep sleep (lowest level of internal activity) to highest levels of adrenaline in the bloodstream-e.g Arousal quality is much less subjective than its pleasure quality. Arousal quality depends largely on the information rate or load of an environment.

9. Insights from Russell Model of Affect
Emotional responses to environments can be described along two main dimensions:
Pleasure: Direct, subjective, depending on how much individual likes or dislikes environment
Arousal: How stimulated individual feels, depends largely on information rate or load of an environment
Russell separated cognitive part of emotions from these two emotional dimensions
Advantage: simplicity, allows a direct assessment of how customers feel
Firms can set targets for affective states

10. Drivers of Affect
Affect can be caused by perceptions and cognitive processes of any degree of complexity
It’s the simple cognitive processes that determine how people feel in a service setting
If higher levels of cognitive processes are triggered, the interpretation of this process determines people’s feelings
The more complex a cognitive process becomes, the more powerful its potential impact on affect.
However, most service encounters are routine and simple processes can determine affect.

11. Behavioral Consequence of Affect
Pleasant environments result in approach, whereas unpleasant ones result in avoidance
Arousal amplifies the basic effect of pleasure on behavior
If environment is pleasant, increasing arousal can generate excitement, leading to a stronger positive consumer response
If environment is unpleasant, increasing arousal level will move customers into the “distressed” region
Feelings during service encounters are an important driver of customer loyalty

12. An Integrative Framework: Bitner’s Servicescape Model
ENVIRONMENTAL DIMENSIONS
MODERATORS
INTERNAL RESPONSES
BEHAVIOR
Approach
Affiliation
Exploration
Stay longer
Satisfaction
Avoid
(opposite of approach)
HOLISTIC ENVIRONMENT
Cognitive
Emotional Psychological
Ambient
Conditions
Space/
Function
Signs,
Symbols, and Artifacts
Employee
Response Moderator
Employee Responses
Social Interaction Between Customers and Employees
Perceived Servicescape
Moderators internal responses can be categorized into Cognitive responses (e.g., quality perceptions and beliefs), emotional responses (e.g., feelings and moods), and psychological responses (e.g., pain and comfort).
Customer Responses
Customer Response Moderator
Approach
Attraction
Stay/Explore
Spend More $$$
Satisfaction
Avoid
(opposite of approach)
Cognitive
Emotional Psychological
Source: Mary J. Bitner, “Servicescapes: The Impact of Physical Surroundings on Customers and Employees,” Journal of Marketing 56 (April 1992), pp

13. An Integrative Framework: Bitner’s Servicescape Model (2)
Identifies the main dimensions in a service environment and views them holistically
Internal customer and employee responses can be categorized into cognitive, emotional, and psychological responses, which lead to overt behavioral responses towards the environment
Key to effective design is how well each individual dimension fits together with everything else

14. Main Dimensions in Servicescape Model
Ambient Conditions
Characteristics of environment pertaining to our five senses
Spatial Layout and Functionality
Spatial layout:
Floorplan
Size and shape of furnishings, counters, machinery,equipment, and how they are arranged
Functionality: Ability of those items to facilitate performance
Signs, Symbols, and Artifacts
Explicit or implicit signals to:
Communicate firm’s image
Help consumers find their way
Convey rules of behavior
Ambient conditions refer to those characteristics of the environment pertaining to our five senses and can be viewed separately or holistically. These include lighting, color schemes, size and shape perceptions, sound, temperature, and scents.

15. Impact of Ambient Conditions
Ambient environment is composed of hundreds of design elements and details that must work together to create desired service environment
Ambient conditions are perceived both separately and holistically, and include:
Lighting and color schemes
Size and shape perceptions
Sounds such as noise and music
Temperature
Scents
Clever design of these conditions can elicit desired behavioral responses among consumers

16. Impact of Music
In service settings, music can have a powerful effect on perceptions and behaviors, even if played at barely audible levels
Structural characteristics of music―such as tempo, volume, and harmony―are perceived holistically
Fast tempo music and high volume music increase arousal levels
People tend to adjust their pace, either voluntarily or involuntarily, to match tempo of music
Careful selection of music can deter wrong type of customers

17. Impact of Music on Restaurant Diners
Restaurant Patron
Behavior
Fast-beat Music
Environment
Slow-beat Music Environment
Difference between
Slow- and Fast-beat
Environments
Absolute Difference %
Difference
Consumer time spent at table
45min
56min
+11min
+24%
Spending on food
$55.12
$55.81
+$0.69
+1%
Spending on beverages
$21.62
$30.47
+$8.85
+41%
Total spending
$76.74
$86.28
+$9.54
+12%
Estimated gross margin
$48.62
$55.82
+$7.20
+15%
Source: Ronald E. Milliman (1982), “Using Background Music to Affect the Behavior of Supermarket Shoppers,” Journal Of Marketing, 56 (3): pp. 86–91

18. Impact of Scent May or may not be consciously perceived by customers
An ambient smell is one that pervades an environment
May or may not be consciously perceived by customers
Not related to any particular product
Scents have distinct characteristics and can be used to solicit emotional, physiological, and behavioral responses
In service settings, research has shown that scents can have significant effect on customer perceptions, attitudes, and behaviors

19. Effects of Scents on Perceptions of Store Environments (1)
Evaluation
Unscented Environment Mean Ratings
Scented Environment Mean Ratings
Difference
Store Evaluation
Negative/positive
4.65
5.24
+0.59
Outdated/modern
3.76
4.72
+0.96
Store Environment
Unattractive/ attractive
4.12
4.98
+0.86
Drab/colorful
3.63
+1.09
Boring/Stimulating
3.75
4.40
+0.65
Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80.

20. Effects of Scents on Perceptions of Store Environments (2)
Evaluation
Unscented Environment Mean Ratings
Scented Environment Mean Ratings
Difference
Merchandise
Outdated/up-to-date style
4.71
5.43
+0.72
Inadequate/adequate
3.80
4.65
+0.85
Low/high quality
4.81
5.48
+0.67
Low/high price
5.20
4.93
-0.27
Source: Eric R. Spangenberg, Ayn E. Crowley, and Pamela W. Hendersen (1996), “Improving the Store Environment: Do Olfactory Cues Affect Evaluations and Behaviors?,” Journal Of Marketing, (April): pp. 67–80

21. Aromatherapy: Effects of Selected Fragrances on People (Table 10.2)
Aroma Type
Aroma- Therapy Class
Traditional Use
Potential Psychological Effect on People
Eucalyptus
Camphor- aceous
Toning, stimulating
Deodorant, antiseptic, soothing agent
Stimulating and energizing
Lavender
Herbaceous
Calming, balancing, soothing
Muscle relaxant, soothing agent, astringent
Relaxing and calming
Lemon
Citrus
Energizing, uplifting
Antiseptic, soothing agent
Soothing energy levels
Black pepper
Spicy
Balancing, soothing
Muscle relaxant, aphrodisiac
Balancing people’s emotions

22. Impact of Color
Colors can be stimulating, calming, expressive, disturbing, impressional, cultural, exuberant, symbolic
Color pervades every aspect of our lives, embellishes the ordinary, gives beauty and drama to everyday objects
Colors have a strong impact on people’s feelings
Colors can be defined into three dimensions:
Hue is the pigment of the color
Value is the degree of lightness or darkness of the color
Chroma refers to hue-intensity, saturation, or brilliance

23. Common Associations and Human Responses to Colors (Table 10.3)
Degree of Warmth
Nature Symbol
Common Association and Human Responses to Color
Red
Warm
Earth
High energy and passion; can excite and stimulate
Orange
Warmest
Sunset
Emotions, expressions, warmth
Yellow
Sun
Optimism, clarity, intellect, mood- enhancing
Green
Cool
Growth, grass, and trees
Nurturing, healing, unconditional love
Blue
Coolest
Sky and ocean
Relaxation, serenity, loyalty
Indigo
Mediation and spirituality
Violet
Violet flower
Spirituality, reduces stress, can create an inner feeling of calm

24. Impact of Signs, Symbols, and Artifacts
Guide customers clearly through process of service delivery
Customers will automatically try to draw meaning from the signs, symbols, and artifacts
Unclear signals from a servicescape can result in anxiety and uncertainty about how to proceed and obtain the desired service
For instance, signs can be used to reinforce behavioral rules (see picture on next slide)

25. Signs Teach and Reinforce Behavioral Rules in Service Settings
Note: Fines are in Singapore dollars (equivalent to roughly US $300)

26. People Are Part of the Service Environment
Distinctive Servicescapes Create Customer Expectations

27. Selection of Environmental Design Elements
Consumers perceive service environments holistically
Design with a holistic view
Servicescapes have to be seen holistically: No dimension of design can be optimized in isolation, because everything depends on everything else
Holistic characteristic of environments makes designing service environment an art
See Research Insights 10.2: Match and Mismatch of Scent and Music in Singapore
Must design from a customer’s perspective
This brings forth a key point—that is to design from a customer’s perspective. This is the most important factor often overlooked by designers and companies alike.

28. Tools to Guide Servicescape Design
Keen observation of customers’ behavior and responses to the service environment by management, supervisors, branch managers, and frontline staff
Feedback and ideas from frontline staff and customers, using a broad array of research tools from suggestion boxes to focus groups and surveys.
Field experiments can be used to manipulate specific dimensions in an environment and the effects observed.
Blueprinting or service mapping—extended to include physical evidence in the environment.

29. Key Points Service environment:
Shapes customers’ experiences and behavior
Facilitates service encounters
Enhances productivity
Mehrabian-Russell stimulus-response model and Russell’s model of affect help us understand customer responses to service environments
Pleasure and arousal
Approach/avoidance
Servicescape model is integrative framework of consumer responses to service environments. Main dimensions:
Ambient conditions—music, scent, color, etc.
Spatial layout and functionality
Signs, symbols, and artifacts
People are also part of service environment

30. Key Points Putting it all together, firms should:
Design with a holistic view
Design from a customer’s perspective
Use tools to guide servicescape design
Some tools for guiding servicescape design are:
Keen observation of customers’ behavior and responses in service environments
Feedback and ideas from frontline staff and customers
Field experiments to manipulate specific dimensions to observe effects
Blueprinting physical evidence of environment

31. Tutorial
Identify firms from three different service sectors where the service environment is a crucial part of the overall value proposition. Analyze and explain in detail the value that is being delivered by the service environment.
What are the implications of the fact that environments are perceived holistically?
 Explain the dimensions of ambient conditions and how each can influence customer responses to the service environment.
What are affective expectations? What is their role in driving customer satisfaction with service encounters?