CHAPTER 4 Services Marketing.

CHAPTER 4 Services Marketing

After studying this chapter, you should be able to:
Learning Objectives: After studying this chapter, you should be able to: Understand the nature of services Understand marketing strategies for service firms

Introduction 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

Define the services Any act or performance that one party can offer to another that is essentially intangible and does not result in the ownership of anything.

Types of Service Government Sector Private Non-profit Sector
Courts, employment services, hospitals, loan agencies, military services, police and fire departments, postal services, regulatory agencies and schools. Private Non-profit Sector Museums, charities, mosques, colleges, foundations and hospitals. Business Sector Airlines, banks, hotels, insurance companies, law firms, management consulting firms, medical practices, motion-picture companies, plumbing-repair companies and real estate firms.

Types of Service Manufacturing Sector Retail Sector
Computer operators, accountants and legal staff. Retail Sector Cashiers, clerks, salespeople and customer service representatives.

Scope of Services Marketing
Service as an organization Services as core product Service as product augmentation Service as product support Services as an act

Figure 1-1 Tangibility Spectrum
Salt  Soft Drinks  Detergents  Automobiles  Cosmetics  Fast-food Outlets  Intangible Dominant Tangible Dominant   Fast-food Outlets  Advertising Agencies  Airlines  Investment Management  Consulting Teaching

Characteristics of services marketing
Variability or Heterogeneity Intangibility Perishability Inseparability

Intangibility Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult

Variability or 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

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

Perishability It is difficult to synchronize supply and demand with services Services cannot be returned or resold

Table 1-2 Services are Different
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985):

Categories of Services Marketing
Pure tangible good The offering consists primarily of a tangible good Example: soap, toothpaste, salt No services accompany the product Tangible good with accompanying services The offering consists of a tangible good accompanied by one or more services. Hybrid The offering consists of equal parts of goods and services.

Categories of Services Marketing
Major service with accompanying minor goods and services The offering consists of a major service along with additional services or supporting goods. Pure Service The offering consists primarily of a service.

Figure 1-5 The Services Marketing Triangle
Company (Management) Internal Marketing External Marketing “enabling the promise” “setting the promise” Employees Customers Interactive Marketing “delivering the promise” Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

Ways to Use the Services Marketing Triangle
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? Overall Strategic Assessment How is the service organization doing on all three sides of the triangle? Where are the weaknesses? What are the strengths?

The Services Triangle and Technology
Figure 1-6 The Services Triangle and Technology Company Technology Customers Providers Source: Adapted from A. Parasuraman

Services Marketing Mix: 7 Ps for Services
Traditional Marketing Mix Expanded Mix for Services: 7 Ps Building Customer Relationships Through People, Processes, and Physical Evidence Ways to Use the 7 Ps

Traditional Marketing Mix
All elements within the control of the firm that communicate the firm’s capabilities and image to customers or that influence customer satisfaction with the firm’s product and services: Product Price Place Promotion

Expanded Mix for Services -- the 7 Ps
Product Price Place Promotion People Process Physical Evidence

Table 1-3 Expanded Marketing Mix for Services

Table 1-3 (Continued) Expanded Marketing Mix for Services

Ways 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?

Services Marketing Triangle Applications 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?

S M Part 1 FOCUS ON THE CUSTOMER

Gaps Model of Service Quality
Expected Service CUSTOMER Customer Gap Perceived Service Service Delivery External Communications to Customers COMPANY GAP 4 GAP 1 GAP 3 Customer-Driven Service Designs and Standards GAP 2 Company Perceptions of Consumer Expectations Part 1 Opener

Gaps Model of Service Quality
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

The Customer Gap Expected Service GAP Perceived Service Part 1 Opener

CONSUMER BEHAVIOR IN SERVICES
Chapter 2 CONSUMER BEHAVIOR IN SERVICES

Objectives for Chapter 2: Consumer Behavior in Services
Overview the generic differences in consumer behavior between services and goods Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior: Information search Evaluation of service alternatives Service purchase and consumption Postpurchase evaluation Role of culture

Consumer Evaluation Processes 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

Figure 2-1 Continuum of Evaluation for Different Types of Products
Clothing Jewelry Furniture Houses Automobiles Restaurant meals Vacations Haircuts Child care Television repair Legal services Root canals Auto repair Medical diagnosis Most Goods Most Services Easy to evaluate Difficult to evaluate { { { High in search qualities High in experience qualities High in credence qualities

Evaluation of Alternatives
Figure 2-2 Categories in Consumer Decision-Making and Evaluation of Services Information Search Evaluation of Alternatives  Use of personal sources  Perceived risk  Evoked set  Emotion and mood Purchase and Consumption Post-Purchase Evaluation  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty

Figure 2-3 Categories in Consumer Decision-Making and Evaluation of Services
Information Search Evaluation of Alternatives Purchase and Consumption Post-Purchase Evaluation  Use of personal sources  Perceived risk  Evoked set  Emotion and mood  Service provision as drama  Service roles and scripts  Compatibility of customers  Attribution of dissatisfaction  Innovation diffusion  Brand loyalty Culture Values and attitudes Manners and customs Material culture Aesthetics Educational and social institutions

Information 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

Perceived 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

Evoked 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

Emotion 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

Service Provision as Drama
Need to maintain a desirable impression Service “actors” need to perform certain routines Physical setting important, smell, music, use of space, temperature, cleanliness, etc.

Global Feature: Differences in the Service Experience in the U. S
Global Feature: Differences in the Service Experience in the U.S. and Japan Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness

CUSTOMER EXPECTATIONS OF SERVICES
Chapter 3 CUSTOMER EXPECTATIONS OF SERVICES

Objectives for Chapter 3: Customer Expectations of Service
Recognize that customers hold different types of expectations for service performance Discuss controllable and uncontrollable sources of customer expectations Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter Acknowledge that expectations are similar for many different types of customers Delineate the most important current issues surrounding customer expectations

DEFINITIONS 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?

(Two levels of expectations)
Figure 3-1 Dual Customer Expectation Levels (Two levels of expectations) Desired Service Zone of Tolerance Adequate Service

The Zone of Tolerance Zone of Tolerance Figure 3-2 Desired Service
Adequate Service

Zones of Tolerance VARY for Different Service Dimensions
Figure 3-3 Zones of Tolerance VARY for Different Service Dimensions Desired Service Level of Expectation Zone of Tolerance Desired Service Adequate Zone of Tolerance Desired Service Adequate Service Adequate Service Most Important Factors Least Important Factors Source: Berry, Parasuraman, and Zeithaml (1993)

Zones of Tolerance VARY for First-Time and Recovery Service
Figure 3-4 Zones of Tolerance VARY for First-Time and Recovery Service First-Time Service Outcome Process Recovery Service Outcome Process LOW HIGH Expectations Source: Parasuraman, Berry and Zeithaml (1991)

Factors that Influence
Figure 3-5 Factors that Influence Desired Service Enduring Service Intensifiers Desired Service Personal Needs Zone of Tolerance Adequate Service

Personal needs include physical, social, psychological categories
Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service This can further divided into Derived Service Expectations and Personal service Philosophies

Factors that Influence
Figure 3-6 Factors that Influence Adequate Service Transitory Service Intensifiers Desired Service Perceived Service Alternatives Zone of Tolerance Self-Perceived Service Role Adequate Service Situational Factors

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

Factors that Influence Desired and Predicted Service
Figure 3-7 Factors that Influence Desired and Predicted Service Explicit Service Promises Implicit Service Promises Word-of-Mouth Desired Service Zone of Tolerance Past Experience Predicted Service Adequate Service

CUSTOMER PERCEPTIONS OF SERVICE
Chapter 4 CUSTOMER PERCEPTIONS OF SERVICE

Objectives for Chapter 4: Customer Perceptions of Service
Provide you with definitions and understanding of customer satisfaction and service quality Show that service encounters or the “moments of truth” are the building blocks of customer perceptions Highlight strategies for managing customer perceptions of service

Reliability Responsiveness Assurance Empathy Tangibles
Figure 4-1 Customer Perceptions of Service Quality and Customer Satisfaction Situational Factors Reliability Service Quality Responsiveness Assurance Customer Satisfaction Product Quality Empathy Tangibles Personal Factors Price

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

Figure 4-3 Relationship between Customer Satisfaction and Loyalty in Competitive Industries
Source: James L. Heskett, W. Earl Sasser, Jr., and Leonard A. Schlesinger, The Service Profit Chain, (New York, NY: The Free Press, 1997), p. 83.

Service 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
Reliability 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. Assurance Tangibles Empathy Responsiveness

Exercise to Identify Service Attributes
In groups of five, choose a services industry and spend 10 minutes brainstorming specific requirements of customers in each of the five service quality dimensions. Be certain the requirements reflect the customer’s point of view. Reliability: Assurance: Tangibles: Empathy: Responsiveness:

SERVQUAL Attributes ASSURANCE RELIABILITY EMPATHY 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 RELIABILITY 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 EMPATHY 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 RESPONSIVENESS Keeping customers informed as to when services will be performed Prompt service to customers Willingness to help customers Readiness to respond to customers’ requests TANGIBLES Modern equipment Visually appealing facilities Employees who have a neat, professional appearance Visually appealing materials associated with the service

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

Figure 4-4 A Service Encounter Cascade for a Hotel Visit
Check-In Bellboy Takes to Room Restaurant Meal Request Wake-Up Call Checkout

A Service Encounter Cascade for an Industrial Purchase
Figure 4-5 A Service Encounter Cascade for an Industrial Purchase Sales Call Delivery and Installation Servicing Ordering Supplies Billing

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: Employee Response to Service Delivery System Failure Employee Response to Customer Needs and Requests Coping: Spontaneity: Unprompted and Unsolicited Employee Actions and Attitudes Employee Response to Problem Customers

Recovery DO DON’T Acknowledge problem Ignore customer Blame customer
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

Adaptability DO DON’T 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

Spontaneity DO DON’T Exhibit impatience Ignore Yell/laugh/swear
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

Coping DO DON’T Listen Try to accommodate Explain
Let go of the customer Take customer’s dissatisfaction personally Let customer’s dissatisfaction affect others

Figure 4-6 Evidence of Service from the Customer’s Point of View
Contact employees Customer him/herself Other customers Operational flow of activities Steps in process Flexibility vs. standard Technology vs. human People Physical Evidence Process Tangible communication Servicescape Guarantees Technology

LISTENING TO CUSTOMER REQUIREMENTS
Part 2 LISTENING TO CUSTOMER REQUIREMENTS

Company Perceptions of Consumer Expectations
Provider GAP 1 CUSTOMER Expected Service GAP 1 Company Perceptions of Consumer Expectations COMPANY Part 2 Opener

S M Chapter 5 UNDERSTANDING CUSTOMER EXPECTATIONS AND PERCEPTIONS THROUGH MARKETING RESEARCH

Objectives for Chapter 5: Understanding Customer Expectations and Perceptions through Marketing Research Present the types of and guidelines for marketing research in services Show the ways that marketing research information can and should be used for services Describe the strategies by which companies can facilitate interaction and communication between management and customers Present ways that companies can and do facilitate interaction between contact people and management

Common Research Objectives for Services
To identify dissatisfied 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

Figure 5-1 Criteria for An Effective Services Research Program
Includes Quantitative Research Includes Qualitative Research Includes Perceptions and Expectations of Customers Occurs with Appropriate Frequency Research Objectives Includes Measures of Loyalty or Behavioral Intentions Measures Priorities or Importance Balances Cost and Value of Information Includes Statistical Validity When Necessary

Portfolio of Services Research
Research Objective Type of Research Identify dissatisfied customers to attempt recovery; identify most common categories of service failure for remedial action Customer Complaint Solicitation “Relationship” Surveys Post-Transaction Surveys Customer Focus Groups “Mystery Shopping” of Service Providers Employee Surveys Lost Customer Research Assess company’s service performance compared to competitors; identify service-improvement priorities; track service improvement over time 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 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 To forecast future expectations of customers To develop and test new service ideas Future Expectations Research

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

Service Quality Perceptions Relative to Zones of Tolerance
Figure 5-5 Service Quality Perceptions Relative to Zones of Tolerance by Dimensions 9 8 7 6 5 4 3 2 1 O O O O O Reliability Responsiveness Assurance Empathy Tangibles Retail Chain Zone of Tolerance S.Q. Perception O

Service Quality Perceptions
Relative to Zones of Tolerance by Dimensions 10 8 6 4 2 O O O O O Reliability Responsiveness Assurance Empathy Tangibles Computer Manufacturer Zone of Tolerance S.Q. Perception O

Figure 5-6 Importance/Performance Matrix
HIGH   High Leverage Attributes to Improve Attributes to Maintain     Importance  Low Leverage    Attributes to Maintain Attributes to De-emphasize LOW HIGH Performance

S M Chapter 6 BUILDING CUSTOMER RELATIONSHIPS

Objectives for Chapter 6: Building Customer Relationships
Explain relationship marketing, its goals, and the benefits of long-term relationships for firms and customers Explain why and how to estimate customer lifetime value Specify the foundations for successful relationship marketing--quality core services and careful market segmentation Provide you with examples of successful customer retention strategies Introduce the idea that “the customer isn’t always right”

Relationship Marketing
is a philosophy of doing business that focuses on keeping and improving current customers does not necessarily emphasize acquiring new customers is usually cheaper (for the firm)--to keep a current customer costs less than to attract a new one goal = to build and maintain a base of committed customers who are profitable for the organization thus, the focus is on the attraction, retention, and enhancement of customer relationships

Lifetime Value of a Customer
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

Customer Loyalty Exercise
Think of a service provider you are loyal to. What do you do (your behaviors, actions, feelings) that indicates you are loyal? Why are you loyal to this provider?

Benefits to the Organization of Customer 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

Figure 6-1 Customer Goals of Relationship Marketing
Enhancing Retaining Satisfying Getting

Customer Satisfaction
Figure 6-3 Underlying Logic of Customer Retention Benefits to the Organization Customer Satisfaction Customer Retention & Increased Profits Quality Service Employee Loyalty

Figure 6-5 Steps in Market Segmentation and Targeting for Services
Identify Bases for Segmenting the Market Develop Profiles of Resulting Segments Develop Measures of Segment Attractive- ness Select the Target Segments Ensure that Segments Are Compatible STEP 1: STEP 2: STEP 3: STEP4: STEP 5:

Levels of Retention Strategies
Figure 6-6 Levels of Retention Strategies Stable Pricing Volume and Frequency Rewards Bundling and Cross Selling I. Financial Bonds Continuous Relationships Integrated Information Systems Excellent Quality and Value IV. Structural Bonds II. Social Bonds Joint Investments Personal Relationships Shared Processes and Equipment Social Bonds Among Customers III. Customization Bonds Anticipation/ Innovation Customer Intimacy Mass Customization

S M Chapter 7 SERVICE RECOVERY

Objectives for Chapter 7: Service Recovery
Illustrate the importance of recovery from service failures in building loyalty Discuss the nature of consumer complaints and why people do and do not complain Provide evidence of what customers expect and the kind of responses they want when they complain Provide strategies for effective service recovery Discuss service guarantees

Figure 7-1 Unhappy Customers’ Repurchase Intentions
Unhappy Customers Who Don’t Complain 9% Unhappy Customers Who Do Complain 37% 19% Complaints Not Resolved 46% 54% Complaints Resolved 70% 82% Complaints Resolved Quickly 95% Percent of Customers Who Will Buy Again Minor complaints ($1-$5 losses) Major complaints (over $100 losses) Source: Adapted from data reported by the Technical Assistance Research Program.

Figure 7-3 Customer Response Following Service Failure
Take Action Do Nothing Switch Providers Stay with Provider Complain to Provider Complain to Family & Friends Complain to Third Party Switch Providers Stay with Provider

Service Recovery Strategies
Figure 7-5 Service Recovery Strategies Learn from Recovery Experiences Treat Customers Fairly Lost Customers Welcome and Encourage Complaints Fail Safe the Service Act Quickly Service Recovery Strategies

Figure 7-6 Causes Behind Service Switching
Pricing High Price Price Increases Unfair Pricing Deceptive Pricing Figure 7-6 Causes Behind Service Switching Inconvenience Location/Hours Wait for Appointment Wait for Service Core Service Failure Service Mistakes Billing Errors Service Catastrophe Service Encounter Failures Service Switching Behavior Uncaring Impolite Unresponsive Unknowledgeable Response to Service Failure Negative Response No Response Reluctant Response Competition Found Better Service Ethical Problems Cheat Hard Sell Unsafe Conflict of Interest Involuntary Switching Source: Sue Keaveney Customer Moved Provider Closed

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?)

Table 7-7 Characteristics of an Effective Service Guarantee
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp

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”

ALIGNING STRATEGY, SERVICE DESIGN AND STANDARDS
M Part 3 ALIGNING STRATEGY, SERVICE DESIGN AND STANDARDS

Provider GAP 2 Customer-Driven Service Designs and Standards
COMPANY GAP 2 Company Perceptions of Consumer Expectations Part 3 Opener

SERVICE DEVELOPMENT AND DESIGN
Chapter 8 SERVICE DEVELOPMENT AND DESIGN

Objectives for Chapter 8: Service Development and Design
Describe the challenges inherent in service design Present steps in the new service development process Show the value of service blueprinting and quality function deployment (QFD) in new service design and service improvement Present lessons learned in choosing and implementing high-performance service innovations

Figure 8-1 Risks of Relying on Words Alone to Describe Services
Oversimplification Incompleteness Subjectivity Biased Interpretation

New Service Development Process
Figure 8-2 New Service Development Process Business Strategy Development or Review New Service Strategy Development Front End Planning Idea Generation Screen ideas against new service strategy Concept Development and Evaluation Test concept with customers and employees Business Analysis Test for profitability and feasibility Service Development and Testing Conduct service prototype test Implementation Market Testing Test service and other marketing-mix elements Commercialization Postintroduction Evaluation Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.

Figure 8-3 New Service Strategy Matrix for Identifying Growth Opportunities
Markets Offerings Current Customers New Customers Existing Services SHARE BUILDING MARKET DEVELOPMENT New Services SERVICE DEVELOPMENT DIVERSIFICATION

Figure 8-4 Service 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. Process Service Mapping Points of Contact Evidence

Service Blueprint Components
CUSTOMER ACTIONS line of interaction “ONSTAGE” CONTACT EMPLOYEE ACTIONS line of visibility “BACKSTAGE” CONTACT EMPLOYEE ACTIONS line of internal interaction SUPPORT PROCESSES

Express Mail Delivery Service
Truck Packaging Forms Hand-held Computer Uniform Truck Packaging Forms Hand-held Computer Uniform PHYSICAL EVIDENCE Customer Calls Customer Gives Package Receive Package CUSTOMER Driver Picks Up Pkg. (On Stage) Deliver Package CONTACT PERSON (Back Stage) Customer Service Order Airport Receives & Loads Fly to Sort Center Dispatch Driver Unload & Sort Load On Truck Fly to Destination SUPPORT PROCESS Load on Airplane Sort Packages

Overnight Hotel Stay Bill Desk Lobby Hotel Exterior Parking PHYSICAL
EVIDENCE Hotel Exterior Parking Cart for Bags Desk Registration Papers Lobby Key Elevators Hallways Room Cart for Bags Room Amenities Bath Menu Delivery Tray Food Appearance Food CUSTOMER Arrive at Hotel Give Bags to Bellperson Call Room Service Check out and Leave Go to Room Receive Bags Sleep Shower Receive Food Check in Eat Greet and Take Bags (On Stage) Process Registration Deliver Bags Deliver Food Process Check Out CONTACT PERSON Take Food Order (Back Stage) Take Bags to Room Registration System Prepare Food Registration System SUPPORT PROCESS

Building a Service Blueprint
Figure 8-8 Building a Service Blueprint Step 1 Identify the process to be blue-printed. Step 2 Identify the customer or customer segment. Step 3 Map the process from the customer’s point of view. Step 4 Map contact employee actions, onstage and back-stage. Step 5 Link customer and contact person activities to needed support functions. Step 6 Add evidence of service at each customer action step.

Application of Service Blueprints
New Service Development concept development market testing Supporting a “Zero Defects” Culture managing reliability identifying empowerment issues Service Recovery Strategies identifying service problems conducting root cause analysis modifying processes

Blueprints Can Be Used By:
Human Resources empowering the human element job descriptions selection criteria appraisal systems System Technology providing necessary tools: system specifications personal preference databases Service Marketers creating realistic customer expectations service system design promotion Operations Management rendering the service as promised managing fail points training systems quality control

CUSTOMER-DEFINED SERVICE STANDARDS
Chapter 9 CUSTOMER-DEFINED SERVICE STANDARDS

Objectives for Chapter 9: Customer-defined Service Standards
Differentiate between company-defined and customer-defined service standards Distinguish among one-time service fixes and “hard” and “soft” customer-defined standards Explain the critical role of the service encounter sequence in developing customer-defined standards Illustrate how to translate customer expectations into behaviors and actions that are definable, repeatable, and actionable

AT&T’s Process Map for Measurements
Figure 9-1 AT&T’s Process Map for Measurements Business Process Customer Need Internal Metric 30% Product 30% Sales 10% Installation 15% Repair 15% Billing Reliability (40%) Easy To Use (20%) Features / Functions (40%) Knowledge (30%) Responsive (25%) Follow-Up (10%) Delivery Interval Meets Needs (30%) Does Not Break (25%) Installed When Promised (10%) No Repeat Trouble (30%) Fixed Fast (25%) Kept Informed (10%) Accuracy, No Surprise (45%) Resolve On First Call (35%) Easy To Understand (10%) % Repair Call % Calls for Help Functional Performance Test Supervisor Observations % Proposal Made on Time % Follow Up Made Average Order Interval % Repair Reports % Installed On Due Date % Repeat Reports Average Speed Of Repair % Customers Informed % Billing Inquiries % Resolved First Call Total Quality Source: AT&T General Business Systems

Exercise for Creating Customer-Defined Service Standards
Form a group of four people Use your school’s undergraduate or graduate program, or an approved alternative Complete the customer-driven service standards importance chart Establish standards for the most important and lowest-performed behaviors and actions Be prepared to present your findings to the class

Customer-Driven Standards and Measurements Exercise
Service Encounter Customer Requirements Measurements Service Quality

Getting to Actionable Steps
Figure 9-2 Getting to Actionable Steps Requirements: Abstract Diagnosticity: Low Satisfaction Value Relationship Solution Provider General Concepts Dig Deeper Reliability Empathy Assurance Tangibles Responsiveness Price Dimensions Dig Deeper Delivers on Time Returns Calls Quickly Knows My Industry Attributes Dig Deeper Delivers by Weds 11/4 Returns Calls in 2 Hrs Knows Strengths of My Competitors Behaviors and Actions Concrete High

Customer-Defined Standards 7. Track Measures Against Standards
Figure 9-3 Process for Setting Customer-Defined Standards 1. Identify Existing or Desired Service Encounter Sequence 2. Translate Customer Expectations Into Behaviors/Actions 3. Select Behaviors/Actions for Standards 4. Set Hard or Soft Standards Measure by Audits or Operating Data Measure by Transaction- Based Surveys Hard 5. Develop Feedback Mechanisms Soft 6. Establish Measures and Target Levels 7. Track Measures Against Standards 8. Update Target Levels and Measures

Importance/Performance Matrix
HIGH 10.0 Maintain Improve Does whatever it takes to correct problems (9.26, 7.96)  Delivers on promises specified in proposal/contract (9.49, 8.51)   Gets project within budget, on time (9.31, 7.84)  Completes projects correctly, on time (9.29, 7.68)    Gets price we originally agreed upon (9.21, 8.64) 9.0    Tells me cost ahead of time (9.06, 8.46) Provides equipment that operates as vendor said it would (9.24, 8.14) Gets back to me when promised (9.04, 7.63) Takes responsibility for their mistakes (9.18, 8.01) Importance Delivers or installs on promised date (9.02, 7.84) 8.0 LOW 7.0 HIGH 8.0 9.0 10.0 Performance

Figure 9-5 Linkage between Soft Measures and Hard Measures for Speed of Complaint Handling S A T I F C O N 10 9 8 7 6 5 4 3 2 1 Large Customers Small Customers W O R K I N G H O U R S

A B C D E F G H 48 Hours Customer Process Blueprint
Figure Aligning Company Processes with Customer Expectations Customer Expectations 48 Hours Customer Process Blueprint Report Lost Card Receive New Card Company Process Blueprint Company Sequential Processes A B C D E F G H Lost Card Reported New Card Mailed 40 Days

PHYSICAL EVIDENCE AND THE SERVICESCAPE
M Chapter 10 PHYSICAL EVIDENCE AND THE SERVICESCAPE

Objectives for Chapter 10: Physical Evidence and the Servicescape
Explain the impact on customer perceptions of physical evidence, particularly the servicescape Illustrate differences in types and roles of servicescapes and their implications for strategy Explain why the servicescape affects employee and customer behavior Analyze four different approaches for understanding the effects of physical environment Present elements of an effective physical evidence strategy

Table 10-1 Elements of Physical Evidence

Table 10-2 Examples of Physical Evidence from the Customer’s Point of View

Table 10-3 Typology of Service Organizations Based on Variations in Form and Use of the Servicescape

Figure 10-3 A Framework for Understanding Environment-user Relationships in Service Organizations
PHYSICAL ENVIRONMENTAL DIMENSIONS HOLISTIC ENVIRONMENT INTERNAL RESPONSES BEHAVIOR Cognitive Emotional Physiological Individual Behaviors Employee Responses Ambient Conditions Space/Function Signs, Symbols, and Artifacts Perceived Servicescape Social Interactions between and among customer and employees Customer Responses Individual Behaviors Cognitive Emotional Physiological Source: Adapted from Mary Jo Bitner, “Servicescapes.”

DELIVERING AND PERFORMING SERVICE
Part 4 DELIVERING AND PERFORMING SERVICE

Service Designs and Standards
Provider GAP 3 CUSTOMER Service Delivery COMPANY GAP 3 Customer-Driven Service Designs and Standards Part 4 Opener

EMPLOYEES’ ROLES IN SERVICE DELIVERY
Chapter 11 EMPLOYEES’ ROLES IN SERVICE DELIVERY

Objectives for Chapter 11: Employees’ Roles in Service Delivery
Illustrate the critical importance of service employees in creating customer satisfaction and service quality Demonstrate the challenges inherent in boundary-spanning roles Provide examples of strategies for creating customer-oriented service delivery Show how the strategies can support a service culture where providing excellent service is a way of life

Service 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

Service Employees Who are they? What are these jobs like?
“boundary spanners” What are these jobs like? emotional labor many sources of potential conflict person/role organization/client interclient quality/productivity

Figure 11-3 Boundary Spanners Interact with Both Internal and External Constituents
External Environment Internal Environment

Figure 11-4 Sources of Conflict for Boundary-Spanning Workers
Person vs. Role Organization vs. Client Client vs. Client Quality vs. Productivity

Figure 11-5 Human Resource Strategies for Closing GAP 3
Hire for Service Competencies and Service Inclination Compete for the Best People Be the Preferred Employer Measure and Reward Strong Service Providers Train for Technical and Interactive Skills Hire the Right People Customer- oriented Service Delivery Develop People to Deliver Service Quality Treat Employees as Customers Retain the Best People Empower Employees Include Employees in the Company’s Vision Provide Needed Support Systems Promote Teamwork Develop Service- oriented Internal Processes Measure Internal Service Quality Provide Supportive Technology and Equipment

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

CUSTOMERS’ ROLES IN SERVICE DELIVERY
Chapter 12 CUSTOMERS’ ROLES IN SERVICE DELIVERY

Objectives for Chapter 12: Customers’ Roles in Service Delivery
Illustrate the importance of customers in successful service delivery Enumerate the variety of roles that service customers play Productive resources Contributors to quality and satisfaction Competitors Explain strategies for involving service customers effectively to increase both quality and productivity

Importance of Other Customers in Service Delivery
Other customers can detract from satisfaction disruptive behaviors excessive crowding incompatible needs Other customers can enhance satisfaction mere presence socialization/friendships roles: assistants, teachers, supporters

How Customers Widen Gap 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

Figure 12-2 Customer Roles in Service Delivery
Productive Resources Contributors to Quality and Satisfaction Competitors

Customers as Productive Resources
“partial employees” contributing effort, time, or other resources to the production process customer inputs can affect organization’s productivity key issue: should customers’ roles be expanded? reduced?

Customers as Contributors to Service Quality and Satisfaction
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

Customers as Competitors
customers may “compete” with the service provider “internal exchange” vs. “external exchange” internal/external decision often based on: expertise resources time economic rewards psychic rewards trust control

Technology Spotlight: Services Production Continuum
Customer Production Joint Production Firm Production 1 2 3 4 5 6 Gas Station Illustration 1. Customer pumps gas and pays at the pump with automation 2. Customer pumps gas and goes inside to pay attendant 3. Customer pumps gas and attendant takes payment at the pump 4. Attendant pumps gas and customer pays at the pump with automation 5. Attendant pumps gas and customer goes inside to pay attendant 6. Attendant pumps gas and attendant takes payment at the pump

Figure 12-3 Strategies for Enhancing Customer Participation
Effective Customer Participation Recruit, Educate, and Reward Customers Define Customer Jobs Manage the Customer Mix

Strategies for Enhancing Customer Participation
1. Define customers’ jobs - helping himself - helping others - promoting the company 2. Individual differences: not everyone wants to participate

Strategies for Recruiting, Educating and Rewarding Customers
1. Recruit the right customers 2. Educate and train customers to perform effectively 3. Reward customers for their contribution 4. Avoid negative outcomes of inappropriate customer participation Manage the Customer Mix

MANAGING DEMAND AND CAPACITY
S M Chapter 14 MANAGING DEMAND AND CAPACITY

Objectives for Chapter 14: Managing Demand and Capacity
Explain: the underlying issue for capacity-constrained services the implications of capacity constraints the implications of different types of demand patterns on matching supply and demand Lay out strategies for matching supply and demand through: shifting demand to match capacity or flexing capacity to meet demand Demonstrate the benefits and risks of yield management strategies Provide strategies for managing waiting lines

Understanding Capacity Constraints and Demand Patterns
Charting demand patterns Predictable cycles Random demand fluctuations Demand patterns by market segment Time, labor, equipment and facilities Optimal versus maximal use of capacity

Figure 14-3 Strategies for Shifting Demand to Match Capacity
Demand Too High Demand Too Low Shift Demand Use sales and advertising to increase business from current market segments Modify the service offering to appeal to new market segments Offer discounts or price reductions Modify hours of operation Bring the service to the customer Use signage to communicate busy days and times Offer incentives to customers for usage during non-peak times Take care of loyal or regular customers first Advertise peak usage times and benefits of non-peak use Charge full price for the service--no discounts

Figure 14-4 Strategies for Flexing Capacity to Match Demand
Demand Too High Demand Too Low Flex Capacity Stretch time, labor, facilities and equipment Cross-train employees Hire part-time employees Request overtime work from employees Rent or share facilities Rent or share equipment Subcontract or outsource activities Perform maintenance renovations Schedule vacations Schedule employee training Lay off employees

Table 14-1 What is the Nature of Demand Relative to Supply?
Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.

Table 14-2 What is the Constraint on Capacity?

Waiting Line Issues and Strategies
unoccupied time feels longer preprocess waits feel longer anxiety makes waits seem longer uncertain waits seem longer than finite waits unexplained waits seem longer unfair waits feel longer longer waits are more acceptable for “valuable” services solo waits feel longer

MANAGING SERVICE PROMISES
Part 5 MANAGING SERVICE PROMISES

External Communications to Customers
Provider GAP 4 CUSTOMER Service Delivery External Communications to Customers COMPANY GAP 4 Part 5 Opener

INTEGRATED MARKETING COMMUNICATION
S M Chapter 15 INTEGRATED MARKETING COMMUNICATION

Objectives for Chapter 15: Integrated Services Marketing Communications
Introduce the concept of Integrated Services Marketing Communication Discuss the key reasons for service communication problems Present four key ways to integrate marketing communication in service organizations Present specific strategies for managing promises, managing customer expectations, educating customers, and managing internal communications Provide perspective on the popular service objective of exceeding customer expectations

Communications and the Services Marketing Triangle
Figure 15-1 Communications and the Services Marketing Triangle Company Internal Marketing Vertical Communications Horizontal Communications External Marketing Communication Advertising Sales Promotion Public Relations Direct Marketing Employees Interactive Marketing Personal Selling Customer Service Center Service Encounters Servicescapes Customers Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler

Approaches for Integrating Services Marketing Communication
Figure 15-3 Approaches for Integrating Services Marketing Communication Manage Customer Expectations Goal: Delivery greater than or equal to promises Manage Service Promises Improve Customer Education Manage Internal Marketing Communication

Figure 15-4 Approaches for Managing Service Promises
Goal: Delivery greater than or equal to promises Create Effective Services Communications Coordinate External Communication Offer Service Guarantees Make Realistic Promises

Figure 15-8 Approaches for Managing Customer Expectations
Offer Choices Create Tiered-Value Offerings Communicate Criteria for Service Effectiveness Negotiate Unrealistic Expectations Goal: Delivery greater than or equal to promises

Figure 15-9 Approaches for Improving Customer Education
Teach Customers to Avoid Peak Demand Periods and Seek Slow Periods Confirm Performance to Standards Clarify Expectations after the Sale Prepare Customers for the Service Process Goal: Delivery greater than or equal to promises

Approaches for Managing Internal Marketing Communications
Figure 15-10 Approaches for Managing Internal Marketing Communications Goal: Delivery greater than or equal to promises Create Effective Vertical Communications Create Effective Horizontal Communications Align Back Office Personnel w/ External Customers Create Cross-Functional Teams

THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY
Chapter 17 THE FINANCIAL AND ECONOMIC IMPACT OF SERVICE QUALITY

Objectives for Chapter 17: The Financial and Economic Impact 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

Figure 17-1 The Direct Relationship between Service and Profits
Quality ? Profits

Figure 17-2 Offensive Marketing Effects of Service on Profits
Quality Profits Market Share Sales Reputation Price Premium

Figure 17-3 Defensive Marketing Effects of Service on Profit
Quality Costs Margins Volume of Purchases Customer Retention Price Premium Profits Word of Mouth

Figure 17-5 Perceptions of Service, Behavioral Intentions and Profits
Costs Margins Service Volume of Purchases Customer Retention Behavioral Intentions Price Premium Profits Word of Mouth Sales

The “80/20” Customer Pyramid
Figure 17-6 The “80/20” Customer Pyramid Most Profitable What segment spends more with Customers us over time, costs less to maintain, Best Customers spreads positive word of mouth? Other Customers What segment costs us in time, effort and money yet does not provide the return we want? What segment is Least Profitable difficult to do business with? Customers

The Expanded Customer Pyramid
Figure 17-7 The Expanded Customer Pyramid Most Profitable What segment spends more with Customers Platinum us over time, costs less to maintain, spreads positive word of mouth? Gold Iron What segment costs us in Lead time, effort and money yet does not provide the return we want? What segment is Least Profitable difficult to do business with? Customers

Figure 17-8 The Key Drivers of Service Quality, Customer Retention, and Profits
Service Encounters Service Encounter Service Quality Service Encounter Behavioral Intentions Customer Retention Profits Service Encounter Service Encounter

Sample Measurements for the
Figure 17-9 Sample Measurements for the Balanced Scorecard Financial Measures Price Premium Volume Increases Value of Customer Referrals Value of Cross Sales Long-term Value of Customer Customer Perspective Operational Perspective: Service Perceptions Service Expectations Perceived Value Behavioral Intentions: Right first time (% hits) Right on time (% hits) Responsiveness (% on time) Transaction time (hours, days) Throughput time Reduction in waste Process quality Innovation and Learning Perspective % Loyalty % Intent to Switch # Customer Referrals # Cross Sales # of Defections Number of new products Return on innovation Employee skills Time to market Time spent talking to customers Adapted from Kaplan and Norton

Service Quality Spells Profits
Figure 17-10 Service Quality Spells Profits Costs Margins Defensive Marketing Volume of Purchases Service Quality Price Premium Customer Retention Profits Word of Mouth Market Share Sales Offensive Marketing Reputation Price Premium

CHAPTER 4 Services Marketing.

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CHAPTER 4 Services Marketing.

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