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Word Count: 1,842

26 October

2017

Tutor: Hayley Vale (Thursday 5pm)

Group Members:

Dayna Callaghan – n9214721

Erin Carvell – n9143041

Karuna Hastie – n7506686

Ilya Dira – n9294112

Service Audit: Group Report

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Table of Contents 1.0 Introduction ................................................................................................................................ 2

2.0 Service Marketing Mix Analysis ................................................................................................... 2

2.1 Service Product and Positioning .............................................................................................. 2

2.2 Pricing, Productive Capacity and Demand ............................................................................... 2

2.3 Physical and Electronic Distribution ........................................................................................ 3

2.4 Integrated Service Marketing Communication ........................................................................ 4

2.5 Managing People ..................................................................................................................... 4

2.6 Service Process ........................................................................................................................ 5

2.7 Service Scape and Physical Evidence ....................................................................................... 7

3.0 Recommendations ...................................................................................................................... 8

4.0 Reference List .............................................................................................................................. 9

5.0 Appendices ................................................................................................................................ 11

Appendix A – Customer Perceptions on Price ................................................................................... 11

Appendix B – Palace Cinema e-Ticket ................................................................................................ 12

Appendix C – Facebook Platform: Unmanaged Customer Enquiries and Complaints ....................... 13

Appendix D – Customer Service Reviews .......................................................................................... 15

Table of Figures Figure 1: Service Encounter Blueprint ..................................................................................................... 6

Table of Tables

Table 1: Palace Cinema Servicescape ...................................................................................................... 7

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1.0 Introduction

Palace Cinemas is a family owned and operated independent, private company; with 13 cinemas

throughout Australia that operate a range of film festivals to Australian audiences. This type of service

falls into the intangible service act of mental stimulus processing according to Lovelock’s Service

Classification (Chew, Lovelock & Wirtz, 2012, p. 17). During the year 2009 - 10, approximately 67% of

the surveyed Australian population aged 15 and over attended the cinemas at least once, with an

average of circa seven visits per person per year (Australian Bureau of Statistics, 2015). Movies have

the power to guide behaviour and form attitudes and in the case of Palace Cinemas, customers must

be physically present to encounter the service experience. The service audit will propose how the

organisation could improve or enhance their services marketing mix to improve organisational

efficiency and effectiveness.

2.0 Service Marketing Mix Analysis

2.1 Service Product and Positioning

Palace Cinemas offers a mixture of mainstream, independent and art house films. Their targeted

moviegoer segment consists of people aged 30 and over who have a higher disposable income and

who are looking to experience high-level entertainment and hospitality. As soon as customers enter

the venue they are greeted by high-class decor and a comfortable waiting area surrounded by chairs

and sofas that create an atmosphere akin to a large living room. To further emphasise their luxury

boutique services, each Palace Cinema features a bar and cafe that offer a variety of food and

beverages. Moreover, the organisation sets itself apart by hosting a number of international film

festivals where works from countries such as France, Britain, Italy, Germany and Spain are screened.

Through the use of physical evidence such as upmarket decor, catering facilities and multicultural film

productions, Palace Cinemas is able to shape appropriate feelings and reactions from their target

audience. The ambient conditions of their venues exude an atmosphere of luxury and class whilst still

retaining the cinematic experience (Chew et al., 2012, p.270). However, such ambient conditions

attract a certain type of customer, which can potentially limit the company’s performance. If Palace

Cinemas ever chooses to attract an additional market segment to increase sales and expand their

entertainment services, a younger market segment would be advantageous as persons between the

age of 15-17 (96.5%) and 18-24 (93%) are most likely to attend such activities (Australian Bureau of

Statistics, 2015; Southgate & Millward, 2017).

2.2 Pricing, Productive Capacity and Demand

An analysis of Palace Cinemas pricing strategy shows they use a value-based, prestige pricing strategy

where value is the quality the consumer gets for the price they pay (Chew et al., 2012, p.157). Palace

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Cinemas provides a higher price level over competitors; however, they add value by offering a point

of difference (Sawhney, 2003). This is supported by customers perceiving the ticket prices as

expensive but are willing to pay due to the quality of the service experience (see Appendix A –

Customer Perceptions on Price).

Furthermore, the high price deters bargain-hunting consumers, meaning Palace Cinemas can operate

at balanced demand and supply at the level of optimum capacity during peak-periods (Chew et al.,

2012, p.270). However, during low-periods Palace Cinemas has excess capacity. This is combated by

offering cheaper prices on a low-demand day (Monday or Tuesday), and encouraging customers to

use the service at other times (de Roos & McKenzie, 2014). Palace Cinemas could further increase

demand by offering additional off-peak pricing. For example, discounting prices between 10am and

5pm on weekdays when demand is at its lowest (de Roos & McKenzie, 2014).

2.3 Physical and Electronic Distribution

According to Lovelock (1983), the nature of interaction between customer and organisation for Palace

Cinemas can be identified as a service in which customers go to a single site of the organisation.

Therefore, it is crucial to ensure the convenience of service locations for the customer and

operational schedules (Chew et al., 2012, p.122).

Palace Cinemas currently delivers its service through two avenues;

1) Through self-service channels via the Palace Cinemas website, and

2) Interpersonal channels where service encounters between cinema staff and

customers create moments of truth.

An analysis of Palace Cinemas’ current distribution strategy through physical and electronic offerings

has proven a convenience for customers. The physical distribution of service locations suggests

convenience to the consumer, with most cinemas located centrally and close to public transport with

many offering parking options (Brown, 1990; Palace Cinemas, n.d). Additionally, the electronic

distribution of information-based supplementary services and promotion flow through the Palace

Cinema website and social media provides ease of access and search.

However, with the rise of smartphone usage and mobile commerce, electronic distribution could be

improved through the implementation of a mobile ticketing app (Luo, Andrews, Fang & Phang, 2013).

A mobile app can provide consumers with convenient, anywhere anytime service and prompt delivery

to information-based supplementary services (Elsen, Hartung, Kampmann & Peters, 2011).

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2.4 Integrated Service Marketing Communication

The ever changing consumer behaviour landscape creates challenges for marketers in maintaining a

constant channel of communication and promotion between their customers. Therefore, in order

improve their marketing functionality business organisations use the marketing communication mix.

Marketing communications mix refers to the specific methods which are utilised by the company to

promote its products to its target audience. The mix includes five elements such as advertising,

personal selling, public relations, direct marketing and occasionally depending on the nature of the

business event sponsorship (Kokemuller, 2017).

When considering the key stakeholders of Palace Cinema, the organisation utilises direct marketing

and advertising as their main elements within the marketing communications mix. Direct marketing

includes the elements of sales promotions and personal selling however it is the interactive

communication with customers where the company’s message seeks to implore a response from

their target market (Kokemuller, 2017). Palace Cinema uses personal marketing through an e-ticket

system to maintain on demand interactive communication with their customers (see Appendix B –

Palace Cinema e-Ticket). The firm further continues its correspondence with the customers by

sending post - service questionnaire that upon completion rewards the individual with special offers

or limited time ticket deals. Additional advertisement material on the e-ticket can be found as

promotions for joining Palace Cinema’s premium club as well as special offers on alcoholic beverages.

2.5 Managing People

Services marketing theory suggests human resource (HR) management is achieved through the

service talent cycle by hiring, enabling and motivating the right people. This section of the report

targets hiring top talent which enables ensuing stages (Heskett, Sasser, & Schlesinger, 2015).

An analysis of Palace Cinemas suggests they operate in a cycle of mediocrity. Facebook is their

primary social media channel. However, customer questions and complaints are not managed.

Additionally, there is no webpage for HR to attract talent. (Appendix C – Facebook Platform:

Unmanaged Customer Enquiries and Complaints). Conversely, competitors such as Event and Hoyts

Cinemas display attributes of the cycle of success with staff endorsing career opportunities and a

vibrant company culture (Chew et al, 2012). According to (Hoyts, 2016) most cinema managers are

internally promoted. Palace Cinemas may offer similar benefits, but sufficient talent is unlikely to be

attracted if they are unaware of opportunities (Wirtz & Jerger, 2016). To address these issues Palace

Cinemas should promote their value propositions to potential employees in order to attract the right

people.

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2.6 Service Process

The Palace Cinema blueprint outlines touch points of each stage in the service process. Potential fail

points are identified, in these critical moments of truth, a person or thing is tested, and a decision

must be made resulting in the customer being lost or retained depending on how well the issue is

managed. This foresight enables the mitigation or reduction of dissatisfied customers by limiting

service failures, reducing the time taken to service customers, enhancing productivity which in turn

increases customer satisfaction (Chew et al, 2012).

Customer reviews of Palace Cinemas service experience are overall quite positive, with a star rating

between 3.5 - 4 of 5 stars. However, after analysing customer feedback, the critical fail points

identified are complaints of uncleanliness in cinemas and lavatory areas, undue customer waiting for

in-house ticket purchases and an inconsistency in service quality standards (see Appendix D –

Customer Service Reviews). In order to combat these issues, Palace Cinemas should consider a service

process redesign.

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2.7 Service Scape and Physical Evidence

The physical service environment plays an imperative role in shaping and enhancing the customer

service experience. It can conjure response behaviours; approach or avoid (Mehrabian-Russell

Stimulus Response Model), or evoke emotional responses; pleasure and arousal (The Russell Model of

Affect) (Lin & Worthley, 2012, p. 31). These behaviours and responses are developed upon in Bitner’s

comprehensive Servicescape Model. Encompassing both customers and employees, the model

holistically evaluates how environmental dimensions cause internal responses, social interaction and

an overall behaviour (Massiah & Rosenbaum, 2011, p. 471).

The table below shows how Palace Cinema’s uses Bitner’s Servicescape to attract consumers and

promote productivity in the workplace.

Table 1: Palace Cinema Servicescape Environmental

Dimension

Design Response/Behaviour

Ambient Conditions

Sounds Quiet music Is used as a social lubricant, to create an

atmosphere and provide background noise.

Approach

Lighting Low light

Accent lighting

Adds drama and brings about suspense to the

customer – approach

Could be potentially problematic with employees

as poor lighting conditions can cause people to

feel ‘sleepy’ (Borisuit, Linhart, Munch &

Scartezzini, 2015)

Scent Smell of popcorn The smell makes consumers feel hungry and in

turn makes them purchase food and beverage

items.

Spatial Layout and Functionality

Layout The ticketing, and food and

beverage are all located in the

one spot.

The layout and functionality of the service

environment allow for a logical flow through the

service encounter.

Signs, Symbols and Artifacts

Signage Minimal As Palace Cinemas wants to create a luxurious

environment for their customers, consumers find

the lack of signage appropriate, however if new

patrons were to attend, they would struggle to

understand how the beginning of the service

encounter works.

Artifacts Minimal posters and billboards

of upcoming and newly released

movies.

This is appropriate for the market segment as

consumers do not require the amount of hype for

their movie viewing compared to a cinema chain

that encourages children to attend.

Style/Decor Elegant and sophisticated with

soft, plush furnishings

throughout.

Brings about a sense of luxury, which captures and

draws in the market segment.

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3.0 Recommendations

Adding a Market Segment

In order to remain competitive and grow within the entertainment industry sector, Palace Cinemas

could add an additional market segment to attract additional customers from a younger

demographic, increasing their market share and enabling the brand to remain relevant with emerging

generations. This can be achieved by implementing appropriate promotional tactics and strategies

which are popular amongst this audience of moviegoers. Increased targeted advertising through

social media channels such as Facebook and Instagram is recommended. A popular influencer can

endorse the brand through these image and video centric platforms which are on-trend with

Generation Z and similarly showcases cinema offerings (Southgate & Millward, 2017).

Improve Service Quality by attracting the right people

To improve service quality through attracting top talent, Palace Cinemas can incorporate a dedicated

webpage for HR within their website. This will enhance the value proposition to potential employees

and improve the company's image in the community to expand the talent pool (Ranjan, Sugathan &

Rossmann, 2014). High service quality from frontline employees increases market share as people

represent the product. Recruited talent can then be enabled and motivated to excel which is

considered the hardest resource for competitors to duplicate. Moreover, research indicates hiring the

right people reduces role stress and emotional labour improving service quality, employee and

customer satisfaction. These changes will help Palace Cinema’s move from a cycle of mediocrity to a

cycle of success within the service talent cycle (Hur, Moon, & Jung, 2015; Gazzoli, & Kim, 2013).

Service Redesign

Palace Cinemas can improve service processes by performing a service redesign. Activities included

could involve:

Common areas being frequently monitored and cleaned in low demand periods.

Displaying signage apologising for any wait times explaining Palace Cinemas commitment to

maintaining cleanliness for the comfort of all patrons to mitigate complaints.

Offering a 10% discount incentive for movie tickets that are purchased online, reducing the

amount of tickets purchased in-house and reducing customer wait periods, resulting in the

expansion of their customer database for email marketing campaigns.

Furthermore, attracting additional top talent by growing internal HR practices will facilitate improved

service quality and service consistency (Wirtz, 2016).

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4.0 Reference List

Australian Bureau of Statistics. (2015). 4114.0 - Attendance at Selected Cultural Venues and Events,

Australia, 2009-10. Retrieved from

http://www.abs.gov.au/ausstats/abs@.nsf/Previousproducts/4114.0Main%20Features12009-

10?opendocument&tabname=Summary&prodno=4114.0&issue=2009-10&num=&view=

Borisuit, A., Linhart, F., Munch, M., & Scartezzini, J. (2015). Effects of Realistic Office Daylighting and

Electric Lighting Conditions on Visual Comfort, Alertness and Mood. Lighting Research and

Technology, 47(2), 192 – 209. https://doi-

org.ezp01.library.qut.edu.au/10.1177/1477153514531518

Brown, L. G. (1990). Convenience in services marketing. Journal of Services Marketing, 4(1), 53-59.

https://doi.org/10.1108/EUM0000000002505

Chew, P., Lovelock, C., & Wirtz, J. (2012). Essentials of Services Marketing (2nd ed.). Singapore:

Pearson Education South Asia Pte Ltd.

De Roos, N., & McKenzie, J. (2014). Cheap Tuesdays and the demand for cinema. International Journal

of Industrial Organization, 33, 93-109. https://doi.org/10.1016/j.ijindorg.2014.02.004

Elsen, I., Hartung, F., Kampmann, M., & Peters, L. (2011). Streaming technology in mobile

communication systems. Computer, 34(9), 46-52. DOI: 10.1109/2.947089

Gazzoli, G., Hancer, M., & Kim, B. C. (2013). Explaining why employee-customer

orientation influences customers’ perceptions of the service encounter. Journal of

Service Management, 24, 382–400. https://doi.org/10.1108/JOSM-09-2012-0192

Heskett, J. L., Sasser, W. E., Schlesinger, L. A., & Books24x7, I. (2015). What great service leaders know

and do: Creating breakthroughs in service firms (First ed.). Oakland, CA: Berrett-Koehler Publishers,

Inc.

Hoyts (2017), Working at Hoyts, Retrieved October 14,

from http://www.hoyts.com.au/cinemas/careers/cinema_applications.aspx

Hur, W. M., Moon, T. W., & Jung, Y. S. (2015). Customer response to employee emotional labor: The

structural relationship between emotional labor, job satisfaction, and customer satisfaction.

Journal of Services Marketing, 29, 71–80. https://doi.org/10.1108/JSM-07-2013-0161

Keller, K. (2001). Mastering the Marketing Communications Mix: Micro and Macro Perspectives on

Integrated Marketing Communication Programs. Journal Of Marketing Management, 17(7-8), 819-

847. http://dx.doi.org.ezp01.library.qut.edu.au/10.1362/026725701323366836

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Kokemuller, N. (2017). What Is a Marketing Communication Mix?. (2017). Smallbusiness.chron.com.

Retrieved 18 October 2017, from http://smallbusiness.chron.com/marketing-communication-mix-

63541.html

Lin, I., & Worthley, R. (2012). Servicescape Moderation on Personality Traits, Emotions, Satisfaction,

and Behaviours. International Journal of Hospitality Management, 31(1), 31-42.

https://doi.org/10.1016/j.ijhm.2011.05.009

Lovelock, C. (1983). Classifying Services to Gain Strategic Marketing Insights. Journal of Marketing,

47(3), 9-20. DOI: 10.2307/1251193

Luo, X., Andrews, M., Fang, Z., & Phang, C. W. (2013). Mobile targeting. Management Science, 60(7),

1738-1756. Retrieved, October 11 from https://doi-

org.ezp01.library.qut.edu.au/10.1287/mnsc.2013.1836 Massiah, C., & Rosenbaun, M. (2011). An

Expanded Servicescape Perspective. Journal of Service Management, 22(4), 471-490.

https://doi.org/10.1108/09564231111155088

Palace Cinemas. (n.d.) Cinemas. Retrieved October 13, 2017, from

https://www.palacecinemas.com.au/cinemas/

Ranjan, K. R., Sugathan, P., & Rossmann, A. (2014). A narrative review and meta-analysis of service

interaction quality: New research directions and implications. Journal of Services Marketing, 29, 3–

14. https://doi.org/10.1108/JSM-01-2014-0029

Sawhney, M. (2003). Fundamentals of customer value. CIO Magazine, 4, 107-10. Retrieved from

http://www.mthink.com/legacy/www.crmproject.com/content/pdf/CRM4_wp_sawhney.pdf

Southgate, D, and Millward, K. (2017). WARC. The Emergence of Generation Z and its Impact in

Advertising: Long-Term Implications for Media Planning and Creative Development. Journal of

Advertising Research, Vol. 57, No. 2, 2017.

Wirtz, J. (2016). Services marketing: People, technology, strategy (Eighth ed.). New Jersey: World

Scientific.

Wirtz, J., & Jerger, C. (2016). Managing service employees: Literature review, expert opinions, and

research directions. The Service Industries Journal, 36(15-16), 757-788.

http://dx.doi.org/10.1080/02642069.2016.1278432

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5.0 Appendices

Appendix A – Customer Perceptions on Price

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Appendix B – Palace Cinema e-Ticket

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Appendix C – Facebook Platform: Unmanaged Customer Enquiries and Complaints

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Appendix D – Customer Service Reviews

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