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Services Marketing
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S M Chapter 1 INTRODUCTION TO SERVICES
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Objectives for Chapter 1: Introduction to Services
Explain what services are and identify service trends Explain the need for special services marketing concepts and practices Outline the basic differences between goods and services and the resulting challenges for service businesses Introduce the service marketing triangle Introduce the expanded services marketing mix Introduce the gaps model of service quality
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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
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Challenges for Services
Defining and improving quality Communicating and testing new services Communicating and maintaining a consistent image Motivating and sustaining employee commitment Coordinating marketing, operations and human resource efforts Setting prices Standardization versus personalization
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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
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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
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Differences Between Goods and Services
Intangibility Heterogeneity Simultaneous Production and Consumption Perishability
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Implications of Intangibility
Services cannot be inventoried Services cannot be patented Services cannot be readily displayed or communicated Pricing is difficult
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Implications of Heterogeneity
Service delivery and customer satisfaction depend on employee actions Service quality depends on many uncontrollable factors There is no sure knowledge that the service delivered matches what was planned and promoted
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Implications of Simultaneous Production and Consumption
Customers participate in and affect the transaction Customers affect each other Employees affect the service outcome Decentralization may be essential Mass production is difficult
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Implications of Perishability
It is difficult to synchronize supply and demand with services Services cannot be returned or resold
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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):
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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
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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?
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The Services Triangle and Technology
Figure 1-6 The Services Triangle and Technology Company Technology Customers Providers Source: Adapted from A. Parasuraman
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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
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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
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Expanded Mix for Services -- the 7 Ps
Product Price Place Promotion People Process Physical Evidence
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Table 1-3 Expanded Marketing Mix for Services
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Table 1-3 (Continued) Expanded Marketing Mix for Services
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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?
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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?
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S M Part 1 FOCUS ON THE CUSTOMER
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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
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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
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The Customer Gap Expected Service GAP Perceived Service Part 1 Opener
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CONSUMER BEHAVIOR IN SERVICES
Chapter 2 CONSUMER BEHAVIOR IN SERVICES
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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CUSTOMER EXPECTATIONS OF SERVICES
Chapter 3 CUSTOMER EXPECTATIONS OF SERVICES
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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
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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?
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(Two levels of expectations)
Figure 3-1 Dual Customer Expectation Levels (Two levels of expectations) Desired Service Zone of Tolerance Adequate Service
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The Zone of Tolerance Zone of Tolerance Figure 3-2 Desired Service
Adequate Service
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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)
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Factors that Influence
Figure 3-5 Factors that Influence Desired Service Enduring Service Intensifiers Desired Service Personal Needs Zone of Tolerance Adequate Service
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Personal needs include physical, social, psychological categories
Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service This can further divided into Derived Service Expectations and Personal service Philosophies
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Factors that 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
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Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends Perceived service alternatives Perceived service role of customer Situational factors
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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
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CUSTOMER PERCEPTIONS OF SERVICE
Chapter 4 CUSTOMER PERCEPTIONS OF SERVICE
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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
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Objectives for Chapter 4: Customer Perceptions of Service
Perception is what a customer thinks about a service Expectation is what a customer desires from a service Meeting customer expectations is not enough to retain customers Good perception means service has surpassed expectations
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Objectives for Chapter 4: Customer Expectation of Service
Good quality Good price Meets goals Satisfies customer
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Objectives for Chapter 4: Positive Expectation of Service
Customer buys a specific model of sony TV from a retail store Price offered is very competitive TV is offered with manufacture warranty Customer is very happy with the TV
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Objectives for Chapter 4: Customer Perception of Service
How easy How reliable How efficient How fast How customer friendly (physical environment)
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Objectives for Chapter 4: Positive Expectation of Service
Customer visits a showroom with a vast display of all sony models Knowledgeable salesman explains every sony model in great detail Customer makes a decision after seeing the reception quality of each model Customer is offered a price that matches the price offered by any other retailer TV delivered the same day
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Why is perception important?
In today’s globalising economy competition is getting more and more fierce customer behaviour has become more hybrid and unpredictable Todays customer is much better informed and has greater expectations it becomes ever more difficult to differentiate a product or service by traditional categories like price, quality, functionality etc
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Objectives for Chapter 4: Customer Perceptions of Service
Why is Café Coffee day so successful? Why is tata the most admired company? What makes Orkut so popular? Why is IIM more famous compared to XLRI? Why is Indian railways the most preferred mode of travel? Why do people prefer to go to family doctors instead of hospitals?
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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
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Customer Perceptions Perceptions can be built Enhanced Changed Managed
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Dell has successfully built an positive perception
Customer Perceptions Dell has successfully built an positive perception Starbucks enhanced customer perception by enriching the coffee experience Netflix changed the dvd rental perception through technology Amazon has managed service perception
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there are few competitors
Building Perceptions Typically early in the lifecycle when customers are not aware of service there are few competitors determine customer need which shapes customer perception of service continuously build perception to match changing needs
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Enhancing Perceptions
Typically in a mature market where potential for differentiation is high eg., hotels there are many competitors determine customer segment and enhance perceptions according to their needs Perceptions need to be enhanced in commoditized markets
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Markets where the needs havent been fully understood
Changing Perceptions Markets where the needs havent been fully understood there are few competitors determine needs and change existing perceptions according to their needs Perceptions can also change due to disruptive technologies
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Maintain positive perception
Manage Perceptions Maintain positive perception Regularly enhance or change perception depending on target segment Keep operations and marketing synchronized Amazon does this successfully
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Execution/Operations
Positioning Building Perception Execution/Operations Validate Perception Word of Mouth Enhance Perception Customer Feedback Change Perception Service Marketing Manage Perception
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Information Search Initial perception is built based on
Marketing collateral Recommendation from happy customers Friends and relatives Positioning Advertising Websites (very important for services with credence qualities) Employees
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Service Encounter Initial perception is validated during service encounter Does the service execution meet the initial perception Was the customer satisfied, happy or delighted? Will the customer choose the service over competitors ? If customer perception was not met why? Was the marketing message consistent?
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Enhance perception through Viral Marketing
Will customers be loyal to you? Would they recommend your service to others? What is unique about your service ? Can you charge a premium over competitors? Can you deliver consistently? Can you handle a larger customer base?
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Customer Issues Was there a disconnect between initial perception and customer experience? How many customers felt service was didn’t match initial perception Could the service have been performed better to meet perception? Are their resources to execute the service in a better way? Will this work for all target customers? If not can the service deliver to customers who have different perceptions? Change marketing message and improve operations
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Factors Influencing Customer Perception
Product/service quality Product/service attributes or features Consumer Emotions Attributions for product/service success or failure Equity or fairness evaluations
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Outcomes of Positive Customer Perception
Increased customer retention Positive word-of-mouth communications Increased revenues
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Figure 4-3 Relationship between Customer Satisfaction and Loyalty in Competitive Industries
+ve perception -ve perception 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.
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Service Perception The customer’s judgment of overall excellence of the service provided in relation to the quality that was expected. Process and outcome quality are both important.
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The Five Dimensions of Customer Perception
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
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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:
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Attributes ASSURANCE RELIABILITY EMPATHY RESPONSIVENESS TANGIBLES
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
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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
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Encounter Design Encounters need to be designed around service positioning Encounters serve the purpose of automation, customization and personalization They should convey a positive perception of customer relationship management Every service typically is a combination of remote, phone and physical encounters
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Service Encounter design
What are the service steps Search qualities, experience qualities or credence qualities? Any processes , policies that the service adheres to How many segments does the service address What is the frequency of customer interactions Does the service operate across geographies What kind of infrastructure exists How different are customer and segment requirements What kind of service is this (commodity or premium) How price sensitive is the market What is the pricing structure (fixed/variable) How fast is the market for the service changing Is inventory being stocked
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Service Script / Design
Service Design Reliability Empathy Service Execution Position Perception Service Script / Design Tangible Assurance Responsive
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Simple Modern Informal
Ginger Hotels Tata Brand Training Service Execution Economic Hotels Simple Modern Informal Service Design Neat and modern decor Reviews Professional Staff
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Service Design Service Reviews Customized Service Execution
Offbeat Kodai Vacations Enjoyable Insightful Adventure Service Design Site photos Website blogs Guides
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Service Design Accuracy of reports/Diagnosis Personal Attention
Service Execution Multi-Speciality Hospital Exclusive & Expensive Service Design Ambience & Equipment Skilled Doctors Professional Staff
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