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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
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
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
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
TangibleDominant
IntangibleDominant
SaltSoft Drinks
DetergentsAutomobiles
Cosmetics
AdvertisingAgencies
AirlinesInvestment
ManagementConsulting
Teaching
Fast-foodOutlets
Fast-foodOutlets
Services cannot be inventoried Services cannot be patented Services cannot be readily
displayed or communicated Pricing is difficult
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
Customers participate in and affect the transaction
Customers affect each other Employees affect the service
outcome Decentralization may be essential Mass production is difficult
It is difficult to synchronize supply and demand with services
Services cannot be returned or resold
Goods Services Resulting Implications Tangible Intangible Services cannot be inventoried.
Services cannot be patented. Services cannot be readily displayed or communicated. Pricing is difficult.
Standardized Heterogeneous Service delivery and customer satisfaction depend 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.
Production separate from consumption
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.
Nonperishable Perishable It is difficult to synchronize supply and demand with services. Services cannot be returned or resold.
Source: Adapted from Valarie A. Zeithaml, A. Parasuraman, and Leonard L. Berry, “Problems and Strategies in Services Marketing,” Journal of Marketing 49 (Spring 1985): 33-46.
Internal Marketing
Interactive Marketing
External Marketing
Company(Management)
CustomersEmployees
“enabling thepromise”
“delivering the promise”
“setting thepromise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler
Overall Strategic Assessment
• How is the service organization doing on all three sides of the triangle?
• Where are the weaknesses?
• What are the strengths?
Specific Service Implementation• What is being promoted
and by whom?
• How will it be delivered and by whom?
• Are the supporting systems in place to deliver the promised service?
Source: Adapted from A. Parasuraman
Company
CustomersProviders
Technology
Figure 1-6 Figure 1-6
The Services Triangle The Services Triangle and Technologyand Technology
Traditional Marketing Mix
Expanded Mix for Services: 7 Ps
Building Customer Relationships Through People, Processes, and Physical Evidence
Ways to Use the 7 Ps
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
PRODUCT PLACE PROMOTION PRICE
Physical good features
Channel type Promotion blend
Flexibility
Quality level Exposure Salespeople Price level
Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales promotion
Differentiation
Warranties Transportation Publicity Allowances
Product lines Storage
Branding
PEOPLE PHYSICAL EVIDENCE
PROCESS
Employees
Facility design Flow of activities
Customers Equipment Number of steps
Communicating culture and values
Signage Level of customer involvement
Employee research Employee dress
Other tangibles
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?
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?
28
SM
PerceivedService
Expected Service
CUSTOMER
COMPANY
CustomerGap
GAP 1
GAP 2
Gaps Model of Service QualityGaps Model of Service Quality
GAP 3
External Communications
to CustomersGAP 4Service Delivery
Customer-Driven Service Designs and Standards
Company Perceptions of Consumer Expectations
Part 1 Opener
29
SMGaps Model of Service Gaps Model of Service
QualityQuality
• Customer Gap:• difference between expectations and
perceptions• Provider Gap 1:
• not knowing what customers expect• Provider Gap 2:
• not having the right service designs and standards
• Provider Gap 3:• not delivering to service standards
• Provider Gap 4:• not matching performance to promises
Part 1 Opener
32
SM
Objectives for Chapter 2:Objectives for Chapter 2:Consumer Behavior in Consumer Behavior in
ServicesServices
• Overview the generic differences in consumer behavior between services and goods
• Introduce the aspects of consumer behavior that a marketer must understand in five categories of consumer behavior:• Information search• Evaluation of service alternatives• Service purchase and consumption• Postpurchase evaluation• Role of culture
33
SM Consumer Evaluation Consumer Evaluation Processes for ServicesProcesses for Services
• Search Qualities– attributes a consumer can determine prior to
purchase of a product• Experience Qualities
– attributes a consumer can determine after purchase (or during consumption) of a product
• Credence Qualities– characteristics that may be impossible to evaluate
even after purchase and consumption
34
SMFigure 2-1Figure 2-1
Continuum of Evaluation for Continuum of Evaluation for Different Types of ProductsDifferent Types of Products
Clo
t hin
g
Jew
elry
Fur
n itu
re
Hou
ses
Aut
omob
iles
Res
tau
rant
mea
ls
Vac
a tio
ns
Ha i
r cut
s
Ch i
ld c
a re
Tel
evis
ion
repa
ir
Leg
a l s
ervi
ces
Roo
t c a
nals
Aut
o re
pair
Med
ical
dia
gno
sis
Difficult to evaluateEasy to evaluate
{High in search
qualitiesHigh in experience
qualitiesHigh in credence
qualities
{{Most
GoodsMost
Services
35
SM
Figure 2-2Figure 2-2
Categories in Consumer Categories in Consumer Decision-Making and Evaluation of Decision-Making and Evaluation of
ServicesServicesInformation Search
Evaluation of Alternatives
Purchase and Consumption
Post-Purchase Evaluation
Use of personal sources Perceived risk
Evoked set Emotion and mood
Service provision as drama Service roles and scripts Compatibility of customers
Attribution of dissatisfaction Innovation diffusion Brand loyalty
36
SM
Figure 2-3Figure 2-3
Categories in Consumer Decision-Categories in Consumer Decision-Making and Evaluation of ServicesMaking and Evaluation of Services
Information Search
Evaluation of Alternatives
Purchase and Consumption
Post-Purchase Evaluation
Use of personal sources Perceived risk
Evoked set Emotion and mood
Service provision as drama Service roles and scripts Compatibility of customers
Attribution of dissatisfaction Innovation diffusion Brand loyalty
Culture Values and attitudes Manners and customs Material culture Aesthetics Educational and social
institutions
37
SM Information searchInformation search
• In buying services consumers rely more on personal sources. WHY? Refer p32
• Personal influence becomes pivotal as product complexity increases
• Word of mouth important in delivery of services
• With service most evaluation follows purchase
38
SM Perceived RiskPerceived Risk
• More risk would appear to be involved with purchase of services (no guarantees)
• Many services so specialised and difficult to evaluate (How do you know whether the plumber has done a good job?)
• Therefore a firm needs to develop strategies to reduce this risk, e.g, training of employees, standardisation of offerings
39
SM Evoked SetEvoked Set
• The evoked set of alternatives likely to be smaller with services than goods
• If you would go to a shopping centre you may only find one dry cleaner or “single brand”
• It is also difficult to obtain adequate prepurchase information about service
• The Internet may widen this potential• Consumer may choose to do it themselves, e.g.
garden services
40
SM Emotion and MoodEmotion and Mood
• Emotion and mood are feeling states that influence people’s perception and evaluation of their experiences
• Moods are transient
• Emotions more intense, stable and pervasive
• May have a negative or positive influence
41
SMService Provision as Service Provision as
DramaDrama
• Need to maintain a desirable impression
• Service “actors” need to perform certain routines
• Physical setting important, smell, music, use of space, temperature, cleanliness, etc.
42
SM
Global Feature:Global Feature:Differences in the Service Differences in the Service
Experience in the U.S. and JapanExperience in the U.S. and Japan
Authenticity Caring Control Courtesy Formality Friendliness Personalization Promptness
Contact: +923006641921 Usman Waheed
44
SM
Objectives for Chapter 3:Objectives for Chapter 3:Customer Expectations of Customer Expectations of
ServiceService
• Recognize that customers hold different types of expectations for service performance
• Discuss controllable and uncontrollable sources of customer expectations
• Distinguish between customers’ global expectations of their relationships and their expectations of the service encounter
• Acknowledge that expectations are similar for many different types of customers
• Delineate the most important current issues surrounding customer expectations
Contact: +923006641921 Usman Waheed
45
SM DEFINITIONSDEFINITIONS
• Customers have different expectations re services – or expected service
• Desired service – customer hopes to receive• Adequate service – the level of service the
customer may accept
• DO YOUR EXPECTATIONS DIFFER RE SPUR and CAPTAIN DOREGO?
Contact: +923006641921 Usman Waheed
46
SM
Figure 3-1Figure 3-1
Dual Customer Dual Customer Expectation LevelsExpectation Levels
(Two levels of expectations)(Two levels of expectations)
Adequate Service
Desired Service
Zone ofTolerance
Contact: +923006641921 Usman Waheed
47
SMFigure 3-2Figure 3-2
The Zone of ToleranceThe Zone of Tolerance
Adequate Service
Desired Service
Zone ofTolerance
Contact: +923006641921 Usman Waheed
48
SM
Figure 3-3Figure 3-3
Zones of Tolerance Zones of Tolerance VARYVARY for forDifferent Service DimensionsDifferent Service Dimensions
Most Important Factors Least Important Factors
Level of
Expectation
Source: Berry, Parasuraman, and Zeithaml (1993)
Adequate Service
Desired Service
Zone ofTolerance
DesiredService
AdequateService
Zone of
Tolerance
Desired Service
Adequate Service
Contact: +923006641921 Usman Waheed
49
SM
Figure 3-5Figure 3-5
Factors that InfluenceFactors that InfluenceDesired ServiceDesired Service
DesiredService
AdequateService
Zone of
Tolerance
Enduring ServiceIntensifiers
Personal Needs
Contact: +923006641921 Usman Waheed
50
SM
• Personal needs include physical, social, psychological categories
• Enduring service intensifiers are individual, stable factors that lead to heightened sensitivity to service
This can further divided into Derived Service Expectations and Personal service Philosophies
Contact: +923006641921 Usman Waheed
51
SM
Figure 3-6Figure 3-6
Factors that InfluenceFactors that InfluenceAdequate ServiceAdequate Service
DesiredService
AdequateService
Zone of
ToleranceSelf-PerceivedService Role
Situational Factors
Perceived ServiceAlternatives
Transitory ServiceIntensifiers
Contact: +923006641921 Usman Waheed
52
SM
• Transitory service intensifiers – temporary – a computer breakdown will be less tolerated at financial year-ends
• Perceived service alternatives
• Perceived service role of customer
• Situational factors
Contact: +923006641921 Usman Waheed
53
SM
Figure 3-7Figure 3-7
Factors that InfluenceFactors that InfluenceDesired and Predicted ServiceDesired and Predicted Service
DesiredService
AdequateService
Zone of
Tolerance
Predicted Service
Explicit ServicePromises
Implicit ServicePromises
Word-of-Mouth
Past Experience
55
SM
Objectives for Chapter 4:Objectives for Chapter 4:Customer Perceptions of Customer Perceptions of
ServiceService
• Provide you with definitions and understanding of customer satisfaction and service quality
• Show that service encounters or the “moments of truth” are the building blocks of customer perceptions
• Highlight strategies for managing customer perceptions of service
56
SM
Objectives for Chapter 4:Objectives for Chapter 4:Customer Perceptions of Customer Perceptions of
ServiceService
• 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
57
SM
Objectives for Chapter 4:Objectives for Chapter 4:Customer Expectation of Customer Expectation of
ServiceService
• Good quality
• Good price
• Meets goals
• Satisfies customer
58
SM
Objectives for Chapter 4: Objectives for Chapter 4: Positive Expectation of Positive Expectation of
ServiceService
• 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
59
SM
Objectives for Chapter 4:Objectives for Chapter 4:Customer Perception of Customer Perception of
ServiceService
• How easy
• How reliable
• How efficient
• How fast
• How customer friendly (physical environment)
60
SM
Objectives for Chapter 4:Objectives for Chapter 4:Positive Expectation of Positive Expectation of
ServiceService
• 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
61
SMWhy is perception Why is perception
important?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
62
SM
Objectives for Chapter 4:Objectives for Chapter 4:Customer Perceptions of Customer Perceptions of
ServiceService
• 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?
63
SM
Figure 4-1Figure 4-1
Customer Perceptions of Customer Perceptions of Service Quality and Service Quality and
Customer SatisfactionCustomer Satisfaction
ServiceQuality
Reliability
Responsiveness
Assurance
Empathy
Tangibles
ProductQuality
PricePersonalFactors
CustomerSatisfaction
SituationalFactors
65
SM Customer PerceptionsCustomer 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
66
SM Building PerceptionsBuilding 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
67
SM Enhancing PerceptionsEnhancing 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
68
SM Changing PerceptionsChanging 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
69
SM Manage PerceptionsManage Perceptions
Maintain positive perception
Regularly enhance or change perception depending on target segment
Keep operations and marketing synchronized
Amazon does this successfully
70
SM
PositioningPositioning
Word of Mouth
Word of Mouth
Customer FeedbackCustomer Feedback
Service Marketing
Service Marketing
Building PerceptionBuilding
Perception
Enhance PerceptionEnhance
Perception
Change Perception
Change Perception
Manage Perception
Manage Perception
Execution/OperationsExecution/Operations
Validate PerceptionValidate
Perception
71
SM Information SearchInformation 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
72
SM Service EncounterService 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?
73
SMEnhance perception Enhance perception
through Viral Marketingthrough 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?
74
SM Customer IssuesCustomer 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
75
SMFactors Influencing Factors Influencing
Customer PerceptionCustomer Perception
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or failure
• Equity or fairness evaluations
76
SM
Outcomes of Outcomes of Positive Customer Positive Customer
PerceptionPerception
• Increased customer retention
• Positive word-of-mouth communications
• Increased revenues
77
SM
Figure 4-3 Figure 4-3
Relationship between Customer Relationship between Customer Satisfaction and Loyalty in Satisfaction and Loyalty in
Competitive IndustriesCompetitive Industries
0%
20%
40%
60%
80%
100%
Verydissatisfied
Dissatisfied Neithersatisfied nordissatisfied
Satisfied Verysatisfied
Satisfaction measure
Lo
yalt
y (r
eten
tio
n)
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.
-ve perception
+ve perception
78
SM Service PerceptionService 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.
79
SM The Five Dimensions of The Five Dimensions of Customer PerceptionCustomer Perception
Ability to perform the promised service dependably and accurately.
Knowledge and courtesy of employees and their ability to convey trust and confidence.
Physical facilities, equipment, and appearance of personnel.
Caring, individualized attention the firm provides its customers.
Willingness to help customers and provide prompt service.
Tangibles
Reliability
Responsiveness
Assurance
Empathy
80
SM Exercise to Exercise to Identify Service AttributesIdentify 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:
81
SM
AttributesAttributes
Providing service as promised Dependability in handling customers’
service problems Performing services right the first time Providing services at the promised time Maintaining error-free records
Keeping customers informed as to when services will be performed
Prompt service to customers Willingness to help customers Readiness to respond to customers’
requests
RELIABILITY
RESPONSIVENESS
Employees who instill confidence in customers
Making customers feel safe in their transactions
Employees who are consistently courteous Employees who have the knowledge to
answer customer questions
ASSURANCE
Giving customers individual attention Employees who deal with customers in a
caring fashion Having the customer’s best interest at heart Employees who understand the needs of
their customers Convenient business hours
EMPATHY
Modern equipment Visually appealing facilities Employees who have a
neat, professional appearance
Visually appealing materials associated with the service
TANGIBLES
82
SM The Service EncounterThe Service Encounter
• is the “moment of truth”• occurs any time the customer interacts with the firm• can potentially be critical in determining customer satisfaction and
loyalty• types of encounters:
– remote encounters– phone encounters– face-to-face encounters
• is an opportunity to:– build trust– reinforce quality– build brand identity– increase loyalty
83
SM Encounter DesignEncounter 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
84
SM Service Encounter designService 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
85
SM Service DesignService Design
ReliabilityReliability
EmpathyEmpathy
TangibleTangible
AssuranceAssurance
ResponsiveResponsive
PerceptionPerceptionService Script / Design
Service Script / Design
Service Execution
Service ExecutionPositionPosition
86
SM Ginger HotelsGinger Hotels
Tata BrandTata Brand
TrainingTraining
Neat and modern decor
Neat and modern decor
ReviewsReviews
Professional StaffProfessional Staff
Simple Modern Informal
Simple Modern Informal
Service DesignService Design
Service Execution
Service ExecutionEconomic
HotelsEconomic
Hotels
87
SM Service DesignService Design
Service ReviewsService Reviews
CustomizedCustomized
Site photosSite photos
Website blogsWebsite blogs
GuidesGuides
Enjoyable Insightful Adventure
Enjoyable Insightful Adventure
Service DesignService Design
Service Execution
Service Execution
Offbeat Kodai
Vacations
Offbeat Kodai
Vacations
88
SM Service DesignService Design
Accuracy of reports/Diagnosis
Accuracy of reports/Diagnosis
Personal AttentionPersonal Attention
Ambience & Equipment
Ambience & Equipment
Skilled DoctorsSkilled Doctors
Professional StaffProfessional Staff
Exclusive &
Expensive
Exclusive &
Expensive
Service DesignService Design
Service Execution
Service Execution
Multi-Speciality Hospital
Multi-Speciality Hospital