Services Marketing2821 PDF

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SM
Services Marketing
Contact: +923006641921 Usman Waheed

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SM
If You want these slides then send me at

E-mail at ch_paki@hotmail.com or call me at
+923006641921

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SM
Chapter 1
INTRODUCTION
TO
SERVICES

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Objectives for Chapter 1:
SM
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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SM 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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SM 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
SM
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
SM 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
Figure 1-2 9
SM Percent of
U.S. Labor Force by Industry
80
70
Percent of GDP
60
50
40
30
20
10
0  Services
1929 1948 1969 1977 1984 1996  Manufacturing
 Mining & Agriculture
Yea
r
Source: Survey of Current Business, April 1998, Table B.8, July 1988, Table 6.6B, and
July 1992, Table 6.4C; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S.
Economy,” Scientific American, 244,3 (1981): 31-39.
Figure 1-3 10
SM Percent of U.S. Gross Domestic

Product by Industry
80
Percent of GDP
70
60
50
40
30
20
10
0
1948 1959 1967 1977 1987 1996  Services
 Manufacturing
Year  Mining & Agriculture
Source: Survey of Current Business, August 1996, Table 11, April 1998, Table
B.3; Eli Ginzberg and George J. Vojta, “The Service Sector of the U.S.
Economy,” Scientific American, 244,3 (1981): 31-39.
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Differences Between
SM
Goods and Services
Intangibility Heterogeneity
Simultaneous
Production Perishability
and
Consumption

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SM 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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SM 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
SM
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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SM Implications of Perishability
 It is difficult to synchronize supply and

demand with services
 Services cannot be returned or resold

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SM Table 1-2
Services are Different
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 Simultaneous Customers participate in and affect the transaction.
separate from production and Customers affect each other.
consumption consumption 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.

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Figure 1-5
SM The Services Marketing Triangle
Company
(Management)
Internal External
Marketing Marketing
“enabling the “setting the
promise” promise”
Employees Interactive Marketing Customers

“delivering the promise”
Source: Adapted from Mary Jo Bitner, Christian Gronroos, and Philip Kotler

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Ways to Use the
SM
Services Marketing Triangle
Overall Strategic Specific Service
Assessment Implementation
• How is the service • What is being promoted
organization doing and by whom?
on all three sides of • How will it be delivered
the triangle? and by whom?
• Where are the • Are the supporting
weaknesses? systems in place to
deliver the promised
• What are the service?
strengths?
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Figure 1-6
SM The Services Triangle

and Technology
Company
Technology
Providers Customers
Source: Adapted from A. Parasuraman

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SM 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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SM 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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SM Expanded Mix for Services --

the 7 Ps
• Product
• Price
• Place
• Promotion
• People
• Process
• Physical Evidence
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Table 1-3
SM Expanded Marketing Mix for
Services
PRODUCT PLACE PROMOTION PRICE
Physical good Channel type Promotion Flexibility
features blend
Quality level Exposure Salespeople Price level

Accessories Intermediaries Advertising Terms
Packaging Outlet location Sales Differentiation
promotion
Warranties Transportation Publicity Allowances
Product lines Storage
Branding

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Table 1-3 (Continued)
SM Expanded Marketing Mix for
Services
PEOPLE PHYSICAL PROCESS
EVIDENCE
Employees Facility design Flow of activities
Customers Equipment Number of steps
Communicating Signage Level of customer

culture and values involvement
Employee research Employee dress
Other tangibles

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SM Ways to Use the 7 Ps
Overall Strategic Specific Service

Assessment Implementation
• How effective is a firm’s • Who is the customer?
services marketing mix? • What is the service?
• Is the mix well-aligned • How effectively does the
services marketing mix for a
with overall vision and
service communicate its
strategy? benefits and quality?
• What are the strengths and • What changes/improvements
weaknesses in terms of the are needed?
7 Ps?

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SM
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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SM
Part 1
FOCUS ON THE CUSTOMER

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SM Gaps Model of Service Quality
CUSTOMER Expected
Service
Customer
Gap
Perceived
Service
External
COMPANY Service Delivery Communications
GAP 4 to Customers
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
SM
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:
Part 1 Opener
• not matching performance to promises
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SM The Customer Gap
Expected
Service
GAP
Perceived
Service
Part 1 Opener
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SM
Chapter 2
CONSUMER BEHAVIOR
IN SERVICES
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SM 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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SM 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
SM Continuum of Evaluation for
Different Types of Products
Most Most
Goods Services
Easy to evaluate
Difficult to evaluate
Clothing
Jewelry
Furniture
Houses
Automobiles
Restaurant meals
Vacations
Haircuts
Child care
Television repair
Legal services
Root canals
Auto repair
Medical diagnosis
{
{
High in search
qualities
High in experience High in credence
qualities qualities
{
Figure 2-2 35
Categories in Consumer
SM Decision-Making and Evaluation of
Services
Information Evaluation of
Search Alternatives
 Use of personal sources  Evoked set
 Perceived risk  Emotion and mood
Purchase and Post-Purchase

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

Consumption Evaluation
 Service provision as drama  Attribution of dissatisfaction
 Service roles and scripts  Innovation diffusion
 Compatibility of customers  Brand loyalty
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SM 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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SM 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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SM 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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SM 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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SM 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:
SM Differences in the Service
Experience in the U.S. and Japan
 Authenticity
 Caring
 Control Courtesy
 Formality
 Friendliness
 Personalization
 Promptness
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SM
Chapter 3
CUSTOMER
EXPECTATIONS OF
SERVICES

44
SM 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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SM 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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Figure 3-1
SM Dual Customer
Expectation Levels
(Two levels of expectations)
Desired Service
Zone of
Tolerance
Adequate Service

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

Figure 3-3 48
SM Zones of Tolerance VARY for

Different Service Dimensions
Desired Service
Level
of
Zone of Desired
Expectation Desired Service
Tolerance Service
Adequate Service
Zone
of
Tolerance
Adequate
Adequate Service
Service
Most Important Factors Least Important Factors

Source: Berry, Parasuraman, and Zeithaml (1993)
Figure 3-4 49
Zones of Tolerance VARY for

SM
First-Time and Recovery Service
First-Time Service
Outcome
Process
Recovery Service
Outcome
Process
LOW HIGH
Expectations
Source: Parasuraman, Berry and Zeithaml (1991)
Figure 3-5 50
SM Factors that Influence

Desired Service
Enduring Service
Intensifiers
Desired
Service
Personal Needs
Zone
of
Tolerance
Adequate
Service

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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

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Figure 3-6
SM Factors that Influence

Adequate Service
Transitory Service
Intensifiers
Desired
Perceived Service Service
Alternatives
Zone
of
Tolerance
Self-Perceived
Service Role Adequate
Service
Situational
Factors
53
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

Figure 3-7 54
Factors that Influence

SM
Desired and Predicted Service
Explicit Service
Promises
Implicit Service
Promises
Desired Word-of-Mouth
Service
Zone
Past Experience
of
Tolerance
Adequate Predicted
Service Service
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SM
Chapter 4
CUSTOMER
PERCEPTIONS OF
SERVICE
56
SM 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
Figure 4-1 57
Customer Perceptions of
SM
Service Quality and
Customer Satisfaction
Reliability Situational
Factors
Responsiveness Service
Quality
Assurance
Customer
Empathy Satisfaction
Product
Quality
Tangibles
Personal
Price Factors
58
Factors Influencing
SM
• Product/service quality
• Product/service attributes or features
• Consumer Emotions
• Attributions for product/service success or
failure
• Equity or fairness evaluations
59
Outcomes of
SM
• Increased customer retention

• Positive word-of-mouth communications
• Increased revenues
Figure 4-3 60
Relationship between Customer

SM
Satisfaction and Loyalty in
Competitive Industries
100%
Loyalty (retention)
80%
60%
40%
20%
0%
Very Dissatisfied Neither Satisfied Very
dissatisfied satisfied nor satisfied
dissatisfied
Satisfaction measure
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.
61
SM 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.
62
SM The Five Dimensions of

Service Quality
Reliability Ability to perform the promised

service dependably and accurately.
Knowledge and courtesy of
Assurance employees and their ability to
convey trust and confidence.
Tangibles Physical facilities, equipment, and
appearance of personnel.
Empathy Caring, individualized attention the
firm provides its customers.
Responsiveness Willingness to help customers and
provide prompt service.
63
SM 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:
64
SERVQUAL Attributes
SM ASSURANCE
■ Employees who instill confidence in
customers
■ Making customers feel safe in their
transactions
RELIABILITY ■ Employees who are consistently courteous
■ Employees who have the knowledge to answe
■ Providing service as promised customer questions
■ Dependability in handling customers’
service problems EMPATHY
■ Performing services right the first time ■ Giving customers individual attention
■ Providing services at the promised time ■ Employees who deal with customers in a
■ Maintaining error-free records caring fashion
■ Having the customer’s best interest at heart
RESPONSIVENESS ■ Employees who understand the needs of
their customers
■ Keeping customers informed as to ■ Convenient business hours
when services will be performed TANGIBLES
■ Prompt service to customers ■ Modern equipment
■ Willingness to help customers ■ Visually appealing facilities
■ Readiness to respond to customers’ ■ Employees who have a neat,
requests professional appearance
■ Visually appealing materials
associated with the service
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SM 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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Figure 4-4
SM A Service Encounter
Cascade for a Hotel Visit
Check-In
Bellboy Takes to Room
Restaurant Meal
Request Wake-Up Call
Checkout
Figure 4-5 67
A Service Encounter
SM
Cascade for an Industrial
Purchase
Sales Call
Delivery and Installation
Servicing
Ordering Supplies
Billing
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Critical Service Encounters
SM
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
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Sample Questions for Critical
SM
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)?
70
SM Common Themes in Critical

Service Encounters Research
Recovery: Adaptability:
Employee Response Employee Response
to Service Delivery to Customer Needs
System Failure and Requests
Coping: Spontaneity:
Employee Response Unprompted and
to Problem Customers Unsolicited Employee
Actions and Attitudes
71
SM Recovery
DO DON’T
• Acknowledge problem • Ignore customer
• Explain causes • Blame customer
• Apologize • Leave customer to
• Compensate/upgrade fend for him/herself
• Lay out options • Downgrade
• Take responsibility • Act as if nothing is
wrong
72
SM Adaptability
DO DON’T
• Recognize the • Promise, then fail to
seriousness of the need follow through
• Acknowledge • Ignore
• Anticipate • Show unwillingness to
• Attempt to try
accommodate • Embarrass the customer
• Explain rules/policies • Laugh at the customer
• Take responsibility • Avoid responsibility
• Exert effort to
accommodate
73
SM Spontaneity
DO DON’T
• Take time • Exhibit impatience
• Be attentive • Ignore
• Anticipate needs
• Yell/laugh/swear
• Listen
• Provide information
• Steal from or cheat a
(even if not asked) customer
• Treat customers fairly • Discriminate
• Show empathy • Treat impersonally
• Acknowledge by name
74
SM Coping
DO DON’T
• Listen • Take customer’s
• Try to accommodate dissatisfaction
• Explain personally
• • Let customer’s
Let go of the customer
dissatisfaction affect
others
75
Figure 4-6
SM Evidence of Service from the
Customer’s Point of View
 Contact employees
 Customer him/herself
 Operational flow of  Other customers
activities
People
 Steps in process
 Flexibility vs.
standard
 Technology vs. Physical  Tangible
human Process
Evidence communication
 Servicescape
 Guarantees
 Technology
76
SM
Part 2
LISTENING TO
CUSTOMER
REQUIREMENTS
77
SM Provider GAP 1
CUSTOMER
Expected
Service
GAP 1
Company
COMPANY Perceptions of
Consumer
Expectations
Part 2 Opener
78
SM
Chapter 5
UNDERSTANDING
CUSTOMER
EXPECTATIONS AND
PERCEPTIONS THROUGH
MARKETING RESEARCH
79
SM 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
80
SM 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
81
Figure 5-1
SM Criteria for An Effective
Services Research Program
Includes
d es Quantitative
l u ve
Inc litati h Research Includes
a c
Qu esear Perceptions
R and
Expectations
Occurs of
Customers
with
Appropriate Research Includes
Frequency Measures
Objectives of
Loyalty or
Behavioral
Measures Intentions
Priorities
or C ost
Importance n ces of
la e
Includes Ba Valu ion
Statistical and rmat
o
Validity Inf
When Necessary
82
SM Portfolio of Services Research

Research Objective Type of Research
Identify dissatisfied customers to attempt recovery;
identify most common categories of service failure Customer Complaint
for remedial action
Solicitation
Assess company’s service performance compared to
competitors; identify service-improvement priorities; track
service improvement over time “Relationship” Surveys
Obtain customer feedback while service experience is still
fresh; act on feedback quickly if negative patterns develop
Post-Transaction Surveys
Use as input for quantitative surveys; provide a
forum for customers to suggest service-improvement
ideas Customer Focus Groups
Measure individual employee service behaviors for use in
coaching, training, performance evaluation, recognition and
rewards; identify systemic strengths and weaknesses in “Mystery Shopping” of
service
Service Providers
Measure internal service quality; identify employee-
perceived obstacles to improve service; track
employee morale and attitudes Employee Surveys
Determine the reasons why customers defect
To forecast future expectations of customers Lost Customer Research

To develop and test new service ideas
Future Expectations Research
83
Stages in the Research
SM
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
84
Figure 5-5
SM Service Quality Perceptions

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

85
Service Quality Perceptions
SM Relative to Zones of Tolerance by
Dimensions
10
8
O O O O
O
6
0
Reliability Responsiveness Assurance Empathy Tangibles
Computer Zone of Tolerance O S.Q. Perception

Manufacturer
86
Figure 5-6
SM 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
87
SM
Chapter 6
BUILDING
CUSTOMER
RELATIONSHIPS
88
SM 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”
89
SM 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
90
SM 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??
91
SM
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
92
SM 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?
93
Benefits to the Organization
SM
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
94
SM 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
95
“The Customer Isn’t Always
SM
Right”
• Not all customers are good relationship

customers:
– wrong segment
– not profitable in the long term
– difficult customers
96
Strategies for Building
SM
Relationships
• Foundations:
– Excellent Quality/Value
– Careful Segmentation
• Bonding Strategies:
– Financial Bonds
– Social & Psychological Bonds
– Structural Bonds
– Customization Bonds
• Relationship Strategies Wheel
97
Figure 6-1
SM Customer Goals of
Relationship Marketing
Enhancing
Retaining
Satisfying
Getting
Figure 6-3 98
SM Underlying Logic of Customer

Retention Benefits to the
Organization
Customer Retention & Quality

Increased Profits Service
Employee Loyalty
99
Figure 6-5
SM Steps in Market Segmentation
and
Targeting for Services
STEP 1: STEP 2: STEP 3: STEP4: STEP 5:

Identify Develop Develop Select the Ensure that
Bases for Profiles of Measures Target Segments
Segmenting Resulting of Segment Segments Are
the Market Segments Attractive- Compatible
ness
Figure 6-6 100
SM Levels of Retention Strategies

Stable
Volume and Pricing
Frequency Bundling and
Rewards Cross Selling
Integrated I. Financial Continuous

Information Bonds Relationships
Systems
IV.
Excellent
Quality II.
Joint Structural Personal
Investments and Social Relationships
Bonds
Value Bonds
Shared Social Bonds

Processes III. Customization Among
and Bonds Customers
Equipment
Anticipation/ Customer
Innovation Intimacy
Mass
Customization
101
SM
Chapter 7
SERVICE RECOVERY
102
SM 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
103
Figure 7-1
SM 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%
Complaints Resolved Quickly

82%
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 7-3 104
SM Customer Response
Following Service Failure
Service Failure
Take Action Do Nothing
Switch Providers Stay with Provider
Complain to Complain to Complain to

Provider Family & Friends Third Party
Switch Providers Stay with Provider

105
Figure 7-5
SM Service Recovery Strategies

We
En lcom
e co
vic ura e an
r ge d
Se Co
e mp
th lai
e
Saf nts
il
Fa
Act Quickly
Service
Learn from
Lost Custom
Recovery
Strategies
ers
y
airl
F
Le s
er
Re arn f om
co rom t
ve
ry Cus
Ex t
pe r ea
rie T
nc
es
Pricing
106
•
•
High Price
Price Increases
Figure 7-6
SM Causes Behind Service

• Unfair Pricing
• Deceptive Pricing
Inconvenience
• Location/Hours
• Wait for Appointment
• Wait for Service
Switching
Core Service Failure
• Service Mistakes
• Billing Errors
• Service Catastrophe
Service Encounter Failures

Service
• Uncaring
• Impolite
• Unresponsive
• Unknowledgeable Switching
Response to Service Failure
• Negative Response
Behavior
• No Response
• Reluctant Response
Competition
• Found Better Service
Ethical Problems
• Cheat
• Hard Sell
• Unsafe
• Conflict of Interest
Involuntary Switching
• Customer Moved Source: Sue Keaveney
• Provider Closed
107
SM 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?)
108
Table 7-7
SM Characteristics of an Effective
Service Guarantee
Unconditional
 The guarantee should make its promise unconditionally -
no strings attached.
Meaningful
 It should guarantee elements of the service that are
important to the customer.
 The payout should cover fully the customer's
dissatisfaction.
Easy to Understand and Communicate
 For customers - they need to understand what to expect.
 For employees - they need to understand what to do.
Easy to Invoke and Collect
 There should not be a lot of hoops or red tape in the way
of accessing or collecting on the guarantee.
Source: Christopher W.L. Hart, “The Power of Unconditional Guarantees,” Harvard Business Review, July-August, 1988, pp. 54-62.
109
Why a Good Guarantee
SM
Works
• forces company to focus on customers

• sets clear standards
• generates feedback
• forces company to understand why it failed
• builds “marketing muscle”
110
• 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
111
• 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”
112
SM
Part 3
ALIGNING STRATEGY,
SERVICE DESIGN
AND STANDARDS
113
SM
Provider GAP 2
CUSTOMER
COMPANY Customer-Driven
Service Designs and
Standards
GAP 2
Company
Perceptions of
Consumer
Expectations
Part 3 Opener
114
SM
Chapter 8
SERVICE DEVELOPMENT
AND DESIGN
Objectives for Chapter 8: 115
SM 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 8-1 116
SM Risks of Relying on Words

Alone to
Describe Services
 Oversimplification
 Incompleteness
 Subjectivity
 Biased Interpretation
Figure 8-2 117
New Service Development Process
SM Business Strategy Development or Review
New Service Strategy Development
Front End
Idea Generation
Planning
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

Market Testing
Implementation
Test service and other marketing-mix elements
Commercialization
Postintroduction Evaluation
Source: Booz-Allen & Hamilton, 1982; Bowers, 1985; Cooper, 1993; Khurana & Rosenthal 1997.
Figure 8-3 118
SM New Service Strategy Matrix

for Identifying Growth
Opportunities
Markets
Offerings Current Customers New Customers
Existing
SHARE BUILDING MARKET
Services
DEVELOPMENT
New
Services SERVICE DIVERSIFICATION
DEVELOPMENT
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 Points of Contact

Mapping
Evidence
120
SM 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
121
Express Mail Delivery Service
SM Truck
Packaging
Truck
Packaging
Forms Forms
EVIDENCE
CONTACT PERSON CUSTOME PHYSICAL
Hand-held Hand-held
Computer Computer
Uniform Uniform
Customer Customer Receive

Calls Gives Package
Package
(Back Stage) (On Stage) R
Driver
Picks Deliver
Up Pkg. Package
Customer
Service
Order
Airport Fly to
Dispatch Unload Load
Driver
Receives Sort Fly to
& Loads Center & On
Destinatio Sort Truck
SUPPORT
Load on
PROCESS
Airplane
n
Sort
Packages
122
SM Overnight Hotel Stay

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

System Food System
123
SM Figure 8-8
Building a Service Blueprint
Step 1 Step 2 Step 3 Step 4 Step 5 Step 6
Identify the Identify the Map the Map contact Link customer Add
process to customer or process from employee and contact evidence of
be blue- customer the actions, person service at
printed. segment. customer’s onstage and activities to each
point of view. back-stage. needed customer
support action step.
functions.
124
Application of Service
SM
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
125
Blueprints Can Be Used By:
SM
• Service Marketers • Human Resources

– creating realistic customer – empowering the human
expectations element
• service system design • job descriptions
• promotion • selection criteria
• appraisal systems
• Operations Management
– rendering the service as
• System Technology
promised
• managing fail points – providing necessary tools:
• training systems • system specifications
• quality control • personal preference databases
126
SM
Chapter 9
CUSTOMER-DEFINED
SERVICE STANDARDS
Objectives for Chapter 9: 127
SM 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
Figure 9-1 128
AT&T’s Process Map for Measurements
SM
Business Process Customer Need Internal Metric
Reliability (40%) % Repair Call
30% Product
Easy To Use (20%) % Calls for Help
Features / Functions (40%) Functional Performance Test
Knowledge (30%) Supervisor Observations

30% Sales Responsive (25%) % Proposal Made on Time
Follow-Up (10%) % Follow Up Made
Total
Delivery Interval Meets Needs (30%) Average Order Interval
Quality 10% Installation
Does Not Break (25%) % Repair Reports
Installed When Promised (10%) % Installed On Due Date
No Repeat Trouble (30%) % Repeat Reports

15% Repair Fixed Fast (25%) Average Speed Of Repair
Kept Informed (10%) % Customers Informed
Accuracy, No Surprise (45%) % Billing Inquiries

15% Billing Resolve On First Call (35%) % Resolved First Call
Easy To Understand (10%) % Billing Inquiries
Source: AT&T General Business Systems

129
Exercise for Creating
SM 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
130
Customer-Driven Standards and
SM Measurements Exercise
Service Encounter Customer Requirements Measurements
Service
Quality
Figure 9-2 131
SM Getting to Actionable Steps

Requirements: Diagnosticity:
Satisfaction Value Abstract Low

Relationship General Concepts
Solution Provider
Dig Reliability Empathy

Deeper Assurance Tangibles Dimensions
Responsiveness Price
Dig Delivers on Time

Deeper Returns Calls Quickly Attributes
Knows My Industry
Dig Delivers by Weds 11/4 Behaviors

Deeper Returns Calls in 2 Hrs
Knows Strengths of and Actions
My Competitors
Concrete High
Figure 9-3 132
Process for Setting
SM 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 Measure by
Audits or Hard 5. Develop Feedback Soft Transaction-
Operating Data Mechanisms Based Surveys
6. Establish Measures and Target Levels
7. Track Measures Against Standards
8. Update Target Levels and Measures

133
SM Importance/Performance Matrix
HIGH 10.0
Improve Maintain
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)
Tells me cost ahead of time (9.06, 8.46)
9.0   
Provides equipment that operates as vendor said it would (9.24, 8.14)
Gets back to me when
Takes responsibility for their mistakes (9.18, 8.01)
promised (9.04, 7.63)
Delivers or installs on
Importance promised date (9.02, 7.84)
8.0
LOW 7.0
HIGH
8.0 9.0 10.0
Performance
134
Figure 9-5
SM Linkage between Soft Measures and

Hard Measures for Speed of
Complaint Handling
S
A 10
T 9
I 8 Large Customers
S 7
Small Customers
F 6
A 5
C 4
T 3
I 2
O 1 2 4 6 8 12 16 20 24
N 0 WORKING HOURS
Figure 9-6 135
Aligning Company
S M Processes with Customer Expectations
Customer Expectations
48 Hours
Customer
Process
Blueprint Report Lost Receive New
Card Card
Company
Process Company Sequential Processes
Blueprint
A B C D E F G H
Lost Card New Card
Reported 40 Days Mailed
136
SM
Chapter 10
PHYSICAL EVIDENCE
AND THE SERVICESCAPE
137
SM 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
138
Table 10-1
SM Elements of Physical
Evidence
Servicescape Other tangibles
Facility exterior Business cards

Exterior design Stationery
Signage Billing statements
Parking Reports
Landscape Employee dress
Surrounding environment Uniforms
Brochures
Facility interior Internet/Web pages
Interior design
Equipment
Signage
Layout
Air quality/temperature
Table 10-2 139
Examples of Physical Evidence from the
SM Service
Customer’s Point of View
Physical evidence
Servicescape Other tangibles
Insurance Not applicable Policy itself
Billing statements
Periodic updates
Company brochure
Letters/cards
Hospital Building exterior Uniforms
Parking Reports/stationery
Signs Billing statements
Waiting areas
Admissions office
Patient care room
Medical equipment
Recovery room
Airline Airline gate area Tickets
Airplane exterior Food
Airplane interior (décor, seats, air Uniforms
quality)
Express mail Not applicable Packaging
Trucks
Uniforms
Computers
Sporting Parking, Seating, Restrooms Signs
event Stadium exterior Tickets
Ticketing area, Concession Areas Program
Entrance, Playiing Field Uniforms
Table 10-3 140
Typology of Service Organizations
SM Based on Variations in Form
and Use of the Servicescape
Complexity of the servicescape evidence
Servicescape Elaborate Lean
usage
Self-service Golf Land ATM
(customer only) Surf 'n' Splash Ticketron
Post office kiosk
Internet services
Express mail drop-off
Interpersonal Hotel Dry cleaner
services Restaurants Hot dog stand
(both customer and Health clinic Hair salon
employeee) Hospital
Bank
Airline
School
Remote service Telephone company Telephone mail-order desk
(employee only) Insurance company Automated voice-messaging-
Utility based services
Many professional services
Figure 10-3 141
A Framework for Understanding
SM Environment-user Relationships
in Service Organizations
PHYSICAL HOLISTIC INTERNAL BEHAVIOR
ENVIRONMENTAL ENVIRONMENT RESPONSES
DIMENSIONS Cognitive
Emotional
Physiological
Individual
Behaviors
Employee
Responses
Ambient Social
Conditions Interactions
Space/Function Perceived between and
Servicescape among
customer and
Signs, Symbols, employees
and Artifacts
Customer
Responses
Individual
Behaviors
Cognitive
Emotional
Source: Adapted from Mary Jo Bitner, “Servicescapes.”
Physiological
142
SM
Part 4
DELIVERING AND
PERFORMING SERVICE
143
SM Provider GAP 3
CUSTOMER
Service Delivery
COMPANY
GAP 3
Customer-Driven
Service Designs and
Standards
Part 4 Opener
144
SM
Chapter 11
EMPLOYEES’ ROLES IN
SERVICE DELIVERY
145
SM 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
146
SM 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
147
SM Service Employees
• Who are they?

– “boundary spanners”
• What are these jobs like?
– emotional labor
– many sources of potential conflict
• person/role
• organization/client
• interclient
• quality/productivity
Figure 11-3 148
Boundary Spanners Interact
SM with Both Internal
and External Constituents
External Environment
Internal Environment
149
Figure 11-4
SM Sources of Conflict for
Boundary-Spanning Workers
• Person vs. Role
• Organization vs. Client
• Client vs. Client
• Quality vs. Productivity

Figure 11-5 150
Human Resource Strategies for Closing GAP 3
SM
Hire for
Service
r
fo Competencies B
Pr e th
e
t t
pe es and Service Em efer e
m B e pl red
Co the opl Inclination oy
Pe er
Se d Str nd
Pr rvic ong
Te nte kills
Tr nica tive
a
ch rac
Hire the
ain l a
I S
wa re
ide e
rs
Re easu
fo nd
Right People
r
r
ov
M
Develop
Customer-
Employees
Empower
Employees
Customers
Retain the People to

oriented
Treat
Deliver
Best
as
Service Service
People Delivery Quality
Em th any’
wo e
rk
Inc ee
am ot
Provide
plo e
Te rom
Co Visio
lud s in
y
Needed Support
mp n
P
e
De Systems
Se velo
s
re
ori rvice p a su al
In ent - Provide Me tern e
Pr tern ed In rvic y
oc Supportive Se alit
es al
se
s Technology Qu
and
Equipment
151
SM Empowerment
• Benefits: • Drawbacks:
– quicker responses – greater investments in
– employees feel more selection and training
responsible – higher labor costs
– employees tend to interact – slower and/or inconsistent
with warmth/enthusiasm delivery
– empowered employees are a – may violate customer
great source of ideas perceptions of fair play
– positive word-of-mouth from – “giving away the store”
customers (making bad decisions)
152
SM 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.”
153
SM
Chapter 12
CUSTOMERS’ ROLES IN
SERVICE DELIVERY
154
SM 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
155
Importance of Other
SM 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
156
SM 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 12-2 157
SM Customer Roles in Service

Delivery
Productive Resources
Contributors to
Quality and
Satisfaction
Competitors
158
SM 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?
159
Customers as Contributors to
SM 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
160
SM 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
161
Technology Spotlight:
SM 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 12-3 162
SM Strategies for Enhancing

Customer Participation
Effective
Define Customer
Customer Recruit, Educate,
Participation and Reward
Jobs
Customers
Manage the
Customer
Mix
163
Strategies for Enhancing
SM
Customer Participation
1. Define customers’ jobs

- helping himself
- helping others
- promoting the company
2. Individual differences: not everyone wants

to participate
164
Strategies for Recruiting,
SM 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

165
SM
Chapter 14
MANAGING DEMAND AND

CAPACITY
166
SM 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
167
Understanding Capacity
SM Constraints and Demand
Patterns
Capacity Constraints Demand Patterns
• Time, labor, • Charting demand

equipment and patterns
facilities • Predictable cycles
• Optimal versus • Random demand
maximal use of fluctuations
capacity • Demand patterns by
market segment
168
Figure 14-3
SM Strategies for Shifting Demand

to Match Capacity
Demand Too High Shift Demand Demand Too Low

• Use signage to communicate • Use sales and advertising to
busy days and times increase business from current
• market segments
Offer incentives to customers
for usage during non-peak • Modify the service offering to
times appeal to new market segments
• Take care of loyal or regular • Offer discounts or price
customers first reductions
• Advertise peak usage times and • Modify hours of operation
benefits of non-peak use • Bring the service to the
• Charge full price for the customer
service--no discounts
169
Figure 14-4
SM Strategies for Flexing Capacity

to Match Demand
Demand Too High Flex Capacity Demand Too Low

• Stretch time, labor, facilities
and equipment
• Perform maintenance
renovations
• Cross-train employees
• Schedule vacations
• Hire part-time employees
• Schedule employee training
• Request overtime work from
employees
• Lay off employees
• Rent or share facilities

• Rent or share equipment
• Subcontract or outsource
activities
Table 14-1 170
SM What is the Nature of Demand

Relative to Supply?
Extent of demand fluctuations over time
Extent to which
supply is Wide Narrow
constrained
Peak demand can 1 2
usually be met Electricity Insurance
without a major Natural gas Legal services
delay Telephone Banking
Hospital maternity unit Laundry and dry cleaning
Police and fire
emergencies
Peak demand 4 3
regularly exceeds Accounting and tax Services similar to those in
capacity preparation 2 but which have
Passenger transportation insufficient capacity for
Hotels and motels their base level of business
Restaurants
Theaters
Source: Christopher H. Lovelock, “Classifying Services to Gain Strategic Marketing Insights,” Journal of Marketing, 47, 3 (Summer 1983): 17.
Table 14-2 171
What is the Constraint on
SM Capacity?
Nature of the constraint Type of service
Time Legal
Consulting
Accounting
Medical
Labor Law firm
Accounting firm
Consulting firm
Health clinic
Equipment Delivery services
Telecommunication
Utilities
Health club
Facilities Hotels
Restaurants
Hospitals
Airlines
Schools
Theaters
Churches
172
SM 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
173
SM
Part 5
MANAGING SERVICE
PROMISES
174
SM
Provider GAP 4
CUSTOMER
COMPANY
Service Delivery External
Communications
GAP 4 to Customers
Part 5 Opener
175
SM
Chapter 15
INTEGRATED
MARKETING
COMMUNICATION
176
SM 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
177
Figure 15-1
SM Communications and the
Company
Internal Marketing External Marketing

Vertical Communications Communication
Horizontal Communications Advertising
Sales Promotion
Public Relations
Direct Marketing
Employees Interactive Marketing Customers

Personal Selling
Customer Service Center
Service Encounters
Servicescapes
Source: Parts of model adapted from work by Christian Gronroos and Phillip Kotler
Figure 15-3 178
Approaches for
SM Integrating Services Marketing
Communication
Manage
Customer
Expectations
Goal:
Manage Delivery Improve
Service greater than Customer
Promises or equal to Education
promises
Manage
Internal
Marketing
Communication
179
Figure 15-4
SM Approaches for
Managing Service Promises
MANAGING SERVICE PROMISES
Goal:
Create Coordinate Offer Delivery
Effective Make
External Realistic Service greater than
Services Communication Guarantees or equal to
Communications Promises
promises
Figure 15-8 180
Approaches for
SM 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
181
Figure 15-9
SM Approaches for
Improving Customer Education
Teach
Customers
Prepare Confirm Clarify to Avoid
Goal: Performance Expectations
Delivery Customers Peak
for the to Standards after the Sale Demand
greater than Service
or equal to Periods
Process and
promises
Seek Slow
Periods
182
Figure 15-10
SM 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
183
SM
Chapter 17
THE FINANCIAL AND

ECONOMIC IMPACT OF
SERVICE QUALITY

184
SM 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
185
Figure 17-1
SM The Direct Relationship between
Service and Profits
Service
Quality
? Profits

186
Figure 17-2
SM Offensive Marketing Effects of
Service on Profits
Service
Quality
Profits
Market
Share
Reputation Sales
Price
Premium
187
Figure 17-3
SM Defensive Marketing Effects of

Service on Profit
Costs
Volume of Margins
Service Customer
Purchases
Quality Retention Price

Premium
Word of
Mouth Profits

188
Figure 17-5
SM Perceptions of Service,
Behavioral
Intentions and Profits
Costs
Volume of Margins
Purchases
Customer
Retention Price
Behavioral Premium
Service Intentions
Word of
Mouth Profits
Sales

Figure 17-6 189
SM 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
Least Profitable we want? What segment is
Customers difficult to do business with?

190
Figure 17-7
SM 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
Least Profitable we want? What segment is
difficult to do business with?
Customers

191
Figure 17-8
SM The Key Drivers of Service Quality,

Customer Retention, and Profits
Key Drivers Service Encounters

Service
Encounter
Service
Encounter
Service Behavioral Customer
Quality Intentions Retention Profits
Service
Encounter
Service
Encounter

Figure 17-9 192
Sample Measurements for the
SM Balanced Scorecard
Financial Measures
Price Premium
Volume Increases
Value of Customer
Referrals
Customer
Perspective
Value of Cross Sales Operational
Long-term Value of Perspective:
Customer
Service Perceptions
Right first time (% hits)
Service Expectations
Right on time (% hits)
Perceived Value
Responsiveness (% on
Behavioral Intentions: Innovation and time)
% Loyalty Learning Perspective Transaction time (hours,
% Intent to Switch days)
# Customer Number of new products Throughput time
Referrals Return on innovation Reduction in waste
# Cross Sales Employee skills Process quality
# of Defections Time to market
Time spent talking to
customers
Adapted from Kaplan and Norton

Figure 17-10 193
SM Service Quality Spells Profits

Costs
Defensive Volume of Margins

Marketing Purchases
Price
Premium
Service Customer
Quality Retention
Word of
Mouth Profits
Market
Share
Sales
Offensive
Marketing Reputation
Price
Premium

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Contact: +923006641921 Usman Waheed

If You want these slides then send me at

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• Services are deeds,processes and

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SM Challenges for Services

• Defining and improving quality

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SM Percent of U.S. Gross Domestic

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 Services cannot be inventoried

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 Service delivery and customer satisfaction

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 Customers participate in and affect the

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 It is difficult to synchronize supply and

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Employees Interactive Marketing Customers

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SM The Services Triangle

Source: Adapted from A. Parasuraman

SM Services Marketing Mix:

• Traditional Marketing Mix

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SM Traditional Marketing Mix

• All elements within the control of the firm that

Contact: +923006641921 Usman Waheed

SM Expanded Mix for Services --

Quality level Exposure Salespeople Price level

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Customers Equipment Number of steps

Communicating Signage Level of customer

Employee research Employee dress

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SM Ways to Use the 7 Ps

Overall Strategic Specific Service

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Contact: +923006641921 Usman Waheed

FOCUS ON THE CUSTOMER

SM Gaps Model of Service Quality

SM The Customer Gap

Purchase and Post-Purchase

Purchase and Post-Purchase

• In buying services consumers rely more on

• More risk would appear to be involved with

• The evoked set of alternatives likely to be smaller

SM Emotion and Mood

• Emotion and mood are feeling states that

• Need to maintain a desirable impression

Contact: +923006641921 Usman Waheed

Contact: +923006641921 Usman Waheed

• Customers have different expectations re

• DO YOUR EXPECTATIONS DIFFER RE

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Contact: +923006641921 Usman Waheed

The Zone of Tolerance

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SM Zones of Tolerance VARY for

Most Important Factors Least Important Factors